COAL TRANSPORTATION AGREEMENT THIS AGREEMENT is made and entered into this 25th day of August, 1995, by and between Northern Coal Transportation Company, an Oregon corporation with an office in Gillette, Wyoming ("Northern"), and American Crystal Sugar Company, a Minnesota cooperative with offices at 101 North Third Street, Moorhead, Minnesota 56560 ("Shipper"). RECITALS 1. Concurrent with this Coal Transportation Agreement ("Agreement"), Kennecott Energy Company, for and on behalf of Spring Creek Coal Company, has executed a Coal Supply Agreement with Shipper (the "Coal Supply Agreement") for the sale and purchase of coal from the Spring Creek Mine (the "Mine") to Shipper. The coal is to be used in Shipper's sugar factories in East Grand Forks, Moorhead and Crookston, Minnesota, in Drayton and Hillsboro, North Dakota, and possibly in Progold LLC's Wahpeton, North Dakota, sugar factory. In this Agreement, these sugar factories shall be referred to collectively as the "Sugar Factories" or individually as a "Sugar Factory." Capitalized terms not otherwise defined in this Agreement will have the meaning set forth in the Coal Supply Agreement. 2. The Coal Supply Agreement contemplates the establishment of a transportation system that can take delivery at the Point of Delivery (as that term is defined in Section 5.01 of the Coal Supply Agreement) of estimated requirements of coal in approximately equal weekly and monthly amounts and transport those amounts to the Sugar Factories. 3. Shipper has appointed United Sugars Corporation, a Minnesota company with offices at 1700 Eleventh Street, Moorhead, Minnesota ("USC") to act as its agent in procuring and facilitating the transportation of coal to the Sugar Factories. USC has the authority and is acting on behalf of Shipper in relation to the transportation of coal under the Coal Supply Agreement. USC will be acting on behalf of Shipper under this Agreement. 4. Northern desires to enter into a contract with Shipper to arrange for the transportation of coal called for by the Coal Supply Agreement and to perform all of the obligations of Shipper with respect to the transportation of coal required by the Coal Supply Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties set forth below, the parties to this Agreement agree as follows: 2 SECTION 1. TERM; CAMPAIGN SEASONS. 1.01 TERM. The term of this Agreement shall commence on July 1,1995 ("the Effective Date"), and shall continue to July 31, 2005. 1.02 CAMPAIGN SEASONS. Shipments under the Coal Supply Agreement have been divided into periods of approximately ten months commencing on or about August 15 and continuing until about May 31 of the following calendar year, with the last such period running from about August 15, 2004, to about May 31, 2005. These ten-month periods of coal deliveries shall be referred to in this Agreement as "Campaign Seasons." The Campaign Season for ProGold LLC is contemplated to be year-round. SECTION 2. SHIPMENTS. 2.01 DESCRIPTION OF TRANSPORTATION SYSTEM. Northern agrees to transport from the Spring Creek Mine to the Sugar Factories the estimated annual requirements under the Coal Supply Agreement in approximately equal weekly and monthly amounts. The coal is to be delivered to Shipper FOB Point of Delivery. The Coal Supply Agreement anticipates that deliveries in the first months of a Campaign Season will be larger to allow Shipper sufficient time to build stockpiles at each Sugar Factory. Northern will design the system to allow Shipper Substantial flexibility to increase or decrease the amount of coal delivered 3 to a Sugar Factory by each unit train (when broken into segments), subject to the tonnage minimum stated in Section 2.09 of this Agreement. However, Shipper may not stop a unit train from cycling except in the event of a force majeure as provided in Section 5 of this Agreement, since such interruptions greatly increase the difficulty of transportation management. Northern reserves the right to tender trains of not more than 80 cars in total or 115,000 tons of coal in total per calendar month consisting of the total cars to Shipper and/or Minn-Dak Farmers Cooperative (""Minn-Dak") for the destination Sugar Factories and Minn-Dak's Sugar Factory so that following telephonic notice to Shipper of such limitation aforesaid Northern shall not be required to tender trains totaling 80 cars or 115,000 tons per calendar month under this Agreement to both Minn-Dak and Shipper, until such time as Northern gives telephonic notice to Shipper that the limitation no longer applies. There will be a stop at Fargo, North Dakota, for removal of cars to be delivered to Moorhead and Wahpeton, North Dakota. Shipper may not require Northern to continue more than 75 cars to Grand Forks, North Dakota. At origin, Northern may place all cars for delivery via Fargo, North Dakota, at the head of the train. A detailed description of the transportation system, as set forth 4 Northern's agreement with the Burlington Northern Railroad (the "Carrier"), is set forth in Exhibit A. 2.02 RESPONSIBILITIES CONCERNING DELIVERY - Northern shall deliver coal to the Sugar Factories. Northern will deliver coal in railcars directly to sidings on Shipper's property at the Sugar Factories. Northern will, on Shipper's behalf, fully pursue all claims against third parties for loss of the coal in any given railcar from the time that the railcar is completely loaded at the Spring Creek Mine until the railcar is on property at a Sugar Factory. 2.03 COORDINATION. Northern shall be responsible for arranging all transportation and for coordinating with Spring Creek Coal Company the arrival of railroad trains for loading at the Point of Delivery (as defined in Section 5.01 of the Coal Supply Agreement). Northern shall use reasonable efforts to schedule arrivals of trains at the Point of Delivery such that coal can be delivered in approximately equal monthly amounts during any Campaign Season; provided that deliveries in the first months of a Campaign Season will be larger to allow Shipper to build stockpiles at each of the Sugar Factories. Weekly shipments will be in substantially equal quantities consistent with the monthly delivery quantity. 5 2.04 NOTICE OF CHANGES IN TRAIN SEGMENTS. If Shipper desires to alter the size of train segments to be transported to any Sugar Factory during a Campaign Season, Shipper may notify Northern by mail or by telephone, telegraph or other electronic means. Any electronic notice shall be confirmed in writing within ten (10) days. Requested changes in the size of train segments to be transported to any Sugar Factory will be implemented for the first train loaded more than 24 hours after notice is received; provided that Northern shall not be obligated to provide unit trains of more than 80 cars or fewer than 55 cars, which trains are comprised -of Shipper and Minn-Dak cars. Subject to system limitations, a train segment that has left the Mine may be reconsigned to a different Sugar Factory. Shipper shall monitor and control its coal stockpiles so that requested increases or decreases in the size of train segments delivered to the Sugar Factories will not result in a unit train with more than 80 cars or fewer than 55 cars which may be combined with Minn-Dak shipments. USC will act on Shipper's behalf in coordinating unit train composition with Minn-Dak and Northern. 2.05 RIGHT TO TRANSPORT EXCESS COAL. To maintain the efficient operation of its transportation system, Northern may transport from the Spring Creek Mine to the Sugar Factories 6 up to 12 percent more than Shipper's estimated or amended coal requirements in any month, as contemplated by Section 3.03 of the Coal Supply Agreement. Shipper agrees to accept and pay for the transportation of such coal, provided that Shipper shall not be required to pay transportation for more coal than it has requested during any Campaign Season, subject to the minimum tonnage stated in Section 2.09 of this Agreement. 2.06 EXTENDED CAMPAIGN SEASON. Under Section 3.02 (b) of the Coal Supply Agreement, Shipper may extend any Campaign Season by three months before August 15 or after May 31 of such Campaign Season upon six weeks written notice to Spring Creek Coal Company. If Shipper chooses to extend any Campaign Season, it shall also be required to give Northern six weeks written notice and Shipper shall pay Northern for any increased transportation costs as specified in Section 2.08 of this Agreement. 2.07 UNLOADING. Shipper agrees to provide facilities at the Sugar Factories to permit delivery by Northern of segments of a train. Said facilities shall be designed and constructed for carload unloading. Northern will place the loaded cars on a siding on Shipper's property. The Shipper will complete unloading operation at its own expense. The Shipper shall exercise reasonable care and caution when unloading.-Cl 7 railcars at their facilities and will insure that railcar doors are closed with latches in the locked position, with cargo hoppers free and clear of any foreign debris. The Shipper shall pay for the actual costs incurred by Northern in respect of any failure of Shipper to exercise such reasonable care and caution, including any origin demurrage incurred by Northern as a result thereof. Plant-personnel are responsible to notify USC, who will in turn notify Northern, of any problems or deficiencies found concerning the railcars. When a train reaches a Sugar Factory, the coal shall be unloaded from each railcar within five (5) full days of the date of the arrival of such railcar to ensure that at least 55 empty railcars- are available at all times to make up unit trains. In the event that railcars are not unloaded within the time specified above, Northern reserves the right to charge a mutually acceptable demurrage rate on each such railcar. 2.08 CHANGES IN TRANSPORTATION SYSTEM. Shipper acknowledges that changes in the transportation system including, but not limited to, (i) reconsignment, of train segments from one Sugar Factory to another; (ii) any break in the unit train cycle due to failure to unload railcars or other reasons caused by Shipper; (iii) any extension of the Campaign Season as provided in Section 2.06 of this Agreement, and (iv) Carriers Line Abandonment as set forth in Section 7.01 may result in changes 8 in Northern's railcar and other costs as set forth in Exhibit' A. Unless excused by Section 5, Shipper agrees to pay all such changes in transportation costs caused by or attributable to Shipper or USC. Northern WILL be responsible for changes in transportation costs caused by or attributable to Northern. Northern will be responsible for changes in transportation costs caused by or attributable to Northern. 2.09 FREIGHT COSTS DUE TO QUANTITY VARIATIONS. *CONFIDENTIAL TREATMENT REQUESTED* 9 *CONFIDENTIAL TREATMENT REQUESTED* 2.10 FROZEN COAL. Shipper assumes the risk that coal may freeze in transit between the Spring Creek Mine or any source of Substitute Coal and the Sugar Factories. No price 10 adjustment or delay in unloading shall be allowed for frozen coal. 2.10 SOLE REPRESENTATIVE. For the purpose of proper and efficient communications, it is expressly understood between Northern and the Shipper that Northern is the sole representative of Shipper, USC and the Sugar Companies for all services stated or contemplated in this Agreement and that all communication, verbal or written, relating in any way to the rates, terms, conditions, and performance of this Agreement be accomplished solely between Northern, Northern Mine's Representative and Carrier. The only exception to the above will involve day-to-day communications between USC or the Sugar Companies it represents and the Carrier pertaining to or relating to railcar switching from and to the Sugar Factories or such switching of destination related operations. SECTION 3. TRANSPORTATION COSTS; ADJUSTMENTS; BILING AND PAYMENT *CONFIDENTIAL TREATMENT REQUESTED* 11 *CONFIDENTIAL TREATMENT REQUESTED* 12 *CONFIDENTIAL TREATMENT REQUESTED* 13 *CONFIDENTIAL TREATMENT REQUESTED* 14 *CONFIDENTIAL TREATMENT REQUESTED* 15 *CONFIDENTIAL TREATMENT REQUESTED* SECTION 4. LIABILITY AND INDEMNIFICATION. 4.01 LIABILITY FOR PROPERTY DAMAGE AND PERSONAL INJURY. Each party shall assume and be responsible for any liability for loss and damage to property and for personal injury, including death, to any person caused by the negligence of that party and arising out of or connected with performance of this Agreement. 4.02 JOINT LIABILITY. If liability is due to the joint and concurring negligence of the parties, it shall be shared by them proportionately on the basis of the negligence of each party involved. 4.03 LIMITATION ON LIABILITY. IN NO EVENT SHALL EITHER PARTY HAVE LIABILITY TO THE OTHER PARTY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT. 16 SECTION 5. FORCE MAJEURE. (a) If either party is unable to meet any of its obligations under this Agreement as a result of flood, earthquake, storm, or other act of God, fire, derailment, accident, strike, lockout, boycotts, picketing, shortages of or inability to obtain electric power, raw materials, railcars or machinery, mechanical breakdown in facilities, war, insurrection, riot, catastrophic sugar beet or corn crop failure (as applicable), railroad line abandonment, act of government or governmental agency, or due to any cause beyond the reasonable control of either party, including the inability of a Sugar Factory, the Mine and/or the Carrier to meet its obligations for reasons whether similar or dissimilar to the foregoing and whether foreseeable or unforeseeable" such event will be deemed an event of force majeure. In addition, it shall be deemed an event of force majeure in the event Shipper is unable to burn Northern's coal due to ash-fouling, sulfur dioxide emissions, or other legally enforceable environmental restrictions, or either party permanently closes or experiences partial failure or nonoperation of any of its facilities lasting a minimum of seven (7) days as a result of reasons beyond the control of such party. In the event of force majeure, the obligations of the parties, other than payment for Transportation Costs incurred, shall be 17 suspended for the duration of the event of force majeure, provided that reasonable notice is given. No suspension or reduction for reason of force majeure shall invalidate the remainder of this Agreement; but on removal of the cause, shipments shall resume at the specified rate; deficiencies in shipments so caused shall not be made up except by mutual consent. If an event of force majeure prevents the performance of either party for a period of one year or more despite that party's efforts to eliminate the force majeure event and to mitigate its impact, then the party not claiming an event of force majeure may terminate this Agreement by providing at least thirty (30) days written notice of termination to the other party. The provisions of this Section shall not excuse either party from performing unless that party gives a reasonable notice to the other party of the occurrence of an, event of force majeure. (b) For the purposes of any partial or total event of Force Majeure under this Agreement, it will be presumed that, except for the event, total loading of coal onto trains at the mine and total deliveries to Shipper by Northern at the Sugar Factories would have been 3650 Tons per Campaign Season day, under the 500,000 Ton Minimum Volume Requirement, for each continuous hour period. Lie Minimum Tonnaqe Requirement of 416,66-1 tons 18 (subject to reduction as provided herein) will be proportionately reduced per Campaign Season day for each Force Majeure day claimed as follows: Minimum Tonnage Requirement DESTINED WHEN TO: 500,000 TONS ----------------- ------------ Redco, ND 575 Tons Wilds, MN 560 Tons Drayton, 4TD 575 Tons Bingham, MN 540 Tons East Grand Forks, MN 750 Tons Wahpeton, ND 650 Tons (c) For the purposes of this Section 5, the Shipper destination Sugar Factories are those located at the destination named in Exhibit C. SECTION 6. DISPUTES. In the event any dispute arises between the parties concerning any issue of law or fact arising out of this Agreement, it shall be settled by arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction over the matter. The parties to the arbitration shall be entitled to such discovery as would be available to them under the Federal Rules of Civil Procedure, and the arbitrators will have all the authority of a court under such Rules incidental to such discovery, Including but not limited to orders to produce documents or 19 other materials and orders to appear and submit to deposition and to impose appropriate sanctions, including but not limited to awarding sanctions against a party for failure to comply with any order. The arbitration panel shall consist of three arbitrators, one appointed by Northern, one by Shipper and the third by the arbitrators appointed by Northern and Shipper. If the partyappointed arbitrators cannot agree within 15 days after their appointment on appointment of a third person, then the third person shall be appointed by the American Arbitration Associa- tion. SECTION 7. GENERAL PROVISIONS. 7.01 LINE ABANDONMENT. The terms of this Agreement in no WAY obligate carrier or Northern to continue ownership, maintenance (including Weight standards), or operation of any rail lines. Northern will not be liable for any consequential damages or increased transportation costs that may be incurred by Shipper as the result of carrier's discontinuation of ownership, maintenance (including Weight standards), or operation of any rail lines. If Shipper fails to meet its Minimum Tonnage Requirements due to lawful cessation of service or abandonment of any ral lines during the term of this Agreement, as the sole remedy of: Shipper, the rates on all coal whhich moved in accor- 20 dance with this Agreement during the then current Campaign Season shall be determined as if the Minimum Tonnage Requirement had been met. 7.02 WAIVER. Failure of either party at any time to require performance of any provision of this Agreement shall not limit that party's right to enforce the provisions, nor shall any waiver of any breach of any provision be a waiver of any succeeding breach of the provision itself or of any other provision. 7.03 HEADINGS. The headings in this Agreement are included only for convenience and shall not control or affect the meaning or construction of this Agreement. 7.04 ENTIRE AGREEMENT. This Agreement is the entire agreement between the parties. There are no other provisions, representations, warranties or understandings, express or implied. No modification, variation or amendment of this Agreement shall be of any force or effect unless it is in writing and signed by all the parties. 7.05 BINDING AFFECT. This Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and assigns. 21 7.06 GOVERNING LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota. 7.07 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 7.08 NOTICES. Notices under this Agreement shall be in writing and shall be effective when actually delivered. If mailed, a notice shall be deemed effective five (5) days after mailing as registered or certified mail, postage prepaid, directed to the other party as set out below. If via telefacsimile, a notice shall be deemed effective upon receipt of the successful telefax transmission report, directed to the other party as set out below. NORTHERN NORTHERN COAL TRANSPORTATION COMPANY Attn: Contract Administration 505 South Gillette Avenue Gillette, Wyoming 82716 or Caller Box 3009 Gillette, Wyoming 82717-3009 Fax No. (307)687-6009 SHIPPER AMERICAN CRYSTAL SUGAR COMPANY Attn: Vice President, Operations 101 North Third Street Moorhead, Minnesota 56560 Fax No. (218)236-4494 22 The addresses and fax numbers of any party may be changed by giving notice in writing at any time to the other party. 7.08 CONFIDENTIALLITY. Any nonpublic information, oral or written, including the contents of this Agreement and any related agreement, disclosed by a party to the other shall be considered confidential information, and such information shall not be disclosed to any third party, other than to Northern's parent corporation, USC, ProGold, or the employees, accountants, attorneys, and lenders of such parties, and will be kept secret and confidential during the term of this Agreement. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the Effective Date set forth above. NORTHERN COAL TRANSPORTATION COMPANY By /s/ ILLEGIBLE -------------------------------------- Title V.P. Marketing & Sales ----------------------------------- AMERICAN CRYSTAL SUGAR COMPANY By /s/ Marcus F. Richardson -------------------------------------- Title CO.O. ----------------------------------- 23 EXHIBIT A DESCRIPTION OF TRANSPORTATION (AS EXCERPTED FROM THE AGREEMENT BETWEEN THE BURLINGTON NORTHERN RAILROAD AND NORTHERN COAL TRANSPORTATION COMPNAY) *CONFIDENTIAL TREATMENT REQUESTED* 24 *CONFIDENTIAL TREATMENT REQUESTED* 25 EXHIBIT B LIQUIDATED DAMAGES *CONFIDENTIAL TREATMENT REQUESTED* 26 EXHIBIT C *CONFIDENTIAL TREATMENT REQUESTED* 27 EXHIBIT D ADJUSTMENT OF RATES AND CHARGES *CONFIDENTIAL TREATMENT REQUESTED* 28 *CONFIDENTIAL TREATMENT REQUESTED* 29