**Exhibit 10.25**

 

**AMERICANCRYSTAL SUGAR COMPANY**

**2005LONG TERM INCENTIVE PLAN**

 

American Crystal Sugar Company, a Minnesota agricultural cooperativecorporation, established the American Crystal Sugar Company Long Term IncentivePlan (the “Plan”) in order to provide incentive awards through deferredcompensation to certain key employees of American Crystal Sugar Company,effective January 1, 2005.  AmericanCrystal Sugar Company determined that it is in its interest to provide certainkey employees with financial incentives to reward the employees for theirperformance and to encourage long term commitment to employment with theCompany.  These financial incentiveawards shall be determined under the terms of this Plan.

 

**ARTICLE 1**

**DEFINITIONS**

 

Section 1.1                                      Definitions.  When used in this document with initialcapital letters, the following terms have the meanings indicated unless adifferent meaning is plainly required by the context:

 

“Board of Directors” or “Board” means theBoard of Directors of American Crystal Sugar Company, and any committee of theBoard of Directors to which the Board delegates authority under this Plan.

 

“Change ofControl” means:

 

(a)                                  The purchase or otheracquisition by any one person, or more than one person acting as a group, ofstock of the Company that, together with stock held by such person or group,constitutes more than 85% of the total combined value or total combined votingpower of all classes of stock issued by the Company; provided, however, that ifany one person or more than one person acting as a group is considered to ownmore than 85% of the total combined value or total combined voting power ofsuch stock, the acquisition of additional stock by the same person or personsshall not be considered a Change of Control;

 

(b)                                 The shareholders ofthe Company approve a reorganization, merger or consolidation, in each casewith respect to which persons who were shareholders of the Company, as the casemay be, immediately prior to such reorganization, merger or consolidation do not,immediately thereafter, own more than 85% of the total combined value or totalcombined voting power of all classes of securities issued by the survivingcorporation for the election of such surviving corporation’s directors;

 

(c)                                  The purchase or otheracquisition by any one person, or more than one person acting as a group, ofmore than 85% of the total gross value of the assets of the Company during thetwelve-month period ending on the date of the most recent purchase or otheracquisition by such person or persons. For purposes of this definition, “gross value” means

 

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the value of the assets of the Company or the value of the assets beingdisposed of, as the case may be, determined without regard to any liabilitiesassociated with such assets.

 

In all cases, the determination of whether a Change of Control hasoccurred shall be made in accordance with Code Section 409A and theregulations, notices and other guidance of general applicability issuedthereunder.

 

“Code” means the Internal Revenue Code of1986, as amended.

 

“Company” means the American Crystal SugarCompany.

 

“Deferred Compensation Account” means theaccount established for a Participant to which the value of an Incentive Awardmay be allocated pursuant to Section 3.5(a).

 

“Disability” shall have the meaning set forthin Code Section 409A and the regulations, notices and other guidance ofgeneral applicability issued thereunder.

 

“Incentive Award” means a financial awardmade by the Board to a Participant under this Plan as described in Sections 3.4and 3.5.

 

“Participant” means any employee orindividual described in Section 2.1. “Participant’s Beneficiary” has the meaning set forth in Section 8.3.

 

“Phantom Stock” means the unit of measurementused to value Incentive Awards pursuant to Section 3.5(b).  The value of a share of Phantom Stock shallbe equal to the value of a share of the Preferred Stock of the Company asdetermined in Section 7.1.

 

“Plan” means the American Crystal SugarCompany Long Term Incentive Plan, as set forth herein, including any amendmentshereto, which is maintained by the Company primarily for the purpose ofproviding financial incentives for certain key employees.

 

“Plan Year” means the given fiscal year ofthe Company for which Incentive Awards are available.  Specific Plan Years shall be designated bythe specific fiscal year in question.

 

“Retirement” means termination of employmenton or after the date that will enable the Participant to be eligible to receivean early or normal retirement benefit under the Company’s Retirement Plan A.

 

“Separation of Service” shall, effective January 1,2005, have the meaning set forth in Code Section 409A and the regulations,notices and other guidance of general applicability issued thereunder.

 

“Trust” means the Rabbi Trust established bythe Company and into which funds allocated under this Plan are paid.

 

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**ARTICLE 2**

**PARTICIPATION**

 

Section 2.1                                      Eligibility.  The employees of the Company who are eligibleto become Participants in the Plan are the Chief Executive Officer of theCompany, officers of the Company who have attained the level of a VicePresident or above and any other employees of the Company who are determined bythe Board to be eligible to become Participants in the Plan.  Participants must be employees of the Companyfor the entire Plan Year to be eligible to receive an Incentive Award for thatPlan Year; provided, however the Board shall have the discretion to award IncentiveAwards on a pro rata basis to Participants who become eligible during a PlanYear.

 

**ARTICLE 3**

**DETERMINATIONOF INCENTIVE AWARDS**

 

Section 3.1                                      Approvalof Long Term Objectives; Weighting. Prior to the end of the first quarter of each fiscal year, the Boardshall review and approve the goals and long term objectives for theParticipants (the “Long Term Objectives”) and each such Long Term Objectiveshall be assigned a percentage weighting that indicates the relative importancethe Board places on such Long Term Objective (the “Weighting”).  The total cumulative Weighting for all LongTerm Objectives shall equal 100%.  TheLong Term Objectives and the specific Weighting applied to each, shall be usedby the Board to determine any Incentive Awards that may be awarded to theParticipants for that Plan Year.  EachLong Term Objective and the Weighting assigned to it shall be in effect for theentire Plan Year, unless otherwise modified by the Board.

 

Section 3.2                                      TargetAward Opportunity Percentage.  Theamount of each Participant’s total potential Incentive Award shall be basedon:  (a) the collective performancelevel of the Participants for that Plan Year as determined by the Board and (b) apercentage of his or her base compensation at the end of a Plan Year.  The percentage of base compensation intendedto be available as an Incentive Award under the Plan shall range from 0% to 40%for Vice Presidents and other Participants, and 0% to 80% for the ChiefExecutive Officer.  At “target”performance levels, the Incentive Award shall be 20% of base compensation forVice Presidents and other Participants, and 40% of base compensation for theChief Executive Officer (the “Target Award Opportunity Percentage”).

 

Section 3.3                                      CollectiveRating for each Long Term Objective. Within 90 days of the conclusion of a Plan Year, the Board shalldetermine the collective performance of the Participants relative to each LongTerm Objective for the previous Plan Year (the “Performance Rating”).  The Board shall establish the PerformanceRating for the Plan Year based on the collective performance of all of theParticipants (all of the Participants as a single group) for each Long TermObjective on a sliding scale consistent with the following ratings:

 

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| Unacceptable | = | 0 |
|--------------|---|---|
| Threshold    | = | 1 |
| Target       | = | 2 |
| Outstanding  | = | 3 |

 

The Board may establish its Performance Rating at any point between therange of zero to three (for example, the rating may be 2.25).  The Performance Rating for each Long TermObjective shall be multiplied by the Weighting for that objective to determinea weighted performance rating for each Long Term Objective.  An overall weighted performance rating forthe Participants shall then be determined by adding the weighted performancerating for each of the Long Term Objectives (the “Overall Weighted PerformanceRating”).  The Overall WeightedPerformance Rating shall be used for calculating the Incentive Award asprovided in Section 3.4 of the Plan.

 

Section 3.4                                      AwardValue Formula.  The value of theIncentive Award for each Participant shall be based on the following formula(the “Award Value Formula”):

 

(P-1) x T x BC = IncentiveAward

 

The above referenced letters are defined as follows:

 
| P      | =      | Overall Weighted Performance Rating       |
|--------|--------|-------------------------------------------|
| T      | =      | Target Award Opportunity Percentage       |
|   |   | (20% for Vice Presidents and 40% for CEO) |
| BC     | =      | Base Compensation at end of Plan Year     |

 

An example of an Incentive Award for a Vice President with basecompensation at the end of the Plan Year of $150,000, a Target AwardOpportunity Percentage of 20%, and an Overall Weighted Performance Rating of2.25 will be:

 

(2.25 -1) x 20% x $150,000 =$37,500

 

Section 3.5                                      Form ofIncentive Awards.  The IncentiveAwards for the Participants for a Plan Year may be granted, at the Board’sdiscretion, as follows:

 

(a)                                  Anamount equal to the value of the Incentive Award may be allocated to theParticipant’s Deferred Compensation Account in this Plan, and paid to theTrust, for the benefit of the Participant;

 

(b)                                 PhantomStock may be allocated to the Participant in an amount equal to the value ofthe Incentive Award; or

 

(c)                                  Acombination of allocations to the Participant’s Deferred Compensation Accountin this Plan and Phantom Stock allocations may be made to the Participant in anamount equal to the value of the Incentive Award.

 

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The form of the grant of the Incentive Award for a given Plan Yearshall be determined by the Board and shall be in the same form for eachParticipant.

 

**ARTICLE 4**

**DEFERREDCOMPENSATION ALLOCATIONS**

 

Section 4.1.                                   IncentiveAwards.  As provided in Section 3.5,the Board shall have the authority to grant Incentive Awards to theParticipants by allocating the value of the Incentive Awards to a DeferredCompensation Account and paying such amount to the Trust for the benefit of theParticipant.  Unless otherwise determinedby the Board, the allocation to each Participant’s Deferred CompensationAccount shall vest over a three-year period, with one-third (1/3) of theallocation vesting at the end of the first fiscal year following the Plan Yearto which the Incentive Award relates, one-third (1/3) vesting at the end of thesecond fiscal year following the Plan Year to which the Incentive Awardrelates, and the final one-third (1/3) vesting at the end of the third fiscalyear following the Plan Year to which the Incentive Award relates.  Notwithstanding the foregoing, the followingspecial rules shall apply:

 

(a)                                  In the event of theParticipant’s death, any unvested allocations to the Participant’s DeferredCompensation Account shall immediately vest;

 

(b)                                 In the event of theParticipant’s Disability or Retirement, any unvested allocations to theParticipant’s Deferred Compensation Account shall continue to vest on thethree-year schedule set forth in this Article 4; and

 

(c)                                  In the event of theParticipant’s Separation of Service for any reason other than death, Disabilityor Retirement, any unvested allocations to the Participant’s DeferredCompensation Account shall be forfeited and the Participant shall have nofurther claim with respect to such forfeited allocations.

 

(d)                                 In the event the Boarddetermines that the Participant is no longer eligible to participate in thePlan, the Board may, in its sole discretion, provide that any unvestedallocations to the Participant’s Deferred Compensation Account shall beforfeited and the Participant shall have no further claim with respect to suchforfeited allocations.

 

Allocations to a Participant’s Deferred Compensation Account that arevested shall be distributed to the Participant pursuant to Article 6 ofthis Plan.  Allocations shall be subjectto such terms and conditions, in addition to the terms and conditions set forthin this Plan, as the Board shall determine. Any allocations which are forfeited as provided in Sections 4.1(c) and4.1(d) above shall be used to reduce the payments that the Company wouldotherwise make to the Trust under this Plan.

 

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**ARTICLE 5**

**PHANTOMSTOCK**

 

Section 5.1                                      PhantomStock Awards.  As provided in Section 3.5,the Board shall have the authority to grant Incentive Awards to Participants inthe form of shares of Phantom Stock, with such shares of Phantom Stock having avalue equal to the Incentive Award at the time it is granted to theParticipant.  The shares of Phantom Stockshall be valued pursuant to Article 7 of this Plan as of the end of thePlan Year to which the Incentive Award relates. Such shares of Phantom Stock shall be subject to the terms andconditions set forth in this Plan and any other terms and conditions that theBoard shall determine.  The Board mayaward fractional shares of Phantom Stock. Unless otherwise determined by the Board, the shares of Phantom Stockgranted to a Participant for a Plan Year shall vest over a three-year period,with one-third (1/3) of the shares of Phantom Stock vesting at the end of thefirst fiscal year following the Plan Year to which the Incentive Award relates,one-third (1/3) vesting at the end of the second fiscal year following the PlanYear to which the Incentive Award relates, and the final one-third (1/3)vesting at the end of the third fiscal year following the Plan Year to whichthe Incentive Award relates. Notwithstanding the foregoing, the following special rules shall apply:

 

(a)                                  In the event of theParticipant’s death, any unvested shares of Phantom Stock shall immediatelyvest and shall be distributed as provided in Section 6.5 of this Plan;

 

(b)                                 In the event of theParticipant’s Disability or Retirement, any unvested shares of Phantom Stockshall continue to vest on the three-year schedule set forth in this Article 5;and

 

(c)                                  In the event of theParticipant’s Separation of Service for any reason other than death, Disabilityor Retirement, any unvested shares of Phantom Stock shall be forfeited and theParticipant shall have no further claim with respect to such forfeited shares.

 

(d)                                 In the event the Boarddetermines that the Participant is no longer eligible to participate in thePlan, the Board may, in its sole discretion, provide that any unvested sharesof Phantom Stock shall be forfeited and the Participant shall have no furtherclaim with respect to such forfeited shares of Phantom Stock.

 

Such shares of Phantom Stock shall be subject to such terms andconditions, in addition to the terms and conditions set forth in this Plan, asthe Board shall determine.

 

**ARTICLE 6.**

**DISTRIBUTION**

 

Section 6.1                                      Separationof Service.  In the event of aParticipant’s Separation of Service with the Company for any reason other thandeath, Disability or Retirement, the Participant shall cease to be aParticipant in the Plan as of the date of such Separation of Service, and theentire value of the vested shares of the Participant’s Phantom Stock and thevested portion of the Participant’s Deferred Compensation Account shall bedistributed to the

 

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Participant pursuant to Section 6.4.  The value of the vested shares of PhantomStock and the vested portion of the Deferred Compensation Account at the timeof distribution shall be determined in the manner described in Article 7of the Plan.  Any unvested shares of theParticipant’s Phantom Stock or any unvested portion of the Participant’sDeferred Compensation Account shall be forfeited as provided in Articles 4 and5 of the Plan.

 

Section 6.2                                      Death.  In the event of a Participant’s death, theentire value of the vested shares of the Participant’s Phantom Stock and thevested portion of the Participant’s Deferred Compensation Account shall be distributedto the Participant’s Beneficiary pursuant to the method of distributionpreviously elected by the Participant pursuant to Section 6.4.  If no schedule has been elected, suchamounts shall be paid to such Beneficiary in one lump sum payment as soon asfeasible after the Participant’s death. The value of the vested shares of Phantom Stock and the vested portionof the Deferred Compensation Account at the time of distribution shall bedetermined in the manner described in Article 7 of the Plan.

 

Section 6.3                                      Disabilityor Retirement.  In the event of aParticipant’s Separation of Service due to Disability or Retirement, theParticipant shall cease to be a Participant in the Plan as of the date of suchSeparation of Service, and the entire value of the vested shares of theParticipant’s Phantom Stock and the vested portion of the Participant’sDeferred Compensation Account shall be distributed to the Participant pursuantto Section 6.4, and allocations to the Participant’s Deferred CompensationAccount or shares of Phantom Stock that become vested pursuant to Section 4.1and Section 5.1, respectively, shall be distributed according to themethod of distribution in effect at the time of the Participant’s Separation ofService.  The value of the vested sharesof Phantom Stock and the vested portion of the Participant’s DeferredCompensation Account at the time of distribution shall be determined in themanner described in Article 7 of the Plan.

 

Section 6.4                                      DistributionRequirements.

 

(a)                                  Payment to or on behalfof a Participant shall be made in one of the following methods as elected bythe Participant:

 

(i)                                     one lump sumpayment; or

 

(ii)                                  equal annualinstallments over a period not to exceed ten (10) years provided that theCompany, at its discretion, may elect to distribute the remaining balance atany time.

 

If the Participant does not elect a method ofdistribution, payment shall be made in one lump sum payment.  Upon payment, the Participant shall have nofurther interest in the Phantom Stock or Deferred Compensation Account that hasbeen distributed, and the Participant shall have no further right to anyincrease in the value of the Phantom Stock or Deferred CompensationAccount.  A Participant’s election underthis Section 6.4 shall not be effective until one year after the electionand, if such election revokes a prior distribution election, payment shall madeor commence only as permitted by Code Section 409A and the regulations,notices and other guidance of general applicability issued thereunder.  Further, in no event will any election under

 

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this Section 6.4 be effective if it precedes the Participant’sSeparation of Service with the Company by less than one year.

 

(b)                                 The Company shall havethe right to deduct from all Incentive Awards made pursuant to the Plan anyfederal or state taxes required by law to be withheld with respect to suchpayments.

 

(c)                                  Notwithstanding anyother provision of the Plan to the contrary, if, at any time, a court or theInternal Revenue Service determines that an amount awarded under the Plan, butnot yet distributed to a Participant, is includable in the gross income of aParticipant and subject to tax, the Board may, in its sole discretion, permit alump sum cash distribution of an amount equal to the amount determined to beincludable in the Participant’s gross income. Further, distributions made pursuant to this Section 6.4 shallcomply with the requirements of Code Section 409A and the regulations,notices and other guidance of general applicability issued thereunder.

 

Section 6.5                                      ProfitPayments.  Each Participant shall beeligible to receive an annual profit payment, determined in accordance withthis Section 6.5, for each vested share of Phantom Stock held by the Participantunder the Plan.  The annual profitpayments payable to or on behalf of a Participant shall be paid by the Companyto the Participant, or the Participant’s Beneficiary, at the end of each fiscalyear unless the Participant has made an election to defer the payments on formsprovided by the Company.  If such anelection has been made, no profit payments shall be paid directly to theParticipant or the Participant’s Beneficiary under this Section 6.5, butshall be allocated to the Participant’s Deferred Compensation Account and paidto the Trust for the benefit of the Participant.  The amount of each profit payment per shareof Phantom Stock shall be equal to the difference between the average grossbeet payment per acre net of unit retains and the average cost of production(as established by the Board and based upon reputable cost surveys) for themost recent year for which data is available. Profit payments shall be made on the same schedule and with thesame adjustments and partial payouts as beet payments are made to the Company’sshareholders.

 

Section 6.6                                      UnitRetain Payments.  Each Participantshall be eligible to receive an annual unit retain payment as determined by theCompany and subject to this Section 6.6. The annual unit retain payment payable to or on behalf of a Participantshall be paid by the Company to the Participant, or the Participant’sBeneficiary, unless the Participant has made an election to defer the paymentson forms provided by the Company.  Ifsuch an election has been made, no unit retain payment shall be paid to theParticipant or the Participant’s Beneficiary under this Section 6.6, butshall be allocated to the Participant’s Deferred Compensation Account and paidto the Trust.  The amount of each unitretain payment shall be equal to the amount subtracted from the gross beetpayment per acre for unit retains used in the calculation of the profitpayments in Section 6.5.  Each suchunit retain payment shall be determined during the fiscal year of the Companyas may correspond to the revolvement cycle, if any, for the Company’s preferredshareholders; it being the intention that the amount of unit retains payment tobe paid to Participants will be paid on the same schedule as unit retainsare revolved to the Company’s preferred shareholders.  The Company’s current unit retain revolvementcycle is seven years, but is subject to change at the discretion of theCompany.

 

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Section 6.7                                      Changeof Control.

 

(a)                                  Notwithstanding anythingin this Plan to the contrary, upon the effective date of a Change of Control,all shares of Phantom Stock and all allocations to Participants’ DeferredCompensation Account shall become immediately vested.  The value of such shares of Phantom Stock andDeferred Compensation Accounts as of the effective date of the Change ofControl shall be determined in accordance with Article 7 and shall be paidto Participants in a lump sum, in cash, on the effective date of such Change ofControl or, if later, on the same date as the consideration is paid in theChange of Control transaction.

 

(b)                                 In the event theCompany determines that this Plan is subject to the limitations of Section 280Gof the Internal Revenue Code of 1986, as amended (the “Code”), or any successorprovision, and the regulations issued thereunder and that payment to theParticipant would constitute an “excess parachute payment” as defined in Code Section 280G,the Participant shall have the right to designate those change of controlbenefits which would be reduced or eliminated so that the Participant will notreceive a “parachute payment.”  Forpurposes of this Section 6.7(b), “change of control benefits” shallinclude any payment, benefit or transfer of property in the nature ofcompensation paid to or for the benefit of the Participant under anyarrangement which is considered contingent on a Change of Control for purposesof Code Section 280G, including, without limitation, any and all of theCompany’s salary, bonus, incentive, compensation or benefit plans, programs orother arrangements, and shall include benefits payable under this Plan.

 

**ARTICLE 7**

**VALUATION**

 

Section 7.1                                      Valuationof Phantom Stock.  The value of ashare of Phantom Stock shall be equal to the prevailing market value of theCompany’s Preferred Stock, as determined by the Board based upon availableinformation from third party sources. The Board shall determine the value of a share of Phantom Stock at theend of each Plan Year for purposes of valuing the Incentive Awards to Participantsfor that Plan Year.  The Board shall alsodetermine the value of a share of Phantom Stock as of the date of anydistribution under the Plan for purposes of making the distribution.

 

Section 7.2                                      Electionto Convert Phantom Stock.  AParticipant may, at any time following the vesting of any or all of his or herPhantom Stock, make an irrevocable election to convert the value of suchPhantom Stock to a cash amount at the prevailing market value of the Company’sPreferred Stock.  The Board shall determinethe value of a share of Phantom Stock under the Plan for purposes of suchconversion.  If the Participant makessuch an election, such cash amount shall be credited to the Participant’sDeferred Compensation Account.

 

Section 7.3                                      Valuationof Deferred Compensation Account.

 

(a)                                  The Participant mayinvest amounts credited to his Deferred Compensation Account among theavailable investment options established by the Company.  The Participant may change his or herinvestment allocation by submitting a written request to

 

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the Company on such form and at such times as determined by theCompany.  Such changes shall becomeeffective as soon as administratively feasible after the Company receives suchwritten request.  Although the Companyintends to invest the cash amount according to the Participant’s requests, itreserves the right to invest such amount without regard to such requests.

 

(b)                                 Each Participant’sDeferred Compensation Account shall be valued as of the last day of each PlanYear and as of such other dates as are selected by the Company.  Such valuation shall reflect the aggregateamounts credited to the Deferred Compensation Account pursuant to Section 4.1,Section 6.5, Section 6.6 or Section 7.2 of the Plan and anyearnings or losses credited to the Participant’s Deferred Compensation Accountbased upon the earnings or losses of the investment options applicable to theParticipant’s Deferred Compensation Account pursuant to this Section 7.3.

 

(c)                                  An investment optionmade available under this Section 7.3 may include any option availableunder the Plan subsequent to January 1, 2005, such as investment at afixed rate, including a prime or reference rate identified by the Company.  Accordingly, even if amounts are invested inthe Participant’s name under the Trust in a manner consistent with election ofthat investment, the amount of earnings or losses credited to the portion ofthe Participant’s Deferred Compensation Account covered by that investmentoption election shall be determined under the terms of the investment option,even if those terms would produce a greater rate of return than an actualinvestment under the Trust.  This mayoccur when the investment option has a fixed rate that is greater than the rateof return of a fixed rate investment provided under the Trust.

 

(d)                                 Earnings under thefixed rate investment option of this Plan shall be credited on the date theParticipant’s Deferred Compensation Account is valued.  For purposes of crediting those earnings asof such date, all amounts credited to the Deferred Compensation Account sincethe prior valuation date will be treated as having been credited as of theprior valuation date.

 

**ARTICLE 8**

**NON-TRANSFERABILITY**

 

Section 8.1                                      Anti-Alienationof Phantom Stock.  Amounts creditedto the Participant’s Deferred Compensation Account and shares of Phantom Stockgranted to a Participant, and any rights and privileges pertaining thereto, maynot be anticipated, alienated, sold, transferred, assigned, pledged,encumbered, or subjected to any charge or legal process; and no interest orright to receive a benefit may be taken, either voluntarily or involuntarily,for the satisfaction of the debts of, or other obligations or claims against,such person or entity, including claims for alimony, support, separatemaintenance and claims in bankruptcy proceedings.

 

Section 8.2                                      IncompetentParticipants.  If any person entitledto an Incentive Award under the Plan has been declared incompetent and aconservator or other person legally charged with the care of such person or ofhis or her estate has been appointed, any distribution under the Plan to whichthe person is entitled shall be paid to such conservator or other personlegally charged with the care of the person or his or her estate.  Except as provided above, when the Companyhas determined that such person is unable to manage his or her affairs, theCompany

 

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may provide for such distribution or any part thereof to be made to anyother person or institution then contributing toward or providing for the careand maintenance of such person.  Any suchdistribution shall be a payment for the account of such person and a completedischarge of any liability of the Company and the Plan therefor.

 

Section 8.3                                      DesignatedBeneficiary.  In the event of aParticipant’s death prior to the distribution of any amounts payable under thePlan, the payment of any amounts on behalf of the Participant under the Planshall be made to the Participant’s Beneficiary designated on a form provided tothe Participant by the Company (the “Participant’s Beneficiary”).  If no such beneficiary has been designated,payments shall be made to the duly appointed and qualified executor or otherpersonal representative of the Participant to be distributed in accordance withthe Participant’s will or applicable intestacy law; or in the event that thereshall be no such representative duly appointed and qualified within six (6) monthsafter the date of death of such deceased Participant, then to such persons as,at the date of the Participant’s death, would be entitled to share in thedistribution of such deceased Participant’s personal estate under theprovisions of the applicable statute then in force governing the descent ofintestate property, in the proportions specified in such statute.

 

**ARTICLE 9**

**ADMINISTRATIONOF THE PLAN**

 

Section 9.1                                      Administrator.  The administrator and named fiduciary of thePlan shall be the Company.

 

Section 9.2                                      Authorityof Administrator.  The Company shallhave authority, duty and power to interpret and construe the provisions of thePlan as it deems appropriate, to temporarily suspend the Plan, to adopt,establish and revise rules, procedures and regulations relating to the Plan, todetermine the conditions subject to which the value of any Incentive Awardsthat may be made or payable, and to make any other determinations which itbelieves necessary or advisable for the administration of the Plan.  The Company shall have the duty andresponsibility of maintaining records, making the requisite calculations anddispersing payments hereunder.  TheCompany’s determinations, interpretations, regulations and calculations shallbe final and binding on all persons and parties concerned.  The Chief Executive Officer of the Companyshall be the agent of the Plan for the service of legal process in accordancewith Section 502 of the Employee Retirement Income Security Act of 1974,as amended.

 

Section 9.3                                      Operationof Plan and Claims Procedures.  TheCompany shall be responsible for the general operation and administration ofthe Plan and for carrying out the provisions thereof.  The Company shall be responsible for theexpenses incurred in the administration of the Plan.  The Company shall also be responsible fordetermining eligibility for payments and the amounts payable pursuant to thePlan.  The Company shall be entitled torely conclusively upon all tables, valuations, certificates, opinions andreports furnished by any actuary, accountant, controller, counsel or otherperson employed or engaged by the Company with respect to the Plan.  The procedures for filing claims for paymentsunder the Plan are described below.  Forclaims procedures purposes, the “Claims Manager” shall be the Company.

 

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(a)                                  Itis the intent of the Company to make Incentive Awards under the Plan withoutthe Participant having to complete or submit any claims forms.  However, a Participant who believes he or sheis entitled to a payment under the Plan may submit a claim for such payment inwriting to the Company.  Any claim mustbe made by the Participant or his or her beneficiary in writing and state theclaimant’s name and the nature of the payment to be made under the Plan on aform acceptable to the Company.  If forany reason a claim under this Plan is denied by the Company, the Claims Managershall deliver to the claimant a written explanation setting forth the specificreasons for the denial, specific references to the pertinent provisions underthe Plan on which the denial is based, a description of any additional materialor information necessary for the claimant to perfect the claim and anexplanation of why such material or information is necessary, and informationon the procedures to be followed by the claimant in obtaining a review of hisor her claim, all written in a manner calculated to be understood by theclaimant.  For this purpose:  (i) the claimant’s claim shall be deemedto be filed when presented in writing to the Claims Manager and (ii) theClaims Manager’s explanation shall be in writing delivered to the claimantwithin 90 days of the date the claim is filed.

 

(b)                                 Theclaimant shall have 60 days following his or her receipt of the denial of theclaim to file with the Claims Manager a written request for review of thedenial.  For such review, the claimant orthe claimant’s representative may review pertinent documents and submit writtenissues and comments.

 

(c)                                  TheClaims Manager shall decide the issue on review and furnish the claimant with acopy within 60 days of receipt of the claimant’s request for review of theclaimant’s claim.  The decision on reviewshall be in writing and shall include specific reasons for the decision,written in a manner calculated to be understood by the claimant, as well asspecific references to the pertinent provisions in the Plan on which thedecision is based.  If a copy of thedecision is not so furnished to the claimant within such 60 days, the claim shallbe deemed denied on review.  In no eventmay a claimant commence legal action for benefits the claimant believes are duethe claimant until the claimant has exhausted all of the remedies andprocedures afforded the claimant by this Section 9.3.

 

Section 9.4                                      Participant’sAddress.  Each Participant shall keepthe Company informed of his or her current address and the current address ofhis or her beneficiary.  The Companyshall not be obligated to search for any person.  If the location of a Participant is not madeknown to the Company within three (3) years after the date on whichpayment of the Participant’s benefits payable under this Plan may be made,payment may be made as though the Participant had died at the end of thethree-year period.  If, within one (1) additionalyear after such three-year period has elapsed, or, within three (3) yearsafter the actual death of a Participant, the Company is unable to locate anydesignated beneficiary of the Participant, then the Company shall have nofurther obligation to pay any benefit hereunder to such Participant ordesignated beneficiary and such benefits shall be irrevocably forfeited.

 

Section 9.5                                      Liability.  Notwithstanding any of the provisions of thePlan to the contrary, neither the Company nor any individual acting as anemployee or agent of the Company shall be liable to any Participant or anyother person for any claim, loss, liability or

 

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expense incurred in connection with the Plan, unless attributable tofraud or willful misconduct on the part of the Company or any such employee oragent of the Company.

 

**ARTICLE 10**

**MISCELLANEOUSPROVISIONS**

 

Section 10.1                                NoEmployment Rights.  Neither the Plannor any action taken hereunder shall be construed as giving any employee anyright to be retained in the employ of the Company.

 

Section 10.2                                NoStock Rights.  Except for paymentsunder Sections 6.5 and 6.6, no Participant shall be entitled to any votingrights, to receive any dividends or other distribution, with respect to thePhantom Stock.

 

Section 10.3                                Unfundedand Unsecured.  The Plan shall at alltimes be considered entirely unfunded both for tax purposes and for purposes ofTitle I of the Employee Retirement Income Security Act of 1974, as amended, andno provision shall at any time be made with respect to segregating assets ofthe Company for payment of any amounts hereunder.  Any funds with respect to payment to be madehereunder shall continue for all purposes to be part of the general assets ofthe Company and available to the general creditors of the Company in the eventof the Company’s bankruptcy (when the Company is involved in a pendingproceeding under the Federal Bankruptcy Code) or insolvency (when the Companyis unable to pay its debts as they mature). No Participant or any other person shall have any interests in anyparticular assets of the Company by reason of the right to receive a benefitunder the Plan and to the extent the Participant or any other person acquires aright to receive benefits under this Plan, such right shall be no greater thanthe right of any general unsecured creditor of the Company.  The Plan constitutes a mere promise by theCompany to make payments to the Participants in the future.  Nothing contained in the Plan shallconstitute a guaranty by the Company or any other person or entity that anyfunds in any trust or the assets of the Company will be sufficient to pay anybenefit hereunder.  Furthermore, noParticipant shall have any right to a benefit under the Plan except inaccordance with the terms of the Plan.

 

Section 10.4                                PlanProvisions.  Except when otherwiserequired by the context, any singular terminology shall include the plural.

 

Section 10.5                                Severability.  If a provision of the Plan shall be held tobe illegal or invalid, the illegality or invalidity shall not affect theremaining parts of the Plan and the Plan shall be construed and enforced as ifthe illegal or invalid provision had not been included.

 

Section 10.6                                ApplicableLaw.  To the extent not preempted bythe laws of the United States, the laws of the State of Minnesota shall applywith respect to this Plan.

 

Section 10.7                                Authorityof CEO.  Except in cases where theresponsibilities are reserved to the Board under this Plan, the Chief ExecutiveOfficer of the Company (or his designee) may act on behalf of the Company underthis Plan.

 

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**ARTICLE 11**

**AMENDMENT**

 

The Company reserves the power to alter, amend or wholly revise orterminate the Plan at any time and from time to time by the action of the Boardand the interest of each Participant is subject to the powers so reserved.  An amendment shall be authorized by the Boardand shall be stated in an instrument in writing signed in the name of the Companyby a person or persons authorized by the Board. After the instrument has been so executed, the Plan shall be deemed tohave been amended in the manner therein set forth, and all parties interestedherein shall be bound thereby.  Noamendment to the Plan may alter, impair, or reduce the benefits of aParticipant that are vested under the Plan prior to the effective date of suchamendment without the written consent of the affected Participant.  Notwithstanding the foregoing, the Companyexpressly reserves the right to amend the Plan to the extent necessary ordesirable to comply with the requirements of Code Section 409A and theregulations, notices and other guidance of general applicability issuedthereunder without the consent of any Participant.

 

**ARTICLE 12**

**TERMINATIONOF PLAN**

 

The Company may at any time terminate the Plan by action of theBoard.  No further Incentive Awards willbe granted after the date of termination of the Plan.  The termination of the Plan shall not alter,impair, or reduce the benefits of a Participant that are awarded prior to theeffective date of such termination, without the written consent of the affectedParticipant.

 

 

Dated as of the 24th day of August, 2005.

 
| ** ** | **AMERICAN CRYSTAL SUGAR COMPANY** |
|------------|------------------------------------|
| ** ** | ** **                         |
| ** ** | ** **                         | ** ** |
|       | By:                                | /s/ G. Terry Stadstad |   |
|       | Title:                             | Chairman of the Board |

 

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