Exhibit 10.25


 


AMERICAN
CRYSTAL SUGAR COMPANY


2005
LONG TERM INCENTIVE PLAN


 


American Crystal Sugar Company, a Minnesota agricultural cooperative
corporation, established the American Crystal Sugar Company Long Term Incentive
Plan (the “Plan”) in order to provide incentive awards through deferred
compensation to certain key employees of American Crystal Sugar Company,
effective January 1, 2005.  American
Crystal Sugar Company determined that it is in its interest to provide certain
key employees with financial incentives to reward the employees for their
performance and to encourage long term commitment to employment with the
Company.  These financial incentive
awards shall be determined under the terms of this Plan.


 


ARTICLE 1


DEFINITIONS


 


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


 


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


 


“Change of
Control” means:


 


(a)                                  The purchase or other
acquisition by any one person, or more than one person acting as a group, of
stock 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 voting
power of all classes of stock issued by the Company; provided, however, that if
any one person or more than one person acting as a group is considered to own
more than 85% of the total combined value or total combined voting power of
such stock, the acquisition of additional stock by the same person or persons
shall not be considered a Change of Control;


 


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


 


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


 





















 


the value of the assets of the Company or the value of the assets being
disposed of, as the case may be, determined without regard to any liabilities
associated with such assets.


 


In all cases, the determination of whether a Change of Control has
occurred shall be made in accordance with Code Section 409A and the
regulations, notices and other guidance of general applicability issued
thereunder.


 


“Code” means the Internal Revenue Code of
1986, as amended.


 


“Company” means the American Crystal Sugar
Company.


 


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


 


“Disability” shall have the meaning set forth
in Code Section 409A and the regulations, notices and other guidance of
general applicability issued thereunder.


 


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


 


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


 


“Phantom Stock” means the unit of measurement
used to value Incentive Awards pursuant to Section 3.5(b).  The value of a share of Phantom Stock shall
be equal to the value of a share of the Preferred Stock of the Company as
determined in Section 7.1.


 


“Plan” means the American Crystal Sugar
Company Long Term Incentive Plan, as set forth herein, including any amendments
hereto, which is maintained by the Company primarily for the purpose of
providing financial incentives for certain key employees.


 


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


 


“Retirement” means termination of employment
on or after the date that will enable the Participant to be eligible to receive
an 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 by
the 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 eligible
to become Participants in the Plan are the Chief Executive Officer of the
Company, officers of the Company who have attained the level of a Vice
President or above and any other employees of the Company who are determined by
the Board to be eligible to become Participants in the Plan.  Participants must be employees of the Company
for the entire Plan Year to be eligible to receive an Incentive Award for that
Plan Year; provided, however the Board shall have the discretion to award Incentive
Awards on a pro rata basis to Participants who become eligible during a Plan
Year.


 


ARTICLE 3


DETERMINATION
OF INCENTIVE AWARDS


 


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


 


Section 3.2                                      Target
Award Opportunity Percentage.  The
amount of each Participant’s total potential Incentive Award shall be based
on:  (a) the collective performance
level of the Participants for that Plan Year as determined by the Board and (b) a
percentage of his or her base compensation at the end of a Plan Year.  The percentage of base compensation intended
to 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 Chief
Executive Officer.  At “target”
performance levels, the Incentive Award shall be 20% of base compensation for
Vice Presidents and other Participants, and 40% of base compensation for the
Chief Executive Officer (the “Target Award Opportunity Percentage”).


 


Section 3.3                                      Collective
Rating for each Long Term Objective. 
Within 90 days of the conclusion of a Plan Year, the Board shall
determine the collective performance of the Participants relative to each Long
Term Objective for the previous Plan Year (the “Performance Rating”).  The Board shall establish the Performance
Rating for the Plan Year based on the collective performance of all of the
Participants (all of the Participants as a single group) for each Long Term
Objective 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 the
range of zero to three (for example, the rating may be 2.25).  The Performance Rating for each Long Term
Objective shall be multiplied by the Weighting for that objective to determine
a weighted performance rating for each Long Term Objective.  An overall weighted performance rating for
the Participants shall then be determined by adding the weighted performance
rating for each of the Long Term Objectives (the “Overall Weighted Performance
Rating”).  The Overall Weighted
Performance Rating shall be used for calculating the Incentive Award as
provided in Section 3.4 of the Plan.


 


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


 


(P-1) x T x BC = Incentive
Award


 


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 base
compensation at the end of the Plan Year of $150,000, a Target Award
Opportunity Percentage of 20%, and an Overall Weighted Performance Rating of
2.25 will be:


 


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


 


Section 3.5                                      Form of
Incentive Awards.  The Incentive
Awards for the Participants for a Plan Year may be granted, at the Board’s
discretion, as follows:


 


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


 


(b)                                 Phantom
Stock may be allocated to the Participant in an amount equal to the value of
the Incentive Award; or


 


(c)                                  A
combination of allocations to the Participant’s Deferred Compensation Account
in this Plan and Phantom Stock allocations may be made to the Participant in an
amount 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 Year
shall be determined by the Board and shall be in the same form for each
Participant.


 


ARTICLE 4


DEFERRED
COMPENSATION ALLOCATIONS 


 


Section 4.1.                                   Incentive
Awards.  As provided in Section 3.5,
the Board shall have the authority to grant Incentive Awards to the
Participants by allocating the value of the Incentive Awards to a Deferred
Compensation Account and paying such amount to the Trust for the benefit of the
Participant.  Unless otherwise determined
by the Board, the allocation to each Participant’s Deferred Compensation
Account shall vest over a three-year period, with one-third (1/3) of the
allocation vesting at the end of the first 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 Plan Year 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 which the Incentive Award relates.  Notwithstanding the foregoing, the following
special rules shall apply:


 


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


 


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


 


(c)                                  In the event of the
Participant’s Separation of Service for any reason other than death, Disability
or Retirement, any unvested allocations to the Participant’s Deferred
Compensation Account shall be forfeited and the Participant shall have no
further claim with respect to such forfeited allocations.


 


(d)                                 In the event the Board
determines that the Participant is no longer eligible to participate in the
Plan, the Board may, in its sole discretion, provide that any unvested
allocations to the Participant’s Deferred Compensation Account shall be
forfeited and the Participant shall have no further claim with respect to such
forfeited allocations.


 


Allocations to a Participant’s Deferred Compensation Account that are
vested shall be distributed to the Participant pursuant to Article 6 of
this Plan.  Allocations shall be subject
to such terms and conditions, in addition to the terms and conditions set forth
in this Plan, as the Board shall determine. 
Any allocations which are forfeited as provided in Sections 4.1(c) and
4.1(d) above shall be used to reduce the payments that the Company would
otherwise make to the Trust under this Plan.


 


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ARTICLE 5


PHANTOM
STOCK


 


Section 5.1                                      Phantom
Stock Awards.  As provided in Section 3.5,
the Board shall have the authority to grant Incentive Awards to Participants in
the form of shares of Phantom Stock, with such shares of Phantom Stock having a
value equal to the Incentive Award at the time it is granted to the
Participant.  The shares of Phantom Stock
shall be valued pursuant to Article 7 of this Plan as of the end of the
Plan Year to which the Incentive Award relates. 
Such shares of Phantom Stock shall be subject to the terms and
conditions set forth in this Plan and any other terms and conditions that the
Board shall determine.  The Board may
award fractional shares of Phantom Stock. 
Unless otherwise determined by the Board, the shares of Phantom Stock
granted 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 the
first 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 Plan
Year 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 which
the Incentive Award relates. 
Notwithstanding the foregoing, the following special rules shall apply:


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 6.


DISTRIBUTION



 


Section 6.1                                      Separation
of Service.  In the event of a
Participant’s Separation of Service with the Company for any reason other than
death, Disability or Retirement, the Participant shall cease to be a
Participant in the Plan as of the date of such Separation of Service, and the
entire value of the vested shares of the Participant’s Phantom Stock and the
vested portion of the Participant’s Deferred Compensation Account shall be
distributed to the


 


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


 


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


 


Section 6.3                                      Disability
or Retirement.  In the event of a
Participant’s Separation of Service due to Disability or Retirement, the
Participant shall cease to be a Participant in the Plan as of the date of such
Separation of Service, and the entire value of the vested shares of the
Participant’s Phantom Stock and the vested portion of the Participant’s
Deferred Compensation Account shall be distributed to the Participant pursuant
to Section 6.4, and allocations to the Participant’s Deferred Compensation
Account or shares of Phantom Stock that become vested pursuant to Section 4.1
and Section 5.1, respectively, shall be distributed according to the
method of distribution in effect at the time of the Participant’s Separation of
Service.  The value of the vested shares
of Phantom Stock and the vested portion of the Participant’s Deferred
Compensation Account at the time of distribution shall be determined in the
manner described in Article 7 of the Plan.


 


Section 6.4                                      Distribution
Requirements.


 


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


 


(i)                                     one lump sum
payment; or


 


(ii)                                  equal annual
installments over a period not to exceed ten (10) years provided that the
Company, at its discretion, may elect to distribute the remaining balance at
any time.


 


If the Participant does not elect a method of
distribution, payment shall be made in one lump sum payment.  Upon payment, the Participant shall have no
further interest in the Phantom Stock or Deferred Compensation Account that has
been distributed, and the Participant shall have no further right to any
increase in the value of the Phantom Stock or Deferred Compensation
Account.  A Participant’s election under
this Section 6.4 shall not be effective until one year after the election
and, if such election revokes a prior distribution election, payment shall made
or 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


 


7





















 


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


 


(b)                                 The Company shall have
the right to deduct from all Incentive Awards made pursuant to the Plan any
federal or state taxes required by law to be withheld with respect to such
payments.


 


(c)                                  Notwithstanding any
other provision of the Plan to the contrary, if, at any time, a court or the
Internal Revenue Service determines that an amount awarded under the Plan, but
not yet distributed to a Participant, is includable in the gross income of a
Participant and subject to tax, the Board may, in its sole discretion, permit a
lump sum cash distribution of an amount equal to the amount determined to be
includable in the Participant’s gross income. 
Further, distributions made pursuant to this Section 6.4 shall
comply with the requirements of Code Section 409A and the regulations,
notices and other guidance of general applicability issued thereunder.


 


Section 6.5                                      Profit
Payments.  Each Participant shall be
eligible to receive an annual profit payment, determined in accordance with
this Section 6.5, for each vested share of Phantom Stock held by the Participant
under the Plan.  The annual profit
payments payable to or on behalf of a Participant shall be paid by the Company
to the Participant, or the Participant’s Beneficiary, at the end of each fiscal
year unless the Participant has made an election to defer the payments on forms
provided by the Company.  If such an
election has been made, no profit payments shall be paid directly to the
Participant or the Participant’s Beneficiary under this Section 6.5, but
shall be allocated to the Participant’s Deferred Compensation Account and paid
to the Trust for the benefit of the Participant.  The amount of each profit payment per share
of Phantom Stock shall be equal to the difference between the average gross
beet 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 the
most recent year for which data is available. 
Profit payments shall be made on the same schedule and with the
same adjustments and partial payouts as beet payments are made to the Company’s
shareholders.


 


Section 6.6                                      Unit
Retain Payments.  Each Participant
shall be eligible to receive an annual unit retain payment as determined by the
Company and subject to this Section 6.6. 
The annual unit retain payment payable to or on behalf of a Participant
shall be paid by the Company to the Participant, or the Participant’s
Beneficiary, unless the Participant has made an election to defer the payments
on forms provided by the Company.  If
such an election has been made, no unit retain payment shall be paid to the
Participant or the Participant’s Beneficiary under this Section 6.6, but
shall be allocated to the Participant’s Deferred Compensation Account and paid
to the Trust.  The amount of each unit
retain payment shall be equal to the amount subtracted from the gross beet
payment per acre for unit retains used in the calculation of the profit
payments in Section 6.5.  Each such
unit retain payment shall be determined during the fiscal year of the Company
as may correspond to the revolvement cycle, if any, for the Company’s preferred
shareholders; it being the intention that the amount of unit retains payment to
be paid to Participants will be paid on the same schedule as unit retains
are revolved to the Company’s preferred shareholders.  The Company’s current unit retain revolvement
cycle is seven years, but is subject to change at the discretion of the
Company.


 


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Section 6.7                                      Change
of Control.


 


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


 


(b)                                 In the event the
Company determines that this Plan is subject to the limitations of Section 280G
of the Internal Revenue Code of 1986, as amended (the “Code”), or any successor
provision, and the regulations issued thereunder and that payment to the
Participant would constitute an “excess parachute payment” as defined in Code Section 280G,
the Participant shall have the right to designate those change of control
benefits which would be reduced or eliminated so that the Participant will not
receive a “parachute payment.”  For
purposes of this Section 6.7(b), “change of control benefits” shall
include any payment, benefit or transfer of property in the nature of
compensation paid to or for the benefit of the Participant under any
arrangement which is considered contingent on a Change of Control for purposes
of Code Section 280G, including, without limitation, any and all of the
Company’s salary, bonus, incentive, compensation or benefit plans, programs or
other arrangements, and shall include benefits payable under this Plan.


 


ARTICLE 7


VALUATION


 


Section 7.1                                      Valuation
of Phantom Stock.  The value of a
share of Phantom Stock shall be equal to the prevailing market value of the
Company’s Preferred Stock, as determined by the Board based upon available
information from third party sources. 
The Board shall determine the value of a share of Phantom Stock at the
end of each Plan Year for purposes of valuing the Incentive Awards to Participants
for that Plan Year.  The Board shall also
determine the value of a share of Phantom Stock as of the date of any
distribution under the Plan for purposes of making the distribution.


 


Section 7.2                                      Election
to Convert Phantom Stock.  A
Participant may, at any time following the vesting of any or all of his or her
Phantom Stock, make an irrevocable election to convert the value of such
Phantom Stock to a cash amount at the prevailing market value of the Company’s
Preferred Stock.  The Board shall determine
the value of a share of Phantom Stock under the Plan for purposes of such
conversion.  If the Participant makes
such an election, such cash amount shall be credited to the Participant’s
Deferred Compensation Account.


 


Section 7.3                                      Valuation
of Deferred Compensation Account.


 


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


 


9





















 


the Company on such form and at such times as determined by the
Company.  Such changes shall become
effective as soon as administratively feasible after the Company receives such
written request.  Although the Company
intends to invest the cash amount according to the Participant’s requests, it
reserves the right to invest such amount without regard to such requests.


 


(b)                                 Each Participant’s
Deferred Compensation Account shall be valued as of the last day of each Plan
Year and as of such other dates as are selected by the Company.  Such valuation shall reflect the aggregate
amounts 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 any
earnings or losses credited to the Participant’s Deferred Compensation Account
based upon the earnings or losses of the investment options applicable to the
Participant’s Deferred Compensation Account pursuant to this Section 7.3.


 


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


 


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


 


ARTICLE 8


NON-TRANSFERABILITY


 


Section 8.1                                      Anti-Alienation
of Phantom Stock.  Amounts credited
to the Participant’s Deferred Compensation Account and shares of Phantom Stock
granted to a Participant, and any rights and privileges pertaining thereto, may
not be anticipated, alienated, sold, transferred, assigned, pledged,
encumbered, or subjected to any charge or legal process; and no interest or
right 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, separate
maintenance and claims in bankruptcy proceedings.


 


Section 8.2                                      Incompetent
Participants.  If any person entitled
to an Incentive Award under the Plan has been declared incompetent and a
conservator or other person legally charged with the care of such person or of
his or her estate has been appointed, any distribution under the Plan to which
the person is entitled shall be paid to such conservator or other person
legally charged with the care of the person or his or her estate.  Except as provided above, when the Company
has determined that such person is unable to manage his or her affairs, the
Company


 


10





















 


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


 


Section 8.3                                      Designated
Beneficiary.  In the event of a
Participant’s death prior to the distribution of any amounts payable under the
Plan, the payment of any amounts on behalf of the Participant under the Plan
shall be made to the Participant’s Beneficiary designated on a form provided to
the 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 other
personal representative of the Participant to be distributed in accordance with
the Participant’s will or applicable intestacy law; or in the event that there
shall be no such representative duly appointed and qualified within six (6) months
after 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 the
distribution of such deceased Participant’s personal estate under the
provisions of the applicable statute then in force governing the descent of
intestate property, in the proportions specified in such statute.


 


ARTICLE 9


ADMINISTRATION
OF THE PLAN


 


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


 


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


 


Section 9.3                                      Operation
of Plan and Claims Procedures.  The
Company shall be responsible for the general operation and administration of
the Plan and for carrying out the provisions thereof.  The Company shall be responsible for the
expenses incurred in the administration of the Plan.  The Company shall also be responsible for
determining eligibility for payments and the amounts payable pursuant to the
Plan.  The Company shall be entitled to
rely conclusively upon all tables, valuations, certificates, opinions and
reports furnished by any actuary, accountant, controller, counsel or other
person employed or engaged by the Company with respect to the Plan.  The procedures for filing claims for payments
under the Plan are described below.  For
claims procedures purposes, the “Claims Manager” shall be the Company.


 


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(a)                                  It
is the intent of the Company to make Incentive Awards under the Plan without
the Participant having to complete or submit any claims forms.  However, a Participant who believes he or she
is entitled to a payment under the Plan may submit a claim for such payment in
writing to the Company.  Any claim must
be made by the Participant or his or her beneficiary in writing and state the
claimant’s name and the nature of the payment to be made under the Plan on a
form acceptable to the Company.  If for
any reason a claim under this Plan is denied by the Company, the Claims Manager
shall deliver to the claimant a written explanation setting forth the specific
reasons for the denial, specific references to the pertinent provisions under
the Plan on which the denial is based, a description of any additional material
or information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary, and information
on the procedures to be followed by the claimant in obtaining a review of his
or her claim, all written in a manner calculated to be understood by the
claimant.  For this purpose:  (i) the claimant’s claim shall be deemed
to be filed when presented in writing to the Claims Manager and (ii) the
Claims Manager’s explanation shall be in writing delivered to the claimant
within 90 days of the date the claim is filed.


 


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


 


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


 


Section 9.4                                      Participant’s
Address.  Each Participant shall keep
the Company informed of his or her current address and the current address of
his or her beneficiary.  The Company
shall not be obligated to search for any person.  If the location of a Participant is not made
known to the Company within three (3) years after the date on which
payment 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 the
three-year period.  If, within one (1) additional
year after such three-year period has elapsed, or, within three (3) years
after the actual death of a Participant, the Company is unable to locate any
designated beneficiary of the Participant, then the Company shall have no
further obligation to pay any benefit hereunder to such Participant or
designated beneficiary and such benefits shall be irrevocably forfeited.


 


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


 


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


 


ARTICLE 10


MISCELLANEOUS
PROVISIONS


 


Section 10.1                                No
Employment Rights.  Neither the Plan
nor any action taken hereunder shall be construed as giving any employee any
right to be retained in the employ of the Company.


 


Section 10.2                                No
Stock Rights.  Except for payments
under Sections 6.5 and 6.6, no Participant shall be entitled to any voting
rights, to receive any dividends or other distribution, with respect to the
Phantom Stock.


 


Section 10.3                                Unfunded
and Unsecured.  The Plan shall at all
times be considered entirely unfunded both for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended, and
no provision shall at any time be made with respect to segregating assets of
the Company for payment of any amounts hereunder.  Any funds with respect to payment to be made
hereunder shall continue for all purposes to be part of the general assets of
the Company and available to the general creditors of the Company in the event
of the Company’s bankruptcy (when the Company is involved in a pending
proceeding under the Federal Bankruptcy Code) or insolvency (when the Company
is unable to pay its debts as they mature). 
No Participant or any other person shall have any interests in any
particular assets of the Company by reason of the right to receive a benefit
under the Plan and to the extent the Participant or any other person acquires a
right to receive benefits under this Plan, such right shall be no greater than
the right of any general unsecured creditor of the Company.  The Plan constitutes a mere promise by the
Company to make payments to the Participants in the future.  Nothing contained in the Plan shall
constitute a guaranty by the Company or any other person or entity that any
funds in any trust or the assets of the Company will be sufficient to pay any
benefit hereunder.  Furthermore, no
Participant shall have any right to a benefit under the Plan except in
accordance with the terms of the Plan.


 


Section 10.4                                Plan
Provisions.  Except when otherwise
required by the context, any singular terminology shall include the plural.


 


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


 


Section 10.6                                Applicable
Law.  To the extent not preempted by
the laws of the United States, the laws of the State of Minnesota shall apply
with respect to this Plan.


 


Section 10.7                                Authority
of CEO.  Except in cases where the
responsibilities are reserved to the Board under this Plan, the Chief Executive
Officer of the Company (or his designee) may act on behalf of the Company under
this Plan.


 


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ARTICLE 11


AMENDMENT


 


The Company reserves the power to alter, amend or wholly revise or
terminate the Plan at any time and from time to time by the action of the Board
and the interest of each Participant is subject to the powers so reserved.  An amendment shall be authorized by the Board
and shall be stated in an instrument in writing signed in the name of the Company
by a person or persons authorized by the Board. 
After the instrument has been so executed, the Plan shall be deemed to
have been amended in the manner therein set forth, and all parties interested
herein shall be bound thereby.  No
amendment to the Plan may alter, impair, or reduce the benefits of a
Participant that are vested under the Plan prior to the effective date of such
amendment without the written consent of the affected Participant.  Notwithstanding the foregoing, the Company
expressly reserves the right to amend the Plan to the extent necessary or
desirable to comply with the requirements of Code Section 409A and the
regulations, notices and other guidance of general applicability issued
thereunder without the consent of any Participant.


 


ARTICLE 12


TERMINATION
OF PLAN


 


The Company may at any time terminate the Plan by action of the
Board.  No further Incentive Awards will
be 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 the
effective date of such termination, without the written consent of the affected
Participant.


 


 


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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