<PAGE>
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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                          -----------------------------
                                    FORM 10-Q
                          -----------------------------



               Quarterly Report pursuant to Section 13 or 15(d)
                   of the Securities Exchange Act of 1934 

                     FOR THE PERIOD ENDED FEBRUARY 28, 1999

                        COMMISSION FILE NUMBER:  33-83868

                         AMERICAN CRYSTAL SUGAR COMPANY
             (Exact name of registrant as specified in its charter)

                  MINNESOTA                       84-0004720
         (State or other jurisdiction of        (I.R.S. Employer
         incorporation or organization)        Identification No.)

                             101 NORTH THIRD STREET
                            MOORHEAD, MINNESOTA 56560
                    (Address of principal executive offices)

                         TELEPHONE NUMBER (218) 236-4400
              (Registrant's telephone number, including area code)

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, and (2) has been subject to such filing requirements
for the past 90 days.

                  YES     X             NO  
                      ---------            --------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
                                             OUTSTANDING AT
         CLASS OF COMMON STOCK               APRIL 6, 1999 
         ---------------------               -------------- 
         <S>                                 <C>
             $10 PAR VALUE                        2,872
</TABLE>

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--------------------------------------------------------------------------------
<PAGE>

                         AMERICAN CRYSTAL SUGAR COMPANY

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                       PAGE NO.
                                                                       --------
<S>                                                                    <C>
PART I   FINANCIAL INFORMATION

       ITEM 1.    FINANCIAL STATEMENTS (UNAUDITED)

                  BALANCE SHEETS                                            1

                  STATEMENTS OF OPERATIONS                                  3

                  STATEMENTS OF CASH FLOWS                                  4

                  NOTES TO THE FINANCIAL STATEMENTS                         5

       ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS
                    OF FINANCIAL CONDITION AND
                    RESULTS OF OPERATIONS                                   7

PART II  OTHER INFORMATION

        ITEM 1.   LEGAL PROCEEDINGS                                         10

        ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                          10



SIGNATURES                                                                  13
</TABLE>

<PAGE>

                        AMERICAN CRYSTAL SUGAR COMPANY
                                Balance Sheets
                                 (Unaudited)
                            (Dollars in Thousands)

                                    ASSETS
<TABLE>
<CAPTION>
                                                          February 28                         August 31,
                                            -------------------------------------------   ----------------------
                                                    1999                   1998                    1998
                                            --------------------   --------------------   ----------------------
<S>                                         <C>                    <C>                    <C>
Current Assets:                                                                              *
 Cash and Cash Equivalents                   $                56    $                52    $                  41
 Accounts Receivable:
  Trade                                                   70,962                 52,794                   53,874
  Members                                                      1                     64                    2,558
  Other                                                      753                  2,929                    2,801
 Advances to Related Parties                              21,316                 20,922                   26,402
 Inventories                                             406,770                379,576                  142,382
 Prepaid Expenses                                          2,788                  3,113                    3,079
                                            --------------------   --------------------   ----------------------

Total Current Assets                                     502,646                459,450                  231,137
                                            --------------------   --------------------   ----------------------



Property and Equipment:
 Land                                                     14,277                 13,395                   13,818
 Buildings and Equipment                                 675,099                640,533                  664,453
 Construction-in-Progress                                127,991                 64,759                  112,470
 Less: Accumulated Depreciation                         (453,553)              (429,429)                (438,801)
                                            --------------------   --------------------   ----------------------

Net Property and Equipment                               363,814                289,258                  351,940
                                            --------------------   --------------------   ----------------------

Other Assets:
 Investments in Banks for Cooperatives                    15,858                 14,524                   15,890
 Investments in Marketing Cooperatives                     2,887                  2,481                    2,197
 Investment in ProGold LLC                                35,233                 34,156                   35,172
 Investment in Crystech                                    1,574                      0                    1,574
 Other Assets                                             12,854                  5,952                    8,550
                                            --------------------   --------------------   ----------------------

Total Other Assets                                        68,406                 57,113                   63,383
                                            --------------------   --------------------   ----------------------

Total Assets                                 $           934,866    $           805,821    $             646,460
                                            --------------------   --------------------   ----------------------
                                            --------------------   --------------------   ----------------------
</TABLE>

* Derived from audited financial statements.
The accompanying notes are an integral part of these financial statements.

                                       1

<PAGE>
                        AMERICAN CRYSTAL SUGAR COMPANY
                                Balance Sheets
                                 (Unaudited)
                            (Dollars in Thousands)


                      LIABILITIES AND MEMBERS' INVESTMENTS
<TABLE>
<CAPTION>
                                                                     February 28                   August 31,
                                                        ------------------------------------   -----------------
                                                               1999               1998                1998
                                                        -----------------  -----------------   -----------------
<S>                                                     <C>                <C>                 <C>
Current Liabilities:                                                                             *
 Short-Term Debt                                        $        225,010   $        162,000    $        116,322
 Current Maturities of Long-Term Debt                             18,800             18,800              17,800
 Accounts Payable:
  Trade                                                            7,829             12,278              31,421
  Other                                                            3,787              4,580               4,710
 Accrued Continuing Costs                                         45,785             25,354                   -
 Other Current Liabilities                                        17,067             16,968              16,112
 Amounts Due Members                                             131,568            157,187              14,415
                                                        -----------------  -----------------   -----------------

Total Current Liabilities                                        449,846            397,167             200,780
Long-Term Debt, Excluding Current
 Maturities                                                      232,795            168,000             194,695
Deferred Income Taxes                                              1,753              1,540               1,753
Other Liabilities                                                 26,135             25,311              24,389
                                                        -----------------  -----------------   -----------------

Total Liabilities                                                710,529            592,018             421,617
                                                        -----------------  -----------------   -----------------


Members' Investments (Note 4):
 Preferred Stock                                                  38,275             38,263              38,275
 Common Stock                                                         28                 27                  28
 Additional Paid-in Capital                                      122,666            111,959             116,183
 Unit Retains                                                     95,597             97,462             105,850
 Pension Liability Adjustment                                     (2,259)            (4,131)             (2,259)
 Retained Earnings                                               (29,970)           (29,777)            (33,234)
                                                        -----------------  -----------------   -----------------

Total Members' Investments                                       224,337            213,803             224,843
                                                        -----------------  -----------------   -----------------
Total Liabilities and Members'
 Investments                                            $        934,866   $        805,821    $        646,460
                                                        -----------------  -----------------   -----------------
                                                        -----------------  -----------------   -----------------
</TABLE>

* Derived from audited financial statements.
The accompanying notes are an integral part of these financial statements.


                                       2

<PAGE>

                       AMERICAN CRYSTAL SUGAR COMPANY
                           Statement of Operations
                                  (Unaudited)
                            (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                            For the Six Months Ended                Three Months Ended
                                                                  February 28                           February 28
                                                        ---------------------------------    ----------------------------------
                                                             1999              1998               1999               1998
                                                        ---------------    --------------    ---------------    ---------------
<S>                                                     <C>                <C>               <C>                <C>
Net Revenue                                             $      375,975     $     333,562     $      180,302     $      154,393
Cost of Product Sold                                           (11,911)          (14,463)           (13,825)           (29,113)
                                                        ---------------    --------------    ---------------    ---------------

Gross Proceeds                                                 387,886           348,025            194,127            183,506
Selling, General & Administrative
 Expenses                                                       85,707            71,264             41,433             31,680
Accrued Continuing Costs                                        45,785            25,354             21,783              9,633
                                                        ---------------    --------------    ---------------    ---------------

Operating Proceeds                                             256,394           251,407            130,911            142,193
                                                        ---------------    --------------    ---------------    ---------------

Other Income (Expenses)
 Interest Income                                                   438               337                159                (49)
 Interest Expense                                              (10,941)           (6,995)            (6,332)            (4,004)
 Other Income (Loss)                                             4,717               483                338                428
 Other Expenses                                                 (1,203)           (5,472)            (1,181)                66
                                                        ---------------    --------------    ---------------    ---------------
Other Income (Expense)                                          (6,989)          (11,647)            (7,016)            (3,559)
                                                        ---------------    --------------    ---------------    ---------------

Proceeds before Income Taxes                                   249,405           239,760            123,895            138,634
                                                        ---------------    --------------    ---------------    ---------------
Net Proceeds Resulting from
 Member and Non-Member Business                         $      249,405     $     239,760     $      123,895     $      138,634
                                                        ---------------    --------------    ---------------    ---------------
                                                        ---------------    --------------    ---------------    ---------------
Distribution of Net Proceeds:
 Credited/(Charged) to Member's
   Investments:
  Non-Member Business Income/(Loss)                              3,264            (6,222)              (695)              (370)
                                                        ---------------    --------------    ---------------    ---------------
Net Credit/(Charge) to Members'
 Investments                                                     3,264            (6,222)              (695)              (370)
Payments to/due Members for
 Sugarbeets, Net of Unit Retains
 Declared                                                      246,141           245,982            124,590            139,004
                                                        ---------------    --------------    ---------------    ---------------

Total                                                   $      249,405     $     239,760     $      123,895     $      138,634
                                                        ---------------    --------------    ---------------    ---------------
                                                        ---------------    --------------    ---------------    ---------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       3

<PAGE>

                        AMERICAN CRYSTAL SUGAR COMPANY
                           Statements of Cash Flows
                                  (Unaudited)
                            (Dollars In Thousands)
<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                               February 28
                                                                   ------------------------------------
                                                                        1999                 1998
                                                                   ---------------       --------------
<S>                                                                <C>                   <C>
Cash Used for Operations:
 Net Proceeds Resulting from Member and Non-
  Member Business                                                   $     249,405         $    239,760
 Payments to/due Members for Sugarbeets,
  Including Unit Retains                                                 (246,141)            (245,982)
 Add/(Deduct) Noncash Items:
  Depreciation and Amortization                                            14,786               16,256
  Loss on Investment Activities                                              (181)               5,134
  (Gain)/loss on the Disposition of Property
   and Equipment                                                              (20)                (280)
  Noncash Portion of Patronage Dividend from
   Banks for Cooperatives                                                      33                    0
  Deferred Gain Recognition                                                  (100)                (104)
 Changes in Assets and Liabilities:
  Accounts Receivable                                                     (12,484)              13,628
  Inventories                                                            (264,388)            (239,519)
  Prepaid Expenses                                                            291                 (221)
  Advances to Related Parties                                               5,086               (5,857)
  Accounts Payable                                                        (24,516)              (9,040)
  Other Liabilites                                                         48,483               28,211
  Amount Due Growers                                                      117,153               91,032
                                                                   ---------------       --------------
Net Cash Used In Operations                                              (112,593)            (106,982)
                                                                   ---------------       --------------

Cash Used In Investing Activities:
 Purchases of Property and Equipment                                      (26,627)             (25,977)
 Proceeds from the Sale of Property and Equipment                              20                  280
 Investment in Banks for Cooperatives                                           0                   44
 Investment in Marketing Coops                                               (589)                (727)
 Investment in ProGold LLC                                                    120                3,718
 Changes in Other Assets                                                   (4,334)              (2,191)
                                                                   ---------------       --------------
Net Cash Used In Investing Activities                                     (31,410)             (24,853)
                                                                   ---------------       --------------

Cash Provided by Financing Activities:
 Net Proceeds (Payments) on Short-Term Debt                               108,688               94,040
 Proceeds from Long-Term Debt                                              57,000                    0
 Long-Term Debt Repayment                                                 (17,900)             (17,800)
 Changes in Preferred Stock                                                     0                4,721
 Changes in Common Stock                                                        0                    1
 Changes in Additional Paid-In Capital                                      6,483               47,362
 Payment of Unit Retains                                                  (10,253)              (7,988)
                                                                   ---------------       --------------
Net Cash Provided by Financing Activities                                 144,018              120,336
                                                                   ---------------       --------------
Decrease in Cash and Cash Equivalents                                          15              (11,499)
Cash and Cash Equivalents Beginning of Period                                  41               11,551
                                                                   ---------------       --------------

Cash and Cash Equivalents End of Period                             $          56         $         52
                                                                   ---------------       --------------
                                                                   ---------------       --------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       4

<PAGE>

                         AMERICAN CRYSTAL SUGAR COMPANY
                        NOTES TO THE FINANCIAL STATEMENTS
        FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998

NOTE 1:  BASIS OF PRESENTATION

The unaudited financial statements contained herein have been prepared 
pursuant to the rules and regulations of the Security and Exchange 
Commission. Accordingly, they do not include all the information and 
footnotes required by generally accepted accounting principles. However, in 
the opinion of management, all adjustments, consisting of normal recurring 
accruals, considered necessary for a fair presentation have been included.

The operating results for the six month period ended February 28, 1999 are 
not necessarily indicative of the results that may be expected for the year 
ended August 31, 1999.

The amount paid to growers for sugarbeets (beet payment) depends on the 
future selling prices of sugar and by-products as well as processing and 
other costs to be incurred during the remainder of the fiscal year. For the 
purposes of this report, the amount of the beet payment, future revenues and 
costs have been estimated. Therefore, adjustments with respect to these 
estimates may be necessary in the future as additional information becomes 
available.

These financial statements should be read in conjunction with the financial 
statements and notes included in the company's annual report for the year 
ended August 31, 1998.

NOTE 2:  INVENTORIES

The major components of inventories are as follows (In Thousands):

<TABLE>
<CAPTION>
                                                 2/28/99          2/28/98           8/31/98
                                              --------------    -------------     -------------
    <S>                                       <C>               <C>               <C>
    Refined Sugar, Pulp, Molasses,
       CSB and Beet Seed                           $249,265         $241,625         $ 123,628
    Unprocessed Sugarbeets                          138,300          117,766                 -
    Maintenance Parts & Supplies                     19,205           20,185            18,754
                                              --------------    -------------     -------------
    Total Inventories                              $406,770         $379,576         $ 142,382
                                              --------------    -------------     -------------
                                              --------------    -------------     -------------
</TABLE>

Sugar, pulp, molasses and CSB inventories are valued at estimated net 
realizable value. Unprocessed sugarbeets are valued at the estimated net beet 
payment plus estimated unit retains to be withheld. Maintenance parts & 
supplies and beet seed inventories are valued the lower of average cost or 
market.

                                       5

<PAGE>

NOTE 3:  ACCRUED CONTINUING COSTS

For interim reporting, the Net Proceeds from Member Business is determined 
based on the forecasted beet payment and the percentage of the tons of 
sugarbeets processed to the total estimated tons of sugarbeets to process for 
a given crop year. Accrued continuing costs represents the difference between 
the Net Proceeds from Member Business as determined above and actual member 
business crop year revenues realized and expenses incurred through the end of 
the reporting period. Accrued continuing costs are reflected in the Financial 
Statements as a cost on the Statements of Operations and as a current 
liability on the Balance Sheets.

NOTE 4:  MEMBERS' INVESTMENTS

<TABLE>
<CAPTION>
                                               Shares        Shares Issued
                                Par Value    Authorized      & Outstanding
                                ---------    ----------      -------------
<S>                             <C>          <C>             <C>    
Preferred Stock:
  April 6, 1999                    $76.77       600,000            498,570
  February 28, 1999                $76.77       600,000            498,570
  August 31, 1998                  $76.77       600,000            498,570
  February 28, 1998                $76.77       600,000            498,415

Common Stock:
  April 6, 1999                    $10.00         4,000              2,872
  February 28, 1999                $10.00         4,000              2,842
  August 31, 1998                  $10.00         4,000              2,835
  February 28, 1998                $10.00         4,000              2,655
</TABLE>

                                       6

<PAGE>

                  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
        FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998

This report contains forward-looking statements that involve risks and 
uncertainties. Such forward-looking statements include, among others, those 
statements including the words "expect," "anticipate," "believe," "may" and 
similar expressions. American Crystal's actual results could differ 
materially from those indicated. Important factors that could cause or 
contribute to such differences include, without limitation, market factors, 
weather and general economic conditions, farm and trade policy, available 
quantity and quality of sugarbeets, and the ability of American Crystal and 
third party suppliers and customers to successfully remediate year 2000 
issues.

RESULTS OF OPERATIONS

COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998

Revenue for the six months ended February 28, 1999, was $376.0 million, an 
increase of $42.4 million from 1998. Revenue from total sugar sales increased 
11.1 percent reflecting a 12.1 percent increase in hundredweights sold 
partially offset by a .9 percent decrease in the average selling price per 
hundredweight. Revenue from pulp sales increased 11.6 percent due to a 60.6 
percent increase in the volume of pulp sold partially offset by a 30.5 
percent decrease in the average selling price per ton. Revenue from molasses 
sales increased 12.0 percent due to a 52.0 percent increase in the volume of 
molasses sold partially offset by a 26.3 percent decrease in the average 
selling price per ton. Revenue from the sales of Concentrated Separated 
By-Product (CSB), a by-product of the molasses desugarization process, 
decreased 26.7 percent due to an 22.5 percent decrease in the volume of CSB 
sold and a 5.4 percent decrease in the average selling price per ton.

Cost of product sold, exclusive of payments for sugarbeets, decreased $2.5 
million. Direct processing costs for sugar and pulp increased 6.0 percent 
primarily due to the harvesting and processing of a larger crop. Fixed and 
committed expenses increased 2.0 percent reflecting higher maintenance costs. 
Changes in product inventory levels between 1999 and 1998, impacted the cost 
of product sold unfavorably by $24.9 million. The cost associated with sugar 
purchased to meet customer needs was down $.9 million due to the supply of 
our inventory.

Selling expenses increased $11.8 million due primarily to the increases in 
the volume of products sold. General and Administrative expenses increased 
$2.6 million due to an insurance claim received last year which reduced 
expenses in 1998.

The increase in accrued continuing costs was due primarily to changes in 
sugar sales and production, and differences in the timing of incurring 
processing costs.

Interest expense increased primarily due to higher average borrowing levels 
for short and long-term debt this year.

Non-member activities resulted in a gain of $3.3 million for the six months 
ended February 28, 1999 as compared to the loss of $6.2 million for the same 
period last year. This gain is related to the sale of beet seed assets to 
Betaseed Inc., a wholly owned subsidiary of Kleinwanzlebener Saatzucht, Ag.

                                       7

<PAGE>

COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998

Revenue for the three months ended February 28, 1999, was $180.3 million, an 
increase of $25.9 million from 1998. Revenue from total sugar sales increased 
14.0 percent reflecting a 12.9 percent increase in hundredweights sold and a 
1.0 percent increase in the average selling price per hundredweight. Revenue 
from pulp sales decreased 2.2 percent due to a 31.3 percent decrease in the 
average selling price per ton partially offset by a 42.4 percent increase in 
volume of pulp sold. Revenue from molasses sales increased 10.9 percent due 
to a 60.1 percent increase in the volume of molasses sold partially offset by 
a 30.7 percent decrease in the average selling price per ton. Revenue from 
the sales of Concentrated Separated By-Product (CSB), a by-product of the 
molasses desugarization process, decreased 38.7 percent due to a 51.7 percent 
decrease in sales volume partially offset by a 27.0 percent increase in 
average selling price per ton.

Cost of product sold, exclusive of payments for sugarbeets, decreased $15.2 
million. Direct processing costs for sugar and pulp increased 8.6 percent 
primarily due to more tons sliced for this period. Fixed and committed 
expenses decreased 9.2 percent this year due to lower maintenance costs. 
Changes in product inventory levels between 1999 and 1998, impacted the cost 
of product sold unfavorably by $11.9 million. The cost associated with sugar 
purchased to meet customer needs was down $1.3 million due to the supply of 
our inventory.

Marketing expenses increased $6.9 million due to various cost increases this 
quarter. General and Administrative expenses were $2.9 million higher in 1999 
due to reduced expense from an insurance claim in 1998.

The decrease in accrued continuing costs was due primarily to changes in 
sugar sales and production, differences in the timing of incurring processing 
costs.

Interest expense increased primarily due to higher average borrowing levels 
for short and long term debt this year.

Non-member activities resulted in a loss of $.7 million for the three months 
ended February 28, 1999 as compared to the loss of $.4 million for the same 
period last year.

Net payments to/due members for sugarbeets decreased by $14.4 million from 
$139.0 million for the second quarter of 1998, to $124.6 million for the same 
period in 1999. This decrease was due to a lower projected per ton beet 
payment this year partially offset by more tons harvested.

LIQUIDITY AND CAPITAL RESOURCES

Because American Crystal operates as a cooperative, 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 
American Crystal and are net of unit retains allocated to them. Unit retains 
remain available to meet American Crystal'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.

                                       8

<PAGE>

However, 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, American Crystal 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 the St. 
Paul Bank for Cooperatives ("Bank"). American Crystal has a short-term line 
of credit with the Bank in 1999 of $280 million.

The various loan agreements between the Bank and American Crystal obligate 
American Crystal to maintain or achieve certain amounts of working capital 
and certain financial ratios and impose restrictions on American Crystal. As 
of February 28, 1999, American Crystal was in compliance with its loan 
agreements.

The primary factor for the changes in American Crystal's cash position for 
the six months ended February 28, 1999 was due to the 1998/1999 sugarbeet 
processing campaign. The cash used in operations of $112.6 million and 
investing activities of $31.4 million, was funded through the cash provided 
by financing activities. The net cash provided by financing activities was 
primarily comprised of the net proceeds from short-term debt of $108.7 
million, proceeds from long-term debt of $57.0 million and proceeds from the 
sale of stock of $6.5 million, partially offset by the payment of long-term 
debt of $17.9 million and the payment of the unit retains of $10.2 million.

Working capital has increased $22.5 million from $30.3 million at the 
beginning of the year to $52.8 million as of February 28, 1999 primarily due 
to increased inventories partially offset by higher short term debt and 
higher amounts due growers.

Capital expenditures for the six months ended February 28, 1999 were $26.6 
million. These capital expenditures are a continuation of American Crystal's 
strategy of expanding capacity and improving operating efficiencies.

American Crystal anticipates that the funds necessary for the Bank's working 
capital requirements and future capital expenditures will be derived from 
depreciation, unit retains and long-term borrowing.

YEAR 2000 COMPUTER ISSUES

American Crystal has made extensive efforts to become year 2000 compliant. In 
February, 1996, a new computer software package (SAP) was installed which 
made most of the company-wide computer systems and its hardware compliant for 
the year 2000. This includes 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 running on hardware that is also year 2000 
compliant.

Work has also been completed at the 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 has been formed with representation from various 
locations and departments, information services functions as well as two of 
American Crystal's associated companies, United Sugars Corporation and 
Midwest Agri-Commodities Company. This committee is in the process of 
assessing what additional systems the Company uses and if there are any year 
2000 compliance problems. The systems that are determined to be non-compliant 
will then be examined, risk assessed and action will be taken as deemed 
appropriate and necessary.

                                       9

<PAGE>

Year 2000 compliance may also adversely affect the operations and financial 
performance of the Company indirectly by causing complications of, or 
otherwise affecting, the operations of any one or more of the Company's 
suppliers and customers. The Company has begun contacting its significant 
suppliers and customers as part of its year 2000 compliance plan. The 
Company's goal is 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 will 
be year 2000 compliant, the Company is currently unable to predict the 
magnitude of the operational and financial impact on the Company of year 2000 
compliance issues with the Company's suppliers and customers. 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 expects to incur (and expense) up to $60,000 during the fiscal 
year which began on September 1, 1998 to resolve the remaining year 2000 
compliance issues. The Company also expects to incur up to $148,000 during the 
current fiscal year for new software and hardware; those amounts will be 
capitalized.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

American Crystal is subject to various lawsuits and claims which arise in the 
ordinary course of its business. While the results of such litigation and 
claims cannot be predicted with certainty, 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 position, 
results of operations or cash flows.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

             (a) EXHIBITS
<TABLE>
<S>              <C>
           *3(i) Restated Articles of Incorporation of American 
                 Crystal Sugar Company

         **3(ii) Restated By-laws of American Crystal Sugar Company

         **10(a) Growers' Contract (5-year Agreement)

          *10(b) Growers' Contract (Annual Contract)

          *10(c) Coal Supply Agreement between Registrant and Spring Creek Coal 
                 Company, dated August 1, 1986

          *10(d) Coal Transportation Agreement between Registrant and 
                 Northern Coal Transportation Company, dated August 1, 1986

          *10(e) Beet Loading and Hauling Agreement between Registrant and 
                 Transystems, Inc., dated May 18, 1993

          *10(f) Form of Uniform Member Marketing Agreement between Registrant 
                 and United Sugars Corporation, dated January 1, 1994
</TABLE>

                                       10

<PAGE>

<TABLE>
<S>              <C>
          *10(g) Trademark License Agreement between Registrant and United 
                 Sugars Corporation, dated November 1, 1993

          *10(h) Uniform Member Marketing Agreement, Pool Basis between 
                 Registrant and Midwest Agri-Commodities Company, dated 
                 April 14, 1992

          *10(i) Stipulation Agreement between Registrant and State of 
                 Minnesota Pollution Control Agency

          *10(j) Master Agreement between Registrant, United Sugars 
                 Corporation, American Federation of Grain Millers, AFL-CIO, 
                 CLC, et al

          *10(k) Loan Agreement between Registrant and St. Paul Bank for 
                 Cooperatives, dated December 20, 1993

          *10(l) Amended and Restated Loan Agreement between Registrant and 
                 First Bank National Association, dated November 22, 1993

          *10(m) Pension Contract and Amendments

          *10(n) Form of Operating Agreement between Registrant and ProGold 
                 Limited Liability Company

          *10(o) Form of Member Control Agreement between Registrant and 
                 ProGold Limited Liability Company

          *10(p) Administrative Services Agreement between Registrant and 
                 ProGold Limited Liability Company

          *10(q) Uniform Member Marketing Agreement

        **+10(r) Coal Supply Agreement between Registrant and Spring Creek 
                 Coal Company, dated August 25, 1995

        **+10(s) Coal Transportation Agreement between Registrant and 
                 Northern Coal Transportation Company, dated August 25, 1995

        **+10(t) Gas Sales Contract between Registrant and Coastal Gas Marketing
                 Company, dated as of March 20, 1996

       ***+10(u) Trademark License Agreement between Registrant and The 
                 Pillsbury Company, dated as of April 9, 1997

       ****10(v) Pledge Agreement between Registrant and First Union Trust 
                 Company, N.A.

       ****10(w) Indemnity Agreement between Registrant, Newcourt Capital 
                 USA Inc., Crystech, LLC and Crystech Senior Lender Trust

       ****10(x) Tolling Services Agreement between Crystech, LLC and Registrant
</TABLE>

                                       11

<PAGE>

<TABLE>
<S>              <C>
       ****10(y) Operations and Maintenance Agreement between Crystech, LLC 
                 and Registrant

     ****++10(z) Limited Liability Company Agreement of Crystech, LLC

          10(aa) Employee Agreement with James J.  Horvath

          27     Financial Data Schedule
</TABLE>

               * Incorporated by reference from the Company's Registration
               Statement on Form S-1 (File No. 33-83868), declared effective
               November 23, 1994.

               ** Incorporated by reference from the Company's Registration
               Statement on Form S-1 (File No. 333-11693), declared effective
               November 13, 1996.

               *** Incorporated by reference from the Company's Registration
               Statement on Form S-1 (File No. 333-32251), declared effective
               October 24, 1997.

               ****Incorporated by reference from to Company's Annual Report on
               Form 10-K for fiscal year ended August, 31, 1998.

               + Certain portions of the exhibit have been granted confidential
               treatment by the SEC. The omitted portions have been separately
               filed with the SEC.

               ++ Portions of the exhibit have been deleted and filed separately
               with the SEC pursuant to a request for confidential treatment.

        (b)    REPORTS ON FORM 10-K

               None


                                       12

<PAGE>

                                   SIGNATURES

PURSUANT TO THE REQUIREMENT 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.

                                               AMERICAN CRYSTAL SUGAR COMPANY
                                           ------------------------------------
                                                         (REGISTRANT)



DATE:          APRIL 6, 1999               /s/   SAMUEL S.M. WAI
       ----------------------------        ------------------------------------
                                               SAMUEL S.M. WAI
                                               CORPORATE CONTROLLER
                                               (DULY AUTHORIZED OFFICER AND
                                               PRINCIPAL FINANCIAL OFFICER)




                                       13

<PAGE>

                              INDEX TO EXHIBITS
<TABLE>
<CAPTION>

Exhibits
--------
<S>               <C>
10(aa)            Employee Agreement with James J. Horvath

27                Financial Data Schedule
</TABLE>

                                       14


<PAGE>

                              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 401(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.

<PAGE>

         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.

<PAGE>

                  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(f) 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:

<PAGE>

                                   (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:


<PAGE>

                                    (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.

<PAGE>

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 (f) 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; 

<PAGE>

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 of 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.

<PAGE>

                  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.

<PAGE>

         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.

<PAGE>

         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.

<PAGE>

                  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, 401(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,
                  401(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.

<PAGE>

         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
                                      ----------------------------------------
                                          Its
                                             ---------------------------------
                                             

                                             ---------------------------------
                                             JAMES J. HORVATH