<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 56
<SECURITIES> 0
<RECEIVABLES> 71,716
<ALLOWANCES> 0
<INVENTORY> 406,770
<CURRENT-ASSETS> 502,646
<PP&E> 817,367
<DEPRECIATION> 453,553
<TOTAL-ASSETS> 934,866
<CURRENT-LIABILITIES> 449,846
<BONDS> 232,795
0
38,275
<COMMON> 28
<OTHER-SE> 186,034
<TOTAL-LIABILITY-AND-EQUITY> 934,866
<SALES> 375,975
<TOTAL-REVENUES> 375,975
<CGS> (11,911)
<TOTAL-COSTS> 119,581
<OTHER-EXPENSES> 6989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,941
<INCOME-PRETAX> 249,405
<INCOME-TAX> 0
<INCOME-CONTINUING> 249,405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 249,405
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
