10-K405

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

/x/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended August 31, 1999

or

/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Nos. 33-83868; 333-11693 and 333-32251

AMERICAN CRYSTAL SUGAR COMPANY

(Exact name of registrant as specified in its charter)

Minnesota (State of incorporation)	84-0004720 (I.R.S. Employer Identification Number)
101 North Third Street Moorhead, MN 56560 (Address of principal executive offices)	(218) 236-4400 (Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act:
NONE

Securities registered pursuant to Section 12(g) of the Act:
NONE

    Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

    As of November 16, 1999, 2,951 shares of the Registrant's Common Stock and 498,570 shares of the Registrant's Preferred Stock were outstanding. There is no established public market for the Registrant's Common Stock or Preferred Stock. Although there is a limited, private market for shares of the Registrant's stock, the Registrant does not obtain information regarding the transfer price in transactions between its members and therefore is unable to estimate the aggregate market value of the Registrant's shares held by non-affiliates.

DOCUMENTS INCORPORATED BY REFERENCE
NONE

PART I

    This report contains forward-looking statements and information based upon assumptions by the American Crystal Sugar Company's (the "Company") management, including assumptions about risks and uncertainties faced by the Company. These forward-looking statements can be identified by the use of forward-looking terminology such as "expects", "believes", "will" or similar verbs or expressions. If any of management's assumptions prove incorrect or should unanticipated circumstances arise, the Company's actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors, including, but not limited to, those factors influencing the Company and its business which are described in this report in the "Important Factors" section below. Readers are urged to consider these factors when evaluating any forward-looking statement. The Company undertakes no obligation to update any forward-looking statements in this report to reflect future events or developments.

Item 1.  BUSINESS

General

    The Company is a Minnesota agricultural cooperative corporation owned by 2,951 sugarbeet growers in the Minnesota and North Dakota portions of the Red River Valley. Throughout this report, the terms "growers," "members" and "shareholders" will be used interchangeably to refer to the equity holders of the Company. The Red River Valley is the largest sugarbeet growing area in the United States, forming a band approximately 35 miles wide on either side of the North Dakota and Minnesota border and extending approximately 200 miles south from the border of the United States and Canada. The Company was organized in 1973 by sugarbeet growers to acquire the business and assets of the American Crystal Sugar Company, then a publicly held New Jersey corporation in operation since 1899. The Company currently processes sugarbeets from a base level of approximately 498,570 acres, subject to tolerances for overplanting and underplanting established by the Board of Directors each year. By owning and operating five sugarbeet processing facilities in the Red River Valley, the Company provides its shareholders with the ability to process their sugarbeets into sugar and agri-products such as molasses, sugarbeet pulp and concentrated separated by-product (CSB), a by-product of the molasses desugarization process.

    The Company's sugar is pooled and then marketed through the services of a marketing agent under contract with the Company. The sugar marketing agent, United Sugars Corporation, is a cooperative owned by the Company, Southern Minnesota Beet Sugar Cooperative, Minn-Dak Farmers Cooperative and United States Sugar Corporation. The Company's agri-products are also marketed through a marketing agent, Midwest Agri-Commodities Company. Midwest Agri-Commodities Company is a cooperative whose members are the Company, Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative.

    The Company is also one of three members of ProGold Limited Liability Company, a joint venture which owns a corn wet-milling plant in Wahpeton, North Dakota. The Company and Newcourt Capital USA own Crystech, LLC which was formed to construct and operate a molasses desugarization facility adjacent to the Company's processing facility in Hillsboro, North Dakota.

    The Company's corporate headquarters are located at 101 North Third Street, Moorhead, Minnesota 56560 (telephone number (218) 236-4400). Its fiscal year ends August 31.

Products and Production

    The Company is engaged primarily in the production and marketing of sugar from sugarbeets. The Company also sells agri-products and sugarbeet seed. The Company's total sugar and agri-product production is influenced by the amount and quality of sugarbeets grown by its members, the processing capacity of the Company's plants and by the ability to store harvested sugarbeets.

    The Company processes sugarbeets grown by its members in five factories located in the Red River Valley area of Minnesota and North Dakota. The growing area is divided into five factory districts, each containing one sugarbeet processing plant. The period during which the Company's plants are in operation to process sugarbeets into sugar and agri-products is referred to as the "campaign." During the campaign, each of the Company's factories is operated twenty-four hours per day, seven days per week. The campaign typically begins in September, when a small portion of the sugarbeet crop is harvested, and continues until the available supply of sugarbeets has been depleted, which generally occurs in May of the following year. Based on current processing capacity, an average campaign lasts approximately 250 days, assuming normal crop yields.

    Once the sugarbeets are harvested, members transport their crop by truck to receiving stations designated by the Company. The sugarbeets are then stored in factory yards and at outlying piling stations until processed. Rapid processing is important to maximize sugar extraction and minimize spoilage. Most of the sugarbeets are stored outside in piles. Although frozen sugarbeets may be stored for extended periods, sugarbeets stored in unprotected piles at temperatures above freezing must be processed within approximately 150 days. In most years, the cold weather in North Dakota and Minnesota offers an advantage to the Company as it permits the outdoor storage of sugarbeets in below-freezing weather conditions. In milder climates or years, unprotected piles of sugarbeets experience cycles of freezing and thawing and are subject to some deterioration. When subject to such freeze and thaw cycles, sugarbeets on the exterior of piles freeze naturally. Sugarbeets near the center of the piles, however, may not freeze and thus may be subject to spoilage.

    In order to avoid spoilage the Company utilizes a process called "split pile storage" in which sugarbeets from the center of the piles are removed for processing first. Split pile storage permits more of the stored sugarbeets to freeze naturally. The Company also utilizes a ventilation technique to further reduce spoilage. In this process, fans circulate air through ventilation channels constructed within sugarbeet piles in order to pre-cool and then deep freeze the sugarbeets. Approximately 24.5% of an average crop may be stored in ventilated storage sites. Enclosed cold storage facilities are also used to extend the sugarbeet storage period at each of the Company's factory locations. Enclosed cold storage sites presently have the capacity to cover approximately 8% of an average crop.

    The basic process for producing sugar from sugarbeets involves: washing the sugarbeets; slicing the sugarbeets into thin strips called "cossettes"; extracting the sugar from the cossettes in a diffuser; purifying the resulting "raw juice" and boiling it, first in an evaporator to thicken it and then in vacuum pans to crystallize the sugar; separating the sugar crystals from the molasses in a centrifuge; drying the sugar; storing sugar in bulk form and grading and screening the crystals for packaging and bulk shipping.

    The sugar production process results in a variety of agri-products. After the extraction of raw juice from the cossettes, the remaining pulp is dried and processed into animal feeds. Currently, the Company processes approximately one-half of its molasses through its molasses desugarization facility to extract additional sugar. Once the new Hillsboro facility becomes operational, the Company expects to process substantially all of its molasses to extract the remaining sugar. Currently, the remaining molasses and CSB from the molasses desugarization process are marketed through Midwest Agri-Commodities Company and are sold primarily to yeast manufacturers and for use in animal feeds.

    The Company develops and markets sugarbeet seeds through a 10-year Product Development, Licensing and Sales Agreement with Betaseed, Inc., a Minnesota corporation ("Betaseed") which is a wholly-owned subsidiary of KWS Kleinwanzlebener Saatzucht, AG, ("KWS"), a German seed company that is one of the three largest seed companies in the world. Prior to 1998, the Company had its own seed division, which was created in the 1920's to ensure that the Company's members had the highest quality sugarbeet hybrids available to maximize their production. In November 1998, the Company sold substantially all of the assets of its seed division to KWS and entered into the 10-year agreement with Betaseed. Under the agreement, the Company retains the right to market its seed to its own members and Betaseed gains the right to market its seed to the Company's members and also to market the Company's seed and its seed in all other markets.

Recent Crops

    The sugarbeet crop grown during 1999 produced a total of approximately 19.9 tons of sugarbeets per acre from approximately 487,000 acres. That production exceeded the ten-year average of 17.8 tons per acre for the crops grown in the years 1989 through 1998. The sugar content of the 1999 crop was 17.37%, in comparison to a ten-year average for the applicable period of 17.36%. The Company has begun processing the sugarbeets produced in the 1999 crop and expects to produce a total of approximately 26.4 million hundredweight of sugar from that crop.

    The sugarbeet crop grown during 1998 produced a total of approximately 22.2 tons of sugarbeets per acre from approximately 481,000 acres. That production exceeded 16.9 tons per acre, which is the ten-year average of tons per acre for the crops grown in the years from 1988 through 1997. The sugar content of the 1998 crop was 17.66%, in comparison to a ten-year average for the applicable period of 17.42%. The company produced a total of approximately 25.5 million hundredweight of sugar from the 1998 sugarbeet crop.

    The sugarbeet crop grown during 1997 produced a total of approximately 18.5 tons of sugarbeets per acre from approximately 462,000 acres. That production exceeded 16.9 tons per acre, which is the ten-year average of tons per acre for the crops grown in the years from 1987 through 1996. The sugar content of the 1997 crop was 17.59%, in comparison to a ten-year average for the applicable period of 17.47%. The company produced a total of approximately 21.5 million hundredweight of sugar from the 1997 sugarbeet crop.

    For a discussion of the 1998, 1997 and 1996 crops and results of operations for fiscal years 1999, 1998 and 1997, see "Management's Discussion and Analysis of Financial Condition and Results of Operations".

Market and Competition

    Current U.S. government statistics estimate total U.S. sugar consumption at 191.6 million hundredweight for the year beginning October 1, 1999 and ending September 30, 2000. For the same period starting October 1998, total consumption was 188.3 million hundredweight. Comparing the two years shows demand growth of 1.7% for U.S. sugar sellers.

    The U.S. government forecasts growth between 2000 and 2001 to be slightly higher than 2%, which is slightly above trendline and includes consumption increases due to population growth. The U.S. refined sugar market has grown over the past twenty years, despite the demand lost to the substitution of high fructose corn syrups for sugar in beverages and certain food products. Non-nutritive sweeteners such as aspartame have also been developed to substitute for sugar. While corn and non-nutritive sweeteners constitute a large portion of the overall sweetener market, the Company believes that the market for sugar will continue to grow between 1 and 2% per year mainly due to population growth.

    The substitution of corn sweeteners for sugar not only reduced demand for sugar in the United States, but also resulted in a high degree of sugar industry consolidation. In 1978 there were 28 sugar producers and sellers in the U.S. market. Today there are eight sugar sellers, with over 75% of U.S. sugar market share concentrated in the top three sellers, all of which are fully integrated sugarbeet and cane suppliers. Given the size of the domestic market, the Company's sugar production and sales represented 13.5% of the total domestic market for refined sugar in 1998/99. Sugar sales by United Sugars Corporation represents approximately 25% of the U.S. sugar market.

    The Company's main competitors in the domestic market are Imperial Sugar Company, Tate & Lyle North America, Amalgamated Sugar Company and California & Hawaiian Sugar Company. Because sugar is a fungible commodity, competition in the U.S. industry is primarily based upon price, customer service and reliability as a supplier.

    According to United States Department of Agriculture (USDA) statistics, the Red River Valley is generally one of the most cost efficient sugarbeet producing areas in the nation. As a result, the Company's management believes that it possesses the ability to compete successfully with other producers of sugar in the United States. In the future, while cost efficiency is a competitive advantage, substitute products for sugar and sugar imports could have a material and adverse effect on the Company's operations.

Marketing, Customers and Prices

    Since January, 1994, United Sugars Corporation, a common marketing agency, operating on a cooperative basis, has marketed the Company's sugar. United Sugars Corporation was formed in late 1993 by the Company, Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative. Upon completion of the incorporation and capitalization of United Sugars Corporation, the Company entered into a "Uniform Member Marketing Agreement" with United Sugars Corporation and the parties operated under that agreement until December of 1997. On December 1, 1997, United States Sugar Corporation ("USSC"), of Clewiston, Florida, a grower of sugar cane and other agricultural products, became a member of United Sugars Corporation. At that time, United Sugars Corporation and USSC entered into a Uniform Cane Sugar Marketing Agreement while the Company, Minn-Dak and Southern Minnesota Beet Sugar Cooperative entered into Uniform Beet Sugar Marketing Agreements. Under these agreements, all of the members market all of their refined sugar through United Sugars Corporation. The Company receives payment for its sugar by receiving its pro rata share of the net proceeds from the sale of the pooled sugar. The net proceeds of such sales represent the gross proceeds from the sale of the sugar, adjusted for the various costs and expenses of marketing the pooled sugar, including the Company's pro rata share of the marketing and sales expenses incurred by United Sugars Corporation. Any net proceeds from the operation of United Sugars Corporation are distributed to the four members proportionally.

    With the admission of USSC, United Sugars Corporation has been able to distribute both cane sugar and beet sugar, and distribute sugar to customers over a large geographical area. All of the uniform marketing agreements terminate on August 31, 2001, with automatic renewal for subsequent terms of one year unless notice of termination is given by a party. A party that desires to terminate its marketing agreement at the end of the initial term must provide written notice of termination by May 1, 2000, for actual termination to occur on August 31, 2001. In order to terminate its agreement after the initial term has expired, a party must provide notice of termination by May 1 of the then current year for the termination to be effective on the August 31 of the subsequent year. In the event one of the parties terminates its uniform marketing agreement, the amount of sugar that is marketed by United Sugars Corporation would decrease, thus reducing proceeds. Furthermore, United Sugars Corporation would also be required to return the exiting member's capital over a period of five years.

    United Sugars Corporation markets the Company's sugar primarily to industrial users such as confectioners, breakfast cereal manufacturers and bakeries. For the fiscal year ended August 31, 1999, 91.5% (by weight) of the Company's sugar production was sold to industrial users. The remaining portion is marketed by United Sugars Corporation through sugar brokers to wholesalers and retailers under the "Crystal Sugar" and "Pillsbury" brand names and various private labels for household consumption. With regard to brand name sales, the Company licenses the use of the "Crystal" name and sub-licenses the use of the "Pillsbury" name to United Sugars Corporation.

    United Sugars Corporation's customers are located primarily in Illinois, Minnesota, Iowa, Wisconsin, Pennsylvania, Michigan, Indiana, Ohio, Missouri and Tennessee. During fiscal 1999, United Sugar Corporation's 10 largest customers purchased approximately 53.7% (by weight) of the Company's sugar sold.

    The prices at which United Sugars Corporation sells the Company's sugar fluctuate periodically based on changes in domestic sugar supply and demand. The largest proportion of United Sugars Corporation's sugar sales are contracted one or more quarters in advance, with the effect of stabilizing fluctuations in revenue from quarter to quarter. Retail (grocery) products are sold on a spot price basis.

    The Company markets its agri-products through Midwest Agri-Commodities Company, a cooperative whose members are the Company, Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative. Sugarbeet pulp is marketed to livestock feed mixers and livestock feeders in the United States and foreign markets. For the year ended August 31, 1999, the majority of the Company's pulp production was exported to Japan and Europe. The market for sugarbeet pulp is affected by the availability and quality of competitive foodstuffs. Sugarbeet molasses is marketed primarily to yeast manufacturers, livestock feed mixers and livestock feeders. Agri-product sales accounted for approximately 8% of the Company's total revenues during fiscal 1999. Export agri-product sales accounted for approximately 3% of the Company's total revenues during fiscal 1999. In the past, export agri-products sales accounted for 6.5% of the Company's total revenues in 1998 and 8.5% in 1997. These percentages are primarily a function of the average market prices for sugar, pulp and molasses and are not necessarily indicative of future relationships between agri-product revenues (both export and domestic) and sugar revenues, because prices of these commodities fluctuate independently of each other.

Government Programs and Regulation

    Domestic sugar prices are supported under a program administered by the USDA. Under the current program, which was initiated in 1981 and extended under the Food Security Act of 1985, the Food, Agriculture, Conservation and Trade Act of 1990 and the Federal Agriculture Improvement and Reform Act of 1996 (the "FAIR Act"), the price of sugar is required to be maintained above the price at which producers could forfeit sugar to repay non-recourse loans obtained through the Commodity Credit Corporation (CCC). The USDA maintains sugar prices without cost to the U.S. Treasury by regulating the quantity of sugar imports. Under the "Tariff Rate Quota" implemented October 1, 1990, sugar producing countries are assigned a fixed quantity of imports duty-free or subject to minimal duties. Unlimited additional quantities may be imported upon payment of a tariff of 16 cents per pound prior to shipment. To date, only minute quantities of sugar have been imported under this higher tariff level.

    The Uruguay Round Agreement, under the General Agreement on Tariffs and Trade (GATT) mandates imports of at least 1,256,000 short tons of sugar per year into the United States. The FAIR Act maintains the basic 18 cent per pound loan rate for raw sugar and puts in place a 22.90 cent per pound loan rate for refined sugarbeet sugar. Both loan rates are effective for crop years 1996 through 2002. Price support loans are to be made on a non-recourse basis as long as United States sugar imports for domestic usage exceed 1.5 million short tons raw value in a given fiscal (October through September) year. Loans made on a non-recourse basis enable the sugar processor to forfeit sugar to the CCC if sugar prices are below the loan rate. If imports during a given year are less than 1.5 million short tons, loans must be made on a recourse basis, meaning that processors will not be able to forfeit sugar to the CCC at its full loan value. In order to recover the full value of a recourse loan, the CCC could require that cash or other assets be provided in addition to the sugar used as collateral when the loan is made. A new provision of the FAIR Act is a one cent per pound penalty paid by processors if the processor defaults on sugar price support loans.

    In November 1999, the so-called Millennium Round of the World Trade Organization (WTO) will begin in Seattle, Washington with the goal of continuing to move toward multilateral free trade in all sectors. Any agreements reached at the Millennium Round could represent a threat to the sugar industry because sugar is one of the most highly protected sectors within world agricultural trade and is thus a target for reform. The trend toward liberalization will most likely focus on the minimum import requirement into the United States of 1,256,000 short tons of sugar. There will likely be a movement to raise the minimum import requirement of sugar, and if successful, such a movement could cause additional supply/demand pressure in the United States.

    The Company believes the North American Free Trade Agreement ("NAFTA") represents the most serious public policy challenge to itself and the domestic sugar industry. Under the terms of the original NAFTA text, Mexico would have been allowed to ship any excess production of sugar into the United States if Mexico were to achieve net surplus producer status two years in a row. Concerned that Mexico's productive capabilities and possible conversion to the use of high fructose corn sweeteners could quickly change Mexico from a net sugar importer to a net sugar exporter, the U.S. sugar industry insisted that NAFTA be changed to delay Mexico's access to the U.S. market. To embody these changes, a side agreement on sugar was reached prior to passage of NAFTA to give Mexico incrementally larger but capped volumes of duty-free access, and an ability to send additional quantities if it were to pay a gradually descending second tier tariff. The side agreement establishes a common market between the United States and Mexico in sugar by 2008.

    The Company is concerned that low world sugar prices and a trade conflict between the U.S. and Mexico over high fructose corn sweeteners could permit de facto acceleration of the side agreement under NAFTA. Under the NAFTA tariff schedule, second tier sugar tariffs are set at approximately 14 cents in 1999 but decline by approximately 1.5 cents per year until reaching zero in 2008. Low world raw sugar prices could make it feasible for Mexican sugar to enter the United States earlier than 2008. In contrast to Mexico's duty free access to the United States sugar market (which rises from 25,000 metric tons per year to 250,000 metric tons per year in fiscal year 2001) NAFTA contains no restrictions on second tier imports.

    Under the current terms of NAFTA and the side agreement, the Company is concerned that imports from Mexico could oversupply the U.S. market, forcing sugar prices significantly lower. Any fluctuation in the price of sugar has a direct impact on any beet payments that are made to members. The Company, along with the domestic sugar industry, is seeking improvements to NAFTA and is also pursuing legal remedies to address the matter. If the sugar industry is unsuccessful in these or any other endeavors it pursues to prevent the influx of Mexican sugar into the U.S. market, there could be adverse financial consequences to the Company and its members.

    From fiscal years 1990 to 1996, the sugar industry was required to remit to the Commodity Credit Corporation a nonrefundable marketing assessment equivalent to 1.1794 percent of the raw cane sugar loan rate of 18 cents per pound. The Federal Agriculture Improvement and Reform Act of 1996 increased the assessment for fiscal years 1997 through 2003 to 1.47425 percent of the raw cane sugar loan rate of 18 cents per pound. In response to the downturn in the agriculture economy, Congress included a provision in the fiscal year 2000 federal agricultural appropriations bill to alleviate the sugar industry from paying the assessment for fiscal years 2000 and 2001. Thus, from October 1, 1999 to September 30, 2001, the Company will not be required to pay a marketing assessment to the Commodity Credit Corporation.

    The nature and scope of future legislation affecting the sugar market cannot be predicted and there can be no assurance that price supports will continue in their present form. If the price support program, including the Tariff Rate Quota system described above, were eliminated in its entirety, or if the protection the United States' price support program provides from foreign competitors were materially reduced, the Company could be materially and adversely effected. In such a situation, if the Company were not able to adopt strategies which would allow it to compete effectively in a greatly changed domestic market for sugar, the adverse affects could impact the Company's continued viability and the desirability of growing sugarbeets for delivery to the Company.

Growers' Contracts

    The Company purchases all of its sugarbeets from members under contract with the Company. All members have five-year contracts with the Company covering the growing seasons of 1998 through 2002 (the "Growers' Contracts"). Each member will be obligated to enter into a new five-year contract for subsequent years. In addition, each member has an annual contract with the Company specifying the number of acres the member is obligated to grow during that year. Each share of Preferred Stock held by a member requires that member to grow one acre of sugarbeets for sale to the Company. The Company's Board of Directors has the discretion to adjust the acreage which may be planted for each share of Preferred Stock held by the members. However, it is management's current intention and recommendation to the Board of Directors that the relationship between shares of Preferred Stock and acres of sugarbeet production be maintained at a ratio of 1 to 1 for the foreseeable future, subject to tolerances for overplanting and underplanting established by the Board each year.

    The total price for sugarbeets paid to a member (the "Net Beet Payment") is based on the "Gross Beet Payment," as adjusted by certain allowances, costs and deductions. The Gross Beet Payment is the value of recovered sugar from the sugarbeets a member delivers plus the member's share of agri-product revenues, minus the member's share of member business operating costs, including depreciation and interest. The following allowances, costs and deductions, if applicable, are used to adjust the Gross Beet Payment to arrive at the Net Beet Payment: hauling allowance program costs, pre-pile quality premium costs, minimum payment allowance program costs, tare incentive premium/ penalty program and unit retains. A "unit retain" is a uniform retention of a portion of the payments otherwise due to members for their crops. Unit retains are considered capital contributions that the Company, at its option, can return to the members. Currently, it is the Company's practice to return unit retains after seven years. Growers are paid a hauling allowance based on the distance they must transport sugarbeets for delivery to the Company and may also receive minimum beet payments and an allowance for early delivery of sugarbeets prior to the commencement of the stockpiling of harvested sugarbeets. The costs of these programs are shared among members on the basis of the net tonnage of sugarbeets delivered by each member.

    Under the current Growers' Contracts, payments to members for sugarbeets must be made in at least three installments: (i) on or about November 15, the Company pays its members an amount equal to 65% of the Company's estimate of the grower's Net Beet Payment; (ii) on or about March 31, the Company pays an amount which combined with the November payment equals 90% of the estimated Net Beet Payment; (iii) and not more than 15 days after completion and acceptance of the audit of the Company's annual financial statements, the Company pays the remainder of the member's Net Beet Payment. Except for unit retains, the Company must pay to members for their sugarbeets all proceeds from the sale of the members' sugar and agri-products in excess of related member business operating costs, as described above.

    The following tables summarize the "Gross Beet Payment" and "Net Beet Payment" and the "Sugar Content of Sugarbeets" for each of the last 10 completed fiscal years, respectively:

	1990			1991			1992			1993			1994			1995			1996			1997			1998			1999
	Distribution of Net Proceeds Totals (In Thousands)
Net Proceeds	$	213,410		$	263,369		$	274,910		$	309,255		$	266,102		$	326,693		$	316,244		$	373,649		$	313,007		$	369,681
Non-Member Loss		698			1,058			1,075			77			544			15			396			18,074			9,679			494
Gross Beet Payment	$	214,108		$	264,427		$	275,985		$	309,332		$	266,646		$	326,708		$	316,640		$	391,723		$	322,686		$	370,175
Unit Retains		(7,995	)		(8,010	)		(10,364	)		(20,223	)		(19,328	)		(16,648	)		(16,040	)		(16,611	)		(8,545	)		(21,332	)
Member Tax ADJ, Net		1,922			589			676			447			12,585			5,621			0			0			0			0
Net Beet Payment	$	208,035		$	257,006		$	266,297		$	289,556		$	259,903		$	315,681		$	300,600		$	375,112		$	314,141		$	348,843
		Distribution of Net Proceeds Per Ton Harvested(1)
Net Proceeds	$	40.00		$	49.27		$	39.75		$	45.83		$	41.25		$	39.21		$	39.39		$	44.95		$	36.60		$	34.62
Non-Member Loss		0.13			0.20			0.16			0.01			0.09			0.00			0.05			2.17			1.13			.05
Gross Beet Payment	$	40.13		$	49.47		$	39.91		$	45.84		$	41.34		$	39.21		$	39.44		$	47.12		$	37.73		$	34.67
Unit Retains		(1.50	)		(1.50	)		(1.50	)		(3.00	)		(3.00	)		(2.00	)		(2.00	)		(2.00	)		(1.00	)		(2.00	)
Member Tax ADJ, Net		0.36			0.11			0.10			0.07			1.95			0.68			0.00			0.00			0.00			0.00
Net Beet Payment	$	38.99		$	48.08		$	38.51		$	42.91		$	40.29		$	37.89		$	37.44		$	45.12		$	36.73		$	32.67
		Crop Statistics(1)
Tons Harvested (In Thousands):		5,336			5,345			6,915			6,748			6,450			8,332			8,029			8,313			8,553			10,679
Tons Purchased Per Acre Harvested:		14.5			13.4			17.4			16.9			16.3			20.2			18.7			18.1			18.5			22.2
Sugar Content of Beets:		16.7	%		18.6	%		17.0	%		18.0	%		17.6	%		16.8	%		16.4	%		17.3	%		17.6	%		17.7	%

(1)

Information provided with respect to net proceeds, gross beet payment, net beet payment, tons harvested per acre and sugar content of sugarbeets represents an average of the financial and production results experienced by the Company's members. As described elsewhere in this annual report, the return to members for their sugarbeets is based upon the value of the recovered sugar from the sugarbeets delivered to the Company by each member. As a result of variations in the sugar content of the sugarbeets delivered by the various members to the Company, the payments received by the various members also vary.

Environmental Matters

    The Company is subject to extensive federal and state environmental laws and regulations with respect to water and air quality, solid waste disposal and odor and noise control. The Company conducts an on-going and expanding control program designed to meet these environmental laws and regulations. The Company believes that it is in substantial compliance with applicable environmental laws and regulations. From time to time, however, the Company may be involved in investigations or determinations regarding non-material matters that may arise. In the future, the Company may determine that it is necessary to invest certain amounts of time, attention and capital in order to ensure continued compliance with environmental regulations at both the state and federal level.

    The Company received a Notice of Violation from the State of Minnesota on September 24, 1998 for an accidental discharge of wastewater and the disposal of decomposed sugarbeets and sugarbeet pulp. The Company is currently involved in negotiations with the Minnesota Pollution Control Agency (the "MPCA") with the intent of concluding a stipulation agreement with regard to the violation and related penalties. Management believes the outcome of the enforcement action should not have a material adverse effect on the Company's financial condition.

Joint Venture ProGold Limited Liability Company

    The Company is one of three members of ProGold Limited Liability Company ("ProGold"). ProGold was formed in July, 1994 as a limited liability company to serve as a joint venture mechanism for the Company, Minn-Dak and Golden Growers Cooperative, a North Dakota cooperative association comprised of corn producers ("Golden Growers"). The joint venture was formed to construct and operate a corn wet-milling plant capable of processing corn to produce corn sweeteners (including high fructose corn syrups) and various agri-products. ProGold's plant became operational in late 1996.

    The Company contributed a total of approximately $48.0 million for its 46% membership interest in ProGold. Golden Growers contributed approximately $51.2 million in exchange for a 49% interest in ProGold, while Minn-Dak made a capital contribution of approximately $5.2 million in exchange for a 5% interest in ProGold. Under the terms of the ProGold Member Control Agreement, in each year after September 1, 1997, the ProGold Board of Governors can require that the three members of ProGold provide additional capital contributions in an aggregate amount not to exceed $5 million per year, with each member obligated to provide a portion of that capital contribution proportionate to its ownership interest in ProGold. As a result, the Company could be required to make annual contributions in an amount of up to $2.3 million per year, based on the Company's ownership of a 46% interest in ProGold. Any other capital contributions can be required only with the prior written consent of all of ProGold's members, including the Company. To date, the Company has not made any additional capital contributions.

    ProGold and Cargill, Incorporated ("Cargill") entered into a lease of ProGold's corn wet-milling plant to Cargill. The lease commenced on November 1, 1997, and the initial term will terminate on December 31, 2007. Under the arrangement, ProGold will retain ownership of the plant, while Cargill will operate the plant. ProGold will receive rental payments in a base amount fixed for each year during the term of the lease. ProGold will also receive supplemental rent equal to fifty percent (50%) of the amount by which earnings before taxes from Cargill's operation of the facility exceeds a contractually-specified base amount. Cargill has also entered into a corn supply agreement with ProGold, pursuant to which ProGold will be obligated to deliver approximately 15.6 million bushels of corn per fiscal year. In a corresponding agreement, ProGold and Golden Growers have entered into a marketing agreement whereby Golden Growers agrees to supply the entire amount of corn to ProGold that ProGold is required to deliver to Cargill. Cargill will pay ProGold a market price for any corn delivered to Cargill under the corn supply agreement.

    The lease specifies a variety of alternatives which may take effect upon expiration of the initial term of the lease. ProGold and Cargill could negotiate a ten year extension of the lease upon mutually agreeable terms and conditions, ProGold could offer to sell the facility to Cargill at a fair market value or ProGold could offer to sell Cargill a fifty percent (50%) ownership interest in ProGold. If the parties are unable to agree upon the terms and conditions of any such transaction, ProGold can enter into a similar transaction with a third party. However, in each case, including a lease of the facility to a third party, Cargill would have the first right to engage in the proposed transaction upon the same terms as agreed to by the third party.

    If ProGold is successful in generating profits for distribution to its members, those distributions would become the property of the Company. Under the Company's Articles of Incorporation and Bylaws, the return, if any, from the Company's involvement with ProGold would be classified as amounts received from "non-patronage" sources. The Company's Bylaws currently provide that any non-patronage net income is to become the property of the Company and is not to be distributed directly to the members of the Company. Distributions from ProGold could, in the discretion of the Company's Board of Directors, yield benefits to the Company's members through such mechanisms as future reductions of annual unit retain amounts, repayment of unit retains in advance of the current seven year repayment schedule and the use of such returns, if any, for capital investment in the Company. To date, the Company's Board of Directors has not adopted any resolutions or made any commitments regarding the distribution of non-patronage revenues directly to the Company's members or the application of any such amounts for the indirect benefit of the Company's members. As described above, any decisions regarding the application of distributions received by the Company from ProGold will be made at the discretion of the Company's Board of Directors.

Joint Venture Crystech, LLC

    Crystech, LLC (Crystech) is a Delaware limited liability company formed on May 28, 1998. The Company received a 50% membership interest in Crystech for its initial contribution of $1,545,000. The other 50% member is Newcourt Capital USA, Inc. As specified by the Limited Liability Company Agreement, the Company and Newcourt Capital USA, Inc. each appointed three members to serve on Crystech's six member Board of Managers.

    Crystech was formed to construct and operate a molasses desugarization facility in Hillsboro, North Dakota. The total cost of the facility is estimated at $103.0 million. It is anticipated that the plant will have the capacity of processing 200,000 tons annually of softened molasses for conversion to sugar and other agri-products. Construction on the facility began in June 1998 and is anticipated to be completed in January 2000.

    Under the Note Purchase Agreement between Crystech and the Crystech Senior Lender Trust (the "Trust"), the Trust agreed to provide term debt to Crystech in the sum of $86,005,000 via the purchase of notes from Crystech. Additionally, the Company has agreed to provide $13,905,000 of subordinated debt to Crystech. To support the construction of the facility, periodic draws from the trust account are made several times each month during the entire construction period. These draws are subject to certain approvals by the independent engineer and Newcourt Capital USA, Inc., as agent for Crystech Senior Lender Trust.

    As of August 31, 1999, Crystech was committed to construction costs related to an Engineering, Procurement and Construction (EPC) Contract totaling $78.9 million. As of August 31, 1999, Crystech had incurred $68.1 million related to this contract. The EPC Contract with the general contractor of the project, Process Systems Inc. of Memphis, Tennessee, also specifies certain cost guarantees, and mechanical and performance warranties.

    The Company has a 12-year tolling services agreement with Crystech whereby upon completion of construction, the Company pays for tolling services for processing sugarbeet molasses delivered to Crystech with title and risk of loss throughout the process maintained by the Company. The tolling agreement may be terminated by the Company if the specific operational processing performance required of Crystech in the contract is not achieved.

The Company's Current Strategic Plan

    In order to obtain the best selling price for its products, the Company intends to focus on sales and marketing strategies which allow the Company to provide its customers with an appropriate mixture of the Company's products. The Company is optimizing its customer mix, improving logistics and continually trying to evaluate and improve its customer performance.

    To pursue the goal of maintaining and improving upon its current status as a low cost producer, the Company intends to focus on working with its members to increase the productivity of the members' sugarbeet farming operations. In addition, the Company plans to focus on cost reduction at the factory level. At the member level, the Company expects to focus on, among others, programs for nitrogen management and new seed varieties. At the factory level, the Company intends to pursue on-going maintenance and improvements. The Company is part of the Crystech joint venture to construct and operate a molasses desugarization plant at the Company's Hillsboro plant, which would allow the Company to desugar the balance of its molasses to extract additional sugar. Currently, only approximately one-half of the Company's molasses is desugared. The Company's goal in participating in the molasses desugarization plant is to reduce the Company's average cost of sugar production, through the use of current separation technologies.

Employees

    As of August 31, 1999, the Company had 1,257 full-time employees, of which 1,035 were hourly and 222 were salaried. The Company also had 35 part-time employees. In addition, the Company employs approximately 441 additional hourly seasonal workers during the sugarbeet harvest and approximately 394 hourly seasonal workers during the remainder of the sugarbeet processing campaign. The Company also contracts with a third party agency for approximately 1,000 additional workers during the sugarbeet harvest.

    Substantially all of the hourly employees at the factories, including full-time and seasonal employees, are represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) AFL-CIO, and are covered by a collective bargaining agreement expiring July 31, 2002. Office, clerical and management employees are not unionized, except for certain office employees at the Moorhead and Crookston, Minnesota, and Hillsboro, North Dakota, factories who are covered by the collective bargaining agreement with the BCTGM. The Company considers its employee relations to be excellent.

    Substantially all employees who meet eligibility requirements of age and length of service are covered by one of the Company's two defined benefit retirement plans. Plan A (nonunion employees) and Plan B (union employees) are defined benefit, noncontributory plans. The plans provide for vesting in five years with benefits for early retirement, normal retirement and disability or death. The Company's policy is to fund pension costs accrued, and the plans were fully funded for vested benefits as of February 28, 1999, the end of the most recent plan year. Union and nonunion employees are also eligible to participate in 401(k) savings plans.

Important Factors

    The financial results of the Company's operations and the payments made to its members for their sugarbeets may be directly and materially affected by many factors, including prevailing prices of sugar and agri-products, the Company's ability to market its sugar competitively, the weather, government programs and regulations, and costs and expenses. Beyond the factors that may impact the Company's business generally, the Company is involved in several ventures that may also materially affect the financial results of the Company's operations.

Competition

    The Company sells sugar through United Sugars Corporation in direct competition with beet and cane sugar produced by other sugar companies. Because sugar is a fungible commodity, competition for sales volume is based primarily upon customer service, price and reliability, though differences in proximity to various geographic markets within the United States result in differences in freight and shipping costs which in turn affect pricing and competitiveness in general.

    In addition to sugar, the overall sweetener market includes corn-based sweeteners, such as regular and high fructose corn syrups, and non-nutritive, high-intensity sweeteners such as aspartame. Differences in functional properties and prices have tended to define the use of these various sweeteners. For example, corn sweeteners are generally limited to applications where a liquid sweetener can be used. Non-nutritive sweeteners presently do not provide the bulk and other physical properties of sugar. Although the various sweeteners are not interchangeable in all applications, the substitution of other sweeteners for sugar has occurred in certain products, such as soft drinks. The Company is not able to predict the availability, development or potential use of these and other alternative sweeteners and their possible impact on the Company and its members.

    According to the U.S. Department of Agriculture (USDA) statistics, the Red River Valley is generally one of the most cost efficient sugarbeet producing areas in the nation. As a result, the Company's management believes that it possesses the ability to compete successfully with other producers of sugar in the United States. In spite of this competitive advantage, substitute products and sugar imports could have a material and adverse effect on the Company's operations in the future.

Weather and Other Factors

    The sugarbeet, as with most other crops, is affected by weather conditions during the growing season. Additionally, weather conditions during the processing season affect the Company's ability to store sugarbeets held for processing. Growing and storage conditions different from the Company's expectations may change the quantity and quality of sugarbeets available for processing and therefore may affect the quantity of sugar produced by the Company.

    A significant reduction in the quantity or quality of sugarbeets harvested resulting from adverse weather conditions, disease or other factors could result in increased per unit processing costs and decreased production, with adverse financial consequences to the Company and its members.

Government Programs and Regulations; Legislation

    The nature and scope of future regulation and legislation affecting the sugar market cannot be predicted and there can be no assurance that price supports and market protections will continue in their present forms. If the price support programs were eliminated in their entirety, or if the protection the United States' price support program provides from foreign competitors were materially reduced, the Company could be materially and adversely affected. In such a situation, if the Company were not able to adopt strategies which would allow it to compete effectively in a greatly changed domestic market for sugar, the adverse affects could impact the desirability of growing sugarbeets for delivery to the Company, the Company's financial results, and the Company's continued viability.

    Under the current terms of NAFTA and other government regulations, imports of sugar from Mexico may enter the U.S. market. These increased imports could oversupply the U.S. market and force the price of sugar down. Any fluctuation in the price of sugar has an impact on the beet payments that are made to members. The Company, along with the domestic sugar industry, is seeking improvements to NAFTA and is also pursuing legal remedies to address the matter. If the sugar industry is unsuccessful in these and any other endeavors it pursues to prevent the influx of Mexican sugar into the U.S. market, there could be adverse financial consequences to the Company and its members.

    From fiscal years 1990 to 1996, the sugar industry was required to remit to the Commodity Credit Corporation a nonrefundable marketing assessment equivalent to 1.1794 percent of the raw cane sugar loan rate of 18 cents per pound for refined beet sugar. The Federal Agriculture Improvement and Reform Act of 1996 increased the assessment for fiscal years 1997 through 2003 to 1.47425 percent of the raw cane sugar loan rate of 18 cents per pound. In response to the downturn in the agriculture economy, Congress included a provision in the fiscal year 2000 federal agricultural appropriations bill to alleviate the sugar industry from paying the assessment for fiscal years 2000 and 2001. Thus, from October 1, 1999 to September 30, 2001, the Company will not be required to pay a marketing assessment to the Commodity Credit Corporation.

Environmental Matters

    The Company is subject to extensive federal and state environmental laws and regulations with respect to water and air quality, solid waste disposal and odor and noise control. The Company conducts an on-going and expanding control program designed to meet these environmental laws and regulations. The Company believes that it is in substantial compliance with applicable environmental laws and regulations. The Company cannot predict whether future changes in environmental laws or regulations might increase the cost of operating its facilities and conducting its business. Any such changes could have adverse financial consequences for the Company.

Year 2000 Compliance

    The Company has completed a year 2000 compliance plan, and to the best of its knowledge, all of its critical information technology and non-information technology systems will be year 2000 compliant by December 31, 1999. A lack of year 2000 compliance on the part of a supplier of the Company, however, may adversely affect the operations and financial performance of the Company by causing complications of, or otherwise affecting, the operations of the Company. The Company has contacted its significant suppliers and customers as part of its year 2000 compliance plan. Although the results of this effort indicate that many of the Company's customers and suppliers expect to be year 2000 compliant, the Company is currently unable to predict the magnitude of the operational and financial impact on the Company if year 2000 compliance issues with the Company's suppliers and customers arise. In the ordinary course of business, the Company keeps a supply of maintenance parts and supplies and stockpiles of coal, coke and limerock. The Company plans to stockpile supplies of coal, coke and limerock in sufficient amounts to continue production for a limited period of time in the event its suppliers are unable to deliver these supplies.

Item 2.  PROPERTY AND PROCESSING FACILITIES

    The Company operates five sugarbeet processing factories in the Red River Valley. The factories are located in Crookston, East Grand Forks and Moorhead, Minnesota and Drayton and Hillsboro, North Dakota. The Company owns all of its factories and the land on which they are located. The factories range in size from 150,000 to 400,000 square feet and have a combined sugarbeet processing capacity, expressed in terms of quantity of sugarbeets which may be sliced into strips or "cossettes," of approximately 33,500 tons per day. The Crookston, Minnesota plant has a capacity of 5,400 tons of sugarbeets per day, the East Grand Forks, Minnesota plant has a capacity of 9,000 tons of sugarbeets per day and the Moorhead plant has a capacity of 5,400 tons of sugarbeets per day. The Company's Hillsboro, North Dakota plant has a capacity of 7,700 tons of sugarbeets per day, while the Drayton, North Dakota plant has a capacity of 6,000 tons of sugarbeets per day. Each of the processing factories includes the physical facilities and equipment necessary to process sugarbeets into sugar. Each factory has space for sugarbeet storage, including ventilated and cold storage sites. Each processing factory includes the washing and slicing equipment necessary to cut the sugarbeets into cossettes, the diffusers necessary to extract sugar from the cossettes in the form of "raw juice" and the purification systems necessary to remove impurities from the raw juice. The factories also contain the evaporators and vacuum pans necessary to thicken the raw juice and then to crystallize the sugar. Each factory also contains the centrifuges and dryers necessary to complete the process. The Company's sugar packaging facilities are located at the Moorhead, Hillsboro, Crookston and East Grand Forks factories. Each of the Company's facilities is currently operating at or near its capacity.

    During 1999 the Company completed a number of capital improvements to its facilities. Process storage tanks and the expansion of the sugar crystallization station to enhance sugar recovery and allow extended processing were completed at the East Grand Forks factory. Improvements were made at all facilities for outside sugarbeet storage by reducing pile heights through the expansion of current sites and new pile insulation technology. Other significant projects included an upgrade to the East Grand Forks factory waste water treatment facility and a tailings recovery project at the Drayton factory.

    Current capital projects in progress include a $13.1 million project at the East Grand Forks factory to replace the carbonation stations which will reduce coke and limerock requirements and increase the quality of sugar extracted. The Company is also participating in a $103 million joint venture to build a molasses desugarization (MDS) plant at the Hillsboro facility to process the balance of the Company's molasses to extract additional sugar (see Joint Venture Crystech, LLC).

    The Company's corporate office is located in a 30,000 square foot, two-story office building in Moorhead, Minnesota. The Company also has a 100,000 square foot research center situated on approximately 200 acres in Moorhead, Minnesota. The Company owns both facilities, and owns numerous sites as sugarbeet receiving and storage stations. All of the Company's property, plant and equipment is mortgaged or pledged as collateral for its indebtedness to CoBank, Agricultural Credit Bank ("CoBank").

Item 3.  LEGAL PROCEEDINGS

    From time to time and in the ordinary course of its business, the Company is named as a defendant in legal proceedings related to various issues, including worker's compensation claims, tort claims and contractual disputes. The Company is currently involved in certain legal proceedings which have arisen in the ordinary course of the Company's business. The Company is also aware of certain other potential claims which could result in the commencement of legal proceedings. The Company carries insurance which provides protection against certain types of claims. With respect to current litigation and potential claims of which the Company is aware, the Company's management believes that (i) the Company has insurance protection to cover all or a portion of any judgments which may be rendered against the Company with respect to certain claims or actions and (ii) any judgments which may be entered against the Company and which may exceed such insurance coverage or which may arise in actions involving potential liabilities not covered by insurance policies are not likely to have a material adverse effect upon the Company, or its assets or operations.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of the Company's shareholders during the quarter ended August 31, 1999.

PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company currently has 2,951 shares of the Common Stock and 498,570 shares of the Preferred Stock outstanding. There is no established public market for the Company's Common Stock or Preferred Stock, as such shares may be held only by farmer-producers who are eligible for membership in the Company. The Company's shares are not listed for trading on any exchange or quotation system. Although transfers of the Company's shares may occur only with the consent of the Board of the Directors, the Company does not obtain information regarding the transfer price in connection with such transfers. As a result, the Company is not able to provide information regarding the prices at which the Company's shares have been transferred.

    Because the number of acres of sugarbeets a member may grow for sale to the Company is directly related to the number of shares of Preferred Stock owned, a limited, private market for Preferred Stock exists. However, it is not anticipated that a general public market for the Company's shares of Common Stock or Preferred Stock will develop due to the limitations on transfer and the various membership requirements which must be satisfied in order to acquire such shares.

    A member desiring to sell his or her Common Stock or Preferred Stock must first offer them to the Company for purchase at par value. If the Company declines to purchase such shares, either class may be sold to a new member (i.e., another farm operator not already a member) and Preferred Stock may be sold to one or more existing members or farm operators approved for membership, in each case subject to approval by the Board of Directors. To date, the Company's Board of Directors has not exercised the Company's right of first refusal to purchase shares offered for sale by its members. In the absence of the exercise of such right of first refusal, the Company is aware of sales of Preferred Stock at prices in excess of the par value of those shares. However, as the Company does not require parties seeking approval for transfers to provide information regarding the transfer price, the Company does not possess verifiable information regarding the transfer price involved in recent transfers of the Company's Preferred Stock.

    Pursuant to an exercise of contract rights held by Daniel McCarty, under the Long Term Incentive Plan (See "Incentive Plans"), the Company sold 155 shares of its Preferred Stock to a qualified member in May of 1998 at a purchase price of $1,500 per share. All of the proceeds from this isolated sale were paid to Mr. McCarty pursuant to the terms of the Long Term Incentive Plan. The Company did not register this sale under the Securities Act based on the belief that such a sale is exempt from registration under Section 4(2) of the Act.

Item 6.  SELECTED FINANCIAL DATA

    The selected financial data of the Company should be read in conjunction with the financial statements and related notes included elsewhere in this Annual Report.

	Fiscal Year Ended August 31, (In Thousands, except for ratios)
	1999		1998		1997		1996		1995
Net Revenues	$	843,968	$	676,625	$	677,004	$	688,012	$	605,960
Net Proceeds(1)	$	369,681	$	313,007	$	373,649	$	316,244	$	326,693
Total Assets	$	665,892	$	648,118	$	581,504	$	465,136	$	420,890
Long-Term Debt, including current maturities	$	252,050	$	212,495	$	204,600	$	190,919	$	119,029
Members' Investments	$	241,286	$	224,843	$	175,928	$	152,136	$	142,047
Property and Equipment
Additions, net of retirements	$	58,692	$	98,992	$	69,542	$	43,168	$	48,394
Working Capital	$	56,733	$	30,357	$	45,652	$	32,071	$	28,046
Ratio of Long-Term Debt to Equity(2)		.97:1		.87:1		1.06:1		1.17:1		.75:1
Ratio of Net Proceeds to Fixed Charges(3)		8.8		11.3		13.5		16.5		11.8

	Fiscal Year Ended August 31, (In Thousands, except for tons purchased per acre and Net Beet Payment per ton)
Production Data(4)
	1999		1998		1997		1996		1995
Acres harvested		481		462		459		429		413
Tons purchased		10,679		8,553		8,313		8,029		8,332
Tons purchased per acre harvested		22.2		18.5		18.1		18.7		20.2
Net beet payment per ton of sugarbeets purchased, plus unit retains	$	34.67	$	37.73	$	47.12	$	39.44	$	39.89
Sugar hundredweight
Produced		25,453		21,528		22,465		19,947		21,369
Sold, including purchased sugar		27,552		21,735		20,579		22,179		19,702
Purchased sugar sold		798		901		869		490		509
Pulp and molasses tons
Produced		844		679		690		651		643
Sold		961		651		618		638		659

(1)

Net Proceeds are the Company's gross revenues, less the costs and expenses of producing and marketing sugar, agri-products and sugarbeet seed, but before payments to members for sugarbeets. Payments to be made to members for the delivery of sugarbeets are liabilities of the Company. (For a more complete description of the calculation of Net Proceeds, see "Description of Business Growers' Contracts.")

(2)

Calculated by dividing the Company's long term debt, exclusive of the current maturities of such debt, by members' investments.

(3)

Computed by dividing (i) the sum of Net Proceeds plus interest plus depreciation by (ii) the sum of interest plus principal payments. Although the Company does lease certain items, such as some office furniture, office equipment and computers, due to the proportionately small amounts involved, such lease payments have not been included in the total of the Company's Fixed Charges or the calculation of this ratio.

(4)

Information for a fiscal year relates to the crop planted and harvested in the preceding calendar year (e.g., information for the fiscal year ended August 31, 1999 relates to the crop of 1998).

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:

The following discussion of the financial conditions and results of operations of the Company should be read in conjunction with the Company's financial statements and notes thereto included elsewhere in this report.

Liquidity and Capital Resources

    Under the Company's Bylaws and Grower Contracts, payments for member delivered sugarbeets, the principal raw material used in producing the sugar and agri-products it sells, are subordinated to all member business expenses. In addition, actual cash payments to members are spread over a period of approximately one year following delivery of their sugarbeet crops to the Company and are net of unit retains allocated to them, both of which remain available to meet the Company's capital requirements. This member financing arrangement may result in an additional source of liquidity and reduced outside financing requirements in comparison to a similar business operated on a non-cooperative basis. Because sugar is sold throughout the year (while sugarbeets are processed primarily in the fall and winter) and because substantial amounts of equipment are required for its operations, the Company has utilized substantial outside financing on both a seasonal and long-term basis to fund such operations. The majority of such financing has been provided by CoBank. The Company has a long-term debt commitment with CoBank during 1999 of $201.2 million. In addition, the Company has long-term debt outstanding of $50 million from a private placement of Senior Notes that occurred in September of 1998 and $34.8 million from seven separate issuances of Pollution Control and Industrial Development Revenue Bonds. The Company also has a seasonal line of credit with CoBank of $290 million that includes a line of credit with Norwest Bank for $10 million and any amounts obtained through issuance of instruments in its commercial paper program. The Company's commercial paper program provides short-term borrowings of up to $150 million.

Results of Operations

    The U.S. sweetener industry experienced three significant trends during the 1970s and 1980s: increased consumption of non-nutritive sweeteners, principally aspartame; the increased use of high fructose corn syrup (HFCS) as a substitute for refined sugar (sucrose) in certain food products, primarily beverages; and a significant degree of sugar industry consolidation.

    U.S. sugar consumption has continued to expand over the past decade, with domestic demand increasing from 153 million hundredweights in 1988 to 188 million hundredweights in 1999. Growth rates averaged close to 1.6% annually during the 1990's. Sugar consumption growth rates are a function of population growth, which has increased slightly over the past five years, and food market trends. The Company believes that sugar consumption should continue to grow between 1 and 2% in connection with population growth.

    The Company's operational results are substantially dependent on market factors, including domestic prices for refined sugar. These factors are continuously influenced by a wide variety of market forces, including domestic sugarbeet and cane production, weather conditions and United States farm and trade policy, that the Company is unable to predict (see "Item 1. Business—Important Factors ").

    In addition, highly variable weather conditions during the growing, harvesting and processing seasons, as well as diseases and insects, may materially affect the quality and quantity of sugarbeets available for purchase as well as the unit costs of raw materials and processing. Sugar prices were at a premium during 1995 and 1996 due to shortages of domestic sugarbeet production and less than adequate cane refinery capacity to cover this shortfall. Prices for domestic refined sugar declined over the past few years to a level closer to average due to increased sugar supplies.

Comparison of the Years Ended August 31, 1999 and 1998

    Revenue for the year ended August 31, 1999, was $844.0 million, an increase of $167.3 million from 1998. Revenue from total sugar sales increased 27.0%, reflecting a 26.8% increase in hundredweight sold and a .2% increase in the average selling price per hundredweight. Revenue from pulp sales increased 2.8% due to a 30.6% increase in the volume of tons sold, partially offset by a 21.3% decrease in the average selling price per ton. Revenue from molasses sales increased 18.8% due to an 81.3% increase in the volume of molasses sold, partially offset by a 34.5% decrease in the average selling price per ton. Revenue from Concentrated Separated By-Product (CSB) decreased 13.1% due to a 17.4% decrease in the average selling price per ton, partially offset by a 5.2% increase in the volume of CSB sold.

    Cost of product sold, exclusive of payments to members for sugarbeets, increased $73.2 million. This was due to lower inventory levels at the end of 1999 and higher costs related to processing a larger crop. Direct costs increased by 16.8% due to harvesting a 24.9% larger crop and processing 20.6% more sugarbeets. The cost associated with purchased sugar decreased $2.4 million in 1999 compared to 1998, due to more produced sugar available to meet customer requirements. Fixed and committed expenses increased 20.9% primarily due to higher depreciation and maintenance costs.

    Selling expenses increased $35.3 million. The increase is primarily attributable to the increase in the volumes of products sold. General and Administrative expenses increased approximately 7.7% from 1998 due to general cost increases.

    Interest expense increased from $14.4 million for the year ended August 31, 1998, to $22.0 million in 1999. Higher inventory levels throughout most of the year, the processing of a larger crop, and increased term debt to finance capital improvements resulted in higher overall borrowing levels.

    Non-member business activities resulted in a loss of $.5 million for the year ended August 31, 1999, as compared to a loss of $9.7 million in 1998. This change is primarily the result of the gain on the sale in 1999 of certain sugarbeet seed assets to Betaseed, Inc., a wholly owned subsidiary of KWS, and the reduced loss in 1999 as compared to 1998, from the investments in ProGold.

    Payments to members for sugarbeets increased by $34.7 million from $314.1 million for the year ended August 31, 1998 to $348.8 million in 1999. The increase is primarily attributable to a 24.9% increase in tons harvested partially offset by a lower per-ton beet payment.

Comparison of the Years Ended August 31, 1998 and 1997

    Revenue for the year ended August 31, 1998, was $677.0 million, virtually the same as in 1997. Revenue from sugar sales increased 1.8%, reflecting a 5.6% increase in hundredweight sold, offset by a 3.7% decrease in the average selling price per hundredweight. Revenue from pulp sales decreased 18.3% due to a 25.1% decrease in the average selling price per ton, partially offset by a 9.1% increase in the volume of pulp sold. Revenue from molasses sales decreased 14.3% due to a 1.4% decrease in the volume of molasses sold and a 13.1% decrease in the average selling price per ton. Revenue from CSB decreased 8.5% due to a 1.3% decrease in the volume of CSB sold and a 7.4% decrease in the average selling price per ton.

    Cost of product sold, exclusive of payments to members for sugarbeets, increased $64.5 million. This was primarily due to an increase in inventories during 1997, which decreased the cost of product sold in 1997 by $62.1 million. Direct costs increased primarily due to a 2.9% larger crop. The cost associated with purchased sugar decreased $.8 million in 1998 compared to 1997, when the short supply of inventory at the beginning of the fiscal year created a greater need to purchase sugar to meet customer requirements. Fixed and committed expenses increased by 6.4% due to higher depreciation and higher storage costs.

    Selling expenses increased $11.6 million. The increase is attributable primarily to the increase in the freight and packaging costs. General and Administrative expenses were approximately the same as 1997.

    Interest expense decreased from $18.3 million during the year ended August 31, 1997, to $14.4 million for the same period in 1998. This resulted from an increase in pollution control bond interest income, increased bank patronage income along with an increase in interest charged to United Sugars Corporation related to the marketing assets used by that company.

    Non-member business activities resulted in a loss of $9.7 million for the year ended August 31, 1998, as compared to a loss of $18.1 million for the same period in 1997. The majority of this loss is related to the Company's investment in ProGold Limited Liability Company.

    Payments to members for sugarbeets decreased by $61.0 million from $375.1 million during the year ended August 31, 1997 to $314.1 million during the same period in 1998. The decrease is attributable primarily to a lower per-ton beet payment for fiscal 1998.

Comparison of the Year Ended August 31, 1997 and 1996

    Revenue for the year ended August 31, 1997, was $677.0 million, a decrease of $11.0 million from the same period in 1996. Revenue from sugar sales decreased 1.8% reflecting a 7.2% decrease in hundredweight sold and a 5.9% increase in the average selling price per hundredweight. Revenue from pulp sales increased 5.1% due to a 2.9% increase in the volume of pulp sold and a 2.1% increase in the average selling price per ton. Revenue from molasses sales decreased 11.5% due to a 12.3% decrease in the volume of molasses sold partially offset by a .9% increase in the average selling price per ton. Revenue from CSB increased 21.2% due to a 10.3% decrease in the volume of CSB sold and a 35.5% increase in the average selling price per ton.

    Cost of product sold, exclusive of payments to members for sugarbeets, decreased $80.8 million. The decrease was primarily due to the amount of products sold compared to the prior year which was partially offset by increased direct processing costs. Changes in product inventory levels decreased the cost of product sold by $103.0 million. The cost associated with sugar purchased to meet customer needs was up $1.1 million due to the short supply of inventory at the beginning of the fiscal year. Fixed and committed expenses increased by 4.7% due to higher depreciation costs.

    Selling expenses decreased $10.5 million. The decrease is attributable primarily to the decrease in the volume of sugar and agri-products sold. General and Administrative expenses decreased $2.7 million due primarily to lower outside services and other general cost decreases.

    Interest expense increased $7.1 million from $11.2 million during the year ended August 31, 1996, to $18.3 million for the same period in 1997. This resulted from higher average borrowing levels for long and short-term debt.

    Non-member business activities resulted in a loss of $18.1 million for the year ended August 31, 1997 as compared to a loss of $.4 million for the same period in 1996. The majority of this loss is related to the Company's investment in ProGold Limited Liability Company.

    Payments to members for sugarbeets increased by $74.5 million from $300.6 million during the year ending August 31, 1996 to $375.1 million during the same period in 1997. The increase is attributable to a higher per-ton beet payment and an increase in tons harvested.

1999 Crop and Estimated Fiscal Year 2000 Information

    As noted earlier, the agreements between the Company and its members regarding the delivery of sugarbeets to the Company require payment for members' sugarbeets in three installments throughout the year after harvest of the applicable sugarbeet crop. As only the final payment is made after the close of the fiscal year in question, the first two payments to members for their sugarbeets are, of necessity, based upon the Company's then-current estimates of the Net Beet Payment arising from the processing of the crop in question and the subsequent sale of the products obtained from processing those sugarbeets.

    This discussion contains a summary of the Company's current estimates of the financial results to be obtained from the Company's processing of the 1999 sugarbeet crop. Given the nature of the estimates required in connection with the payments to members for their sugarbeets, this discussion includes forward-looking statements regarding the quantity of sugar to be produced from the 1999 sugarbeet crop, the net selling price for the sugar and agri-products produced by the Company and the Company's operating costs. These forward-looking statements are based largely upon the Company's expectations and estimates of future events; as a result, they are subject to a variety of risks and uncertainties. Some of those estimates, such as the selling price for the Company's products and the quantity of sugar produced from the sugarbeet crop, are beyond the Company's control. The actual results experienced by the Company could differ materially from the forward-looking statements contained herein. As indicated above, the Company will prepare new, then-current estimates in connection with the payment to the members of the second installment of the Net Beet Payment. That installment is expected to be made to the members with respect to the 1999 sugarbeet crop on or about March 31, 2000.

    The completed harvest of the sugarbeet crop grown during 1999 produced a total of 9.7 million tons of sugarbeets, or approximately 19.9 tons of sugarbeets per acre from approximately 487,000 acres. That production exceeded 17.8 tons per acre, which is the ten-year average of tons per acre for crops grown in the years 1989 through 1998. The sugar content of the 1999 crop is 17.37% in comparison to a ten year average for the applicable period of approximately 17.36%. The Company expects to produce a total of approximately 26.4 million hundredweight of sugar from the 1999 crop, an increase of approximately 3.6% compared to the 1998 crop. Such sugar production provides a total sugar recovery of approximately 273 pounds of sugar for each ton of sugarbeets harvested by the Company.

    The Company's anticipated recovery of sugar from each ton of sugarbeets results in expected sugar revenue per ton of sugarbeets in an amount equal to $60.99 per ton.

    The Company's sales of sugar must be added to the revenue produced by the agri-products: molasses, sugarbeet pulp and concentrated separated by-product to determine the net beet payment. The Company's estimates of additional revenue from those sources would be $3.18 per ton of sugarbeets.

    From the revenues generated from the sale of products produced from each ton of sugarbeets must be deducted the Company's operating costs, which are currently estimated to be $29.17 per ton. The deduction of those operating costs results in an estimated gross beet payment of $35.00 per ton of sugarbeets. With the deduction of an anticipated unit retain of $2.00 per ton for the fiscal year ending on August 31, 2000, the Company's current estimated Net Beet Payment is $33.00 per ton of sugarbeets. If successful in achieving the estimated results, the Company's Net Beet Payment will be lower than the ten year average Net Beet Payment by approximately $6.86 per ton.

Year 2000 Compliance

    The Company has made extensive efforts to become year 2000 compliant. The Company has completed a year 2000 compliance plan, and to the best of its knowledge, all of its critical internal information technology and non-information technology systems will be year 2000 compliant by December 31, 1999. The Company has incurred approximately $60,000 in expenses during the fiscal year to resolve the remaining year 2000 compliance issues. The Company has also spent approximately $148,000 during the 1999 fiscal year for new software and hardware.

    In February, 1997, a new Enterprise Resource Planning ("ERP") computer software package and related hardware was installed which made most of the company-wide computer systems and its hardware compliant for the year 2000. This package included software for the financial applications such as accounts payable, accounts receivable and general ledger as well as costing, project accounting, sales and distribution, plant maintenance, and production planning. The payroll and human resources software has also been upgraded to be year 2000 compliant and is running on hardware that is also year 2000 compliant.

    Work has also been completed at the Company's factories to ensure the systems and controls used in the day-to-day production of sugar will not be adversely effected by year 2000 problems.

    A Year 2000 Assessment Team was formed with representation from various locations and departments, information services functions as well as two of the Company's associated companies, United Sugars Corporation and Midwest Agri-Commodities Company. The team has gone through the process of assessing what additional systems the Company uses and if there are any year 2000 compliance problems. The systems that were determined to be non-compliant were examined, risk assessed and action was taken as deemed appropriate and necessary.

    A lack of year 2000 compliance, on the part of a supplier of the Company, however, may adversely affect the operations and financial performance of the Company by causing complications of, or otherwise affecting, the operations of the Company. The Company has contacted its significant suppliers and customers as part of its year 2000 compliance plan. The Company's goal was to identify any potential year 2000 compliance issues with the enterprises with whom the Company does business. Although the results of this effort indicate that many of the Company's customers and suppliers expect to be year 2000 compliant, the Company is currently unable to predict the magnitude of the operational and financial impact on the Company if year 2000 compliance issues with the Company's suppliers and customers arise. In the ordinary course of business, the Company keeps a supply of maintenance parts and supplies and stockpiles of coal, coke and limerock. In anticipation of any stoppage or delay in delivery of these supplies, the Company will increase these stockpiles to allow the Company to continue production for a limited period of time.

Item 7a.  Quantitative and Qualitative Disclosures about Market Risk

    Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, exchange rates, commodity prices, equity prices and other market changes. Market risk is attributed to all market-risk sensitive financial instruments, including long term debt.

    The Company does not believe that there is any material market risk exposure with respect to interest rates, exchange rates, commodity prices, equity prices and other market changes that would require disclosure under this item.

Item 8.  FINANCIAL STATEMENTS

    The financial statements of the Company for the fiscal years ended August 31, 1999, 1998 and 1997 have been audited by Eide Bailly LLP, independent certified public accountants. Such financial statements have been included herein in reliance upon the report of Eide Bailly LLP. The financial statements of the Company are included in Appendix A to this annual report.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

    None

PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS

Board of Directors

    The Board of Directors of the Company consists of three directors from each of the five factory districts. Directors must be common shareholders or representatives of common shareholders belonging to the district they represent and are elected by the members of that district. In the case of a common shareholder who is other than a natural person, a duly appointed or elected representative of such common shareholder may serve as a director. The directors have been elected to serve three-year terms expiring in December of the years indicated in the table below. One director is elected each year from each factory district.

    The table below lists certain information concerning current directors of the Company.

Name and Address	Year of Birth	Factory District	Director Since	Term Expires Dec.
Michael A. Astrup	1953	Moorhead	1996	2002*
Box 219
Dilworth, MN 56529
Jerry D. Bitker	1948	Hillsboro	1996	2002*
1694 Co. Highway #19
Halstad, MN 56548
Richard Borgen	1949	Moorhead	1997	2000
1544 Co. Highway #39
Perley, MN 56574
Aime J. Dufault	1954	East Grand Forks	1990	2000
RR 1, Box 162
Argyle, MN 56713
Steven M. Goodwin	1958	East Grand Forks	1995	2001
RR 3, Box 116
Angus, MN 56712
Court G. Hanson	1948	Hillsboro	1993	2001
RR 2, Box 1
Blanchard, ND 58009
Lonn M. Kiel	1953	Crookston	1994	2000
RR 3, Box 71
Crookston, MN 56716
David J. Kragnes	1952	Moorhead	1995	2001
10600 60th St. N.
Felton, MN 56536
Francis L. Kritzberger	1945	Hillsboro	1996	2000
RR #1, Box 22
Hillsboro, ND 58045
Wayne Langen (Chairman)	1939	Drayton	1988	2000
Box 133
Kennedy, MN 56733
Patrick D. Mahar	1942	Drayton	1993	2002*
RR 1, Box 363
Cavalier, ND 58220-9789
Ronald E. Reitmeier	1945	Crookston	1996	2002*
RR 1, Box 49
Fisher, MN 56723
Jim A. Ross	1950	Crookston	1998	2001
RR 1, Box 5
Fisher, MN 56723
G. Terry Stadstad	1943	East Grand Forks	1993	2002*
1774 22nd Avenue NE
Grand Forks, ND 58203
Robert Vivatson (Vice Chairman)	1949	Drayton	1992	2001
PO Box 631
Cavalier, ND 58220

*

These Directors were all re-elected for additional terms at the 1999 Factory District meetings held in November 1999. Their terms will now expire in 2002.

    Michael A. Astrup. Mr. Astrup has been a director since 1996. He has been a farmer near Dilworth, Minnesota, since 1977. He serves on the Board of Directors for the American Sugarbeet Growers Association.

    Jerry D. Bitker. Mr. Bitker has been a director since 1996 and has been a farmer since 1974 near Halstad and Ada, Minnesota.

    Richard Borgen. Mr. Borgen has been a director since 1997. He has farmed east of Perley, Minnesota since 1967 and has served as a director on the Perley Co-op Elevator Board for nine years and the Norman County West school board for 10 years.

    Aime J. Dufault. Mr. Dufault has been a director since 1990. He has farmed near Argyle, Minnesota since 1974. Mr. Dufault serves on the Board of Directors for Midwest Agri-Commodities Company.

    Steven M. Goodwin. Mr. Goodwin has been a director since 1995. Mr. Goodwin has been a farmer since 1980 and owns and operates a farm near Angus, Minnesota.

    Court G. Hanson. Mr. Hanson has been a director since 1993 and has been a farmer since 1971. Mr. Hanson is president of C. Hanson Farm, Inc., operating near Blanchard, North Dakota. Prior to farming, Mr. Hanson was an assistant national bank examiner from 1970 to 1973.

    Lonn M. Kiel. Mr. Kiel has been a director since 1994 and has been farming near Crookston, Minnesota since 1982. He is the president of Kiel Corporation and also serves on the Board of Directors of the Crookston Fuel Company.

    David J. Kragnes. Mr. Kragnes has been a director since 1995. Mr. Kragnes has been a farmer since 1972, with his farming operation located near Felton, Minnesota. Mr. Kragnes is a director for the American Sugarbeet Growers Association.

    Francis L. Kritzberger. Mr. Kritzberger has been a director since 1996. He has previously served as a director with the Company, from July 30, 1989 until July 30, 1993. Mr. Kritzberger has been a farmer since 1964. He serves on the Board of Directors of the North Dakota Council of Cooperatives.

    Wayne Langen. Mr. Langen has been a director since 1988 and a farmer since 1963. Mr. Langen is a partner of Langen Bros. Joint Venture and operates its farming operations near Kennedy, Minnesota. Mr. Langen serves on the Board of Directors of Kennedy Farmers Elevator Company, United Sugars Corporation and Midwest Agri-Commodities Company and on the Board of Governors of ProGold Limited Liability Company.

    Patrick D. Mahar. Mr. Mahar has been a director since 1993 and has been a farmer since 1962. He is currently a partner of Mahar Farms near Cavalier, North Dakota. Mr. Mahar previously served as president of the Red River Valley Sugarbeet Growers Association, Fargo, North Dakota, and as president of the American Sugarbeet Growers Association, Washington, D.C. Mr. Mahar is currently serving as a director for Midwest Agri-Commodities Company and also on the Boards of Directors of First State Bank and Farmers Co-op Elevator, both of Cavalier, North Dakota.

    Ronald E. Reitmeier. Mr. Reitmeier has been a director since 1996, and has been a farmer since 1968. He previously served on the Board of Directors of PKM Electric Co-op for ten years.

    Jim A. Ross. Mr. Ross has been a director since 1998. Mr. Ross has farmed near Fisher, Minnesota since 1971 and is a board member of Fisher Fuel and Hardware Cooperative.

    G. Terry Stadstad. Mr. Stadstad has been a director since 1993 and has been farming near Grand Forks, North Dakota since 1965. Mr. Stadstad serves on the Board of Directors of United Sugars Corporation.

    Robert Vivatson. Mr. Vivatson has been a director since 1992. Operating as a farmer near Cavalier, North Dakota since 1975, Mr. Vivatson is a partner of Vivatson Bros. and president of Vivatson Farms Inc. Mr. Vivatson is serving on the Board of Directors of First State Bank, Cavalier, North Dakota and on the Board of Governors of ProGold Limited Liability Company and United Sugars Corporation.

    The Board of Directors meets monthly. The Company provides its directors with compensation consisting of (i) a payment of $200 per month, (ii) a per diem payment of $200 for each day spent on Company activities, including board meetings and other Company functions, and (iii) reimbursement of expenses for attendance at Board of Directors' meetings. The Chairman of the Board of Directors receives a payment of $500 per month, rather than $200 per month; the Chairman also receives a per diem in the amount of $200 for each day spent on Company activities.

Executive Officers

    The table below lists the principal officers of the Company, none of whom owns any shares of Common or Preferred Stock. Officers are elected annually by the Board of Directors.

Name	Year of Birth	Position
James J. Horvath	1945	Chief Executive Officer
James W. Dudley	1950	Vice President—Agriculture
Joseph J. Talley	1960	Vice President—Finance
David A. Berg	1954	Vice President—Administration
David A. Walden	1953	Vice President—Operations
Daniel C. Mott	1959	Secretary
Samuel S. M. Wai	1953	Treasurer and Assistant Secretary
Thomas S. Astrup	1968	Corporate Controller, Assistant Secretary and Assistant Treasurer
Mark L. Lembke	1955	Assistant Secretary & Assistant Treasurer
Ronald K. Peterson	1955	Assistant Secretary & Assistant Treasurer
David L. Malmskog	1957	Assistant Secretary & Assistant Treasurer

    James J. Horvath. Mr. Horvath was named Chief Executive Officer in May, 1998. He served as Chief Financial Officer from 1996 to 1998. From 1994 to 1996, Mr. Horvath served as the Company's Vice President—Joint Ventures as well as Chief Manager and Chief Operating Officer of ProGold Limited Liability Company. Mr. Horvath also served as the Company's Vice President—Finance from 1985 to 1994. Mr. Horvath currently serves on the Boards of Directors of United Sugars Corporation and Midwest Agri-Commodities Company.

    James W. Dudley. Mr. Dudley was appointed Vice President—Agriculture in January, 1998. He had served as Vice President—Operations, Factory Operations Manager and Regional Manager from 1985 through 1997.

    Joseph J. Talley. Mr. Talley was named Vice President—Finance in 1998. He served as the Company's Treasurer and Finance Director, Assistant Treasurer and Assistant Secretary from 1996 until his appointment as Vice President—Finance. Mr. Talley served as Finance Director of ProGold Limited Liability Company from 1994 through 1996. He currently serves on the Board of Governors for ProGold Limited Liability Company and on the Board of Directors of Midwest Agri-Commodities Company. Prior to July 1994, Mr. Talley was a partner with the accounting firm of Eide Helmeke PLLP.

    David A. Berg. Mr. Berg served as a Factory Shift Supervisor and Packaging and Warehousing Superintendent during 1998 as part of a development assignment. In October 1998, he was named Vice President—Administration. During the period from 1994 to 1998, Mr. Berg served as the Company's Vice President—Business Development, Vice President—Strategic Planning, Director—Market Information, Manager of Marketing and Analysis and Manager—Economic Research. He currently serves on the Domestic Sugar Committee of the New York Coffee, Sugar and Cocoa Exchange which oversees the administration and regulatory compliance of sugar futures contracts traded on the Exchange.

    David W. Walden. Mr. Walden was elected Vice President of Operations in January 1998. He served as Production Manager from 1995 until 1998. He joined the Company in 1979 as a Resident Engineer at the Crookston facility and has held positions of Engineering and Maintenance Superintendent, Production Superintendent, Assistant Operations Manager and Maintenance Manager. Mr. Walden also serves as the chairman of the Board of Managers of Crystech LLC.

    Daniel C. Mott. Mr. Mott became the Company's Secretary during 1999. Previously, he had served as Assistant Secretary since 1995. He is a Partner in the law firm of Oppenheimer Wolff & Donnelly LLP. The firm acts as corporate counsel to the Company. Mr. Mott is not an employee of the Company.

    Samuel S. M. Wai. Mr. Wai was named the Company's Treasurer and Assistant Secretary in 1999. He served as the Company's Corporate Controller from 1996 until 1999 and was the Company's Treasurer from 1985 to 1996. He held various financial positions with the Company from 1979 to 1985. Mr. Wai also serves on the Board of Managers of Crystech LLC and as Treasurer of the American Crystal Sugar Political Action Committee. Mr. Wai also serves on the Board of Directors of the Institute of Cooperative Financial Officers.

    Thomas S. Astrup. Mr. Astrup currently serves as the Company's Corporate Controller, Assistant Treasurer and Assistant Secretary. From 1997 until 1999, he held the position of Controller for Midwest Agri-Commodities Company. He was also the Corporate Accountant for ProGold Limited Liability Company from 1994 to 1997.

    Mark L. Lembke. Mr. Lembke was named Assistant Secretary and Assistant Treasurer in 1996. He currently serves as Finance Administration Manager. Mr. Lembke served as the Company's Corporate Accounting Manager from 1995 to 1999. From 1987 through 1995, Mr. Lembke served as Factory Accounting Supervisor.

    Ronald K. Peterson. Mr. Peterson has served as Assistant Treasurer and Assistant Secretary since 1993. He currently holds the position of Accounting and Systems Manager. From 1996 to 1999 Mr. Peterson was the Financial Systems Manager and from 1991 to 1995 served as the Company's Corporate Accounting Manager. Mr. Peterson has held various financial positions with the Company since 1979. He is also the Assistant Treasurer for American Crystal Sugar Political Action Committee.

    David L. Malmskog. Mr. Malmskog currently serves as Director—Business Development and was appointed Assistant Secretary and Assistant Treasurer in 1998. Mr. Malmskog has held various financial positions with the Company since 1980.

Item 11.  EXECUTIVE COMPENSATION

    The following table summarizes the amount of compensation paid for services rendered to the Company during the fiscal year ended August 31, 1999 and the two prior fiscal years to those persons serving as the Company's Chief Executive Officer and to the four other most highly compensated current executive officers of the Company whose cash compensation exceeded $100,000 per annum. Information is also included for two executive officers who retired during 1999.

SUMMARY COMPENSATION TABLE

	Annual Compensation				Long-Term Compensation Payouts
	Year	Salary ($)	Incentive Compensation ($)	Other Annual Compensation ($)(1)	LTIP Payouts ($)(2)	All Other Compensation ($)(3)
James J. Horvath Chief Executive Officer*	1999 1998 1997	$388,840 $270,031 $216,228	$103,000 $64,556 $97,943	$34,249 $51,354 $37,958	$4,197 $19,546 $45,925
David A. Berg Vice President—Administration	1999 1998 1997	$152,994 $138,412 $124,211	$39,000 $35,053 $56,084	$14,735 $15,180 $11,527	$1,852 $8,624 $20,261
James W. Dudley Vice President—Agriculture	1999 1998 1997	$177,900 $176,034 $160,423	$30,000 $35,580 $72,776	$15,987 $28,713 $20,042	$3,456 $16,096 $37,820
Joseph J. Talley Vice President—Finance**	1999 1998 1997	$154,231 $133,992 $119,927	$49,008 $25,584 $32,708	$12,594 $8,135 $5,819
David A. Walden Vice President—Operations***	1999 1998 1997	$158,561 $126,765 $104,540	$35,000 $22,796 $28,440	$14,966 $10,311 $8,164
Lawrence L. Mathias	1999	$98,118	$—	$18,599	$3,333	$205,718
Vice President—Human Resources	1998	$177,192	$35,558	$52,797	$15,522
and Public Relations (Retired)****	1997	$171,483	$69,044	$42,840	$36,470
Marcus F. Richardson(4)	1999	$128,163	$75,000	$28,790	$10,425	$377,823
Chief Operating Officer	1998	$263,339	$52,897	$90,265	$47,713
(Retired)****	1997	$253,453	$114,550	$71,718	$112,111

*	Effective May 15, 1998
**	Effective May 27, 1998
***	Effective January 6, 1998
****	Effective January 2, 1999

(1)

Includes the cost of additional life insurance coverage, use of a company car, costs of tax return preparation, Company 401(k) matching contributions, Company matching SERP contributions, car allowances, flexible spending taxable cash, and flexible spending dollars into 401(k).

(2)

Represents the sum of (i) dollar value at $1,500 per share of contract rights with respect to the vested portion of contract rights granted to the executive under the company's LTIP plan (described below) during the fiscal year; and (ii) "profit per acre payments" made to the executive under the Company's LTIP plan. The profit per acre payments are determined by subtracting from the Company's beet payment per acre the average cost of production per acre incurred by the Company's members and multiplying the result by the number of contract rights held by the executive.

(3)

Represents cash payments made pursuant to Retirement and Release Agreements between the Company and Lawrence L. Mathias and between the Company and Marcus F. Richardson.

Employment Agreement with CEO

    Effective May 15, 1998, the Company and Mr. Horvath entered into an agreement regarding Mr. Horvath's employment by the Company. The agreement provides that Mr. Horvath shall serve as an "at will" employee at the pleasure of the Board of Directors. The agreement also contains the provision of a three-year non-compete/non-solicitation agreement with Mr. Horvath. Among other terms, the agreement establishes Mr. Horvath's base compensation at $388,840 per year, and also provides that he may participate in other benefit plans offered by the Company. If the Board of Directors terminates Mr. Horvath's employment with the Company without cause, Mr. Horvath shall receive of severance payment equal to three (3) years of Mr. Horvath's base compensation.

    If the Board of Directors terminates Mr. Horvath's employment with the Company without cause after age 60 or he incurs a termination due to disability, Mr. Horvath is entitled to receive reimbursement for the cost of medical and dental coverage for himself and his spouse from the date of termination through their respective deaths; life insurance coverage to age 59¹/2 equal to his base salary on the date of termination, from age 65 to 70 equal to 50% of his base salary on the date of termination, and after age 70 equal to 25% of his base salary on the date of termination; and supplemental pension benefits equal to the difference between the cumulative monthly amount of the retirement benefit Mr. Horvath would have received under Retirement Plan A and the Supplemental Executive Retirement Plan (SERP) computed as though Mr. Horvath continued his employment to age 65 and had attained 30 years of service, and the cumulative monthly amount of the retirement benefits actually paid to Mr. Horvath under Retirement Plan A and the Supplemental Executive Retirement Plan (SERP).

    If the Board of Directors terminates Mr. Horvath's employment with the Company without cause before age 55 or he incurs a termination due to disability, Mr. Horvath is entitled to receive supplemental early retirement benefits equal to the difference between the cumulative monthly amount of the retirement benefit Mr. Horvath would have received under Retirement Plan A and the Supplemental Executive Retirement Plan (SERP) computed as though Mr. Horvath continued his employment to age 55 and assuming compensation equal to that in effect as of the termination date with no reduction in benefits for death benefits payable to Mr. Horvath's spouse, and the cumulative monthly amount of the retirement benefits actually paid to Mr. Horvath under Retirement Plan A and the Supplemental Executive Retirement Plan (SERP) assuming commencement at age 55.

    If the Board of Directors terminates Mr. Horvath's employment with the Company without cause after age 60 and Mr. Horvath subsequently dies, or if Mr. Horvath dies prior to terminating his employment with the Company, Mr. Horvath's spouse is entitled to receive monthly payments for the remainder of her life equal to the difference between the cumulative monthly amount of the retirement benefit Mr. Horvath would have received under Retirement Plan A and the Supplemental Executive Retirement Plan (SERP) computed as though Mr. Horvath continued his employment to age 65 and had attained 30 years of service, and the cumulative monthly amount of the retirement benefits actually payable to his spouse under Retirement Plan A and the Supplemental Executive Retirement Plan (SERP).

Incentive Plans

    Certain management employees are entitled to participate in an incentive program that provides for cash awards based partially on the performance of the Company and partially on achievement of certain management performance objectives. The performance objectives of the CEO are determined by the Board of Directors. The performance objectives of other executives are determined by the CEO. An executive is not eligible for any awards under the incentive program if that executive's performance for the applicable fiscal year is rated as "unsatisfactory." The amount of the incentive bonus is dependent on the executive's responsibilities, the performance of the Company and the results of the executive's evaluation for the fiscal year.

    Effective September 1, 1995, the Company adopted a Long Term Incentive Plan ("LTIP") which provides deferred compensation to certain key executives of the Company. The LTIP created financial incentives that reward executives for long-term commitment to the Company and for successfully implementing the Company's long-term growth strategies. Such incentives are based upon contract rights which are available to the executive under the terms of the LTIP, the value of which is related to the value of preferred shares of the Company. The LTIP allows participants to purchase a limited number of contract rights at the end of each three-year cycle. The LTIP establishes both minimum and maximum ownership levels. When an executive reaches his minimum ownership level, he or she may sell any vested shares over the minimum to any qualified grower. The executive or his estate may also sell any vested shares at the time of his termination, disability or death. At the point of sale, the contract right becomes a share of Preferred Stock which the Company issues to the purchasing grower. The executive receives the proceeds of the sale, less appropriate taxes. The long-term cost of the stock will not be to the Company, but to the grower who eventually purchases the stock from the executive. The LTIP also provides for annual payments of "profit per acre payments" to executives holding contract rights. The profit per acre payments are determined by subtracting from the Company's beet payment per acre the average cost of production per acre incurred by the Company's members and multiplying the result by the number of contract rights held by the executive. The contract rights acquired under this plan terminate five years after the executive's employment with the Company is terminated, if not exercised by the executive.

    A total of 717 contract rights have been granted under the plan. The table below lists executives named in the executive compensation table who have been granted and hold contract rights with respect to the number of shares set forth below. Each contract right listed below carried a stated value upon grant of $1,485 per share; the current stated value is $1,500 per share.

Long-Term Incentive Plan Awards in Last Fiscal Year

Executive Officers	Contract Rights	Representative Payout(1)
Marcus F. Richardson	249	$	10,245
James J. Horvath	102	$	4,197
James J. Dudley	28	$	3,456
Lawrence L. Mathias	81	$	3,333
David A. Berg	45	$	1,852

(1)

The amount shown represents a representative amount, determined for the last fiscal year, with respect to "profit per acre payments", which are non-stock price based payments. The profit per acre payments are determined by subtracting from the Company's beet payment per acre the average cost of production per acre incurred by the Company's members and multiplying the result by the number of contract rights held by the executive. Based on that formula, the Company must provide a beet payment per acre to its members equal to the average cost of production for an acre of sugarbeets in order for executives holding contract rights to obtain any payment of profit per acre payments. Given the method of determining the profit per acre payments, there is no maximum payment amount.

    To date, only Mr. McCarty, the former CEO, has exercised his contract rights, having sold 155 contract rights in May, 1998.

    Contract rights were available under the LTIP with regard to fiscal years 1996, 1997, and 1998. Contract rights are no longer being made available to the executives under the LTIP. However, the profit per acre payments discussed above will continue to be made under the terms of the plan for so long as participants remain in the plan.

    In June of 1999, the Board of Directors adopted a new Long-Term Incentive Plan which is effective with respect to fiscal year 2000. Under the new plan, awards will be based upon progress towards achieving certain long-term strategic objectives established by the Board of Directors. Incentive awards under the plan will range from 0 to 40% of base compensation for the Vice Presidents and from 0 to 80% of base compensation for the President. The actual amount of the award available to a given individual will be based upon that individual's performance level. Awards paid under the plan may be paid in the form of cash paid to the employee's Supplemental Executive Retirement Plan, as discussed below, or in the form of contract rights to be paid in a manner consistent with the LTIP discussed above, in each case as determined by the Board of Directors. All awards will be subject to a three year vesting schedule. The Board of Directors retains the discretion to determine the amount of any cash awards and/or contract rights to be made available to plan participants with respect to a given fiscal year.

Retirement Plans

    The Company has established noncontributory, defined benefit retirement plans which are available to all eligible employees of the Company. Those employees who are covered by a collective bargaining agreement participate in Plan B, while employees who are not subject to a collective bargaining agreement, including the executive officers listed on the Summary Compensation Table, participate in pension Plan A. The benefits of the plans are funded by periodic Company contributions to a retirement trust which invests the Company's contributions and the earnings from such contributions in order to pay the benefits to the employees. The plans provide for the payment of monthly retirement benefits determined under a calculation based on years of service and a participant's compensation. Retirement benefits are paid to participants upon normal retirement at the age of 65 or later or upon early retirement. The plans also provide for the payment of certain disability and death benefits.

    Effective September 1, 1994, certain executive employees of the Company became eligible to participate in a "Supplemental Executive Retirement Plan." Subject to the discretion of the Board of Directors, the plan provides for the Company to credit to the account of each executive eligible to participate in the Supplemental Plan amounts equal to (i) the difference between amounts actually contributed to the Company's 401(k) plan on behalf of the executive and the amounts which could have been contributed if certain provisions of the Internal Revenue Code did not prohibit the contribution of such amounts and (ii) the difference between the benefits actually payable to the executive under the provisions of Retirement Plan "A" and the amounts which would be payable under Retirement Plan "A" if certain provisions of the Internal Revenue Code did not prohibit the payment of such benefits. In addition, the executive may elect to defer a portion of his or her compensation, ranging from 2% to 16%, by regular payroll deductions under the Supplemental Plan, and may also defer 100% of all bonus and profits-per-acre payments. The Supplemental Plan is an "unfunded" plan, with all amounts to be paid under the Supplemental Plan to be paid from the general assets of the Company when due and also to be subject to the claims of the Company's creditors.

    The table below shows the approximate annual pension benefits payable to executive officers at normal retirement under Retirement Plan A, as well as a non-qualified supplemental benefit plan. The compensation covered by the pension program is based on an employee's annual salary and bonus. Amounts payable are computed on the basis of a straight life annuity and are not reduced for social security benefits or other offsets.

American Crystal Sugar Company
1999 Calculation
Plan A Qualified and Non-Qualified Supplemental Benefits

	Years of Service
Remuneration
	15		20		25		30		35
$125,000	$	24,266	$	32,355	$	40,443	$	48,532	$	48,532
$150,000	$	29,516	$	39,355	$	49,193	$	59,032	$	59,032
$175,000	$	34,766	$	46,355	$	57,943	$	69,532	$	69,532
$200,000	$	40,016	$	53,355	$	66,693	$	80,032	$	80,032
$225,000	$	45,266	$	60,355	$	75,443	$	90,532	$	90,532
$250,000	$	50,516	$	67,355	$	84,193	$	101,032	$	101,032
$300,000	$	61,016	$	81,354	$	101,693	$	122,032	$	122,032
$400,000	$	82,016	$	109,355	$	136,693	$	164,032	$	164,032
$500,000	$	103,016	$	137,355	$	171,693	$	206,032	$	206,032

    The five executive officers named in the Summary Compensation Table who are currently employees of the Company, have years of service under the plan as follows: Mr. Horvath has served for 14 years; Mr. Dudley has served for 15 years; Mr. Walden has served for 20 years; Mr. Berg has served for 12 years; and Mr. Talley has served for 5 years.

    The Company maintains Section 401(k) plans that permit employees to elect to set aside, on a pre-tax basis, a portion of their gross compensation in trust to pay future retirement benefits. The Company matches 100% of the nonunion and union year-round participant's contribution up to 4% and 2% respectively of their gross earnings. The total annual pre-income tax addition to any employees' account in any calendar year may not exceed the lesser of (i) $30,000 or (ii) 25% of annual compensation less the amount of the contribution and any salary conversion. During 1999, the employee pre-income tax contribution was limited to $10,000. An employee may also contribute up to 10% of his annual compensation on an after-tax basis. Benefits under the 401(k) plans begin to be paid to the employee upon the close of the plan year in which one of the following events has occurred: the date the employee attains age 59¹/2, the date the employee terminates his service with the employer and the date specified in a written election made by the employee to receive benefits no later than April 1 of the year following the calendar year in which the employee retires, dies, becomes disabled, reaches age 70¹/2 or is terminated.

Arrangements with Retired Officers

Marcus Richardson

    Effective December 31, 1998, the Company and Mr. Richardson entered into a "Retirement and Release Agreement." The agreement provides that Mr. Richardson will retire from his employment with the Company effective as of January 2, 1999 in return for the Company agreeing to the following terms.

    The Company agreed to reimburse Mr. Richardson and his spouse for the cost of continuing medical and dental coverage from the Company through their respective deaths. The Company agreed to provide life insurance coverage for Mr. Richardson of at least $265,000 until he reaches age 65, at least $132,500 from ages 65 to 70, and at least $66,250 from age 70 until his death. Furthermore, the Company agreed to pay Mr. Richardson a monthly payment from the date of his retirement equal to the monthly Social Security benefit which would be payable to Mr. Richardson when he reaches age 62.

    Additionally, the Company agreed to provide a supplemental benefit equal to the difference between the qualified and nonqualified retirement benefit. The nonqualified benefit is calculating without a compensation cap and assuming Mr. Richardson continued his employment until he attained age 65 at the agreed upon salary, completed 30 years of accrual service, with no reduction for survivor death benefits payable to his wife. In the event of Mr. Richardson's death, his surviving spouse would receive a monthly benefit equal to the monthly benefit Mr. Richardson was receiving at the time of his death.

Lawrence Mathias

    Effective January 2, 1999, the Company and Mr. Mathias entered into a "Retirement and Release Agreement." The agreement provides that Mr. Mathias will retire from his employment with the Company effective as of January 2, 1999 in return for the Company agreeing to the following terms.

    The Company agreed to reimburse Mr. Mathias and his spouse for the cost of continuing medical and dental coverage from the Company through their respective deaths. The Company agreed to provide life insurance coverage for Mr. Mathias of at least $178,000 until he reaches age 62. Furthermore, the Company agrees to pay Mr. Mathias a monthly payment from the date of his retirement equal to the monthly Social Security benefit which would be payable to Mr. Mathias when he reaches age 62. Additionally, the Company agrees to provide a supplemental benefit equal to the difference between the qualified and nonqualified retirement benefit. The nonqualified benefit is calculating without a compensation cap assuming Mr. Mathias continued his employment until he attained age 62 at the agreed upon salary, completed 30 years of accrual service, with no reduction for survivor death benefits payable to his wife.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    Under state law and the Company's Bylaws, each member of the cooperative is entitled to one vote, regardless of the number of shares the member holds. The Common Stock of the Company is voting stock and each member of the Company holds one share of Common Stock. The Preferred Stock of the Company is non-voting stock. The Company's stock can only be held by individuals who are sugarbeet growers. None of the officers or executives of the Company hold stock of the Company. As of the date hereof, no director owns beneficially more than 1% of the Company's issued and outstanding Preferred Stock and the directors, as a group, beneficially own less than 2% of the Company's issued and outstanding Preferred Stock. To the best of the Company's knowledge, no other party beneficially owns more than 2% of the Company's Preferred Stock.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Each of the Company's directors is also a sugarbeet farmer and a shareholder member or representative of a shareholder member of the Company. By virtue of their status as such members of the Company, each director or the member he represents sells sugarbeets to the Company and receives payments for those sugarbeets. Such payments for sugarbeets often exceed $60,000. However, such payments are received by the directors or the entities they represent on exactly the same basis as payments are received by other members of the Company for the delivery of their sugarbeets. Except for the sugarbeet sales described in the preceding sentences, none of the directors or executive officers of the Company have engaged in any other transactions with the Company involving amounts in excess of $60,000.

PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)

Documents filed as part of this report



1.

Financial Statements
Report of Independent Auditors
Balance Sheets as of August 31, 1999 and 1998
Statements of Operations for the Years Ended August 31, 1999, 1998 and 1997
Statements of Changes in Members' Investment for the Years Ended August 31, 1999, 1998 and 1997
Statements of Cash Flows for the Years Ended August 31, 1999, 1998 and 1997
Notes to Financial Statements



2.

Financial Statement Schedules
None



3.

The exhibits to this Annual Report on Form 10-K are listed in the Exhibit Index on pages E-1 to E-4 of this report




The following management contract is required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c):

Employment Agreement between the Company and James J. Horvath

(b)

Reports on Form 8-K




None

(c)

Exhibits




The response to this portion of Item 14 is included as a separate section of this Annual Report on Form 10-K.

SIGNATURES

    Pursuant to the requirements of Section 13 or 15 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 26, 1999.

AMERICAN CRYSTAL SUGAR COMPANY
By:	/s/ JAMES J. HORVATH
	Chief Executive Officer

Dated: November 26, 1999

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature	Title	Date
/s/ JAMES J. HORVATH	Chief Executive Officer (Principal Executive Officer)	November 26, 1999
/s/ JOSEPH J. TALLEY	Vice President-Finance (Principal Financial and Accounting Officer)	November 26, 1999
/s/ MICHAEL A. ASTRUP	Director	November 26, 1999
/s/ JERRY D. BITKER	Director	November 26, 1999
/s/ RICHARD BORGEN	Director	November 26, 1999
/s/ AIME J. DEFAULT	Director	November 26, 1999
/s/ STEVEN M. GOODWIN	Director	November 26, 1999
/s/ COURT G. HANSON	Director	November 26, 1999
/s/ LONN M. KIEL	Director	November 26, 1999
/s/ DAVID J. KRAGNES	Director	November 26, 1999
/s/ FRANCIS L. KRITZBERGER	Director	November 26, 1999
/s/ WAYNE LANGEN	Director	November 26, 1999
/s/ PATRICK D. MAHAR	Director	November 26, 1999
/s/ RONALD E. REITMEIER	Director	November 26, 1999
/s/ JIM A. ROSS	Director	November 26, 1999
/s/ G. TERRY STADSTAD	Director	November 26, 1999
/s/ ROBERT VIVATSON	Director	November 26, 1999

APPENDIX A

INDEX TO FINANCIAL STATEMENTS

AMERICAN CRYSTAL SUGAR COMPANY
FINANCIAL STATEMENTS:
Report of Independent Auditors	A-2
Statements of Operations for the Years Ended August 31, 1999, 1998 and 1997	A-3
Balance Sheets as of August 31, 1999 and 1998	A-4
Statements of Changes in Members' Investment for the Years Ended August 31, 1999, 1998 and 1997	A-6
Statements of Cash Flows for the Years Ended August 31, 1999, 1998 and 1997	A-7
Notes to the Financial Statements	A-8

REPORT OF INDEPENDENT AUDITORS

To the Members of American Crystal Sugar Company
Moorhead, Minnesota

    We have audited the accompanying balance sheets of the American Crystal Sugar Company (a Minnesota cooperative corporation) as of August 31, 1999 and 1998, and the related statements of operations, changes in members' investments and cash flows for the years ended August 31, 1999, 1998 and 1997. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the American Crystal Sugar Company as of August 31, 1999 and 1998, and the results of its operations and its cash flows for the years ended August 31, 1999, 1998 and 1997, in conformity with generally accepted accounting principles.

/s/ EIDE BAILLEY LLP

Eide Bailly LLP
October 8, 1999
Eden Prairie, Minnesota

AMERICAN CRYSTAL SUGAR COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31
(IN THOUSANDS)

	1999			1998			1997
Net Revenue	$	843,968		$	676,625		$	677,004
Cost of Product Sold, Excluding Payments to Members for Sugarbeets		267,159			193,949			129,437
Gross Proceeds		576,809			482,676			547,567
Selling, General and Administrative Expenses		190,898			153,561			141,949
Operating Proceeds		385,911			329,115			405,618
Other Income (Expense):
Interest Income		1,762			2,045			2,063
Other Income		5,588			1,058			1,066
Interest Expense, Net		(21,960	)		(14,390	)		(18,321	)
Other Expenses		(1,489	)		(4,866	)		(15,050	)
Total Other (Expense)		(16,099	)		(16,153	)		(30,242	)
Proceeds Before Income Taxes		369,812			312,962			375,376
Income Tax Benefit/(Expense)		(131	)		45			(1,727	)
Net Proceeds Resulting from Member and
Non-Member Business	$	369,681		$	313,007		$	373,649
Distributions of Net Proceeds:
Credited (Charged) to Members' Investments:
Non-Member Business (Loss)	$	(494	)	$	(9,679	)	$	(18,074	)
Unit Retains Declared to Members		21,332			8,545			16,611
Net Credit (Charge) to Members' Investments		20,838			(1,134	)		(1,463	)
Payments to Members for Sugarbeets, Net of Unit Retains Declared		348,843			314,141			375,112
Total	$	369,681		$	313,007		$	373,649

The Accompanying Notes are an Integral Part of These Financial Statements.

AMERICAN CRYSTAL SUGAR COMPANY
BALANCE SHEETS
AUGUST 31
(In Thousands)
Assets

	1999			1998
Current Assets:
Cash and Cash Equivalents	$	2,156		$	41
Receivables:
Trade		71,654			53,874
Members		1,595			2,558
Other		2,642			2,801
Advances to Related Parties		22,419			26,402
Inventories		111,958			142,382
Prepaid Expenses		2,944			3,079
Total Current Assets		215,368			231,137
Property and Equipment:
Land		24,102			13,818
Buildings and Equipment		804,962			664,453
Construction in Progress		6,647			112,470
Less Accumulated Depreciation		(459,096	)		(438,801	)
Net Property and Equipment		376,615			351,940
Other Assets:
Investments in Banks for Cooperatives		15,427			15,890
Investments in Marketing Cooperatives		3,112			2,197
Investments in ProGold Limited Liability Company		35,629			35,172
Investments in Crystech, LLC		1,688			1,574
Notes Receivable—Crystech, LLC		11,883			3,719
Other Assets		6,170			6,489
Total Other Assets		73,909			65,041
Total Assets	$	665,892		$	648,118

The Accompanying Notes are an Integral Part of These Financial Statements.

AMERICAN CRYSTAL SUGAR COMPANY
BALANCE SHEETS
AUGUST 31
(In Thousands)
Liabilities and Members' Investments

	1999			1998
Current Liabilities:
Short-Term Debt	$	60,844		$	116,322
Current Maturities of Long-Term Debt		18,915			17,800
Accounts Payable		26,258			36,131
Other Current Liabilities		16,920			16,112
Amounts Due Members		35,698			14,415
Total Current Liabilities		158,635			200,780
Long-Term Debt, Net of Current Maturities		233,135			194,695
Other Liabilities		32,836			27,800
Total Liabilities		424,606			423,275
Members' Investments:
Preferred Stock		38,275			38,275
Common Stock		30			28
Additional Paid-In Capital		123,948			116,183
Unit Retains		116,849			105,850
Accumulated Other Comprehensive Income (Loss)		(4,088	)		(2,259	)
Retained Earnings (Deficit)		(33,728	)		(33,234	)
Total Members' Investments		241,286			224,843
Total Liabilities and Members' Investments	$	665,892		$	648,118

The Accompanying Notes are an Integral Part of These Financial Statements.

AMERICAN CRYSTAL SUGAR COMPANY

STATEMENTS OF CHANGES IN MEMBERS' INVESTMENTS

FOR YEARS ENDED AUGUST 31
(In Thousands)

	Preferred Stock		Common Stock		Additional Paid-In Capital		Unit Retains			Other Comprehensive Income (Loss)			Retained Earnings (Deficit)			Total
Balance, August 31, 1996	$	31,879	$	24	$	33,041	$	97,191		$	(4,518	)	$	(5,481	)	$	152,136
Non-Member Business (Loss)		—		—		—		—			—			(18,074	)		(18,074	)
Pension Liability Adjustment		—		—		—		—			387			—			387
Comprehensive (Loss)																	(17,687	)
Unit Retains Withheld from Members ($2.00/Ton)		—		—		—		16,611			—			—			16,611
Payments to Estates and Disabled Individuals		—		—		—		(673	)		—			—			(673	)
Payments of 1989 Crop Unit Retains to Members		—		—		—		(7,679	)		—			—			(7,679	)
Contributed Capital of Investee		—		—		892		—			—			—			892
Stock Issued, Net		1,663		2		30,663		—			—			—			32,328
Balance, August 31, 1997	$	33,542	$	26	$	64,596	$	105,450		$	(4,131	)	$	(23,555	)	$	175,928
Non-Member Business (Loss)		—		—		—		—			—			(9,679	)		(9,679	)
Pension Liability Adjustment		—		—		—		—			1,872			—			1,872
Comprehensive (Loss)																	(7,807	)
Unit Retains Withheld from Members ($1.00/Ton)		—		—		—		8,545			—			—			8,545
Payments to Estates and Disabled Individuals		—		—		—		(478	)		—			—			(478	)
Payments of 1990 Crop Unit Retains to Members		—		—		—		(7,667	)		—			—			(7,667	)
Contributed Capital of Investee		—		—		21		—			—			—			21
Stock Issued, Net		4,733		2		51,566		—			—			—			56,301
Balance, August 31, 1998	$	38,275	$	28	$	116,183	$	105,850		$	(2,259	)	$	(33,234	)	$	224,843
Non-Member Business (Loss)		—		—		—		—			—			(494	)		(494	)
Pension Liability Adjustment		—		—		—		—			(1,829	)		—			(1,829	)
Comprehensive (Loss)																	(2,323	)
Unit Retains Withheld from Members ($2.00/Ton)		—		—		—		21,332			—			—			21,332
Payments to Estates and Disabled Individuals		—		—		—		(365	)		—			—			(365	)
Payments of 1991 Crop Unit Retains to Members		—		—		—		(9,968	)		—			—			(9,968	)
Stock Issued, Net		—		2		7,765		—			—			—			7,767
Balance, August 31, 1999	$	38,275	$	30	$	123,948	$	116,849		$	(4,088	)	$	(33,728	)	$	241,286

The Accompanying Notes are an Integral Part of These Financial Statements.

AMERICAN CRYSTAL SUGAR COMPANY

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED AUGUST 31
(In Thousands)

	1999			1998			1997
Cash Provided By (Used In) Operations:
Net Proceeds Resulting from Member and Non-Member Business	$	369,681		$	313,007		$	373,649
Payments to Members for Sugarbeets, Net of Unit Retains Declared		(348,843	)		(314,141	)		(375,112	)
Add (Deduct) Non-Cash Items:
Depreciation and Amortization		34,334			26,870			24,188
(Income) Loss from Equity Method Investees		(697	)		4,007			13,919
Loss on the Disposition of Property and Equipment		661			2,412			37
Non-Cash Portion of Patronage Dividend from Banks for Cooperatives		463			(1,322	)		609
Deferred Gain Recognition		(201	)		(209	)		(213	)
Changes in Assets and Liabilities:
Receivables		(16,658	)		10,182			(13,256	)
Inventories		30,424			(2,325	)		(67,380	)
Prepaid Expenses		135			(187	)		196
Advances to Related Parties		3,983			(11,338	)		(4,756	)
Accounts Payable		(9,873	)		10,234			1,346
Other Liabilities		3,900			3,242			4,717
Amounts Due Members		21,283			(51,740	)		19,037
Net Cash Provided By (Used In) Operations		88,592			(11,308	)		(23,019	)
Cash Provided By (Used In) Investing Activities:
Purchases of Property and Equipment		(59,783	)		(101,769	)		(70,246	)
Proceeds from the Sale of Property and Equipment		430			365			667
Investments in Marketing Cooperatives		(714	)		(338	)		14,031
Distributions (Investments) in ProGold Limited Liability Company		—			3,588			(5,735	)
Investments in Crystech, LLC		(114	)		(1,574	)		—
Issuance of Notes Receivable—Crystech, LLC		(8,164	)		(3,719	)		—
Changes in Other Assets		357			(1,189	)		(814	)
Net Cash (Used In) Investing Activities		(67,988	)		(104,636	)		(62,097	)
Cash Provided By (Used In) Financing Activities:
Net Proceeds (Payments) on Short-Term Debt		(55,478	)		48,362			54,317
Proceeds from Long-Term Debt		67,455			26,694			28,200
Long-Term Debt Repayment		(27,900	)		(18,799	)		(14,525	)
Issuance of Stock		7,767			56,322			33,220
Payment of Unit Retains		(10,333	)		(8,145	)		(8,352	)
Net Cash Provided By (Used In) Financing Activities		(18,489	)		104,434			92,860
Increase (Decrease) In Cash and Cash Equivalents		2,115			(11,510	)		7,744
Cash and Cash Equivalents, Beginning of Year		41			11,551			3,807
Cash and Cash Equivalents, End of Year	$	2,156		$	41		$	11,551

The Accompanying Notes are an Integral Part of These Financial Statements.

AMERICAN CRYSTAL SUGAR COMPANY
NOTES TO THE FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization

    The American Crystal Sugar Company (The "Company") is a Minnesota agricultural cooperative corporation which processes and markets sugar, sugarbeet pulp, molasses and seed. Business done with its shareholders (members) constitutes "patronage business" as defined by the Internal Revenue Code, and the net proceeds therefrom are credited to members' investments in the form of unit retains or distributed to members in the form of payments for sugarbeets. Members are paid the net amounts realized from the current year's production less member operating costs determined in conformity with generally accepted accounting principles.

Cash and Cash Equivalents

    The Company considers financial instruments purchased with a maturity of three months or less to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. At times, such investments may be in excess of the applicable insurance limit.

Receivables

    The Company grants credit, individually and through its marketing cooperatives, to its customers, which are primarily companies in the food processing industry located throughout the United States. Ongoing credit evaluations of customers' financial condition are performed and the Company maintains a reserve for potential credit losses. The Company had a major customer that accounted for approximately 15.7% and 15.8% of total receivables as of August 31, 1999 and 1998, respectively. In addition, the Company had another major customer that accounted for approximately 12.9% of total receivables as of August 31, 1998.

Inventories

    Sugar, pulp, molasses and other agri-products inventories are valued at estimated net realizable value. Maintenance parts and supplies and sugarbeet seed inventories are valued at the lower of average cost or market. Sugarbeets are valued at the projected gross per-ton beet payment related to that year's crop.

Property, Equipment and Depreciation

    Property and equipment are recorded at cost. Indirect costs and construction period interest are capitalized as a component of the cost of qualified assets. Property and equipment are depreciated for financial reporting purposes principally using straight-line and declining-balance methods with estimated useful lives ranging from 3 to 45 years. Statutory lives and methods are used for income tax reporting purposes.

    Indirect costs capitalized were $1.0 million, $1.3 million and $1.1 million in 1999, 1998 and 1997, respectively. Construction period interest capitalized was $1.2 million, $3.9 million and $2.6 million in 1999, 1998 and 1997, respectively.

Related Parties

    The following organizations are considered related parties for financial reporting purposes: United Sugars Corporation (United), Midwest Agri-Commodities Company (Midwest), Crystech, LLC (Crystech), and ProGold Limited Liability Company (ProGold).

Investments

    Investments in the Banks for Cooperatives are stated at cost plus unredeemed patronage refunds received in the form of capital stock. Investments in marketing cooperatives, ProGold and Crystech are accounted for using the equity method. The net interest capitalized related to the investment in ProGold totaled $1.1 million for the year ended August 31, 1997. The net interest capitalized related to the investment in Crystech totaled $114,000 and $29,000 for the years ended August 31, 1999 and 1998, respectively.

Members' Investments

    Preferred and Common Stock—The ownership of common and preferred stock is restricted to a "farm operator" as defined by the bylaws of the Company. Each "farm operator" may own only one share of common stock and is entitled to one vote in the affairs of the Company. Each "farm operator" is required to grow a specified number of acres of sugarbeets in proportion to the shares of preferred stock owned. The preferred shares are non-voting. All transfers of stock must be approved by the Company's board of directors and any shareholder desiring to sell stock must first offer it to the Company for repurchase at its par value. The Company has never exercised this repurchase option. The bylaws do not allow dividends to be paid on either the common or preferred stock.

	Par Value		Shares Authorized	Shares Issued & Outstanding
Preferred Stock:
August 31, 1999	$	76.77	600,000	498,570
August 31, 1998	$	76.77	600,000	498,570
August 31, 1997	$	76.77	600,000	436,915
Common Stock:
August 31, 1999	$	10.00	4,000	2,950
August 31, 1998	$	10.00	4,000	2,835
August 31, 1997	$	10.00	4,000	2,585

     Unit Retains—The bylaws authorize the Company's board of directors to require additional direct capital investments by members in the form of a variable unit retain per ton of up to a maximum of 10% of the weighted average gross per ton beet payment. The Company has a policy whereby the Company refunds, to the entity legally entitled thereto, the unit retains attributable to a deceased or totally and permanently disabled former shareholder.

    Accumulated Other Comprehensive Income (Loss)—During 1999, the Company adopted Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income", which establishes standards for the reporting and displaying of changes in equity from non-owner sources in the financial statements. Accumulated Other Comprehensive Income (Loss) represents the cumulative net increase (decrease) in equity related to the recording of the minimum pension liability adjustment. Consistent with the Company's treatment of income taxes related to member source income and expenses, accumulated other comprehensive income (loss) does not include any adjustment for income taxes.

    Retained Earnings (Deficit)—Retained earnings represent the cumulative net income/(loss) resulting from non-member business and the difference between member income as determined for financial reporting purposes and federal income tax reporting purposes from the years prior to 1996.

Stock Offering

    On July 23, 1997, the Board of Directors authorized an offer of up to 61,500 shares of preferred stock, $76.77 par value and up to 500 shares of common stock, $10.00 par value for sale at $1,500.00 per share and $10.00 per share, respectively, to sugarbeet farm operators in the territory in which the Company is engaged in business. The filings with the Securities and Exchange Commission and the North Dakota Securities Commission became effective in November, 1997. The Company sold all of the 61,500 shares of preferred stock offered. The shares of preferred stock offered equal approximately 13.7% of preferred shares outstanding on July 25, 1997. The Company received $7.8 million and $56.3 million from the sale of stock during the years ended August 31, 1999 and 1998, respectively, with the remaining $28.3 million to be received in installment amounts through 2004.

Interest Expense, Net

    The Company earns patronage dividends from the Banks for Cooperatives based on the Company's share of the net income earned by the banks. These patronage dividends are applied against interest expense.

Income Taxes

    The Company is a non-exempt cooperative for federal income tax purposes. As such, the Company is subject to corporate income taxes on its net income from non-member sources. The provision for income taxes relates to the results of operations from non-member business, state income taxes and certain other permanent differences between financial and income tax reporting. Total income tax payments (refunds) were $(380,000), $106,000 and $(4,000), in the years ended August 31, 1999, 1998 and 1997, respectively.

    As of August 31, 1999, the Company had accumulated approximately $20.0 million of net operating loss carryforwards. The net operating loss carryforwards expire in the years 2012 through 2019. The Company has provided a valuation allowance for the entire balance of the deferred tax asset related to the loss carryforwards.

Accounting Estimates

    The preparation of the financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

    Certain reclassifications have been made to the 1998 and 1997 financial statements to conform with the 1999 presentation. Most significantly, payments to members for hauling allowance of $7.2 million and $6.9 million for 1998 and 1997, respectively, have been reclassified from Cost of Product Sold to Payments to Members for Sugarbeets.

(2) INVENTORIES:

The major components of inventories are as follows:

(In Thousands)	1999		1998
Refined Sugar, Pulp, Molasses, other Agri-Products and Beet Seed	$	88,466	$	123,628
Sugarbeets		3,817		—
Maintenance Parts and Supplies		19,675		18,754
Total Inventories	$	111,958	$	142,382

(3) INVESTMENTS IN MARKETING COOPERATIVES:

    The Company has a 62% ownership interest and a 25% voting interest in United. The investment is accounted for using the equity method. All sugar products produced are sold by United as an agent for the Company. The amount of sales and related costs to be recognized by each owner of United is allocated based on its pro rata share of sugar production for the year. The owners provide United with cash advances on an ongoing basis for operating and marketing expenses incurred by United. The Company had outstanding advances to United of $22.6 million and $19.2 million as of August 31, 1999 and 1998, respectively. The Company provides administrative services for United and is reimbursed for costs incurred. The Company was reimbursed $.9 million, $1.1 million and $.7 million for services provided during 1999, 1998 and 1997, respectively.

    The Company has a 33¹/3% ownership and voting interest in Midwest. The investment is accounted for using the equity method. All sugarbeet pulp, molasses and other agri-products produced are sold by Midwest as an agent for the Company. The amount of sales and related costs to be recognized by each owner of Midwest is allocated based on its pro rata share of production for each product for the year. The owners provide Midwest with cash advances on an ongoing basis for operating and marketing expenses incurred by Midwest. The Company had outstanding advances to (from) Midwest of $(2.6) million and $5.0 million as of August 31, 1999 and 1998, respectively. The owners of Midwest are guarantors of the short-term line of credit Midwest has with CoBank, Agricultural Credit Bank (ACB). As of August 31, 1999, Midwest had outstanding short-term debt with CoBank, ACB of $2.5 million, of which $1.8 million was guaranteed by the Company.

(4) PROGOLD LIMITED LIABILITY COMPANY:

    The Company has a 46% ownership interest in ProGold. On November 1, 1997, ProGold signed an agreement to lease substantially all of its assets to Cargill, Incorporated. Under the terms of this operating lease, Cargill, Incorporated manages all aspects of the operations of the ProGold corn wet-milling plant. Following is summary financial information for ProGold:

(In Thousands)	1999		1998
Current Assets	$	3,578	$	2,661
Long-Term Assets		220,332		230,655
Total Assets	$	223,910	$	233,316
Current Liabilities	$	10,828	$	12,759
Long-Term Liabilities		143,618		152,608
Total Liabilities		154,446		165,367
Members' Equity		69,464		67,949
Total Liabilities and Members' Equity	$	223,910	$	233,316
Rental Revenue on Operating Lease	$	27,988	$	23,055
Expenses from Continuing Operations		26,473		19,824
Income from Continuing Operations		1,515		3,231
Loss from Discontinued Operations		—		(11,942	)
Net Income / (Loss)	$	1,515	$	(8,711	)

(5) CRYSTECH, LLC:

    On May 28, 1998, the Company entered into an agreement with Newcourt Capital U.S.A., Inc. to form a joint venture (special purpose) entity, Crystech. Crystech was formed to acquire, construct, finance, operate and maintain a molasses desugarization facility at the Company's Hillsboro, North Dakota sugar factory together with certain sugar processing equipment located at the Hillsboro, North Dakota and Moorhead, Minnesota sugar factories. The Company acquired an initial 50% ownership interest in Crystech through a $1.5 million cash contribution. The Company accounts for its investment in the joint venture using the equity method. Crystech is currently a development stage company.

    As of August 31, 1999 and 1998, respectively, the Company had outstanding notes receivable from Crystech totaling $11.9 million and $3.7 million. The notes are subordinate to long-term debt of Crystech totaling $73.5 million and $23.0 million as of August 31, 1999 and 1998, respectively. The notes bear interest at rates of 6.41% to 7.62%. Interest income related to these notes totaled $677,000 and $70,000 during 1999 and 1998, respectively. The Company has agreed to provide $13.9 million of subordinated debt to Crystech. Repayments are to be made in 28 quarterly installments following provisional acceptance but beginning no later than October 31, 2000. The Company also had an outstanding receivable of $2.0 million and $1.4 million as of August 31, 1999 and 1998, respectively, relating to capital expenditures paid on behalf of Crystech.

    The Company has a 12-year tolling services agreement with Crystech whereby upon completion of construction, the Company pays for tolling services for processing sugarbeet molasses delivered to Crystech with title and risk of loss throughout the process maintained by the Company. The tolling agreement may be terminated by the Company if the specified plant performance is not achieved. Following is summary financial information for Crystech:

(In Thousands)	1999		1998
Current Assets	$	5,980	$	4,667
Long-Term Assets		88,413		29,729
Total Assets	$	94,393	$	34,396
Current Liabilities	$	9,488	$	4,587
Long-Term Liabilities		81,815		26,719
Total Liabilities		91,303		31,306
Members' Equity		3,090		3,090
Total Liabilities and Members' Equity	$	94,393	$	34,396

(6) LONG-TERM AND SHORT-TERM DEBT:

    The long-term debt outstanding as of August 31, 1999 and 1998, is summarized below:

(In Thousands)	1999			1998
Term Loans from Banks for Cooperatives, Due in Varying Amounts through 2008, Interest at 5.54% to 8.58%, with Senior Lien on Substantially all Non-Current Assets.	$	155,300		$	155,300
Term Loans from Insurance Companies, Due in Varying Amounts From 2018 through 2028, Interest at 7.32% to 7.42%, with Senior Lien on Substantially all Non-Current Assets.		50,000			10,000
Term Loans from US Bank, Minneapolis, Due in Equal Amounts through 2002, Interest at 8.25%, unsecured.		4,000			4,000
Term Loan from the Bank of North Dakota, Due in Equal Amounts through 2009, Interest at 6.34%, unsecured.		8,000			8,800
Pollution Control and Industrial Development Revenue Bonds, Due in Varying Amounts through 2018, Interest at 3.67% to 8.00%, substantially secured by letters of credit.		34,750			34,395
Total Long-Term Debt		252,050			212,495
Less Current Maturities		(18,915	)		(17,800	)
Long-Term Debt, Net of Current Maturities	$	233,135		$	194,695

Aggregate maturities of long-term debt are as follows:

(In Thousands)
2000	$	18,915
2001		20,925
2002		20,930
2003		20,940
2004		19,950
Thereafter		150,390
Total	$	252,050

    As of August 31, 1999, the unused portion of the term loan line of credit with the Banks for Cooperatives was $45.9 million.

    During the year ended August 31, 1999, the Company borrowed from the Banks for Cooperatives and issued commercial paper to meet its short-term borrowing requirements. The Company had no outstanding seasonal loans with the Banks for Cooperatives as of August 31, 1999. As of August 31, 1998, $47.0 million of seasonal loans were outstanding with the Banks for Cooperatives. The Company had outstanding short-term commercial paper debt of $60.8 million and $69.3 million as of August 31, 1999 and 1998, respectively.

    During the year ended August 31, 1999, the Company had available short-term lines of credit totaling $290.0 million.

    Maximum borrowings, average borrowing levels and average interest rates for short-term debt for the years ended August 31, 1999 and 1998, follow:

(In Thousands, Except Interest Rates)	1999			1998
Maximum Borrowings	$	255,000		$	218,625
Average Borrowing Levels	$	161,454		$	147,703
Average Interest Rates		5.61	%		6.07	%

    The terms of the loan agreements contain certain covenants related to, among other matters, the: level of working capital; ratio of term liabilities to members' investment; current ratio; level of term debt to net funds generated; and investment in Banks for Cooperatives stock in amounts prescribed by the banks. Substantially all non-current assets are pledged to the senior lenders to provide security to support the Company's seasonal and long-term financing. As of August 31, 1999, the Company was in compliance with the terms of the loan agreements.

    Interest paid was $23.9 million, $19.7 million and $21.6 million for the years ended August 31, 1999, 1998 and 1997, respectively.

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS:

    The fair value of financial instruments is generally defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced liquidation sale. Quoted market prices are generally not available for the Company's financial instruments. Fair values are based on judgments regarding anticipated cash flows, future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates involve uncertainties and matters of judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Notes Receivable—Crystech, LLC—Based on current interest rates with similar maturities, the fair value of the notes receivable approximates the carrying value.

Long-term debt—Based upon current borrowing rates with similar maturities, the fair value of the long-term debt approximates the carrying value.

Investments in Banks for Cooperatives, Investments in Marketing Cooperatives, Investments in ProGold Limited Liability Company and Investments in Crystech, LLC—The Company believes it is not practical to estimate the fair value of these investments without incurring excessive costs because there is no established market for these securities and equity interests, and it is inappropriate to estimate future cash flows which are largely dependent on future earnings of these organizations.

(8) EMPLOYEE BENEFIT PLANS:

    During 1999, the Company adopted Statement of Financial Accounting Standards No. 132 (SFAS 132), "Employers' Disclosures about Pensions and Other Post-Retirement Benefits". SFAS 132 revises employers' disclosures related to pension and other post-retirement plans by requiring, among other things, standardization of disclosures among such plans as well as additional information on the changes in benefit obligations and fair values of plan assets. SFAS 132 had no effect on the Company's financial position or results of operations as it did not change the measurement or recognition criteria for such plans.

Company-Sponsored Defined Benefit Pension and Other Post-Retirement Benefit Plans

    Substantially all employees who meet eligibility requirements of age and length of service are covered by a Company-sponsored retirement plan. As of August 31, 1999, the pension plans were funded as required by the funding standards set forth by the Employee Retirement Income Security Act (ERISA). The Company also has a non-qualified supplemental executive retirement plan for certain employees.

    The Company has a medical plan and a Medicare supplement plan which are available to substantially all the Company retirees. The costs of these plans are shared by the Company and plan participants.

    The following schedules provide the components of the Net Periodic Pension and Post-Retirement Costs as of August 31, 1999, 1998 and 1997:

Components of Net Periodic Pension Cost (In Thousands)	1999			1998			1997
Service Cost	$	1,816		$	1,663		$	1,579
Interest Cost		4,341			4,349			4,106
Expected Return on Plan Assets		(4,923	)		(4,353	)		(3,894	)
Multiple Employer Adjustment		(1	)		(38	)		(34	)
Amortization of Net Transition Assets		(296	)		(296	)		(296	)
Amortization of Prior Service Costs		1,090			424			425
Amortization of Net (Gain) Loss		(6	)		161			308
Net Periodic Pension Cost	$	2,021		$	1,910		$	2,194

Components of Net Periodic Post-Retirement Cost (In Thousands)	1999			1998		1997
Service Cost	$	619		$	694	$	546
Interest Cost		900			1,090		921
Amortization of Prior Service Costs		2			2		2
Amortization of Net (Gain) Loss		(100	)		—		(4	)
Net Periodic Post-Retirement Cost	$	1,421		$	1,786	$	1,465

    For measurement purposes, a 7.5% annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 1999. The rate is assumed to decline to 5.5% over the next three years.

    Assumed healthcare trends can have a significant effect on the amounts reported for healthcare plans. A 1% change in the assumed healthcare trend rates would have the following effects:

(In Thousands)	1% Increase		1% Decrease
Effect on total service and interest cost components of net periodic post-retirement benefit costs	$	294	$	(213	)
Effect on the accumulated post-retirement benefit obligation	$	1,851	$	(1,508	)

    The following schedules set forth a reconciliation of the changes in the plans' benefit obligation and fair value of assets for the years ending August 31, 1999 and 1998 and a statement of the funded status and amounts recognized in the Balance Sheet as of August 31, 1999 and 1998:

	Pension						Post-Retirement
(In Thousands)
	1999			1998			1999			1998
Change in Benefit Obligation
Obligation at the Beginning of the Year	$	63,493		$	59,361		$	13,085		$	14,764
Service Cost		1,816			1,663			619			694
Interest Cost		4,341			4,349			900			1,090
Plan Participant Contributions		—			—			(442	)		(399	)
Amendments		—			199			—			49
Actuarial (Gain)/Loss		(1,277	)		2,188			(2,156	)		(2,972	)
Benefits Paid by Employer		(3,016	)		(2,565	)		(204	)		(141	)
Other		—			(1,702	)		—			—
Obligation at the End of the Year	$	65,357		$	63,493		$	11,802		$	13,085
Change in Plan Assets
Fair Value at the Beginning of the Year	$	55,950		$	49,057		$	—		$	—
Actual Return on Plan Assets		1,927			9,292			—			—
Plan Participant Contributions		—			—			(442	)		(399	)
Employer Contributions		369			1,868			(204	)		(141	)
Benefits Paid		(3,016	)		(2,565	)		646			540
Other		—			(1,702	)		—			—
Fair Value at the End of the Year	$	55,230		$	55,950		$	—		$	—
Funded Status
Funded Status as of August 31,	$	(10,127	)	$	(7,543	)	$	(11,802	)	$	(13,085	)
Unrecognized Net Transition Asset		(1,161	)		(1,457	)		—			—
Unrecognized Actuarial Loss		6,255			5,204			(5,403	)		(2,906	)
Unrecognized Prior Service Cost		3,627			4,074			7			9
Net Amount Recognized	$	(1,406	)	$	278		$	(17,198	)	$	(15,982	)
Amounts Recognized in the Balance Sheet
Prepaid Pension Cost	$	519		$	1,410		$	—		$	—
Accrued Benefit Liability		(8,269	)		(5,530	)		(17,198	)		(15,982	)
Intangible Asset		2,256			2,139			—
Accumulated Other Comprehensive Income		4,088			2,259			—			—
Net Amount Recognized	$	(1,406	)	$	278		$	(17,198	)	$	(15,982	)
Change in Additional Minimum Liability (for the current year)
	1999
Other Comprehensive Loss	$	1,829
Intangible Asset Increase	$	117
Accrued Pension Liability Increase	$	1,946

The assumptions used in the measurement of the Company's benefit obligations are shown below:

	Pension		Post-Retirement
	1999	1998	1999	1998
Weighted Average Assumptions as of August 31,
Discount Rate	7.5%	7.0%	7.5%	7.0%
Expected Return on Plan Assets	9.0%	9.0%	N/A	N/A
Rate of Compensation Increase (Non-Union Plan Only)	5.0%	5.0%	N/A	N/A

Long-Term Incentive Plan

    The Long-Term Incentive Plan provides deferred compensation to certain key executives of the Company. The plan creates financial incentives that are based upon contract rights which are available to the executive under the terms of the plan, the value of which is related to the value of preferred shares of the Company. As of August 31, 1999, there were 562 rights issued of which 234 rights were 100% vested and 328 rights were 50% vested.

Defined Contribution Plans

    The Company also has qualified 401(k) plans for all eligible employees. The plans provide for immediate vesting of benefits. Participants contribute a percentage of their gross earnings each pay period as provided in the participation agreement. The Company matches the non-union and union year-round participants' contribution up to 4% and 2% respectively, of their gross earnings. The Company's contributions to these plans totaled $1.4 million, $1.4 million, and $1.1 million for the years ended August 31, 1999, 1998 and 1997, respectively.

(9) ENVIRONMENTAL MATTERS:

    The Company is subject to extensive federal and state environmental laws and regulations with respect to water pollution, discharge permits, air pollution, noise pollution and solid waste disposal. The Company conducts an ongoing pollution control program designed to meet these environmental laws and regulations. In June 1998, a dike failure occurred near the East Grand Forks, Minnesota factory. The Minnesota Pollution Control Agency (MPCA) has commenced enforcement action for this alleged violation. The Company and the MPCA are currently seeking a settlement to this matter. Management believes the outcome of the enforcement action should not have a material adverse effect on the Company's financial condition.

(10) COMMITMENTS AND CONTINGENCIES:

    The Company had outstanding letters of credit totaling $34.3 million as of August 31, 1999.

    The Company is subject to various lawsuits and claims that arise in the ordinary course of its business. Management believes the disposition of all such proceedings, individually or in the aggregate, should not have a material adverse effect on the Company's financial condition.

    The Company has outstanding commitments totaling $6.6 million as of August 31, 1999, for consulting services, equipment and construction contracts related to various capital projects.

EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
FOR FISCAL YEAR ENDED AUGUST 31, 1999

Item No.		Method of Filing
3.1	Restated Articles of Incorporation of American Crystal Sugar Company	Incorporated by reference to Exhibit 3(i) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
3.2	Restated By-laws of American Crystal Sugar Company	Incorporated by reference to Exhibit 3(ii) from the Company's Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.
4.1	Restated Articles of Incorporation of American Crystal Sugar Company	See Exhibit 3.1
4.2	Restated By-laws of American Crystal Sugar Company	See Exhibit 3.2
10.1	Growers' Contract (5-year Agreement)	Incorporated by reference to Exhibit 10(f) from the Company's Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.
10.2	Growers' Contract (Annual Contract)	Incorporated by reference to Exhibit 10(g) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.3	Trademark License Agreement between Registrant and United Sugars Corporation, dated November 1, 1993	Incorporated by reference to Exhibit 10(l) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.4	Uniform Member Marketing Agreement, Pool Basis between Registrant and Midwest Agri-Commodities Company, dated April 14, 1992	Incorporated by reference to Exhibit 10(m) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.5	Stipulation Agreement between Registrant and State of Minnesota Pollution Control Agency	Incorporated by reference to Exhibit 10(n) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.6	Loan Agreement between Registrant and St. Paul Bank for Cooperatives, dated December 20, 1993	Incorporated by reference to Exhibit 10(p) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.7	Amended and Restated Loan Agreement between Registrant and First Bank National Association, dated November 22, 1993	Incorporated by reference to Exhibit 10(q) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.8	Pension Contract and Amendments	Incorporated by reference to Exhibit 10(r) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.9	Form of Operating Agreement between Registrant and ProGold Limited Liability Company	Incorporated by reference to Exhibit 10(u) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.10	Form of Member Control Agreement between Registrant and ProGold Limited Liability Company	Incorporated by reference to Exhibit 10(v) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.11	Administrative Services Agreement between Registrant and ProGold Limited Liability Company	Incorporated by reference to Exhibit 10(w) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.12	Uniform Member Marketing Agreement	Incorporated by reference to Exhibit 10(x) from the Company's Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
†10.13	Coal Supply Agreement between Registrant and Spring Creek Coal Company, dated August 25, 1995	Incorporated by reference to Exhibit 10(y) from the Company's Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.
†10.14	Coal Transportation Agreement between Registrant and Northern Coal Transportation Company, dated August 25, 1995	Incorporated by reference to Exhibit 10(z) from the Company's Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.
†10.15	Gas Sales Contract between Registrant and Coastal Gas Marketing Company, dated as of March 20, 1996	Incorporated by reference to Exhibit 10(aa) from the Company's Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.
†10.16	Trademark License Agreement between Registrant and The Pillsbury Company, dated as of April 9, 1997	Incorporated by reference to Exhibit 10(dd) from the Company's Registration Statement on Form S-1 (File No. 333-32251), declared effective October 24, 1997.
10.17	Pledge Agreement between Registrant and First Union Trust Company, NA	Incorporated by reference to Exhibit 10(ee) from the Company's Annual Report on Form 10-K for the year ended August 31, 1998.
10.18	Indemnity Agreement between Registrant, Newcourt Capital USA Inc., Crystech, LLC and Crystech Senior Lender Trust	Incorporated by reference to Exhibit 10(ff) from the Company's Annual Report on Form 10-K for the year ended August 31, 1998.
10.19	Tolling Services Agreement between Crystech, LLC and Registrant	Incorporated by reference to Exhibit 10(gg) from the Company's Annual Report on Form 10-K for the year ended August 31, 1998.
10.20	Operations and Maintenance Agreement between Crystech, LLC and Registrant	Incorporated by reference to Exhibit 10(hh) from the Company's Annual Report on Form 10-K for the year ended August 31, 1998.
‡10.21	Limited Liability Company Agreement of Crystech, LLC	Incorporated by reference to Exhibit 10(ii) from the Company's Annual Report on Form 10-K for the year ended August 31, 1998.
10.22	Master Agreement between the Registrant and Bakery, Confectionery, Tobacco Workers & Grain Millers AFL-CIO, CLC	Filed herewith electronically
10.23	Uniform Member Beet Sugar Marketing Agreement	Filed herewith electronically
10.24	Registrant's Senior Note Purchase Agreement	Filed herewith electronically
10.25	Registrant's Senior Note Intercreditor and Collateral Agency Agreement	Filed herewith electronically
10.26	Registrant's Senior Note Restated Mortgage and Security Agreement	Filed herewith electronically
10.27	Term and Seasonal Loan Agreements between the Registrant and St. Paul Bank for Cooperatives dated March 5, 1999	Filed herewith electronically
10.28	Employment Agreement between the Registrant and James J. Horvath	Filed herewith electronically
21.1	List of Subsidiaries of the Registrant	Filed herewith electronically
23.1	Consent of Eide Bailley LLP	Filed herewith electronically
27	Financial Data Schedule	Filed herewith electronically

†

Portions of the Exhibit have been granted confidential treatment by the Commission. The omitted portions have been filed separately with the Commission.

‡

Portions of the Exhibit have been deleted from the publicly filed document and have been filed separately with the Commission pursuant to a request for confidential treatment.

QuickLinks

APPENDIX A
INDEX TO FINANCIAL STATEMENTS

AMERICAN CRYSTAL SUGAR COMPANY STATEMENTS OF OPERATIONS FOR THE YEARS ENDED AUGUST 31 (IN THOUSANDS)
AMERICAN CRYSTAL SUGAR COMPANY BALANCE SHEETS AUGUST 31 (In Thousands) Assets
AMERICAN CRYSTAL SUGAR COMPANY BALANCE SHEETS AUGUST 31 (In Thousands) Liabilities and Members' Investments

EX-10.22

Exhibit 10.22

MASTER AGREEMENT
BETWEEN
AMERICAN CRYSTAL SUGAR
COMPANY
AND
BAKERY, CONFECTIONERY, TOBACCO WORKERS
& GRAIN MILLERS
AFL-CIO, CLC
SUGAR COUNCIL
August 1, 1999 to July 31, 2002

MASTER AGREEMENT
PREAMBLE

    The parties to this Agreement are American Crystal Sugar Company, a Minnesota agricultural cooperative, having its general offices at 101 North Third Street, Moorhead, Minnesota 56560, and United Sugars Corporation at 7801 E. Bush Lake Road, Bloomington, Minnesota 55439, hereinafter referred to as the Employer or the Company, and the Bakery, Confectionery, Tobacco Workers & Grain Millers, AFL-CIO, CLC, at 4949 Olson Memorial Highway, Minneapolis, Minnesota 55422, and its affiliated Local Unions: No. 264-G, East Grand Forks, Minnesota; No. 265-G, Chaska, Minnesota; No. 266-G, Moorhead, Minnesota; No. 267-G, Crookston, Minnesota; No. 269-G, Mason City, Iowa; No. 326-G, Drayton, North Dakota; and No. 372-G, Hillsboro, North Dakota, hereinafter referred to as the Union.

ARTICLE I
RECOGNITION

    1.1  Union Recognition  Employees have designated the Union as their bargaining representative for the purpose of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment. The Employer recognizes the Union as the sole collective bargaining agent for all employees at the above-mentioned factories, excluding: Maintenance Superintendent, Production Superintendent, Factory Chemist, Electrical/Instrument Supervisor, Shift Supervisor, Packaging Supervisor, Molasses Desugarization Supervisor, Harvest Maintenance Supervisor, Agronomy Manager, Occupational Health Nurse, Secretary, Central Warehouse Manager, Central Warehouse Clerk, Employee Relations Coordinator, Agriculturists, Sugarbeet Quality Lab Superintendent, Factory Office Employees (except at the Moorhead, Crookston, and Hillsboro factories, where they shall be included, except the Factory Accounting Supervisor, Office Administrator), and any individual employed as a "Guard" as defined in Section IX (b)(3) of the National Labor Relations Act, as amended.

    1.2  Agriculture and Beet Receiving Employees:  The Agriculture Repair Foreman, Agriculture Repairman, and the Agriculture Mechanic Helper at Moorhead, Crookston, East Grand Forks, Drayton, and Hillsboro, and the beet receiving employees working within the factory grounds at all factories are covered by this Agreement, but the Agricultural Equipment Superintendent, and the work of moving beets from outside beet receiving stations to the factory shall not be covered by this Agreement.

    1.3  Specialized Work:  It is understood that situations may arise wherein it will be necessary to employ temporarily especially skilled labor such as bricklayers for relining kilns, for example, and it is agreed that when so performed, such work and employees performing it are exempt from this Agreement, and it is further agreed that if practicable and not prohibited by law, members of the American Federation of Labor and Congress of Industrial Organization, or Canadian Labor Congress shall be given preference in such noncovered work.

    1.4  Work Covered:

    (a) All work performed at the above listed plants, including beet seed cleaning, necessary to prepare for the production and the production of sugar and its byproducts, warehousing and distribution thereof at the plant site shall be covered by this Agreement. This work includes factory maintenance, repairs, additions, improvements and replacements, provided such work falls within the experience and qualifications of the employees.

    (b) Loading Trucks: The loading of trucks with our product or by-products shall be performed by bargaining unit personnel and not by drivers or others who are not members of the bargaining unit.

    (c) Non-Bargaining Unit Work: Supervisors and other plant personnel excluded from the bargaining unit will not be permitted or assigned to do work covered by the bargaining unit, except as outlined in 1 through 5 below:

    1.  Experimental, testing or Research & Development projects.

    2.  Training or instruction.

    3.  Demonstrating the correct use of tools and equipment.

    4.  Acting to prevent an accident or injury to an employee, damage to equipment or damage to product.

    5.  Emergency situations.

    It is also understood that in some situations, such as the DuoFiber start up, special agreements may be agreed to by both parties that amend Article 1.4.

    1.5  Subcontracting Beet Moving in Factory Yards:  In the event the work of moving beets from storage piles in the factory yards to the factory flumes is contracted to some independent contractor, it is understood that such contractor will be required to agree to pay his employees while engaged in such work not less than the minimum rate per hour at the factory in question up to 40 hours in any one week, and time and one-half to be paid for work performed in excess of 40 hours in any one week.

    1.6  Contracting Work:  The Company agrees that, except in cases of emergencies, it shall give the bargaining committee at the plant at least 15 working days written notice prior to the time the contract is awarded of its intention to sub-contract. The notice shall set forth the scope of the work to be performed and reasons behind the Company's intention to sub-contract. Within 10 working days of receiving the notice, the union committee may request a meeting to discuss the proposed sub-contract and the Company shall then meet with the union committee to discuss the sub-contract prior to the work being awarded. In addition the parties have agreed to a letter of agreement on implementation.

    1.7  Management Rights:  The Company shall have full power and authority to determine all matters in connection with plant operations, including the right to introduce labor-saving devices or new processes which are not inimical to the safety and health of employees. When such devices are installed, or new processes are attempted, the Company will meet with the Local Union Committee to discuss such changes. It is further agreed that six months later the Company and Local Union will meet to re-assess such changes if requested by the Local Union. The Company shall have the right to close any plant when they genuinely believe it to be in the best interests of the Company.

    1.8  Job Elimination:  Any employee whose job has been eliminated shall retain his/her classified rate of pay until he/she is able to successfully bid on a permanent position of equal or greater classification. Employees who are on a protected rate status must bid on positions for which they are qualified.

If a vacancy occurs in a classification in which there are employees on rate protection status, the senior employee in such status shall be placed in the vacancy and the position will not be posted for bids.

In the event that an employee under the protection of this Section is placed or bids into a permanent position of equal or greater classification, any subsequent elimination of the new position will result in protection of the new rate for the period of time specified above.

ARTICLE II
DEFINITIONS

    2.1  Inter-Campaign:  Inter-campaign shall mean that portion of the year, which is not included in the definitions of campaigns below.

    2.2  Beet Campaign:  Beet Campaign period means the period starting with the first twenty-four (24) hour period during which beets are sliced. The beet campaign period will end 5 days (7 days at East Grand Forks and Hillsboro) after the last beets are sliced. At the Mason City and Chaska plants no part of the year shall be considered as campaign.

    2.3  Syrup and Desugarization Campaign:  Syrup and/or Desugarization Campaign shall be the period starting with the beginning of the first twenty-four (24) hour period during which stored syrup is processed and ending four (4) days after the last stored syrup has been processed into dried sugar. During the syrup and/or desugarization campaign all employees (including the Sugar Warehouse Foremen and Assistant Warehouse Foremen, when warehouse crew is used for the production of sugar), whose jobs are directly related to such production shall be considered as working in the campaign, and all employees who are not assigned to syrup and/or desugarization campaign shall be considered as working on the inter-campaign schedule.

    2.4  Year-Round Employees:  A year-round employee shall be any employee who:

1.

is hired as year-round;

2.

works 75 percent of the scheduled work days in any twelve (12) month period; *(Compensible time lost by an employee need not be made up to qualify as year-round. Employees who qualify as year-round may refuse year-round seniority if they so desire, at any time they qualify for year-round.)

3.

continues on after beet, syrup or desugarization campaign, or is laid off for a period of less than 31 days at the end of such campaign.

    All employees, except Office and Packaging, qualifying for year-round status under the 75% provision as defined above, must possess a minimum skill level of Mechanics Helper to be considered as a year-round employee. However, if an Office or Packaging Employee bids on a position outside of these areas, such employees will be required to have a minimum skill level of Mechanic Helper.

    It is further recognized that campaign employees may be retained or recalled for up to 2 weeks at the end of their assigned campaign to assist with plant cleanup and shall not become year round employees. It is further recognized that the size of the year-round crew at each factory may vary from one contract year to another; and, in this connection, it is agreed that any increase in or reduction of the size of the year-round crew at any factory during any contract year shall be based upon seniority and the ability and physical qualifications of the affected employees to perform the inter-campaign work to which they are assigned in satisfactory manner.

    *Date for calculation of whether an employee qualified under the 75% provisions will be their date of hire or any date of recall from lay-off.

Year-Round Employees—Example of 75% Rule

(a)

2080 hours per year + shift schedule overtime days × 75%




Example:

Shift work schedule

2080 hours + 72 hours (9 scheduled overtime days) = 2152

2152 hours/8 hours per days = 269 days × 75% = 202 days

Straight day schedule

2080 hours/8 hours per day = 260 days × 75% = 195 days

Note: overtime hours not included in calculation unless scheduled work day according to rotating shift schedule.

(b)

Qualifications for year round employees via 75% rule



1.

Must possess skills of at least a Mechanic & Electricians Helper as below:



a.

Minimum required tools (list).



b.

Must demonstrate how to properly use said tools and must identify said tools by name.



c.

Must successfully pass a minimum mechanical Aptitude Assessment Test.



d.

Ability to read and understand written information at the 7th grade level.



e.

Pass a basic welding and cutting exam.

    (c) Each contract year, the Company will pay 100% of the cost of tuition and books for a basic welding and cutting course offered through a local AVTI or other means for a maximum of 10 campaign employees who are interested in obtaining the skill qualifications for Mechanic & Electrician Helper. A sign up list will be posted on October 1 of each year for a period of 15 days for employees to indicate their desire to receive training on their own time. The 10 most senior employees who are otherwise qualified for a mechanic helper will be selected for participation.

    (d) Provisions of 2.4 may be waived to allow the use of bargaining unit employees for specific projects if mutually agreed to by the local union committee and local management. Such agreements must be approved by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Vice President and Corporate Vice President—Human Resources.

    2.5  Campaign Employees:  A "Campaign Employee" is an employee who is not a year round employee as defined in Section 2.4. Refer to Section 2.2, Mason City and Chaska.

    2.6  Temporary Employees (Chaska & Mason City):  A "Temporary Employee" is an employee who is not a year-round employee as defined in Section 2.4. A temporary employee is employed specifically to perform the duties of base positions at Chaska & Mason City. A temporary employee that is credited with one hundred ninety-five (195) days worked in any twelve (12) month period shall be considered year-round and will be entitled to all benefits accumulated.

ARTICLE III
WORK SCHEDULES

    3.1  Campaign Work Schedules:

    (a) During campaign, employees will be assigned to work crews which are scheduled to work for eight (8) hours per day, five (5) days per week for three (3) weeks, and eight (8) hours per day, six (6) days per week every fourth (4th) week in accordance with the appended campaign shift schedule. During campaign the work week shall be from 8:00 a.m. Monday to 8:00 a.m. the following Monday.

    (b) During campaign, office and agriculture repair employees shall work Monday through Friday, commencing at 8:00 a.m. and running for eight (8) hours each day exclusive of a lunch period which shall be allowed without pay at such time each day and for such length as may be agreed upon at each plant.

    (c) During campaign, beet receiving employees, for so long as they are employed, shall work such number of hours each day and for such number of days each week as is necessary to handle beets as received.

    (d) During campaign, other employees not on jobs requiring 24-hour staffing shall work five (5) or six (6) eight (8) hour days per week on a regular schedule as the Company shall determine for each such employee which shall give the employee three (3) forty (40) hour weeks and one (1) forty- eight (48) hour week every four (4) weeks. Employees assigned to straight day jobs only shall work five (5) eight (8) hour days per week. Exceptions to working schedules can vary by mutual agreement between the Company and Local Union.

    (e) Upon mutual agreement with the Company and the Local Union, 7:00 a.m. may be the scheduled starting time.

    (f)  Employees who are working a Monday through Friday rotating shift schedule, may elect to start shift on Sunday nights. The work week for all employees on such a schedule at a given location will begin at 12:00 A.M. Sunday and will not cause overtime to be paid for such start. The Company and Union will jointly review this provision each year and must mutually agree to any continuance.

    3.2  No Loss of Time at End of Campaign:  Appropriate work schedules will be established to prevent a year-round employee from loss of time worked at the close of campaign. During this period if an employee is scheduled to work more than one shift in a twenty-four (24) hour period, he will be allowed at least eight (8) hours off between shifts, provided that this shall not prevent the Employer from working an employee overtime.

    3.3  Campaign Work Schedules:

    (a) During campaign all employees who have regular relief shall make a complete rotation of all three shifts. Employees on jobs staffed on a two (2) shift basis will change shifts as per mutual agreement between the Local Union and the Company at each plant.

    (b) Campaign Work Schedule: Each employee whose job required twenty-four (24) hour staffing during campaign, as determined by the Company, will be assigned to one of four work crews to be designated A, B, C and D, and during campaign, each employee shall work the days and shifts as indicated for his crew on the appended work schedule. Each year at the start of the campaign season, each crew will change their crew designation from A to B, B to C, C to D and D to A. The schedule shall begin on September 1 and ends on the day campaign actually ends.

    3.4  Inter-Campaign Work Schedules:  During inter-campaign, employees are scheduled to work Monday through Friday commencing at 8:00 a.m. and running for eight (8) hours each day exclusive of a lunch period which shall be allowed without pay at such time each day and for such length as may be agreed upon at each plant. There shall be a break period approximately in the middle of the first (1st) four (4) hours of work and another break period approximately in the middle of the second (2nd) four (4) hours of work. Such breaks are to be scheduled by management so as not to interfere with normal operations. This time is to be paid for by the Company. Upon mutual agreement with the Company and the Local Union, 7:00 a.m. may be the scheduled starting time.

    During the months of September through March, the workday for employees at Chaska and Mason City shall commence at 8:00 a.m. and run for eight (8) hours inclusive of a twenty (20) minute paid lunch period.

    Company will not use whistles for signaling the beginning and ending of breaks.

    3.5  Lunch Period:

    (a) During the inter-campaign period the lunch period will be one-half (¹/2) hour duration, to be scheduled by the Company in accordance with past practice. The Company recognizes that there will be occasions when an employee is required to work beyond his normal shift without notice. In the event that such unexpected work extends more than two (2) hours beyond the end of an employee's normal shift, the Company agrees to grant such employee a thirty (30) minute paid lunch period.

    (b) Campaign Shift Work: Shift employees whose duties are being performed during one of one, two or three shifts of eight (8) hours each may take a twenty (20) minute paid lunch period; also a ten (10) minute paid rest period approximately midway in the first four (4) hours and in the last four (4) hours of each shift provided that the nature of their employment is such that no interruption of their duties will result. In the event the nature of their employment requires constant attendance, relief will be supplied, but it is agreed that no relief will be requested by employees who can normally eat their lunch while in performance of their duties.

    3.6  Inter-Campaign Shift Work:  During the inter-campaign when work is required on two or more shifts, the shifts will start and end at times determined by mutual agreement between the Local Union and the Company Each shift will be eight (8) hours long and employees assigned to their particular work will receive a ten (10) minute paid rest period approximately midway through the first four (4) hours and the last four (4) hours as well as a twenty (20) minute paid lunch period.

    Management may, at its discretion, operate some or all packaging lines on a three (3) shift five day-per-week basis, Monday through Friday. This schedule, if adopted, would apply to both campaign and inter-campaign periods.

    Employees who are working a Monday through Friday rotating shift schedule, may elect to start shift on Sunday nights. The work week for all employees on such a schedule at a given location will begin at 12:00 A.M. Sunday and will not cause overtime to be paid for such start. The Company and Union will jointly review this provision each year and must mutually agree to any continuance.

    If it becomes necessary to schedule packaging line crews on a seven day a week basis for an extended period of time the Company will discuss the scheduling needs with the Local Union Committees. The Company will schedule one weekend per month off for those employees who so request.

    3.7  Notice of Shift Change:  During inter-campaign an employee will be given at least twenty-eight (28) hours notice before being assigned to any two or three shift schedule.

    3.8  Split Shifts:  There will be no split shifts. This is to mean that work in any one day will be continuous except for the recognized lunch periods.

    3.9  Shift Differential:  During inter-campaign there shall be a shift differential of fifteen ($.15) cents per hour for the 4 to 12 shift, and twenty ($.20) cents per hour for the 12 to 8 shift. If two or more shifts are scheduled these shifts shall be rotated. Shift differential shall be computed in holiday, vacation and overtime pay.

ARTICLE IV
OVERTIME

    4.1  Workday and Workweek:

    (a) The regular workday shall be eight (8) hours. The regular workweek shall be forty (40) hours. For purposes of determining when overtime occurs, a week shall be measured from 8:00 a.m. Monday to 8:00 a.m. the following Monday and a day shall be measured from 8:00 a.m. of one day to 8:00 a.m. on the following day.

    (b) For any plant which has elected, under Article III, 3.4, to start at 7:00 a.m., the workweek shall be measured from 7:00 a.m. Monday to 7:00 a.m. the following Monday, and a day shall be measured from 7:00 a.m. one day to 7:00 a.m. the following day.

    4.2  Overtime at Time and One-Half:  Overtime shall be paid for at the rate of one and one-half (¹/2) times the straight-time rate.

    (a) for all work in excess of eight (8) hours per day;

    (b) for all work in excess of forty (40) hours per week;

    (c) for all work in excess of eight (8) consecutive hours in two (2) days except when changing shifts;

    (d) for all work performed on the sixth (6th) day of any week.

    (e) When Article IV, 4.10 does not apply, then all overtime shall be awarded according to seniority where ability is sufficient to perform the work required.

    4.3  Overtime at Double Time:  Overtime shall be paid for at the rate of two (2) times the straight-time rate of pay:

    (a) for all work in excess of sixteen (16) hours per day;

    (b) for all work in excess of sixteen (16) consecutive hours in two (2) days, except when changing shifts;

    (c) for all work performed on the seventh (7th) day of any week.

    (d) When Article IV, 4.10 does not apply, then all overtime shall be awarded according to seniority where ability is sufficient to perform the work required.

    4.4  Holdover and Call-In:  A limit of two (2) hours holdover on the midnight to 8:00 a.m. shift may be considered part of the regular shift and paid for at the appropriate overtime rate. If more than two (2) hours are devoted to such holdover, all hours worked after 8:00 a.m. will be credited to, and paid for as work performed in that work day.

    4.5  Saturday and Sunday Work:  All work performed on Saturday during inter-campaign shall be paid for at one and one-half (1¹/2) times the straight-time rate of pay and all work performed on Sunday during inter-campaign shall be paid for at double the straight-time rate of pay. This does not apply to those employees assigned to a four shift, shift rotation.

    4.6  Holidays Off Count As Hours Worked:  For the purpose of computing overtime, payment for recognized holidays shall be considered as eight (8) hours time worked, provided the holiday falls on a day which would otherwise have been a regularly scheduled workday for the employee.

    4.7  No Pyramiding Overtime:  Overtime shall not be pyramided. For instance, a particular hour of work shall be computed as overtime under only one provision of this Agreement and if an hour is counted as overtime, it shall not also operate to convert other regularly scheduled straight-time into additional overtime.

    4.8  No Layoffs To Equalize Overtime:  Employees shall not be asked or required to lay off regular straight-time work hours to equalize overtime by them.

    4.9  Time Lost Not Limiting Overtime:  Time lost by an employee because of illness, injury, excused absence or while on paid sick leave or paid vacation, need not be made up to qualify for any overtime compensation.

    4.10  Assignment of Overtime:  During campaign when overtime is required the employee so classified who worked the preceding shift shall work the first four (4) hours and the employee so classified on the following shift shall work the last four (4) hours, except that upon mutual agreement of the employee and the Company (or employee is not available) the work may be assigned to another employee.

    During inter-campaign when overtime is required, year-round employees shall have preference over campaign employees. When assigning employees to new crews that are scheduled for overtime, the more senior employees in the needed classifications shall be assigned to such work provided they have the qualifications to do the work required.

    Employees will be notified of overtime as far in advance as possible. The Company may require employees to perform overtime work; provided, however, employees may be excused from overtime work by the Company. In the event there is a choice among two or more present and qualified employees who prefer not to work, the least senior shall be required to work the overtime.

    The Company shall attempt to notify employees by 4:00 p.m. on Thursdays when Saturday or Sunday work is required during inter-campaign. If employees are notified later than 4:00 p.m. on Thursday, employees may refuse such work on the basis of seniority provided that the lowest seniority employees in the needed classifications must accept such work. The notification requirement as specified above shall be satisfied by the Company posting the names of those employees affected at a location mutually agreed upon between the Local Union and the Company.

    Temporary employees (Chaska & Mason City) may not be used for overtime assignments until all eligible regular full-time employees have had an opportunity for such overtime.

    4.11  Report-In Pay:  An employee called to work by the Company, or reporting for work when regularly scheduled shall, unless the Company shall have instructed him not to come or report to work, be given at least two (2) hours work, or in lieu thereof, be credited with at least two (2) hours work for pay purposes. Notwithstanding the foregoing, there shall be no minimum report-in pay or work for employees reporting at the start of campaign or during campaign when factory operation is hampered due to insufficient supply of beets.

    4.12  Call Back Pay:

    (a) In the event of a call of an employee to duty after he had put in his shift and left the factory, if he devotes less than four (4) hours on such call he shall be credited with four (4) full hours of work. If however, the call back is within the two (2) hour period just prior to his next regularly scheduled shift, he shall be credited with the time he starts work up to the starting time of his next regularly scheduled shift. In either event such time will be paid for at his established overtime rate.

    (b) An employee shall be considered as having left the factory when he punches his time card at the end of his regular shift.

    (c) An employee called back to work will be advised as to the particular job for which he is being called back.

    (d) The employee will be excused upon his completion of the work he was called back to perform.

    (e) All call backs shall be made on a seniority basis where ability is sufficient to perform the work required.

ARTICLE V
SENIORITY

    5.1  Seniority and How Lost:  Seniority shall be based upon the employee's continuous service with the Company at the plant where he is employed. An employee's total length of service shall date from the time he was first placed on the Company payroll, provided that his service has been continuous as hereinafter defined. In the event that the employee's service has not been continuous, as hereinafter defined, from the time he was first placed on the payroll, his total length of service shall be the period last past during which his service was continuous.

    An employee's service is deemed to be continuous for purposes of seniority as long as he works during each successive campaign and in addition thereto works each successive inter-campaign to the extent that employment is offered to him. Continuous service shall not be broken due to lay-off of less than one year or absence due to sickness or injury or leave of absence or other reasons approved by the Company. However, an employee's continuous service shall be broken by any of the following:

    (a) Voluntary quit;

    (b) Discharge for just cause;

    (c) Lay-off for a period of one (1) year;

    (d) Failure to return after a leave of absence without reasonable excuse;

    (e) Failure to offer his services to the Company for campaign work in accordance with the Company's rules regarding offering of services for campaign employment;

    (f)  Except at the start of campaign, failure to report to work within seventy-two (72) hours after recall. The Local Union shall be notified immediately of all such recalls to assist in arranging for the employee to report to work. Employees will be notified by certified mail, with a copy to the Union, if the Company is unable to notify by telephone;

    (g) Leaving the bargaining unit to accept employment with the Company as a management employee;

    (h) At the start of campaign, failure to report to work on the date and at the time specified provided the Company has given the employee twenty-four (24) hours notice, unless the employee has a legitimate reason for such absence.

    5.2  Plant Seniority:  The employee's plant seniority will commence the day he becomes a year-round employee. (Refer to 5.5)

    5.3  Campaign Seniority:  The employee's campaign seniority will commence the day he starts to work as a campaign employee. Campaign seniority shall be calculated by taking the number of days between the date the employee is hired or recalled and the date the employee is laid off.

    Campaign employees shall accumulate seniority during an approved medical leave of absence, but only for the time that the employee would have normally worked.

    Temporary Employees Seniority:  The temporary employees seniority will commence on the day he starts to work as a temporary employee. Temporary employees seniority shall be calculated by adding the actual number of days worked between recall and lay-off.

    5.4  Company Seniority:  In addition to plant seniority, each employee entitled to seniority rights shall have a Company-wide seniority rating based on length of service with the Company.

    5.5  Seniority Dates:

    (a) A year-round employee's plant seniority shall commence on the date when he becomes a year-round employee, and shall include all subsequent and previous continuous service, until he loses seniority as provided in Section 5.1. For purposes of determining previous continuous service for employees attaining year-round status under 2.4(2) the beginning date of the 12 month calculation period shall be used. For those qualifying under 2.4(3) the last date of recall or initial date of hire (whichever is later) shall be used. It is understood that pension benefits and vacations will be computed on the basis of seniority as described above. Insurance benefits shall commence on the date that the employee completes the requirements for year-round status.

    (b) An employee's campaign seniority shall commence with his employment as a campaign employee and shall include all subsequent continuous service as a campaign employee until he loses seniority as provided in Section 5.9 below.

    (c) An employee's temporary seniority shall commence with his employment as a temporary employee and shall include all subsequent continuous service as a temporary employee until he loses seniority as provided in Section 5.9 below.

    (d) When two (2) or more campaign employees obtain year-round status on the same date, the sequence of year-round seniority will be determined by the employee's previous campaign seniority. When two (2) or more current employees with identical seniority dates have a seniority question that cannot be answered in the sentence above, they will in the presence of each other, a Union Representative, and the Employee Relations Coordinator draw numbers from a hat to break the tie for the given seniority question. The employee pulling the lower number will be awarded the higher seniority for the given situation. In the event that any employee cannot be present for the drawing, a Union Representative will take the affected employee's place.

    (e) Employees hired after August 1, 1984, shall follow the same procedure to determine the higher seniority employee. This procedure will permanently determine seniority of the affected employees.

    5.6  Benefits Accumulate:  A year-round employee who is laid off, so long as he retains seniority under this contract, upon recall, retains all prior accumulated year-round seniority for the purpose of computing the benefits of a year-round employee under this Agreement.

    Hospital-medical coverage shall be maintained at the Company's expense for year-round employees on lay-off, so long as they retain seniority under this Agreement.

    A year-round employee who is laid off may continue dental coverage at his own expense, so long as he retains seniority under this Agreement.

    Employees on Disability Retirement will be covered at the Company's expense for Health and Medical Insurance Programs until eligible for Medicare or age 65. Such employees' dependents will be covered as long as they remain dependents or until the employee reaches age 65.

    Early Retirees who qualify under the Pension Program may elect to continue their hospital-medical coverage until age 65 or eligible for Medicare. If such employee elects to continue coverage, the Company shall pay one-half (¹/2) of the premium cost for the employee and eligible dependents and the employee shall pay the remaining one-half (¹/2).

    Effective August 1, 1984, upon attainment of age 65 or eligibility for Medicare, retirees who qualify under the Pension Program may elect to purchase through the Company, a Medicare Supplement Plan for themselves and a qualifying spouse. The Company shall contribute $15.00 per month per covered individual for those who elect to participate in the Plan and the retiree shall pay the balance of the premium cost.

    A campaign employee who is laid off, shall so long as he retains seniority under Section 5.1 of the Agreement, upon being recalled, retain all prior accumulated campaign seniority for the purpose of computing campaign employee benefits under this Agreement.

    5.7  Inter-Campaign Availability:

    (a) A list of campaign employees available for and desiring inter-campaign work shall be established at the close of each campaign. Campaign employees desiring inter-campaign work shall signify their willingness to be available for such work by placing their names on the list provided within three (3) weeks of its posting. This list shall be depleted before any other sign-ups are hired, provided such sign-ups have the ability to perform the work required. The Company and the Union Committee shall meet within one (1) week to verify the seniority of the employees who signed the list. Employees who later find that contrary to their prior indication either that they will not be available or that they will be available for work must notify the Employer in writing of that fact. Employees who have their name added to the list after the close of the campaign shall not be permitted to use their seniority to bump a junior employee who is working. Employees who sign up for inter-campaign work and fail to report for work within seventy-two (72) hours after notification (provided that the Local Union is notified immediately of all such recalls to assist in arranging for the employee to report to work) except for temporary employment, and have not previously requested their names to be removed from the list shall lose all their accumulated seniority. Failure of an employee to sign up for inter-campaign work shall not result in loss of seniority rights.

    It is understood that employees who are scheduled for recall to the factory within 7 working days of the start of campaign will not be eligible for piling station jobs during the duration of the harvest period, including preharvest.

    It is further agreed that factory employees who are on lay-off may not use their seniority to claim the jobs listed below unless a vacancy exists. Employees who request and receive one of the below listed positions must stay in that position for the duration of the piling season and may return to the factory only as provided in Article 5.7 (b). However, this shall not preclude such employees from bidding or posted positions within the factory. If awarded a bid position, the employee shall immediately move into the new job.

—Weigh Master
—Foreman
—Piler Operator
—Quality Lab

    It is further agreed that a new 30 day trial period shall apply to Agriculture employees bidding on factory jobs. Agriculture employees who fail the trial period shall be returned to their Agriculture position. Any Agriculture employee who has not completed their initial forty-five (45) day probationary period prior to accepting a factory position must complete a new forty-five (45) day probationary period

    (b) Campaign Availability:  Campaign employees working on the factory receiving crews must indicate their desire to work in the factory operations by signifying their preference on a sign-up sheet within five (5) days of their lay-off from the piling grounds. Those desiring work in the factory shall be placed in positions for which they are qualified by virtue of ability and seniority and receive a new permanent classification. Conversely, any persons on lay-off from the factory must accept agricultural assignments for which they are qualified until a position comes available in the factory. When their regular position becomes available they will be returned to their factory position within three (3) days.

    If an agricultural employee accepts employment in the factory, that individual will be recalled the following year to a factory position for which he/she is qualified.

    Employees whose personal circumstances change may remove their name from the factory work list. This must be done in writing with the notice being received by the Company prior to being notified of a vacancy. Unless this procedure is utilized, preferences shall be binding until the end of the next piling season.

    5.8  Seniority for Inter-Campaign Work:

    Campaign employees, if available, shall be considered in line for all temporary or permanent employment in the inter-campaign period when such work is available. For the purpose of this Article, employment of thirty (30) calendar days or less shall be temporary. Seniority will govern in selecting employees for re-employment provided that the employee's ability and physical qualifications are sufficient to permit him to perform the duties of the job involved in a satisfactory manner. For seniority purposes, effective August 1, 1971, campaign employees who perform work during the inter-campaign period will be credited one (1) full day for each day of work performed, regardless of the number of hours worked.

    5.9  Loss of Campaign and/or Temporary Seniority:

    Campaign seniority shall be lost:

    (a) by the employee's failure to report when called upon, except as above provided when the work is temporary;

    (b) by the employee quitting;

    (c) by discharge for just cause;

    (d) by failure to answer the Company's inquiry as to their availability for campaign work;

    (e) by leaving the bargaining unit to accept employment as a management employee of the Company;

    (f)  except at the start of campaign, failure to report to work within seventy-two (72) hours after recall. The Local Union shall be notified immediately of all such recalls to assist in arranging for the employee to report to work. Employees will be notified by certified mail, with a copy to the Union, if the Company is unable to notify by telephone;

    (g) lay-off for a period of one (1) year;

    (h) at the start of campaign, failure to report to work on the date and at the time specified provided the Company has given the employee 24 hours notice, unless the employee has a legitimate reason for such absence.

    Temporary employees seniority shall be lost by (b), (c), and (g) above. Temporary employees who have lost seniority shall have no rights to recall and shall be considered as terminated.

    The Employer shall notify the Union in writing within five (5) days when an employee having seniority standing is offered employment and refuses same.

    5.10  Seniority Lists:  There shall be three seniority lists in each factory; one showing the seniority of year-round employees, one showing the seniority of campaign employees and the other showing the seniority of the factory harvest employees that do not have a factory title and have not successfully completed the thirty (30) day trial period.

    Temporary employees seniority at Chaska & Mason City will be tracked for purposes of lay-off and recall.

    5.11  Posting Lists:  The year-round seniority list shall be posted on August 1st of each year for a period of thirty (30) days for correction. The campaign seniority list shall be posted five (5) days prior to the start of campaign for a period of thirty (30) days for correction. The agriculture harvest seniority list shall be updated ten (10) days after the completion of harvest and be posted for a period of thirty (30) days for corrections. During the thirty (30) day posting period of the harvest seniority list, the most recent list will be used to determine seniority issues. If no objections are made, they shall be assumed as correct, and the appropriate Local Union Committee shall be furnished a copy of all three lists.

    5.12  Promotions:  Promotions or changes to other classifications shall be made on the basis of plant seniority provided that the employees ability and physical qualifications are sufficient to permit him to perform the duties of the job involved in a satisfactory manner, by mutual agreement between the Union Committee and the Company. However, the Company may offer a promotion to a less senior employee if: (i) the employee has successfully completed a training program in the job under Section 5.19; (ii) the employee has demonstrated he or she is qualified by holding the job temporary under Section 5.13 or (iii) the employee has successfully completed Operational Training under Section 5.20. An employee has the right to accept or reject a promotion. However, if an employee rejects a promotion, another employee with less seniority may be promoted as outlined above. An employee accepting a promotion or change in classification shall be given a fair trial in the new classification, and shall be returned to his old position if he is unable to perform the new assignment satisfactorily The length of the fair trial period shall be determined by mutual agreement between the Union Committee and the Company at the time the employee is offered a promotion. (Minimum of ten (10) working days for Tech. I, II, III and Stations A and a minimum of five (5) working days for Stations., B, C, and D.)

    5.13  Job Openings:  When vacancies occur, or new positions are created, during campaign or inter- campaign such position shall be posted immediately for a period of ten (10) calendar days, and such vacancy shall be filled within five (5) calendar days after the posting period is ended. If a vacancy occurs the qualifications for the position to be set forth in the posted notice shall be the qualifications required to perform the duties of the position. If a campaign position becomes vacant during the inter-campaign period, such position will be posted as provided above. No adjustment in rate will be effective until a fair trial period has been completed at the start of the next campaign for those employees who have not previously demonstrated they are fully qualified for the position. Those employees who have successfully demonstrated their qualifications and who do not need a fair trial period, shall receive the appropriate rate adjustment immediately. An employee covered by the Agreement shall be permitted to apply for such position and if the applicant is qualified he shall be placed in such position. If it is necessary to fill such position during the time the job is posted, it may be filled on a temporary basis, and the employee who is finally accepted shall be placed in such position over the temporary employee. Applications received will be given consideration on the basis of plant seniority provided the employees ability and physical qualifications are sufficient to permit him to perform the duties of the job involved in a satisfactory manner. However, the Company may offer a promotion to a less senior employee if: (i) the employee has successfully completed a training program in the job under Section 5.19; (ii) the employee has demonstrated he or she is qualified by holding the job temporary under Section 5.13; or (iii) the employee has successfully completed Operational Training under Section 5.20.

    When the Company determines to change the content of a job posting it will provide a copy of the new posting to the Union prior to posting. If requested, the Company will discuss the changes with the Union.

    If a job assessment is not available in written form prior to awarding a job, it will not be required for the successful completion of a trial period. However, an on the job evaluation will still be performed.

    Applications shall be in writing and in duplicate on forms provided by the Employer, setting forth in detail the applicant's qualifications. The original copy shall be filed with the Personnel office, and the carbon copy shall be filed with the Employee's Committee of the Local Union. Employees eligible for the filling of vacancies shall be limited to the employees making applications therefore, unless none of the applicants qualify. The names of applicants considered and the name of the employee who is selected to fill the vacancy shall be promptly posted on the bulletin board, and a copy will be furnished to the Local Union. The bulletin posting of jobs below the Technician Group and Group A Station will be suspended, however, a current list of openings will be posted on the bulletin board.

    Employees who are awarded a lateral or downward classification change and then refuse the award shall be restricted from any further bidding on lateral or downward positions for a period of 12 months from such award.

    Employees who are classified 2nd Class will be reclassified to 1st Class when they perform the work of that classification satisfactorily.

    5.14  Temporary Transfers:  The Company may temporarily transfer any employee to another job at any time. If an employee is temporarily transferred to a job with a lower rate of pay, he shall receive his regular rate of pay If an employee is temporarily transferred to a job with a higher rate of pay under the appended wage scale, he shall receive the higher rate of pay for all time worked at the temporary job.

    5.15  Posting of Temporary Transfers:  When it can be reasonably determined by the Company and the Union Committee that a temporary transfer will be in effect for more than fourteen (14) calendar days, the job will be posted and filled on a temporary basis under the prescribed procedure for filling vacancies occurring in the Station A and Technician classifications.

    In exception to the above, temporary transfers to replace employees on vacation will not require posting.

    5.16  Intra-Company Transfers:  When a vacancy exists the Employer may transfer an employee with his consent, provided such transfer is offered on a seniority basis, from one plant to another and any employee so transferred shall carry with him his Company seniority rating for the purpose of protecting all benefits the employee now enjoys. For the purpose of promotions, demotions, and layoffs, the employee's plant seniority will commence the day he starts to work in the plant he is being transferred to. It is agreed that the Company will pay the moving expenses of such employees. Moving expenses shall be limited to movement of normal household goods (furniture, clothes, dishes) from the employee's principle residence to the employee's new residence at his/her new job site and mileage for one (1) vehicle from the employees former residence to his/her new residence.

    5.17  Demotions:  In cases where an employee is unable to perform the duties of his classification, the Employer with the employee's consent in writing, and with a copy of the consent furnished to the Local Union, and after meeting with the Employee's Committee, instead of laying off said employee may transfer him to any other position and fix his rate accordingly.

    5.18  Job Shifting, Crew Assignment:  Except in case of a plant closing, an employee cannot use his seniority to move from one job to another or from one shift to another unless a vacancy exists. The Company shall not require employees to move from one shift to another without first meeting with the Local Union Committee and the employee involved.

    5.19  Training Program:  A training job will be posted and filled in accordance with Article 5.13, Job Openings. All employees, including those who have previously held the position for which training is being offered, should submit an application.

    If the most senior applicant has had prior experience in the position and the company considers the applicant already qualified, no training will be required and the posted training position shall be terminated or shall be awarded to the next senior qualified applicant.

    There will be no adjustment in classification for the training. The trainee will receive the same wage during the training period as he did before. Wages will be adjusted to the rate applicable only after he is assigned to and classified in the position.

    The trainee will return to his former position after the training period is declared over if no openings exist in the position in which he received training.

    The posting of jobs for training will in no way alter or change the present method of posting job openings. However, it is agreed that Employees that have been selected for and receive training will be given preference over other employees for a period of time equal to the length of training as stated in the job posting or twelve (12) months, whichever is longer in the filling of vacancies in positions for which they have been trained except for a senior employee who has had previous training on the same job or a senior employee who has held the job permanently.

    If a vacancy occurs in the position being trained for and no one is otherwise qualified, the company may move the trainee into a position for which they have trained before the training has been completed if the Company feels the trainee has ability to do the job.

    The trainee will return to his/her former position after the training period is declared over if no openings exist in the position in which he/she received training.

    If at any time during the training period, the Company and Local Union Committee meet and agree that an employee in training is not capable of filling the position, either by lack of ability or through lack of interest shown, or at employee's option, he/she shall be returned to the former crew and job classification, and steps to obtain another trainee will be taken up with the Union Committee.

    An employee shall participate in no more than one training program at a time. An employee who has successfully completed a training program must bid for an open job for which he has been trained. If awarded the position he must accept or not be eligible for training for twenty-four (24) months. If the training position was at a wage rate less than the rate the employee held at the time of the training, an employee who does not accept the position shall be reduced to the wage rate of the position, unless during the interim period of time the employee has bid on and been awarded a position at a wage rate higher than the wage rate of the training position.

    In addition to the above, the Company may at its discretion provide technical training for the purposes of upgrading technical skills. This training may be offered, when practical, to interested employees not normally qualified for such training, on a voluntary basis. Area Vo-Tech testing and counseling will be utilized to determine qualifications for this training.

    Employees who wish to enter an approved degree program at a Vo-Tech, College or University will be eligible for reimbursement for 75% of the cost of tuition and books. Eligible college degree programs include, but are not limited to, Engineering, Business, Agriculture, Agricultural Economics, and other programs directly applicable to the needs of A.C.S.C. Eligible Vo-Tech programs include but are not limited to, Computer Programming, Electronics, Electrical, Mechanics, Welding, Steam Engineering, Chemistry, Pipe Fitting, Accounting and Supervision. Employees may also apply for tuition reimbursement for courses, which are directly applicable and beneficial to A.C.S.C.

    Application for tuition reimbursement must be submitted in writing to the Training and Organizational Development Manager and approval granted prior to beginning of course work in order to be eligible for reimbursement. In all cases, a grade of "C" or better is required to be eligible for reimbursement. Payments for approved courses will be made after proof of completion of course and grade are presented to the Training and Organizational Development Manager

    5.20  Operational Training:  Operational training may be offered by the company at Station A and below. Prior to offering operational training a factory shall post a notice for operational training for a period of 10 calendar days. Employees must indicate their interest in the training in writing to the factory Employee Relations Coordinator during the posting period. Employees will be selected for operational training on the basis of seniority. Employees who have successfully completed a minimum of 40 hours of operational training shall be considered qualified in the position in which they have trained and may be given preference in future job awards under Section 5.13 for a period of 12 months.

    Nothing in this provision shall limit the Company's right to otherwise offer training to employees.

ARTICLE VI
LAY-OFF AND RECALL—
HIRING AND REHIRING

    6.1  Hiring:  The Employer reserves complete freedom in hiring. When temporary employees are going to be hired, the Company will notify the Local Union and, if requested, will discuss with the Local Union.

    6.2  Lay-Off and Recall:

    (a) Year-Round Employees—Lay-off and recall shall be based on plant seniority. The employee with the least seniority shall be the first laid off and, in making recalls to work, the employee with the most seniority who is on the laid off list, shall be the first returned to work, provided however, that the employees retained in event of a lay-off or retained to work have the ability to perform the work required.

    (b) Campaign Employees

     (i) Lay-off—Except at the end of campaign, campaign employees shall be laid off according to seniority provided, however, that the employees retained have the ability to perform the work required. At the end of campaign, campaign employees may be laid off as their shift and job are completed, according to such employees' seniority of their shift and job provided that the employees retained have the ability to perform the work required.

    (ii) Recall—At the start of campaign, campaign employees shall be recalled according to seniority and shift provided that the employees recalled have the ability to perform the work required.

    (iii) Factory Yard Dump Foremen may be recalled a maximum of two (2) weeks prior to the anticipated date of initial harvest and retained a maximum of two (2) weeks after the completion of piling, without regard to seniority for the purpose of preparing for and completion of piling operations. Campaign employees who are assigned to the Beet Seed operation may be retained for a maximum of two (2) weeks beyond the completion of the normal factory campaign if their work has not yet been completed. However, no seniority for Moorhead beet seed employees will be credited beyond the normal lay-off date.

    (c) Plant Emergency—In the event of an emergency requiring a plant shut down of operations because of such emergency, employees may be laid off without the requirement of advance notice and without regard to the normal seniority provisions governing other types of lay-offs. Employees retained to assist with an emergency shut down of operations will be selected on the basis of skills required to handle the given situation.

    6.3  Lay-Off Notices:  The Employer agrees to prepare notice of lay-off in triplicate for each employee to be laid off. One copy shall be given to the employee at the time of lay-off, the original is to be retained by the Employer and one copy is to be deposited in a box provided by the Local Union. The Financial Secretary of the Local at the plant will designate the place where the box shall be installed. In case of a layoff of a year-round employee, the Employer shall give each year-round employee to be laid-off at least ten (10) working days notice in writing prior to laying off said employee. It is further agreed that working days shall mean Monday through Friday. In the case of a temporary lay-off of a year-round employee (30 days or less) the lay-off notice shall be five (5) working days. If a year-round employee on lay-off is recalled for a period of thirty (30) days or less and subsequently laid off, the requirement for a five (5) or ten (10) day notice shall be waived. The employee affected will be notified at the time of recall of the time period of the work required. If the time actually worked goes beyond thirty (30) days, the requirement for a five (5) or ten (10) day layoff notice shall apply. Such temporary lay-off notices shall apply only to employees working in the packaging, shipping, and handling of sugar, excluding Chaska and Mason City.

    During campaign or inter-campaign we will use the Monday through Friday workweek counting that period as five (5) days; two (2) such consecutive five (5) day weeks would constitute the ten (10) day advance notice.

    6.4  Voluntary Lay-off

    In the event that it becomes necessary to lay-off year-round employees, the company will post a notice asking interested employees to contact the Employee Relations Coordinator. The notice will be posted for fourteen (14) calendar days. The Employee Relations Coordinator will generate the list of names of people volunteering for lay-off. The company will discuss their selections with the union committee prior to announcing who will be laid off.

    The company retains the right to keep people out of seniority that have the skills needed to perform the work; however, lay-offs will be by seniority whenever possible.

ARTICLE VII
DISCIPLINE AND DISCHARGE

7.1 The Company reserves the right to discipline or discharge employees for just cause. Discharge shall be evidenced in writing, which shall state the reason for the discharge and shall be given to the employee at the time of his discharge. An employee who believes his discipline or discharge to be unjustified shall have recourse to the grievance procedure under this Agreement.

    7.2  Discrimination:  Employer shall not discharge or discriminate against any employee for Union Activities, upholding Union principles, or serving on a committee of the Union or any AFL-CIO organization with which it is affiliated.

    Neither the Union nor the Employer shall discriminate against any employee or applicant for employment because of race, creed, color, sex or national origin; and to the extent prohibited by applicable state and federal law, there shall be no discrimination because of age.

ARTICLE VIII
SERVICE IN ARMED FORCES

    8.1  Military Service:  Employees inducted into the armed forces under the Military Selective Service Act of 1967 shall be accorded by Employer the re-employment benefits provided for in said Act.

ARTICLE IX
GRIEVANCE AND ARBITRATION

    9.1  Union Right To Discuss:  Any duly authorized officer or representative of the Local Union or the International Union shall have the right to visit the Company's local office during working hours and to discuss with a responsible Company representative any matter arising under this Agreement or relating to the terms and conditions of employment of any employee. The Company shall give the Union representative courteous and reasonable prompt attention.

    9.2  Union Stewards:  The employees in any plant may designate one or more of their number to act as steward. A steward shall be deemed authorized by the employees and by the Union to aid in adjusting any grievance between employees and the Company. To the extent possible, any grievance involving employees and arising under this Agreement may be adjusted by a steward with the Company

    9.3  Plant Employee's Committee:  The Union shall be represented in the adjustment of grievances in the steps set forth in this Article by an Employee's Committee composed of a steward, two Union Officers and, upon the request of those three, an International Representative. Names of those comprising the Employee's Committee shall be officially filed with the Employer.

    9.4  Definition Of A Grievance:  A grievance, for the purpose of this Agreement, is any controversy, complaint, misunderstanding or dispute arising as to the meaning, or application or observance of any of the provisions of this Agreement (other than the provisions of the Article X (No strikes or Lockout), which would be handled immediately as conditions require).

    9.5  Steps in Grievance Procedure:  In the event of a grievance, any employee affected who wishes to have the matter determined with respect to him shall file a grievance in writing with a steward, on a form approved by the Local Union and the Company and to be provided by the Local Union, within ten (10) working days of the date of the grievance. The filed grievance claim shall describe the nature of the grievance and shall establish the date of the grievance and shall be signed by the aggrieved employee. The date of filing of the written grievance shall be put on the written grievance and shall be referred to hereinafter as "the date shown on the written grievance." The grievance shall be prepared in quadruplicate with one copy to be retained by the employee, one copy to be available to the steward for his own use and for that of the Local Union Employee's Committee, one copy to be forwarded by the Local Union to the International Union and the original to be presented promptly to the Company. The grievance shall be processed in accordance with the following steps:

    STEP 1:  Within five (5) days after the date shown on the written grievance, the steward and the aggrieved employee and the shift superintendent, if any, shall meet and attempt to settle the grievance. The grievance shall proceed to Step 2 if no settlement is made within two (2) days after such meeting or within seven (7) days after the date shown on the written grievance, whichever is earlier.

    STEP 2:  Within seven (7) days after the date shown on the written grievance, and whether or not a meeting has been had in accordance with Step 1, but only if no settlement has been made pursuant to Step 1, the Employee's Committee of the Local Union shall meet with the appropriate management representative of the Company and attempt to settle the grievance. The grievance shall proceed to Step 3 if no settlement is made within ten (10) days after the meeting between the Employee's Committee and the Management Representative or within seventeen (17) days after the date shown on the written grievance, whichever is earlier.

    STEP 3:  Within seventeen (17) days after the date shown on the written grievance, if no settlement has been made pursuant to Steps 1 and 2, a representative from the Employees Committee or a representative of the International Union shall take up the pending grievance either in person or by telephone with the Employee Relations Manager and appropriate local manager of the Company and they shall attempt to effect a settlement. If no settlement is made within thirteen (13) days after the matter has been taken up with the Employee Relations Manager and appropriate local manager or, within thirty (30) days after the date shown on the written grievance, whichever is earlier, the matter may be referred to arbitration.

    9.6  Arbitration:  If the parties hereto are unable to satisfactorily settle a grievance in accordance with the foregoing procedure and if such grievance arises and is presented during the term of this Agreement and concerns the interpretation or application of any of the terms or provisions of this Agreement, such grievance may be submitted by either party to arbitration as hereinafter provided. Notification of the intent to arbitrate must be given in writing, within sixty (60) calendar days of the company's final written answer after Step 3 above. Failure to give such notification within the specified time period shall constitute a waiver of any further right to arbitration of the grievance.

    Note—An extension of 60 days will be granted if agreed to by both parties.

9.7 If the Union and the Company are unable to agree upon an arbitrator within five (5) days after the first meeting to attempt to select an arbitrator, the Union and the Company shall apply jointly to the Director of the Federal Mediation and Conciliation Service for the designation of a list of at least 5 arbitrators. The Union and the Company shall attempt agreement as to the selection of an arbitrator from this list. Absent agreement, the arbitrator shall be selected from this list with the Union and the Company, in rotation, each striking one name from the list until only one name remains, the determination of which should strike the first name to be determined by lot. The arbitrator whose name remains on the list at the conclusion of this striking procedure shall be the arbitrator who shall hear the unresolved grievance. It shall be the duty of each party to cooperate in the selection of the arbitrator as promptly as possible, to notify the arbitrator of his selection, to attend any hearing called by the arbitrator and to provide such evidence and testimony as the arbitrator may request or as he may deem necessary to reach a fair and impartial decision. The arbitrator shall have authority to act only with respect to grievances which arise and are presented during the term of this Agreement and which relate to the interpretation and application of the provisions of this Agreement and his decision shall be final and binding on all parties. The arbitrator shall be requested to issue his decision with all reasonable dispatch after the close of the hearing before him and, at the request of either party, shall prepare a statement in support of his decision. The fees and expenses of the arbitrator for the arbitration shall be borne equally between Company and the Union.

ARTICLE X
NO STRIKES OR LOCKOUT

10.1  During the term of this Agreement there shall be no cessation of work by any employee nor any action in any form taken or permitted by an employee or by the Union which might impair operations of the Company or affect the distribution of its products nor shall there be any lockout by the Company.

ARTICLE XI
UNION SECURITY

    11.1  Union Shop:  Each employee covered by this Agreement, if not already a member of the Local Union for the plant at which he is employed, shall make application for membership on the forty-sixth (46th) day after the effective date of this Agreement or from the date he is first hired, whichever date is later. Failure to so make application for Union Membership or to tender the periodic dues and initiation fees uniformly required as a condition of acquiring or retaining membership in the Union shall render the employee liable for discharge from employment. This section shall not be applicable with respect to employees in any state in which membership in the Union may not be lawfully required as a condition of employment but shall be applicable in such state whenever membership in a Union may be lawfully imposed as a condition of employment.

    AGENCY SHOP:  If any agency shop clause is permissible in any state where the other provisions of this Article cannot apply, the following Agency Clause shall prevail and as to such date shall be a substitute for the foregoing Union Shop provision.

    1.  Membership in the Local Union is not compulsory, employees have the right to join, not join, maintain, or drop their membership in the Union, as they see fit. Neither party shall exert any pressure on or discriminate against any employee as regards such matters.

    2.  Membership in the Local Union is separate, apart,, and distinct from the assumption by one of his equal obligations to the extent that he receives equal benefits. The Union is required under this Agreement to represent all of the employees in the bargaining unit fairly and equally without regard as to whether or not an employee is a member of the Union. The terms of this Agreement have been made for all employees in the bargaining unit and not only for members in the Union, and this Agreement has been executed by the Employer after it has satisfied itself that the Union is the choice of a majority of the employees in the bargaining unit. Accordingly, it is fair that each employee in the bargaining unit pay his own way and assume his fair share of the obligation along with the grant of equal benefit contained in this Agreement.

    3.  In accordance with the policy set forth under subparagraphs (1) and (2) of this Section all employees shall as a condition of continued employment, pay to the Local Union the employee's exclusive collective bargaining representative, an amount of money equal to that paid by other employees in the bargaining unit who are members of the Local Union which shall be limited to an amount equal to the Local Union's regular and usual initiation fees, and its regular and usual dues. For existing employees, such payment shall commence thirty-one (31) days following the date of execution of this Agreement, and for new employees the payment shall start forty-six (46) days following the date of employment.

    11.2  Union Membership:  The Union agrees that employees making application for membership in the Union shall not be refused membership except for good cause, nor shall employees now members of the Union be deprived of their membership except for good cause.

    11.3  Dues Check-Off:  The Company agrees to deduct each month from any wages payable to an employee who is a member of the Union, the amount of such employee's monthly union dues and unpaid initiation fees, payable to the Local Union, if authorized by such employee in a written assignment filed with the Company in form satisfactory to the Company and to pay the aggregate amount of such deductions to the Local Union. The deduction is to be made from the second pay check each month. Each such assignment executed by an employee for the deduction of monthly union dues or unpaid initiation fees shall, if so stated in the assignment, be irrevocable for a period of one (1) year from the date thereof, or until the termination of this Agreement, whichever occurs sooner. Each such assignment shall continue in effect for so long as this Agreement shall be continued in full force and effect or until the employee's pay day occurring next after written notice of revocation is given by such employee to the Company. In case of any difference between the terms of this section and any written assignment, the terms of this section shall govern. Along with the payment to the Union of the dues, the Company shall furnish an alphabetical list of the employees for whom the deductions are made.

    11.4  New Employees:  The Company agrees to notify the Local Union in writing of the names of new employees covered by the work classifications in the bargaining Agreement. Notification is to be given within five (5) working days after hire or rehire.

    Newly hired employees shall be considered as probationary employees for the first forty-five 45 calendar days. Probationary employees shall have no rights to invoke the grievance and/or arbitration provisions of this contract. Upon completion of the probationary period, employees shall become entitled to seniority, which shall be effective as of the first day worked upon employment.

ARTICLE XII
LEAVES OF ABSENCE

    12.1  Leaves of Absence Without Pay:  At anytime during the year, the Employer may grant an employee a written leave of absence which, except in the case of a leave of absence for pregnancy, shall not extend beyond the beginning of the following campaign, during which continuous service may not be deemed broken, and in the event the Employer grants such leave of absence, it will give to the Local Union written notice thereof. Written leaves of absence shall not be required for excused leaves of absence not exceeding three (3) days and eligible employee shall have the option of taking the time off without pay or as vacation time. Leave of absence shall be limited to six (6) months, except as otherwise provided in this contract and the Employer may renew such leave of absence for additional periods not to exceed six (6) months duration each.

    Campaign employees who are called back to work but cannot report in for their scheduled work date due to illness or injury, shall be granted a leave of absence without loss of classification seniority or benefits until employee has a medical release. If such employee does not return within one (1) full campaign after such leave is granted, such employee's job shall be filled on a permanent basis. If any employee granted a medical leave of absence, pursuant to the terms of the paragraph, is released to return to work after such employee's job is filled on a permanent basis, he or she shall immediately notify the Company and such employee shall be recalled to the first available position for which such employee is qualified.

    Unpaid Leaves for Campaign Employees—It is agreed that campaign employees who have need for an occasional personal leave day will be given proper consideration by their supervisor in a timely manner. The Company will discuss the issue with its supervisory personnel to help ensure that employees are given fair and consistent treatment in the handling of such requests. It is also understood that employees will cooperate with supervisor in making such requests and excessive use of personal unpaid leaves will not occur. Any problems regarding this issue should be discussed with Production Superintendent or other appropriate management representative.

    Year-round employees who cannot work due to illness or injury shall be granted a medical leave of absence without loss of classification seniority or benefits until he or she has a medical release. If such employee does not return within one (1) year from the commencement of the leave, the employee's job shall be filled on a permanent basis. An employee who is released by a medical authority to return to work after such employee's job is filled on a permanent basis, he or she shall immediately notify the Company and shall be recalled based on seniority and the ability to perform the work required. Such employee's rate shall be the classified rate of the position from which he or she was granted a leave and shall remain so until he or she is able to successfully bid on a position of equal or greater classification. Employees who are on a protected rate status must bid on positions for which they are qualified.

    Employees who leave the bargaining unit to accept a permanent position in management shall be granted a leave of absence for a maximum of twelve (12) continuous months and shall not be considered to have broken seniority or continuous service during such period of time. If he/she returns to his/her former position, he/she will pay union dues for the time absent.

    12.2  Insurance Status During Leave:  During a leave of absence because of illness or accident after the short-term disability benefits and accumulated sick leave has been used, the Company will continue to pay 100% of the Hospital-Medical premium until he returns to work. However, the Company's obligation hereunder shall not exceed twelve (12) months. Employees may continue their dental and life insurance plans by paying the appropriate monthly rate to the Company.

    12.3  Leave For Union Duty:  Any employee who is now engaged in full-time duty for the Bakery, Confectionery, Tobacco Workers & Grain Millers, AFL-CIO, or who shall hereafter be engaged in such full-time duty for this organization will be granted a leave of absence therefore without loss of seniority, provided that such leave of absence shall not extend beyond the terms of this contract, unless extended by mutual consent. During such leave of absence the employee's continuous service shall not be deemed broken.

    12.4  Short Term Leave For Union Duty:  Employees who are members of the Union and who are detailed by the Union as delegates to conventions, to serve on the Inter-factory Committee or to perform other committee work on behalf of the Union shall be granted the necessary leave of absence (not to exceed thirty (30) days at any one time) from their employment to perform their duties to which they have been detailed and they shall not be discriminated against by the Employer or their supervisory officials for performing such Union duties. The Company agrees to pay such employee for the temporary time off at his classified rate of pay, provided the Union reimburses the Company for such time off, together with any necessary payroll taxes, such as but not limited to, Social Security Taxes. The Local Union President will notify the Company in writing with respect to individuals who will need short term leaves of absence for union duty.

ARTICLE XIII
HOLIDAYS

    13.1  Recognized Holidays:  The recognized holidays under this Agreement are: New Year's Day (January 1), Good Friday, Easter Monday, Memorial Day (last Monday in May), Independence Day (July 4), Labor Day (first Monday in September), Thanksgiving Day (the day appointed by the President or Governor of the State in which the factory is located), Christmas Day (December 25). Year-round employees shall receive three (3) additional floating holidays, which may be taken at anytime during the contract year at the employee's discretion provided that no interference with the employer's operation will result. Campaign employees who are working in the factory or the quality lab (for the entire beet campaign) shall be granted one (1) paid floating holiday commencing with their third (3rd) consecutive campaign. Such day must be scheduled in advance and not interfere with the factory operation.

    Factory Campaign and Quality Beet Lab employees working during inter-campaign prior to August I shall be eligible for three (3) floating holidays to be taken during the inter-campaign period, provided they are scheduled and do not interfere with the employers operation. If a campaign employee has taken a paid floating holiday during the previous campaign, the number of floating holidays available shall be limited to two (2).

    13.2  Saturday and Sunday Inter-Campaign:  During inter-campaign if any recognized holiday falls on a Sunday, the following Monday will be considered as the holiday. If any recognized holiday falls on Saturday, the preceding Friday will be considered the holiday

    13.3  Saturday and Sunday Campaign:  During campaign if a recognized holiday falls on a Sunday, Sunday shall be considered as the holiday and if a recognized holiday falls on Saturday, Saturday shall be considered as the holiday.

    13.4  Holiday Work Pay:

    (a) All work performed by year-round employees during campaign or inter-campaign on any of the above holidays shall be paid for at two and one-half (2¹/2) times the straight time rate:

    (b) All work performed by campaign employees and non year-round employees during campaign on any of the above holidays shall be paid for at one and one-half (1¹/2) times the straight time rate, except that for campaign employees who have worked the two (2) previous full campaigns, such employees shall be paid two (2) times their straight time rate;

    (c) All work performed by campaign employees and non year-round employees on any of the above holidays during inter-campaign shall be paid for at two (2) times the straight time rate.

    (d) A replacement working in a higher classification than his regular classification during the entire scheduled work week in which a holiday occurs will be paid the higher rate for the holiday whether or not he works on that holiday.

    13.5  Holiday Not Worked Pay:

    (a) Year-round employees will be paid eight (8) times their straight time hourly rate for the holiday listed if no work is performed on these holidays.

    During inter-campaign, campaign employees who worked the previous two consecutive campaigns will be paid eight (8) times their straight time hourly rate for the holidays listed if no work is performed on these holidays. Such employees who have received holiday pay under this provision during inter-campaign shall receive eight (8) times their straight time hourly rate for the holidays listed in the next succeeding campaign if no work is performed on these holidays. Office employees covered by this Agreement, starting with their third consecutive campaign shall receive eight (8) hours pay for campaign holidays at the regular rate; even though it is not necessary to work on a specified holiday

    (b) All employees at Mason City and Chaska shall be paid holiday pay for all holidays not worked.

    13.6  Eligibility Limitations:  Eligibility for holiday pay for holidays not worked under Section 13.5 above is subject to the following:

    (a) For all employees except year-round employees: if the holiday falls on what would have been a regularly scheduled work day for the employee, and the employee worked the regularly scheduled work day prior to and the first scheduled work day following the holiday, unless absence on the work day prior to or the work day following the holiday was due to industrial accident, or bona fide illness, or other absence excused by the Employer.

    (b) There shall be no pay for holidays not worked for either year-round or non year-round employees if the employee refused to work on the holiday when requested to do so without a legitimate reason for such refusal, or the employee is on unpaid leave of absence except that, employees who are on approved unpaid leave of absence due to injury, illness and industrial injury or illness shall be paid for all holidays for a period of twelve (12) months from the date such employee exhausts his/her sick leave benefits.

ARTICLE XIV
VACATIONS

    14.1  Vacation Schedule:

    (a) A year-round employee shall become eligible for vacation in accordance with the following schedule:

Years of Continuous Service	Vacation
1	1 Week
2	2 Weeks
6	3 Weeks
15	4 Weeks
20	5 Weeks
25	6 Weeks

    The weeks referred to in this Section 14.1

    (a) shall consist of a week of 40 straight time hours.

    (b) In the event an employee is an inpatient at a hospital or there is a death in the immediate family, an employee on vacation shall not be required to use vacation but may use sick leave or funeral leave if the employer is notified promptly. Funeral leave will be granted pursuant to Paragraph 15.5, provided the employee attends the funeral.

    14.1(b)  Campaign Vacation:  A factory campaign employee shall become eligible for vacation in accordance with the following schedule:

Years of Continuous Service	Vacation
5 Years	2 days
10 Years	3 days
20 Years	4 days

    14.2  Time Vacation Accrues:  The first vacation shall be taken following the first anniversary of the beginning of continuous service. Subsequent vacations shall be taken at some time during the calendar year following the calendar year of taking the first vacation and without regard to anniversary date of the commencement of continuous service. The time at which an employee shall become entitled to the number of weeks vacation specified above for 2, 6, 15, 20, and 25 years continuous service, shall be the inter-campaign of the year in which he will complete 2, 6, 15, 20 and 25 years of continuous service, as the case may be. Continuous service shall be determined as defined in Article 5.1.

    14.3  Prorated Vacations:  Any year-round employee who has worked 1000 or more compensated hours during the applicable 12 month qualifying period shall be entitled to his full vacation. For any year-round employee who has qualified for vacation and who may not have worked 1000 compensated hours during the applicable 12 month period, then the employee's vacation, with pay, will be prorated on the basis of one-twelfth (¹/12) of the full vacation for each 83 compensated hours worked during such qualifying period.

    When an employee returns to work after a leave of absence due to injury or illness, for the purpose of determining such employee's vacation eligibility it shall be assumed such employee worked the required number of hours in the preceding year and the year in which he returned to work to make such employee eligible for a full vacation as specified in Paragraph 14.1 (a) above based on the employee's seniority.

    14.4  Computing Vacation Pay:  The pay for each day of vacation for which an employee is eligible shall be computed on the basis of the straight-time rate of pay per hour, multiplied by eight (8) hours.

    14.5  Scheduling of Vacations:  Vacations may be scheduled at any time during the year at the employee's convenience provided it is scheduled in advance and that no interference with the Employer's operations will result. A vacation scheduling period shall be in effect each year from January 1 through March 15, during which time employees may submit their vacation requests for scheduling and approval. (The vacation scheduling period for employees assigned to packaging lines will be until two (2) weeks after the inter-campaign shift schedule begins or March 15, whichever is later.) Any vacations scheduled and approved during that period of time shall not be subject to change as a result of bumping by a more senior employee who submits a vacation request after March 15. Where requested vacation periods prior to March 15 conflict, preference shall be given to the oldest employee in point of service. A senior employee may bump a junior employee for a vacation time period only if both employees submitted their requests after the March 15 scheduling period and the senior employee requests such vacation two (2) or more weeks prior to the commencement of such vacation period. Except in the case of emergency, employees shall give reasonable notice when taking individual vacation days.

    14.6  Holiday During Vacation Period:  If a recognized holiday falls during an employee's vacation period he shall receive the holiday.

    14.7  Advance Vacation Pay:  If an employee desires to draw his vacation pay in advance, it will be paid to him not later than the last working day before his vacation begins.

    14.8  Anticipating Vacations:  Vacations may be anticipated when it is for the mutual convenience of the employee and the Company.

    14.9  Failure to Take Vacations:  Employees cannot waive their vacations and draw double pay by working during the time allowed, but up to ten (10) days of vacation may be carried over from year to year. If ten (10) days of vacation are carried over, an employee shall not lose any additional negotiated vacation days.

    14.10  Accrued Vacation Pay:  In the event an employee's services with the Company are terminated for any reason, vacation pay will be granted for any vacation not taken during the calendar year, for which the employee would have been eligible at the date of termination. Where termination is by death, the payment will be made to the same individual to whom is paid any accrued wages. In addition to his vacation allowance for the current calendar year, an employee leaving the service of the Company for any reason shall receive prorated benefits for the calendar year in which he leaves. Such benefits shall be computed at the rate of one-fifty-second (1/52nd) part of the full vacation benefit for each week or partial week of service during the calendar year.

ARTICLE XV
SICK LEAVE AND PAID ABSENCE

    15.1  Sick Leave And Short Term Disability Benefits:  Year-round employees shall be eligible to receive five (5) sick leave days each contract year commencing the date of attaining year-round status. Unused sick leave days may be accumulated, or "banked,", each year and carried forward for use in succeeding years.

    Campaign employees, commencing with their third consecutive campaign, shall be eligible to receive each contract year, not to exceed five (5) full days with pay provided that payment shall be made only for those scheduled days which employee would have worked had the disability not occurred. Agriculture harvest and quality lab employees shall be eligible for one (1) day with pay commencing with their third consecutive campaign.

    Employee or employees eligible for sick leave shall receive regular wages for such leave, providing said employee or employees cooperate, if possible, by giving notice in advance of the starting time of their shift and their illness. The employer may require evidence from a medical authority in the event this privilege appears to be abused.

    In addition to the sick leave days provided above, year-round employees shall be eligible for a short-term disability plan providing 80% of base pay, up to a maximum of 26 weeks duration, for each separate disability which may occur. Base pay shall be the employees' regular classified rate of pay times eight (8) hours per day to a maximum of forty (40) hours per week. All applications for short-term disability benefits must be verified by the employees' attending physician.

    15.2  Eligibility Limitations, And Accumulation Of Sick Leave And Short-Term Disability Benefits:

    (a) Year-Round Employees

     (i) If an employee is unable to work because of illness, short-term disability benefits will be payable commencing with the eighth (8th) consecutive regularly scheduled work day of absence from work.

    (ii) If an employee is unable to work because of an accidental injury or an illness requiring hospitalization, benefits will be payable commencing with the first regularly scheduled day of absence from work.

    (iii) Employees who return to work after being on short-term disability leave and later become disabled because of the same illness or injury, must be actively at work for a minimum of ninety (90) calendar days before short-term disability benefits will be payable for such illness or injury. If the ninety (90) calendar day period has not been completed, the employee may resume benefits payable from any unused portion of the original twenty-six (26) week benefit period applicable to the injury or illness.

    (iv) Employees suffering illnesses not requiring hospitalization, may use sick leave or vacation days to provide 100% base pay until such benefits have been exhausted or until short-term benefits begin, whichever occurs first. When short-term disability benefits are being paid, sick leave or vacation days may be used at the rate of 20% for each day of disability until such available days are exhausted.

    (b) Campaign Employees

     (i) An eligible employee may accumulate unused days of sick leave to be transferred to the following contract year, and from year to year thereafter. There shall be no maximum accumulation.

    (ii) Employees going from a campaign status to year-round status shall carry over their campaign sick leave accumulated.

    In industrial injury or disability cases, workmen's compensation benefits and sick benefit allowance shall be paid separately, but in the event workmen's compensation payments cover all or part of the period during which sick benefit allowances are paid, the sum of the two shall not exceed the sick benefits payable for said period, and the unused portion of the accumulated sick leave will continue to be credited to the employee. In the event that an employee's absence due to industrial injury or disability extends beyond the sick leave or short-term disability period he shall receive only workmen's compensation for the excess period.

    15.3  On The Job Injury:  In case of any injury which required medical attention, the injured worker shall be paid for all time lost during that shift that he is unable to return to work.

    15.4  Jury Service:  An employee required to be absent from work for jury service shall receive eight (8) hours straight time pay for each day of jury duty falling on his regularly scheduled work days up to and including forty (40) hours in any one week, less the amount of any jury pay which he receives. Each day of jury service falling on a regularly scheduled work day shall be credited as one (1) eight (8) hour day in the computation of overtime. To be eligible for these jury service benefits, the employee must notify his immediate supervisor at the time he first receives notice of his call to jury service; must apply for postponement of jury service during campaigns if requested; and must furnish evidence of the amount of pay received for jury service.

    It is understood that if an employee is working the graveyard shift at a factory which is at a substantial distance from the court house to which he is summoned to perform jury service, the Company will excuse him from graveyard shift early enough to permit him to arrive at court in time to respond to jury summons as required by the court and that the time for which he is excused will be paid for as jury service time as provided above. Furthermore, if such an employee is held by the court for jury service past 12 o'clock noon of that day, he will be excused from reporting for his next shift as scheduled later in that day

    15.5  Funeral Leave:  In the event of a death in the immediate family of an employee, the employee shall be granted three (3) regularly scheduled work days off with pay to make arrangements for the funeral and to attend same, provided he gives the Company reasonable notice. For purposes of this provision, the immediate family shall be restricted to father, mother, brother, sister, spouse, child, mother-in-law, father-in-law, sister-in-law, brother-in-law, grandparents, grandparents-in-law, grandchildren, stepmother, stepfather and stepchildren. In the event of the death of a spouse or child, the bereavement period will be extended to five (5) days.

ARTICLE XVI
MISCELLANEOUS

    16.1  Safety Committee:  In order to promote cooperation between the Company and employees, it is deemed advisable by the Company that the employees shall be represented on a Safety Committee at each plant by two of their members per shift, selected by the Local Union. During campaign the members of the Safety Committee on the day shift shall participate in the safety tour. During inter-campaign two (2) members of the Safety Committee designated by the Union shall participate in the tour.

    16.2  Welders Equipment:  Welders shall be furnished at Company expense, with helmets, gloves, jackets and chaps suitable from a safety standpoint for this work.

    16.3  Tools:  Employee's tools which are damaged on the job and are no longer useable for that reason will be replaced by the Employer at the Employer's expense; provided the employee furnishes the Employer a certificate, or other proof satisfactory to the Employer, that such tools were damaged on the job. The employer will pay three-fourths (³/4) of the cost up to a maximum of $3,000.00 (if the employee loses $4,000 worth of tools he/she would receive $3,000) towards the replacement of tools which are stolen or for tool boxes which are forcibly broken into, provided the employee has an inventory of tools filed with the Maintenance Superintendent's office. If an employee lays down a tool and it disappears such loss is not covered under this provision. Employees shall be required to have a pass to remove packages from the plant. Passes to remove packages from the plant will be given to employees at the request of the employee. The employee's only obligation is to notify the designated management person of the nature of the article to be removed from the plant.

    16.4  Sugar Bins:  Whenever it is necessary for employees to work inside the bulk sugar storage bins in connection with the removal of sugar or cleaning the bins, it is understood that no less than two employees will be assigned to this work at all times. It is also agreed that when entering, working or leaving the bins through the top openings two or more employees will be assigned to work inside the bins and one employee will be on duty on top of the bins.

    16.5  Safety Glasses:  The Company shall furnish prescription safety glasses in accordance with past practice to year-round and non-agricultural campaign employees who require such in the performance of their duties at no cost to the employee, provided that the prescription shall be obtained and furnished by the employee at no cost to the Company. Pursuant to past practice a prescription need not require a correction in the lens to qualify as a prescription within the meaning of this Section 16.5. If a campaign employee terminates their employment within the first sixty (60) days after the glasses are purchased, the employee will reimburse the Company for the cost of the glasses.

    16.6  Traveling Employees:  An employee who is requested to work temporarily in another location for the Company will be reimbursed for all reasonable travel, hotel, meals, and other legitimate expenses incurred, or will be paid a per diem sufficient to cover his expenses and will be paid for his compensable time, at applicable straight-time, overtime or premium compensation, the hourly rate for the job at the plant where he is regularly employed or at the location it is performed, whichever is higher. When an employee is required to furnish his own vehicle for traveling, he shall be compensated at the rate set by the Internal Revenue Service for reimbursement.

    All employees will be covered under the $100,000 life insurance policy, while traveling on behalf of the company. This is to include United Sugars and Ag repair employees who must travel from station to station throughout the year.

    16.7  Bulletin Boards:  The Company will furnish a suitable place at each plant for the posting of notices and bulletins pertaining to employee and Company affairs. Any notice posted by the Local Union shall be signed by the Secretary or President of the Local Union.

    16.8  Comprehensive Medical and Dental Plan:  The Company agrees to maintain for the life of this Agreement for eligible year-round employees a comprehensive medical and dental plan. The plan shall be set forth in separate booklets apart from this Agreement, but shall be considered a part of this Agreement.

Medical Benefit Summary:

    Each employee selects a provider from the managed care network prior to January 1 of each year. Eligible services received from the selected provider are paid at Network benefit levels; services provided out-of-network are paid at a reduced benefit level as follows:

	Network	Out-of-Network
Comprehensive Medical	Deductible, then 80%	Deductible, then 70%
Chiropractic	Deductible, then 80%	No Coverage
Prescription Drugs	$8 co-pay, closed generic formulary
Mental Health	Deductible, Then 80%	Deductible, then 70%
Inpatient	*30 days per year	*30 days per year
Outpatient	40 hours per year	40 hours per year
Chemical Dependency	Deductible, Then 80%	Deductible, then 70%
Inpatient	*30 days per year	*30 days per year
Outpatient	130 hours per year	130 hours per year
Deductible	$150 per person $450 family aggregate	Additional $200 per person $350 per person maximum
Coinsurance	$500 per person $1500 family aggregate	Additional $800 per person $1300 per person maximum
Annual Maximum Out of Pocket	$650 per person $1950 family aggregate	Additional $1000 per person $1650 per person maximum

*Inpatient services are reviewed and must be medically necessary.

Dental Benefit Summary

1)

Basic and Preventive Services—
$50 annual family deductible
80% of eligible charges after satisfaction of deductible.



2)

Major Services—
$50 annual deductible per person
50% of eligible charges after satisfaction of deductible.



3)

Maximum basic, preventive, and major services per year—$1,600.



4)

Orthodontic Benefit $50 deductible
75% of eligible charges after satisfaction of deductible
$1,500 maximum lifetime benefit

    The medical and dental plan document shall prevail in all benefit determinations.

    16.9  Group Life Insurance:  The Company agrees to maintain for the life of this Agreement for eligible year-round employees a group life insurance plan. The plan shall be set forth in a separate booklet apart from this Agreement, but shall be considered a part of this Agreement.

	8-1-94
Technicians I, II & III	$	24,000
Technicians IV and all other Year-round employees	$	17,000

    The Company will make available to year-round employees the ability to purchase additional group life insurance through the plan at plan rates.

    16.10  Group Retirement Plan:  The Company agrees to maintain for the life of this Agreement the group retirement plan for eligible year-round employees. The plan shall be set forth in a separate booklet apart from this Agreement, but shall be considered a part of this Agreement.

Pension Benefit Summary:

1)

Monthly Benefit

Summary:	Technicians I, II & III		Technicians IV		Non-Technicians
08/0199	$	28.00	$	24.00	$	21.00
08/01/00	$	28.50	$	24.50	$	21.50
08/01/01	$	29.00	$	25.00	$	22.00

2)

Vesting—100% after 5 years service.



3)

Pre and Post Retirement Survivor Benefit

8/1/94	$250/month	Technicians
	$195/month	Non-Technicians
8/1/95	$300/month	Technicians
	$220/month	Non-Technicians
8/1/96	$325/month	Technicians
	$240/month	Non-Technicians

4)

Lump-sum death benefit—$5,000



5)

Early Retirement—After age 55 with 5 or more years vesting service and actuarially reduced.



6)

Normal retirement (unreduced)—After age 60.



7)

Disability Retirement—After 5 years vesting service and social security disability award.

    The pension plan document shall prevail in all benefit determinations.

    16.11  Clean-up Time:  During inter-campaign employees shall be allowed five (5) minutes personal clean-up time before lunch and quitting time.

    16.12  Severance Pay:  In the event that the operation of any of the Company's sugar factories covered by this Agreement is discontinued in whole or in part or should layoffs occur due to automation and/or modification by the Company a year round employee who has not lost seniority pursuant to Article V, Paragraph 5.1 at said factory or plant, to whom the Company or its successor does not offer employment either in the same or other location at a reasonably similar rate of pay, shall be granted severance pay, as outlined below based upon employee's current classified straight time rate of pay, prior to the discontinuance of that factory's operation. An employee who is offered a transfer to another factory will have the option of accepting the transfer or accepting severance pay. Pay to be based upon the forty (40) hour week. Severance pay shall be computed on the basis of one (1) week of severance pay for each full year of year-round service with the Company.

    16.13  Paycheck Deductions:

    (a) The Company will continue making the credit union payroll deductions.

    (b) The employer agrees to deduct and transmit to BCTGM-PAC, $      (an amount specified by the employee) per pay period, from the wages of those employees who voluntarily authorize such contributions on the forms provided for that purpose by the BCTGM Locals. These transmittals shall occur for each payroll period and shall be accompanied by a list of the names of those employees for whom such deductions have been made and the amount deducted for each such employee.

    16.14  Notification of Absence:  If an employee calls in to notify the Company of his/her inability to report for work prior to the beginning of such employee's shift, the Company will consider the call timely This provision does not guarantee that such call-in shall automatically excuse such employee but rather each such absence shall be considered on its individual merits.

    16.15  Union Label:  The Company will use the B.C.T.G.M. union label on its bagged product wherever and whenever possible.

    16.16  401(K) Plan:  The Company agrees to establish and maintain for the life of this Agreement a 401(k) salary reduction plan for year-round, and campaign employees. The plan for campaign employees shall be non-contributory. The plan shall be set forth in a separate documents apart from this Agreement, but shall be considered a part of this Agreement.

    16.17  Gender Clause:  Wherever the male or female gender is used in this agreement, it shall be understood to include the other gender as well.

ARTICLE XVII
WORK CLASSIFICATIONS AND WAGE RATES

    17.1  Work Classifications and Wage Rates:  Every employee covered by this Agreement shall be given a work classification under the wage scale appended to this Agreement and shall be paid not less than the minimum wage specified therein. The wages specified in the scale are minimum wages and are not to be considered as restricting Company from giving or employees from receiving any additional compensation, and so long as the minimum schedules are maintained no increases in wages to one class or to individuals of a class shall necessitate a change in the wages of other individuals or classes. However, when any additional amounts are paid, whether as merit increases or red circle rates, the Local Union shall be notified in writing at the time of change.

    17.2  Changes in Job Content:  Whenever the duties responsibilities, or other content of any job classification have changed substantially, either party to this Agreement may request a meeting with the other for the purpose of arriving at a satisfactory adjustment in rate for the same. However, no rate shall be changed except by mutual consent of the Local Union and the Company If a job is changed substantially as provided in Paragraph 17.2 and the Company and the Union agree that a change in rate is merited, such rate shall be effective with the date the Union notified the Company in writing of such change in job content or the Company notified the Union of such change in job content in writing.

    17.3  Newly Created Jobs:  Prior to the inauguration of a permanent new classification or job, the Union shall be advised of its intended establishment. When the permanent new classification or job is created, the Company may at its discretion, establish a temporary rate for such work, and after thirty (30) days operation, shall negotiate with the Union a permanent rate. When the permanent rate has been determined there shall be a retroactive adjustment, either up or down, to the beginning of the new job or classification assignment.

    17.4  Inter-Campaign Wage Rates:  All employees who work in the inter-campaign shall be paid their classified rate of pay for all work performed in the inter-campaign season. However, year-round employees shall be subject to a minimum of the Station A rate for inter-campaign service. Any employee working inter-campaign M&R work will receive a minimum of Station A rate.

    Referring to the application of the Master Contract to the Company's Chaska factory, it is understood that employees at Chaska who are called to work to relieve an employee, shall be paid the rate of the employee relieved, but shall not receive any fringe benefits.

ARTICLE XVIII
TERM OF AGREEMENT

    18.1  Term:  This Agreement shall remain in force and be effective and binding upon the parties without change from date hereof to and including, July 31, 2002, and shall continue in force and effect thereafter from year to year unless the Company or the International Union of Inter-Factory Committee, with written approval of the individual Local Unions, at least sixty (60) days prior to July 31, 2002, or sixty (60) days prior to July 31 of any year thereafter, gives written notice to the other party of its desire or intention to alter, modify, or terminate the same upon the 31st of July immediately following such notice.

WORK CLASSIFICATION AND WAGE SCALE

    The Wage Classifications and rates have been adjusted to read:

	Aug. 1 1999		Aug. 1 2000		Aug. 1 2001
TECHNICIANS I
Distribution Facility Foreman	$	22.34	$	23.01	$	23.47
Contractor Pipe Fitter		21.28		21.92		22.35
Journeyman Pipe Fitter		20.26		20.87		21.29
Maintenance Planner		20.05		20.65		21.07
End Foreman (EGF)		20.02		20.62		21.04
Chief Electrician		19.28		19.86		20.25
Apprentice Pipe Fitter		19.24		19.82		20.21
Shop Foreman		19.09		19.67		20.06
Steam Fitter		19.09		19.67		20.06
Welding Foreman—DN		19.09		19.67		20.06
Electronic Control Technician		19.05		19.63		20.02
Beet End Foreman		19.00		19.57		19.96
Sugar End Foreman		19.00		19.57		19.96
Certified Welder		19.00		19.57		19.96
Chief Boilerhouse Engineer		19.00		19.57		19.96
Electrician—1st Class		19.00		19.57		19.96
Sugar Warehouse Foreman DN		19.00		19.57		19.96
Machinist—Shop & Floor		18.88		19.45		19.84
Ion Technician—1st Class		18.88		19.45		19.84
Vehicle Repair Mechanic		18.62		19.17		19.56
Boilerhouse Foreman—1st Class		18.62		19.17		19.56
Crane Operator—1st Class		18.62		19.17		19.56
House Mechanic—1st Class		18.62		19.17		19.56
Instrument Man		18.62		19.17		19.56
Pipefitter—1st Class		18.62		19.17		19.56
Carpenter		18.62		19.17		19.56
Welder—1st Class		18.62		19.17		19.56
Sugar Boiler		18.53		19.09		19.47
Control Room Operator		18.53		19.09		19.47
Process Technician I		18.53		19.09		19.47
TECHNICIANS II
Pulp Drier Foreman		18.06		18.61		18.98
Boilerhouse Foreman—2nd Class		18.00		18.54		18.91
Beet Quality Lab Technician		18.00		18.54		18.91
Maintenance Foreman		17.87		18.41		18.77
Sugar Warehouse Foreman		17.87		18.41		18.77
Tool Crib		17.87		18.41		18.77
Assistant Chemist		17.63		18.15		18.52
Beet Seed Foreman—MHD		17.63		18.15		18.52
Electrician—2nd Class		17.36		17.88		18.24
House Mechanic—2nd Class		17.36		17.88		18.24
Welder—2nd Class		17.36		17.88		18.24
Instrument Man—2nd Class		17.36		17.88		18.24
Packaging Technician		17.36		17.88		18.24
Process Technician II	$	17.36	$	17.88	$	18.24
Ion Technician—2nd Class		17.36		17.88		18.24
Yard Coordinator		17.28		17.80		18.15
Assistant Chemist		17.18		17.69		18.05
Invert Sugar Operator		17.03		17.55		17.90
Pulp Drier Fireman & Drum Man Coal Fired		16.62		17.11		17.46
Boilerhouse Fireman		16.62		17.11		17.46
TECHNICIANS III
Technical Writer		16.45		16.95		17.29
Laboratory Foreman		16.45		16.95		17.29
Utility Man		16.45		16.95		17.29
Process Technician III		16.45		16.95		17.29
Mechanic Helper—1st Class		16.45		16.95		17.29
Limerock Shovel Operator		16.45		16.95		17.29
Head Painter		16.45		16.95		17.29
Pay Loader Operator—HB		16.45		16.95		17.29
Storeroom Foreman—EGF		16.45		16.95		17.29
Liquid Sugar Operator—Chaska		16.10		16.58		16.91
Special Chemist		16.05		16.54		16.87
Pan Floor Helper—1st Class		16.05		16.54		16.87
Facility Utility Person (MC)		15.92		16.40		16.73
Assistant Yard Coordinator (MHD, CN, EGF, DN)		15.92		16.40		16.73
Safety & Sanitation Leadperson		15.92		16.40		16.73
Liquid Sugar Operator—2nd Class—Chaska		15.66		16.13		16.45
Juice Purification & Filtration—EGF		15.53		16.00		16.32
Mechanic & Electrician Helper (Starting 3rd Campaign)		15.47		15.94		16.26
Assistant Beet Seed Foreman		15.47		15.94		16.26
Bin Operator—1st Class—Chaska		15.29		15.75		16.06
Sugar Warehouse—Trucking, Stacking, Loading & Bins—Chaska, Mason City		14.70		15.14		15.44
Binman Operator—Chaska		14.70		15.14		15.44
Assistant Sugar Warehouse Foreman—Chaska & M.C.		14.70		15.14		15.44
Pay Loader Operator		14.70		15.14		15.44
Sugar Screen House Operator		14.70		15.14		15.44
Truck Loading Coordinator—EGF		14.70		15.14		15.44
Pulp Packaging Technician		14.70		15.14		15.44
Anamet Plant Operator		13.08		13.47		13.74
Juice Purification & Filtration		12.99		13.38		13.65
Trackmobile and Caterpillar Operator		12.33		12.70		12.96
Lime Kiln Foreman		12.26		12.63		12.88
Misc. Labor—Chaska & Mason City		12.04		12.40		12.65
STATION A	$	11.31	$	11.65	$	11.88
Bulk Sugar Loader
Knife Filer
Knife Setter
Diffuser Operator
Carbonators
Carbonation Filter Operator
Wet Hopper & Car Unloading Foreman
Truck Driver
Factory Yard Dump Foreman
White Centrifugal Operator
Coal Handlers (Coal Fired Houses)
Boilerhouse & Pulp Drier Ashman (EGF & DN)
Beet Seed Cleaning
Miscellaneous Leadperson
Backhoe Operator—EGF
Fork Lift Operator
Drum Filter & Thickener Operator—EGF
Mechanic & Electrician Helpers
Material & Supply Handler
Quality Lab Foreman
Molasses Loader—EGF
Temporary Employees—Chaska & Mason City Only
Laboratory Benchperson
Standard Liquid/Granulator Operator
Building Maintenance Helper
Pressure Filter Operator—DN
STATION B	$	10.69	$	11.01	$	11.23
Pressure Filter Operators
Raw Centrifugal Operators
Pellet Mill Operator
Oilers-Main House
Receiving & Handling Supplies (one man per plant)
Beet Washer Operator—EGF
Pellet Loader
Ion Exclusion Helper
STATION C	$	10.24	$	10.55	$	10.76
Beet Flume & Wet Hopper Man
Laboratory Sample Carrier, Station & Helpers
Beet Washer Operator
Lime Slacker
Lime Kiln-Hoist, Rock, Coke, Mill Men
Sugar Warehouse-Trucking, Stacking, Loading & Bins
Boilerhouse Cleaners & Helpers (EGF)
Crane Helper
Piler Operator
Remelt
Powdered Sugar
Bulk Sugar Silos
Pulp Drier Pressman
STATION D*	$	9.68	$	9.97	$	10.17
Rock & Trash Catcher Helpers
Beet Washer Helpers, Trash Rolls & Picking Table
Sweepers & Janitors
Sewer Screens
Pulp Drier Shovelers, Sweepers, & Cleaners
Beet Laboratory—EGF
Handling Molasses
Miscellaneous Labor
Factory Yard Beet Receiving
Beet Storage (Ventilation)
Receiving & Handling Supplies
STATION D—NEW HIRES	$	8.29	$	8.54	$	8.71
Rock & Trash Catcher Helpers
Beet Washer Helpers, Trash Rolls & Picking Table
Sweepers & Janitors
Sewer Screens
Pulp Drier Shovelers, Sweepers & Cleaners
Beet Laboratory—EGF
Handling Molasses
Miscellaneous Labor
Factory Yard Beet Receiving
Beet Storage (Ventilation)
Receiving & Handling Supplies

*

Second Year and thereafter.

WORK CLASSIFICATION AND WAGE SCALE
OFFICE EMPLOYEES
Hillsboro, Moorhead, Crookston

	Aug. 1 1999		Aug. 1 2000		Aug. 1 2001
Materials Handling Foreman—MHD	$	16.22	$	16.70	$	17.04
Storeroom Foreman—MHD—DN—CRX		15.70		16.17		16.49
Storekeeper		12.66		13.04		13.30
Clerk-Utility		12.04		12.40		12.65
Clerk-Shipping		12.04		12.40		12.65
Accounts Payable Clerk		12.04		12.40		12.65
Assistant Storekeeper		9.27		9.55		9.74

STOREROOM FLOORPERSON
AT ALL PLANTS

	Aug. 1 1999		Aug. 1 2000		Aug. 1 2001
Head Storeroom Floor Person	$	11.31	$	11.65	$	11.88
Storeroom Floorperson		10.24		10.55		10.76

AGRICULTURE REPAIR EMPLOYEES
Moorhead, Crookston, East Grand Forks, Drayton, Hillsboro

	Aug. 1 1999		Aug. 1 2000		Aug. 1 2001
Agriculture Repair Foreman	$	18.62	$	19.17	$	19.56
Agriculture Repair Man—1st class		17.87		18.41		18.77
Deep Freeze/Agriculture Repair Man—1st class		17.87		18.41		18.77
Agriculture Repair Man—2nd class		17.36		17.88		18.24
Deep Freeze/Agriculture Repair Man—2nd class		17.36		17.88		18.24
Agriculture Mechanic Helper		10.69		11.01		11.23

WORK CLASSIFICATION AND WAGE SCALE
EAST GRAND FORKS CENTRAL WAREHOUSE

	Aug. 1 1999		Aug. 1 2000		Aug. 1 2001
Materials Handling Foreman	$	16.45	$	16.95	$	17.29
Asst. Materials Handling Foreman		15.70		16.17		16.49
Truck Driver		14.70		15.14		15.44
Materials Handler		11.31		11.65		11.88

    In cases where any of the above classifications are not now filled or required at any of the individual plants, the Employer shall not be obligated to fill such classification.

    It is understood and agreed by the parties to this agreement of which this work classification and wage scale is a part that the agreement and the foregoing wage scale shall become effective August 1, 1999.

ROTATING SHIFT SCHEDULE—PRIMARY

1st WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	D	D	D	D	D	OFF	OFF
"B"	S	S	OFF	G	G	G	G
"C"	G	G	G	OFF	OFF	D	D
"D"	OFF	OFF	S	S	S	S	S

2nd WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	OFF	OFF	S	S	S	S	S
"B"	G	G	G	OFF	OFF	D	D
"C"	D	D	D	D	D	OFF	OFF
"D"	S	S	OFF	G	G	G	G

3rd WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	S	S	OFF	G	G	G	G
"B"	D	D	D	D	D	OFF	OFF
"C"	OFF	OFF	S	S	S	S	S
"D"	G	G	G	OFF	OFF	D	D

4th WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	G	G	G	OFF	OFF	D	D
"B"	OFF	OFF	S	S	S	S	S
"C"	S	S	OFF	G	G	G	G
"D"	D	D	D	D	D	OFF	OFF

D = DAYLIGHT SHIFT

G = GRAVEYARD SHIFT

S = SWING SHIFT

    The cycle of shifts in the above schedule is completed with the Fourth Week and commences to repeat with the Fifth Week.

OPTIONAL SHIFT SCHEDULE—I

1st WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	D	D	D	D	D	OFF	OFF
"B"	S	S	S	S	OFF	D	D
"C"	G	G	OFF	OFF	S	S	S
"D"	OFF	OFF	G	G	G	G	G

2nd WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	OFF	OFF	G	G	G	G	G
"B"	D	D	D	D	D	OFF	OFF
"C"	S	S	S	S	OFF	D	D
"D"	G	G	OFF	OFF	S	S	S

3rd WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	G	G	OFF	OFF	S	S	S
"B"	OFF	OFF	G	G	G	G	G
"C"	D	D	D	D	D	OFF	OFF
"D"	S	S	S	S	OFF	D	D

4th WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	S	S	S	S	OFF	D	D
"B"	G	G	OFF	OFF	S	S	S
"C"	OFF	OFF	G	G	G	G	G
"D"	D	D	D	D	D	OFF	OFF

D = DAYLIGHT SHIFT

G = GRAVEYARD SHIFT

S = SWING SHIFT

    The cycle of shifts in the above schedule is completed with the Fourth Week and commences to repeat with the Fifth Week.

OPTIONAL SHIFT SCHEDULE—II

1st WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	D	D	D	D	D	OFF	OFF
"B"	S	S	S	OFF	OFF	D	D
"C"	G	OFF	OFF	S	S	S	S
"D"	OFF	G	G	G	G	G	G

2nd WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	OFF	G	G	G	G	G	G
"B"	D	D	D	D	D	OFF	OFF
"C"	S	S	S	OFF	OFF	D	D
"D"	G	OFF	OFF	S	S	S	S

3rd WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	G	OFF	OFF	S	S	S	S
"B"	OFF	G	G	G	G	G	G
"C"	D	D	D	D	D	OFF	OFF
"D"	S	S	S	OFF	OFF	D	D

4th WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	S	S	S	OFF	OFF	D	D
"B"	G	OFF	OFF	S	S	S	S
"C"	OFF	G	G	G	G	G	G
"D"	D	D	D	D	D	OFF	OFF

D = DAYLIGHT SHIFT

G = GRAVEYARD SHIFT

S = SWING SHIFT

    The cycle of shifts in the above schedule is completed with the Fourth Week and commences to repeat with the Fifth Week.

OPTIONAL SHIFT SCHEDULE—III

1st WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	D	D	D	D	D	OFF	OFF
"B"	S	OFF	OFF	G	G	G	G
"C"	G	G	G	OFF	OFF	D	D
"D"	OFF	S	S	S	S	S	S

2nd WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	OFF	S	S	S	S	S	S
"B"	G	G	G	OFF	OFF	D	D
"C"	D	D	D	D	D	OFF	OFF
"D"	S	OFF	OFF	G	G	G	G

3rd WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	S	OFF	OFF	G	G	G	G
"B"	D	D	D	D	D	OFF	OFF
"C"	OFF	S	S	S	S	S	S
"D"	G	G	G	OFF	OFF	D	D

4th WEEK

SHIFT	MON.	TUES.	WED.	THURS.	FRI.	SAT.	SUN.
"A"	G	G	G	OFF	OFF	D	D
"B"	OFF	S	S	S	S	S	S
"C"	S	OFF	OFF	G	G	G	G
"D"	D	D	D	D	D	OFF	OFF

D = DAYLIGHT SHIFT

G = GRAVEYARD SHIFT

S = SWING SHIFT

    The cycle of shifts in the above schedule is completed with the Fourth Week and commences to repeat with the Fifth Week.

    During the term of the Agreement, the Company, after agreement with the Union, may try for one campaign at one location a 12 hour day schedule on a cost neutral basis for the Company. If the Company and the Union agree, the 12 hour day schedule may be continued or expanded after the trial concludes.

NOTES & EXAMPLES

Janitors Start Times

    During the course of the 1990 Negotiations it was agreed that local agreements may be made regarding the adjustment of starting times for janitors. Such adjustments will not have the affect of causing any additional overtime to be paid.

DRUG & ALCOHOL TESTING POLICY

    The Company will maintain a Drug and Alcohol Testing Policy under the terms of this Agreement. The policy will be set forth in the Employee Handbook.

ATTENDANCE PROGRAM

Excused Absences

    The following absences will be excused and will not result in disciplinary action for any purpose:

1.

Scheduled vacation, holidays, floating holidays as provided in the union contract.



2.

Jury duty.



3.

Time off due to bona fide industrial injury or accident.



4.

Funeral leave in accordance with the union contract.



5.

Any approved leave of absence.



6.

Time off due to official union business.



7.

Absences granted in accordance with the Family Medical Leave Act or similar state law.



8.

Pre-authorized medical absence with a 16 hour notice and proper medical documentation.



9.

Storm or weather related event as declared by the Production Superintendent.



10.

For campaign employees with less than three campaigns, the three scheduled, unpaid days off presently granted per past practice.



11.

For campaign employees with more than three campaigns, the two scheduled, unpaid days off presently granted per past practice.

Other Absences

1.

An employee shall be granted up to 40 hours of unscheduled absences. Unscheduled absences shall be paid from sick leave time, floating holidays, or vacation time, as appropriate and as available to the employee.

2.

After an employee has exhausted 40 hours of unscheduled absence time, they shall be subject to progressive discipline, but separate from other non-attendance violations for each subsequent occurrence.

3.

An employee who does not call in in a timely fashion shall be subject to progressive discipline, but separate from other non-attendance violations.

4.

An employee who is tardy more than five days shall be subject to progressive discipline, but separate from other non-attendance violations for each subsequent occurrence.

5.

An employee who is absent 3 days without a call in will be terminated.

6.

Any employee entitled to sick leave with unscheduled absence time remaining at contract year end, may have the balance paid (up to 40 hours) at the employee's hourly rate.

Progressive Discipline

1st Offense	—	Verbal Warning
2nd Offense	—	Written Warning
3rd Offense	—	One-Day Suspension
4th Offense	—	Termination

    It should be understood that these are guidelines and are not absolute and inflexible rules. The merits of each case will determine what and when any disciplinary action is to be taken.

1000 Hour Incentive

    Employees who retire with a minimum of 1000 hours of accrued sick leave will receive an additional year of service credit for pension purposes. Employees with less than 1000 hours shall receive a pro-rated year of service. Employees with more than 1000 hours shall receive an additional pro-rated year. Employees must be previously vested in the pension plan to qualify for this provision.

    The attendance program will be effective September 1, 1999. Effective September 1,1999 the oldest active attendance related discipline will be rolled off for each employee.

Addendum Relating To
Four 10-Hour Day Schedules
For Inter-Campaign Work

    The parties have agreed that four 10-hour day schedules may be utilized during the inter-campaign period. The Union and Employer recognize that not all classifications and/or departments may be scheduled on four 10-hour days and, accordingly, the Employer will advise the Union of those classifications and/or departments where it intends to utilize such schedules. Such notification shall be given prior to the implementation thereof so that the parties will have sufficient time to meet and discuss any questions concerning such schedules.

    The following is a listing of the provisions of the Master Agreement which will be modified where four 10-hour day schedules are used and the modifications to be made thereto:

    1.  Section 3.4:  During inter-campaign, employees may be scheduled to work Monday through Thursday, commencing at 7:00 a.m. and running for ten (10) hours each day exclusive of a lunch period which shall be allowed without pay at such time each day and for such length as may be agreed upon at each plant. There shall be a break period approximately in the middle of the first five (5) hours of work and another break period approximately in the middle of the second five (5) hours of work. A break shall be fifteen (15) minutes in length. Such breaks are to be scheduled by management so as not to interfere with normal operations. This time is to be paid for by the Company.

    2.  Section 3.6:  During the inter-campaign when work is required on two (2) shifts, the shifts will start and end at times determined by mutual agreement between the Local Union and the Company. Each shift will be ten (10) hours long, and employees assigned to their particular work will receive a fifteen (15) minute paid rest period approximately midway through the first five (5) hours and the last five (5) hours as well as a twenty (20) minute paid lunch period.

    3.  Section 3.9:  During inter-campaign there shall be a shift differential of fifteen ($.15) cents per hour for the second ten (10) hour shift. If two (2) shifts are scheduled, these shifts shall be rotated. Shift differential shall be computed in holiday, vacation and over-time pay. Shift differential does not apply to watchmen.

    4.  Section 4.1(a):  The regular workday shall be ten (10) hours. The regular work week shall be forty (40) hours. For purposes of determining when overtime occurs, a week shall be measured from 7:00 a.m. Monday to 7:00 a.m. the following Monday and a day shall be measured from 7:00 a.m. of one day to 7:00 a.m. on the following day.

    5.  Section 4.2:  Overtime shall be paid at the rate of one and one-half times the straight-time rate.

(a)

For all work in excess of ten (10) hours per day;



(b)

For all work in excess of forty (40) hours per week;



(c)

For all work performed on the fifth (5th) or sixth (6th) day of any week.



(d)

When Article IV, 4.10 does not apply, then all overtime shall be awarded according to seniority where ability is sufficient to perform the work required.

    6.  Section 13.1:  In any week in which a holiday falls, the four (4) ten (10) hour day schedule shall not be utilized and employees will be scheduled to work regular eight (8) hour days. The floating holidays provided shall be limited to eight (8) hours. A year-round employee may supplement an eight (8) hour floating holiday with two (2) hours of accumulated vacation pay-

    7.  Section 14.4:  The pay for each day of vacation for which an employee is eligible shall be computed on the basis of the straight-time rate of pay per hour multiplied by ten (10) hours. For purposes of computing vacation pay, one (1) week of vacation is equal to forty (40) hours.

    8.  Section 15.1:  For purposes of calculating sick leave, one (1) week shall be equal to forty (40) hours of pay.

    9.  Section 15.2:  The waiting period for short-term disability benefits will be calculated in the same way as if the employee had been working a regular eight (8) hour schedule.

    10.  Section 15.4:  An employee required to be absent from work for jury service shall receive ten (10) hours straight-time pay for each day of jury duty falling on his regularly scheduled work days up to and including forty (40) hours in any one (1) week, less the amount of any jury pay which he receives. Each day of jury service falling on a regularly scheduled work day shall be credited as one (1) ten (10) hour day in the computation of overtime. To be eligible for these jury service benefits, the employee must notify his immediate supervisor at the time he first receives notice of his call to jury service and must furnish evidence of the amount of pay received for jury service.

    11.  Section 15.5:  In calculating the funeral leave benefit, a day shall be considered eight (8) hours and a year-round employee may supplement a funeral leave day with two (2) hours of accumulated vacation.

    12.  Sections 1.6, 5.13, 6.3, and 9.5:  All references contained in these Sections to a working day shall mean a traditional eight (8) hour per day—five (5) day per week schedule.

    The Employer and the Union shall both have the right to terminate the provisions of this Addendum and the four (4) day per week, ten (10) hour per day work schedules by giving written notice to the other party at least seven (7) calendar days prior to the effective date of termination. Any termination shall take place on a Monday at the beginning of a work week as provided in this agreement.

    The parties recognize that the provisions of this Addendum have been negotiated as a pilot or trial program and that adjustments to this Addendum may be necessary during the term of this agreement. It is agreed that any such modifications or interpretations that may be required shall be made after full discussion and by mutual agreement of the parties.

Addendum Relating To
Moorhead Packaging and Warehouse Operations

    The parties have agreed that certain provisions of the Master Agreement be modified with respect to employees working in the Moorhead Packaging and Warehouse area. The following is a listing of modifications, which supercede all other provisions of the Master Agreement for such employees:

A.  Seniority

    1.  Separate seniority provisions shall be established which are distinct and separate from the main factory and agriculture/beet seed operations.

    2.  Employees wishing to bid or transfer to vacant permanent positions from one area to another would have zero seniority for such purposes, but would have preference for such vacant positions before hiring a new person from the street.

    3.  Any lay-offs or recall shall be made in accordance with the established departmental seniority, except in the case of an operations shutdown of either the packaging or factory operations areas. If such shutdowns should occur the two seniority lists shall be combined and the most senior employees shall be retained at their present wage scale. (Operation shutdowns shall be defined as a complete/ permanent shutdown of either facility or lay-off of year-round employees for more than six months.)

B.  Established Core Compliment of Year-Round Positions

    1.  A core group of 75-80 year-round positions shall be established.

    2.  Temporary employees may be utilized to supplement the year-round workforce for temporary or short term increases due to production requirements. Once a temporary employee has worked 195 days in any 12 month period, they shall be considered a year-round employee. Their seniority shall be tracked for purposes of lay-off and recall. At no time will a temporary employee be assigned to the Technician I, II or III group unless it has been mutually agreed upon by local management and local union committee.

    3.  The testing procedures for attaining year-round status shall be suspended for packaging/warehouse positions. However, if year-round employees bid on vacancies in the main factory, such employee must possess the minimum skills established for a mechanic helper and pass the associated testing requirements.

C.  Classification and Wage Schedule

    1.  See Moorhead Packaging/Warehouse Classification and Wage Schedule.

    2.  All overtime shall be paid in accordance with Article 4.2 and 4.3 of the Master Agreement.

D.  Emergency Situations

    It is recognized that in emergency situations it may be necessary to utilize mechanical/electrical personnel from the factory operations on a short term basis. Emergency situations shall be defined as a production shutdown.

    Any specialized, skilled factory employee assigned to the packaging area (Electrician, Instrumentation, Mechanical), shall be paid a minimum rate of Packaging Technician I.

Moorhead Packaging/Warehouse Classification
and Wage Schedule

	Aug. 1 1999		Aug. 1 2000		Aug. 1 2001
Technician I	$	19.00	$	19.57	$	19.96
Technician II		16.10		16.58		16.91
Technician III		12.04		12.40		12.65
Technician IV		11.48		11.82		12.06
Temporary Employee		10.24		10.55		10.76

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective representatives thereto duly authorized this 24th day of August, 1999.

Bakery, Confectionery, Tobacco Workers & Grain Millers
(AFL-CIO, CLC)

 
/s/ JACK LICK Jack Lick

 
 
/s/ DAN GUST Dan Gust

American Crystal Sugar Company

 
 
/s/ DAVID BERG David Berg

 
 
/s/ DAVID WALDEN David Walden

 
 
/s/ DAVE GRAVALIN Dave Gravalin

 
 
/s/ MICHELE BERG Michele Berg

 
 
/s/ JENNY KJOS Jenny Kjos

Local #264-G, East Grand Forks, Minnesota

 
 
/s/ CHARLES HUGHES Charles Hughes

 
 
/s/ MEL MORRIS Mel Morris

 
 
/s/ MARK FROEMKE Mark Froemke

 
 
/s/ SCOTT RIPPLINGER Scott Ripplinger

 
 
/s/ ROBERT HEWITT Robert Hewitt

Local #265-G, Chaska, Minnesota

 
 
/s/ JERRY LAHR Jerry Lahr

Local #266-G, Moorhead, Minnesota

 
 
/s/ BYRON BOWLUS Byron Bowlus

 
 
/s/ TONY ST. MICHEL Tony St. Michel

 
 
/s/ DAN OLSON Dan Olson

 
 
/s/ PENNY GUNDERSON Penny Gunderson

Local #267-G, Crookston, Minnesota

 
 
/s/ ELTON JONES Elton Jones

 
 
/s/ ROGER DELAGE Roger Delage

 
 
/s/ RALPH VIGOREN Ralph Vigoren

 
 
/s/ ALICE OSETH Alice Oseth

Local #269-G, Mason City, Iowa

 
 
/s/ DENNIS PAULSON Dennis Paulson

Local #326-G, Drayton, North Dakota

 
 
/s/ BRAD NELSON Brad Nelson

 
 
/s/ JOHN G. RISKEY John G. Riskey

 
 
/s/ BILL TUTTLE Bill Tuttle

Local #372-G, Hillsboro, North Dakota

 
 
/s/ TERRY HOLM Terry Holm

 
 
/s/ LARRY SINNER Larry Sinner

QuickLinks

MASTER AGREEMENT PREAMBLE
ARTICLE I RECOGNITION
ARTICLE II DEFINITIONS
ARTICLE III WORK SCHEDULES

ARTICLE IV OVERTIME
ARTICLE V SENIORITY

ARTICLE VI LAY-OFF AND RECALL— HIRING AND REHIRING
ARTICLE VII DISCIPLINE AND DISCHARGE
ARTICLE VIII SERVICE IN ARMED FORCES
ARTICLE IX GRIEVANCE AND ARBITRATION

ARTICLE X NO STRIKES OR LOCKOUT
ARTICLE XI UNION SECURITY
ARTICLE XII LEAVES OF ABSENCE
ARTICLE XIII HOLIDAYS
ARTICLE XIV VACATIONS
ARTICLE XV SICK LEAVE AND PAID ABSENCE

ARTICLE XVI MISCELLANEOUS
ARTICLE XVII WORK CLASSIFICATIONS AND WAGE RATES
ARTICLE XVIII TERM OF AGREEMENT

EX-10.23

Exhibit 10.23

UNIFORM MEMBER BEET SUGAR MARKETING AGREEMENT

    THIS AGREEMENT, Made as of the 1st day of December, 1997, by and between United Sugars Corporation, a cooperative association organized under the laws of the State of Minnesota (hereinafter referred to as "Marketing Agent"), and American Crystal Sugar Company, a cooperative association organized under the laws of the State of Minnesota (hereinafter referred to as "Processor").

WITNESSETH

    WHEREAS, Processor is a producer-owned and 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. 1 141j(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 beet sugar processing plants for the purpose of producing one or more forms of refined sugar; and

    WHEREAS, Marketing Agent 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. 1 141j(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 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, specialty products and corn sweetener (hereinafter referred to as the "Products"); and

    WHEREAS, Processor is a member of Marketing Agent and wishes to participate with other members of Marketing Agent in developing and maintaining a dependable market for such Products; and

    WHEREAS, Marketing Agent and Processor desire to enter into a member marketing agreement on a pool basis.

    NOW, THEREFORE, in consideration of the above, subject to the respective terms, conditions, and obligations of Processor and Marketing Agent herein and the pooling obligations of the other members of Marketing Agent, Marketing Agent and Processor agree as follows:

    1.  Appointment of Marketing Agent as Sales Agent.

    (a) Processor appoints and employs Marketing Agent to act as its sole agent in the sale and marketing of all Product produced by Processor during the Term (as hereinafter defined) of this Agreement, and Marketing Agent accepts such appointment and employment and agrees to act as the sales agent and pool administrator in accordance with the terms of this Agreement.

    (b) Processor agrees that Marketing Agent 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 Marketing Agent 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 Marketing Agent.

    (c) Marketing Agent agrees, and is hereby empowered by Processor, to sell in its own name, and pass title on behalf of Processor to, 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 Marketing Agent determines to be in the best interests of Processor and other members of Marketing Agent.

    (d) Marketing Agent shall have no rights, and nothing herein contained shall be deemed to create rights in Marketing Agent in and to any other products produced by Processor (other than refined sugar), including without limitation, molasses.

    (e) It is understood and agreed that Marketing Agent 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 Marketing Agent. Processor and Marketing Agent agree that Marketing Agent 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 Marketing Agent on the same basis as allocations from the pool for which the Products were purchased.

    2.  Packaging.  Processor intends to have the capacity to sell Product in bulk as well as in packages in the sizes set forth on Schedule A hereto. 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, Marketing Agent agrees to coordinate orders for packaged Product taking into consideration Processor's production and packaging limitations.

    3.  Production and Delivery.  It is anticipated that Processor will produce Products during its campaign on an approximately even monthly schedule. However, Processor acknowledges that Marketing Agent's requirements may be greater in certain specified months and less in others. Accordingly, subject to mutual agreement of the parties, Marketing Agent will endeavor to coordinate demands with Processor's production and storage capacities. At Marketing Agent's request, Processor will attempt to maximize production in any month in order to accommodate customer demand.

    3.1  Product Production Schedules.  Processor shall provide to Marketing Agent by June 1 of each Fiscal Year (as hereinafter defined) during the Term a preliminary estimated production schedule (specifying volume and dates) for the next following Fiscal Year and will provide a revised estimated production schedule by July 1 of each such year, reflecting any changes from the June preliminary estimate. Thereafter, the estimated production schedule shall be updated each month. For the purposes of this Agreement, the term "Fiscal Year" shall mean each twelve month period from September 1 through August 31 of the next following calendar year. Marketing Agent 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.

    3.2  Weekly Delivery Amounts.  Estimated weekly delivery schedules, 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.

    4.  Billing and Collection.  All sales made by Marketing Agent shall be billed on invoices of Marketing Agent and all receipts shall be collected by Marketing Agent.

    5.  Pool Years.  Processor's members processes beets and thick juice into refined sugar, generally from September through May ("Beet Processing Season"). Certain other of Marketing Agent's members process cane into feedstock for their refinery from mid-October through March ("Cane Processing Season"), and cane feedstock is processed into Product throughout the year, from November through October. Marketing Agent markets Product in one or more pools, each of which begins on September 1 and ends on or about the last day of the applicable Fiscal Year (August 31). Each Beet Processing Season falls substantially within a corresponding Fiscal Year (pool year) of Marketing Agent. In order to include sales of carry-over Product produced by Processor in a given Beet Processing Season in the 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 Marketing Agent's pool in each Fiscal Year shall be the amount of Product produced during the applicable Fiscal Year.

    6.  Price for Product.

    6.1  Price.  Marketing Agent shall pay to Processor for all Product delivered hereunder, Processor's pro rata share of the Net Pool Price (as hereinafter defined) for each product pool in which Processor participates.

    6.2  Product Pools.  Marketing Agent and Processor agree that the Products to be sold by Marketing Agent hereunder shall be pooled for each Fiscal Year with Products of the other members of Marketing Agent, as set forth in Section 5 hereof There shall initially be the following three (3) pools for Products: (a) Primary Pool, (b) Export Option Pool, and (c) High Fructose Syrup ("I-IFS") Pool. The Marketing Agent 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. As sales are made, the proceeds received by Marketing Agent from the sale of pooled Products received from its members, shall be deposited into the pools for the appropriate Fiscal Year and shall be credited to Processor and the other members of Marketing Agent on the basis of their respective pro rata shares. Processor's pro rata share of the Net Pool Price (as hereinafter defined) of each pool shall be distributed to Processor by Marketing Agent as rapidly as collection and accounting procedures permit.

    6.3  Primary Pool.  Processor's pro-rata share for the Primary Pool for each Fiscal Year shall be based upon total production, less the amount of Product designated for other alternative or separate pools. With respect to the Primary Pool for each Fiscal Year covered by this Agreement, distributions of the Net Pool Price shall initially be based on Marketing Agent's best estimate of the amount of the Products anticipated to be produced in such year by Processor and each other participant in the pool, and shall be adjusted by Marketing Agent periodically as production figures are more precisely determined. Such adjustments shall reflect an interest charge to be paid by any pool participant who has received excess distributions based on the preliminary production estimates and such interest shall be paid to the pool participant(s) who received less than frill distributions. For purposes of this paragraph, interest charges shall be equal to the average of (i) the monthly Commodity Credit Corporation loan rate for the period in question and (ii) the rate charged by Marketing Agent's principal lender for thirty (30) day seasonal fixed rate financing for the period in question. As soon as exact information and production figures are available, Marketing Agent shall determine Processor's final Product price for the Fiscal Year, and appropriate adjustments, together with interest, as provided above, shall be made. Estimated payments shall be made by Marketing Agent to Processor no less frequently than weekly during the Term, and final accounting for each Fiscal Year shall be made no later than the ninetieth day following the last day of each Fiscal Year.

    6.4  Export Option and Other Pools.  The distribution of Net Pool Price from the Export Option Pool and the HFS Pool (and any other pool established by the Marketing Agent) shall be based on the Product committed by each member to such pool and payments shall be made following the procedure set forth above for Primary Pool payments.

    7.  Marketing Agent's Books and Records.  Marketing Agent shall keep accurate records of costs, sales, and pool proceeds in accordance with sound and generally accepted accounting practices. Said records shall be at all reasonable times frilly available for copying and inspection by Processor and/or its certified public accountants. All records of each pool shall be audited annually by independent certified public accountants selected by Marketing Agent. Such audit shall be made available to Processor promptly after completion.

    8.  Definitions of Net Pool Price.  The net proceeds of the product pools for each Fiscal Year (the "Net Pool Price") shall be defined as the gross proceeds realized by Marketing Agent from sales of Products produced by Processor and the other members in each pool, less expenses directly attributable to such pool in accordance with authorized and established rules of Marketing Agent as follows:

    (a) All costs, charges or expenses attributable to the marketing and sale of pooled Products, including without limitation salaries, wages and other benefits of Marketing Agent's employees, office expense and appropriate consulting fees;

    (b) All costs of transportation of the pooled Products; provided, however, that to the extent rail transportation is not available from the location of Processor's plants, transportation costs shall be adjusted to reflect the added cost related to transportation from such plants;

    (c) Insurance premiums paid by Marketing Agent;

    (d) Interest expense for financing obtained by Marketing Agent;

    (e) State inspection fees and all other fees and taxes incurred in the marketing of the pooled Products;

    (f)  All charges, fees and expenses paid by Marketing Agent to Processor, any other member of Marketing Agent, or any other person, for advertising or use of trademarks;

    (g) All costs and expenses reimbursed to Processor or any other member pursuant to Section 16 hereof;

    (h) All amounts paid by Marketing Agent to any third person for shipping, storage, warehousing or packaging costs or expenses described in Section 16 hereof;

    (i)  All other direct and indirect charges or expenses, including administrative and overhead, attributable to the sale of the pooled Products in the operation of the relevant Product pool; and

    (j)  Depreciation of property and equipment of Marketing Agent.

All losses incurred by Marketing Agent as a result of uncollectible accounts receivable shall be allocated to the appropriate Product pool and shall be regarded as a marketing expense in determining the Net Pool Price of that Product pool.

    9.  Budget and Advance of Marketing Costs.  Marketing Agent shall prepare a monthly budget or estimate of all direct and indirect marketing costs for the pools. It is the intention of Marketing Agent to secure independent financing for costs associated with the marketing of Products as reflected in the budget.

    10.  Product Warranties, Quality Standards, Transfer of Title: Handling of Products of Substandard Quality.

    (a) It is understood and agreed that title to Products shall remain in the name of Processor until the earlier of (i) such time as title is transferred to a buyer by Marketing Agent on behalf of Processor or (ii) risk of loss passes to Marketing Agent, as provided in Section 12(a)(ii) hereof All Processor's Products which are delivered to buyers pursuant to Marketing Agent's shipping orders or are delivered to Marketing Agent shall at the time of delivery be free and clear of any liens, attachments, security interests, claims or encumbrances of any kind whatsoever.

    (b) Marketing Agent shall furnish to Processor from time to time customer specifications for Products prescribing standards and procedures for quality control, storing and shipping of such Products. Initially such standards shall be mutually agreed upon by Marketing Agent and its members, and thereafter from time to time revised in a manner consistent with the Quality Assurance Policy attached hereto as Schedule B. In the absence of an agreement by the parties to another set of standards, the applicable standards shall be those set forth on Schedule C attached hereto.

    (c) Processor shall observe and comply with any buyer specifications furnished by Marketing Agent. Also, all Products delivered to or at the order of Marketing Agent shall conform to quality and other standards prescribed by applicable state and federal rules and regulations.

    (d) Product which fails to meet the customer specifications and the agreed standards, or in the absence of agreed standards, the standards set forth on Schedule D hereto shall be considered substandard for purposes of this Agreement. Product of substandard quality, shall, on the joint agreement of Processor and Marketing Agent: (i) be withheld from the product pool and marketed by Marketing Agent as shall be mutually agreed by Marketing Agent and Processor with proceeds of the sale of such Product, less all direct and indirect selling expenses, distributed to Processor, or (ii) remain in the product pool and be charged with the additional costs relating to the substandard quality of the Product.

    11.  Storage of Product.  Processor shall store its Product as the parties shall mutually agree. At the earliest reasonable time after processing commences in each Fiscal Year and as soon as Product has begun to be placed in storage, Processor shall deliver daily inventory reports to Marketing Agent of both feedstock and Product. All Product included in the daily inventory shall be included in the product pool for the appropriate Fiscal Year even though the Product remains on the premises of Processor. Certain storage and warehousing costs and expenses associated with the Products shall be charged to Marketing Agent and be included in the calculation of the Net Pool Price of the Product Pools, as provided in Sections 8(g) and (h) and 16 of this Agreement.

    12.  Risk of Loss; Insurance; Indemnification.

    (a) Processor covenants and agrees that it shall bear the risk of loss of all Products produced by Processor or any portion thereof until earlier of the time (i) the Products are shipped to the buyer of the same; or (ii) at the time it is no longer possible to identify the Product as that of Processor (i.e., commingled or processed Product), at which time the risk of loss shall pass to Marketing Agent; provided, however, that Processor shall continue to be the owner of the Product until the Product is sold to the buyer. Whenever Marketing Agent shall have possession or control over the Product prior to sale to the buyer, Marketing Agent shall act strictly as custodian thereof in accordance with the provisions of this Agreement.

    (b) Processor covenants and agrees, at its sole cost and at all times during the Term (as hereinafter defined) 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 Marketing Agent from time to time, which product liability insurance shall name Marketing Agent as an additional or a named insured.

    (c) Marketing Agent 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 Marketing Agent, which product liability insurance shall name Processor as an additional or named insured.

    (d) Insurance policies shall be taken out with responsible insurance companies licensed to write insurance in Minnesota, in the case of Marketing Agent, and Florida, in the case of Processor, and each shall not be canceled or altered without ten days' written notice to Marketing Agent 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.

    (e) Processor hereby agrees to indemnify and hold harmless, Marketing Agent, its members, and their respective employees, from and against any claims, losses or liabilities arising out of, or resulting from, the production, on-site storage or loading of any Products which are marketed by Marketing Agent pursuant to this Agreement.

    (f)  Marketing Agent hereby agrees to indemnify and hold harmless, Processor, and its employees, agents and shareholders from and against any claims, losses or liabilities arising out of, or resulting from, the actions or omissions of Marketing Agent, its employees or agents with respect to the Product, from and after the time risk of loss of Processor's Product transfers.

    13.  Orders.  Regardless of factory or warehouse designation, the proceeds from sales orders shall be credited to the Product pool for the appropriate Fiscal Year as provided in Section 5 hereof Marketing Agent 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.  Traffic Function.  Marketing Agent shall be responsible for performing all normal traffic functions relating to the shipment of all Products produced at Processor's plant, and at the request of Processor, will perform the traffic function for Processor's production inputs. Direct or indirect costs of Marketing Agent associated with the performance of the traffic functions related to Products shall be as a pooled marketing expense in accordance with Section 8 of this Agreement. Marketing Agent's traffic function costs attributable to production inputs shall be allocated to the Processor or member(s) of the pool for whom the input traffic function is provided under this Section 14.

    15.  Information from Processor.  Processor shall, whenever requested by Marketing Agent, furnish to Marketing Agent pooled Products production and related statistical data prepared on a daily basis, and shall make its books and records related thereto available at all reasonable times for inspection by Marketing Agent. Processor shall not be required to release information concerning Processor's proprietary processes or costs (other than reimbursable Asset Costs and Operating Costs (as hereinafter defined)), which costs shall be provided in sufficient detail to satisfy Marketing Agent'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 Marketing Agent, to furnish Marketing Agent with samples of Products for grading or selling purposes.

    16.  Reimbursement to Processor.

    (a) Processor shall be reimbursed by Marketing Agent for its (i) carrying costs of assets associated with Product shipping, packaging, warehousing (including all costs historically included by Marketing Agent as warehousing costs), and storage functions (including storage costs of thick juice from beets or desugarization), including depreciation and interest, and its (ii) operating costs associated with Product shipping, packaging, warehousing (including all costs historically included by Marketing Agent as warehousing costs) and storage functions (including storage costs of thick juice from beets or desugarization) including, without limitation, labor (including direct and indirect costs, such as employee benefits, insurance, etc.), supplies and utilities ("Operating Costs"). Notwithstanding the foregoing, costs associated with thick juice storage shall not be charged to Marketing Agent for any month during which Processor elects to use such storage capacity for purposes other than thick juice storage.

    (b) Reimbursement for Asset Costs and Operating Costs shall be made monthly and Processor shall provide monthly to Marketing Agent a breakdown of Asset and Operating Costs. Marketing Agent shall pay to Processor the Asset and Operating Costs specified within thirty (30) days of submission of Processor's cost breakdown. In the event there is a dispute regarding the amount of such reimbursement, Marketing Agent shall pay 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 23 hereof

    17.  Term of Agreement: Termination.

    (a)  Term.  The term of this Agreement shall commence on the date hereof and shall continue through August 31, 2001 (the "initial term") and from Fiscal Year to Fiscal Year thereafter (the "renewal terms") until terminated as provided herein. "Term" shall mean the initial term and any renewal terms, as provided herein.

    (b)  Termination by Producer by Reason of Dissent.  During the Term, Processor shall have the right to terminate this Agreement, without penalty, by Notice delivered to Marketing Agent twelve months prior to the effective date of termination, if the Processor dissents from any of the following actions taken by the Marketing Agent: (i) changes in Marketing Agent's strategic plan; (ii) merger of or acquisition by Marketing Agent; (iii) amendment to the Articles of Incorporation or By-Laws of Marketing Agent; or (iv) admission of a new member into the Marketing Agent.

    (c)  Termination by Either Party After the Initial Term.  Either party has the right to terminate this Agreement at the end of the initial term and thereafter by giving written notice by registered mail to the other party of such termination as follows:

     (i) Notice of termination to be effective at the conclusion of the initial term shall be given prior to May 1, 2000.

    (ii) Notice of termination to be effective at the conclusion of a renewal term shall be given prior to May I of a given year to be effective on August 31 of the subsequent year.

    (d)  Termination Pursuant to the By-Laws of the Marketing Agent.  In the event membership in the Marketing Agent is terminated pursuant to the provisions of the By-Laws of the Marketing Agent, this Agreement shall terminate effective the date of termination of membership; provided, however, that the Marketing Agent shall have the obligation to purchase from Processor and the Processor shall have the obligation to sell Products in the quantities and under the payment terms provided in this Agreement for the next succeeding twelve (12) month period following termination; further provided, that in no event shall Marketing Agent or Processor be required to take any actions that could jeopardize Marketing Agent's status as a common marketing agent under Capper-Volstead Act.

    (e)  Performance Following Termination.

     (i) Following termination of this Agreement, as provided in clauses (a), (b), or (c) above, Processor shall have the obligation to sell its pro-rata share of any Product for which Marketing Agent 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.

    (ii) The rights and obligations with respect to the marketing of Processor's Products shall continue in effect until all of such pooled Products have been sold by Marketing Agent and Processor's pro-rata share of the Net Pool Price from sales of pooled Products produced by Marketing Agent's members during such years and reimbursable costs and expenses have been distributed to Processor and Marketing Agent's members.

    (f)  Return of Capital.  Upon termination of this Agreement, Processor shall be entitled to have its then capital account returned in five equal annual installments, without interest, in exchange for the cancellation of capital equities held by Processor in the Marketing Agent. Upon the return to Processor of such capital contribution, the Marketing Agent shall cancel capital equities equal to such capital contributions.

    18.  Marketing Commitments; Indemnifications.

    (a) Processor represents and warrants that it is not under contract or obligation to sell, market, consign or deliver any of the Products committed to the pools under this Agreement to any other person, firm, association, corporation or other entity. Further, Processor shall defend and hold harmless Marketing Agent 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.

    (b) Marketing Agent 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, Marketing Agent shall defend and hold harmless Processor and its employees, agents and shareholders, from any costs, claims, liabilities, suits or other proceedings or actions of any nature or kind whatsoever arising from or connected with any sales by Marketing Agent of Products hereunder.

    19.  Compliance with Marketing Agent's Governing Instruments.  Processor accepts and agrees to conform to and abide by the provisions of the Articles of Incorporation and By-Laws of Marketing Agent and all amendments thereto during the Term of this Agreement.

    20.  Marketing Allotments.  It is the intention of the parties that all Products produced by Processor during the Term hereof will be marketed by Marketing Agent. In the event government marketing allotments are imposed during the Term hereof, Marketing Agent will continue to market all of Processor's Products; provided that products in excess of Processor's allocated volume shall not be included in the Primary Pool but will be marked as part of an alternative or separate pool. It is the intention of the parties that Processor may elect to have Product in excess of its allocation marketed by Marketing Agent in the current year (in the export market) or carried over by Marketing Agent to the next Fiscal Year. The Net Pool Price of non-pool Product shall be determined in a manner consistent with the provisions of Sections 6. 1 and 8 of this Agreement. Marketing allotments attributable to Processor shall be the property of Processor. This provision shall survive the termination or expiration of this Agreement.

    21.  Interdependent Agreement.  Processor agrees that Marketing Agent shall have all rights and remedies provided by law and in the Bylaws of Marketing Agent in the event of a breach or threatened breach by Processor of this Agreement. Marketing Agent represents that all other members either have entered into or will be required to enter into substantially identical member marketing agreements for the marketing of pooled Products produced by the other members.

    22.  Force Majeure.

    (a) Neither party shall be liable to the other for failure to perform any part of this Agreement if such failure results from the occurrence of an event of Force Majeure (as hereinafter defined), 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.

    (b) 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.

    (c) For purposes of this Agreement, the term "Force Majeure" shall mean 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.

    23.  Dispute Resolution.

    23.1  My dispute, controversy or claim arising out of or relating to this Agreement that cannot be resolved amicably between the parties shall be finally resolved by arbitration in Chicago, Illinois, or such other location as may be mutually agreed upon, in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"), as modified by this Section 23; 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 23; 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 23. 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.

    23.2  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.

    23.3  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.

    24.  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.

    25.  Assignment.  Neither Processor nor Marketing Agent may assign this agreement without prior written consent of the other party and the other members who have entered into identical pool marketing agreements with Marketing Agent.

    26.  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.

    27.  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 Marketing Agent:

United Sugars Corporation
7801 E. Bush Lake Road
Bloomington, Minnesota 55439
Attn: President

With a copy to:

Ralph Morris, Esq.
Doherty, Rumble & Butler, P.A.
2800 Minnesota World Trade Center
30 E. 7th Street
St. Paul, Minnesota 55101

If to Processor:

American Crystal Sugar Company
101 North Third Street
Moorhead, MN 56560
Attention: CEO

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

    28.  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.

    29.  Successors and Assigns.  Subject to the other provisions of this Agreement, all of the terms, covenants and conditions of this Agreement shall inure to the benefit of and shall bind the parties hereto and their successors and assigns.

    IN WITNESS WHEREOF, Marketing Agent and Processor have executed this Agreement effective the day and year first above written.

UNITED SUGARS CORPORATION
By:	/s/ ROBERT ATWOOD
Its:	President
AMERICAN CRYSTAL SUGAR COMPANY
By:	/s/ DANIEL MCCARTY
Its:	CEO

EX-10.24

Exhibit 10.24

$12,500,000 7.32% Senior Secured Notes, Series A, due August 31, 2018
$15,000,000 7.37% Senior Secured Notes, Series B, due August 31, 2023
$22,500,000 7.42% Senior Secured Notes, Series C, due August 31, 2028

NOTE PURCHASE AGREEMENT

Dated as of September 15, 1998

AMERICAN CRYSTAL SUGAR COMPANY
101 NORTH 3RD STREET
MOORHEAD, MINNESOTA 56560

$12,500,000 7.32% Senior Secured Notes, Series A, due August 31, 2018
$15,000,000 7.37% Senior Secured Notes, Series B, due August 31, 2023
$22,500,000 7.42% Senior Secured Notes, Series C, due August 31, 2028

Dated as of
September 15, 1998

TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:

Ladies and Gentlemen:

    American Crystal Sugar Company, a Minnesota cooperative corporation (the "Company"), agrees with you as follows:

SECTION 1 AUTHOR1ZATION OF NOTES.

    The Company will authorize the issue and sale of(i) $12,500,000 7.32% Senior Secured Notes, Series A, due August 31, 2018 (the "Series A Notes"), (ii) $15,000,000 7.37% Senior Secured Notes, Series B, due August 31, 2023 (the "Series B Notes"), (iii) $22,500,000 7.42% Senior Secured Notes, Series C, due August 31, 2028 (the "Series C Notes"), and together with the Series A Notes and the Series B Notes (the "Notes"), such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter defined)). The Series A Notes shall be substantially in the form set out in Exhibit I-A, the Series B Notes shall be substantially in the form set out in Exhibit 1-B, and the Series C Notes shall be substantially in the form set out in Exhibit I -C, with such changes therefrom, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

SECTION 2 SALE AND PURCHASE OF NOTES.

    Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount specified opposite your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "Other Agreements") identical with this Agreement with each of the other purchasers named in Schedule A (the "Other Purchasers"), providing for the sale at such Closing to each of the Other Purchasers of Notes in the principal amount specified opposite its name in Schedule A. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder. You and the Other Purchasers are sometimes referred to hereunder as the "Purchasers".

SECTION 3 CLOSING.

    The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Doherty Rumble & Butler, 2800 Minnesota World Trade Center, 30 East Seventh Street, St. Paul, Minnesota 55101 at 11:00 A.M. Minneapolis, Minnesota time, at a closing (the "Closing") on September 24, 1998 or on such other Business Day thereafter on or prior to September 30, 1998 as may be agreed upon by the Company and you and the Other Purchasers. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $500,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company at Norwest Bank, Minneapolis, Routing #09 1000019, for further credit at Norwest Bank, Fargo, for credit to the Company's account no. 0720017777. If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such non-fulfillment.

SECTION 4 CONDITIONS TO CLOSING.

    Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions:

    Section 4.1 Representations and Warranties.  The representations and warranties of the Company in this Agreement and the Security Documents shall be correct when made and at the time of the Closing.

    Section 4.2 Performance; No Default.  The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14) no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Sections 10.1, 10.3 or 10.6 hereof had such Sections applied since such date.

Section 4.3 Compliance Certificates.

    (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1,4.2 and 4.9 have been fulfilled.

    (b) Secretary's Certificate. The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Agreements.

    (c) Officer's Certificate. The Collateral Agent shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that (i) the representations and warranties of the Collateral Agent set forth in Section 2.2 of the Intercreditor and Collateral Agency Agreement shall be correct when made and at the time of the Closing, (ii) the Collateral Agent shall have performed and complied with all agreements and conditions contained in the Intercreditor and Collateral Agency Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14) no Default or Event of Default shall have occurred and be continuing, and (iii) the Collateral Agent shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation.

    (d) Secretary's Certificate. The Collateral Agent shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Intercreditor and Collateral Agency Agreement.

    Section 4.4 Opinions of Counsel.  You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Doherty, Rumble & Butler, counsel for the Company, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you), (b) from McDermott, Will & Emery, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as you may reasonably request, (e) from Dorsey & Whitney, special local counsel for the Purchasers, covering the matters set forth in Exhibit 4.4(e) and covering such other matters incident to the transactions contemplated hereby as you or your special counsel may reasonably request, and (d) from the Associate General Counsel of the Collateral Agent substantially in the form set forth in Exhibit 4.4(d) and covering such other matters incident to such transactions as you may reasonably request.

    Section 4.5  Purchase Permitted By Applicable Law, Etc. On the date of the Closing your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted.

    Section 4.6 Sale of Other Notes.  Contemporaneously with the Closing the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A.

    Section 4.7 Payment of Special Counsel Fees.  Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel and your special local counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing.

Section 4.8 Private Placement Number. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each series of the Notes.

    Section 4.9 Changes in Corporate Structure.  The Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5.

    Section 4.10 Execution of Security Documents.  On or prior to the Closing:

    (a) the Collateral Agent, the Banks and you shall have entered into and delivered the Intercreditor and Collateral Agency Agreement and the Company shall have acknowledged the execution and delivery of such agreement and the Intercreditor and Collateral Agency Agreement shall be in full force and effect and you shall have received true, correct and complete copies thereof and

    (b) the Company and the Collateral Agent shall have entered into and delivered the Mortgage in form and substance satisfactory to you and the Mortgage shall be in full force and effect and you shall have received true, correct and complete copies thereof.

    Section 4.11 Filing and Recording.  The Security Documents (and/or financing statements or similar notices thereof if and to the extent permitted by applicable law) shall have been recorded or filed for record in such public offices as may be deemed necessary or appropriate by you or your special local counsel in order to perfect the Liens and security interests granted or conveyed thereby.

    Section 4.12 Evidence of Insurance.  You shall have received a certificate dated the Closing executed by the independent insurance broker of the Company certifying to the existence of the insurance required by the Security Documents and the payment of all premiums thereon.

The original of the policies or certificates thereof evidencing such insurance issued by the insurers shall be delivered to the Collateral Agent for safekeeping on your behalf immediately upon receipt thereof by the Company.

    Section 4.13 Consent of Holders of Other Securities.  Any consents or approvals required to be obtained from any holder or holders of any outstanding Security of the Company and any amendments of agreements pursuant to which any Security may have been issued which shall be necessary to permit the consummation of the transactions contemplated hereby or by the Security Documents shall have been obtained and all such consents or amendments shall be satisfactory in form and substance to you and your special counsel.

    Section 4.14 Funding Instructions.  At least 3 Business Days prior to the Closing, you shall have received written instructions executed by a Responsible Officer of the Company directing the manner of the payment of funds and setting forth (a) the name of the transferee bank, (b) such transferee bank's ABA number, (e) the account name and number into which the purchase price for the Notes is to be deposited, and (d) the name and telephone number of the account representative responsible for verifying receipt of such funds.

    Section 4.15 Payment of Recording Fees, Charges and Taxes.  All fees, charges and taxes in connection with the recordation or filing and re-recordation or re-filing of the Security Documents and any other agreement or instrument, financing statement or any publication of notice required to be filed or recorded to protect the validity of the liens securing the obligations of the Notes shall have been paid in full.

    Section 4.16 Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request.

SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

    The Company represents and warrants to you that:

    Section 5.1 Organization: Power and Authority.  The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement, the Other Agreements, the Mortgage and the Notes and to perform the provisions hereof and thereof.

    Section 5.2 Authorization, Etc.  This Agreement, the Other Agreements, the Mortgage and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

    Section 5.3 Disclosure.  The Company, through its agents, SPP Hambro & Co., LLC, St. Paul Bank and CoBank, has delivered to you and each Other Purchaser a copy of a Confidential Private Placement Memorandum, dated July 1998 (the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. This Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Since December 31, 1997, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby.

Section 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates.

    (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and senior officers.

    (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4).

    (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

    (d) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

    Section 5.5 Financial Statements.  The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such financial statements and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments).

    Section 5.6 Compliance with Laws, Other Instruments, Etc.  The execution, delivery and performance by the Company of this Agreement, the Mortgage and the Notes will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary.

    Section 5.7 Governmental Authorizations, Etc.  No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement, the Mortgage or the Notes.

Section 5.8 Litigation; Observance of Agreements, Statutes and Orders.

    (a) There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

    (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

    Section 5.9 Taxes.  The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended August 31, 1992.

    Section 5.10 Title to Property; Leases.  The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects.

Section 5.11 Licenses, Permits, Etc.

    (a) The Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others.

    (b) To the best knowledge of the Company, no product of the Company infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person.

    (c) To the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries.

Section 5.12 Compliance with ERISA.

    (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either ease pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material.

    (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA.

    (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.

    (d) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material.

    (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to (i) the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you and (ii) the assumption, made solely for the purpose of making such representation, that Department of Labor Interpretive Bulletin 75-2 with respect to prohibited transactions remains valid in the circumstances of the transactions contemplated herein.

    Section 5.13 Private Offering by the Company.  Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you, the Other Purchasers and not more than 76 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act.

    Section 5.14 Use of Proceeds; Margin Regulations.  The Company will apply the proceeds of the sale of the Notes to repay short-term Debt and seasonal Debt and for general corporate purposes. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 1% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 1% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U.

Section 5.15 Existing Debt; Future Liens.

    (a) Schedule 5.15 sets forth a complete and correct list of all outstanding Debt of the Company and its Subsidiaries as of August 25, 1998, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Debt of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Debt of the Company or such Subsidiary and no event or condition exists with respect to any Debt of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

    (b) Neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.3.

    Section 5.16 Foreign Assets Control Regulations. Etc.  Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto.

    Section 5.17 Status under Certain Statutes.  Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended.

    Section 5.18 Environmental Matters.  Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing,

    (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect;

    (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and

    (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.

Section 5.19 Collateral Matters.

    (a) The provisions of each of the Security Documents are effective to create in favor of the Collateral Agent for the benefit of the Purchasers, a legal, valid and (subject to the qualifications to enforceability in Section 5.2) enforceable security interest (with the priorities provided for therein and limited to the extent the Collateral described therein is within the scope of the UCC) in all right, title and interest of the Company and its Subsidiaries in the collateral described therein; and executed financing statements have been, or on or before the Closing will be, filed in all public offices wherein such filing is necessary to perfect the security interests in the Collateral therein described as against creditors of and purchasers from the Company.

    (b) All representations and warranties of the Company and any of its Subsidiaries party thereto contained in the Security Documents are true and correct.

    (c) All fees, charges and taxes in connection with the recordation or filing and re-recordation or re-filing of the Security Documents and any other agreement or instrument, financing statement or any publication of notice required to be filed or recorded, including without limitation the Minnesota mortgage registration tax imposed by Minnesota Statutes Chapter 287, to protect the validity of the liens securing the obligations of the Notes shall have been paid in full.

    Section 5.20 Parity of Obligations.  All obligations hereunder and under the Notes are direct and secured obligations of the Company ranking pad passu as against the assets of the Company with all other present and future secured Debt (actual or contingent) of the Company which is not expressed to be subordinate or junior in rank to any other secured Debt of the Company except for Debt secured by liens permitted by Sections 10.3(f), (g) or (h).

    Section 5.21 Year 2000 Issues.  The Company has adopted a plan (the "Year 2000 Plan") which adequately addresses, in the reasonable judgment of senior management of the Company, the operational and financial issues (the "Year 2000 Issues") arising from data in the Company's management information and computer systems respecting dates prior to, on or after January 1, 2000. The Year 2000 Plan is the process of implementation and, in the reasonable judgment of senior management of the Company, the Year 2000 Issues do not present a reasonable likelihood of resulting in a Material Adverse Effect.

SECTION 6 REPRESENTATIONS OF THE PURCHASER.

    Section 6.1 Purchase for Investment.  You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.

    Section 6.2 Source of Funds.  You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder:

    (a) the Source is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee benefit plan, treating as a single plan, all plans maintained by the same employer or employee organization, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan, exceed ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with your state of domicile; or

    (b) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

    (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPA.M Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(e)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part 1(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (c); or

    (d) the Source is a governmental plan; or

    (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (e); or

    (f) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

    If you or any subsequent transferee of the Notes indicates that you or such transferee are relying on any representation contained in paragraph (b), (c) or (e) above, the Company shall deliver on the date of Closing and on the date of any applicable transfer a certificate, which shall either state that (i) it is neither a party in interest nor a "disqualified person" (as defined in Section 4975(e)(2) of the Internal Revenue Code of 1986, as amended), with respect to any plan identified pursuant to paragraphs (b) or (e) above, or (ii) with respect to any plan, identified pursuant to paragraph (c) above, neither it nor any "affiliate" (as defined in Section V(c) of the QPAM Exemption) has at such time, and during the immediately preceding one year, exercised the authority to appoint or terminate said QPAM as manager of any plan identified in writing pursuant to paragraph (c) above or to negotiate the terms of said QPAM's management agreement on behalf of any such identified plan. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA.

SECTION 7 INFORMATION AS TO COMPANY.

    Section 7.1 Financial and Business Information.  The Company shall deliver to each holder of the Notes that is an Institutional Investor:

    (a) Quarterly Statements—within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of,

    (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and

    (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter,

    (iii) setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments;

    (b) Annual Statements—within 120 days after the end of each fiscal year of the Company, duplicate copies of,

    (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and

    (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by

    (1) an opinion thereon of Eide Bailly LLP or any other independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and

    (2) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit);

    (c) SEC and Other Reports—promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material;

    (d) Notice of Default or Event of Default—promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

    (e) ERISA Matters—promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:

    (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or

    (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or

    (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect;

    (f) Notices from Governmental Authority—promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and

    (g) Requested Information—with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes.

    Section 7.2 Officer's Certificate.  Each set of financial statements delivered to a holder of Notes pursuant to Section (a) or Section (b) of Section 7.1 shall be accompanied by a certificate of a Senior Financial Officer setting forth:

    (a) Covenant Compliance—the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.2 through Section 10.6 hereof, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and

    (b) Event of Default—a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.

    Section 7.3 Inspection.  The Company shall permit the representatives of each holder of Notes that is an Institutional Investor:

    (a) No Default—if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and

    (b) Default—if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested.

SECTION 8 PREPAYMENT OF THE NOTES.

Section 8.1 Required Prepayments.

    (a) Except as set forth in clause (b) below, the Notes are not subject to prepayment in whole or in part prior to the maturity dates thereof, except as otherwise provided in this Section 8.

    (b) In the event that the Company shall, for any reason, fail to complete the post closing matters set forth in Section 9.8 on or prior to November 24, 1998, (i) the Company shall give prompt written notice thereof to the holders of all outstanding Notes in which the Company shall offer to prepay the outstanding Notes on such date (the "Special Prepayment Date"), together with accrued interest to the Special Prepayment Date and the Make-Whole Amount determined for the Special Prepayment Date with respect to such principal amount, as shall be specified in the notice which shall be not less than 30 days nor more than 60 days after the date of the notice, and (ii) the Company shall on the Special Prepayment Date make the tendered prepayment with accrued interest and the Make-Whole Amount as described in the preceding clause (i) of all Notes held by holders who have accepted such tender by notice in writing given to, the Company not less than ten days prior to the Special Prepayment Date.

    Section 8.2 Optional Prepayments with Make-Whole Amount.  The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of (but if in part then such prepayment shall be applied against the Series A Notes, the Series B Notes and the Series C Notes, respectively, in proportion to the aggregate amount outstanding of each series), the Notes, in an amount not less than 5% of the aggregate principal amount of all series of the Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, together with interest accrued thereon to the date of such prepayment, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.4), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.

Section 8.3 Change in Control.

    (a) Notice of Change in Control or Control Event. The Company will, within two Business Days after any Responsible Officer has knowledge of the occurrence of any Change in Control or Control Event, give written notice of such Change in Control or Control Event to each holder of Notes unless notice in respect of such Change in Control (or the Change in Control contemplated by such Control Event) shall have been given pursuant to subparagraph (b) of this Section 8.3. If a Change in Control has occurred, such notice shall contain and constitute an offer to purchase Notes as described in subparagraph (c) of this Section 8.3 and shall be accompanied by the certificate described in subparagraph (g) of this Section 8.3.

    (b) Condition to Company Action. The Company will not take any action that consummates or finalizes a Change in Control unless (i) at least 60 days prior to such action it shall have given to each holder of Notes written notice containing and constituting and offer to purchase Notes as described in subparagraph (c) of this Section 8.3, accompanied by the certificate described in subparagraph (g) of this Section 8.3, and (ii) contemporaneously with such action, it purchases all Notes required to be purchased in accordance with this Section 8.3.

    (c) Offer to Purchase Notes. The offer to purchase Notes contemplated by subparagraphs (a) and (b) of this Section 8.3 shall be an offer to purchase, in accordance with and subject to this Section 8.3, all, but not less than all, of the Notes held by each holder (in this ease only, "holder" in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such offer (the "Proposed Purchase Date"). If such Proposed Purchase Date is in connection with an offer contemplated by subparagraph (a) of this Section 8.3, such date shall be not less than 60 days and not more than 90 days after the date of such offer (if the Proposed Purchase Date shall not be specified in such offer, the Proposed Purchase Date shall be the 75th day after the date of such offer).

    (d) Acceptance. A holder of Notes may accept or reject the offer to purchase made pursuant to this Section 8.3 by causing a notice of such acceptance or rejection to be delivered to the company at least 15 days prior to the Proposed Purchase Date. A failure by a holder of Notes to respond to an offer to purchase made pursuant to this Section 8.3 shall be deemed to constitute an acceptance of such offer by such holder.

    (e) Purchase. Purchase of the Notes to be purchased pursuant to this Section 8.3 shall be at 100% of the principal amount of such Notes, together with interest on such Notes accrued to the date of purchase. The purchase shall be made on the Proposed Purchase Date except as provided in subparagraph (1) of this Section 8.3.

    (f) Deferral Pending flange in Control. The obligation of the Company to purchase Notes pursuant to the offers required by subparagraph (b) and accepted in accordance with subparagraph (d) of this Section 8.3 is subject to the occurrence of the Change in Control in respect of which such offers and acceptances shall have been made. In the event that such Change in Control does not occur on or prior to the Proposed Purchase Date in respect thereof, the purchase shall be deferred until and shall be made on the date on which such Change in Control occurs. The Company shall keep each holder of Notes reasonably and timely informed of(i) any such deferral of the date of purchase, (ii) the date on which such Change in Control and the purchase are expected to occur, and (iii) any determination by the Company that efforts to effect such Change in Control have ceased or been abandoned (in which case the offers and acceptances made pursuant to this Section 8.3 in respect of such Change in Control shall be deemed rescinded).

    (g) Officer's Certificate. Each offer to purchase the Notes pursuant to this Section 8.3 shall be accompanied by a certificate, executed by a Senior Financial Officer of the Company and dated the date of such offer, specifying: (i) the Proposed Purchase Date; (ii) that such offer is made pursuant to this Section 8.3; (iii) the principal amount of each Note offered to be purchased; (iv) the interest that would be due on each Note offered to be purchased, accrued to the Proposed Purchase Date; (v) that the conditions of this Section 8.3 have been fulfilled; and (vi) in reasonable detail, the nature and date or proposed date of the Change in Control.

    (h) Definitions.

    "Change in Control" shall be deemed to have occurred if any person (as such term is used in section 13(d) and section 14(d)(2) of the Exchange Act as in effect on the date of the Closing) or related persons constituting a Group (other than one or more Permitted Investors) become the "beneficial owners" (as such term is used in Rule 13d-3 under the Exchange Act as in effect on the date of the Closing), directly or indirectly, of more than 50% of the total voting power of all classes then outstanding of the Company's voting stock.

    "Group" shall mean any group of related persons constituting a "Group" for the purposes of Section 13(d) of the Exchange Act, or any successor provision.

    "Control Event" means:

    (i) the execution by the Company or any of its Subsidiaries or Affiliates of any agreement or letter of intent with respect to any proposed transaction or event or series of transactions or events which, individually or in the aggregate, may reasonably be expected to result in a Change of Control,

    (ii) the execution of any written agreement which, when fully performed by the parties thereto, would result in a Change in Control, or

    (iii) the making of any written offer by any person (as such term is used in section 13(d) and section 14(d)(2) of the Exchange Act as in effect on the date of the Closing) or related persons constituting a Group to the holders of the common stock of the Company, which offer, if accepted by the requisite number of holders, would result in a Change in Control.

    Section 8.4 Allocation of Partial Prepayments.  In the case of each partial prepayment of the Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.

    Section 8.5 Maturity; Surrender, Etc.  In the ease of each prepayment or purchase of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid or purchased shall mature and become due and payable on the date fixed for such prepayment or purchase, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid, purchased or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid or purchased principal amount of any Note.

    Section 8.6 Purchase of Notes.  The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the purchase, payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

    Section 8.7 Make-Whole Amount.  The term "Make-Whole Amount" means, with respect to any Note of any series, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note of such series over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

    "Called Principal" means, with respect to any Note of any series, the principal of such Note of such series that is to be prepaid or purchased pursuant to Section 8.2 or Section 8.3 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

    "Discounted Value" means, with respect to the Called Principal of any Note of any series, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes of the series is payable) equal to the Reinvestment Yield with respect to such Called Principal.

    "Reinvestment Yield" means, with respect to the Called Principal of any Note, .50% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on Telerate Access Service) for actively traded U.S. Treasury securities having a maturity equal to the maturity of the Notes of the subject series as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H. 15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the maturity of the Notes of the subject series as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the maturity of the Notes of the subject series and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the maturity of the Notes of the subject series.

    "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note of any series, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment or purchase of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes of the series, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2, 8.3 or 12.1.

    "Settlement Date" means, with respect to the Called Principal of any Note of any series, the date on which such Called Principal is to be prepaid or purchased pursuant to Section 8.2 or Section 8.3 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

SECTION 9 AFFIRMATIVE COVENANTS.

    The Company covenants that so long as any of the Notes are outstanding:

    Section 9.1 Compliance with Law.  The Company will, and will cause each of its Subsidiaries, to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each ease to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

    Section 9.2 Insurance.  The Company will, and will cause each of its Subsidiaries, to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

    Section 9.3 Maintenance of Properties.  The Company will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

    Section 9.4 Payment of Taxes and Claims.  The Company will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect.

    Section 9.5 Corporate Existence, Etc.  The Company will at all times preserve and keep in full force and effect its corporate existence as a cooperative corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia); provided that the Company may convert its form of organization to a limited liability company so long as it shall maintain Investment Grade Status. Subject to Section 10.2, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect.

    Section 9.6 Notes to Rank Pari Passu.  The Notes and all other obligations of the Company under this Agreement are and at all times shall remain direct and secured obligations of the Company ranking pan passu as against the assets of the Company with all other Notes from time to time issued and outstanding hereunder without any preference among themselves and pari passu with all other present and future secured Debt (actual or contingent, of the Company which is not expressed to be subordinate or junior in rank to any other secured Debt of the Company, except for Debt secured by Liens permitted by Sections 10.3(f), (g) or (h).

    Section 9.7 Further Assurances.  Promptly upon request by the Collateral Agent, the Company shall (and shall cause its Subsidiaries including all entities which become Subsidiaries after the date hereof to) execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all such further conveyances, security agreements, charges, debentures, guaranties, mortgages, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments the Collateral Agent may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement or any Security Document, (ii) to subject to the Liens created by any of the Security Documents any of the properties, rights or interests covered by any of the Security Documents, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Security Documents and the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Collateral Agent the rights granted or now or hereafter intended to be granted to the Purchasers under any Security Document or under any other document executed in connection therewith (including the granting of a mortgage on any now or hereafter acquired owned real property). In connection with the execution of the foregoing, the Company shall cause to be delivered to the Collateral Agent such opinions of counsel and other supporting documents as the Collateral Agent shall reasonably require.

Section 9.8 Post Closing Matters.

    (a) Mortgagee's Title Insurance; Endorsements. Loan title insurance policies issued by a title insurance company reasonably satisfactory to the Noteholders and their special counsel shall have been issued for each property secured by the Mortgage on or prior to November 24, 1998 insuring the Collateral Agent's first perfected security interest in such properties and such policies shall be satisfactory in scope and form to the Noteholders and their special counsel; provided that such policies will not be required to include an exception for a survey of any property and that a survey of the properties, to the extent not previously prepared prior to Closing, will not be required by the Noteholders.

    (b) Environmental Reports. On or prior to November 24 1998, environmental reports for each of the properties secured by the Mortgage prepared by the Company in substantially the same form as a "Phase I" environmental report shall have been delivered to the Noteholders and the Collateral Agent and shall be reasonably satisfactory to the Noteholders and their special counsel in scope and form.

    Section 9.9 Incorporation of Additional Covenants, Events of Default and Additional Information Requests.  In the event that the Company shall agree in any agreement under which Funded Debt is issued which Funded Debt is secured by the Mortgage to include in such agreement either (a) financial covenants or restrictions which are not included in this Agreement or to an increase in the restrictiveness of a financial covenant or restriction which is contained in this Agreement, (b) any events of default which are not contained in this Agreement or (c) any informational requests which are not included in this Agreement (collectively, the "Additional Provision"), such Additional Provision shall be incorporated in this Agreement as if fully set forth herein. In the event such Additional Provision is deleted from such other agreement or waived by the holders of the related Funded Debt, such Additional Provision shall be deemed to be deleted from or waived under this Agreement without further action.

SECTION 10 NEGATIVE COVENANTS.

    The Company covenants that so long as any of the Notes are outstanding:

    Section 10.1 Transactions with Affiliates.  The Company will not and will not permit any Subsidiary to enter into directly or indirectly any transaction or Material group of related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate other than Permitted Specified Affiliate Transactions.

    Section 10.2 Merger, Consolidation, Etc.  The Company will not, and will not permit any Subsidiary to, consolidate with or be a party to a merger with any other Person, or sell, lease or otherwise dispose of all or substantially all of its assets; provided that:

    (a) any Subsidiary may merge or consolidate with or into the Company or any other Subsidiary so long as in any merger or consolidation involving the Company, the Company shall be the surviving or continuing corporation; and

    (b) the Company may consolidate or merge with or into or transfer all or substantially all of its assets to any other corporation or limited liability company if (i) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety, as the case may be, shall be organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and, if in the event the Company is not such successor, survivor or transferee, (ii) the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observation of all of the covenants in the Notes and this Agreement to be performed or observed by the Company are expressly assumed in writing by the surviving corporation (if other than the Company) and the surviving corporation shall furnish to the Holders an opinion of counsel satisfactory to such Holders to the effect that the instrument of assumption has been duly authorized, executed and delivered and constitutes the legal, valid and binding contract and agreement of the surviving corporation enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (iii) immediately prior to and after giving effect to such transaction, (A) no Default or Event of Default shall have occurred and be continuing and (B) the surviving corporation would be permitted by the provisions of Section 10.6(c) to incur at least $1.00 of additional Funded Debt; and (iv) shall maintain Investment Grade Status.

No such conveyance, transfer or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any successor corporation that shall theretofore have become such in the manner prescribed in this Section 10.2 from its liability under this Agreement or the Notes.

    Section 10.3 Liens.  The Company will not, and will not permit any Subsidiary to, create, assume, incur, or suffer to be created, assumed, or incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except:

    (a) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided that payment thereof is not at the time required by Section 9.4;

    (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured within 60 days after the expiration of any such stay;

    (c) Liens incidental to the conduct of business or the ownership of properties and assets (including, without limitation, Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature, in any such case incurred in the ordinary course of business and not in connection with the borrowing of money and which do not in any event materially impair the use of such property in the operation of the business of the Company and its Subsidiaries taken as a whole, or the value of such property for the purposes of such business, provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings;

    (d) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Company and its Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Company and its Subsidiaries taken as a whole, or the value of the property for the purposes of such business;

    (e) Liens securing Debt of a Subsidiary to the Company or to a Wholly-Owned Subsidiary;

    (f) (i) Liens existing as of the Closing and described on Schedule 5.15 hereto including, without limitation, Liens securing Funded Debt (including Funded Debt incurred after the Closing under and pursuant to 10.6(e)) which are evidenced by the Mortgage and the St. Paul Stock Lien and (ii) Permitted Current Asset Liens;

    (g) Liens incurred after the Closing given to secure the payment of the purchase price incurred in connection with the acquisition, construction or improvement of fixed assets of the Company or any Subsidiary, which Liens are incurred contemporaneously with or within 180 days after the payment of such purchase price or completion of such construction, and Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Company or any Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach, provided that (i) the Lien shall attach solely to the fixed assets acquired, constructed or improved, (ii) at the time of acquisition, construction or improvement of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets whether or not assumed by the Company or any Subsidiary shall not exceed an amount equal to 100% of the fair market value at the time of acquisition, construction or improvement of such fixed assets (as determined in good faith by the Board of Directors of the Company), and (iii) all Debt secured by such Liens shall have been incurred within the applicable limitations of this Agreement including, without limitation, Section 10.6; and

    (h) in addition to the liens permitted under Section 10.3(a) through (g), Liens, other than Current Asset Liens, securing Debt of the Company or any Subsidiary incurred within the limitations of Section 10.6(d).

    Section 10.4 Consolidated Net Worth.  The Company will at all times keep and maintain Consolidated Net Worth at an amount not less than the sum of $175,000,000.

    Section 10.5 Sale of Assets.  The Company shall not, and shall not permit any Subsidiary thereof to, sell, lease, transfer or otherwise dispose of assets (except assets sold in the ordinary course of business for fair market value and except as provided in Section 10.2(b)); provided that the foregoing restrictions do not apply to:

    (a) the sale, lease, transfer or other disposition of assets of a Subsidiary to the Company or a Wholly-Owned Subsidiary; or

    (b) the sale of assets for cash or other property to a person or persons if all the following conditions are met:

    (i) such assets (valued at net book value) do not, together with all other assets of the Company and its Subsidiaries previously disposed of during the period from the date of this Agreement to and including the date of the sale of such assets (other than in the ordinary course of business), exceed 25% of Consolidated Total Assets, determined at the end of the immediately preceding fiscal quarter;

    (ii) in the opinion of the Company's board of directors, the sale is for fair value and is in the best interests of the Company and its Subsidiaries, taken as a whole; and

    (iii) immediately prior to and after the consummation of the transaction and prior to and after giving effect thereto (A) no Default or Event of Default would exist and (B) the Company would be permitted by the provisions of Section 10.6(e) to incur at least $1.00 of additional Funded Debt;

provided, however, that for the purposes of the foregoing calculation, there shall not be included any assets to the extent that the net proceeds of the sale of such assets were or are applied within 270 days of the date of sale of such assets to either (A) the acquisition of fixed assets useful and intended to be used in the operation of the business of the Company and its Subsidiaries as described in Section 10.7 and having a fair market value (as determined in good faith by the board of directors of the Company) at least equal to that of the net proceeds applied from the sale of the assets so disposed of or (B) the prepayment of senior Funded Debt on a pro rata basis. It is understood and agreed by the Company that any such proceeds paid and applied to the prepayment of the Notes as hereinabove provided shall be prepaid as and to the extent provided in Section 8.2.

    Section 10.6 Limitations on Funded Debt.  The Company will not, and the Company will not permit any Subsidiary to, create, assume, guarantee or otherwise incur or in any manner become liable in respect of any Funded Debt except:

    (a) Funded Debt evidenced by the Notes;

    (b) Funded Debt of the Company and its Subsidiaries outstanding as of the date of this Agreement and described on Schedule 5.15 hereto or any extension, renewal or refunding of any Funded Debt without increase in the principal amount thereof at the time of such extension, renewal or refunding;

    (c) additional Funded Debt of the Company and of its Subsidiaries incurred after the Closing, provided, however, that Consolidated Funded Debt shall not exceed 60% of Consolidated Total Capitalization, determined at the end of the immediately preceding fiscal quarter; and

    (d) additional Priority Debt, provided however, that the Company will not at any time permit the aggregate amount of outstanding Priority Debt to exceed an amount equal to 15% of Consolidated Net Worth, determined at the end of the immediately preceding fiscal quarter.

Any Person which becomes a Subsidiary after the date hereof shall for all purposes of this Section 10.6 be deemed to have created, assumed or incurred at the time it becomes a Subsidiary all Debt of such Person existing immediately after it becomes a Subsidiary.

    Section 10.7 Line of Business.  The Company will not, and will not permit any of its Subsidiaries to, engage in any business if, as a result, the general nature of the business in which the Company, or the Company and its Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Company and it Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Memorandum.

SECTION 11 EVENTS OF DEFAULT.

    An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing:

    (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

    (b) the Company defaults in the payment of any interest on any Note after the same becomes due and payable; or

    (c) the Company defaults in the performance of or compliance with any term contained in Sections 10.4, 10.5, 10.6 or 10.7; or

    (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (e) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11); or

    (e) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or

    (f) (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Debt that is outstanding in an aggregate principal amount of at least $2,500,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Debt in an aggregate outstanding principal amount of at least $2,500,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and such failure continues unremedied for 30 days after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure, or (iii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Debt in an aggregate outstanding principal amount of at least $2,500,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Debt has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iv) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Debt to convert such Debt into equity interests), the Company or any Subsidiary has become obligated to purchase or repay Debt before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $2,500,000; or

    (g) the Company or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

    (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Subsidiaries, or any such petition shall be filed against the Company or any of its Subsidiaries and such petition shall not be dismissed within 60 days; or

    (i) a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 are rendered against one or more of the Company and its Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or

    (j) (i) any Security Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason cease to be a perfected security interest (having the priority provided for therein) subject only to Liens permitted pursuant to Section 10.3, or (ii) any material provision of any Security Document shall for any reason cease to be valid and binding on or enforceable against the Company or any Subsidiary party thereto or the Company or any Subsidiary shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or

    (k) (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERJSA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed an amount equal to 5% of Consolidated Net Worth, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect.

As used in Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA.

SECTION 12 REMEDIES ON DEFAULT, ETC.

Section 12.1 Acceleration.

    (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

    (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 25% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.

    (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.

Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances.

    Section 12.2 Other Remedies.  If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

    Section 12.3 Rescission.  At any time after any Notes have been declared due and payable pursuant to clause (b) or (e) of Section 12.1, the holders of not less than 66²/3% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

    Section 12.4 No Waivers or Election of Remedies, Expenses, etc.  No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements.

SECTION 13 REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

    Section 13.1 Registration of Notes.  The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.

    Section 13.2 Transfer and Exchange of Notes.  Upon surrender of any Note of any series at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes of the series (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note of such shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1-A, Exhibit 1-B or Exhibit 1-C, as applicable. Each such new Note of such series shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note of the series or dated the date of the surrendered Note of the series if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $1,000,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $1,000,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2.

    Section 13.3 Replacement of Notes.  Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and

    (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $25,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or

    (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

SECTION 14 PAYMENT OF NOTES.

    Section 14.1 Place of Payment.  Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in New York, New York at the principal office of Citibank, N.A. in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

    Section 14.2 Home Office Payment.  So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2.

SECTION 15 EXPENSES, ETC.

    Section 15.1 Transaction Expenses.  Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you).

    Section 15.2 Survival.  The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement.

SECTION 16 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

    All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

SECTION 17 AMENDMENT AND WAIVER.

    Section 17.1 Requirements.  This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section I, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.

Section 17.2 Solicitation of Holders of Notes.

    (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes.

    (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment.

    Section 17.3 Binding Effect, etc.  Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.

    Section 17.4 Notes held by Company, Etc.  Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.

SECTION 18 NOTICES.

    All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent:

    (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing,

    (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or

    (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of Vice President-Finance, or at such other address as the Company shall have specified to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

SECTION 19 REPRODUCTION OF DOCUMENTS.

    This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates. and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

SECTION 20 CONFIDENTIAL INFORMATION.

    For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, trustees, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor which is not a Competitor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20); provided that if an Event of Default described in Section 11 has occurred and is continuing or if the Notes have been accelerated pursuant to Section 12.1, any such lnstitutional Investor may be a Competitor, (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be denied to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20.

SECTION 21 SUBSTITUTION OF PURCHASER.

    You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a con finnation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement.

SECTION 22 MISCELLANEOUS.

    Section 22.1 Successors and Assigns.  All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not.

    Section 22.2 Payments Due on Non-Business Days.  Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day.

    Section 22.3 Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

    Section 22.4 Construction.  Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

    Section 22.5 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

    Section 22.6 Governing Law.  This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

    Section 22.7 Additional Indebtedness.  Subject to the terms and provisions hereof, the Company may, from time to time, issue and sell additional senior promissory notes and may, in connection with the documentation thereof, incorporate by reference various provisions of this Agreement. Such incorporation by reference shall not modify, dilute or otherwise affect the terms and provisions hereof including, without limitation, the priority of the Notes and the percentage of the Notes required to approve an amendment or effectuate a waiver under the provisions of Section 17 or the percentages of the Notes required to accelerate the Notes or rescind such an acceleration under provisions of Section 12.

* * * * *

    If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company.

Very truly yours,
AMERICAN CRYSTAL SUGAR COMPANY
By:	/s/ BRIAN INGULSRUD
Its:	Treasurer

The foregoing is hereby agreed to as of the date thereof.

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:	/s/ SIGNATURE
Its:	Investment Officer

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By:	/s/ SIGNATURE
Its:	Investment Officer

THE PAUL REVERE LIFE INSURANCE COMPANY
By:	Provident Investment Management, LLC
Its:	Agent
By:	/s/ DAVID FUSSELL
Its:	Vice President

EX-10.25

Exhibit 10.25

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

Dated as of September 15, 1998 By and Among
ST. PAUL BANK FOR COOPERATIVES,
as Collateral Agent,

THE NOTEHOLDERS NAMED IN SCHEDULE I HERETO,

ST. PAUL BANK FOR COOPERATIVES

AND

ADDITIONAL CREDITORS

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

    THIS INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT, dated as of September 15, 1998 (this "Agreement"),is entered into by and among St. Paul Bank for Cooperatives ("St Paul"), in its capacity as Collateral Agent (the "Collateral Agent"), St. Paul Bank for Cooperatives, as the lender under the Credit Facility described below (together with its permitted successors, transferees and assigns, the"Bank Lender"), each of the Noteholders set forth on the signature pages hereof (together with their permitted successors, transferees and assigns, the "Noteholders") and the Additional Creditors (as described below).

RECITALS:

    A. Pursuant to those separate Note Purchase Agreements, each dated as of September 15, 1998 (collectively, the "Note Agreements"), entered into by American Crystal Sugar Company (the "Company"), with each of the Noteholders listed on Schedule I hereto (the "Noteholders"), the Noteholders will purchase $12,500,000 7.32% Senior Secured Notes, Series A, Due August 31, 2018, $15,000,000 7.3 7% Senior Secured Notes, Series B, Due August 31, 2023 and $22,500,000 7.42% Senior Secured Notes, Series C, due August 3 1, 2028. (collectively, the "Senior Secured Notes") from the Company.

    B. The Company has entered into that certain Term Loan Agreement, dated September 17, 1998, as amended (the "Credit Facility"),with the Bank Lender, pursuant to which the Bank Lender is providing to the Company various credit facilities.

    C. The Company contemplates that from time to time after the date hereof, the Company may, subject to the terms and conditions of the Note Agreements and the Credit Facility, incur additional Funded Debt (as defined in the Note Agreements) (the "Additional Funded Debt") which the Company desires to secure by the Collateral. Such Funded Debt shall be permitted to be secured by the Collateral if the obligees of such Funded Debt (the "Additional Creditors") execute and deliver and become a party to this Agreement pursuant to the requirements of §2.5 hereof.

    D. The obligations of the Company to the Noteholders under the Note Agreements and under the Senior Note Documents (as hereinafter defined) including, without limitation, the obligations evidenced by the Senior Secured Notes, and the obligations of the Company to the Bank Lender under the Credit Facility and under the Loan Documents (as hereinafter defined) including, without limitation, the obligations evidenced by the promissory notes issued under the Credit Facility (together with amendments, modifications, and replacements thereof, the"Credit Facility Notes"), and the obligations of the Company to the Additional Creditors under the agreements evidencing such additional Funded Debt (the "Additional Facilities") will be secured pari passu pursuant to the Security Documents described below. The Noteholders and the Bank Lender desire to appoint St. Paul as Collateral Agent to act on behalf of the Secured Parties regarding the Collateral (as hereinafter defined), all as more fully provided herein. The parties hereto have entered into this Agreement to, among other things, further define the rights, duties, authority and responsibilities of the Collateral Agent and the relationship among the Secured Parties regarding their pari passu interests in the Collateral.

    NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1 DEFINITIONS.

    Section 1.1 Definitions.  The following terms shall have the meanings assigned to them below in this §1 or in the provisions of this Agreement referred to below:

"Additional Creditors" shall have the meaning assigned thereto in the Recitals hereof.

"Additional Facilities" shall have the meaning assigned thereto in the Recitals hereof.

"Additional Facility Documents" shall mean all outstanding Additional Facilities; the Security Documents and all other mortgages, security agreements, documents, certificates and instruments relating to, arising out of, or in any way connected therewith or any of the transactions contemplated thereby.

"Additional Facility Notes" shall mean the obligations of the Company which are evidenced by the promissory notes issued under the Additional Facilities.

"Affiliate" shall mean, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such first Person.

"Agreement" shall mean this Intercreditor and Collateral Agency Agreement as amended or modified in accordance with the terms hereof.

"Bankruptcy Proceeding" shall mean, with respect to any Person, a general assignment by such Person for the benefit of its creditors, or the institution by or against such Person of any proceeding seeking its relief as debtor, or seeking to adjudicate such Person as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of such Person or its debts, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for such Person or for any substantial part of its property.

"Bank Lender(s)" shall mean St. Paul Bank for Cooperatives and its permitted successors and assigns.

"Business Day" shall mean any day other than a Saturday, a Sunday or a day on which commercial banks in Minneapolis, Minnesota or New York, New York are required or authorized to be closed.

"Cash Equivalent Investments" shall mean, (a) direct obligations of the United States Government or any agencies thereof and obligations guaranteed by the United States Government, in each case having remaining terms to maturity of not more than thirty days; and (b) certificates of deposit, time deposits and acceptances, including Eurodollar deposits, having remaining terms to maturity of not more than sixty days issued by a United States bank which has a combined capital and surplus of at least $750,000,000 and whose long-term certificates of deposit are rated "A" or better by Standard & Poor's Corporation or "A2" or better by Moody's Investors Service, Inc.

"Closing Date" shall have the meaning assigned thereto in Section 2 of the Note Agreements.

"Collateral" shall mean all collateral under the Security Documents.

"Commitment" shall mean the commitment of the Bank Lender to make advances to the Company in accordance with the Credit Facility.

"Company" shall mean American Crystal Sugar Company, a Minnesota cooperative association and any Person who succeeds to all, or substantially all, of the assets and business of such entity.

"Corporation" shall mean a corporation, joint stock association or business trust.

"Credit Facility" shall have the meaning assigned thereto in the Recitals hereof, and shall include such agreement as amended or modified in accordance with its terms.

"Credit Facility Notes" shall have the meaning assigned thereto in the Recitals hereof.

"Default" shall mean any event or condition, the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default.

"Event of Default" shall mean any event or occurrence which would constitute an "Event of Default" under the terms of the Credit Facility, the Note Agreements or any Additional Facility.

"Lien" upon the property or assets (or the income or profits therefrom) of any Person shall mean (in each case, whether the same is consensual or non-consensual or arises by contract, operation of law, legal process or otherwise) any mortgage, lien, pledge, attachment, charge or other security interest or encumbrance or other type of preferential arrangement of any kind on or in respect of any property of such Person, or upon the income or profits therefrom, including, without limitation, the lien or retained security title of a conditional vendor and any covenant, right of way or other encumbrance on title to real property.

"Loan Documents" shall mean the Credit Facility, the Credit Facility Notes, the Security Documents and all other mortgages, security agreements, documents, certificates and instruments relating to, arising out of, or in any way connected therewith or any of the transactions contemplated thereby.

"Make-Whole Amount" shall have the meaning assigned thereto in the Note Agreements.

"Majority Secured Parties" shall mean (a) Noteholders holding more than 66²/3% of the outstanding principal amount of the Senior Secured Notes, (b) Bank Lenders holding more than 50% of the sum of (1) the outstanding principal amount of the Credit Facility Notes, plus (2) the unborrowed portion of the Commitment that would be permitted to be borrowed by the Company under the provisions of the Credit Facility and the Note Agreements on the date of determination of "Majority Secured Parties" and (e) Additional Creditors holding more than 50%of the outstanding principal amount of the Additional Funded Debt.

"Mortgage" shall have the meaning assigned thereto in the Note Agreements.

"Note Agreements" shall have the meaning assigned thereto in the Recitals hereof, and shall include such agreements as amended or modified in accordance with their respective terms.

"Noteholders" shall mean those parties identified as such in the Recitals hereof, and their permitted successors and assigns.

"Notice of Default" shall mean a notice pursuant to §5.2 hereof from the Collateral Agent or the Majority Secured Parties to the Secured Parties of the occurrence of an Event of Default or Special Event of Default.

"Person" shall mean an individual, corporation, partnership, trust or unincorporated organization, and a government or agency or political subdivision thereof.

"Required Secured Parties" shall mean (a) Noteholders holding more than 90% of the outstanding principal amount of the Senior Secured Notes, (b) Banks holding more than 90% of the sum of (1) the outstanding principal amount of the Credit Facility Notes, and (2) the unborrowed portion of the Commitment that would be permitted to be borrowed by the Company under the provisions of the Credit Facility and the Note Agreements on the date of determination of "Required Secured Parties" and (e) Additional Creditors holding more than 90% of the outstanding principal amount of the Additional Funded Debt.

"Secured Party" shall mean any Bank Lender, any Noteholder, any Additional Creditor and any permitted successor and assign to the interests in the Senior Secured Obligations owing to any such Bank Lender, Noteholder or Additional Creditor, and "Secured Parties" shall mean all Secured Parties, collectively.

    "Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

"Security Documents" shall mean the Mortgage and any and all other agreements, documents and instruments relating to, arising out of, or in any way connected with any of the foregoing documents or granting to the Collateral Agent Liens to secure the Senior Secured Obligations, whether now or hereafter executed, each as amended or amended and restated in conjunction herewith, or as may be amended from time to time hereafter in accordance with the terms hereof and any and all ancillary documents and instruments relating thereto such as stock powers and financing statements and all extensions, renewals, amendments, substitutions and replacements to and of any of the foregoing; provided, however, that Security Documents shall not include the Credit Facility, the Credit Facility Notes, the Note Agreements, the Senior Secured Notes or the Additional Facilities.

"Senior Note Documents" shall mean the Note Agreements, the Senior Secured Notes, the Security Documents and all other mortgages, security agreements, documents, certificates and instruments relating to, arising out of, or in any way connected therewith or any of the transactions contemplated thereby.

"Senior Preferential Payment" shall mean any payments, or proceeds of the Collateral, from the Company or any other source with respect to the Senior Secured Obligations (including from the exercise of any set-off) which are:

    (a) received by a Secured Party within 90 days prior to (1) the commencement of a Bankruptcy Proceeding with respect to the Company or (2) the acceleration of the Senior Secured Notes or the obligations under the Credit Facility and the Credit Facility Notes, and which payment reduces the amount of the Senior Secured Obligations owed to such Secured Party below the amount owed to such Secured Party as of the 90th day prior to such commencement or acceleration,

    (b) received by a Secured Party (1) within 90 days prior to the occurrence of any Event of Default which has not been waived or cured within 30 days after the occurrence thereof and which payment reduces the amount of the Senior Secured Obligations owed to such Secured Party below the amount owed to such Secured Party as of the 90th day prior to the occurrence of such Event of Default or (2) within 30 days after the occurrence of such Event of Default, or

    (c) received by a Secured Party after the occurrence of a Special Event of Default except as provided in §5.11(b).

"Senior Secured Notes" shall have the meaning assigned thereto in the Recitals hereof.

"Senior Secured Obligations" shall mean collectively the indebtedness, obligations and liabilities of the Company to the Bank Lenders under the Loan Documents (whether for principal, interest, fees, expenses or otherwise), the indebtedness, obligations and liabilities of the Company to the Noteholders under the Senior Note Documents (including, but not limited to, all unpaid principal of, premium, if any, and accrued and unpaid interest on the Senior Secured Notes) and the indebtedness, obligations and liabilities of the Company to the Additional Creditors under the Additional Facilities, in each case whether now existing or hereafter arising, joint or several, direct or indirect, absolute or contingent, due or to become due, matured or unmatured, liquidated or unliquidated, arising by contract, operation of law or otherwise, and all obligations of the Company to the Secured Parties or the Collateral Agent arising out of any extension, refinancing or refunding of any of the foregoing obligations.

"Special Event of Default" shall mean (a) the commencement of a Bankruptcy Proceeding with respect to the Company, (b) any other Event of Default which has not been waived or cured within 30 days after the occurrence thereof, or (c) the acceleration of the Senior Secured Notes or the obligations under the Credit Facility and the Credit Facility Notes or under the Additional Facilities.

"Special Trust Account" shall mean that certain restricted account maintained by the Collateral Agent for the purpose of receiving and holding Senior Preferential Payments.

    The term "subsidiary" shall mean as to any particular parent corporation or partnership, any corporation of which more than 50% (by number of votes) of the Voting Stock shall be beneficially owned, directly or indirectly, by such parent corporation or partnership. The term "Subsidiary"shall mean a subsidiary of the Company.

"Voting Stock" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions).

    Section 1.2 Effectiveness of this Agreement.  The effectiveness of this Agreement is conditioned upon the execution and delivery of (a) this Agreement by the Collateral Agent, the Bank Lenders and the Noteholders, (b) the execution, delivery and effectiveness of the Note Agreements, the Credit Facility and the Security Documents by the parties thereto and (c) the execution and delivery of the Acknowledgment of this Agreement by the Company.

SECTION 2 RELATIONSHIPS AMONG SECURED PARTIES.

    Section 2.1 Restrictions on Actions.  Each Secured Party agrees that, so long as any Senior Secured Obligations are outstanding or available, the provisions of this Agreement shall provide the exclusive method by which any Secured Party may exercise rights and remedies under the Security Documents. Therefore, each Secured Party shall, for the mutual benefit of all Secured Parties, except as permitted under this Agreement:

    (a) refrain from taking or filing any action, judicial or otherwise, to enforce any rights or pursue any remedy under the Security Documents, except for delivering notices hereunder;

    (b) refrain from (1) selling any Senior Secured Obligations to the Company or any Affiliate of the Company and (2) accepting any guaranty of, or any other security for, the Senior Secured Obligations from the Company or any Affiliate of the Company, except any guaranty or security granted to the Collateral Agent for the benefit of all Secured Parties; and

    (c) refrain from exercising any rights or remedies under the Security Documents which have or may have arisen or which may arise as a result of a Default or Event of Default or otherwise;

provided, however, that nothing contained in subsections (a) through (c) above, shall prevent any Secured Party from imposing a default rate of interest in accordance with the Credit Facility or the Note Agreements, as applicable, or prevent a Secured Party from raising any defenses in any action in which it has been made a party defendant or has been joined as a third party, except that the Collateral Agent may, but shall not be obligated to, direct and control any defense directly relating to the Collateral or any one or more of the Security Documents, which shall be governed by the provisions of this Agreement.

Section 2.2 Representations and Warranties.

    (a) Each of the Secured Parties represents and warrants to the other parties hereto that:

    (1) It (i) is either (x) a corporation duly organized, existing and in good standing under the laws of the jurisdiction of its incorporation or (y) a national banking association duly incorporated and existing under the laws of the United States of America, and (ii) has all requisite power (corporate or otherwise) to own its property and conduct its business as now conducted and as presently contemplated.

    (2) The execution, delivery and performance by such Secured Party of this Agreement has been authorized by all necessary proceedings (corporate or otherwise) and does not and will not contravene any provision of law, its charter or by-laws or any amendment thereof, or of any indenture, agreement, instrument or undertaking binçling upon such Secured Party.

    (3) The execution, delivery and performance by such Secured Party of this Agreement will result in a valid and legally binding obligation of such Secured Party enforceable in accordance with its terms.

    (b) The Collateral Agent hereby represents and warrants that:

    (1) The Collateral Agent is a cooperative banking association duly organized, validly existing, and in good standing under the laws of the United States.

    (2) The Collateral Agent has full power, authority and legal right under the laws of the United States pertaining to its banking and trust powers to execute, deliver, and perform this Agreement and has taken all necessary action to authorize the execution, delivery, and performance by it of this Agreement.

    (3) The execution, delivery and performance by the Collateral Agent of this Agreement will not contravene any law, rule or regulation of the United States or any United States governmental authority or agency regulating the Collateral Agent's banking or trust powers or any judgment or order applicable to or binding on the Collateral Agent and will not contravene or result in any breach of, or constitute a default under, the Collateral Agent's articles of association or by-laws or the provision of any indenture, mortgage, contract or other agreement to which it is a party or by which it or any of its properties is bound.

    (4) The execution, delivery and performance by the Collateral Agent of this Agreement will not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any United States governmental authority or agency regulating the banking and trust activities of the Collateral Agent.

    (5) This Agreement has been duly executed and delivered by the Collateral Agent and constitute the legal, valid, and binding agreements of the Collateral Agent, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law).

    Section 2.3 Cooperation; Accountings.  Each of the Secured Parties will, upon the reasonable request of another Secured Party, from time to time execute and deliver or cause to be executed and delivered such further instruments, and do and cause to be done such further acts as may be necessary or proper to carry out more effectively the provisions of this Agreement. The Secured Parties agree to provide to each other upon reasonable request a statement of all payments received in respect of Senior Secured Obligations.

    Section 2.4 Termination of Credit Facility, Note Agreements or Additional Facilities.  Upon final payment in full of all Senior Secured Obligations owing to any Secured Party, and, in the case of any Bank Lender, after the termination of such Bank Lenders' ratable share of the Commitment, such Secured Party shall cease to be a party to this Agreement; provided, however, if all or any part of any payments to such Secured Party are invalidated or set aside or required to be repaid to any Person in any Bankruptcy Proceeding or otherwise, then this Agreement shall be renewed as of such date and shall thereafter continue in full force and effect to the extent of the Senior Secured Obligations so invalidated, set aside or repaid.

    Section 2.5 Additional Creditor.  Additional Creditors may, upon compliance with the relevant provisions of the Note Agreements, the Credit Facility and any outstanding Additional Facility, become "Secured Parties" hereunder by executing and delivering to each of the then existing Secured Parties (a) a copy of this Agreement so executed and (b) a copy of the Additional Facility or Additional Facilities to which such Person is a party. Accordingly, upon the execution and delivery of any such copy of this Agreement by any such Person, such Person, shall, upon delivery thereof to the then existing Sccuràd Parties, thereinafter become a Secured Party for all purposes of this Agreement.

SECTION 3 APPOINTMENT AND AUTHORIZATION OF COLLATERAL AGENT

    (a) Each Secured Party hereby irrevocably designates and appoints St. Paul Bank for Cooperatives as the Collateral Agent of such Secured Party under this Agreement and the Security Documents, and each Secured Party hereby irrevocably authorizes St. Paul Bank for Cooperatives as the Collateral Agent for such Secured Party to execute and enter into each of the Security Documents and all other instruments relating to said Security Documents and (i) to take action on its behalf and exercise such powers and use such discretion as are expressly permitted hereunder and under the Security Documents and all instruments relating hereto and thereto and (ii) to exercise such powers and perform such duties as are, in each case, expressly delegated to the Collateral Agent by the terms hereof and thereof together with such other powers and discretion as are reasonably incidental hereto and thereto.

    (b) Notwithstanding any provision to the contrary elsewhere in this Agreement or the Security Documents, the Collateral Agent shall not have any duties or responsibilities except those expressly set forth herein or therein or any fiduciary relationship with any Secured Party, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any Security Document or otherwise exist against the Collateral Agent.

SECTION 4 AGENCY PROVISIONS.

    Section 4.1 Delegation of Duties.  The Collateral Agent may exercise its powers and execute any of its duties under this Agreement and the Security Documents by or through employees, agents or attorneys-in-fact and shall be entitled to take and to rely on advice of counsel concerning all matters pertaining to such powers and duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. The Collateral Agent may utilize the services of such Persons as the Collateral Agent in its sole discretion may determine, and all reasonable fees and expenses of such Persons shall be borne by the Company.

    Section 4.2 Exculpatory Provisions.  Neither the Collateral Agent nor any of the Collateral Agent's officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any action taken or omitted to be taken by it or such Person under or in connection with this Agreement or any Security Document or any Collateral (except for its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Secured Parties for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in, or made or deemed made in connection with, any Loan Document, Senior Note Document, Additional Facility Document or Security Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement or any Loan Document, Senior Note Document, Additional Facility Document or Security Document, or for the due execution, legality, value, validity, effectiveness, genuineness, enforceability or sufficiency of the Loan Documents, the Senior Note Documents, Additional Facility Document or the Security Documents or any other document or instrument furnished pursuant thereto or for any failure of the Company to perform its obligations thereunder. The Collateral Agent shall be under no obligation to the Secured Parties to ascertain or to inquire as to the observance or performance of any of the agreements contained in, statements made in, or conditions of, the Loan Documents, the Senior Note Documents, the Additional Facility Documents or the Security Documents or to inspect the property (including the books and records) of the Company.

    Section 4.3 Reliance by Collateral Agent  The Collateral Agent shall be entitled to rely, and shall be fully protected and shall incur no liability in acting and relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Collateral Agent. Without limiting the generality of the foregoing, the Collateral Agent may treat the payee of any Credit Facility Note, any Senior Secured Note or any Additional Facility Note as the registered holder thereof until it receives notice or otherwise has actual knowledge that such payee is no longer the registered holder of such Credit Facility Note, such Senior Secured Note or such Additional Facility Note. Notwithstanding anything to the contrary contained herein or in any Security Document, the Collateral Agent shall be fully justified in failing or refbsing to take action under this Agreement or the Security Documents (including, without limitation, the exercise of any rights or remedies under, or the entering into of any agreement amending, modi~ing, supplementing, waiving any provision of, or the giving of consent pursuant to, any of the Security Documents) unless it shall first receive instructions of the Majority Secured Parties as is contemplated by§5 hereof and it shall first be indemnified to its reasonable satisfaction by the Secured Parties against any and all liability and expense which may be incurred by it by reason of taking, continuing to take or refraining from taking any such action. The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Security Documents in accordance with the provisions of §5.5 hereof and in accordance with written instructions of the Majority Secured Parties pursuant to §5.3 hereof, and such instructions and any action taken or failure to act pursuant thereto shall be binding upon all the Secured Parties and all other holders from time to time of the Credit Facility Notes, the Senior Secured Notes and the Additional Facility Notes.

    Section 4.4 Knowledge or Notice of Default, Event of Default or Special Event of Default.  The Collateral Agent shall not be deemed to have actual, constructive, direct or indirect knowledge or notice of the occurrence of any Default, Event of Default or Special Event of Default unless and until the Collateral Agent has received written notice from a Secured Party or the Company referring to the Credit Facility, the Note Agreements or the Additional Facilities, describing such Default, Event of Default or Special Event of Default, setting forth in reasonable detail the facts and circumstances thereof and stating that the Collateral Agent may rely on such notice without further inquiry; provided that if St. Paul is the Collateral Agent hereunder, the Collateral Agent shall be deemed to have actual knowledge and notice of the occurrence of any default or Event of Default (as defined in the Credit Facility) under the Credit Facility if the Bank Lender has actual knowledge of such default or Event of Default or has declared an Event of Default under the Credit Facility. The Collateral Agent shall have no obligation or duty prior to or after receiving any such notice to inquire whether a Default, Event of Default or Special Event of Default has in fact occurred and shall be entitled to rely, and shall be filly protected in so relying, on any such notice furnished to it.

    Section 4.5 Non-Reliance on Collateral Agent and Other Secured Parties.  Each Secured Party expressly acknowledges that, except as expressly set forth in this Agreement, neither the Collateral Agent nor any of the Collateral Agent's officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Collateral Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by the Collateral Agent to any Secured Party. Each Secured Party represents that it has, independently and without reliance upon the Collateral Agent or any other Secured Party, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit-worthiness of the Company and made its own decision to enter into this Agreement, the other Loan Documents, the Senior Note Documents and the Additional Facilities. Each Secured Party also represents that it will, independently and without reliance upon the Collateral Agent or any other Secured Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under the Loan Documents, the Senior Note Documents, the Additional Facilities and the Security Documents and this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly required to be finished to the Secured Parties by the Collateral Agent hereunder, the Collateral Agent shall not have any duty or responsibility to provide the Secured Parties with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of the Collateral Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

    Section 4.6 Indemnification.  The Secured Parties agree to indemnify the Collateral Agent in its capacity as such (to the extent not reimbursed by the Company and without limiting any obligation of the Company to do so), ratably according to the Secured Parties' respective share of (a) the aggregate outstanding principal amount of the Credit Facility Notes plus the unborrowed portion of the Commitment that would be permitted to be borrowed by the Company under the provisions of the Credit Facility and the Note Agreements at such time, and (b) the aggregate outstanding principal amount of the Senior Secured Notes and (c) the aggregate outstanding principal amount of the Additional Facility Notes, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Senior Secured Obligations) be imposed on, incurred by or asserted against the Collateral Agent in any way relating or arising out of any of the Loan Documents, the Senior Note Documents, the Additional Facilities or the Security Documents or actions or omissions of the Collateral Agent specifically required or permitted by this Agreement or by written instructions of the Majority Secured Parties pursuant to §5.3 hereof (including, without limitation, costs incurred in accordance with the provisions of §4.1); provided that no Secured Party shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Collateral Agent's gross negligence or willful misconduct. The agreements in this §4.6 shall survive the payment of the Senior Secured Obligations.

    Section 4.7 Collateral Agent in Its Individual Capacity.  St. Paul Bank for Cooperatives and its Affiliates may make loans to and generally engage in any kind of business with the Company as though such Person was not the Collateral Agent hereunder and without any duty to account therefor to the Secured Parties. With respect to any Credit Facility Note issued to it and advances made by it under the Credit Facility, St. Paul Bank for Cooperatives shall have the same rights and powers under this Agreement as any Secured Party and may exercise the same as though it were not the Collateral Agent, and the terms "Secured Party" and"Secured Parties" shall include St. Paul Bank for Cooperatives in its individual capacity.

Section 4.8 Successor Collateral Agent.

    (a) The Collateral Agent may resign at any time upon sixty days' notice to the Secured Parties and the Company and may be removed at any time, with or without cause, by the Majority Secured Parties by written notice delivered to the Company, the Collateral Agent and the Secured Parties. If the Collateral Agent is also a Bank Lender, then the Noteholders may remove the Collateral Agent at any time upon a vote of the holders of 66²/3% or more of the aggregate principal amount of outstanding Senior Secured Notes. After any resignation or removal hereunder of the Collateral Agent, the provisions of this §4 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it in connection with its agency hereunder while it was the Collateral Agent under this Agreement and it shall be entitled to be paid promptly when due any amounts owing to it pursuant to §4.6.

    (b) Upon receiving notice of any such resignation or removal, a successor Collateral Agent shall be appointed by the Majority Secured Parties; provided, however, that such successor Collateral Agent shall be (i) a bank or trust company having a combined capital and surplus of at least $500,000,000, subject to supervision or examination by a federal or state banking authority; and (ii) authorized under the laws of the jurisdiction of its incorporation or organization to assume the functions of the Collateral Agent. If the appointment of such successor shall not have become effective (as hereafter provided) within such sixty day period after the Collateral Agent's resignation or upon removal of the Collateral Agent, then the Collateral Agent may assign the Liens and its duties hereunder and under the Security Documents to the Secured Parties, as their interests may appear, and in such case all references herein to "Collateral Agent" shall be deemed to refer to "Majority Secured Parties." Any Secured Party may petition a court of competent jurisdiction for the appointment of a successor Collateral Agent. Such court shall, after such notice as it may deem proper, appoint a successor Collateral Agent meeting the qualifications specified in this §4.8(b). The Secured Parties hereby consent to such petition and appointment so long as such criteria are met.

    (c) The resignation or removal of a Collateral Agent shall become effective upon the execution and delivery of such documents or instruments as are necessary to transfer the rights and obligations of the Collateral Agent under the Security Documents, including, without limitation, the delivery and recordation of all amendments, instruments, mortgages, financing statements, continuation statements and other documents necessary to maintain the perfection of the security interests held by the Collateral Agent hereunder. Copies of each such document or instrument shall be delivered to all Secured Parties. The appointment of a successor Collateral Agent pursuant to this §4.8 shall become effective upon the acceptance of the appointment as Collateral Agent hereunder by a successor Collateral Agent. Upon such effective appointment, the successor Collateral Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent and the retiring Collateral Agent shall be discharged from its rights, powers, privileges and duties under this Agreement and the other Security Documents, but shall remain liable for its actions prior to and including such date of discharge.

SECTION 5 ACTIONS BY THE COLLATERAL AGENT.

    Section 5.1 Duties and Obligations.  The duties and obligations of the Collateral Agent are only those set forth in this Agreement and in the Security Documents.

    Section 5.2 Notification of Default.  If the Collateral Agent has been notified in a writing conforming to the requirements of §4.4 by any Secured Party that a Default, an Event of Default or a Special Event of Default has occurred, the Collateral Agent shall furnish to the Secured Parties a copy of such written notice and may, but is under no obligation to, furnish to the Company a copy of the notice received by the Collateral Agent and a copy of the Collateral Agent's notice to the Secured Parties. The failure of any Secured Party having knowledge of the occurrence of a Default, an Event of Default or a Special Event of Default to notify the Collateral Agent or any Secured Party of such occurrence, however, does not constitute a waiver of such Default, Event of Default or a Special Event of Default by the Secured Parties. Upon receipt of a notice conforming to the requirements of §4.4 from a Secured Party of the occurrence of an Event of Default or a Special Event of Default, the Collateral Agent shall (in addition to the action required by the first sentence of this §5.2) promptly (and in any event no later than three Business Days after receipt of such notice) issue its Notice of Default to all Secured Parties. Such Notice of Default shall indicate whether such Event of Default is a Special Event of Default. The Notice of Default may contain a recommendation of actions to be taken by the Secured Parties and/or request instructions from the Secured Parties and shall specify the date on which responses are due in order to be timely within §5.4 hereof.

    Section 5.3 Exercise of Remedies.  Except as otherwise provided in §5.5, the Collateral Agent shall take only such actions and exercise only such remedies under the Security Documents as are approved in written instructions delivered to the Collateral Agent and signed by the Required Secured Parties. In the event that the Collateral Agent shall determine in good faith that taking the actions specified in such instructions is contrary to law, it may refrain (and shall be fully protected in so refraining) from taking such action and shall immediately give notice of such fact to each of the Secured Parties. In the event that instructions received by the Collateral Agent are in its good faith judgment ambiguous or conflict with other instructions received by the Collateral Agent, the Collateral Agent (a) shall promptly notify the Secured Parties of such ambiguity or conflict and request clarifying instructions, and (b) may either (1) delay taking any such action or exercising any such remedy pending the receipt of such clarifying instructions (and shall be fully protected in so delaying) or (2) take such actions as it is entitled under §5.5.

    Section 5.4 Instructions from Secured Parties.  If any Secured Party does not respond in a timely manner to any notice (including, without limitation, a Notice of Default) from the Collateral Agent or request for instructions within the time period specified by the Collateral Agent in such notice or request for instructions (which shall be a minimum of five Business Days), the Senior Secured Obligations held by such Secured Party which would otherwise be included in a determination of Required Secured Parties shall not be included in the determination of Required Secured Parties for purposes of such notice or request for instructions. Any action taken or not taken without the vote of a Secured Party or Secured Parties under this §5.4 shall nevertheless be binding on such Secured Party or Secured Parties.

    Section 5.5 Emergency Actions.  If the Collateral Agent has asked the Secured Parties for instruction and if the Required Secured Parties have not yet responded to such request, the Collateral Agent shall be authorized to take, but shall not be required to take and shall in no event have any liability for the taking or the failure to take, such actions (other than any action described or permitted under Section 5.7 hereof) with regard to a Default, Event of Default or a Special Event of Default which the Collateral Agent, in good faith, believes to be reasonably required to promote and protect the interests of the Secured Parties and to maximize both the value of the Collateral and the present value of the recovery by the Secured Parties on the Senior Secured Obligations and shall give the Secured Parties appropriate notice of such action;provided that once instructions with respect to such request have been received by the Collateral Agent from the Required Secured Parties, the actions of the Collateral Agent shall be governed thereby and the Collateral Agent shall not take any further action which would be contrary thereto.

    Section 5.6 Changes to Security Documents  Any term of the Security Documents may be amended, and the performance or observance by the parties to a Security Document of any term of such Security Document may be waived (either generally or in a particular instance and either retroactively or prospectively) by the Collateral Agent only upon the written consent of the Majority Secured Parties; provided that no amendment to the Security Documents which directly or indirectly narrows the description of the Collateral or the obligations being secured thereby, changes the priority of payments to the Secured Parties or the Collateral Agent under the Security Documents or amends the definitions of "Majority Secured Parties" or "Required Secured Parties" may be made without the written consent of all of the Secured Parties.

Section 5.7 Release of Collateral

    (a) Unless a Default has occurred and is continuing, the Collateral Agent may, without the approval of the Secured Parties as otherwise required by §5.3 hereof, release any Collateral under the Security Documents which is permitted to be sold or disposed of by the Company pursuant to both the Credit Facility and the Note Agreements and execute and deliver such releases as may be necessary to terminate of record the Secured Parties' security interest in such Collateral. In determining whether any such release is permitted, the Collateral Agent may rely upon instructions from the Majority Banks (as defined in the Credit Facility) as to the Credit Facility or Noteholders holding more than 50% of the outstanding principal amount of the Senior Secured Notes as to the Note Agreements.

    (b) The release of any Collateral (other than a release permitted by (a) above) by the Collateral Agent shall be prohibited unless the Required Secured Parties expressly consent in writing thereto.

    Section 5.8 Other Actions.  The Collateral Agent shall have the right to take such actions, or omit to take such actions, hereunder and under the Security Documents not inconsistent with the written instructions of the Required Secured Parties delivered pursuant to§5.3 hereof or the terms of this Agreement, including actions the Collateral Agent deems necessary or appropriate to perfect or continue the perfection of the Liens on the Collateral for the benefit of the Secured Parties. Except as otherwise provided by applicable law, the Collateral Agent shall have no duty as to any Collateral, the collection or protection of the Collateral or any income thereon (including any duty to ascertain or take action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters), nor as to the preservation of rights against prior parties, nor as to the preservation of rights pertaining to the Collateral beyond the safe custody of any Collateral in the Collateral Agent's actual possession.

    Section 5.9 Cooperation.  To the extent that the exercise of the rights, powers and remedies of the Collateral Agent in accordance with this Agreement requires that any action be taken by any Secured Party, such Secured Party shall take such action and cooperate with the Collateral Agent to ensure that the rights, powers and remedies of all Secured Parties are exercised in full.

    Section 5.10 Distribution of Proceeds.  All amounts owing with respect to the Senior Secured Obligations shall be secured pro rata by the Collateral without distinction as to whether some Senior Secured Obligations are then due and payable and other Senior Secured Obligations are not then due and payable. Upon any realization upon the Collateral, the Secured Parties agree that the proceeds thereof shall be applied (a) first, to the amounts owing to the Collateral Agent by the Company or the Secured Parties solely in its capacity as Collateral Agent hereunder pursuant to this Agreement or the Security Documents; (b) second, ratably to the payment of all amounts of interest (other than any Make-Whole Amount) outstanding which constitute the Senior Secured Obligations according to the aggregate amounts of such interest then owing to each Secured Party; (c) third, ratably to all amounts of principal outstanding under the Senior Secured Obligations according to the aggregate amounts of such principal then owing to each Secured Party; (d) fourth, ratably to all other amounts then due to the Secured Parties under the Credit Facility, the Note Agreements and the Additional Facilities (including fees, expenses and premiums, including Make-Whole Amounts, if any) (e) fifth, the balance, if any, shall be returned to the Company or such other Persons as are entitled thereto. Upon the request of the Collateral Agent prior to any distribution under this §5.10, each Secured Party shall provide to the Collateral Agent certificates, in form and substance reasonably satisfactory to the Collateral Agent, setting forth the respective amounts referred to in clauses (b) through (d) above which each such Secured Party believes it is entitled to receive.

Section 5.11 Senior Preferential Payments and Special Trust Account.

    (a) After the receipt by each Secured Party of a Notice of Default pursuant to §5.2 stating that a Special Event of Default has occurred, all Senior Preferential Payments other than those payments received pursuant to subsection (b) of this §5.11 shall be delivered to the Collateral Agent for deposit into the Special Trust Account.

    (b) If (i) such Special Event of Default is waived by the Banks and the Noteholders and if no other Event of Default has occurred and is continuing, (ii) such Special Event of Default is cured by the Company or by any amendment of the Credit Facility or the Note Agreements, as the case may be, and if no other Event of Default has occurred and is continuing or (iii) any or all of the Senior Secured Obligations have not been accelerated and the Required Secured Parties have not instructed the Collateral Agent to foreclose on a substantial portion of the Collateral, seek the appointment of a receiver, commence litigation against the Company, liquidate the Collateral, commence a Bankruptcy Proceeding against the Company, seize Collateral, or exercise other remedies of similar character prior to the 180th day following such Special Event of Default, the Collateral Agent thereupon shall return all amounts, together with their pro rata share of any interest earned thereon, held in the Special Trust Account representing payment of any Senior Secured Obligations to the Secured Party initially entitled thereto, and no payments thereafter received by a Secured Party shall constitute a Senior Preferential Payment by reason of such cured or waived Special Event of Default. No payment returned to a Secured Party for which such Secured Party has been obligated to make a deposit into the Special Trust Account shall thereafter ever be characterized as a Senior Preferential Payment.

    (c) Each Secured Party agrees that upon the occurrence of a Special Event of Default it shall (i) promptly notify the Collateral Agent of the receipt of any Senior Preferential Payments, (ii) hold such amounts in trust for the Secured Parties and act as agent of the Secured Parties during the time any such amounts are held by it, and (iii) deliver promptly to the Collateral Agent such amounts for deposit into the Special Trust Account as soon as practicable.

    (d) If the Senior Secured Obligations have been accelerated or the Required Secured Parties have instructed the Collateral Agent to foreclose on a substantial portion of the Collateral, seek the appointment of a receiver, commence litigation against the Company, liquidate the Collateral, commence a Bankruptcy Proceeding against the Company, seize Collateral, or exercise other remedies of similar character, then all funds, together with interest earned thereon, held in the Special Trust Account and all subsequent Senior Preferential Payments shall be applied in accordance with the provisions of §5.10 above.

    Section 5.12 Authorized Investments.  Any and all funds held by the Collateral Agent in its capacity as Collateral Agent, whether pursuant to any provision of this Agreement or any of the Security Documents, shall to the extent feasible within a reasonable time be invested by the Collateral Agent in Cash Equivalent Investments. Prior to making such investment or to the extent it is not feasible to invest such funds in Cash Equivalent Investments, the Collateral Agent shall hold any such funds in an interest bearing account. Any interest earned on such funds shall be disbursed to the Secured Parties in accordance with §5.10 or §5.11, as applicable. The Collateral Agent shall have no duty to place funds held and invested pursuant to this §5.12 in investments which provide a maximum return. The Collateral Agent shall not be responsible for any loss of any funds invested in accordance with this §5.12.

    Section 5.13 Restoration of Obligations.  For the purposes of determining the amount of outstanding Senior Secured Obligations, if any Secured Party is required to deposit any Senior Preferential Payment in the Special Trust Account, then the obligations intended to be satisfied by such Senior Preferential Payment shall be revived, as of the date of the deposit of such amount with the Collateral Agent, in the amount of such Senior Preferential Payment and such obligation shall continue in full force and effect (and bear interest from such deposit date at the non-default rate as provided in the Senior Secured Notes, in the Credit Facility, or in the Additional Facility as the case may be) as if such Secured Party had not received such payment. All such revived obligations shall be included as Senior Secured Obligations for purposes of allocating any payments under §5.10 and for applying the definitions of Majority Secured Parties and Required Secured Parties. If any such revived obligation shall not be allowed as a claim under the Bankruptcy Code due to the fact that the Senior Preferential Payment has in fact been made by the Company, the Secured Parties shall make such other equitable arrangements for the purchase and sale of participations in the Senior Secured Obligations to effectuate the intent of this §5.13.

    Section 5.14 Bankruptcy, Preferences, etc.  If any payment to a Secured Party is subsequently invalidated, declared to be fraudulent or preferential or set aside and is required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or Federal law, common law or equitable cause, and such Secured Party has previously made a deposit in respect of such payment into the Special Trust Account pursuant to §5.11, then the Collateral Agent shall distribute to such Secured Party proceeds from the Special Trust Account in an amount equal to such deposit or so much thereof as is affected by such events and if, due to previous disbursements to the Secured Parties pursuant to §5.11(d), the proceeds in the Special Trust Account are insufficient for such purpose, then each other Secured Party shall pay to such Secured Party upon demand an amount equal to a ratable portion of such disbursements of the deposit which was distributed to each such Secured Party according to the aggregate amounts so distributed to each such Secured Party.

    Section 5.15 Crystech Documents.  Notwithstanding any other provision of this Agreement, the Secured Parties acknowledge and consent to the provisions of, and St. Paul's rights and obligations under, that certain Consent, Non-Disturbance and Attorninent Agreement dated as of June 3, 1998 and that certain Crysteeh Consent, Non-Disturbance and Attomment Agreement also dated as of June 3, 1998 pertaining to Crystech LLC and the molasses desugarization facility to be installed in and about the facilities of the Company (such documents being referred to collectively herein as the "Crystech Documents"). Furthermore, the Secured Parties agree that St. Paul shall be deemed to have entered into the Crysteeh Documents in its capacity as Collateral Agent hereunder and with the consent of all Secured Parties.

SECTION 6 BANKRUPTCY PROCEEDINGS.

    The following provisions shall apply during any Bankruptcy Proceeding of the Company:

    (a) The Collateral Agent shall represent all Secured Parties in connection with all matters directly relating to the Collateral, including without limitation, use, sale or lease of Collateral, use of cash collateral, relief from the automatic stay and adequate protection. The Collateral Agent shall act on the instructions of the Required Secured Parties;provided that such instructions by the Required Secured Parties shall not treat any Secured Party differently with respect to rights in the Collateral from any other Secured Party; and provided further that if action is required prior to the time such instructions are received or if the Required Secured Parties fail to give instructions with respect to any matter, the Collateral Agent shall be authorized to act, or refrain from acting, in accordance with §5.5 hereof.

    (b) Each Secured Party shall be free to act independently on any issue not directly relating to the Collateral, including without limitation, matters relating to appointment of a trustee, conversion of a case, filing of claims, and plans of reorganization. Each Secured Party shall give prior notice to the Collateral Agent of any action hereunder to the extent that such notice is possible. If such prior notice is not given, such Secured Party shall give prompt notice following any action taken hereunder.

SECTION 7 MISCELLANEOUS

    Section 7.1 Secured Parties; Other Collateral.  The Secured Parties agree that all of the provisions of this Agreement shall apply to any and all properties, assets and rights of the Company in which the Collateral Agent at any time acquires a security interest or Lien pursuant to the Security Documents, the Credit Facility, the Additional Facilities or the Note Agreements, including, without limitation, real property or rights in, on or over real property, notwithstanding any provision to the contrary in any mortgage, leasehold mortgage or other document purporting to grant or perfect any lien in favor of the Secured Parties or any of them or the Collateral Agent for the benefit of the Secured Parties; provided, however, that the provisions of this Section 7.1 shall not apply to the Equities described in Section 7.10 hereof.

    Section 7.2 Marshalling.  The Collateral Agent shall not be required to marshal any present or future security for (including, without limitation, the Collateral), or guaranties of, the Senior Secured Obligations or any of them, or to resort to such security or guaranties in any particular order; and all of each of such Person's rights in respect of such securities and guaranties shall be cumulative and in addition to all other rights, however existing or arising. To the extent that they lawfully may, the Secured Parties hereby agree that they will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Secured Parties' rights under the Security Documents or under any other instrument evidencing any of the Senior Secured Obligations or under which any of the Senior Secured Obligations is outstanding or by which any of the Senior Secured Obligations is secured or guaranteed.

    Section 7.3 Consents, Amendments; Waivers.  All amendments, waivers or consents of any provision of this Agreement shall be effective only if the same shall be in writing and signed by the Majority Secured Parties and the Company.

    Section 7.4 Parties in Interest.  All terms of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, including, without limitation, any future holder of the Credit Facility Notes, of the Senior Secured Notes or of the Additional Facility Notes; provided that no Secured Party may assign or transfer its rights hereunder or under the Security Documents without such assignees or transferees agreeing, by executing an instrument in form and substance reasonably acceptable to the Collateral Agent, to be bound by the terms of this Agreement as though named herein.

    Section 7.5 Counterparts.  This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.

    Section 7.6 Termination.  Upon the later of the payment in full of the Senior Secured Obligations in accordance with their terms and the termination of the Commitment this Agreement shall terminate.

    Section 7.7 Notices.  Except as otherwise expressly provided herein, all notices, consents and waivers and other communications made or required to be given pursuant to this Agreement shall be in writing and shall be delivered by hand, mailed by United States registered or certified first-class mail, postage prepaid, or sent by overnight courier or by telecopy, telegraph or telex and confirmed by letter, addressed as follows:

If to the Collateral Agent at: St. Paul Bank for Cooperatives
375 Jackson Street
St. Paul, MN 55101-1849
Attention: General Counsel

or at such other address for notice as the Collateral Agent shall last have furnished in writing to the Person giving the notice; and

If to any Noteholder, at:	Such address as set forth on Schedule I hereto
If to the Bank Lender, at:	St. Paul Bank for Cooperatives 375 Jackson Street St. Paul, MN 55101-1849 Attention: General Counsel
If to the Company2 at:	American Crystal Sugar Company 101 North 3rd Street Moorhead, MN 56560-1990 Attn: Vice President-Finance

or at such other address for notice as such Secured Party or the Collateral Agent shall last have furnished in writing to the Person giving such notice.

    Any such notice, consent, waiver or demand shall be deemed to have been duly given or made and to have become effective (a) if delivered by hand to a responsible officer of the party to which it is directed, at time of the receipt thereof by such officer, (b) if sent by registered or certified first class mail, postage prepaid, on the earlier of (i) the time of receipt thereof if a Business Day or, if not a Business Day, the next succeeding business day, or (ii) five Business Days after the posting thereof, and (c) if sent by telecopy, telex or cable, at the time of receipt thereof if a Business Day or, if not a Business Day, the next succeeding Business Day. Notices given by telecopy shall be promptly confirmed in writing sent by courier.

    Section 7.8 Special Voting Provision.  If, at any time a vote of Majority Secured Parties or Required Secured Parties would otherwise be taken, and a Default, but not an Event of Default, shall have occurred and be continuing, then, at the election of one or more Secured Parties holding greater than 10% of the aggregate outstanding principal amount of the Senior Secured Obligations, such vote may be deferred for a period of up to, but not more than, twenty days or until such time as an Event of Default shall have occurred, whichever is earlier.

    Section 7.9 Establishing Outstanding Amount of Senior Secured Obligations.  In order to establish what constitutes the Majority Secured Parties or the Required Secured Parties, the Collateral Agent may request from time to time, and the Secured Parties agree to provide, certificates setting forth the amount of Senior Secured Obligations held or represented by each Secured Party, which certificates the Collateral Agent shall be entitled to rely upon.

    Section 7.10 Excepted Collateral.  The Secured Parties acknowledge and agree that, pursuant to 12 USC 2131, St. Paul has, and shall continue to have, a statutory first lien on all stock and other equities of St. Paul held by the Company (referred to collectively as the"Equities") to secure all indebtedness of the Company to St. Paul, and that such statutory lien shall be for the sole benefit of St. Paul. Consistent therewith, and notwithstanding any other provision of this Agreement, it is agreed (a) that neither the Equities nor the proceeds thereof shall constitute part of the Collateral for purposes of this Agreement, (b) that St. Paul shall not at any time or in any capacity be required to retire the Equities for application against the Company's indebtedness to St. Paul or otherwise be required to foreclose or exercise its statutory lien with respect to the Equities, (c) that the value of the Equities shall not be offset against the Company's indebtedness to St. Paul for purposes of calculating St. Paul's pro rata share under this Agreement, and (d) that no party to this Agreement (including any Noteholder), other than St. Paul, shall be entitled to any of the Equities or any proceeds thereof. The foregoing shall in no way be construed as a waiver or limitation of St. Paul's statutory lien on the Equities and proceeds thereof nor shall it limit or restrict St. Paul's ability to exercise such statutory lien at its sole and absolute discretion and for its own benefit.

    Section 7.11 Governing Law.  This Agreement shall be deemed to be a contract under seal and shall for all purposes be governed by and construed in accordance with the laws of the State of New York.

    IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed as an instrument by their authorized representatives as of the date first written above.

ST. PAUL BANK for COOPERATIVES, as Collateral Agent
By:	/s/ SIGNATURE Its: Vice President

ST. PAUL BANK for COOPERATIVES, as Bank Lender
By:	/s/ SIGNATURE Its: Vice President

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:	/s/ SIGNATURE Its: Investment Officer

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By:	/s/ SIGNATURE Its: Investment Officer

THE PAUL REVERE LIFE INSURANCE COMPANY
By:	/s/ DAVID FUSSELL Its: Vice President

EXECUTION BY ADDITIONAL CREDITORS

    The undersigned hereby acknowledges and agrees to the foregoing Agreement and executes and delivers this Agreement and agrees to become a party thereto with all the rights, benefits and obligations of a Secured Party (as defined in the Agreement) all as of the date hereof

    The undersigned have entered into the following facility with the Company [insert description of Funded Debt facility of the Company].

Dated:
        

[ADDITIONAL CREDITORS]
By	Its

Acknowledgment

    The undersigned hereby acknowledges (a) the terms of the foregoing Agreement, (b) that the foregoing Agreement is for the sole benefit of the Secured Parties and that it has no rights or benefits under such Agreement, and (c) that the provisions of the foregoing Agreement may be waived, amended or modified without its consent.

AMERICAN CRYSTAL SUGAR COMPANY
By	/s/ BRIAN INGULSRUD Its Treasurer

INFORMATION RELATING TO PURCHASERS

Name and Address of Purchaser	Principal Amount of Notes to be Purchased		Series of Notes
John Hancock Mutual Life Insurance Company	$	1,000,000	A
200 Clarendon Street	$	11,000,000	A
Boston, Massachusetts 02117	$	8,500,000	B
Facsimile Number: 617-572-1605	$	5,500,000	B
Confirmation Number: 617-572-5323

Payments

    All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "American Crystal Sugar Company, 7.32% Senior Secured Notes, Series A, due August 31, 2018, PPN 02530# AA 9, principal, premium or interest" or "American Crystal Sugar Company, 7.37% Senior Secured Notes, Series B, due August 31, 2023, PPN 02530# AB 7, principal, premium or interest") to:

Bank Boston
ABA No. 011000390
Boston, Massachusetts 02110
Account of: John Hancock Mutual Life Insurance Company Private
Placement Collection Account
Account Number 541-55417
On order of: American Crystal Sugar Company & [PPN Number]

Notices

    Contemporaneous with the above electronic funds transfer, mail or fax the following information setting forth: (1) the full name, private placement number, interest rate and maturity date of the Notes or other obligations; (2) the allocation of payment between principal, interest, premium and any special payment; and (3) the name and address of the Bank (or Trustee) from which such transfer was sent, to:

John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Manager Investment Accounting Division, B-3
Telephone Number: 617-572-5323
Facsimile Number: 617-572-1605

    All other notices and communications to be addressed as first provided above.

John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance
Telephone Number: 617-572-5323
Facsimile Number: 617-572-1605

Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1414660

SCHEDULE I
(to Intercreditor and Collateral Agency Agreement)

Name and Address of Purchaser	Principal Amount of Notes to be Purchased		Series of Notes
John Hancock Variable Life Insurance Company 200 Clarendon Street Boston, Massachusetts 02117 Facsimile Number: 617-572-1605 Confirmation Number: 617-572-5323	$	500,000 1,000,000	A B

Payments

    All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "American Crystal Sugar Company, 7.32% Senior Secured Notes, Series A, due August 31, 2018, PPN 02530# AA 9, principal, premium or interest" or "American Crystal Sugar Company, 7.37% Senior Secured Notes, Series B, due August 31, 2023, PPN 02530# AB 7, principal, premium or interest") to:

Bank Boston
ABA No. 011000390
Boston, Massachusetts 02110
Account of: John Hancock Mutual Life Insurance Company Private Placement Collection Account
Account Number 541-55417
On order of: American Crystal Sugar Company & [PPN Number]

Notices

    Contemporaneous with the above electronic funds transfer, mail or fax the following information setting forth: (1) the full name, private placement number, interest rate and maturity date of the Notes or other obligations; (2) the allocation of payment between principal, interest, premium and any special payment; and (3) the name and address of the Bank (or Trustee) from which such transfer was sent, to:

John Hancock Variable Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Manager, Investment Accounting Division, B-3
Telephone Number: 617-572-5323
Facsimile Number: 617-572-1605

All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-2664016

    Series

Name and Address of Purchaser	Principal Amount of Notes to be Purchased		Series of Notes
The Paul Revere Life Insurance Company c/o Provident Investment Management, LLC Private Placement	$	22,500,000	C
One Fountain Square Chattannooga, Tennessee 37402 Facsimile Number: 423-755-3351 Confirmation Number: 423-755-1365

Payments

    All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "American Crystal Sugar Company, 7.42% Senior Secured Notes, Series C, due August 31, 2028, PPN 02530# AC 5, principal, premium or interest") to:

CUDD & Co.
do The Chase Manhattan Bank
New York, New York
ABA No. 021 000 021
SSG Private Income Processing
A/C #900-9-000200
Custodial Account NO. G06992

Notices

    Contemporaneous with the above electronic funds transfer, mail or fax the following information setting forth: (1) the full name, private placement number, interest rate and maturity date of the Notes or other obligations; (2) the allocation of payment between principal, interest, premium and any special payment; and (3) the name and address of the Bank (or Trustee) from which such transfer was sent, to the address first provided above.

    Name of Nominee in which Notes are to be issued: CIJDD & CO. (the nominee for The Paul Revere Life Insurance Company)

Taxpayer I.D. Number: 13-6022143

QuickLinks

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT
RECITALS:

EXECUTION BY ADDITIONAL CREDITORS
Acknowledgment

INFORMATION RELATING TO PURCHASERS
SCHEDULE I (to Intercreditor and Collateral Agency Agreement)

EX-10.26

Exhibit 10.26

RESTATED MORTGAGE AND SECURITY AGREEMENT
Mortgage Short-Term Redemption
Dated as of September 15, 1998

From
AMERICAN CRYSTAL SUGAR COMPANY
(the "Company")
To
ST. PAUL BANK FOR COOPERATIVES, as Collateral Agent
(the "Mortgagee")

Drafted by and after recording, return to:

Elizabeth L. Majers, Esq.
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606

Tax statements for the real property described herein and situate in the State of Minnesota should be sent to:

American Crystal Sugar Company
101 North Third Street
Moorhead, MN 56560

    THIS RESTATED MORTGAGE AND SECURITY AGREEMENT-MORTGAGE-SHORT-TERM REDEMPTION dated as of September 15, 1998 (the or this"Mortgage'), is from AMERICAN CRYSTAL SUGAR COMPANY, a Minnesota cooperative corporation (the "Company"), having its principal office at 101 North 3111 Street, Moorhead, Minnesota 56560, to ST. PAUL BANK FOR COOPERATIVES, for itself, and as Collateral Agent for each of the holders of the hereinafter described Senior Secured Notes and the bank lenders which are signatories to the Credit Facility (collectively, the "Banks") (together with its permitted successors and assigns, the "Mortgagee") whose post office address is 375 Jackson Street, St. Paul, Minnesota 55101-1849 restating the Original Mortgages (as hereinafter defined).

RECITALS:

    A. Pursuant to those separate Note Purchase Agreements, each dated as of September 15, 1998 (collectively, the "Note Agreements"), entered into by the Company, with each of the Purchasers listed on Schedule A thereto (the "Noteholders"), the Noteholders will purchase $12,500,000 7.32% Senior Secured Notes, Series A, Due August 31, 2018, $15,000,000 7.37% Senior Secured Notes, Series B, Due August 31, 2023 and $22,500,000 7.42% Senior Secured Notes, Series C, due August 31, 2028 (collectively, the "Senior Secured Notes") of the Company.

    B. The Company has entered into that certain Term Loan Agreement dated September 17, 1998, as amended (the "Credit Facility"), with the Banks, pursuant to which the Banks are providing to the Company various credit facilities. Pursuant to the Credit Facility, the Company may fix the rate of interest for multiple periods, which rate is currently 6.25%.

    The Company has previously executed and delivered to the St. Paul Bank for Cooperatives various mortgages, as supplemented to date and as recorded in the appropriate county records of the State of Minnesota and the State of North Dakota (as so supplemented, the "Original Mortgages'). The Saint Paul Bank for Cooperatives is designated as an instrumentality of the United States under federal law, and as such, all mortgages securing repayment of debt held by the Saint Paul Bank for Cooperatives are exempt from payment of mortgage registration tax pursuant to United States Code, Title 12, Section 2134 and Minnesota Statutes, Section 287.06. Prior to the date of execution and delivery hereof, St. Paul Bank for Cooperatives was the holder of $231,000,000.00 in aggregate principal indebtedness secured in part by the Original Mortgages, which principal indebtedness is continuing hereunder and is the same debt secured by this Mortgage, without modification to the terms thereof The Noteholders are issuing an additional $50,000,000.00 of new indebtedness pursuant to the Note Agreements, which debt is subject to payment of mortgage registration tax, such that on the date of execution and delivery hereof, the aggregate of principal of all indebtedness issued and secured hereunder, including such continuing and new indebtedness, is $281,000,000.00.

    C. Pursuant to the Intercreditor and Collateral Agency Agreement, dated as of September 15, 1998 (the "Intercreditor and Collateral Agency Agreement") entered into by the Noteholders, the Banks and the Mortgagee, the Mortgagee was appointed as collateral agent to act on behalf of the Secured Parties (as hereinafter defined) regarding the Collateral (as hereinafter defined) and the obligations of the Company to the Noteholders under the Note Agreements and under the Senior Note Documents (as hereinafter defined) including, without limitation, the obligations evidenced by the Senior Secured Notes, and the obligations of the Company to the Banks under the Credit Facility and under the Loan Documents (as hereinafter defined) including, without limitation, the obligations evidenced by the promissory notes issued under the Credit Facility (together with amendments, modifications and replacements thereof, the "Credit Facility Notes"), and the obligations of the Company to the Additional Creditors (as hereinafter defined) under the Additional Facilities (as hereinafter defined) are to be secured pari passu pursuant to this Mortgage.

    D. All principal, premium and interest and all fees and additional amounts and other sums at any time due and owing from and all other obligations of any nature of the Company now or hereafter existing, or required to be paid by the Company under the terms of the Senior Secured Notes, the Credit Facility, the Note Agreements, this Mortgage, or any other document, mortgage or security agreement executed and delivered by the Company pursuant to the Note Agreements or Credit Facility and any extensions, renewals or modifications of any of the above are hereinafter sometimes referred to as the "Senior Secured Obligations".

    E. The Company is duly authorized under all applicable provisions of law, its Articles of Incorporation and By laws to issue the Senior Secured Notes and the Credit Facility Notes and to execute and deliver this Mortgage and to mortgage, convey, assign and grant a security interest in the Collateral (as hereinafter defined) to the Mortgagee, as security for the Senior Secured Obligations and all corporate action and all consents, approvals and other authorizations and all other acts and things necessary to make this Mortgage the valid, binding and legal instrument for the security of the Senior Secured Obligations have been done and performed.

    NOW, THEREFORE, THIS MORTGAGE WITNESSETH that the Company, in consideration of the premises, the purchase and acceptance of the Senior Secured Notes by the Purchasers, the making of loans and other financial accommodations by the Banks, and of the sum of Ten Dollars received by the Company from the Mortgagee and other good and valuable consideration, receipt whereof is hereby acknowledged, and in order to secure the payment of all of the Senior Secured Obligations, the Company does hereby warrant, mortgage, pledge, assign, bargain, hypothecate, convey, grant, transfer, grant a first perfected security interest in and set over unto the Mortgagee and its successors and assigns, all of its estate, right, title and interest in and to all and singular the following described properties, rights, interest and privileges and all of the Company's estate, right, title and interest therein, thereto and thereunder, if any (all of which properties hereby mortgaged, assigned, pledged and in which a first perfected security interest has been granted or intended so to be are hereinafter collectively referred to as the "Collateral"):

GRANTING CLAUSE FIRST
REAL PROPERTY

    The parcels of land in Clay County and Polk County in the State of Minnesota and Pembina County and Trail County, in the State of North Dakota described in Annex A attached hereto and made a part hereof, together with the entire interest of the Company in and to all buildings, structures, improvements and appurtenances now standing, or at any time hereafter constructed or placed, upon such land, including all right, title and interest of the Company, if any, in and to all building material, building equipment and fixtures of every kind and nature whatsoever on said land or in any building, structure or improvement now or hereafter standing on said land which are classified as fixtures under applicable law and which are used in connection with the operation, maintenance or protection of said buildings, structures and improvements as such (including, without limitation, all boilers, air conditioning, ventilating, plumbing, heating, lighting and electrical systems and apparatus, all communications equipment and intercom systems and apparatus, all sprinkler equipment and apparatus and all elevators and escalators) and the reversion or reversions, remainder or remainders, in and to said land, and together with the entire interest of the Company in and to all and singular the tenements, hereditaments, easements, rights of way, rights, privileges and appurtenances to said land, belonging or in anywise appertaining thereto, including, without limitation, the entire right, title and interest of the Company in, to and under any streets, ways, alleys, gores or strips of land adjoining said land, and all claims or demands whatsoever of the Company either in law or in equity, in possession or expectancy, of, in and to said land, it being the intention of the parties hereto that, so far as may be permitted by law, all property of the character hereinabove described, which is now owned or is hereafter acquired by the Company and is affixed or attached or annexed to said land, shall be and remain or become and constitute a portion of said land and the security covered by and subject to the Lien of this Mortgage, together with all accessions, parts and appurtenances appertaining or attached thereto and all substitutions, renewals or replacements of and additions, improvements, accessions and accumulations to any and all thereof, and together with all rights, powers, privileges, options and other benefits of the Company, as lessor, under any leases including the right to collect any and all rents, profits or other income and the present and continuing right to make claim for, collect, receive and receipt for any and all of such rents, profits or other income (all of which properties are hereinafter referred to as the "Real Property"'.

GRANTING CLAUSE SECOND TRADE PROPERTY

    All materials, furniture, furnishings, machinery, fixtures and equipment now or hereafter erected on or affixed to the Real Property and including, but not limited to, all heating, plumbing, lighting, water heating, cooking, laundry, refrigerating, incinerating, communications, ventilating and air conditioning equipment, building signs, disposals, dishwashers, telephone systems, sprinkler systems, fire extinguishing apparatus and equipment, water tanks, engines, machines, boilers, dynamos, stokers, elevators, motors, cabinets, shades, blinds, partitions, window screens, screen doors, storm windows, awnings, drapes, rugs and other floor coverings, furniture, furnishings, radios and television sets and wiring and antennae therefor, and all fixtures, accessions and appurtenances thereto, and all renewals or replacements of or substitutions for any of the foregoing, together with all other goods, equipment, furnishings, fixtures, machinery and furniture owned by the Company now or hereafter attached or affixed to or used in and about the building or buildings now erected or hereafter to be erected on the Real Property, or otherwise located on the Real Property, and all fixtures, accessions and appurtenances thereto, and all renewals or replacements of or substitutions for any of the foregoing (all of which properties are hereinafter referred to as "Trade Property").

GRANTING CLAUSE THIRD
GENERAL INTANGIBLES

    All general intangibles, whether now owned or hereafter acquired or arising, or in which the Company now has or hereafter acquires any rights, including without limitation all causes of action, goodwill and similar intangibles and all income tax refunds, all privileges, franchises, immunities, licenses (to the extent a security interest can be granted in particular licenses), permits, similar intangibles, any rights to receive any payments in connection with a termination of any pension plan or employees stock ownership plan or trust established for the benefit of employees of the Company, patents, patent applications, patent licenses, trademarks, trademark registrations and trademark licenses, and tradenames, and all other intangible personal property (including things in action) not otherwise covered by this Mortgage (collectively, "General Intangibles").

GRANTING CLAUSE FOURTH
CONDEMNATION AWARDS AND PAYMENTS

    All judgments, awards of damages, settlements and other compensation heretofore or hereafter made resulting from condemnation proceedings or the taking of the Real Property or any part thereof or any improvements now or at any time hereafter located thereon or any easement or other appurtenance thereto under the power of eminent domain, or any similar power or right (including any award from the United States Government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for the payment thereof), whether permanent or temporary, or for any damage (whether caused by such taking or otherwise) to said Real Property or any part thereof or the improvements thereon or any part thereof, or to any rights appurtenant thereto, including severance and consequential damage, and any award for change of grade of streets (collectively, "Condemnation Awards").

GRANTING CLAUSE FIFTH
PROCEEDS

    All proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or other liquidated claims, including, without limitation, all proceeds and payments of insurance related to the Collateral.

EXCEPTED PROPERTY

    There is, however, to the extent included in the Lien and operation of this Mortgage, expressly excepted and excluded from the Lien and operation of this Mortgage the following described property of the Company, now owned or hereafter acquired (herein called "Excepted Property"):

    (a) all Inventory of the Company, wherever located, now or hereafter existing;

    (b) the Specified Pledged Stock;

    (c) all Accounts of the Company, including without limitation monies due to the Company in respect of such Accounts;

    (d) all Instruments, Documents, Securities or Chattel Paper of the Company including, without limitation, investments in United Sugars Corporation, Midwest AgriCommodities Company, Crystech LLC and ProGold Limited Liability Company, and

    (e) all licenses, government permits and motor vehicle title certificates now owned or hereafter acquired by the Company individually or with others and wherever located.

    SUBJECT HOWEVER, as to all property or rights in property at any time subject to the Lien hereof (whether now owned or hereafter acquired), to Permitted Encumbrances, as defined in §1 hereof.

    To HAVE AND TO HOLD the Collateral unto the Mortgagee and its successors and assigns forever for the purpose of securing performance of each agreement, covenant and warranty of the Company contained in the Senior Secured Notes, the Credit Facility, this Mortgage, the other Senior Security Documents and the Note Agreements and payment of the Senior Secured Obligations. It is understood and agreed that this Mortgage is to secure the obligation of the Company to repay, without preference or priority, all Senior Secured Obligations.

    PROVIDED, NEVERTHELESS, and these presents are upon the express condition that if the Company performs the covenants herein contained and the Senior Secured Obligations are paid in full and all other sums due or payable hereunder, under the Note Agreements, the Credit Facility or under the other Senior Security Documents, the estate, right and interest of the Mortgagee in the property hereby conveyed and granted a first perfected security interest in shall cease and this Mortgage shall become null and void, but otherwise to remain in full force and effect.

    It is agreed and understood by the parties hereto that:

    1. The Senior Secured Obligations are also secured by the other Senior Security Documents. The other Senior Security Documents are intended to and shall constitute security for the entire indebtedness represented by the Notes and all other Senior Secured Obligations without allocation.

    2. Any part of the security herein described, and any security described in the other Senior Security Documents or any other mortgage or other instrument now or hereafter given to secure the Senior Secured Obligations, may be released pursuant to the terms of the Senior Secured Obligations, or by or at the direction of the Mortgagee without affecting the Lien hereof on the remainder of the obligations of the Company on and in respect of the Senior Secured Obligations and any person acquiring any direct or indirect interest in the security herein described or in any security described in the other Senior Security Documents or any other mortgage or other instrument now or hereafter given to secure the Senior Secured Obligations shall take the same subject to all of the provisions hereof.

    3. The Company for itself and all who may claim through or under it waives to the extent permitted by law any and all right to have the property and estates comprising the Collateral or any other property of the Company constituting security for the Senior Secured Obligations marshaled upon any foreclosure of the Lien hereof, or to have the Collateral hereunder and the property covered by any other mortgage or deed of trust securing the Senior Secured Obligations marshaled upon any foreclosure of any of said mortgages or deeds of trust, and agrees that any court having jurisdiction to foreclose such Lien may order the Collateral sold as an entirety.

    4. Upon the occurrence and during the continuance of an Event of Default hereunder the Mortgagee has, among other things, the right to foreclose on the Collateral and dispose of the same. The Mortgagee's deed (if permitted by law) or Sheriffs deed or other instrument of conveyance, transfer or release (which, if permitted by law, may be executed by the Mortgagee in its own name or as attorney-in-fact for the Company and the Mortgagee is hereby irrevocably appointed attorney-in-fact for the Company to, in the event that an Event of Default hereunder shall have occurred and be continuing, so execute such deed or other instruments of conveyance, transfer or release) shall be effective to convey and transfer to the grantee an indefeasible title to the property covered thereby, discharged of all rights of redemption (to the extent permitted by law) by the Company or any person claiming under it, and to bar forever all claims by the Company or the Mortgagee to the property covered thereby and no grantee from the Mortgagee or Sheriff shall be under any duty to inquire as to the authority of the Mortgagee or Sheriff to execute the same, or to see to the application of the purchase money.

SECTION 1. DEFINIITIONS.

    The following terms shall have the following meanings for all purposes of this Mortgage:

    "Account", "Chattel Paper", "Documents", "Equipment", "General Intangibles", "Instruments", "Inventory", "Patents", "Securities", "Trademarks" and "Tradenames" shall each have the meaning set forth in the Uniform Commercial Code.

"Additional Creditors" shall have the meaning assigned thereto in the Intercreditor and Collateral Agency Agreement.

"Additional Facilities" shall have the meaning assigned thereto in the Intercreditor and Collateral Agency Agreement.

"Capitalized Leases" shall have the meaning assigned thereto in the Note Agreements.

"CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.

"Collateral" shall have the meaning assigned thereto in the paragraph immediately preceding the Granting Clause First hereof.

"Company" shall mean American Crystal Sugar Company, a Minnesota cooperative corporation and its successors and assigns.

"Credit Facility Notes" shall have the meaning assigned thereto in Recitals hereof

"Default" shall mean any event which would constitute an Event of Default if all requirements in connection therewith for the giving of notice, the lapse of time and the happening of any further condition, event or act had been satisfied.

"Eligible Investments" shall mean:

(a) Investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition thereof, is accorded the highest rating by at least two of the following rating agencies: Standard & Poor's Corporation, Moody's Investors Service, Inc. or Duff & Phelps;

(b) Investments in direct obligations of the United States of America or any agency or instrumentality of the United States of America, the payment or guarantee of which constitutes a full faith and credit obligation of the United States of America, in either case, maturing in twelve months or less from the date of acquisition thereof;

(c) Investments in certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $500,000,000 and whose long-term certificates of deposit are, at the time of acquisition thereof, rated AA or better by Standard & Poor's Corporation or Aa or better by Moody's Investors Service, Inc.; and

(d) Investments in Federally tax-exempt municipal bonds maturing in twelve months or less from the date of acquisition thereof and, at the time of acquisition, is rated "AAA" or better by Standard & Poor's Corporation or "Aaa" or better by Moody's Investors Service, Inc.;

"Environmental Claim" shall mean all claims, however, asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment.

"Environmental Law" shall have the meaning assigned thereto in the Note Agreements.

"Event of Default" shall have the meaning specified in §5.1 hereof

"Funded Debt" shall have the meaning assigned thereto in the Note Agreements.

"GAAP" shall have the meaning assigned thereto in the Note Agreements.

"Governmental Approvals" shall mean any written permit, license, variance, certification, consent, no-action letter, clearance, exemption or other approval granted by a Governmental Authority.

"Governmental Authority" shall mean any international, foreign, federal, state, regional, county, local or other governmental authority.

"Hazardous Materials" shall have the meaning assigned thereto in the Note Agreements.

"Impositions" shall have the meaning assigned thereto in §2.7(a) hereof

Intercreditor and Collateral Agency Agreement" shall have the meaning assigned thereto in Recitals hereof

"Lien" shall mean any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting property.

"Material Adverse Effect" shall have the meaning assigned thereto in the Note Agreements.

"Motor Vehicle" shall mean all trucks, trailers, automobiles, rolling stock, forklifts and vehicles of every kind and description, whether now owned or hereafter acquired by the Company, or in which the Company may acquire an interest.

"Note Agreements" shall have the meaning ascribed to it in the Recitals hereof this Mortgage.

"Notes" and "Note" shall mean the Credit Facility Notes and the Senior Secured Notes.

"Overdue Rate" shall mean the lesser of (a) the maximum interest rate permitted by law and (b) the annual percentage rate of interest which is established by Citibank, N.A. from time to time as its prime rate plus 2%.

"Permitted Encumbrances" shall mean the liens described in clauses (a) through (j) of §2.8.

"Person" shall mean an individual, partnership, corporation, trust or unincorporated organization.

"RCRA" shall mean the Resource Conservation and Recovery Act, as amended.

"Release" shall have the meaning assigned thereto in the Note Agreements.

"Rentals" shall have the meaning assigned thereto in the Note Agreements.

"Replacement Items of Trade Property" shall have the meaning assigned thereto in §3.3(a)(1) hereof.

"Securities" shall have the meaning assigned thereto in the Note Agreements.

"Secured Parties" shall have the meaning assigned thereto in the Intercreditor and Collateral Agency Agreement.

"Senior Note Documents" shall mean the Note Agreements, the Senior Secured Notes, and all other mortgages, security agreements, documents, certificates and instruments relating to, arising out of, or in any way connected therewith or any of the transactions contemplated thereby.

"Senior Secured Obligations" shall have the meaning assigned thereto in Recitals hereof

"Senior Security Documents" shall have the meaning assigned to the term "Security Documents" in the Note Agreements.

"Senior Secured Notes" shall have the meaning assigned thereto in the Note Agreements.

"Specified Pledged Stock" shall mean the stock and all other equity interests of St. Paul Bank owned by the Company and subject to the St. Paul Stock Lien (as defined in the Note Agreements).

"Subsidiary" shall have the meaning assigned thereto in the Note Agreements.

"Trade Property" shall have the meaning ascribed to it in Granting Clause Second of this Mortgage.

"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in the States of Minnesota and North Dakota, as amended, as the case may be.

"Voting Stock" shall mean securities of any class or classes of a corporation, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions),

SECTION 2. GENERAL COVENANTS ANT) WARRANTIES.

    The Company covenants, warrants and agrees as follows:

    Section 2.1. Agreement and Mortgage Covenants.  Each and all of the terms, provisions, restrictions, covenants and agreements set forth in the Note Agreements and in each and every supplement thereto or amendment thereof which at any time or from time to time may be executed and delivered by the parties thereto or their successors and assigns, are incorporated herein by reference to the same extent as though each and all of said terms, provisions, restrictions, covenants and agreements were fully set out herein and as though any amendment or supplement to the Note Agreements and the Credit Facility were fully set out in an amendment or supplement to this Mortgage; and the Company does hereby covenant and agree well and truly to abide by, perform and be governed and restricted by each and all of the matters provided for by the Note Agreements and the Credit Facility and so incorporated herein to the same extent and with the same force and effect as if each and all of said terms, provisions, restrictions, covenants and agreements so incorporated herein by reference were set out and repeated herein at length. Without limiting the foregoing, the Company covenants and agrees to pay all taxes, assessments and governmental charges or levies imposed upon this Mortgage or the Senior Secured Obligations (other than income taxes of the Mortgagee or of the Secured Parties). If any such sums shall be advanced by the Mortgagee or any Secured Party, they shall bear interest, shall be paid and shall be secured as provided in §2.9 hereof.

    Section 2.2. Ownership of Collateral.  The Company covenants and warrants that it has fee simple title to the Real Property and good and marketable title to the other Collateral hereinbefore conveyed to the Mortgagee free and clear of all liens, charges and encumbrances whatever except Permitted Encumbrances, and the Company has full right, power and authority to convey, transfer, mortgage and grant a first perfected security interest in the same to the Mortgagee for the uses and purposes in this Mortgage set forth; and the Company will warrant and defend the title to the Collateral against all claims and demands whatsoever except Permitted Encumbrances.

    Section 2.3. Further Assurances.  The Company will, at its own expense, do, execute, acknowledge and deliver all and every further reasonable act, deed, conveyance, transfer and assurance necessary or proper for (a) the better assuring, conveying, assigning and confirming unto the Mortgagee all of the Collateral, or property intended so to be, whether now owned or hereafter acquired and (b) the perfection of the first security interest provided for in the Collateral whether now owned or hereafter acquired. The Mortgagee, as secured party, may file one or more financing statements disclosing its security interest in any or all of the Collateral without the Company's signature appearing thereon. The Company also hereby grants the Mortgagee, as such secured party a power of attorney to execute any such financing statement, or amendments and supplements to financing statements, on behalf of the Company without notice thereof to the Company, which power of attorney is coupled with an interest and is irrevocable until the Senior Secured Obligations have been fully satisfied.

Section 2.4. Payment of Principal, Premium and Interest The Company will duly and punctually pay the principal of, and premium and interest on all Notes secured hereby according to the terms thereof.

Section 2.5. Maintenance of Collateral, Other Liens, Compliance with Laws, Environmental Matters, Etc. Without limiting the provisions of the Note Agreements and the Credit Facility,

(a) The Company shall (1) promptly repair, restore, replace or rebuild any material buildings, improvements or Trade Property now or hereafter on the Real Property which may become damaged or be destroyed, (2) keep the Collateral in good condition and repair, ordinary wear and tear excepted, without waste, and free from all claims, liens, charges and encumbrances (except for claims, liens, charges and encumbrances that are being contested under and in compliance with §2.7(c) hereof) other than Permitted Encumbrances, (3) pay when due any indebtedness which may be secured by a Lien or charge on the Collateral and upon request provide satisfactory evidence of the discharge of such Lien to the Mortgagee (unless such payment is being contested under and in compliance with §2.7(c) hereof), (4) comply with all requirements of law or municipal ordinances, including without limitation all Environmental Laws, with respect to the Collateral and the use thereof, failure to comply with which would be reasonably likely to result in any material interference with the use or operation of the Collateral by the Company or would materially adversely affect the assets, business, operations, income or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, and (5) make no material alterations in said Collateral except as required by law or municipal ordinance; provided that the Company may make such other material alterations so long as such alterations are completed in compliance with the requirements of paragraphs (b) and (c) of this §2.5.

(b) The Company may, at its expense, (1) construct upon the Collateral additional buildings, structures and other improvements and (2) install, assemble and place upon the Collateral any items of Trade Property, signs, furniture, furnishings, equipment, machinery and other tangible personal property used or useful in the Company's business, in each case upon compliance with the provisions of paragraph (a) of this §2.5. All such buildings, structures and other improvements shall be and remain part of the realty and shall be subject to this Mortgage with respect thereto.

(c) Any repair, restoration, rebuilding, substitution, replacement, modification, alteration of or addition to the Collateral pursuant to §2.5(b) hereof must not materially impair the market value, structural integrity or usefulness of the Collateral for use in the ordinary course of business; shall be performed in a good and workmanlike manner and be expeditiously completed in compliance in all material respects with all laws, ordinances, orders, rules, regulations and requirements applicable thereto, including to the extent necessary to maintain in full force and effect the policies of insurance required by §2.6 hereof All costs and expenses of each such repair, restoration, rebuilding, substitution, replacement, the discharge of all liens filed against the Collateral arising out of the same, together with all costs and expenses necessary to obtain any permits or licenses required in connection therewith shall be promptly paid by the Company (except to the extent such costs and expenses are being contested under and in compliance with §2.7(c) hereof).

(d) The Company:

    (1) shall, as soon as reasonably practicable, maintain the Collateral in compliance in all material respects with any applicable Environmental Law;

    (2) shall require that all of its tenants and subtenants at the Collateral, as soon as reasonably practicable, comply in all material respects with any applicable Environmental Law;

    (3) shall obtain and maintain in full force and effect all material Governmental Approvals required for its operations at or on the Collateral by any applicable Environmental Law;

    (4) shall, as soon as reasonably practicable, cure any material violation of applicable Environmental Laws by any Person at the Collateral;

    (5) shall not, and shall not permit any other Person to, own or operate on the Collateral any (i) landfill or dump or (ii) hazardous waste treatment, storage or disposal facility as defined pursuant to RCRA or any comparable state law;

    (6) shall not use, generate, treat, store, release or dispose Hazardous Materials at or on the Collateral except in the ordinary course of its business;

    (7) shall within ten (10) Business Days notify the Mortgagee in writing of and provide any reasonably requested documents upon learning of any of the following which arise in connection with the Collateral:

    (A) any material liability for response or corrective action, natural resource damage or other harm pursuant to CERCLA, RCR.A or any comparable state law;

    (B) any material Environmental Claim;

    (C) any material violation of an Environmental Law or material Release of a Hazardous Material;

    (D) any material restriction on the ownership, occupancy, use or transferability arising pursuant to any (i) Release, threatened Release or disposal of a Hazardous Material or (ii) Environmental Law; or,

    (E) any other environmental, natural resource, health or safety condition, which would reasonably be expected to have a Material Adverse Effect; and,

    (8) at its expense, will conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other response action necessary to remove, clean up or abate any material quantity of Hazardous Material Released or disposed at or on the Collateral as required by any applicable Environmental Law and any order or directive from a Governmental Authority having jurisdiction, except to the extent the Company is reasonably contesting any Environmental Law or any order or directive from a Governmental Authority, so long as (i) such contest is in good faith and by appropriate proceedings, (ii) adequate reserves are maintained in accordance with GAAP and (iii) no forfeiture will result from a failure to comply with the contested requirement.

(e) The Company at its own expense and at the reasonable written request of the Mortgagee shall provide reasonably expeditiously an environmental report of reasonable scope, form and depth by a consultant reasonably acceptable to the Mortgagee as to any matter for which notice is provided pursuant to §2.5(d)(7) above or which may reasonably be believed by the Mortgagee to form the basis of a material Environmental Claim in connection with the Collateral. If such a requested environmental report is not delivered within seventy-five (75) days after receipt of the Mortgagee's request, then the Mortgagee may arrange for same, and the Company hereby grants to the Mortgagee and its representatives access to the Collateral and a license to undertake such an assessment. The reasonable cost of any assessment arranged for by the Mortgagee pursuant to this provision will be payable by the Company on demand and added to the obligations secured by the Senior Security Documents.

(f) The Company may use and operate the Collateral for any lawful purpose not inconsistent with the provisions of §10.7 of the Note Agreements and the applicable provisions of the Credit Facility and any Additional Credit Facility.

Section 2.6. Insurance.

(a) Insurance against Loss, Damage and Liability. Without limiting the provisions of the Note Agreements and the Credit Facility, the Company will insure the Collateral against such perils and hazards, and in such amounts and with such limits as the Mortgagee may from time to time reasonably require, and in any event will continuously maintain the following-described policies of insurance:

    (1) insurance against loss and damage by all risks of direct physical loss or damage, including fire, windstorm, earthquake and other risks covered by the so-called "all risk" form of property policy with replacement cost and agreed amount endorsements; provided, however, that the amount of such insurance with respect to the Collateral shall not at any time be less than the full insurable replacement value of the Collateral from time to time; and provided further that such insurance policy shall provide that not more than $5,000,000 may be deductible from the loss payable per occurrence for any casualty and that such insurance shall not be subject to a co-insurance clause;

    (2) business interruption insurance, covering loss of earnings due to any direct physical loss of real property owned by the Company, in an amount, as of the Closing Date, as is customary for corporations of established reputation engaged in the same or similar business and owning and operating similar properties; provided, however, such insurance policy may provide for an exclusion (or waiting period) of not more than 30 consecutive days following such shutdown;

    (3) during the course of any material construction, repair or improvements on the Collateral, commercial general public liability insurance (including coverage for elevators and escalators, if any, on the Collateral and, if any construction of new improvements occurs after execution of this Mortgage, completed operations coverage for two years after construction of the improvements has been completed) on an "occurrence basis" or a "claims made basis" against claims for "personal injury" including without limitation bodily injury, death or property damage occurring on, in or about the Collateral and the adjoining streets, sidewalks and passageways, such insurance to afford immediate minimum protection to a limit of not less than the greater of $1,000,000 or such amount as may be reasonably required by the Mortgagee with respect to personal injury or death to any one or more persons or damage to property;

    (4) workmen's compensation insurance, unless the Company is an authorized self-insurer, (including employer's liability insurance, if requested by the Mortgagee) for all employees of the Company engaged on or with respect to the Collateral in such amount as is reasonably satisfactory to the Mortgagee or, if such amounts are established by law, in such amounts;

    (5) during the course of any material construction or repair of improvements on the Collateral, builder's completed value risk insurance against "all risks of direct physical costs", including collapse, with deductibles not to exceed $1,000,000, in nonreporting form, covering the total value of work performed and equipment, supplies and materials furnished as part of the work. Such policy of insurance shall contain the "permission to occupy upon completion of work or occupancy" endorsement;

    (6) boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air conditioning and elevator equipment and escalator equipment and insurance against loss or occupancy or use arising from any such breakdown, in such amounts and with such terms as are customary for companies of established size and reputation engaged in substantially the same business as the Company and similarly situated;

    (7) flood insurance in such amounts as are reasonably satisfactory to the Mortgagee; provided, however, that the Company shall not be required to maintain such flood insurance if and so long as and to the extent that the Collateral shall not be located in a flood hazard area, as designated as such pursuant to the Flood Disaster Protection Act of 1973, as amended, or other applicable law with such insurance to be at least the amount available under the National Flood Insurance Program and if available under policies issued by other sources, then in such additional amounts as the Mortgagee may reasonably require;

    (8) insurance against liability for injury to a person and loss or damage to the property of others from such risks and in such amounts as are customarily carried by companies owning property of a similar character and engaged in a business similar to that engaged in by the Company; provided, however, that in no event shall the insurance maintained in accordance with this paragraph be less than an aggregate of $1,000,000 under single limit liability for such loss; and provided, further, that such insurance shall provide that not more than $100,000 may be deductible from the loss payable for any loss thereunder; and

    (9) such other insurance against such risks as is customary to be carried by companies of established size and reputation engaged in substantially the same business as the Company and similarly situated and owning Properties in the states in which the Collateral is located.

(b) Form of Policies. Any insurance policies carried in accordance with this §2.6 shall be written by companies of recognized national standing rated "A-", Class X or better by A.M. Best Company and shall be authorized to do business in the state in which the Collateral is located. Such insurers shall be accorded a similar rating by another nationally recognized insurance rating agency of similar standing acceptable to the Mortgagee if A.M. Best Company ceases to rate insurers. In the event that an insurer meeting the requirements set forth above is subsequently downgraded so as to no longer meet such requirements, the Company shall have 60 days from the date of such downgrading to obtain insurance from an insurer rated at least "A-", Class X by A.M. Best Company. All premiums on such insurance shall be paid by the Company and the policies of such insurance (or certificates therefor) delivered to the Mortgagee.

    All such policies of insurance: (1) shall name the Mortgagee, the Banks, the Noteholders and each other holder of the Senior Secured Notes as additional insureds, as their interests may appear, (2) in the case of policies covering loss or damage to the Collateral, shall provide that losses, if any, shall be payable solely to the Mortgagee under a standard mortgage loss payable clause satisfactory to the Mortgagee, (3) shall provide that the Mortgagee's, the Banks' and the Noteholders' interests shall be insured regardless of any breach or violation by the Company of any warranties, declarations or conditions contained in such policies, (4) the insurers shall waive any right of subrogation of the insurers to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Company, (5) such insurance, as to the interest of the Mortgagee, the Banks and/or the Noteholders, as the case may be, therein, shall not be invalidated by the use or operation of the Collateral for purposes which are not permitted by such policies, nor by any foreclosures or other proceedings relating to the Collateral, nor by change in title to or ownership of the Collateral, (6) if any premium or installment is not paid when due, or if such insurance would lapse or be cancelled, terminated or changed for any reason whatsoever, the insurers will promptly notify the Mortgagee and any such lapse, cancellation, termination or change shall not be effective as to the Mortgagee, the Banks and/or the Noteholders, as the case may be, for 10 Business Days after receipt of such notice, and (7) appropriate certification shall be made to the Mortgagee by each insurer with respect thereto.

    The Company hereby authorizes the Mortgagee, upon the occurrence and during the continuation of any Event of Default hereunder, at the Mortgagee's option to adjust, compromise and settle any losses under any insurance afforded, and the Company does hereby irrevocably constitute the Mortgagee, its officers, agents and attorneys, as its attorneys-in-fact, with full power and authority, upon the occurrence and during the continuation of any Event of Default hereunder, to effect such adjustment, compromise and/or settlement and to endorse any drafts drawn by an insurer of the Collateral or any part thereof and to do everything necessary to carry out such purposes and to receive and receipt for any unearned premiums due under policies of such insurance; but unless the Mortgagee elects to adjust, compromise or settle losses as aforesaid, such adjustment, compromise and/or settlement shall be made by the Company, subject to final approval of the Mortgagee in the case of losses exceeding $5,000,000.

Section 2.7. Payment of Taxes and Other Charges; Contests Thereof

(a) Without limiting the provisions of the Note Agreements and the Credit Facility, the Company will pay and discharge, before the same shall become delinquent, together with interest and penalties thereon, if any, (1) all taxes, assessments (including assessments for benefits from public works or improvements whenever begun or completed), levies, fees, water and sewer rents and charges, and all other governmental charges, general and special, ordinary and extraordinary, and whether or not within the contemplation of the parties hereto, which are at any time levied upon or assessed against it or the Collateral or any part thereof or upon this Mortgage or the Senior Secured Obligations secured hereby, or upon the revenues, rents, issues, income and profits in respect of the Collateral, or arising in respect of the occupancy, use or possession thereof, which failure to pay would result in the creation of a Lien upon the Collateral or any part thereof, or upon the revenues, rents, issues, income and profits of the Collateral or in the diminution thereof or would result in any material interference with the use or operation of the Collateral by the Company, (2) all corporate franchise, excise and other taxes, fees and charges assessed, levied or imposed in respect of its corporate existence or its right to do business in any state, (3) all income, excess profits, excise, sales, franchise, gross receipts and other taxes, duties or imposts, whether of a like or different nature, assessed, levied or imposed by any Governmental Authority on it or the Collateral, or any portion thereof, or upon the revenues, rents, issues, income and profits of the Collateral whether or not the failure to pay any such tax, duty or impost might result in the creation of a Lien upon any asset of the Company or the Collateral or any part thereof or upon the revenues, rents, issues, income and profits of the Collateral or in the diminution thereof, and whether or not any such tax, duty or impost is payable directly by the Company or is subject to withholding at the source and (4) all lawful claims and demands of mechanics, laborers, materialmen and others which, if unpaid, might result in the creation of a Lien on the Collateral or upon the revenues, rents, issues, income and profits of the Collateral and, in general, will do or cause to be done everything necessary so that the Lien hereof shall be fully preserved, at the cost of the Company, without expense to the Mortgagee (all of which taxes, assessments, levies, fees and other governmental or nongovernmental charges, claims and demands of like nature are hereinafter referred to as "Impositions"). The Company shall discharge any claim or Lien relating to Impositions upon the Collateral.

(b) The Company will pay when due all utility charges which are incurred by the Company for the benefit of the Collateral or which may become a charge or Lien against the Collateral for gas, electricity, water or sewer services furnished to the Collateral and all other assessments or charges of a similar nature, whether public or private, affecting the Collateral or any portion thereof, whether or not such taxes, assessments or charges are or may become Liens thereon.

(c) Contest. Without limiting the provisions of the Note Agreements and the Credit Facility, and always subject to the terms and conditions thereof, the Company may, in good faith and with reasonable diligence and by appropriate proceedings diligently prosecuted, contest or cause to be contested the validity or amount of any such Impositions, provided that:

    (1) such contest shall have the effect of preventing (i) sale, forfeiture or loss of the Collateral or any part thereof or interest therein to satisfy the same and (ii) any material interference with the value, use or occupancy of the Collateral or any part thereof; and

    (2) the Company shall have established with respect to such Impositions (and any attendant penalties or late fees) reserves deemed by it to be adequate with respect thereto.

    Section 2.8. Limitation on Liens.  The Company will not create or incur or suffer to be incurred or to exist, any mortgage, pledge, security interest, encumbrance, charge or other Lien of any kind upon the Collateral, whether now owned or hereafter acquired, or upon any income or proceeds therefrom, except the following:

(a) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen,provided that payment thereof is not at the time required by § 9.4 of the Note Agreements or the Credit Facility;

(b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured within 60 days after the expiration of any such stay;

(c) Liens incidental to the conduct of business or the ownership of properties and assets (including, without limitation, Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature, in any such case incurred in the ordinary course of business and not in connection with the borrowing of money and which do not in any event materially impair the use of such property in the operation of the business of the Company and its Subsidiaries taken as a whole, or the value of such property for the purposes of such business, provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings;

(d) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Company and its Subsidiaries or which customarily exist on properties of organizations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Company and its Subsidiaries taken as a whole, or the value of the property for the purposes of such business;

(e) Liens securing Debt of a Subsidiary to the Company or to a Wholly-Owned Subsidiary;

(f) Liens existing as of the Closing and described on Schedule 5.15 to the Note Agreements;

(g) Liens incurred after the Closing (as defined in the Note Agreements) given to secure the payment of the purchase price incurred in connection with the acquisition, construction or improvement of fixed assets of the Company or any Subsidiary, which Liens are incurred contemporaneously with or within 180 days after the payment of such purchase price or completion of such construction, and Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Company or any Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach, providedthat (i) the Lien shall attach solely to the fixed assets acquired, constructed or improved, (ii) at the time of acquisition, construction or improvement of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets whether or not assumed by the Company or any Subsidiary shall not exceed an amount equal to 100% of the fair market value at the time of acquisition, construction or improvement of such fixed assets (as determined in good faith by the Board of Directors of the Company), and (iii) all Debt secured by such Liens shall have been incurred within the applicable limitations of this Agreement including, without limitation, §10.6 of the Note Agreements; and

(h) in addition to the liens permitted under §~2.8(a) through (g), such other Liens as may be allowed by the Note Agreements and the Credit Facility.

    Section 2.9. Advances.  If the Company shall fail to comply with the covenants contained herein or contained in the Note Agreements or the Credit Facility and incorporated herein by reference, the Mortgagee, without waiving any Default or Event of Default or releasing any obligation, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Company, and may enter upon the Collateral or any part thereof for such purpose and take all such action thereon as, in the opinion of the Mortgagee, may be necessary or reasonably appropriate therefore. All sums so paid by the Mortgagee and all costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) so incurred, together with interest thereon at the Overdue Rate from the date of payment or incurrence, shall be secured hereby and shall be paid by the Company to the Mortgagee on demand. The Mortgagee in making any payment authorized under this §2.9 relating to taxes or assessments may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax Lien or title or claim thereof. The Mortgagee, in performing any act hereunder, shall be the sole judge of whether the Company is required to perform the same under the terms of this Mortgage and no such advance shall be deemed to relieve the Company from any default hereunder.

    Section 2.10. Recordation.  The Company will, at its own expense, cause this Mortgage and all supplements hereto and any financing statements and continuation statements required by the Uniform Commercial Code or other law in respect thereof at all times to be kept recorded and filed at its own expense in such manner and in such places as may be required by law in order to fully preserve and protect the rights of the Mortgagee hereunder, and will furnish to the Mortgagee promptly after the execution and delivery of this Mortgage and of each supplement and each financing statement or continuation statement, as the case may be, an opinion of counsel stating that in the opinion of such counsel this Mortgage or such supplement and/or such financing statement or continuation statement, as the case may be, has been properly recorded or filed for record so as to make effective of record the Lien and (subject to Permitted Encumbrances) the first perfected security interest intended to be created hereby.

    Section 2.11. After-Acquired Property.  Any and all property hereafter acquired which is of the kind or nature described in the Granting Clauses hereof and is or is intended to become a part thereof, shall ipso facto, and without any further conveyance, assignment or act on the part of the Company or the Mortgagee become and be, subject to the Lien and first perfected security interest of this Mortgage as fully and completely as though specifically described herein; but nevertheless the Company shall from time to time, if requested by the Mortgagee, execute and deliver any and all such further assurances, conveyances and assignments thereof as the Mortgagee may reasonably require for the purpose of expressly and specifically subjecting to the Lien and first perfected security interest of this Mortgage any and all such property, subject to Permitted Encumbrances. In the event the Company acquires a material leasehold estate in any property which is of the kind or nature described in the Granting Clauses hereof, such leasehold estate shall be made subject to a lien and first perfected security interest in favor of the Mortgagee by means of the Company's execution and delivery of a leasehold mortgage and security agreement in form and substance satisfactory to the Mortgagee. The Company agrees that in the event the Company acquires a leasehold estate as described in this §2.11, the Company will use its best efforts to promptly obtain from the subject lessor an agreement for the benefit of the Mortgagee, inter alia, providing that the lessor will give the Mortgagee written notice of any defaults under the subject lease together with the option to cure such defaults and providing for such other requirements as the Mortgagee may reasonably request.

Section 2.12. Indemnification; Waiver of Offset

(a) If the Mortgagee is made a party defendant to any litigation concerning this Mortgage or the Collateral or any part thereof or interest therein, then the Company shall indemnify, defend and hold the Mortgagee harmless from all liability by reason of said litigation, including reasonable attorneys' fees and expenses incurred by the Mortgagee in any such litigation, whether or not any such litigation is prosecuted to judgment. If the Mortgagee commences an action against the Company to enforce any of the terms hereof or because of the breach by the Company of any of the terms hereof, or for the recovery of any of the Senior Secured Obligations, the Mortgagee shall have its reasonable attorneys' fees and expenses paid by the Company. If the Mortgagee is a party to any discussion or negotiations relating to any amendment, waivers or consents to the Senior Secured Notes, the Note Agreements, the Credit Facility Notes, the Credit Facility or this Mortgage or relating to any loan modification, recasting, settlement or other agreement relating to the Senior Secured Obligations, then the Company shall indemnify, defend and hold the Mortgagee harmless from all liability, costs and expenses incurred in connection therewith, including reasonable attorneys' fees and expenses.

(b) All sums payable by the Company hereunder shall be paid without notice, demand, counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the obligations and liabilities of the Company hereunder shall in no way be released, discharged or otherwise affected (except as expressly provided herein) by reason of: (i) any damage to or destruction of or any condemnation or similar taking of the Collateral or any part thereof; (ii) any restriction or prevention of or interference with any use of the Collateral or any part thereof; (iii) any title defect or encumbrance on the Collateral or any part thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Mortgagee, or any action taken with respect to this Mortgage by any trustee or receiver of the Mortgagee, or by any court, in any such proceeding; (v) any claim which the Company has or might have against the Mortgagee; (vi) any default or failure on the part of the Mortgagee to perform or comply with any of the terms hereof or of any other agreement with the Company; or (vii) any other occurrence whatsoever, whether similar or dissimilar to the foregoing; whether or not the Company shall have notice or knowledge of any of the foregoing. Except as expressly provided herein, the Company waives to the extent permitted by law all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any of the Senior Secured Obligations and payable by the Company.

(c) The Company shall, at its sole expense, indemnify, defend (with attorneys, consultants and experts acceptable to Mortgagee), and hold Mortgagee harmless from and against any and all liens, damages, losses, liabilities, obligations, settlement payments, penalties, assessments, citations, directives, claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever which may at any time be imposed upon, incurred by or asserted or awarded against Mortgagee or the Collateral, and arising prior to the Company's obtaining title to the Collateral through foreclosure or other like proceedings, directly or indirectly from or out of: (i) the presence, release or threat of release of any Hazardous Materials on, in, under or affecting all or any portion of the Collateral or any surrounding areas, regardless of whether or not caused by or within control of the Company; (ii) the violation of any Environmental Laws relating to or affecting the Collateral, caused by the Company; (iii) the failure by the Company to comply fully with the terms and conditions of this § 2.12(b); (iv) the breach of any representation or warranty contained in this Mortgage or the Note Agreements relating to matters covered by this § 2.12(b); or (v) the enforcement of this § 2.12(b), including, without limitation, the cost of assessment, containment and/or removal of any and all Hazardous Materials from all or any portion of the Collateral or any surrounding areas, the cost of any actions taken in response to the presence, release or threat of release of any Hazardous Materials on, in, under or affecting any portion of the Collateral or any surrounding areas to prevent or minimize such release or threat of release so that it does not migrate or otherwise cause or threaten danger to present or future public health, safety, welfare or the environment, and costs incurred to comply with the Environmental Laws in connection with all or any portion of the Collateral or any surrounding areas. The indemnity set forth in this § 2.12(b) shall also include any diminution in the value of the security afforded by the Collateral or any future reduction in the sales price of the Collateral by reason of any matter set forth in this § 2.12(b). The Company's obligations under this § 2.12(b) shall survive payment in full of the indebtedness secured hereby and shall be in addition to all other rights of Mortgagee under this Mortgage, the Note Agreements, the Notes and the Intercreditor and Collateral Agency Agreement.

Section 2.13. Additional Secured Obligations.

    The Credit Facility and the Note Agreements contemplate that the Company may from time to time, incur additional Funded Debt (each, an "Additional Loan"), subject to the terms and conditions contained in the Credit Facility and the Note Agreements, and that each Additional Loan will be made pursuant to an Additional Facility, as defined in the Intercreditor and Collateral Agency Agreement, and evidenced by a promissory note of the Company which will be in the amount of the Additional Loan and which will be secured by this Mortgage. Such promissory notes evidencing the Additional Loans shall be included within the meaning of "Senior Secured Obligations," provided that:

    (1) Such person or entity making the Additional Loan shall become a party to the Intercreditor and Collateral Agency Agreement;

    (2) The Additional Loan is made in conformance with the Credit Facility, the Note Agreements and any outstanding Additional Facility and, after giving effect to such Additional Loan, no Event of Default shall have occurred or be continuing and no Default (as defined in the Note Agreements) shall have occurred;

    (3) The Mortgagee and Mortgagor shall sign an amendment to this Mortgage identifying the holder of the Additional Loan and the amount of the Additional Loan secured by this Mortgage;

    (4) The appropriate mortgage registry tax, if any, is paid in full; and

    (5) The Company obtains an opinion of counsel addressed to the Mortgagee to the effect that the Additional Loan is of equal priority with the existing Senior Secured Obligations.

SECTION 3. POSSESSION, USE AND RELEASE OF COLLATERAL.

    Section 3.1. Company's Right of Possession.  Provided no Event of Default hereunder has occurred and is continuing, the Company shall be suffered and permitted to remain in full possession, enjoyment and control of the Collateral subject always to the observance and performance of the terms of this Mortgage and of the Note Agreements and the Credit Facility.

    Section 3.2. Disposition of Certain Trade Property.  The Company, so long as no Event of Default hereunder has occurred and is continuing and subject to the provisions of §3.3 hereof in connection with each replacement, shall have full power, from time to time, in its discretion, and without any action by or notice to the Mortgagee, to sell, exchange, or otherwise dispose of, any item of Trade Property, at any time subject to the security interest hereof pursuant to the terms of the Note Agreements, Credit Facility or any Additional Facility or which may have become worn out, unserviceable, obsolete or unnecessary for use in the conduct of its business;provided however, that with respect to any worn out, unserviceable, obsolete or unnecessary Trade Property except where such item is, in the ordinary course of business, unnecessary to the conduct of its business, the Company shall contemporaneously replace the same with, or substitute for the same, other items of Trade Property having a value and utility at least equal to that of the items of Trade Property so replaced, which shall forthwith become, without further action, subject to the security interest of this Mortgage.

Section 3.3. Release of Trade Property.

(a) The Mortgagee, so long as no Event of Default hereunder exists, shall execute a release of its security interest hereunder as to the items of Trade Property which the Company has replaced or otherwise disposed of under §3.2 hereof (1) upon the written notice of the Company in the event such Trade Property has a fair market value in the good faith judgment of the Company of less than $500,000 which notice shall (i) reference this §3.3, (ii) estimate the fair market value of the Trade Property replaced or otherwise disposed of and (iii) request such release or (2) for all other Trade Property, upon:

    (1) receipt of an Officer's Certificate (A) stating that no Event of Default exists, (B) describing the newly acquired items of Trade Property (the"Replacement Items of Trade Property') replacing the old items of Trade Property, (C) stating that the Replacement Items of Trade Property are in as good operating condition as, and have a value, utility and useful life at least equal to that of the items of Trade Property so replaced, and (D) stating that the Company has good title to the Replacement Items of Trade Property, free of all Liens other than Permitted Encumbrances;

    (2) execution and delivery of a Mortgage and Security Agreement Supplement and any necessary financing statements subjecting the Replacement Items of Trade Property to the lien of this Mortgage, but only such supplement or financing statement as shall be necessary to subject such Replacement Items of Trade Property to the lien and first perfected security interest of this Mortgage;

    (3) receipt of evidence that such Mortgage and Security Agreement Supplement and financing statements have been recorded, registered and filed as may be deemed reasonably necessary by counsel for the Mortgagee in order to preserve and protect the rights of the Mortgagee as to all property comprising the Collateral; and

    (4) if the fair market value of the Replacement Items of Trade Property equal or exceed $500,000, receipt of an opinion of counsel to the effect that the Company's right, title and interest in and to the Replacement Items of Trade Property, are either subject to the lien of this Mortgage, or that such Mortgage and Security Agreement Supplement and any necessary financing statements have been recorded, registered and filed in such manner and in such places as may be required by law to preserve and protect the Mortgagee as to all property comprising the Collateral (including, without limitation, the Replacement Items of Trade Property).

(b) No purchaser in good faith of an item of Trade Property shall be bound to inquire into the authority of the Company to sell such item of Trade Property, or the authority of the Mortgagee to execute a release of its security interest, under the terms hereof.

Section 3.4. Release of Collateral—Loss, Damage to or Destruction of the Collateral and Prepayment of the Notes.Upon the occurrence of any material loss, damage to or destruction of the Collateral, the Company shall give the Mortgagee, within 30 days after the occurrence thereof; written notice of such loss, damage or destruction. Such notice shall generally describe the nature and extent of the loss, damage to or destruction of the Collateral and shall include a detailed estimate of the cost of repair or replacement of such damaged or destroyed Collateral. In the case of any loss, damage to or destruction of the Collateral which results in a prepayment of the Notes in accordance with the provisions of §4.1 hereof; the Mortgagee shall execute a release in respect of the damaged or destroyed Collateral upon receipt of such prepayment in full,provided no Event of Default hereunder has occurred and is continuing.

    All determinations of the cost of repair or replacement of the Collateral hereof shall be made by the Company in good faith and shall be evidenced by the delivery of an officer's certificate or a resolution of the Board of Directors of the Company certifying the accuracy and reasonableness of such determination. In making such determinations, the Company shall base such calculations on engineer's, architect's or other objective criteria, including insurance estimates of cost of repair, as shall be reasonably consulted in good faith by the Company.

    Section 3.5. Eminent Domain.  The Company, immediately upon obtaining knowledge of the institution of any proceeding for the condemnation of the Collateral or any portion thereof, shall notify the Mortgagee of the pendency of such proceeding. The Mortgagee may participate in any such proceeding, and the Company from time to time will deliver or cause to be delivered to the Mortgagee all instruments requested by it to permit such participation. Any award or compensation payable to the Company on account of such condemnation proceeding, if any, shall be paid to the Mortgagee, and such award of compensation shall be retained by the Mortgagee as part of the Collateral and applied in accordance with §4.1(a) or §4.1(b) hereof The Mortgagee shall be under no obligation to question the amount of the award of compensation and the Mortgagee may accept any such award of compensation. In any such condemnation proceedings the Mortgagee may be represented by counsel.

SECTION 4. APPLICATION OF INSURANCE AND CERTAIN OTHER MONEYS RECEIVED BY THE MORTGAGEE.

Section 4.1. Insurance Proceeds and Condemnation Awards The amounts received by or payable to the Mortgagee from time to time which constitute insurance proceeds in respect of any damage to or destruction of the Collateral or any part thereof or Condemnation Awards or compensation covering the Collateral (less the actual costs, fees and expenses incurred in the collection thereof) shall be held by the Mortgagee as part of the Collateral and shall be applied by the Mortgagee as set forth below:

(a) In case of any loss, damage to, destruction or condemnation of the Collateral or any part thereof for which the total cost of repair or replacement is less than $1,000,000, such proceeds shall be paid over to the Company and the Company shall have the right and the option, so long as no Event of Default hereunder has occurred and is continuing, to use the net insurance proceeds, Condemnation Awards or other compensation from such loss, damage to, destruction or condemnation of the Collateral for either (i) the repair or replacement of such Collateral so lost, damaged, destroyed or condemned, so long as such repair or replacement is commenced within 90 days of the receipt by the Company of such insurance proceeds or condemnation award and the Mortgagee has received written evidence satisfactory to the Mortgagee demonstrating that the collateral lost, damaged or destroyed will be replaced or restored to the market value and condition immediately prior to the loss, damage to, destruction or condemnation of or other event giving rise to the payment of such proceeds; or (ii) the reduction of the Senior Secured Obligations (whether or not then due) in accordance with the Intercreditor and Collateral Agency Agreement; and

(b) In case of any loss, damage to or destruction of the Collateral or any part thereof for which the total cost of repair or replacement is greater than or equal to $1,000,000, the net insurance proceeds, Condemnation Awards or other compensation from such loss, damage to, destruction or condemnation of the Collateral shall be placed in a separate escrow account and 90 days thereafter shall be applied by the Mortgagee to the reduction of the Senior Secured Obligations (whether or not then due) in accordance with the Intercreditor and Collateral Agency Agreement;provided, however, that the Mortgagee agrees, subject to the immediately following sentence, to release such insurance proceeds to the Company for replacement or restoration of the portion of the Collateral so lost, damaged or destroyed if, but only if; (i) no Event of Default hereunder has occurred and is continuing at the time of release, (ii) written application for such release signed by the President or any Vice President of the Company is received by the Mortgagee within 90 days of the placement of such proceeds in escrow and (iii) the Mortgagee has received evidence reasonably satisfactory to the Mortgagee demonstrating that the Collateral lost, damaged or destroyed has been or will be replaced or restored to the market value and condition immediately prior to the loss, damage to, destruction or condemnation of or other event giving rise to the payment of such insurance proceeds. All insurance proceeds shall be subject to the lien and security interest of the Mortgagee hereunder. In the case of any repair or replacement of the Collateral for which the cost exceeds $1,000,000, the Mortgagee shall receive a supplement hereto sufficient, as shown by an opinion of counsel (which may be counsel for the Company) to grant a valid first Lien and first perfected security interest (subject to Permitted Encumbrances) in any additions to or substitutions for the Collateral to or for the benefit of the Mortgagee, which opinion shall also cover the filing and/or recording of such supplement (and a financing statement or similar notice thereof if and to the extent permitted or required by applicable law) so as to perfect the Lien and security interest in such additions or substitutions, or in the alternative an opinion that no such supplement is required for such purpose.

    Section 4.2. Mortgage Title Insurance.  Any moneys received by the Mortgagee as payment for any loss under any policy of mortgage title insurance which was delivered by the Company shall become part of the Collateral.

    Section 4.3. Other Proceeds.  Any other moneys received by the Mortgagee in connection with the release of the Collateral shall be held by the Mortgagee as part of the Collateral and shall be applied by the Mortgagee upon the terms and in the manner provided in §5.3 hereof

    Section 4.4. Application if Event of Default Exists.  If an Event of Default hereunder has occurred and is continuing, all amounts received by the Mortgagee under this Mortgage, including without limitation, all amounts held pursuant to §4.5 hereof; shall be applied in the manner provided for in §5.3 hereof in respect of proceeds and avails of the Collateral.

Section 4.5. Investment of Collateral All monies held by the Mortgagee hereunder as Collateral shall be invested and reinvested by the Mortgagee at the direction of the Company in one or more Eligible Investments. The Mortgagee shall not in any way be held liable by reason of any insufficiency of such invested Collateral resulting from any loss on any Eligible Investment included therein. All interest earned on such Eligible Investments shall be held by the Mortgagee as Collateral hereunder and shall be invested and reinvested pursuant to this §4.5.

SECTION 5. DEFAULTS AND REMEDIES THEREFOR.

    Section 5.1. Events of Default.  The Company acknowledges and agrees, without limitation, that each and all of the terms and provisions of §11 of the Note Agreements and §13 of the Credit Facility, inclusive, have been and are incorporated into this Mortgage by reference to the same extent as though fully set out herein and that the term Event of Default wherever used in this Mortgage shall mean either: (a) an Event of Default as defined in the Note Agreements, (b) an Event of Default as defined in the Credit Facility, or (c) the failure of the Company to comply with any covenant, agreement or warranty contained in this Mortgage within 30 days after the earlier of the date that (1) the Mortgagee shall have given written notice thereof to the Company, or (2) such failure shall first become actually known to a Responsible Officer of the Company.

    Section 5.2. Remedies.  When any Event of Default hereunder has occurred and is continuing and pursuant to the terms and conditions of the Intercreditor and Collateral Agency Agreement, the Mortgagee may exercise any one or more or all, and in any order, of the remedies hereinafter set forth, it being expressly understood that no remedy herein or in the Intercreditor and Collateral Agency Agreement conferred is intended to be exclusive of any other remedy or remedies; but each and every remedy shall be cumulative and shall be in addition to every other remedy given herein or now or hereafter existing at law or in equity or by statute:

(a) Subject to compliance with Note Agreements, the Credit Facility and the Intercreditor and Collateral Agency Agreement, the Noteholders may, by notice in writing to the Company declare the entire unpaid balance of the Senior Secured Notes to be immediately due and payable; and thereupon all outstanding principal, together with all accrued interest thereon and premium, if any, and all other fees or other amounts payable with respect thereto shall be and become immediately due and payable. Subject to compliance with Note Agreements, the Credit Facility and the Intercreditor and Collateral Agency Agreement, the Banks may, by notice in writing to the Company declare the entire unpaid balance of the Credit Facility Notes to be immediately due and payable; and thereupon all outstanding principal, together with all accrued interest thereon and premium, if any, and all other fees or other amounts payable with respect thereto shall be and become immediately due and payable.

(b) Subject to the terms and conditions of the Intercreditor and Collateral Agency Agreement, the Mortgagee, personally or by agents or attorneys may, to the extent permitted by law, enter into and take possession of all or any part of the Collateral, and may forthwith use, operate and manage the Collateral, collect the earnings and income therefrom, pay all charges including taxes and assessments levied thereon and operating and maintenance expenses and all disbursements and liabilities of the Company hereunder and apply the net proceeds arising from any such operation of the Collateral as provided in §5.3 hereof in respect of the proceeds of a sale of the Collateral. The right to enter and take possession of the Collateral and use any personal property therein, to manage, operate and conserve the same, and to collect the rents, issues and profits thereof; shall be in addition to all other rights or remedies of the Mortgagee hereunder or afforded by law, and may be exercised concurrently therewith or independently thereof The expenses (including any reasonable receiver's fees, reasonable counsel fees, costs and agent's compensation) incurred pursuant to the powers herein contained shall be secured hereby and the Company promises to pay all such expenses upon demand together with interest thereon at the Overdue Rate. The Mortgagee shall not be liable to account to the Company for any action taken pursuant hereto other than to account for any rents actually received by the Mortgagee. Without taking possession of the Collateral, the Mortgagee may, in the event the Collateral becomes vacant or is abandoned, take such reasonable steps as it deems appropriate to protect and secure the Collateral (including hiring watchmen therefor) and all costs incurred in so doing shall constitute so much additional Senior Secured Obligations payable upon demand with interest thereon at the Overdue Rate.

(c) Subject to the terms and conditions of the Intercreditor and Collateral Agency Agreement, the Mortgagee may, if at the time such action may be lawful and always subject to compliance with any mandatory legal requirements, either with or without taking possession and either before or after taking possession, and without instituting any legal proceedings whatsoever, and having first given notice of such sale to the Company at least 30 days prior to the date of such sale and having given any other notice which may be required by law, sell and dispose of said Collateral or any part thereof at public auction or private sale to the highest bidder, which may be the Company in one lot as an entirety or in separate lots (the Company for itself and for all who may claim by, through or under it hereby expressly waiving and releasing all rights to have the Collateral marshaled to the extent permitted by law), and either for cash or on credit and on such terms as the Mortgagee may determine and at any place (whether or not it be the location of the Collateral or any part thereof) designated in the notice above referred to. Any such sale or sales may be adjourned from time to time by announcement at the time and place appointed for such sale or sales or for any such adjourned sale or sales, without further published notice.

(d) Subject to the terms and conditions of the Intercreditor and Collateral Agency Agreement, the Mortgagee may proceed to protect and enforce its rights by a suit or suits in equity or at law, or for the specific performance of any covenant or agreement contained herein or in the Notes, or in aid of the execution of any power herein or therein granted, or for the foreclosure of this Mortgage, or for the enforcement of any other appropriate legal or equitable remedy. Upon the bringing of any suit to foreclose this Mortgage or to enforce any other remedy available hereunder, the plaintiff shall be entitled as a matter of right, without notice and without giving bond to the Company or anyone claiming under, by or through it, and without regard to the solvency or insolvency of the Company or the then value of the premises, to apply to an appropriate court to have a receiver appointed of all the Collateral and of the earnings, income, rents, issues, profits and proceeds thereof; with such power as the court making such appointment shall confer, and the Company does hereby irrevocably consent to such appointment. It is understood and agreed upon by the Company and the Mortgagee that this Mortgage may be foreclosed upon simultaneously in one or more jurisdictions.

(e) Subject to the terms and conditions of the Intercreditor and Collateral Agency Agreement, in case of any sale of the Collateral, or of any part thereof; pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Mortgage, the Mortgagee may bid and become the purchaser, and the purchaser or purchasers, for the purpose of making settlement for or payment of the purchase price, shall be entitled to turn in and use the Notes and any claims for interest and premium matured and unpaid thereon, in order that there may be credited as paid on the purchase price the sum apportionable and applicable to the Notes, including principal and interest and premium thereof; out of the net proceeds of such sale after allowing for the proportion of the total purchase price required to be paid in actual cash. If at any foreclosure proceeding the Collateral shall be sold for a sum less than the total amount of indebtedness for which judgment is therein given, the Mortgagee shall be entitled to the entry of a deficiency decree against the Company and against the property of the Company for the amount of such deficiency.

(f) Subject to the terms and conditions of the Intercreditor and Collateral Agency Agreement, the Mortgagee shall have any and all rights and remedies (including, without limitation, extra judicial power of sale) provided to a secured party by the Uniform Commercial Code with respect to any and all parts of the Collateral which are and which are deemed to be governed by the Uniform Commercial Code. Without limiting the generality of the foregoing, the Mortgagee shall, with respect to any part of the Collateral constituting property of the type in respect of which realization on a Lien or security interest granted therein is governed by the Uniform Commercial Code, have all the rights, options and remedies of a secured party under the Uniform Commercial Code, including, without limitation, the right to the possession of any such property, or any part thereof, and the right to enter without legal process any premises where any such property may be found. Any requirement of said Uniform Commercial Code for reasonable notification shall be met by mailing written notice to the Company at its address set forth in §6.3 hereof at least 30 days prior to the sale or other event for which such notice is required.

(g) The Mortgagee shall have any and all rights and remedies provided for in the Intercreditor and Collateral Agency Agreement.

    Section 5.3. Application of Proceeds.  The purchase money proceeds and/or avails of any sale of the Collateral, or any part thereof and the proceeds and the avails of any remedy hereunder shall be paid to and applied as follows:

(a) first, to the payment pro rata of costs and expenses of foreclosure or suit, if any, and of such sale, and to the extent permitted by applicable law, the reasonable compensation of the Mortgagee's agents, attorneys and counsel, and of all proper expenses, liability and advances incurred or made hereunder by the Mortgagee or such agents, attorneys and counsel, and of all taxes, assessments or liens superior to the Lien of these presents, except any taxes, assessments or other superior Lien subject to which said sale may have been made;

(b) second, in accordance with the terms and conditions of the Intercreditor and Collateral Agency Agreement

    Section 5.4. Waiver of Extension, Appraisement and Stay Laws.  The Company covenants that, upon the occurrence and the continuance of an Event of Default hereunder and the acceleration of the Notes pursuant to §5.2(a) hereof and to the extent that such rights may then be lawfully waived, it will not at any time thereafter insist upon or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension law now or at any time hereafter in force, or claim, take or insist upon any benefit or advantage of or from any law now or hereafter in force providing for the valuation or appraisement of the Collateral or any part thereof prior to any sale or sales thereof to be made pursuant to any provision herein contained, or to the decree, judgment or order of any court of competent jurisdiction or, after confirmation of any such sale or sales claim or exercise any right under any statute now or hereafter made or enacted by any state or otherwise to redeem the property so sold or any part thereof, and hereby expressly waives for itself and on behalf of each and every person who may claim under it, all benefit and advantage of any such law or laws which would otherwise be available to any such Person in connection with the enforcement of any of the Mortgagee's remedies hereunder; and covenants that it will not in connection with any such enforcement proceedings invoke or utilize any such law or laws or otherwise hinder, delay or impede the execution of any power herein granted and delegated to the Mortgagee but will suffer and permit the execution of every such power as though no such law or laws had been made or enacted.

    The Company hereby waives any and all rights of redemption from sale under any order or decree of foreclosure pursuant to rights herein granted, on behalf of the Company, and each and every Person acquiring any interest in, or title to the Collateral described herein subsequent to the date of this Mortgage, and on behalf of all other Persons to the extent permitted by applicable law.

    Any sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall operate to divest all right, title, interest, claim and demand whatsoever, either at law or in equity, of the Company in and to the property sold and shall be a perpetual bar, both at law and in equity, against the Company, its successors and assigns, and against any and all Persons claiming the property sold or any part thereof under, by or through the Company, its successors or assigns.

    Section 5.5. Effect of Discontinuance of Proceedings.  In case the Mortgagee shall have proceeded to enforce any right under this Mortgage by foreclosure, sale, entry or otherwise, and such proceedings shall have been discontinued through written notice to the Company by the Mortgagee or shall have been determined adversely, then and in every such case the Company and the Mortgagee shall be restored to its position and rights hereunder, except with respect to any rights specifically denied in a proceeding which was adversely determined, as they existed immediately prior to the commencement of such proceedings with respect to the property subject to the Lien and first perfected security interest of this Mortgage.

    Section 5.6. Delay or Omission Not a Waiver.  No delay, failure or omission of the Mortgagee to exercise any right or power arising from any Event of Default on the part of the Company shall exhaust or impair any such right or power or prevent its exercise during the continuance of such Event of Default. No waiver by the Mortgagee of any such Event of Default, whether such waiver be full or partial, shall extend to or be taken to affect any subsequent Event of Default, or to impair the rights resulting therefrom, except as may be otherwise provided herein. No right, power or remedy hereunder is intended to be exclusive of any other right, power or remedy but each and every right, power or remedy shall be cumulative and in addition to any and every other right, power or remedy given hereunder or otherwise existing. Nor shall the giving, taking or enforcement of any other or additional security, collateral or guaranty for the payment of the indebtedness secured under this Mortgage operate to prejudice, waive or affect the security of this Mortgage or any rights, powers or remedies hereunder; nor shall the Mortgagee be required to first look to, enforce or exhaust such other or additional security, collateral or guaranties.

    Section 5.7. Costs and Expenses of Foreclosure.  In any suit to foreclose the Lien or first perfected security interest hereon there shall be allowed and included as additional Senior Secured Obligations in the decree for sale all expenditures and expenses which may be paid or incurred by or on behalf of the Mortgagee for reasonable attorney's fees, reasonable appraiser's fees, outlays for documentary and expert evidence, stenographic charges, publication costs and costs (which may be estimated as the items to be expended after the entry of the decree) of procuring all such abstracts of title, title searches and examination, guarantee policies, and similar data and assurances with respect to title as the Mortgagee may deem to be reasonably necessary either to prosecute any foreclosure action or to evidence to the bidder at any sale pursuant thereto the true condition of the title to or the value of the Collateral, all of which expenditures shall become so much additional Senior Secured Obligations which the Company agrees to pay and all of such shall be immediately due and payable with interest thereon from the date of expenditure until paid at the Overdue Rate.

    Section 5.8. Notes to Become Due Upon Sale by Mortgagee.  Upon any sale under or by virtue of this Mortgage, whether pursuant to foreclosure, power of sale or otherwise, the entire unpaid principal amount of the Notes shall, unless the Mortgagee shall expressly declare otherwise or if not previously declared due and payable, immediately become due and payable, together with interest accrued thereon and premium and/or fees, if any, and all other indebtedness which this Mortgage by its terms secures, anything contrary in this Mortgage, the Notes or any other instrument serving the Notes to the contrary notwithstanding.

    Section 5.9. Remedies Subject to Applicable Law.  All rights, remedies, and powers provided by this Section5 entitled "Defaults and Remedies Therefor" may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of law, and all of the provisions of this Section are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Mortgage invalid, unenforceable, or not entitled to be recorded, registered, or filed under the provisions of any applicable law.

SECTION 6. MISCELLANEOUS.

    Section 6.1. Successors and Assigns.  Whenever any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all the covenants, premises and agreements in this Mortgage contained by or on behalf of the Company, or by or on behalf of the Mortgagee, shall bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not.

    Section 6.2. Severability.  The unenforceability or invalidity of any provision or provisions of this Mortgage shall not render any other provision or provisions herein contained unenforceable or invalid.

    Section 6.3. Addresses for Notices and Demands.  All communications provided for herein shall be in writing and shall be deemed to have been given (unless otherwise required by the specific provisions hereof in respect of any matter) when delivered personally or when deposited in the United States mail, registered or certified, postage prepaid, or mailed prepaid overnight air courier, addressed as follows:

If to the Company:	American Crystal Sugar Company 101 North 3rd Street Moorhead, Minnesota 56560
If to the Mortgagee:	St. Paul Bank for Cooperatives, as Collateral Agent 375 Jackson Street St. Paul, Minnesota 55101-1849

or as to either party at such other address as such party may designate by notice duly given in accordance with this Section to the other party.

    Section 6.4. Headings and Table of Contents.  The headings of the sections of this Mortgage and the table of contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof.

    Section 6.5. Release of Mortgage.  This Mortgage shall be a continuing agreement in every respect and shall remain in full force and effect until all of the Notes, premium, if any, principal and interest thereon and all other Senior Secured Obligations, shall have been fully paid and satisfied and any commitment of the Noteholders or the Banks to extend any credit to the Company under the Note Agreements or the Credit Facility, respectively, shall have terminated. Upon such termination of the Note Agreements and the Credit Facility, the Mortgagee shall, upon the request and at the expense of the Company, forthwith release all its liens and security interests hereunder.

    Section 6.6. Counterparts.  This Mortgage may be executed, edged and delivered in any number of counterparts, each of such counterparts constituting an original but all together only one Mortgage.

    Section 6.7. Agency.  Each holder of the Notes, by its execution and delivery of the Intercreditor and Collateral Agency Agreement, appoints and authorizes the Mortgagee to hold the lien of this Mortgage on the Collateral for the equal and ratable benefit and security of all holders of the Notes, without preference, priority or distinction of any thereof or any other by reason of difference in time of issuance, sale or delivery of the Notes to such holders. The Mortgagee shall take such actions in respect of the Collateral (including actions after the occurrence of an Event of Default) as are delegated to the Mortgagee by the terms of the Intercreditor and Collateral Agency Agreement.

    Section 6.8. Successor Mortgagee.  The Mortgagee may, at any time, by instrument in writing, appoint a successor or successors to, or discharge and appoint a new Mortgagee in the place of; any Mortgagee named herein or acting hereunder, which instrument, executed and acknowledged by the Mortgagee, and recorded in the appropriate office of the county wherein the Collateral is situated, shall be conclusive proof of the proper substitution of such successor or successors or new Mortgagee, who shall have all the estate powers, duties, rights and privileges of the predecessor Mortgagee; provided, that any substitutions pursuant to this §6.8 shall be made subject to the provisions of the Intercreditor and Collateral Agency Agreement.

    Section 6.9. Governing Law.  This Mortgage should be construed in accordance with and governed by the laws of the State of Minnesota; provided, however, that as to any matter involving any portion of the Collateral consisting of real property located in the State of North Dakota, the laws of the State of North Dakota shall govern.

    Section 6.10. Time.  Time shall be of the essence of this Mortgage.

    Section 6.11. Future Advances.  At all times, this Mortgage secures as part of the Senior Secured Obligations the payment of any and all loan commissions, service charges, liquidated damages, attorney's fees, expenses and advances due to or incurred by the Mortgagee in connection with the Senior Secured Obligations, all in accordance with the Notes, this Mortgage, the Note Agreements, the Credit Facility, any Additional Credit Facility and any of the Senior Security Documents, together with such future or additional advances as may be made by the Mortgagee or the holder hereof; at its exclusive option to the Company or its successors or assigns in title, for any purpose,provided that all such advances are made within twenty years of the date of this Mortgage.

    Section 6.12. Waiver of Jury Trial.  The Company and the Mortgagee hereby knowingly, voluntarily and intentionally waive the right to trial by jury in respect of any litigation based hereon, arising out of, under or in connection with this Mortgage or any other Senior Security Document contemplated to be executed in connection herewith, or any course of conduct, course of dealings, statements (whether verbal or written) or acts of either party, or any exercise of any party of their respective rights under this Mortgage or any such Senior Security Document. The Company hereby acknowledges that this waiver of jury trial is a material inducement to the Noteholders in extending credit to the Company, that the Noteholders would not have extended credit without this waiver of jury trial and that the Company has had an opportunity to consult with an attorney in connection with this waiver of jury trial and understands the legal affect of this waiver.

    Section 6.13. Special Minnesota Provisions.  The terms, conditions and provisions of this Section shall apply solely to the portion of the security herein described which is located in Minnesota and shall govern, control and take precedence with respect to such portion of the security:

(a) Assignment of Rents and Lease. Receiver. The Mortgagee's rights and remedies hereunder upon the occurrence of an Event of Default shall include, without limitation, the fullest range and benefit of the rights and remedies made available to a Mortgagee pursuant to Mm. Stat. § 576.1 and Mm. Stat. § 559.17, as said statutes may be amended from time to time. In the event that Mortgagee elects to exercise its remedies under said statutes, or any of said remedies, the terms and provisions of said statutes, as amended, governing the exercise of said remedies shall govern, control and take precedence over any contrary terms contained in this Mortgage. The exercise by Mortgagee of the statutory remedies referenced in this paragraph shall not constitute Mortgagee a "mortgagee-in-possession" under Minnesota law, or give rise to any liability which might otherwise attach to Mortgagee as a mortgagee-in-possession.

(b) Remedies of Mortgagee. Mortgage Foreclosure. Mortgagor does hereby grant and confer upon Mortgagee the fullest rights and remedies available for foreclosure of this Mortgage by action or by advertisement pursuant to Mm. Stat. Chapters 580, 581 and 582, as said statutes may be amended from time to time, and pursuant to other applicable Minnesota laws and statutes, as amended, governing and authorizing mortgage foreclosures by action and by advertisement; and the power of sale granted Mortgagee in this Mortgage shall include, without limitation, the power of sale required to permit, at Mortgagee's option, lawful foreclosure of this Mortgage by advertisement in accordance with the statutes then made and provided.

(c) Maturity Date. The liabilities secured hereby shall mature no later than August 31, 2028.

(d) Mortgage Registry Tax. Mortgagor agrees to pay upon demand, or upon demand to promptly reimburse Mortgagee for the payment of; the amount of the Mortgage Registry Tax payable with respect to and upon the recording of this Mortgage in accordance with Minn. Stat. § 287.05.

(e) Fixture Financing Statement. This Mortgage covers goods which are or are to become fixtures. The name and address of the Mortgagor (debtor) is:

    American Crystal Sugar Company
101 North 3rd Street
Moorhead, MN 56560

The name and address of the Mortgagee (secured party) is:

St. Paul Bank for Cooperatives, as Collateral Agent
375 Jackson Street
St. Paul, MN 55101-1849

Section 6.14. Special North Dakota Provisions

(a) THE PARTIES AGREE THAT THE PROVISIONS OF THE SHORT-TERM MORTGAGE REDEMPTION ACT (N.D.C.C., CHAPTER 32-19.1) SHALL GOVERN THIS MORTGAGE.

(b) PURSUANT TO NORTH DAKOTA CENTURY CODE SECTION 32-19-06.1, MORTGAGOR IS HEREBY PUT ON NOTICE THAT MORTGAGEE MAY HAVE THE RIGHT TO PROCEED TO OBTAIN AND COLLECT A DEFICIENCY JUDGMENT, TOGETHER WITH FORECLOSURE OF THE REAL PROPERTY MORTGAGED UNDER APPLICABLE LAWS.

    IN WITNESS WHEREOF, the Company has caused this Mortgage to be executed in its behalf by its Treasurer as of the day and year first above written.

AMERICAN CRYSTAL SUGAR COMPANY
By:	/s/ BRIAN INGULSRUD Its: Treasurer
Address: 101 North 3rd Street Moorhead, Minnesota 56560 Taxpayer Identification No: 84-0004720

State of Minnesota	)
	)	ss.
County of Ramsey	)

    This instrument was acknowledged before me on September 22, 1998, by Brian Ingulsrud, as Treasurer of American Crystal Sugar Company, a Minnesota cooperative corporation, on behalf of the corporation.

 
/s/ KAREN R. KEES Notary Public

QuickLinks

RECITALS:
GRANTING CLAUSE FIRST REAL PROPERTY
GRANTING CLAUSE SECOND TRADE PROPERTY

GRANTING CLAUSE THIRD GENERAL INTANGIBLES
GRANTING CLAUSE FOURTH CONDEMNATION AWARDS AND PAYMENTS
GRANTING CLAUSE FIFTH PROCEEDS
EXCEPTED PROPERTY

EX-10.27

Exhibit 10.27

*Total of Commercial Paper, Seasonal Loan, CCC and other short term loans.

Date Approved: 03/05/99

ST. PAUL BANK FOR COOPERATIVES Term Loan Agreement

Loan Agreement, Note Nos. 31142 / 31142NP / 30343 / 30800NP, is hereby further amended in its entirety, to read as follows:

Borrower:		Application No. S-26959
AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD, MINNESOTA
New Loan		Present Loans
$20,000,000.00—Term Loan
	$	98,057,180.00	—Term Loan
		76,142,820.00	—Term Loan
		31,000,000.00	—Term Loan
		8,000,000.00	—Term Loan
	$	213,200,000.00
Increased Loans
$3,940,300.00—Term Loan, Note No. 31142
$3,059,700.00—Term Loan, Note No. 31142NP*

Total Loans
	$	20,000,000.00	—Term Loan, Note No. 31144NP*
		101,997,480.00	—Term Loan, Note No. 31143
		79,202,520.00	—Term Loan, Note No. 31143NP*
		31,000,000.00	—Long Term L/C Commitment, Note No. 30343
		8,000,000.00	—Term Facility Loan, Note No. 30800NP*
	$	240,200,000.00	—Total

*NP indicates a non-patronage note

The St. Paul Bank for Cooperatives (the "Bank") and Borrower agree to the above loans (the "Loans") to the Borrower subject to all the terms and conditions of this loan agreement. Patronage Loans and Commitments require the Borrower to purchase equities of the Bank as set forth in the "CONDITIONS" section, paragraph B of this loan agreement.

I. NOTES AND SECURITY

Advances under this loan agreement, together with any existing indebtedness of the Borrower to the Bank, shall be evidenced by a promissory note or notes acceptable to the Bank, and shall be secured to the extent of all collateral presently held by the Bank, and shall be secured by the Amended and Restated Mortgage and Security Agreement dated as of September 15, 1998.

II. LIMITATION ON ADVANCES

    A. The total Term Loans outstanding under this or any loan agreement between the Bank and the Borrower shall not exceed the amount shown in the above heading.

B.

The minimum advance on any Loan at one time is $2,000,000.



C.

All advances on Term Loans shall be allocated 56.29% to Note No. 31143 and 43.71% to Note No. 31143NP.



D.

No advances shall be made on Term Loan, Note No. 31144NP, until Term Loans, Note Nos. 31143 / 31143NP, have been fully advanced.

III. INTEREST

A.

All Term Loans, Note Nos. 31143 / 31143NP / 31144NP balances which are not part of a fixed amount (as defined in the "CUSTOMER MANAGED FIXED RATE TERM ADVANCES AND MATURITIES" section of this loan agreement), shall bear interest at a variable interest rate per annum equal to the Bank's cost of funds plus 105 basis points(1.05%).

B.

All Term Loans, Note Nos. 31143 / 31143NP / 31144NP balances which are part of a fixed amount (as defined in the "CUSTOMER MANAGED FIXED RATE TERM ADVANCES AND MATURITIES" section of this loan agreement), shall bear rates of interest as follows:

TABLE 2

RATE PRODUCT	INDEX	SPREAD OVER INDEX IN BASIS POINTS
One Month	LIBOR	90
Two Months	LIBOR	90
Three Months	LIBOR	90
Six Months	LIBOR	90
One Year	U.S.$ Constant Maturity Treasury ("US$CMT")	125
Two Years	US$CMT	125
Three Years	US$CMT	125
Four Years	US$CMT	125
Five Years	US$CMT	125
Seven Years	US$CMT	140
Ten Years	US$CMT	140
Floor (Minimum) Margin (For One to Ten Year Fixed Rate Products Only)	Bank's cost of funds	105

In addition, the spread over the above indices, including the Floor Margin, may increase or decrease for future fixed amounts for Term Loans, Note Nos. 31143 / 31143NP / 31144NP, based on the Borrower's previous fiscal quarter's leverage ratio, as defined in the "CONDITIONS" section, paragraph L., as follows:

TABLE 3

LEVERAGE RATIO (as defined in Section VII., paragraph L.)	INCREASE / DECREASE TO SPREAD	CHANGE TO SPREAD LISTED IN TABLE 2 (IN BASIS POINTS)
A. Equal to or greater than 1.35:1.00	Increase	20
B. Equal to or greater than 1.20:1.00, but less than 1.35:1.00	None	0
C. Less than 1.20:1.00, but greater than or equal to 1.00:1.00	Decrease	10
D. Less than 1.00:1.00	Decrease	20

The spread shall be adjusted quarterly on the latter of either: (a) five business days after the Bank's receipt of the Borrower's certification of compliance with the leverage ratio, or (b) 30 days after the end of each calendar quarter.

LIBOR (London Inter-Bank Offered Rate) means, for any period selected, the rate per annum (rounded upwards, if necessary, to the next one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for the period selected as it appears on Bloomberg BBAM page as of 11:00 a.m. (London, England time) on the date two business days before the effective date of period selected. All fixed amounts on the Term Loans shall be allocated to Note No. 31143 and Note No. 31143NP and Note No. 31144NP according to the percentages specified in Section II. C. above.

C.

All outstanding loan balances under the Term Facility Loan, Note No. 30800NP shall bear such rate of interest as described in the Note Agreement dated November5, 1994, by and between the Bank, the Borrower, and the Bank of North Dakota (the "Note Agreement").



D.

Any outstanding draws made under the Long Term L/C Commitment No. 30343 shall bear interest at a variable interest rate per annum equal to the Prime Rate, with any change in the variable interest rate to be effective as changes are reported in The Wall Street Journal.



E.

Interest on the Loans shall be payable on the last day of each calendar quarter, in arrears, and shall be computed on the basis of a year of 360 days for the actual number of days elapsed.



F.

The basis point spread on the Loans shall remain in effect for interest rate quotes made through January 31, 2000, after which date the Bank shall have the option of increasing or decreasing the basis point spread.

IV. FEES

A.

The Loans, except for Term Facility Loan, Note No. 30800NP shall be subject to an agency fee of 10 basis points (0.10%) on an annualized basis, on the daily outstanding balances payable on the last day of each calendar quarter, in arrears, and shall be computed on the basis of a year of 360 days for the actual number of days elapsed.



B.

Commitments arising from special payments on Term Loans, Note Nos. 31143 / 31143NP / 31144NP, described in the "REPAYMENT" section of this loan agreement, shall be subject to a commitment fee of 25 basis points (0.25%) on an annualized basis, on the average daily commitment. Any such fees incurred shall be payable on the last day of the calendar quarter, in arrears, computed on the basis of a year of 360 days for the actual number of days elapsed in which reinstatable Term Loans commitments were outstanding.



C.

Long Term L/C Commitment, No. 30343, shall be subject to an origination fee of five basis points (0.05%), and annual commitment fee of 62.5 basis points (0.625%,) payable in advance of March 31 of each year.



D.

Borrower shall pay a closing fee of $5,000 ($2,000 patronage, $3,000 non-patronage).

V. CUSTOMER MANAGED FIXED RATE TERM ADVANCES AND MATURITIES

In accordance with and subject to the Bank's Customer Managed Fixed Rate Term Program and subject to the Bank's overall program funding limitations, it is agreed the interest rate may be fixed on any term loan indebtedness (the "fixed amount") under this loan agreement as follows:

A.

The minimum fixed amount shall be $2,000,000.



B.

Each fixed amount and each selected pricing maturity date shall be treated as a separate indebtedness for interest rate designation and interest billing purposes.

C.

Fixed amount pricing maturities shall be for a minimum maturity of one month and a maturity date no later than the final repayment date of Term Loans, Note Nos. 31143 / 31143NP / 31144NP.



D.

The Borrower shall have indebtedness under the variable rate term interest rate program or priced maturing fixed amounts against which to apply scheduled term loan payments as set forth in the "REPAYMENT" section of this loan agreement.



E.

For fixed amounts that are not indexed to LIBOR, the Borrower's selection of loan interest rate quotes and pricing maturities must be communicated to the Bank by 2:00 p.m. (Central Time) on the day prior to the fixed amount advance. If this selection deadline is not met, maturing fixed amounts shall automatically convert to the variable rate term loan. For fixed amounts that are indexed to LIBOR, the Borrower shall notify the Bank by 12:01 p.m. (Central Time) at least three business days prior to the date upon which the Borrower requests a fixed amount to become effective, whether that fixed amount represents a new advance, pricing maturity date of an existing LIBOR fixed amount, or a conversion from the variable rate. If these selection deadlines are not met, maturing fixed amounts shall automatically convert to the variable rate term loan.



F.

The Borrower may select fixed interest rates and pricing maturities for subsequent delivery. Fixed amounts priced by the Borrower shall ordinarily exceed $2,000,000 per transaction. The Bank shall:



1.

At the request of the Borrower, offer indications of current market interest rates adjusted for future deliveries of fixed amounts with various pricing maturities.



2.

Summarize the interest rate, fixed amount, selected pricing maturity, and future delivery date of the fixed amount by written notice of confirmation to and acceptance by the Borrower.




In the event the Borrower fails to take delivery of fixed amounts, the Borrower shall be subject to prepayment penalties as calculated for fixed amounts in paragraph G. below.

G.

Fixed amounts cannot be repaid or repriced by the Borrower prior to their respective pricing maturity dates without being subject to prepayment penalties. Such penalties shall be determined according to a methodology specified by the Bank which preserves the Bank's yield on the fixed amount prepaid or repriced and which is based upon the difference between the Bank's cost of like funds to pricing maturity at the time of prepayment and the existing fixed rate on the fixed amount.



H.

Each fixed amount shall be summarized in the Daily Activity Statement (the "statement") to the Borrower. Each statement shall reference and confirm the following:

1.

Note Nos. 31143/31143NP/31144NP.



2.

The fixed amount and its Contract No.



3.

The rate of interest.



4.

The effective date.



5.

The pricing maturity date.




I.

The Borrower agrees that the statement shall verify the understanding reached by the parties, and that the Borrower shall be bound by the statement without its signature; provided, however, if there is an error reflected in the statement, the Borrower shall notify the Bank of the error within five days after receipt of the statement and an appropriate correction will be made.



J.

If there is a question on the interest rate applicable to the fixed amount, the rate as established by the Bank for such amounts shall be controlling.

VI. TERM FACILITY LOAN

Advances made on the Term Facility Loan, Note No. 30800NP, have been sold to the Bank of North Dakota in accordance with a Participation Agreement between the Bank and the Bank of North Dakota. The Term Facility Loan is subject to the terms and conditions, including interest rate and repayment, of the Note Agreement, by and between the Bank, the Borrower and the Bank of North Dakota.

VII. CONDITIONS

While this loan agreement is in effect, the Borrower agrees to comply with the following conditions:

A.

Eligibility Status: The Borrower will maintain its status as an eligible borrower as defined in the Farm Credit Act of 1971, as amended (12 U.S.C. 2129).



B.

Patronage Loans: Note Nos. 31143 / 30343 shall be patronage loans and the Borrower will purchase equities of the Bank in such amounts as prescribed by the Bank's capital plan and any amendments to the plan. The Borrower will receive allocations of patronage earnings for Note Nos. 31143 / 30343. The Bank shall have a first lien on all stock or other equities of the Borrower in the Bank as collateral, among other, for the payment of any indebtedness of the Borrower to the Bank.



C.

Non-Patronage Loans: Note Nos. 31143NP / 30800NP / 31144NP shall be non-patronage loans. The Borrower foregoes any opportunity to purchase Bank equities or receive allocations of patronage earnings on Note Nos. 31143NP / 30800NP / 31144NP.



D.

Insurance: The Borrower will maintain business and property insurance with financially sound insurers, in amounts sufficient to protect the Loans. The Borrower shall purchase and maintain flood insurance as may be required by the Bank in accordance with applicable law including, but not limited to, regulations of the Farm Credit Administration.



E.

Financial Information: The Borrower will furnish the Bank:



1.

Audited annual financial statements prepared in accordance with generally accepted accounting principles ("GAAP") within 120 days after the end of each fiscal year;



2.

Annual operating budgets within 60 days after the end of each fiscal year;



3.

Quarterly and annual financial statements as prepared and filed with the Securities Exchange Commission within five days of filing; and



4.

Such other information as the Bank may request relative to the Borrower's business.




Further, the Borrower shall cause Crystech, L.L.C. ("Crystech") to furnish the Bank:

1.

Audited annual financial statements prepared in accordance with GAAP within 120 days after the end of each fiscal year; and



2.

Quarterly financial statements within 60 days after the end of each fiscal quarter.




Borrower shall (and shall cause Crystech to) permit such examination of its books and records as the Bank may reasonably specify.

F.

Negative Pledge: The Borrower will not mortgage, pledge, assign, or grant security interests in any assets to any other party, except the permitted liens identified on Attachment A, without the prior written consent of the Bank.



G.

Outside Senior Secured Borrowings: The Borrower will not borrow senior secured funds (with original maturity dates of 12 months or more) from other sources, except for permitted borrowings identified on Attachment B, without prior approval of the Bank. This approval will not be unreasonably withheld.



H.

Grower Agreements: The Borrower shall abide by the terms and conditions of its member grower agreements; make no amendments or changes to the agreements without the prior written consent of the Bank; and extend the agreements for an additional five years when the current contracts expire.



I.

Capital Expenditure Budget: The Borrower will furnish an annual capital expenditure budget, within 60 days after the end of each fiscal year. The Borrower will also furnish a revised budget if increases over the original capital expenditure budget are approved by the board of directors.



J.

Minimum Net Working Capital: The Borrower shall maintain minimum net working capital of not less than $30,000,000; and will attain and maintain minimum net working capital of not less than $32,500,000 by February 28, 1999; and will attain and maintain minimum net working capital of not less than $35,000,000 by November 30, 1999. Minimum net working capital shall be calculated in accordance with GAAP, plus any reinstatable unadvanced available term loan commitment, plus the estimated unit retain.



K.

Current Ratio: The Borrower shall maintain a current ratio (current assets divided by adjusted current liabilities) of 110% or more based on a rolling four quarter average. Current liabilities shall be adjusted to exclude current year unit retains from amounts due members.



L.

Leverage Ratio: The Borrower will maintain a leverage ratio of not more than1.50:1.0, and attain a leverage ratio of not more than 1.40:1.0 on November 30, 2002. Leverage ratio is long term debt (excluding current maturities) calculated in accordance with GAAP plus or minus the difference between actual working capital and minimum net working capital (as defined in Paragraph J. above), divided by total members investments plus the estimated unit retains.



M.

Term Debt Coverage Ratio: The Borrower's term debt outstanding shall not exceed six times (6) the average annual net funds generated during the most recent three fiscal years. Net funds generated in any fiscal year are to be calculated as follows:




Add:

1.

Unit retains.



2.

Depreciation and amortization.



3.

Net income from non-member business and member business tax timing differences.



4.

Decrease in investments in other cooperatives (excluding subsidiaries).



5.

Net revenue from the sale of stock.




Minus:

6.

Increase in investments in other cooperatives (excluding subsidiaries).



7.

Net loss from non-member business and member business tax timing differences.



8.

Provision for income tax.



9.

Members' investment retirements.




N.

Compliance Report: The Borrower will furnish the Bank a quarterly compliance report within 45 days of each fiscal quarter end, in a form acceptable to the Bank, certified by an officer of the Borrower, that measures compliance with Paragraphs J., K., L., and M. above.



O.

Guaranties. The Borrower's agreement to guaranty, assume, or provide surety of other entities' financial obligations shall not exceed an aggregate amount greater than 10% of the Borrower's net worth, without the Bank's prior written consent.

VIII. REPAYMENT

The indebtedness arising from the Loans shall be repaid as follows:

A.

The Term Loans, Note Nos. 31143 / 31143NP, totaling $181,200,000, shall be repaid by annual principal payments of Seventeen Million Dollars ($17,000,000) each, due on or before December 31 of each year through December 31, 2008, and by a final principal payment of Eleven Million Two Hundred Thousand Dollars ($11,200,000) due on or before December 31, 2009. All outstanding balances shall be repaid by December 31, 2009.




The Borrower shall be permitted to make special payments, in a minimum amount of $500,000, on the variable rate portion of Term Loans Note Nos. 31143 / 31143NP, when all short term financing, including the Seasonal Loans (in accordance with a Seasonal Loan Agreement between the parties of even date), Commodity Credit Corporation loans and other short term loans have been zeroed out. These special payments shall be readvanced subject to the provisions of the "REINSTATEMENT" section of this loan agreement and prior to the Borrower's borrowing of new short term funds. The reinstatable Term Loans commitment arising from such special payments shall be subject to the Term Loans commitment fee (as described in the "FEES" section, paragraph B. of this loan agreement) from the date of the special payment to the date of the readvance.

B.

The new Term Loan, Note No. 31144NP, of $20,000,000, shall be repaid by annual principal payments of Two Million Dollars ($2,000,000) each, to be remitted to the Bank on or before the last day of December 31, commencing in 2000. All outstanding balances shall be repaid by December 31, 2009.



C.

The present Long Term L/C Commitment, Note No. 30343, shall mature on April 30, 2013. Advances on Long Term L/C Commitment, Note No. 30343, made in support of outstanding letters of credit shall be payable on demand.



D.

The present Term Facility Loan, Note No. 30800NP, totaling $8,000,000, shall be repaid in accordance with the terms and conditions of the Note Agreement.




The Bank, at its discretion, may apply repayments to the reduction of any indebtedness outstanding under this loan agreement.

IX. LATE FEE PENALTY

Payments received fifteen (15) calendar days after the scheduled repayment date are subject to a late payment penalty equal to 1% of the past due amount but not less than $25.00 per transaction.

X. EXPIRATION

The unadvanced portion of the Loans shall be canceled as indicated below; provided, however, the Bank may, at its option, extend the expiration date of the Loans and the maturity date of the Seasonal Loans without notice to or consent of the Borrower.

Term Loans, Note Nos. 31143 / 31143NP / 31144NP—February 29, 2000 Long Term L/C Commitment, Note No. 30343—April 30, 2013

XI. REINSTATEMENT

In order to facilitate repayments and reborrowings under this loan agreement, the Bank is hereby authorized to reinstate special payments on the Term Loans, Note Nos. 31143 / 31143NP / 31144NP, through the expiration dates specified in this loan agreement; provided, however, that the total amount outstanding hereunder shall not exceed the face amounts of the Term Loans, Note Nos. 31143 / 31143NP / 31144NP; and provided, further, that the right of the Borrower to such reinstatement may be denied and canceled at any time at the option of the Bank.

XII. DEFAULT PROVISION

If the Borrower shall fail to pay when due any amount on any of the Loans hereunder, or any other indebtedness of the Borrower to the Bank, or shall fail to observe or perform any of the provisions or representations of this agreement, any other loan agreement(s) with the Bank, or of any security agreement, or of any mortgage, or of the Note Agreement, or of any of its credit and/or security documents with any third party (including without limitation the Note Purchase Agreement dated as of September 15, 1998, with, among others, John Hancock Mutual Life Insurance Company, and all notes, security documents and other documents related thereto), the Borrower shall be in default hereunder. Further, the Borrower shall be in default of this Loan Agreement if the Borrower causes a default under the Crystech Note Purchase Agreement dated June 3, 1998, as amended, or if Crystech's obligation on Notes under the Crystech Note Purchase Agreement are accelerated for reasons other than the plant not achieving the 72% minimum production level. When the Borrower is in default the Bank may declare by written notice to the Borrower that all such Loans and other indebtedness are immediately due and payable and the Bank may terminate its commitments and any reinstatement rights hereunder and proceed to enforce payment and to exercise any or all of the rights afforded to the Bank by law or agreement. Upon demand, the Borrower shall pay to the Bank all attorney's fees and costs incurred by the Bank in enforcing its rights under this agreement or in protecting the collateral securing the Loans, including reasonable attorney's fees incurred by the Bank in a bankruptcy or receivership proceeding or in enforcing any judgment against the Borrower.

XIII. ACCEPTANCE

This loan agreement is the full agreement under the terms and conditions of the Loan. It shall not be modified except in writing, and shall not become effective unless the Borrower shall, within 60 days from date, signify its acceptance of these terms and conditions by signing and returning a copy of this loan agreement to the Bank.

BY DIRECTION of the loan committee this 5th day of March, 1999.

ST. PAUL BANK FOR COOPERATIVES

By /s/ Marion L. Lindo




Its    Senior Vice President

ACCEPTED AND AGREED TO:

AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD MINNESOTA

By /s/ Brian Ingurlsud




Its    Treasurer




Date  4/9/99

NONNEGOTIABLE NOTE OF
AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD, MINNESOTA
Note No. 31144NP

$20,000,000.00 March 5, 1999

    For value received, the undersigned ("Maker") promises to pay to the St. Paul Bank for Cooperatives ("Bank"), at its office in the City of St. Paul, Minnesota, the sum of Twenty Million and no/100 Dollars ($20,000,000.00) with interest on the unpaid balance at a variable rate of interest which may increase or decrease as the Bank may, from time to time, determine as provided in the Loan Agreement of even date between the Maker and the Bank. The unpaid balance of this note, with accrued interest, and required equity purchases, may be paid at any time subject to a prepayment penalty, if any, in accordance with the terms of the Loan Agreement between the Bank and Maker.

    This note shall at all times evidence and constitute prima facie proof of the indebtedness of the Maker to the Bank or its successors or assigns, of such amount of money (not in excess of the amount of the principal indebtedness stated above plus accrued interest and required equity purchases) as shown to be owing by the records of the Bank, or its successors or assigns.

    In the event that suit is brought on this note, the Maker agrees to pay such reasonable attorneys' fees and costs of collection as permitted by law to be charged.

    The Maker hereby waives presentment for payment, demand, protest, notice of protest, and notice of dishonor and nonpayment of this note.

    If requested by the Bank, its successors or assigns, the Maker agrees to deliver in substitution for this note, a negotiable note for the amount of the unpaid balance of Maker's indebtedness, plus accrued interest and required equity purchases.

AMERICAN CRYSTAL SUGAR COMPANY
By	/s/ BRIAN INGURLSUD
	Its Treasurer
By	/s/ MARK LEMBKE
	Its Assistant Treasurer

NONNEGOTIABLE NOTE OF
AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD, MINNESOTA
Note No. 31143

$101,997,480.00 March 5, 1999

    For value received, the undersigned ("Maker") promises to pay to the St. Paul Bank for Cooperatives ("Bank"), at its office in the City of St. Paul, Minnesota, the sum of One Hundred One Million Nine Hundred Ninety-Seven Thousand Four Hundred Eighty and no/100 Dollars ($101,997,480.00) with interest on the unpaid balance at a variable rate of interest which may increase or decrease as the Bank may, from time to time, determine as provided in the Loan Agreement of even date between the Maker and the Bank. The unpaid balance of this note, with accrued interest, and required equity purchases, may be paid at any time subject to a prepayment penalty, if any, in accordance with the terms of the Loan Agreement between the Bank and Maker.

    This note shall at all times evidence and constitute prima facie proof of the indebtedness of the Maker to the Bank or its successors or assigns, of such amount of money (not in excess of the amount of the principal indebtedness stated above plus accrued interest and required equity purchases) as shown to be owing by the records of the Bank, or its successors or assigns.

    In the event that suit is brought on this note, the Maker agrees to pay such reasonable attorneys' fees and costs of collection as permitted by law to be charged.

    The Maker hereby waives presentment for payment, demand, protest, notice of protest, and notice of dishonor and nonpayment of this note.

    If requested by the Bank, its successors or assigns, the Maker agrees to deliver in substitution for this note, a negotiable note for the amount of the unpaid balance of Maker's indebtedness, plus accrued interest and required equity purchases.

AMERICAN CRYSTAL SUGAR COMPANY
By	/s/ BRIAN INGURLSUD
	Its Treasurer
By	/s/ MARK LEMBKE
	Its Assistant Treasurer

NONNEGOTIABLE NOTE OF
AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD, MINNESOTA
Note No. 31143NP

$79,202,520.00 March 5, 1999

    For value received, the undersigned ("Maker") promises to pay to the St. Paul Bank for Cooperatives ("Bank"), at its office in the City of St. Paul, Minnesota, the sum of Seventy-Nine Million Two Hundred Two Thousand Five Hundred Twenty and no/100 Dollars ($79,202,520.00) with interest on the unpaid balance at a variable rate of interest which may increase or decrease as the Bank may, from time to time, determine as provided in the Loan Agreement of even date between the Maker and the Bank. The unpaid balance of this note, with accrued interest, and required equity purchases, may be paid at any time subject to a prepayment penalty, if any, in accordance with the terms of the Loan Agreement between the Bank and Maker.

    This note shall at all times evidence and constitute prima facie proof of the indebtedness of the Maker to the Bank or its successors or assigns, of such amount of money (not in excess of the amount of the principal indebtedness stated above plus accrued interest and required equity purchases) as shown to be owing by the records of the Bank, or its successors or assigns.

    In the event that suit is brought on this note, the Maker agrees to pay such reasonable attorneys' fees and costs of collection as permitted by law to be charged.

    The Maker hereby waives presentment for payment, demand, protest, notice of protest, and notice of dishonor and nonpayment of this note.

    If requested by the Bank, its successors or assigns, the Maker agrees to deliver in substitution for this note, a negotiable note for the amount of the unpaid balance of Maker's indebtedness, plus accrued interest and required equity purchases.

AMERICAN CRYSTAL SUGAR COMPANY
By	/s/ BRIAN INGURLSUD
	Its Treasurer
By	/s/ MARK LEMBKE
	Its Assistant Treasurer

Attachment A

AMERICAN CRYSTAL SUGAR COMPANY
Permitted Liens

Asset	Lien Holder
Sugar	Commodity Credit Corporation
Real Estate, Equipment, Intangibles	St. Paul Bank as Collateral Agent
The Company's equity in Crystech, LLC	First Union Trust Company, National Association, as Collateral Agent
Pollution Control Equipment located at the Company's Moorhead, MN facility	Security Agreement American National Bank and Trust Company (now known as Firstar Bank)
Industrial Development Revenue Bond Issue and located at the Company's Moorhead, MN facility (Security Agreement)	American National Bank and Trust

Attachment B
Term Loan

American Crystal Sugar Company
Permitted Outside Borrowings

Lender	Amount
Tax Exempt Bonds:	$	4,500,000
East Grand Forks Series A		1,000,000
East Grand Forks Series B		18,000,000
Trail County Series A, B, & C		5,750,000
Trail County Bonds		5,500,000
City of Moorhead	$	34,750,000
Total
Private Placements:
Series A 8/31/2018		12,500,000
Series B 8/31/2023		15,000,000
Series C 8/31/2028		22,500,000
Note Purchase Agreement (9/15/98)	$	50,000,000

[Form of Compliance Certificate]

American Crystal Sugar Company
Quarterly Compliance Certificate
Term and Seasonal Loans

J. Net Working Capital:

Per GAAP Financial Statements	$
Reinstatable Unadvanced Available Term Loan Commitment	$
Estimated Unit Retain	$
Adjusted Net Working Capital	$
Minimum ($30, $32.5 or $35 million)	$
Compliance		Yes/No

K. Current Ratio

	Current Assets	Current Liabilities	Adjusted per Unit Retain	Current Ratio
Quarter I					%
Quarter II					%
Quarter III					%
Quarter IV					%
Average
Minimum				110	%
Compliance				Yes/No

L. Leverage Ratio

a)	Long-term Debt (GAAP)	$
b)	Actual Less Minimum Net Working Capital	$
c)	Adjusted Long-term Debt (a-b)	$
d)	Total Member Investment	$
e)	Estimated Unit Retains	$
f)	Adjusted Members Investment (d + e)	$
g)	Adjusted Leverage Ratio (c/f)		:1.0
	Maximum		1.5:1.0
	Compliance		Yes/No

Pricing Grid (Term Only)

A.  >1.35:1        B. >1.20:1        C. <1.20:1       D.<1.0:1       

M. Calendar Year Paydown (Seasonal Only)

    All short-term debt was less than $       ($100 or $80 million) for 30 days between   /  /  and  /  /  .

M. Term Debt Coverage Ratio: (Annual) (Term Only):

Net Funds		Year 1		Year 2		Year 3
a)	Unit retains	+
b)	Depreciation and amortization	+
c)	Net income from non-member business and member business tax timing differences	+
d)	Decrease in investments in other cooperatives (excluding subsidiaries)	+
e)	Net revenue from the sale of stock
f)	Increase in investments in other cooperatives (excluding subsidiaries)	(	)	(	)		(	)
g)	Net loss from non-member business and member business tax timing differences	(	)	(	)		(	)
h)	Provision for income tax	(	)	(	)		(	)
i)	Members' investment retirements	(	)	(	)		(	)
	Sum (a through i)
	Average Net Funds					$
	Long-term Debt					$
	Ratio (i / j)						:1
	Maximum						6.0:1
	Compliance						Yes/No

ST. PAUL BANK FOR COOPERATIVES Seasonal Loan Agreement

Loan Agreement, Note Nos. 29590 / 29590NP / 30811, is hereby further amended in its entirety, to read as follows:

Borrower:	Application No. S-26959
AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD, MINNESOTA

	Present Loans
	$	205,000,000.00	—Seasonal Loan
		75,000,000.00	—Seasonal Loan
		7,400,000.00	—Short Term L/C Commitment
	$	287,400,000.00
Increased Loan
$10,000,000.00—Seasonal Loan, Note No. 29590NP*
Decreased Loan
$1,400,000.00—Short Term L/C Commitment, Note No. 30811
	Total Loans
	$	205,000,000.00	—Seasonal Loan, Note No. 29590
		85,000,000.00	—Seasonal Loan, Note No. 29591NP*
	$	6,000,000.00	—Short Term L/C Commitment, Note No. 30812
	$	296,000,000.00	—Total

*NP indicates a non-patronage note

The St. Paul Bank for Cooperatives (the "Bank") and Borrower agree to the above loans (the "Loan") to the Borrower subject to all the terms and conditions of this loan agreement. Patronage Loans and Commitments require the Borrower to purchase equities of the Bank as set forth in the "CONDITIONS" section, paragraph B. of this loan agreement.

I. NOTES AND SECURITY

Advances under this loan agreement, together with any existing indebtedness of the Borrower to the Bank, shall be evidenced by a promissory note or notes acceptable to the Bank, and shall be secured by Bank stock and other equities.

II. LIMITATION ON ADVANCES

A.

The total Seasonal Loans outstanding under this or any loan agreement between the Bank and the Borrower shall not exceed the amount shown in the above heading.



B.

The combined balance outstanding on the Seasonal Loans, Note Nos. 29590 / 29591NP and all other sources of seasonal financing shall not exceed $290,000,000.



C.

The minimum advance on any Loan at one time is $2,000,000.



D.

All advances on Seasonal Loans shall be allocated 70.689551724138% to Note No. 29590, and 29.3103448275862% to Note No. 29591NP.

III. INTEREST

A.

All Seasonal Loans, Note Nos. 29590 / 29591NP balances which are not part of a fixed amount (as defined in the "FIXED RATE SEASONAL ADVANCES AND MATURITIES" section of this loan agreement), shall bear interest at a variable interest rate per annum equal to the Bank's cost of funds plus 60 basis points (0.60%).



B.

All Seasonal Loans, Note Nos. 29590 / 29591NP balances which are part of a fixed amount (as defined in the "FIXED RATE SEASONAL ADVANCES AND MATURITIES" section of this loan agreement), shall bear rates of interest as follows:

TABLE 1

RATE PRODUCT	INDEX	SPREAD OVER INDEX IN BASIS POINTS
15-29 Days	Bank's cost of funds	60
One Month	LIBOR	45
Two Months	LIBOR	45
Three Months	LIBOR	45
Six Months	LIBOR	45

LIBOR (London Inter-Bank Offered Rate) means, for any period selected, the rate per annum (rounded upwards, if necessary, to the next one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for the period selected as it appears on Bloomberg BBAM page as of 11:00 a.m. (London, England time) on the date two business days before the effective date of period selected. All fixed amounts on the Seasonal Loans shall be allocated to Note No. 29590 and Note No. 29591NP according to the percentages specified in Section II. E. above.

C.

Any outstanding draws made under the Short Term L/C Commitment, No. 30812, shall bear interest at a variable interest rate per annum equal to the Prime Rate, with any change in the variable interest rate to be effective as changes are reported in The Wall Street Journal.



D.

Interest on the Loans shall be payable on the last day of each calendar quarter, in arrears, and shall be computed on the basis of a year of 360 days for the actual number of days elapsed.



E.

The basis point spread on the Loans shall remain in effect for interest rate quotes made through January 31, 2000, after which date the Bank shall have the option of increasing or decreasing the basis point spread.

IV. FEES

A.

The Loans shall be subject to an additional agency fee of 10 basis points (0.10%) on an annualized basis, on the daily outstanding balances payable on the last day of each calendar quarter, in arrears, and shall be computed on the basis of a year of 360 days for the actual number of days elapsed.



B.

Seasonal Loans, Note Nos. 29590 / 29591NP shall be subject to a commitment fee of five basis points (0.05%), on an annualized basis, on the daily unadvanced commitment, payable on the last day of each calendar quarter in arrears, and shall be computed on the basis of a year of 360 days for the actual number of days elapsed.



C.

Letters of credit issued on the Short Term L/C Commitment, No. 30812, will be subject to fees in accordance with the Bank's standard letter of credit fee schedule, as the Bank may from time to time assess.

V.  FIXED RATE SEASONAL ADVANCES AND MATURITIES

In accordance with and subject to the Bank's Fixed Rate Seasonal Loan Program, and subject to the Bank's overall program funding limitations, it is agreed the interest rate may be fixed on any seasonal loan indebtedness (the "fixed amount") made under this loan agreement as follows:

A.

The minimum fixed amount shall be $2,000,000.



B.

Each fixed amount and each selected pricing maturity date will be treated as a separate indebtedness for interest rate designation and interest billing purposes.



C.

Fixed amount pricing maturities shall not be less than 15 days nor greater than 180 days from the day of advance to be based on the maturity selection of the Borrower; however, all fixed amounts shall have pricing maturities no later than August 31, 2000.



D.

For fixed amounts that are not indexed to LIBOR, the Borrower may receive same day interest rate quotes if a firm request is placed and accepted by the Bank before 12:01 p.m. (Central Time) on any business day (any day, other than Saturday or Sunday, on which national banks are required to be open for business). For fixed amounts that are indexed to LIBOR, the Borrower shall notify the Bank by 12:01 p.m. (Central Time) at least three business days prior to the date upon which the Borrower requests a fixed amount to become effective, whether that fixed amount represents a new advance, pricing maturity date of an existing LIBOR fixed amount, or a conversion from the variable rate. A firm request is one placed by telephone or in writing by an authorized representative of the Borrower.



E.

Fixed amounts shall be automatically converted to the variable rate seasonal loan at maturity.



F.

Fixed amounts cannot be repaid or repriced by the Borrower prior to their respective pricing maturity dates without being subject to prepayment penalties. Such penalties shall be determined according to a methodology specified by the Bank which preserves the Bank's yield on the fixed amount prepaid or repriced and which is based upon the difference between the Bank's cost of like funds to pricing maturity at the time of prepayment and the existing fixed rate on the fixed amount.



G.

Each fixed amount shall be summarized in the Daily Activity Statement (the "statement") to the Borrower. Each statement shall reference and confirm at least the following:



1.

Note Nos. 29590 / 29591NP.



2.

The fixed amount and its Contract No.



3.

The rate of interest.



4.

The effective date.



5.

The pricing maturity date.




H.

The Borrower agrees that the statement shall verify the understanding reached by the parties, and that the Borrower shall be bound by the statement without its signature; provided, however, if there is an error reflected in the statement, the Borrower shall notify the Bank of the error within five days after receipt of the statement and an appropriate correction will be made.



I.

If there is a question on the interest rate applicable to the fixed amount, the rate as established by the Bank for such amounts shall be controlling.

VI. CONDITIONS

While this loan agreement is in effect, the Borrower agrees to comply with the following conditions:

A.

Eligibility Status: The Borrower will maintain its status as an eligible borrower as defined in the Farm Credit Act of 1971, as amended (12 U.S.C. 2129).



B.

Patronage Loans: Note Nos. 29590 / 30812 shall be patronage loans and the Borrower will purchase equities of the Bank in such amounts as prescribed by the Bank's capital plan and any amendments to the plan. The Borrower will receive allocations of patronage earnings for Note Nos. 29590 / 30812. The Bank shall have a first lien on all stock or other equities of the Borrower in the Bank as collateral for the payment of any indebtedness of the Borrower to the Bank.



C.

Non-Patronage Loan: Note No. 29591NP shall be a non-patronage loan. The Borrower foregoes any opportunity to purchase Bank equities or receive allocations of patronage earnings on Note No. 29591NP.



D.

Insurance: The Borrower will maintain business and property insurance with financially sound insurers, in amounts sufficient to protect the Loans. The Borrower shall purchase and maintain flood insurance as may be required by the Bank in accordance with applicable law including, but not limited to, regulations of the Farm Credit Administration.



E.

Financial Information: The Borrower will furnish the Bank:



1.

Audited annual financial statements prepared in accordance with generally accepted accounting principles ("GAAP") within 120 days after the end of each fiscal year;



2.

Annual operating budgets within 60 days after the end of each fiscal year;



3.

Quarterly and annual financial statements as prepared and filed with the Securities Exchange Commission within five days of filing; and



4.

Such other information as the Bank may request relative to the Borrower's business.




Further, the Borrower shall cause Crystech, L.L.C. ("Crystech") to furnish the Bank:

1.

Audited annual financial statements prepared in accordance with GAAP within 120 days after the end of each fiscal year; and



2.

Quarterly financial statements within 60 days after the end of each fiscal quarter.




Borrower shall (and shall cause Crystech to) permit such examination of its books and records as the Bank may reasonably specify.

F.

Negative Pledge: The Borrower will not mortgage, pledge, assign, or grant security interests in any assets to any other party, except for the permitted liens identified on Attachment A, without the prior written consent of the Bank.



G.

Outside Borrowings: The Borrower will not borrow funds (with original maturity dates of 12 months or less) from other sources, except for permitted outside borrowings identified on Attachment B, without the prior written consent of the Bank.



H.

Grower Agreements: The Borrower shall abide by the terms and conditions of its member grower agreements; make no amendments or changes to the agreements without the written consent of the Bank; and extend the agreements for an additional five years when the current contracts expire.



I.

Capital Expenditure Budget: The Borrower will furnish an annual capital expenditure budget, within 60 days after the end of each fiscal year. The Borrower will also furnish a revised budget if increases over the original capital expenditure budget are approved by the board of directors.



J.

Minimum Net Working Capital: The Borrower shall maintain minimum net working capital of not less than $30,000,000; and will attain and maintain minimum net working capital of not less than $32,500,000 by February 28, 1999; and will attain and maintain minimum net working capital of not less than $35,000,000 by November 30, 1999. Minimum net working capital shall be calculated in accordance with GAAP, plus any reinstatable unadvanced available term loan commitment, plus the estimated unit retain.



K.

Current Ratio: The Borrower shall maintain a current ratio (current assets divided by adjusted current liabilities) of 110% or more based on a rolling four quarter average. Current liabilities shall be adjusted to exclude current year unit retains from amounts due members.



L.

Leverage Ratio: The Borrower will maintain a leverage ratio of not more than1.50:1.0. Leverage ratio is long term debt (excluding current maturities) calculated in accordance with GAAP plus or minus the difference between actual working capital and minimum net working capital (as defined in Paragraph J. above), divided by total members investments plus the estimated unit retains.



M.

Annual Paydown: The Borrower will paydown all short term loans to $80,000,000 or less for a period of 30 consecutive days in calendar year 1999. Total short term loans includes the Seasonal Loans, Commodity Credit Corporation loans, commercial paper, overdraft loans and other loans with original maturity dates of one year or less. Total short term loans excludes current maturities of long term debt.



N.

Borrowing Base Reports: The Borrower will furnish the Bank monthly borrowing base reports to be submitted in such form as defined in Attachment C.



0.

Compliance Reports: The Borrower will furnish the Bank a quarterly compliance report within 45 days of each fiscal quarter end, in a form acceptable to the Bank, certified by an officer of the Borrower, that measures compliance with Paragraphs J., K., L., and M. above.



P.

Guaranties. The Borrower's agreement to guaranty, assume, or provide surety of other entities' financial obligations shall not exceed an aggregate amount greater than 10% of the Borrower's net worth, without the Bank's prior written consent.

VII. REPAYMENT

    The indebtedness arising from the Loans shall be repaid as follows:

A.

The Seasonal Loans, Note Nos. 29590 / 29591NP, of not to exceed $290,000,000 shall mature on February 29, 2000; provided however, if the Borrower is not in default, any balances outstanding under the fixed rate seasonal loan provisions shall mature as specified in the statement. Any outstanding fixed amounts as of February 29, 2000 shall be repaid no later than August 31, 2000.



B.

The decreased Short Term L/C Commitment, No. 30812, shall mature on December 31, 2001. Advances on Commitment No. 30812 made in support of outstanding letters of credit shall be payable on demand.




The Bank, at its discretion, may apply repayments to the reduction of any indebtedness outstanding under this loan agreement.

VIII. LATE FEE PENALTY

Payments received fifteen (15) calendar days after the scheduled repayment date are subject to a late payment penalty equal to 1% of the past due amount but not less than $25.00 per transaction.

IX. EXPIRATION

The unadvanced portion of the Loans shall be canceled as indicated below; provided, however, the Bank may, at its option, extend the expiration date of the Loans and the maturity date of the Seasonal Loans without notice to or consent of the Borrower.

Seasonal Loans, Note Nos. 29590 / 29591NP—February 29, 2000
Short Term L/C Commitment, Note No. 30812—February 29, 2000

X. REINSTATEMENT

In order to facilitate repayments and reborrowings under this loan agreement, the Bank is hereby authorized to reinstate repayments on the Seasonal Loans, Note Nos. 29590 / 29591NP through the expiration dates specified in this loan agreement; provided, however, that the total amount outstanding hereunder shall not exceed the face amounts of the Seasonal Loans, Note Nos. 29590 / 29591NP; and provided, further, that the right of the Borrower to such reinstatement may be denied and canceled at any time at the option of the Bank.

XI. DEFAULT PROVISION

If the Borrower shall fail to pay when due any amount on any of the Loans hereunder, or any other indebtedness of the Borrower to the Bank, or shall fail to observe or perform any of the provisions or representations of this agreement, any other loan agreement(s) with the Bank, or of any security agreement, or of any mortgage, or of the Note Agreement (as defined in the Term Loan Agreement of even date herewith), or of any of its credit and/or security documents with any third party (including without limitation the Note Purchase Agreement dated as of September 15, 1998, with, among others, John Hancock Mutual Life Insurance Company, and all notes, security documents and other documents related thereto), the Borrower shall be in default hereunder. Further, the Borrower shall be in default of this Loan Agreement if the Borrower causes a default under the Crystech Note Purchase Agreement dated June 3, 1998, as amended, or if Crystech's obligation on Notes under the Crystech Note Purchase Agreement are accelerated for reasons other than the plant not achieving the 72% minimum production level. When the Borrower is in default the Bank may declare by written notice to the Borrower that all such Loans and other indebtedness are immediately due and payable and the Bank may terminate its commitments and any reinstatement rights hereunder and proceed to enforce payment and to exercise any or all of the rights afforded to the Bank by law or agreement. Upon demand, the Borrower shall pay to the Bank all attorney's fees and costs incurred by the Bank in enforcing its rights under this agreement or in protecting the collateral securing the Loans, including reasonable attorney's fees incurred by the Bank in a bankruptcy or receivership proceeding or in enforcing any judgment against the Borrower.

XII. ACCEPTANCE

This loan agreement is the full agreement under the terms and conditions of the Loan. It shall not be modified except in writing, and shall not become effective unless the Borrower shall, within 60 days from date, signify its acceptance of these terms and conditions by signing and returning a copy of this loan agreement to the Bank.

BY DIRECTION of the loan committee this 5th day of March, 1999.

ST. PAUL BANK FOR COOPERATIVES

By /s/ Marion L. Lindo




Its    Senior Vice President




ACCEPTED AND AGREED TO:

AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD MINNESOTA

By /s/ Brian Ingurlsud




Its    Treasurer




Date    4/9/99

NONNEGOTIABLE NOTE OF
AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD, MINNESOTA
Note No. 29591NP

$85,000,000.00 March 5, 1999

    For value received, the undersigned ("Maker") promises to pay to the St. Paul Bank for Cooperatives ("Bank"), at its office in the City of St. Paul, Minnesota, the sum of Eighty-Five Million and no/100 Dollars ($85,000,000.00) with interest on the unpaid balance at a variable rate of interest which may increase or decrease as the Bank may, from time to time, determine as provided in the Loan Agreement of even date between the Maker and the Bank. The unpaid balance of this note, with accrued interest, and required equity purchases, may be paid at any time subject to a prepayment penalty, if any, in accordance with the terms of the Loan Agreement between the Bank and Maker.

    This note shall at all times evidence and constitute prima facie proof of the indebtedness of the Maker to the Bank or its successors or assigns, of such amount of money (not in excess of the amount of the principal indebtedness stated above plus accrued interest and required equity purchases) as shown to be owing by the records of the Bank, or its successors or assigns.

    In the event that suit is brought on this note, the Maker agrees to pay such reasonable attorneys' fees and costs of collection as permitted by law to be charged.

    The Maker hereby waives presentment for payment, demand, protest, notice of protest, and notice of dishonor and nonpayment of this note.

    If requested by the Bank, its successors or assigns, the Maker agrees to deliver in substitution for this note, a negotiable note for the amount of the unpaid balance of Maker's indebtedness, plus accrued interest and required equity purchases.

AMERICAN CRYSTAL SUGAR COMPANY
By	/s/ BRIAN INGURLSUD
	Its Treasurer
By	/s/ MARK LEMBKE
	Its Assistant Treasurer

NONNEGOTIABLE NOTE OF
AMERICAN CRYSTAL SUGAR COMPANY
MOORHEAD, MINNESOTA
Note No. 30812

$6,000,000.00 March 5, 1999

    For value received, the undersigned ("Maker") promises to pay to the St. Paul Bank for Cooperatives ("Bank"), at its office in the City of St. Paul, Minnesota, the sum of Six Million and no/100 Dollars ($6,000,000.00) with interest on the unpaid balance at a variable rate of interest which may increase or decrease as the Bank may, from time to time, determine as provided in the Loan Agreement of even date between the Maker and the Bank. The unpaid balance of this note, with accrued interest, and required equity purchases, may be paid at any time subject to a prepayment penalty, if any, in accordance with the terms of the Loan Agreement between the Bank and Maker.

    This note shall at all times evidence and constitute prima facie proof of the indebtedness of the Maker to the Bank or its successors or assigns, of such amount of money (not in excess of the amount of the principal indebtedness stated above plus accrued interest and required equity purchases) as shown to be owing by the records of the Bank, or its successors or assigns.

    In the event that suit is brought on this note, the Maker agrees to pay such reasonable attorneys' fees and costs of collection as permitted by law to be charged.

    The Maker hereby waives presentment for payment, demand, protest, notice of protest, and notice of dishonor and nonpayment of this note.

    If requested by the Bank, its successors or assigns, the Maker agrees to deliver in substitution for this note, a negotiable note for the amount of the unpaid balance of Maker's indebtedness, plus accrued interest and required equity purchases.

AMERICAN CRYSTAL SUGAR COMPANY
By	/s/ BRIAN INGURLSUD
	Its Treasurer
By	/s/ MARK LEMBKE
	Its Assistant Treasurer

Attachment A

American Crystal Sugar Company
Permitted Liens

Asset	Lien Holder
Sugar	Commodity Credit Corporation
Real Estate, Equipment, Intangibles	St. Paul Bank as Collateral Agent
The Company's equity in Crystech, LLC	First Union Trust Company, National Association, as collateral Agent
Pollution Control equipment located at the Company's Moorhead, MN facility	Security Agreement American National Bank and Trust Company (now known as Firstar Bank)
Industrial Development Revenue Bond Issue and located at the Company's Moorhead, MN facility (Security Agreement)	American National Bank and Trust

[Form of Compliance Certificate]

American Crystal Sugar Company
Quarterly Compliance Certificate
Term and Seasonal Loans

J. Net Working Capital:

Per GAAP Financial Statements	$
Reinstatable Unadvanced Available Term Loan Commitment	$
Estimated Unit Retain	$
Adjusted Net Working Capital	$
Minimum ($30, $32.5 or $35 million)	$
Compliance		Yes/No

K. Current Ratio

	Current Assets	Current Liabilities	Adjusted per Unit Retain	Current Ratio
Quarter I					%
Quarter II					%
Quarter III					%
Quarter IV					%
Average
Minimum				110	%
Compliance				Yes/No

L. Leverage Ratio

a)	Long-term Debt (GAAP)	$
b)	Actual Less Minimum Net Working Capital	$
c)	Adjusted Long-term Debt (a-b)	$
d)	Total Member Investment	$
e)	Estimated Unit Retains	$
f)	Adjusted Members Investment (d + e)	$
g)	Adjusted Leverage Ratio (c/f)		:1.0
	Maximum		1.5:1.0
	Compliance		Yes/No

Pricing Grid (Term Only)

A.  >1.35:1        B. >1.20:1        C. <1.20:1       D.<1.0:1       

M. Calendar Year Paydown (Seasonal Only)

    All short-term debt was less than $       ($100 or $80 million) for 30 days between   /  /  and  /  /  .

M. Term Debt Coverage Ratio: (Annual) (Term Only):

Net Funds		Year 1		Year 2		Year 3
a)	Unit retains	+
b)	Depreciation and amortization	+
c)	Net income from non-member business and member business tax timing differences	+
d)	Decrease in investments in other cooperatives (excluding subsidiaries)	+
e)	Net revenue from the sale of stock
f)	Increase in investments in other cooperatives (excluding subsidiaries)	(	)	(	)		(	)
g)	Net loss from non-member business and member business tax timing differences	(	)	(	)		(	)
h)	Provision for income tax	(	)	(	)		(	)
i)	Members' investment retirements	(	)	(	)		(	)
	Sum (a through i)
	Average Net Funds					$
	Long-term Debt					$
	Ratio (i / j)						:1
	Maximum						6.0:1
	Compliance						Yes/No

Attachment B
Seasonal Loan

American Crystal Sugar Company
Permitted Outside Borrowings (Condition G, Outside Senior Secured Borrowings)

Lender	Commitment Amount		August 29, 1998
Commercial Paper		Variable	$	119,035,000
Norwest Bank Fargo (not to exceed)	$	15,000,000	$	0
Commodity Credit Corporation		Variable	$	0

[Form of Borrowing Base]

Attachment C
Seasonal Loan

American Crystal Sugar Company
Monthly Borrowing Base Condition
For the month ended                   

Trade Accounts Receivable (Excludes Members, Affiliates, etc.)	$	@75	%	$
Inventory	$	@65	%	$
Cash and Equivalents	$	@85	%	$
Total				$
Commercial paper				$
Seasonal Loan
CCC
Total Short-term Loans*				$
Compliance		Yes (Excess) / No (Shortfall)

QuickLinks

ST. PAUL BANK FOR COOPERATIVES Term Loan Agreement
TABLE 2
TABLE 3

NONNEGOTIABLE NOTE OF AMERICAN CRYSTAL SUGAR COMPANY MOORHEAD, MINNESOTA Note No. 31144NP
NONNEGOTIABLE NOTE OF AMERICAN CRYSTAL SUGAR COMPANY MOORHEAD, MINNESOTA Note No. 31143
NONNEGOTIABLE NOTE OF AMERICAN CRYSTAL SUGAR COMPANY MOORHEAD, MINNESOTA Note No. 31143NP
AMERICAN CRYSTAL SUGAR COMPANY Permitted Liens
American Crystal Sugar Company Permitted Outside Borrowings

ST. PAUL BANK FOR COOPERATIVES Seasonal Loan Agreement
TABLE 1

NONNEGOTIABLE NOTE OF AMERICAN CRYSTAL SUGAR COMPANY MOORHEAD, MINNESOTA Note No. 29591NP
NONNEGOTIABLE NOTE OF AMERICAN CRYSTAL SUGAR COMPANY MOORHEAD, MINNESOTA Note No. 30812
American Crystal Sugar Company Permitted Liens

American Crystal Sugar Company Quarterly Compliance Certificate Term and Seasonal Loans
American Crystal Sugar Company Permitted Outside Borrowings (Condition G, Outside Senior Secured Borrowings)
American Crystal Sugar Company Monthly Borrowing Base Condition For the month ended

EX-10.28

Exhibit 10.28

EMPLOYMENT AGREEMENT

    THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of the 15th day of May, 1998 by and between American Crystal Sugar Company ("Company") and James J. Horvath ("Executive").

WHEREAS, Company has named Executive as its President and Chief Executive Officer;

WHEREAS, Executive has given faithful service to the Company and has agreed to serve as the President and Chief Executive Officer as an "at will" employee of the Company;

WHEREAS, Executive is a participant in certain benefit plans, including but not limited to (i) Retirement Plan A, a plan qualified under Section 40 1(a) of the Internal Revenue Code and which is maintained by Company (the "Pension Plan") and (ii) the Supplemental Executive Retirement Plan, a nonqualified supplemental retirement plan maintained by Company (the "SERP");

WHEREAS, in consideration of Executive's service on behalf of the Company and acceptance of the position of President and Chief Executive Officer on an at will basis, the parties desire to provide for certain supplemental benefits to be made available to Executive and his spouse;

WHEREAS, Company and Executive recognize that, in performing his past and anticipated future job-related duties and responsibilities, Executive has had, and will in the future have, extensive access to Company's confidential manufacturing, financial, accounting, human resources and marketing information; and has had, and will have, opportunities to cultivate valuable business relationships with Company's customers; and

WHEREAS, Company desires to continue to employ Executive, and Executive desires to continue to be employed by Company, pursuant to the terms and conditions of this Agreement. It is understood that Executive will continue to be subject to the same policies, terms and conditions as those described in Company's employee handbook, other policies and employee benefit plans, except as otherwise specifically provided in this Agreement.

NOW THEREFORE, in consideration of the foregoing and the mutual terms and conditions set forth herein, the parties agree as follows:

    1.  TERM OF EMPLOYMENT.  Company and Executive expressly agree that they have an "at will" employment relationship, which means that either party has the right to terminate the employment relationship at any time and for any reason, with or without cause. The reason for the termination, as set forth in Paragraph 6, will determine the amount of post-termination payments upon termination, as set forth in Paragraph 7.

    2.  DUTIES.  Effective May 15, 1998, Executive shall be employed in the capacity of, and shall hold the title of, President and Chief Executive Officer. Executive shall assume primary responsibility for his job titles, reporting responsibilities and duties which are assigned, and may be changed from time to time, by Company's Board of Directors, subject to the laws of the United States and the State of Minnesota, and subject to the terms and provisions of Company's Articles of Incorporation and Bylaws. Executive shall be responsible for providing Company with such technical or other expertise as is within the areas of Executive's knowledge and professional experience. Executive agrees to devote his full time, attention, effort and skill to the performance of his job duties.

    3.  RELATIONSHIP BETWEEN PARTIES.  The relationship between Company and Executive shall be that of employer and employee. Nothing contained herein shall be construed to give Executive any interest in the assets of Company. All of the records of any and all business ventures in which Company from time to time may become involved, and all of the records and files pertaining to Company's suppliers, licensors, licensees and customers are herein specifically acknowledged to be the property of Company and not that of Executive.

    4.  COMPENSATION.  As compensation for all of Executive's services under this Agreement, subject to the provisions of Paragraph 7, Company agrees to provide Executive the following compensation, reimbursements and benefits:

        a.  Base Salary.  Company will pay Executive a gross base salary (the "Base Salary"), payable in accordance with Company's standard payroll practices and withholdings. Executive's initial gross Base Salary shall be based on an annual rate of $388,840 per year. The Base Salary shall be subject to annual performance review and adjustment by Company's Board of Directors.

        b.  Incentive Awards.  As additional compensation, Executive may be eligible to receive discretionary annual bonuses and/or long term incentive compensation ("Incentive Awards") pursuant to the terms and conditions of Company's short term (annual) bonus program and/or Company's Long Term Incentive Plan (jointly referred to as "Incentive Plans"). With reference to the Incentive Plans, the parties understand as follows:

    (i)  Executive's eligibility to receive Incentive Awards will be determined by Company's Board of Directors, in its sole discretion;

    (ii)  The Incentive Plans are as complete and accurate as Company can reasonably make them. However, they are not necessarily all-inclusive because circumstances which Company has not anticipated may arise. Company may interpret or vary from the Incentive Plans if, in its opinion, the circumstances warrant it;

    (iii)  Company reserves the right to make any changes at any time to the Incentive Plans by adding to, deleting from or otherwise amending any portion of them, with or without notice to Executive.

    (iv)  Any questions regarding the computation of Incentive Awards under the Incentive Plans will be conclusively determined by Company's Board of Directors, pursuant to the terms and conditions of the Incentive Plans.

        c.  Automobile.  Company will provide Executive with the use of a Company automobile, pursuant to reasonable rules and conditions as established from time to time by the Company. Upon termination of employment, Executive shall be given the option of purchasing the automobile provided by the Company at its then fair market value.

        d.  Business Expenses.  Company shall reimburse Executive for any and all ordinary, necessary and reasonable business expenses that Executive incurs in connection with the performance of Executive's duties under this Agreement, including entertainment, telephone, travel and miscellaneous expenses, provided that Executive obtains proper approval for such expenses pursuant to Company's practices and procedures and that Executive provides Company with documentation for such expenses in a form sufficient to sustain Company's deduction for such expenses under the Internal Revenue Code.

        e.  Standard Benefits.  Except as otherwise provided in this Agreement, Company shall continue to provide Executive with the same time off pay (e.g., vacation), health, disability and life insurance coverage provided generally to other employees of Company, and to continued participation in Company's other employee benefit plans which are presently existing or which may be established in the future by Company for its employees. It is understood that no references in this Agreement to particular employee benefit plans established or maintained by Company are intended to change the terms and conditions of these plans or to preclude Company from amending or terminating any such benefit plans.

        f.  Supplemental Payment Relating to Medical and Dental Coverage.  Company agrees that in the event the Executive (1) incurs a termination of employment with the Company after reaching age 60 and is not discharged by the Company for "cause" (as such term is defined in Subparagraph 6(c) of this Agreement); (2) or incurs a termination of such employment on account of his "disability" (as such term is defined in Subparagraph 6(b) of this Agreement) or death, then in each such case it will make reimbursements to the Executive and his spouse pursuant to the following requirements:

    (i)  The Company shall reimburse the Executive and his spouse for the cost of their continuing medical and dental coverage made available to the Executive and his spouse by the Company through health insurance continuation or otherwise from the date the Executive's employment is terminated with the Company through their respective deaths.

    (ii)  If the Company ceases to make such coverage available to the Executive or spouse, the Company shall reimburse the Executive or spouse, as applicable, for the cost of medical and dental coverage consistent with coverage provided by the Company to Company employees, provided that the Company may limit the reimbursements to the cost of premiums for a conversion policy available under the Company's coverage, the cost of a Medicare supplement when either the Executive or his spouse becomes covered by Medicare, or the cost of any other reasonable coverage available to the Executive or his spouse.

    (iii)  The parties recognize that payments under this Subparagraph 6(0 may be included in the recipient's taxable income.

Notwithstanding the prior provisions of this Subparagraph 4(f), if prior to the date that the Executive reaches age 55, the Executive's employment with the Company is terminated by the Company and the Executive is not discharged by the Company for "cause" (as such term is defined in Subparagraph 6(c) of this Agreement), the Company will provide the benefits described in the preceding provisions of this Subparagraph 4(f), except that the reimbursement amount will be one half of the total premiums for the benefits described under those provisions.

        g.  Supplemental Pension Benefit.  In the event that the Executive (1) incurs a termination of employment with the Company after reaching age 60 and is not discharged by the Company for "cause" (as such term is defined in Subparagraph 6(c) of this Agreement); or (2) incurs a termination of such employment on account of his "disability" (as such term is defined in Subparagraph 6(b) of this Agreement); then in each such case a supplemental benefit will be payable by the Company to or on behalf of the Executive commencing as of the first day of the month following the month such employment is terminated and continuing on a monthly basis thereafter for the remainder of the Executive's life. The amount of the monthly payments shall be equal to the difference between:

    (i)  the cumulative monthly amount of the retirement benefit to which the Executive would have been entitled to receive under Retirement Plan A which is maintained by the Company (the "Pension Plan") and the Executive's pension plan account under the non-qualified Supplemental Executive Retirement Plan maintained by the Company (the "SERP"), if the benefits were computed as though the Executive had continued in the employ of the Company until he attained age 65 assuming compensation (as defined in the Pension Plan) equal to that in effect as of the date of such termination of employment and thirty (30) years of service with the Company, irrespective of the number of years of service actually attained as of the date of such termination of employment or the date on which he attains age 65, with no reduction in benefits on account of an election by the Executive for any death benefit to be paid to his spouse under the Pension Plan; and

    (ii)  the cumulative monthly amount of the retirement benefits actually payable to the Executive under the Pension Plan and the Executive's pension plan account under the SERP.

It is the intention of the parties that the monthly payments to which the Executive will be entitled under this Subparagraph (4)(g) shall be equal to that which would have been received by the Executive had he remained in the employ of the Company until he attained age 65 and received credit under the Pension Plan and the pension plan account under the SERP for thirty (30) years of service with the Company, and had the Executive's benefits under the Pension Plan and the pension plan account under the SERP not been reduced to take into account any election for the payment of a death benefit to his spouse.

The prior provisions of this Subparagraph (4)(g) are meant to describe the method for determining a benefit to the Executive. The actual form and timing of payment shall be elected by the Executive consistent with the options and method described in the payment of benefits section of the SERP and the actuarial equivalence calculation necessary to determine the amount or amounts to be paid shall be made using the assumptions stated in such section of the SERP. Such an election shall be made at the time of this Agreement and may be changed at a later date; however, a change or changes will not be effective until the calendar year following the calendar year in which the change or changes were elected by the Executive. Further, an attempted change in the form of payment or in the benefit commencement date will not be effective if the Executive has incurred a termination of employment with the Company for any reason (including death) during or prior to the calendar year in which such change in the payment election is made. Absent a distribution election, distribution will be made in a lump sum as soon as practicable after the Executive's termination of employment with the Company.

        h.  Supplemental Early Retirement Benefit.  If, prior to the date that the Executive reaches age 55, (1) the Executive's employment with the Company is terminated by the Company and the Executive is not discharged by the Company for "cause" (as such term is defined in Subparagraph 6(c) of this Agreement); or (2) the Executive incurs a termination of such employment on account of his "disability" (as such term is defined in Subparagraph 6(b) of this Agreement); then in each such case a supplemental benefit will be payable by the Company to or on behalf of the Executive commencing as of the first day of the month following the month that the Executive reaches age 55 and continuing on a monthly basis thereafter for the remainder of the Executive's life. The amount of the monthly payments shall be equal to the difference between:

    (i)  the cumulative monthly amount of the retirement benefit to which the Executive would have been entitled to receive under Retirement Plan A which is maintained by the Company (the "Pension Plan") and the Executive's pension plan account under the non-qualified Supplemental Executive Retirement Plan maintained by the Company (the "SERP"), if the benefits were computed as though the Executive had continued in the employ of the Company until he attained age 55 assuming compensation (as defined in the Pension Plan) equal to that in effect as of the date of such termination of employment, with no reduction in benefits on account of an election by the Executive for any death benefit to be paid to his spouse under the Pension Plan; and

    (ii)  the cumulative monthly amount of the retirement benefits actually payable to the Executive under the Pension Plan and the Executive's pension plan account under the SERP commencing on the first day of the month following the month that the Executive reaches age 55 provided that he were to elect to have those benefits commence at that time.

The prior provisions of this Subparagraph (4)(h) are meant to describe the method for determining a benefit to the Executive. The actual form and timing of payment shall be elected by the Executive consistent with the options and method described in the payment of benefits section of the SERP and the actuarial equivalence calculation necessary to determine the amount or amounts to be paid shall be made using the assumptions stated in such section of the SERP. Such an election shall be made at the time of this Agreement and may be changed at a later date; however, a change or changes will not be effective until the calendar year following the calendar year in which the change or changes were elected by the Executive. Further, an attempted change in the form of payment or in the benefit commencement date will not be effective if the Executive has incurred a termination of employment with the Company for any reason (including death) during or prior to the calendar year in which such change in the payment election is made. Absent a distribution election, distribution will be made in a lump sum as soon as practicable after the Executive's termination of employment with the Company.

        i.  Supplemental Death Benefit.  If the Executive becomes entitled to a benefit under Subparagraph (4)(g) and subsequently dies, or if the Executive dies prior to terminating employment with the Company, the Executive's spouse at the time of the Executive's death shall be entitled to a monthly payment for the remainder of her life in an amount equal to the difference between:

    (i)  the cumulative monthly amount determined in accordance with Subparagraph (g)(i) above (if the Executive has died prior to such termination of employment, that monthly amount will be calculated as if the Executive had met the requirements for a benefit under Subparagraph 4(g)), and

    (ii)  the cumulative monthly amount actually payable to such spouse and a former spouse under the Pension Plan and the Executive's pension plan account under the SERP.

The parties acknowledge and agree that it is their intention that the Executive's spouse will be entitled to monthly payments for her life under this Agreement and from the Plan and SERP in an amount equal to the monthly payments from the same sources being received by the Executive at the time of his death (or in the case of his death before termination of employment, the payments he would have been entitled to had he met the requirements for a benefit under Subparagraph 4(g)), unless a former spouse is receiving benefits under the Pension Plan or SERP subsequent to the Executive's death in which case those monthly payments will be reduced by payments made to the former spouse from such Pension Plan and SERP.

The prior provisions of this Subparagraph (4)(i) are meant to describe the method for determining a benefit to the Executive's spouse. Payment shall actually be made in the form of a lump sum as soon as practicable after the Participant's death. The actuarial equivalence calculation necessary to determine the amount to be paid shall be made using the assumptions used under the SERP for a death benefit under the SERP.

        j.  Life Insurance.  In the event the Executive (1) incurs a termination of employment with the Company after reaching age 60 and is not discharged by the Company for "cause" (as such term is defined in Subparagraph 6(c) of this Agreement); or (2) incurs a termination of such employment on account of his "disability" (as such term is defined in Subparagraph 6(b) of this Agreement); then in each such case the Company shall provide the Executive with life insurance coverage from the date the Executive's employment with the Company is terminated until he attains age 65 in an amount equal to the base salary of the Executive as of the date such employment is terminated. However, if the Executive becomes entitled to such coverage, coverage will be a lesser amount from age 65 to age 70 equal to 50% of his base salary as of the date such employment is terminated and such coverage will be equal to 25% of such base salary after age 70.

In the event that the Company is for any reason prohibited from providing such coverage to the Executive by virtue of applicable state or federal law, or if such provision would cause material adverse tax consequences as to the Company, the Company shall be relieved of its obligation to provide such benefit and the parties hereto shall use their best efforts to reach a mutual agreement with respect to permissible benefits to be provided in lieu of such insurance.

The parties recognize that premium payments made under this Subparagraph 4(j) may be included in the Executive's taxable income.

All benefits described in Paragraphs (1) through (j) above shall be paid by the Company out of its general assets and no assets shall be set aside or otherwise obligated for purposes of paying such benefits.

        k.  Changes.  No reference in this Agreement to any policy or any employee benefit plan established or maintained by Company shall preclude Company from changing any such policies or amending or terminating any such benefit plans; provided, that, such change, amendment or termination shall not cause an amendment of this Agreement without the written approval of the parties as provided in Paragraph 12.

        l.  Withholding Taxes.  Company may withhold from any compensation, reimbursements and benefits payable to Executive all federal, state, city and other taxes as shall be required pursuant to any law or governmental regulation or ruling.

        m.  Termination.  Except as otherwise stated in this Agreement, Company's obligations under Paragraph 4 will cease upon the date of Executive's termination of employment.

    5.  BUSINESS PROTECTIONS TO COMPANY.

        a.  Non-Disclosure of Trade Secrets and Confidential Information.  Executive shall not during the term of his employment or at any time thereafter divulge, furnish or make accessible to anyone or use in any way other than for the benefit of Company in the ordinary course of business of Company any trade secrets or confidential information of Company which Executive has acquired or has become acquainted with or will acquire or become acquainted with during the term of his employment, whether developed by him or by others. Confidential information includes any information or compilation of information that derives independent economic value from not being generally known or readily ascertainable by proper means by other persons and which relates to any aspect of Company's business, including, but not limited to, trade secret information relating to Company's scientific technology, processes and products; research and development; Company's philosophies and strategies; vendor and customer lists; all information with respect to "Inventions" described in Subparagraph c. of Paragraph 5; and any confidential information of a vendor, licensor, licensee or customer which has been divulged to Company by such individuals or entities. All information disclosed to Executive, or to which he obtains access, whether originated by him or by others, during the period of his employment, which he has reasonable basis to believe to be confidential information, or which is treated by Company as being confidential information, shall be presumed to be confidential information.

        b.  Non-Competition/Non-Solicitation of Customers or Employees.  Executive agrees that he will devote all of his time, attention, knowledge and skill solely and exclusively to the business and interests of Company. Executive expressly agrees that during the term o. his employment by Company he will not, without the prior written consent of Company, be interested or involved, directly or indirectly, in any form, fashion or manner, as a partner, officer, director, stockholder, adviser, employee, agent or in any other form or capacity, in any other business competitive with Company's business, or which, had Executive presented the opportunity to Company, is so closely related to Company's business that such opportunity could have been pursued by Company. Executive also agrees that he will bring any business opportunity that Company may be interested in to Company's attention.

    Executive further agrees that for a period of three years after termination of his employment with Company for whatever reason, whether voluntary or involuntary, Executive will not, directly or indirectly, either for himself or for any other person, firm, company or corporation, engage in or otherwise affiliate with any business operation engaged in competition with Company, or call upon, solicit, divert, or attempt to solicit or divert business from any person, firm or corporation which was a customer of Company during Executive's employment with Company. Executive agrees and acknowledges that Company's natural trade area is international in its geographic scope, and therefore that it is reasonable that the restrictions set forth in this paragraph pertain to all states in the United States of America and all other countries in which Company does business.

    Further, for a three year period after Executive's termination of employment for any reason, whether voluntary or involuntary, Executive agrees not to solicit or induce any of Company's employees to terminate their employment relationship with Company, for any reason.

    The term "customer" of Company as used herein shall be defined and construed to mean any and all persons, partnerships, trusts, corporations or other entities which were customers of Company, or any of Company's related companies or affiliates, at any time during Executive's employment.

        c.  Non-Disparagement.  During the period of Executive's employment and for an unlimited period thereafter, Executive agrees not to make any disparaging remarks of any sort or otherwise communicate any disparaging remarks about Company or any of its shareholders, directors, officers or employees, directly or indirectly, to any of Company's employees, shareholders, directors, customers, vendors, competitors, or other people or entities with whom Company has a business or employment relationship.

        d.  Return of Confidential Information Upon Termination of Employment.  Upon the termination of his employment, Executive agrees to deliver promptly to Company all originals and copies of records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, accounts, calculations and copies thereof, which are the property of Company or which relate in any way to the business, products, customers, practices or techniques of Company, and all other property, trade secrets and confidential information of Company, including, but not limited to, all documents which in whole or in part contain any trade secrets or confidential information of Company, which in any of these cases are in his possession or under his control.

        e.  Cooperation in Claims.  During the period of Executive's employment and for an unlimited time thereafter, at the request of Company, Executive will cooperate with Company with respect to any claims or lawsuits by or against Company where Executive has knowledge of the facts involved in such claims or lawsuits. Such cooperation shall include, but shall not be limited to, Executive providing reasonable deposition, hearing and trial testimony and making himself available at reasonable times to prepare for such testimony with Company's attorneys; responding to questions that may be posed from time to time by Company's attorneys regarding such claims or lawsuits; declining to voluntarily aid, assist or cooperate with any party who has claims or lawsuits by or against Company, or with their attorneys or agents; and notifying Company and Company's attorneys when and if the Executive is contacted by other parties or their attorneys or agents involved in actions by or against Company. Nothing in Subparagraph 5.e. shall prevent Executive from honestly testifying at an administrative hearing, arbitration, deposition or in court, in response to a lawful and properly served subpoena in a proceeding involving Company. Company agrees to pay, or reimburse Executive, for any out of pocket expenses which he incurs relating to his cooperation. If Executive forfeits compensation from other employment as a result of meeting his requirements under this subparagraph, Company agrees to compensate Executive in an amount equal to the amount of compensation forfeited.

        f.  Remedies.  The parties recognize and agree that, because the breach by Executive of the provisions of Paragraph 5 would result in damages difficult to ascertain, Company shall be entitled to injunctive and other equitable relief to prevent a breach or threatened breach of the provisions of Paragraph 5. Accordingly, Executive specifically agrees that Company shall be entitled to temporary and permanent injunctive relief to enforce the provisions of Paragraph 5 and that such relief may be granted without the necessity of proving actual damages. Such injunctive or equitable relief shall be in addition to and not in lieu of any right to recover money damages for any such breach. Further, if Executive violates any portion of Paragraph 5, in connection with any suit at law or in equity, Company shall be entitled to an accounting, and to the repayment of all profits, compensation, commissions, fees, royalties or other enumeration which Executive or any other entity or person may have either directly or indirectly realized and/or may realize, as a result of, growing out of, or in connection with Executive's violations; and if Company prevails against Executive in a legal action for violation of any portion of Paragraph 5, Company shall be entitled to collect from Executive any attorney's fees and costs incurred in bringing any action to enforce the terms of Paragraph 5, as well as any attorney's fees and costs for the collection of any judgments in Company's favor arising out of Executive's violations.

        g.  Enforceability.  Executive agrees that considering Executive's relationship with Company, and given the terms of this Agreement, the restrictions and remedies set forth in Paragraph 5 are reasonable. Notwithstanding the foregoing, if any of the covenants set forth above shall be held to be invalid or unenforceable, the remaining parts thereof shall nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts have not been included therein. In the event the provisions relating to time periods and/or areas of restriction shall be declared by a court of competent jurisdiction to exceed the maximum time periods or areas of restriction permitted by law, then such time periods and areas of restriction shall be amended to become and shall thereafter be the maximum periods and/or areas of restriction which said court deems reasonable and enforceable. Executive also agrees that Company's action in not enforcing a particular breach of any part of Paragraph 5 will not prevent Company from enforcing its rights as to any other breach that Company discovers, and shall not operate as a waiver by Company against any future enforcement of a breach.

        h.  Other Obligations.  It is intended that the obligations of Executive to perform pursuant to the terms of Paragraph 5 are unconditional and do not depend on the performance or nonperformance of any agreements, duties or obligations between Company and Executive not specifically contained in this Agreement. Paragraph 5 shall survive the termination of Executive's employment, regardless of the reason for termination.

    6.  TERMINATION.  Executive's employment will or may be terminated at any time as follows:

        a.  Death.  Executive's employment shall terminate upon Executive's death.

        b.  Disability.  Executive's employment shall terminate if Executive sustains a disability which is serious enough that Executive is not able to perform the essential functions of Executive's job, with or without reasonable accommodations, as defined and if required by applicable state and federal disability laws. Executive shall be presumed to have such a disability for purpose of this Agreement if Executive qualifies, because of illness or incapacity, to begin receiving disability income insurance payments under the long term disability income insurance policy that Company makes available for the benefit of its employees generally. If there is no such policy in effect at the date of Executive's potential disability, or if Executive does not qualify for such payments, Executive shall nevertheless be presumed to have such a disability if Executive is substantially incapable of performing Executive's duties for a period of more than twelve (12) weeks.

        c.  For Cause.  Company may terminate Executive's at will employment at any time for Cause. "Cause" shall be defined as:

    (i)  Executive's material breach of any of Executive's obligations under this Agreement, or Executive's repeated failure or refusal to perform or observe Executive's duties, responsibilities and obligations as an employee of Company for reasons other than disability or incapacity;

    (ii)  Any dishonesty or other breach of the duty of loyalty of Executive affecting Company or any customer, vendor or employee of Company;

    (iii)  Use of alcohol or other drugs in a manner which affects the performance of Executive's duties, responsibilities and obligations as an employee of Company;

    (iv)  Conviction of Executive of a felony or of any crime involving misrepresentation or fraud;

    (v)  Commission by Executive of any other willful or intentional act which could reasonably be expected to injure the reputation, business or business relationships of Company and/or Executive;

    (vi)  The existence of any court order or settlement agreement prohibiting Executive's continued employment with Company; or

    (vii)  Any other reason or act of misconduct which would permit discharge of an employee of Company under disciplinary guidelines applicable to Executive as an employee of Company.

        d.  Voluntary Resignation/Retirement.  Executive may, upon sixty (60) days written notice, voluntarily resign and/or retire from Executive's at will employment at any time and for any reason. During the sixty (60) days after notice is given, Executive agrees that he shall continue to render his normal services to Company, and Company agrees that it shall continue to pay him his regular rate of compensation.

        e.  Without Cause "At Will".  Company may, upon written notice, terminate Executive's at will employment without cause. In other words, Company can terminate Executive's at will employment at any time and for any reason, by giving Executive written notice.

    7.  PAYMENTS UPON TERMINATION.

        a.  Death.  If Executive's employment is terminated due to the death of Executive, Executive's estate or heirs, as appropriate, shall be paid (i) Executive's monthly Base Salary (or other applicable benefits) through the date of death; (ii) any benefits payable under any life insurance policy maintained by Company for the benefit of Executive at the time Executive's death occurred; (iii) Executive's accrued but unpaid time off pay (including, but not limited to, vacation) (iv) any unpaid expense reimbursement; (v) any vested incentive Awards owing to Executive pursuant to the terms and conditions of the Incentive Plans; and (vi) Executive's other accrued benefits, if any, under any of Company's other employee benefit plans (e.g., pension plan, 401(k) plan, the SERP), subject to the terms and conditions of those plans. In the event of a termination of employment as a result of Executive's death, Executive understands that no Incentive Awards will be granted to Executive for the fiscal year in which the termination of employment takes place.

        b.  Disability.  If Executive's employment is terminated due to Executive's Disability, Executive shall be paid (i) the applicable employee benefit (e.g. paid leave, sick leave, unpaid leave, disability benefits, etc.) through the date of termination; (ii) any benefits payable under any disability policy made available to Executive by Company for the benefit of Executive at the time of Executive's disability (iii) Executive's accrued but unpaid time off pay (including, but not limited to, vacation); (iv) any unpaid expense reimbursement; (v) any vested Incentive Awards owing to Executive pursuant to the terms and conditions of the incentive Plans; and (vi) Executive's other accrued benefits, if any, under any of Company's other employee benefits plans (e.g., pension plan, 401(k) plan, the SERP), subject to the terms and conditions of those plans. In the event of a termination of employment as a result of Executive's disability, Executive understands that no Incentive Awards will be granted to Executive for the fiscal year in which the termination of employment takes place.

        c.  For Cause/Voluntary Resignation/Retirement.  If Company terminates Executive's employment for Cause, or if Executive voluntarily resigns and/or retires from his employment, Executive shall be paid (i) Executive's monthly Base Salary through the date of termination; (ii) Executive's accrued but unpaid time off pay (including, but not limited to, vacation); (iii) any unpaid expense reimbursement; and (iv) any vested incentive Awards owing to Executive pursuant to the terms and conditions of the Incentive Plans; and (v) Executive's other accrued benefits, if any, under any of Company's other employee benefit plans (e.g., pension plan, 401(k) plan, the SERP), subject to the terms and conditions of those plans. In the event of a termination for Cause by Company, or a voluntary termination by Executive, Executive understands that no Incentive Awards will be granted to Executive for the fiscal year in which the termination of employment takes place.

    If Executive voluntarily resigns and/or retires from his employment, Company may, at its sole option, waive some portion or all of the 60-day notice period; and continue to pay Executive his full Base Salary as well as all benefits for the remainder of the 60-day notice period, with the understanding that Executive will have no rights or obligations to provide employment services. In other words, the effective date of the resignation or retirement will not be changed; and Company's compensation obligations, as set forth in Paragraph 4, will continue through the designated date of resignation or retirement, although Executive will not be performing services during that period of time. The parties expressly agree that, should Company choose to waive some portion or all of the 60-day notice period under this provision, it will nevertheless be treated as a voluntary resignation and/or retirement; it will not be treated as a termination without cause.

        d.  Without Cause At Will.  If Company terminates Executive's at will employment without Cause, Executive shall be paid (i) Executive's monthly Base Salary through the date of termination; (ii) Executive's accrued but unpaid time off pay (including, but not limited to, vacation); (iii) any unpaid expense reimbursement; (iv) any vested Incentive Awards owing to Executive pursuant to the terms and conditions of the Incentive Plans; and (v) Executive's other accrued benefits, if any, under any of Company's other employee benefit plans (e.g., pension plan, 40 1(k) plan, the SERP), subject to the terms and conditions of those plans. In the event of a termination without Cause, Executive understands that no Incentive Awards will be granted to Executive for the fiscal year during which the termination takes place.

    An additional payment of "post-termination severance pay" may be available if Company terminates Executive's at will employment without Cause. If Executive (after having Executive's employment terminated without Cause) signs (and does not rescind, as allowed by law) a Release of Claims in a form satisfactory to Company which assures, among other things, that Executive will not commence any type of litigation or other claims as a result of the termination, and if Executive honors all of Executive's other obligations as required by this Agreement, Company shall pay Executive post-termination severance pay, as follows:

    (i)  Except as provided in Paragraph (7)(d)(ii) below, if Company terminates Executive's at will employment without Cause, Company agrees to pay Executive a post-termination severance payment equal to three years of Executive's Base Salary in effect as of the effective date of the termination of employment. This payment will be made over a three year period of time in a manner consistent with the Company's normal payroll practices, unless otherwise agreed to by the parties, less applicable payroll withholdings, after the above-referenced Release is signed and becomes effective.

    (ii)  If Company terminates Executive's at will employment without Cause as a result of a change of control, (e.g., a merger, consolidation, sale of a controlling interest in Company, or a sale or lease of substantially all of its assets), and if Executive accepts a position of employment in a comparable position with the new controlling entity (either before or after termination of employment with the Company), Company will not be obligated to pay Executive the remainder of the post-termination severance payments provided in Paragraph (7)(d)(i) above, for the period following acceptance of the position with the new controlling entity.

    (iii)  No Additional Pay/Benefits. It is understood that, except as specifically set forth above, no post-termination payments or benefits will be provided to Executive following the termination of Executive's employment, it is specifically understood that no pension, retirement, 40 1(k) or SERP contributions will be paid by Company based on the post-termination severance payments. Further, the parties expressly agree and understand that Executive shall not be entitled to an Incentive Award under Company's Incentive Plans or any other bonus for any fiscal year, or part thereof, during which the post-termination pay is paid.

    8.  ASSIGNMENT.  The rights and obligations of Company hereunder may be transferred to its successors and assigns. Executive may not, however, transfer or assign his rights or obligations contained in this Agreement.

    9.  SEVERABILITY.  To the extent any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted from this Agreement and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect. Notwithstanding the foregoing, in the event that any provision of this Agreement is unenforceable because it is over broad, then such provision shall be limited to the extent necessary to make it enforceable under applicable law and enforced as so limited. Executive acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.

    10.  GOVERNING LAW.  This Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota, to the extent not pre-empted by federal law. Any legal proceeding related to this Agreement shall be brought in an appropriate state or federal court in the State of Minnesota, and each of the parties hereby consents to the exclusive jurisdiction of the state and/or federal courts in the State of Minnesota for this purpose.

    11.  WAIVER.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either party.

    12.  ENTIRE AGREEMENT; AMENDMENT.  This Agreement supersedes any prior employment or other agreements between the parties and contains the entire Agreement of the parties. There are no terms other than those contained herein. No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto with the same formality attending execution of this Agreement.

IN WITNESS WHEREOF, Company has caused this Agreement to be executed by its duly authorized officer and Executive has signed this Agreement as of the day and year first above written.

AMERICAN CRYSTAL SUGAR COMPANY
By:	/s/ WAYNE LANGEN

Its:     Chairman

/s/ JAMES J HORVATH JAMES J. HORVATH

QuickLinks

EX-21.1

Exhibit 21.1

List of Subsidiaries of the Company:

Name of Entity	State of Incorporation
United Sugars Corporation	Minnesota
Midwest Agri-Commodities Company	Minnesota
ProGold Limited Liability Company	Minnesota
Crystech, LLC	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Auditor

We consent to the incorporation by reference of our reports in the registration statements of the American Crystal Sugar Company on Form S-1 (File No. 33-83868, 333-11693 and 333-32251) and our audits of the financial statements of American Crystal Sugar Company as of August 31, 1999, such reports are included or incorporated by reference in this Annual Report on Form 10-K.

/s/ EIDE BAILLEY LLP

Eide Bailley LLP
Eden Prairie, Minnesota

November 22, 1999

EX-27

 


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