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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000897101-01-500128.txt : 20010411
<SEC-HEADER>0000897101-01-500128.hdr.sgml : 20010411
ACCESSION NUMBER:		0000897101-01-500128
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20010228
FILED AS OF DATE:		20010410

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CENEX HARVEST STATES COOPERATIVES
		CENTRAL INDEX KEY:			0000823277
		STANDARD INDUSTRIAL CLASSIFICATION:	WHOLESALE-FARM PRODUCT RAW MATERIALS [5150]
		IRS NUMBER:				410251095
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			0831

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		
		SEC FILE NUMBER:	333-17865
		FILM NUMBER:		1598717

	BUSINESS ADDRESS:	
		STREET 1:		5500 CENEX DRIVE
		CITY:			INVER GROVE HEIGHTS
		STATE:			MN
		ZIP:			55077
		BUSINESS PHONE:		6129469433

	MAIL ADDRESS:	
		STREET 1:		5500 CENEX DRIVE
		CITY:			INVER GROVE HEIGHTS
		STATE:			MN
		ZIP:			55077

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	HARVEST STATES COOPERATIVES
		DATE OF NAME CHANGE:	19961212
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>cenex010535_10q.txt
<DESCRIPTION>CENEX HARVEST STATES COOPERATIVES FORM 10-Q
<TEXT>

================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 ---------------

                                    FORM 10-Q

                                 ---------------

(Mark One)
   [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28,
            2001.

   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____.


                        COMMISSION FILE NUMBER 333-17865

                                 ---------------

                       CENEX HARVEST STATES COOPERATIVES
             (Exact name of registrant as specified in its charter)

                      MINNESOTA                              41-0251095
          (State or other jurisdiction of                 (I.R.S. Employer
           incorporation or organization)              Identification Number)

                  5500 CENEX DRIVE,                        (651) 451-5151
           INVER GROVE HEIGHTS, MN 55077              (Registrant's telephone
(Address of principal executive offices and zip code)     number including
                                                             area code)

                                 ---------------

     Include 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.

                                YES __X__ NO ____


     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

                        NONE                                   NONE
                        ----                                   ----
                      (Class)                   (Number of shares outstanding at
                                                        November 30, 2000)

================================================================================

<PAGE>


                                     INDEX

<TABLE>
<CAPTION>
                                                                                           PAGE
                                                                                           NO.
                                                                                           ----
<S>                                                                                         <C>
PART I. FINANCIAL INFORMATION

               CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES

 Item 1. Financial Statements
 Consolidated Balance Sheets as of February 28, 2001 (unaudited), August 31, 2000 and
 February 29, 2000 (unaudited) ...........................................................   2
 Consolidated Statements of Operations for the three months and six months ended
 February 28, 2001 and February 29, 2000 (unaudited) .....................................   3
 Consolidated Statements of Cash Flows for the three months and six months ended
 February 28, 2001 and February 29, 2000 (unaudited) .....................................   4
 Notes to Consolidated Financial Statements (unaudited) ..................................   5
 Item 2. Management's Discussion and Analysis of Financial Condition and
 Results of Operations ...................................................................  10
 Item 3. Quantitative and Qualitative Disclosures about Market Risk ......................  17

              OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

 Item 1. Financial Statements
 Balance Sheets as of February 28, 2001 (unaudited), August 31, 2000 and
 February 29, 2000 (unaudited) ...........................................................  18
 Statements of Operations for the three months and six months ended
 February 28, 2001 and February 29, 2000 (unaudited) .....................................  19
 Statements of Cash Flows for the three months and six months ended
 February 28, 2001 and February 29, 2000 (unaudited) .....................................  20
 Notes to Financial Statements (unaudited) ...............................................  21
 Item 2. Management's Discussion and Analysis of Financial Condition and
 Results of Operations ...................................................................  22

                       WHEAT MILLING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

 Item 1. Financial Statements
 Balance Sheets as of February 28, 2001 (unaudited), August 31, 2000 and
 February 29, 2000 (unaudited) ...........................................................  26
 Statements of Operations for the three months and six months ended
 February 28, 2001 and February 29, 2000 (unaudited) .....................................  27
 Statements of Cash Flows for the three months and six months ended
 February 28, 2001 and February 29, 2000 (unaudited) .....................................  28
 Notes to Financial Statements (unaudited) ...............................................  29
 Item 2. Management's Discussion and Analysis of Financial Condition and
 Results of Operations ...................................................................  30

PART II. OTHER INFORMATION
 Items 1 through 3 have been omitted since all items are inapplicable or answers
  are negative
 Item 4. Submission of Matters to a Vote of Security Holders .............................  33
 Item 5 has been omitted since the answer is negative
 Item 6. Exhibits and Reports on Form 8-K ................................................  33

SIGNATURE PAGE ...........................................................................  34
</TABLE>

                                        i
<PAGE>


                         PART I. FINANCIAL INFORMATION

                     SAFE HARBOR STATEMENT UNDER THE PRIVATE
                    SECURITIES LITIGATION REFORM ACT OF 1995

     This Quarterly Report on Form 10-Q may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to the following:

     SUPPLY AND DEMAND FORCES. The Company may be adversely affected by supply
and demand relationships, both domestic and international. Supply may be
affected by weather conditions, disease, insect damage, acreage planted,
government regulation and policies and commodity price levels. The current short
supply and high demand of natural gas will impact the supply of fertilizer.
Demand may be affected by foreign governments and their programs, relationships
of foreign countries with the United States, the affluence of foreign countries,
acts of war, currency exchange fluctuations and substitution of commodities.
Reduced demand for U.S. agricultural products may also adversely affect the
demand for fertilizer, chemicals and petroleum products sold by the Company and
used to produce crops. Demand may also be affected by changes in eating habits,
population growth and increased or decreased per capita consumption of some
products.

     PRICE RISKS. Upon purchase, the Company has risks of carrying grain and
petroleum, including price changes and performance risks (including delivery,
quality, quantity and shipment period), depending upon the type of purchase
contract. The Company is exposed to risk of loss in the market value of
positions held, consisting of grain and petroleum inventories and purchase
contracts at a fixed or partially fixed price, in the event market prices
decrease. The Company is also exposed to risk of loss on its fixed price or
partially fixed price sales contracts in the event market prices increase. To
reduce the price change risks associated with holding fixed priced positions,
the Company generally takes opposite and offsetting positions by entering into
commodity futures contracts (either a straight futures contract or an option
futures contract) on regulated commodity futures exchanges.

     OILSEED PROCESSING AND REFINING BUSINESS COMPETITION. This industry is
highly competitive. Competitors are adding new plants and expanding capacity of
existing plants. Unless exports increase or existing refineries are closed, this
extra capacity is likely to put additional pressure on prices and erode margins,
adversely affecting the profitability of the Oilseed Processing and Refining
Defined Business Unit.

     MILLING BUSINESS COMPETITIVE TRENDS. Certain major durum milling
competitors of the Wheat Milling Defined Business Unit have developed long-term
relationships with customers by locating plants adjacent to pasta manufacturing
plants. This trend could potentially decrease the future demand for semolina
from nonintegrated millers. In addition, the growth in demand for baking and
bread flour is marginal during a period when the milling industry has been
expanding, which will continue to put pressure on gross margins.

     The forward-looking statements herein are qualified in their entirety by
the cautions and risk factors set forth in Exhibit 99, under the caption
Cautionary Statement to this Quarterly Report on Form 10-Q for the quarter ended
February 28, 2001.


                                        1
<PAGE>


CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS


              CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS
                                                                 FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                                                     2001            2000            2000
                                                                --------------   ------------   -------------
(DOLLARS IN THOUSANDS)                                            (UNAUDITED)                    (UNAUDITED)
<S>                                                               <C>            <C>             <C>
CURRENT ASSETS
 Cash and cash equivalents ..................................     $   47,348     $   56,393      $   55,234
 Receivables ................................................        732,010        834,743         707,434
 Inventories ................................................        622,210        602,385         670,549
 Other current assets .......................................        130,027         37,777         181,550
                                                                  ----------     ----------      ----------
  Total current assets ......................................      1,531,595      1,531,298       1,614,767
INVESTMENTS .................................................        440,996        451,211         407,924
PROPERTY, PLANT AND EQUIPMENT ...............................      1,028,775      1,034,768         989,101
OTHER ASSETS ................................................        201,146        155,403         125,132
                                                                  ----------     ----------      ----------
  Total assets ..............................................     $3,202,512     $3,172,680      $3,136,924
                                                                  ==========     ==========      ==========

                            LIABILITIES AND EQUITIES

CURRENT LIABILITIES
 Notes payable ..............................................     $  385,918     $  217,926      $  225,475
 Current portion of long-term debt ..........................         28,270         30,173          20,802
 Customer credit balances ...................................         65,848         36,779          55,210
 Customer advance payments ..................................        142,799        131,935         243,913
 Checks and drafts outstanding ..............................         44,572         84,086          37,350
 Accounts payable ...........................................        456,740        624,772         648,618
 Accrued expenses ...........................................        121,890        147,710         129,650
 Patronage dividends and equity retirements payable .........         35,362         43,694          15,056
                                                                  ----------     ----------      ----------
  Total current liabilities .................................      1,281,399      1,317,075       1,376,074
LONG-TERM DEBT ..............................................        530,213        480,327         451,500
OTHER LIABILITIES ...........................................         89,768         84,929          78,366
MINORITY INTERESTS IN SUBSIDIARIES ..........................         74,242        125,923         108,938
COMMITMENTS AND CONTINGENCIES
EQUITIES ....................................................      1,226,890      1,164,426       1,122,046
                                                                  ----------     ----------      ----------
  Total liabilities and equities ............................     $3,202,512     $3,172,680      $3,136,924
                                                                  ==========     ==========      ==========
</TABLE>

               The accompanying notes are an integral part of the
                 consolidated financial statements (unaudited).


                                       2
<PAGE>


              CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               FOR THE                          FOR THE
                                                         THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                   -------------------------------   ------------------------------
                                                    FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                        2001             2000             2001             2000
(DOLLARS IN THOUSANDS)                             --------------   --------------   --------------   -------------
<S>                                                  <C>              <C>              <C>             <C>
REVENUES:
 Net sales .....................................     $1,853,239       $1,920,116       $4,022,021      $3,938,874
 Patronage dividends ...........................            823            1,266            1,248           1,524
 Other revenues ................................         39,581           23,815           67,351          49,102
                                                     ----------       ----------       ----------      ----------
                                                      1,893,643        1,945,197        4,090,620       3,989,500
                                                     ----------       ----------       ----------      ----------
COSTS AND EXPENSES:
 Cost of goods sold ............................      1,789,408        1,903,539        3,900,368       3,888,352
 Marketing, general and administrative .........         42,465           37,717           80,875          75,493
 Interest ......................................         17,500           14,001           33,072          26,957
 Equity loss from investments ..................         15,853            7,787           13,493           8,610
 Minority interests ............................          8,473           (9,703)          12,206          (9,166)
                                                     ----------       ----------       ----------      ----------
                                                      1,873,699        1,953,341        4,040,014       3,990,246
                                                     ----------       ----------       ----------      ----------
INCOME (LOSS) BEFORE INCOME
 TAXES AND CUMULATIVE EFFECT
 OF ACCOUNTING CHANGE ..........................         19,944           (8,144)          50,606            (746)
Income taxes ...................................         (6,528)          (4,016)         (38,651)         (5,737)
                                                     ----------       ----------       ----------      ----------
NET INCOME (LOSS) BEFORE
 CUMULATIVE EFFECT OF
 ACCOUNTING CHANGE .............................         26,472           (4,128)          89,257           4,991
Cumulative effect of accounting change,
 net of income tax benefit .....................                                           (3,263)
                                                     ----------       ----------       ----------      ----------
NET INCOME (LOSS) ..............................     $   26,472       $   (4,128)      $   85,994      $    4,991
                                                     ==========       ==========       ==========      ==========
</TABLE>

               The accompanying notes are an integral part of the
                 consolidated financial statements (unaudited).


                                       3
<PAGE>


              CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                       FOR THE                          FOR THE
                                                                 THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                           -------------------------------   ------------------------------
                                                            FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                                2001             2000             2001             2000
(DOLLARS IN THOUSANDS)                                     --------------   --------------   --------------   -------------
<S>                                                          <C>              <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss) .....................................     $   26,472       $   (4,128)      $   85,994      $    4,991
 Adjustments to reconcile net income (loss) to net
  cash (used in) provided by operating activities:
   Cumulative effect of accounting change, net of
    income tax benefit .................................                                            3,263
   Depreciation and amortization .......................         24,872           21,795           49,627          43,973
   Noncash net loss from equity investments ............         15,853            7,787           13,493           8,610
   Minority interests ..................................          8,473           (9,703)          12,206          (9,166)
   Noncash portion of patronage dividends received .....           (724)          (1,004)            (875)         (1,074)
   Gain on sale of property, plant and equipment .......        (13,790)            (756)         (14,416)           (832)
   Other, net ..........................................         (1,938)             378           (1,938)            378
   Changes in operating assets and liabilities:
    Receivables ........................................        107,697           17,429          102,679         (97,863)
    Inventories ........................................          9,699            3,099          (74,224)        (66,446)
    Other current assets and other assets ..............        (80,559)        (148,822)        (138,495)       (149,890)
    Customer credit balances ...........................         (8,015)           7,571           29,069          10,240
    Customer advance payments ..........................         13,722           (6,639)          10,864         116,158
    Accounts payable and accrued expenses ..............       (203,027)         171,716         (193,852)        208,766
    Other liabilities ..................................         (4,424)          (1,331)           2,912          (9,807)
                                                             ----------       ----------       ----------      ----------
      Net cash (used in) provided by operating
       activities ......................................       (105,689)          57,392         (113,693)         58,038
                                                             ----------       ----------       ----------      ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of property, plant and equipment ..........        (24,124)         (28,690)         (48,536)        (60,544)
 Proceeds from disposition of property, plant and
  equipment ............................................         26,206              939           27,721           1,395
 Investments ...........................................         (4,123)            (104)         (11,604)         (1,663)
 Investments redeemed from equity investments ..........            638                             8,204          10,338
 Investments redeemed ..................................            468            1,437              635           2,688
 Changes in notes receivable ...........................           (360)          (1,634)            (392)         (1,581)
 Acquisition of intangibles ............................         (7,038)                           (7,038)
 Distribution to minority owners .......................         (8,537)          (3,779)         (12,525)         (5,027)
 Other investing activities, net .......................          4,533            1,306            5,609             390
                                                             ----------       ----------       ----------      ----------
      Net cash used in investing activities ............        (12,337)         (30,525)         (37,926)        (54,004)
                                                             ----------       ----------       ----------      ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Changes in notes payable ..............................         77,863           (3,879)         167,992          28,489
 Long-term debt borrowings .............................         61,244                            61,809
 Principal payments on long-term debt ..................         (4,718)          (4,795)         (13,826)        (10,639)
 Changes in checks and drafts outstanding ..............        (28,202)             450          (39,514)        (11,255)
 Retirements of equities ...............................         (2,374)          (1,581)          (7,911)        (13,092)
 Cash patronage dividends paid .........................        (25,976)         (17,970)         (25,976)        (17,970)
                                                             ----------       ----------       ----------      ----------
      Net cash provided by (used in) financing
       activities ......................................         77,837          (27,775)         142,574         (24,467)
                                                             ----------       ----------       ----------      ----------
NET DECREASE IN CASH AND CASH
 EQUIVALENTS ...........................................        (40,189)            (908)          (9,045)        (20,433)
CASH AND CASH EQUIVALENTS AT
 BEGINNING OF PERIOD ...................................         87,537           56,142           56,393          75,667
                                                             ----------       ----------       ----------      ----------
CASH AND CASH EQUIVALENTS AT END
 OF PERIOD .............................................     $   47,348       $   55,234       $   47,348      $   55,234
                                                             ==========       ==========       ==========      ==========
</TABLE>

               The accompanying notes are an integral part of the
                 consolidated financial statements (unaudited).


                                       4
<PAGE>


              CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                            (DOLLARS IN THOUSANDS)


NOTE 1. ACCOUNTING POLICIES

     The unaudited consolidated balance sheets as of February 28, 2001 and
February 29, 2000, and the statements of operations and cash flows for the three
months and six months ended February 28, 2001 and February 29, 2000 reflect, in
the opinion of management of Cenex Harvest States Cooperatives (the Company),
all normal recurring adjustments necessary for a fair statement of the financial
position and results of operations and cash flows for the interim periods. The
results of operations and cash flows for interim periods are not necessarily
indicative of results for a full year. The consolidated balance sheet data as of
August 31, 2000 was derived from audited consolidated financial statements but
does not include all disclosures required by accounting principles generally
accepted in the United States of America.

     The unaudited consolidated financial statements include the accounts of the
Company and all of its' wholly-owned and majority-owned subsidiaries and limited
liability companies. The effects of all significant intercompany accounts and
transactions have been eliminated.

     Certain reclassifications have been made to the prior year's financial
statements to conform to the current year presentation. These reclassifications
had no effect on previously reported net income or equity.

     These statements should be read in conjunction with the consolidated
financial statements and footnotes for the year ended August 31, 2000, included
in the Company's Report on Form 10-K previously filed with the Securities and
Exchange Commission on November 22, 2000.

EQUITIES

     Effective September 1, 2000, the Company's Board of Directors approved a
resolution to compute patronage distributions based on audited earnings for
financial statement purposes rather than tax basis earnings. On December 1,
2000, the resolution was ratified by the Company's members and beginning in
fiscal year 2001 patronage distributions will be based on audited financial
statement earnings.

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     The Company adopted SFAS No. 133, as amended, a standard related to the
accounting for derivative transactions and hedging activities, effective
September 1, 2000. The effect of adoption was a loss of $3.6 million ($3.3
million net of income tax benefit) relating to the energy business segment.

     All of the Company's derivatives are designated as non-hedge derivatives.
The futures, options, and forward contracts utilized by the Company are
discussed below. Although the contracts are effective economic hedges of
specified risks, they are not designated as and accounted for as hedging
instruments.

     The Company, as part of its trading activity, utilizes futures and option
contracts offered through regulated commodity exchanges to reduce risk. The
Company is exposed to risk of loss in the market value of inventories and fixed
or partially fixed purchase and sale contracts. To reduce that risk, the Company
generally takes opposite and offsetting positions using future contracts or
options.

     Certain commodities cannot be hedged with future or option contracts
because such contracts are not offered for these commodities by regulated
commodity exchanges. Inventories and purchase contracts for those commodities
are hedged with forward sales contracts to the extent practical so as to arrive
at a net commodity position within the formal position limits set by the Company
and deemed prudent for each of those commodities. Commodities for which future
contracts and options are available are also typically hedged first in this
manner, with futures and options used to hedge within position limits that
portion not covered by forward contracts.

     Unrealized gains and losses on futures and options contracts used to hedge
grain, oilseed and certain energy inventories, and fixed priced contracts, are
recognized for financial reporting. Grain and oilseed inventories and fixed
priced contracts are marked to market so that gains and losses on the


                                       5
<PAGE>


derivative contracts are offset by gains and losses on inventories and fixed
priced contracts during the same accounting period. Energy inventories are
valued at the lower of cost or market, and energy fixed price contracts are
marked to market.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 101 "Revenue Recognition in Financial Statements". The
SAB summarizes certain of the SEC staff's views in applying accounting
principles generally accepted in the United States of America to revenue
recognition in financial statements. In June 2000, the SEC issued SAB 101B,
which delays the implementation date of SAB 101 until no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999. The Company
does not believe that adoption of this SAB will materially impact its financial
statements.

     Emerging Issues Task Force (EITF) Issue 00-10 "Accounting for Shipping and
Handling Fees and Costs", is effective for all fiscal years beginning after
December 15, 1999. EITF 00-10 states that all amounts billed to a customer in a
sale transaction related to shipping and handling represent revenues earned for
the goods provided and should be classified as revenue. The Company does not
believe that adoption of EITF 00-10 will materially impact the financial
statements.

NOTE 2. RECEIVABLES

<TABLE>
<CAPTION>
                                                      FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                                          2001            2000            2000
                                                     --------------   ------------   -------------
<S>                                                     <C>             <C>             <C>
   Trade .........................................      $725,411        $834,349        $715,390
   Other .........................................        30,404          23,643          15,657
                                                        --------        --------        --------
                                                         755,815         857,992         731,047
   Less allowances for doubtful accounts .........        23,805          23,249          23,613
                                                        --------        --------        --------
                                                        $732,010        $834,743        $707,434
                                                        ========        ========        ========
</TABLE>

NOTE 3. INVENTORIES

<TABLE>
<CAPTION>
                                            FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                                2001            2000            2000
                                           --------------   ------------   -------------
<S>                                           <C>             <C>             <C>
   Energy ..............................      $229,714        $286,276        $299,316
   Grain and oilseed ...................       251,209         215,570         202,497
   Feed and farm supplies ..............       104,583          63,909          64,930
   Processed grain and oilseed .........        32,755          32,993          14,612
   Agronomy ............................            --              --          86,153
   Other ...............................         3,949           3,637           3,041
                                              --------        --------        --------
                                              $622,210        $602,385        $670,549
                                              ========        ========        ========
</TABLE>

NOTE 4. INVESTMENTS

     The following provides summarized unaudited financial information for
Ventura Foods, LLC and Agriliance, LLC for the three-month and six-month periods
as indicated below.

                              VENTURA FOODS, LLC
<TABLE>
<CAPTION>
                              FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                            -------------------------------   ------------------------------
                             FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                 2001             2000             2001             2000
                            --------------   --------------   --------------   -------------
<S>                            <C>              <C>              <C>              <C>
   Net sales ............      $229,427         $216,237         $459,435         $446,267
   Gross profit .........        31,655           27,147           65,532           62,891
   Net income ...........        10,950            5,844           22,414           18,631
</TABLE>

     Effective January 1, 2000, Cenex Harvest States Cooperatives, Farmland
Industries, Inc. and Land O'Lakes, Inc. created Agriliance, a distributor of
crop nutrients, crop protection products and other agronomy inputs and
services. At formation, Agriliance managed the agronomy marketing operations of
Cenex Harvest States Cooperatives, Farmland Industries, Inc. and Land O'Lakes,
Inc. with the Company exchanging the right to use its agronomy operations for
26.455% of the results of the jointly managed operations.


                                       6
<PAGE>


     In March 2000, the Company sold 1.455% of its economic interest in
Agriliance, resulting in a gain of approximately $7.4 million. In July 2000, the
Company exchanged its ownership in the Cenex/Land O'Lakes Agronomy Company and
in Agro Distribution, LLC for a 25% equity interest in Agriliance. The interests
of the Company and Farmland Industries, Inc. are held through equal ownership in
United Country Brands, LLC, a joint venture holding company whose sole
operations consist of the ownership of a 50% interest in Agriliance.

     In July 2000, Agriliance secured its own financing, which is without
recourse to the Company. Agriliance then purchased the net working capital
related to agronomy operations from each of its member owners, consisting
primarily of trade accounts receivable and inventories, net of accounts payable.

     As of July 31, 2000, the Company recorded the results of its 25% ownership
in Agriliance on the equity method.

                                AGRILIANCE, LLC

                             FOR THE THREE     FOR THE SIX
                              MONTHS ENDED     MONTHS ENDED
                              FEBRUARY 28,     FEBRUARY 28,
                                  2001             2001
                            ---------------   -------------
   Net sales ............      $ 668,397       $1,329,278
   Gross profit .........         52,363          109,361
   Net loss .............        (26,130)         (48,767)

NOTE 5. COMPREHENSIVE INCOME

     During the three months ended February 28, 2001 and February 29, 2000,
total comprehensive income (loss) amounted to $27.4 million income and $5.3
million loss, respectively. For the six months ended February 28, 2001 and
February 29, 2000, total comprehensive income amounted to $88.4 million and $3.9
million, respectively. Accumulated other comprehensive loss on February 28,
2001, August 31, 2000 and February 29, 2000 was $0.1 million, $2.4 million and
$2.3 million, respectively.

NOTE 6. SEGMENT REPORTING

     Effective September 1, 2000, the Company's management reorganized the way
its businesses are managed and internally reported. A new segment named Country
Operations was created. This new segment includes the former Farm Marketing &
Supply business previously included in the Grain Marketing and Farm Marketing &
Supply segment, and also the Country Services, hedging and insurance services
formerly included in Other. With the reorganization there are five business
segments. These segments, which are based on products and services, include
Agronomy, Energy, Grain Marketing, Country Operations, and Processed Grain and
Consumer Products. Reconciling items represent the eliminations of intracompany
sales between segments. Intracompany sales from Country Operations to Grain
Marketing were $169.3 million and $163.1 million for the three months ended
February 28, 2001 and February 29, 2000, respectively, and $374.8 million and
$345.5 million for the six months ended February 28, 2001 and February 29, 2000,
respectively. Intra-company sales from Energy to Country Operations were $18.2
million and $10.9 million for the three months ended February 28, 2001 and
February 29, 2000, respectively, and $38.2 million and $22.3 million for the six
months ended February 28, 2001 and February 29, 2000, respectively. The prior
year's segment information has been restated to reflect the change in segments.
Due to cost allocations and intersegment activity, management does not represent
that these segments if operated independently, would report the income before
income taxes and other financial information as presented.


                                       7
<PAGE>


     Segment information for the three months and six months ended February 28,
2001 and February 29, 2000 is as follows:

<TABLE>
<CAPTION>
                                                                       GRAIN
                                       AGRONOMY        ENERGY        MARKETING
                                      ----------     ----------     ----------
<S>                                   <C>            <C>            <C>
FOR THE THREE MONTHS ENDED
 FEBRUARY 28, 2001:
  Net sales .......................                  $  696,740     $  872,897
  Patronage dividends .............                          31            444
  Other revenues (losses) .........                         671          5,979
                                      ----------     ----------     ----------
                                                        697,442        879,320
  Cost of goods sold ..............                     640,075        873,566
  Marketing, general
   and administrative .............   $    1,926         11,504          5,148
  Interest ........................       (1,411)         6,822          2,160
  Equity loss (income)
   from investments ...............       13,100           (189)          (707)
  Minority interests ..............                       8,356
                                      ----------     ----------     ----------
  (Loss) income before
   income taxes ...................   $  (13,615)    $   30,874     $     (847)
                                      ==========     ==========     ==========
FOR THE THREE MONTHS ENDED
 FEBRUARY 29, 2000
  Net sales .......................   $  126,957     $  663,713     $  892,348
  Patronage dividends .............                          72            518
  Other revenues ..................                         473          5,080
                                      ----------     ----------     ----------
                                         126,957        664,258        897,946
  Cost of goods sold ..............      114,619        670,863        889,300
  Marketing, general
   and administrative .............        2,803         12,280          4,890
  Interest ........................       (1,584)         7,367          2,349
  Equity loss (income)
   from investments ...............       12,835           (412)        (2,338)
  Minority interests ..............                      (9,732)
                                      ----------     ----------     ----------
  (Loss) income before
   income taxes ...................   $   (1,716)    $  (16,108)    $    3,745
                                      ==========     ==========     ==========
FOR THE SIX MONTHS ENDED
 FEBRUARY 28, 2001
  Net sales .......................                  $1,570,136     $1,840,387
  Patronage dividends .............   $      268             40            501
  Other revenues ..................                       1,418         11,420
                                      ----------     ----------     ----------
                                             268      1,571,594      1,852,308
  Cost of goods sold ..............                   1,470,461      1,838,868
  Marketing, general
   and administrative .............        3,716         21,254         10,656
  Interest ........................       (2,582)        13,902          4,325
  Equity loss (income)
   from investments ...............       18,329           (344)        (2,526)
  Minority interests ..............                      12,086
                                      ----------     ----------     ----------
  (Loss) income before
   income taxes and
   cumulative effect of
   accounting change ..............   $  (19,195)    $   54,235     $      985
                                      ==========     ==========     ==========
   Total identifiable
    assets ........................   $  207,572     $1,212,305     $  360,507
                                      ==========     ==========     ==========
</TABLE>

<PAGE>

[WIDE TABLE CONTINUED]

<TABLE>
<CAPTION>
                                                   PROCESSED
                                                   GRAIN AND
                                       COUNTRY     CONSUMER                   RECONCILING
                                     OPERATIONS    PRODUCTS       OTHER         AMOUNTS        TOTAL
                                    ------------ ------------ ------------- -------------- -------------
<S>                                   <C>         <C>           <C>           <C>           <C>
FOR THE THREE MONTHS ENDED
 FEBRUARY 28, 2001:
  Net sales .......................   $324,161    $ 146,936                   $ (187,495)   $1,853,239
  Patronage dividends .............        313                  $      35                          823
  Other revenues (losses) .........     27,488          (15)        5,458                       39,581
                                      --------    ---------     ---------     ----------    ----------
                                       351,962      146,921         5,493       (187,495)    1,893,643
  Cost of goods sold ..............    324,735      138,527                     (187,495)    1,789,408
  Marketing, general
   and administrative .............     14,323        7,518         2,046                       42,465
  Interest ........................      4,011        3,464         2,454                       17,500
  Equity loss (income)
   from investments ...............        158       (5,632)        9,123                       15,853
  Minority interests ..............        117                                                   8,473
                                      --------    ---------     ---------     ----------    ----------
  (Loss) income before
   income taxes ...................   $  8,618    $   3,044     $  (8,130)    $       --    $   19,944
                                      ========    =========     =========     ==========    ==========
FOR THE THREE MONTHS ENDED
 FEBRUARY 29, 2000
  Net sales .......................   $280,759    $ 130,335                   $ (173,996)   $1,920,116
  Patronage dividends .............        603                  $      73                        1,266
  Other revenues ..................     16,032            4         2,226                       23,815
                                      --------    ---------     ---------     ----------    ----------
                                       297,394      130,339         2,299       (173,996)    1,945,197
  Cost of goods sold ..............    279,840      122,913                     (173,996)    1,903,539
  Marketing, general
   and administrative .............     12,334        3,870         1,540                       37,717
  Interest ........................      2,414        1,909         1,546                       14,001
  Equity loss (income)
   from investments ...............       (332)      (1,966)                                     7,787
  Minority interests ..............         29                                                  (9,703)
                                      --------    ---------     ---------     ----------    ----------
  (Loss) income before
   income taxes ...................   $  3,109    $   3,613     $    (787)    $       --    $   (8,144)
                                      ========    =========     =========     ==========    ==========
FOR THE SIX MONTHS ENDED
 FEBRUARY 28, 2001
  Net sales .......................   $726,046    $ 298,475                   $ (413,023)   $4,022,021
  Patronage dividends .............        346                  $      93                        1,248
  Other revenues ..................     48,007           10         6,496                       67,351
                                      --------    ---------     ---------     ----------    ----------
                                       774,399      298,485         6,589       (413,023)    4,090,620
  Cost of goods sold ..............    725,714      278,348                     (413,023)    3,900,368
  Marketing, general
   and administrative .............     26,531       14,895         3,823                       80,875
  Interest ........................      7,748        7,172         2,507                       33,072
  Equity loss (income)
   from investments ...............        251      (11,340)        9,123                       13,493
  Minority interests ..............        120                                                  12,206
                                      --------    ---------     ---------     ----------    ----------
  (Loss) income before
   income taxes and
   cumulative effect of
   accounting change ..............   $ 14,035    $   9,410     $  (8,864)    $       --    $   50,606
                                      ========    =========     =========     ==========    ==========
   Total identifiable
    assets ........................   $790,555    $ 429,935     $ 201,638     $       --    $3,202,512
                                      ========    =========     =========     ==========    ==========
</TABLE>

                                       8
<PAGE>


<TABLE>
<CAPTION>
                                                               GRAIN        COUNTRY
                                  AGRONOMY       ENERGY      MARKETING    OPERATIONS
                                ------------ ------------- ------------- ------------
<S>                               <C>         <C>           <C>            <C>
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000
  Net sales ...................   $229,020    $1,334,332    $1,848,691     $628,139
  Patronage dividends .........        111            87           547          647
  Other revenues ..............                      947         9,514       34,725
                                  --------    ----------    ----------     --------
                                   229,131     1,335,366     1,858,752      663,511
  Cost of goods sold ..........    210,189     1,326,214     1,843,159      627,775
  Marketing, general
   and administrative .........      5,700        23,914        10,346       24,163
  Interest ....................       (253)       12,582         4,568        4,538
  Equity loss (income)
   from investments ...........     22,160          (577)       (5,187)        (726)
  Minority interests ..........                   (9,217)                        51
                                  --------    ----------    ----------     --------
  (Loss) income before
   income taxes ...............   $ (8,665)   $  (17,550)   $    5,866     $  7,710
                                  ========    ==========    ==========     ========
   Total identifiable
    assets ....................   $502,030    $1,263,845    $  230,094     $638,156
                                  ========    ==========    ==========     ========
</TABLE>

[WIDE TABLE CONTINUED]

<TABLE>
<CAPTION>
                                  PROCESSED
                                  GRAIN AND
                                  CONSUMER                  RECONCILING
                                  PRODUCTS       OTHER        AMOUNTS        TOTAL
                                ------------ ------------ -------------- -------------
<S>                               <C>          <C>          <C>            <C>
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000
  Net sales ...................   $266,487                  $ (367,795)   $3,938,874
  Patronage dividends .........                $    132                        1,524
  Other revenues ..............        135        3,781                       49,102
                                  --------     --------     ----------    ----------
                                   266,622        3,913       (367,795)    3,989,500
  Cost of goods sold ..........    248,810                    (367,795)    3,888,352
  Marketing, general
   and administrative .........      8,505        2,865                       75,493
  Interest ....................      3,445        2,077                       26,957
  Equity loss (income)
   from investments ...........     (7,081)          21                        8,610
  Minority interests ..........                                               (9,166)
                                  --------     --------     ----------    ----------
  (Loss) income before
   income taxes ...............   $ 12,943     $ (1,050)    $       --    $     (746)
                                  ========     ========     ==========    ==========
   Total identifiable
    assets ....................   $304,589     $198,210     $       --    $3,136,924
                                  ========     ========     ==========    ==========
</TABLE>

                                       9
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     Effective September 1, 2000, the Company's Board of Directors approved a
resolution to compute patronage distributions based on audited earnings for
financial statement purposes rather than tax basis earnings. On December 1,
2000, the resolution was ratified by the Company's members and beginning in
fiscal year 2001 patronage distributions will be based on audited financial
statement earnings.

     The Company adopted SFAS No. 133, as amended, a standard related to the
accounting for derivative transactions and hedging activities, effective
September 1, 2000. The effect of adoption was a loss of $3.6 million ($3.3
million net of income tax benefit) related to the energy business segment. All
of the Company's derivatives are designated as non-hedge derivatives. The
Company utilizes futures, options and forward contracts related to grain and
certain energy inventories. Although the contracts are effective economic hedges
of specified risks, they are not designated as and accounted for as hedging
instruments.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

     Consolidated net income for the three months ended February 28, 2001 was
$26.5 million compared to a net loss of $4.1 million for the same three-month
period in 2000, which represents a $30.6 million increase. This increase in
profitability is primarily attributable to an increase in net income from the
Company's Energy and Country Operations segments of $47.0 million and $5.5
million, respectively. These increases were partially offset by decreases from
the Agronomy and Grain Marketing segments of $11.9 million and $4.6 million,
respectively. As a greater than 20% owner in two technology companies, the
Company recognized its pro-rata share of those entities' operating losses, which
also partially offset the increases from the Energy and Country Operations
segments. The Company's pro-rata share of the entities' operating losses were
$9.1 million.

     Consolidated net sales of $1.9 billion for the three months ended February
28, 2001 decreased $66.9 million (3%) compared to the same three months ended in
2000.

     Company-wide grain and oilseed net sales of $916.9 million decreased $3.7
million during the three months ended February 28, 2001 compared to the same
three months ended in 2000. Sales for the three months ended February 28, 2001
were $872.9 million and $213.4 million from Grain Marketing and Country
Operations, respectively. Sales for the three months ended February 29, 2000
were $892.3 million and $191.4 million from Grain Marketing and Country
Operations, respectively. The Company eliminated all intracompany sales from
Country Operations to its Grain Marketing segment, of $169.3 million and $163.1
million, for the three months ended February 28, 2001 and February 29, 2000,
respectively. The decrease in sales was primarily due to a decrease in grain
volume of approximately 4%, which was partially offset by an increase of $0.13
per bushel in the average sales price of all grain and oilseed marketed by the
Company compared to the same three months ended in 2000.

     Energy net sales of $678.5 million increased $25.7 million (4%) during the
three months ended February 28, 2001 compared to the same period in 2000. Sales
for the three months ended February 28, 2001 and February 29, 2000 were $696.7
million and $663.7 million, respectively. The Company eliminated all
intracompany sales from the Energy segment to the Country Operations segment of
$18.2 million and $10.9 million, respectively. This increase is primarily
attributable to an increase in the average sales price of refined fuels of $0.14
per gallon, which was partially offset by a volume decrease of 3% compared to
the same three months ended in 2000. Effective December 31, 2000, Cooperative
Refining, LLC (CRLLC) was dissolved through mutual agreement of its members. The
Company owned 58% of CRLLC through its 75% ownership in National Cooperative
Refining Association (NCRA) and therefore consolidated CRLLC business activity
up to the time of dissolution. The average sales price of propane increased by
$0.35 per gallon and volume increased by 44% compared to the same three months
ended in 2000. These propane increases were primarily due to cold weather in the
northern regions of the United States creating a high demand which affected both
volume and price, in addition to increased volumes due to an acquisition in May
2000.

     The Company did not record Agronomy sales during the three months ended
February 28, 2001 compared to $127.0 million for the same three-month period in
2000. Effective January 1, 2000, the


                                       10
<PAGE>


Company exchanged its agronomy operations for an ownership interest in
Agriliance, LLC (owned indirectly through United Country Brands, LLC). As of
July 31, 2000, the Company recorded the results of its 25% ownership in
Agriliance, LLC on the equity method, and as such, income or losses are
reflected in equity loss from investments.

     Country Operations farm supply sales of $110.8 million increased by $21.4
million (24%) during the three months ended February 28, 2001 compared to the
same three months ended in 2000. This increase is primarily due to additional
volume from acquisitions and price increases primarily in agronomy and energy
products.

     Processed Grain and Consumer Products sales of $146.9 million increased
$16.6 million (13%) during the three months ended February 28, 2001 compared to
the same three months ended in 2000. Sales of processed oilseed decreased by
$2.2 million due to volume and price decreases compared to the same three months
ended in 2000. Sales of processed wheat increased by $7.7 million compared to
the same three months ended in 2000, primarily due to increased volume from an
acquisition. The addition of tortilla operations as the result of the
acquisition of Sparta Foods, Inc. in June 2000 and the assets of Rodriguez
Festive Foods, Inc. in February 2001, added $11.1 million of sales to the second
quarter of fiscal year 2001.

     Other revenues of $39.6 million increased $15.8 million (66%) during the
three months ended February 28, 2001 compared to the same three months ended in
2000. The most significant change was revenues from the sale of feed plants and
other assets within the Country Operations segment.

     Cost of goods sold of $1.8 billion decreased $114.1 million (6%) during the
three months ended February 28, 2001, compared to the same three months ended in
2000. The decrease was primarily attributable to the impact of recording the
Company's share of its agronomy operation on the equity method as previously
discussed, which caused a reduction in cost of good sold of $114.6 million
compared to the three months ended in 2000. In addition, during the three months
ended February 28, 2001 the cost of goods of the Energy segment decreased by
$30.8 million (5%) primarily due to a drop in volume from the dissolution of
CRLLC which was partially offset by price increases. The cost of all grains and
oilseed procured by the Company through its Grain Marketing and Country
Operations segments during the current three-month period was essentially
unchanged compared to the same three-month period ended in 2000. The cost of
grain and oilseed increased by $0.13 per bushel, which was offset by a 4%
decrease in volume. Country Operations farm supply cost of goods sold increased
by 22% during the current three-month period compared to the three-month period
in the prior year, primarily due to increased purchases related to acquisitions,
and cost increases primarily in agronomy and energy products. Within the
Company's Processed Grain and Consumer Products segment cost of goods increased
by $15.6 million (13%). The volumes of processed soybeans decreased and wheat
increased and additional costs were reported due to the addition of the tortilla
operation compared to the same three months ended in 2000.

     Marketing, general and administrative expenses of $42.5 million for the
three months ended February 28, 2001 increased by $4.7 million (13%) compared to
the same three months ended in 2000 primarily due to additional expenses from
the tortilla operations.

     Interest expense of $17.5 million for the three months ended February 28,
2001 increased by $3.5 million (25%) compared to the same three months ended in
2000. The average level of short-term borrowings increased by approximately 67%
during the three months ended February 28, 2001 compared to the same period of a
year ago and such borrowings were at a .30% higher average interest rate than a
year ago.

     Equity losses from investments of $15.9 million for the three months ended
February 28, 2001 increased by $8.1 million compared to the same three months
ended in 2000. The losses were primarily attributable to technology investments
of $9.1 million and decreased earnings of $1.3 million from a grain marketing
joint venture. These losses were partially offset by an increase in earnings of
a consumer products packaging joint venture of $3.7 million.

     Minority interests in operations of $8.5 million for the three months ended
February 28, 2001 increased by $18.2 million compared to the same three months
ended in 2000. Substantially all minority


                                       11
<PAGE>


interests is related to NCRA. This net change in minority interests during the
current year was reflective of more profitable operations within the Company's
majority-owned subsidiaries as compared to the same three months ended in 2000.

     Income tax benefits of $6.5 million and $4.0 million were reported for the
three months ended February 28, 2001 and February 29, 2000, respectively. The
income tax benefit or expense and effective tax rate varies from period to
period based upon the profitability and non-patronage business activity during
each of the comparable periods. During the three-month period ended February 28,
2001 the income tax benefit was primarily due to non-patronage business losses.

COMPARISON OF SIX MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

     Consolidated net income for the six months ended February 28, 2001 was
$86.0 million compared to net income of $5.0 million for the same six-month
period in 2000, which represents an $81.0 million increase. The increase in
profitability is primarily attributable to an increase in net income from the
Company's Energy and Country Operations segments of $71.8 million and $6.3
million, respectively. In addition, a change in the tax rate applied to the
Company's cumulative temporary differences between earnings for financial
statement purposes and tax basis earnings resulted in an increase in deferred
tax assets of approximately $34.2 million during the current six-month period.
The Company's calculation of its patronage distribution using audited earnings
for financial statement purposes rather than tax earnings prompted the rate
change. These increases were partially offset by increased losses from the
Agronomy segment of $10.5 million. As a greater than 20% owner in two technology
companies, the Company recognized its pro-rata share of those entities'
operating losses, which also partially offset the increases mentioned above. The
Company's pro-rata share of the entities' operating losses were $9.1 million.

     Consolidated net sales of $4.0 billion for the six months ended February
28, 2001 increased $83.1 million (2%) compared to the same six months ended in
2000.

     Company-wide grain and oilseed net sales of $1.9 billion increased $13.8
million (1%) during the six months ended February 28, 2001 compared to the same
six months ended in 2000. Sales for the six months ended February 28, 2001 were
$1,840.4 million and $471.9 million from Grain Marketing and Country Operations,
respectively. Sales for the six months ended February 29, 2000 were $1,848.7
million and $420.3 million from Grain Marketing and Country Operations,
respectively. The Company eliminated all intracompany sales from Country
Operations to its Grain Marketing segments, of $374.8 million and $345.5
million, for the six months ended February 28, 2001 and February 29, 2000,
respectively. The increase in sales was primarily due to an increase in grain
volume of approximately 3%, which was partially offset by a decrease of $0.06
per bushel in the average sales price of all grain and oilseed marketed by the
Company compared to the same six months ended in 2000.

     Energy net sales of $1.5 billion increased $220.0 million (17%) during the
six months ended February 28, 2001 compared to the same period in 2000. Sales
for the six months ended February 28, 2001 and February 29, 2000 were $1.6
billion and $1.3 billion, respectively. The Company eliminated all intracompany
sales from the Energy segment to the Country Operations segment of $38.2 million
and $22.3 million, respectively. This increase is primarily attributable to an
increase in the average sales price of refined fuels of $0.24 per gallon, which
was partially offset by a volume decrease of 6% compared to the same six months
ended in 2000 due to the dissolution of CRLLC, as previously discussed. In
addition, the average sales price of propane increased by $0.30 per gallon and
volume increased by 41% compared to the same six months ended in 2000. These
propane increases were primarily due to cold weather in the northern regions of
the United States creating a high demand which affected both volume and price,
in addition to increased volumes due to an acquisition in May 2000.

     The Company did not record Agronomy sales during the six months ended
February 28, 2001 compared to $229.0 million for the same six-month period in
2000. Effective January 1, 2000, the Company exchanged its agronomy operations
for an ownership interest in Agriliance, LLC (owned indirectly through United
Country Brands, LLC). As of July 31, 2000, the Company recorded the results of
its 25% ownership in Agriliance, LLC on the equity method, and as such, income
or losses are reflected in equity loss from investments.


                                       12
<PAGE>


     Country Operations farm supply sales of $254.3 million increased by $46.4
million (22%) during the six months ended February 28, 2001 compared to the same
six months ended in 2000. This increase is primarily due to additional volume
from acquisitions and price increases primarily in agronomy and energy products.

     Processed Grain and Consumer Products sales of $298.5 million increased
$32.0 million (12%) during the six months ended February 28, 2001 compared to
the same six months ended in 2000. Sales of processed oilseed increased by $2.4
million due to volume and price increases compared to the same six months ended
in 2000. Sales of processed wheat increased by $9.5 million compared to the same
six months ended in 2000, primarily due to increased volume primarily from an
acquisition. The addition of tortilla operations as the result of the
acquisition of Sparta Foods, Inc. in June 2000 and the assets of Rodriguez
Festive Foods, Inc. in February 2001 added $20.1 million of sales to the six
months of fiscal year 2001.

     Other revenues of $67.4 million increased $18.2 million (37%) during the
six months ended February 28, 2001 compared to the same six months ended in
2000. The most significant change was revenues from the sale of feed plants and
other assets within the Country Operations segment.

     Cost of goods sold of $3.9 billion increased $12.0 million during the six
months ended February 28, 2001, compared to the same six months ended in 2000.
During the six months ended February 28, 2001 the average cost of refined fuels
and propane increased by $0.20 and $0.29 per gallon, respectively compared to
the same six months ended in 2000. The cost of all grains and oilseed procured
by the Company through its Grain Marketing and Country Operations segments
during the current six-month period was essentially unchanged compared to the
same six-month period ended in 2000. The cost of grain and oilseed decreased by
$0.06 per bushel, which was offset by a 3% increase in volume. Country
Operations farm supply cost of goods sold increased by 23% during the current
six-month period compared to the six-month period in the prior year, primarily
due to increased purchases related to acquisitions, and cost increases primarily
in agronomy and energy products. Processed Grain and Consumer Products cost of
goods increase $29.5 million (12%). The volumes of processed soybeans and wheat
increased and additional costs were reported due to the addition of the tortilla
operation compared to the same six months ended in 2000. These increases were
partially offset by the impact of recording the Company's share of its agronomy
operation on the equity method as described previously, which caused a reduction
in cost of good sold of $210.2 million compared to the same six months ended in
2000.

     Marketing, general and administrative expenses of $80.9 million for the six
months ended February 28, 2001 increased by $5.4 million (7%) compared to the
same three months ended in 2000 primarily due to additional expenses from the
tortilla operations.

     Interest expense of $33.1 million for the six months ended February 28,
2001 increased by $6.1 million (23%) compared to the same six months ended in
2000. The average level of short-term borrowings increased by approximately 28%
during the three months ended February 28, 2001 compared to the same period of a
year ago and such borrowings were at a .80% higher average interest rate than a
year ago.

     Equity loss from investments of $13.5 million for the six months ended
February 28, 2001 increased by $4.9 million (57%) compared to the same three
months ended in 2000. The losses were primarily attributable to technology
investments of $9.1 million and decreased earnings of $2.4 million from a grain
marketing joint venture. These losses were partially offset by an increase in
earnings of a consumer products packaging joint venture of $4.3 million and
decreased losses from the Agronomy segment of $3.8 million. The Company records
its 25% share of Agriliance, LLC, on the equity method as previously discussed.

     Minority interests in operations of $12.2 million for the six months ended
February 28, 2001 increased by $21.4 million compared to the same six months
ended in 2000. Substantially all minority interests is related to NCRA. This net
change in minority interests during the current year was reflective of more
profitable operations within the Company's majority-owned subsidiaries as
compared to the same six months ended in 2000.


                                       13
<PAGE>


     Income tax benefits of $38.7 million and $5.7 million were reported for the
six months ended February 28, 2001 and February 29, 2000, respectively. An
income tax benefit of $34.2 million for the six-month period ended February 28,
2001 resulted due to a change in the tax rate applied to the Company's
cumulative temporary differences between income for financial statement purposes
and income used for tax reporting purposes. The Company's calculation of its
patronage distribution using audited earnings for financial statement purposes
rather than tax basis earnings prompted the rate change. The Company also
recorded an income tax benefit for the six months ended February 28, 2001 of
$4.5 million, which compares to a $5.7 million tax benefit for the same period
in 2000. The income tax benefit and effective tax rate varies from period to
period based upon the profitability and non-patronage business activity during
each of the comparable periods. During the six-month period ended February 28,
2001 the income tax benefit was primarily due to non-patronage business losses.

     A cumulative effect of an accounting change was incurred due to the
adoption of SFAS No. 133, as amended, related to the energy segment. The loss
incurred was $3.6 million ($3.3 million net of income tax benefit).

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS FROM OPERATIONS

     Operating activities of the Company used net cash of $105.7 million and
provided net cash of $57.4 million for the three months ended February 28, 2001
and February 29, 2000, respectively. For the three-month period ended in 2001,
net income of $26.5 million and net non-cash income and expenses of $32.7
million were offset by increased working capital requirements of $164.9 million.
For the three-month period ended February 29, 2000, a net loss of $4.1 million
was offset by net non-cash income and expenses of approximately $18.5 million
and decreased working capital requirements of approximately $43.0 million.

     Operating activities of the Company used net cash of $113.7 million and
provided net cash of $58.0 million for the six months ended February 28, 2001
and February 29, 2000, respectively. For the six-month period ended in 2001, net
income of $86.0 million and net non-cash income and expenses of $61.4 million
were offset by increased working capital requirements of $261.1 million. For the
six-month period ended February 29, 2000, net income of $5.0 million, net
non-cash income and expenses of approximately $41.9 million and decreased
working capital requirements of approximately $11.1 million provided the cash
from operating activities.

CASH FLOWS FROM INVESTING

     Investing activities of the Company used net cash of $12.3 million during
the three-month period ended February 28, 2001. Expenditures for the acquisition
of property, plant and equipment of $24.1 million, investments of $4.1 million,
acquisition of intangibles of $7.0 million, distributions to minority owners of
$8.5 million and the net change in notes receivable were partially offset by
proceeds from the disposition of property, plant and equipment of $26.2 million,
investments redeemed of $1.1 million and other investing activities. The
acquisition of intangibles relates to the asset purchase of Rodriguez Festive
Foods, Inc., a manufacturer of Mexican foods. The proceeds from the disposition
of property, plant and equipment were primarily from the sale of feed plants and
other assets in the Country Operations segment. For the fiscal year ending
August 31, 2001, the Company projects that total expenditures for the
acquisition of property, plant and equipment will be approximately $104.3
million.

     Investing activities of the Company used net cash of $30.5 million during
the three months ended February 29, 2000. Expenditures for the acquisition of
property, plant and equipment of $28.7 million, distributions to minority owners
of $3.8 million, investments and the net change in notes receivable were
partially offset by, investments redeemed of $1.4 million, proceeds from the
disposition of property, plant and equipment of $0.9 million and other investing
activities.

     Investing activities of the Company used net cash of $37.9 million during
the six-month period ended February 28, 2001. Expenditures for the acquisition
of property, plant and equipment of $48.5 million, investments of $11.6 million,
acquisition of intangibles of $7.0 million, distributions to


                                       14
<PAGE>


minority owners of $12.5 million and the net change in notes receivable were
partially offset by, proceeds from the disposition of property, plant and
equipment of $27.7 million, investments redeemed of $8.8 million and other
investing activities. The proceeds from the disposition of property, plant and
equipment were primarily from the sale of feed plants and other assets in the
Country Operations segment.

     Investing activities of the Company used net cash of $54.0 million during
the six months ended February 29, 2000. Expenditures for the acquisition of
property, plant and equipment of $60.5 million, investments of $1.7 million,
distributions to minority owners of $5.0 million and the net change in notes
receivable were partially offset by investments redeemed of $13.0 million,
proceeds from the disposition of property, plant and equipment of $1.4 million,
and other investing activities.

CASH FLOWS FROM FINANCING

     The Company finances its working capital needs through short-term lines of
credit with a syndication of banks. In May 2000, the Company renewed and
expanded its 364-day credit facility from $400.0 million to $500.0 million
committed. In addition to this short-term line of credit, the Company has a
364-day credit facility dedicated to NCRA, with a syndication of banks in the
amount of $50.0 million, all of which is committed. On February 28, 2001, August
31, 2000 and February 29, 2000, the Company had total short-term indebtedness on
these various facilities and other short-term notes payable totaling $385.9
million, $217.9 million and $225.5 million, respectively.

     In June 1998, the Company established a five-year revolving credit facility
with a syndication of banks, with $200.0 million committed. On February 28, 2001
and August 31, 2000 the Company had outstanding balances of $80.0 million and
$45.0 million, respectively, categorized as long-term debt. The amount
outstanding at August 31, 2000 was drawn during the third quarter of the fiscal
year then ended. In January 2001, an additional $35.0 million was drawn, with
the proceeds used to repay debt drawn on the 364-day facility.

     The Company has financed its long-term capital needs, primarily for the
acquisition of property, plant and equipment, with long-term loan agreements
through the banks for cooperatives. In June 1998, the Company established a
long-term credit agreement through the banks for cooperatives. This facility
committed $200.0 million of long-term borrowing capacity to the Company, with
repayments through fiscal year 2009. The commitment expired on May 31, 1999. The
amount outstanding on this credit facility was $154.2 million on February 28,
2001, $157.4 million on August 31, 2000 and $160.7 million on February 29, 2000,
respectively, with zero remaining available. Repayments of approximately $1.6
million and $3.3 million were made on this facility during each of the three
months and six months ended February 28, 2001 and February 29, 2000,
respectively.

     Also in June 1998, the Company entered into a private placement with
several insurance companies for long-term debt in the amount of $225.0 million.
Repayments will be made in equal installments of $37.5 million each in the years
2008 through 2013.

     In January 2001, the Company entered into a note purchase and private shelf
agreement with Prudential Insurance Company. The long-term note in the amount of
$25.0 million will be repaid in equal annual installments of approximately $3.6
million, in the years 2005 through 2011. Proceeds from the note were used to
repay debt on the 364-day facility. A subsequent note for $55.0 million was
issued in March 2001, related to the private shelf facility for the same dollar
amount. The $55.0 million note will be repaid in equal annual installments of
approximately $7.9 million, in the years 2005 through 2011. Proceeds from the
March note were used to repay debt of $35.0 million on the five-year revolver
and $20.0 million on the 364-day facility.

     On February 28, 2001 the Company had total long-term debt outstanding of
$558.5 million, of which approximately $288.4 million was bank financing, $250.0
million was private placement proceeds and $20.1 million was industrial revenue
bonds, capitalized leases and other notes payable. Long-term debt of NCRA
represented $42.6 million of the total long-term debt outstanding on February
28, 2001. On August 31, 2000 and February 29, 2000, the Company had long-term
debt outstanding of $510.5 million and $472.3 million, respectively.


                                       15
<PAGE>


     During the three-month periods ended February 28, 2001 and February 29,
2000, the Company repaid long-term debt of $4.7 million and $4.8 million,
respectively, and had additional long-term borrowings of $61.2 million during
the three months ended February 28, 2001.

     During the six-month periods ended February 28, 2001 and February 29, 2000,
the Company repaid long-term debt of $13.8 million and $10.6 million,
respectively, and had additional long-term borrowings of $61.8 million during
the six months ended February 28, 2001.

     In accordance with the by-laws and by action of the Board of Directors,
annual net earnings from patronage sources are distributed to consenting patrons
following the close of each year. Effective September 1, 2000, patronage refunds
are calculated based on audited earnings for financial statement purposes rather
than based on amounts reportable for federal income tax purposes as had been the
Company's practice prior to this date. This change was authorized through a
by-law amendment at the Company's annual meeting on December 1, 2000. The
patronage earnings from the fiscal year ended August 31, 2000 were distributed
in January 2001. The cash portion of this distribution, deemed by the Board of
Directors to be 75% for Equity Participation Units and 30% for other patronage
earnings was $26.0 million. During the three-month period ended February 29,
2000, the Company distributed cash patronage of $18.0 million from the patronage
earnings of the fiscal year ended August 31, 1999.

     The current equity redemption policy, as authorized by the Board of
Directors, allows for the redemption of capital equity certificates held by
inactive direct members and patrons and active members and patrons at age 72 or
death that were age 61 or older on June 1, 1998. For active direct members and
patrons who were age 60 or younger on June 1, 1998 and member cooperatives,
equities will be redeemed annually based on a prorata formula where, the
numerator is dollars available for such purpose as determined by the Board of
Directors, and the denominator is the sum of the patronage certificates held by
such eligible members and patrons. Total redemptions related to the year ended
August 31, 2000, to be distributed in the current fiscal year, are expected to
be approximately $17.7 million, of which approximately $7.9 million was redeemed
during the six months ended February 28, 2001. During the six months ended
February 29, 2000 the Company redeemed $13.1 million of equity. Redemptions of
equity by the Company during the three-month periods ended February 28, 2001 and
February 29, 2000 were $2.4 million and $1.6 million, respectively.

     During the year ended May 31, 1997, the Company offered securities in the
form of Equity Participation Units (EPUs) in its Wheat Milling and Oilseed
Processing and Refining Defined Business Units. These EPUs give the holder the
right and obligation to deliver to the Company a stated number of bushels in
return for a prorata share of the undiluted grain based patronage earnings of
these respective Defined Business Units. The offering resulted in the issuance
of such equity with a stated value of $13,870,000 and generated additional
capital and cash of $10,837,000, after issuance cost and conversion privileges.
Conversion privileges allowed a member to elect to use outstanding patrons'
equities for the payment of up to one-sixth the purchase price of the EPUs.

     The Company's Board of Directors adopted a resolution to issue, at no
charge, to each Defined Member of the Oilseed Processing and Refining Defined
Business Unit an additional 1/4 Equity Participation Unit (EPU) for each EPU
held, due to increased crush volume. At the time of issuance, the Oilseed
Processing and Refining EPUs were based on a normal annual crush of 30,500,000
bushels, and since the date of issuance, the actual crush has expanded and is
projected to be 38,100,000 bushels in the fiscal year ending August 31, 2001.

     Holders of the EPUs will not be entitled to payment of dividends by virtue
of holding such units. However, holders of the units will be entitled to receive
patronage refunds attributable to the patronage-sourced income from operations
of the applicable defined business unit on the basis of wheat or soybeans
delivered pursuant to the Member Marketing Agreement. The Board of Directors'
goal is to distribute patronage refunds attributable to the EPUs in the form of
75% cash and 25% capital equity certificates, and to retire that capital equity
certificates on a revolving basis seven years after declaration. However, the
decision as to the percentage of cash patronage will be made each fiscal year by
the Board of Directors and will depend upon the cash and capital needs of the
respective Defined Business Units and is subject to the discretion of the Board
of Directors. The redemption policy will also be subject to change at the
discretion of the Board of Directors.


                                       16
<PAGE>


EFFECT OF INFLATION AND FOREIGN CURRENCY TRANSACTIONS

     The Company's management believes that inflation and foreign currency
fluctuations have not had a significant effect on its operations.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements".
The SAB summarizes certain of the SEC staff's views in applying accounting
principles generally accepted in the United States of America to revenue
recognition in financial statements. In June 2000, the SEC issued SAB 101B,
which delays the implementation date of SAB 101 until no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999. The Company
does not believe that adoption of this SAB will materially impact its financial
statements.

     Emerging Issues Task Force (EITF) Issue 00-10 "Accounting for Shipping and
Handling Fees and Costs", is effective for all fiscal years beginning after
December 15, 1999. EITF 00-10 states that all amounts billed to a customer in a
sale transaction related to shipping and handling represent revenues earned for
the goods provided and should be classified as revenue. The Company does not
believe that adoption of EITF 00-10 will materially impact the financial
statements.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Effective September 1, 2000, unrealized gains and losses on futures
contracts and options used to hedge certain energy inventories and fixed priced
contracts are recognized for financial reporting. The inventories hedged with
these derivatives are valued at the lower of cost or market, and the fixed
priced contracts are marked to market. The effect of this change was a loss of
$3.6 million ($3.3 million net of income tax benefit).

     There have been no other changes since the Company's fiscal year-end August
31, 2000 that are considered material.


                                       17
<PAGE>


OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
ITEM 1. FINANCIAL STATEMENTS


             OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
        (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

                                BALANCE SHEETS

<TABLE>
<CAPTION>
                                    ASSETS
                                                                  FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                                                      2001            2000            2000
                                                                 --------------   ------------   -------------
(DOLLARS IN THOUSANDS)                                             (UNAUDITED)                    (UNAUDITED)
<S>                                                                  <C>             <C>            <C>
CURRENT ASSETS
 Receivables .................................................       $28,249         $30,011        $24,634
 Inventories .................................................        21,882          25,449         17,405
 Other current assets ........................................           649              18             23
                                                                     -------         -------        -------
  Total current assets .......................................        50,780          55,478         42,062
PROPERTY, PLANT AND EQUIPMENT ................................        42,307          40,270         39,329
OTHER ASSETS .................................................           378
                                                                     -------         -------        -------
  Total assets ...............................................       $93,465         $95,748        $81,391
                                                                     =======         =======        =======

                  LIABILITIES AND DEFINED BUSINESS UNIT EQUITY

CURRENT LIABILITIES
 Due to Cenex Harvest States Cooperatives ....................       $10,382         $15,891        $ 1,119
 Accounts payable ............................................         5,841           9,028          4,928
 Accrued expenses ............................................         6,272           5,976          5,289
                                                                     -------         -------        -------
  Total current liabilities ..................................        22,495          30,895         11,336
COMMITMENTS AND CONTINGENCIES
DEFINED BUSINESS UNIT EQUITY .................................        70,970          64,853         70,055
                                                                     -------         -------        -------
  Total liabilities and Defined Business Unit Equity .........       $93,465         $95,748        $81,391
                                                                     =======         =======        =======
</TABLE>

               The accompanying notes are an integral part of the
                        financial statements (unaudited).


                                       18
<PAGE>


             OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
        (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

                            STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                               FOR THE                          FOR THE
                                                         THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                   -------------------------------   ------------------------------
                                                    FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                        2001             2000             2001             2000
(DOLLARS IN THOUSANDS)                             --------------   --------------   --------------   -------------
<S>                                                    <C>              <C>             <C>              <C>
REVENUES:
 Processed oilseed sales .......................       $76,988          $79,199         $165,181         $162,756
 Other revenues ................................             3              250               17              579
                                                       -------          -------         --------         --------
                                                        76,991           79,449          165,198          163,335
                                                       -------          -------         --------         --------
COSTS AND EXPENSES:
 Cost of goods sold ............................        72,730           74,057          156,332          151,421
 Marketing, general and administrative .........         1,626            1,182            2,972            2,538
 Interest ......................................           143                               432
                                                       -------          -------         --------         --------
                                                        74,499           75,239          159,736          153,959
                                                       -------          -------         --------         --------
INCOME BEFORE INCOME TAXES .....................         2,492            4,210            5,462            9,376
Provision (benefit) for income taxes ...........           216              215             (655)             515
                                                       -------          -------         --------         --------
NET INCOME .....................................       $ 2,276          $ 3,995         $  6,117         $  8,861
                                                       =======          =======         ========         ========
</TABLE>

               The accompanying notes are an integral part of the
                        financial statements (unaudited).


                                       19
<PAGE>


             OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
        (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                       FOR THE                          FOR THE
                                                                 THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                           -------------------------------   ------------------------------
                                                            FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                                2001             2000             2001             2000
(DOLLARS IN THOUSANDS)                                     --------------   --------------   --------------   -------------
<S>                                                          <C>               <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income ..............................................   $   2,276         $  3,995         $  6,117        $  8,861
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation ..........................................         696              621            1,388           1,245
   Loss on sale of property, plant and equipment .........                                                            35
   Changes in operating assets and liabilities:
    Receivables ..........................................      12,034            2,242            1,762              16
    Inventories ..........................................         576           (1,389)           3,567            (321)
    Other current assets and other assets ................           2                2           (1,009)            (23)
    Accounts payable and accrued expenses ................         317           (1,029)          (2,891)            222
                                                             ---------         --------         --------        --------
      Net cash provided by operating activities ..........      15,901            4,442            8,934          10,035
                                                             ---------         --------         --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of property, plant and equipment ............      (2,237)            (890)          (3,425)         (1,608)
                                                             ---------         --------         --------        --------
      Net cash used in investing activities ..............      (2,237)            (890)          (3,425)         (1,608)
                                                             ---------         --------         --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Changes in due to Cenex Harvest States

  Cooperatives ...........................................     (13,664)          (3,552)          (5,509)         (8,427)
                                                             ---------         --------         --------        --------
      Net cash used in financing activities ..............     (13,664)          (3,552)          (5,509)         (8,427)
                                                             ---------         --------         --------        --------
NET INCREASE (DECREASE) IN CASH ..........................          --               --               --              --
CASH AT BEGINNING OF PERIOD ..............................          --               --               --              --
                                                             ---------         --------         --------        --------
CASH AT END OF PERIOD ....................................   $      --         $     --         $     --        $     --
                                                             =========         ========         ========        ========
</TABLE>

               The accompanying notes are an integral part of the
                        financial statements (unaudited).


                                       20
<PAGE>


             OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
        (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

                   NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                            (DOLLARS IN THOUSANDS)


NOTE 1. ACCOUNTING POLICIES

     The unaudited balance sheets as of February 28, 2001 and February 29, 2000,
and the statements of operations and cash flows for the three months and six
months ended February 28, 2001 and February 29, 2000 reflect, in the opinion of
management of Cenex Harvest States Cooperatives (the Company), all normal
recurring adjustments necessary for a fair statement of the financial position
and results of operations and cash flows for the interim periods. The results of
operations and cash flows for interim periods are not necessarily indicative of
results for a full year. The balance sheet data as of August 31, 2000 was
derived from audited financial statements but does not include all disclosures
required by accounting principles generally accepted in the United States of
America.

     These statements should be read in conjunction with the financial
statements and footnotes included in the Oilseed Processing and Refining Defined
Business Unit financial statements for the year ended August 31, 2000, which are
included in the Company's Report on Form 10-K previously filed with the
Securities and Exchange Commission on November 22, 2000.

NOTE 2. RECEIVABLES

<TABLE>
<CAPTION>
                                                      FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                                          2001            2000            2000
                                                     --------------   ------------   -------------
<S>                                                  <C>              <C>            <C>
   Trade .........................................       $28,644         $30,406        $25,029
   Less allowances for doubtful accounts .........           395             395            395
                                                         -------         -------        -------
                                                         $28,249         $30,011        $24,634
                                                         =======         =======        =======
</TABLE>

NOTE 3. INVENTORIES

<TABLE>
<CAPTION>
                                           FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                               2001            2000            2000
                                          --------------   ------------   -------------
<S>                                       <C>              <C>            <C>
   Processed oilseed products .........       $19,967         $22,075        $10,811
   Oilseed ............................         1,915           3,374          6,594
                                              -------         -------        -------
                                              $21,882         $25,449        $17,405
                                              =======         =======        =======
</TABLE>

                                       21
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The Company's Board of Directors adopted a resolution to issue, at no
charge, to each Defined Member of the Oilseed Processing and Refining Defined
Business Unit an additional 1/4 Equity Participation Unit (EPU) for each EPU
held, due to increased crush volume. At the time of issuance, the Oilseed
Processing and Refining EPUs were based on a normal annual crush of 30,500,000
bushels, and since the date of issuance, the actual crush has expanded and is
projected to be 38,100,000 bushels in the fiscal year ending August 31, 2001.

     See the Management's Discussion and Analysis for the Company in regard to
new accounting pronouncements.

RESULTS OF OPERATIONS

     Effective September 1, 2000, patronage distributions from the Oilseed
Processing and Refining Defined Business Unit are calculated on the basis of
audited financial statement earnings per bushel. Prior to September 1, 2000,
patronage refunds from the Oilseed Processing and Refining Defined Business Unit
were calculated on the basis of tax earnings per bushel. The Company believes
the calculation below is an important measure of the Defined Business Unit's
performance.

<TABLE>
<CAPTION>
                                                    FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                                  -------------------------------   ------------------------------
                                                   FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                       2001             2000             2001             2000
                                                  --------------   --------------   --------------   -------------
<S>                                                   <C>             <C>              <C>             <C>
   (IN THOUSANDS EXCEPT PER BUSHEL INFORMATION)
   Income before income taxes .................       $2,492          $  4,210         $  5,462        $  9,376
   Income from purchased oil ..................         (466)           (1,275)          (1,076)         (2,816)
   Non-patronage joint venture ................           --                --               --            (153)
   Book to tax differences ....................           --                23               --              47
                                                      ------          --------         --------        --------
   Patronage income from processed
    soybeans ..................................       $2,026          $  2,958         $  4,386        $  6,454
                                                      ======          ========         ========        ========
   Bushels processed ..........................        9,808            10,018           19,678          19,245
   Patronage income per bushel ................      $ 0.207          $  0.295         $  0.223        $  0.335
</TABLE>

     Certain operating information pertaining to the Oilseed Processing and
Refining Defined Business Unit is set forth below, as a percentage of processed
oilseed sales, except processing margins. Because of the volatility of commodity
prices, the Company believes that processing margins are a better measure of the
Oilseed Processing and Refining Defined Business Unit's performance than gross
margin percentages.

<TABLE>
<CAPTION>
                                                       FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                                     -------------------------------   ------------------------------
                                                      FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                          2001             2000             2001             2000
                                                     --------------   --------------   --------------   -------------
<S>                                                  <C>              <C>              <C>              <C>
   Gross margin ..................................        5.53%             6.49%            5.36%            6.96%
   Marketing, general and administrative .........        2.11%             1.49%            1.80%            1.56%
   Interest ......................................        0.19%               --             0.26%              --
   Processing margins
    Crushing/bushel ..............................     $  0.15           $  0.16          $  0.15          $  0.16
    Refining/pound ...............................     $ .0116           $ .0142          $ .0109          $ .0157
</TABLE>

COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

     The Oilseed Processing and Refining Defined Business Unit net income of
$2.3 million for the three months ended February 28, 2001 represents a $1.7
million decrease (43%) compared to the three-month period ended February 29,
2000. An increase in plant expenses of $1.5 million, primarily related to higher
energy prices, was the main factor in this unfavorable variance in net income
for the three-month period ended February 28, 2001, compared to the three-month
period ended February 29, 2000.

     Processed oilseed sales of $77.0 million for the three months ended
February 28, 2001 decreased by $2.2 million (3%) compared to the three months
ended February 29, 2000. Decreases in sales volumes


                                       22
<PAGE>


for refined oil of 3% and processed soybean products of 3%, and $0.005 per pound
reduction in the sales price for refined oil were partially offset by an
increase in the sales price for processed soybeans of approximately $6 per ton
during the three-month period compared to the same period of a year ago.

     Other revenues decreased $247 thousand during the three months ended
February 28, 2001 compared to the three months ended February 29, 2000. During
the three months ended February 29, 2000, the Defined Business Unit recognized
interest income of $247 thousand, accounting for this decrease.

     Cost of goods sold of $72.7 million for the three months ended February 28,
2001 decreased $1.3 million (2%) compared to the three months ended February 29,
2000. Decreases in cost for soybeans averaging $0.23 per bushel, crush volume
(209 thousand bushels) and refining volume (6.2 million pounds), were partially
offset by higher plant expense of $1.5 million and an increase in the cost of
crude soybean oil averaging $0.01 per pound during the three months ended
February 28, 2001 compared to the three months ended February 29, 2000.

     Marketing, general and administrative expenses of $1.6 million for the
three months ended February 28, 2001 increased $444 thousand (38%) compared to
the three months ended February 29, 2000, and is primarily related to increases
in administrative and technology expenses.

     The Oilseed Processing and Refining Defined Business Unit incurred $143
thousand of interest expense for the three-month period ended February 28, 2001,
compared to interest income, included with other revenue, for the same period
ended in 2000. This unfavorable variance is primarily attributable to additional
borrowings due to increased working capital needs during this period in 2001, as
compared to the same period in 2000.

     Income taxes of $216 thousand and $215 thousand for the three-month periods
ended February 28, 2001 and February 29, 2000, respectively, resulted in
effective tax rates of 8.7% and 5.1%, respectively. The income tax benefit or
expense and effective tax rate varies from period to period based upon the
Defined Business Unit's profitability and non-patronage business activity during
each of the comparable periods.

COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

     The Oilseed Processing and Refining Defined Business Unit net income of
$6.1 million for the six months ended February 28, 2001 represents a $2.7
million decrease (31%) compared to the six-month period ended February 29, 2000.
A $2.5 million increase in plant expenses, primarily related to higher energy
prices, was the main factor in this unfavorable variance in net income for the
six-month period ended February 28, 2001, compared to the same period ended
February 29, 2000. During the six-month period ending February 28, 2001 there
was also a change in the tax rate applied to the Oilseed Processing and Refining
Defined Business Unit's cumulative temporary differences between earnings for
financial statement purposes and tax basis earnings which resulted in an
increase in deferred tax assets of $1.0 million. The Oilseed Processing and
Refining Defined Business Unit's calculation of its patronage distribution using
audited earnings for financial statement purposes rather than tax basis earnings
prompted this rate change. Effective September 1, 2000, the Company's Board of
Directors approved a resolution to compute patronage distributions based on
audited earnings for financial statement purposes rather than tax basis
earnings. The resolution was ratified by the members at the Company's December
2000, annual meeting.

     Processed oilseed sales of $165.2 million for the six months ended February
28, 2001 increased by $2.4 million (1%) compared to the six months ended
February 29, 2000. An increase in the sales price for processed soybeans of
approximately $14 per ton, sales volume increases of 1% for refined oil and 1%
for processed soybean products, was partially offset by $0.01 per pound
reduction in the sales price for refined oil during the six-month period
compared to the same period of a year ago.

     Other revenues decreased approximately $562 thousand during the six months
ended February 28, 2001 compared to the six months ended February 29, 2000.
During the six months ended February 29, 2000, the Defined Business Unit
recognized interest income of $444 thousand, accounting for most of this
decrease.


                                       23
<PAGE>


     Cost of goods sold of $156.3 million for the six months ended February 28,
2001 increased $4.9 million (3%) compared to the six months ended February 29,
2000. An increase in plant expense of $2.5 million and volume increases in
soybean crush of 2% (433 thousand bushels) and refining volume of 4% (10.9
million pounds), was partially offset by a decrease in crude soybean oil
averaging $0.005 per pound during the six months ended February 28, 2001,
compared to the six months ended February 29, 2000.

     Marketing, general and administrative expenses of $3.0 million for the six
months ended February 28, 2001 increased $434 thousand (17%) compared to the six
months ended February 29, 2000, and is primarily related to increases in
administrative and technology expenses.

     The Oilseed Processing and Refining Defined Business Unit incurred $432
thousand of interest expense for the six-month period ended February 28, 2001,
compared to interest income, included with other revenue, for the same period
ended in 2000. This unfavorable variance is primarily attributable to additional
borrowings due to increased working capital needs during this period in 2001 as
compared to the same period in 2000.

     Income tax benefit of $655 thousand for the six-month period ended February
28, 2001 was primarily due to a change in the tax rate applied to the Oilseed
Processing and Refining Defined Business Unit's cumulative temporary differences
between income for financial statement purposes and income used for tax
reporting purposes. The Oilseed Processing and Refining Defined Business Unit's
calculation of its patronage distribution using audited earnings for financial
statement purposes rather than tax basis earnings prompted this rate change. The
benefit was partially offset with tax expense for the six-month period ending
February 28, 2001 of $359 thousand, which compares to $515 thousand for the same
period in 2000. The effective tax rates exclusive of the tax benefit during the
six-month period ended February 28, 2001 were 6.6% as compared to 5.5% for the
six-month period ended February 29, 2000. The income tax benefit or expense and
effective tax rate varies from period to period based upon the Defined Business
Unit's profitability and non-patronage business activity during each of the
comparable periods.

LIQUIDITY AND CAPITAL RESOURCES

     The Oilseed Processing and Refining Defined Business Unit's cash
requirements result from capital improvements and a need to finance inventories
and receivables based on raw material costs and levels. These cash needs are
expected to be fulfilled by the Company.

CASH FLOWS FROM OPERATIONS

     Operating activities for the three months ended February 28, 2001 provided
net cash of $15.9 million. Net income of $2.3 million, decreased working capital
requirements $12.9 million and non-cash expenses of $0.7 million generated this
net cash provided by operating activities. For the three-month period ended
February 29, 2000, operating activities provided net cash of $4.4 million.
During that period, net income of $4.0 million and non-cash expenses of $0.6
million were partially offset by increased working capital requirements of $0.2
million, and resulted in this net cash from operating activities.

     Operating activities for the six months ended February 28, 2001 provided
net cash of $8.9 million. Net income of $6.1 million, non-cash expenses of $1.4
million and a decrease in working capital requirements of $1.4 million resulted
in this net cash from operating activities. For the six-month period ended
February 29, 2000, operating activities provided net cash of $10.0 million.
During that period, net income of $8.9 million, non-cash expenses of $1.2
million were slightly offset by an increase in working capital requirements of
$0.1 million provided this net cash from operating activities.

CASH FLOWS FROM INVESTING

     During the three-month periods ended February 28, 2001 and February 29,
2000, the Oilseed Processing and Refining Defined Business Unit used cash for
investing activities of $2.2 million and $0.9 million, respectively, for the
acquisition of property, plant and equipment.

     During the six-month periods ended February 28, 2001 and February 29, 2000,
the Oilseed Processing and Refining Defined Business Unit used cash for
investing activities of $3.4 million and $1.6 million, respectively, for the
acquisition of property, plant and equipment.


                                       24
<PAGE>


CASH FLOWS FROM FINANCING

     The Oilseed Processing and Refining Defined Business Unit's financing
activities are coordinated through the Company's cash management department.
Cash from all of the Company's operations is deposited with the Company's cash
management department and disbursements are made centrally. As a result, the
Oilseed Processing and Refining Defined Business Unit has a zero cash position.
Financing is available from the Company to the extent of the Company's working
capital position and corporate loan agreements with various banks, and the cash
requirements of all other Company operations.

     Working capital requirements for a Defined Business Unit of the Company are
reviewed on a periodic basis, and could potentially be restricted based upon
management's evaluation of the prevailing business conditions and availability
of funds.

     The Oilseed Processing and Refining Defined Business Unit had debt
outstanding to the Company of $10.4 million on February 28, 2001 compared to
$15.9 million on August 31, 2000 and $1.1 million on February 29, 2000. These
interest-bearing balances reflect working capital and fixed asset financing
requirements at the end of the respective periods.


                                       25
<PAGE>


WHEAT MILLING DEFINED BUSINESS UNIT
ITEM 1. FINANCIAL STATEMENTS


                      WHEAT MILLING DEFINED BUSINESS UNIT
        (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

                                BALANCE SHEETS

<TABLE>
<CAPTION>
                                    ASSETS
                                                                   FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                                                       2001            2000            2000
                                                                  --------------   ------------   -------------
(DOLLARS IN THOUSANDS)                                              (UNAUDITED)                    (UNAUDITED)
<S>                                                                  <C>             <C>             <C>
CURRENT ASSETS
 Receivables ..................................................      $ 33,306        $ 33,737        $ 36,821
 Inventories ..................................................        23,009          19,537          18,107
 Other current assets .........................................           443              83             139
                                                                     --------        --------        --------
  Total current assets ........................................        56,758          53,357          55,067
PROPERTY, PLANT AND EQUIPMENT .................................       126,778         128,151         108,860
OTHER ASSETS ..................................................         8,249           8,348           8,881
                                                                     --------        --------        --------
  Total assets ................................................      $191,785        $189,856        $172,808
                                                                     ========        ========        ========

                  LIABILITIES AND DEFINED BUSINESS UNIT EQUITY

CURRENT LIABILITIES
 Due to Cenex Harvest States Cooperatives .....................      $ 71,512        $ 67,956        $ 60,634
 Current portion of long-term debt ............................         7,304           7,410          10,005
 Accounts payable .............................................         9,284           5,201           9,386
 Accrued expenses .............................................         3,374           3,462           4,076
                                                                     --------        --------        --------
  Total current liabilities ...................................        91,474          84,029          84,101
LONG-TERM DEBT ................................................        37,051          40,100          23,633
COMMITMENTS AND CONTINGENCIES
DEFINED BUSINESS UNIT EQUITY ..................................        63,260          65,727          65,074
                                                                     --------        --------        --------
   Total liabilities and Defined Business Unit Equity .........      $191,785        $189,856        $172,808
                                                                     ========        ========        ========
</TABLE>

               The accompanying notes are an integral part of the
                        financial statements (unaudited).


                                       26
<PAGE>


                      WHEAT MILLING DEFINED BUSINESS UNIT
        (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

                            STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                               FOR THE                          FOR THE
                                                         THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                   -------------------------------   ------------------------------
                                                    FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                        2001             2000             2001             2000
(DOLLARS IN THOUSANDS)                             --------------   --------------   --------------   -------------
<S>                                                   <C>              <C>              <C>             <C>
REVENUES:
 Processed grain sales .........................      $ 58,894         $ 51,136         $113,189        $103,730
                                                      --------         --------         --------        --------
COSTS AND EXPENSES:
 Cost of goods sold ............................        57,990           48,422          107,961          97,388
 Marketing, general and administrative .........         1,778            2,369            4,425           4,669
 Interest ......................................         2,018            1,574            4,095           3,069
                                                      --------         --------         --------        --------
                                                        61,786           52,365          116,481         105,126
                                                      --------         --------         --------        --------
LOSS BEFORE INCOME TAXES .......................        (2,892)          (1,229)          (3,292)         (1,396)
Income tax benefit .............................          (367)            (115)            (825)           (130)
                                                      --------         --------         --------        --------
NET LOSS .......................................      $ (2,525)        $ (1,114)        $ (2,467)       $ (1,266)
                                                      ========         ========         ========        ========
</TABLE>

               The accompanying notes are an integral part of the
                        financial statements (unaudited).


                                       27
<PAGE>


                      WHEAT MILLING DEFINED BUSINESS UNIT
        (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                       FOR THE                          FOR THE
                                                                 THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                           -------------------------------   ------------------------------
                                                            FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                                2001             2000             2001             2000
(DOLLARS IN THOUSANDS)                                     --------------   --------------   --------------   -------------
<S>                                                           <C>              <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss ................................................    $ (2,525)        $ (1,114)        $ (2,467)       $ (1,266)
 Adjustments to reconcile net loss to net cash (used
  in) provided by operating activities:
   Depreciation and amortization .........................       1,997            1,688            3,992           3,378
   Loss on sale of property, plant and equipment .........          36                                36
   Changes in operating assets and liabilities:
    Receivables ..........................................       7,279            1,294              431          (5,861)
    Inventories ..........................................        (776)           3,279           (3,472)         (3,768)
    Other current assets and other assets ................        (212)             128             (794)             71
    Accounts payable and accrued expenses ................      (8,808)          (6,468)           3,995           1,784
                                                              --------         --------         --------        --------
      Net cash (used in) provided by operating
       activities ........................................      (3,009)          (1,193)           1,721          (5,662)
                                                              --------         --------         --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of property, plant and equipment ............        (834)            (712)          (2,122)         (1,157)
                                                              --------         --------         --------        --------
      Net cash used in investing activities ..............        (834)            (712)          (2,122)         (1,157)
                                                              --------         --------         --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Changes in due to Cenex Harvest States

  Cooperatives ...........................................       5,394            4,344            3,556          11,696
 Long-term debt borrowings ...............................                                           436
 Principal payments on long-term debt ....................      (1,551)          (2,439)          (3,591)         (4,877)
                                                              --------         --------         --------        --------
      Net cash provided by financing activities ..........       3,843            1,905              401           6,819
                                                              --------         --------         --------        --------
NET INCREASE (DECREASE) IN CASH ..........................          --               --               --              --
CASH AT BEGINNING OF PERIOD ..............................          --               --               --              --
                                                              --------         --------         --------        --------
CASH AT END OF PERIOD ....................................    $     --         $     --         $     --        $     --
                                                              ========         ========         ========        ========
</TABLE>

               The accompanying notes are an integral part of the
                        financial statements (unaudited).


                                       28
<PAGE>


                      WHEAT MILLING DEFINED BUSINESS UNIT
        (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

                   NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                            (DOLLARS IN THOUSANDS)


NOTE 1. ACCOUNTING POLICIES

     The unaudited balance sheets as of February 28, 2001 and February 29, 2000,
and the statements of operations and cash flows for the three months and six
months ended February 28, 2001 and February 29, 2000 reflect, in the opinion of
management of Cenex Harvest States Cooperatives (the Company), all normal
recurring adjustments necessary for a fair statement of the financial position
and results of operations and cash flows for the interim periods. The results of
operations and cash flows for interim periods are not necessarily indicative of
results for a full year. The balance sheet data as of August 31, 2000 was
derived from audited financial statements but does not include all disclosures
required by accounting principles generally accepted in the United States of
America.

     Certain reclassifications have been made to the prior year's financial
statements to conform to the current year presentation. These reclassifications
had no effect on previously reported net income or equity.

     These statements should be read in conjunction with the financial
statements and footnotes included in the Wheat Milling Defined Business Unit
financial statements for the year ended August 31, 2000, which are included in
the Company's Report on Form 10-K previously filed with the Securities and
Exchange Commission on November 22, 2000.

NOTE 2. RECEIVABLES

<TABLE>
<CAPTION>
                                                      FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                                          2001            2000            2000
                                                     --------------   ------------   -------------
<S>                                                      <C>             <C>            <C>
   Trade .........................................       $34,215         $34,576        $37,012
   Other .........................................           860             810            969
                                                         -------         -------        -------
                                                          35,075          35,386         37,981
   Less allowances for doubtful accounts .........         1,769           1,649          1,160
                                                         -------         -------        -------
                                                         $33,306         $33,737        $36,821
                                                         =======         =======        =======
</TABLE>

NOTE 3. INVENTORIES

<TABLE>
<CAPTION>
                                         FEBRUARY 28,     AUGUST 31,     FEBRUARY 29,
                                             2001            2000            2000
                                        --------------   ------------   -------------
<S>                                         <C>             <C>            <C>
   Grain ............................       $12,325         $ 9,610        $14,306
   Processed grain products .........         9,844           9,288          3,242
   Other ............................           840             639            559
                                            -------         -------        -------
                                            $23,009         $19,537        $18,107
                                            =======         =======        =======
</TABLE>

                                       29
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

     See the Management's Discussion and Analysis for the Company in regard to
new accounting pronouncements.

RESULTS OF OPERATIONS

     Effective September 1, 2000, patronage distributions from the Wheat Milling
Defined Business Unit are calculated on the basis of audited financial statement
earnings per bushel. Prior to September 1, 2000, patronage refunds from the
Wheat Milling Defined Business Unit were calculated on the basis of tax earnings
per bushel. The Company believes the calculation below is an important measure
of the Defined Business Units performance.

<TABLE>
<CAPTION>
                                                    FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                                  -------------------------------   ------------------------------
                                                   FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                       2001             2000             2001             2000
                                                  --------------   --------------   --------------   -------------
<S>                                                  <C>              <C>              <C>             <C>
   (IN THOUSANDS EXCEPT PER BUSHEL INFORMATION)
   Loss before income taxes ...................      $ (2,892)        $ (1,229)        $ (3,292)       $ (1,396)
   Book to tax differences ....................            --              101               --             202
                                                     --------         --------         --------        --------
   Patronage loss .............................      $ (2,892)        $ (1,128)        $ (3,292)       $ (1,194)
                                                     ========         ========         ========        ========
   Bushels processed ..........................        11,125           10,893           23,134          20,828
   Patronage loss per bushel ..................      $ (0.260)        $ (0.104)        $ (0.142)       $ (0.057)
</TABLE>

     Certain operating information pertaining to the Wheat Milling Defined
Business Unit is set forth below, as a percentage of sales.

<TABLE>
<CAPTION>
                                                       FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                                     -------------------------------   ------------------------------
                                                      FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,
                                                          2001             2000             2001             2000
                                                     --------------   --------------   --------------   -------------
<S>                                                        <C>              <C>              <C>             <C>
   Gross margin ..................................         1.53%            5.31%            4.62%           6.11%
   Marketing, general and administrative .........         3.02%            4.63%            3.91%           4.50%
   Interest ......................................         3.43%            3.08%            3.62%           2.96%
</TABLE>

COMPARISON OF THREE MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

     The Wheat Milling Defined Business Unit incurred a net loss of $2.5
million for the three months ended February 28, 2001 compared to a net loss of
$1.1 million for the three months ended February 29, 2000, which resulted in a
net loss variance of $1.4 million. This net loss variance in operating results
is primarily attributable to $0.31 per hundred weight decline in gross margin
during the three months ended February 28, 2001 as compared to the previous year
three-month period.

     Net sales of $58.9 million for the three months ended February 28, 2001
increased $7.8 million (15%) compared to the three months ended February 29,
2000. This increase is attributable to a 10% increase in volume, resulting
primarily through business generated at the Fairmount, North Dakota mill, which
was acquired in April 2000. The average sales price per hundred-weight of all
products increased $0.37 per hundred weight in the three months ended February
28, 2001 compared to the same period in 2000.

     Cost of goods sold of $58.0 million for the three months ended February 28,
2001 increased $9.6 million (20%) compared to the three months ended February
29, 2000. An increase in bushel volume of 232 thousand (2%) and a $0.69 per
bushel increase in the average price for these bushels, compared with the
business activity conducted during the three months ended February 29, 2000
produced this increase.

     Marketing, general and administrative expenses of $1.8 million for the
three months ended February 28, 2001 decreased $591 thousand (25%) compared to
the same period ended in 2000.

     Interest expense of $2.0 million for the three months ended February 28,
2001 increased $444 thousand (28%) compared to the three months ended February
29, 2000. Most of this increase is attributable to


                                       30
<PAGE>


the acquisition of the Fairmount mill, purchased in April 2000 for approximately
$19.9 million and 0.30% increase in the short-term borrowing rates.

     An income tax benefit of $367 thousand for the three months ended February
28, 2001 is based upon an effective tax rate of 12.7% applied to the pretax loss
of $2.9 million. For the three months ended February 29, 2000 an income tax
benefit of $115 thousand was based on an effective tax rate of 9.4% applied to
the pretax loss of $1.2 million. The income tax benefit or expense and effective
tax rate varies from period to period based upon the Defined Business Unit's
profitability and non-patronage business activity during each of the comparable
periods.

COMPARISON OF SIX MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

     The Wheat Milling Defined Business Unit reported a net loss of $2.5 million
for the six months ended February 28, 2001 compared to a net loss of $1.3
million for the six months ended February 29, 2000, for a net loss variance of
$1.2 million. This net loss variance is primarily attributable to a 18% decline
in gross margins and an increase of interest expense as compared to the previous
year six-month period. During the six-month period ending February 28, 2001
there was also a change in the tax rate applied to the Wheat Milling Defined
Business Unit's cumulative temporary differences between earnings for financial
statement purposes and tax basis earnings which resulted in an increase in
deferred tax assets of $406 thousand. The Wheat Milling Defined Business Unit's
calculation of its patronage distribution using audited earnings for financial
statement purposes rather than tax basis earnings prompted this rate change.
Effective September 1, 2000, the Company's Board of Directors approved a
resolution to compute patronage distributions based on audited earnings for
financial statement purposes rather than tax basis earnings. The resolution was
ratified by the members at the Company's December 2000, annual meeting.

     Net sales of $113.2 million for the six months ended February 28, 2001
increased $9.5 million (9%) compared to the six months ended February 29, 2000.
This increase is attributable to a 10% increase in volume, resulting primarily
through business generated at the Fairmount, North Dakota mill, which was
acquired in April 2000. The average sales price per hundred-weight of all
products decreased $0.08 per hundred weight in the six months ended February 28,
2001 compared to the same period in 2000.

     Cost of goods sold of $108.0 million for the six months ended February 28,
2001 increased $10.6 million (11%) compared to the six months ended February 29,
2000. An increase in bushel volume of 2.3 million (11%) was partially offset by
a $0.04 per bushel decline in the average price for these bushels, compared with
the business activity conducted during the six months ended February 29, 2000.
Milling expense attributable to this additional volume increased $2.1 million in
the six months ended February 28, 2001 compared to the same period in 2000,
primarily attributable to the operation of the Fairmount mill.

     Marketing, general and administrative expenses of $4.4 million for the six
months ended February 28, 2001 decreased $244 thousand (5%) compared to the same
period ended in 2000.

     Interest expense of $4.1 million for the six months ended February 28, 2001
increased $1.0 million (33%) compared to the six months ended February 29, 2000.
Most of this increase is attributable to the acquisition of the Fairmount mill,
purchased in April 2000 for $19.9 million and 0.80% increase in short-term
borrowing rates.

     The income tax benefit of $825 thousand for the six months ended February
28, 2001 included a change in the tax rate applied to the Wheat Milling Defined
Business Unit cumulative temporary differences between income for financial
statement purposes and income used for tax reporting purposes. The Wheat Milling
Defined Business Unit's calculation of its patronage distribution using audited
financial statement earnings rather than tax basis earnings prompted this rate
change. An additional tax benefit for the six-month period in 2001 of $419
thousand was recorded based on a pretax loss of $3.3 million. This compares to a
$130 thousand tax benefit for the same period in 2000 on a pretax loss of $1.4
million. The effective tax rates, without the method of patronage calculation
rate change, of the income tax benefit for the six months ended February 28,
2001 and February 29, 2000 were 12.7% and 9.3%, respectively. The income tax
benefit or expense and effective tax rate varies from period to period based
upon the Defined Business Unit's profitability and non-patronage business
activity during each of the comparable periods.


                                       31
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     The Wheat Milling Defined Business Unit's cash requirements result from
capital improvements and a need to finance inventories and receivables based on
raw material costs and levels. These cash needs are expected to be fulfilled by
the Company.

CASH FLOWS FROM OPERATIONS

     Operating activities for the three months ended February 28, 2001 used net
cash of $3.0 million. Net loss of $2.5 million and an increase in working
capital requirements of $2.5 million were partially offset by non-cash expenses
of $2.0 million to generate this net use of cash. For the three-month period
ended February 29, 2000, operating activities used net cash of $1.2 million.
During that period, net loss of $1.1 million and increased working capital
requirements of $1.8 million were partially offset by non-cash expenses of $1.7
million resulting in net cash used in operating activities.

     Operating activities for the six months ended February 28, 2001 provided
net cash of $1.7 million. Net loss of $2.5 million, was offset by non-cash
expenses of $4.0 million and a decrease in working capital requirements of $0.2
million to generate this net cash provided by operating activities. For the
six-month period ended February 29, 2000, operating activities used net cash of
$5.7 million. During that period, net loss of $1.3 million and increased working
capital requirements of $7.8 million were partially offset by non-cash expenses
of $3.4 million which resulted in this net cash used in operating activities.

CASH FLOWS FROM INVESTING

     During the three-month periods ended February 28, 2001 and February 29,
2000, the Wheat Milling Defined Business Unit used cash for investing activities
of $0.8 million and $0.7 million, respectively, for the acquisition of property,
plant and equipment.

     During the six-month periods ended February 28, 2001 and February 29, 2000,
the Wheat Milling Defined Business Unit used cash for investing activities of
$2.1 million and $1.2 million, respectively, for the acquisition of property,
plant and equipment.

CASH FLOWS FROM FINANCING

     The Wheat Milling Defined Business Unit's financing activities are
coordinated through the Company's cash management department. Cash from all of
the Company's operations is deposited with the Company's cash management
department and disbursements are made centrally. As a result, the Wheat Milling
Defined Business Unit has a zero cash position. Financing is available from the
Company to the extent of the Company's working capital position and corporate
loan agreements with various banks, and the cash requirements of all other
Company operations.

     Working capital requirements for a Defined Business Unit of the Company are
reviewed on a periodic basis, and could potentially be restricted based upon
management's evaluation of the prevailing business condition and availability of
funds.

     The Wheat Milling Defined Business Unit had short-term debt outstanding and
payable to the Company of $71.5 million, $68.0 million and $60.6 million on
February 28, 2001, August 31, 2000 and February 29, 2000, respectively. This
increase is primarily attributable to the Wheat Milling Defined Business Unit
operating loss in combination with increased working capital requirements.

     The Wheat Milling Defined Business Unit had long-term debt outstanding to
the Company of $44.4 million on February 28, 2001 compared with $47.5 million on
August 31, 2000 and $33.6 million on February 29, 2000. On February 28, 2001,
the Defined Business Unit had $7.3 million due to the Company within the next
twelve months. During the three-month and six-month periods ended February 28,
2001 the Wheat Milling Defined Business Unit made principal payments to the
Company of $1.6 million and $3.6 million, respectively. During this same period
the Company, on behalf of the Wheat Milling Defined Business Unit assumed an
'interest free' Rural Economic Development Loan in conjunction with the
Fairmount, North Dakota mill acquisition totaling $450 thousand. This
non-interest bearing loan, payable in monthly installments over nine years, has
been discounted at 8% to reflect a present value principal balance due of $320
thousand and an interest discount of $130 thousand. The Company also incurred
long-term debt during the first quarter of 2001 on behalf of the Defined
Business Unit in the amount of $116 thousand, payable to the Minnesota
Department of Transportation quarterly over 120 months at 5.7% interest for the
purpose of rail track rehabilitation at the Rush City mill.


                                       32
<PAGE>


                           PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Reference is made to Item 4 of the Company's Quarterly Report on Form 10-Q
for the quarter ended November 30, 2000 for a description of the results of
votes at the Company's Annual Meeting of Members held on November 30, 2000 and
December 1, 2000.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     EXHIBIT   DESCRIPTION
     -------   -----------------------------------------------------------------

     10.1a     Note Purchase and Private Shelf Agreement dated as of January 10,
               2001 between Cenex Harvest States Cooperatives and The Prudential
               Insurance Company of America

     10.1b     Amendment No. 1 to Note Purchase and Private Shelf Agreement,
               dated as of March 2, 2001

     10.2      Agreement of Dissolution dated as of December 31, 2000 among
               National Cooperative Refinery Association, Farmland Industries,
               Inc. and Cooperative Refining, LLC.

     99        Cautionary Statement


(b)  Reports on Form 8-K

     None.


                                       33
<PAGE>


                                  SIGNATURES

     Pursuant to the requirements 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.


                                         CENEX HARVEST STATES COOPERATIVES
                                    -------------------------------------------
                                                    (Registrant)



        NAME                          TITLE                           DATE
        ----                          -----                           ----

 /S/ JOHN SCHMITZ        Senior Vice President and Chief          April 10, 2001
 ----------------        Financial Officer
  John Schmitz


                                       34
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>cenex010535_ex10-1a.txt
<DESCRIPTION>EXHIBIT 10.1A NOTE PURCHASE AGREEMENT
<TEXT>

                                                                   Exhibit 10.1a


                                                                  EXECUTION COPY

================================================================================





                        CENEX HARVEST STATES COOPERATIVES

                    NOTE PURCHASE AND PRIVATE SHELF AGREEMENT



                                   $25,000,000

                7.90% Series B Senior Notes due January 10, 2011

                                   $55,000,000

                             Private Shelf Facility




                          Dated as of January 10, 2001



================================================================================

<PAGE>

                                TABLE OF CONTENTS
                             (not part of agreement)
                                                                            Page
                                                                            ----

1.  AUTHORIZATION OF ISSUE OF NOTES............................................1
    1A.          Authorization of Issue of Series B Notes......................1
    1B.          Authorization of Issue of Shelf Notes.........................2

2.  PURCHASE AND SALE OF NOTES.................................................2
    2A.          Purchase and Sale of Series B Notes...........................2
    2B.          Purchase and Sale of Shelf Notes..............................2
    2B(1).       Facility......................................................2
    2B(2).       Issuance Period...............................................3
    2B(3).       Request for Purchase..........................................3
    2B(4).       Rate Quotes...................................................3
    2B(5).       Acceptance....................................................4
    2B(6).       Market Disruption.............................................4
    2B(7).       Facility Closings.............................................4
    2B(8).       Fees..........................................................5
    2B(8)(i).    Structuring Fee...............................................5
    2B(8)(ii).   Issuance Fee..................................................5
    2B(8)(iii).  Delayed Delivery Fee..........................................5
    2B(8)(iv).   Cancellation Fee..............................................6

3.  CONDITIONS OF CLOSING......................................................6
    3A.          Certain Documents.............................................7
    3B.          Opinion of Purchaser's Special Counsel........................8
    3C.          Representations and Warranties; No Default....................8
    3D.          Purchase Permitted by Applicable Laws.........................8
    3E.          Payment of Fees...............................................8

4.  PREPAYMENTS
    4A.          Required Prepayments of Series B Notes........................8
    4B.          Required Prepayments of Shelf Notes...........................9
    4C.          Optional Prepayment With Yield-Maintenance Amount.............9
    4D.          Notice of Optional Prepayment.................................9
    4E.          Application of Prepayments....................................9
    4F.          Retirement of Notes...........................................9

5.  AFFIRMATIVE COVENANTS.....................................................10
    5A.          Financial Statements; Notice of Defaults.....................10
    5B.          Information Required by Rule 144A............................11
    5C.          Inspection of Property.......................................12
    5D.          Covenant to Secure Notes Equally.............................12
    5E.          Offer to Prepay Notes in the Event of a Change in Control....12
    5E(1).       Notice of Impending Change in Control........................12

                                       i
<PAGE>


    5E(2).       Notice of Occurrence of Change in Control....................12
    5E(3).       Notice of Acceptance of Offer under Paragraph 5E(2)..........12
    5E(4).       Offer to Prepay Notes........................................12
    5E(5).       Rejection; Acceptance........................................13
    5E(6).       Prepayment...................................................13
    5E(7).       Officer's Certificate........................................13
    5F.          Compliance with Law..........................................13
    5G.          Insurance....................................................14
    5H.          Maintenance of Properties....................................14
    5I.          Payment of Taxes.............................................14
    5J.          Corporate Existence, etc.....................................14
    5K.          Liens of Business............................................15
    5L.          Agreement Assuming Liability on Notes........................15

6.  NEGATIVE COVENANTS........................................................15
    6A.          Intentionally Left Blank.....................................15
    6B.          Financial Covenants..........................................15
    6B(1).       Working Capital..............................................15
    6B(2).       Funded Debt to Consolidated Cash Flow........................15
    6B(3).       Adjusted Consolidated Funded Debt to Consolidated
                 Members' and Patrons' Equity.................................15
    6C.          Priority Debt................................................16
    6D.          Liens........................................................16
    6E.          Merger and Consolidation ....................................17
    6F.          Sale of Assets...............................................18
    6G.          Transactions with Affiliates.................................19
    6H.          Subsidiary Dividend Restrictions.............................19
    6I.          Subsidiary Preferred Stock...................................19
    6J.          Issuance of Stock by Subsidiaries............................19

7.  EVENTS OF DEFAULT.........................................................19
    7A.          Acceleration.................................................19
    7B.          Rescission of Acceleration...................................22
    7C.          Notice of Acceleration or Rescission.........................23
    7D.          Other Remedies...............................................23

8.  REPRESENTATIONS, COVENANTS AND WARRANTIES.................................23
    8A.          Organization.................................................23
    8A(2).       Power and Authority..........................................23
    8B.          Financial Statements.........................................24
    8C.          Actions Pending..............................................24
    8D.          Outstanding Debt.............................................24
    8E.          Title to Properties..........................................24
    8F.          Taxes........................................................25
    8G.          Conflicting Agreements and Other Matters.....................25

                                       ii
<PAGE>


    8H.          Offering of Notes............................................25
    8I.          Use of Proceeds..............................................26
    8J.          ERISA........................................................26
    8K.          Governmental Consent.........................................26
    8L.          Environmental Compliance.....................................26
    8M.          Regulatory Status............................................27
    8N.          Permits and Other Operating Rights...........................27
    8O.          Disclosure...................................................27
    8P.          Hostile Tender Offers........................................27

9.  REPRESENTATIONS OF THE PURCHASERS.........................................28
    9A.          Nature of Purchase...........................................28
    9B.          Source of Funds..............................................28

10. DEFINITIONS; ACCOUNTING MATTERS...........................................28
    10A.         Yield-Maintenance Terms......................................28
    10B.         Other Terms..................................................29
    10C.         Accounting Principles, Terms and Determinations..............37

11. MISCELLANEOUS.............................................................37
    11A.         Note Payments................................................37
    11B.         Expenses.....................................................38
    11C.         Consent to Amendments........................................38
    11D.         Form, Registration, Transfer and Exchange of Notes;
                 Lost Notes...................................................39
    11E.         Persons Deemed Owners; Participations........................39
    11F.         Survival of Representations and Warranties;
                 Entire Agreement.............................................40
    11G.         Successors and Assigns.......................................40
    11H.         Independence of Covenants....................................40
    11I.         Notices......................................................40
    11J.         Payments Due on Non-Business Days............................41
    11K.         Severability.................................................41
    11L.         Descriptive Headings.........................................41
    11M.         Satisfaction Requirement.....................................41
    11N.         Governing Law................................................41
    11O.         Severalty of Obligations.....................................41
    11P.         Counterparts.................................................42
    11Q.         Binding Agreement............................................42

                                      iii

<PAGE>


                             Exhibits and Schedules
                             ----------------------

Purchaser Schedule
Information Schedule
Exhibit A-1              --Form of Series B Note
Exhibit A-2              --Form of Shelf Note
Exhibit B                --Form of Request for Purchase
Exhibit C                --Form of Confirmation of Acceptance
Exhibit D-1              --Form of Opinion of Company Counsel
Exhibit D-2              --Form of Opinion of Company Counsel
Schedule 6D              --List of Existing Liens
Schedule 8G              --Agreements Restricting Debt





                                       iv

<PAGE>



                        CENEX HARVEST STATES COOPERATIVES
                                5500 CENEX DRIVE
                          INVER GROVE HEIGHTS, MN 55077

                                                          As of January 10, 2001


The Prudential Insurance Company
  of America ("PRUDENTIAL")
Pruco Life Insurance Company ("PRUCO")

Each Prudential Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with Prudential and Pruco
collectively, the "PURCHASERS")

c/o Prudential Capital Group
Two Prudential Plaza
Suite 5600
Chicago, Illinois  60601

Ladies and Gentlemen:

         The undersigned, CENEX HARVEST STATES COOPERATIVES, a nonstock
agricultural cooperative corporation organized under the laws of Minnesota
(herein called the "COMPANY"), hereby agrees with you as set forth below.
Reference is made to paragraph 10 hereof for definitions of capitalized terms
used herein and not otherwise defined herein.

         1. AUTHORIZATION OF ISSUE OF NOTES.

         1A. AUTHORIZATION OF ISSUE OF SERIES B NOTES. The Company will
authorize the issue of its senior promissory notes (the "SERIES B NOTES") in the
aggregate principal amount of $25,000,000, to be dated the date of issue
thereof, to mature January 10, 2011, to bear interest on the unpaid balance
thereof from the date thereof until the principal thereof shall have become due
and payable at the rate of 7.90% per annum and on overdue principal,
Yield-Maintenance Amount and interest at the rate specified therein, and to be
substantially in the form of Exhibit A-1 attached hereto. The terms "SERIES B
NOTE" and "SERIES B NOTES" as used herein shall include each Series B Note
delivered pursuant to any provision of this Agreement and each Series B Note
delivered in substitution or exchange for any such Series B Note pursuant to any
such provision.


                                       1
<PAGE>


         1B. AUTHORIZATION OF ISSUE OF SHELF NOTES. The Company will authorize
the issue of its additional senior promissory notes (the "SHELF NOTES") in the
aggregate principal amount of $55,000,000, to be dated the date of issue
thereof, to mature, in the case of each Shelf Note so issued, no more than 15
years after the date of original issuance thereof, to have an average life, in
the case of each Shelf Note so issued, of no more than 12 years after the date
of original issuance thereof, to bear interest on the unpaid balance thereof
from the date thereof at the rate per annum, and to have such other particular
terms, as shall be set forth, in the case of each Shelf Note so issued, in the
Confirmation of Acceptance with respect to such Shelf Note delivered pursuant to
paragraph 2B(5), and to be substantially in the form of Exhibit A-2 attached
hereto. The terms "SHELF NOTE" and "SHELF NOTES" as used herein shall include
each Shelf Note delivered pursuant to any provision of this Agreement and each
Shelf Note delivered in substitution or exchange for any such Shelf Note
pursuant to any such provision. The terms "NOTE" and "NOTES" as used herein
shall include each Series B Note and each Shelf Note delivered pursuant to any
provision of this Agreement and each Note delivered in substitution or exchange
for any such Note pursuant to any such provision. Notes which have (i) the same
final maturity, (ii) the same principal prepayment dates, (iii) the same
principal prepayment amounts (as a percentage of the original principal amount
of each Note), (iv) the same interest rate, (v) the same interest payment
periods and (vi) the same date of issuance (which, in the case of a Note issued
in exchange for another Note, shall be deemed for these purposes the date on
which such Note's ultimate predecessor Note was issued), are herein called a
"SERIES" of Notes.

         2. PURCHASE AND SALE OF NOTES.

         2A. PURCHASE AND SALE OF SERIES B NOTES. The Company hereby agrees to
sell to Prudential and, subject to the terms and conditions herein set forth,
Prudential agrees to purchase from the Company $25,000,000 aggregate principal
amount of Series B Notes at 100% of such aggregate principal amount. On January
10, 2001 or any other date prior to January 10, 2001, upon which the Company and
Prudential may agree (herein called the "SERIES B CLOSING DAY"), the Company
will deliver to Prudential at the offices of Prudential Capital Group, Two
Prudential Plaza, Suite 5600, Chicago, Illinois 60601, one or more Series B
Notes registered in its name, evidencing the aggregate principal amount of
Series B Notes to be purchased by Prudential and in the denomination or
denominations specified with respect to Prudential in the Purchaser Schedule
attached hereto, against payment of the purchase price thereof by transfer of
immediately available funds for credit to the Company's account as specified in
the Disbursement Direction Letter delivered to Prudential as of the Series B
Closing Day.

         2B. PURCHASE AND SALE OF SHELF NOTES.

         2B(1). FACILITY. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by Prudential
from time to time, the purchase of Shelf Notes pursuant to this Agreement. The
willingness of Prudential to consider such purchase of Shelf Notes is herein
called the "FACILITY". At any time, the aggregate principal amount of Shelf
Notes stated in paragraph 1B, minus the aggregate principal amount of Shelf
Notes purchased and sold pursuant to this Agreement prior to such time, minus
the aggregate principal amount of Accepted Notes (as hereinafter defined) which
have not yet been purchased and sold hereunder prior to such time, is


                                       2
<PAGE>


herein called the "AVAILABLE FACILITY AMOUNT" at such time. NOTWITHSTANDING THE
WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF SHELF NOTES, THIS AGREEMENT
IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY
PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE
SHELF NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC
PURCHASES OF SHELF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A
COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.

         2B(2). ISSUANCE PERIOD. Shelf Notes may be issued and sold pursuant to
this Agreement until the earlier of (i) the third anniversary of the date of
this Agreement (or if such anniversary date is not a Business Day, the Business
Day next preceding such anniversary) and (ii) the thirtieth day after Prudential
shall have given to the Company, or the Company shall have given to Prudential,
a written notice stating that it elects to terminate the issuance and sale of
Shelf Notes pursuant to this Agreement (or if such thirtieth day is not a
Business Day, the Business Day next preceding such thirtieth day). The period
during which Shelf Notes may be issued and sold pursuant to this Agreement is
herein called the "ISSUANCE PERIOD".

         2B(3). REQUEST FOR PURCHASE. The Company may from time to time during
the Issuance Period make requests for purchases of Shelf Notes (each such
request being herein called a "REQUEST FOR PURCHASE"). Each Request for Purchase
shall be made to Prudential by telecopier or overnight delivery service, and
shall (i) specify the aggregate principal amount of Shelf Notes covered thereby,
which without the consent of Prudential shall not be less than $10,000,000 and
not be greater than the Available Facility Amount at the time such Request for
Purchase is made, (ii) specify the principal amounts, final maturities,
principal prepayment dates and amounts and interest payment periods (quarterly
or semi-annual in arrears) of the Shelf Notes covered thereby, (iii) specify the
use of proceeds of such Shelf Notes, (iv) specify the proposed day for the
closing of the purchase and sale of such Shelf Notes, which shall be a Business
Day during the Issuance Period not less than 10 days and not more than 25 days
after the making of such Request for Purchase, (v) specify the number of the
account and the name and address of the depository institution to which the
purchase prices of such Shelf Notes are to be transferred on the Closing Day for
such purchase and sale, (vi) certify that the representations and warranties
contained in paragraph 8 are true on and as of the date of such Request for
Purchase and that there exists on the date of such Request for Purchase no Event
of Default or Default, (vii) specify whether the fee to be due pursuant to
paragraph 2B(8)(ii) should be included in the rate quotes Prudential may provide
pursuant to paragraph 2B(4) or will be paid separately by the Company on the
Closing Day for such purchase and sale, and (viii) be substantially in the form
of Exhibit B attached hereto. Each Request for Purchase shall be in writing and
shall be deemed made when received by Prudential.

         2B(4). RATE QUOTES. Not later than five Business Days after the Company
shall have given Prudential a Request for Purchase pursuant to paragraph 2B(3),
Prudential may, but shall be under no obligation to, provide to the Company by
telephone or telecopier, in each case between 9:30 A.M. and 1:30 P.M. New York
City local time (or such later time as Prudential may elect) interest rate
quotes for the several principal amounts, maturities, principal prepayment
schedules,


                                       3
<PAGE>


and interest payment periods of Shelf Notes specified in such Request for
Purchase. Each quote shall represent the interest rate per annum payable on the
outstanding principal balance of such Shelf Notes at which Prudential or a
Prudential Affiliate would be willing to purchase such Shelf Notes at 100% of
the principal amount thereof.

         2B(5). ACCEPTANCE. Within the Acceptance Window, the Company may,
subject to paragraph 2B(6), elect to accept such interest rate quotes as to not
less than $10,000,000 aggregate principal amount of the Shelf Notes specified in
the related Request for Purchase (or such lesser amount as to which Prudential
in its sole discretion may agree). Such election shall be made by an Authorized
Officer of the Company notifying Prudential by telephone or telecopier within
the Acceptance Window that the Company elects to accept such interest rate
quotes, specifying the Shelf Notes (each such Shelf Note being herein called an
"ACCEPTED NOTE") as to which such acceptance (herein called an "ACCEPTANCE")
relates. The day the Company notifies Prudential of an Acceptance with respect
to any Accepted Notes is herein called the "ACCEPTANCE DAY" for such Accepted
Notes. Any interest rate quotes as to which Prudential does not receive an
Acceptance within the Acceptance Window shall expire, and no purchase or sale of
Shelf Notes hereunder shall be made based on such expired interest rate quotes.
Subject to paragraph 2B(6) and the other terms and conditions hereof, the
Company agrees to sell to Prudential or a Prudential Affiliate, and Prudential
agrees to purchase, or to cause the purchase by a Prudential Affiliate of, the
Accepted Notes at 100% of the principal amount of such Notes. As soon as
practicable following the Acceptance Day, the Company, Prudential and each
Prudential Affiliate which is to purchase any such Accepted Notes will execute a
confirmation of such Acceptance substantially in the form of Exhibit C attached
hereto (herein called a "CONFIRMATION OF ACCEPTANCE"). If the Company should
fail to execute and return to Prudential within three Business Days following
receipt thereof a Confirmation of Acceptance with respect to any Accepted Notes,
Prudential may at its election at any time prior to its receipt thereof cancel
the closing with respect to such Accepted Notes by so notifying the Company in
writing.

         2B(6). MARKET DISRUPTION. Notwithstanding the provisions of paragraph
2B(5), if Prudential shall have provided interest rate quotes pursuant to
paragraph 2B(4) and thereafter prior to the time an Acceptance with respect to
such quotes shall have been notified to Prudential in accordance with paragraph
2B(5) the domestic market for U.S. Treasury securities or derivatives shall have
closed or there shall have occurred a general suspension, material limitation,
or significant disruption of trading in securities generally on the New York
Stock Exchange or in the domestic market for U.S. Treasury securities or
derivatives, then such interest rate quotes shall expire, and no purchase or
sale of Shelf Notes hereunder shall be made based on such expired interest rate
quotes. If the Company thereafter notifies Prudential of the Acceptance of any
such interest rate quotes, such Acceptance shall be ineffective for all purposes
of this Agreement, and Prudential shall promptly notify the Company that the
provisions of this paragraph 2B(6) are applicable with respect to such
Acceptance.

         2B(7). FACILITY CLOSINGS. Not later than 11:30 A.M. (New York City
local time) on the Closing Day for any Accepted Notes, the Company will deliver
to each Purchaser listed in the Confirmation of Acceptance relating thereto at
the offices of the Prudential Capital Group, Two Prudential Plaza, Suite 5600,
Chicago, Illinois 60601, Attention: Law Department, the Accepted



                                       4
<PAGE>

Notes to be purchased by such Purchaser in the form of one or more Notes in
authorized denominations as such Purchaser may request for each Series of
Accepted Notes to be purchased on the Closing Day, dated the Closing Day and
registered in such Purchaser's name (or in the name of its nominee), against
payment of the purchase price thereof by transfer of immediately available funds
for credit to the Company's account specified in the Request for Purchase of
such Notes. If the Company fails to tender to any Purchaser the Accepted Notes
to be purchased by such Purchaser on the scheduled Closing Day for such Accepted
Notes as provided above in this paragraph 2B(7), or any of the conditions
specified in paragraph 3 shall not have been fulfilled by the time required on
such scheduled Closing Day, the Company shall, prior to 1:00 P.M., New York City
local time, on such scheduled Closing Day notify Prudential (which notification
shall be deemed received by each Purchaser) in writing whether (i) such closing
is to be rescheduled (such rescheduled date to be a Business Day during the
Issuance Period not less than one Business Day and not more than 10 Business
Days after such scheduled Closing Day (the "RESCHEDULED CLOSING DAY")) and
certify to Prudential (which certification shall be for the benefit of each
Purchaser) that the Company reasonably believes that it will be able to comply
with the conditions set forth in paragraph 3 on such Rescheduled Closing Day and
that the Company will pay the Delayed Delivery Fee in accordance with paragraph
2B(8)(iii) or (ii) such closing is to be canceled. In the event that the Company
shall fail to give such notice referred to in the preceding sentence, Prudential
(on behalf of each Purchaser) may at its election, at any time after 1:00 P.M.,
New York City local time, on such scheduled Closing Day, notify the Company in
writing that such closing is to be canceled. Notwithstanding anything to the
contrary appearing in this Agreement, the Company may not elect to reschedule a
closing with respect to any given Accepted Notes on more than one occasion,
unless Prudential shall have otherwise consented in writing.

         2B(8). FEES.

         2B(8)(i). STRUCTURING FEE. At the time of the execution and delivery of
this Agreement by the Company and Prudential, the Company will pay to Prudential
in immediately available funds a fee (herein called the "STRUCTURING FEE") in
the amount of $50,000.

         2B(8)(ii). ISSUANCE FEE. The Company will pay to Prudential in
immediately available funds a fee (herein called the "ISSUANCE FEE") on each
Closing Day (other than the Series B Closing Day) in an amount equal to 0.10% of
the aggregate principal amount of Notes sold on such Closing Day, unless the
Company shall have requested pursuant to the applicable Request for Purchase
that such fee be included in the rate quotes Prudential may provide pursuant to
paragraph 2B(4).

         2B(8)(iii). DELAYED DELIVERY FEE. If the closing of the purchase and
sale of any Accepted Note is delayed for any reason beyond the original Closing
Day for such Accepted Note, the Company will pay to Prudential (a) on the
Cancellation Date or actual closing date of such purchase and sale and (b) if
earlier, the next Business Day following 90 days after the Acceptance Day for
such Accepted Note and on each Business Day following 90 days after the prior
payment hereunder, a fee (herein called the "DELAYED DELIVERY FEE") calculated
as follows:


                                       5
<PAGE>




                           (BEY - MMY) X DTS/360 X PA

where "BEY" means Bond Equivalent Yield, I.E., the bond equivalent yield per
annum of such Accepted Note; "MMY" means Money Market Yield, I.E., the yield per
annum on a commercial paper investment of the highest quality selected by
Prudential on the date Prudential receives notice of the delay in the closing
for such Accepted Note having a maturity date or dates the same as, or closest
to, the Rescheduled Closing Day or Rescheduled Closing Days (a new alternative
investment being selected by Prudential each time such closing is delayed);
"DTS" means Days to Settlement, I.E., the number of actual days elapsed from and
including the original Closing Day with respect to such Accepted Note (in the
case of the first such payment with respect to such Accepted Note) or from and
including the date of the next preceding payment (in the case of any subsequent
delayed delivery fee payment with respect to such Accepted Note) to but
excluding the date of such payment; and "PA" means Principal Amount, I.E., the
principal amount of the Accepted Note for which such calculation is being made.
In no case shall the Delayed Delivery Fee be less than zero. Nothing contained
herein shall obligate any Purchaser to purchase any Accepted Note on any day
other than the Closing Day for such Accepted Note, as the same may be
rescheduled from time to time in compliance with paragraph 2B(7).

         2B(8)(iv). CANCELLATION FEE. If the Company at any time notifies
Prudential in writing that the Company is canceling the closing of the purchase
and sale of any Accepted Note, or if Prudential notifies the Company in writing
under the circumstances set forth in the last sentence of paragraph 2B(5) or the
penultimate sentence of paragraph 2B(7) that the closing of the purchase and
sale of such Accepted Note is to be canceled, or if the closing of the purchase
and sale of such Accepted Note is not consummated on or prior to the last day of
the Issuance Period (the date of any such notification, or the last day of the
Issuance Period, as the case may be, being herein called the "CANCELLATION
DATE"), the Company will pay to Prudential in immediately available funds an
amount (the "CANCELLATION FEE") calculated as follows:

                                     PI X PA

where "PI" means Price Increase, I.E., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as determined by
Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the bid
price (as determined by Prudential) of the Hedge Treasury Notes(s) on the
Acceptance Day for such Accepted Note by (b) such bid price; and "PA" has the
meaning ascribed to it in paragraph 2B(8)(iii). The foregoing bid and ask prices
shall be as reported by Telerate Systems, Inc. (or, if such data for any reason
ceases to be available through Telerate Systems, Inc., any publicly available
source of similar market data). Each price shall be based on a U.S. Treasury
security having a par value of $100.00 and shall be rounded to the second
decimal place. In no case shall the Cancellation Fee be less than zero.

         3. CONDITIONS OF CLOSING. The obligation of any Purchaser to purchase
and pay for any Notes is subject to the satisfaction, on or before the Closing
Day for such Notes, of the following conditions:



                                       6
<PAGE>


         3A. CERTAIN DOCUMENTS. Such Purchaser shall have received the
following, each dated the date of the applicable Closing Day:

                      (i) This Agreement;

                      (ii) The Note(s) to be purchased by such Purchaser;

                      (iii) A favorable opinion of David A. Kastelic, General
         Counsel of the Company (or such other counsel designated by the Company
         and acceptable to the Purchaser(s)) satisfactory to such Purchaser and
         substantially in the form of Exhibit D-1 (in the case of the Series B
         Notes) or D-2 (in the case of any Shelf Notes) attached hereto and as
         to such other matters as such Purchaser may reasonably request. The
         Company hereby directs each such counsel to deliver such opinion,
         agrees that the issuance and sale of any Notes will constitute a
         reconfirmation of such direction, and understands and agrees that each
         Purchaser receiving such an opinion will and is hereby authorized to
         rely on such opinion;

                      (iv) a Secretary's Certificate signed by the Secretary or
         an Assistant Secretary and one other officer of the Company certifying,
         among other things, (A) as to the names, titles and true signatures of
         the officers of the Company authorized to sign this Agreement, the
         Notes and the other documents to be delivered in connection with this
         Agreement, (B) that attached as Exhibit A thereto is a true, accurate
         and complete copy of the Articles of Incorporation of the Company,
         certified by the Secretary of State of Minnesota as of a date not more
         than ten Business Days from the Closing Day, (C) that attached as
         Exhibit B thereto is a true, accurate and complete copy of the
         Company's Bylaws which were duly adopted and are presently in effect
         and have been in effect immediately prior to and at all times since the
         adoption of the resolutions referred to in clause (D) below, (D) that
         attached as Exhibit C thereto is a true, accurate and complete copy of
         the resolutions of the Company's Board of Directors (authorizing the
         issuance and sale of the Notes and the execution, delivery and
         performance of this Agreement) duly adopted by written action or at a
         meeting of the Company's Board of Directors, and such resolutions have
         not been rescinded, amended or modified and (E) that attached as
         Exhibit D thereto is a good standing certificate for the Company from
         the Secretary of State of Minnesota;

                      (v) an Officer's Certificate certifying that (A) the
         representations and warranties contained in paragraph 8 shall be true
         on and as of the Closing Day, except to the extent of changes caused by
         the transactions herein contemplated; and (B) on the date of closing no
         Event of Default or Default exists;

                      (vi) certified copies of Requests for Information or
         Copies (Form UCC-11) or equivalent reports listing all effective
         financing statements which name the Company or any Subsidiary (under
         its present name and previous


                                       7
<PAGE>


         names used in the last seven years) as debtor and which are filed in
         the office of the Secretary of State of Minnesota together with copies
         of such financing statements; and

                      (vii) additional documents or certificates with respect to
         legal matters or corporate or other proceedings related to the
         transactions contemplated hereby as may be reasonably requested by such
         Purchaser.

         3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. Such Purchaser shall have
received from Wiley S. Adams, Assistant General Counsel of Prudential or such
other counsel who is acting as special counsel for it in connection with this
transaction, a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.

         3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph 8 shall be true on and as of such Closing Day,
except to the extent of changes caused by the transactions herein contemplated;
there shall exist on such Closing Day no Event of Default or Default; and the
Company shall have delivered to such Purchaser an Officer's Certificate, dated
such Closing Day, to both such effects.

         3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes to be purchased by such Purchaser on the terms and conditions
herein provided (including the use of the proceeds of such Notes by the Company)
shall not violate any applicable law or governmental regulation (including,
without limitation, Section 5 of the Securities Act or Regulation U, T or X of
the Board of Governors of the Federal Reserve System) and shall not subject such
Purchaser to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and such Purchaser
shall have received such certificates or other evidence as it may request to
establish compliance with this condition.

         3E. PAYMENT OF FEES. The Company shall have paid to Prudential any fees
due it pursuant to or in connection with this Agreement, including any
Structuring Fee due pursuant to paragraph 2B(8)(i), any Issuance Fee due
pursuant to paragraph 2B(8)(ii) and any Delayed Delivery Fee due pursuant to
paragraph 2B(8)(iii).

         4. PREPAYMENTS. The Series B Notes and any Shelf Notes shall be subject
to required prepayment as and to the extent provided in paragraphs 4A and 4B,
respectively. The Series B Notes and any Shelf Notes shall also be subject to
prepayment under the circumstances set forth in paragraph 4C. Any prepayment
made by the Company pursuant to any other provision of this paragraph 4 shall
not reduce or otherwise affect its obligation to make any required prepayment as
specified in paragraph 4A or 4B.

         4A. REQUIRED PREPAYMENTS OF SERIES B NOTES. Until the Series B Notes
shall be paid in full, the Company shall apply to the prepayment of the Series B
Notes, without Yield-Maintenance Amount, the sum of $3,571,428.58 on January 10
of each year commencing on January 10, 2005 through and including January 10,
2011 and such principal amounts of the Series


                                       8
<PAGE>


B Notes, together with interest thereon to the payment dates, shall become due
on such payment dates. Any remaining unpaid principal amount of the Series B
Notes, together with any accrued and unpaid interest, shall become due on the
maturity date of the Series B Notes.

         4B. REQUIRED PREPAYMENTS OF SHELF NOTES. Each Series of Shelf Notes
shall be subject to required prepayments, if any, set forth in the Notes of such
Series.

         4C. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes of
each Series shall be subject to prepayment, in whole at any time or from time to
time in part (in integral multiples of $1,000,000 and in a minimum amount of
$5,000,000), at the option of the Company, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect to each such Note. Any partial prepayment of a
Series of the Notes pursuant to this paragraph 4C shall be applied in
satisfaction of required payments of principal in inverse order of their
scheduled due dates.

         4D. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder of
each Note of a Series to be prepaid pursuant to paragraph 4C irrevocable written
notice of such prepayment not less than 10 Business Days prior to the prepayment
date, specifying such prepayment date, the aggregate principal amount of the
Notes of such Series to be prepaid on such date, the principal amount of the
Notes of such Series held by such holder to be prepaid on that date and that
such prepayment is to be made pursuant to paragraph 4C. Notice of prepayment
having been given as aforesaid, the principal amount of the Notes specified in
such notice, together with interest thereon to the prepayment date and together
with the Yield-Maintenance Amount, if any, herein provided, shall become due and
payable on such prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment pursuant to paragraph 4C, give
telephonic notice of the principal amount of the Notes to be prepaid and the
prepayment date to each Significant Holder which shall have designated a
recipient for such notices in the Purchaser Schedule attached hereto or the
applicable Confirmation of Acceptance or by notice in writing to the Company.

         4E. APPLICATION OF PREPAYMENTS. In the case of each prepayment of less
than the entire unpaid principal amount of all outstanding Notes of any Series
pursuant to paragraphs 4A, 4B or 4C, the amount to be prepaid shall be applied
pro rata to all outstanding Notes of such Series (including, for the purpose of
this paragraph 4E only, all Notes prepaid or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates other
than by prepayment pursuant to paragraph 4A, 4B or 4C) according to the
respective unpaid principal amounts thereof.

         4F. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraphs 4A, 4B or 4C or upon exercise of the put option pursuant to
paragraph 5E, or upon acceleration of such final maturity pursuant to paragraph
7A), or purchase or otherwise acquire, directly or indirectly, Notes held by any
holder unless the Company or such Subsidiary or Affiliate shall have offered to
prepay or otherwise retire or purchase or otherwise acquire, as the case may be,
the same proportion of the aggregate


                                       9
<PAGE>

principal amount of Notes held by each other holder of Notes at the time
outstanding upon the same terms and conditions. Any such offer shall provide
each holder with sufficient information to enable it to make an informed
decision with respect to such offer, and shall remain open for at least 30
Business Days. If the holders of more than 5% of the principal amount of the
Notes then outstanding accept such offer, the Company shall promptly notify the
remaining holders of such fact and the expiration date for the acceptance by
holders of Notes of such offer shall be extended by the number of days necessary
to give each such remaining holder at least 15 Business Days from its receipt of
such notice to accept such offer. Any notes so prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates shall not be deemed to be outstanding for any purpose under this
Agreement, except as provided in paragraph 4E.

         5. AFFIRMATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:

         5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. The Company covenants
that it will deliver to each Significant Holder in duplicate:

                      (i) as soon as practicable and in any event within 45 days
         after the end of each quarterly period (other than the last quarterly
         period) in each fiscal year consolidated statements of income, members'
         equity and cash flows of the Company and its Subsidiaries for the
         period from the beginning of the current fiscal year to the end of such
         quarterly period, and a consolidated balance sheet of the Company and
         its Subsidiaries as at the end of such quarterly period, setting forth
         in each case in comparative form figures for the corresponding period
         in the preceding fiscal year, all in reasonable detail and satisfactory
         in form to the Required Holder(s) and certified by an authorized
         financial officer of the Company, subject to changes resulting from
         year-end adjustments; provided, however, that delivery pursuant to
         clause (iii) below of copies of the Quarterly Report on Form 10-Q of
         the Company for such quarterly period, if any, including such financial
         statements filed with the Securities and Exchange Commission shall be
         deemed to satisfy the requirements of this clause (i);

                      (ii) as soon as practicable and in any event within 90
         days after the end of each fiscal year, consolidating and consolidated
         statements of income and cash flows and a consolidated statement of
         members' equity of the Company and its Subsidiaries for such year, and
         a consolidating and consolidated balance sheet of the Company and its
         Subsidiaries as at the end of such year, setting forth in each case in
         comparative form corresponding consolidated figures from the preceding
         annual audit, all in reasonable detail and satisfactory in form to the
         Required Holder(s) and, as to the consolidated statements, reported on
         by independent public accountants of recognized national standing
         selected by the Company whose report shall be without limitation as to
         scope of the audit and satisfactory in substance to the Required
         Holder(s) and, as to the consolidating statements, certified by an
         authorized financial officer of the Company provided, however, that
         delivery pursuant to clause (iii)


                                       10
<PAGE>


         below of copies of the Annual Report on Form 10-K of the Company for
         such fiscal year including such financial statements filed with the
         Securities and Exchange Commission shall be deemed to satisfy the
         requirements of this clause (ii);

                      (iii) promptly upon transmission thereof, copies of all
         such financial statements and copies of all registration statements
         (without exhibits) and all reports which it files with the Securities
         and Exchange Commission (or any governmental body or agency succeeding
         to the functions of the Securities and Exchange Commission);

                      (iv) promptly upon receipt thereof, a copy of each other
         report submitted to the Company by independent accountants in
         connection with any annual, interim or special audit made by them of
         the books of the Company or any Subsidiary; and

                      (v) with reasonable promptness, such other information as
         such Significant Holder may reasonably request.

Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Subsidiaries with the provisions of paragraphs 6B, 6C, 6D
and 6F and stating that there exists no Event of Default or Default, or, if any
Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto. Together with each delivery of financial statements required by clause
(ii) above, the Company will deliver to each Significant Holder a certificate of
such accountants stating that, in making the audit necessary for their report on
such financial statements, they have obtained no knowledge of any Event of
Default or Default arising under paragraph 6B or 6C or under paragraph 6E(ii) or
6F(iv) insofar as such Default or Event of Default relates to 6E(ii)(c)(y) or
6F(iv)(b)(y) and existing as of the last day of the Company's fiscal year, or,
if they have obtained knowledge of any Event of Default or Default arising under
any such paragraph, specifying the nature and period of existence thereof. Such
accountants, however, shall not be liable to anyone by reason of their failure
to obtain knowledge of any Event of Default or Default which would not be
disclosed in the course of an audit conducted in accordance with generally
accepted auditing standards. The Company also covenants that immediately after
any Responsible Officer obtains knowledge of an Event of Default or Default, it
will deliver to each Significant Holder an Officer's Certificate specifying the
nature and period of existence thereof and what action the Company proposes to
take with respect thereto.

         5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
will, upon the request of the holder of any Note, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Notes, except at such times
as the Company is subject to and in compliance with the reporting requirements
of


                                       11
<PAGE>


section 13 or 15(d) of the Exchange Act. For the purpose of this paragraph 5B,
the term "QUALIFIED INSTITUTIONAL BUYER" shall have the meaning specified in
Rule 144A under the Securities Act.

         5C. INSPECTION OF PROPERTY. The Company covenants that it will permit
any Person designated by any Significant Holder in writing, at such Significant
Holder's expense (if no Default or Event of Default then exists) or at the
expense of the Company (if a Default or an Event of Default then exists), to
visit and inspect any of the properties of the Company and its Subsidiaries, to
examine the corporate books and financial records of the Company and its
Subsidiaries and make copies thereof or extracts therefrom and to discuss the
affairs, finances and accounts of any of such corporations with the principal
officers of the Company and its independent public accountants; provided,
however, that the Company shall have the option to have a representative present
at any meeting between its independent public accountants and such Significant
Holder, all at such reasonable times and as often as such Significant Holder may
reasonably request.

         5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants that, if it
or any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of paragraph 6D (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to paragraph 11C), it will
make or cause to be made effective provision whereby the Notes will be secured
by such Lien equally and ratably with any and all other Debt thereby secured so
long as any such other Debt shall be so secured.

         5E. OFFER TO PREPAY NOTES IN THE EVENT OF A CHANGE IN CONTROL.

                      5E(1) NOTICE OF IMPENDING CHANGE IN CONTROL. The Company
         will not take any action that consummates or finalizes a Change in
         Control unless at least 30 days prior to such action it shall have
         given to each holder of the Notes written notice of such impending
         Change in Control.

                      5E(2) NOTICE OF OCCURRENCE OF CHANGE IN CONTROL. The
         Company will, within five Business Days after any Responsible Officer
         has knowledge of the occurrence of any Change in Control, give written
         notice of such Change in Control to each holder of the Notes. If a
         Change in Control has occurred, such notice shall contain and
         constitute an offer to prepay the Notes as described in paragraph 5E(4)
         and shall be accompanied by the certificate described in paragraph
         5E(7).

                      5E(3) NOTICE OF ACCEPTANCE OF OFFER UNDER PARAGRAPH 5E(2).
         If the Company shall at any time receive an acceptance to an offer to
         prepay Notes under paragraph 5E(2) from some, but not all of, the
         holders of the Notes, then the Company will, within two Business Days
         after the receipt of such acceptance, give written notice of such
         acceptance to each other holder of the Notes.

                      5E(4) OFFER TO PREPAY NOTES. The offer to prepay Notes
         contemplated by paragraph 5E(2) shall be an offer to prepay, in
         accordance with and subject to this paragraph 5E, all, but not less
         than all, of the Notes held by each holder (in this case


                                       12
<PAGE>


         only, "HOLDER" in respect of any Note registered in the name of a
         nominee for a disclosed beneficial owner shall mean such beneficial
         owner) on a date specified in such offer (the "PROPOSED PREPAYMENT
         DATE"). Such Proposed Prepayment Date shall be not less than 30 days
         and not more than 60 days after the date of such offer (if the Proposed
         Prepayment Date shall not be specified in such offer, the Proposed
         Prepayment Date shall be the 30th day after the date of such offer).
         Notwithstanding the foregoing, if the Company shall be required to give
         a notice of acceptance under paragraph 5E(3) hereof with respect to any
         offer to prepay Notes under paragraph 5E(2), then the Proposed
         Prepayment Date for such offer shall be the later of (i) the date
         specified in the immediately preceding sentences, or (ii) the 10th
         Business Day after the date the first such notice of acceptance with
         respect to such offer was given by the Company under paragraph 5E(3).

                      5E(5) REJECTION; ACCEPTANCE. A holder of Notes may accept
         the offer to prepay made pursuant to this paragraph 5E by causing a
         notice of such acceptance to be delivered to the Company prior to the
         Proposed Prepayment Date. A failure by a holder of Notes to so respond
         to an offer to prepay made pursuant to this paragraph 5E shall be
         deemed to constitute a rejection of such offer by such holder.

                      5E(6) PREPAYMENT. Prepayment of the Notes to be prepaid
         pursuant to this paragraph 5E shall be at 100% of the principal amount
         of such Notes, together with interest on such Notes accrued to the date
         of prepayment. The prepayment shall be made on the Proposed Prepayment
         Date.

                      5E(7) OFFICER'S CERTIFICATE. Each offer to prepay the
         Notes pursuant to this paragraph 5E shall be accompanied by a
         certificate, executed by a Responsible Officer of the Company and dated
         the date of such offer, specifying (i) the Proposed Prepayment Date,
         (ii) that such offer is made pursuant to this paragraph 5E, (iii) the
         principal amount of each Note offered to be prepaid, (iv) the interest
         that would be due on each Note offered to be prepaid, accrued to the
         Proposed Prepayment Date, (v) that the conditions of this paragraph 5E
         have been fulfilled, and (vi) in reasonable detail, the nature and date
         of the Change in Control.

         5F. COMPLIANCE WITH LAW. The Company covenants that it will, and will
cause each of its Subsidiaries to, comply with all laws, ordinances or
governmental rules or regulations to which each of them is subject (unless such
failure to comply is subject to a good faith contest), including, without
limitation, environmental laws, and will obtain and maintain in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations would
not reasonably be expected, individually or in the aggregate, to have a material
adverse effect on the business, condition (financial or otherwise) or operations
of the Company and its Subsidiaries, taken as a whole.


                                       13
<PAGE>


         5G. INSURANCE . The Company covenants that it will, and will cause each
of its Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts as is customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated; provided,
however, the Company may, to the extent permitted by law, provide for
appropriate self-insurance with respect to workers' compensation.

         5H. MAINTENANCE OF PROPERTIES. The Company covenants that it will, and
will cause each of its Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective Properties in good repair, working order
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted in all material respects at
all times, provided that this paragraph shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
Properties if such discontinuance is desirable in the conduct of its business
and such discontinuance would not reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole.

         5I. PAYMENT OF TAXES. The Company covenants that it will, and will
cause each of its Subsidiaries to, file all income tax or similar tax returns
required to be filed in any jurisdiction and to pay and discharge all taxes
shown to be due and payable on such returns and all other taxes, assessments,
governmental charges or levies payable by any of them, and to pay and discharge
all amounts payable for work, labor and materials, in each case to the extent
such taxes, assessments, charges, levies and amounts payable have become due and
payable and before they have become delinquent, provided that neither the
Company nor any Subsidiary need pay any such tax, assessment, charge, levy or
amount payable if (i) the amount, applicability or validity thereof is being
actively contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with generally accepted
accounting principles on the books of the Company or such Subsidiary or (ii) the
nonpayment of all such taxes, assessments, charges, levies and amounts payable
in the aggregate would not reasonably be expected to have a materially adverse
effect on the business, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole.

         5J. CORPORATE EXISTENCE, ETC. Subject to paragraph 6E, the Company will
at all times preserve and keep in full force and effect its corporate existence
and will at all times preserve and keep in full force and effect the corporate
existence of each of its Subsidiaries except to the extent the failure to do so
could not reasonably be expected to result in a material adverse effect on the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole. The Company will at all times preserve and
keep in full force and effect all certificates of convenience and necessity,
rights and franchises, licenses, permits, operating rights and other
authorization from federal, state, foreign, regional, municipal and other local
regulatory bodies or administrative agencies or governmental bodies having


                                       14
<PAGE>


jurisdiction over the Company and its Subsidiaries or any of their respective
Properties as are necessary for the ownership, operation and maintenance of its
respective businesses and Properties, unless the termination of or failure to
preserve and keep in full force and effect such corporate existence, right,
certificate or franchise, license, permit, operating right or other
authorization would not reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole.

         5K. LINES OF BUSINESS. The Company shall not engage in any material
respects in any business activity or operations other than operations or
activities (i) in or reasonably related to the agriculture industry, (ii) in the
food industry, or (iii) which are not substantially different from or related to
its present business activities or operations.

         5L. AGREEMENT ASSUMING LIABILITY ON NOTES. The Company covenants that,
if at any time any Person should become liable (as co-obligor, endorser,
guaranty or surety) on any other material obligation of the Company, the Company
will, at the same time, cause such Person to deliver to the holder of the Notes
an agreement pursuant to which such Person becomes similarly liable on the
Notes; provided this paragraph 5L shall not apply to any Person becoming liable
solely as an endorser of a check, or as a signatory to a letter of credit for
trade liabilities of the Company incurred, in the ordinary course of business.

         6. NEGATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note or other amount due hereunder is outstanding and unpaid,
the Company covenants as follows:

         6A. [INTENTIONALLY LEFT BLANK].

         6B. FINANCIAL COVENANTS.

         6B(1). WORKING CAPITAL. The Company covenants that it will not permit
Working Capital to be less than $150,000,000. As used herein, the term "WORKING
CAPITAL" means consolidated current assets of the Company and its Subsidiaries
minus consolidated current liabilities of the Company and its Subsidiaries, in
each case determined in accordance with generally accepted accounting principles
consistently applied.

         6B(2). FUNDED DEBT TO CONSOLIDATED CASH FLOW. The Company shall not
permit the ratio of (i) consolidated Funded Debt of the Company and its
Subsidiaries at such time to (ii) Consolidated Cash Flow determined as of the
end of the four fiscal quarter period then most recently ended, to exceed 3.00
to 1.00 at any time.

         6B(3). ADJUSTED CONSOLIDATED FUNDED DEBT TO CONSOLIDATED MEMBERS' AND
PATRONS' EQUITY. The COMPANY shall not permit the ratio of Adjusted Consolidated
Funded Debt to Consolidated Members' and Patrons' Equity to exceed .80 to 1.00
at any time.


                                       15
<PAGE>


         6C. PRIORITY DEBT . The Company covenants that it will not, and will
not permit any of its Subsidiaries to, directly or indirectly create, issue,
incur or assume any Priority Debt if after giving effect thereto the aggregate
outstanding principal amount of all Priority Debt would exceed 15% of
Consolidated Tangible Net Worth at the time of such creation, issuance,
incurrence or assumption.

         6D. LIENS. The Company covenants that it will not, and will not permit
any of its Subsidiaries to, directly or indirectly create, incur, assume or
suffer to be created, incurred or assumed or to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any Property of the
Company or any of its Subsidiaries, whether now owned or held or hereinafter
acquired (unless (1) provision is made for the equal and ratable securing of the
Notes in accordance with paragraph 5D, and (2) the obligees of the obligations
secured by such Liens shall have entered into an intercreditor agreement with
the holders of the Notes in form and substance satisfactory to the holders of
the Notes), except:

                      (i) Liens for taxes, assessments or other governmental
         charges or levies securing obligations not overdue, or if overdue,
         being actively contested in good faith by appropriate proceedings that
         will prevent the forfeiture or sale of any Property, provided that
         adequate reserves are established in accordance with generally accepted
         accounting principles on the books of the Company or a Subsidiary of
         the Company;

                      (ii) attachment, judgment and other similar Liens arising
         in connection with court proceedings, provided the execution or other
         enforcement of such Lien(s) is effectively stayed and the claims
         secured thereby are being actively contested in good faith in such
         manner that the Property subject to such Lien(s) is not subject to
         forfeiture or sale, and further provided that adequate reserves are
         established in accordance with generally accepted accounting principles
         on the books of the Company or a Subsidiary of the Company;

                      (iii) Liens incidental to the normal conduct of the
         business of the Company or a Subsidiary of the Company or to the
         ownership by the Company or a Subsidiary of the Company of its Property
         which were not incurred in connection with the borrowing of money or
         the obtaining of credit or advances and which do not in the aggregate
         materially detract from the value of the Property of the Company or any
         Subsidiary of the Company for the purpose of such business or
         materially impair the use thereof in the operation of the business of
         the Company or any Subsidiary of the Company;

                      (iv) Liens existing as of the date of this Agreement and
         set forth on Schedule 6D hereto;

                      (v) any Lien renewing, extending or refunding any Lien
         permitted by clause (iv) of this paragraph 6D, provided that (a) the
         principal amount of the Debt secured by such Lien immediately prior to
         such extension, renewal or refunding is not increased or the maturity
         thereof reduced, (b) such Lien is not extended to any other


                                       16
<PAGE>


         Property, and (c) immediately after such extension, renewal or
         refunding no Default or Event of Default would exist;

                      (vi) Liens on Property of the Company or any of its
         Subsidiaries securing Debt owing to the Company or to any of its
         Wholly-Owned Subsidiaries;

                      (vii) any Lien created to secure all or any part of the
         purchase price or cost of construction, or to secure Debt incurred or
         assumed to pay all or a part of the purchase price or cost of
         construction, of any Property acquired or constructed by the Company or
         a Subsidiary of the Company after the date of closing, provided that
         (a) any such Lien shall extend solely to the item or items of such
         Property so acquired or constructed or rights relating solely to such
         item or items or Property, (b) the principal amount of the Debt secured
         by any such Lien shall at no time exceed an amount equal to 100% of the
         fair market value of the Property acquired or constructed at the time
         of such acquisition or construction, and (c) such Lien shall be created
         contemporaneously with, or within 180 days after, the acquisition or
         completion of construction of such Property;

                      (viii) any Lien existing on Property acquired by the
         Company or any Subsidiary of the Company at the time such Property is
         so acquired (whether or not the Debt secured thereby is assumed by the
         Company or such Subsidiary) or any Lien existing on Property of a
         Person immediately prior to the time such Person is merged into or
         consolidated with the Company or any Subsidiary of the Company,
         provided that (a) no such Lien shall have been created or assumed in
         contemplation of such acquisition of Property or such consolidation or
         merger, (b) such Lien shall extend only to the Property acquired or the
         Property of such Person merged into or consolidated with the Company or
         Subsidiary which was subject to such Lien as of the time of such
         consolidation or merger, and (c) the principal amount of the Debt
         secured by any such Lien shall at no time exceed an amount equal to
         100% of the fair market value of the Property subject thereto at the
         time of the acquisition thereof or at the time of such merger or
         consolidation;

                      (ix) Liens to CoBank, St. Paul Bank and other cooperatives
         with respect to equity held by Company in such banks or other
         cooperatives securing Debt with the aggregate amount of such equity
         securing Debt not to exceed $35,000,000 at any one time; and

                      (x) other Liens not otherwise permitted under clause (i)
         through (ix) of this paragraph 6D securing Debt, provided that the
         creation, issuance, incurrence or assumption of such Debt is permitted
         under paragraphs 6B and 6C hereof.

         6E. MERGER AND CONSOLIDATION . The Company covenants that it will not,
and will not permit any of its Subsidiaries to, merge or consolidate with any
other Person, except that


                                       17
<PAGE>


                      (i) any Subsidiary of the Company may merge into the
         Company or any Wholly-Owned Subsidiary, provided that the Company or
         such Wholly-Owned Subsidiary is the surviving corporation, and

                      (ii) the Company may merge or consolidate with any other
         Person provided that (a) the successor formed by such consolidation or
         the survivor of such merger (the "SURVIVING CORPORATION") is a solvent
         corporation organized and existing under the laws of the United States
         of America, any State thereof or the District of Columbia, (b) if the
         Company is not the Surviving Corporation, the Surviving Corporation
         shall have executed and delivered to each holder of the Notes its
         written assumption of the due and punctual performance and payment of
         each covenant and condition in this Agreement and the Notes, which
         assumption shall be in form and substance approved in writing by the
         Required Holders, and the Company shall have caused to be delivered to
         each holder of Notes an opinion of nationally recognized independent
         counsel, or other independent counsel reasonably satisfactory to the
         Required Holders, to the effect that all agreements or instruments
         effecting such assumption are enforceable in accordance with their
         terms and comply with the terms hereof, and (c) immediately after
         giving effect to such merger or consolidation, (x) no Default or Event
         of Default shall exist and (y) the Surviving Corporation is able to
         incur at least $1.00 of additional Funded Debt under the provisions of
         paragraph 6B(2) and (3) and at least $1.00 of additional Priority Debt
         under the provisions of paragraph 6C hereof.

         6F. SALE OF ASSETS . The Company covenants that it will not, and will
not permit any of its Subsidiaries to, sell, transfer, convey, lease or
otherwise dispose of (a "TRANSFER") any Property (including capital stock of or
other ownership interests in any Subsidiary of the Company), except that:

                      (i) the Company or any Subsidiary of the Company may
         Transfer any of its inventory, fixtures or equipment in the ordinary
         course of business;

                      (ii) any Subsidiary may Transfer any of its Property to
         the Company or a Wholly-Owned Subsidiary; and

                      (iii) the Company or any Subsidiary of the Company may
         lease its assets to any joint venture entity, of which the Company or
         any Subsidiary of the Company holds an ownership interest and shares in
         the earnings; provided that the terms of any such lease and the
         division of the joint venture's earnings, when viewed as a whole, can
         be reasonably expected to generate the same or greater book earnings
         and cash flow for the Company or Subsidiary of the Company as would be
         generated absent such lease;

                      (iv) the Company or any Subsidiary of the Company may
         Transfer any of its Properties at the fair market value thereof
         provided that (a) either (1) the aggregate amount of the Disposition
         Value of all Property Transferred pursuant to this clause (iv) on or
         after the date of closing does not exceed an amount equal to 25% of
         Consolidated


                                       18
<PAGE>


         Total Assets as of the end of the fiscal year of the Company most
         recently ended prior to the date of such Transfer, or (2) concurrently
         with the making of such Transfer the Net Proceeds Amount for such
         Transfer is (A) applied to the acquisition by the Company or the
         Subsidiary making such Transfer of other Property of a nature similar
         to, and of at least an equivalent value of, the Property Transferred,
         or is committed to be applied to such acquisition within one year of
         the date of such Transfer, or (B) applied to the payment of the
         outstanding principal of all of the Funded Debt of the Company
         (excluding any Funded Debt owed to any Subsidiary or Affiliate of the
         Company and excluding any Funded Debt in respect of any revolving
         credit or similar credit facility providing the Company with the right
         to obtain loans or other extensions of credit from time to time, except
         to the extent that, in connection with such payment of such Funded
         Debt, the availability of loans or other extensions of credit under
         such credit facility is permanently reduced by an amount not less than
         the amount of such proceeds applied to the payment of such Funded Debt)
         pro rata in proportion to the respective outstanding principal amounts
         thereof, and (b) immediately after giving effect to such Transfer (x)
         no Default or Event of Default shall exist and (y) the Company is able
         to incur at least $1.00 of additional Funded Debt under the provisions
         of paragraph 6B(2) and (3) hereof and at least $1.00 of additional
         Priority Debt under the provisions of paragraph 6C hereof.

         6G. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Subsidiary of the Company to, enter into directly or indirectly any
transaction (including, without limitation, the purchase, lease, sale or
exchange of Properties of any kind or the rendering of any service) with any
Affiliate, except pursuant to the reasonable requirements of the Company's or
such Subsidiary's business and upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.

         6H. SUBSIDIARY DIVIDEND RESTRICTIONS. The Company covenants that it
will not, and will not permit any Subsidiary of the Company to, enter into, or
be otherwise subject to, any contract or agreement (including its certificate of
incorporation) which limits the amount of, or otherwise imposes restrictions on
the payment of, dividends by any Subsidiary of the Company.

         6I. SUBSIDIARY PREFERRED STOCK. The Company covenants that it will
not, and will not permit any Subsidiary of the Company to, issue or permit to be
outstanding any class of capital stock which has priority over any other class
of capital stock of such Subsidiary as to dividends or in liquidation.

         6J. ISSUANCE OF STOCK BY SUBSIDIARIES. The Company covenants that it
will not permit any Subsidiary of the Company to issue, sell or otherwise
dispose of any shares of any class of its stock (either directly or indirectly
by the issuance of rights or options for, or securities convertible into, such
shares) except to the Company or another Subsidiary of the Company.


                                       19
<PAGE>


         7. EVENTS OF DEFAULT.

         7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):

                      (i) the Company defaults in the payment of any principal
         of, or Yield- Maintenance Amount payable with respect to, any Note when
         the same shall become due, either by the terms thereof or otherwise as
         herein provided; or

                      (ii) the Company defaults in the payment of any interest
         on any Note for more than 5 Business Days after the date due; or

                      (iii) the Company or any Subsidiary of the Company
         defaults (whether as primary obligor or as guarantor or other surety)
         in any payment of principal of or interest on any other obligation for
         money borrowed (or any Capitalized Lease Obligation, any obligation
         under a conditional sale or other title retention agreement, any
         obligation issued or assumed as full or partial payment for property
         whether or not secured by a purchase money mortgage or any obligation
         under notes payable or drafts accepted representing extensions of
         credit) beyond any period of grace provided with respect thereto, or
         the Company or any Subsidiary of the Company fails to perform or
         observe any other agreement, term or condition contained in any
         agreement under which any such obligation is created (or if any other
         event thereunder or under any such agreement shall occur and be
         continuing) and the effect of such failure or other event is to cause,
         or a holder or holders of such obligation (or a trustee on behalf of
         such holder or holders) causes, such obligation to become due (or to be
         repurchased by the Company or any Subsidiary of the Company) prior to
         any stated maturity, provided that the aggregate amount of all
         obligations as to which such a payment default shall occur and be
         continuing or such a failure or other event causing acceleration (or
         resale to the Company or any Subsidiary of the Company) shall occur and
         be continuing exceeds $5,000,000; or

                      (iv) any representation or warranty made by the Company
         herein or by the Company or any of its officers in any writing
         furnished in connection with or pursuant to this Agreement shall be
         false in any material respect on the date as of which made or deemed to
         have been made; or

                      (v) the Company fails to perform or observe any agreement
         contained in paragraph 5E or paragraph 6; or

                      (vi) the Company fails to perform or observe any other
         agreement, term or condition contained herein and such failure shall
         not be remedied within 30 days after any Responsible Officer obtains
         actual knowledge thereof; or


                                       20
<PAGE>


                      (vii) the Company or any Subsidiary of the Company makes
         an assignment for the benefit of creditors or is generally not paying
         its debts as such debts become due; or

                      (viii) any decree or order for relief in respect of the
         Company or any Subsidiary of the Company is entered under any
         bankruptcy, reorganization, compromise, arrangement, insolvency,
         readjustment of debt, dissolution or liquidation or similar law,
         whether now or hereafter in effect (herein called the "BANKRUPTCY
         LAW"), of any jurisdiction; or

                      (ix) the Company or any Subsidiary of the Company
         petitions or applies to any tribunal for, or consents to, the
         appointment of, or taking possession by, a trustee, receiver,
         custodian, liquidator or similar official of the Company or any
         Subsidiary of the Company, or of any substantial part of the assets of
         the Company or any Subsidiary of the Company, or commences a voluntary
         case under the Bankruptcy Law of the United States or any proceedings
         (other than proceedings for the voluntary liquidation and dissolution
         of a Subsidiary) relating to the Company or any Subsidiary of the
         Company under the Bankruptcy Law of any other jurisdiction; or

                      (x) any such petition or application is filed, or any such
         proceedings are commenced, against the Company or any Subsidiary of the
         Company and the Company or such Subsidiary by any act indicates its
         approval thereof, consent thereto or acquiescence therein, or an order,
         judgment or decree is entered appointing any such trustee, receiver,
         custodian, liquidator or similar official, or approving the petition in
         any such proceedings, and such order, judgment or decree remains
         unstayed and in effect for more than 30 days; or

                      (xi) any order, judgment or decree is entered in any
         proceedings against the Company decreeing the dissolution of the
         Company and such order, judgment or decree remains unstayed and in
         effect for more than 60 days: or

                      (xii) any order, judgment or decree is entered in any
         proceedings against the Company or any Subsidiary of the Company
         decreeing a split-up of the Company or such Subsidiary which requires
         the divestiture of assets representing a substantial part, or the
         divestiture of the stock of a Subsidiary of the Company whose assets
         represent a substantial part, of the consolidated assets of the Company
         and its Subsidiaries (determined in accordance with generally accepted
         accounting principles) or which requires the divestiture of assets, or
         stock of a Subsidiary of the Company, which shall have contributed a
         substantial part of the consolidated net income of the Company and its
         Subsidiaries (determined in accordance with generally accepted
         accounting principles) for any of the three fiscal years then most
         recently ended, and such order, judgment or decree remains unstayed and
         in effect for more than 60 days; or


                                       21
<PAGE>


                      (xiii) a final judgment in an amount in excess of
         $5,000,000 is rendered against the Company or any Subsidiary of the
         Company and, within 45 days after entry thereof, any such judgment is
         not discharged or execution thereof stayed pending appeal, or within 45
         days after the expiration of any such stay, such judgment is not
         discharged; or

                      (xiv) the Company or any ERISA Affiliate, in its capacity
         as an employer under a Multiemployer Plan, makes a complete or partial
         withdrawal from such Multiemployer Plan resulting in the incurrence by
         such withdrawing employer of a withdrawal liability in an amount
         exceeding $10,000,000 unless paid within 60 days;

then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, any holder of any Note (other than the Company or any of its
Affiliates or Subsidiaries) may at its option, by notice in writing to the
Company, declare all of the Notes held by such holder to be, and all of the
Notes held by such holder shall thereupon be and become, immediately due and
payable at par together with interest accrued thereon, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company, (b) if such event is an Event of Default specified in clause (viii),
(ix) or (x) of this paragraph 7A with respect to the Company, all of the Notes
at the time outstanding shall automatically become immediately due and payable
together with interest accrued thereon and together with the Yield-Maintenance
Amount, if any, with respect to each Note, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Company, and (c)
with respect to any event constituting an Event of Default, the Required
Holder(s) of the Notes of any Series may at its or their option during the
continuance of such Event of Default, by notice in writing to the Company,
declare all of the Notes of such Series to be, and all of the Notes of such
Series shall thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield-Maintenance Amount, if any,
with respect to each Note of such Series, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Company. The
Company acknowledges, and the parties hereto agree, that each holder of a Note
has the right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and that the provision for
payment of Yield-Maintenance Amount by the Company in the event the Notes are
prepaid or are accelerated as a result of an Event of Default is intended to
provide compensation for the deprivation of such right under such circumstances.

         7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes of any Series shall have been declared immediately due and payable
pursuant to paragraph 7A, the Required Holder(s) of the Notes of such Series
may, by notice in writing to the Company, rescind and annul such declaration and
its consequences if (i) the Company shall have paid all overdue interest on the
Notes of such Series, the principal of and Yield-Maintenance Amount, if any,
payable with respect to any Notes of such Series which have become due otherwise
than by reason of such declaration, and interest on such overdue interest and
overdue principal and Yield-Maintenance Amount at the rate specified in the
Notes of such Series, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by


                                       22
<PAGE>


reason of such declaration, shall have been cured or waived pursuant to
paragraph 11C, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes of such Series or this
Agreement. No such rescission or annulment shall extend to or affect any
subsequent Event of Default or Default or impair any right arising therefrom.

         7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
of each Series at the time outstanding.

         7D. OTHER REMEDIES. If any Event of Default or Default shall occur and
be continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement and such Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by suit
in equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the holder of any Note is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.

         8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows (all references to "Subsidiary" and
"Subsidiaries" in this paragraph 8 shall be deemed omitted if the Company has no
Subsidiaries at the time the representations herein are made or repeated):

         8A. ORGANIZATION. The Company is a nonstock agricultural cooperative
corporation duly organized and existing in good standing under the laws of the
State of Minnesota and each Subsidiary of the Company is duly organized and
existing in good standing under the laws of the jurisdiction in which it is
incorporated. The Company and each of its Subsidiaries have duly qualified or
been duly licensed, and are authorized to do business and are in good standing,
in each jurisdiction in which the ownership of their respective properties or
the nature of their respective businesses makes such qualification or licensing
necessary and in which the failure to be so qualified or licensed would be
reasonably likely to have a material adverse effect on the business condition
(financial or otherwise) or operations of the Company and its Subsidiaries,
taken as a whole.

         8A(2). POWER AND AUTHORITY. The Company and each Subsidiary of the
Company has all requisite corporate power to own and operate its respective
properties and to conduct its business as currently conducted and as currently
proposed to be conducted. The Company has all requisite corporate power to
execute, deliver and perform its obligations under this Agreement and the Notes.
The execution, delivery and performance of this Agreement and the Notes has been
duly authorized by all requisite corporate action, and this Agreement and the
Notes have been duly executed and delivered by authorized officers of the
Company and are valid obligations of the Company, legally binding upon and
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy,


                                       23
<PAGE>


insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

         8B. FINANCIAL STATEMENTS. The Company has furnished each Purchaser of
any Note with the following financial statements, identified by a principal
financial officer of the Company: (i) a consolidated balance sheet of the
Company and its Subsidiaries as at August 31 in each of the three fiscal years
of the Company most recently completed prior to the date as of which this
representation is made or repeated to such Purchaser (other than fiscal years
completed within 90 days prior to such date for which audited financial
statements have not been released) and consolidated statements of income and
cash flows and a consolidated statement of members' equity of the Company and
its Subsidiaries for each such year, all reported on by either Deloitte &
Touche, L.L.P. or Pricewaterhouse Coopers, LLP or other nationally recognized
independent public accounting firm and (ii) consolidated balance sheet of the
Company and its Subsidiaries as at the end of the quarterly period (if any) most
recently completed prior to such date and after the end of such fiscal year
(other than quarterly periods completed within 60 days prior to such date for
which financial statements have not been released) and the comparable quarterly
period in the preceding fiscal year and consolidated statements of income and
cash flows and a consolidated statement of members' equity for the periods from
the beginning of the fiscal years in which such quarterly periods are included
to the end of such quarterly periods, prepared by the Company. Such financial
statements (including any related schedules and/or notes) are true and correct
in all material respects (subject, as to interim statements, to changes
resulting from audits and year-end adjustments), have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of the Company and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the operations
of the Company and its Subsidiaries and their cash flows for the periods
indicated. There has been no material adverse change in the business, condition
(financial or otherwise), operations of the Company and its Subsidiaries taken
as a whole since the end of the most recent fiscal year for which such audited
financial statements have been furnished.

         8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which, individually or in the aggregate, could reasonably
be expected to result in any material adverse change in the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole.

         8D. OUTSTANDING DEBT. Neither the Company nor any of its Subsidiaries
has outstanding any Debt except as permitted by paragraph 6B. There exists no
default under the provisions of any instrument evidencing such Debt or of any
agreement relating thereto.

         8E. TITLE TO PROPERTIES. The Company has and each of its Subsidiaries
has good and indefeasible title to its respective real properties (other than
properties which it leases) and good


                                       24
<PAGE>


title to all of its other respective properties and assets, including the
properties and assets reflected in the most recent audited balance sheet
referred to in paragraph 8B (other than properties and assets disposed of in the
ordinary course of business), except for defects in title not reasonably
expected to result in a material adverse effect, subject to no Lien of any kind
except Liens permitted by paragraph 6D. All leases necessary in any material
respect for the conduct of the respective businesses of the Company and its
Subsidiaries are valid and subsisting and are in full force and effect.

         8F. TAXES. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being actively
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with generally accepted accounting
principles or with respect to which the failure to so pay could not be
reasonably expected to have a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole or the ability of the Company to satisfy its obligations under this
Agreement. The Company is a cooperative association taxed under the provisions
of "subchapter T" of the Code and the Company does not presently intend to alter
its status as a subchapter T cooperative association for federal income tax
purposes.

         8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement or subject to
any charter or other corporate restriction which materially and adversely
affects its business, property or assets, condition (financial or otherwise) or
operations. Neither the execution nor delivery of this Agreement or the Notes,
nor the offering, issuance and sale of the Notes, nor fulfillment of nor
compliance with the terms and provisions hereof and of the Notes will conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries pursuant to, the charter or by-laws of the Company or any of
its Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of its Subsidiaries is subject.
Neither the Company nor any of its Subsidiaries is a party to, or otherwise
subject to any provision contained in, any instrument evidencing Debt of the
Company or such Subsidiary, any agreement relating thereto or any other contract
or agreement (including its charter) which limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the Company of the type to be
evidenced by the Notes except as set forth in the agreements listed in Schedule
8G attached hereto (as such Schedule 8G may have been modified from time to time
by written supplements thereto delivered by the Company and accepted in writing
by Prudential).

         8H. OFFERING OF NOTES. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes or any similar security of
the Company for sale to, or solicited any offers to buy the Notes or any similar
security of the Company from, or otherwise approached or negotiated with respect
thereto with, any Person other than institutional investors, and neither the
Company nor any agent acting on its behalf has taken or will take any action
which


                                       25
<PAGE>


would subject the issuance or sale of the Notes to the provisions of Section 5
of the Securities Act or to the provisions of any securities or Blue Sky law of
any applicable jurisdiction.

         8I. USE OF PROCEEDS. The proceeds of the Series B Notes will be used to
retire existing indebtedness. The Company is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying "margin stock" (within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System), and the aggregate market
value of all "margin stock" owned by the Company and its Subsidiaries does not
exceed 25% of the aggregate value of the assets thereof, as determined by any
reasonable method. Neither the Company nor any agent acting on its behalf has
taken or will take any action which might cause this Agreement or the Notes to
violate Regulation U, Regulation T or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Exchange Act, in each
case as in effect now or as the same may hereafter be in effect.

         8J. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan) which could be reasonably
expected to have a material adverse effect on the business condition (financial
or otherwise) or operations of the Company and its Subsidiaries) taken as a
whole or the ability of the Company to satisfy its obligations under this
Agreement. No liability to the PBGC has been or is expected by the Company or
any ERISA Affiliate to be incurred with respect to any Plan (other than a
Multiemployer Plan) by the Company, any Subsidiary or any ERISA Affiliate which
is or would be materially adverse to the business, property or assets, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole. Neither the Company, any Subsidiary nor any ERISA Affiliate has
incurred or presently expects to incur any withdrawal liability under Title IV
of ERISA with respect to any Multiemployer Plan which is or would be materially
adverse to the business, property or assets, condition (financial or otherwise)
or operations of the Company and its Subsidiaries taken as a whole. The
execution and delivery of this Agreement and the issuance and sale of the Notes
will be exempt from or will not involve any transaction which is subject to the
prohibitions of section 406 of ERISA and will not involve any transaction in
connection with which a penalty could be imposed under section 502(i) of ERISA
or a tax could be imposed pursuant to section 4975 of the Code. The
representation by the Company in the next preceding sentence is made in reliance
upon and subject to the accuracy of the representation of each Purchaser in
paragraph 9B as to the source of funds to be used by it to purchase any Notes.

         8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
any action by or notice to or filing with any court or administrative or
governmental body (other than routine filings after the Closing Day for any
Notes with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the offering, issuance, sale or delivery of the Notes or fulfillment of or
compliance with the terms and provisions hereof or of the Notes.


                                       26
<PAGE>


         8L. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries and all
of their respective properties and facilities have complied at all times and in
all respects with all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings and
regulations including, without limitation, those relating to protection of the
environment except, in any such case, where failure to comply, individually or
in the aggregate, would not reasonably be expected to result in a material
adverse effect on the business, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole.

         8M. REGULATORY STATUS. Neither the Company nor any Subsidiary is (i) an
"Investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding
company" or a "subsidiary company" or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) a "public utility"
within the meaning of the Federal Power Act, as amended.

         8N. PERMITS AND OTHER OPERATING RIGHTS. The Company and each Subsidiary
of the Company has all such valid and sufficient certificates of convenience and
necessity, franchises, licenses, permits, operating rights and other
authorizations from federal, state, foreign, regional, municipal and other local
regulatory bodies or administrative agencies or other governmental bodies having
jurisdiction over the Company or any Subsidiary of the Company or any of its
Properties, as are necessary for the ownership, operation and maintenance of its
businesses and Properties, as presently conducted and as proposed to be
conducted while the Notes are outstanding, subject to exceptions and
deficiencies which, individually or in the aggregate, would not reasonably be
expected to materially adversely affect the business and operations of the
Company, any Subsidiary of the Company or any material part thereof, and such
certificates of convenience and necessity, franchises, licenses, permits,
operating rights and other authorizations from federal, state, foreign,
regional, municipal and other local regulatory bodies or administrative agencies
or other governmental bodies having jurisdiction over the Company, any
Subsidiary of the Company or any of its Properties are free from restrictions or
conditions which, individually or in the aggregate, would reasonably be expected
to be materially adverse to the business or operations of the Company and its
Subsidiaries and neither the Company nor any Subsidiary of the Company is in
violation of any restriction or condition thereof in any material respect.

         8O. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact peculiar to the
Company or any of its Subsidiaries which materially adversely affects or in the
future may (so far as the Company can now foresee) materially adversely affect
the business, property or assets, condition (financial or otherwise) or
operations of the Company or any of its Subsidiaries and which has not been set
forth in this Agreement.


                                       27
<PAGE>


         8P. HOSTILE TENDER OFFERS. None of the proceeds of the sale of any
Notes will be used to finance a Hostile Tender Offer.











                                       28
<PAGE>




         9. REPRESENTATIONS OF THE PURCHASERS.

             Each Purchaser represents as follows:

         9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of such Purchaser's property shall at all times be and remain within
its control. Such Purchaser will not sell or otherwise transfer the Notes to be
purchased by it hereunder in violation of the Securities Act.

         9B. SOURCE OF FUNDS. The source of the funds being used by such
Purchaser to pay the purchase price of the Notes being purchased by such
Purchaser hereunder constitutes assets allocated to: (i) the "insurance company
general account" of such Purchaser (as such term is defined under Section V of
the United States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60), and as of the date of the purchase of the Notes such Purchaser
satisfies all of the applicable requirements for relief under Sections I and IV
of PTCE 95-60, (ii) a separate account maintained by such Purchaser in which no
employee benefit plan, other than employee benefit plans identified on a list
which has been furnished by such Purchaser to the Company, participates to the
extent of 10% or more or (iii) an investment fund, the assets of which do not
include any assets of any employee benefit plan. For the purpose of this
paragraph 9B, the terms "SEPARATE ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall
have the respective meanings specified in section 3 of ERISA.

         10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this Agreement,
the terms defined in paragraphs 10A and 10B (or within the text of any other
paragraph) shall have the respective meanings specified therein and all
accounting matters shall be subject to determination as provided in paragraph
10C.

         10A. YIELD-MAINTENANCE TERMS.

                  "CALLED PRINCIPAL" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to paragraph 4C, is put to
the Company pursuant to paragraph 5E or is declared to be immediately due and
payable pursuant to paragraph 7A, as the context requires.

                  "DISCOUNTED VALUE" shall mean, with respect to the Called
Principal of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a discount
factor (as converted to reflect the periodic basis on which interest on such
Note is payable, if payable other than on a semi-annual basis) equal to the
Reinvestment Yield with respect to such Called Principal.

                  "REINVESTMENT YIELD" shall mean, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M.


                                       29
<PAGE>


(New York City local time) on the Business Day next preceding the Settlement
Date with respect to such Called Principal, on the display designated as "Page
678" on the Telerate Service (or such other display as may replace page 678 on
the Telerate Service) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date, or if such yields shall not be reported as of such time or the
yields reported as of such time shall not be ascertainable, (ii) the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date. Such
implied yield shall be determined, if necessary, by (a) converting U.S. Treasury
bill quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between yields reported for various
maturities. The Reinvestment Yield will be rounded to that number of decimal
places as appears in the coupon for the Notes.

                  "REMAINING AVERAGE LIFE" shall mean, with respect to the
Called Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.

                  "REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.

                  "SETTLEMENT DATE" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be prepaid
pursuant to paragraph 4C, is put to the Company pursuant to paragraph 5E or is
declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.

                  "YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any
Note, an amount equal to the excess, if any, of the Discounted Value of the
Called Principal of such Note over the sum of (i) such Called Principal plus
(ii) interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal. The Yield-Maintenance Amount shall
in no event be less than zero.

         10B. OTHER TERMS.

                  "ACCEPTANCE" shall have the meaning specified in paragraph
2B(5).

                  "ACCEPTANCE DAY" shall have the meaning specified in paragraph
2B(5).


                                       30
<PAGE>


                  "ACCEPTANCE WINDOW" shall mean, with respect to any interest
rate quote made by Prudential pursuant to paragraph 2B(4), the time period
designated by Prudential during which the Company may elect to accept such
interest rate quote as to not less than $10,000,000 in aggregate principal
amount of Shelf Notes specified in the related Request for Purchase.

                  "ACCEPTED NOTE" shall have the meaning specified in paragraph
2B(5).

                  "ADJUSTED CONSOLIDATED FUNDED DEBT" shall mean all
indebtedness for borrowed money of the Company and its Subsidiaries, in each
case maturing by its terms more than one year after, or which is renewable or
extendible for a period ending one year or more after the date of determination,
and shall include Debt of such maturity created or assumed by the Company or any
Subsidiary of the Company either directly or indirectly, including obligations
of such maturity secured by liens upon property of the Company or its
Subsidiaries and upon which such entity customarily pays the interest, and all
rental payments under capital leases of such maturity, and the net present value
of operating leases as discounted by a rate which is 1.5% less than the National
Prime Rate as stated in the WALL STREET JOURNAL.

                  "AFFILIATE" shall mean (i) any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with such
Person (except, with respect to the Company, a Subsidiary) and (ii) with respect
to Prudential, any investment fund or vehicle for which Prudential or any
Prudential Affiliate acts as investment advisor or portfolio manager. A Person
shall be deemed to control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.

                  "AUTHORIZED OFFICER" shall mean (i) in the case of the
Company, its chief executive officer, its chief financial officer, any vice
president of the Company designated as an "Authorized Officer" of the Company in
the Information Schedule attached hereto or any vice president of the Company
designated as an "Authorized Officer" of the Company for the purpose of this
Agreement in an Officer's Certificate executed by the Company's chief executive
officer or chief financial officer and delivered to Prudential, and (ii) in the
case of Prudential, any officer of Prudential designated as its "Authorized
Officer" in the Information Schedule or any officer of Prudential designated as
its "Authorized Officer" for the purpose of this Agreement in a certificate
executed by one of its Authorized Officers or a lawyer in its law department.
Any action taken under this Agreement on behalf of the Company by any individual
who on or after the date of this Agreement shall have been an Authorized Officer
of the Company and whom Prudential in good faith believes to be an Authorized
Officer of the Company at the time of such action shall be binding on the
Company even though such individual shall have ceased to be an Authorized
Officer of the Company, and any action taken under this Agreement on behalf of
Prudential by any individual who on or after the date of this Agreement shall
have been an Authorized Officer of Prudential and whom the Company in good faith
believes to be an Authorized Officer of Prudential at the time of such action
shall be binding on Prudential even though such individual shall have ceased to
be an Authorized Officer of Prudential.


                                       31
<PAGE>


                  "AVAILABLE FACILITY AMOUNT" shall have the meaning specified
in paragraph 2B(1).

                  "BANKRUPTCY LAW" shall have the meaning specified in clause
(viii) of paragraph 7A.

                  "BUSINESS DAY" shall mean any day other than (i) a Saturday or
a Sunday, (ii) a day on which commercial banks in New York City are required or
authorized to be closed and (iii) for purposes of paragraph 2B(3) hereof only, a
day on which The Prudential Insurance Company of America is not open for
business.

                  "CANCELLATION DATE" shall have the meaning specified in
paragraph 2B(8)(iv).

                  "CANCELLATION FEE" shall have the meaning specified in
paragraph 2B(8)(iv).

                  "CAPITALIZED LEASE OBLIGATION" shall mean any rental
obligation which, under generally accepted accounting principles, is or will be
required to be capitalized on the books of the Company or any Subsidiary, taken
at the amount thereof accounted for as indebtedness (net of interest expenses)
in accordance with such principles.

                  "CHANGE OF CONTROL" shall mean any Person or Persons acting in
concert, together with the Affiliates thereof, directly or indirectly
controlling or owning (beneficially or otherwise) in the aggregate more than 50%
of the aggregate voting power of the issued and outstanding Voting Interests of
the Company.

                  "CLOSING DAY" shall mean, with respect to the Series B Notes,
the Series B Closing Day and, with respect to any Accepted Note, the Business
Day specified for the closing of the purchase and sale of such Accepted Note in
the Request for Purchase of such Accepted Note, provided that (i) if the Company
and the Purchaser which is obligated to purchase such Accepted Note agree on an
earlier Business Day for such closing, the "CLOSING DAY" for such Accepted Note
shall be such earlier Business Day, and (ii) if the closing of the purchase and
sale of such Accepted Note is rescheduled pursuant to paragraph 2B(7), the
Closing Day for such Accepted Note, for all purposes of this Agreement except
references to "original Closing Day" in paragraph 2B(8)(iii), shall mean the
Rescheduled Closing Day with respect to such Accepted Note.

                  "CODE" shall mean the Internal Revenue Code of 1986, as
amended.

                  "CONFIRMATION OF ACCEPTANCE" shall have the meaning specified
in paragraph 2B(5).

                  "CONSOLIDATED CASH FLOW" for any period shall mean the sum of
(i) earnings before income taxes of the Company and its Subsidiaries for such
period, determined on a consolidated basis in accordance with generally accepted
accounting principles, plus (ii) the amounts that have been deducted in the
determination of such earnings before income taxes for such period for (a)
interest expense, (b) depreciation, and (c) amortization, minus (iii) the


                                       32
<PAGE>


amounts that have been included in the determination of such earnings before
income taxes for such period for (a) one-time gains, (b) extraordinary income,
(c) non-cash patronage income, and (d) non-cash equity earnings in joint
ventures.

                  "CONSOLIDATED MEMBERS' AND PATRONS' EQUITY" shall mean the
amount of equity accounts plus (or minus in the case of a deficit) the amount of
surplus and retained earnings accounts of the Company and its Subsidiaries and
the minority interest in Subsidiaries, provided that the total amount of
intangible assets of the Company and its Subsidiaries (including, without
limitation, unamortized debt discount and expense, deferred charges and
goodwill) included therein shall not exceed $30,000,000 (and to the extent such
intangible assets exceed $30,000,000, they will not be included in the
calculation of Consolidated Members' and Patrons' Equity); all as determined in
accordance with generally accepting accounting principles consistently applied,
but excluding therefrom any minority interests in any Subsidiaries without
duplication of deduction if already deducted in determining retained earnings
and surplus.

                  "CONSOLIDATED NET WORTH" shall mean, as of any date, members'
equity of the Company and its Subsidiaries as of such date, determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied.

                  "CONSOLIDATED TANGIBLE NET WORTH" shall mean, as of any date,
Consolidated Net Worth as of such date, less any goodwill or other intangible
assets but, adding back in the minority interests in Subsidiaries of the
Company.

                  "CONSOLIDATED TOTAL ASSETS" shall mean, as of any date, the
total assets of the Company and its Subsidiaries as of such date, determined on
a consolidated basis in accordance with generally accepted accounting principles
consistently applied.

                  "DEBT" shall mean, with respect to any Person (i) all
obligations of such Person for borrowed money (including all obligations for
borrowed money secured by any Lien with respect to any Property owned by such
Person whether or not such Person has assumed or otherwise become liable for
such obligations), (ii) all obligations of such Person for the deferred purchase
price of property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created or arising
under any conditional sale or other title retention agreement with respect to
such property), (iii) all Capital Lease Obligations of such Person and (iv) all
Guarantees of such Person with respect to liabilities of the type described in
clause (i), (ii) or (iii) of any other Person, provided that (a) Debt of a
Subsidiary of the Company shall exclude such obligations and Guarantees of such
Subsidiary if owed or guaranteed by a Subsidiary to the Company or a
Wholly-Owned Subsidiary of the Company, (b) Debt of the Company shall exclude
such obligations and Guarantees if owed or guaranteed by the Company to a
Wholly-Owned Subsidiary of the Company and (c) Debt of the Company shall exclude
any unfunded obligations which may exist now and in the future in the Company's
pension plans.

                  "DELAYED DELIVERY FEE" shall have the meaning specified in
paragraph 2B(8)(iii).


                                       33
<PAGE>


                  "DISPOSITION VALUE" shall mean, with respect to the Transfer
of any Property:

                      (i) in the case of Property that does not constitute
         capital stock of or other ownership interests in any Subsidiary of the
         Company, the book value thereof, valued at the time of such Transfer in
         good faith by the board of directors of the Company, and

                      (ii) in the case of Property that constitutes capital
         stock of or other ownership interests in any Subsidiary of the Company,
         an amount equal to that percentage of book value of the assets of the
         Subsidiary that issued such capital stock or other ownership interests
         as is equal to the percentage that the book value that such capital
         stock or other ownership interests represents of the book value of all
         of the outstanding capital stock of or other ownership interests in
         such Subsidiary (assuming, in making such calculations, that all
         securities convertible into such capital stock or other ownership
         interests are so converted and giving full effect to all transactions
         that would occur or be required in connection with such conversion),
         determined at the time of such Transfer in good faith by the board of
         directors of the Company.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.

                  "ERISA AFFILIATE" shall mean any corporation which is a member
of the same controlled group of corporations as the Company within the meaning
of section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.

                  "EVENT OF DEFAULT" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "DEFAULT" shall mean
any of such events, whether or not any such requirement has been satisfied.

                  "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.

                  "FACILITY" shall have the meaning specified in paragraph
2B(1).

                  "FUNDED DEBT" shall mean, with respect to any Person, all Debt
which would, in accordance with generally accepted accounting principles, be
required to be classified as a long term liability on the books of such Person,
and shall include, without limitation (i) any Debt which by its terms or by the
terms of any instrument or agreement relating thereto matures, or which is
otherwise payable or unpaid, more than one year from the date of creation
thereof, (ii) any Debt outstanding under a revolving credit or similar agreement
providing for borrowings (and renewals and extensions thereof) which would, in
accordance with generally accepted accounting principles, be required to be
classified as a long term liability of such Person, (iii) any Capital Lease
Obligation of such Person, and (iv) any Guarantee of such Person with respect to
Funded Debt of another Person. Notwithstanding anything to the contrary
contained herein,


                                       34
<PAGE>


any Debt outstanding under a revolving credit or similar agreement providing for
borrowings where no amount of such Debt is outstanding for a period of 30
consecutive days during each 12 month period (and which has not been refinanced
with other Debt which does not constitute Funded Debt) will not be deemed to
constitute Funded Debt.


                  "GUARANTEE" shall mean, with respect to any Person, any direct
or indirect liability, contingent or otherwise, of such Person with respect to
any Debt, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or service, regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.

                  "HEDGE TREASURY NOTE(S)" shall mean, with respect to any
Accepted Note, the United States Treasury Note or Notes whose duration (as
determined by Prudential) most closely matches the duration of such Accepted
Note.

                  "HOSTILE TENDER OFFER" shall mean, with respect to the use of
proceeds of any Note, any offer to purchase, or any purchase of, shares of
capital stock of any corporation or equity interests in any other entity, or
securities convertible into or representing the beneficial ownership of, or
rights to acquire, any such shares or equity interests, if such shares, equity
interests, securities or rights are of a class which is publicly traded on any
securities exchange or in any over-the-counter market, other than purchases of
such shares, equity interests, securities or rights representing less than 5% of
the equity interests or beneficial ownership of such corporation or other entity
for portfolio investment purposes, and such offer or purchase has not been duly
approved by the board of directors of such corporation or the equivalent
governing body of such other entity prior to the date on which the Company makes
the Request for Purchase of such Note.

                  "INCLUDING" shall mean, unless the context clearly requires
otherwise, "including without limitation".

                  "ISSUANCE PERIOD" shall have the meaning specified in
paragraph 2B(2).


                                       35
<PAGE>


                  "LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction other than solely for notification purposes as opposed to
security purposes), any interest or title of a lessor under a Capital Lease, or
any other type of preferential arrangement for the purpose, or having the
effect, of protecting a creditor against loss or securing the payment or
performance of an obligation.

                  "MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA.

                  "NET PROCEEDS AMOUNT" shall mean, with respect to any Transfer
of any Property by any Person, an amount equal to the difference of (i) the
aggregate amount of the consideration (valued at the fair market value of such
consideration at the time of the consummation of such Transfer) received by such
Person in respect of such Transfer, minus (ii) all ordinary and reasonable
out-of-pocket costs and expenses actually incurred by such Person in connection
with such Transfer.

                  "NOTES" shall have the meaning specified in paragraph 1B.

                  "OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of the Company by an Authorized Officer of the Company.

                  "PERSON" shall mean and include an individual, a partnership,
a joint venture, a corporation, a trust, a limited liability company, an
unincorporated organization and a government or any department or agency
thereof.

                  "PLAN" shall mean any employee pension benefit plan (as such
term is defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any ERISA Affiliate.

                  "PRIORITY DEBT" shall mean (i) all Debt of the Company or any
Subsidiary of the Company secured by a Lien (other than Debt secured only by
Liens permitted under clauses (i) through (viii) of paragraph 6D hereof), and
(ii) all Funded Debt of the Subsidiaries of the Company.

                  "PROPERTY" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.

                  "PRUDENTIAL" shall mean The Prudential Insurance Company of
America.

                  "PRUDENTIAL AFFILIATE" shall mean any Affiliate of Prudential.


                                       36
<PAGE>


                  "PURCHASERS" shall mean Prudential and Pruco with respect to
the Series B Notes and, with respect to any Accepted Notes, Prudential and/or
the Prudential Affiliate(s), which are purchasing such Accepted Notes.

                  "RELATED PARTY" shall mean (i) any Significant Stockholder,
(ii) all persons to whom any Significant Stockholder is related by blood,
adoption or marriage and (iii) all Affiliates of the foregoing Persons.

                  "REQUEST FOR PURCHASE" shall have the meaning specified in
paragraph 2B(3).

                  "REQUIRED HOLDER(S)" shall mean the holder or holders of at
least a majority of the aggregate principal amount of the Notes or of a Series
of Notes, as the context may require, from time to time outstanding.

                  "RESCHEDULED CLOSING DAY" shall have the meaning specified in
paragraph 2B(7).

                  "RESPONSIBLE OFFICER" shall mean the chief executive officer,
chief operating officer, chief financial officer or chief accounting officer of
the Company, general counsel of the Company or any other officer of the Company
involved principally in its financial administration or its controllership
function.

                  "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

                  "SERIES" shall have the meaning specified in paragraph 1B.

                  "SERIES B CLOSING DAY" shall have the meaning specified in
paragraph 2A.

                  "SERIES B NOTE(S)" shall have the meaning specified in
paragraph 1A.

                  "SHELF NOTES" shall have the meaning specified in paragraph
1B.

                  "SIGNIFICANT HOLDER" shall mean (i) Prudential, so long as
Prudential or any Prudential Affiliate shall hold (or be committed under this
Agreement to purchase) any Note, and (ii) any other holder of at least 5% of the
aggregate principal amount of the Notes from time to time outstanding, or (iii)
any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.

                  "STRUCTURING FEE" shall have the meaning specified in
paragraph 2B(8)(i).

                  "SUBSIDIARY" shall mean with respect to any Person any other
Person greater than 50% of the total combined voting power of all classes of
Voting Interests of which shall, at the time as of which any determination is
being made, be owned by such first Person either directly or through other
Subsidiaries of such first Person.


                                       37
<PAGE>


                  "TRANSFER" shall have the meaning given in paragraph 6F
hereof.

                  "TRANSFEREE" shall mean any direct or indirect transferee of
all or any part of any Note purchased by any Purchaser under this Agreement.

                  "VOTING INTERESTS" shall mean (a) with respect to any stock
corporation, any shares of stock of such corporation whose holders are entitled
under ordinary circumstances to vote for the election of directors of such
corporation or persons performing similar functions (irrespective of whether at
the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency), and (b) with respect to
the Company or any other entity, membership or other ownership interests in the
Company or such other entity whose holders are entitled under ordinary
circumstances to vote for the election of the directors of the Company or such
other entity or persons performing similar functions (irrespective of whether at
the time membership or other ownership interests of any other class or classes
shall have or might have voting power by reasoning of the happening of any
contingency).

                  "WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary of the
Company all of the capital stock or other ownership interests of every class of
which is, at the time as of which any determination is being made, owned by the
Company either directly or through a wholly-owned Subsidiary.

         10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in
this Agreement to "generally accepted accounting principles" shall be deemed to
refer to generally accepted accounting principles in effect in the United States
at the time of application thereof. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles applied on a basis consistent with the
most recent audited financial statements delivered pursuant to clause (ii) of
paragraph 5A or, if no such statements have been so delivered, the most recent
audited financial statements referred to in clause (i) of paragraph 8B. Any
reference herein to any specific law, statute, rule or regulation shall refer to
such law, statute, rule or regulation as the same may be may be modified,
amended or replaced from time to time.

         11. MISCELLANEOUS.

         11A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser
shall hold any Note, it will make payments of principal of, interest on, and any
Yield-Maintenance Amount payable with respect to, such Note, which comply with
the terms of this Agreement, by wire transfer of immediately available funds for
credit (not later than 12:00 noon, New York City local time, on the date due) to
(i) the account or accounts of such Purchaser specified in the Purchaser
Schedule attached hereto in the case of any Series B Note, (ii) the account or
accounts of such Purchaser specified in the Confirmation of Acceptance with
respect to such Note in the case of any Shelf Note


                                       38
<PAGE>


or (iii) such other account or accounts in the United States as such Purchaser
may from time to time designate in writing, notwithstanding any contrary
provision herein or in any Note with respect to the place of payment. Each
Purchaser agrees that, before disposing of any Note, it will make a notation
thereon (or on a schedule attached thereto) of all principal payments previously
made thereon and of the date to which interest thereon has been paid. The
Company agrees to afford the benefits of this paragraph 11A to any Transferee
which shall have made the same agreement as the Purchasers have made in this
paragraph 11A.

         11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save Prudential, each
Purchaser and any Transferee harmless against liability for the payment of, all
out-of-pocket expenses arising in connection with such transactions, including
(i) all document production and duplication charges and the fees and expenses of
any special counsel engaged by the Purchasers or any Transferee in connection
with this Agreement, the transactions contemplated hereby and any subsequent
proposed modification of, or proposed consent under, this Agreement, whether or
not such proposed modification shall be effected or proposed consent granted,
and (ii) the costs and expenses, including attorneys' fees, incurred by any
Purchaser or any Transferee in enforcing (or determining whether or how to
enforce) any rights under this Agreement or the Notes or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the transactions contemplated hereby or by
reason of any Purchaser's or any Transferee's having acquired any Note,
including without limitation costs and expenses incurred in any bankruptcy case
and (iii) all costs and expenses, including, without limitation, reasonable
attorneys' fees, of obtaining a Private Placement Number from CUSIP Service
Bureau of Standard and Poor's Ratings Group with respect to the Notes. The
obligations of the Company under this paragraph 11B shall survive the transfer
of any Note or portion thereof or interest therein by any Purchaser or any
Transferee and the payment of any Note.

         11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holder(s) of the
Notes of each Series except that, (i) with the written consent of the holders of
all Notes of a particular Series, and if an Event of Default shall have occurred
and be continuing, of the holders of all Notes of all Series, at the time
outstanding (and such written consents), the Notes of such Series may be amended
or the provisions thereof waived to change the maturity thereof, to change or
affect the principal thereof, or to change or affect the rate or time of payment
of interest on or any Yield-Maintenance Amount payable with respect to the Notes
of such Series, (ii) without the written consent of the holder or holders of all
Notes at the time outstanding, no amendment to or waiver of the provisions of
this Agreement shall change or affect the provisions of paragraph 7A or this
paragraph 11C insofar as such provisions relate to proportions of the principal
amount of the Notes of any Series, or the rights of any individual holder of
Notes, required with respect to any declaration of Notes to be due and payable
or with respect to any consent, amendment, waiver or declaration, (iii) with the
written consent of Prudential (and without the consent of any other holder of
the Notes) the provisions of paragraph 2B may be amended or waived (except
insofar as any such amendment or waiver would affect any rights or obligations
with respect to the purchase and sale of Notes which shall have become Accepted
Notes prior to such


                                       39
<PAGE>


amendment or waiver), and (iv) with the written consent of all of the Purchasers
which shall have become obligated to purchase Accepted Notes of any Series (and
not without the written consent of all such Purchasers), any of the provisions
of paragraphs 2B and 3 may be amended or waived insofar as such amendment or
waiver would affect only rights or obligations with respect to the purchase and
sale of the Accepted Notes of such Series or the terms and provisions of such
Accepted Notes. Each holder of any Note at the time or thereafter outstanding
shall be bound by any consent authorized by this paragraph 11C, whether or not
such Note shall have been marked to indicate such consent, but any Notes issued
thereafter may bear a notation referring to any such consent. No course of
dealing between the Company and the holder of any Note nor any delay in
exercising any rights hereunder or under any Note shall operate as a waiver of
any rights of any holder of such Note. As used herein and in the Notes, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.

         11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable as registered notes without coupons in denominations of
at least $100,000, except as may be necessary to reflect any principal amount
not evenly divisible by $100,000. The Company shall keep at its principal office
a register in which the Company shall provide for the registration of Notes and
of transfers of Notes. Upon surrender for registration of transfer of any Note
at the principal office of the Company, the Company shall, at its expense,
execute and deliver one or more new Notes of like tenor and of a like aggregate
principal amount, registered in the name of such transferee or transferees. At
the option of the holder of any Note, such Note may be exchanged for other Notes
of like tenor and of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the principal office of
the Company. Whenever any Notes are so surrendered for exchange, the Company
shall, at its expense, execute and deliver the Notes which the holder making the
exchange is entitled to receive. Each prepayment of principal payable on each
prepayment date upon each new Note issued upon any such transfer or exchange
shall be in the same proportion to the unpaid principal amount of such new Note
as the prepayment of principal payable on such date on the Note surrendered for
registration of transfer or exchange bore to the unpaid principal amount of such
Note. No reference need be made in any such new Note to any prepayment or
prepayments of principal previously due and paid upon the Note surrendered for
registration of transfer or exchange. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Note or such
holder's attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of any
Note of the loss, theft, destruction or mutilation of such Note and, in the case
of any such loss, theft or destruction, upon receipt of such holder's unsecured
indemnity agreement, or in the case of any such mutilation upon surrender and
cancellation of such Note, the Company will make and deliver a new Note, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Note.

         11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and interest


                                       40
<PAGE>


on, and any Yield-Maintenance Amount payable with respect to, such Note and for
all other purposes whatsoever, whether or not such Note shall be overdue, and
the Company shall not be affected by notice to the contrary. Subject to the
preceding sentence, the holder of any Note may from time to time grant
participations in all or any part of such Note to any Person on such terms and
conditions as may be determined by such holder in its sole and absolute
discretion, provided that any such participation shall be in a principal amount
of at least $100,000 except as may be necessary to reflect any principal amount
not evenly divisible by $100,000.

         11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by any Purchaser of any
Note or portion thereof or interest therein and the payment of any Note, and may
be relied upon by any Transferee, regardless of any investigation made at any
time by or on behalf of any Purchaser or any Transferee. Subject to the
preceding sentence, this Agreement and the Notes embody the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter.

         11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.

         11H. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is prohibited by
any one of such covenants, the fact that it would be permitted by an exception
to, or otherwise be in compliance within the limitations of, another covenant
shall not avoid (i) the occurrence of a Default or Event of Default if such
action is taken or such condition exists or (ii) in any way prejudice an attempt
by the holder of any Note to prohibit through equitable action or otherwise the
taking of any action by the Company or any Subsidiary which would result in a
Default or Event of Default.

         11I. NOTICES. All written communications provided for hereunder (other
than communications provided for under paragraph 2) shall be sent by first class
mail or nationwide overnight delivery service (with charges prepaid) and (i) if
to any Purchaser, addressed as specified for such communications in the
Purchaser Schedule attached hereto (in the case of the Series B Notes) or the
Purchaser Schedule attached to the applicable Confirmation of Acceptance (in the
case of any Shelf Notes) or at such other address as any such Purchaser shall
have specified to the Company in writing, (ii) if to any other holder of any
Note, addressed to it at such address as it shall have specified in writing to
the Company or, if any such holder shall not have so specified an address, then
addressed to such holder in care of the last holder of such Note which shall
have so specified an address to the Company and (iii) if to the Company,
addressed to it at 5500 Cenex Drive, Inver Grove Heights, Minnesota, 55077,
Attention: Chief Financial Officer with a copy to the attention of the General
Counsel, or at such other address as the Company shall have specified to the
holder of each Note in writing; provided, however, that any such communication
to the Company may also, at the option of the Person sending such communication,
be delivered by any


                                       41
<PAGE>


other means either to the Company at its address as determined above or to any
Authorized Officer of the Company. Any communication pursuant to paragraph 2
shall be made by the method specified for such communication in paragraph 2, and
shall be effective to create any rights or obligations under this Agreement only
if, in the case of a telephone communication, an Authorized Officer of the party
conveying the information and of the party receiving the information are parties
to the telephone call, and in the case of a telecopier communication, the
communication is signed by an Authorized Officer of the party conveying the
information, addressed to the attention of an Authorized Officer of the party
receiving the information, and in fact received at the telecopier terminal the
number of which is listed for the party receiving the communication in the
Information Schedule or at such other telecopier terminal as the party receiving
the information shall have specified in writing to the party sending such
information.

         11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on, or Yield-Maintenance Amount payable with respect to, any Note that
is due on a date other than a Business Day shall be made on the next succeeding
Business Day. If the date for any payment is extended to the next succeeding
Business Day by reason of the preceding sentence, the period of such extension
shall not be included in the computation of the interest payable on such
Business Day.

         11K. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         11L. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.

         11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to any Purchaser, to any holder of Notes or to the
Required Holder(s), the determination of such satisfaction shall be made by such
Purchaser, such holder or the Required Holder(s), as the case may be, in the
sole and exclusive judgment (exercised in good faith) of the Person or Persons
making such determination.

         11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF ILLINOIS.

         11O. SEVERALTY OF OBLIGATIONS. The sales of Notes to the Purchasers are
to be several sales, and the obligations of Prudential and the Purchasers under
this Agreement are several obligations. No failure by Prudential or any
Purchaser to perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations hereunder, and neither
Prudential nor any Purchaser shall be responsible for the obligations of, or any
action taken or omitted by, any other such Person hereunder.


                                       42
<PAGE>


         11P. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

         11Q. BINDING AGREEMENT. When this Agreement is executed and delivered
by the Company and Prudential, it shall become a binding agreement between the
Company and Prudential. This Agreement shall also inure to and each such
Purchaser shall be bound by this Agreement to the extent provided in such
Confirmation of Acceptance.

                                        Very truly yours,

                                        CENEX HARVEST STATES COOPERATIVES

                                        By:  /s/ John Schmitz
                                           -------------------------------------
                                        Name:  John Schmitz
                                        Title: Executive Vice President & CFO

The foregoing Agreement is
hereby accepted as of the
date first above written.

THE PRUDENTIAL INSURANCE
  COMPANY OF AMERICA


By: /s/ Julia Buthman
   -------------------------------------
              Vice President



PRUCO LIFE INSURANCE COMPANY


By: /s/ Julia Buthman
   -------------------------------------
              Vice President



                                       43
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>cenex010535_ex10-1b.txt
<DESCRIPTION>EXHIBIT 10.1B AMEND NO. 1 TO NOTE PURCHASE AGRMT
<TEXT>

                                                                   Exhibit 10.1b



                                  March 2, 2001



Cenex Harvest States Cooperatives
5500 Cenex Drive
Inver Grove Heights, Minnesota  55077

Attention:  Chief Financial Officer

                  Re:  Amendment No. 1
                       ---------------
Ladies and Gentlemen:

         Reference is made to that certain Note Purchase and Private Shelf
Agreement dated as of January 10, 2001 (the "NOTE AGREEMENT") between Cenex
Harvest States Cooperatives, a non-stock agricultural cooperative corporation
organized under the laws of Minnesota (the "COMPANY"), and The Prudential
Insurance Company of America ("PRUDENTIAL") and each Prudential Affiliate which
is now or hereafter becomes a party thereto. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Note Agreement.

         Pursuant to the request of the Company and in accordance with the
provisions of paragraph 11C of the Note Agreement, the parties hereto agree as
follows:

         SECTION 1. AMENDMENT. From and after the date this letter becomes
effective in accordance with its terms, the Note Agreement is amended as
follows:

         1.1 The definition of "Affiliate" appearing in paragraph 10B of the
Note Agreement is hereby deleted in its entirety and the following is hereby
substituted therefor:

                  "AFFILIATE" shall mean (i) any Person directly or indirectly
         controlling, controlled by, or under direct or indirect common control
         with such Person (except, with respect to the Company, a Subsidiary)
         and (ii) with respect to Prudential, shall include any managed account,
         investment fund or other vehicle for which Prudential or any Prudential
         Affiliate acts as investment advisor or portfolio manager. A Person
         shall be deemed to control a corporation if such Person possesses,
         directly or indirectly, the power to direct or cause the direction of
         the management and policies of such corporation, whether through the
         ownership of voting securities, by contract or otherwise.


<PAGE>

Cenex Harvest States Cooperatives
March 2, 2001
Page 2

         SECTION 2. CONDITIONS PRECEDENT. This letter shall become effective as
of the date first above written upon the return by the Company to Prudential of
a counterpart hereof duly executed by the Company and Prudential. The letter
should be returned to: Prudential Capital Group, Two Prudential Plaza, Suite
5600, Chicago, Illinois 60601-6716, Attention: Wiley S. Adams.

         SECTION 3. REFERENCE TO AND EFFECT ON NOTE AGREEMENT. Upon the
effectiveness of this letter, each reference to the Note Agreement in any other
document, instrument or agreement shall mean and be a reference to the Note
Agreement as modified by this letter. Except as specifically set forth in
Section 1 hereof, the Note Agreement shall remain in full force and effect and
is hereby ratified and confirmed in all respects.

         SECTION 4. GOVERNING LAW. THIS LETTER SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.

         SECTION 5. COUNTERPARTS; SECTION TITLES. This letter may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. The section titles contained in this letter are and shall be
without substance, meaning or content of any kind whatsoever and are not a part
of the agreement between the parties hereto.

                                      Very truly yours,

                                      THE PRUDENTIAL INSURANCE
                                         COMPANY OF AMERICA

                                      By: /s/ Alfred D. Sharp
                                         ----------------------------------
                                                     Vice President

                                      PRUCO LIFE INSURANCE COMPANY

                                      By: /s/ Alfred D. Sharp
                                         ----------------------------------
                                                      Vice President
AGREED AND ACCEPTED:

CENEX HARVEST STATES COOPERATIVES

By: /s/ John Schmitz
   ----------------------------------
Title: Executive Vice President & CFO
      -------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>cenex010535_ex10-2.txt
<DESCRIPTION>EXHIBIT 10.2 AGREEMENT OF DISSOLUTION
<TEXT>

                                                                    Exhibit 10.2


                            AGREEMENT OF DISSOLUTION

          This AGREEMENT OF DISSOLUTION (this "Agreement") made and entered into
as of 11:59 p.m. on the 31st day of December, 2000, by and among NATIONAL
COOPERATIVE REFINERY ASSOCIATION, a Kansas cooperative marketing association
("NCRA"); FARMLAND INDUSTRIES, INC., a Kansas cooperative corporation
("Farmland"); and COOPERATIVE REFINING, LLC, a Delaware limited liability
company (the "Company"). NCRA, Farmland and the Company also are referred to
herein collectively as the "Parties" and individually as a "Party."

          WHEREAS, NCRA is the owner of a refinery and related assets located at
McPherson, Kansas (the "NCRA Refinery"); and Farmland is the owner of a refinery
and related assets located at Coffeyville, Kansas (the "Coffeyville Refinery");

          WHEREAS, in 1999, NCRA and Farmland established the Company for the
purpose of operating the above-mentioned assets; and, as of September 1, 1999,
NCRA and Farmland entered into that certain Limited Liability Company Agreement
(the "LLC Agreement") relating to the Company;

          WHEREAS, the Parties, on September 1, 1999, entered into that certain
Refinery Operating and Product Output Purchase Agreement (the "Refinery
Agreement") to provide for the operation by the Company of the above-mentioned
assets and for certain related matters and that certain Personnel Lease
Agreement (the "Personnel Lease Agreement");

          WHEREAS, in accordance with the LLC Agreement, the managers of the
Company have agreed to dissolve and liquidate the Company effective at 11:59
p.m. on December 31, 2000; and

          WHEREAS, the Parties wish to enter into this Agreement to provide for
the timely and orderly dissolution of the Company.

          NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements of the Parties contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto hereby acree as follows:

                                   ARTICLE I:
                                   DEFINITIONS

          Unless the context otherwise specifies or requires, the terms defined
in this Article I shall, for the purposes of this Agreement, have the meanings
herein specified.

          "Act" means the Delaware Limited Liability Company Act, as amended
from time to time.

          "Capital Account" shall have the meaning assigned to such term in the
LLC Agreement.

          "Farmland Assets" shall have the meaning assigned to such term in the
Refinery Agreement plus all additional equipment and other assets utilized by or
located at Farmland's refinery in Coffeyville, Kansas.

          "Farmland Contracts" shall have the meaning assigned to such term in
the Refinery Agreement.

          "Manager" shall have the meaning assigned to such term in the LLC
Agreement.

          "Membership Interest" shall have the meaning assigned to such term in
the LLC Agreement.

          "Members" shall have the meaning assigned to such term in the LLC
Agreement.


<PAGE>


          "NCRA Assets" shall have the meaning assigned to such term in the
Refinery Agreement plus all additional equipment and other assets utilized by or
located at NCRA's refinery in McPherson, Kansas.

          "NCRA Contracts" shall have the meaning assigned to such term in the
Refinery Agreement.

          "Other Dissolution Agreements" collectively means the Crude Oil
Purchase Agreement between NCRA and Farmland attached hereto as Exhibit A, the
Accounting Services Agreement between NCRA and Farmland attached hereto as
Exhibit B, the Employee Lease Agreement between NCRA and Farmland to be attached
hereto as Exhibit C, and the Equipment Lease Agreement between NCRA and Farmland
to be attached hereto as Exhibit D.

          "Unit" shall have the meaning assigned to such term in the LLC
Agreement.

                                   ARTICLE II:
                     DISSOLUTION AND LIQUIDATION OF COMPANY

          SECTION 2.1. Agreement of Dissolution. Pursuant to Section 14.1(b) of
the LLC Agreement and ss. 18-801(3) of the Act, the Parties agree that the
Company shall be dissolved effective as of 11:59 p.m. on December 31, 2000 (the
"Effective Time") in accordance with the provisions of this Agreement and the
LLC Agreement.

          SECTION 2.2. Liquidation and Winding Up. The Company shall be
liquidated and the Managers shall wind up the affairs of the Company. The
Managers shall promptly proceed to the liquidation of the Company and, in
settling the accounts of the Company, the assets and the property of the Company
shall be distributed, subject to Section 14.4 of the LLC Agreement, in the
following order of priority:

          (a) To the payment of all debts and liabilities of the Company in the
order of priority as provided by law (other than outstanding loans from a
Member);

          (b) To the establishment of any reserves deemed necessary by the
Managers for any contingent liabilities or obligations of the Company;

          (c) To the repayment of any outstanding loans from a Member to the
Company;

          (d) To the Members in proportion to and to the extent of their
respective Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods; and

          (e) The balance, if any, to the Members pro rata in accordance with
the number of Units owned by each Member.

Notwithstanding the foregoing, however, (1) no payment, repayment or
distribution of any kind (collectively, a "Liquidating Distribution") shall be
made to Farmland, NCRA, any member of NCRA, or any affiliate thereof
(collectively, the "Company Affiliates") unless such Liquidating Distribution to
the Company Affiliate is approved by both Farmland and NCRA, which approval
shall not be unreasonably withheld or delayed, and (2) all Liquidating
Distributions to the Company Affiliates shall be made subject to the audit
described in Section 2.11 of this Agreement. The Parties shall cooperate to make
interim Liquidating Distributions to the Members as promptly as possible so as
to minimize the amount of cash held by the Company during the liquidation and
winding up of the Company. The Parties anticipate that the first such interim
Liquidating Distribution will occur on or before February 2, 2001.

          SECTION 2.3. Division of Assets.

         (a) Farmland Assets and NCRA Assets. Effective as of the Effective
Time, the Farmland Assets shall be returned back to Farmland's exclusive control
and the NCRA Assets shall be returned back to NCRA's exclusive control.

         (b) Inventories. As of the Effective Time, the Company has inventories
of crude oil, other raw materials, work-in-process and finished products
(collectively, the "Inventory"). The Parties acknowledge and agree


<PAGE>


Farmland's Inventory requirements to operate the Coffeyville Refinery are
greater than NCRA's Inventory requirements to operate the NCRA Refinery.
Therefore, effective as of the Effective Time,

          (1)       The levels of Inventory contributed by NCRA and Farmland to
                    the Company shall be re-distributed back to NCRA and
                    Farmland, and then

          (2)       Any excess levels of Inventory shall be sold by the Company
                    to NCRA and Farmland based upon the location of the
                    Inventory and the operational need for the Inventory, with
                    the cash paid by NCRA and Farmland being placed into the
                    cash balance of the Company for distribution in accordance
                    with Section 2.2 of this Agreement.

         SCHEDULE 2.3 attached hereto and incorporated herein sets forth
spreadsheets that generally depict the aforementioned distribution and sale of
Inventory.

          SECTION 2.4. Assignment of Contracts from Company to Members.
Effective as of the Effective Time, the Company hereby assigns and conveys to
NCRA the NCRA Contracts, including without limitation the operating permits,
licenses, contracts and leases listed on Schedule 2.4(a) attached hereto.
Effective as of the Effective Time, the Company hereby assigns and conveys to
Farmland the Farmland Contracts, including without limitation the operating
permits, licenses, contracts and leases listed on Schedule 2.4(b) attached
hereto. In consideration of such assignment, NRCA and Farmland hereby assumes
and agrees to be bound by and to perform, observe and comply with all of the
terms, covenants, conditions, undertakings and other provisions of each such
contract assigned them from and after the Effective Time, in the same manner and
with the same force and effect as of NCRA or Farmland, as the case may be, had
originally executed such contracts. In the event an operating permit, license,
lease or other agreement of the Company is not listed on either Schedule 2.4(a)
or 2.4(b), then such operating permit, license, lease or agreement shall be
assigned from the Company to the Member whose refinery utilized such operating
permit, license, lease or agreement. The Parties hereto shall use their best
efforts to obtain any necessary consent of a third party to the assignment of
any of the operating permits, licenses, leases or other agreements hereunder.

          SECTION 2.5. Termination of Refinery Agreement. As provided in Section
22.3 of the Refinery Agreement, the Refinery Agreement shall terminate as of the
Effective Time.

          SECTION 2.6. Interconnect Payments to Members. The Parties hereto
shall consummate the asset transfers and payment obligations set forth Schedule
2.6 attached hereto and incorporated herein by this reference relating the
purchase and sale of certain products between the Coffeyville Refinery and
Farmland's fertilizer plant located in Coffeyville, Kansas (the "Fertilizer
Plant").

          SECTION 2.7. Allocation of Liabilities. NCRA shall be solely
responsible for all past, present and future losses, claims, damages and
liabilities of any kind, including but not limited to environmental liability
arising out of or imposed by all federal, state or local environmental laws,
administrative regulations or ordinances, relating to the NCRA Assets during the
period the NCRA Assets were operated by CRLLC. Farmland shall be solely
responsible for all past, present and future losses, claims, damages and
liabilities of any kind, including but not limited to environmental liability
arising out of or imposed by all federal, state or local environmental laws,
administrative regulations or ordinances, relating to the Farmland Assets during
the period the Farmland Assets were operated by CRLLC.

          SECTION 2.8. Return of Confidential Information. Prior to the Closing
Date, NCRA and Farmland shall each redeliver to the other all documents,
agreements, financial data, notes, analyses, compilations, studies and other
materials ("Evaluation Materials") that each received from the other, or their
member owners, in connection with the formation of the Company and/or the
proposed merger of Farmland and Cenex Harvest States Cooperatives. Each Party
shall destroy or caused to be destroyed all notes, discs, tapes and other
writings and materials prepared by or on behalf of it or its representatives
based on the Evaluation Materials and shall at the request of the other Party
deliver an affidavit executed by one of its responsible officers expressly
affirming such destruction.

          SECTION 2.9. Termination of Personnel Lease Agreement. In accordance
with Section 7 of the Personnel Lease Agreement, the Personnel Lease Agreement
shall terminate as of the Effective Time.


<PAGE>


          SECTION 2.10. Loans to Members. To the extent the Company has made any
loans to NCRA (the "NCRA Loans") or any loans to any member of NCRA or any
affiliate of NCRA or any member of NCRA (the "NCRA Affiliate Loans"), the NCRA
Loans and the NCRA Affiliate Loans shall be immediately due and payable, and
NCRA shall immediately (a) repay the NCRA Loans and (b) exercise commercially
reasonable efforts to cause to the prompt repayment of the NCRA Affiliate Loans.

          SECTION 2.11. Further Assurances. Following the Effective Time, the
Parties shall execute, acknowledge, deliver and file, or cause to be executed,
acknowledged, delivered and filed, such additional instruments, documents,
conveyances or assurances, and take, or cause to be taken, such other actions,
including without limitation all reasonable efforts to obtain such third party
consents, as shall be necessary or may be reasonably requested by any other
Party, to confirm, assure or otherwise fully effect the purposes, terms and
conditions of this Agreement; provided, however, that the Company shall not
execute, acknowledge, deliver, file or otherwise take any action contemplated by
this Section without obtaining the prior approval of both NCRA and Farmland,
which approval shall not be unreasonable withheld or delayed. To this end, the
Parties acknowledge and agree that execution and delivery of the Other
Dissolution Agreements, in such form and content as shall be mutually acceptable
to both NCRA and Farmland, is a condition precedent to this Agreement and, thus,
in the event any Other Dissolution Agreement is not executed and delivered by
both NCRA and Farmland, then this Agreement and any Other Dissolution Agreement
so executed and delivered shall be void AB INITIO and shall have no force or
effect whatsoever.

          SECTION 2.12. Audit. The Parties acknowledge that the employees of
NCRA generally have been providing the accounting-related services to the
Company and will perform similar services in connection with the dissolution and
liquidation of the Company. In connection with the dissolution and liquidation
of the Company, Farmland shall have the right, until a date occurring six (6)
months after the final Liquidating Distribution is made and the final financial
statements of the Company have been prepared and distributed to the Members,
upon at least five (5) business days prior notice to NCRA during business hours,
to inspect and audit, or cause to be inspected and audited, the business
records, bookkeeping and accounting records relating thereto. The Company and
NCRA shall fully cooperate with representatives of Farmland and its
representatives and advisors in connection with any such inspection or audit.
All costs incurred by Farmland in connection with the audit or inspection shall
be borne by Farmland, and all costs incurred by the Company and NCRA in
connection with the audit or inspection shall be borne by NCRA; provided,
however, that in the event a material discrepancy is found in connection with
the audit, then the Party causing the material discrepancy shall reimburse the
other Party all of that party's reasonable out-of-pocket costs incurred in
connection with the audit or inspection. For purposes of this Section, "material
discrepancy" shall mean a discrepancy greater than two hundred fifty thousand
dollars ($250,000.00).

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

          SECTION 3.1. Representations and Warranties of the Members. Each of
NCRA and Farmland (collectively, the "Members" and individually, a "Member")
represents and warrants as of the date of this Agreement to the other Member and
the Company as follows:

          (a) Such Member has the requisite power and authority (whether
corporate or otherwise) and legal capacity to enter into, and to carry out its
obligations under, this Agreement.

          (b) The execution and delivery by such Member of this Agreement and
the consummation by such Member of the transactions contemplated hereby have
been duly authorized prior to the date of this Agreement by all necessary action
on the part of such Member.

          (c) This Agreement has been duly executed and delivered by such Member
and constitutes a valid and binding obligation enforceable against such Member
in accordance with its terms.

          (d) Such Member is not subject to, or obligated under, any provision
of (i) any agreement, arrangement or understanding, (ii) any license, franchise
or permit or (iii) any law, regulation, order, judgment or decree that would be
breached or violated, or in respect of which a right of termination or
acceleration or any encumbrance on any of such Member's assets would be created,
by such Member's execution, delivery and


<PAGE>


performance of this Agreement or the consummation of the transactions
contemplated hereby, except for such agreements as to which a Member has
previously obtained the consent of the other party or parties thereto.

          (e) Other than in connection with the assignment or transfer of
environmental-related permits or licenses or other permits, licenses, contracts
or leases, no authorization, consent or approval of, waiver or exemption by, or
filing or registration with, any public body, court, third party or authority is
necessary on such Member's part, which has not previously been obtained by such
Member for the consummation of the transactions contemplated by this Agreement.

          (f) Such Member is not presently engaged in, nor to its knowledge,
threatened with or aware of, any situation which could subject it to any
litigation (including appeals of lower courts decisions), arbitration claim or
other legal proceedings or governmental or any other investigation relating to
its affairs or any of its respective properties, assets, or shareholders, which
questions the validity or enforceability of this Agreement, the LLC Agreement,
the Refinery Agreement, or any related agreements, or which could prevent,
hinder or delay the consummation of the transactions contemplated by this
Agreement.

                                   ARTICLE IV
                                   INDEMNITIES

          SECTION 4.1. Indemnification. Each Party shall indemnify, defend and
hold each other Party, and its respective officers, directors, managers, and
employees ("Indemnitee") harmless from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, attorney's fees and expenses) imposed upon, incurred by or
asserted against the Indemnitee that are caused by, are attributable to, result
from or arise out of (i) any liability allocated to the indemnifying Party
pursuant to Section 2.7 of this Agreement, (ii) the indemnifying Party's breach
of any provision of this Agreement, or (iii) the indemnifying Party's breach of
any Other Dissolution Agreement.

          SECTION 4.2. Indemnification Procedures; Survival.

          (a) Promptly after receipt by an Indemnitee of notice of the
commencement of any action that may result in a claim for indemnification
pursuant to Section 4.1, the Indemnitee shall notify the indemnifying Party in
writing within thirty (30) days thereafter; PROVIDED, HOWEVER, that any omission
so to notify the indemnifying Party will not relieve it of any liability for
indemnification hereunder as to the particular item for which indemnification
may then be sought (except to the extent that the failure to give notice shall
have been materially prejudicial to the indemnifying Party) nor from any other
liability that it may have to any Indemnitee. The indemnifying Party shall have
the right to assume sole and exclusive control of the defense of any claim for
indemnification pursuant to Section 4.1, including the choice and direction of
any legal counsel.

          (b) An Indemnitee shall have the right to employ separate counsel in
any action as to which indemnification may be sought under any provision of this
Agreement and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnitee unless (i) the
indemnifying Party has agreed in writing to pay such fees and expenses, (ii) the
indemnifying Party has failed to assume the defense thereof and employ counsel
within a reasonable period of time after being given the notice required above,
or (iii) the Indemnitee shall have been advised by its counsel that
representation of such Indemnitee and other Parties by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between them. It is understood, however, that to
the extent more than one Indemnitee is entitled to employ separate counsel at
the indemnifying Party's expense pursuant to clause (iii) above, the
indemnifying Party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys at any time for all such
Indemnitees having actual or potential differing interests with the indemnifying
Party, unless but only to the extent the Indemnitees have actual or potential
differing interests with each other.

         (c) The indemnifying Party shall not be liable for any settlement of
 any such action effected without its written consent, but if settled with such
 written consent, or if there is a final judgment against the Indemnitee in


<PAGE>


any such action, the indemnifying Party agrees to and hold harmless the
Indemnitee to the extent provided above from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.

          (d) The indemnification obligations set forth in Section 4.1 and this
Section 4.2 shall survive the termination of this Agreement for a period of five
(5) years.

                                    ARTICLE V
                            MISCELLANEOUS PROVISIONS

          SECTION 5.1. Notice. Any notices permitted or required to be given
under this Agreement shall be in writing, and shall be addressed to the Parties
hereto as follows:

         For NCRA:                  National Cooperative Refining Association
                                    1391 Iron Horse Road
                                    P.O. Box 1404
                                    McPherson, Kansas 67460
                                    Attention: President
                                    Fax: (316) 241-9130

         For Farmland:              Farmland Industries, Inc.
                                    3315 North Oak Trafficway
                                    P.O. Box 7305 Dept. 62
                                    Kansas City, Missouri 64116
                                    Attention: General Counsel
                                    Fax: (816) 459-5902

Either Farmland or NCRA may from time to time change its address for service
hereunder on written notice to the other Party. Any notice shall:

          (a) if delivered by hand delivery, be deemed to have been given or
made at the time of delivery as acknowledged by signature of the receiving
Party;

          (b) if sent by telecopy, telex, telecommunication device or other
similar form of communication or by overnight private courier service, be deemed
to have been given or made on the working day following the day on which it was
received; and

          (c) if mailed by certified or registered mail, return receipt
requested, postage prepaid, be deemed to have been given or made, four (4) days
after deposit in the United States Mail.

          SECTION 5.2. Confidentiality. Any information heretofore or hereafter
disclosed or obtained in connection with this Agreement concerning the business,
operations, affairs or financial condition of any Party hereto shall be kept
confidential except as otherwise required by law or legal process or except to
the extent that it (i) is or has been disclosed to any lender or lessor or
governmental official or the respective attorneys, accountants and financial
advisers of any Party hereto, or (ii) is or hereafter becomes lawfully
obtainable from other sources or to the extent that such duty as to
confidentiality is waived in writing by the Party to whom the confidential
information relates, or (iii) was known to the receiving Party as of the time of
its disclosure, or (iv) independently developed by the receiving Party without
reference to the confidential information.

          SECTION 5.3. Dispute Resolution. In the event of any dispute or
controversy arising out of or related to this Agreement, or the breach thereof,
including the interpretation of any provision of this Agreement which cannot be
resolved informally by the Members, or regarding the Company, the ownership of
the Company or the Company's business, the Members shall first make a good faith
effort to promptly resolve such dispute. If the Members are unable to reach
agreement with respect to such discrepancy, then such dispute shall be resolved
by binding arbitration administered by the American Arbitration Association in
accordance with its Commercial Arbitration Rules then in effect, except as such
rules may be modified by this Agreement or by the mutual consent of the


<PAGE>


Members. Any arbitration proceeding conducted hereunder shall alternate
locations between the greater metropolitan areas of Kansas City, Missouri and
Wichita, Kansas, with the first such arbitration proceeding to be conducted at
such location as is specified by the Member requesting the arbitration
proceeding. Any award rendered in the arbitration proceeding shall be final and
binding upon the Members and a judgment thereon may be entered in any court
having competent jurisdiction. Each Member shall bear its own expenses in
connection with the arbitration; provided, however, that the fees and expenses
of the arbitrator and all other expenses of the arbitration shall be borne
equally by the Members. The arbitration proceedings shall be governed by the
laws of the State of Kansas. The arbitrator shall be selected from a list of
five (5) arbitrators provided by the American Arbitration Association. Alternate
strikes shall be made to the list commencing with the Member requesting
arbitration until a single name remains. That individual shall be the arbitrator
for the matter. After the arbitrator has been selected, the Members may obtain
reasonable discovery in advance of the arbitration by way of: (i) exchange of
copies of all documents in the possession, custody or control of a Member and
relevant to the matter in dispute; (ii) written interrogatories for the purpose
of determining the name and address of each witness proposed to be called by a
Member and a brief description of the relevant information each such witness is
expected to provide; and (iii) such further discovery, including dispositions,
as the arbitrator may determine is appropriate after taking into consideration
the nature of the dispute and the amount in controversy. To the extent possible,
the arbitration hearing shall be conducted within sixty (60) days after
selection of the arbitrator, and the arbitrator shall render a decision within
twenty (20) days after the conclusion of the hearing. Post-hearing briefs shall
be permitted. The arbitration award shall be in writing and shall specify the
factual and legal basis for the award.

          SECTION 5.4. Amendments. Unless otherwise provided herein, no changes,
alteration or modifications to this Agreement shall be effective unless in
writing and signed by the respective duly authorized representatives of the
Parties hereto.

          SECTION 5.5. Successors and Assigns. This Agreement shall enure to the
benefit of and be binding upon the legal representatives, permitted assigns and
successors of the Parties hereto.

         SECTION 5.6. Entire Agreement. This Agreement, along with any Exhibits
and/or Schedules attached hereto or incorporated herein and the Other
Dissolution Agreements, constitutes the entire agreement between the Parties
with respect to the dissolution of the Company and supersedes all prior
negotiations and agreements thereto, written or oral.

          SECTION 5.7. Headlines. The headings in this Agreement are for
convenience only and shall not be considered in the interpretation of the
Agreement.

          SECTION 5.8. Industry Practices. This Agreement shall be construed in
accordance with accepted oil industry terminology and practices.

          SECTION 5.9. Severability. If any provision or any portion of any
provision of this Agreement or the application of any such provision or any
portion thereof to any person or circumstance, is held invalid or unenforceable,
the remaining portion of such provision and the remaining provisions shall
remain in full force and effect.

          SECTION 5.10. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Kansas, without reference
to conflict of laws principles of said state.

          IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement as of the date set forth above.

NATIONAL COOPERATIVE                           FARMLAND INDUSTRIES, INC.
REFINING ASSOCIATION

By:      /s/ James S. Loving                   By:      /s/ Robert B. Terry
         -------------------------                      ------------------------
Name:    James S. Loving                       Name:    Robert B. Terry
         -------------------------                      ------------------------
Title:   President                             Title:   Executive Vice President
         -------------------------                      ------------------------
                                                        Administrative Group and
                                                        General Counsel


<PAGE>


COOPERATIVE REFINING, L.L.C.

By:      /s/James S. Loving
         -------------------------
Name:    James S. Loving
         -------------------------
Title:   President
         -------------------------

<PAGE>


                                  SCHEDULE 2.6

                              INTERCONNECT PAYMENTS

          (1) Oxygen. The Company shall pay to Farmland ninety dollars ($90.00)
per short ton ("ST") of oxygen transferred from the Fertilizer Plant to the
Coffeyville Refinery on or before the Effective Time.

          (2) Nitrogen. The Company shall pay to Farmland twenty-five and
nine-tenths cents ($0.259) per 100 standard cubic feet of nitrogen transferred
from the Fertilizer Plant to the Coffeyville Refinery on or before the Effective
Time.

          (3) Coke. Farmland shall pay to the Company ten dollars ($10.00) per
ton of petroleum coke transferred from the Coffeyville Refinery to the
Fertilizer Plant on or before the Effective Time.

          (4) Instrument Air. The Company shall pay to Farmland one hundred
forty-four thousand dollars ($144,000) for the instrument air transferred from
the Fertilizer Plant to the Coffeyville Refinery from May 1, 2000 to the
Effective Time.

          (5)     Steam.

          (a) Farmland shall pay to the Company the Variable Steam Price (as
hereinafter defined) per one thousand (1,000) pounds of steam transferred from
the Coffeyville Refinery to the Fertilizer Plant on or before the Effective
Time.

          (b) The Company shall pay to Farmland the Variable Steam Price per one
thousand (1,000) pounds of steam transferred from the Fertilizer Plant to the
Coffeyville Refinery on or before the Effective Time, but only for steam so
transferred during periods in which the Coffeyville Refinery was not flaring
excess refinery fuel gas.

          (c)     Variable Steam Price.

                  (1) Flaring. During periods in which the Coffeyville Refinery
          was flaring excess refinery fuel gas, the Variable Steam Price per one
          thousand (1,000) pounds of steam shall equal three and six hundred
          forty-five one thousandths cents ($0.03645).

                  (2) No Flaring. During periods in which the Coffeyville
          Refinery was not flaring excess refinery fuel gas, the Variable Steam
          Price per one thousand (1,000) pounds of steam shall equal the product
          of (a) the Natural Gas Price (as hereinafter defined), multiplied by
          (b) one and two thousand two hundred thirty-six ten-thousandths
          (1.2236).

          (d) Natural Gas Price. The term "Natural Gas Price" shall mean (1) if
the daily volumes of steam transferred are available for the days in a calendar
month in which the refinery was not flaring excess refinery fuel gas
("Non-Flaring Days"), the daily closing price for natural gas for such
Non-Flaring Day measured in dollars per one million standard cubic feet
("$/mmscf"), or (2) if the daily volumes of steam transferred are not available
for Non-Flaring Days in a calendar month, the average of all daily closing
prices for natural gas for such Non-Flaring Days measured in $/mmscf for the
calendar month.


<PAGE>


                                    EXHIBIT A

                          CRUDE OIL PURCHASE AGREEMENT

This Crude Oil Purchase Agreement ("Agreement") is made and entered into as of
the lst day of January, 2001, by and between FARMLAND INDUSTRIES, INC., a Kansas
cooperative corporation ("Farmland"), and NATIONAL COOPERATIVE REFINING
ASSOCIATION, a Kansas cooperative marketing association ("NCRA"). Farmland and
NCRA also are referred to herein collectively as the "Parties" and individually
as a "Party".

                                    RECITALS

A.       NCRA is the owner and operator of a refinery and related assets located
         at McPherson, Kansas (the "NCRA Refinery"), and Farmland is the owner
         and operator of a refinery and related assets located at Coffeyville,
         Kansas (the "Coffeyville Refinery").

B.       In 1999, NCRA and Farmland formed Cooperative Refining, LLC, a Delaware
         limited liability company ("CRLLC") for the purpose of jointly
         operating the NCRA Refinery and the Coffeyville Refinery.

C.       In connection with the agreement of NCRA and Farmland to dissolve CRLLC
         effective December 31, 2000, NCRA and Farmland agreed that after the
         effective date of the dissolution of CRLLC, the purchase of lease crude
         oil from the mid-Kansas counties identified on Exhibit A attached
         hereto and incorporated herein by this reference (such counties being
         referred to collectively as the "Mid-Kansas Counties" and such lease
         crude oil from the Mid-Kansas Counties being referred to collectively
         as the "Crude Oil") shall be made by NCRA for the joint benefit of NCRA
         and Farmland pursuant to the terms and conditions set forth in this
         Agreement.

D.       NCRA hereby agrees to offer to sell and deliver to Farmland, and
         Farmland is hereby given the option, but not the obligation, to
         purchase and accept delivery from NCRA the quantity of the Crude Oil
         acquired directly from time to time by NCRA or by an Affiliate (as
         defined in Section 15.03) of NCRA, and not acquired through a bulk
         purchase from a reseller of Crude Oil, on the terms and conditions set
         forth below.

                                    AGREEMENT

1.       TERM AND TERMINATION

         1.01     This Agreement shall be effective from January 1, 2001, and
                  shall continue until terminated in accordance with this
                  Section.

         1.02     This Agreement may be terminated at the option of a Party in
                  the event of:

               (a)  A material breach of this Agreement by the other Party,
                    except for the failure of Farmland to make a timely payment
                    for the purchase of Crude Oil under Section l.02(g), and
                    such breach has not been cured by such Party within thirty
                    (30) days after receipt of written notice thereof from the
                    non-breaching Party or, in the case of a breach that is not
                    reasonably feasible to effect a cure within said 30-day
                    period, within ninety (90) days after such receipt provided
                    that the breaching Party diligently prosecutes the cure of
                    such breach;

               (b)  The mutual agreement of the Parties;

               (c)  The appointment of a receiver for the other Party or any
                    part of its property, the assignment for the benefit of
                    creditors of the other Party, or the commencement of a
                    proceeding under any bankruptcy, insolvency, reorganization,
                    arrangement or other law relating to the relief of debtors
                    by or against the other Party; provided, however, that if
                    any such appointment or proceeding is initiated without the
                    consent or application of the other Party, such appointment
                    or proceeding shall not constitute a termination event under
                    this Agreement until the same shall have remained


<PAGE>


                    in effect for sixty (60) days;

               (d)  At any time by Farmland;

               (e)  Upon the Other Party's refinery (e.g., in the case of NCRA,
                    the NCRA Refinery, or in the case of Farmland, the
                    Coffeyville Refinery) ceasing to process crude oil other
                    than as a result of (i) Force Majeure or (ii) the temporary
                    shutdown thereof for maintenance, capital improvements or
                    other reasons;

               (f)  After December 31, 2005, upon at least six months' prior
                    notice of either Party;

               (g)  Farmland is one or more days late in making payments to NCRA
                    for the purchase of Crude Oil under this Agreement (other
                    than payments disputed in good faith); unless such failure
                    to make a timely payment is the result of an unintended
                    clerical error or third party error in the transmission of
                    payment. Upon NCRA's notice of such failure to make a timely
                    payment due to an unintended clerical error or third party
                    error, Farmland shall then make payment, together with
                    interest thereon at a rate of interest per annum equal to
                    five percent (5%) above the "prime rate" as published from
                    time to time in the Eastern Edition of the Wall Street
                    Journal as the average prime lending rate for seventy-five
                    percent (75%) of the United States thirty (30) largest
                    commercial banks, within one (1) business day after receipt
                    of notice thereof from NCRA; or

               (h)  The letter of credit required to be provided to NCRA
                    pursuant to Section 7.03 shall cease to be in full force and
                    effect and Farmland shall not provide NCRA with a
                    replacement letter of credit meeting the requirements set
                    forth in Section 7.03 within thirty (30) days after receipt
                    of written notice from NCRA that the then existing letter of
                    credit has ceased.

         1.03     The Parties acknowledge and agree that in the event this
                  Agreement is terminated, then immediately after such
                  termination NCRA effectively should be placed in a position to
                  continue to acquire sixty-six and twenty-eight one hundredths
                  percent (66.28%) (the "NCRA Share"), and Farmland effectively
                  should be placed in a position to continue to acquire
                  thirty-three and seventy-two one hundredths percent (33.72%)
                  (the "Farmland Share"), of the Crude Oil generally acquired by
                  NCRA and the NCRA Affiliates under this Agreement prior to the
                  termination thereof (the "Intended Termination Result"), but
                  that the Intended Termination Result may prove to be
                  impractical. Therefore, upon any such termination or, if
                  earlier, upon notice of any such termination (the "Trigger
                  Date"), the Parties shall meet promptly, but in no event later
                  than ten (10) business days thereafter, to negotiate in good
                  faith a fair and equitable arrangement to effect the Intended
                  Termination Result effective as of the date of such
                  termination. At any time during such negotiations, however,
                  either Party may elect to cause a "draft" process to occur
                  whereby the division orders and pay lists associated with the
                  Crude Oil accounts (the "Leases") comprising the Crude Oil
                  Acquisition Business (as defined herein) shall be allocated to
                  NCRA and Farmland in proportion to the NCRA Share and the
                  Farmland Share (the "Draft").

          1.04    The Draft, whether initiated by Farmland or NCRA pursuant to
                  Section 1.03, shall occur at the offices of NCRA on such date
                  consisting of a normal business day and at such time during
                  normal business hours as Farmland shall set forth in a notice
                  to NCRA; provided, however, that in no event shall the Draft
                  begin on a date occurring more than one hundred thirty (130)
                  days after the Trigger Date. The Draft shall begin by Farmland
                  first choosing Leases representing a specified daily
                  production of Crude Oil of up to three percent (3%) of the
                  total to be "drafted," followed by NCRA then choosing Leases
                  representing its proportional equivalent of up to said daily
                  production, and so on until all Leases have been chosen and
                  assigned to either Farmland or NCRA, as the case may be,
                  whereupon Farmland shall have been assigned Leases
                  representing a daily production of Crude Oil equal to the
                  Farmland Share of the total daily production of Crude Oil
                  represented by the Leases, and NCRA shall have been assigned
                  Leases representing a daily production of Crude Oil equal to
                  the NCRA Share of the total daily production of Crude Oil
                  represented by all Leases.


<PAGE>


          1.05    Upon completion of the Draft, NCRA shall prepare and send
                  written notices to the appropriate person or persons
                  respecting each Lease assigned to Farmland in the Draft (the
                  "Farmland Leases"), in such form and content as Farmland shall
                  reasonably require, that the applicable Lease has been
                  assigned by NCRA to Farmland and that, effective as of the
                  first day of the month following the Draft Closing Date (as
                  defined herein) (the "Draft Effective Date"), Farmland shall
                  assume all existing agreements of NCRA respecting the Lease
                  and shall purchase the Crude Oil produced in connection with
                  the Lease.

         1.06     The term "Draft Closing Date" shall mean the date on which the
                  Draft Closing (as defined herein) shall occur, which date
                  shall be as set forth in a notice given by Farmland to NCRA;
                  provided, however, that in no event shall the Draft Closing
                  Date occur later than the last day of month occurring six (6)
                  months after the Trigger Date.

         1.07     The term "Draft Closing" shall mean the execution and delivery
                  of the agreements, documents and other instruments to
                  consummate the transactions to occur in connection with the
                  Draft and the termination of this Agreement.

         1.08     For the period beginning upon the Trigger Date and ending upon
                  the commencement of the Draft, Farmland shall be afforded the
                  opportunity to conduct a due diligence review of all lease
                  crude accounts of NCRA in the Mid-Kansas Counties, and NCRA
                  shall cooperate fully with the due diligence review.

         1.09     After the Trigger Date and until the Draft Effective Date,
                  NCRA shall continue to own, operate, manage, preserve and
                  maintain the Crude Oil acquisition business to be operated by
                  NCRA under this Agreement (the "Crude Oil Acquisition
                  Business"), including without limitation the sale of Crude Oil
                  to Farmland in accordance with the terms hereof.

         1.10     After the Trigger Date, Farmland likely will commence various
                  activities intended to enable Farmland to operate a Crude Oil
                  acquisition business (the "Farmland Transition Activities").
                  After the Trigger Date and until the Draft Effective Date,
                  NCRA shall cooperate with Farmland in connection with
                  Farmland's post-termination transition activities, including:

                  (a)      NCRA shall negotiate in good faith with Farmland to
                           sell to Farmland such crude oil gathering assets
                           (excluding pipelines) of NCRA and the NCRA
                           Affiliates, so that when such assets are combined
                           with any assets owned or leased by Farmland but then
                           utilized in the Crude Oil Acquisition Business,
                           Farmland will have approximately thirty-three and
                           seventy-two one hundredths percent (33.72%) of the
                           assets utilized in the Crude Oil Acquisition
                           Business; and

                  (b)      in efforts to afford Farmland a reasonable
                           opportunity to obtain the services of approximately
                           thirty-three and seventy-two one hundredths percent
                           (33.72%) of the employees of NCRA and the NCRA
                           Affiliates that are part of the Crude Oil Acquisition
                           Business, NCRA shall make such employees available to
                           meet with Farmland, at such times and locations as
                           Farmland may reasonably request, to discuss future
                           employment with Farmland

         1.11     At the Draft Closing, the Parties shall execute and deliver to
                  each other the following:

                  (a)      (i) in the event that NCRA terminates this Agreement
                           pursuant to Section 1.02(f) or Farmland terminates
                           this Agreement pursuant to Section 1.02(a), a
                           Non-Compete Agreement, in such form and content as
                           Farmland shall reasonably require, that provides that
                           NCRA and the NCRA Affiliates shall not, directly or
                           indirectly, purchase or solicit the purchase of crude
                           oil from the Farmland Leases for a period of time
                           ending one (1) year after the Draft Effective Date,
                           or (ii) in the event this Agreement is terminated
                           otherwise, a Non-Compete Agreement, in such form and
                           content as each Party shall reasonably require, that
                           provides that the other Party and its Affiliates
                           shall not, directly


<PAGE>


                           or indirectly, purchase or solicit the purchase of
                           crude oil from the Farmland Leases or the NCRA
                           Leases, as the case may be, for a period of time
                           ending one (1) year after the Draft Effective Date.

                  (b)      an Assignment and Bill of Sale from NCRA to Farmland,
                           in such form and content as Farmland shall reasonably
                           require, covering the Purchased Assets and the
                           Farmland Leases.

                  (c)      such other agreements, documents and other
                           instruments as Farmland may reasonably request to
                           effect the assignment of the Farmland Leases to
                           Farmland, the purchase of the Purchased Assets by
                           Farmland and the other transactions to occur in
                           connection with the Draft Closing.

         1.12     After the Draft Closing, NCRA shall execute and deliver to
                  Farmland such other agreements, documents and other
                  instruments as Farmland may reasonably request to affect the
                  assignment of the Farmland Leases to Farmland, the purchase of
                  the Purchased Assets by Farmland and the other transactions
                  associated with the Draft Closing.

         1.13     During the term of this Agreement, Farmland covenants and
                  agrees not to purchase Crude Oil in the Mid-Kansas Counties,
                  other than through bulk purchases of crude oil from resellers
                  of Crude Oil.

2.       PROCEDURE FOR EXERCISE OF OPTION: QUANTITY

         2.01     On or before 5:00 p.m. (Central Time) on the tenth (10th) day
                  of the month prior to each month in which NCRA will be
                  offering to sell and deliver Crude Oil to Farmland, NCRA shall
                  provide Farmland written notice of NCRA's best estimate of the
                  quantity of Crude Oil that NCRA and any Affiliate of NCRA
                  expects to purchase directly (but not through a bulk purchase
                  from a reseller of Crude Oil) during the immediately following
                  month (the "Estimate Notice"). On or before the fifteenth
                  (15th) day of the month prior to the month in which Farmland
                  intends to exercise its option to purchase, Farmland shall by
                  5:00 P.M. Central Time, provide NCRA written notice of the
                  quantity of Crude Oil that Farmland will purchase (the
                  "Purchase Notice").

         2.02     During the term of this Agreement, NCRA offers to sell and
                  deliver thirty-three and seventy-two one hundredths percent
                  (33.72%) of the Crude Oil directly purchased (but not through
                  a bulk purchase from a reseller of Crude Oil) by NCRA or any
                  Affiliate in a given month in the Mid-Kansas Counties (the
                  "Farmland Maximum Percentage"), and Farmland shall have the
                  option to purchase and receive any quantity of such Crude Oil
                  up to the Farmland Maximum Percentage of such Crude Oil. The
                  actual quantity of Crude Oil delivered to NCRA and Farmland
                  shall be subject to, without duplication, (a) all applicable
                  loss allowances on pipelines or other crude gathering or
                  transportation systems (collectively, "Pipelines") that are
                  not operated or controlled by NCRA or any Affiliate of NCRA,
                  (b) actual gains or losses on Pipelines that are operated or
                  controlled by NCRA or an Affiliate of NCRA, and (c) all
                  applicable gains or losses on trucks (collectively, the
                  "Allowances"). In the event Farmland fails to provide the
                  Purchase Notice to NCRA by the deadline established in Section
                  2.01, Farmland shall be deemed to have provided a notice to
                  purchase the Farmland Maximum Percentage of such Crude Oil.
                  Farmland shall have no right to carryover any portion of the
                  unused percentage from a particular month.

         2.03     The quantity of Crude Oil delivered hereunder shall be
                  determined by use of 100% tank tables, or mutually acceptable
                  automatic measuring equipment, with customary adjustments to
                  volume and density to 60(degree) F temperature and full
                  deduction of BS&W, as adjusted by any applicable Allowances.
                  The Parties agree to conduct an accounting of quantities
                  delivered to Farmland on no greater than a quarterly basis.

         2.04     During the term of this Agreement and through the Draft
                  Effective Date, NCRA shall exercise its commercially
                  reasonable efforts to operate the Crude Oil Acquisition
                  Business efficiently and to


<PAGE>


                  maximize the economic benefit to both Parties. NCRA shall
                  provide Farmland with such monthly and other reports as
                  Farmland may reasonably request regarding the Crude Oil
                  Acquisition Business and otherwise keep Farmland reasonably
                  informed as to the quantity of Crude Oil purchased each month,
                  but in any event, NCRA shall notify Farmland promptly upon
                  NCRA's belief that actual purchases for a given month will be
                  less than, or exceed, the estimated purchases for such month
                  by more than ten percent (10%).

3.       DELIVERY POINT: TITLE AND RISK OF LOSS

         3.01     NCRA shall deliver or cause to be delivered the Crude Oil to
                  be purchased and sold hereunder to Farmland at Lyons, Kansas,
                  Phillipsburg, Kansas, Valley Center, Kansas, McPherson, Kansas
                  or any other delivery point designation that Farmland may
                  reasonably designate from time to time (the "Delivery Points")
                  and in such quantities as Farmland may reasonably specify from
                  time to time; provided that NCRA shall not be obligated to
                  incur any capital expenditures to create a Delivery Point not
                  othenvise in existence on or after the effective date hereof.
                  NCRA and Farmland shall work together to schedule deliveries
                  of Crude Oil for each month and, unless the parties otherwise
                  agree, NCRA shall operate the Crude Oil Acquisition Business
                  so deliveries of Crude Oil to Farmland hereunder shall occur
                  on a relatively consistent and uniform basis during each month
                  in proportion to the percentage of Crude Oil that Farmland
                  purchases. For pricing purposes only, however, total volume
                  delivered during each month shall be deemed to have been
                  delivered at an average daily rate during that month.

         3.02     Farmland will accept delivery of the Crude Oil upon completion
                  of measurement of the Crude Oil by pipeline meter. Title to
                  the Crude Oil and risk of loss shall pass from NCRA to
                  Farmland upon completion of such measurements at the Delivery
                  Point.

         3.03     Farmland may from time to time give NCRA notice of Farmland's
                  election to cause a portion of the Crude Oil to be purchased
                  by Farmland hereunder to be delivered to NCRA at McPherson,
                  Kansas, whereupon NCRA shall provide to Farmland, in exchange
                  for the Crude Oil so delivered to NCRA, the same quantity of
                  Crude Oil at any Pipeline trading point location reasonably
                  designated by Farmland in said notice.

4.       PRICE

         4.01     The purchase price per barrel of Crude Oil sold by NCRA to
                  Farmland hereunder shall be equal to the sum of (a) the Crude
                  Oil Price, plus (b) the Transportation Charges.

         4.02     For purposes hereof, the term "Crude Oil Price" shall mean the
                  average price per barrel of Crude Oil paid by NCRA in its
                  operation of the Crude Oil Acquisition Business during the
                  month of delivery.

         4.03     For the purposes hereof, the term "Transportation Charges"
                  shall mean the sum of (a) the applicable Average Pipeline
                  Tariff for actual barrels delivered at each Delivery Point,
                  plus (b) the quotient of (1) the total direct, out-of-pocket
                  costs reasonably incurred by NCRA in its operation of the
                  Crude Oil Acquisition Business during the month of delivery
                  (including any reasonable costs or expenses associated with
                  any damage to property or injury, sickness, disease or death
                  to persons arising out of or in connection with any acts or
                  omissions of NCRA or any officer, director, Affiliate, agent,
                  employee, representative or advisor (each a "Representative")
                  of NCRA in connection with the operation of the Crude Oil
                  Acquisition Business, but not arising out of or in connection
                  with the gross negligence, malfeasance or willful misconduct
                  of NCRA or any NCRA Representative), divided by (2) the total
                  number of barrels of Crude Oil purchased by NCRA in its
                  operation of the Crude Oil Acquisition Business during the
                  month of delivery, subject to any applicable Allowances.

         4.04     For purposes hereof, the term "Average Pipeline Tariff" shall
                  mean the then applicable weighted


<PAGE>


                  average pipeline tariff to the then applicable Delivery
                  Points, determined based upon the quantities of Crude Oil for
                  each pipeline origin listed in Exhibit B with the weighted
                  average pipeline tariff calculation set forth in Exhibit B and
                  incorporated herein by this reference, provided that either
                  Party may require the re-determination of the Average Pipeline
                  Tariff, effective upon any change in any applicable published
                  pipeline tariff. The Parties agree that as of the date of this
                  Agreement, the Average Pipeline Tariff is as follows:

                           Destination                Average Pipeline Tariff
                           -----------                -----------------------
                           Lyons, KS                  $0.4948
                           Phillipsburg, KS           $0.2000
                           Valley Center, KS          $0.5611
                           McPherson, KS              $0.5377

         4.05     NCRA shall reimburse Farmland for the reasonable direct costs
                  incurred by Farmland in connection with the Crude Oil
                  Acquisition Business gathering operations (e.g. employee
                  costs, asset lease costs, etc., excluding, however, pipeline
                  operations), which costs will in turn be included in the costs
                  described in Section 4.03(b)(1) used in the calculation of the
                  overall Crude Oil purchase price set forth in Section 4.01.

5.       FARMLAND EMPLOYEE

         A Farmland employee (currently Lee Couture) shall continue to have a
         meaningful and appropriate management role concerning the trucking
         operations of the Crude Oil Acquisition Business, and any significant
         changes to said role will first be discussed by the Parties. The
         Parties also acknowledge that Mr. Couture will have a management role
         associated with Farmland's Pipeline operations and operation of the
         Phillipsburg Refinery and, thus, in accordance with the terms of the
         Employee Lease Agreement, NCRA shall be obligated to reimburse Farmland
         for only one-half (1/2) of the costs of Farmland associated with Mr.
         Couture.

6.       FARMLAND'S RIGHT TO AUDIT: DISPUTE RESOLUTION

         6.01     Farmland shall have the right, from time to time, upon at
                  least five (5) business days prior notice to NCRA during
                  business hours to inspect and audit, or cause to be inspected
                  and audited, the business records, bookkeeping and accounting
                  records which relate to the Crude Oil Acquisition Business.
                  NCRA shall fully cooperate with representatives of Farmland
                  and its representatives and advisors in connection with any
                  such inspection or audit. All costs incurred by Farmland in
                  connection with the audit or inspection shall be borne by
                  Farmland, and all costs incurred by NCRA in connection with
                  the audit or inspection shall be borne by NCRA; provided,
                  however, that in the event a material discrepancy is found in
                  connection with the audit, then NCRA shall reimburse Farmland
                  all of its reasonable out-of-pocket costs incurred in
                  connection with the audit or inspection. For purposes of this
                  Section, "material discrepancy" shall mean a discrepancy
                  greater than two hundred fifty thousand dollars ($250,000.00),
                  excluding any accrual to actual adjustments.

         6.02     In the event of any dispute or controversy arising out of or
                  related to this Agreement, or the breach thereof; including
                  the interpretation of any provision of this Agreement which
                  cannot be resolved informally by the Parties, the Parties
                  shall first make a good faith effort to promptly resolve such
                  dispute. If the Parties are unable to reach agreement with
                  respect to such discrepancy, then such dispute shall be
                  resolved by binding arbitration administered by the American
                  Arbitration Association in accordance with its Commercial
                  Arbitration Rules then in effect, except as such rules may be
                  modified by this Agreement or by the mutual consent of the
                  Parties. Any arbitration proceeding conducted hereunder shall
                  alternate locations between the greater metropolitan areas of
                  Kansas City, Missouri and Wichita, Kansas, with the first such
                  arbitration proceeding to be conducted at such location as is
                  specified by the Party requesting the arbitration proceeding.
                  Any award rendered in the arbitration proceeding shall be
                  final and binding upon the Parties and a judgment thereon may
                  be entered in any court having competent


<PAGE>


                  jurisdiction. Each Party shall bear its own expenses in
                  connection with the arbitration; provided, however, that the
                  fees and expenses of the arbitrator and all other expenses of
                  the arbitration shall be borne equally by the Parties. The
                  arbitration proceedings shall be governed by the laws of the
                  State of Kansas. The arbitrator shall be selected from a list
                  of five (5) arbitrators provided by the American Arbitration
                  Association. Alternate strikes shall be made to the list
                  commencing with the Party requesting arbitration until a
                  single name remains. That individual shall be the arbitrator
                  for the matter. After the arbitrator has been selected, the
                  Parties may obtain reasonable discovery in advance of the
                  arbitration by way of: (i) exchange of copies of all documents
                  in the possession, custody or control of a Party and relevant
                  to the matter in dispute; (ii) written interrogatories for the
                  purpose of determining the name and address of each witness
                  proposed to be called by a Party and a brief description of
                  the relevant information each such witness is expected to
                  provide; and (iii) such further discovery, including
                  dispositions, as the arbitrator may determine is appropriate
                  after taking into consideration the nature of the dispute and
                  the amount in controversy. To the extent possible, the
                  arbitration hearing shall be conducted within sixty (60) days
                  after selection of the arbitrator, and the arbitrator shall
                  render a decision within twenty (20) days after the conclusion
                  of the hearing. Post-hearing briefs shall be permitted. The
                  arbitration award shall be in writing and shall specify the
                  factual and legal basis for the award.

7.       PAYMENT

         7.01     NCRA shall invoice Farmland promptly after the end of each
                  month for deliveries made during that month, but in no event
                  later than the fifteenth (15th) day of the following month,
                  and subject to Section 7.02, payment shall be made by Farmland
                  by electronic funds transfer by the twentieth (20th) day of
                  the month following delivery of such Crude Oil to Farmland. In
                  the event that Farmland fails to receive an invoice on or
                  before the fifteenth (15th) day of the applicable month, then
                  Farmland shall be granted one additional business day to make
                  the required payment for each day that the invoice is late.
                  Invoices shall be forwarded promptly to:

                            Farmland Industries, Inc.
                            3315 North Oak Trafficway
                            P.O. Box 7305 Dept. 11
                            Kansas City, Missouri 64116
                            Attention: Manager, Petroleum Accounting
                            Fax: 816.459.5944

                  with a copy to:

                            Farmland Industries, Inc.
                            3315 North Oak Trafficway
                            P.O. Box 7305 Dept. 160
                            Kansas City, Missouri 64116
                            Attention: Vice President - Treasurer
                            Fax: 816.459.5961

         7.02     If the date for payment of any monies under this Agreement
                  falls on a Saturday or on a bank holiday, then payment shall
                  be due on the first previous business day. If the date for
                  payment of any monies under this Agreement falls on a Sunday
                  or a Monday bank holiday, then payment shall be due on the
                  next business day.

          7.03    Farmland shall post a letter of credit in the total sum of
                  Eight Million Dollars ($8,000,000.00) ("Letter of Credit") to
                  support its payment obligations hereunder. Farmland's
                  obligation to provide the Letter of Credit to NCRA shall cease
                  in the event Farmland reports net income on a consolidated
                  basis for the then most recently completed fiscal year and an
                  EBITDA to Net Interest Expense ratio of at least 1.6 (the
                  "Financial Covenants"). Within one-hundred-twenty (120) days
                  after the end of each fiscal year, Farmland shall evidence its
                  compliance, or its failure to comply, with the Financial
                  Covenants by providing NCRA a copy of Farmland's audited
                  financial


<PAGE>


                  statements and a certificate signed by Farmland's Chief
                  Financial Officer or Treasurer certifying Farmland's
                  compliance with the Financial Covenants. In the event Farmland
                  fails to satisfy any of the Financial Covenants at the end of
                  any fiscal year, then Farmland shall continue to provide or,
                  if Farmland was not obligated to provide the Letter of Credit
                  to NCRA with respect to the immediately preceding fiscal year,
                  provide no later than one hundred twenty (120) days after the
                  then most recently completed fiscal year, the Letter of Credit
                  to NCRA until such time that Farmland satisfies the Financial
                  Covenants as set forth above. If NCRA shall not have received
                  evidence of Farmland's compliance with the Financial Covenants
                  on or before one hundred twenty (120) days after the end of a
                  fiscal year, then Farmland shall be deemed not to have
                  satisfied the Financial Covenants with respect to such fiscal
                  year.

8.        FORCE MAJEURE

          8.01    In the event of the occurrence of a Force Majeure event which
                  prevents performance hereunder, the Party or Parties whose
                  performance is thereby prevented or delayed shall, unless
                  otherwise provided below, be relieved of any obligation or
                  liability under the terms of this Agreement until the
                  expiration of a reasonable time after termination of the force
                  majeure event.

          8.02    "Force Majeure" means an event which is unforeseen and beyond
                  the reasonable control of the Party that either prevents the
                  Party from delivering the affected volume or prevents the
                  Party from accepting delivery of the affected volume. The
                  following are the only instances that will be recognized as
                  Force Majeure events hereunder: earthquakes; floods;
                  landslides; civil disturbances; sabotage; acts of public
                  enemies; war; blockades; insurrections; riots; epidemics; the
                  act of any government or other authority or statutory
                  undertaking; the inability to obtain or the curtailment of
                  electric power, water or fuel; strikes, lockouts or other
                  disruptions; fires; explosions; breakdowns or failure of pipe,
                  plant, machinery or equipment; apportionment of applicable
                  carriers; contamination or poisoning of catalyst and/or
                  solvent or biological treatment facilities; and any other
                  event which is unforeseen and beyond the reasonable control of
                  the Party that either prevents the Party from delivering the
                  affected volume or prevents the Party from accepting the
                  delivery the affected volume.

          8.03    A lack of funds, the availability of a more attractive market,
                  or inefficiencies in operations do not constitute events of
                  Force Majeure.

          8.04    The Party claiming the Force Majeure event agrees to notify in
                  writing the other Party of the occurrence of the Force Majeure
                  event as soon as possible, but in any event within twenty (20)
                  business days after the occurrence of the Force Majeure event;
                  otherwise the claim for Force Majeure shall be deemed waived.
                  The Party whose performance is prevented hereunder by a Force
                  Majeure event shall diligently endeavor to mitigate and remedy
                  the situation with all reasonable dispatch.

9.        TITLE AND WARRANTIES

          9.01    NCRA makes no other warranty, expressed or implied, concerning
                  the Crude Oil purchased and sold hereunder beyond any warranty
                  provided by the lease operator. Notwithstanding the foregoing,
                  however, NCRA represents and warrants (a) that it will use its
                  best efforts to ensure that all lease crude oil sold to
                  Farmland hereunder shall be Crude Oil and (b) that, upon each
                  sale, Farmland shall be vested with good and marketable title
                  to the lease crude oil sold, free and clear of all liens,
                  claims and encumbrances.

10.       LIABILITY AND INDEMNITY

          10.01   NCRA shall not, in any case other than in connection with the
                  gross negligence or willful misconduct of NCRA and NCRA's
                  indemnity obligations hereunder, be liable for any special,
                  incidental, consequential, indirect or other similar damages,
                  including, but not limited to, lost profits, arising from its
                  obligations under this Agreement. Notwithstanding the
                  foregoing,


<PAGE>


                  however, Farmland and NCRA acknowledge and agree that in the
                  event that NCRA fails to provide, or offer to provide,
                  Farmland with the quantity of Crude Oil that NCRA is obligated
                  to provide, or offer to provide, hereunder, then Farmland
                  shall sustain substantial damages associated with its crude
                  oil refining business, but the exact amount of such damages
                  would be impractical or extremely difficult to ascertain.
                  Therefore, in the event of any such failure that has not been
                  fully cured by NCRA within sixty (60) days after Farmland
                  notifies NCRA of such failure, NCRA shall pay to Farmland, as
                  liquidated damages and not as a penalty, an amount equal to
                  the product of (a) the difference between (1) the Cushing
                  Crude Oil Price, minus (2) the Crude Oil Price, multiplied by
                  (b) the number of barrels of Crude Oil that NCRA failed to
                  provide, or offer to provide, hereunder in the applicable
                  period, multiplied by (c) three (3).

          10.02   For purposes hereunder, the term "Cushing Crude Oil Price"
                  shall mean, for a given month, the sum of (a) Koch Petroleum's
                  posted price for West Texas/New Mexico intermediate crude oil
                  for the month of delivery, plus (b) the average P-plus price
                  published by Platt's Oilgram Price Report from the 26th day of
                  the month that is two months prior to the applicable month of
                  delivery through the 25th day of the month that is immediately
                  preceding the applicable month of delivery; provided, however,
                  that if Koch Petroleum ceases to post a price for West
                  Texas/New Mexico Intermediate crude oil or if Platts Oilgram
                  Price Report ceases to publish a P-plus price, then the
                  Parties shall negotiate in good faith a mutually agreeable
                  alternative price index formula to determine the Cushing Crude
                  Oil Price.

          10.03   Subject to Section 4.03 herein, Farmland shall not, in any
                  case, be liable for any costs or expenses associated with any
                  damage to property or injury, sickness, disease or death to
                  third persons arising out of or in any way connected with any
                  acts or omissions of NCRA in connection with NCRA's operation
                  of the Crude Oil Acquisition Business, and NCRA shall
                  indemnify and hold Farmland and the Farmland Representatives
                  harmless from and against any and all losses, costs (including
                  but not limited to attorneys' fees and expenses), damages,
                  liabilities, fines, penalties, expenses, claims, demands,
                  actions, suits and judgments for, arising out of, or
                  attributable to any damage to property or injury, sickness,
                  disease or death to third persons arising out of or anyway
                  connected with any acts or omissions of NCRA in connection
                  with the operation of the Crude Oil Acquisition Business.

11.       APPLICATION OF LAW

          11.01   This Agreement shall be interpreted in accordance with and
                  governed by the laws of the State of Kansas, without reference
                  to conflict of laws principles or said state.

12.       BUSINESS ETHICS

          12.01   Neither party, nor their duly authorized representatives are
                  permitted to take any action hereunder which would constitute
                  a breach of any law. All activities and transactions performed
                  by the parties and their duly authorized representatives shall
                  be carried out in good faith and in a proper and truthful
                  manner, and any records or other documents relating to such
                  activities and transactions shall contain a true and proper
                  account of the facts and circumstances pertaining thereto.

13.       TAXES

          13.01   Each Party shall be liable for their respective percentage of
                  any taxes imposed on the Crude Oil purchased.

14.       NOTICES

          14.01   Any notices permitted or required to be given under this
                  Agreement shall be in writing and shall be addressed to the
                  parties hereto as follows:


<PAGE>


                  For NCRA:        National Cooperative Refining Association
                                   1391 Iron Horse Road
                                   P.O. Box 1404
                                   McPherson, Kansas 67460
                                   Attention: Vice President, Supply and Trading
                                   Fax: (316) 241-5562

                  For Farmland:

                           (i)     For invoices required under Section 7, as
                                   provided therein.

                           (ii)    For the Estimate Notice and any other
                                   notices required under Section 2 hereof, as
                                   follows:

                                   Farmland Industries, Inc.
                                   c/o National Cooperative Refining Association
                                   1391 Iron Horse Road
                                   P.O. Box 1404
                                   McPherson, Kansas 67460
                                   Attention: Mr. Patrick Quinn
                                   Fax: 316.241.9269

                           (iii)   For all other notices required hereunder, as
                                   follows:

                                   Farmland Industries, Inc.
                                   3315 North Oak Trafficway
                                   P.O. Box 7305 Dept. 11
                                   Kansas City, Missouri 64116
                                   Attention: General Counsel
                                   Fax: 816.459.5902

                          with a copy to:

                                   Farmland Industries, Inc.
                                   3315 North Oak Trafficway
                                   P.O. Box 7305 Dept. 160
                                   Kansas City, Missouri 64116
                                   Attention: Vice President - Treasurer
                                   Fax: 816.459.5961

                          Either Farmland or NCRA may from time to time change
                          its address for service hereunder on written notice to
                          the other party.

         14.02   Any notice shall:

         1)       If delivered by hand delivery, be deemed to have been given or
                  made at the time of delivery as acknowledged by signature of
                  the receiving party;

         2)       If sent by telecopy, telex, telecommunication device or other
                  similar form of communication or by any overnight private
                  courier service, be deemed to have been given or made on the
                  working day on which it was received; and

         3)       If mailed by certified or registered mail, returned receipt
                  requested, postage prepaid, be deemed to have been given or
                  made, four (4) days after deposit in the United States mail.

15.      ASSIGNMENT


<PAGE>


          15.01   Either party may assign this Agreement in whole or in part to
                  an Affiliate or may cause any or all of its obligations to be
                  performed by an Affiliate. Except as otherwise provided
                  hereunder, any attempt by either party to assign its rights or
                  delegate its duties under this Agreement in whole or in part
                  to a non-Affiliate without prior written consent of the other
                  party shall be ineffective to the extent consistent with the
                  law.

          15.02   For purposes of this Agreement, the term "Affiliate" shall
                  mean a corporation, partnership, limited liability company or
                  any other person or entity which controls, is controlled by,
                  or under common control with either Farmland or NCRA, as the
                  case may be.

          15.03   Notwithstanding the foregoing provisions of this Article 15,
                  in the event Farmland desires to transfer its ownership
                  interest in the Coffeyville Refinery during the term of this
                  Agreement, then Farmland may assign this Agreement to the
                  transferee of the Coffeyville Refinery without the consent of
                  NCRA, and upon such transferee assuming this Agreement and
                  Farmland's obligations hereunder, Farmland shall not be liable
                  for the performance of its obligations hereunder from and
                  after the date of such assignment, and NCRA shall return to
                  Farmland any Letter of Credit then issued in favor of NCRA
                  under Section 7.03 together with a written statement signed by
                  an authorized officer of NCRA in form and content reasonably
                  acceptable to Farmland to the effect that the issuer of the
                  Letter of Credit may cancel the Letter of Credit. Further, in
                  lieu of the requirements of Section 7.03, the assignee shall
                  provide NCRA credit terms or support comparable to whatever
                  credit terms and support are required of it from other bulk
                  crude oil suppliers. Any assignee of Farmland shall be
                  required to provide NCRA information on a quarterly basis
                  regarding its credit terms and support requirements from its
                  bulk crude oil suppliers.

16.       GENERAL

          16.01   Amendments. Unless otherwise provided herein, no changes,
                  alteration or modifications to this Agreement shall be
                  effective unless in writing and signed by the respective duly
                  authorized representatives of the Parties hereto.

          16.02   Successors and Assigns. This Agreement shall enure to the
                  benefit of and be binding upon the legal representatives,
                  permitted assigns and successors of the parties hereto.

          16.03   Entire Agreement. This Agreement, along with its Exhibits and
                  Schedules, constitutes the entire agreement between the
                  parties with respect to the Crude Oil Acquisition Business and
                  supersedes all prior negotiations and agreements thereto,
                  written or oral.

          16.04   Headings. The headings in this Agreement are for convenience
                  only and shall not be considered in the interpretation of the
                  Agreement.

          16.05   Industry Practices. This Agreement shall be construed in
                  accordance with accepted oil industry terminology and
                  practices.

          16.06   Severability. If any provision or any portion of any provision
                  of this Agreement or the application of any such provision or
                  any portion thereof to any person or circumstance, is held
                  invalid or unenforceable, the remaining portion of such
                  provision and the remaining provisions shall remain in full
                  force and effect.

          16.07   Effect of Termination. Except (a) with respect to Sections
                  1.03, 6.01, 6.02, 9.01, 10.01, 10.02, 10.03, 12.01, 15.01, and
                  15.03, (b) as otherwise provided herein with respect to
                  obligations which are contemplated by their terms to survive
                  any termination of this Agreement, and (c) any agreements,
                  obligations or liabilities of any Party arising from any
                  default, breach or failure to perform by such Party under any
                  provision of this Agreement prior to any termination of this
                  Agreement, upon the termination of this Agreement pursuant to
                  the provisions hereof, all further obligations of each Party
                  to the other Party hereunder shall terminate.


<PAGE>


          16.08   Independent Contractor. The Parties acknowledge and agree that
                  NCRA shall not be an agent or representative of Farmland with
                  respect to any matter related to this Agreement, and Farmland
                  shall not be an agent or representative of NCRA with respect
                  to any matter related to this Agreement. This Agreement shall
                  not be deemed to create a partnership, joint venture, or any
                  other joint enterprise of any kind whatsoever between NCRA and
                  Farmland.

          IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date set forth above.

NATIONAL COOPERATIVE                                  FARMLAND INDUSTRIES, INC.
   REFINING ASSOCIATION

By:_______________________                            By:_______________________
Name:_____________________                            Name:_____________________
Title:____________________                            Title:____________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>cenex010535_ex-99.txt
<DESCRIPTION>EXHIBIT 99 CAUTIONARY STATEMENT
<TEXT>

                                                                      EXHIBIT 99


                              CAUTIONARY STATEMENT

     Cenex Harvest States Cooperatives (the Company), or persons acting on
behalf of the Company, or outside reviewers retained by the Company making
statements on behalf of the Company, or underwriters, from time to time, may
make, in writing or orally, "forward-looking statements" as defined under the
Private Securities Litigation Reform Act of 1995 (the Act). This Cautionary
Statement is for the purpose of qualifying for the "safe harbor" provisions of
the Act and is intended to be a readily available written document that contains
factors which could cause results to differ materially from those projected in
such forward-looking statements. These factors are in addition to any other
cautionary statements, written or oral, which may be made or referred to in
connection with any such forward-looking statement.

     The following matters, among others, may have a material adverse effect on
the business, financial condition, liquidity, results of operations or
prospects, financial or otherwise, of the Company. Reference to this Cautionary
Statement in the context of a forward-looking statement shall be deemed to be a
statement that any one or more of the following factors may cause actual results
to differ materially from those which might be projected, forecast, estimated or
budgeted by the Company in such forward-looking statement or statements:

     COMPANY SUBJECT TO SUPPLY AND DEMAND FORCES. The Company may be adversely
affected by supply and demand relationships, both domestic and international.
Supply is affected by weather conditions, disease, insect damage, acreage
planted, government regulation and policies and commodity price levels. The
current short supply and high demand for natural gas will impact the supply of
fertilizer. The business is also affected by transportation conditions,
including rail, vessel, barge and truck. Demand may be affected by foreign
governments and their programs, relationships of foreign countries with the
United States, the affluence of foreign countries, acts of war, currency
exchange fluctuations and substitution of commodities. Demand may also be
affected by changes in eating habits, by population growth and increased or
decreased per capita consumption of some products.

     The Freedom to Farm Act of 1996 (the Farm Act), enacted in April of 1996,
may affect crop production in several ways. The Farm Act more narrowly defines
what will qualify as environmentally sensitive acreage for purposes of the
conservation reduction program, with the result that acres were put back into
agricultural production. The Farm Act also removes restrictions on the type of
crops planted (other than fruit and vegetables), allowing farmers to plant crops
having favorable prices and thereby increasing the production of those crops.
Increased production may lower prices of certain crops but increase the amount
available for export. However, the Farm Act also reduces Export Enhancement
Program subsidies, which may adversely affect the ability of the U.S. exports to
compete with those of other countries. Reduced demand for U.S. agricultural
products may also adversely affect the demand for fertilizer, chemicals, and
petroleum products sold by the Company and used to produce crops.

     COMPANY SUBJECT TO PRICE RISKS. Upon purchase, the Company has risks of
carrying grain and petroleum, including price changes and performance risks
(including delivery, quality, quantity and shipment period), depending upon the
type of purchase contract entered into. The Company is exposed to risks of loss
in the market value of positions held, consisting of grain and petroleum
inventory and purchase contracts at a fixed or partially fixed price, in the
event market prices decrease. The Company is also exposed to risk of loss on its
fixed price or partially fixed price sales contracts in the event market prices
increase.

     To reduce the price change risks associated with holding fixed price
positions, the Company generally takes opposite and offsetting positions by
entering into commodity futures contracts (either a straight futures contract or
an options futures contract) on regulated commodity futures exchanges. While
hedging activities reduce the risk of loss from changing market values, such
activities also limit the gain potential which otherwise could result from
changes in market prices. Hedging arrangements do not protect against
nonperformance of a contract. The Company's policy is to generally maintain
hedged positions in grain and petroleum, which are hedgeable, but the Company
can be long or short at any time. The Company's profitability is primarily
derived from margins on grain and products merchandised and processed, not from
hedging transactions.

     At any one time, the Company's inventory and purchase contracts for
delivery to the Company may be substantial.
<PAGE>


     OILSEED PROCESSING AND REFINING BUSINESS COMPETITION. Competition in the
soybean processing and refining business is driven by price, transportation
costs, service and product quality. The industry is highly competitive. Media
newsletters and other publications indicate that construction of new crush
plants are under strong consideration. The Company estimates that U.S. crushing
capacity has increased by about 30% to 35% between 1994 and 1999. Refining
capacity has increased by an estimated 25% to 30% between 1996 and 1999. Unless
exports increase or existing refineries are closed, this extra capacity is
likely to put additional pressure on prices and erode margins, adversely
affecting the profitability of the Oilseed Processing and Refining Defined
Business Unit. Several competitors operate over various market segments and may
be suppliers to, or customers of, other competitors.

     WHEAT MILLING BUSINESS COMPETITIVE TRENDS. Certain major durum milling
competitors of the Wheat Milling Defined Business Unit have developed long-term
relationships with customers by locating plants adjacent to pasta manufacturing
plants. This trend could potentially decrease the future demand for semolina
from nonintegrated millers. In addition, the growth in demand for baking and
bread flour is marginal during a period when the milling industry has been
expanding, which will continue to put pressure on gross margins.

     TAXATION OF COOPERATIVES COULD CHANGE. Although under Subchapter T of the
Internal Revenue Code patronage refunds are excluded in determining taxable
income of a cooperative and patronage refunds are taxable to the recipient,
current income tax laws, regulations and interpretations pertaining to the
receipt of patronage refunds could be changed.

     DEPENDENCE ON CERTAIN CUSTOMERS. Each of the Wheat Milling Defined Business
Unit and the Oilseed Processing and Refining Defined Business Unit has certain
major customers. Loss of, or a decline in, the business done with one or more of
these customers could have a material adverse effect on the operations of the
affected defined business unit. In addition, the Wheat Milling Defined Business
Unit would be adversely affected by a decline in pasta production in the United
States.

     The foregoing review of factors pursuant to the Act should not be construed
as exhaustive or as any admission regarding the adequacy of disclosures made by
the Company prior to the effective date of the Act.
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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