-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WUHPfEhUG3KKX7waG/v8UEvp1jXmAc3HMxivEvqpZmYtdoCJvjkIzaWezjqHRJmW Xf2RzBC6Nvf2ZUpi5O6kcw== 0000897101-10-002339.txt : 20101124 0000897101-10-002339.hdr.sgml : 20101124 20101124131806 ACCESSION NUMBER: 0000897101-10-002339 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 24 CONFORMED PERIOD OF REPORT: 20100831 FILED AS OF DATE: 20101124 DATE AS OF CHANGE: 20101124 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MINN DAK FARMERS COOPERATIVE CENTRAL INDEX KEY: 0000948218 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 237222188 STATE OF INCORPORATION: ND FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-94644 FILM NUMBER: 101214296 BUSINESS ADDRESS: STREET 1: 7525 RED RIVER RD CITY: WAHPETON STATE: ND ZIP: 58075-9698 BUSINESS PHONE: 7016428411 MAIL ADDRESS: STREET 1: 7525 RED RIVER RD CITY: WAHPETON STATE: ND ZIP: 58075-9698 10-K 1 minndak105883_10k.htm FORM 10-K FOR THE FISCAL YEAR ENDED AUGUST 31, 2010

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

For the fiscal year ended

AUGUST 31, 2010

o Transition Report Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Commission File

No. 33-94644

MINN-DAK FARMERS COOPERATIVE

(Exact name of Registrant as specified in its charter)


North Dakota	23-7222188
(State of incorporation)	(I.R.S. Employer Identification Number)

7525 Red River Road
Wahpeton, North Dakota 58075	(701) 642-8411
(Address of principal executive offices)	(Registrant’s telephone number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
o YES x NO

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
o YES x NO

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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. o YES o NO

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

Indicate by check mark if the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller Reporting Co o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

Minn-Dak Farmers Cooperative is a cooperative. Its voting and non-voting common equity can only be held by its members. No public market for voting and non-voting common equity of Minn-Dak Farmers Cooperative is established and it is unlikely, in the foreseeable future that a public market for its voting and non-voting common equity will develop.

As of November 24, 2010, 477 shares of the Company’s Common Stock and 72,200 “units” of the Registrant’s Preferred Stock, each consisting of 1 share of Class A Preferred Stock, 1 share of Class B Preferred Stock and 1 share of Class C Preferred Stock, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

PART I


ITEM 1.	BUSINESS

PUBLIC COMPANY REPORTING

Minn-Dak Farmers Cooperative (the “Company” or the “Registrant”) has previously registered securities for offer and sale pursuant to the Securities Act of 1933, as amended (the “Securities Act”). As a result of that previous registration under the Securities Act, under Sections 15(d) and 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is obligated to file quarterly reports on form 10-Q, annual reports on Form 10-K and supplemental reports on Form 8-K. However, the Company has not registered any of its securities under Section 12(g) of the Exchange Act. The Company is exempt from any obligation to register its securities under the Exchange Act due to the provisions of Section 12(g)(2)(E), which exempts from Exchange Act registration any security of an issuer, such as the Company, which is a “cooperative association” as defined in the Agricultural Marketing Act of 1929. As a result, those provisions of the Exchange Act, which are applicable only to securities registered under Section 12 of that act, do not apply to shares issued by the Company. The provisions, which do not apply to the Company’s shares, include the regulation of proxies under Section 14 of the Exchange Act and the reporting and other obligations of directors, officers and principal stockholders under Section 16 of the Exchange Act.

WARNING REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements and information based upon assumptions by the Company’s management, including assumptions about risks and uncertainties faced by the Company. Any statements regarding future market prices, anticipated costs, agricultural results, operating results and other statements that are not historical facts contained in this annual report are considered forward-looking statements. The words “expect”, “project”, “estimate”, “believe”, “anticipate”, “plan”, “intend”, “could”, “may”, “predict”, and similar expressions are also intended to be identified as forward-looking terminology. Such statements involve risks, uncertainties and assumptions, including, without limitation, market factors, the effect of weather and economic conditions, farm and trade policy, the available supply of sugar, available quantity and quality of sugarbeets and other factors detailed elsewhere in this and other Company filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

GENERAL

The Company is a North Dakota agricultural cooperative that was formed in 1972 and currently has 477 members. Membership in the Company is limited to sugarbeet growers located in those areas of North Dakota and Minnesota within an approximate fifty (50) mile radius of the Company’s offices and sugarbeet processing facilities in Wahpeton, North Dakota. The Company’s facilities allow the members to process their sugarbeets into sugar and other products. The products are pooled and then marketed through the services of marketing agents under contract with the Company. The sugar-marketing agent, United Sugars Corporation, is a cooperative association owned by its members, the Company, American Crystal Sugar Company and United States Sugar Corporation. The Company’s sugarbeet molasses and sugarbeet pulp are also marketed through a marketing agent, Midwest Agri-Commodities Company. Midwest Agri-Commodities Company is a cooperative association owned by its members, the Company, American Crystal Sugar Company, Southern Minnesota Beet Sugar Cooperative and Michigan Sugar Company. The Company owns a 100 percent interest in Minn-Dak Yeast Company, Inc. (“Minn-Dak Yeast”), which has facilities located adjacent to the Company’s sugar production facilities, and which produces fresh baker’s yeast.

The Company’s corporate headquarters are located at 7525 Red River Road, Wahpeton, North Dakota 58075, telephone number (701) 642-8411. Its fiscal year ends August 31. The Company’s website is www.mdf.coop. The Company files annual, quarterly and periodic reports with the United States Securities and Exchange Commission (SEC). The SEC maintains an Internet site at http:/www.sec.gov that contains reports and other information filed electronically about the Company.

PRODUCTS AND PRODUCTION

The Company is engaged primarily in the production and marketing of sugar from sugarbeets. The Company also produces and markets certain co-products, sugarbeet molasses and sugarbeet pulp pellets. The Company’s subsidiary Minn-Dak Yeast uses a portion of the Company’s sugarbeet molasses as the growth medium in the production of fresh baker’s yeast. Minn-Dak Yeast provided revenues totaling approximately 7 percent of the Company’s total revenues for the fiscal year ended August 31, 2010.

The Company processes sugarbeets grown by its members at its sugarbeet processing facility located in Wahpeton, North Dakota. The processing period generally occurs from September to April or May of the following year, depending on the size of the crop. The 2010-crop was anticipated to be the largest crop on record and as a result, harvest was started on August 18, 2010 and factory processing began on August 20, 2010.

Because the Company’s harvest period is much shorter than its processing period, sugarbeet long-term storage is very important to maximize the earnings from each crop year. Each harvest is unique and critical judgments are made by the agricultural staff regarding each crop. Judgments are impacted by the weather conditions at the time of harvest. If the weather is too warm or too cold when the sugarbeets are harvested they will not store well.

The Company uses what it considers to be the best industry practices to preserve and extend the quality of sugarbeets it has in storage. The methods utilized by the Company include, but are not limited to: minimizing pile height, leveling the tops of piles, infrared scanning, timely hauling, splitting piles, passive ventilation, active ventilation, covering active ventilation piles with plastic, storage sheds, and insulating sugarbeets in storage sheds. Each method is evaluated for its anticipated economic impact for each crop year.

The period during which the Company’s processing facility is in operation to process sugarbeets into sugar and co-products is referred to as the “campaign.” The campaign typically begins in September of each year and continues until the available supply of sugarbeets has been depleted. Once the sugarbeets arrive at the processing facility, the basic steps in producing sugar from them include: washing; slicing into thin strips called “cossettes”; extracting the sugar from the cossettes in a diffuser; purifying the resulting “raw juice” and boiling it, first in an evaporator to thicken it and then in vacuum pans to crystallize the sugar; separating the sugar crystals in a centrifuge; drying the sugar; and storing sugar in bulk form for bulk and bag shipping.

The Company’s sugarbeet co-products include sugarbeet molasses, sugarbeet pulp pellets and sugarbeet pressed pulp. After the extraction of raw juice from the cossettes, the remaining sugarbeet pulp is dried, processed into pellets and sold as animal feed or not dried and sold as wet animal feed to the local market. Sugarbeet molasses is the process materials left after all economical means have been taken to extract the sugar from the process. The sugarbeet molasses is sold primarily to yeast and pharmaceutical manufacturers and for use in animal feeds.

RECENT CROPS

The Company’s members harvested 3.1 million tons of sugarbeets from the 2010-crop, approximately 42 percent more than the most recent 5-year average. Sugar content of the 2010-crop was 1 percent above the average of the five most recent years. Due to the higher harvested tons and sugar content, the Company’s production of sugar from the 2010-crop sugarbeets is expected to be 31 percent more than the average of the five most recent years of sugar production.

The Company’s initial sugarbeet payment estimate totals $56.86 per ton or $0.19369042 per harvested /bonus extractible pound of sugar, with the final sugarbeet payment determined in October of 2011. This projected payment is 20 percent more than the final 2009-crop payment per ton and 5 percent more per pound of extractible sugar. The higher projected 2010-crop payment per ton results from more total tons of beets processed, higher sugar content in the sugarbeets, decreased operating and fixed costs per ton and improved sugar prices versus the prior year. The price per pound of extractible sugar was diluted by 6.5% due to bonus sugar for the 2010-crop vs. 2.3% for the 2009-crop. Bonus sugar is an incentive to growers to deliver sugarbeets prior to main harvest. Harvest for the 2010-crop began on August 18, 2010 vs. September 8, 2009 for the 2009-crop.

For a discussion of the calendar 2009, 2008 and 2007 crops and results of operations for fiscal years 2010, 2009 and 2008, see “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”

GROWERS’ AGREEMENTS

The Company purchases virtually all of its sugarbeets from members under contract with the Company. All members have automatically renewing contracts with the Company covering each growing season (the “Growers’ Agreements”). At the end of each year, the Growers Agreement automatically extends for an additional year, so that such agreements always have a remaining term of one year, unless the Company, prior to the automatic renewal, has given notice of termination. In that situation, the agreement will not renew, but will continue in effect for the then remaining year under the agreement. Each Unit of Preferred Stock currently entitles a member to grow the maximum number of acres per share authorized by the Board of Directors for each farming year. The Company’s Board of Directors has the discretion to adjust the acreage that may be planted for each Unit of Preferred Stock held by the members. For the 2010-crop year the Company’s Board of Directors authorized its members to plant up to 1.60 acres per unit but no less than 1.40 acres per unit. For the 2011-crop year, the Company’s Board of Directors has authorized members a planting level of up to 1.60 acres but no less than 1.40 acres per unit; however, this authorization is subject to change by the board before the planting of the 2011-crop. The level authorized acres for planting are due to a desire to more fully utilize the Company’s plant capacity and the anticipated sugar marketing allocations that will be available for the 2011-crop production. (For a discussion of the current farm bill sugar allocations, see Management’s Discussion on Government Programs and Regulations.)

Under the terms of the Growers Agreement, each member receives payment for his or her sugarbeets based on a price per pound of extractable and bonus sugar. The price per pound of extractable and bonus sugar is determined by dividing the total grower distribution of net proceeds (less the amount credited to members investment from member patronage and credited to retained earnings from non-member patronage) by the total of members’ pounds of extractable and bonus sugar. Extractable pounds of sugar are calculated by the processing of sugarbeet samples taken from members’ sugarbeets during harvest. Bonus sugar is a formula driven program premium for delivery of sugarbeets during the period prior to main harvest. Each member’s grower payment is obtained by multiplying that member’s total pounds of extractable and bonus sugar times the price per pound of extractable and bonus sugar as determined above.

Under the Growers Agreement, each member receives an initial installment of the payment for his or her sugarbeets on or about November 15, soon after delivery of his or her crop to the Company. That initial installment is subject to adjustment by the Company’s Board of Directors and Management, but will not exceed 65 percent of the estimated price per pound of extractable and bonus sugar. A second installment is paid in early February; that installment, in combination with the first installment, will not exceed 70 percent of the estimated price per pound of extractable and bonus sugar. A third installment is paid in early April, with the aggregate of all installments paid to that date not to exceed 80 percent of the estimated price per pound of extractable and bonus sugar. A fourth installment payment is paid in early July, with the total of installment payments to that date not to exceed 95 percent of the estimated price per pound of extractable and bonus sugar. The final payment is determined after the end of the Company’s fiscal year, ending on August 31, and is an amount necessary to bring the total of all payments to the price to be paid per pound of extractable and bonus sugar to all growers during the applicable fiscal year. In addition, the Company’s annual patronage net income, if any, which is equal to the Company’s sales less all expenditures and member sugarbeet payments, is distributed to the members on the basis of the pounds of extractable sugar obtained from each of the members’ sugarbeets; such amounts are distributed in either cash payments or allocated in the form of patronage credits to the member’s patronage account on the books of the Company.

COMPANY DISTRICTS

The Company’s by-laws provide that the Company’s members are to be divided into districts for the purposes of voting and the election of members of the Board of Directors. Those districts do not have specific geographic boundaries but, instead, contain a loosely defined area representing the area served by a particular piling station to which members deliver their sugarbeets for storage until the sugarbeets are to be processed. When a member joins the Company, he or she is assigned to a particular district based upon criteria including: (i) the physical location of the shareholder’s sugarbeet growing acres relative to a piling site; (ii) if the previous criteria do not clearly indicate the district to which the shareholder should be assigned, then the physical location of the shareholder’s base of farming operations relative to a piling site (some members deliver sugarbeets to more than one piling site due to the locations of their various fields, even though they are assigned to membership in only one district); and (iii) if the first two criteria do not provide a clear indication of the district to which the shareholder should be assigned, then the shareholder is given the option of being assigned to the district which would best serve the needs of that shareholder.

Given that shareholders are assigned to districts based upon ease of delivery of harvested sugarbeets and because shareholders own different numbers of Units of Preferred Stock, each district includes a different number of acres of sugarbeet production and, therefore, a different quantity of sugarbeets delivered to the Company. However, none of the districts provides the Company with a materially disproportionate quantity of the sugarbeets produced by the Company’s members. While the allocation of members to the various districts has a significant impact on the election of directors, the Company does not believe that the districts represent a significant factor in the day-to-day business operations of the Company.

RESEARCH AND DEVELOPMENT

The Company conducts a modest amount of research and development activity, but does participate in some sugar industry research and development activities. Any research findings are then shared by the entire sugar industry. Participatory research and development is accomplished through such organizations as the Beet Sugar Development Foundation and North Dakota/Minnesota Research and Education Board. The Company participates in the organizations listed above through the efforts of its representatives to the boards of directors of those entities. The Company’s representatives, either a member of the Company’s Board of Directors or a Management employee of the Company, allow the Company to participate in and help direct agricultural and factory operations research and development activities carried out by the listed organizations. Those organizations also have established various committees on which the Company has placed certain of its employees. That practice is designed to provide the company with direct access to any research and development information available from the applicable committees. None of the Company’s employees or directors devotes a significant portion of their time and energies to the activities described in this section.

During the fiscal year ended on August 31, 2010, the Company contributed approximately $0.1 million to the North Dakota/Minnesota Research and Education Board to fund that entity’s research and development activities and the Company spent $0.3 million for research aimed at process improvements.

The Company also has established a sugarbeet seed committee, whose membership includes shareholders, directors and Company employees, which reviews the performance of new and existing sugarbeet seed varieties. The committee then advises the Board of Directors with regard to those sugarbeet seed varieties that should be approved by the Board of Directors for use by the Company’s shareholders.

ENVIRONMENTAL MATTERS

The Company is subject to a broad range of evolving environmental laws and regulations. These laws and regulations include the Food Quality Protection Act of 1996, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Comprehensive Environmental Response, Compensation and Liability Act. Other than what is provided herein, the Company is not aware of any areas of non-compliance.

The Company has $0.6 million of environmental capital improvements budgeted for the fiscal year ending August 31, 2011, slightly less than was expended for the fiscal year ending August 31, 2010.

Compliance with these laws and related regulations is an ongoing process that, at the current levels of spending, is not expected to have a material effect on the Company’s capital expenditures, earnings or competitive position. Environmental concerns are, however, inherent in most major agricultural operations, including those conducted by the Company, and there can be no assurance that the cost of compliance with environmental laws and regulations will not be material. Moreover, it is possible that future developments, such as increasingly strict environmental laws and enforcement policies there under, and further restrictions on the use of agricultural chemicals, could result in increased compliance costs.

On March 10, 2009, the United States Environmental Protection Agency (“EPA”) proposed regulations mandating reporting of greenhouse gas emissions from “all sectors of the economy.” The proposed regulation would apply to downstream facilities with greenhouse gas emissions equal to or greater than 25,000 tons per year and to upstream suppliers of fossil fuels and industrial greenhouse gases as well as to manufacturers of vehicles and engines. Those subject to the regulations would be required to submit annual reports of emissions of carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), sulfur hexafluoride (SF₆), hydro fluorocarbons (HFCs), per fluorocarbons (PFCs), and other fluorinated gasses. The Company is monitoring this and similar proposed regulation changes and their potential impact to the Company.

In March 2005, the U.S. Department of Agriculture (the “USDA”) made a determination that the Roundup Ready® sugarbeets should be deregulated. On January 23, 2008, a coalition group including the Center for Food Safety, the Sierra Club and two organic seed groups filed a lawsuit challenging the USDA’s determination. On September 21, 2009, the U.S. District Court for the Northern District of California (the “District Court”) ruled that the USDA violated the National Environmental Policy Act by failing to prepare an Environmental Impact Statement (“EIS”) before deregulating Roundup Ready sugarbeets. The District Court also ordered the USDA to complete an EIS.

On January 19, 2010, the coalition group filed a motion seeking a preliminary injunction to halt the planting and processing of Roundup Ready sugarbeets for both the seed and root crops until the EIS is completed. On March 16, 2010, the District Court denied the plaintiffs’ request for the preliminary injunction. On August 13, 2010, the District Court issued an order allowing harvesting and processing of Roundup Ready sugarbeets planted before August 13, 2010. In that order, the District Court also vacated the USDA’s decision to deregulate Roundup Ready sugarbeets. As a result, the planting of Roundup Ready® sugarbeet seed after August 13, 2010 is prohibited until further action is taken by the USDA, in accordance with applicable environmental laws, to allow planting of Roundup Ready sugarbeet seed.

In September 2010, the USDA, under existing regulatory authority, issued permits to commercial sugarbeet seed companies to plant root crop seed, or stecklings, for the purpose of possible commercial seed availability for the 2012 crop and beyond. That move was immediately challenged in court by the Center for Food Safety along with other groups. An evidentiary hearing took place November 2-4, 2010 to hear arguments by the plaintiffs and the defendant (USDA) regarding the U.S. District Court’s finding that the sugarbeet seed stecklings “likely” should not have been planted. Following the evidentiary hearing the District Court will decide what will become of the stecklings.

On November 2, 2010 the USDA announced that it has prepared a draft environmental assessment (EA) to address a request from interested chemical and seed companies to partially deregulate or provide for some similar administrative action to allow the continued use of Roundup Ready® sugarbeet seed for sugarbeet crops in the US. The proposed EA evaluates three options, including the USDA’s preferred alternative, which would authorize production of Roundup Ready® sugarbeets under strict USDA permit conditions for the 2011 and future sugarbeet crops. The draft EA is available for public comment for 30 days following the announcement, with the USDA intending to analyze all comments received by December 6, 2010, and then deciding whether to grant the supplemental request for partial deregulation.

According to the USDA, Roundup Ready varieties accounted for about 95% of the planted acres in the 2009/10 crop year. The Company’s Board of Directors authorized the planting of Roundup Ready® sugarbeets beginning with the 2008 crop. Of the sugarbeet crop processed by the Company in 2010, the Company estimates that 100% was grown with Roundup Ready seed.

Given these actions by the District Court and the uncertain timing or course of USDA action, the Company’s shareholders may not be able to plant Roundup Ready sugarbeets in 2011. The ability of shareholders to plant Roundup Ready sugarbeets in subsequent years will be based upon actions by the USDA, which may be subject to further challenge in the future by the coalition group that filed suit in January 2008 or other groups. Environmental law restrictions on the use of Roundup Ready sugarbeet seeds or other restriction relating to sugarbeet seeds or herbicides could have a significant, negative financial impact on the Company and its shareholders.

MARKET AND COMPETITION

Current U.S. Government statistics estimated total United States (“U.S.”) sugar deliveries for domestic food and beverage consumption at 200.0 million cwt refined for its fiscal year beginning October 1, 2009 and ending September 30, 2010 (fiscal year 2010). For the same period ending in 2009 (fiscal year 2009), total deliveries were 194.7 million cwt refined. Comparing the two years shows demand increased by 2.7 percent for U.S. sugar sellers. The U.S. Government estimates that fiscal year 2011 deliveries will total 201.4 million cwt refined, less than a 1 percent increase versus fiscal year 2010.

Given the size of the domestic market, the Company’s sugar production and sales represent less than 2 percent of the total domestic market for refined sugar in fiscal year 2010. United Sugars Corporation, which sells the Company’s production through a sugar marketing pool, represented approximately 25 percent share of the fiscal year 2010 U.S. sugar market.

The U.S. refined sugar market is a mature market and has grown over the past ten years at a rate of slightly less than 1 percent per year. Its growth is affected by the substitution of high fructose corn syrups, artificial and other non-sucrose sweeteners for sugar in beverages and certain food products and imported sugar-containing products. The substitution of non-sugar sweeteners for sugar not only reduced demand for sugar in the United States, but has also resulted in a high degree of sugar industry contraction. Also, sugar companies have been consolidating or closing as a result of marketplace conditions. Since 1996, 13 of the 35 sugarbeet refineries owned by sugar companies have closed. Similar results in that time period can be shown for cane sugar companies, cane raw mills and cane refineries. Today there are seven sugar sellers, with approximately 90 percent of U.S. sugar market share concentrated in the top five sellers, most of which are integrated sugarbeet and sugarcane suppliers. The Company’s main competitors in the domestic market are Imperial Sugar Company, American Sugar Refining Company, Amalgamated Sugar Company and Cargill. Competition in the U.S. sugar industry, because sugar is a fungible commodity, is primarily based upon price, customer service and reliability as a supplier.

GOVERNMENT PROGRAMS AND REGULATION

Domestic sugar prices are supported under a program administered by the United States Department of Agriculture (“USDA”). Under the current program, which was initiated in 1981 and extended under the Food Security Act of 1985, the Food, Agriculture, Conservation and Trade Act of 1990, the Federal Agriculture Improvement and Reform Act of 1996, the Farm Security and Rural Investment Act of 2002 and now the Food, Conservation, and Energy Act of 2008 (the “Farm Bill”), the price of sugar is required to be maintained above the price at which producers could forfeit sugar to repay non-recourse loans obtained through the Commodity Credit Corporation (“CCC”). The USDA maintains sugar prices without cost to the U.S. Treasury by regulating the quantity of sugar imports. The U.S. currently imports approximately 25 percent of its total domestic needs.

Food, Conservation, and Energy Act of 2008

The Farm Bill was enacted in June 2008. It contains several provisions related to the domestic sugar industry, with the ultimate goal of such provisions to achieve balance and stability in the U.S. sugar market while minimizing the cost to the Federal government. The Farm Bill applies to the 2008 through 2012-crop years. Generally, the Farm Bill restricts imports of foreign sugar, maintains a non-recourse loan program, and establishes a system of marketing allocations for sugarbeet and sugarcane producers in an attempt to balance the supply and demand for sugar in the U.S. domestic sugar market.

Under the Farm Bill, sugar processors can borrow funds on a non-recourse basis from the CCC, with repayment of such funds secured by sugar. When the price of sugar drops below the forfeiture price, the processors can forfeit the sugar securing the loans to the CCC in lieu of repayment. Processors may also obtain CCC loans for “in-process” sugar or syrups at 80 percent of the loan rate.

The USDA has historically maintained sugar prices above the forfeiture price level, without cost to the U.S. Treasury, by regulating the supply of sugar in the U.S. market through the regulation of the quantity of sugar imports and the establishment of an overall allotment quantity for the domestic sugar producers. Under the Tariff Rate Quota (“TRQ”) implemented October 1, 1990, sugar-producing countries are allowed to export a fixed quantity of sugar into the United States duty-free or subject to minimal duties. The amount of the TRQ established by USDA for fiscal year 2011 is 1,231,497 short tons raw value (“STRV”), or the minimum access commitment level under World Trade Organization (“WTO”). In addition, the USDA also set the fiscal year 2011 refined TRQ at 109,251 STRV. Together the initial raw and refined TRQ was set at 80 percent of fiscal year 2011 estimated TRQ entries. In addition, sugar is imported under free trade agreements with other countries, including the North American Free Trade Agreement (“NAFTA”), which includes trade with Canada and Mexico. Mexico is projected by the USDA to export 1,025,000 STRV of sugar to the U.S. in FY 2011. In total, imports from other countries are expected to total 2,058,000 STRV for FY 2011by USDA.

The Farm Bill incorporates gradual loan rate increases for raw and refined sugar. For raw sugar, the loan rate will increase three-quarters of a cent per pound, raw value, phased-in in quarter-cent increments over crop years 2009-2011. Raw cane load rates will remain at 18.00 cents/lb in 2008 then rise gradually to 18.75 cents by 2011, and they will remain at 18.75 cents/lb for the 2012 crop year. Refined beet sugar loan rates are set at 23.45 cents/lb for the 2009 crop and thereafter are set at a rate equal to 128.5 percent of the loan rate per pound for raw cane sugar for each of the 2010 through 2012 crop years.

In order to reduce the risk of sugar forfeitures to the CCC and to provide balance in the marketplace, the Farm Bill establishes annual flexible marketing allotments for both cane and sugarbeet sugar processors. The Farm Bill requires the USDA to set the overall allotment quantity (OAQ) for the U.S. domestic sugar market for each crop year at no less than 85 percent of the estimated quantity of sugar for domestic consumption. Once the USDA has determined the OAQ for a crop year, it then determines each allotment for sugarbeet and sugarcane sugar by multiplying the OAQ by 54.35 percent for beet and 45.65 percent for cane. An individual processor’s allocation of the allotment for a crop year is determined by formula set forth in the Farm Bill. Each domestic processor of sugar, which includes the Company, is provided an allocation whenever allotments are in effect, based upon that formula. Sugarbeet processor allocations are based on each sugar processor’s sugar production history, while sugar cane processor allocations are based on past marketings, ability to market and past processings. The USDA annually establishes individual processor’s allocations.

Under the Farm Bill, a processor may market sugar in excess of its allocation if such sales (i) enable another processor to meet its allocation, (ii) facilitate the export of sugar or (iii) are made for nonhuman consumption. Or, any sugar in excess of a processor’s allocation may be held until such time that allotments are lifted or additional allocations become available. The USDA can assess a penalty equal to three times the U.S. market value of any quantity of sugar marketed in excess of a processor’s allocation. The Farm Bill and its related regulations do not allow marketing allocations to be traded among processors. The Farm Bill does, however, provide for the transfer of allocations associated with a particular processing facility in the event ownership of the facility is transferred.

The marketing allotments and allocations set forth under the Farm Bill affect the sugar processed from the 2008 crop through the 2012 crop. On an annual basis, the marketing allotments, and the corresponding allocation to the Company, will determine the amount of sugar the Company can sell into the domestic market. The Company’s allocation may reduce the amount of sugar the Company can market for a given year, thus reducing the number of acres of sugarbeets required for processing. The Company anticipates that it may have to increase or reduce its authorized planted acres each year to more closely match its anticipated allocation of sugar sales. The Company also manages its allocation needs by selling non-allocation sugar to other sugar producers and for non-human consumption needs, which are not counted against allocation sales.

North American Free Trade Agreement

The North American Free Trade Agreement (“NAFTA”) governs sweetener trade between the U.S. and Mexico. Under the terms of the NAFTA text the agreement established a common market between the United States and Mexico in sugar in 2008. Effective January 1, 2008, under NAFTA, there are no duties or quantitative restraints between the two countries on all sugar and HFCS trade. Sugar from Mexico may enter and be sold in the U.S. in any quantity without the added cost of tariffs.

The U.S. Government forecasts that Mexico will export 807,000 short tons raw value to the U.S. in 2009-2010, which would represent approximately 7.3 percent of domestic sugar consumption for food and other; and 1,025,000 short tons raw value in 2010-2011, representing approximately 9.3 percent of domestic sugar consumption for food and other. Key variables that ultimately will determine the amount of imports from Mexico include: (1) Mexican production; (2) Mexican high fructose corn syrup use; (3) Mexican third-country imports and possible substitution; (4) Mexican government policy decisions, such as a proposed ethanol program and others that could mitigate or increase exports to the U.S.; (5) domestic U.S. production of beet and cane sugar; and (6) possible U.S. and Mexico government agreement on a rational sugar trade policy, other than what currently exists in the NAFTA. Excessive imports of Mexican sugar could cause material harm to the U.S. sugar market; however, the Company is unable to determine what the level of imports would need to be in order to trigger material harm.

The Company believes the NAFTA may present a potential serious public policy challenge to itself and the domestic sugar industry. Should there be low world raw sugar prices it would be economically viable for Mexican sugar to enter the United States in any year, if the Mexican interests so choose. Since January 1, 2008 there has not been a sugar market disruption due to NAFTA in the U.S. for a variety of reasons; mostly those reasons have to do with the market conditions that currently exist in the U.S. and Mexico, including supply / demand reasons. It is possible that the NAFTA could, in the future, have a material adverse effect on the Company through a reduction in acreage that can be planted by the Company’s shareholders, and/or a reduction in sugar selling prices, and a corresponding reduction in the sugarbeet payment to the shareholders and to the Company earnings. The magnitude of the impact cannot be determined at this time.

World Trade Organization

Under the General Agreement on Tariffs and Trade Act of 1990 (“GATT”), tariff rate quotas were implemented for certain sugar producing countries that provided for a fixed quantity of sugar imports duty-free or subject to minimal duties. Further, imports of sugar under the tariff rate quota are based upon the difference between domestic sugar consumption and domestic sugar production, with one exception. Under the terms of the GATT the minimum imports of sugar are established at 1,257,000 short tons, raw value. Therefore, even if the difference between domestic sugar consumption and production are less than 1,257,000 short tons, raw value, GATT will require that 1,257,000 short tons be imported into the U.S. from the quota holding foreign countries.

Unlimited additional quantities may be imported upon payment of a tariff of 15.36 cents per pound of refined sugar prior to shipment. In recent months the price spread between imported and domestic sugar prices has narrowed, resulting in greater high-tier sugar imports. Through July of 2010 fiscal year 2010 high-tier sugar imports totaled 115,700 STRV compared to just 2,204 STRV in the prior year.

The World Trade Organization (WTO) met in November, 2001 in Doha, Qatar where members launched new multilateral trade negotiations aimed at improving market access, reducing and eventually phasing out all forms of export subsidies and substantial reductions in trade-distorting domestic support. Any agreements reached during the Doha Round could present a threat to the domestic sugar industry because sugar is one of the most highly protected sectors within world agricultural trade and is thus a target for reform.

The 147 members of the WTO reached an agreement July 31, 2004, on a framework for the final phase of the Doha Development Agenda of global trade talks. The original deadline to complete talks by January 1, 2005, has been postponed a number of times. Talks have stalled repeatedly and currently there appears to be little chance of WTO countries completing the Doha in the short term. The effect of any final WTO agreement on United States farm programs and the sugar program in particular and the Company will depend largely on the details of the agreement, which have not yet been fully negotiated.

Dominican Republic - Central American Free Trade Agreement

The Dominican Republic - Central American Free Trade Agreement (DR-CAFTA) was signed into law in 2005 and was substantially implemented starting on January 1, 2006. As a result, the Company has seen an increase in the amount of sugar that will be imported into the United States as a result of this agreement. The impact of this trade agreement on the Company will continue to be assessed by taking into consideration this and all of the other agreements that require certain amounts of raw or refined sugar to be imported to the U.S., and the resultant amount of sugar that becomes available for sale in the domestic sugar marketplace. It is possible that the trade agreement could have a material adverse effect on the Company through a reduction in acreage that can be planted by the Company’s shareholders, and/or a reduction in sugar selling prices, and a corresponding reduction in the sugarbeet payment to the shareholders and the Company earnings. The magnitude of the impact cannot be determined at this time.

Regional and Bilateral Free Trade Agreements

The United States government is pursuing additional international trade agreements. It is seeking to negotiate new free trade agreements with a number of countries and regions that are major producers of sugar. The Company believes these agreements, if they reach fruition, could negatively impact the Company’s profitability.

The primary negotiated or currently being negotiated free trade agreements with countries and regions that are major producers of sugar include, to the Company’s knowledge, the Columbia Free Trade Agreement; the Thailand Free Trade Agreement; the Panama Free Trade Agreement; the Free Trade Area of the Americas; the South African Customs Union Free Trade Agreement, and others. The Columbia Free Trade Agreement and the Panama Free Trade Agreement have been completed, signed, but as yet not been ratified by the U.S. Congress. The Company is uncertain when these two trade agreements will be brought before Congress for a vote. The Company believes these agreements, should they reach fruition, could negatively impact the Company’s profitability. Many of the countries included in these agreements are major sugar producers and exporters. If increases in guaranteed access or reductions in sugar tariffs are included in these agreements, excess sugar from these regions could enter the U.S. market and put pressure on domestic sugar.

The U.S. sugar industry and the Company recognize the potential negative impact that would result if these agreements were entered into by the United States.

The impact of the various trade agreements on the Company cannot be assessed at this time due to the uncertainty concerning the terms of the agreements and whether they will ultimately be implemented. It is possible, however, that the passage of various trade agreements could have a material adverse effect on the Company through a reduction in acreage that can be planted by the Company’s shareholders, and/or a reduction in sugar selling prices, and a corresponding reduction in the sugarbeet payment to the shareholders and to the Company earnings. The magnitude of the impact cannot be determined at this time.

The Farm Bill provides price support provisions for sugar. However, if the price support program including the Tariff Rate Quota system described above were eliminated in its entirety, or if the effectiveness that the United States’ price support program provides from foreign competitors were materially reduced, the Company could be materially and adversely affected. In such a situation if the Company were not able to adopt strategies that would allow it to compete effectively in a greatly changed domestic market for sugar, the adverse affects could impact the Company’s continued viability and the desirability of grower sugarbeets for delivery to the Company.

EMPLOYEES

As of October 29, 2010, the Company had 313 full time employees, of whom 277 were hourly and 36 were salaried. It also employs approximately 411 additional hourly seasonal workers during the sugarbeet harvest and processing campaign. The Company has a collective bargaining agreement with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (AFL-CIO, CLC) for its factory group. The contract became effective June 1, 2005 and continues through May 31, 2011. Office, clerical, Management, truck drivers and harvest employees are not unionized. Full time employees are provided with health, dental and vision insurance, a defined benefit or defined contribution retirement plan, a 401(k) retirement savings plan, a long term disability plan, sick leave plan, term life insurance, vacation plan and holiday pay. Seasonal workers are also provided some of these same employee benefits. The Company considers its employee relations to be excellent.

ABOUT THE COOPERATIVE

The Company is typically referred to as a “Closed Cooperative”. In a “Closed Cooperative”, members must purchase equity (represented by classes of preferred shares) in a cooperative to acquire the rights to participate in the cooperative’s business, and membership must be approved by the Cooperative’s Board of Directors. The Company requires shareholders to own a Unit of Preferred Stock, which currently entitles a member to grow and deliver a maximum number of acres of sugarbeets per unit as authorized by the Board of Directors for each farming year. See Part II Item 5 for a more detailed explanation.


ITEM 1A.	RISK FACTORS

If any of the following risks actually occur, the Company’s results of operations, cash flows and the trading price of its common stock could be negatively impacted. Although the Company believes that it has identified and discussed below the key, significant risk factors affecting its business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect its performance or financial condition.

Regional and Bilateral Trade Agreements

In the event that the United States government enters into bilateral trade agreements with sugar producing countries, the amount of sugar in the domestic sugar market could be impacted. A change in the supply of sugar could put pressure on the price of sugar, which would impact the Company’s profitability.

Government Programs and Regulations; Legislation

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

Legislation that would significantly increase energy costs, health care costs, or other employee benefit costs could have severe adverse impacts on the financial returns of the Company.

Unregulated Foreign Competition

Under the current terms of the NAFTA and other government regulations, imports of sugar from Mexico may enter the U.S. market. These imports could oversupply the U.S. market and negatively affect the price of sugar. The Company, along with the domestic sugar industry, closely monitors the level of imported sugar coming from Mexico and is consulting with the U.S. government to encourage improved data reporting and continued consultation with the Mexican government relating to sugar trade.

The Farm Bill

The impact of the Farm Bill on the operations of the Company cannot be completely predicted. The long-term ramifications of the marketing allotment and allocation program depend on the Company’s base allocation received on an annual basis and its ability to obtain access, if necessary, to additional allocations at a reasonable price.

Operating Expenses and Sugar Prices

The Company has an ongoing strategy of maximizing profitability by controlling operating expenses and maximizing production of sugar. This strategy is necessary because the price of sugar has historically remained within a fairly narrow government program controlled price range. The strategy includes ongoing activities that include constant review of costs and a capital expenditure program that emphasizes efficiencies through cost reduction or production increases. The Company cannot be assured that its continued efforts in this area will result in its continued or increased profitability.

The Company consumes large quantities of energy in its operations. The Company annually consumes coal, electricity, metallurgical coke, diesel fuel, and natural gas; therefore significant changes in energy prices would have a significant effect on the operating costs of the Company. The Company also consumes operating supplies whose costs are impacted by the price of energy, and therefore the price to the Company. The Company has a strategy to purchase its energy needs and operating supplies as cheaply as possible through long-term contracts, volume purchases and competitive bidding.

Inability to compete in the sweetener market, could affect operating results.

Sugar is a fungible commodity with competition for sales volume based primarily upon price, customer service and reliability. The sweetener market, in addition to sugar, includes corn-based sweeteners, such as regular and high fructose corn syrups, and non-nutritive, high-intensity sweeteners such as aspartame. Differences in functional properties and prices have tended to define the use of these various sweeteners. Although the various sweeteners are not interchangeable in all applications, the substitution of other sweeteners for sugar has occurred in certain products, such as soft drinks. The Company cannot predict the availability, development or potential use of these and other alternative sweeteners and their possible impact on it or its members. The Company believes that it possesses the ability to compete successfully with other producers of sugar in the United States. In spite of that, substitute products could reduce the demand for sugar which could lower the price of sugar, resulting in reduced profitability in the future.

The Company’s Board of Directors authorized the planting of Roundup Ready® sugarbeets beginning with the 2008 crop. Sugar and co-products produced from Roundup Ready® sugarbeets have received regulatory approval in most of the countries in which the Company has direct or indirect sales of our products. While the sale of sugar and co-products from Roundup Ready® sugarbeet seed has been approved in most markets, marketing risks still exist. United Sugars Corporation and Midwest Agri-Commodities, its sugar and co-product marketing agents, respectively, feel they can successfully sell and distribute products from Roundup Ready® sugarbeets with minimal affect on the Company’s revenue. However, customers’ views on the use of products from biotechnology derived crops such as Roundup Ready® sugarbeets may change over time which could negatively impact the Company’s profitability.

Beet Seed Availability

On January 24, 2008, the Center for Food Safety along with other groups filed a lawsuit against the USDA indicating that, a full environmental impact study (EIS) should have been completed before it made the decision to deregulate Roundup Ready® sugarbeets. On September 21, 2009 the U.S. District Court (Court) ruled against the USDA finding that the USDA violated federal law by not preparing an Environmental Impact Statement before deregulating Roundup Ready® sugarbeets. The Court has determined that the USDA now needs to prepare a full Environmental Impact Statement.

A District Court hearing on interim remedies for the September 21, 2009 decision was held on August 13, 2010, and following the hearing issued a ruling confirming the ability of the shareholders to harvest the 2010 root crop even though it was produced primarily from Roundup Ready® sugarbeet seed. In addition, the District Court immediately vacated the original decision by USDA to deregulate the use of Roundup Ready® sugarbeet seed. As a result, the planting of Roundup Ready® sugarbeet seed after August 13, 2010 is prohibited until further action is taken by USDA, in accordance with applicable law, to allow planting of Roundup Ready® sugarbeet seed.

In September 2010 USDA, under existing regulatory authority, issued permits to commercial sugarbeet seed companies to plant root crop seed, or stecklings, for the purpose of possible commercial seed availability for the 2012 crop and beyond. That move was immediately challenged in court by the Center for Food Safety along with other groups. An evidentiary hearing took place November 2-4, 2010 to hear arguments by the plaintiffs and defendant (USDA) regarding the U.S. District Court’s finding that the sugarbeet seed stecklings “likely” should not have been planted. Following the evidentiary hearing The Court will decide what will become of the stecklings.

Given the recent Court rulings, and the uncertain timing of USDA action, if any, and continued litigation attempts by certain groups that oppose the growing of sugarbeets using Roundup Ready® sugarbeet seed, it is possible that the Company’s shareholders may not be able to plant Roundup Ready® sugarbeets in 2011. The ability of shareholders to plant Roundup Ready® sugarbeets in subsequent years will be determined as a final matter based on the outcome of the EIS and further decision by USDA. The USDA is currently developing the EIS, which it says is expected to be completed by the end of May 2012.

If the Court restricts planting in 2011 of Roundup Ready® sugarbeet seed, conventional varieties would need to be utilized, which could have a negative impact on the sugarbeet producers’ crop yields. Chemical manufacturers have significantly reduced planned production of conventional herbicides due to the rapid increase in planting of Roundup Ready® sugarbeets. Weed control for conventional varieties could be difficult if there is an inadequate supply of conventional herbicides. Therefore, the risk of Roundup Ready® sugarbeet restrictions could have a significant, negative financial impact to the Company and to its members.

Weather and Other Factors

The sugarbeet, as with most other crops, is affected by weather conditions during the growing and harvesting seasons. Additionally, weather conditions during the processing season affect the Company’s ability to store sugarbeets held for processing. Growing and storage conditions different from the Company’s expectations may change the quantity and quality of sugarbeets available for processing and therefore may affect the quantity of sugar produced by the Company. A significant reduction in the quantity or quality of sugarbeets harvested resulting from adverse weather conditions, disease (such as rhizomania) or other factors could result in increased per unit processing costs and decreased production, with adverse financial consequences to the Company and its members.

Increased profitability of alternative crops could adversely affect the desirability of growing sugarbeets.

The prices growers receive from crops other than sugarbeets could impact their decisions as to which crop to plant and how much to plant. Higher prices and increased profitability for alternative crops could negatively impact the desirability of growing sugarbeets for delivery to the Company for processing, its financial results and its continued viability.


ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.


ITEM 2.	PROPERTIES

The Company operates a single sugarbeet processing factory at Wahpeton, North Dakota that is located in the Red River Valley area of Minnesota-North Dakota. The Company owns the factory, receiving sites, and the land on which they are located. The Corporate office is located at the factory site at Wahpeton, ND.

The properties are adequate to process normal and above normal crop sizes, and for the last three years have averaged a slice rate of 9,183 tons per day. The 2010-crop is the largest tonnage in the history of the Company, amounting to approximately 3,108,000 tons of sugarbeets. If the Company encounters normal weather patterns, which will in turn provide normal long-term sugarbeet storage conditions and if the beets harvested are of good quality, healthy and low in tare, then it does not anticipate having material difficulties in processing crops equal in size to the 2010-crop. Achievement of the levels of slice and sugar production in the factory is due mostly to the quality of the crop and the Company’s effort to maximize the potential production from a crop.

Minn-Dak Yeast Company (MDYC), of which the Company is a 100 percent owner, operates a single factory yeast manufacturing business at Wahpeton, North Dakota. MDYC owns the factory and the land on which it is located. During fiscal 2010, fresh yeast was produced and sold into the domestic yeast marketplace.

All properties are held subject to a mortgage by the Company’s primary lender.


ITEM 3.	LEGAL PROCEEDINGS

From time to time and in the ordinary course of its business, the Company is named as a defendant in legal proceedings related to various issues, including worker’s compensation claims, tort claims and contractual disputes. Other than as provided herein, the Company is not currently involved in legal proceedings that have arisen in the ordinary course of its business, and the Company is also unaware of certain other potential claims that could result in the commencement of legal proceedings. The Company carries insurance that provides protection against certain types of claims.

The Company is subject to extensive federal and state environmental laws and regulations with respect to water and air quality, solid waste disposal and odor and noise control. The Company conducts an ongoing and expanding control program designed to meet these environmental laws and regulations. As disclosed under “ENVIRONMENTAL MATTERS” above, there currently are no pending regulatory enforcement actions and the Company believes that it is in substantial compliance with applicable environmental laws and regulations.


ITEM 4.	[REMOVED AND RESERVED]

PART II


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

SHAREHOLDER STOCK VALUE

The Company is typically referred to as a “closed cooperative.” In a “closed cooperative”, members must purchase equity (represented by classes of preferred shares) in a cooperative to acquire the rights to participate in the cooperative’s business, and membership must be approved by the Company’s Board of Directors.

The Company’s equity consists of common stock and preferred stock. The Company’s preferred stock consists of Class A preferred stock, Class B preferred stock and Class C preferred stock, with one share of each class of preferred stock constituting a “unit” of preferred stock.

There is no established public market for the Company’s common equity and it is unlikely that a public market for the Company’s equity will develop in the foreseeable future. Transfer of shares, if any, is subject to significant restriction, including the approval of the Company’s Board of Directors and the requirement that preferred stock must be transferred together.

Holders of the Company’s common stock are entitled to share in the Company’s profits and losses based upon sugar delivered, to receive distributions of the Company’s net cash flow when declared by the Board of Directors, to participate in the distribution of the Company’s assets if it dissolves or liquidates, and, to vote on matters submitted to a vote of the Company’s members. Under state law and the Company’s Bylaws, each member of the Company is entitled to one vote, regardless of the number of shares the member holds. Holders of the Company’s common stock are committed under Uniform Delivery and Marketing Agreements to grow and deliver a minimum and maximum number of acres of sugarbeets per unit of preferred stock as authorized by the Board of Directors for each farming year. The Company’s common stock and preferred stock may be held only by farmer-producers who are eligible for membership in the Company and may only be transferred with the consent of the Board of Directors of the Company.

The Company has never declared a dividend. The Company distributes its patronage based upon net margins in the form of qualified or non-qualified allocated patronage using the sugar delivered for the crop year as the distribution factor.

As of November 24, 2010, 477 shares of the Company’s Common Stock and 72,200 “units” of the Company’s Preferred Stock, each consisting of 1 share of Class A Preferred Stock, 1 share of Class B Preferred Stock and 1 share of Class C Preferred Stock, were outstanding.

The Company has not made any repurchases of its securities in the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K.


ITEM 6.	SELECTED FINANCIAL DATA

The following table summarizes selected financial data for each of the last five fiscal years. The selected financial data of the Company should be read in conjunction with the financial statements and related notes included elsewhere in this report.


	Fiscal Year Ended August 31,
FINANCIAL DATA	2010		2009		2008		2007		2006

(in thousands)
Revenues	$	214,312	$	225,034	$	243,573	$	278,571	$	176,967
Distribution of net proceeds (1)		100,233		96,053		110,863		148,415		76,096
Total assets		197,065		179,884		177,063		177,666		163,129
Long-term debt, including current maturities		40,907		38,545		31,872		36,931		42,008
Members’ investment (2)		71,274		76,143		84,016		83,373		83,951
Property and equipment additions, net of retirements		8,283		9,246		8,560		4,947		4,426
Working capital		13,688		13,387		10,163		13,265		14,025

RATIOS
Ratio of long-term debt to equity (3)		.53		.44		.32		.39		.45
Ratio of net proceeds to fixed charges (4)		51.82		48.64		35.36		35.56		22.50
Current ratio		1.20		1.24		1.17		1.23		1.36

PRODUCTION DATA (5)
Acres harvested (members)		97,247		75,097		107,649		116,646		102,121
Tons of sugarbeets purchased (members)		2,010,071		1,863,920		2,208,622		3,019,475		1,810,269
Tons purchased per acre harvested		20.66		24.82		20.52		25.89		17.73
Payment to members per ton of sugarbeets delivered, plus allocated patronage and unit retains (6)	$	49.29	$	51.35	$	48.96	$	49.06	$	41.89

Sugar (cwts):
Produced (from member, tolled and purchased sugarbeets)		5,218,993		5,427,888		6,914,346		7,822,687		4,848,804
Sold (includes purchased sugar)		5,032,891		5,834,662		7,060,619		7,301,360		4,844,315

Beet pulp pellets (tons):
Produced		112,048		102,073		107,600		147,888		101,328
Sold		115,529		90,715		106,006		151,791		105,138

Beet molasses (tons):
Produced		95,572		87,647		99,349		130,878		79,599
Sold		70,739		61,240		87,803		88,652		47,007
Used for Yeast Subsidiary Production		28,494		23,531		25,307		31,513		21,821

Yeast (pounds, in thousands):
Produced		38,774		35,975		37,436		39,248		34,787
Sold		38,805		36,071		37,436		39,152		34,670

(1) Net Proceeds are the Company’s gross revenues, less the costs and expenses of producing, purchasing and marketing sugar, sugar co-products, and yeast, but before payments to members for sugarbeets. (For a more complete description of the calculation of Net Proceeds, see “Description of Business-Growers’ Agreements”.)

(2) Members’ investment includes preferred and common stock, unit retention capital, allocated patronage and retained earnings.

(3) Calculated by dividing the Company’s long-term debt, exclusive of the current maturities of such debt, by equity.

(4) Computed by dividing (i) the sum of Net Proceeds plus fixed charges, plus amortization of capitalized interest by (ii) the sum of interest expense and interest capitalized. The Company does lease certain items, such as some office equipment. Due to the proportionately small amounts involved, an interest factor on lease payments has not been included in the total of the Company’s fixed charges or the calculation of this ratio. See Exhibit 12.

(5) Information for a fiscal year relates to the crop planted and harvested in the preceding calendar year (e.g., information for the fiscal year ended August 31, 2010, relates to the 2009 crop).

(6) Reflects the total amount paid in cash and allocated to individual grower equity accounts for each ton of sugarbeets delivered.


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

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Company’s financial statements and notes included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. The Company’s actual future results may differ materially from those anticipated in the forward-looking statements contained in this section; such differences could arise as a result of a variety of factors including, but not limited to, the market and regulatory factors described elsewhere in this Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Preparation of the Company’s consolidated financial statements requires estimates and judgments to be made that affect the amounts of assets, liabilities, revenues and expenses reported. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. Management continually evaluates these estimates based on historical experience and other assumptions it believes to be reasonable under the circumstances.

The difficulty in applying these policies arises from the assumptions, estimates and judgments that have to be made currently about matters that are inherently uncertain, such as future economic conditions, operating results and valuations as well as management intentions. As the difficulty of the assumptions, estimates and judgments increases, the level of precision decreases, meaning that actual results could be different from those currently estimated.

Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made, and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. The Company’s critical accounting estimates include the following:

Subsidiaries

Subsidiaries that are controlled by the Company are consolidated in the Company’s financial statements. The Company has created and capitalized a wholly owned subsidiary called Link Acquisition Company LLC on December 18, 2008, which was formed to advance possible strategic business activities by the Company.

Inventory Valuation

Inventories of refined sugar, sugar thick juice and pulp and molasses to be sold on a pooled basis are valued at net realizable value, while third-party purchased refined sugar to be sold on a pooled basis is valued at the lower of cost or market. Inventory of yeast is valued at the lower of average cost or market. Materials and supplies are valued at most recent purchase price that approximates cost. During the periods when sugarbeets are purchased from growers, but not yet converted into granulated sugar or sugar thick juice, that inventory is valued at grower payment cost. In valuing inventories at net realizable value, the Company, in effect sells the remaining inventory to the subsequent periods sugar and co-product pool. The Company derives its estimates from sales contracts, recent sales and evaluations of market conditions and trends. Changes in market conditions may cause estimates to differ from actual results.

Property and Equipment, Property and Equipment Held for Lease, and Depreciation

Property and equipment, and property and equipment held for lease are depreciated for financial reporting purposes principally using straight-line methods with estimated useful lives ranging from 3 to 40 years. Economic circumstances or other factors may cause management’s estimates of expected useful lives to differ from actual.

The Company reviews its property and equipment, and property and equipment held for lease for impairment whenever events indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recorded when the sum of the future cash flows is less than the carrying amount of the asset. An impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. There were no impairment losses incurred during the fiscal years covered by this report. However, considerable management judgment is necessary to estimate future cash flows, which may differ from actual results.

Defined Benefit Pension Plan

The Company maintains and administers a non-contributory defined benefit pension plan. The annual cost of this plan can be significantly affected by changes in assumptions and differences between expected and actual experience. The Company utilizes actuarial methods required by FASB ASC 715, “Employers’ Accounting for Pensions,” to account for its defined benefit pension plan. The actuarial methods require numerous assumptions to calculate the net periodic pension benefit expense and the related projected benefit obligations for our defined benefit pension plan. Three of the most significant assumptions are the discount rates, expected long-term rate of return on plan assets and rate of total compensation increase. In making these assumptions, the Company is required to consider current market conditions, including changes in interest assumptions.

Income Taxes

The Company is a nonexempt cooperative as described under Section 1381(a)(2) of the Internal Revenue Code of 1986. Accordingly, net margins from business done with member patrons, which are allocated and distributed as prescribed in Section 1382 of the Code, will be taxable to the members and not to the Company. To the extent that net margins are not allocated and paid as stated above or arise from non-patronage business, the Company shall have taxable income subject to corporate income tax rates.

Determining the consolidated provision for income tax expense, income tax liabilities and deferred tax assets and liabilities involves judgment. The Company calculates income taxes in each of the tax jurisdictions in which it operates. This involves estimating current tax liability in each jurisdiction as well as making judgments regarding the valuation of deferred tax assets. Tax liabilities can involve complex issues and may require an extended period to resolve.

On September 1, 2007 The Company adopted the provisions of FASB ASC 740-10, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109”. FASB ASC 740-10 prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in an income tax return. FASB ASC 740-10 requires that the company determine whether the benefits of tax positions are more likely than not of being sustained upon audit based upon the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is more likely than not of being sustained in our financial statements. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit in its financial statements.

The Company has no outstanding uncertain income tax positions as of November 24, 2010.

Fair Value Measurements

Investments - - The investments in CoBank, Dakota Valley Electric Cooperative, Inc. and all other cooperatives are stated at cost, plus the cooperative’s share of allocated patronage and capital credits. The investments in United Sugars Corporation and Midwest Agri-Commodities are accounted for using the equity method, wherein the investments are recorded at the amount of the underlying equity in the net assets of the investments and adjusted to recognize the cooperative’s share of the undistributed earnings or losses. The Company believes it is not practicable to estimate the fair value without incurring excessive costs because there is no established market for this stock and it is inappropriate to estimate future cash flows, which are largely dependent on future patronage earnings of the investment.

Long-term debt and bonds payable - The fair value of obligations under long-term debt and bonds payable are estimated based on the quoted market prices for similar issues or on the current rates offered for debt of similar maturities. The carrying amount on the financial statements approximates fair market value.

Pension assets – The fair value of pension assets involve all Level 1 inputs.

Accumulated Other Comprehensive Income (Loss)

The Company accounts for Other Comprehensive Income(Loss) using activities from the Company as well as its pro-rata share of activity from its marketing subsidiaries.

Deferred Costs and Product Values

The Company defers the economic costs and benefits to the following fiscal year if they are associated with the crop accounted for in that fiscal year. This matching principle is consistently applied from year to year.

LIQUIDITY AND CAPITAL RESOURCES

Because the Company operates as a cooperative, payment for member-delivered sugarbeets, the principal raw material used in producing the sugar and co-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 sugarbeet crops to the Company and are net of unit retains and patronage allocated to them, both of which remain available to meet the Company’s capital requirements. This member financing arrangement may result in an additional source of liquidity and reduced outside financing requirements in comparison to a similar business operated on a non-cooperative basis. However, because sugar is sold throughout the year (while sugarbeets are processed primarily between September and April) and because substantial amounts of equipment are required for its operations, the Company has utilized substantial outside financing on both a seasonal and long-term basis to fund such operations. The short and long-term financing has been primarily provided by CoBank (the “Bank”). As of August 31, 2010, the Company had a seasonal line of credit totaling $45.0 million through December 31, 2010, of which $17.4 million was available as of August 31, 2010. The Company also has available the USDA Sugar Loan Provisions contained in the 2008 Farm Bill to provide an additional source of seasonal financing for the current and future crops. On November 15, 2010, the Company and its Bank agreed to a new seasonal line of credit totaling $85.0 million through May 31, 2011, then reduced to $45.0 million through December 31, 2011. The significant increase in the seasonal line of credit was directly related to the increased anticipated grower payments for the 2010-crop.

The loan agreements between the Bank and the Company obligate the company to maintain, “in accordance with GAAP”, the following financial covenants:


•	Maintain a current ratio of no less than 1.10 for the first quarter of a fiscal year and 1.15 for all other quarter and fiscal year ends;
•	Maintain a long-term debt and capitalized leases to equity ratio of not greater than .8:1;
•	Maintain available cash flow to current long-term debt ratio as defined in the agreement of not less than 1.25:1.

As of August 31, 2010 the Company was in compliance with its loan agreement covenants with the Bank.

Net Cash provided by operations totaled $8.2 million for the year ended August 31, 2010, compared to $12.3 million for the previous year. This decrease of $4.1 million was primarily due to the following changes:


Income allocated to member investment	$	1.1	million
Accumulated other comprehensive loss		1.9
Depreciation and Amortization		0.8
Non-cash portion of capital credits		1.0
Inventory and Prepaid Expenses		(6.4	)
Deferred charges		(3.0	)
All other factors		0.5

Total	$	4.1

The net cash used in investing activities totaled $7.7 million for the year ended August 31, 2010, compared to $7.2 million for the previous year. The increase of $0.5 million was primarily due to a $1.1 million increase in capital adjustments to unconsolidated marketing cooperatives, caused by FASB ASC 220 activities, offset by $0.8 million in reduced capital expenditures and $0.2 million from other factors.

The net cash used in financing activities totaled $0.5 million for the year ended August 31, 2010 compared to $5.2 million for the previous year. This decrease of $4.7 million was primarily due to a $14.0 million increase in short term debt obligations offset by a $10.0 million difference in additional long-term debt, all other factors totaling $0.7 million.

The Company anticipates that the funds necessary for working capital requirements and future capital expenditures will be derived from operations, short-term borrowings, depreciation, patronage and long-term borrowings. On November 15, 2010, the Company obtained a new seasonal line of credit necessary for the large 2010 crop.

Working capital increased $0.3 million for fiscal year 2010. The Company funds its capital expenditure and debt retirement needs primarily from operating activities. As of August 31, 2010 the Company had approximately 6 years of long-term debt remaining with the Bank and it has two tax exempt bond issues with single payment requirements, one for $12.4 million due February 1, 2023 and one for $7.0 million due February 1, 2025.

Capital expenditures for the years ended August 31, 2010, 2009 and 2008 totaled $8.0 million, $8.8 million, and $8.0 million respectively. The Company’s purchase of equipment by issuance of capital lease debt for the years ended August 31, 2010, 2009, and 2008 totaled $0.4 million $2.4 million and $0.7 million respectively.

Capital expenditures for fiscal year 2011 have been approved at $19.2 million. The Company has secured the right, but not the obligation to obtain $8.8 million of additional tax exempt bonds to finance additional capital expenditures. The capital expenditures are for normal efficiency, improved beet storage, improved rail facilities, safety and replacement activities. Failure by the Company to make capital expenditures over a period of years would result in the Company being less competitive due to its failure to reduce costs, increase operating efficiencies or increase revenues.

The Bonds are secured by a letter of Credit from the Bank. The letter of credit is ultimately secured by the plant and property of the Company’s facility at Wahpeton, ND.

Payments Due by Period


Contractual Obligations (in millions)	Total		Less Than 1 Year		1 – 3 Years		4 –5 Years		After 5 Years
Long-Term Debt	$	19.1	$	2.5	$	10.0	$	6.6	$	0.0
Bonds Payable		19.2		0.0		0.0		0.0		19.2
Capital Leases		2.6		0.5		1.4		0.7		0.0
Unconditional Purchase Obligations		4.8		1.6		3.2		0.0		0.0
Other Long-Term Obligations - Pension		19.6		1.8		5.4		3.6		8.8
Total Long Term Obligations	$	65.3	$	6.4	$	20.0	$	10.9	$	28.0
Interest on Long Term Debt & Bond		10.9		1.1		2.8		1.6		5.4
Operating Leases		0.2		0.1		0.1		0.0		0.0
Total Contractual Obligations	$	76.4	$	7.6	$	22.9	$	12.5	$	33.4

The Company is not aware of any known trends, demands, commitments, events or uncertainties that will likely result in the Company’s liquidity increasing or decreasing materially.

Other than those items described above, the Company is not aware of any known material trends, either favorable or unfavorable, that would cause the mix of equity to debt or the cost of debt to materially change.

RESULTS OF OPERATIONS

Comparison of the years ended August 31, 2010 and 2009

Net payments to members for sugarbeets delivered by the shareholder/growers, increased by $3.1 million or 3 percent in fiscal year 2010 and totaled $95.1 million. As of August 31, 2010, the Board of Directors authorized the payment of prior years’ member patronage and per unit retains (including equity payments to estates of deceased shareholders) totaling $4.0 million to shareholders compared to $3.7 million in the previous year. The payment of $4.0 million will leave approximately 4.7 years of prior years’ patronage and per unit retains withheld, the same as the prior year.

Revenues for the year ended August 31, 2010 were comprised of Sugar 81 percent, Pulp 7 percent, Yeast 7 percent and Molasses 5 percent.

Consolidated revenue for the year ended August 31, 2010, decreased $10.7 million or 4.8 percent from 2009. Revenue from total sugar sales decreased $7.3 million or 4.0 percent reflecting a 13.9 percent decrease in cwt. sold, and a 9.9 percent increase in the average net selling price per cwt. Revenue from pulp decreased $2.1 million or 10.6 percent reflecting a 36.5 percent decrease in the average net selling price per ton and a 25.9 percent increase in tons sold. Revenue from molasses sales increased $2.2 million or 21.8 percent reflecting a 6.3 percent increase in the average net selling price per ton and a 15.5 percent increase in tons sold. The decrease in volume of sugar sold is attributable a slightly larger 2009 crop, offset by fewer outside purchased sugarbeets and the addition of tolling of sugarbeets (rather than purchase) for another processor, when compared to the 2008 crop of sugarbeets delivered by shareholder/growers. The increase in volume of co-products sold is attributable to a slightly larger 2009 crop and the addition of tolling of sugarbeets for another processor (co-products were included in the pricing structure of the transaction), offset some by fewer outside purchased sugarbeets.

Revenues from yeast sales increased $1.6 million or 11.4 percent reflecting an increase in volume of 7.6 percent, and an increase in the average net selling price of 3.8 percent. Sales volume increased due to existing customers’ increased demand for yeast. Selling prices increased due to general market conditions.

The value of finished product inventories in fiscal year 2010 decreased $6.5 million from fiscal year 2009, $5.1 million more than the prior year decrease, mostly the result of a decrease in the volume of ending sugar inventory. Sugar inventory was lower due to a high demand of available sugar in the domestic marketplace.

Expenses decreased $10.5 million; $10.2 million due to a decrease in the cost of purchased sugarbeets, $2.9 million due to reduced Sales and Distribution Costs, offset by $2.5 million in increased costs of operations. Higher than normal harvest tare (mostly dirt) was a significant contributor to the higher costs of operations. Overall consolidated expenses, exclusive of grower payments for sugarbeets and cost of non-member purchased sugarbeets, decreased $0.3 million or less than one percent. Minn-Dak Farmers Cooperative (MDFC) expenses decreased $0.4 million, while Minn-Dak Yeast Company (MDYC) expenses, after eliminations, increased $0.1 million.

The production cost per cwt. of sugar produced increased 8 percent versus the prior year due to a combination of a 4 percent decrease in sugar produced with less than a 1 percent decrease in total costs.

Sales and Distribution costs decreased $2.9 million or 7 percent. Decreases are mainly the result of the reduction in the production and sale of finished goods from purchased and tolled sugarbeets. General and Administrative expenses increased less than $0.1 million or less than 1 percent. Interest expense decreased less than $0.1 million or 2 percent, reflecting a decreased rate of interest and a lower level of term bank debt; offset some by higher levels of seasonal debt and tax exempt bond debt financing.

Other business income before income taxes increased $5.3 million in fiscal year 2010 due primarily to revenue generated for tolling another sugar processor’s sugarbeets. Income taxes in fiscal year 2010 were a direct result of the tolling business activity.

Comparison of the years ended August 31, 2009 and 2008

Net payments to members for sugarbeets delivered by the shareholder/growers, decreased by $11.0 million or 11 percent in fiscal year 2009 and totaled $92.0 million. As of August 31, 2009, the Board of Directors authorized the payment of prior years’ member patronage and per unit retains (including equity payments to estates of deceased shareholders) totaling $3.7 million to shareholders compared to $4.4 million in the previous year. The payment of $3.7 million will leave approximately 4.7 years of prior years’ patronage and per unit retains withheld versus the prior year of 4.5 years withheld.

Revenues for the year ended August 31, 2009 were comprised of Sugar 79 percent, Pulp 10 percent, Yeast 6 percent and Molasses 5 percent.

Consolidated revenue for the year ended August 31, 2009, decreased $18.5 million or 7.6 percent from 2008. Revenue from total sugar sales decreased $23.0 million or 11.1 percent reflecting a 17.6 percent decrease in cwt. sold, and a 6.5 percent increase in the average net selling price per cwt. Revenue from pulp increased $2.5 million or 14.5 percent reflecting a 38.1 percent increase in the average net selling price per ton and a 23.6 percent decrease in tons. Revenue from molasses sales decreased $1.6 million or 13.9 percent reflecting a 16.3 percent increase in the average net selling price per ton and a 30.2 percent decrease in tons sold. The decrease in volume of sugar and co-products sold from the 2008-crop is attributable to the smaller crop size, including purchased beets from a neighboring sugarbeet cooperative, and quality when compared to the 2007 crop of beets delivered by shareholder/growers.

Revenues from yeast sales increased 4.0 percent reflecting a decrease in volume of 3.6 percent, and an increase in the average net selling price of 7.6 percent. Selling prices increased due to a reflection of higher costs in the industry, which was passed on to the customers.

The value of finished product inventories in fiscal year 2009 decreased $1.4 million from fiscal year 2008, mostly the result of a decrease in the volume of ending sugar inventory. Sugar inventory was lower due to a high demand of available sugar in the domestic marketplace.

Of the $5.4 million decrease in the MDFC expenses, the cost of operations increased $1.2 million, or 2 percent due to a smaller volume of sugarbeets processed in a higher cost environment vs. the 2007-crop.

Expenses, exclusive of grower payments for sugarbeets and cost of non-member purchased beets, decreased $5.4 million or 2 percent. Minn-Dak Farmers Cooperative (MDFC) expenses decreased $5.5 million, while Minn-Dak Yeast Company expenses, after eliminations, increased $0.1 million.

The production cost per cwt. of sugar produced increased 30 percent versus the prior year due to a combination of a 22 percent decrease in sugar produced with only a corresponding 4 percent decrease in total costs.

Sales and Distribution costs decreased $5.4 million or 11 percent. Decreases are mainly the result of the reduction in the production and sale of finished goods from the smaller sugarbeet crop. General and Administrative expenses decreased $0.2 million or 3 percent. Employee costs were the primary reasons for the decrease. Interest expense decreased $1.2 million or 37 percent, reflecting a lower level of seasonal debt and a decreased rate of interest, offset some by a higher level of term debt.

Other business income before income taxes increased $1.1 million in fiscal year 2009 due primarily to a combination of the settlement of a lawsuit and the gain on sale of equipment. Income taxes decreased by $1.7 million in fiscal year 2009 vs. fiscal year 2008. Income taxes in fiscal year 2008 were a direct result of the purchase of non-member sugarbeets from a neighboring sugarbeet processor.

Comparison of the years ended August 31, 2008 and 2007

Net payments to members for sugarbeets delivered by the shareholder/growers, decreased by $37.6 million or 27 percent in fiscal year 2008 and totaled $103.0 million. As of August 31, 2008, the board of directors authorized payment to shareholders for prior years’ member patronage and per unit retains (including equity payments to estates of deceased shareholders) totaling $4.4 million compared to $6.0 million in the previous year. The payment of $4.4 million will leave approximately 4.5 years of prior years’ patronage and per unit retains still outstanding – the same as the prior year.

Revenues for the year ended August 31, 2008 were comprised of Sugar 83 percent, Pulp 7 percent, Yeast 6 percent and Molasses 4 percent.

Consolidated revenue for the year ended August 31, 2008, decreased 12.6 percent or $35.0 million from 2007. Revenue from total sugar sales decreased $16.0 million or 7.2 percent, reflecting a 2.8 percent decrease in cwt. sold and a 4.4 percent decrease in the average net selling price per cwt. Revenue from co-products decreased 7.8 percent, reflecting a decrease of 19.4 percent in volume and an 11.6 percent increase in the average selling price per ton. The decrease in volume of sugar and co-products sold from the 2007-crop is attributable to the smaller crop size, including the non-member purchased beets; with reduced production of sugar being offset slightly by higher quality sugarbeets processed.

Revenues from yeast sales increased 2 percent reflecting a decrease in volume of 4.4 percent, and an increase in the average net selling price of 6.4 percent. Increased selling prices were necessary to help defray a portion of substantial increases in operating materials and shipping costs experienced in the production and sale of yeast.

The value of finished product inventories in fiscal year 2008 decreased $4.4 million from fiscal year 2007, mostly the result of a decrease in the volume of ending sugar inventory. Sugar inventory was lower due to the timing of contract off-take from customers.

All expenses, exclusive of grower payments for sugarbeets and cost of non-member purchased beets, decreased $4.9 million or 4 percent. Minn-Dak Farmers Cooperative (MDFC) expenses decreased $5.4 million, while Minn-Dak Yeast Company expenses, after eliminations, increased $0.5 million.

The cost per cwt. of sugar produced increased 9 percent versus the prior year due to factory maintenance costs being higher than normal in the areas of solid waste disposal and the lime kiln, and fixed costs on a per unit basis exceeding that of the prior year due to the record crop processed in fiscal year 2007.

Of the $5.4 million decrease in the MDFC expenses, the cost of operations decreased $2.5 million, or 4 percent due to the smaller volume of sugarbeets processed versus the record 2006-crop, including the record length of the 2006-crop processing period.

Sales and Distribution costs decreased $1.8 million or 4 percent. Decreases are mainly the result of the reduction in the production and sale of finished goods from the smaller sugarbeet crop and reduced cost of sugar marketing allocations. Sugar marketing allocation costs decreased $3.4 million, or 54 percent due to the smaller amount of allocation needed for the marketing of the 2007 crop versus the record volume 2006 crop. General and Administrative expenses increased $0.2 million or 2 percent. Employee costs and professional fees were the primary reasons for the increase. Interest expense decreased $1.1 million reflecting a lower average level of seasonal and term debt and a decreased rate of interest.

Other business income before income taxes increased $0.1 million due primarily to a combination of prior period activities, offset by higher losses on the disposal of equipment. Income taxes increased $1.5 million due mainly to increased non-member income.

Estimated Fiscal Year 2011 Information

This discussion contains a summary of the Company’s current estimates of the financial results to be obtained from the Company’s processing of the 2010 sugarbeet crop. Given the nature of the estimates required in connection with the payments to members for their sugarbeets, this discussion includes forward-looking statements regarding the quantity of sugar to be produced from the 2010 sugarbeet crop, the net selling price for the sugar and co-products produced by the Company and the Company’s operating costs. These forward-looking statements are based largely upon the Company’s expectations and estimates of future events; as a result, they are subject to a variety of risks and uncertainties. Some of those estimates, such as the selling price for the Company’s products, the quantity of sugar produced from the sugarbeet crop, changes in plant production efficiencies and sugarbeet storage conditions are beyond the Company’s control. The actual results experienced by the Company could differ materially from the forward-looking statements contained herein.


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company for the fiscal years ended August 31, 2010, 2009 and 2008 have been audited by Eide Bailly LLP, independent registered public accounting firm. Such consolidated financial statements have been included herein in reliance upon the report of Eide Bailly LLP. The consolidated financial statements of the Company are included in Appendix A to this annual report.


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

There have been no changes in or disagreements with accountants on accounting and financial disclosure.


ITEM 9A.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer, David H. Roche, and the Company’s Chief Financial Officer, Steven M. Caspers, have evaluated the Company’s disclosure controls and procedures as of August 31, 2010. Based upon such evaluation, they have concluded that these disclosure controls and procedures are effective. The Company’s Chief Executive Officer and Chief Financial Officer used the definition of “disclosure controls and procedures” as set forth in Rule 15d-15(e) under the Exchange Act in making their conclusion as to the effectiveness of such controls and procedures.

Management’s Annual Report on Internal Control over Financial Reporting.


	(a)	Management’s Annual Report on Internal Control over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting; as such term is defined in Rules 13a-15(f) and 15d – 15(f) of the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


	•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

	•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that its receipts and expenditures are being made only in accordance with authorizations of Management and the Company’s directors; and

	•	Provide reasonable assurance regarding prevention and timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements.


		Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems that are deemed to be effective provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

		Under the supervision and with the participation of its Management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Company’s management concluded that its internal control over financial reporting is effective as of August 31, 2010.

	(b)	*Attestation.* Management’s report is not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this annual report.

Changes in Internal Control over Financial Reporting.

There was no change in the Company’s internal control over financial reporting during the fiscal quarter ended August 31, 2010 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.


ITEM 9B.	OTHER INFORMATION

None

PART III


ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE

GOVERNANCE

BOARD OF DIRECTORS

The table below lists the current directors of Minn-Dak Farmers Cooperative. The board of directors consists of one director from each district. Directors must be common shareholders or representatives of common shareholders belonging to the district they represent and are elected by the members of that district. In the case of a common shareholder who is other than a natural person, a duly appointed or elected representative of such common shareholder may serve as a director. The directors have been elected to serve three-year terms expiring in December of the years indicated in the table below. One director is elected each year from three selected districts. Brief biographies for each of the directors are included after the table. Each person’s experience, qualifications, attributes or skills to serve as a director are evaluated by the Nominating Committee for each district. The Nominating Committee members are selected by the shareholders of each district. Minn-Dak provides each Nominating Committee with written guidelines relating to the legal requirements relating to service on the Board, but does not evaluate or otherwise consider the experience, qualifications, attributes or skills of any nominee and does not otherwise have a role in the Nominating Committees’ processes for selecting nominees.


Name	Age	District	Director Since	Term Expires in December
Dale Blume	60	District #7 – Lehman	2005	2011

Dennis Butenhoff	64	District #9 – Peet	2004	2010 (1)

Brent Davison	59	District #5 – Hawes	2003	2011

Douglas Etten	59	District #8 – Lyngaas	1997	2012

Patrick Freese	51	District #4 – Factory East	2008	2011

Dennis Klosterman	50	District #3 – Gorder	2004	2010 (2)

Kevin Kutzer	57	District #1 – Tyler	2009	2012

Russell Mauch	55	District #2 – Factory West	1998	2010 (3)

Chuck Steiner	60	District #6 – Yaggie	2000	2012


1)	Mr. Butenhoff’s term as a director of the Company from District #9-Peet expires on December 7, 2010.
2)	Mr. Klosterman’s term as a director of the Company from District #3-Gorder expires on December 7, 2010.
3)	Mr. Mauch’s term as a director of the Company from District #2-Factory West expires on December 7, 2010.

Dale Blume has been a director since 2005 and also serves on the board of directors for Minn-Dak Yeast Company. He graduated from the NDSU with a degree in Ag Economics in 1973. He began farming in 1971 and continues to be actively farming today. Mr. Blume is one of Minn-Dak Farmers Cooperative’s original stockholders. Mr. Blume is a member of the Delaware Township Board, and is a director at the First State Bank in Kensington, MN. He is also the co-chairman of the administrative council and on the financial committee of the United Methodist Church in Herman. He also serves on the board of directors of Minn-Dak Yeast Company.

Dennis Butenhoff has been a director since 2004 and serves on the board of directors of Minn-Dak Yeast Company and Midwest Agri-Commodities. Mr. Butenhoff graduated from Barnesville High School, Barnesville, MN in 1965. Prior to serving his country in the military, Mr. Butenhoff attended North Dakota State University for 4 years, focusing on ag economics. He has been farming in the Baker/Barnesville area since 1967. Mr. Butenhoff has served Trinity Lutheran Church as a Sunday school teacher and church elder.

Brent Davison has been a director since 2003 and currently serves as the board vice chairman. Mr. Davison earned his B.S. degree in Education at Concordia University, Moorhead, MN, graduating in 1972. Mr. Davison taught school in Warren, MN from 1972 until coming home to farm near Tintah, Minnesota area in 1974. He is currently serving on the Tintah Township Board and is a former volunteer fireman and first responder. Mr. Davison is also one of Minn-Dak’s representatives to the American Sugarbeet Growers Association in Washington, DC and serves on the board of directors for United Sugars Corporation.

Douglas Etten has been a director since 1997 and currently serves as the board chairman. Mr. Etten has been farming near Foxhome, MN since graduating from Concordia College in Business and Math in 1974. He is also one of Minn-Dak’s representatives to the American Sugarbeet Growers Association in Washington, DC. He also serves on the board of directors of Minn-Dak Yeast Company, United Sugars Corporation, and Midwest Agri-Commodities Company.

Patrick Freese graduated Breckenridge High School in 1977 and North Dakota College of Science in 1979. From 1979 to 1985 Mr. Freese worked as a sales coordinator for Chief Industries in Grand Island, NE. Mr. Freese has been farming near Kent, MN since 1985. Mr. Freese has, and continues to, serve his community and church in several areas. He was a member and chairman of the Minn-Dak Farmers Cooperative Political Action Committee. Mr. Freese is a member of various farm and commodity organizations.

Dennis Klosterman has been a director since 2004. Mr. Klosterman graduated from Wahpeton High School in Wahpeton, ND in 1978. He began farming with his father and brother in the Mooreton, ND area in 1979 while attending North Dakota State College of Science and North Dakota State University. Mr. Klosterman has, and continues to, serve his community and church in several areas. He was a member and chairman of the Minn-Dak Farmers Cooperative Political Action Committee. Mr. Klosterman is a member of various farm and commodity organizations. He also serves on the board of directors for Minn-Dak Yeast Company.

Kevin Kutzer grew up in a family farming operation and continues that tradition in a family joint venture operation with brother Kyle and son Corey raising wheat, soybeans, sugarbeets, and corn in the Fairmount, ND. Mr. Kutzer received an Associate Degree in Pre Engineering at the North Dakota State College of Science in Wahpeton, ND and a B.S. in Mechanized Agriculture at North Dakota State University in Fargo, ND. Mr. Kutzer has served on the boards of the Lamars Co-op Elevator and AgCountry Farm Credit Services. He has served on the St. Anthony’s Church Council and Cemetery Board.

Russell Mauch has been a director since 1998 and currently serves as board treasurer. Mr. Mauch graduated from North Dakota State University in 1977 with a BS in agriculture. From 1979 to 1981 Mr. Mauch was a commercial and agriculture loan officer for First Bank Corporation in Valley City, ND. Mr. Mauch has been farming near Barney, ND since 1981. Mr. Mauch also serves on the board of directors for United Sugars Corporation and as one of Minn-Dak’s representatives to the American Sugarbeet Growers Association in Washington, DC.

Charles Steiner has been a director since 2000 and currently serves as the board secretary. Mr. Steiner has been farming near Foxhome, MN since 1969. Mr. Steiner graduated from the Northwest School of Agriculture, University of Minnesota at Crookston, MN. Mr. Steiner serves as the ex-officio member on the board of directors for United Sugars Company.

The Board of Directors meets monthly. The Company provides its directors with minimal compensation, consisting of (i) a payment of $290 per meeting for regular and special board meetings, (ii) the greater (a) $145 for any day in which directors partake in activities on the Company’s behalf that take less than five hours or (b) $290 for any day in which directors partake in activities on the Company’s behalf that take five hours or more. The Chairman of the Board of Directors also receives a flat $500 per month to compensate for the extra duties associated with that position. The Board of Directors has adjusted compensation effective October 1, 2010. Effective on that date the board will receive reimbursement in the amount of $290/day for any amount of time spent on board business, effectively doing away with a half day per diem. In addition the board added a conference call compensation rate in the amount of $145 and increased the Chairman’s monthly stipend to $750/month. Effective Jan. 1, 2011, the director’s monthly per diem rate will be increase to $300/day and $150 for conference calls. Effective Jan. 1, 2012 and each year thereafter, the directors monthly per diem will increase by $25 and the conference call rate will continue to be paid at half of the daily per diem amount.

Information about Committees of the Board of Directors

The Board of Directors has established a Compensation Committee, an Audit Committee and a Nominating Committee. The composition and function of these committees are set forth below

Compensation Committee. The Compensation Committee operates under a written charter and discharges the Board’s responsibilities relating to the fair and competitive compensation for the Chief Executive Officer, including reviewing and approving goals and objectives relating to the compensation of the Chief Executive Officer and the performance of the Chief Executive Officer. Based on its review, the Compensation Committee makes recommendations to the Board of Directors regarding the elements of the Chief Executive Officer’s compensation and the Compensation Committee, along with the Board of Directors, approves the compensation and other benefits of the Chief Executive Officer. A copy of the current charter of the Compensation Committee is available by following the link to “Corporate Governance” on the Company’s website at www.mdf.coop During 2010, the members of the Compensation Committee are Messrs. Charles Steiner (Chair), Dale Blume, Dennis Klosterman, Brent Davison and Dennis Butenhoff.

Nominating Committee. Shareholders from each district select two shareholders to serve as a Nominating Committee for that district. The Nominating Committee for each district is responsible for facilitating nominations for the position of director by shareholders of that district and evaluating whether shareholder proposed nominees are qualified candidates. Each Nominating Committee operates under a series of written guidelines relating to the legal requirements for the Company’s directors, qualifications of nominees, and process for soliciting shareholder nominees. During 2010, the members of the Nominating Committee were Messrs. Bradley Nelson (Chair), Blaine Benedict, Andy Mauch, Luke Mauch, Jeff Erbes and Jeff Olson. In fiscal 2010, there have not been any material changes to the procedures by which shareholders may recommend nominees to the Company’s Board of Directors.

Audit Committee. The Audit Committee assists the Board in fulfilling its responsibility relating to corporate accounting and reporting practices of the Company, the quality and integrity of financial reports, the financial reporting processes, the system of internal controls; the qualifications, independence and performance of the independent auditors; and compliance by the Company with certain legal and regulatory requirements. The Audit Committee has the authority to retain, compensate, oversee and terminate the independent auditors. The Audit Committee reviews the Company annual audited financial statements, quarterly financial statements and filings with the Securities and Exchange Commission. The Audit Committee also pre-approves all audit and non-audit services performed by the independent auditor. The Audit Committee operates under a written charter that is available by following the link to “Corporate Governance” on the Company’s website at www.mdf.coop. During 2010, the Audit Committee consisted of Messrs. Russ Mauch (Chair), Dale Blume, Dennis Butenhoff, Dennis Klosterman and Kevin Kutzer.

The Board of Directors has reviewed the education, experience and other qualifications of each of the members of its Audit Committee. After review, the Board of Directors has determined that none of the members of the Audit Committee meet the Securities and Exchange Commission definition of an “audit committee financial expert.” However, the Company believes that, taken as a whole, the members of the Audit Committee have sufficient education, experience and qualifications to carry out their duties.

Executive Officers

The table below lists the executive officers (Messrs. Roche, Caspers, Knudsen, Haugen and Larson) and other senior management employees of the Company, none of whom owns any common or preferred shares. Brief biographies for each of the officers are included after the table.


Name	Age	Position
David H. Roche	63	President and Chief Executive Officer

Steven M. Caspers	60	Executive Vice President and Chief Financial Officer

Thomas D. Knudsen	56	Vice President Agriculture

Parker Thilmony	40	Director of Operations

John Haugen	58	Vice President Engineering

Allen Larson	55	Controller and Chief Accounting Officer

Greg Schmalz	59	Director Human Resources

David H. Roche is Minn-Dak Farmers Cooperative’s third president and CEO. He joined the Wahpeton, ND based sugar cooperative on March 1, 2001. He serves on the boards of United Sugars Corporation and Midwest Agri-Commodities. Mr. Roche is chairman of the board for Minn-Dak Yeast Company. In addition, he is a trustee of the United States Beet Sugar Association, and a member of the board of directors of The Sugar Association, Washington, D.C. Mr. Roche began his sugar industry career as a controller for Michigan Sugar Company in 1976. He progressed through the ranks until he was named president in 1994. In 1996 he became president of Savannah Foods Industrial and was appointed senior vice president of Savannah Foods & Industries. Imperial Sugar Company acquired controlling interest in Savannah in 1998. He was named as a managing director and senior vice president. Mr. Roche holds an MBA in Accounting from Michigan State University and became a Certified Public Accountant in 1974.

Steven M. Caspers is a graduate of the University of North Dakota with a Bachelor of Science in Business Administration and a major in Accounting. He has been employed with the Company since May 5, 1974. Mr. Caspers is president of Minn-Dak Yeast Company. He is active in national industry related boards and committees.

Thomas D. Knudsen is a graduate of North Dakota State University with a Bachelor of Science in horticulture and has attended the Beet Sugar Institute at Fort Collins, Colorado. He began employment with the Company on May 24, 1977.

Parker Thilmony is a graduate of the University of North Dakota, with a BS in Mechanical Engineering. He started his career with the Company on February 5^th, 1995 as an Assistant Engineer. Mr. Thilmony was promoted to the position of Director of Operations on May 12^th, 2010. Prior to this promotion he held the position of Senior Engineer.

John R. Haugen was promoted to the position of Director of Engineering on November 2, 2001 and to Vice President Engineering on August 1, 2002. He started his career with Minn-Dak Farmers Cooperative in 1976 as an Assistant Engineer and prior to this promotion held the position of Senior Engineer. Mr. Haugen is a graduate of the University of North Dakota and holds a BS in Mechanical Engineering.

Allen E. Larson is a graduate of Moorhead State University with a Bachelor of Science in Business Administration and a major in Accounting. He has been employed with the Company since October 26, 1981.

Greg J. Schmalz is a graduate of the University of North Dakota, Grand Forks, with a Bachelor of Arts Degree in Sociology and a Masters Degree in Guidance and Counseling. Mr. Schmalz is a member of the Society of Human Resources Management and the Agassiz Valley Human Resources Association. He began his career in human resources in 1979. He has been employed with the Company since August 30, 2004.

Code of Ethics for Executive Officers

The Company has adopted a code of ethics that applies to all directors, officers and employees, including its principal executive officer, principal financial officer and controller. This code of ethics is included in its Standards of Business Conduct which is publicly available by following the link to “Corporate Governance” at its website at www.mdf.coop.

The Company intends to satisfy the disclosure requirements of the Securities and Exchange Commission regarding certain amendments to, or waivers from, provisions of its code of ethics that apply to the Company’s principal executive officer, principal financial officer and principal accounting officer or controller by posting such information on the Company’s website at www.mdf.coop.


ITEM 11.	EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion and analysis describes the Company’s compensation objectives and policies as applied to the following executive officers who are referred to in this Annual Report on Form 10-K as the Named Executive Officers:


	•	David H. Roche, President and Chief Executive Officer;
	•	Steven M. Caspers, Executive Vice President and Chief Financial Officer;
	•	Tom Knudsen, Vice President Agriculture
	•	Allen Larson, Controller; and
	•	Jeffrey L. Carlson, Vice President Operations for a portion of fiscal year 2010 until May 12, 2010.

This section is intended to provide a framework within which to understand the actual compensation awarded to or earned by the Named Executive Officers during the year ended August 31, 2010, as reported in the compensation tables and accompanying narrative sections appearing on pages 35 to 41 of this Annual Report on Form 10-K.

Role of the Compensation Committee in Determining Executive Compensation

The primary responsibility of the Compensation Committee is to discharge the Board’s responsibilities relating to the fair and competitive compensation of the Company’s Chief Executive Officer. This responsibility includes reviewing and recommending to the Board the compensation and other terms of employment of the Chief Executive Officer, overseeing significant aspects of compensation and benefit programs in which the Chief Executive Officer participates, and approving performance-based goals and compensation. The Compensation Committee also annually reviews the Chief Executive Officer’s compensation and evaluates the Chief Executive Officer’s performance.

Under its charter, the Committee has the authority to engage the services of outside advisors, experts and others to assist it in performing its duties. While the Compensation Committee has used the services of a compensation consultant in the past, it did not do so in determining fiscal year 2010 compensation for the Chief Executive Officer. The Compensation Committee may choose to use the services of a compensation consultant in the future.

Role of Management in Compensation Process

The Compensation Committee does not oversee or design compensation programs for any of the Named Executive Officers other than the Chief Executive Officer. The Compensation Committee believes that it is the responsibility of the Chief Executive Officer, as the highest-ranking executive, to implement the business goals of the Company established by the Board of Directors and to manage the Company’s business against an annual budget established by the Board of Directors. In this regard, the Chief Executive Officer is responsible for determining a strategy for achieving these goals, including the allocation of personnel, time and financial resources consistent with the budget that is approved by the Board. The Compensation Committee believes it is the responsibility of the Chief Executive Officer to manage and compensate the other Named Executive Officers in a manner that provides sufficient incentives for these employees to meet the business goals of the Company and to control compensation and benefits expense for all employees, including the Named Executive Officers. In reviewing the performance of the Chief Executive Officer each year, the Compensation Committee takes into consideration the extent to which the Chief Executive Officer has successfully fulfilled these responsibilities and holds the Chief Executive Officer accountable for the performance of each executive officer reporting to him.

In determining compensation for the Chief Executive Officer, the Compensation Committee solicits input from the Director of Human Resources and the Chief Financial Officer, primarily relating to the cost of the Company’s compensation programs and the financial performance of the Company. None of the Named Executive Officers, other than the Chief Executive Officer, has a role in establishing executive compensation. From time to time, some of the Named Executive Officers are invited to attend meetings of the Compensation Committee. However, no Named Executive Officer attends any executive session of the Compensation Committee or is present during deliberations or determination of that Named Executive Officer’s compensation.

While the Chief Executive Officer does not seek approval from the Compensation Committee for the compensation of the other Named Executive Officers, the Chief Executive Officer does discuss their compensation with the Compensation Committee and with the Board of Directors from time to time to solicit input and advice.

Compensation Philosophy and Design of Compensation Programs

The Compensation Committee’s philosophy is to provide competitive levels of compensation that are consistent with the Company’s annual and long-term performance goals. The Compensation Committee attempts to balance the financial interests of the Chief Executive Officer against the Company’s goal of maximizing its return to its shareholders. In determining the competitiveness of its programs, the Compensation Committee reviews the compensation offered by other local employers, as well as other sugar production cooperatives, such as American Crystal Sugar Company and Southern Minnesota Beet Sugar Cooperative. When determining compensation for the Chief Executive Officer, the Compensation Committee considers whether the form and amount of compensation is consistent with its philosophy.

The Compensation Committee has set the Chief Executive Officer’s base salary at or below base salaries of similar positions in the region and in the Company’s industry. The Compensation Committee adjusts base salary comparables for the size of the Company’s operations, both in terms of tons of sugarbeets processed and the quantity of sugar produced. The Compensation Committee has set base salary lower than comparable salaries believing that variable cash compensation, tied to specific performance measures, should constitute a significant portion of the Chief Executive Officer’s overall cash compensation. For the Named Executive Officers other than the Chief Executive Officer, the Chief Executive Officer sets base salaries annually based, in part, on base salaries of similar positions as reported by surveys, data and other market information. The Chief Executive Officer also reviews the executive’s personal performance, the need for the salary to remain competitive with other organizations in the industry and the general budgetary guidelines established by the Chief Executive Officer. The Chief Executive Officer has typically set the base salaries of the other Named Executive Officers near the median reported for that position.

The variable cash compensation for the Chief Executive Officer is provided through two bonus programs, one based on return per acre (referred to as the “Profit Sharing Bonus”) and one recommended by the Compensation Committee for Board of Directors approval based upon the results of an annual performance review (the “Performance Bonus”). The Compensation Committee intends the Profit Sharing Bonus to be fairly challenging and that average financial performance measured by return per acre will result in a relatively low level of Profit Sharing Bonus, while above average or exceptional financial performance would be required before a higher level Profit Sharing Bonus is earned by the Chief Executive Officer. Because financial return per acre is the measure that best quantifies the Company’s return to its shareholders, the Compensation Committee believes that this measure is appropriate to align the Chief Executive Officer’s interests with those of the shareholders. Additionally, in determining the Performance Bonus for Mr. Roche in 2010, the Compensation Committee also considered the aggregate return to shareholders and the financial performance of the Company and shareholders for the fiscal year 2010, which was significantly impacted by delays in harvest due to weather.

Beginning with fiscal year 2009, the Profit Sharing Bonus criteria were adjusted to make this bonus more challenging with the goals of ensuring that bonuses will be paid only when shareholders/growers receive a meaningful return and providing greater incentives for superior performance. For example, the new formula for 2009, increased the minimum return per acre that must be achieved to result in any bonus, which the Compensation Committee designed to be a reflection of the increased expenses experienced by shareholder/growers since the Profit Sharing Bonus formula was adopted in 2001. As another example, the return per acre to growers that resulted in the maximum bonus to the Chief Executive Officer in prior years is significantly less under the new formula.

For fiscal year 2010, the Compensation Committee continued this more challenging formula for determining the Profit Sharing Bonus, which was set out in the amended and restated employment agreement dated August 27, 2009. The Compensation Committee believes that the more challenging Profit Sharing Bonus formula continues to be consistent with the goals that prompted the adjustment of the formula for 2009. The Compensation Committee will review the Profit Sharing Bonus formula every two years to ensure it continues to provide appropriate incentives consistent with the Compensation Committee’s philosophy. See “Employment and Post-Employment Arrangements” for a description of Mr. Roche’s employment agreement as in effect for fiscal year 2010.

In determining the total compensation for the other Named Executive Officers, the Chief Executive Officer ascribes to much the same philosophy as the Compensation Committee but the Chief Executive Officer also considers internal pay equity, external competitiveness and the contribution of each executive to the Company’s overall performance when determining base salary and eligibility for a discretionary performance-based bonus.

Elements of In-Service Compensation

The Compensation Committee followed the guiding principles outlined above in the development and administration of the compensation of the Chief Executive Officer while employed by the Company. The elements of in-service compensation of the Chief Executive Officer consist of base salary, a Profit Sharing Bonus based on return to shareholders and a discretionary Performance Bonus based on the Chief Executive Officer’s individual performance.

The Named Executive Officers, other than the Chief Executive Officer, receive compensation while employed with the Company consisting of a base salary and a discretionary performance bonus determined by the Chief Executive Officer based upon the Company’s overall performance and the individual performance of the Named Executive Officer.

The Company does not believe that personal benefits or perquisites (i.e. “perks”) are appropriate as a significant element of compensation, in particular because perks are not conditioned upon performance and are not based upon contribution to the Company’s business. None of the Named Executive Officers received perks that were a significant compensation element in fiscal 2010.

Base Salaries

Mr. Roche and the Company entered into an employment agreement in 2001 and since that time, the Company has annually reviewed Mr. Roche’s performance to determine whether to retain Mr. Roche’s services, to establish a salary for Mr. Roche and, if necessary, to revise other terms of Mr. Roche’s employment and compensation. The Compensation Committee set Mr. Roche’s base salary for fiscal year 2010 at the time the Company entered into the amended and restated employment agreement dated August 27, 2009 that had a term of September 1, 2009 to August 21, 2010. Mr. Roche’s annual base salary for 2010 was set at $352,300, an increase of 2.5% from the annual base salary of $343,700 for 2009. The Compensation Committee increased Mr. Roche’s base salary primarily to recognize an increase in the cost of living over the prior year.

Mr. Roche determined salaries for the other Named Executive Officers in July 2009, with adjustments to annual base salaries effective at the beginning of fiscal year 2010. These salary adjustments were considered moderate and were reflective of the challenges facing the Company due to less than optimum volumes of sugarbeets to process. The following table sets forth the annual base salaries for 2010 and 2009 for each of the other Named Executive Officers, as well as the percentage increase in 2010 as compared to 2009:


Named Executive Officer	2010 Annual Base Salary	2009 Annual Base Salary	% Increase 2010 Over 2009
Steven M. Caspers	$182,100	$177,100	2.8%
Tom Knudsen	$133,600	$130,000	2.8%
Allen Larson	$130,800	$127,300	2.8%
Jeffrey L. Carlson	$149,000	$145,000	2.8%

Cash Bonus Programs

The cash bonus element of total compensation is available to the Named Executive Officers through a discretionary individual performance bonus, which for the Chief Executive Officer is referred to as the “Performance Bonus.” The Chief Executive Officer is also eligible for the Profit Sharing Bonus, which is a cash bonus based upon the return per acre to growers in the fiscal year.

In July 2010, the Compensation Committee and the Board of Directors conducted a performance review of Mr. Roche for fiscal 2010, in part to determine whether Mr. Roche would receive a Performance Bonus. Consistent with its process in prior years, this performance review solicited a rating from the Board of Directors of Mr. Roche’s performance in areas such as leadership, communication, budget and time management, as well as overall performance. This information was compiled anonymously and discussed among the Board members. The Board of Directors reviewed various aspects of Mr. Roche’s achievements and performance in 2010, prior year compensation information (including salary, Performance Bonus and Profit Sharing Bonus amounts) and estimated financial returns to the shareholders for fiscal year 2010 in determining whether to award a Performance Bonus and the amount of the Performance Bonus. In view of the variety of the factors and the amount of information considered as well as the complexity and subjectivity of these matters, the Compensation Committee did not find it practical to, and did not attempt to, make specific assessments of, quantify, rank or otherwise assign relative weights to the specific factors considered by the Board or by the Compensation Committee. While individual members of the Compensation Committee may have given different weight to different factors, the predominate factors considered by the Compensation Committee for fiscal year 2010 were the Company’s financial results despite the significant challenges of processing the sugarbeet crop and the positive evaluations of Mr. Roche’s performance by the Board. The Compensation Committee determined Mr. Roche’s Performance Bonus for fiscal year 2010 to be $70,000.

Mr. Roche determined the discretionary performance bonus amounts to be paid to the other Named Executive Officers in August 2010. In establishing the performance bonus awards for the other Named Executive Officers, Mr. Roche considered their individual contribution toward achieving the Company goals in fiscal year 2010, and the level of return to shareholders measured through dollars paid per acre of sugarbeets grown. Consistent with past practice, he also received feedback from various members of the Compensation Committee and the Board of Directors on proposed bonus amounts. The Company and Mr. Roche continue to consider and attempt to develop a more formal program for executive officers (other than the Chief Executive Officer) for determining performance bonus awards. The following table shows the individual performance bonus earned by each of the Named Executive Officers for 2010 and also shows the performance bonus as a percentage of 2010 salary:


Named Executive Officer	2010 Performance Bonus			% of 2010 Annual Base Salary
Steven M. Caspers		$	36,000	19.8	%
Tom Knudsen		$	12,500	9.4	%
Allen Larson		$	12,000	9.2	%

In determining performance bonus amounts to the other Named Executive Officers, Mr. Roche considered the severe impact of weather conditions during the harvest period in both fiscal years 2010 and 2009, which reduced the volume of sugarbeets harvested and processed in those years. Accordingly, aggregate performance bonus levels for all employees in both fiscal years 2010 and 2009 were reduced significantly from prior years. Individual bonus levels are reflective of individual performance and contributions toward the achievement of company goals.

Mr. Carlson, who ceased serving as the Company’s Vice President, Operations on May 12, 2010, was not eligible for a performance bonus as he was not employed at the end of the fiscal year.

Mr. Roche is also eligible for the Profit Sharing Bonus. This consists of a cash bonus based upon the return per acre to growers, with a matrix determining the amount of Profit Sharing Bonus at various levels of return per acre. The matrix applicable to 2010 was approved as part of the amended and restated employment agreement entered into between the Company and the Chief Executive Officer on August 27, 2009 and it sets forth the Profit Sharing Bonus that would be earned by him at various levels of return per acre to the growers as follows:


Return Per Acre to Growers		Profit Sharing Bonus Amount
$825 - $900		$15,000
$901 - $975		$25,000
$976 - $1,050		$35,000
$1,051 - $1,125		$45,000
$1,126 - $1,200		$55,000
$1,201 and over		$65,000

For the purposes of the Profit Sharing Bonus, return per acre is the amount received by the shareholders/growers as a grower payment for sugarbeets and does not include patronage, retains or trucking payments. However, no Profit Sharing Bonus will be paid if 30% or more of the crop, based on planted acres, is lost or unharvested. For 2010, the return per acre to growers was $849 per acre, resulting in a Profit Sharing Bonus to Mr. Roche of $15,000.

Elements of Post-Termination Compensation

In 2001, the Company entered into an employment agreement with Mr. Roche relating to his service as the President and Chief Executive Officer. Since 2001, the term of the employment agreement has been renewed for successive fiscal years. For the fiscal year 2010 term of September 1, 2009 to August 31, 2010, Mr. Roche and the Company entered into an amended and restated employment agreement on August 27, 2009. Under this amended and restated employment agreement, Mr. Roche will be paid his then-current base salary for a period of twelve months in the event of termination of Mr. Roche’s employment without cause, upon receipt of a general release and compliance with provisions of the agreement relating to confidential information. Mr. Roche is not entitled to post-employment payments in the event of termination of Mr. Roche’s employment by Mr. Roche, by the Company for cause, or by reason of death or disability.

If Mr. Roche’s employment were terminated without cause on August 31, 2010, he would receive $352,300 in post-termination benefits, payable over a twelve month period.

Former Vice President Operations, Mr. Carlson’s employment with the Company ended on May 12, 2010. Following his separation from employment, the Company and Mr. Carlson entered into a separation agreement and release that became binding and enforceable May 25, 2010. Under that separation agreement and release, the Company paid Mr. Carlson $40,116 in separation payments in fiscal year 2010. The Company also continued insurance coverage for Mr. Carlson following termination of employment. Please see “Employment and Post-Employment Arrangements – Agreement with Jeffrey L. Carlson” of this Item 11 for a description of the separation agreement and release with Mr. Carlson.

Other than with respect to Messrs. Roche and Carlson, the Company does not have employment agreements or arrangements with any of the other Named Executive Officers. Other than with respect to the post-termination benefits to Messrs. Roche and Carlson as described above, the Company does not provide for severance or any other post-termination benefits to the Named Executive Officers, except through plans in which executive officers participate generally. See “Executive Compensation – Employment and Post-Employment Arrangements” in this Annual Report on Form 10-K for a discussion of the terms of the employment agreement with Mr. Roche as in effect for fiscal year 2010.

Impact of Regulatory Requirements

In determining the compensation policies, programs and actions to be taken by the Company with respect to executive compensation, the Compensation Committee considers the impact of accounting rules, securities rules and tax rules. The Compensation Committee also regularly reviews changes in these regulatory requirements to determine their applicability and impact on the Company.

Summary Compensation Table

The following table shows information concerning compensation earned for services in all capacities during the last three fiscal years for: (i) David H. Roche, who served as the Company’s Chief Executive Officer in fiscal year 2010; (ii) Steven M. Caspers, who served as the Company’s Chief Financial Officer in fiscal year 2010; and (iii) the three other most highly compensated executive officers of the Company in fiscal year 2010 whose total compensation was at least $100,000, less the amount representing the change in pension value and nonqualified deferred compensation earnings (together referred to as the “Named Executive Officers”).


Name and Position	Year	Salary (1)		Bonus (2)		Change in Pension Value and Nonqualified Deferred Compensation Earnings (3)		All Other Compensation (4)		Total
David H. Roche,	2010	$	352,102	$	85,000	$	210,002	$	27,025	$	674,129
President & CEO	2009	$	343,509	$	55,000	$	97,277	$	22,133	$	517,919
	2008	$	333,483	$	81,000	$	54,772	$	21,887	$	491,142
Steven M. Caspers,	2010	$	182,388	$	36,000	$	251,919	$	33,270	$	503,577
Executive VP & CFO	2009	$	177,390	$	30,000	$	147,663	$	12,020	$	367,073
	2008	$	171,470	$	45,000	$	72,623	$	9,156	$	298,249
Tom Knudsen,	2010	$	134,063	$	12,500	$	140,887	$	35,321	$	322,771
V.P. Agriculture	2009	$	130,474	$	10,000	$	54,092	$	8,745	$	203,311
	2008	$	126,011	$	27,000	$	34,373	$	8,346	$	195,730
Allen Larson,	2010	$	130,991	$	12,000	$	96,580	$	18,581	$	258,152
Controller	2009	$	127,502	$	8,000	$	34,516	$	13,786	$	183,804
	2008	$	123,265	$	0	$	29,676	$	14,487	$	167,428
Jeffrey L. Carlson,	2010	$	108,312	$	0	$	81,755	$	67,808	$	257,875
V.P. Operations (5)	2009	$	145,232	$	10,000	$	40,094	$	8,264	$	203,590
	2008	$	133,740	$	27,000	$	24,477	$	7,957	$	193,174


	(1)	A portion of the salary of each of Messrs. Roche and Caspers was deferred into the Company’s Nonqualified Deferred Compensation Plan. Amounts shown are not reduced to reflect the deferral elections of any of the Named Elective Officers.
	(2)	This column reflects bonuses earned in the year indicated, including both a discretionary and profit sharing bonus, where applicable. See “Compensation Discussion and Analysis – Elements of In-Service Compensation – Cash Bonus Programs” for a description of bonuses that may be earned by the Named Executive Officers.
	(3)	Amounts in this column reflect the aggregate increase in actuarial present value of the benefits under the pension plan as applicable. A portion of the change in pension benefits value is attributable to the additional year of service, any annual salary increase and bonus received. The 2010 change in Pension Value was also affected by a change in the discount rate of 6.19% in 2009 to 5.19% in 2010. An additional portion of the change is due to a change in the mortality values used for demographic assumptions. This table changed from the 1983 Group Annuity Mortality Table in 2009 to the RP-2000 Combined Mortality Table in 2010.
	(4)	Amounts in this column include:


	FY 2010
Name	Company Contributions to Defined Contribution Plans (a)		Insurance Premiums (b)		Other (c)
David H. Roche	$	14,184	$	12,841		—
Steven M. Caspers	$	8,495	$	3,763	$	21,012
Tom Knudsen	$	5,763	$	1,781	$	27,777
Allen Larson	$	5,560	$	1,702	$	11,319
Jeffrey L. Carlson	$	4,732	$	1,473	$	61,603


	FY 2009
Name	Company Contributions to Defined Contribution Plans (a)		Insurance Premiums (b)		Other (c)
David H. Roche	$	9,477	$	12,656		—
Steven M. Caspers	$	8,896	$	3,124		—
Tom Knudsen	$	6,299	$	1,573	$	873
Allen Larson	$	5,100	$	1,342	$	7,344
Jeffrey L. Carlson	$	6,889	$	1,375		—


	FY 2008
Name	Company Contributions to Defined Contribution Plans (a)		Insurance Premiums (b)		Other (c)
David H. Roche	$	9,313	$	12,574		—
Steven M. Caspers	$	6,296	$	2,860		—
Tom Knudsen	$	6,480	$	1,130	$	736
Allen Larson	$	6,171	$	1,220	$	7,096
Jeffrey L. Carlson	$	6,790	$	1,167		—


	(a)	Reflects the Company’s contribution to the 401(k) plan for each Named Executive Officer. For Mr. Roche, also includes $4,650 in Company’s contributions to the Deferred Compensation Plan for 2010.
	(b)	Includes premiums paid by the Company for life insurance coverage in excess of $50,000 and supplemental long-term disability coverage.
	(c)	Reflects amounts paid in cash to Named Executive Officers for vacation hours; except that (i) amounts for Mr. Carlson for 2010 reflect only severance paid and (ii) for Mr. Knudsen amounts for 2010 also include $800 for company vehicle use and amounts for 2009 and 2008 reflect only company vehicle use.

(5)	Mr. Carlson ceased serving as the Company’s Vice President Operations and as its employee effective May 12, 2010.

2010 Pension Benefits

The table below sets forth information on the pension benefits for the Named Executive Officers under each of the following:


	•	Minn-Dak Farmers Cooperative Pension Plan; and

	•	Minn-Dak Farmers Cooperative Supplemental Executive Retirement Plan.

Both the Pension Plan and the SERP are described in more detail in Item 11. Executive Compensation of this Annual Report on Form 10-K under the section entitled “Employment and Post-Employment Arrangements – Post-Employment Arrangements for Named Executive Officers.”

No pension benefits were paid to any of the Named Executive Officers in fiscal year 2010. The Company does not have a policy permitting granting of additional years of pension service. Further information on these pension plans is included within this section of this Item of Form 10-K entitled “Compensation Discussion and Analysis.”

The amounts reported in the table below equal the present value of the accumulated benefit at August 31, 2010, for the Named Executive Officers under each plan based upon the assumptions described in footnote 2.


Name	Plan Name	Number of Years Credited Service (1)	Present Value of Accumulated Benefit (2)
David H. Roche	Pension Plan	10		$	340,528
	SERP	10		$	325,695
Steven M. Caspers	Pension Plan	35		$	984,266
	SERP	35		$	20,331
Tom Knudsen	Pension Plan	34		$	467,690
Allen Larson	Pension Plan	29		$	338,927
Jeffrey L. Carlson	Pension Plan	20		$	276,536


	(1)	An employee earns a full year of credited service in the pension plan with 1,000 or more hours of service during the year.
	(2)	The accumulated benefit is based on service and earnings (base salary and bonus, as described above) considered by the plans for the period through August 31, 2010. It includes the value of contributions made by the Named Executive Officers throughout their careers. For the Pension Plan and SERP, the present value has been calculated assuming the Named Executive Officers will remain in service until age 65, the age at which retirement may occur without any reduction in benefits, and that the benefit is payable under the available forms of annuity consistent with the assumptions as described in Note 13 to the financial statements contained elsewhere in this Annual Report on Form 10-K. As described in such note, the discount rate is 6.19% for fiscal year 2009. As described in such note, the discount rate is 5.19% for fiscal year 2010. The post-retirement mortality assumption is based on the RP-2000 Combined Mortality Table.

Nonqualified Deferred Compensation

The table below provides information on the non-qualified deferred compensation of the Named Executive Officers in fiscal year 2010 under the Company’s Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”). Under the terms of the Deferred Compensation Plan, participants may elect to defer receipt of their compensation and the Deferred Compensation Plan provides a means for deferrals of compensation. All of the Named Executive Officer except Mr. Carlson participated in the Deferred Compensation Plan in fiscal year 2010.

The Deferred Compensation Plan is described in more detail in Item 11. Executive Compensation of this Annual Report on Form 10-K under the section entitled “Employment and Post-Employment Arrangements – Post-Employment Arrangements for Named Executive Officers.”


Name	Executive Contributions in Fiscal Year 2010 (1)			Company Contribution in Fiscal Year 2010			Aggregate Earnings in Fiscal Year 2010 (2)			Distribution and Withdrawals in Fiscal Year 2010	Aggregate Balance at August 31, 2010
David H. Roche		$	52,500		$	4,650		$	16,498	—		$	286,014
Steven M. Caspers			—			—		$	5,401	—		$	45,076
Tom Knudsen			—			—		$	1,234	—		$	17,467
Allen Larson			—			—		$	951	—		$	9,831


	(1)	The annual salary deferrals included in this column are reflected in the salary column of the Summary Compensation Table. The deferrals of the bonus awards reflected in this column are reported in the bonus column of the Summary Compensation Table.
	(2)	Amounts in this column include gains and losses on deferred compensation invested through the Deferred Compensation Plan. None of the earnings or losses in this column are included in the Summary Compensation Table.

Employment and Post-Employment Arrangements

Agreement with David H. Roche

On March 1, 2001, the Company entered into an employment agreement with David H. Roche to serve as its President and Chief Executive Officer with an initial term through August 31, 2002. This initial term has been renewed for 12 month periods running from September 1 to August 31 of the following year. The employment agreement was amended and restated on August 27, 2009 for the fiscal year 2010 term of September 1, 2009 to August 31, 2010. Below is a description of the amended and restated employment agreement in effect for fiscal year 2010.

Under the employment agreement, Mr. Roche will receive an annual base salary of $352,300 per year and is eligible for an increase in this base salary based upon an annual performance review. Mr. Roche is also eligible for a profit sharing bonus based upon return per acre. See “Compensation Discussion and Analysis – Elements of In-Service Compensation – Cash Bonus Programs” for the matrix associated with the return per acre bonus. A review of the matrix associated with the return per acre bonus will be conducted every two years with the first review August 31, 2010. The Board of Directors also has the discretion to grant Mr. Roche a performance bonus regardless of whether the return per acre bonus is awarded. Mr. Roche is also eligible for health, dental and vision insurance on the same terms as other non-union employees, as well as other group benefits such as term life insurance, accidental death and dismemberment insurance, long-term disability insurance. Mr. Roche must also submit to an annual physical examination at the Company’s expense.

If Mr. Roche retires as Chief Executive Officer on or after his 62nd birthday, the Company will provide him with medical insurance until he reaches age 65. Mr. Roche will also be included in the Company’s non-qualified deferred compensation plan, the pension plan, supplemental executive retirement plan and 401(k) plan.

During any term of the employment agreement, the agreement may be terminated by either party upon written notice to the other at least ninety days prior to the end of the term, by the Company for “material breach” or “just cause” by Mr. Roche, upon Mr. Roche’s death, or his total and permanent disability. For the purposes of the employment agreement, “material breach” and “just cause” mean willful misconduct in following legitimate directions of the Board of Directors; breach of loyalty to the cooperative; conviction of a felony; habitual drunkenness; excessive absenteeism not related to illness, sick leave or vacations, but only after notice from the Board of Directors followed by a repetition of such excessive absenteeism; dishonesty; or continuous conflicts of interest after notice in writing from the Board of Directors.

If the Company terminates Mr. Roche’s employment without cause, the Company will pay Mr. Roche’s then-current base salary for a period of 12 months, conditioned upon receipt of a general release and compliance with provisions of the renewal agreement relating to confidential information. This post-employment payment does not apply to termination of Mr. Roche’s employment by Mr. Roche, by the Company for cause, or by reason of death or disability. The employment agreement also contains provisions relating to the confidentiality of certain Company information.

Under the employment agreement, Mr. Roche is entitled to 5 weeks of vacation, seven paid holidays and four days of floating holiday. The Company will also reimburse Mr. Roche for travel and other business expenses. Further, Mr. Roche will be provided with a laptop computer and cell phone for company business.

Agreement with Jeffrey L. Carlson

The Company and Mr. Carlson, the Company’s former Vice President Operations, entered into a separation agreement and release that became binding and enforceable May 25, 2010 relating to Mr. Carlson’s separation from employment. The separation and release agreement provided that in exchange for a full release of all claims, the Company would pay Mr. Carlson a separation payment equal to six months base pay, in thirteen bi-weekly installments. The Company will also pay the employer’s portion of COBRA coverage until the earlier of six months following the separation date of May 12, 2010 or until Mr. Carlson becomes eligible for alternative coverage. The agreement also contains provisions relating to payout of accrued vacation and confidentiality of Company information.

Post-Employment Arrangements for Named Executive Officers

The Company’s employment agreement with Mr. Roche does not provide for severance (unless terminated without cause) or any other post-termination payments for 2010, except through plans in which the Named Executive Officers participate generally. The separation and release agreement with Mr. Carlson relates exclusively to post-employment payments and benefits and is described above.

The Company also provides post-employment compensation for the Named Executive Officers, David H. Roche, Steven M. Caspers, Jeffrey L. Carlson, Tom Knudsen, and Allen Larson, through the following plans:


	•	Defined benefit retirement plan (which is the Minn-Dak Farmers Cooperative Pension Plan);
	•	Supplemental executive retirement plan;
	•	Non-qualified deferred compensation plan; and
	•	401(k) retirement savings plan.

The Company has established the Minn-Dak Farmers Cooperative Pension Plan. The Pension Plan is a noncontributory, defined benefit retirement plan, which is available to all of its eligible employees. For 2010, there were approximately 320 eligible current employees participating in the Pension Plan, including the Named Executive Officers. The benefits of the Pension Plan are funded by periodic contributions by the Company to a retirement trust that invests the contributions and earnings from such contributions to pay benefits to employees. The Pension Plan provides for the payment of a monthly retirement benefit determined under a formula based on years of service and each employee’s compensation level. Benefits are paid to the employees upon reaching early (age 55 or older) or normal (age 65) retirement age. The plan also provides for the payment of certain disability and death benefits. See the table entitled “Pension Benefits” under this Item 11 of this Annual Report on Form 10-K for information on the benefits for 2010 to each of the Named Executive Officers under the Pension Plan.

The Board of Directors adopted a Supplemental Executive Retirement Plan on January 21, 1997. Subject to the discretion of the Board of Directors, the Company credits to the account of each executive eligible to participate in the Supplemental Plan amounts equal to the difference between the benefits actually payable to the executive under the provisions of the defined benefit retirement plan and the amounts which would have been payable under the defined benefit retirement plan if certain provisions of the Internal Revenue Code did not prohibit the payment of such benefits. Of the Named Executive Officers, Messrs. Roche and Caspers were eligible to participate in the Supplemental Executive Retirement Plan in 2010. In fiscal 2010, only Mr. Roche was credited amounts to his account in the Supplemental Executive Retirement Plan, representing his defined benefit plan benefits in excess of the maximums established by the Internal Revenue Code. See the table entitled “Pension Benefits” under this Item 11 of this Annual Report on Form 10-K for information on the benefits for 2010 the Named Executive Officers under the Supplemental Executive Retirement Plan. Unlike the Company’s Pension Plan, the Supplementary Executive Retirement Plan is an unfunded, unsecured obligation of the Company and is not qualified for tax purposes.

On August 1, 1978 the Company executed an adoption agreement establishing an unfunded Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”) for a select group of management or highly compensated employees. Under the terms of the Deferred Compensation Plan, certain employees may elect to defer receipt of their compensation and the Deferred Compensation Plan provides a means for deferrals of compensation into various investment options. The participants may change their election among these options no more than one time per quarter. The income earned does not constitute an “above-market interest rate” as defined by the Securities and Exchange Commission.

Under the Deferred Compensation Plan, participants may elect to defer any amount of their current salary and bonus as of the end of the prior year for the first payroll period beginning in the next year of the Deferred Compensation Plan. If the Company makes matching contributions under its 401(k) retirement savings plan, amounts in excess of the current 401(k) plan compensation limit may also be matched, but the matching contributions will be applied to the Deferred Compensation Plan. For fiscal year 2010, no Named Executive Officer deferred any amount of salary or and no Named Executive Officer other than Mr. Roche deferred any bonus under the Deferred Compensation Plan. For fiscal year 2010, Mr. Roche was eligible to receive a Company match on compensation in excess of the current 401(k) Plan limit and these excess matching contribution amounts were contributed to Mr. Roche’s account in the Deferred Compensation Plan. Income will be gained or lost on a daily basis as a result of the participants directed investment of his/her account. The participant is vested in those earnings immediately. Participants are eligible for payouts from the Deferred Compensation Plan at retirement, termination, death or disability. With respect to distributions, participants may only elect to receive payments in the form of cash over no more than ten annual installments. Participants have no right, either directly or indirectly, to anticipate, sell, assign or otherwise transfer any benefit accrued under the Deferred Compensation Plan. In addition, no participant has any interest in any Company assets set aside as a source of funds to satisfy its benefit obligations under the Deferred Compensation Plan, including the establishment of any trust. Participants have the status of general unsecured creditors of the Company and the Deferred Compensation Plan constitutes an unsecured promise by the Company to make benefit payments in the future. See the table entitled “Nonqualified Deferred Compensation” under this Item 11 in this Annual Report on Form 10-K for information on the benefits for 2010 for each of the Named Executive Officers under the Deferred Compensation Plan.

The Company maintains a Section 401(k) retirement savings plan that permits employees, including the Named Executive Officers, to elect to set aside a portion of their gross compensation on a pre-tax basis in a trust to pay future retirement benefits. The Company provides a matching contribution of 100% of each employee’s first 4% of compensation that is set aside under the plan. The amounts set aside by each employee and the Company vests immediately. Benefits under the 401(k) plan begin to be paid to the employee: (i) upon the attainment of normal retirement at age 65, or if the employee chooses, any time after early retirement at or after age 55; (ii) the date the employee terminates employment with the Company; or (iii) a pre-retirement distribution equal to the value of the employees 401(k) account, provided the employee has attained age 59 1/2 and provided a written consent of the spouse (if married). Federal law limits employee pre-tax income contributions. For calendar year 2010, employee pre-tax income contributions were limited to $16,500 for each participating employee age 49 and under and $22,000 for each participating employee age 50 and older. See the table entitled “Summary Compensation Table” for information on the benefits for 2010 to each of the Named Executive Officers under the Company’s 401(k) plan.

In fiscal year 2010, the Company also maintained a defined contribution pension plan for all newly-hired employees who are not part of a collective bargaining arrangement. None of the Named Executive Officers participate in this defined contribution pension plan.

DIRECTOR COMPENSATION

Directors of the Company received the following amounts for Board and committee service in fiscal year 2010: $290 per regular Board meeting, special Board meeting and committee meeting. In addition, from time to time the Company requests that directors represent the Company’s interests at various industry meetings and conferences, meetings with government or regulators, meetings with shareholders and growers, and other meetings with stakeholders. For attendance at each meeting requested by the Company, each director receives $145 per day for service of less than five hours and $290 per day for service of more than five hours. The Chairman of the Board of Directors also receives an additional retainer of $500 per month to compensate for the extra duties associated with that position. Mr. Doug Etten served as the Chairman of the Board of Directors in fiscal year 2010.

The following table shows for fiscal year 2010 the amounts earned by each of the Company’s directors. Other than cash retainer and meeting fees as described above, none of the Company’s directors earned any other cash or any other compensation in fiscal year 2010.


Name of Director	Fees Earned or Paid in Cash (1)			Total
Dale Blume		$	12,040		$	12,040
Dennis Butenhoff		$	15,780		$	15,780
Brent Davison		$	12,950		$	12,950
Doug Etten		$	28,240		$	28,240
Patrick Freese		$	10,140		$	10,140
Dennis Klosterman		$	14,230		$	14,230
Russell Mauch		$	17,810		$	17,810
Charles Steiner		$	12,305		$	12,305
Kevin Kutzer (2)		$	6,050		$	6,050
Alton Theede (2)		$	1,680		$	1,680


	(1)	Includes the amount of cash compensation earned or paid in fiscal year 2010 for Board and committee service, as well as for attendance at meetings requested by the Company.
	(2)	Mr. Theede served on the Board until his term ended on December 9, 2009. Mr. Kutzer was elected as his replacement. Accordingly, amounts for Messrs. Theede and Kutzer reflect partial years of service.

REPORT OF THE COMPENSATION COMMITTEE

The following report of the Compensation Committee shall not be deemed to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.

The Compensation Committee has reviewed and discussed the section of this Annual Report on Form 10-K for the year ended August 31, 2010 entitled Compensation Discussion and Analysis (the “CD&A”) with Management. In reliance on this review and discussion, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Annual Report on Form 10-K for the year ended August 31, 2010 for filing with the Securities and Exchange Commission.

By the Compensation Committee of the Board of Directors

Charles Steiner (Chair)
Dale Blume
Dennis Klosterman
Brent Davison
Dennis Butenhoff


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Under state law and the Company’s Bylaws, each member of the cooperative is entitled to one vote, regardless of the number of shares the member holds. The Common Stock of the Company is voting stock and each member of the Company holds one share of Common Stock. The Preferred Stock of the Company is non-voting stock. The Company’s stock can only be held by individuals who are sugarbeet growers. To the Company’s knowledge, as of November 24, 2010, no person owned beneficially more than 5 percent of the Company’s outstanding shares and none of the principal officers listed above owned any such shares. As members of the cooperative, each director owns one share of Common Stock and is entitled to one vote. As a group, the directors own 4.46 percent of the outstanding Preferred Stock.


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Each of the Company’s directors is also a sugarbeet grower or a shareholder member or representative of a shareholder member. By virtue of their status as such members of the Company, each director or the member he represents sells sugarbeets to the Company and receives payments for those sugarbeets; also, each director could potentially receive grower trucking payments. Such payments for sugarbeets and trucking payments, either separately or together, can often exceed $120,000. However, such payments that are received by the directors, or the entities they represent, are on the same basis as payments received by other members of the Company for the delivery and payment of their sugarbeets. Except for the sugarbeet sales and receipt of grower trucking payments described in the preceding sentences, since the beginning of fiscal year 2010, the Company has not entered into any transaction and there are no currently proposed transactions, in which the Company was or is to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest.

The charter of the Audit Committee provides that the Audit Committee is responsible for reviewing and approving the terms and conditions of all of transactions the Company enters into in which an officer, director or 5 percent or greater shareholder or any affiliate of these persons has a direct or indirect material interest. The Standards of Business Conduct, which is applicable to all of the Company’s employees and directors, also prohibits the Company’s employees, including executive officers, and the Company’s directors from engaging in conflict of interest transactions. Requests for waivers by the Company’s executive officers and directors from the provisions of, or requests for consents by the Company’s executive officers and directors under, the Standards of Business Conduct must be made to the Audit Committee.

In addition, the Company has a formal related person transaction approval policy, which sets forth the Company’s policies and procedures for the review, approval or ratification of any transaction required to be reported in its filings with the Securities and Exchange Commission. The Company’s policy applies to any financial transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships in which the Company is a participant and in which a related person has a direct or indirect interest. Through the policy, the Audit Committee has also identified and pre-approved certain transactions with related persons, including:


	•	employment of executive officers, director compensation to be reported in the Company’s Annual Report on Form 10-K,
	•	payment of ordinary expenses and business reimbursements;
	•	transactions with related companies in which the dollar amount does not exceed $60,000 or 2 percent of the other company’s total revenues;
	•	charitable contributions in which the dollar amount does not exceed $25,000 or 2 percent of the charitable organization’s receipts;
	•	payments made under our articles of incorporation, bylaws, insurance policies or other agreements relating to indemnification;


	•	transactions in which our shareholders receive proportional benefits, specifically including payments to shareholders for sugarbeets of a similar quality and quantity and grower trucking payments to shareholders based upon generally applicable formulas; and
	•	transactions that involve competitive bid, banking transactions and transactions where the terms of which are regulated by law or governmental authority.

The Audit Committee must approve any related person transaction subject to this policy before commencement of the related party transaction. If pre-approval is not feasible, the Audit Committee may ratify, amend or terminate the related person transaction. The Audit Committee will analyze the following factors, in addition to any other factors the Audit Committee deems appropriate, in determining whether to approve a related party transaction:


	•	whether the terms are fair to the Company;
	•	whether the terms of the related party transaction are no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances;
	•	whether the related party transaction is material to the Company;
	•	the role the related party has played in arranging the transaction;
	•	the structure of the related party transaction;
	•	the interests of all related parties in the transaction;
	•	the extent of the related party’s interest in the transaction; and
	•	whether the transaction would require a waiver of the Standards of Business Conduct.

The Audit Committee may, in its sole discretion, approve or deny any related person transaction. Approval of a related person transaction may be conditioned upon the Company and the related person taking such precautionary actions, as the Audit Committees deems appropriate.

Independence of Directors and Committee Members

The Board of Directors undertook a review of director independence in November 2010 as to all nine directors then serving. As part of that process, the Board reviewed all transactions and relationships between each director (or any member of his immediate family) and the Company, its executive officers and its auditors, and other matters bearing on the independence of directors. Although none of the Company’s securities are listed on any stock exchange, the Board of Directors is required to select and apply the independence standards of a stock exchange. For the purposes of determining the independence of the Company’s directors and committee members, the Board of Directors selected the NASDAQ Marketplace Rules. As a result of its review, directors Dale N. Blume, Dennis Butenhoff, Brent Davison, Douglas Etten, Patrick Freese, Dennis Klosterman, Russell Mauch, Charles Steiner and Kevin Kutzer meet the criteria for “independence” under the NASDAQ Marketplace Rules. All members of the Audit Committee meet the “independence” requirements of Section 10A-3.

The Company has also established separate criteria for eligibility to serve as a member of the Company’s Compensation Committee and Audit Committee.

The charter of the Compensation Committee requires that this committee consist of no fewer than three Board members and that no director shall be a member if the director currently is, or at any time during the past two fiscal years has been employed by the Company or in the judgment of the Executive Committee, has a relationship that would interfere with the exercise of independent judgment in carrying out responsibilities as a director or member of the Compensation Committee. Each member of our Compensation Committee meets these requirements.

The charter of the Audit Committee requires that the Audit Committee be comprised of at least three members, all of who must be independent from Management and the Company. The members of the Audit Committee should also include directors with financial or accounting backgrounds if available. The Board of Directors has reviewed the education, experience and other qualifications of each of the members of its Audit Committee. After review, the Board of Directors has determined that none of the members of the Audit Committee meet the Securities and Exchange Commission definition of an “audit committee financial expert.” However, the Company believes that, taken as a whole, the members of Audit Committee have sufficient education, experience and qualifications to carry out their duties.


ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES


	1.	Audit Fees - paid to the Company’s principal accountant for the audit of annual financial statements and review of financial statements included in Forms 10-Q during the fiscal year ended August 31, 2010 totaled $94,140 (Including a $20,000 progress billing for the 2010 audit) and for the year ended August 31, 2009 $96,550 (including a $16,000 progress billing for the 2009 audit).

	2.	Audit Related Fees - paid to the Company’s principal accountant for the audit of employee benefit plans during the fiscal year ended August 31, 2010 totaled $14,500 and for the year ended August 31, 2009 totaled $14,500.

	3.	Tax Fees - paid to the Company’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning totaled $27,010 for the year ended August 31, 2010 and $20,700 for fiscal year ended August 31, 2009.

	4.	All Other Fees – paid to the Company’s principal accountant for USDA agreed upon procedures during the fiscal year ended August 31, 2010 totaled $5,000 and for the year ended August 31, 2009 totaled $5,000.

	5.	It is part of the audit committee’s duties to appoint, compensate, and oversee the engagement of, retention, or replacement of, the independent auditors who audit the financial statements of the Company and its subsidiaries. The audit committee approves all audit services to be performed by the independent auditor. The committee ensures that the independent auditor is not engaged to perform any non-audit services that are considered “prohibited activities” by the Sarbanes-Oxley law.

		The audit committee approves 100 percent of the services described in items 1 thru 4 above.

	6.	The percentage of hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees is zero.

PART IV.


ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


	Documents filed as part of this report:

	a.	Consolidated Financial Statements
		-Report of Independent Registered Public Accounting Firm
		-Consolidated Balance Sheets as of August 31, 2010, 2009 and 2008
		-Consolidated Statements of Operations for the Years Ended August 31, 2010, 2009 and 2008
		-Consolidated Statements of Changes in Members’ Investments for the years ended August 31, 2010, 2009 and 2008
		-Consolidated Statements of Cashflows for the Years Ended August 31, 2010, 2009 and 2008
		-Notes to the Consolidated Financial Statements

	b.	Financial Statement Schedules – None

	c.	The exhibits to this Annual Report on Form 10-K are listed in the Exhibit Index, Item 15c.


Item 15a.	Report of Independent Registered Public Accounting Firm

The Audit Committee
Minn-Dak Farmers Cooperative
Wahpeton, North Dakota

We have audited the accompanying consolidated balance sheets of Minn-Dak Farmers Cooperative (a North Dakota cooperative association) as of August 31, 2010, 2009, and 2008, and the related consolidated statements of operations, change in members’ investments and comprehensive income and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we do not express such an opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Minn-Dak Farmers Cooperative as of August 31, 2010, 2009, and 2008, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/S/ Eide Bailly LLP

Fargo, North Dakota
November 24, 2010

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2010, 2009, AND 2008


	2010		2009		2008
ASSETS

CURRENT ASSETS
Cash	$	128,611	$	93,949	$	159,175

Current bond trust		4,731,005		—		—

Receivables
Trade accounts		12,730,660		14,299,830		16,376,068
Growers		13,763,089		10,196,312		7,313,090
Income tax		—		—		234,461
Other		2,551		2,551		2,551
		26,496,300		24,498,693		23,926,170

Advances to affiliates - Midwest Agri-Commodities Co. and United Sugars Corporation		—		1,105,797		1,492,451

Inventories
Refined sugar, pulp, molasses and thick juice to be sold on a pooled basis		29,770,313		27,046,374		28,452,755
Sugarbeets		3,121,298		—		—
Nonmember refined sugar		1,717,395		1,451,972		1,357,893
Yeast		237,105		200,317		167,799
Materials and supplies		13,403,175		11,296,034		10,159,944
		48,249,286		39,994,697		40,138,391

Deferred charges		—		1,324,353		1,436,316

Prepaid expenses and other assets		2,047,411		3,109,313		2,149,816

Current deferred income tax asset		—		25,600		145,000

Total current assets		76,792,997		70,058,453		69,288,144

PROPERTY, PLANT AND EQUIPMENT
Land and land improvements		28,164,267		27,130,273		26,476,273
Buildings		37,882,719		37,757,659		37,592,109
Factory equipment		152,493,105		147,419,262		141,263,455
Other equipment		5,300,600		4,675,425		3,766,400
Capitalized leases		3,352,917		2,960,658		746,210
Construction in progress		5,213,973		4,690,526		4,500,912
		232,407,581		224,633,803		214,345,359
Less accumulated depreciation and amortization		135,638,384		127,336,389		119,566,871
		96,769,197		97,297,414		94,778,488

OTHER ASSETS
Investment in other cooperatives and unconsolidated marketing cooperatives		11,115,672		11,343,602		11,523,024
Bond trust and financing costs		2,492,735		98,302		126,663
Other		5,034,845		992,175		1,187,408
		18,643,252		12,434,079		12,837,095

	$	192,205,445	$	179,789,946	$	176,903,727

See Notes to Consolidated Financial Statements.


	2010			2009			2008
LIABILITIES AND MEMBERS’ INVESTMENT

CURRENT LIABILITIES
Short-term notes payable	$	27,557,680		$	18,977,978		$	24,440,000

Current portion of long-term debt and capital leases		2,977,034			2,905,841			2,594,188
Current portion of bonds payable		—			2,120,000			2,010,000
		2,977,034			5,025,841			4,604,188
Accounts payable
Trade		10,143,993			11,566,445			9,511,224
Checks Outstanding		1,007,863			545,766			—
Deferred liabilities		8,825,180			—			—
Growers		13,874,124			17,704,288			17,429,879
Income tax		194,745			—			—
		34,045,905			29,816,499			26,941,103
Payable to affiliates - Midwest Agri-Commodities Co. and United Sugars Corporation		283,460			—			—
Accrued liabilities		3,100,968			2,945,383			3,299,010

Total current liabilities		67,965,047			56,765,701			59,284,301

LONG-TERM DEBT AND CAPITAL LEASES, NET OF CURRENT PORTION		18,690,023			22,148,959			13,778,143

BONDS PAYABLE		19,240,000			11,370,000			13,490,000

LONG-TERM DEFERRED INCOME TAX LIABILITY		265,800			354,400			443,000

LONG-TERM UNRECOGNIZED TAX BENEFITS LIABILITY		—			274,075			256,075

LONG-TERM PENSION LIABILITY		19,629,704			12,827,360			5,795,189

COMMITMENTS AND CONTINGENCIES (NOTE 10)

Total liabilities		125,790,574			103,740,495			93,046,708

MEMBERS’ INVESTMENT
Preferred stock
Class A - 100,000 shares authorized, $105 par value; 72,200 shares issued and outstanding		7,581,000			7,581,000			7,581,000
Class B - 100,000 shares authorized $75 par value; 72,200 shares issued and outstanding		5,415,000			5,415,000			5,415,000
Class C - 100,000 shares authorized, $76 par value; 72,200 shares issued and outstanding		5,487,200			5,487,200			5,487,200
		18,483,200			18,483,200			18,483,200
Common stock, 600 shares authorized, $250 par value;
477 shares issued and outstanding on 8-31-10,		119,250			118,500			120,750
474 shares outstanding on 8-31-09 and
483 shares outstanding on 8-31-08 and
Paid in capital in excess of par value		32,094,407			32,094,407			32,094,407
Nonqualified allocated patronage		28,298,571			28,298,718			28,298,508
Accumulated other comprehensive loss		(18,837,157	)		(12,811,235	)		(4,890,516	)
Retained earnings		11,116,217			9,959,810			9,909,845
		71,274,488			76,143,400			84,016,194

	$	197,065,062		$	179,883,895		$	177,062,902

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2010, 2009, AND 2008


	2010		2009			2008
REVENUE
From sales of sugar, sugar co-products, and yeast, net of discounts	$	214,311,789	$	225,034,020		$	243,573,467

EXPENSES
Production costs of sugar, co-products, and yeast sold		72,008,374		79,586,897			73,592,738
Sales and distribution costs		40,451,329		43,308,982			48,667,319
General and administrative		7,079,301		7,065,675			7,275,736
Interest		1,974,363		2,017,946			3,230,496
		121,513,367		131,979,500			132,766,289

OTHER INCOME		7,777,785		2,493,245			1,299,870

NET PROCEEDS RESULTING FROM MEMBER AND NON-MEMBER BUSINESS BEFORE INCOME TAXES		100,576,207		95,547,765			112,107,049

INCOME TAXES EXPENSE (BENEFIT)		343,580		(505,145	)		1,243,679

NET PROCEEDS RESULTING FROM MEMBER AND NON-MEMBER BUSINESS	$	100,232,627	$	96,052,910		$	110,863,370

DISTRIBUTION OF NET PROCEEDS
Credited to members’ investment
Components of net income
Income from non-member business	$	1,156,407	$	334,861		$	2,721,265
Patronage income		4,020,142		3,727,840			5,117,244

Net income credited to member’s investment		5,176,549		4,062,701			7,838,509

Payments to members for sugarbeets, net of unit retention capital		95,056,078		91,990,209			103,024,861

NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS	$	100,232,627	$	96,052,910		$	110,863,370

See Notes to Consolidated Financial Statements.

MINN-DAK FARMERS COOPERATIVE

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ INVESTMENT

YEARS ENDED AUGUST 31, 2010, 2009, AND 2008


	Preferred Stock		Common Stock			Paid in Capital In Excess of Par Value		Non-Qualified Allocated Patronage			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total			Comprehensive Income/ (Loss)
BALANCE, AUGUST 31, 2007	$	18,483,200	$	121,000		$	32,094,407	$	27,598,667		$	(2,368,458	)	$	7,444,091		$	83,372,907
Stock - Sales - common (8 shares)				2,000														2,000
Repurchases - - common (9 shares)				(2,250	)													(2,250	)
Revolvement of unit retention capital																		—
Revolvement of prior years’ allocated patronage									(4,417,403	)								(4,417,403	)
Adoption of FIN 48															(255,511	)		(255,511	)
Net income for the year ended August 31, 2008									5,117,244						2,721,265			7,838,509		$	7,838,509
Pension liability adjustment												(2,522,058	)					(2,522,058	)		(2,522,058	)
Comprehensive Income (Loss)																				$	5,316,451
BALANCE, AUGUST 31, 2008		18,483,200		120,750			32,094,407		28,298,508			(4,890,516	)		9,909,845			84,016,194
Stock - Sales - common (6 shares)				1,500														1,500
Repurchases - - common (15 shares)				(3,750	)													(3,750	)
Revolvement of patronage-Estate									(101,701	)								(101,701	)
Revolvement of prior years’ allocated patronage									(3,625,929	)								(3,625,929	)
Effects of FAS 158 Adjustments															(284,896	)		(284,896	)
Net income for the year ended August 31, 2009									3,727,840						334,861			4,062,701		$	4,062,701
Pension liability adjustment												(7,920,719	)					(7,920,719	)		(7,920,719	)
Comprehensive Income (Loss)																				$	(3,858,018	)
BALANCE, AUGUST 31, 2009		18,483,200		118,500			32,094,407		28,298,718			(12,811,235	)		9,959,810			76,143,400
Stock - Sales - common (10 shares)				2,500														2,500
Repurchases - - common (7 shares)				(1,750	)													(1,750	)
Revolvement of patronage-Estate																		—
Revolvement of prior years’ allocated patronage									(4,020,289	)								(4,020,289	)
Effects of FAS 158 Adjustments																		—
Net income for the year ended August 31, 2010									4,020,142						1,156,407			5,176,549		$	5,176,549
Pension liability adjustment												(6,025,922	)					(6,025,922	)		(6,025,922	)
Comprehensive Income (Loss)																				$	(849,374	)
BALANCE, AUGUST 31, 2010	$	18,483,200	$	119,250		$	32,094,407	$	28,298,571		$	(18,837,157	)	$	11,116,217		$	71,274,488

See Notes to Consolidated Financial Statements.

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2010, 2009, AND 2008


	2010			2009			2008
OPERATING ACTIVITIES
Income allocated to members’ investment	$	5,176,549		$	4,062,701		$	7,838,509
Accumulated other comprehensive loss		(6,025,922	)		(7,920,718	)		(2,522,058	)
Add (deduct) noncash items
Depreciation		8,808,312			8,440,002			8,115,079
Amortization		752,461			359,548			436,512
(Gain) Loss on disposal of equipment		(25,553	)		(108,602	)		112,747
(Gain)Loss allocated from unconsolidated marketing cooperatives		84,761			(115,543	)		43,419
Noncash portion of patronage capital credits		32,396			(974,925	)		(644,842	)
Deferred income taxes		(63,000	)		30,800			1,136,000
(Increase)/Decrease in cash surrender of retired executive life insurance		11,651			49,555			20,224
Changes in assets and liabilities:
Accounts receivable and advances		(608,351	)		(420,329	)		(2,408,377	)
Inventory and prepaid expenses		(7,192,687	)		(815,803	)		1,299,903
Deferred charges and other		(2,873,808	)		114,473			629,083
Accounts payable, accrued liabilities, and other liabilities		10,158,503			9,665,509			(662,766	)

NET CASH FROM OPERATING ACTIVITIES		8,235,312			12,366,668			13,393,433

INVESTING ACTIVITIES
Proceeds from disposition of property, plant and equipment		125,666			332,455			11,170
Capital expenditures		(7,987,929	)		(8,817,485	)		(7,975,759	)
Capital adjustment of unconsolidated marketing cooperatives		(237,248	)		871,094			325,357
Proceeds from patronage refunds and equity revolvements		367,407			418,184			272,726

NET CASH USED FOR INVESTING ACTIVITIES		(7,732,104	)		(7,195,752	)		(7,366,506	)

FINANCING ACTIVITIES
Sale (repurchase) of common stock, net		750			(2,250	)		(250	)
Net proceeds (repayments) of short-term debt		8,579,703			(5,462,022	)		5,440,000
Checks outstanding		462,098			545,766			—
Proceeds from long term debt		—			10,000,000			—
Payment of financing fees		(753,447	)		(207,405	)		(284,410	)
Payment of long-term debt/lease		(5,030,020	)		(5,692,828	)		(5,239,138	)
Payment of unit retains and allocated patronage		(3,727,630	)		(4,417,403	)		(6,038,860	)

NET CASH USED FOR FINANCING ACTIVITIES		(468,546	)		(5,236,142	)		(6,122,658	)

NET CHANGE IN CASH		34,662			(65,226	)		(95,731	)

CASH, BEGINNING OF YEAR		93,949			159,175			254,906

CASH, END OF YEAR	$	128,611		$	93,949		$	159,175

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF CASHFLOWS
YEARS ENDED AUGUST 31, 2010, 2009, AND 2008


	2010		2009			2008

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for Interest	$	1,861,232	$	2,067,437		$	3,438,931
Income tax net payments (refunds)	$	485,910	$	(790,406	)	$	1,930,729

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Proceeds for bond issuance transferred to restricted investment	$	7,000,000		—			—

Equipment purchased by issuance of capital lease	$	392,259	$	2,365,296		$	746,210

See Notes to Consolidated Financial Statements.

NOTE 1 - PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Minn-Dak Farmers Cooperative (the Company) is a North Dakota cooperative association owned by its member-growers for the purpose of processing sugarbeets and marketing sugar and co-products. Minn-Dak Yeast Company, Inc. (Minn-Dak Yeast) is a North Dakota corporation engaged primarily in the production and marketing of baker’s yeast. Link Acquisition Company LLC (Link) was formed to advance possible strategic business activities by the Company. Approximately 93% of net sales are related to sugarbeet operations and 7% are related to yeast operations.

The majority of the net proceeds from the Company are from member patronage business.

Principles of Consolidation

The financial statements include the accounts of the Company and its wholly owned subsidiaries, Minn-Dak Yeast and Link. Significant intercompany activity has been eliminated from the Balance Sheet, Statement of Operations, Statement of Members’ Investment and Statements of Cash Flows.

Cash and Cash Equivalents

Cash Equivalents are assets which are readily convertible into cash within three months. The Company does not consider Bond Trust assets as Cash Equivalents.

Receivable and Credit Policy

Trade receivables are uncollateralized customer obligations due under normal trade terms requiring payment within 15 to 90 days from the invoice date. Trade receivables are stated at the amount billed to the customer. Customer account balances with invoices dated over 90 days old are considered delinquent. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices. The carrying amount of trade receivables is reduced by a valuation allowance that reflects Management’s best estimate of the amounts that will not be collected. Management reviews all trade receivable balances that exceed 90 days from the invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. Additionally, Management estimates an allowance to apply to the aggregate trade receivables to create a general allowance covering those amounts. The allowance is based on an evaluation of the receivables account with particular attention paid to the largest customer balances and the risk profile of the entire portfolio.

Credit Risk

The Company via United Sugars and Midwest Agri-Commodities and Minn-Dak Yeast grant credit to food processors located throughout the United States. In addition, the Company grants credit to member-growers located in North Dakota and Minnesota, for sugarbeet seed, technology fees, and co-products.

Inventories

Inventories of refined sugar, thick juice, pulp and molasses to be sold on a pooled basis are valued at net realizable value, while third-party purchased refined sugar to be sold on a pooled basis is valued at the lower of the cost or market. Inventory of yeast is valued at the lower of average cost or market. Materials and supplies are valued at most recent purchase price that approximates weighted average cost. During the periods when sugarbeets are purchased from growers, but not yet converted into bin sugar or thick juice, that inventory is valued at grower payment cost. In valuing inventories at net realizable value, the Company, in effect sells the remaining inventory to the subsequent periods sugar and co-product pool.

Reclassifications

Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation in the current-year financial statements.

Prepaid Expense and Other Assets

Purchased sugar allocation and prepaid insurance costs related to subsequent fiscals year are recorded as assets and subsequently expensed to those years.

Deferred Costs and Product Values

All costs incurred prior to the beginning of the Company’s fiscal year that relate to agricultural development and labor procurement costs, receiving and processing the subsequent year’s sugarbeet crop are deferred. Similarly, the net realizable values of products produced prior to the beginning of the Company’s fiscal year that relate to the subsequent year’s sugarbeet crop are deferred. The net result of these deferred costs and grower sugar beet payables as of August 31, 2010 of $8,825,181 has been recorded in the Company’s balance sheet in “Deferred liabilities.” Deferred costs as of August 31, 2009 and August 31, 2008 of $1,324,343 and $1,436,316 respectively were recorded in the Company’s balance sheet as current assets under the heading “Deferred charges”. There were no deferred products produced prior to the fiscal years ending August 31, 2009 and August 31, 2008.

Property, Plant, Equipment and Depreciation

Property, plant and equipment are stated at cost. Additions, renewals and betterments are capitalized, whereas expenditures for maintenance and repairs are charged to expense. The cost and related accumulated depreciation of assets retired or sold are removed from the appropriate asset and depreciation accounts and the resulting gain or loss is reflected in income.

It is the policy of the Company to provide depreciation based on methods designed to amortize the cost of the properties over their estimated useful lives. Property, plant and equipment are depreciated for financial reporting purposes, principally using declining balance methods, with estimated useful lives ranging from 3 to 40 years. Statutory lives and methods are used for income tax reporting purposes. Capital lease equipment is depreciated in accordance with FASB ASC 840, Accounting for Leases.

Capitalized assets include indirect costs such as fringe benefits, interest and engineering when appropriate. The indirect costs capitalized for the years ended August 31, 2010, 2009 and 2008 were $257,391, $205,240, and $133,775, respectively. There was no construction-period interest capitalized for the years ended August 31, 2010, 2009 and 2008.

Goodwill and Other Intangible Assets

In accordance with Statement of Financial Accounting Standards FASB ASC 350 (Accounting Standards Codification), Intangibles – Goodwill and Other, the Company does not amortize goodwill. The Company has annually evaluated goodwill and other intangible assets for impairment and concluded that no impairment charge was necessary.

Costs associated with the acquisition of permanent allocation rights will be amortized over the remaining life of the farm program, currently estimated at four crop years.

Investments in Other Cooperatives and Unconsolidated Marketing Cooperatives

Equity Value Investments in Unconsolidated Marketing Cooperatives Investments - The investments in United Sugars Corporation and Midwest -Commodities Company are accounted for using the equity method, wherein the investment is recorded at the amount of the underlying equity in the net assets of the investments and adjusted to recognize the Company’s share of the undistributed earnings or losses. Transactions with these companies are considered to be related party transactions.

Investments in Other Cooperatives - The investments in stocks and capital credits of other cooperatives are stated at cost, plus the Company’s share of allocated patronage and capital credits.

Income Taxes

A consolidated federal income tax return is filed for the Company and its wholly owned subsidiaries. Deferred income taxes are provided for in the timing of certain temporary deductions/increases for financial and income tax reporting purposes.

Revenue Recognition

The Company generally recognizes revenue at the point of customer receipt of product.

Accounting Estimates

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

Bond Origination Costs

Bond financing costs incurred in connection with the financing of the construction projects related to the processing facility have been capitalized. The Company is amortizing the bond financing costs over the terms of the financing obtained using a straight line method.

Amortization of bond financing cost for the years ended August 31, 2010, 2009, and 2008 totaled $21,650, $28,362 and $28,362, respectively.

Self-Funded Insurance

The Contract year for the Company’s employee health plan starts January 1 and ends December 31. In fiscal year 2008, the Company operated with a fully insured employee health plan through December 2007. In fiscal years ending August 31, 2009 and 2010, the Company operated with a self-funded employee health plan administered by Blue Cross Blue Shield of North Dakota (BCBS) for the entire fiscal year. In addition to administering claims, BCBS insures individual health claims in excess of $100,000 and aggregate annual claims in excess of 120% of expected claims for the plan year. The Company has exposure for claims incurred but not paid at the end of each reporting period. Historical information supplied by BCBS, based on employee enrollment and factors that are established at each contract renewal, is used to estimate it’s liability for these claims. This liability is estimated, actual claims experience may differ from Company estimates.

Uninsured Cash Balance

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to certain limits. At times during the year, the Company’s balances exceeded these limits. The Company does not consider this a material risk.

Impairment and Disposal of Long-Lived Assets

The Company accounts for impairment or disposal of long-lived assets in accordance with the provisions of FASB ASC 144, Impairment or Disposal of Long-Lived Assets.

Shipping and Handling Costs

Shipping and handling costs are included in cost of product sold upon receipt of the Company’s product by its customers as well as the net realizable value calculations of the inventory through allocations from the Company’s marketing cooperatives.

Advertising

The Company’s advertising costs are expensed as incurred. Advertising expense for the years ended August 31, 2010, 2009 and 2008 totaled $19,875, $19,955 and $21,568, respectively.

Pension Liability

In accordance with FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans, the Company records the liability for its defined benefit retirement plan as the benefit obligation in the financial statements. The Company has determined that the future tax benefits associated with FASB ASC 715 are patronage sourced and, therefore, will flow directly to the shareholder/growers. As a result, no future tax benefit to the Company is recorded.

Fair Value

Fair value is defined under FASB ASC 820, Accounting for Fair Value Measurements as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under FASB ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. FASB ASC 820 established a fair value hierarchy that prioritizes the assumptions, or “inputs,” used in applying valuation techniques. The three levels of inputs within fair value hierarchy include:


	o	Level 1 inputs were quoted prices (unadjusted) in active markets for identical assets or liabilities.

	o	Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that were not active, and inputs (other than quoted prices) that were observable for the asset or liability, either directly or indirectly.

	o	Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Recently Issued Accounting Pronouncements

In January 2010, the FASB issued new standards in the ASC 820, Fair Value Measurements. These standards require new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. The standards also require disclosure of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements. The standard also clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. The new disclosures regarding Level 1 and 2 fair value measurements and clarification of existing disclosures are effective for the Company beginning with its interim filing for February 2010. The disclosures about the roll forward of information in Level 3 are required for the Company with its interim filing in February 2011. This update will not have a material effect on the Company’s results of operations, financial position or cash flows.

Recently Adopted Accounting Pronouncements

In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance. This amendment was effective upon issuance.

In June 2009, the FASB issued Accounting Standards Update 2009-01 Generally Accepted Accounting Principles. The Company adopted this ASU on September 1, 2009. This standard did not have an impact on the Company’s results of operations or financial condition. However, throughout the notes to the financial statements references that were previously made to various former US GAAP pronouncements have been changed to coincide with the appropriate section of the ASC.

In September of 2006, the FASB issued FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans. This pronouncement was adopted by the Company with the notation that the Company would continue to measure its plan’s liabilities as of May 31. However, with full adoption of FASB ASC 715, the new measurement date for the plan’s liabilities is August 31. In 2009, this resulted in a one-time addition to liability and reduction of retained earnings of $284,896 for the August 31, 2009 financial statements.

Concentration and Sources of Labor

The Company’s total factory campaign and full time workforce consists of 457 employees, of which 61% are covered by a collective bargaining agreement. The agreement expires on May 31, 2011.

Risks and Uncertainties

Interest costs - - The Company is at risk for interest rate changes in both seasonal and long-term debt. The Company has variable rates on a substantial majority of its seasonal and long-term debt. Interest rate risk is not expected to have a material impact on the Company’s annual return to its growers. During the first quarter of the Company’s fiscal year ending August 31, 2011, the Company adopted a policy to manage future risks associated with interest rate variability.

Accumulated Other Comprehensive Income (Loss)

FASB ASC 220, Reporting Comprehensive Income (Loss), establishes rules for reporting comprehensive income and loss and its components. Accumulated other comprehensive loss consists of the FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans adjustment and is presented in the Statement of Member’s Investment. See Note 12.

NOTE 2 - INTANGIBLE ASSETS

Intangible assets derived from the purchase of the non-controlling interest in Minn-Dak Yeast include $110,152 of Goodwill, which is not being amortized; $514,000 for Customer Relations and $62,000 for a Non-Compete Agreement, which are being amortized on a straight-line basis over 5 years. The amortization of these intangible assets for the years ended August 31, 2010, 2009 and 2008 was $143,127, $143,127 and $143,127, respectively. The cumulative amortization of these intangible assets as of August 31, 2010, 2009 and 2008 is $480,582, $337,455 and $194,327 respectively.

NOTE 3 - INVESTMENTS

The investment in stock of other cooperatives and unconsolidated marketing cooperatives consists of the following:


	2010		2009		2008

Dakota Valley Electric Cooperative	$	6,166,685	$	5,978,829	$	5,632,704
CoBank		4,379,995		4,964,489		4,801,609
United Sugars Corporation		369,509		216,396		971,797
Midwest Agri-Commodities		10,091		10,717		10,867
Other		189,392		173,171		106,047

	$	11,115,672	$	11,343,602	$	11,523,024


NOTE 4 -	SHORT-TERM DEBT, LONG-TERM DEBT, CAPITAL LEASE PAYABLE, AND BONDS PAYABLE

Short-Term Debt

Information regarding short-term debt for the years ended August 31, is as follows:


	2010		2009		2008

Seasonal loan with CoBank, due December 31, 2010, the interest rate was 2.76% as of August 31, 2010.	$	27,557,680	$	18,977,978	$	24,440,000

The Company had a $45,000,000 seasonal line of credit with CoBank, with $17,442,320 available on August 31, 2010. On November 15, 2010, the Company obtained a seasonal line of Credit renewal for $85,000,000 through May 31, 2011; with a step down to $45,000,000 from June 1, 2011 through December 31, 2011. The lines are secured with a first lien on substantially all property and equipment and current assets of the Company. The Company utilizes the USDA’s CCC Sugar Loan Program to provide an additional source of seasonal financing. Un-advanced funds remaining from the $85,000,000 and $45,000,000 seasonal debt lines are subject to a 0.375% commitment fee.

Maximum borrowings, average borrowing levels and average interest rates for short-term debt for the years ended August 31, are as follows:


	2010			2009			2008

Maximum borrowings	$	50,390,927		$	45,551,000		$	57,767,930

Average borrowing levels	$	31,524,428		$	28,410,018		$	36,003,083

Average interest rates		2.37	%		2.23	%		4.23	%

Long-Term Debt

Information regarding long-term debt at August 31 is as follows:


	2010			2009			2008
CoBank term loan, with fixed and variable rates, due in varying principal repayments through August 20, 2016 as of August 31, 2010, fixed interest rate currently at 5.60% and the variable interest rate was 1.66% as of August 31, 2010 with a first lien on substantially all property, equipment, and current assets of the Company located in Wahpeton, ND	$	19,134,260		$	22,461,958		$	15,789,655

Less current portion		(2,495,773	)		(2,495,773	)		(2,493,103	)

Long term portion	$	16,638,487		$	19,966,185		$	13,296,552

In addition, the Company may make special advance payments on its term loans with CoBank after its seasonal loans have been paid in full, with the understanding that the special advance payments will be re-advanced subject to the reinstatement provisions, prior to the granting of any new seasonal loans. Any such advance payments are subject to a commitment fee of 0.375% of the daily un-advanced commitment.

Interest expense for the years ended August 31, 2010, 2009 and 2008 totaled $1,974,363, $2,017,946 and $3,230,496, respectively.

Minimum principal amounts due on the Company’s long-term debt are as follows:


Years ending August 31,

2011	$	2,495,773
2012		3,327,697
2013		3,327,697
2014		3,327,697
2015		3,327,697
Thereafter		3,327,699

Total Principal amounts due	$	19,134,260

As of August 31, 2010, the Company was in compliance with all loan covenants with the Bank.

Capital Leases

The Company is the lessee of equipment under capital leases with varying expiration dates. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. For the years ended August 31, 2010, 2009 and 2008 the capitalized costs of the leased assets were $3,352,917, $2,960,658 and $821,950 respectively and accumulated amortization was $853,734, $365,403 and $468,472 respectively. This equipment is being depreciated in accordance with FASB ASC 840, Accounting for Leases. Depreciation of assets under these capital leases is included in depreciation expense.

Minimum future lease payments under capital leases are as follows:


Years ending August 31,

2011	$	600,729
2012		609,416
2013		960,621
2014		212,886
2015		463,711

Total minimum lease payments	$	2,847,363

Less: Amount representing interest		314,566

Present value of net minimum lease payment	$	2,532,797

Less: Current Portion		481,262

Long Term Portion	$	2,051,535

Bonds Payable

The Company financed capital expenditures related to the processing facility through the sale of Industrial Development Revenue Bonds, Series 2002, by Richland County North Dakota. On December 7, 2009, the Company applied for and received approval from Richland County to re-finance its tax-exempt long-term bonds. All variable rate bonds outstanding as of January 15, 2010 were called and new variable rate bonds were issued with a single maturity date of February 1, 2023 with no associated gains or losses. In addition, $7.0 million in new tax-exempt bonds, which are exempt from alternative minimum taxes, were approved by Richland County to finance future capital expenditures. These variable rate bonds were issued on February 18, 2010 with a single maturity date of February 1, 2025. The letters of credit from the Bank associated with these bonds were also renewed as of the date of the issuance of the bonds. The new tax-exempt bond proceeds, initially $7.0 million, are held as a restricted investment in a bond trust until qualified expenditures related to the bonds have been expended by the Company. The Company guarantees the bonds. The Company has letter of credit arrangements expiring February 28, 2011 with a bank that provides security for obligations under the bonds payable totaling approximately $19,814,564 at August 31, 2010. There were no outstanding advances under these letter of credit arrangements as of August 31, 2010.

The Company also has the right, but not the obligation to sell an additional $8.8 million of tax-exempt bonds prior to December 31, 2010.

Information regarding tax exempt bonds payable at August 31 is as follows:


	2010		2009			2008
Richland County North Dakota Bonds, with variable rates, due in varying principal repayments through January 2011 Refinanced January 28, 2010.	$	—	$	2,570,000		$	3,755,000

Bonds with repayments through April 2019. Refinanced January 28, 2010.		—		10,920,000			11,745,000

Richland County North Dakota bonds, with variable interest rates due February 1, 2023, the effective interest rate was 3.10% as of August 31, 2010.		12,240,000

Richland County North Dakota bonds with variable interest rate due February 1, 2025; the effective interest rate was 2.81% as of August 31, 2010.		7,000,000		—			—
	$	19,240,000	$	13,490,000		$	15,500,000

Less Current Portion		—		(2,120,000	)		(2,010,000	)
Long Term Portion	$	19,240,000	$	11,370,000		$	13,490,000

Minimum future principal payments required on the obligations under bonds payable are as follows:


Years ending August 31,

2011	$	—
2012		—
2013		—
2014		—
2015		—
Thereafter		19,240,000

	$	19,240,000


Funds Held In Trust as of August 31, 2010	$	7,000,000
Funds Eligible for Draw-Current as of August 31, 2010		4,731,005
Funds Eligible for Draw-Long Term as of August 31, 2010	$	2,268,995

NOTE 5 - MEMBERS’ INVESTMENT AND GROWER PAYMENTS

The ownership of non-dividend bearing common stock is restricted to a “member-producer,” as defined in the by-laws of the Company. Each member-producer shall own only one share of common stock and is entitled to one vote at any meeting of the members. Each member-producer is also required to purchase units of preferred stock and is entitled to grow the maximum acres per unit of preferred stock as is authorized by the Board of Directors each farming year. The Company’s Board of Directors authorized the members to plant for the fiscal years 2010, 2009 and 2008, respectively 1.60, 1.60 and 1.50 acres per unit of preferred stock. A unit consists of one share each of Class A, Class B and Class C preferred stock. The preferred shares are non-voting and non-dividend bearing. The Company’s Board of Directors must approve all transfers and sales of stock.

The Company’s net income, determined in accordance with generally accepted accounting principles consistently applied, shall be distributed annually on the basis of delivered pounds of sugar, in cash or in the form of credits to each member-producer’s patronage credit account as established on the books of the Company. In the event of a loss in any one-year, the Company shall act in such a manner as to first recoup the loss from those patrons who were patrons in the year in which the loss occurred.

Under the terms of the Company sugarbeet growing contracts with each of its member-producers, the Company is obligated to pay the member-producers for sugarbeets delivered at a price per pound of extractable and bonus sugar. However, if, in the opinion of the Company’s Board of Directors, the working capital position of the Company is insufficient, the Company shall withhold and/or retain from the price to be paid per pound of extractable sugar such amounts as are deemed by the Board of Directors to be necessary for operations, the deductions to be made at such time and in a manner as the Board of Directors shall decide. The amount so withheld and or retained shall be evidenced in the records of the Company by allocated patronage and/or per unit retains in favor of the member-producers. The Board of Directors has the power to determine whether such allocated patronage and/or per unit retains shall be “qualified” or “nonqualified” for income tax purposes.

The Company allocated non-qualified patronage to the members for the years ended August 31, 2010, 2009 and 2008 of $4,020,142, $3,727,840, and $5,117,244, respectively.

During the year ended August 31, 2010, the Company revolved the remaining 66% of the allocated patronage for the fiscal year ended August 31, 2004 totaling $2,876,660 and 31% of the allocated patronage for the fiscal year ended August 31, 2005, totaling $1,143,629. In addition, for the fiscal period ending August 31, 2010, 2009 and 2008 the Company revolved $-0-, $101,701, and $-0- of allocated patronage to certain deceased members’ estates.

During the year ended August 31, 2009, the Company revolved the remaining 46% of the allocated patronage for the fiscal year ended August 31, 2003 totaling $2,199,418 and 33% of the allocated patronage for the fiscal year ended August 31, 2004, totaling $1,426,511.

During the year ended August 31, 2008, the Company revolved the remaining 52% of the allocated patronage for the fiscal year ended August 31, 2002 totaling $1,868,412 and 54% of the allocated patronage for the fiscal year ended August 31, 2003, totaling $2,548,991.

NOTE 6 - INVESTMENT IN MARKETING COOPERATIVES

The Company has formed common marketing agency agreements with United Sugars Corporation (United Sugars) and Midwest Agri-Commodities (Midwest) to be the exclusive marketing agents for all products produced by the Company and other member processors.

The Company’s ownership requirement in United Sugars is calculated periodically and is based on the average volume of sugar produced during the five previous fiscal years. The investment is accounted for on the equity method and the amount of sales and related costs recognized by each member processor is allocated based on their pro-rata share of production for the year. The Company provided United Sugars with cash advances on an ongoing basis for its share of operating and marketing expenses incurred. During the years ended August 31, 2010, 2009 and 2008, the Company had advanced $26,299,502, $30,087,285 and $34,383,138, for operating and marketing expenses incurred respectively. The Company had outstanding advances due to/(from) United Sugars as of August 31, 2010, 2009 and 2008 of $(1,424,545), $(1,740,649) and $(2,064,475), respectively. The Company accounts for United Sugars’ FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans adjustment as an additional change in accumulated other comprehensive income (loss).

The Company has a one-fourth ownership interest in Midwest. The amount of the investment is accounted for using the equity method. All sugarbeet pulp and a portion of the molasses produced are sold by Midwest as an agent for the Company. The amount of sales and related costs to be recognized by each owner is allocated based on their pro-rata share of production for the year. The Company provided Midwest with cash advances on an ongoing basis for its share of operating and marketing expenses incurred by Midwest. The Company advanced Midwest during the years ended August 31, 2010, 2009 and 2008, $9,235,346, $8,440,062 and $9,026,985, respectively. The Company had outstanding advances due to Midwest as of August 31, 2010, 2009 and 2008 of $1,708,006, $634,852 and $572,020, respectively. The owners of Midwest guarantee, on a pro-rata basis, the $9,000,000 short-term line of credit that Midwest has with its primary lender. The Company accounts for Midwest’s FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans adjustment as an additional change in accumulated other comprehensive income (loss).

NOTE 7 - INCOME TAXES

The Company is a nonexempt cooperative as described under Section 1381(a) (2) of the Internal Revenue Code of 1986. Accordingly, net margins from business done with member patrons, which are allocated and distributed as prescribed in Section 1382 of the Code, will be taxable to the members and not to the Company. To the extent that net margins are not allocated and paid as stated above or arise from non-patronage business, the Company shall have taxable income subject to corporate income tax rates.

The significant components of deferred tax assets and liabilities included on the balance sheet at August 31 are as follows:


	2010			2009			2008

Deferred tax assets
Non-qualified unit retains and allocated patronage due to members	$	11,319,500		$	11,319,000		$	11,319,000
Net operating loss carry-forwards		7,241,900			6,121,600			5,706,455
Other		2,443,123			1,113,741			2,427,545

Total deferred tax assets		21,004,523			18,554,341			19,453,000

Deferred tax liabilities
Depreciation		18,503,239			18,528,741			16,325,000
Other		2,767,083			354,400			3,426,000

Total deferred tax liabilities		21,270,323			18,883,141			19,751,000

Net deferred tax asset (liability)	$	(265,800	)	$	(328,800	)	$	(298,000	)

Classified as follows
Current asset	$	—		$	25,600		$	145,000
Long-term asset (liability)		(265,800	)		(354,400	)		(443,000	)

Net deferred tax asset (liability)	$	(265,800	)	$	(328,800	)	$	(298,000	)

The state and federal operating loss carry forwards totaling approximately $18,100,000 will expire in 2015 through 2029.

The provision for income taxes is as follows:

	2010			2009			2008

Current expense (benefit)	$	406,579			(535,945	)		107,679
Net change in temporary differences		(62,999	)		30,800			1,136,000

Provision for income taxes	$	343,580		$	(505,145	)	$	1,243,679

Deferred tax assets are reduced by a valuation allowance to the extent Management concludes it is more likely than not that the assets will not be realized. For the years ended August 31, 2010, 2009, and 2008 the Company had a valuation allowance of $705,400, $335,300 and $-0- respectively.

The items accounting for the difference between expected tax (benefit) computed at the federal statutory rate of 35% and the provision of income taxes were as follows:


	2010			2009			2008
Expected federal income tax expense at the statutory rate		35.0	%		35.0	%		35.0	%
State tax expense at statutory rate		5.0	%		5.0	%		5.0	%
Payments to members		-39.4	%		-40.0	%		-38.3	%
Other, net		-0.3	%		-0.5	%		-0.6	%

Effective tax rate		0.3	%		-0.5	%		1.1	%

The Company allocates the patronage related benefits of the Domestic Production Activities Deduction directly to its patrons. During the years ended August 31, 2010, 2009 and 2008 the Company passed through $5,944,573, $5,742,508 and $-0- respectively to its patrons.

Significant temporary timing differences between financial and income tax reporting are as follows:


	1.	When non-qualified allocated patronage is elected by the Board of Directors, the Company is not allowed an income tax deduction until they are paid in cash to the member-producers, where as qualified allocated patronage is deducted when declared.
	2.	Depreciation - For financial reporting purposes, the Company uses straight-line and accelerated methods of depreciation with lives of 3 to 40 years, while, for income tax purposes, the Company uses required statutory depreciable lives and methods.


	3.	Non-qualified patronage credits from investments in other cooperatives - For financial statement purposes, the Company recognizes income when the patronage credit notification is received while, for income tax purposes, the companies recognize income when the patronage is received in cash.
	4.	Inventory capitalization - For income tax reporting purposes, certain overhead costs are included as a part of inventory costs in accordance with inventory capitalization rules. These costs are charged to expense as incurred for financial reporting purposes.
	5.	Recognition of vacation pay - For financial reporting purposes, vacation pay is charged to expense as accrued, whereas, for income tax purposes, vacation pay is deducted to the extent paid within 2 ½ months of year end.
	6.	On August 31, 2006, the Company had a net $915,560 in non-patronage long-term tax liability resulting from a combination of non-patronage tax issues that will reverse over the life of certain assets now considered to be member business related. The Company will amortize the $915,560 long-term liability over the approximate remaining book life of those assets generating the liability. The amortization of the long-term tax liability for the years ended August 31, 2010, 2009 and 2008 was $88,600, $88,600 and $236,280, respectively leaving a remaining balance on August 31, 2010 of $265,800 to be amortized in future years.
	7.	Non-qualified deferred compensation is deducted for book purposes as incurred and deducted for tax purposes as paid.

Adoption of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes

As of August 31, 2010, the company’s financial statements reflect the final settlement pertaining to its only income tax activity qualifying for FASB ASC 740-10 treatment. For purposes of FASB ASC Topic 740-10, the Company recognizes any interest and penalties accrued related to unrecognized tax benefits in tax expense.

The total amount of unrecognized tax benefits as of August 31, 2010 is $-0-.

The aggregate changes in the balance of the Company’s gross unrecognized tax benefits were as follows for the periods indicated:


Year Ended August 31,	2010			2009		2008

Balance of unrecognized tax benefits beginning balance	$	274,075		$	256,075	$	—
Increases for tax positions related to current year		13,500			18,000		—
Increases for tax positions related to prior year		—					256,075
Reductions for tax positions of prior years		—			—		—
Decreases related to settlements		(287,575	)		—		—
Reductions due to lapsed statute of limitations		—			—		—
Balance of unrecognized tax benefits at August 31	$	—		$	274,075	$	256,075

Tax returns filed as of August 31, 2004 through current filings are open for examination.

NOTE 8 - DEPRECIATION

The Company’s depreciation expense for the years ended August 31, 2010, 2009 and 2008 was $8,808,312, $8,440,002 and $8,115,079, respectively.

NOTE 9 - ENVIRONMENTAL MATTERS

The Company is subject to extensive federal and state environmental laws and regulations with respect to water and air quality, solid waste disposal and odor and noise control. The Company conducts an ongoing and expanding control program designed to meet these environmental laws and regulations. While the Company will continue to have ongoing environmental compliance requirements, currently there are no pending regulatory enforcement actions and the Company believes that it is in substantial compliance with applicable environmental laws and regulations.

The Company cannot predict whether future changes in environmental laws or regulations might increase the cost of operating its facilities and conducting its business. Any such changes could have financial consequences for the Company and its members.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

During fiscal year 1997, the Company entered into a long-term lease agreement on a property, which included providing a guarantee for the notes to finance the leased property. The Company’s contingent liability related to these notes totaled $555,286 as of August 31, 2010.

During fiscal year 2000, the Company sold certain notes receivable with recourse. The Company’s contingent liability related to these notes totaled $23,585 as of August 31, 2010.

During the fiscal year 2010, the Company entered into a coal purchase agreement requiring a minimum annual purchase of coal in the amount of $1.6 million for each of the fiscal years ending August 31, 2011, 2012 and 2013 respectively.

NOTE 11 - OPERATING LEASES

The Company is a party to various operating leases for vehicles and equipment. Future minimum payments for long-term leases for the years ending August 31, under these obligations, are as follows:


Years ending August 31,

2011	$	74,540
2012		67,258
2013		38,222
	$	180,020

Operating lease and contract expenses for the years ended August 31, 2010, 2009 and 2008, totaled $960,068, $1,145,998 and $1,535,475, respectively.

NOTE 12 - EMPLOYEE BENEFIT PLANS

401(k) Plan

The Company has a qualified 401(k) employee benefit plan that covers all employees meeting eligibility requirements. The Company’s matching contribution to the plan is at a level of 100% of employee contributions, with a maximum of 4% of compensation. Employer contributions to the plan for the years ended August 31, 2010, 2009 and 2008 totaled $660,677, $637,822 and $631,063, respectively.

Effective September 1, 2007, individual participating employees who have met the non-elective eligibility requirements of the plan received a contribution of 4% of their compensation each pay period as provided by the plan. Individuals participating in this benefit are excluded from the non-contributory defined benefit plan. Employer contributions to the plan for the years ended August 31, 2010, 2009, and 2008 totaled $79,385, $65,657 and $53,907, respectively.

Pension plan

The Company has a non-contributory defined benefit plan, which covers substantially all employees who meet certain requirements of age, hours worked per year, years of service, and age at retirement or termination. The pension funding policy is to deposit amounts allowable by law with independent trustees. Funds deposited with independent trustees maintained to provide pension benefits to plan participants and their beneficiaries. The Company’s measurement date was changed in 2009 which resulted in measurement dates of August 31, 2010 and 2009, and for the prior year the measurement date was May 31, 2008.

In August 2006, the Pension Protection Act (PPA) was signed into law. The PPA modified the funding requirements for defined benefit pension plans by subjecting defined benefit plans to 100% of the current liability-funding target. Defined benefit plans with a funding status of less than 80% of the current liability are defined as being “at risk”. These provisions do not apply to plans with less than 500 participants. As of the last plan filing, the Company’s plan had 477 participants.

In September 2006, the FASB issued FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans. This standard requires employers to recognize the underfunded or overfunded status of defined benefit pension and Post-retirement plans as an asset or liability in its statement of financial position, and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive loss, which is a component of stockholders’ equity. As a result of the application of FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans as of August 31, 2010, 2009 and 2008 the Company increased liabilities by $6,802,344, $7,547,180 and $639,310. These liabilities were offset to accumulated other comprehensive income (loss). As a result of FASB ASC 715, in the year ended August 31, 2010, 2009 and 2008 the Company recognized an increase in accumulated other comprehensive income/(loss) of ($6,274,921), ($7,080,155) and ($2,218,282), respectively. In accordance with FASB ASC 715, the measurement date was moved from May 31, 2008 to August 31, 2009 creating a fifteen-month period vs. twelve-month period the preceding year.

The following table sets forth the plan’s funded status at August 31:


	2010			2009			2008

Change in pension benefit obligation
Benefit obligation at beginning of year	$	31,076,170		$	26,101,309		$	25,712,339
Service cost		1,003,895			1,284,966			940,135
Interest cost		1,843,576			2,175,966			1,558,671
Experience (gain)/loss due to participant changes		7,260,190			2,774,339			(1,351,129	)
Benefits paid		(1,051,850	)		(1,260,410	)		(758,707	)

Benefit obligation at end of year		40,131,981			31,076,170			26,101,309

Change in plan assets
Fair value of plan assets at beginning of year		18,480,578			20,158,363			20,277,824
Actual return on plan assets		1,882,201			(2,494,214	)		(360,683	)
Employer contribution		1,512,580			2,097,024			1,060,000
Benefits and expenses paid		(1,068,267	)		(1,280,595	)		(818,778	)

Fair value of plan assets at end of year		20,807,092			18,480,578			20,158,363

Accrued pension benefit cost liability	$	(19,324,889	)	$	(12,595,592	)	$	(5,942,946	)


	Pension Benefits
	2010			2009			2008

Non-current assets	$	—		$	—		$	—
Current liabilities		—			—			—
Noncurrent liabilities		(19,324,889	)		(12,595,592	)		(5,942,946	)
	$	(19,324,889	)	$	(12,595,592	)	$	(5,942,946	)

The estimated amounts that will be amortized from Accumulated Other Comprehensive Income to future fiscal years are as follows:


	2010		2009		2008

Accumulated loss	$	17,802,784	$	11,525,420	$	4,436,275
Prior service cost		104,828		136,860		169,107
	$	17,907,612	$	11,662,280	$	4,605,382

The accumulated benefit obligations for all defined benefit pension plans for the years ended August 31, 2010, 2009 and 2008 were $29,641,358, $22,858,793 and $19,721,092, respectively.


	2010		2009		2008

Weighted-average assumptions as of August 31
Discount rate		5.2%		6.2%		6.5%
Expected return on plan assets		8.0%		8.0%		8.0%
Rate of total compensation increase		4.5%		4.3%		4.3%

The net periodic pension cost for the years ended August 31, includes the following components:


	2010			2009			2008

Components on net periodic pension benefit cost
Service cost	$	1,003,895		$	1,284,966		$	940,135
Interest cost		1,843,576			2,175,966			1,558,671
Expected return on plan assets		(1,492,426	)		(2,036,453	)		(1,621,109	)
Amortization of prior service cost		32,032			32,247			32,782
Amortization of transition amount		—			—			—
Amortization of net (gain) or loss		609,468			236,046			—

Net periodic pension benefit cost	$	1,996,545		$	1,692,772		$	910,479

The 2009 data includes a fifteen-month period. The net periodic cost was allocated as follows:


Current Period	$	1,407,876
Adjustment to Retained Earnings		284,896
Total	$	1,692,772

The Company’s pension plan weighted-average asset allocation at August 31, by asset category is as follows:


	2010			2009			2008

Asset category
Equity securities		59	%		61	%		66	%
Debt securities		35	%		37	%		31	%
Real estate		4	%		0	%		0	%
Other		2	%		2	%		3	%

Total		100	%		100	%		100	%

The fair values of the company’s pension plan assets at August 31, 2010, by asset category are as follows:


Pension Plan Assets Fair Value Measurements at August 31, 2010

	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Cash and Cash Equivalents	$	544,983	$	544,983	$	—	$	—
Domestic Common Stocks	$	2,708,722	$	2,708,722	$	—	$	—
Foreign Stocks	$	85,377	$	85,377	$	—	$	—
Mutual Funds-Equity	$	8,018,686	$	8,018,686	$	—	$	—
Mutual Funds-Fixed Income	$	6,978,002	$	6,978,002	$	—	$	—
Core Equity Account	$	296,753	$	296,753	$	—	$	—
International Equity Account	$	2,174,569	$	2,174,569	$	—	$	—
	$	20,807,092	$	20,807,092	$	—	$	—

The fair values of the company’s pension plan assets at August 31, 2009, by asset category are as follows:


Pension Plan Assets Fair Value Measurements at August 31, 2009

	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Cash and Cash Equivalents	$	924,841	$	924,841	$	—	$	—
Domestic Common Stocks	$	2,400,669	$	2,400,669	$	—	$	—
Foreign Stocks	$	131,010	$	131,010	$	—	$	—
Mutual Funds-Equity	$	6,482,750	$	6,482,750	$	—	$	—
Mutual Funds-Fixed Income	$	6,460,184	$	6,460,184	$	—	$	—
Core Equity Account	$	440,639	$	440,639	$	—	$	—
International Equity Account	$	1,640,485	$	1,640,485	$	—	$	—
	$	18,480,578	$	18,480,578	$	—	$	—

The fair values of the company’s pension plan assets at August 31, 2008, by asset category are as follows:


Pension Plan Assets Fair Value Measurements at August 31, 2008

	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Cash and Cash Equivalents	$	943,634	$	943,634	$	—	$	—
Domestic Common Stocks	$	2,580,263	$	2,580,263	$	—	$	—
Foreign Stocks	$	151,351	$	151,351	$	—	$	—
Mutual Funds-Equity	$	8,737,566	$	8,737,566	$	—	$	—
Mutual Funds-Fixed Income	$	5,893,353	$	5,893,353	$	—	$	—
Core Equity Account	$	568,645	$	568,645	$	—	$	—
International Equity Account	$	1,283,551	$	1,283,551	$	—	$	—
	$	20,158,363	$	20,158,363	$	—	$	—

Discount Rate

The Company’s methodology for selecting the discount rate for the Company’s plan was to seek guidance from outside pension experts for determination of the appropriate discount rate through August 31, 2008 and use the Mercer Index for dates beginning September 1, 2008. The decision to use the Mercer index rate was intended to provide an outside unbiased benchmark for this key accounting assumption.

Investment Philosophy

The Company’s Board of Directors appoints individuals to serve as Trustees of the Company’s Pension Plans. The Trustees approve the Investment Policy Statement for the Company’s Pension Plans. The Pension Operating committee is responsible for administering and following the Investment Policy Statement. The independent Investment Consultant provides investment advice and assistance regarding the investments of the Trust, analyzes investment expenses, and negotiates fees of Investment Managers and Custodians. The Investment Policy Statement is designed to diversify against the risk of large losses while still achieving long-term return goals on a historical basis. The Investment Policy is reviewed at least annually by the Operating Committee who recommends changes to the Trustees. Diversification of investment risk is consistent with other pension plans of similar size and demographics as reviewed by the Company’s independent Investment Consultant. The asset allocation targets for the plan consist of five primary areas: Domestic Equity, International Equity, Real Estate, Marketable Alternatives and Fixed Income. Cash allocations are allowed only as necessary for impending benefit payments. The stated goal for each allocation target is to exceed the return of its corresponding benchmark without exposure to excessive risk.

Percentage of Pension Plan Assets by Asset Class as of August 31, 2010


Asset Class	Target Range	Actual Allocations

Large Cap Us Common Stocks	25% - 30%	30.8	%

Mid and Small Cap US Common Stock	10% - 20%	14.7	%

Total Domestic Equity	40% - 50%	45.5	%

International (Non US) Equity	15% - 21%	15.8	%

Total Equity	58% - 68%	61.3	%

Real Estate	2.5% - 5.5%	4.4	%

Marketable Alternatives	1.5% - 4.5%	3.3	%

Total Fixed Income	25% - 40%	31.0	%

Cash	0% - 5%	0.0	%

Prohibited Investments
Non-Marketable Securities
Short Sales or Purchases on Margin

There have been no changes in the valuation methodologies used at August 31, 2010, 2009 and 2008. The Plan’s investment in any category over 10% is diversified through the use of multiple investment alternatives to reduce risk.

Expected Return on Plan Assets

The expected long-term rate of return on plan assets should, over time, approximate the historical long-term returns on pension plan assets. The Company’s methodology for selecting the Expected Return on Plan Assets is to seek guidance from outside pension experts for an appropriate rate.

The expected return on total Plan assets is developed by combining the Plan’s long-term asset class allocation targets with the long-term return expectations for each of these asset classes. Expected asset class returns are developed by the Plan’s investment consultant. The final assumption is chosen by the company as their best estimate among a range of possible alternatives, and reviewed for reasonableness by the Plan actuary.

Contributions

The Company expects to contribute $1,790,000 to its pension plan in 2011.

Distributions (Expected Future)

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


2011	$	929,000
2012		884,000
2013		968,000
2014		899,000
2015		1,038,000
Thereafter, through 2020		8,426,000
	$	13,144,000

As a result of FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans, the Company has recognized a charge to accumulated other comprehensive loss as follows:


Fiscal Year Ended August 31:	2010			2009		2008

Beginning Balance	$	12,811,235		$	4,890,516		2,368,458
Minn Dak Farmers Cooperative		6,274,921			7,080,155		2,218,280
United Sugars		(315,151	)		771,949		209,017
Midwest Agri		66,152			68,615		94,761

Ending Balance	$	18,837,157		$	12,811,235	$	4,890,516

Non-qualified benefit plans

The Company has various non-qualified plans for those employees who meet certain requirements.

The Supplemental Executive Retirement Plan (SERP) is designed to provide an employee who exceeds the annual compensation limit of the Company’s defined benefit plan with a benefit as if the annual compensation limit didn’t apply. This plan is unfunded; therefore there are no assets associated with this plan. The cumulative liability for this plan for the years ended August 31, 2010, 2009, and 2008 was $304,815, $231,768 and $276,562, respectively.

The Non-Qualified Deferred Compensation plan allows an employee to defer wages to a future date. The deferment becomes part of the company assets. To receive payments under this plan, the participant must meet the requirements of the plan or separate from the Company. The cumulative assets and liabilities for this plan for the years ended August 31, 2010, 2009, and 2008 were $411,507, $365,015 and $385,745, respectively.

Non-Qualified key-life insurance - The Company has life insurance policies on a former executive sufficient to cover a $500,000 obligation to the former executive’s estate. The policies are self sufficient, and requiring no additional funding for the term of the policies.

NOTE 13 - FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Quoted market prices are generally not available for the Company’s financial instruments. Fair values are based on judgments regarding anticipated cash flows, future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates involve uncertainties and matters of judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.


	o	Long-Term Debt, Inclusive of Current Maturities - Based upon discounted cash flows and current borrowing rates with similar maturities, the book value of the Bank debt of approximately $19.1 million, $22.5 million and $15.8 million compares to fair values of $19.2 million, $22.8 million and $16.1 million respectively as of August 31, 2010, 2009 and 2008. Also included in the Company’s long-term debt was $19.2 million, $13.5, million and $15.5 million in tax exempt bonds, in comparison to the fair value of $19.2 million, $13.5 million and $15.5 million respectively for the periods ending August 31, 2010, 2009 and 2008.

	o	Proceeds for Bond Issuance Transferred to Restricted Investment – included in the Company’s current bond trust and restricted long-term other assets was $7.0 million in comparison to the fair value of $7.0 million as of August 31, 2010.

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

NOTE 14 – SUBSEQUENT EVENTS

The Company has considered subsequent events through the date the financial statements were issued.


Item 15c.	Exhibits


Index
3(i)		Articles of Amendment to the Articles of Incorporation of Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1996 as filed on November 21, 1996.
3(ii)		Articles of Incorporation of Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 33-94644), declared effective September 11, 1995.
3(iii)		Amended Bylaws of Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s7 Annual Report on Form 10-K for the fiscal year ended August 31, 2008 as filed on November 26, 2008.
10(a)		Growers’ Agreement (example of agreement which each Shareholder is required to sign).
10(b)		Amended and Restated Uniform Member Marketing Agreement by and between United Sugars Corporation and Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Annual Report on Form 10-k for the fiscal year ended August 31, 2007 as filed November 29, 2007.
10(e)		Memorandum of Understanding and Uniform Member Agreement by and between Midwest Agri-Commodities Company and Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2006 as filed on November 28, 2006.
10(k)		Agreement for Electrical Service. Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 33-94644), declared effective September 11, 1995.
10(l)		Master Coal Purchase and Sale Agreement and Railroad Equipment Lease Agreement (Confidential Treatment has been requested as to certain provisions).
10(m)		Minn-Dak Farmers Cooperative Pension Plan. Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 33-94644), declared effective September 11, 1995.
10(p)		Amendment to Minn-Dak Farmers Cooperative Pension Plan. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1997 as filed on November 25, 1997.
10(q)		Amendment to Minn-Dak Farmers Cooperative Pension Plan. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1998 as filed on November 24, 1998.
10(r)		David H. Roche Employment Agreement. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2001 as filed on November 29, 2001 and Amended and Restated Agreement dated August 27, 2010.
10(s)		Richland County Development Revenue Refunding Bond agreement dated February 18, 2010.
10(t)		CoBank revolving credit supplement dated November 15, 2010.
12		Statement re Computation of Ratio of Net Proceeds to Fixed Charges.
21		Subsidiaries of the Registrant. Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 33-94644), declared effective September 11, 1995.
31.1		Certification of the President/Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act.
31.2		Certification of the Executive Vice President/Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act.
31.3		Certification of the Controller/Chief Accounting Officer in accordance with Section 302 of the Sarbanes-Oxley Act.
32		Certification of the President/Chief Executive Officer and the Executive Vice President/Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act.
99.1		Audit Committee Charter. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2003 as filed on November 26, 2003.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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.


	MINN-DAK FARMERS COOPERATIVE

	BY	/S/ David H. Roche
		DAVID H. ROCHE, PRESIDENT AND CHIEF EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DUTIES INDICATED.


SIGNATURE	TITLE	REPORT DATE

/s/ David H. Roche	President and	11-24-10
David H. Roche	Chief Executive Officer

/s/ Steven M. Caspers	Executive Vice President and	11-24-10
Steven M. Caspers	Chief Financial Officer

/s/ Allen E. Larson	Controller and	11-24-10
Allen E. Larson	Chief Accounting Officer

/s/ Dale Blume		11-24-10
Dale Blume	Director

/s/ Dennis Butenhoff		11-24-10
Dennis Butenhoff	Director

/s/ Brent Davison		11-24-10
Brent Davison	Director

/s/ Doug Etten		11-24-10
Doug Etten	Director

/s/ Patrick Freese		11-24-10
Patrick Freese	Director

/s/ Dennis Klosterman		11-24-10
Dennis Klosterman	Director

/s/ Russell Mauch	Director	11-24-10
Russell Mauch

/s/ C Kevin Kutzer		11-24-10
C Kevin Kutzer	Director

/s/ Charles Steiner		11-24-10
Charles Steiner	Director

EX-10.A 2 minndak105883_ex10-a.htm GROWERS' AGREEMENT

Exhibit 10(a)

(REVISED, Effective 2011)
GROWERS AGREEMENT

(Applicable to all Farmer-Grower-Stockholders
of Minn-Dak Farmers Cooperative)

This agreement is entered into between _1030 ROBERT G BEYER , a farmer-grower-stockholder of Minn-Dak Farmers Cooperative, Wahpeton, North Dakota, whose mailing address is 6610 790TH STREET TINTAH, MN 56583, hereinafter referred to as the “Grower”; and MINN-DAK FARMERS COOPERATIVE of 7525 Red River Road, Wahpeton, North Dakota, hereinafter referred to as the “Cooperative”.

This Growers Agreement provides as follows:

1. The Grower agrees to prepare the land, plant, care for, harvest and deliver the product of 70 Units of stock times the acres per share authorized by the Board of Directors each year for the farming year commencing on 01-01-2011 and continuing for a period of one (1) year. (Each Unit consists of one share of the Company’s Class A Preferred Stock, par value $105 per share, one share of the Company’s Class B Preferred Stock, par value $75 per share and one share of the Company’s Class C Preferred Stock, par value $76 per share). At the end of each “farming year” the term of this agreement shall automatically be renewed for an additional period of one (1) year so that at the commencement of each year of farming, there shall be a term of one (1) year remaining, unless notice of termination shall have been given by the Cooperative to the grower prior to the beginning of any farming year with the termination effective as of the end of that year. For purposes of this agreement, a “farming year” shall commence on January 1 and run through December 31 of each year.

(a) The Grower agrees that in the planting of said sugarbeets the Grower will follow a crop rotation plan which will be established by the Cooperative from time to time. (See Addendum A for current crop rotation policy)

(b) The Grower agrees that annually the Grower will furnish and enter into an annual requirement agreement with the Cooperative setting forth the description of the land on which said sugarbeets will be grown and including such other information as may be required by the Cooperative. Each current annual requirement shall become a part of this agreement and be binding upon the parties hereto. The Grower shall report all changes to the Annual Requirement to the Agricultural Staff by August 1 of each year.

(d) The Grower agrees to notify and receive written approval from two members of the Agricultural Staff and the vice president of agriculture before acreage is destroyed.

(e) The Grower shall not plant sugarbeets on any land on which canola has been planted during any of the previous six years.

Any Grower who violates 1(d) will be required to pay the Cooperative a sum equal to 100% of the Cooperative’s direct overhead costs per acre on the authorized acreage less .1 acres per share. [i.e. at authorized acreage of 1.60, the direct overhead costs would be assessed using 1.60 less .1 acres = 1.50 acres/share] (See Addendum A for calculation of direct overhead costs per acre)

Any Grower who violates 1 (a), (b), (c) or (e), and such violation is discovered prior to harvest, will not be issued harvest cards until the acreage in violation has been destroyed. If the violation is not discovered until after the acreage has been harvested, the grower shall forfeit the crop raised on the acres determined to have been in violation. The forfeiture of the crop shall be implemented by reducing the grower’s total pounds of sugar by the pounds of sugar produced on the number of acres determined by the Board to be in violation, using the total farm average/acre. This will adjust downward all future payments for this crop made to the grower including the trucking payment. Any amount already paid for these pounds of sugar to the grower shall be deducted from the next beet payment to be made. In addition, the grower shall be required to sign a release authorizing the FSA Office to provide to Minn-Dak all certification of acres records for a three-year period following the year of the violation. These records will be used by the agriculturist for comparison with Minn-Dak records. If any discrepancy is found, it will be brought to the attention of the Board.

2. The Grower agrees to furnish the Cooperative with such information as it may request from time to time regarding the crop or crops covered by this agreement. Representatives of the Cooperative shall also have the right to enter the Grower’s beet fields from time to time during the growing and harvesting seasons to inspect the crops thereon and to take samples for testing in ascertaining the quality of the beets.

3. The Grower will harvest and deliver to the Cooperative all beets grown under this contract, said delivery to be made at such times and in such quantities and to such place or places as may be designated by the Cooperative. All beets delivered hereunder shall be properly topped as designated by the Cooperative’s Agricultural Department. All beets shall be subject to a proper deduction for tare. There shall be deducted from the gross weight of beets delivered hereunder, before net tons are determined, the Grower’s tare weight, as determined by the Cooperative’s method of sampling loads for tare and through the use of the Cooperative’s laboratory which measures each Grower’s beet sample for dirt, stones, trash and other foreign substances. Each Grower’s daily average tare percentage, as determined by all load samples of the Grower for that delivery day or delivery day by field, if field method is used by Grower, is used to determine the tare weight of all beets delivered by the Grower for that delivery day. The Cooperative has the option of rejecting any diseased, frozen, muddy, or damaged beets; beets with excessive weeds or which were improperly topped; beets which, in the Cooperative’s opinion, are not suitable for the manufacture of sugar; beets as to which in the Cooperative’s opinion, the terms and conditions of this contract have not been properly complied with or for any other bona fide reason.

4. Any grower who fails to plant by June 20 the authorized acreage less .1 acres per share [i.e. at an authorized acreage of 1.60, the direct overhead costs would be assessed using 1.60 less .1 acres = 1.50 acres/share] of Cooperative stock owned by the Grower in any one year, may be subject to a minimum penalty in a sum equal to 100% of the Cooperative’s direct overhead costs per acre and a maximum penalty of $1000 per acre found to be in violation following a hearing and a determination of such by the Board of Directors. (See Addendum A for calculation of direct overhead costs per acre)

5. Any Cooperative member grower who does not replant acreage through June 20 which his agriculturist determines necessary, may be required to pay the Cooperative a sum equal to 100% of the Cooperative’s direct overhead costs per acre in violation following a hearing and a determination of such by the Board of Directors. (See Addendum A for calculation of direct overhead costs per acre)

Such penalty will be assessed on the authorized acreage less .1 acres per share of stock owned, which such grower fails to replant through June 20.

6. The Cooperative may assess a penalty against any Grower who it determines, after a review by the Board of Directors and the Agricultural Staff, has not properly cared for the crop. The penalty shall be a sum up to 100% of the Cooperative’s direct overhead costs per acre. (See Addendum A for calculation of direct overhead costs per acre)

7. Any grower having acres unreported to the Cooperative over and above the Grower’s contracted acres plus the overplant permitted in that year after the August 1^st deadline for destroying acres, will be penalized for such excess of unreported acres in the following manner. First, there shall be a hearing before the Board of Directors and a finding as the number of acres in violation. Second, the following overplant penalties shall be assessed.

First Violation:

A. If the unreported acres are discovered prior to harvest, the sugarbeets shall be destroyed and the grower shall be assessed a penalty of $200 per acre found in violation.

B. If the unreported acres are discovered after harvest, the grower shall be assessed a penalty of $200 per acre found in violation. Further, the grower shall forfeit the crop raised on the acres determined to have been unreported. The forfeiture of the crop shall be implemented by reducing the grower’s total pounds of sugar by the pounds of sugar produced on the number of acres determined by the Board to be unreported, using the total farm average/acre. This will adjust downward all future payments for this crop made to the grower including the trucking payment. Any amount already paid for these pounds of sugar to the grower shall be deducted from the next beet payment to be made.

C. In addition to number one or two above, the grower shall be required to sign a release authorizing the FSA Office to provide to Minn-Dak all certification of acres records for a three-year period following the year of the violation. These records will be used by the field man for comparison with Minn-Dak records. If any discrepancy is found, it will be brought to the attention of the Board.

Second Violation:

In addition to the penalties stated under First Violation, the Grower shall be subject to a maximum penalty of $1000 per acre found to be in violation following a hearing by the Board of Directors.

8. It is understood and agreed that if any Governmental authority shall establish any restrictions, allotment or quota upon the growing, production or processing of beets, or the output, transportation or sale of beet sugar, then the Cooperative may reduce to the extent which it deems necessary the acreage of beets herein contracted for, and shall be obligated to purchase beets only from such reduced acreage.

_______ Initial

9. Grower agrees not to intentionally apply to the crop or land on which the crop is grown any pesticide chemical, or other substance, as defined in all applicable Federal and State laws, unless a regulation shall then be in effect, exempting such chemical from the necessity of a tolerance or establishing a tolerance for such chemical, in which event such chemical shall be applied to the crop or land only at such time and in such manner and quantities as shall be specified in the labeling of such chemical and so that any residue of such chemical on beets delivered hereunder shall be within the tolerance specified in such regulation. The Cooperative reserves the right to reject the delivery of any beets not complying with this provision. In addition, any Grower found to be in noncompliance with this provision, after hearing before the Board of Directors, at the discretion of the Board the Grower may be:


	a)	assessed all direct overhead costs (as defined in Addendum A – B) incurred by the Cooperative in each incident. As the result of the rejection of noncompliant beets;

	b)	assessed all direct costs (as defined in Addendum A - C) incurred by the Cooperative in each incident as the result of the rejection of noncompliant beets;

	c)	held liable for consequential damages including but not limited to the value of a lost pile of sugarbeets in the event that any contaminated sugarbeets are deposited into a pile and the pile must then be destroyed.

In addition, pursuant to Article XVI of the By Laws of Minn-Dak Farmers Cooperative, if the Board of Directors finds intentional or repeated violations or breach of contract, the Board of Directors shall in its discretion recall all common stock owned by such member, and the cooperative shall refund to him the par value or the book value of the stock whichever is less. In the event the common stock is recalled, the cooperative shall have the right, at its option, (a) to purchase the preferred shares at its book or par value, whichever is less, as determined by the Board of Directors; or (b) to require the transfer of any such stock at such book or par value, to any person eligible to hold it.

10. The Grower agrees that, in connection with the growing and delivery of beets under this contract, he will comply with all applicable laws, including but not limited to child and migrant labor laws, and all regulations or rulings relating thereto issued by any duly authorized governmental authority.

_______ Initial

11. Seed varieties to be planted by Growers must be approved by the Cooperative’s Seed Committee. All sugar beet seed to be planted by the Grower must be purchased by the Grower from the Cooperative with the exception of seed used in field test plots; however, all such test plot seed must be approved by the Cooperative’s Ag Staff. No sugarbeets raised from Biotech seed shall be delivered to the Cooperative until authorized by the Board of Directors. The Cooperative agrees to use its best efforts to obtain its seed inventory at the best possible prices and terms and to resell such seed to the Grower at no profit to the Cooperative. The Cooperative makes no warranty of merchantability, fitness for a particular purpose, productiveness or any other warranty as to any seed furnished by the Cooperative, except that seed furnished by the Cooperative is warranted, to the extent of the purchase price only, to be as described on the seed container within recognized tolerances. It is also expressly agreed that the Cooperative does not guarantee a crop. The Cooperative reserves the right to reject the delivery of any beets not complying with this provision and assess back to the grower direct costs incurred by the Cooperative in each incident. (See Addendum A for calculation of direct costs.)

In addition to the penalties stated above, in the event of a second violation, the Grower shall be subject to a maximum penalty of $1000 per acre found to be in violation following a hearing by the Board of Directors.

Further, any Grower who knowingly jeopardizes the processibility or marketability of the crop or a portion of the crop through actions, including but not limited to, use of nonlabeled chemicals or planting of unapproved beet seed varieties, may be held liable for damages incurred by the Cooperative including consequential damages.

12. The amount charged for all beet seed furnished by the Cooperative to the Grower hereunder, and all charges, penalties, costs and/or advances made to the Grower by the Cooperative shall constitute a debt from the Grower to the Cooperative which the Cooperative shall have the right to collect as in the case of any other contractual obligation. The Cooperative shall have the right, at its option, to treat any such amounts, advances or indebtedness as part payment for beets grown and delivered under this contract. Any such amounts, advances, or indebtedness which are due and payable or which hereafter may become due and payable from the Grower to the Cooperative shall be, become, and remain a first and prior lien on any payments from the Cooperative to the Grower which shall become due hereunder, or under any prior or subsequent beet contract between the Cooperative and the Grower.

13. The Cooperative will furnish all loading equipment at the loading stations, pay all freight charges from outside piling stations, and pay mileage on beets assigned to and delivered to all receiving stations in accordance with policies determined and amended by the Cooperative from time to time. (See Addendum A for current Receiving Station Regulation) Upon delivery to and acceptance by the Cooperative of the sugarbeets as provided for herein, title thereto shall be deemed to vest, and shall be vested, in the Cooperative.

Any Grower using an unauthorized truck(s) for the delivery of sugarbeets to a Cooperative piler will be subject to the following penalty:


1^st Violation:

A.	Upon determination by the Agriculturist and Vice President of Ag that a violation has occurred, the violator shall lose all unallocated trucks and one allocated truck, as determined by the cooperative, for the remainder of the harvest.

B.	Notification of violation will be sent to all members of the hauling group including shareholders and growers. This notification will include the following language: “All members of a hauling group are responsible for the actions of another member of that hauling group in regard to the use of unauthorized trucks.

C.	For three subsequent harvests:

	-	Special stickers will be issued to the hauling group in violation

	-	The special stickers will not be issued until just before main harvest and may be replaced periodically during the harvest

	-	The hauling group shall be subject to audit which may include, but is not limited to, spot checks of all stickers and trucks during harvest, and requiring the hauling group members to provide, and document to Minn-Dak, all license numbers of all trucks used by the hauling group.


	2^nd Violation:

	A.	All penalties listed above for 1^st violation

B. After a hearing before the Board of Directors, a $2,500/unallocated truck penalty will be assessed against the hauling group.


		First time violations by a hauling group shall always remain on the records of the cooperative, making them subject to the penalties for a 2^nd violation, should further violations occur.

14. Each delivery pool may harvest the number of acres equal to its stock acres multiplied by a “Harvest Factor”, as determined by the Board of Directors annually based on acreage of record as of August 10. Any acres in excess of those determined by the “Harvest Factor” calculation will be considered “at risk” acres. No “at risk” acres may be defoliated or harvested prior to receiving permission from the Cooperative, nor may the “at risk” acres by destroyed prior to being released by the Cooperative. After the completion of harvest, the Cooperative will audit (GPS verify) delivery pools for “at risk” acreage compliance. Each delivery pool’s respective agriculturist will measure the acres remaining. Any delivery pool found to have harvested more acreage than allocated under the “Harvest Factor” calculation shall not receive payment from the Cooperative for beets harvested from those “at risk” acres and be assessed a penalty of $1,000 per acre found in violation following a hearing before the Board of Directors and a finding made of the number of acres in violation.

_______ Initial

15. The Grower specifically acknowledges and agrees that the Grower may be required by the Cooperative to take back sugarbeets, dirt or other substances, if determined by the Board of Directors that hauling out is necessary and legally feasible.

16. Each year of this agreement, the Cooperative will pay to the Grower for beets delivered and accepted at the time and in the manner hereinafter provided, a price per pound of extractable sugar, determined to be as follows:

(a) Extractable pounds of sugar will be determined by the Cooperative in its laboratory from beet samples statistically taken from each Grower at its receiving stations. The beet samples will be tested for sugar content and purity, and said results used in a formula to determine extractable pounds of sugar delivered. (See Addendum A for calculation of extractable pounds of sugar.)

(b) In addition, the Board, in its sole discretion shall make a determination each year if an early harvest bonus shall be paid. If it is determined that an early harvest bonus will be paid, each Grower will be reviewed for eligibility for early harvest bonus extractable pounds of sugar. The bonus extractable pounds of sugar will be determined by a formula that takes into account the delivery date in early harvest, as well as the extractable pounds of sugar delivered on that same date. (See Addendum A for the current Bonus Sugar Formula and Early Harvest Delivery Policy.)

(c) Payment to the Grower will be an amount equal to the individual Grower’s total delivered extractable pounds of sugar (as determined in 16a.) plus the calculated pounds of early harvest bonus sugar (as determined in 16b.), multiplied by the price to be paid per pound of extractable sugar to all Growers.

(d) The price per pound of extractable sugar to all Growers will be determined by dividing the total Grower proceeds by the total pounds of extractable and bonus sugar delivered from all Growers. Grower’s proceeds are defined as the amount after deducting from gross sales, all costs, charges, expenses, and margins (including reserves but excluding payments to growers) as are regularly and customarily deducted from gross sales in accordance with the Cooperative’s system of accounting heretofore established.

(e) If in the opinion of the Board of Directors of the Cooperative, the working capital position of the Cooperative is at any time insufficient, the Cooperative may and shall retain from the price to be paid for beets such amount(s) as are deemed necessary by the Board of Directors, the deduction(s) to be made at such time(s) as the Board of Directors shall require; and such amounts(s) as may be retained shall be evidenced in the records of the Cooperative by equity credits in favor of the Shareholders.

17. Settlements shall be made as follows:

For all beets delivered from the beginning of harvest up to and including October 31st, initial payments shall be made on or about November 15th of the year in which beets are delivered to the Cooperative; for all beets delivered after October 31st, initial payment shall be made no later than the 15th day of each month for beets delivered during the previous calendar month. Further, each Grower agrees to the following:

(a) The first payment shall not exceed 65 percent of the estimated price to be paid per pound of extractable sugar to all Growers;

(b) The second payment shall be paid on the first Friday in February, and shall bring the total of the first and second payments to an amount not to exceed 70 percent of the estimated price to be paid per pound of extractable sugar to all Growers;

(c) The third payment shall be paid on the first Friday in April, and shall bring the total of the first, second and third payments to an amount not to exceed 80 percent of the estimated price to be paid per pound of extractable sugar to all Growers;

(d) The fourth payment shall be paid on the first Friday in July, and shall bring the total of the first, second, third and fourth payments to an amount not to exceed 95 percent of the estimated price to be paid per pound of extractable sugar to all Growers;

(e) The final payment shall be determined as of the end of the Cooperative’s fiscal year, after the Board of Directors has reviewed the final audited financial statements of the Cooperative; and shall bring the total of the payments to an amount equal to the price to be paid per pound of extractable sugar to all Growers.

18. The Grower is an independent contractor. Agricultural or other advice may be offered the Grower by the Cooperative’s representatives, but the Grower’s status as an independent contractor shall not be thereby affected. In no event shall the Cooperative be responsible for any failures or partial failures of the crop or damage to the beets or actions of the Grower.

19. In case of the bankruptcy of the Cooperative, the destruction of an integral part of the factory and the Cooperative’s failure or inability to rebuild or repair the same, or in the event of fire, strikes, accidents, acts of God and the public enemy, or other causes beyond the control of the parties which prevent the Grower from the performance of this contract or the Cooperative from utilizing the beets contracted for in the manufacture of sugar therefrom, shall excuse the respective parties hereto from the performance of this contract. Furthermore the Cooperative shall not be subject to any damage for failing to receive the sugarbeets of the Grower, the Grower hereby waiving and abandoning any rights or claims which the Grower may have for such damages, if any. However, in the event a Lendor shall through foreclosure or otherwise acquire in whole or in part the assets of the Cooperative, the Growers shall remain obligated hereunder as though the contract were originally entered into between the Growers and the Lendor.

20. The Grower acknowledges and agrees that the Grower may be liable to the Cooperative for damages in the event the Grower’s actions result in a loss to the Cooperative. Any Grower who knowingly jeopardizes the processibility or marketability of the crop or a portion of the crop through actions, including but not limited to, use of nonlabeled chemicals or planting of unapproved beet seed varieties, may be held liable for damages incurred by the Cooperative including consequential damages.

21. It is mutually agreed that there are no other or different documents, representations, promises or agreements affecting this agreement, and that this agreement, the annual requirement, the Articles of Incorporation and By-Laws of the Cooperative, constitute the full, free and complete understanding of the parties.

22. No agent of the Cooperative has any authority to change, waive, or modify any of the terms or provisions of this contract.

23. This Agreement may be amended effective at the beginning of any calendar year by the Cooperative giving notice to the Grower of the amendment by November 1 of the prior year and providing a new Agreement to the Grower/Shareholder for signature prior to the planting of the crop.

24. This agreement shall be binding upon the Grower, the Grower’s heirs, legal representative, successors, and assigns, and upon the Cooperative, its successors and assigns, and shall not be transferable by the Grower without the written consent of the Cooperative, its successors and assigns; and shall apply equally to owned, rented or leased acres.

25. By signing this Growers Agreement, the parties specifically agree that all prior Growers Agreements between the Grower and the Cooperative are hereby canceled effective on the first day of the year following the date this agreement is signed by both parties.

IN WITNESS WHERE OF, the Grower has hereunto executed this Growers Agreement on this _____ day of _______________, 20__.



Farmer-Grower-Stockholder		Farmer-Grower-Stockholder

ACCEPTANCE BY COOPERATIVE

This Growers Agreement is hereby accepted by the Board of Directors of Minn-Dak Farmers Cooperative on this _____ day of ___________________, 20 _____.


		MINN-DAK FARMERS COOPERATIVE

	By

ADDENDUM A
2010


A.	(G.A.-1a,) CROP ROTATION POLICY: The board of directors adopted a policy for a three-year rotation for all sugarbeets, including irrigated acres, unless authorized by the board in an emergency situation only.

B.	(G.A.-5,6) DIRECT OVERHEAD COST CALCULATION: Direct Overhead Cost Calculation is defined as a penalty equal to 100% of the cooperative’s prior fiscal year’s actual fixed costs per acre for the number acres involved. Overhead costs vary from year to year depending on the crop size. Total actual fixed costs for the prior fiscal year divided by the authorized acreage per share of stock owned would equal the fixed cost per acre. The cost per acre times the number of acres involved equals the amount of the penalty. An example for 25 affected acres would be:

	$24,254,875 FY2010 fixed costs / 115,520 2009 crop (the authorized acreage per share of stock owned) = $209.96 fixed cost per acre
	$209.96 fixed cost per acre X 25 acres = $5,249.00 penalty

C.	(G.A.-9,11) DIRECT COSTS DEFINITION: Direct costs are defined as all direct and indirect costs incurred by the cooperative to mitigate said violation of the Growers Agreement. These would include but not be limited to the following: director(s) fees, analysis and testing costs and travel expenses and attorney fees.


D.	(G.A.-13)	RECEIVING STATION REGULATIONS
		(2010)


	1.	Grower shall pick up cards, stickers, letters and truck numbers at preharvest meetings.

	2.	Designated sticker certification will be required on all trucks to be unloaded at factory.

	3.	Growers with 24-hour trucks shall haul the full 24 hours.

	4.	In case of breakdowns, the Agriculturist must be contacted prior to any substitute truck being authorized.

	5.	In the absence of the Agriculturist, the piler operator has the authority to enforce Minn-Dak Policy regarding harvest deliveries.

	6.	The grower is ultimately responsible for a driver’s conduct at the receiving station. Drivers suspected of operating trucks under the influence of drugs/alcohol will not be allowed to unload their trucks and will be reported to law enforcement officials. Growers will be notified if any of their drivers are driving unsafely at the receiving station. Any driver considered unfit to drive or who refuses to conform to receiving station rules will be dismissed by the Agriculturist. Any criminal conduct will be reported to law enforcement officials.


	7.	Growers whose drivers block the scale intentionally, or act in any manner which causes delay in delivery of sugarbeets at the receiving station in any way, will not be allowed to deliver any beets for a minimum of 24 hours as determined by the Agriculturist.

	8.	Drivers shall not drive over beets at the toe of the pile, miss their tare dirt or drive over an unprotected portion of the power cord.


E.	(G.A.-16a) EXTRACTABLE SUGAR FORMULA: The formula for arriving at total pounds of extractable sugar delivered per grower is as follows:


	1. Each day’s delivery of beets by each grower is sampled for RDS (which is converted to purity), sugar content and net weight of beets.

	2. The samples are averaged for purity and sugar content, and those averages are plugged into a formula to determine pounds of extractable sugar per ton of beets delivered.
	The formula is:

[40.4(S)] - [2040(S)] - - 12 = Pounds of Sugar Per Ton
Q

Where: S = % sugar content

Q = Purity

3. After determining the pounds of extractable sugar per ton for the grower for that day’s delivery of beets, that resultant number is multiplied by the total net tons of beets delivered for that day, resulting in the total pounds of extractable sugar delivered for that day for each grower. Each day’s deliveries are calculated and accumulated until the total pounds of extractable sugar delivered for the entire harvest, by grower, has been determined.


F.	(G.A.-16b) EARLY HARVEST DELIVERY POLICY (including Bonus Sugar Formula):

1. The plan is based upon a premium payment for beet deliveries starting the first day of early harvest and continuing to the first day of stockpiling.

2. Premium payment is on a daily declining percentage rate of two percent (2%). The initial premium will be determined by the interval from the first day of early harvest, up to, but not including the first day of main harvest.


Example:	Early-harvest starts September	10
	Main harvest starts October	5
		25	day interval

All deliveries on September 10 will receive a fifty percent (50%) adjustment, on September 11, a 48% adjustment, and continue the adjustment decline at 2% per day until deliveries on October 4 would receive only a 2% adjustment.

3. The actual pounds of extractable sugar delivered on any delivery day will be multiplied by the premium adjustment for that day. This “Bonus Sugar” will be added to the grower final total extractable sugar delivery and paid for at the final average rate per pound for the crop.

4. Growers will receive and be expected to deliver the assigned pre-harvest tonnage quotas on the specific scheduled receiving station operating days. The agriculture department must approve and be informed of any quota adjustments between growers. All quotas are net tons.

5. Unless specifically requested by the agriculture department, no premium payment will be paid on deliveries in excess of assigned quotas.

6. Premium payment example:

September 10 = 50% premium adjustment
Grower delivers 100 tons with 20,000 pounds of extractable sugar
20,000 X 50% - 10,000 pounds of Bonus Sugar

September 20 = 30% premium adjustment
Grower delivers 100 tons with 20,000 pounds of extractable sugar
20,000 X 30% - 6,000 pounds Bonus Sugar

September 30 = 10% premium adjustment
Grower delivers 100 tons with 20,000 pounds of extractable sugar
20,000 X 10% - 2,000 pounds Bonus Sugar

EX-10.L 3 minndak105883_ex10-l.htm COAL PURCHASE AND SALE AGREEMENT

Exhibit 10(1)

Coal Purchase and Sale Agreement

between

Minn-Dak Farmers Cooperative

and

Enserco Energy Inc.

The prices for coal have been redacted for business confidentiality.

COAL PURCHASE AND SALE AGREEMENT

This Coal Purchase and Sale Agreement (the “Agreement”) is entered into and is effective as of the 1^st day of September, 2010, by and between Enserco Energy lnc., a South Dakota corporation (“Enserco” or “Seller”), and Minn-Dak Farmers Cooperative, a North Dakota cooperative, (“Minn-Dak” or “Buyer”). Both Enserco and Minn-Dak may be individually referred to herein as “Party” or collectively as “Parties”. Any capitalized term used but not otherwise defined in the Agreement shall have its meaning set forth in Article 27 of the Agreement.

RECITALS

WHEREAS, Minn-Dak operates a sugar beet processing plant in North Dakota, and requires coal to operate such plant; and

WHEREAS, Enserco is engaged in the business of trading coal and other energy commodities; and

WHEREAS, Minn-Dak desires to purchase coal from Enserco, and Enserco desires to sell coal to Minn-Dak.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth hereafter, the Parties to this Agreement, intending to be legally bound, hereby agree as follows:

ARTICLE 1 – TERM


1.1	This Agreement shall begin on September 1, 2010 and shall continue in effect until August 31, 2013, unless terminated earlier in accordance with Article 13 (“Term”).

ARTICLE 2 – QUANTITY


2.1	Except as otherwise provided for hereunder, Buyer shall be obligated to purchase and pay for, and Seller shall be obligated to sell and deliver a minimum of 100,000 Tons of Coal during each 12 month period over the Term (“Base Quantity”).

2.2	Buyer shall also have the right to purchase and pay for, and Seller shall be obligated to sell and deliver any additional quantity of Coal above the Base Quantity necessary to fuel its sugar beet plant, or to sell back to Seller in conjunction with any third party sales under Article 23, in any 12 month period (“Additional Quantity”). Buyer shall provide Seller with a written, non-binding notice of the quantity of Coal it expects to take during each 12 month period at least 60 days prior to the start of each such period.

ARTICLE 3 – DELIVERY, TRANSPORTATION, and EQUIPMENT DAMAGE


3.1	All Coal (as defined in Article 6.1) delivered hereunder shall be delivered to Buyer F.O.B. Railcar (as defined in Article 3.3) at the source mine (“Delivery Point”).

3.2	Seller shall deliver the Coal to Buyer over the Term in accordance with monthly delivery schedules to be submitted by Buyer not later than 60 days prior to the beginning of each applicable delivery month (“Delivery Schedule”). Delivery Schedules shall be based on a ratable monthly basis unless otherwise agreed to in writing by both Parties. Within 15 days of receipt of such Delivery Schedules, Seller may notify Buyer of any objections to such Delivery Schedules, and the Parties shall thereafter work together in good faith to reach a mutually acceptable Delivery Schedule.


3.3	Seller shall be responsible for providing the railcars (“Railcars”) necessary to deliver the Coal to Buyer as unit trains. Unit trains shall be comprised of a minimum of 115 Railcars per train (a “Unit Train”), with the exact size of the Unit Trains to be determined by Seller. Each Unit Train of Coal shall constitute a “Shipment”.

3.4	Buyer shall be responsible for arranging and paying for all rail transportation services to move the Unit Trains from the Delivery Point to the Red River Valley & Western Railroad rail yard at Wahpeton, ND (“Rail Yard”), to shuttle the Railcars from the Rail Yard to Buyer’s facility (“Unloading Point”) to unload the Coal, and to return the clean and empty Railcars to Seller at the source mine.

3.5	Buyer shall promptly notify Seller of the arrival of each Unit Train at the Rail Yard. Upon arrival of each Unit Train at the Rail Yard from the source mine, Buyer shall have 12 days from the date of such arrival (“Free Time”) in which to complete unloading of the Railcars at the Unloading Point and to return the empty and clean Railcars to the Rail Yard prior to Buyer either transporting the Railcars to the source mine or placing Railcars into storage in accordance with Article 4. Buyer shall promptly return Railcars to Rail Yard upon unloading the Coal at the Unloading Point, and Buyer shall have no rights to use Railcars for any other purpose. In the event that Buyer fails to return a minimum of 115 Railcars to Rail Yard in an empty and clean state before the expiration of the Free Time, Buyer shall incur and pay Seller a charge Confidential per Railcar per day for all 115 Railcars (Whether such Railcars have been returned or not) until such time that a minimum of 115 Railcars have been returned to Rail Yard in an empty and clean condition. Buyer shall notify Seller when the 115^th Railcar has been returned to the Rail Yard and again after the last of the Railcars has been returned to the Rail Yard (if any Unit Train contains more than 115 cars).


3.6	Buyer shall return custody of the Railcars to Seller in as good a condition, order and repair as when Buyer takes custody of the Railcars at the Delivery Point. Buyer shall be responsible for, and shall indemnify Seller for any and all direct costs associated with, or resulting from damage to or destruction of Railcars if such Railcars are damaged or destroyed while in Buyer’s or Buyer’s agent’s custody from the Delivery Point until the time custody of the Railcars is returned to Seller. Settlement for damage or destruction of Railcars shall be made by Buyer in accordance with the Field Office Manual of the Code of Interchange Rules, promulgated by the Association of American Railroads (“Code of Rules”).

3.7	In order to obtain a more favorable rail transportation rate, and at Buyer’s request, Seller has agreed to deliver all Coal hereunder in aluminum Railcars. Buyer and Seller recognize that Coal stored in aluminum Railcars can experience unloading problems due to freezing of the Coal during the winter months. Seller agrees to use commercially reasonable efforts to work with Buyer to help minimize any such unloading problems. However, notwithstanding anything to the contrary herein, Buyer agrees that any costs incurred because of delivery complications or delays due to the inability to unload Coal from Railcars at the Unloading Point because of frozen Coal in such Railcars (including, but not limited to, any charges incurred under Article 3.5, above, because of inability to return a minimum of 115 Railcars before the expiration of Free Time) shall be solely for Buyer’s account.

3.8	At Buyer’s request, Seller shall make commercially reasonable efforts to treat the Coal with freeze control agents or other additives as directed by Buyer. Buyer shall thereafter reimburse Seller for the actual cost of materials, including costs for the application of the freeze control agents or other additives. Seller shall invoice Buyer and Buyer shall pay Seller for such freeze conditioning in accordance with Article 11.1.

ARTICLE 4 – RAILCAR STORAGE


4.1	Prior to the commencement of Free Time for any delivery, Seller shall notify Buyer if Buyer should return the Railcars to the source mine specified by Seller, or if Seller requires Buyer to store Railcars at the Rail Yard. If Seller notifies Buyer to return Railcars to the source mine, Buyer shall transport all Railcars to the source mine at Buyer’s expense. If Seller notifies Buyer that it requires storage of Railcars, Buyer shall arrange for such storage at the Rail Yard until such time as Seller notifies Buyer that Railcars should be transported by Buyer to the source mine, at which time Buyer shall so transport all Railcars to the source mine at Buyer’s expense. All costs and fees associated with storage of Railcars shall be for Buyer’s account. Seller shall not be limited in the number of times it places Railcars into storage or removes Railcars from storage during the Term. Seller will use commercially reasonable efforts to utilize the Railcars when not in use for deliveries under this Agreement in order to minimize storage time at Rail Yard and Buyer’s associated costs of storage.

4.2	Buyer shall be responsible for, and shall indemnify Seller for, any and all direct costs associated with, or resulting from damage to, or destruction of Railcars if such Railcars are damaged or destroyed while Buyer or Buyer’s agent is storing Railcars under this Agreement. Settlement for damage or destruction shall be in accordance with the Code of Rules.

TITLE AND RISK OF LOSS


5.1	Title to the Coal and all risk of loss shall pass to Buyer upon delivery at the Delivery Point. Seller and Buyer shall each indemnify, defend and hold harmless the other Party and its Affiliates and their officers, directors, agents, and employees from and against any liabilities, losses, claims, damages, penalties, causes of action, or suits arising out of or in connection with its failure to comply with its obligations under this Agreement while title to and risk of loss of the Coal is vested in the indemnifying Party, unless caused by the gross negligence or willful misconduct of the indemnified Party or its Affiliates, or their officers, directors, agents, or employees.

ARTICLE 6 – COAL SPECIFICATIONS


6.1	All Coal sold and delivered under this Agreement shall be crushed, sub-bituminous, containing no synthetic fuels, substantially free from any extraneous material (including, but not limited to, mining debris, bone, slate, iron, steel, petroleum coke, earth, rock pyrite, wood or blasting wire), be Substantially consistent in quality throughout a Shipment, with no intermediate sizes to be added or removed, and otherwise meeting the specifications of this Agreement (“Coal”).

6.2	Except as provided under Article 6.3, all Coal delivered hereunder shall be sourced from the Black Thunder Mine located in the Powder River Basin of Wyoming, and shall meet the specifications for PRB 8800 as follows:


Characteristic	Base Standard	Rejection Limit
Btu/lb:	8800	<8600
Sulfur (%)	0.29	>0.45
Moisture (%)	27.0	>30.0
Ash (%)	5.5	>7.5
Sodium (%)	1.2	>2.8
Top Size (inches)	<3	N/A


6.3	Upon 45 days written notice to Seller prior to any scheduled Shipment, Buyer shall have the right to have Seller deliver Coal meeting PRB 8400 specifications, with Seller having the right to source such Coal from any of the Rawhide, Buckskin, Eagle Butte, or Dry Fork mines located in the Powder River Basin of Wyoming. Any PRB 8400 Coal delivered hereunder shall meet the following specifications:


Characteristic	Base Standard	Rejection Limit
Btu/lb:	8400	<8200
Sulfur (%)	0.29	>0.45
Moisture (%)	30.0	>32.0
Ash (%)	5.5	>8.0
Sodium (%)	1.2	2.8
Top Size (inches)	<3	N/A

ARTICLE 7 – SAMPLING AND ANALYSIS


7.1	Seller, or Seller’s agent, shall cause a representative Coal sample (“Mine Sample”) to be taken from each Shipment at the Railcar load point. The sample shall be taken in accordance with ASTM Standards, using a mechanical sampler or other ASTM approved procedure. Seller shall have an active quality control program at the load point, assuring the mechanical sampler is in proper working condition and has been bias-tested by an independent third party at least once each calendar year. If an alternate sampling procedure is used, Seller shall be capable of demonstrating the alternate procedure conforms to ASTM Standards and the procedure produces accurate and repeatable results. Sampling, sample preparation, and sample analysis shall be performed at Seller’s expense in accordance with ASTM Standards. Each sample shall be divided into three (3) parts in accordance with ASTM Standards and placed in separate airtight containers. One (1) part of each sample shall be analyzed by an independent certified laboratory selected by Seller (“Commercial Lab”); one (1) part shall be retained by the Commercial Lab for a period of 45 days or shipped per Buyer’s directions; and one (1) part shall be retained by the Commercial Lab for a period of 45 days to be used in a Referee Analysis, if necessary (“Referee Split”).


7.2	The Commercial Lab shall perform a short proximate analysis on an “as-received” basis and in accordance with ASTM Standards. Such analysis shall include total moisture, ash, Btu and sulfur and any other specification that has a Rejection Limit. At the request and the expense of either Party, additional analyses may be performed. The results of such analysis shall be defined as the “Shipment Quality.” As soon as available, but in any event no later than 48 hours after the completion of the loading of each Shipment, Seller shall cause the shipping data, which shall include Shipment Weight (as defined In Article 9.1) and Shipment Quality, to be reported to Buyer (“Shipping Report”).

7.3	Buyer or Seller may request an analysis of the Referee Split within forty-five (45) days of the delivery of a Shipment (“Referee Analysis”). If a Referee Analysis is requested, the Referee Split shall be sent for analysis to an independent third party laboratory agreeable to both Buyer and Seller. If the Referee Analysis is within interlaboratory ASTM Reproducibility Limits, then the original Shipment Quality shall control, and the cost of the Referee Analysis shall be paid by the Party requesting such analysis. If the Referee Analysis is not within the ASTM Reproducibility Limits, then the Referee Analysis shall control, and the cost of such analysis shall be paid by the non-requesting Party.

7.4	Upon providing Seller 24-hour advance written notice, Buyer may, at Buyer’s risk and expense, arrange for an independent laboratory to witness the collection of samples during the loading of any Shipment at the load point. If the Independent laboratory designated by Buyer visits any of Seller’s mines and/or load points for purposes of sampling inspections, the independent laboratory must show evidence of insurance and must conform to all mine safety procedures while at such location.

ARTICLE 8 – REJECTION


8.1	If any Shipment of Coal triggers any of the Rejection Limits identified under the specifications provided in Articles 6.2 or 6.3, as appropriate (a “non-Conforming Shipment”), Buyer shall have the option, exercisable by written notice to Seller not later than 48 hours of receipt of the Shipping Report of either (i) rejecting such Non-Conforming Shipment while enroute, but prior to unloading thereof, or (ii) accepting any Non-Conforming Shipment with a price adjustment agreed to between Seller and Buyer. If Buyer timely fails to exercise its rejection rights hereunder as to a Non-Conforming Shipment, Buyer shall be deemed to have waived such rights with respect to that Non-Conforming Shipment only. If Buyer timely rejects the Non-Conforming Shipment, Seller shall be responsible for promptly transporting the rejected Coal to an alternative destination determined by Seller and, if applicable, promptly unloading such Coal, and shall reimburse Buyer for all reasonable costs and expenses associated with the transportation, storage, handling and removal of the Non-Conforming Shipment, if any. Seller shall use commercially reasonable efforts to replace the rejected Coal as soon as possible. Any Shipment delivered in any calendar month that has been rejected by Buyer in accordance with this section and not made up within 30 days after such rejection shall be deemed to have not been delivered for purposes of calculating damages under this Agreement.

ARTICLE 9 – WEIGHING


9.1	Unless otherwise agreed by the Parties, each Shipment shall be weighed at Seller’s expense (“Shipment Weights”). Weighing shall be by means of a certified batch weighing system, certified track scales, or, in the absence of both, a batch weighing system and certified track scales, by official railroad weights. If Seller’s scales are not available to determine the valid net weight of all of the railcars in a Unit Train but valid weights are obtained for 30 or more railcars in such train, the arithmetic average of all of the valid net weights of the 30 or more railcars in such train shall be used as the net weight for each railcar in such train for which a valid net weight was not determined by Seller’s scales. If Seller’s scales are inoperative or fail to determine the valid net weight of at least 30 railcars in a Unit Train, the weighted arithmetic average of the net railcar weights of the previous ten (10). Unit Trainloads of Coal shipped to Buyer shall be used as the net weight for each of the unweighed railcars in such train. The calculation of the weighted arithmetic average net weight for the previous ten (10) Unit Trainloads shall exclude all bad-order railcars, which were not loaded, and any trainload of Coal for which the net weights were estimated on 30 or more railcars. Absent manifest error, the weights as determined hereunder will be the basis on which invoices will be rendered and payments made.

9.2	Seller shall cause the mine source to test, calibrate, and certify the scales at the source approximately every six (6) months, so to maintain them at a scale accuracy in accordance with the guidelines outlined in Handbook 44 of the National Institute of Standards and Technology. Seller shall use commercially reasonable efforts to notify Buyer as soon as it knows the date and time for such testing, calibration, and certification, and Buyer shall have the right to witness such events.


9.3	Buyer, at its own risk and expense, shall have the right to have a representative present at any and all times to observe weighing of the Coal. If either Party should at any time question the accuracy of the scales at the source, such Party may request a prompt test and, if necessary, adjustment of such track scales or batch weighing system at its expense by an entity mutually agreed upon by Buyer and Seller. Should an inaccuracy be discovered during the test, and if an adjustment of such track scales or batch weighing system is necessary, then the Party requesting such test shall be reimbursed for its expense in requesting a test and adjustment of such track scales or batch weighing system from the other, non-disputing party.

ARTICLE 10 – PRICE, PRICE ADJUSTMENTS, AND TAXES


10.1	For all Shipments of Coal sold to Buyer under this Agreement, Buyer shall pay Seller a Base Price per ton, which sh Confidential per ton for all 8800 Coal, confidential per ton for all 8400 Coal. The Base Price shall include the cost of use by Buyer of the Railcars.

10.2	The Base Price for each Shipment of Coal sold to Buyer will also include a price adjustment based upon the calorific value and sulfur content of the Coal as follows:

BTU Adjustment

If the actual Btu on an as-received basis of any Shipment accepted by Buyer is other than the Standard Btu, an adjustment shall be calculated based on each Shipment as follows:

BTU Adjustment = ((Actual Shipment Btu/lb – Standard Btu/lb) ÷ Standard Btu/lb ) × Base Price

SO₂ Adjustment

If the actual SO₂ Ibs/MMBTU on an as-received basis of any Shipment accepted by Buyer is other than the Standard SO₂ Ibs/MMBTU, an adjustment shall be calculated based on each Shipment as follows:

SO₂ Adjustment = ( (Standard SO₂ Ibs/MMBTU – Actual Shipment SO₂ Ibs/MMBTU) × Actual Shipment Btu/lb × E × F ) / 1,000,000

E is the price of one SO₂ Allowance. The price of an SO₂ Allowance is determined by the monthly SO₂ price indices published in Argus Air Daily published by Argus Media Ltd. or any successor publication (“Air Daily”) for the vintage year of the SO₂ Index Month

F is the number of SO₂ Allowances required to emit one ton of SO₂ during the current calendar year in a state covered by the Clean Air Interstate Rule under 40 CFR 96.202 (“CAIR”) (see Final Rule, 60 Fed. Reg. 91 (May 12, 2005) at p. 25363). F shall be as follows (irrespective of where the coal is delivered or burned): Year 2010 – 2014: F=2.00; and After 2014: F = 2.86.

In the event the information contained in Air Daily is no longer published or a change in the methodology, law, regulations or industry standards has occurred that will materially alter the information, a substitute calculation shall be mutually agreed to by the Parties.

The above information reflects that pursuant to CAIR, currently two SO₂ Allowances are required to emit one ton of SO₂ during a calendar year in a state covered by CAIR and that in 2015, this will Increase to 2.86 SO₂ Allowances required to emit one ton of SO₂. The Parties recognize that CAIR is required to be modified pursuant to a court order, and agree that SO₂ Adjustments shall be calculated using the ratios of SO₂ Allowances to tons of SO₂ as set forth above, or as may be otherwise changed by the modification of CAIR or any replacement or Successor rules or laws, as applicable, to as closely as possible reflect that number of SO₂ Allowances required to emit one ton of SO₂ in a state covered by CAIR or any replacement thereof.


10.3	Seller shall be solely responsible for all assessments, fees, costs, expenses, and taxes (including but not limited to any ad valorem, property, occupation, severance, generation, first use, conservation, Btu or energy, utility, gross receipts, privilege, sales, use, consumption, excise, lease, transaction, and other taxes, governmental charges, licenses, fees, permits and assessments, or increases thereto, other than taxes based on net income) imposed by governmental authorities or other third parties (“Third Party Impositions”) relating to the mining, beneficiation, production, sale, use, loading and delivery of Coal to Buyer at the Delivery Point or in any way accrued or levied prior to the transfer of title to the Coal to Buyer, and including, without limitation, all severance taxes, royalties, black lung fees, reclamation fees and other costs, charges and liabilities. Buyer shall be solely responsible for Third Party Impositions relating to the Coal accrued or levied at or after the transfer of title to the Coal to Buyer, including, but not limited to sales or use tax, if applicable.

ARTICLE 11 – BILLING, PAYMENT, NETTING, & SETOFF


11.1	After each Shipment month, Seller shall provide Buyer with an invoice, setting forth (i) the aggregate sum owed pursuant to Article 10.1 for Coal delivered to Buyer at the Delivery Point, including a per Shipment itemization; (ii) Quality Adjustments pursuant to Article 10.2 for such Coal, if any, or for previous Shipments and their supporting calculation; (iii) charges for treatment pursuant to Article 3.8 for such Coal, if any; and (iv) any other charges owed by Buyer pursuant to this Agreement. No later than five (5) Business Days after receipt of Seller’s invoice, Buyer shall pay Seller via electronic means in immediately available United States funds the amount set forth on such invoice. Over due payments shall accrue interest at the Interest Rate from the due date until the date paid.

	Payment shall be sent to Seller to the following account:


Account Name:	Enserco Energy Inc.
Account#	341 8229 328
Bank Name:	Wells Fargo Bank, N.A.
ABA Bank #	121 000 248


11.2	If Buyer disputes in good faith part or all of an invoice, then Buyer shall provide notice of the disputed portion, including a written explanation of the dispute, and pay any undisputed portion no later than the due date. If an amount disputed by Buyer is subsequently determined due, then such amount shall be paid by Buyer to Seller within five (5) Business Days of such determination, along with interest at the Interest Rate, accrued from the original due date through date paid. If a disputed amount is paid and it is subsequently determined such amount was not due, then such amount shall be refunded from Seller to Buyer within five (5) Business Days of such determination, along with interest calculated at the Interest Rate, accrued from the original due date through the date refunded. All invoices will be final and not subject to further adjustments or correction unless objection to the accuracy thereof is made prior to one (1) year from the rendition thereof.


11.3	If the Parties are required to pay amounts to each other under this Agreement in the same invoice period, then such amounts with respect to each Party may be aggregated and the Parties may discharge their obligations to pay through netting; in which case, the Party owing the greater aggregate amount shall pay to the other Party the difference between the amounts owed.

11.4	Each Party reserves to itself all rights, setoffs, counterclaims, and other remedies and defenses to the extent not expressly denied or waived herein which such Party has or may be entitled to arising from or out of this Agreement.

11.5	If a Party fails to pay amounts under this Agreement within ten (10) Business Days after receipt of an invoice, unless such amount is the subject of a dispute as provided above, in addition to the rights and remedies otherwise provided in this Agreement, the aggrieved Party shall have the right to suspend performance hereunder. If such failure to pay continues for an additional five (5) Business Days, the aggrieved Party shall have the right to terminate this Agreement and shall be entitled to all other rights under this Agreement.

ARTICLE 12 – FORCE MAJEURE


12.1	The term “Force Majeure” as used herein shall mean an unanticipated or unexpected act or event that is not reasonably within the control and is without the fault of the Party claiming Force Majeure including without limitation, acts of God; acts of the public enemy; insurrections; terrorism; riots; labor disputes; boycotts; fires; explosions; floods; breakdowns of or damage to major components or equipment of Buyer’s plants or Seller’s mines; embargoes; acts of judicial or military authorities; acts of governmental authorities; inability to obtain necessary permits, licenses, and governmental approvals after applying for same with reasonable diligence; or other causes which prevent the producing, processing, and/or loading of Coal by Seller, or the receiving, accepting, unloading and/or utilizing of Coal by Buyer. Force Majeure includes the failure of a Party’s contractor(s) to furnish labor, services, Coal, materials or equipment in accordance with its contractual obligations (but solely to the extent such failure is itself due to Force Majeure).

12.2	If, because of Force Majeure, either Party fails to perform any of its obligations under this Agreement (other than the obligation of a Party to pay money), and if such Party shall promptly give to the other Party written notice of such Force Majeure, then the obligation of the Party giving such notice shall be suspended to the extent made necessary by such Force Majeure and during its continuance; provided, the Party giving such notice shall use good faith efforts to eliminate such Force Majeure, insofar as reasonably possible, with a minimum of delay. Should the situation of Force Majeure exceed 90 consecutive days, so long as the Force Majeure event is continuing, the Party not claiming Force Majeure may, at its option, terminate this Agreement in whole or in part and neither Party shall have any further obligation to the other Party; provided, however, each Party shall be obligated to make any payments which had become due and payable prior to such termination. Any deficiencies in deliveries of Coal caused by an event of Force Majeure shall not be made up, except by mutual agreement. The Party claiming a Force Majeure shall provide suitable proof to the other Party to substantiate any claim made under this Article 12.


12.3	Both Parties agree the settlement of strikes and lockouts shall be entirely within the discretion of the Party having the difficulty. The above requirement that any Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes and lockouts by acceding to the demands of the opposing Party when such course is inadvisable in the discretion of the Party claiming a Force Majeure.

12.4	Notwithstanding the provisions of Article 12.1, the following shall not constitute an event of Force Majeure: the loss of Buyer’s markets or Buyer’s inability to economically use or resell Coal purchased hereunder; the loss of Seller’s supply or Seller’s ability to sell Coal to a market at a more advantageous price; the change in the market price of Coal or price of power; or any regulatory or contractual disallowance of the pass-through of the costs of Coal or other related costs.

ARTICLE 13 – DEFAULT, REMEDIES, AND TERMINATION


13.1	Unless excused by Force Majeure or the other Party’s failure to perform, the occurrence of one or more of the following events with respect to a Party (the “Defaulting Party”) shall constitute an “Event of Default””: (i) a Party’s failure to make, when due, any payment required hereunder, if such failure is not remedied within three (3) Business Days of being provided written notice of such failure by the other Party; (ii) a Party’s failure to comply in good faith with any material obligations under this Agreement (except for the obligation to deliver or receive Coal, the exclusive remedies for which are provided for in Articles 13.3 and 13.4, respectively) and such non-compliance is not cured within five (5) Business Days of being provided written notice of such failure by the other Party; provided that if it shall be impracticable or impossible to remedy such failure within such five (5) Business Day period, then the cure period shall be extended for an additional period reasonably necessary to remedy such failure, subject to the condition that during the additional period, the potential Defaulting Party shall be diligently pursuing a remedy for the failure; (iii) a Party or its guarantor are subject to a Bankruptcy Proceeding; (iv) a failure of a Party’s guarantor to perform any covenant in a guaranty of such Party’s obligations that is provided to the other Party and such non-performance is not cured within five (5) Business Days of being provided written notice of such failure by the other Party; (v) a material representation or warranty made by a Party herein shall prove to be untrue in a material respect when made; (vi) a Party fails to establish, maintain, extend, increase or enhance Credit Assurance when required pursuant to this Agreement and such failure is not cured within three (3) Business Days of being provided written notice of such failure by the other Party; or (vii) a Party repudiates its obligations hereunder.


13.2	Upon the occurrence of an Event of Default and while such Event of Default continues, the Non-Defaulting Party may (A) suspend performance of its obligations under the Agreement, (B) establish by notice to the Defaulting Party a date on which the Agreement shall terminate, which date shall be no earlier than the date such notice is effective and no later than twenty (20) days after such notice is effective (“Early Termination Date”), and calculate its resulting Gains, Losses, and Costs, and/or (C) exercise such other remedies as may be provided under this Agreement. The Gains, Losses, and Costs shall be determined by calculating the value of the amount of Coal that the Parties contracted to be delivered under the Agreement but has not been delivered (“Terminated Quantity”) using the applicable Price and comparing to the value of the Terminated Quantity, using relevant market price(s) quoted by a bona fide third-party or that are reasonably expected to be available in the market to replace the Terminated Quantity. In calculating the Terminated Quantity, the quantity contracted to be delivered shall be the Base Quantity. The Non-Defaulting Party shall aggregate such Gains, Losses and Costs with respect to the Terminated Quantity into a single net amount (the “Termination Payment”) and notify the Defaulting Party of such amount. If the Non-Defaulting Party’s aggregate Losses and Costs exceed its aggregate Gains, then the Defaulting Party shall, within five (5) days of receipt of such notice, pay the net amount to the Non-Defaulting Party, which amount shall bear interest at the Interest Rate from the Early Termination Date through the date paid. If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs, then the Non-Defaulting Party, shall, within 20 Business Days of the Early Termination Date, pay the net amount (without interest) to the Defaulting Party; provided, however, that notwithstanding any provision to the contrary contained in this Agreement, the Non-Defaulting Party may withhold any payment otherwise owed to the Defaulting Party hereunder until the Non-Defaulting Party receives confirmation satisfactory, in the reasonable opinion of the Non-Defaulting Party, that (I) all amounts due and payable as of the Early Termination Date by the Defaulting Party under the Transaction have been fully and finally paid, and (ii) all other obligations of the Defaulting Party to the Non-Defaulting Party that are due under the Agreement as of the Early Termination Date have been fully and finally performed. As used herein with respect to a Party: (i) “Costs” shall mean, brokerage fees, commissions and other similar transaction costs and expenses reasonably incurred by such Party in entering into new agreements to replace the Terminated Quantity and reasonable attorneys’ fees, if any, incurred in connection with enforcing its rights under the Agreement; (ii) “Gains” shall mean, with respect to a Party, the present value of the economic benefit (exclusive of Costs), if any, to such Party, resulting from the termination of its obligations with respect to the Terminated Quantity, determined in a commercially reasonable manner and (iii) “Losses” shall mean, with respect to a Party, the present value of the economic loss (exclusive of Costs), if any, to such Party resulting from the termination of its obligations with respect to the Terminated Quantity, determined in a commercially reasonable manner. A Party’s Gains, Losses or Costs may not include penalties or similar charges unless such penalties or charges are unavoidably assessed by a third party.


13.3	Unless excused by Force Majeure or Buyer’s failure to perform, if Seller fails to deliver all or part of the Base Quantity or Additional Quantity of Coal to be delivered hereunder, then Seller shall pay Buyer for each Ton of such deficiency (“Seller’s Deficiency”) the positive difference, if any, obtained by subtracting the Base Price for the Seller’s Deficiency from the Replacement Price. “Replacement Price” means the price at which Buyer, acting in a commercially reasonable manner, purchases substitute Coal for the Seller’s Deficiency or, absent such a purchase, the market price for such quantity of Coal (F.O.B., Delivery Point), as determined by Buyer in a commercially reasonable manner. It is expressly agreed that Buyer shall not be required to enter into a replacement transaction in order to determine the Replacement Price. Seller shall make any payment owed to Buyer pursuant to this Paragraph 13.3 within five (5) days after receipt of notice from Buyer requesting payment of such amount.

13.4	Unless excused by Force Majeure or Seller’s failure to perform, if Buyer fails to accept all or part of the Base Quantity or Additional Quantity of Coal to be delivered hereunder, then Buyer shall pay Seller for each Ton of such deficiency (“Buyer’s Deficiency”) the positive difference, if any, obtained by subtracting the Sales Price from the Price. “Sales Price” means the price at which Seller, acting in a commercially reasonable manner, resells the Buyer’s Deficiency (including additional transportation charges, if any, incurred by Seller as a result of delivering Coal at a location other than the relevant Delivery Point) or, absent such a sale, the market price for such quantity of coal (F.O.B., Delivery Point), as determined by Seller in a commercially reasonable manner. It is expressly agreed that Seller shall not be required to enter into a replacement transaction in order to determine the Sales Price. Buyer shall make any payment owed to Seller pursuant to this Paragraph 13.4 within five (5) days after receipt of notice from Seller requesting payment of such amount.


13.5	Each Party stipulates that the payment obligations set forth in this Article 13 are reasonable in light of the anticipated harm and the difficulty of estimation or calculation of actual damages, and each Party waives the right to contest such payments as an unreasonable penalty. The remedies set forth in Articles 13.3 and 13.4 shall be the sole and exclusive remedy of the aggrieved Party for the failure of the other Party to deliver or accept, as the case may be, the quantity of Coal specified herein prior to the Early Termination Date, and all other damages and remedies are hereby waived as to such failure(s).

ARTICLE 14 – RECORDS, AUDITS, AND ACCESS


14.1	Seller shall maintain books and records relating to the supply of Coal under this Agreement and the calendar year applicable Transaction for a period of not less than two (2) years after the end of each calendar year for all Coal tendered during such.

14.2	Upon reasonable notice and during normal business hours, Buyer and/or Buyer’s independent auditors shall have the right to inspect Seller’s books and records relating to all provisions of this Agreement which include Coal quality, quantity shipped, and price adjustments or as may be necessary to satisfy inquiries from governmental or regulatory agencies, but only to the extent necessary to verify the accuracy of any statement, charges or computations made pursuant to this Agreement and/or a Transaction; provided, however, that no adjustment for any statement of payment will be made unless objection to the accuracy thereof was made in writing, in reference hereto, prior to the lapse of one (1) year from the rendition thereof. Seller shall make a reasonable effort to facilitate Buyer’s Inspection of such records in Seller’s possession. Buyer and its auditors, to the extent permitted by law or regulation, shall treat all such information as confidential.

ARTICLE 15 – NOTICES


15.1	Except as expressly provided otherwise, any notice, election or other correspondence required or permitted hereunder shall be in writing and delivered by letter, facsimile, electronically or other documentary form. Notice by facsimile, electronic means, or hand delivery shall be deemed to have been received (and effective) by the close of the Business Day on which it was transmitted or hand delivered. Notice by overnight mail or courier shall be deemed to have been received one (1) Business Day after it was sent.


	Notices to Minn-Dak:
	Minn-Dak Farmers Cooperative
	Attn: Purchasing and A/P
	7525 Red River Rd
	Wahpeton ND 58075
	Fax 701-671-1369

	Scheduling to Minn-Dak:
	Attn: Purchasing & Factory Clerk
	Fax 701-671-1369
	purchasing@mdf.coop
	vnelson@mdf.coop


	Notices to Enserco:
	Enserco Energy Inc.
	Attn: Coal Trading
	1515 Wynkoop, Suite 500
	Denver, CO 80202
	Fax: 303-476-5992

	With copy, that shall not constitute notice, to:

	Enserco Energy Inc.
	Attn: legal Counsel
	1515 Wynkoop, Suite 500
	Denver, CO 80202
	Fax: 303-476-5989

	Scheduling to Enserco:
	Attn: Coal Trading
	Fax: 303-476-5992
	Email: coalnominations@blackhillscorporation.com


	The Parties’ addresses may be changed upon written notice in the manner provided above, and no amendment hereof shall be required for a change of address under this Article 15.1.

ARTICLE 16 – WARRANTY, LIMITATION OF LIABILITY, DUTY TO
MITIGATE, AND INDEMNIFICATION


16.1	FOR BOTH MINN-DAK FARMERS COOPERATIVE AND ENSERCO ENERGY INC., A BREACH OF ANY PROVISION HEREUNDER FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY’S LIABILITY HEREUNDER SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE HEREBY WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, A PARTY’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE HEREBY WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, WHETHER BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

16.2	EXCEPT AS EXPRESSLY SETFORTH HEREIN, SELLER MAKES NO WARRANTY, EXPRESSED OR IMPLIED, AS TO THE QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE COAL TO BE DELIVERED UNDER THIS AGREEMENT OR AS TO THE RESULTS TO BE OBTAINED FROM THE USE OF SUCH COAL.


16.3	Each Party agrees it has a commercially reasonable good faith duty to mitigate damages hereunder. Each Party will use commercially reasonable efforts to minimize any damages it may incur as a result of the other Party’s performance or non-performance of the Agreement (except that neither Party shall be required to enter into a replacement transaction as provided under this Agreement).

16.4	Each Party shall indemnify, defend, and hold the other Party harmless from and against any and all third party claims arising out of or resulting from the willful acts or negligence of such Party, its agents, and employees.

ARTICLE 17 – LIMITATION ON WAIVER


17.1	No waiver by either Party of any one or more defaults of the other Party in the performance of this Agreement shall operate or be construed as a waiver of any future default, or defaults, whether of a like or different character.

ARTICLE 18 – CONFIDENTIALITY


18.1	The Parties shall protect the confidentiality of the terms of this Agreement and neither this Agreement nor any of its terms shall be disclosed to any other person unless such disclosure is: (i) agreed to in writing by the Parties prior to release; (ii) required by law; (iii) required by jurisdictional regulation pursuant to the request of any regulatory authorities (including, without limitation, state utility commissions or boards, the Federal Energy Regulatory Commission, the U.S. Securities and Exchange Commission and tax authorities); or (iv) to attorneys, auditors, consultants or other outside experts of the Parties if said individuals are advised of the confidential nature of the information and said individuals agree to maintain the confidentiality of the information. Where the law requires such disclosure, notice shall be given to the other Party, and to the extent possible, such notice shall be given in advance of disclosure.

ARTICLE 19 – ENTIRETY AND AMENDMENTS


19.1	This Agreement constitutes the entire agreement between the Parties. This Agreement may not be amended except in a written instrument making reference hereto signed by the Parties.

ARTICLE 20 – SUCCESSOR AND ASSIGNS


20.1	Neither Party shall assign the Agreement without the prior written consent of the other Party, which consent may not be unreasonably withheld or delayed. Notwithstanding the foregoing, either Party may, without consent from the other Party (and without relieving itself from liability hereunder), (a) transfer, sell, pledge, encumber or assign the Agreement or the accounts, revenues, or proceeds hereof in connection with a financing or any other financial arrangement; (b) transfer or assign the Agreement to an Affiliate of such Party if such Affiliate’s creditworthiness and ability to perform the duties under this Agreement are the same or better than the assigning Party; or (c) transfer or assign the Agreement to any person or entity succeeding to all or substantially all of the assets of such Party; provided, however, that in each such case any such assignee shall agree in writing to be bound by the Agreement.

ARTICLE 21 – GOVERNING LAW


21.1	This Agreement shall be governed by and construed in accordance with the laws in the State of Colorado.

ARTICLE 22 – INTERPRETATION


22.1	The Parties acknowledge that each Party and its counsel have reviewed this Agreement and that the rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not be employed in the interpretation of this Agreement.

ARTICLE 23 – RESALE


23.1	As part of the consideration for Seller entering into this Agreement, Buyer grants to Seller the exclusive right to purchase Coal sourced from Coal stockpiled at Buyer’s plant for Seller to sell to third parties during the Term of this Agreement. The Parties shall cooperate to identify such third parties. The terms of sale of any of Buyer’s Coal to Seller for sale to third parties shall be mutually agreed to between Buyer and Seller.

ARTICLE 24 – DISPUTE RESOLUTION


24.1	Any dispute between the Parties arising under this Agreement shall be referred for resolution to a senior representative of each Party. Upon receipt of a notice describing the dispute, designating the notifying Party’s senior representative, and indicating the dispute to be resolved by the Parties’ senior representatives under this Agreement, the other Party shall promptly designate its senior representative and notify the notifying Party. The designated senior representatives shall attempt to resolve the dispute on an informal basis as promptly as practicable. If the dispute has not been resolved within 30 days after the notifying Party’s notice was received by the Other Party, or within such other period as the Parties may jointly agree in writing, either Party may pursue whatever relief or remedy it deems appropriate.

ARTICLE 25 – CREDIT ASSURANCE


25.1	If a Party (“Requesting Party”) has reasonable grounds to believe the other Party (“Providing Party”) or such Party’s guarantor has suffered a Material Adverse Change after the date of this Agreement, then the Requesting Party may deliver a written demand to the Providing Party requiring Credit Assurance in a form reasonably acceptable to the Requesting Party; provided, however, that in no event shall the Requesting Party require the value of such Credit Assurance with respect to this Agreement on any day to exceed the amount that would be payable by the Providing Party as a Termination Payment, if such day were an Early Termination Date. The Providing Party shall deliver such Credit Assurance to the Requesting Party within three (3) Business Days.

ARTICLE 26 – SURVIVAL


26.1	The provisions of Articles 13 through 22 and Articles 24 and 26 shall survive the termination of this Agreement.

ARTICLE 27 – DEFINITIONS


“Affiliate” shall mean, with respect to a Party, any other party (other than an individual) that directly/indirectly, through one (1) or more intermediaries, controls or is controlled by, or is under common control with, such Party. For this purpose, “control^” shall mean direct or indirect ownership of a 50% or more of the outstanding capital stock or other equity interests having ordinary voting power.

“ASTM” shall mean the American Society for Testing and Materials.

“ASTM Reproducibility Limits” shall mean the limits for permissible differences for reproducibility listed within the relevant ASTM Standard.


“ASTM Standards” shall mean the then-current, applicable and published standards of the American Society for Testing and Materials.

“Bankruptcy Proceeding” means with respect to a Party or entity, such Party or entity (a) makes an assignment or any general arrangement for the benefit of creditors, (b) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy or similar law for the protection of creditors, (c) has such a petition filed against it and such petition is not withdrawn or dismissed within 30 days after such filing, (d) otherwise becomes bankrupt or insolvent (however evidenced), or (e) is unable to pay its debts as they fall due.

“Business Day” shall mean any day except a Saturday, Sunday, or a Federal Reserve Bank holiday. A Business Day shall open at 8:00 a.m. and close at 5:00 p.m. eastern prevailing time.

“Credit Assurance” shall mean collateral deemed acceptable by the Requesting Party, which may be in the form of prepayment, cash collateral, Letter(s) of Credit, or other security, in a form acceptable to the Requesting Party.

“Interest Rate” shall mean the lower of (i) one percent (1%) over the then-current U.S. prime rate, as listed in the Money Rates section of The Wall Street Journal on the first day of the month in which such interest was calculated, and (ii) the maximum lawful rate.

“Letter of Credit” shall mean one or more irrevocable and nontransferable standby letters of credit issued by a U.S. commercial bank or a foreign bank with a U.S. branch and with such bank having a credit rating of at least A- from Standard & Poor’s Ratings Group and A3 from Moody’s Investor Services, Inc.,

EX-10.S 4 minndak105883_ex10-s.htm RICHLAND COUNTY DEV. REVENUE REFUNDING BOND AGREEMENT

Exhibit 10(s)

LOAN AGREEMENT

between

RICHLAND COUNTY, NORTH DAKOTA

and

MINN-DAK FARMERS COOPERATIVE

regarding

$12,240,000

RICHLAND COUNTY, NORTH DAKOTA

VARIABLE RATE DEMAND

INDUSTRIAL DEVELOPMENT REVENUE REFUNDING BONDS

(MINN-DAK FARMERS COOPERATIVE PROJECT)

SERIES 2010A

and

$7,000,000

RICHLAND COUNTY, NORTH DAKOTA

VARIABLE RATE DEMAND

RECOVERY ZONE FACILITY REVENUE BONDS

(MINN-DAK FARMERS COOPERATIVE PROJECT)

SERIES 2010B

Dated as of February 1, 2010

Certain rights of Richland County, North Dakota in this Loan Agreement have been pledged and assigned to Wells Fargo Bank, National Association, Minneapolis, Minnesota, as Trustee, under an Indenture of Trust dated as of February 1, 2010, between the County and the Trustee.

TABLE OF CONTENTS
(This Table of Contents is not part of the
Loan Agreement and is only for convenience of reference)


		Page

PARTIES		1-1

ARTICLE I
DEFINITIONS

Section 1.1.	Definitions	1-1
Section 1.2.	Interpretation	1-5

ARTICLE II
REPRESENTATIONS AND WARRANTIES

Section 2.1.	Representations by the Issuer	2-1
Section 2.2.	Representations and Warranties by the Company	2-1
Section 2.3.	Representations of the Company Regarding Federal Tax Matters	2-2

ARTICLE III
CONSTRUCTION OF PROJECT; REFUNDING OF PRIOR BONDS

Section 3.1.	Acquisition and Construction of Project by Company	3-1
Section 3.2.	Payment of Costs of the Project by Company	3-1
Section 3.3.	Disbursements from Project Fund	3-1
Section 3.4.	Enforcement of Contract and Surety Bonds	3-2
Section 3.5.	Plans and Specifications	3-2
Section 3.6.	Establishment of Completion Date	3-2
Section 3.7.	Refunding of Prior Bonds	3-3
Section 3.8.	Obligation of the Company to Cooperate in Furnishing Documents to Trustee	3-3

ARTICLE IV
ISSUANCE OF THE BONDS; INVESTMENT OF FUNDS

Section 4.1.	Agreement to Issue Bonds	4-1
Section 4.2.	The Loan	4-1
Section 4.3.	Investment of Moneys	4-1

ARTICLE V
EFFECTIVE DATE OF AGREEMENT; DURATION OF TERM; PAYMENT AND OTHER PROVISIONS

Section 5.1.	Effective Date and Duration of Agreement	5-1

-i-


Section 5.2.	Basic Payments and Other Amounts Payable	5-1
Section 5.3.	Certain Company Obligations Unconditional	5-3
Section 5.4.	Basic Payments and Other Payments Assigned	5-3
Section 5.5.	Maintenance and Modification of the Projects by the Company	5-4
Section 5.6.	Taxes, Other Governmental Charges and Utility Charges	5-4
Section 5.7.	Insurance	5-5
Section 5.8.	Determination of Taxability	5-5
Section 5.9.	Optional Tender Purchases and Mandatory Purchases	5-5

ARTICLE VI
CASUALTY AND CONDEMNATION

Section 6.1.	Casualty	6-1
Section 6.2.	Condemnation	6-1
Section 6.3.	Failure to Restore Projects; Application of Net Proceeds	6-1
Section 6.4.	Cooperation	6-1
Section 6.5.	Effect of Damage, Destruction or Condemnation	6-1

ARTICLE VII SPECIAL COVENANTS

Section 7.1.	No Warranty of Condition or Suitability by the Issuer; Issuer to Maintain Existence	7-1
Section 7.2.	Right of Access to the Projects	7-1
Section 7.3.	The Company to Maintain its Existence; Conditions Under Which Exceptions Permitted	7-1
Section 7.4.	Further Assurances and Corrective Instruments	7-1
Section 7.5.	The Issuer and Company Representatives	7-1
Section 7.6.	Removal of Liens Respecting Company Payments	7-1
Section 7.7.	Release and Indemnification	7-2
Section 7.8.	Compliance with the Indenture	7-3
Section 7.9.	Delivery of Substitute Credit	7-3
Section 7.10.	Annual Statement	7-3

ARTICLE VIII
ASSIGNMENT, SALE, LEASING OF PROJECTS

Section 8.1.	Assignment of Agreement; or Leasing of Projects	8-1
Section 8.2.	Sale and Encumbrance of Projects	8-1

ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES

Section 9.1.	Events of Default Defined	9-1
Section 9.2.	Remedies on Default	9-2

-ii-


Section 9.3.	No Remedy Exclusive	9-2
Section 9.4.	Agreement to Pay Attorneys’ Fees and Expenses	9-3
Section 9.5.	No Additional Waiver Implied by One Waiver	9-3
Section 9.6.	Rights of Credit Provider	9-3

ARTICLE X
COMPANY OPTIONS

Section 10.1.	Optional Termination Upon Discharge of Indenture	10-1
Section 10.2.	Optional Prepayment of Rent Because of Casualty or Condemnation	10-1
Section 10.3.	Optional Redemption of Bonds	10-2

ARTICLE XI
MISCELLANEOUS

Section 11.1.	Notices	11-1
Section 11.2.	Binding Effect	11-1
Section 11.3.	Severability	11-2
Section 11.4.	Amounts Remaining in Funds	11-2
Section 11.5.	Amendments, Changes and Modifications	11-2
Section 11.6.	Execution in Counterparts	11-2
Section 11.7.	Captions	11-2
Section 11.8.	Recording and Filing	11-2
Section 11.9.	Law to Govern	11-2
Section 11.10.	Limitation on Issuer’s Liability	11-3
Section 11.11.	Credit Not in Effect	11-3

SIGNATURES		11-4

EXHIBIT A: DESCRIPTION OF PRIOR PROJECTS		A-1
EXHIBIT B: DESCRIPTION OF RECOVERY ZONE PROJECTS		B-1
EXHIBIT C: CERTIFICATE OF REQUISITION		C-l

-iii-

LOAN AGREEMENT

THIS LOAN AGREEMENT is entered into as of February 1, 2010 (the “Agreement”), by and between RICHLAND COUNTY, a political subdivision of the State of North Dakota (the “Issuer”), and MINN-DAKFARMERS COOPERATIVE, a North Dakota cooperative association (the “Company”).

ARTICLE I

DEFINITIONS

SECTION 1.1. DEFINITIONS. Unless a different meaning clearly appears from the context, all capitalized terms shall have the meanings defined in this Section, or if not so defined, as defined in the Indenture:

“Act” means North Dakota Century Code, Chapter 40-57, applicable as of the Date of Issue.

“Act of Bankruptcy” means the filing of a petition in bankruptcy by or against the Company or any guarantor of the Company’s obligations under the United States Bankruptcy Code.

“Additional Payments” means the amounts payable as such under Section 5.2(b) and (d) and Section 5.9.

“Agreement” means this Loan Agreement, as amended from time to time in accordance with the Indenture.

“Bank” means the same as that term is defined in the Indenture.

“Basic Payments” means the payments required under Section 5.2(a).

“Bond Counsel” means the same as that term is defined in the Indenture.

“Bond Fund” means the same as that term is defined in the Indenture.

“Bond Year” means the same as that term is defined in the Indenture.

“Bondholder” or “Holder” means, when used with reference to a Bond or Bonds, the registered owner of any Outstanding Bond or Bonds.

“Bonds” means, collectively, the Series 2010A Bonds and the Series 2010B Bonds.

“Business Day” means the same as that term is defined in the Indenture.

“Call Date” means February 18, 2010, the date on which the Prior Bonds will be redeemed.

1-1

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

“Company” means Minn-Dak Farmers Cooperative, a North Dakota cooperative association, its successors and assigns.

“Company Representative” means the same as that term is defined in the Indenture.

“Conversion Date” means the same as that term is defined in the Indenture.

“Costs of Issuance” means any and all costs and expenses relating to the issuance, sale and delivery of the Bonds, including, but not limited to, Underwriter’s discount or commission, all fees and expenses of legal counsel, financial consultants, feasibility consultants, accountants, any fee to be paid to the Issuer, printing costs, costs of preparation and reproduction of documents, filing and recording fees, initial fees and charges of the Trustee, and any other cost, charge or fee in connection with the original issuance of the Bonds which are treated as “issuance costs” within the meaning of Section 147(g) of the Code.

“Credit” means the same as that term is defined in the Indenture.

“Credit Provider” means the same as that term is defined in the Indenture.

“Date of Issue” means the same as that term is defined in the Indenture.

“Determination of Taxability” means the same as that term is defined in the Indenture.

“Eligible Funds” means the same as that term is defined in the Indenture.

“Event of Default” means an event defined as such under Section 9.1.

“Facilities” means the Company’s sugar beet processing facilities in Richland County, North Dakota.

“Fund” means the same as that term is defined in the Indenture.

“Indenture” means the Indenture of Trust of even date herewith between Issuer and the Trustee, and any amendment thereof permitted by the Indenture.

“Insurance and Award Fund” means the same as that term is defined in the Indenture.

“Interest Payment Date” means the same as that term is defined in the Indenture.

“Interest Rate Period” means the same as that term is defined in the Indenture.

“Investment Obligations” means the same as that term is defined in the Indenture.

1-2

“Issuer” means Richland County, a political subdivision of the State, and any successors or assigns.

“Issuer Representative” means any person at any time designated to act on behalf of the Issuer by a written certificate furnished to the Company, the Trustee and the Credit Provider containing the specimen signature of such person and signed on behalf the Issuer by the Chair of the Board of County Commissioners or County Auditor of the Issuer.

“Mandatory Purchase” means the same as that term is defined in the Indenture.

“Mandatory Tender Date” means the same as that term is defined in the Indenture.

“Net Proceeds” means the same as that term is defined in the Indenture.

“Opinion of Counsel” means the same as that term is defined in the Indenture.

“Optional Tender Date” means the same as that term is defined in the Indenture.

“Optional Tender Purchase” means the same as that term is defined in the Indenture.

“Payments” means Basic Payments and Additional Payments.

“Plans” means the plans and specifications for the acquisition and construction of the Recovery Zone Projects.

“Principal Office” means the same as that term is defined in the Indenture.

“Prior Bonds” means, collectively, the Series 1996A Bonds, the Series 1996B Bonds and the Series 2002 Bonds.

“Prior Indentures” means the Indenture of Trust between the Issuer and First Trust National Association, now known as U.S. Bank National Association, dated as of January 1, 1996; and the Indenture of Trust between the Issuer and Wells Fargo Bank Minnesota, National Association, dated as of February 1, 2002, relating to the Prior Bonds.

“Prior Projects” means all items of machinery, equipment, fixtures and functionally related property described on Exhibit A attached hereto acquired and installed with the proceeds of the Prior Bonds and used in connection with solid waste disposal facilities within the meaning of Section 142(a)(6) of the Code or manufacturing facilities within the meaning of Section 144(a)(12) of the Code.

“Project Fund” means the same as that term is defined in the Indenture.

“Projects” means collectively the Prior Projects and the Recovery Zone Projects.

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“Purchase Account” means the same as that term is defined in the Indenture.

“Purchase Price” means the same as that term is defined in the Indenture.

“Qualifying Costs” means (i) expenses or costs for “recovery zone property” which means any property to which Section 168 of the Code applies (relating to the accelerated cost recovery system) or would apply but for Section 179 of the Code (relating to electing to expense certain depreciable business assets) if: (a) such property was constructed, reconstructed, renovated, or acquired by purchase by the Company after August 3, 2009; (b) the original use of which in Richland County, North Dakota commences with the Company; (c) substantially all of the use of which is in Richland County, North Dakota and is in the active conduct of a qualified business (as defined in Section 1400U-3(c)(1) of the Code; and (d) such expenses or costs were not incurred more than sixty (60) days prior to November 2, 2009, the Official Action Date, or (ii) to pay Costs of Issuance, provided such Costs of Issuance do not exceed two percent (2%) of the proceeds of the Series 2010B Bonds.

“Rebate Amount” means the same as that term is defined in the Indenture.

“Recovery Zone Projects” means all items of machinery, equipment, fixtures and functionally related property described on Exhibit B attached hereto acquired and installed with the proceeds of the Series 2010B Bonds and used in connection with Company’s sugar beet processing facilities.

“Redemption Date” means the same as that term is defined in the Indenture.

“Reimbursement Agreement” means the same as that term is defined in the Indenture.

“Remarketing Agent” means W.R. Taylor & Company, LLC, Montgomery, Alabama, its successors and assigns.

“Remarketing Agreement” means the Remarketing Agreement of even date herewith between the Company and Remarketing Agent.

“Series 1996A Bonds” means the Issuer’s Solid Waste Disposal Revenue Bonds (Minn-Dak Farmers Cooperative Project), Series 1996A, dated January 25, 1996, issued in the original principal amount of $11,000,000.

“Series 1996B Bonds” means the Issuer’s Industrial Development Revenue Bonds (Minn-Dak Farmers Cooperative Project), Series 1996B, dated February 13, 1996, issued in the original principal amount of $1,000,000.

“Series 2002 Bonds” means the Issuer’s Solid Waste Disposal Revenue Bonds (Minn-Dak Farmers Cooperative Project), Series 2002, dated February 28, 2002, issued in the original principal amount of $14,000,000.

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“Series 2010A Bonds” means the Issuer’s Variable Rate Demand Industrial Development Revenue Refunding Bonds (Minn-Dak Farmers Cooperative Project), Series 2010A described in the Indenture.

“Series 2010B Bonds” means the Issuer’s Variable Rate Demand Recovery Zone Facility Revenue Bonds (Minn-Dak Farmers Cooperative Project), Series 2010B described in the Indenture.

“State” means the State of North Dakota.

“Substitute Credit” means the same as that term is defined in the Indenture.

“Tender Date” means the same as that term is defined in the Indenture.

“Tendered Bonds” means the same as that term is defined in the Indenture.

“Term” means, subject to Section 9.6, the period from the Date of Issue to May 15, 2025, or earlier termination of this Agreement in accordance herewith.

“Trustee” means the same as that term is defined in the Indenture.

“Underwriter” means W.R. Taylor & Company, LLC, Montgomery, Alabama.

SECTION 1.2. INTERPRETATION.


	(a) Any reference herein to the Issuer or to any officer thereof includes entities or officials succeeding to their respective functions, duties or responsibilities pursuant to or by operation of law or who are lawfully performing their functions.

	(b) Unless the context indicates otherwise, words importing the singular number include the plural number, and vice versa. Words of any gender include the correlative words of the other gender, unless the sense indicates otherwise. “Articles” and “Sections” mentioned by number only are the respective Articles and Sections of this Agreement so numbered. The terms “hereof,” “hereby,” “herein,” “hereto,” “hereunder,” “hereinafter,” and similar terms refer to this Agreement; and the term “hereafter” means after, and the term “heretofore” means before, the Date of Issue. Reference to a “person” shall include any natural individual, corporation, cooperative, limited liability company, association, partnership, joint venture, trust or other legally recognized entity and any successor or assign not in contravention of this Agreement or the Indenture. Reference to any document or instrument shall mean each amendment thereof or supplement thereto.

	(c) Unless otherwise expressly provided herein, any terms pertaining to accounting or financial matters shall be interpreted conformity and in accordance with generally accepted accounting principles as the case may be.

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ARTICLE II

REPRESENTATIONS AND WARRANTIES

SECTION 2.1. REPRESENTATIONS BY THE ISSUER. The Issuer represents that:


	(a) The Issuer is a political subdivision of the State, duly organized and existing under the Constitution and the laws of the State. Under the provisions of the Act, the Issuer has the power to enter into this Agreement and carry out its obligations hereunder.

	(b) To the best knowledge of the Issuer, no member of the governing body or other officer or employee of the Issuer is directly or indirectly interested in this Agreement or, the issuance and sale of the Bonds.

	(c) The issuance and sale of the Bonds and the execution and delivery of this Agreement and the Indenture have been duly authorized by resolutions of the governing body of the Issuer adopted at meetings thereof duly called, by the affirmative vote of not less than a majority of its members.

	(d) The execution and delivery of this Agreement, the Indenture and the other agreements contemplated hereby to which the Issuer is a party will not conflict with, or constitute on the part of the Issuer a breach of or a default under, any agreement, indenture, mortgage, lease or other instrument to which the Issuer is subject or is a party or by which it is bound.

SECTION 2.2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company represents and warrants as of the Date of Issue that:

	(a) The Company is a cooperative association duly organized under the laws of the State of North Dakota, is not in violation of any provisions of its Articles of Incorporation (the “Articles”) pursuant to which it was formed or the laws of the State, has power to enter into this Agreement, the Reimbursement Agreement and the Remarketing Agreement and has duly authorized the execution, delivery and performance of this Agreement, the Reimbursement Agreement and the Remarketing Agreement.

	(b) Neither the execution and delivery of this Agreement, the Reimbursement Agreement, or the Remarketing Agreement, the consummation of the transactions contemplated hereby and thereby nor the fulfillment of or compliance with the terms and conditions of such instruments is prevented by, limited by or conflicts with or results in a breach of the terms, conditions or provisions of any restriction of the Articles, or the Company’s Bylaws or any evidence of indebtedness, agreement or instrument of whatever nature to which the Company is now a party or by which it is bound or constitutes a default under any of the foregoing.

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	(c) The Company is duly authorized and licensed to operate the Projects under the laws, rulings, regulations and ordinances of the State and the departments, agencies and political subdivisions thereof; the Company has obtained or will obtain all requisite approvals of the State and other federal, state, regional and local governmental bodies for the operation of the Projects; and the Prior Projects are, and the Recovery Zone Projects will be, in compliance with applicable federal, state and local zoning, subdivision, environmental, pollution control and building laws, regulations, codes and ordinances.

	(d) The Company shall operate or cause the Projects to be operated as a “project” within the meaning of the Act and otherwise comply with all provisions of the Act.

	(e) To the best of the Company’s knowledge, no member of the governing body or other officer or employee of the Issuer is directly or indirectly interested in the transaction contemplated by the Indenture, this Agreement, the Bonds, or any contract, agreement or job hereby contemplated to be entered into or undertaken.

	(f) There is no pending suit, action or proceeding against or affecting the Company before or by any court, arbitrator, administrative agency or other governmental authority which will materially and adversely affect the validity, as to the Company, of any of the transactions contemplated hereby or the ability of the Company to perform its obligations as contemplated hereby.

	(g) The Company has reviewed and approved the provisions of the Indenture and will observe and comply with any obligations of the Company stated therein.

SECTION 2.3. REPRESENTATIONS OF THE COMPANY REGARDING FEDERAL TAX MATTERS. The Company makes the following representations, understanding, after such consultation with such legal counsel as deemed appropriate, that the exclusion from gross income of interest on the Bonds for federal income tax purposes is dependent on the accuracy and truthfulness of such representations:

	(a) All of the proceeds of the Series 2010A Bonds will be used exclusively to refund the outstanding Prior Bonds on the Call Date. The principal amount of the Series 2010A Bonds does not exceed the outstanding principal amount of the Prior Bonds. At least ninety-five percent (95%) of the net proceeds of the Prior Bonds were used to provide the Prior Projects which constitute solid waste disposal facilities within the meaning of Section 142(a)(6) of the Code or manufacturing facilities within the meaning of Section 144(a)(12) of the Code.

	(b) The average maturity of the Series 2010A Bonds does not exceed one hundred twenty percent (120%) of the average remaining reasonably expected life of the Prior Projects financed with proceeds of the Prior Bonds within the meaning of Section 147(b) of the Code.

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	(c) Within the meaning of Section 150(b) of the Code, there has been no change in the use of the Prior Projects financed with the proceeds of the Prior Bonds.

	(d) Within the meaning of Section 147(c) of the Code, no portion of the proceeds of the Prior Bonds was used (directly or indirectly) for the acquisition of land (or an interest therein) to be used for farming purposes and not more than twenty-five percent (25%) of the net proceeds of the Prior Bonds was used (directly or indirectly) for the acquisition of any other land (or interest therein).

	(e) No portion of the Prior Bond proceeds was used to provide any airplane, sky box or other private luxury box, health club facility, facility primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises, all within the meaning of Section 147(e) of the Code.

	(f) The Prior Bonds and the Bonds satisfied the public approval requirements of Section 147(f) of the Code because the issuance of the Prior Bonds and the Bonds was approved by the Issuer (which has jurisdiction over the Projects) by its elected legislative body after reasonable public notice published in a newspaper of general circulation in the corporate limits of the Issuer not less than fourteen (14) days prior to the date of respective public hearings held with respect to the Prior Bonds and the Bonds.

	(g) No more than two percent (2%) of the proceeds of the Prior Bonds was used to finance Costs of Issuance of the Prior Bonds within the meaning of Section 147(g) of the Code. No proceeds of the Series 2010A Bonds and no more than two percent (2%) of the proceeds of the Series 2010B Bonds will be used to pay Costs of Issuance.

	(h) Within the meaning of Section 149(b) of the Code, the Bonds are not “federally guaranteed.”

	(i) In addition to the Bonds, no other obligations have been or are expected to be issued under Section 103(a) of the Code for sale at substantially the same time (within fifteen (15) days) as the Bonds are sold, pursuant to the same plan of financing, including bonds for the same facility or related facilities, and which are reasonably expected to be paid from substantially the same source of funds, determined without regard to guarantees from unrelated parties, or to otherwise become part of the same “issue of obligations” of the Bonds as described in Treasury Regulations Section 1.150-(1)(c)(1).

	(j) The Prior Bonds have received proper allocation of authority for the entire amount of the issues in accordance with Section 146 of the Code and the amount of the Series 2010A Bonds does not exceed the outstanding principal amount of the Prior Bonds.

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	(k) The Company will not use the proceeds of the Bonds in such a manner as to cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code. The Company shall determine or cause to be determined the Rebate Amount at or before such time as may be required by the Treasury Regulations. Upon each such determination, the Company shall furnish the Trustee a certificate showing how such calculation was made and shall pay to the United States the amounts required to be paid in respect of each Rebate Payment Date. The Company shall retain all records of the determination of the foregoing amounts until six (6) years after the Bonds have been fully paid.

	(l) The Company shall cooperate with the Issuer in filing all information returns required by Section 149(e) of the Code.

	(m) No net proceeds of the Prior Bonds was used to provide an office unless the office was located on the premises of the Prior Projects and not more than a de minimis amount of the functions to be performed at such office is not directly related to the day-to-day operations of the Company.

	(n) Ninety-five percent (95%) or more of the net proceeds of the Series 2010B Bonds will be used for Recovery Zone Property within the meaning of Section 1400U-3 of the Code and none of the Series 2010B Bond proceeds will used to provide any residential rental property, private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises, all within the meaning of Section 1400U-3 of the Code.

	(o) The Issuer has designated the Series 2010B Bonds as Recovery Zone Facility Bonds for purposes of Section 1400U-3 of the Code and the Series 2010B Bonds have received proper allocation of the Recovery Zone Facility Bond volume cap from the Issuer for the entire amount of the Series 2010B Bonds in accordance with Section 1400U-l of the Code.

	(p) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall not otherwise use any of the Bond proceeds or take or fail to take any action the effect of which would cause interest on the Bonds to be included in gross income of the Holders thereof for federal income tax purposes.

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ARTICLE III

CONSTRUCTION OF THE PROJECT;
REFUNDING OF PRIOR BONDS

SECTION 3.1. ACQUISITION AND CONSTRUCTION OF PROJECT BY COMPANY. The Issuer hereby authorizes the Company to provide for the acquisition, construction, equipping and installation of the Project without advertisement for bids as required for the acquisition and installation of other municipal property and pursuant to the terms and conditions of this Article III. Pursuant to such authority, the Company agrees that it will:


	(a) acquire, construct and equip the Project in accordance with the Plans;

	(b) cause insurance to be maintained during the construction period in accordance with the provisions of Section 5.7 hereof; and

	(c) use its best efforts to complete construction and installation of the Project by February 1, 2013.

SECTION 3.2. PAYMENT OF COSTS OF THE PROJECT BY COMPANY. The Company agrees that it will provide promptly any and all sums of money required to complete the acquisition, construction, equipping and installation of the Project to the extent not paid from the proceeds of the Series 2010B Bonds.

The Company agrees to pay from its own funds all Costs of Issuance incurred in connection with the Series 2010B Bonds in excess of two percent (2%) of the proceeds of the Series 2010B Bonds.

SECTION 3.3. DISBURSEMENTS FROM PROJECT FUND. The proceeds of the Series 2010B Bonds and any Company funds deposited in the Project Fund will be disbursed by the Trustee in accordance with the terms of this Agreement upon receipt of a certificate (substantially in the form of Exhibit C attached hereto) signed by a Company Representative, evidencing the written consent of the Bank and containing the following information:


	(a) if the Company seeks reimbursement for Qualifying Costs paid by it, a statement of the amount and nature of the Qualifying Costs and the name and address of the payee of each item of the Qualifying Costs certified to have been paid by and requested to be reimbursed to the Company; or

	(b) if payment is to be made to someone other than the Company, a statement of the amount and nature of each item of Qualifying Costs certified to be due and payable and requested to be paid to a person other than the Company; and

	(c) a certificate for payment under paragraphs (a) or (b) of this Section must also contain a statement that each item for which payment or reimbursement is requested is or was necessary in connection with the Project and that such item has not formed the basis for any previous payment or reimbursement from the Project Fund.

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Upon receipt of the certificate the Trustee shall disburse funds from the Project Fund to the persons entitled thereto. Bond proceeds in the Project Fund shall be expended only to pay Qualifying Costs. Company funds in the Project Fund may be expended to pay Costs of Issuance which exceed two percent (2%) of the proceeds of the Series 2010B Bonds.

SECTION 3.4. ENFORCEMENT OF CONTRACT AND SURETY BONDS. In the event of material default of any contractor or subcontractor under any contract made in connection with the Project, or in the event of a material breach of warranty with respect to any materials, workmanship or performance, the Company will diligently pursue, either separately or in conjunction with others, such remedies of the Company as it deems reasonable against the contractor or subcontractor in default and against any surety on a bond securing the performance of such contract.

SECTION 3.5. PLANS AND SPECIFICATIONS. The Company may make any changes in or modifications of the Plans as initially approved by the Company, any may make any deletions from or substitutions or additions to the Project, without the prior consent of the Credit Provider or the Trustee, so long as such changes or modifications in the Plans, or deletions from or substitutions or additions to the Project, do not, in the opinion of a Company Representative as noted on each change order, materially and adversely alter the size, scope or cost of the Project, materially impair the structural integrity and utility of the structures, or materially impair the usefulness or character of the Project. No material changes in the size, scope or cost of the Project may be made without the written consent of the Credit Provider.

SECTION 3.6. ESTABLISHMENT OF COMPLETION DATE. The completion date shall be evidenced to the Trustee by a Certificate of Completion signed by a Company Representative and accepted by the Trustee stating that, except for amounts retained by the Trustee at the direction of the Company for any Qualifying Costs not then due and payable or the liability for which is being contested in good faith by the Company:


	(a) construction of the Project has been completed in accordance with the Plans, and all labor, services, materials and supplies used in such construction have been paid for; and

	(b) all other facilities necessary in connection with the Project have been constructed, acquired and installed in accordance with the Plans and all costs and expenses incurred in connection therewith have been paid.

Notwithstanding the foregoing, the Certificate of Completion may state that it is given without prejudice to any rights against third parties which exist at the date of such certificate or which may subsequently come into being. The Company agrees to cooperate in causing such Certificate of Completion to be furnished to the Trustee as promptly as practicable after the occurrence of the events and conditions referred to in clauses (a) and (b) of the first sentence of this Section 3.6. Moneys remaining in the Project Fund on the completion date, except for any moneys which the Company directs the Trustee in writing to retain therein for the payment of any Qualifying Costs not then due and payable or the liability for which is being contested in good faith by the Company shall be transferred to the Bond Fund and used to redeem the a portion of the Series 2010B Bonds.

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SECTION 3.7. REFUNDING OF PRIOR BONDS. The Issuer has, in the Indenture, authorized and directed the Trustee to use the proceeds of the Series 2010A Bonds and other available funds of the Company to pay the principal of, premium, if any, and interest on the Prior Bonds to and including the Call Date and to cause the Prior Bonds to be paid or redeemed in whole on the Call Date, as further specified in the Indenture.

The Company covenants and agrees that, in addition to the proceeds of the Bonds, it will provide such moneys as may be required to refund and pay or redeem in whole the Prior Bonds on the Call Date including (i) the accrued interest on the Prior Bonds to the Call Date; (ii) the fees and expenses of the Trustee in connection with the redemption of the Prior Bonds; and (iii) all Costs of Issuance related to the Series 2010A Bonds, and that on the Call Date there shall accordingly be sufficient funds on hand with the Trustee to pay all principal of, premium, if any, and interest then due on the Prior Bonds. The Company further covenants and agrees that it will cause or has caused the Trustee to give notice of the redemption in whole of the Prior Bonds to be redeemed, in accordance with the provisions of the Prior Indentures.

SECTION 3.8. OBLIGATION OF THE COMPANY TO COOPERATE IN FURNISHING DOCUMENTS TO TRUSTEE. The Company agrees to cooperate in furnishing to the Trustee (i) any documents referred to in the Indenture or the Prior Indentures that are required to effect the payment and redemption of the Prior Bonds on the Call Date, and (ii) the documents referred to in Section 205 of the Indenture required for the authentication and delivery of the Bonds. Such obligations are subject to any provision of this Agreement or the Indenture requiring additional documentation.

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ARTICLE IV

ISSUANCE OF THE BONDS; INVESTMENT OF FUNDS

SECTION 4.1. AGREEMENT TO ISSUE BONDS. In accordance with the Indenture, the Issuer, upon the request of the Company, shall sell, issue and deliver the Bonds and deposit the net proceeds thereof with the Trustee; provided the conditions to such issuance as set forth in the Indenture have been satisfied with respect to the Bonds.

SECTION 4.2. THE LOAN. The Issuer agrees, upon the terms and conditions herein specified, to lend to the Company the proceeds received by the Issuer from the sale of the Bonds, excluding any accrued interest, by causing such proceeds to be deposited with the Trustee for disposition as provided herein and in the Indenture. The amount of the Loan shall also be deemed to include any “discount” or any other amount by which the aggregate price at which the Issuer sells the Bonds to the Underwriter is less than the aggregate principal amount of the Bonds, plus accrued interest; and the obligation of the Issuer to make the Loan shall be deemed fully discharged upon so depositing the proceeds of the Bonds with the Trustee.

SECTION 4.3. INVESTMENT OF AONEYS. Subject to Sections 409 and 410 of the Indenture, any moneys held as a part of any Fund shall be invested or reinvested by the Trustee, at the request of and as directed by the Company in Investment Obligations to the extent permitted by law; and provided further, however, investments shall not be made in such a way as to cause any of the Bonds to become an “arbitrage bond” within the meaning of Section 148 of the Code. The Trustee may make any and all such investments from and through its own investment department.

Any investments shall mature in such amounts and at such times or shall be redeemable by the Holder at such times as may be necessary to provide funds when needed by the respective Funds. The Trustee may, at any time, to the extent required for payment from any Fund, sell any of the investments in such Fund, and the proceeds of such sale and of all payments at maturity and upon redemption of such investments shall be held in the Fund from which such investments were sold. Interest and other income received on moneys or securities in any Fund shall be credited to such Fund and applied as provided in Article IV of the Indenture, except as may be otherwise provided herein.

At the request of the Credit Provider or Company, the Issuer agrees to cause and direct the Trustee, at the expense of the Company, to furnish the Company or Credit Provider monthly or at such other times as the Company or Credit Provider and the Issuer may reasonable request, but not more often than monthly, an accounting of any Fund held by the Trustee under the Indenture.

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ARTICLE V

EFFECTIVE DATE OF AGREEMENT; DURATION OF TERM;
PAYMENT AND OTHER PROVISIONS


	SECTION 5.1. EFFECTIVE DATE AND DURATION OF AGREEMENT.

	(a) This Agreement shall become effective upon the Date of Issue. Subject to the provisions of this Agreement, this Agreement and the terms and provisions herein, shall remain in full force and effect in their entirety from the Date of Issue throughout the Term. Upon the expiration of the Term, this Agreement shall terminate, and the provisions and terms of this Agreement shall become unenforceable and of no effect, except as specifically provided otherwise by Section 5.1(b).

	(b) Any other provision of this Agreement notwithstanding, the provisions of Sections 5.2(b), 5.2(d), 5.8, 7.6, 7.7 and Article X of this Agreement shall survive any expiration or termination of this Agreement, and such provisions shall remain effective and enforceable with respect to any party according to their terms subsequent to any such termination or expiration of the remainder of this Agreement.

SECTION 5.2. BASIC PAYMENTS AND OTHER AMOUNTS PAYABLE.


	(a) As long as any Bonds are Outstanding, as and for Basic Payments the Company shall pay in immediately available funds at the Principal Office of the Trustee for deposit in the Bond Fund amounts sufficient to pay when due all principal and Redemption Price of and interest on all Outstanding Bonds, including:

		(i) on or before 10:00 a.m., Minneapolis, Minnesota time, on or before the Business Day preceding each Interest Payment Date, Redemption Date or Stated Maturity Date occurring on or before the Conversion Date (or on or before 9:00 a.m., Minneapolis, Minnesota time on the Interest Payment Date, in the case of a Conversion Date which is not otherwise an Interest Payment Date), an amount equal to all principal and Redemption Price of and interest on all Outstanding Bonds to become due on such Interest Payment Date, Redemption Date or Stated Maturity Date for whatever reason; and

		(ii) on or before the day which is two (2) Business Days preceding each Interest Payment Date, Redemption Date or Stated Maturity Date occurring after the Conversion Date, an amount equal to all principal and Redemption Price of and interest on the Bonds to become due on such Interest Payment Date, Redemption Date or Stated Maturity Date for whatever reason.

	Any above payment by the Company which would otherwise be due and payable on a date which is not a Business Day shall be due and payable on the first Business Day immediately preceding such date. Any payment due above shall be reduced by giving credit for moneys then on deposit in the Bond Fund and available for payment of principal of or interest on the Bonds which do not consist of prior Basic Payments (or amounts credited against such payments).

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	(b) In addition to any other amounts payable hereunder, as Additional Payments:

		(i) If a Determination of Taxability occurs, the Company shall within two (2) Business Days after notice thereof from the Trustee or otherwise pay to the Trustee in immediately available funds an amount which, together with any balance on hand in any Fund and available for such purpose, shall equal the Redemption Price of all related Outstanding Bonds, together with unpaid interest accrued or to accrue thereon to the Redemption Date.

		(ii) If all Bonds are subject to redemption as a result of an Event of Default hereunder and direction to the Trustee is given by the Credit Provider to redeem all Bonds, the Company shall pay to the Trustee in immediately available funds no later than one (1) Business Day prior to the date selected for redemption an amount which, together with any balance on hand in any Fund and available for such purpose, shall equal the Redemption Price, together with unpaid interest accrued or to accrue to the Redemption Date.

		(iii) If the Bonds shall be accelerated pursuant to Section 9.2 after any Event of Default, the Company shall pay to the Trustee in immediately available funds on the date the Bonds are accelerated (or such later date as the Trustee may designate pursuant to such Section) the principal of all Outstanding Bonds and all unpaid interest accrued or to accrue on such Bonds to the payment date established by the Trustee pursuant to the Indenture, together with any applicable premium due for redemption of the Bonds.

		(iv) If the Trustee notifies the Company of a deficiency in the Rebate Fund in accordance with Section 411 of the Indenture, the Company shall promptly deposit the amount of such deficiency.

	(c) If the amount held by the Trustee in the Bond Fund and available for such purpose should be sufficient to pay when due all principal or Redemption Price of and interest on all Outstanding Bonds then remaining unpaid, the Company shall not be obligated to make any further payment of Basic Payments under the provisions of Section 5.2(a).

	(d) As Additional Payments, the Company shall also pay the following amounts to the following persons:

		(i) to the Trustee, when due, all fees of the Trustee for services rendered under the Indenture and all fees and charges of legal counsel and others incurred at the request of the Trustee in the performance of services under the Indenture for which the Trustee and such other persons are entitled to payment or reimbursement, provided that the Company may, without creating a default hereunder, contest in good faith the reasonableness of any such fees or expenses; and

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		(ii) to the Issuer, all reasonable expenses incurred by the Issuer in connection with the transactions contemplated hereby and by the Indenture which are not otherwise required to be paid by the Company under the terms of this Agreement, provided that the Company may, without creating a default hereunder, contest in good faith the reasonableness of any such expenses.

	(e) In the event the Company should fail to make any of the payments required by this Section, the item in default shall continue as an obligation of the Company until the amount in default shall have been fully paid with interest accruing thereon at a rate equal to the “Prime Rate” or “Reference Rate” of Wells Fargo Bank, National Association.

SECTION 5.3. CERTAIN COMPANY OBLIGATIONS UNCONDITIONAL. The obligation of the Company to make the payments as provided in this Agreement and to maintain or cause to be maintained the Projects in accordance with Section 5.5 of this Agreement shall be absolute and unconditional, irrespective of any defense or any rights of setoff, recoupment, or counterclaim it might otherwise have against the Issuer, the Trustee, the Credit Provider, any Holder of a Bond or any other person. The Company shall not suspend or discontinue any such payment or terminate this Agreement (other than such termination as is provided for hereunder) for any cause or circumstance whatsoever, including, without limiting the generality of the foregoing, any acts or circumstances that may constitute an eviction or constructive eviction, any failure of consideration, any failure of title, any commercial frustration of purpose, the unenforceability or invalidity of the Credit or the failure for any reason of the Trustee to submit a claim under the Credit, any damage to or destruction of the Projects, any taking by eminent domain of title to or the right of temporary use of all or any part of the Projects, any change in the tax or other laws of any jurisdiction, including the United States, the State or any political subdivision of either, or any failure of the Issuer, the Credit Provider or the Trustee to perform and observe any agreement or covenant, whether express or implied, or any duty or obligation of the Issuer to the Company, whether hereunder or otherwise, or out of any indebtedness or liability at any time owing to the Company by the Issuer. The provisions of this paragraph shall apply only if and so long as there shall be Outstanding Bonds. The Company hereby waives, to the extent permitted by applicable law, any or all rights which the Company may now have or which at any time hereafter may be conferred upon the Company, by statute or otherwise, to terminate, to cancel or to limit the Company’s liability under this Agreement except in accordance with the express terms hereof.

SECTION 5.4. BASIC PAYMENTS AND OTHER PAYMENTS ASSIGNED. It is understood and agreed that all Basic Payments, all payments in respect of mandatory or optional prepayment and all payments in respect of an Optional Tender Purchase or Mandatory Purchase, paid over by the Company pursuant to Section 5.2 and Section 5.9, are assigned under the Indenture to the Trustee. The Company consents to such assignment and hereby agrees that, as to the Trustee, the Company’s obligation to make such Basic Payments and other amounts payable to the Trustee hereunder shall be absolute and shall not be subject to any defense or any right of setoff, counterclaim or recoupment arising out of any breach by the Issuer of any duty or obligation to the Company, whether hereunder or otherwise, or out of any indebtedness or liability at any time owing to the Company by the Issuer.

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SECTION 5.5. MAINTENANCE AND MODIFICATION OF THE PROJECTS BY THE COMPANY. The Company agrees that, at all times during the Term, the Company shall, at its own expense, operate and maintain, preserve and keep the Projects with the appurtenances and every part and parcel thereof in good repair, working order and condition (loss by fire or other casualty, condemnation, ordinary wear, tear and obsolescence and acts of God excepted), and that the Company shall, from time to time, make or cause to be made all necessary and proper repairs, replacements and renewals thereto.

Subject to the provisions of the Reimbursement Agreement, the Company agrees during the Term to comply at all times with respect to the Projects, with all governmental laws, ordinances, approvals, rules, regulations and requirements, including, but not limited to, such zoning, sanitary, pollution, environmental, safety ordinances, laws and such rules and regulations thereunder as shall be binding upon the Company under applicable laws, except during any period in which the Company at its expense and in its name and subject to Section 5.5 or Section 5.6 herein shall be in good faith contesting compliance with any of the aforesaid laws, ordinances, approvals, rules, regulations, restrictions and requirements.

The Company shall have the privilege of renovating the Projects or making substitutions, additions, modifications, deletions and improvements to the Projects from time to time as the Company, in its discretion, may deem to be desirable for its uses and purposes. The costs of such renovating, substitutions, additions, modifications and improvements shall be paid by the Company, and the same shall be included under the terms of this Agreement as part of the Projects, provided, however, that the nature of the Projects shall not be changed if such change would cause the Prior Projects to fail as a “solid waste disposal facility” or a “manufacturing facility” under the Code or cause the Recovery Zone Projects to fail as “recovery zone property” within the meaning of the Code.

Subject to the provisions of the Reimbursement Agreement, the Company shall have the privilege from time to time of removing from the Projects any improvements, machinery, equipment, fixtures or facilities constituting a part of the Projects, provided that such improvements, machinery, equipment, fixtures or facilities are removed in the ordinary course of business or are substituted or replaced at the expense of the Company by improvements, machinery, equipment, fixtures or facilities free of all liens and encumbrances (other than liens granted to CoBank, ACB) and such substitution or replacement shall not cause the Prior Projects to fail as a “solid waste disposal facility” or a “manufacturing facility” under the Code or cause the Recovery Zone Projects to fail to qualify as “recovery zone property” within the meaning of the Code.

SECTION 5.6. TAXES, OTHER GOVERNMENTAL CHARGES AND UTILITY CHARGES. The Company shall pay during the Term all taxes, special assessments and governmental charges of any kind whatsoever as the same become due, respectively, that may at any time be lawfully assessed or levied upon or with respect to any property of the Company, any sales and excise taxes on products or transactions thereof, any taxes levied upon or with respect to income or profits from any property of the Company and, without limiting the generality of the foregoing, any taxes which, if not paid, would become a lien on the property of the Company, all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Company’s facilities and all other assessments and charges of any nature that may be secured by a lien on the Company’s facilities; provided, however, with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the Company shall be obligated to pay only such installments as are required to be paid during the Term.

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The Company may, in good faith, at its expense in its own name, contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges or payments in lieu of taxes so contested to remain unpaid during the period of such contest and any appeal therefrom.

In the event that the Company shall fail to pay any of the foregoing items required by this Section to be paid by the Company, the Trustee may (but shall be under no obligation to) pay the same, and any amounts so advanced therefor by the Trustee shall become an additional obligation of the Company to the party making the advance, which amounts, together with interest thereon from the date thereof at the rate stated in Section 5.2, the Company agrees to pay.

SECTION 5.7. INSURANCE. The Company shall insure the Company’s Facilities against such perils and for such amounts as are customary for similar facilities by means of policies issued by reputable insurance companies duly qualified to do such business in the State. As an alternative, the Company may insure the Facilities under a blanket policy or policies which cover not only the Facilities but other properties of the Company.

The Company shall carry public liability insurance with respect to its activities with one or more reputable insurance companies. The insurance provided by this paragraph may be by blanket insurance policy or policies. The Net Proceeds of the insurance required in this paragraph shall be applied toward extinguishment or satisfaction of the liability with respect to which such insurance proceeds may be paid.

SECTION 5.8. DETERMINATION OF TAXABILITY. If a Determination of Taxability occurs, the Company shall immediately pay Additional Payments as provided in Section 5.2(b)(i), and the Trustee, following such Determination of Taxability shall call for redemption and prepayment of all Bonds then Outstanding as provided in Section 304 of the Indenture. The Company shall immediately give notice to the Issuer, the Credit Provider and the Trustee upon receipt of notice by the Company of a Determination of Taxability.

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SECTION 5.9. OPTIONAL TENDER PURCHASES AND MANDATORY PURCHASES. The Company shall cause an Optional Tender Purchase on each Optional Tender Purchase Date and Mandatory Purchase of all Tendered Bonds on each Mandatory Tender Date. For such purpose the Company shall cause to be paid to the Tender Agent in immediately available funds the Purchase Price of all Tendered Bonds no later than 10:00 a.m., Minneapolis, Minnesota time on each Tender Date, less any amounts on deposit with the Tender Agent in the Purchase Account and available for such purpose. Each Purchase Price payment shall be paid directly to the Tender Agent at its Principal Office and shall be deposited in the Purchase Account as provided in the Indenture. All Bonds purchased shall be transferred, held or canceled as provided in the Indenture. The Company hereby authorizes and directs the Trustee to submit a claim under or draw upon the Credit in accordance with the terms of the Indenture to the extent necessary to pay such Purchase Price on any Tender Date. All moneys drawn under the Credit to pay the Purchase Price shall be credited against the obligation of the Company. Following a draw by the Trustee as contemplated by this Section and the Indenture, the amount of such draw shall be paid by the Trustee to the Credit Provider, but only from and to the extent of amounts in the Purchase Account deposited by the Company or the Remarketing Agent and not required to pay any Purchase Price due on or before such Tender Date.

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ARTICLE VI

CASUALTY AND CONDEMNATION

SECTION 6.1. CASUALTY. Unless the Company exercises its option to prepay Basic Payments pursuant to Section 10.2(a) with reasonable promptness after the occurrence of any material damage to or destruction of the Projects or any material part thereof, the Company shall notify the Issuer, the Credit Provider and the Trustee as to the nature and extent of such damage or destruction. The Company shall proceed promptly to rebuild or restore the Projects to substantially the same or better condition or value as it existed prior to the event causing such damage or destruction. Any Net Proceeds of insurance received in respect of such damage or destruction and on deposit with the Trustee in the Insurance and Award Fund shall be applied to such restoration or repair as provided in the Indenture. After completion of the restoration and repair of the Projects, any Net Proceeds remaining in the Insurance and Award Fund shall be paid to the Company.

SECTION 6.2. CONDEMNATION. Unless the Company is permitted to and does elect to prepay Basic Payments pursuant to Section 10.2(b) in the event the title to or the temporary use of the Projects or any material part thereof shall be taken by the exercise of the power of eminent domain by any governmental body or by any person acting under governmental authority, the Company shall, with reasonable promptness after such taking, notify the Issuer, the Credit Provider and the Trustee as to the nature and extent of such taking. The Company shall proceed promptly to restore the Projects to as substantially a similar facility as possible, given such taking, through the replacement of the equipment or otherwise. Any Net Proceeds received from any award or awards in respect of such taking or takings and on deposit with the Trustee in the Insurance and Award Fund shall be applied to such restoration and as provided in the Indenture. After completion of the restoration and repair of the Projects, any Net Proceeds remaining in the Insurance and Award Fund shall be paid to the Company.

SECTION 6.3. FAILURE TO RESTORE PROJECTS; APPLICATION OF NET PROCEEDS. If the Company elects not to restore, repair or replace that part of the Projects damaged or destroyed or taken by the exercise of the power of eminent domain, any Net Proceeds on deposit in the Insurance and Award Fund but not expended in restoring, repairing or replacing the Projects shall be paid to the Trustee for deposit in the Bond Fund and application as provided in Section 10.2.

SECTION 6.4. COOPERATION. The Issuer shall cooperate with the Company, at the request and sole expense of the Company, in all matters relating to any casualty to or condemnation of all or any material part of the Projects to protect the interests of the Issuer under this Agreement pledged to the Trustee under the Indenture.

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SECTION 6.5. EFFECT OF DAMAGE, DESTRUCTION OR CONDEMNATION. Unless all of the Bonds shall have been called for redemption and the Company shall prepay Basic Payments pursuant to the provisions of Section 10.2(a) or (b), in the event that the Projects are damaged or destroyed in whole or in part, or title to or the temporary use of the Projects or any part thereof is condemned or taken under the exercise of the power of eminent domain, the Company shall be obligated to continue to make all payments due under Section 5.2, including Basic Payments and payment for any Optional Tender Purchase or Mandatory Purchase in accordance with Section 5.9.

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ARTICLE VII

SPECIAL COVENANTS

SECTION 7.1. NO WARRANTY OF CONDITION OR SUITABILITY BY THE ISSUER; ISSUER TO’ MAINTAIN EXISTENCE. The Issuer makes no warranty, either express or implied, as to the Projects or their condition or that they shall be suitable for the Company’s purposes or needs. The Issuer covenants and agrees that the Issuer shall, at all times, do or cause to be done all things necessary to preserve and keep in full force and effect its existence or to assure the assumption of its obligations under this Agreement and the Indenture by any public body succeeding to its powers under the Act.

SECTION 7.2. RIGHT OF ACCESS TO THE PROJECTS. The Company agrees that the Issuer, the Credit Provider and the Trustee and their duly authorized agents shall have the right at all reasonable times to enter upon the Projects to examine and inspect the Projects as may be necessary to carry out or determine compliance with this Agreement and the Reimbursement Agreement.

SECTION 7.3. THE COMPANY TO MAINTAINITS EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS PERMITTED. The Company agrees and warrants that during the Term the Company shall maintain its existence as a cooperative association duly organized and in good standing under the laws of the State. The Company shall not dissolve and wind up, dispose of all or substantially all of its assets or consolidate with or merge into another entity, unless the resultant or transferee entity is a party subject to personal jurisdiction in the State who shall assume in writing all of the obligations of the Company under this Agreement. The Company’s privileges under this Section may not be exercised unless, (i) previously consented thereto in writing by the Credit Provider (if such consent is required under the Reimbursement Agreement); and (ii) the Trustee obtains a written opinion of Bond Counsel confirming that the transaction to be undertaken pursuant to this Section shall not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

SECTION 7.4. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. The Issuer and the Company shall, from time to time, execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Projects for carrying out the intention of or facilitating the performance of this Agreement.

SECTION 7.5. THE ISSUER AND COMPANY REPRESENTATIVES. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval or such request may be given for the Issuer by an Issuer Representative and for the Company by a Company Representative, and the Trustee shall be authorized to act on any such approval or request.

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SECTION 7.6. REMOVAL OF LIENS RESPECTING COMPANY PAYMENTS. Notwithstanding any discharge of the Indenture, termination or expiration of this Agreement or payment of the Bonds, if any lien, encumbrance or charge of any kind based on any claim of any kind (including, without limitation, any claim for income, franchise or other taxes, whether federal, state or otherwise) shall be asserted or filed against any amount paid or payable by the Company under or pursuant to this Agreement or any order (whether or not valid) of any court shall be entered with respect to any such amount by virtue of any claim of any kind, in either case so as to:


	(a) interfere with the due payment of such amount to the Trustee or the due application of such amount by the Trustee pursuant to the applicable provisions of the Indenture; or

	(b) result in the refusal of the Trustee to make such due application because of its good-faith determination that liability might be incurred if such due application were to be made;

then the Company shall promptly take such action (including, but not limited to, the payment of money) as may be necessary to prevent or to nullify the cause or result of such interference, such obligation or such refusal, as the case may be.

SECTION 7.7. RELEASE AND INDEMNIFICATION. The Company hereby (i) releases the Issuer its governing body members, officers, agents, including independent contractors, consultants and legal counsel, servants and employees (hereinafter, for purposes of this Section, the “indemnified parties”) from, (ii) agrees that the indemnified parties shall not be liable for, and (iii) agrees to indemnify and hold harmless the indemnified parties from and against the following (except for matters directly resulting from the negligence, breach of contract, willful misconduct or recklessness of an indemnified party or their agents) all liabilities, losses, damages, costs, expenses, suits, claims, settlements and judgments, of any nature whatsoever arising from or related in any manner whatsoever to the acquisition, construction, improving, equipping, ownership, leasing or operation of the Projects or any activities related to the foregoing and the authorization, execution or delivery of the Bonds, the offering or sale of the Bonds or any documents, action or transaction related to any of the same.

All covenants, stipulations, promises, agreements and obligations of the Issuer contained herein shall not be deemed to be the covenants, stipulations, promises, agreements and obligations of any governing body member, officer, agent, consultant and legal counsel, servant or employee of the Issuer in the individual capacity thereof. No recourse shall be had for the payment of the principal or Redemption Price of or Purchase Price or interest on the Bonds or for any claim based thereon or hereunder against the Issuer or any governing body member, officer, agent, consultants and legal counsel, servant or employee of the Issuer or any natural person executing the Bonds or pertaining to their sale, delivery, payment, redemption or Mandatory Purchase or Optional Tender Purchase.

Neither the Issuer nor the Trustee shall be responsible or liable for any market loss suffered in connection with the investment of funds made in accordance with the Indenture, or shall have any liability for nonpayment of interest on any uninvested moneys that the Trustee may hold at any time in trust or receive under any of the provisions of the Agreement or the Indenture, except as otherwise specifically agreed in writing.

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Promptly after receipt by the Issuer or Trustee, as the case may be, or any such other indemnified person of notice of the commencement of any action in respect of which indemnity may be sought against the Company under this Section, such person will notify the Company in writing of the commencement thereof, and, subject to the provisions hereinafter stated, the Company shall assume the defense of such action (including the employment of counsel who shall be counsel satisfactory to the Issuer, Trustee or such other person as the case may be, and the payment of expenses). Insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company, the Issuer or any such other indemnified person shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the Company unless the employment of such counsel has been specifically authorized by the Company. The Company shall not be liable to indemnify any person for any settlement of any such action effected without its consent.

SECTION 7.8. COMPLIANCE WITH THE INDENTURE. The Company agrees that it shall comply with the provisions of the Indenture with respect to the Company and that the Company shall not interfere with the exercise of the power and authority granted to the Trustee in the Indenture. The Company further agrees to aid in the furnishing to the Issuer or the Trustee of any Opinion of Counsel that may be required under the Indenture.

SECTION 7.9. DELIVERY OF SUBSTITUTE CREDIT. The Company has caused the Trustee to be provided with the Letter of Credit for the benefit of the holders of all Bonds. At any time prior to full payment of all Bonds and the accrued interest thereon, the Company may deliver a Substitute Credit in accordance with Section 412 of the Indenture conforming to the definition of “Substitute Credit” set forth in Section 101 thereof.

SECTION 7.10. ANNUAL STATEMENT. The Company shall have an annual audit made by an independent certified public accountant and shall furnish the Credit Provider a copy of such audit promptly upon its completion but not later than one hundred fifty (150) days after the end of each fiscal year of the Company during the term of this Agreement.

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ARTICLE VIII

ASSIGNMENT, SALE, LEASING OF PROJECTS

SECTION 8.1. ASSIGNMENT OF AGREEMENT; OR LEASING OF PROJECTS.


	(a) This Agreement may be assigned by the Company, but only if: (i) the assignee shall assume in writing, satisfactory to the Credit Provider, all obligations and covenants of the Company hereunder in respect of the interest assigned and shall deliver such assumption, and such other documents or certificates as the Issuer and Bond Counsel shall deem reasonably necessary, to the Trustee; and (ii) the Company shall furnish the Trustee, an opinion of Bond Counsel to the effect that the assignment shall not result in interest on the Bonds becoming included in the gross income of the Holders for federal income tax purposes.

	(b) None of the Projects shall be leased unless: (i) the Company shall have first obtained prior written consent of the Credit Provider (if such consent is required by the Reimbursement Agreement), and (ii) the lessee shall expressly subordinate its rights under the lease to the rights of the Issuer and the Trustee under this Agreement and (iii) the Company shall furnish the Trustee an opinion of Bond Counsel to the effect that the leasing shall not result in interest on the Bonds becoming included in the gross income of Holders for federal income tax purposes.

SECTION 8.2. SALE AND ENCUMBRANCE OF PROJECTS. The Company agrees that, except as provided in Section 5.5 hereof, it will not during the Term sell, assign, transfer, convey or otherwise dispose of any of the Projects or any part thereof, unless:

	(a) In the event any of the Projects or a material portion thereof is sold, assigned, transferred or conveyed in connection with the sale or transfer of a processing facility, the purchaser thereof shall receive an assignment of this Agreement in accordance with Section 8.1, and the Credit Provider shall consent thereto in writing. Upon such sale the Company shall be released from all obligations of or performance hereunder thereafter to become due; or

	(b) In any other event, the proceeds from such sale, assignment, transfer, conveyance or other disposition are deposited with the Trustee and used to redeem a portion of the Bonds corresponding to the amount of the Prior Bonds or Series 2010B Bonds issued to finance such Project or portion of the Facilities on the earliest practicable redemption date.

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ARTICLE IX

EVENTS OF DEFAULT AND REMEDIES

SECTION 9.1. EVENTS OF DEFAULT DEFINED. The following shall be “Events of Default” under this Agreement, and the term “Event of Default” shall mean, whenever it is used in this Agreement, any one or more of the following events (and the term “default” shall mean any event which would, with the passage of time or giving of notice, or both, be an “Event of Default” hereunder):


(a) failure by the Company to pay in full when due any Basic Payment and such amount remains unpaid on the next succeeding Interest Payment Date, Redemption Date or Stated Maturity Date;

(b) failure by the Company to pay in full when due any payments required to be paid under Section 5.2(b) (but only to the extent amounts due under Section 5.2(b) remain unpaid on the Redemption Date established under Section 5.2(b)) or Section 5.9 (but only to the extent amounts due under Section 5.9 remain unpaid at the close of business on the applicable Tender Date);

(c) the occurrence of an Act of Bankruptcy;

(d) if the Company shall:

	(i)	admit in writing its inability to pay its debts generally as they become due;

	(ii)	make an assignment for the benefit of its creditors;

	(iii)	have appointed a receiver (or other similar official) for itself or for the whole or any substantial part of its property;

(e) if a court of competent jurisdiction shall enter an order or decree appointing, without the consent of the Company, a receiver or other similar official for the Company or of the whole or substantially all of its property; or

(f) failure by the Company to observe and perform any covenant, condition, obligation or agreement on its part to be observed or performed hereunder, other than as referred to in Section 9.1 (a), (b), (c), (d) or (e) hereof, after written notice, specifying such failure and requesting that it be remedied, given to the Company and the Credit Provider by the Trustee or to the Company and the Trustee by the Holders of not less than twenty-five percent (25%) of the aggregate principal amount of the Bonds then Outstanding, and the continuance of such default for a period of thirty (30) days or such longer period as shall be reasonably necessary to cure such default, but only if in the Trustee’s reasonable opinion, the Company is continuing to pursue diligently the cure of such default (which is subject to cure).

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The Trustee shall promptly provide telephonic notice to the Company, Credit Provider and Remarketing Agent, promptly confirmed in writing, upon the Trustee receiving notice that any default is existing.

SECTION 9.2. REMEDIES ON DEFAULT. If a Credit is in effect and an Event of Default shall occur and be continuing pursuant to above paragraphs (a) or (b) of Section 9.1, the Trustee may, and upon the request of the Credit Provider or upon the request of Holders owning not less than twenty-five percent (25%) principal amounts of Bonds outstanding (accompanied by the written consent of the Credit Provider) shall, take any one or more of the following actions:


	(a) Declare all Payments to be immediately due and payable (being an amount equal to that necessary to pay in full the principal of and interest accrued to the date for payment of all Bonds then outstanding, assuming acceleration of the Bonds under the Indenture, and to pay all other amounts due and payable hereunder), whereupon the same shall become immediately due and payable.

	(b) Take whatever action at law or in equity may appear necessary or appropriate to collect the Payments then due and thereafter to become due hereunder, or to enforce performance and observance of any obligation, agreement, or covenant of the Company under this Agreement.

Whenever any Event of Default occurs and is continuing, and if the Credit is not in effect, the Issuer or the Trustee may, and upon the request of the Holders owning not less than twenty-five percent (25%) principal amount of all Bonds Outstanding shall, take whatever action, at law or in equity, as may appear necessary or desirable to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement.

Any amounts collected pursuant to action taken under this Section shall be paid into the Bond Fund, except as provided in the Indenture, and applied in accordance with the provisions of the Indenture, or if the Bonds have been fully paid (or provision for payment thereof has been made in accordance with the provisions of the Indenture) and all sums owing hereunder by the Company to the Issuer have been paid, the amount so collected shall be paid first to the Credit Provider to the extent of any amounts owing under the Reimbursement Agreement and then to the Company.

SECTION 9.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer to exercise any remedy reserved to the Issuer in this Article IX, it shall not be necessary to give notice, other than such notice as may be required in this Article IX. Such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee, and the Trustee and the Holders, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained.

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SECTION 9.4. AGREEMENT TO PAY ATTORNEYS’ FEES AND EXPENSES. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee or both shall employ attorneys or incur other expenses for the collection of payments due or to become due or incur other expenses for the collection of payments due or to become due or the enforcement or performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it shall, on demand therefor, pay to the Issuer or the Trustee, as the case may be, the reasonable fees of such attorneys and such other expenses so incurred by the Issuer or the Trustee or both.

SECTION 9.5. No ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waiver any other concurrent, previous or subsequent breach hereunder.

SECTION 9.6. RIGHTS OF CREDIT PROVIDER. The Company and the Issuer hereby agree that the Credit Provider shall be subrogated to the rights of the Company under this Agreement, including the Company’s options set forth in Article X hereof, for any amounts paid under the Letter of Credit and not reimbursed by the Company pursuant to the Reimbursement Agreement.

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ARTICLE X

COMPANY OPTIONS

SECTION 10.1. OPTIONAL TERMINATION UPON DISCHARGE OF INDENTURE. The Company shall have the following options to terminate this Agreement and discharge the lien of the Indenture as provided in Section 1001 of the Indenture:


	(a) At any time prior to full payment of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), the Company may terminate this Agreement by giving the Issuer notice in writing of such termination and by paying or causing to be paid to the Trustee, for the account of the Issuer for deposit in the Bond Fund, an amount of Eligible Funds which, when added to the amount on deposit in any Funds and available therefor, shall be sufficient to discharge the Indenture in accordance with its terms.

	(b) At any time after full payment of the Bonds (or provision for payment thereof having been made in accordance with the provisions of Section 1001 of the Indenture) and arrangements satisfactory to the Trustee and Issuer have been made for the discharge of all other accrued liabilities under this Agreement, this Agreement shall terminate.

Section 10.2. Optional Prepayment Because of Casualty or Condemnation. The Company shall be permitted to prepay amounts due hereunder in full or in part prior to the Stated Maturity of the Bonds (or provision for payment in full thereof having been made under the Indenture), if any of the following shall have occurred:


	(a) Any Project or any material part of a Project shall have been damaged or destroyed to such extent that in the reasonable judgment of the Company such Project or any material part thereof (i) cannot reasonably be restored within six (6) months to substantially its condition immediately preceding such damage or destruction, or (ii) cannot reasonably be used to carry on the normal operations of the Company for six (6) months, or (iii) the reasonably estimated cost of restoration exceeds twenty percent (20%) of the original face amount of the Bonds and is also reasonably estimated to exceed the Net Proceeds; or

	(b) By reason of the exercise of the power of eminent domain by any governmental authority, title shall have been taken to all or a material part of any Project, or so much thereof that in the reasonable judgment of the Company such Project (i) cannot reasonably be restored within six (6) months to substantially its condition immediately preceding such damage or destruction, or (ii) cannot reasonably be used to carry on the normal operations of the Company for six (6) months, or (iii) the reasonably estimated cost of restoration exceeds twenty percent (20%) of the original face amount of the Bonds and is also reasonably estimated to exceed the Net Proceeds; or

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(c) As a result of any changes in the Constitution of the State or the Constitution of the United States of America, or of any legislative or administrative action, whether state or federal, or of any final decree, judgment or order of any court or administrative body, whether state or federal, entered after the contest thereof by the Company in good faith, the agreements contained in this Agreement shall have become impossible of performance in accordance with the intent and purposes of the parties as expressed herein, or unreasonable burdens or excessive liabilities shall have been imposed upon the Company, including, but not limited to the imposition of new state or local ad valorem, property, income or other taxes not imposed on the date of this Agreement, other than ad valorem taxes upon privately owned property and for the same general purpose as the Projects and special assessments levied in amounts proportionate to and not exceeding the benefits of future public improvements to the Company’s property.

To exercise such prepayment, the Company shall, within one hundred twenty (120) days following the event as set forth in paragraph (a), (b) or (c) above, give written notice to the Issuer, Credit Provider and the Trustee if any of the Bonds shall then be unpaid and provision for the payment thereof has not been made in accordance with the provisions of the Indenture and shall specify therein the date of closing such prepayment, which date shall be not less than ten (10) days nor more than ninety (90) days from the date such notice is mailed. Such notice shall specify the Redemption Date for the Bonds to be redeemed, which date shall be the first date succeeding the date set for closing such prepayment for which the Trustee can properly give notice as provided in Section 303 of the Indenture, and shall request the Trustee to take all steps necessary under the applicable provisions of the Indenture to effect the redemption of the Bonds on such date upon receipt in full of the prepayment. The prepayment amounts by the Company pursuant to this Section shall be the sum of the following:


	(i) an amount of money to be paid into the Bond Fund which, when added to the amount then on deposit with the Trustee in the Funds and available for payment of the Bonds, shall be sufficient to pay the principal of and accrued interest to the redemption date on all the Bonds to be redeemed in accordance with the Indenture; plus

	(ii) an amount of money equal to the Trustee’s fees and expenses under the Indenture and the expenses of the Issuer accrued and to accrue in connection with the redemption of the Bonds.

In such event, the Company may direct the Trustee to pay into the Bond Fund any Net Proceeds of insurance or condemnation award which the Trustee may then hold to be used solely for payment of principal of and accrued interest on the Bonds on the date selected for redemption.

Section 10.3. Optional Redemption of Bonds. The Company shall have the option, at any time and from time to time, to direct the Issuer to cause all or a portion, as the case may be, of Outstanding Bonds to be redeemed pursuant to Section 301(a) of the Indenture on any Redemption Dates and at the prices specified therein, from moneys available therefor in the Bond Fund or from Eligible Funds paid by the Company or caused to be paid to the Trustee for deposit in the Bond Fund for the purpose of such redemption prior to the giving of notice of redemption. To exercise the foregoing option, the Company shall deliver to the Issuer, Credit Provider and to the Trustee a certificate of a Company Representative:

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	(a) stating that the Company elects to exercise such option and specifying the Redemption Date for the Bonds to be redeemed;

	(b) specifying the aggregate principal amount and the maturity of the Bonds to be redeemed and stating that all funds necessary to effect such redemption have been deposited by the Company in the Bond Fund; and

	(c) requesting the Trustee to take all steps necessary under the applicable redemption provisions of the Indenture to effect the redemption of the Bonds to be redeemed.

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ARTICLE XI

MISCELLANEOUS

Section 11.1. Notices. All notices, certificates or other communications hereunder shall be deemed sufficiently given when delivered or when mailed by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:


To the Issuer:		Richland County 418 2^nd Avenue North Wahpeton, North Dakota 58075 Attention: County Auditor

To the Trustee:		Wells Fargo Bank, National Association MAC N9311-115 625 Marquette Avenue, 11^th Floor Minneapolis, Minnesota 55479 Attention: Corporate Trust Department

To the Company:		Minn-Dak Farmers Cooperative 7525 Red River Road Wahpeton, North Dakota 58075 Attention: Controller

To the Bank:		CoBank, ACB 5500 South Quebec Street Greenwood Village, Colorado 80111 Attention: Corporate Finance Division

To the Remarketing Agent:		W.R. Taylor & Company, LLC 4740 Woodmere Boulevard Montgomery, Alabama 36106 Attention: Robbins Taylor

A duplicate copy of each notice, certificate or other communication given hereunder by the Issuer or the Company to the other shall also be given to the Trustee, the Credit Provider and the Remarketing Agent. The Issuer, the Company, the Credit Provider, the Remarketing Agent and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.

Section 11.2. Binding Effect. This Agreement shall inure to the benefit of the Trustee, the Holders and the Credit Provider and shall inure to the benefit of and shall be binding upon the Issuer, the Company and their respective successors and assigns (whether or not such successors or assigns are specifically referred to in the definitions or other provisions hereof), subject, however, to the limitations contained in Sections 7.3 and 8.1. This Agreement is executed in part to induce the purchase of the Bonds and for the further securing of the Bonds, and accordingly, all representations, warranties, covenants and agreements of the parties hereto herein contained are hereby declared to be for the benefit of the Holders from time to time of the Bonds (whether or not so expressed) and may be enforced by or on behalf of such Holders by the Trustee in accordance with the provisions of the Indenture. Except as expressly provided in this Section, this Agreement shall not be deemed to create any right in any person who is not a party hereto and shall not be construed in any respect to be a contact, in whole or in part, for the benefit of any third party.

11-1

Section 11.3. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 11.4. Amounts Remaining in Funds. It is agreed by the parties hereto that any amounts remaining in any Funds upon expiration or sooner termination of the Term, as provided in this Agreement, and after payment in full of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture) and the fees, expenses and advances of the Trustee, the Issuer and the Credit Provider, their agents and counsel in accordance with the Indenture, shall, subject to the Indenture, be paid to the Company.

Section 11.5. Amendments, Changes and Modifications. Subsequent to the issuance of the Bonds and so long as any Bonds remain Outstanding, this Agreement, except as provided herein and in the Indenture, may not be effectively amended, changed, modified, altered, supplemented or terminated.

Section 11.6. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 11.7. Captions. The captions or headings in this Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Sections of this Agreement.

Section 11.8. Recording and Filing. The security interest of the Trustee created by the Indenture and the assignment of such security interest to the Trustee shall be perfected by the filing of financing statements which fully comply with the Uniform Commercial Code--Secured Transactions. All necessary instruments and continuation statements (but exclusive of the initial filing of any financing statements) shall be prepared by the Trustee or its agents at the expense of the Company and be recorded and filed by the Trustee or its attorneys or agents within the time prescribed by law, including, but not limited to, the Uniform Commercial Code--Secured Transactions of the State in order to continue the security interest created by the Indenture.

Section 11.9. Law to Govern. This Agreement is delivered in and shall be governed by and construed in accordance with the laws of the State.

11-2

Section 11.10. Limitation on Issuer’s Liability. It is understood and agreed by the Company that the Bonds shall not be a general obligation of the Issuer or give rise to a charge against its general credit or taxing powers, but rather shall be a special obligation payable solely from the revenues pledged and assigned to the payment thereof and secured as provided in the Indenture. No Holder or Holders of the Bonds shall ever have the right to compel any exercise of any taxing power of the Issuer to pay the Bonds or the interest or premium, if any, thereon nor to enforce payment thereof against any property of the Issuer except the Projects and the revenues under this Agreement pledged to the payment thereof or other amounts pledged pursuant to the Indenture. No failure of the Issuer to comply with any term, condition, covenant or agreement herein shall subject the Issuer to liability for any claim for damages, costs or other financial or pecuniary charge except to the extent that the same can be recovered from the Projects or the revenues therefrom, and no execution on any claim, demand, cause of action or judgment shall be levied upon or collected from the general credit, general funds or taxing power of the Issuer. The Bonds shall not constitute a debt of the Issuer within the meaning of any constitutional, statutory or charter limitation.

Section 11.11. Credit Not in Effect. If a Credit is not in effect as provided by Section 1115 of the Indenture, notwithstanding any other provision herein to the contrary, no notice to or consent by, or action in respect of the Credit Provider or the Credit shall be required hereunder.

(Remainder of this page intentionally left blank.)

11-3

IN WITNESS WHEREOF, the Issuer and the Company have caused this Loan Agreement to be executed in their respective names, all as of the date first above written.


	RICHLAND COUNTY, NORTHDAKOTA

	By:
		Vice Chair, Board of County Commissioners

	By:
		County Auditor

	MINN-DAK FARMERS COOPERATIVE

	By:
		President

11-4

EXHIBIT A

DESCRIPTION OF PRIOR PROJECTS

1996 SOLID WASTE HANDLING AND DISPOSAL FACILITIES

Pulp Presses (2)
Multiclones with Aspirator
Sugar Dryer Emission Control
Beet Washing Equipment
Flume Water Mud Filters
Aerobic Treatment
Domestic Sewer System
Evaporation System-Yeast Waste

2002 SOLID WASTE HANDLING AND DISPOSAL FACILITIES

Anaerobic Sludge Filter System
Pulp Dryer
Dust Collectors

A-1

EXHlBIT B

DESCRIPTION OF RECOVERY ZONE PROJECTS

Replace Modicon 800 Series I/O
Main MCC Expansion
Pipe Steam Dryer Vaper to Boiler
New Belt Cleaners
Extend Remelt Scroll
Molasses Railcar Loadout System
Beet Bunker Pokers
Increase Capacity of Trash Pumping Station
Flume Mud Bunker Overflow Screw Conveyer
Dewatering Louvers for Wet Pulp Chute
Raw Pan Automation
Dust Abatement
Yeast Plant Improvements
Loop Track Rail System
Fly Ash Bunker Expansion
Coal Unloading System
Evaporator for Steam Dryer

B-1

EXHIBIT C

CERTIFICATE OF REQUISITION

$7,000,000
Richland County, North Dakota
Variable Rate Demand Recovery Zone Facility Revenue Bonds
(Minn-Dak Farmers Cooperative Project)
Series 2010B

Certificate of Requisition
of Minn-Dak Farmers Cooperative
As to Requested Payment or Reimbursement
From the Project Fund

Wells Fargo Bank, National Association
625 Marquette Avenue, 11^th Floor
Minneapolis, Minnesota 55479
Attn: Corporate Trust Services

Dear Sirs:

In conformity with the provisions of Section 3.3 of the Loan Agreement between Richland County, North Dakota, and Minn-Dak Farmers Cooperative, as an authorized Company Representative, I hereby certify to you, as Trustee, as follows:

(1) That the Company hereby requests payment or reimbursement from the Project Fund as of the date hereof of the following amounts:


Payments:

To	For	Amount

Reimbursement to Company:

Payee	For	Amount

C-l

(2) That each of the above items for which payment or reimbursement is requested is or was necessary in connection with the above Project, and that none of such items has formed the basis for any previous payment or reimbursement from the Project Fund.

(3) That the Company has received properly executed lien waivers from all contractors, subcontractors and suppliers for materials, goods and services previously paid from the Project Fund.


Dated:	.
		Sincerely,

		MINN-DAK FARMERS COOPERATIVE

		By:
			Authorized Company Representative

CONSENT OF CREDIT PROVIDER

CoBank, ACB as the Credit Provider, hereby consents to the foregoing disbursement from the Project Fund.

C-2

EX-10.T 5 minndak105883_ex10-t.htm COBANK REVOLVING CREDIT SUPPLEMENT DATED NOV. 15, 2010

Exhibit 10(t)

Loan No. RIA685S01G

REVOLVING CREDIT SUPPLEMENT

THIS SUPPLEMENT to the Master Loan Agreement dated June 24, 2004 (the “MLA”), is entered into as of November 15, 2010 between CoBANK, ACB (“CoBank”) and MINN-DAK FARMERS COOPERATIVE, Wahpeton, North Dakota (the “Company”), and amends and restates the Supplement dated December 11, 2009 and numbered RIA685S01F.

SECTION 1. The Revolving Credit Facility. On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company in an aggregate principal amount not to exceed, at any one time outstanding: (A) $85,000,000.00 during the period commencing on the date hereof, and ending on and including May 31, 2011; and (B) $45,000,000.00 during the period commencing on June 1, 2011 and ending on and including December 31, 2011 (the “Commitment”). Within the limits of the Commitment, the Company may borrow, repay, and reborrow.

SECTION 2. Purpose. The purpose of the Commitment is to finance the operating needs of the Company.

SECTION 3. Term. Intentionally Omitted.

SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loan(s) in accordance with one or more of the following interest rate options, as selected by the Company:

(A) One-Month LIBOR Index Rate. At a rate (rounded upward to the nearest 1/l00th and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as hereinafter defined] or required by any other federal law or regulation) per annum equal at all times to 2.50% above the rate quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time for the offering of one (l)-month U.S. dollars deposits, as published by Bloomberg or another major information vendor listed on BBA’s official website on the first “U.S. Banking Day” (as hereinafter defined) in each week, with such rate to change weekly on such day. The rate shall be reset automatically, without the necessity of notice being provided to the Company or any other party, on the first “U.S. Banking Day” of each succeeding week, and each change in the rate shall be applicable to all balances subject to this option. Information about the then- current rate shall be made available upon telephonic request. For purposes hereof: (1) “U.S. Banking Day” shall mean a day on which CoBank is open for business and banks are open for business in New York, New York; (2) “Eurocurrency Liabilities” shall have the meaning as set forth in “FRB Regulation D”; and (3) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

(B) Quoted Rate. At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to CoBank in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 30 days; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; and (3) the maximum number of fixes in place at any one time shall be ten.


Revolving Credit Supplement RIA685S01G	-2-
MINN-DAK FARMERS COOPERATIVE
Wahpeton, North Dakota

(C) LIBOR. At a fixed rate per annum equal to “LIBOR” (as hereinafter defined) plus 2.50%, Under this option: (1) rates may be fixed for “Interest Periods” (as hereinafter defined) of 1, 2, 3, or 6 months as selected by the Company; (2) amounts may be fixed in increments of $100,000.00 or multiples thereof; (3) the maximum number of fixes in place at any one time shall be ten; and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on three Banking Days’ prior written notice. For purposes hereof: (a) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as herein defined] or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time two Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) “Banking Day” shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England: (c) “Interest Period” shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month or the month that is 2,3, or 6 months thereafter, as the case may be: provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D”; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed for periods expiring after the maturity date of the loans. All elections provided for herein shall be made electronically (if applicable), telephonically or in writing and must be received by CoBank not later than 12:00 Noon Company’s local time in order to be considered to have been received on that day; provided, however, that in the case of LIBOR rate loans, all such elections must be confirmed in writing upon CoBank’s request. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month or on such other day in such month as CoBank shall require in a written notice to the Company; provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at CoBank’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than three months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three-month anniversary of the commencement date of such Interest Period, and at maturity.


Revolving Credit Supplement RIA685S01G	-3-
MINN-DAK FARMERS COOPERATIVE
Wahpeton, North Dakota

SECTION 5. Promissory Note. The Company promises to repay the unpaid principal balance of the loans on the last day of the term of the Commitment, except that on June 1, 2011, the Company promises to pay so much of the loans as is necessary to reduce the outstanding balance of the loans to the limit of the Commitment. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth in Section 4 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.

SECTION 6. Letters of Credit. If agreeable to CoBank in its sole discretion in each instance, in addition to loans, the Company may utilize the Commitment to open irrevocable letters of credit for its account. Each letter of credit will be issued within a reasonable period of time after CoBank’s receipt of a duly completed and executed copy of CoBank’s then current form of Application and Reimbursement Agreement or, if applicable, in accordance with the terms of any CoTrade Agreement between the parties, and shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. Any draw under any letter of credit issued hereunder shall be deemed a loan under the Commitment and shall be repaid in accordance with this Supplement. Each letter of credit must be in form and content acceptable to CoBank and must expire no later than the maturity date of the Commitment.

SECTION 7. Security. The Company’s obligations hereunder and to the extent related hereto, the MLA, shall be secured as provided in the Security Section of the MLA, including without limitation as a future advance under any existing mortgage or deed of trust.

SECTION 8. Amendment Fee. In consideration of the amendment, the Company agrees to pay to CoBank an amendment fee in the amount agreed upon in the Fee Letter dated November 15, 2010.

SECTION 9. Commitment Fee. In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of 0.375% per annum (calculated on a 360-day basis), payable monthly in arrears by the 20th day following each month. Such fee shall be payable for each month (or portion thereof) occurring during the original or any extended term of the Commitment.

IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.


CoBANK, ACB	MINN-DAK FARMERS COOPERATIVE

By:	By:

Title:	Title:	EVP & CFO

(IMAGE)

36380096
CoBANK, ACB
INCUMBENCY CERTIFICATE
The undersigned, as Secretary of the Company named below, hereby certifies that the following persons are the current, duly elected or appointed Officers enumerated in applicable Resolutions of the Company’s Board of Directors and that the following are the specimen signatures of those Officers:
OFFICERS

NOTE: INSERT THE NAMES AND OBTAIN THE SIGNATURES OF ONLY THOSE OFFICER AUTHORIZED BY THE RESOLUTION REFFERED TO ABOVE


CHAIRPERSON	VICE CHAIRPERSON

Signature			Signature

TYPE or PRINT name: Douglas Etten	TYPE or PRINT name: Brent Davision


PRESIDENT	EXECUTIVE VICE PRESIDENT & CFO

Signature			Signature


TYPE or PRINT name: David H. Roche	TYPE or PRINT name: Steven M. Caspers



TREASURER	SECRETARY



Signature			Signature


TYPE or PRINT name: Russell Mauch	TYPE or PRINT name: Charles Steiner


TITLE:		TITLE:


Signature			Signature


TYPE or PRINT name	TYPE or PRINT name



TITLE:		TITLE:


Signature			Signature


TYPE or PRINT name	TYPE or PRINT name


Dated this 10th day of November, 2010
		Change of address? o Yes [No MINN-DAK FARMERS COOPERATIVE 7525 Red River Road Wahpeton, North Dakota 58075-9698 Phone: (701) 642-8411 Fax No: (701) 642-6814

Secretary: Charles Steiner


Annual Meeting Month: December

Loan No. RIA685T04A

SINGLE ADVANCE TERM LOAN SUPPLEMENT

THIS SUPPLEMENT to the Master Loan Agreement dated June 24, 2004 (the “MLA”), is entered into as of October 23, 2008 between CoBANK, ACB (“CoBank”) and MINN-DAK FARMERS COOPERATIVE, Wahpeton, North Dakota (the “Company”), and amends and restates the Supplement dated May 12, 2006 and numbered RIA685T04.

SECTION 1. The Term Loan Commitment. On the terms and conditions set forth in the MLA, CoBank agrees to make an additional single advance loan to the Company in an amount whereby the total amount outstanding does not exceed $25,789,655.20 (the “Commitment”). The Commitment shall expire at 12:00 Noon (Company’s local time) on the date of closing, or on such later date as CoBank may, in its sole discretion, authorize in writing.

SECTION 2. Purpose. The purpose of the Commitment is for general operating purposes.

SECTION 3. Interest. The Company agrees to pay interest on the unpaid balance of the loan(s) in accordance with one or more of the following interest rate options, as selected by the Company:

(A) 7-Day LIBOR Index Rate. At a rate (rounded upward to the nearest l/100th and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as hereinafter defined] or required by any other federal law or regulation) per annum equal at all times to the annual rate quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time for the offering of seven-day U.S. dollars deposits, as published by Bloomberg or another major information vendor listed on BBA’s official website on the first U.S. Banking Day (as hereinafter defined) in each week with such rate to change weekly on such day, plus the Performance Pricing Adjustment, if any set forth in Section 3(D) below. The rate shall be reset automatically, without the necessity of notice being provided to the Company or any other party, on the first U.S. Banking Day of each succeeding week and each change in the rate shall be applicable to all balances subject to this option and information about the then current rate shall be made available upon telephonic request. For purposes hereof: (a) “U.S. Banking Day” shall mean a day on which CoBank is open for business and banks are open for business in New York, New York; (b) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D”; and (c) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

(B) Quoted Rate. At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to CoBank in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 180 days; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; and (3) the maximum number of fixes in place at any one time shall be ten.

(C) LIBOR. At a fixed rate per annum equal to “LIBOR” (as hereinafter defined) plus the Performance Pricing Adjustments, if any, set forth in Section 3(D) below. Under this option: (1) rates may be fixed for “Interest Periods” (as hereinafter defined) of 1, 2, 3, 6, 9, or 12 months as selected by the Company; (2) amounts may be fixed in increments of $100,000.00 or multiples thereof; (3) the maximum number of fixes in place at any one time shall be ten; and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on three Banking Days’ prior written notice. For purposes hereof: (a) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on


Single Advance Term Loan Supplement RIA685T04A	-2-
Minn-Dak Farmers Cooperative
Wahpeton, North Dakota

“Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as herein defined] or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time two Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) “Banking Day” shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; (c) “Interest Period” shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3, 6, 9, or 12 months thereafter, as the case may be; provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D”; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

(D) Performance Pricing Adjustments. The interest rate spread parameters set forth in Subsections (A) and (C) above shall be either increased or decreased in accordance with the following schedule:


Performance Level	Pricing Leverage Ratio*	LIBOR Spread
Level 1	Lesser than or equal to .35 to 1	1.40%
Level 2	Lesser than or equal to .45 to 1	1.65%
Level 3	Greater than .45 to 1	2.15%

*The Pricing Leverage Ratio (for determining LIBOR Spread as indicated in subsection (D) above and the Commitment Fee as indicated in Section 6(A) below) is defined as: (long term debt + capital leases) divided by (long term debt + capital leases + Equity + Minority Interests (as defined in the Company’s financial statements)), all as determined in accordance with GAAP consistently applied.

The applicable interest rate adjustment shall: (i) be considered as of each fiscal quarter end based on interim financial information provided by the Company within 20 working days of quarter end; (ii) become effective as of the first day of the month following receipt of such information by CoBank; and (iii) shall be effective on a prospective basis only and shall not affect existing fixed rate pricing.


Single Advance Term Loan Supplement RIA685T04A	-3-
Minn-Dak Farmers Cooperative
Wahpeton, North Dakota

LIBOR rate loans, all such elections must be confirmed in writing upon CoBank’s request. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month or on such other day in such month as CoBank shall require in a written notice to the Company; provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at CoBank’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than three months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three-month anniversary of the commencement date of such Interest Period, and at maturity.

SECTION 4. Promissory Note. The Company promises to repay the loan as follows: (1) in 30 equal, consecutive quarterly installments of $831,924.36, with the first such installment due on February 20, 2009, and the last such installment due on May 20, 2016, and (2) followed by a final installment in an amount equal to the remaining unpaid principal balance of the loans on August 20, 2016. If any installment due date is not a day on which CoBank is open for business, then such installment shall be due and payable on the next day on which CoBank is open for business. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loan at the rate and at the times set forth above. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.

SECTION 5. Prepayment. Subject to the broken funding surcharge provision of the MLA, the Company may on one Business Day’s prior written notice prepay all or any portion of the loan(s). Unless otherwise agreed by CoBank, all prepayments will be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.

SECTION 6. Security. The Company’s obligations hereunder and, to the extent related hereto, the MLA, shall be secured as provided in the Security Section of the MLA, including without limitation as a future advance under any existing mortgage or deed of trust.

IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.


CoBANK, ACB	MINN-DAK FARMERS COOPERATIVE

By:	By:

Title:	Title:	EXEC. V.P. & C.F.O.

(COBANK LOGO)

Invoice


Billing Date:	October 27, 2008

Customer Number:	36380096

Customer Name:	Minn-Dak Farmers Cooperative
Customer Address:	7525 Red River Road
City/State/Zip:	Wahpeton, North Dakota 58075-9698


Billing Detail



Amendment Fee	$50,000.00
Agreement Number	RIA685S01E

Total	$50,000.00

Comments:

Method of Payment:


o By Check	o By Wire	þ Advance Against Loan No. RIA685S01E


Amount due upon execution of agreement(s) detailed above.


Remit to:	Loan Processing Closing
	CoBank, ACB
	5500 South Quebec Street
	Greenwood Village, Colorado 80111

Return this copy with payment instructions.

EX-12 6 minndak105883_ex12.htm STATEMENT RE COMPUTATION OF RATIO OF NET PROCEEDS TO FIXED CHARGES

Exhibit 12

MINN DAK FARMERS COOPERATIVE
COMPUTATION OF RATIO OF NET PROCEEDS TO FIXED CHARGES
(IN THOUSANDS)


	Year Ended August 31,

	2010		2009		2008		2007		2006
Earnings:
Net proceeds before income taxes from Continuing operations		100,233		96,053		110,863		148,415		76,096
Fixed charges, excluding capitalized interest, see below		1,974		2,018		3,230		4,297		3,544
Amortization of capitalized interest		93		94		106		106		106

Net Proceeds		102,300		98,165		114,199		152,818		79,746

Fixed Charges:
Interest Expense		1,974		2,018		3,230		4,297		3,544
Interest factor included in rentals (1)		0		0		0		0		0

Fixed charges, excluding capitalized Interest		1,974		2,018		3,230		4,297		3,544
Interest capitalized		0		0		0		0		0
Fixed Charges		1,974		2,018		3,230		4,297		3,544

Ratio of net proceeds to fixed charges		51.82		48.64		35.36		35.56		22.50


(1)	The company does lease certain items, such as office equipment. Due to the proportionately small amounts involved, interest on such lease payments has not been included in the total of the company’s fixed charges of the calculation of this ratio.

EX-31.1 7 minndak105883_ex31-1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 302


CERTIFICATION	Exhibit 31.1

I, David H. Roche, certify that:

1. I have reviewed this annual report on Form 10-K of Minn-Dak Farmers Cooperative (the Registrant);

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and Rule 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves Management or other employees who have a significant role in the Registrant’s internal control over financial reporting.


Date:	November 24, 2010	/s/ David H. Roche
		President and Chief Executive Officer

EX-31.2 8 minndak105883_ex31-2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 302


CERTIFICATION	Exhibit 31.2

I, Steven M. Caspers, certify that:

1. I have reviewed this annual report on Form 10-K of Minn-Dak Farmers Cooperative (the Registrant);

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Registrant and have:

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and to the audit committee of our board of directors (or persons performing the equivalent functions):

b) any fraud, whether or not material, that involves Management or other employees who have a significant role in the Registrant’s internal control over financial reporting.


Date:	November 24, 2010	/s/ Steven M. Caspers
		Executive Vice President and Chief Financial Officer

EX-31.3 9 minndak105883_ex31-3.htm CERTIFICATION OF CAO PURSUANT TO SECTION 302


CERTIFICATION	Exhibit 31.3

I, Allen E. Larson, certify that:

1. I have reviewed this annual report on Form 10-K of Minn-Dak Farmers Cooperative (the Registrant);

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and to the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

b) any fraud, whether or not material, that involves Management or other employees who have a significant role in the Registrant’s internal control over financial reporting.


Date:	November 24, 2010	/s/ Allen E. Larson
		Controller and Chief Accounting Officer

EX-32 10 minndak105883_ex32.htm CERTIFICATION OF CEO/CFO PURSUANT TO SECTION 906

Exhibit 32

906 CERTIFICATION

The undersigned certify pursuant to 18 U.S.C. § 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The accompanying Minn-Dak Farmers Cooperative Annual Report on Form 10-K for the period ended August 31, 2010, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the accompanying Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	November 24, 2010	/s/ David H. Roche
		President and
		Chief Executive Officer


		/s/ Steven M. Caspers
		Executive Vice President and
		Chief Financial Officer

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