FCStone Group, Inc. (Form: S-4/A, Received: 12/30/2004 17:29:30)

Adjusted net capital

Minimum net capital requirement

As filed with the Securities and Exchange Commission on December 30, 2004

Registration No. 333-118342

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 3 to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

FCStone Group, Inc.

(Exact name of registrant as specified in its charter)

Iowa

6221

42-1091210

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

(515) 223-3788

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Paul G. Anderson

President and Chief Executive Officer

FCStone Group, Inc.

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

(515) 223-3756

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Craig L. Evans

Shook, Hardy & Bacon L.L.P.

2555 Grand Boulevard

Kansas City, Missouri 64108-2613

(816) 474-6550

Richard A. Malm

Dickinson, Mackaman, Tyler
& Hagen, P.C.

1600 Hub Tower

699 Walnut Street

Des Moines, Iowa 50309

(515) 246-4516

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the restructuring pursuant to the plan of conversion described herein have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

LOGO

PROPOSED RESTRUCTURING

of FCStone Group, Inc., an Iowa corporation operating on a cooperative basis

Dear Member:

The board of directors and senior management of FCStone Group, Inc., have decided to propose a significant structural change to the company’s form of business. Although our cooperative structure has been beneficial to us for many years, after careful analysis, we are proposing a different structure in order to gain more flexibility to expand our current business and pursue new opportunities. The restructuring will be effected by converting the existing common and preferred stock and patronage-based rights in the company into a new class of common stock, and by amending the company’s articles of incorporation and bylaws to terminate the company’s cooperative status and end the patronage-based rights accruing to the company’s members. Additional investment in the company will be solicited from existing stockholders, and we anticipate that an employee stock ownership plan will be established. We believe that the proposed restructuring will increase the ability of the company to serve its members and other customers, as well as enhance the value of the ownership interests in the company by converting the existing patronage-based relationship with members into an investment-based relationship.

The restructuring cannot proceed without our stockholders’ approval of the proposed amendments to the articles of incorporation and plan of conversion. As described in the attached notice of special meeting, we will hold a special meeting of stockholders at 10:00 a.m., local time, on March 1, 2005 at the West Des Moines Marriott, 1250 74th Street, West Des Moines, Iowa, for the purpose of approving the restructuring. To vote, you are invited to attend the special meeting and submit your ballot at that time or to return the enclosed proxy. Your vote is very important . Our board of directors has approved the restructuring and recommends that you vote “FOR” approval of the amendments to the articles of incorporation and the plan of conversion effecting the restructuring. The affirmative vote of a majority of the votes cast by each class of stockholders, in person or by proxy, at the special meeting is required for approval. Under Iowa law, stockholders who oppose the restructuring will not have the statutory right to dissent from the transaction and demand the cash payment of the fair value of their shares.

Attached is a proxy statement of the company and prospectus of the new common stock which provides detailed information about the proposed restructuring. Please carefully review the entire proxy statement-prospectus. We have not authorized anyone to provide you with information that is different from the information contained in the proxy statement-prospectus. Information on our web site is not part of the proxy statement-prospectus. Please see “Risk Factors” beginning on page 12 to read about important factors you should consider before voting.

Bruce Krehbiel

Chairman

Paul G. Anderson

Chief Executive Officer

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN THE RESTRUCTURING OR DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The proxy statement-prospectus is dated , 2005, and is first being mailed to stockholders on or about , 2005.

FCSTONE GROUP, INC.

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON MARCH 1 , 2005

To the Stockholders:

This is a notice of a special meeting of the stockholders of FCStone Group, Inc, an Iowa corporation, (the “company”) to be held on March 1, 2005 at 10:00 a.m., local time, at the West Des Moines Marriott, 1250 74th Street, West Des Moines, Iowa for the purpose of considering:

1. A proposal to restructure the company by terminating the company’s cooperative status and ending the patronage-based rights accruing to the company’s stockholders. The restructuring cannot be effected without our stockholder’s approval of the proposed amendments to the articles of incorporation of the company and the plan of conversion converting shares of, and subscriptions for, the Class A common stock, the Class B common stock and the preferred stock in the company into shares of a new class of common stock in the company. Stockholders and subscribers will receive 500 shares of new common stock for each fully-paid share of Class A common stock, $5,000 par value, 10,000 shares of new common stock for each fully-paid share of Class B common stock, $100,000 par value, one share of new common stock for each $10.00 of paid subscription and one share of new common stock for each $10.00 in par value of preferred stock they hold as of the effective date of the restructuring. The membership interests in the company represented by patronage-based rights as of August 31, 2004, will be converted into (i) shares of new common stock based on a formula and (ii) nontransferable subscription rights to purchase additional shares of new common stock at a purchase price of $10.00 per share within 60 days after the distribution of new common stock and subscription rights. If the proposal is approved, the distribution of new common stock and subscription rights is expected to take place on or after March 3, 2005.

2. Such other business as may properly come before the meeting.

The close of business on January 3, 2005 has been fixed as the record date for determining those stockholders of the company entitled to vote at the special meeting and any adjournments or postponements of the meeting. Only holders of record may vote at the meeting. The company has determined that stockholders are not entitled to assert statutory appraisal rights under the Iowa Business Corporation Act in the event the restructuring is approved.

Your vote is important. The board of directors of the company solicits you to sign, date and promptly mail the proxy in the enclosed postage prepaid envelope, regardless of whether or not you intend to be present at the special meeting of stockholders. Sending in your proxy now will not interfere with your right to attend the meeting or to vote your shares personally at the meeting if you wish to do so. You may revoke your proxy with respect to any proposal at any time prior to completion of the vote, by following the procedures set forth in the accompanying proxy statement-prospectus.

BY ORDER OF THE BOARD OF

DIRECTORS

Eric Parthemore

Secretary of the board of directors

January 7, 2005

West Des Moines, Iowa

The board of directors of the company recommends that stockholders vote for approval of the proposed restructuring. As of the January 3, 2005 record date for the determination of shares of the company eligible to vote, there were 422 Class A common shares, five Class B shares and 13,880 preferred shares outstanding and entitled to vote on the proposal.

PROXY STATEMENT-PROSPECTUS

TABLE OF CONTENTS


		Page
Questions and Answers About the Restructuring		1
Summary		6
Risk Factors		12
Cautionary Statement Regarding Forward-Looking Information		21
The Restructuring		22
Use of Proceeds		36
Dividend Policy		36
The Special Meeting		37
Information Regarding the Company		39
Selected Financial Data		46
Pro Forma Financial Information		47
Management’s Discussion and Analysis of Financial Condition and Results of Operations		49
Company Management and Directors		64
Executive Compensation		67
Certain Relationships and Related Transactions		70
Security Ownership of the Company Before and After the Restructuring		71
Description of Capital Stock After Restructuring		73
Description of Subscription Rights		75
Comparative Rights of Members and Stockholders		76
Legal Matters		79
Experts		79
Future Stockholder Proposals		79
Where You Can Find More Information		80
Financial Statements of FCStone Group, Inc.		F-1
Appendix A—Articles of Restatement and Amendment		A-1
Appendix B—Amended and Restated Bylaws of FCStone Group, Inc.		B-1

QUESTIONS AND ANSWERS ABOUT THE RESTRUCTURING

Below are answers to questions that we anticipate will be frequently asked by stockholders in connection with making a decision on whether to approve the restructuring. We encourage you to read this entire document to obtain more complete answers to these questions.

Q1:

What is the restructuring being proposed and what will I receive?

We are proposing to restructure from a cooperative into an ordinary business corporation. The restructuring will be effected by adopting a plan of conversion and amending our articles of incorporation and bylaws to remove provisions which establish our cooperative character, including the obligation to pay patronage dividends, and adopting certain other provisions that are beneficial to the operations of an ordinary business corporation, while maintaining much of the company’s existing governance structure. Currently, members hold Class A common stock or subscriptions, Class B common stock, and preferred stock in the company and earn patronage-based rights. We will recapitalize by converting the Class A common stock and subscriptions, Class B common stock, and preferred stock into newly issued shares of common stock (“new common stock”). If the restructuring is effected by approval of the amendments to the articles of incorporation and the plan of conversion, you will receive 500 shares of new common stock issued by the company for each fully paid share of Class A common stock, $5,000 par value, or 10,000 shares of new common stock for each fully paid share of Class B common stock, $100,000 par value, and one share of new common stock for each $10.00 in par value of each preferred share you hold as of the effective date of the restructuring. Partially paid subscriptions for shares of Class A common stock will be converted at a rate of one new common share for each $10.00 paid. The membership interests represented by patronage-based rights will be converted into (a) shares of new common stock on a pro rata basis based on the appraisal of the company and a formula based on patronage for the three fiscal years ended August 31, 2004, and (b) nontransferable subscription rights to purchase additional shares of new common stock at a purchase price of $10.00 per share within 60 days after the distribution of new common stock and subscription rights.

Q2:

Will the ownership of the company change?

After the restructuring, ownership interests in the company will be represented by new common stock. Shares of new common stock and subscription rights will be distributed solely to the existing members as of the effective date of the restructuring. In most cases, each stockholder’s percentage ownership of the company will change to some extent as a result of the conversion and the exercise of subscription rights, depending upon the levels of patronage such stockholder had during the three years ended August 31, 2004 and the extent such stockholder and other stockholders exercise their subscription rights. We also intend to issue stock to an Employee Stock Ownership Plan, or ESOP, after the restructuring which will reduce the percentage ownership of our existing stockholders. See Question 12 below.

Q3:

How will the number of shares to be distributed to each member be determined?

If the restructuring is approved by the stockholders, the company will issue a total of 4.31 million shares of new common stock. This number of shares was determined by dividing the appraised value of the equity of company, $43.1 million, by $10.00. Each member’s existing stock ownership represented by common stock or subscriptions, and preferred stock will be converted by distribution of shares of new common stock at a conversion rate of one share of new common stock per $10.00 in current stock held. The remaining shares of new common stock will be distributed based on each member’s pro-rata share of patronage determined by a formula which considers patronage for the last three fiscal years, including the year ended August 31, 2004. In the case of Class A members, the formula utilizes the actual patronage paid

during the three-year period. In the case of Class B members, the patronage will be limited to $1.35 per round turn trade, which is less than the patronage paid to those members. The value of the stock to be issued with respect to patronage-based rights will be approximately $26.4 million, which is the $43.1 million appraised value of the equity of the company less the August 31, 2004 common and preferred stock value of $16.7 million. This amount represents approximately 5.4 times the total of all members three year defined patronage. Each member’s share will likewise be 5.4 times its individual three year defined patronage. One share of new common stock will be issued for each $10.00 of such value.

Q4:

Why are Class A and Class B amounts calculated differently?

Historically, the commissions paid by Class A and Class B members have not been comparable. As a result, the patronage amounts paid are not comparable between the two classes. The patronage amount for Class B members was adjusted downward to arrive at a more accurate reflection of the relative patronage. The formula to be used is intended to fairly allocate shares of new common stock between the two classes of members, and in the judgment of the board of directors and management, does so.

Q5:

Why is the company proposing to restructure?

A:	As part of an ongoing analysis of our business, the board of directors and senior management identified several primary factors which led them to recommend the proposed restructuring to the stockholders. See “The Restructuring — Reasons for the Restructuring.” They include:

•

Given the competitive nature of the industries in which we do business, we believe that the company will need significant capital resources to fund ongoing and future activities. If the business were to continue operating on a cooperative basis, our ability to raise and retain capital would be limited. After the restructuring, we will be able to issue common equity more freely and have the flexibility to raise new capital in a timely fashion.

•

We expect the restructuring to afford us greater flexibility to retain earnings and to position us to have greater access to capital, both of which we believe are necessary to allow our business to keep pace with the growth, consolidation and cost structure within the commodities/futures industry. The restructuring will allow us to form an ESOP and to issue nontransferable subscription rights to purchase additional shares of new common stock in connection with the restructuring, the proceeds of which will increase our capital and improve our balance sheet.

•

We believe that the restructuring may improve the liquidity of your investment in the company. Currently, common and preferred stock may be transferred only as an incident of membership in the company. After the restructuring, a stockholder may transfer its common shares to (a) any other holder of common shares (unless the transferee would hold more than 5% of the issued and outstanding shares of common stock after the transfer), or (b) any person approved in advance by the board of directors. In addition, it is the current intention of the board of directors to redeem a limited number of common shares every year, although the board will not be obligated to redeem any shares and has not yet established the terms of a plan for redemption.

•

The likely tax impact of the restructuring upon the company and its stockholders, the loss of the patronage dividend deduction and the additional costs of being a public company are acceptable, given the expected benefits to both the business enterprise and the company’s stockholders.

•

Growth of our business with non-members has reduced the significance of our cooperative status and pushed us closer to the boundaries of the definition of a cooperative under applicable law.

•

The restructuring will allow us to make distributions to our stockholders based on their equity interests rather than their patronage.

•

The restructuring will allow us to retain most aspects of our current system of corporate governance. We intend to limit the transfer of common stock of the company to cooperatives and the ESOP. We will also maintain our existing system of nominating eight Class I board members on a regional basis,

with one Class II board member being nominated by the 12 largest stockholders and the ESOP, and one Class III board member being nominated by the other board members. However, after the restructuring, the nominating procedure will only indicate the stockholders’ preference for certain nominees. The board of directors will be responsible for selecting all nominees, after consideration of the stockholders’ preferred nominees.

•

We believe the restructuring will enhance the value of the individual ownership interests of members in the company by converting such interests into stock with an investment value more directly related to the value of the company.

Q6:

In analyzing the proposed restructuring, did the board and senior management consider alternatives for the business to raise capital?

In addition to the restructuring as currently proposed, we considered a number of alternatives for structuring the business going forward and for obtaining capital investment including issuing subordinated debt, bringing in a large equity investor, seeking a joint venture with a well-capitalized partner, engaging in an initial public offering of our stock, and maintaining the status quo.

Q7:

How might my liquidity be improved by the restructuring?

We believe that the restructuring could improve the liquidity of your membership interests. The existing Class A and Class B common stock, preferred stock and other membership interests are not transferable. The new common stock will be subject to restrictions on transfer, but will be transferable among existing stockholders or to others with the approval of the board of directors. The opportunity may also arise to sell shares of common stock to an ESOP proposed to be established by the company, although no current plans for such sales exist at this time. In addition, it is the current intention of the board of directors to redeem a limited number of common shares every year, although the board will not be obligated to redeem any shares and has not yet established the terms of a plan for redemption. We believe it may be possible to sell your equity interests after the restructuring; however, we expect that the improvement in liquidity immediately following the restructuring will be limited, because the company intends to limit its stockholders to cooperatives and the ESOP. See “The Restructuring — Resales of Common Stock.”

Q8:

Will patronage dividends continue to be paid?

No. Our status as a cooperative will be terminated. A final patronage dividend has been declared and paid for the fiscal year ended August 31, 2004, but no patronage dividends will be paid thereafter. A regular dividend payable on a per share basis to holders of new common stock may be declared and paid at the discretion of the board of directors. If our financial results and condition are adequate, the board of directors anticipates payment of a regular annual dividend in the future. See “Dividend Policy.”

Q9:

How will the company and its members be taxed on the restructuring?

A:	We generally expect that the company and its stockholders should not recognize gain or loss for U.S. federal income tax purposes as a result of the restructuring. See “The Restructuring — Material U.S. Federal Income Tax Consequences.”

Q10:

How will voting rights change as a result of the restructuring?

Currently, each member of the company is limited to owning one share of Class A or Class B common stock. Following the restructuring, each stockholder will own the number of shares of new common stock distributed in the restructuring and any shares of new common stock acquired upon exercise of the subscription rights. Holders of common stock will continue to vote on matters such as the election or removal of directors, mergers, sales of all or substantially all of the assets of the company, dissolution of

the company and amendments to the articles of incorporation. After the restructuring, each share of common stock will continue to carry one vote, but stockholders will be able to vote the number of shares of common stock held. As a result, instead of each member having one vote, stockholders with more new common stock in the company will have greater proportionate voting power after the restructuring.

Until fully paid, shares of Class A common stock are subscribed but not issued. A share becomes fully paid after its par value of $5,000 has been withheld from patronage distributions in accordance with the company’s bylaws. Currently, those subscribed shares are not entitled to vote. However, after the restructuring, the subscribed shares will convert into shares of new common stock in the company which will be entitled to vote.

Currently, under the company’s bylaws, members also participate in the process of nomination for election to the board of directors on a one-member/one-vote basis, by casting nominating ballots. The nomination process is applied on a regional basis for eight of the ten members of the board of directors. Another board member is nominated by ballot of the twelve largest stockholders, and one board member is nominated by the other members of the board of directors. We intend to continue this nominating process after the restructuring, but the process will only indicate to the board of directors the stockholders’ preference. The board will ultimately select the nominees.

Q11:

What are nontransferable subscription rights and how do I exercise them?

As part of the restructuring, we will issue a nontransferable subscription right to each of our stockholders, which is a right to purchase during a 60-day period following issuance, additional shares of new common stock, in exchange for the stockholder’s patronage-based rights. Each subscription right will give the holder the right to purchase 100 shares of new common stock for each 200 shares of new common stock received in the restructuring in exchange for patronage-based rights. The subscription rights will be granted in 100 share blocks, rounded up to the next highest multiple of 100. The exercise price of subscription rights will be $10.00 per share. The subscription rights generally must be exercised in full. Partial exercises are only allowed if the subscription is for at least 1,000 shares of new common stock.

A stockholder who wishes to exercise subscription rights granted as part of the restructuring will be required to do so within 60 days after the distribution date provided in the plan of conversion. We expect the distribution date to be on or about March 3, 2005. The subscription rights of a particular holder, if not exercised, will terminate at the end of the 60-day exercise period.

Q12:

Will the Company establish an ESOP as a result of the restructuring?

The restructuring will give us the ability to adopt an employee stock ownership plan, or ESOP, and the board of directors has authorized our management to take steps to establish an ESOP. However, an ESOP cannot be implemented unless the stockholders vote to approve the proposed restructuring. The proposed bylaws will limit the ESOP to ownership of 20% of the new common stock of the company. Sales of new common stock to the ESOP will be at its appraised value. Sales of shares of common stock to the proposed ESOP will allow us to raise capital while capturing certain tax advantages. In addition, ownership of a percentage of our equity through the ESOP may assist us in retaining and attracting quality employees, and will align the interests of the employees and the stockholders. See “The Restructuring — The Proposed ESOP.”

Q13:

Will the restructuring affect the company’s relationship with CoBank?

No. After the restructuring, we will remain eligible to do business with CoBank, ACB, as long as at least 50% of our ownership interests continue to be held by eligible cooperatives. The board of directors intends to limit ownership of our common stock to ensure that we remain eligible to do business with CoBank.

Q14:

Does the restructuring require regulatory approval?

A:	No. Other than applicable state, provincial and federal securities registration requirements, we do not need to make any filings with or seek the approval of any regulatory agency in connection with the restructuring.

Q15:

If I oppose the restructuring, will I be able to assert statutory appraisal rights under Iowa law?

A:	No. Under Iowa corporate law, stockholders of the company who oppose the restructuring will not have the statutory right to dissent from the transaction and demand the cash payment of the fair value of their shares.

Q16:

After the restructuring, will my shares be subject to redemption if I do not do business with the company?

The company’s articles of incorporation currently give it the right to redeem the shares of common stock of any stockholder that the board determines has not transacted business with or through the company for a period of two consecutive years. The shares may be redeemed by the company at the book value of such shares. The company has no obligation to exercise this right. After the restructuring, this right will continue, but will not apply to any shares of new common stock purchased pursuant to a subscription right or to any other shares of stock except those received in the conversion effected by the restructuring. This redemption right will expire on August 31, 2009. The board of directors also intends to redeem a limited number of common shares every year, but has no right to require stockholders to be subject to such redemption. The material terms of any such voluntary redemption program have not been determined as of the date of this proxy statement-prospectus.

SUMMARY

The following summary, together with the preceding Question and Answer section, highlights selected information from this proxy statement-prospectus and may not contain all of the information that is important to you. To understand the transaction fully and for a complete description of the legal terms of the restructuring, we encourage you to read this entire document, including the section entitled “Risk Factors,” the appendices and the financial statements and related notes to those statements included in this document.

The Company

FCStone Group, Inc. is an Iowa corporation operating on a cooperative basis. The company operates its businesses in several segments, including:

Commodity and Risk Management Services. Our primary business in this segment is to offer commodity risk management services to our customers using futures, options and other derivative instruments. Our principal operating subsidiary is FCStone, LLC, a wholly owned Iowa limited liability company, registered with the Commodity Futures Trading Commission as a futures commission merchant, or FCM. Customer accounts maintained in this segment are primarily used by customers for hedging as a part of their commodity merchandising and acquisition programs. The company also acts as a broker for physical grain, fertilizer, and energy commodities and offers related transportation services. “Over-the-counter” commodity swaps and trade options are brokered with our parent company’s wholly owned limited liability company, FCStone Trading, LLC, as counterparty. We offer a full range of consulting, brokerage and transaction services through our staff of risk management consultants, supported by systems used to gather, disseminate and utilize commodity market information and intelligence.

Clearing and Execution Services. Our Stone Division offers low-cost clearing and direct execution services to professional, commercial, institutional and retail customers including services under the service name Futures Direct ^® . The Futures Direct ^® program provides an efficient method of order entry to qualified clients by providing direct access to the trading floor.

Grain Merchandising. We act as a dealer in, and manager of, physical grain and fertilizer through a majority interest in FGDI, LLC. FGDI acts as a grain dealer in the United States and international markets, primarily in Canada, Latin America and the Far East and also manages a pool of grain originated by a group of elevators in Texas. FGDI links suppliers and purchasers of grain products through its network of contacts in the industry. FGDI’s activities are supported by facilities, the most significant of which are a leased export terminal facility at the port of Mobile, Alabama and a fleet of leased rail cars.

Financial Services. We offer financing and facilitation for customers to carry commodities through our wholly-owned subsidiary, FCStone Financial, Inc., and our majority ownership of FCStone Merchant Services, LLC. The primary activity of FCStone Financial is entering into sale/repurchase agreements whereby it purchases grain evidenced by warehouse receipts subject to a simultaneous agreement to resell such grain back to the seller at a later date. FCStone Merchant Services, LLC expects to do similar transactions, in energy, grain and other commodities, as well as transactions where it shares in commodity profits with customers in exchange for financial support, but is newly formed and does not yet have any material operating history.

Our principal offices are located at 2829 Westown Parkway, Suite 200, West Des Moines, Iowa 50266, and our telephone number is 515-223-3788.

The Restructuring

The restructuring, if approved, will convert the company from a cooperative into a regular business corporation and will be followed by an offering of common stock to our members by means of nontransferable subscription rights, and the organization of an employee stock ownership plan. We have attached a copy of the proposed plan of

conversion and the amended and restated articles of incorporation of the company to this proxy statement- prospectus as part of Appendix A. We encourage you to read the proposed plan of conversion and the proposed amended and restated articles of incorporation as they are the legal documents that govern the restructuring.

As a result of the restructuring, we will no longer operate as a cooperative and will cease paying patronage dividends. We may pay dividends in the future on a per-share basis at the discretion of the board of directors.

The Special Meeting

A special meeting of the stockholders of the company will be held on March 1, 2005, at 10:00 a.m., local time, at the West Des Moines Marriott, 1250 74th Street, West Des Moines, Iowa, to vote on a proposal to amend the articles of incorporation and approve the plan of conversion to effect the restructuring of the company as described herein. The close of business on January 3, 2005 has been fixed as the record date for determining those stockholders entitled to vote at the special meeting and any adjournments or postponements of the meeting. Stockholders may vote by attending the special meeting and submitting votes on the ballot provided at that time or by completing and submitting a proxy card at or prior to the meeting. A quorum of stockholders eligible to vote must exist at the special meeting, either in person or by proxy, to approve the restructuring. If holders representing at least a majority of the Class A common stock, at least a majority of the Class B common stock, and at least a majority of the preferred stock are present at the special meeting, a quorum will exist. The affirmative vote of a majority of the votes cast at the special meeting by the Class A shares, the Class B shares and the preferred shares, voting as separate classes, is required to approve the restructuring. Abstentions will be counted as present for the purposes of determining the presence of a quorum at the special meeting. Abstentions will not be counted as votes cast. Accordingly, assuming no stockholders present at the meeting abstain from voting, the vote of at least 106 Class A common shares, two Class B common shares and 3,471 shares of preferred stock would be needed to approve the amendments to the articles of incorporation effecting the restructuring if the minimum for a quorum for each class of stock attended the stockholders’ meeting. Our board of directors has approved the restructuring and recommends that you vote “FOR” approval of the amendments to the articles of incorporation effecting the restructuring. The directors, as managers of cooperatives that are members of the company, have beneficial ownership of nine shares of Class A common stock, one share of Class B common stock and 894.3 shares of preferred stock, constituting 2.1%, 20.0% and 6.4% of the outstanding shares of those classes, respectively. The officers of the company have no beneficial ownership of shares of any class of stock of the company.

Pursuant to the company’s bylaws, holders of subscribed but not fully paid shares of Class A common stock will not be entitled to vote at the special meeting. However, such subscribers will receive a copy of this proxy statement-prospectus because, in connection with the conversion of their patronage-based rights, they will receive subscription rights to purchase shares of new common stock.

You may change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways. First, you can send a written notice stating that you would like to revoke your proxy. Second, you can complete and submit a new proxy card. Third, you can attend the special meeting and vote in person by requesting a ballot and voting at the meeting. Simply attending the meeting without voting, however, will not revoke your proxy.

You should carefully read and consider the information contained in this document. Then, please fill out, sign and mail your proxy card as soon as possible so that your shares may be represented at the special meeting.

Interests of Officers and Directors

ESOP

We plan to adopt an employee stock ownership plan, or ESOP, following the consummation of the restructuring. The ESOP will acquire shares of new common stock of the company at an appraised value and hold such shares for the benefit of the participating officers and employees. The proposed bylaws will limit the ESOP to owning no more than 20% of the equity of the company.

Other Equity-Based Plans

Following the restructuring, the company may consider additional equity-based incentive plans for its officers, directors and employees. The board of directors has no current plans, however, to adopt any other equity-based incentive plan.

Indirect Director Interests

Since each director of the company is a manager of a member of the company, each director has an indirect interest in the approval of the proposed transaction. In most cases, these members do a significant amount of business with the company and have significant patronage-based rights, which will be converted into new common stock upon consummation of the restructuring. If the restructuring is approved, the proportionate ownership interest of these members may increase.

SUMMARY FINANCIAL DATA

We derived the following historical financial information from our audited consolidated financial statements as of August 31, 2004 and August 31, 2003 and for each of the years in the three-year period ended August 31, 2004, which are included elsewhere in this proxy statement-prospectus, and our audited consolidated financial statements as of August 31, 2002 and as of and for the years ended August 31, 2001 and August 31, 2000, which are not included in this proxy statement-prospectus. Historical per share data has been omitted because, under the cooperative structure, earnings of the cooperative are distributed as patronage dividends to members based on the level of business conducted with the cooperative as opposed to common stockholder’s proportionate share of underlying equity in the cooperative. This table should be read together with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes included elsewhere in this proxy statement-prospectus.


	Year Ended August 31,
	2004		2003		2002		2001		2000
	(dollars in thousands)
Statement of Operations Data:
Total revenues	$	1,623,587	$	1,232,008	$	895,942	$	689,591	$	446,230
Costs and expenses:
Cost of grain and fuel sold		1,521,925		1,154,103		830,188		633,367		404,394
Employee compensation and broker commissions		28,502		24,111		21,835		18,022		14,845
Pit brokerage and clearing fees		26,743		16,152		11,557		7,903		3,888
Introducing broker commissions		10,016		7,881		7,802		6,441		3,118
Interest		4,790		3,192		1,297		1,217		835
Depreciation and amortization		833		803		850		711		625
Other operating expenses		21,758		19,700		17,145		14,130		10,899

Total costs and expenses		1,614,567		1,225,942		890,674		681,791		438,604

Income before income tax expense and minority interest		9,020		6,066		5,268		7,800		7,626
Minority interest		576		561		600		242		—

Income after minority interest and before income taxes		8,444		5,505		4,668		7,558		7,626
Income tax expense		2,030		1,200		1,280		1,590		1,370

Net income	$	6,414	$	4,305	$	3,388	$	5,968	$	6,256

Balance Sheet Data (at end of period):
Total assets	$	603,827	$	504,733	$	399,526	$	271,911	$	234,851	(1)
Notes payable and subordinated debt		47,281		76,548		66,013		24,179		8,702
Obligations under capital leases		4,675		5,363		—		—		—
Minority interest		5,488		4,109		3,758		3,243		—
Capital stock and equity		39,829		35,827		35,172		35,068		31,069

(1)	The company acquired the assets of a futures brokerage business on July 1, 2000 with assets of $118 million.

PRO FORMA FINANCIAL INFORMATION

The following selected unaudited pro forma data presented for the year ended August 31, 2004 gives pro forma effect to the restructuring from a cooperatively operated company to a regular business corporation. Adjustments to reflect this change include a reduction of commissions from the Class B member business and the loss of the patronage dividend deduction for income taxes. The pro forma number of common stock shares is based on the appraised fair market value of the equity of company of $43.1 million. Shares will be issued at $10 per share which would result in 4.31 million shares being issued.


	Year Ended August 31, 2004
	(unaudited)
	(dollars in thousands, except per share data)
Total revenues	$	1,623,587
Total costs and expenses		1,614,567

Income before income tax expense and minority interest		9,020
Minority interest		576

Income before income tax expense		8,444
Pro forma adjustments (1)		483

Income before income tax expense, after pro forma adjustments		7,961
Pro forma income tax expense (2)		3,000

Pro forma net income	$	4,961

Pro forma shares outstanding (3)		4,310,000

Pro forma earnings per share	$	1.15

(1)

Adjustment to commissions to reflect the reduction of Class B member futures commission rates to a market rate going forward as opposed to the above market rate paid previously. The above market rate resulted in additional patronage paid to Class B members to bring their rate after patronage to a net cost basis.

(2)	Income tax expense without patronage dividend deduction.

(3)

Assumes shares outstanding with a $43.1 million appraisal value of the equity of the company pursuant to the restructuring. Pursuant to the restructuring, shares will be distributed based on a value of $10.00 per share of new common stock. No effect of shares potentially issued under subscription rights has been assumed.

The following unaudited pro forma data estimates the amount and number of shares to be distributed to Class A and Class B members.


	(1) August 31, 2004 Stock Amounts (a)		(2) Three Year Patronage		(3) Patronage-Based Rights Value Distributed (b)		(1) & (3) Appraisal Allocation Value		Total Number of Shares Outstanding after Restructuring (c)
Class A common and preferred stock	$	14,668,833	$	4,643,854	$	25,104,773	$	39,773,606	3,977,361
Class B common and preferred stock		2,069,689		232,464		1,256,705		3,326,394	332,639

Totals		$16,738,522	$	4,876,318	$	26,361,478	$	43,100,000	4,310,000

(a)

Column (1) represents stock amounts for Class A and Class B stockholders as reflected on our balance sheet as of August 31, 2004. Pursuant to the restructuring, with respect to these stock amounts, Class A and Class B stockholders will be distributed 1,466,883 and 206,969 shares of new common stock, respectively.

(b)

Pursuant to the restructuring, the company will make a further distribution of new common stock having a value equal to the difference between the appraised value of the company’s equity and the total stock amounts as of August 31, 2004 set forth in column (1). Accordingly, new common stock to be distributed with respect to patronage-based rights will have a value equal to the difference between the appraisal value of $43,100,000 and the stock outstanding at August 31, 2004 of $16,738,522, which is $26,361,478. This distribution will be based upon the value of each stockholder’s patronage based rights as of August 31, 2004. The allocations among stockholders for patronage-based rights will be made pro rata based upon each stockholder’s total patronage determined according to the plan of conversion for the three years ended August 31, 2004. Column (2) sets forth the three year patronage for the Class A stockholders and the three year patronage for Class B stockholders determined on the basis of $1.35 per round turn trade. The three year patronage of Class A stockholders represents 95.2% of the total three year patronage, resulting in an allocation of $25,104,773 of the value attributable to patronage-based rights of Class A stockholders, or 2,510,477 shares of new common stock. The three year patronage of Class B stockholders represents 4.8% of the total three year patronage, resulting in an allocation of $1,256,705 of the value attributable to patronage-based rights of Class B stockholders, or 125,670 shares of new common stock.

(c)

No effect of shares potentially issued under subscription rights has been assumed.

RISK FACTORS

You should carefully consider the risks described below before making a decision on whether or not to approve the restructuring.

Risks Relating to the Restructuring

Cooperative tax treatment will be unavailable after the restructuring.

We currently are taxed as a nonexempt cooperative under Subchapter T of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes and are generally taxed as a cooperative for state tax purposes. After the restructuring, we will no longer qualify for treatment as a cooperative for federal and state income tax purposes, but rather will be taxed as a C corporation.

Under Subchapter T, we are subject to tax only on nonmember and nonpatronage income and on any undistributed member patronage income. Our members are currently subject to tax in the year of receipt on patronage dividends received from the company, including patronage dividends paid in stock or other qualified written notices of allocation. Such patronage dividends are normally treated as ordinary income.

After the restructuring, we will be taxed at corporate rates on our entire net income, including net income that is derived from business done with persons who were members before the restructuring and who continue as stockholders. After the restructuring, distributions by the company to our stockholders will generally be taxed to the stockholders as corporate dividends.

The shares of common stock to be issued by the company will be subject to significant restrictions on transfer.

The ability to transfer your shares of new common stock will be restricted by the articles of incorporation and bylaws of the company. The proposed bylaws provide that your shares of the company’s common stock will not be transferable, except to (a) any other holder of common shares (unless the transferee will hold more than 5% of issued and outstanding shares of common stock after the transfer), or (b) any person approved in advance by the board of directors. In addition, there may be restrictions placed upon certain transfers that would violate federal or state securities laws. As a result, you may be unable to find a suitable transferee for your shares and therefore be required to hold your shares of new common stock for an indefinite period of time.

The shares of common stock to be issued by the company have no public market and no public market is expected to develop.

There is no established public trading market for the new common stock that will be issued in the restructuring, and we do not expect one to develop in the foreseeable future. As a result, you may have to hold your new common stock for an indefinite period of time because you may not be able to readily resell your shares of new common stock.

The ability of the company to issue additional shares of common stock or other classes of shares may dilute or otherwise limit your voting or economic rights in the company.

The board of directors will be able to issue additional shares of common stock or preferred stock. The board of directors also can establish the designations, powers, preferences, rights, qualifications, limitations or restrictions of any preferred stock. Such rights, powers, preferences and privileges may be greater in voting power, liquidation and dividend rights than those associated with the common stock. These new shares could be issued at a lower price than the value of the common stock. Issuances of additional shares may have the effect of diluting or otherwise limiting your voting or economic rights in the company, particularly if the new shares are issued on more favorable terms than the new common stock issued in the restructuring.

The loss of patronage dividends could affect our relationship with current members.

Under our current structure, members that transact business with or through the company receive a patronage dividend, which generally acts as a rebate to members of a certain amount of the fees paid to the company in the current year. The patronage dividend system promotes member business with the company and rewards higher volumes of transactions by members. Upon closing the restructuring, we will no longer pay patronage dividends and these incentives for member transactions with the company will disappear. When these incentives to do business with the company are gone, current members may decide to use other firms for commodity and risk management services, clearing and execution services, physical grain purchases and sales and financial services, which would negatively impact our business.

Your shares may be subject to redemption if you do not do business with the company.

After the restructuring, our articles of incorporation will give us the right to redeem the shares of new common stock received in the restructuring by a stockholder if the board determines that a stockholder has not transacted business with or through the company for a period of two consecutive years. The shares may be redeemed by the company at the book value of such shares. The company has no obligation to exercise this redemption right. After the restructuring, this right will not apply to any shares of new common stock purchased pursuant to a subscription right or to any other shares of stock except those received in the conversion effected by the restructuring. Shares issued to the ESOP would not be subject to this right of redemption. This redemption right will expire August 31, 2009.

Dividends to stockholders are not guaranteed after the restructuring.

After the restructuring, we will not be under any legal requirement to pay dividends based on patronage. We may elect not to pay any dividends after the restructuring, and any dividends that we pay may be substantially less than the cash portion of patronage dividends previously distributed to members by the company.

Changes in the process for nomination and election of directors resulting from the restructuring could affect the results of director elections.

Our articles of incorporation and bylaws currently provide a system of nomination and election intended to promote representation of differing member interests on the board of directors as well as implementation of effective member choice in selection of directors. For this purpose the board is divided into three classes, with eight Class I directors nominated from four geographic regions by a process of nominating committee selection and member ballot, one Class II director nominated by the twelve largest stockholders by nomination and ballot, and one Class III director nominated in the discretion of the board. This classification system will not change as a result of the restructuring, but certain changes in the nomination and election process will occur as a result of the restructuring. The most important changes include providing one vote for each share held, rather than one vote per common stockholder, the expected addition of the ESOP as one of the largest stockholders in the Class II nomination process, a new procedure outside the regular nomination process for direct nomination by stockholders, and provisions whereby the results of the nominating ballot procedure will only indicate the preferred nominees of the stockholders, with the board making the final nomination after considering such preferences. These changes could affect the results of future elections of directors.

Elimination of the requirement that common stockholders be cooperatives could affect our business.

Our articles of incorporation currently require all common stockholders to be cooperatives. After the restructuring this requirement will be eliminated and a non-cooperative, the ESOP, will become a stockholder, subject to a limit contained in the bylaws that such shares not exceed 20% of the outstanding shares. Shares may also be distributed by the ESOP to its beneficiaries. Although it has no current plan to do so, the board of directors could authorize issuance or transfer of shares to non-cooperative holders after the restructuring. The interests of non-cooperative stockholders could vary from the interests of the existing members, and such

stockholders could exercise stockholder rights in a manner different than the members would. This could affect our business when and if such stockholder held a sufficient number of shares to effectively influence stockholder votes. In addition, we have substantial credit facilities established with a cooperative lender, CoBank ACB, but would become ineligible as a borrower from such bank if a majority of our shares were not held by cooperatives.

Our anti-takeover provisions could prevent or delay a change in control of our company, even if such a change of control would be beneficial to our stockholders.

Provisions of our articles of incorporation and bylaws could discourage, delay or prevent an acquisition or other change in control of our company, even if such a change in control would be beneficial to our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our common stock. These provisions might also discourage a potential acquisition proposal or tender offer. These provisions include:

•

a board of directors that is classified so that only some of the directors are elected each year;

•

authorization of “blank check” preferred stock that may be issued by the board of directors to thwart a takeover attempt, which could adversely impact the voting power of existing common stockholders;

•

a prohibition in the articles of incorporation granting the right of the company to refuse to recognize a transfer or attempted transfer of any common stock to any person who beneficially owns more than 5% of the common stock;

•

a reduction in the voting rights of the shares of common stock held by a beneficial owner in excess of 5% of the issued and outstanding shares to one hundredth (1/100) of one vote per share;

•

a requirement that at least 80% of all stockholders or at least 50% of disinterested stockholders vote to approve a business combination with any beneficial owner of more than 5% of the issued and outstanding shares, or any affiliate or associate of such a beneficial owner; and

•

the ability of the board of directors to limit the transfer of stock to existing stockholders or persons approved by the board.

Tax-free treatment for the restructuring is not assured.

The restructuring should qualify as a tax-free reorganization. No ruling has been or will be obtained from the Internal Revenue Service regarding any matter related to the restructuring. We have obtained an opinion from McDermott Will & Emery LLP that the restructuring will qualify as a tax-free reorganization. An opinion of counsel is not binding upon the Internal Revenue Service or the courts. There can be no assurance that the Internal Revenue Service will not assert, or that a court will not sustain, a contrary position. You are urged to consult with your tax advisor as to the U.S. federal income tax consequences of the restructuring, as well as the effects of state and local tax laws in light of your own tax situation. See “The Restructuring — Material U.S. Federal Income Tax Consequences.”

Risk Factors Regarding Commodity, Risk Management and Clearing Activities

Our business depends heavily on market and general economic conditions.

As a firm providing risk management services related to commodity prices and dealing in commodities, our business depends heavily on conditions in the commodity and financial markets and on economic conditions generally, both domestic and abroad. Many factors outside our control may directly affect the trading business, in many cases in an adverse manner. These include but are not necessarily limited to:

•

Commodity market conditions,

•

Economic and political conditions,

•

Broad trends in business and finance,

•

Legislation and regulation affecting the national and international business and financial communities,

•

Currency values,

•

Inflation,

•

Market conditions for agricultural and energy commodities,

•

The availability and cost of short-term or long-term funding and capital,

•

The credit capacity or perceived credit worthiness of the futures industry in the market place, and

•

The level and volatility of interest rates.

One of our subsidiaries is a futures commission merchant, or FCM, and clears commodities transactions on a number of commodities exchanges for its clients that trade commodities. The company, through another subsidiary, also acts as a principal in commodity swaps and trade options with our customers which are offset with an opposite transaction with other counterparties. Such client commodity accounts contain significant leverage and have a greater than average likelihood of becoming unsecured for clients incurring substantial losses, which ultimately could result in a loss to the company.

We are subject to a risk of legal proceedings, which may result in significant losses to us that we cannot recover.

Many aspects of our business subject us to substantial risk of potential liability to customers and to regulatory enforcement proceedings by state and federal regulators. Participants in the commodities trading industry face a significant amount of litigation and arbitration proceedings. Dissatisfied clients can make claims against their brokers for negligence, fraud, unauthorized trading, failure to supervise, breach of fiduciary duty, employee errors, intentional misconduct, unauthorized transactions by associated persons and failures in the processing of transactions. These types of claims expose us to the risk of significant loss. Acts of fraud are difficult to detect and deter, and we cannot assure you that our risk management procedures and controls will prevent losses from fraudulent activity. While we do not expect the outcome of any existing claims against us to have a material adverse impact on our business, financial condition or results of operations, we cannot assure you that these types of proceedings will not materially and adversely affect us. During the past three fiscal years, we have not suffered any losses as a result of such legal proceedings that were material, in the opinion of management. Our bylaws provide for the indemnification of our officers and directors to the maximum extent permitted under Iowa law. Indemnification of employees may be provided in the discretion of the board of directors. We may be the subject of indemnification assertions under these documents by our officers or directors who have or may become defendants in litigation. These claims for indemnification may subject us to substantial risks of potential liability.

In addition to the foregoing financial costs and risks associated with potential liability, the defense of litigation has increased costs associated with attorneys’ fees. The amount of outside attorneys’ fees incurred in connection with the defense of litigation could be substantial and might materially and adversely affect our results of operations for any reporting period.

We face legal uncertainties in the conduct of our business that could adversely affect our financial results.

Our business involves operations in futures markets, derivatives markets, and cash commodities markets. The legal and regulatory framework for these businesses involves substantial legal uncertainties, especially for agricultural commodities in the United States, and in international markets due to unresolved issues of a technical, legal, political and regulatory character. Recent examples in which legal uncertainties have led to losses by entities in the commodities business include disputes concerning Hedge to Arrive contracts and

international and domestic losses from genetically modified grains. The exclusion of agricultural commodities from certain regulatory reforms of the Commodity Futures Modernization Act has particular significance for us because of our involvement in risk management related to agricultural commodities. These uncertainties create substantial risks for the company.

We are subject to substantial governmental and organizational regulation.

Our businesses, and the commodity brokerage industry generally, are subject to extensive regulation at both the federal and state levels. In addition, self-regulatory organizations, such as the Chicago Mercantile Exchange (our designated self-regulatory organization) and the National Futures Association, require compliance with their extensive rules and regulations. Among other things, these regulatory authorities impose restrictions on sales methods, trading practices, use and safekeeping of customer funds and securities, record keeping and the conduct of principals and employees. The extensive regulatory framework applicable to our industry, the purpose of which is to protect customers and the integrity of the commodities markets, imposes significant compliance burdens and attendant costs on us. The regulatory bodies that administer these rules do not attempt to protect the interests of our stockholders as such, but rather the public and markets generally. Failure to comply with any of the laws, rules or regulations of any independent, state or federal regulatory authority could result in a fine, injunction, suspension or expulsion from the industry, which could materially and adversely impact us. Furthermore, amendments to existing state or federal statutes, rules and regulations or the adoption of new statutes, rules and regulations could require us to alter our methods of operation at costs which could be substantial. In addition, our ability to comply with laws, rules and regulations is highly dependent upon our ability to maintain a compliance system which is capable of evolving with increasingly complex and changing requirements.

We depend on our ability to attract and retain key personnel.

Our business, as a service business, relies heavily upon our highly-skilled and often highly-specialized employees and executive officers and the relationships they form with clients. The unexpected loss of services of any of our key employees and executive officers, or the inability to recruit and retain highly qualified personnel in the future, could have an adverse effect on our business and results of operations.

We depend heavily on our communications and information systems, which are vulnerable to systems failures.

Any failure or interruption of our communications and information systems could cause delays in our trading activities, which could significantly harm our operating results. We cannot assure you that we will not suffer any of these systems failures or interruptions from power or telecommunication failures, natural disasters, or that our back-up procedures and capabilities in the event of any such failure or interruption will be adequate.

We are subject to margin funding requirements on short notice; failure to meet such requirements would significantly harm our business.

Our business involves establishment and carrying of substantial open positions for customers on futures exchanges. We are required to post and maintain margin for these positions. Although we collect margin from our customers for these positions, significant adverse price movements can occur which will require us to post margin on short notice, whether or not we are able to collect additional margin from our customers. Although we maintain borrowing facilities for the purpose of funding margin and have systems to endeavor to collect margin from customers on a same-day basis, there can be no assurance that these facilities and systems will be adequate to eliminate the risk of margin calls in the event of severe adverse price movements affecting open positions of our customers.

We do a substantial amount of business with grain companies which subjects us to additional risk.

We do a substantial amount of business with grain companies, which are subject to economic forces, including agricultural commodity, energy and financial markets, which could result in uniform financial distress

to companies in that business segment. Any significant increase in business distress and failures in such segment could result in corresponding risk and losses to the company.

We must obtain and maintain credit facilities to operate; failure to maintain such facilities would require curtailment of our operations and result in losses.

We are substantially dependent on credit facilities for liquidity and operational funding. These credit facilities are necessary in order to meet immediate margin funding requirements, to fund and carry ownership in cash commodities, and to maintain positions required for our own risk management position in futures and over-the-counter markets. If we are unable to obtain and maintain credit facilities, our operational ability will be impaired and we would be required to curtail operations and incur operational losses.

We operate as a principal in over-the-counter markets which involves the risks associated with commodity derivative instruments.

We offer commodity swaps and trade options to our customers in which we act as a principal counterparty. We endeavor to simultaneously offset the commodity price risk of the instruments by establishing corresponding offsetting positions with major commodity counterparties. There can be no assurance, however, that these offsetting positions will be fully effective to eliminate the commodity derivative risk.

Transactions involving over-the-counter derivative contracts may be adversely affected by fluctuations in the level or volatility of or correlation or relationship between one or more market prices, rates or indices or other factors. These types of instruments may also be burdened by illiquidity in the market for the relevant transaction or in a related market.

Over-the-counter derivative transactions are subject to credit risks, which is the risk that a counterparty will fail to perform its obligation when due. These transactions involve substantial credit risk from our customers and other counterparties. We attempt to manage our customer credit risk by collecting trade option premiums in advance when we are a seller and by obtaining and maintaining customer deposits to cover swap and short trade option exposures. In the case of its major commodity counterparties, we have a policy of limiting transactions to the extent we are able to obtain counterparty credit risk coverage in the form of default risk insurance or credit default swaps. Despite these practices and policies, we are exposed to credit risk arising from our commodity swap and trade option activities, which could result in a material loss to the company.

Over-the-counter derivative transactions are subject to the risk that, as a result of mismatches or delays in the timing of cash flows due from or to counterparties in over-the-counter derivative transactions or related hedging, trading, collateral or other transactions, the company or its counterparty may not have adequate cash available to fund its current obligations.

We could incur material losses pursuant to over-the-counter derivative transactions because of inadequacies in or failures of our internal systems and controls for monitoring and quantifying the risk and contractual obligations associated with over-the-counter derivative transactions, for recording and valuing over-the-counter derivative and related transactions or for detecting human error, systems failure or management failure.

Over-the-counter derivative transactions may be modified or terminated only by mutual consent of the original parties and subject to agreement on individually negotiated terms. Accordingly it may not be possible to modify, terminate or offset obligations or exposure to the risk associated with a transaction prior to its scheduled termination date.

Some of our over-the-counter transactions may be highly leveraged, which increases the risk of loss.

We may engage in highly leveraged over-the-counter transactions. Because of the leverage ratios in these transactions, substantial losses may be incurred as a result of relatively small changes in the value or level of an underlying or related market factor.

We depend on risk management policies, practices and systems to manage significant risks.

Our businesses involve substantial risks which could cause material losses if not properly managed. These risks include, but are not limited to, the risks of failing to collect and maintain adequate margin from customers, the risk of adverse price movements on company-owned commodities or forward cash contracts and derivative contracts, and the risks of significant credit defaults. We attempt to reduce and manage these risks by appropriate management and hedging policies.

Although we have developed risk management procedures and policies to identify, monitor and manage risks, we cannot assure you that our procedures will be fully effective. Our risk management methods may not effectively predict the risks we will face in the future, which may be different in nature or magnitude than past experiences. In addition, some of our risk management methods are based on an evaluation of information regarding markets, clients and other matters provided by third parties. This information may not be accurate, complete, up-to-date or properly evaluated, and our risk management procedures may be correspondingly flawed. Management of operational, legal and regulatory risk requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and we cannot assure investors that our policies and procedures will be fully effective.

We engage in substantial commodity transactions as a principal.

We purchase and resell substantial grain and energy commodities. Such transactions involve substantial risks including risks of physical loss, price risk, counterparty default risks and funding and liquidity risk. We manage these risks by contract, by insurance, by hedging, and by maintaining lines of credit. However, there can be no assurance that these methods will be effective, and our commodity transactions could result in material losses.

We engage in a substantial amount of international business, which is subject to additional risk.

We engage in a significant amount of business with customers in the Far East, Latin America and Canada, as well as other international customers. These business activities are subject to currency rate fluctuation, which affects our income from these activities. In addition, we may not be in a position to seek enforcement of any amounts owed by these customers to the company because of the costs involved and other difficulties associated with seeking an enforceable judgment in these jurisdictions. In the event one of these customers decides not to provide us with payment for services rendered or goods sold, we may be left with limited remedial measures. We are also subject to legal, regulatory and political risks in the other countries involved.

We are subject to net capital requirements; failure to comply with these rules would significantly harm our business.

The CFTC requires futures commission merchants to maintain adequate regulatory capital in relation to their liabilities and the size of their customer business. These rules require futures commission merchants to maintain a substantial portion of their assets in cash or highly liquid investments. Failure to maintain the required net capital may subject a firm to limitation of its activities, including suspension or revocation of its registration by the CFTC and suspension or expulsion by the National Futures Association, various exchanges of which the futures commission merchant is a member and other regulatory bodies, and ultimately may require its liquidation. Failure to comply with the net capital rules could have material and adverse consequences such as:

•

limiting our operations that require intensive use of capital, such as trading activities; or

•

restricting us from withdrawing capital from our futures commission merchant subsidiary, even where it has more than the minimum amount of required capital. This, in turn, could limit our ability to pay dividends, implement our business and growth strategies, pay interest on and repay the principal of our debt and/or repurchase shares.

In addition, a change in the net capital rules or the imposition of new rules affecting the scope, coverage, calculation or amount of net capital requirements, or a significant operating loss or any large charge against net capital, could have similar adverse effects.

Risk Factors Regarding Grain Merchandising Activities

We buy and sell agricultural commodities and agricultural commodity products in our business, the demand for which can be affected by weather, disease and other factors beyond our control.

Weather conditions, disease and other factors have historically caused volatility in the agricultural commodities industry and consequently in our operating results by causing crop failures or significantly reduced or increased harvests, which can affect the supply and pricing of the agricultural commodities that we buy and sell in our business, reduce the demand for our fertilizer products and negatively affect the creditworthiness of our customers and suppliers. Reduced supply of agricultural commodities due to weather-related factors could adversely affect our profitability in the future.

We are subject to government policies and regulations affecting the agricultural sector and related industries that could adversely affect our operations and profitability.

Government policies and regulations affecting the agricultural sector and related industries could adversely affect our operations and profitability. Agricultural production and trade flows are significantly affected by government policies and regulations. Governmental policies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies and import and export restrictions on agricultural commodities and commodity products, can influence industry profitability, the planting of certain crops versus other uses of agricultural resources, the location and size of crop production, whether unprocessed or processed commodity products are traded and the volume and types of imports and exports. Future government policies may adversely affect the supply, demand for and prices of our products, restrict our ability to do business in our existing and target markets and could cause our financial results to suffer.

Our grain merchandising activities involve numerous business risks.

Our grain merchandising activities depend on our ability to earn a margin on bushels of grain purchased and sold. We can incur losses if the sale price, after taking into account hedge gains and losses, is less than the purchase price, if the purchase price cannot be collected, or if there are uncovered losses relating to physical quality or uncovered risk of casualty losses. We attempt to mitigate the losses by appropriate policies and practices, but there can be no assurance that such efforts will be sufficient to avoid losses.

We are dependent on access to external sources of financing to acquire and maintain the inventory, facilities and equipment necessary to run our business.

We require significant amounts of capital to operate our business. We require significant working capital to purchase and market our agricultural commodities inventories. An interruption of our access to short-term credit or a significant increase in our cost of credit could materially increase our interest expense and impair our ability to compete effectively in our business.

Risk Factors Regarding Financial Services Activities

Our financial services activities involve substantial credit and operational risk.

Our financial service activities, which primarily relate to financial accommodations to customers used to acquire and carry commodities, expose us to substantial credit risks due to possible defaults or nonperformance of our customers. In addition, we are exposed to various kinds of operational risks relating to the underlying commodities that form the basis of our financial services transactions. Losses in and to these commodities, which

could be caused by fraud, misappropriation or other uninsured loss, could cause loss to us. Many of our financial services transactions depend on grain warehouse receipts issued to, or held by, us. If such receipts were invalid or not fully enforceable, it could cause a material loss. There are government programs that back grain warehouse receipts, but these could be inadequate to fully reimburse us for the value of grain evidenced by our warehouse receipts in the event of the business failure of the issuer of the receipt.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This proxy statement-prospectus includes forward-looking statements regarding, among other things, our plans, strategies and prospects, both business and financial. All statements other than statements of current or historical fact contained in this proxy statement-prospectus are forward-looking statements. The words “believe,” “expect,” “anticipate,” “should,” “plan,” “will,” “may,” “intend,” “estimate,” “potential,” “continue” or the negative of these terms and similar expressions, as they relate to us, are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They can be affected by inaccurate assumptions, including the risks, uncertainties and assumptions described in “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking statements in this proxy statement-prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. When you consider these forward-looking statements, you should keep in mind these risk factors and other cautionary statements in this proxy statement-prospectus.

Our forward-looking statements speak only as of the date of this proxy statement-prospectus. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

THE RESTRUCTURING

General

The restructuring will be effected by amending our articles of incorporation to eliminate provisions requiring the company to operate on a cooperative basis, effecting other modifications considered appropriate by the board of directors for a regular business corporation and approving the plan of conversion. After the restructuring, we will cease operating as a cooperative and will function as a general business corporation under the Iowa Business Corporation Act. All membership and stock interests, as evidenced by Class A common stock and subscriptions, Class B common stock and preferred stock in the company will be cancelled and replaced with one class of common stock (“new common stock”) of the company. Patronage-based rights will also be exchanged for new common stock and nontransferable subscription rights to purchase additional shares of new common stock. Upon completion of the restructuring, the directors and senior management of the company will not change.

Termination of Cooperative Status

Under the cooperative structure, each of our stockholders or stock subscribers was a member of the company, holding, or subscribing for, one share of Class A or Class B common stock each, and shares of preferred stock and was entitled to receive patronage-based distributions. Upon consummation of the restructuring, we will cease operating as a cooperative and our stockholders will no longer be entitled to patronage dividends with respect to periods after August 31, 2004. Future distributions, if any, will be made in the form of dividends or other distributions with respect to share ownership in accordance with our articles of incorporation, bylaws and applicable law.

Conversion of Common and Preferred Stock and Post-Restructuring Status of Patronage-Based Rights

Generally, each stockholder will receive one share of new common stock for each $10.00 in par value of current stock held. Specifically, in the restructuring, each issued and outstanding share of existing Class A common stock, $5,000 par value, will be converted into 500 shares of new common stock. Each issued and outstanding share of existing Class B common stock, $100,000 par value, will be converted into 10,000 shares of new common stock. All issued and outstanding shares of preferred stock, including all fractional preferred shares, will be converted into shares of new common stock at the rate of one share of new common stock for each $10.00 in par value of each preferred share. The par value of fractional preferred shares will be proportional to the par value of a whole share. Each subscriber for existing Class A common stock will receive shares of new common stock on the basis of one share of new common stock for each $10.00 credited to the account of each subscriber.

The preferred stock of the company has been issued in two series designated as Series I Preferred and Series II Preferred. Series I Preferred and Series II Preferred stock have identical rights and privileges and are treated identically in the restructuring. The only difference between the two series is that Series II Preferred was previously issued to reflect separate FGDI patronage, and to satisfy minimum preferred stock requirements relating to FGDI patronage, for the period of time that FGDI operated on a cooperative basis with a separate patronage pool. Series I Preferred was issued for all other patronage and minimum preferred stock requirements. If the restructuring is approved, no preferred stock will be issued with respect to patronage-based rights for periods after August 31, 2004.

In converting shares, no fractional shares will be issued. Each fractional share of new common stock resulting from the conversion calculation will be rounded up to the next whole share of new common stock.

Through the restructuring, the patronage-based rights of the members of the company will be converted into new common stock and nontransferable subscription rights to purchase additional shares of new common stock (“subscription rights”) in the following manner. Our appraiser, RSM McGladrey, Inc., has conducted an appraisal of the company and determined that the fair market value of the equity of the company as of August 31, 2004,

was $43.1 million. This value is divided by $10.00 to establish the total number of shares of new common stock, 4.31 million shares, to be issued in the restructuring. This number of shares of new common stock issued in exchange for the existing shares of Class A common stock, shares of Class B common stock, subscribed shares of Class A common stock and preferred stock, totaling approximately 1.7 million shares, is subtracted from the total number of new common stock to be issued in the restructuring, and the remaining 2.6 million shares of new common stock will be distributed in exchange for patronage-based rights.

The patronage-based new common stock will be distributed to members owning stock or subscriptions as of August 31, 2004, in proportion to the defined patronage of the company during the fiscal years ended August 31, 2004, August 31, 2003, and August 31, 2002 (“computation period”). The three-year computation period is considered fairly representative of the relative existing rights of members who currently patronize the company. The patronage of a holder or subscriber of Class A common stock will be based on the total patronage received in cash and stock by the Class A member, including both commission and interest pool amounts. The patronage of a Class B member will be based on a total of $1.35 per round turn trade, which is less than the actual patronage paid. Historically, the commissions paid by Class A and Class B members have not been comparable. Unlike our Class A members, Class B members to do not use the company’s brokers to assist in hedging and other services. Instead, Class B members call directly to the trading floor to make their trades. The Class B members have historically paid rates for these services that are substantially above the prevailing market rates for such services and have recouped these amounts with higher per-trade patronage dividends than those paid to Class A members for their trades. As a result, the patronage amounts paid are not comparable on a dollar for dollar basis between the two classes. The patronage amount for Class B members was adjusted downward to arrive at a more accurate reflection of the relative amount of business done by each class with the company. The $1.35 per round turn trade was selected as an amount which would, in the judgment of the board of directors and management, fairly allocate patronage-based rights between the Class A and Class B members by adjusting for the effect of above-market rates initially paid by Class B members. The $1.35 per round turn reflects an approximate 83% reduction of the dollar patronage on the Class B commission pool. The patronage credited to a member will include the patronage of any entity to which the member is a successor by merger or acquisition. Each Class A member and Class B member will then receive its pro rata share of the number of shares of new common stock available for exchange for patronage-based rights. No patronage-based shares of new common stock will be distributed to any member that did not receive patronage dividends from the company with respect to business conducted during the period from September 1, 2001 to August 31, 2004. Each member’s patronage-based new common stock value will equal approximately 5.4 times their three year patronage total, as defined above.

In addition to receiving shares of new common stock, each member receiving patronage-based new common stock will receive a nontransferable subscription right which gives the member the right to purchase additional shares of new common stock of the company. Each subscription right will give the holder the right to purchase 100 shares of new common stock for each 200 shares of new common stock received in exchange for patronage-based rights. Subscription rights will be issued in multiples of 100 shares, rounded up to the next highest multiple of 100 shares. Partial exercises are permitted so long as the total subscription by that member is for not less than 1,000 shares of new common stock. Full exercises will not be subject to this minimum requirement. The subscription rights will be exercisable at $10.00 per share, will be subject to terms and conditions established by the board of directors, and will expire 60 days after the distribution date. After the completion of the appraisal, the company will distribute to each holder of a subscription right notice of the number of shares such holder is entitled to purchase. Subscription rights for approximately 1.3 million shares of new common stock will be distributed.

Accounting Treatment of the Restructuring

The restructuring does not change the accounting for assets, liabilities and equity. The only impact is to exchange a new issue of common stock for the existing membership Class A common, Class B common and preferred stock owned by the stockholders. The amount assigned to the new common stock will be equal to the August 31, 2004 combined amounts of the Class A common, the Class B common and total preferred stock.

Reasons for the Restructuring

Our board of directors and senior management determined the structure and terms of the restructuring of the company into a general business corporation under Iowa law after extensive investigation of the anticipated business, tax and other effects on the company and its stockholders of converting to another form of entity or continuing to operate on a cooperative basis. As discussed below, the decision to effect the restructuring is a result of extensive internal discussion and research among the members of the board of directors and senior management of the company taking into account the advice of outside consultants and private discussions of management with certain members and groups of members.

Over the past several years, and particularly in recent months, our board of directors and senior management have carefully analyzed the company’s business and structure. As a result of that analysis, it has become apparent that significant structural changes are necessary in order to continue to operate and expand our business in an appropriate manner. After carefully exploring alternatives, the board of directors and senior management have determined that it is in the best interests of the company and its stockholders to cease operating on a cooperative basis. Given the competitive nature of the commodities/futures business, the board of directors and senior management believe that the business will require significant capital resources to fund on-going activities. We expect that restructuring to discontinue operating as a cooperative will afford the business greater access to capital, which we believe is necessary to allow the business to keep pace with the growth, consolidation and cost structure within the industry.

Ultimately, the company’s board of directors and senior management based its final decision to convert from a cooperative on a number of factors, including those summarized below.

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Given the competitive nature of the industries in which we do business, we believe that the company will need significant capital resources to fund ongoing and future activities. The company’s growth requires significant capital. Our commodity and risk management business require regulated levels of capital which must grow as the businesses grow. Under the current cooperative form, our ability to raise capital is limited. In particular, its common stock is limited to one share per member, does not earn an investment return, and cannot be held by non-members. After the restructuring, the company will be able to issue common and preferred equity more freely and have the flexibility to raise new capital in a number of ways. First, under the terms of the restructuring, each existing stockholder that receives new common stock in exchange for patronage-based rights will receive nontransferable subscription rights to purchase an additional 100 shares of new common stock for each 200 shares received in exchange for patronage-based rights. Second, through the anticipated employee stock ownership plan, or ESOP, eligible employees will be able to invest in our common stock. The company has no current plans to raise capital from parties other than the existing stockholders and the ESOP, but could elect to do so in the future. These and other capital raising options would be more readily available after the restructuring as compared to the current cooperative structure.

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The board of directors and senior management have determined that the current cooperative structure lacks the flexibility needed to act in a timely fashion to meet capital requirements or emergencies. Under the terms of the restructuring, many of the restrictions on share ownership will be removed from the articles of incorporation, and the company will be registered as a public company under the Securities Exchange Act of 1934. The restructuring will allow us to form an ESOP and issue nontransferable subscription rights to purchase additional shares of new common stock in connection with the restructuring, the proceeds of which will increase our capital and improve our balance sheet. If the need should arise, the board of directors would be able to raise capital in a more timely fashion than is currently the case.

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We believe that the restructuring may improve the liquidity of your investment in the company. The current cooperative form requires that shares of the company’s common and preferred stock may be transferred only as an incident of membership in the company. After the restructuring, a stockholder may transfer its common shares to (a) any other holder of common shares (unless the transferee would

hold more than 5% of issued and outstanding shares of common stock after the transfer), or (b) any person approved in advance by the board of directors. In addition, it is the current intention of the board of directors to redeem a limited number of common shares every year, although the board will not be obligated to redeem any shares and has not yet established the terms of a plan of redemption.

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The board of directors and senior management determined that the likely tax impact of the restructuring upon the company and our stockholders, the loss of the patronage dividend deduction and the additional costs of being a public company are acceptable, given the expected benefits to both the business enterprise and the company’s stockholders.

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In order to maintain our status as a cooperative under applicable laws, we must conduct a substantial portion of our business with our members. However, we are already conducting a significant amount of business with non-members. As the level of business the company transacts with non-members increases, our status as a cooperative could begin to come into question.

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We do not currently distribute the earnings which result from business with non-members. After the restructuring, the board of directors will have the discretion to make distributions from member and non-member business to the stockholders based on their equity interests rather than their patronage. This change will make it possible to raise investment capital by issuance of common stock or securities convertible into common stock.

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The board of directors and senior management have determined that the restructuring will allow us to retain most aspects of its current system of corporate governance. The proposed amendments to the bylaws will give the board of directors the authority to limit transfers of common stock to parties other than existing stockholders. The board of directors intends to use its discretion provided in the bylaws to limit the transfer of common stock of the company to cooperatives and the ESOP. The company will maintain most aspects of its existing system of nominating eight Class I board members on a regional basis, with one Class II board member being nominated by the ESOP and the 12 largest stockholders, and one Class III board member being nominated by the other board members. However, after the restructuring, the bylaws will grant the board of directors the ultimate authority to make nominations and the nominating process will only be used to indicate stockholder preferences.

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We believe the restructuring will enhance the value of the individual interests of our members by converting such interests into stock which will have an investment value more directly related to the value of the company.

This discussion of factors considered by our board of directors and senior management is not intended to be exhaustive, but is believed to include the material factors they considered. In reaching its determination to approve and recommend the restructuring, the board of directors considered the above issues and factors collectively without quantifying or assigning a greater weight to any one factor.

Recommendation of the Company’s Board of Directors

The board of directors and senior management believe that it is in the best interests of the company and our stockholders to restructure the company to cease operating on a cooperative basis and to adopt certain provisions in our articles of incorporation considered beneficial to the operation of a regular business corporation. Accordingly, the board of directors has approved the restructuring. The board of directors recommends that stockholders of the company vote “FOR” adoption of the proposal to restructure the company as described herein. If the restructuring is not consummated for any reason, we intend to continue to operate our business in a cooperative form.

Regulatory Approval

Other than as necessary to comply with federal, state and provincial securities laws, no regulatory approvals must be obtained in connection with the proposed restructuring.

Statutory Appraisal Rights

Under Iowa corporate law, stockholders of the company who oppose the restructuring and the conversion of existing Class A and Class B common stock, preferred stock and patronage-based rights for shares of new common stock will not have the statutory right to dissent from the transaction and demand the cash payment of the fair value of their shares in the transaction. Therefore, if the restructuring is approved and completed, you will have no statutory right to seek a separate appraisal of your existing shares of Class A and Class B common stock, preferred stock and patronage-based rights in the company.

Employee Benefit Plans

Under the restructuring, we will continue to honor all benefits accrued by the company under any employee benefit plan, policy or arrangement in accordance with the respective terms of those benefit plans and to the extent required by law. We will maintain the effectiveness of, and continue to administer all such benefit plans, policies or arrangements. However, if the restructuring is approved, and the ESOP is established, we intend to replace for all eligible employees the company’s existing matching contributions to the company’s 401(k) plan with a company contribution to the ESOP.

Redemption of Certain Inactive Members’ Equity

Under the existing articles of incorporation, membership rights and common stock of members may be canceled and redeemed in the event that the member has not patronized the company for a period of two years. Preferred stock is callable on thirty days’ notice. At its meeting of June 30, 2004, prior to adoption of the proposed restructuring, the board of directors considered the status of members that had not patronized the company for more than two years and determined that it should exercise the rights to redeem inactive members, excluding those in bankruptcy and those which had merged with or been acquired by active members. As a result, the common and preferred stock rights of 152 members were canceled and will be redeemed. This cancellation and redemption is not contingent upon approval of the restructuring. None of the inactive members so redeemed would have been eligible for a distribution of new common stock in exchange for patronage-based rights under the terms of the restructuring. The primary effects of this action on the restructuring will be to reduce the number of shares outstanding, to reduce the number of stockholders, to reduce the capital of the company by the amount of the redemption and to slightly increase the proportionate shares of the remaining members in the company after the restructuring.

Federal Securities Law Consequences

Subject to the restrictions on transfer set forth in the bylaws, under the federal securities laws (specifically Rule 145), new common stock in the company received in the restructuring by persons who are not affiliates of the company, as defined by the Securities Act of 1933 may be resold immediately in transactions not involving an issuer, underwriter or dealer. Common stock received in the restructuring by “affiliates” of the company may be resold only in compliance with Rule 145(d) of the Securities Act (which incorporates specific provisions of Rule 144 of the Securities Act), in transactions that are exempt from registration under the Securities Act, or pursuant to further registration under the Securities Act. The restrictions under Rule 145 are generally expected to apply to the directors and senior management of the company. Affiliates of the company may be required to execute agreements to comply with Rule 145(d).

This document cannot be used in connection with subsequent sales of new common stock of the company received in the restructuring by a stockholder who may be deemed to be an affiliate of the company under the Securities Act.

Immediately prior to the consummation of the restructuring, we will register the shares of new common stock under the Securities Exchange Act of 1934. Upon that registration, we will be subject to the requirements

of the 1934 Act, will file annual, quarterly and current reports with the Securities and Exchange Commission, and will also become subject to the proxy rules, management reporting of insider ownership and other requirements of a company registered pursuant to Section 12(g) of the 1934 Act.

Amendments to the Company’s Articles of Incorporation

If the proposed amendments of the articles of incorporation and the plan of conversion are approved, existing provisions which require us to operate on a cooperative basis and which allow us to be taxed as a cooperative under Subchapter T of the Internal Revenue Code of 1986, as amended will be removed. The amended articles of incorporation will permit us to engage in all lawful business for which corporations may be organized under the Iowa Business Corporation Act. The amended articles of incorporation will replace the existing outstanding shares of, and subscriptions for, Class A and Class B common stock and outstanding preferred stock with a single class of common stock. Subject to provisions applicable to holders of more than 5% of our common stock, each share of new common stock will have the same dividend and voting rights, with each share of common stock entitled to one vote. Twenty-five percent of the shares of common stock entitled to vote will constitute a quorum at meetings of common stockholders.

The amended articles of incorporation will preserve the right of the company, at its option, to redeem at book value, any common stock issued in the restructuring if the board of directors determines that the holder of such shares has not done business with the company for a period of two years. This right will not apply to any shares of new common stock purchased pursuant to a subscription right or to any other shares of stock except those received in the conversion effected by the restructuring. Shares issued to the ESOP would not be subject to this right of redemption. This redemption right will expire on August 31, 2009.

The amended articles of incorporation will continue to provide that the company will have a lien on the issued common stock of each holder for indebtedness of that holder owed to the company or any of its subsidiaries or affiliates.

The amended articles of incorporation will eliminate the existing qualifications to membership which limit the ownership of the company’s equity interests to agricultural cooperatives, federated cooperative associations of agricultural cooperatives and other cooperative entities. The amended articles of incorporation will continue to allow restrictions on ownership of the new common stock to be provided in the bylaws of the company. The amended bylaws of the company do not have any restrictions on ownership of the new common stock, however, the board of directors currently intends to limit the issuance and transfer of shares to cooperatives and the ESOP.

The amended articles of incorporation authorize the company’s board of directors to issue one or more series of preferred stock with rights, privileges, qualifications, limitations or restrictions as established by the board of directors, including voting rights. The board has no current plans to issue preferred stock.

The amended articles contain provisions placing limitations on the amount of common stock that may be beneficially owned by a single person, other than the company or any compensation plan maintained by the company. In the event that any person, or group of persons acting in concert, becomes the beneficial owner of more than 5% of our common stock, the shares in excess of 5% will be entitled to one hundredth ( ¹ / 100 ) of one vote per share. In addition, the amended articles authorize us to refuse to recognize any transfer or attempted transfer of common stock to any person who beneficially owns, or who we believe would, by virtue of the transfer or attempted transfer would become the beneficial owner of, more than 5% of our common stock. The board of directors will be authorized to adopt regulations and procedures not inconsistent with these provisions for the administration of these provisions. The board of directors will also have the right to demand that the beneficial owner of more than 5% of the common stock supply factual information that would allow the board to determine the applicability of these provisions. The amended articles provide that any applications, interpretations, constructions or other determinations made by the board of directors in good faith and on the basis of information reasonably available will be conclusive and binding on the company and its stockholders.

These provisions will not apply to any offer or sale of common stock by the company to an underwriter in connection with the public offering of the common stock or to certain transactions undertaken by the company which do not have the effect of changing the beneficial ownership interests of the stockholders.

The amended articles provide for a maximum of 15 members of the company’s board of directors. The current board consists of ten members. The board of directors has no current plans to increase the size of the board of directors under this provision.

The amended articles of incorporation require the affirmative vote of at least 80% of all the outstanding shares of common stock and at least 50% of the common stock not held by the beneficial owner (and any associate or affiliate of such a beneficial owner) of 5% or more of the common stock to approve any business combination with the beneficial owner of 5% or more of the company’s common stock. If the business combination has been approved by a majority of the disinterested directors then in office, these provisions will not apply.

The amended articles do not provide for any preemptive rights to acquire any unissued or treasury shares of the company.

The amended articles provide for the limitation or elimination of the personal liability of directors of the company to the fullest extent permitted by the Iowa Business Corporation Act, except for financial benefits received by a director to which the director is not entitled, any intentional infliction of harm on the company or its stockholders, any violation of Section 833 of the Iowa Business Corporation Act, or any intentional violation of law.

The amended articles retain an existing provision requiring three-fourths of the outstanding shares of common stock to vote for dissolution of the company or to amend such voting requirement.

Amendments to the Company’s Bylaws

If the restructuring is approved, the board of directors will amend our bylaws to eliminate the rights and requirements relating to patronage and to alter the restrictions on ownership of our equity interests. Specifically, the company’s bylaws will be amended to eliminate the right to patronage dividends. The amended bylaws will provide for dividends to be paid on shares of common and preferred stock at the discretion of the board of directors. The amended bylaws will not contain any requirements that any stockholder maintain any level of equity investment based on the volume and kind of business done with the company. However, as discussed above, the amended articles of incorporation grant the company the right to redeem shares issued in the restructuring if the board determines that a holder of shares has not done business with the company for a period of two years.

The amended bylaws of the company will not require that any person meet membership or patronage requirements in order to own the common stock of the company. The amended bylaws will provide that shares of common stock will not be transferable, except to (a) any other holder of common shares (unless the transferee holds more than 5% of issued and outstanding shares of common stock after the transfer) or (b) any person approved in advance by the board of directors. Shares in any employee stock ownership plan will be transferable as permitted in such plan.

The amended bylaws will also contain advance notice provisions relating to business to be brought before an annual meeting of stockholders. In order to give timely notice, a stockholder must deliver or mail a written notice to the principal offices of the company not less than 120 days prior to the date of the annual meeting. If no annual meeting was held the previous year, or the date of the annual meeting has changed more than 30 days from the date contemplated by the previous year’s proxy statement, the notice must be received no later than 10 calendar days following the date on which the public announcement of the date of the meeting is first made. The

notice must set forth (a) a brief description of the business desired to be brought before the annual meeting, (b) the reasons for conducting such business at the annual meeting, and any material interest in such business of such stockholder and the beneficial owner if any, on whose behalf the proposal is made, (c) the name and address of the stockholder giving the notice and of the beneficial owner, if any, on whose behalf the proposal is made, (d) the class and number of shares of the company that are beneficially owned and of record by such stockholder and such beneficial owner, and (e) all other information with respect to each such matter as would have been required to be included in a proxy statement filed pursuant to Regulation 14A, as then in effect under the Securities Exchange Act of 1934, had proxies been solicited by the board of directors with respect thereto. No business may be conducted at the annual meeting except in accordance with these procedures and Rule 14a-8, as then in effect under the Exchange Act. The amended articles provide that meetings of the stockholders will be presided over by the chairman of the board, and authorize the board of directors to adopt rules and regulations for the conduct of the stockholders’ meetings.

The amended bylaws restate the procedures and processes for the qualification and selection of nominees to the board of directors to conform to the changes made by the restructuring, but generally preserve the existing procedures and processes. In particular, the system of regional qualification, regional nominating committees, and candidate preference ballots for eight Class I directors is preserved. However, the results of the nominating ballot procedure will only indicate the preferred candidate of the stockholders. The board of directors, upon consideration of the results of the preference ballot will determine the Class I nominee(s) put to a vote of stockholders at the annual meeting. Similarly, the twelve largest stockholders and the ESOP will continue to be involved in the selection of the one Class II director with the company. The results of the nominating ballot procedure will only indicate the preferred nominees of the stockholders. The board of directors will make the final nomination after considering the preferences of these large stockholders. The amended bylaws provide that individual stockholders may submit nominations of directors for consideration by the board of directors or a nominating committee.

Finally, the amended bylaws provide that the ESOP, if adopted, will be limited to owning 20% of the common shares of the company.

The Proposed ESOP

We presently contemplate the establishment of an “employee stock ownership plan”, or ESOP, following the consummation of the restructuring. An ESOP is a special type of qualified retirement plan described in and subject to certain requirements contained in the Internal Revenue Code of 1986, as amended (the “Code”), and the Employee Retirement Income Security Act of 1974 (“ERISA”). By definition, an ESOP must be designed to invest primarily in stock of the sponsoring employer.

Generally, an employer maintaining an ESOP will make contributions to the plan in the form of cash or in the form of company stock. Subject to certain limitations set forth in the Code, such contributions will ordinarily be deductible by the company. As a form of qualified retirement plan, an ESOP will typically cover a broad range of employees. Each employee participating in an ESOP will have his or her own account in the ESOP, and the assets in each participant’s account will be subject to a vesting schedule in the plan document. The vested portion of the assets in a participant’s ESOP account typically become distributable following the occurrence of certain events, including the participant’s death, disability, retirement or other separation from service.

ERISA requires that the assets of an ESOP be held in a trust and imposes on the trustee (as well as other fiduciaries) of the plan an obligation (a) to act solely in the interest of plan participants and their beneficiaries for the exclusive purpose of providing benefits and defraying the reasonable expenses of administration of the plan, (b) to act prudently, and (c) to act in accordance with the governing plan documents to the extent consistent with ERISA.

terms of the 401(k) Plan, employees who are expected to work at least 1000 hours in a year, who have attained the age of twenty-one (21) and who have completed at least four (4) months of service are eligible to participate in the plan. To the extent participants make 401(k) elective deferrals to the plan (“401(k) Contributions”), the company has historically made matching contributions to the plan in an amount equal to 50% of each participant’s 401(k) contributions, subject to a maximum matching contribution in an amount equal to 4% of the participant’s compensation.

We anticipate that participants in the 401(k) Plan that are eligible to participate in the ESOP will be given a one-time opportunity to elect to transfer up to 33% of the assets in their 401(k) Plan account to the ESOP. We expect that such funds would subsequently be invested in company stock at a price not less than the same $10.00 per share price that is offered to members pursuant to the subscription rights. If such an election is, in fact, made available to 401(k) Plan participants, a detailed written description of the proposed transaction and the election procedures, along with a discussion of the various risks associated therewith would be provided to plan participants well in advance of such a transaction.

We also anticipate that, following the establishment of the ESOP, matching contributions for all eligible ESOP participants would no longer be made to the 401(k) Plan, but would, instead, be made to the ESOP where they would be invested in company stock.

As a result of the foregoing, employees of the company will be given an opportunity to acquire a proprietary interest in the company and will be given an opportunity to align their interests with the interests of company stockholders.

ERISA and the Code would require shares of company stock held by the ESOP to be appraised at least once a year by a qualified independent appraiser. In addition, all purchases of company stock by the ESOP, including the shares purchased with the initial transfers from the 401(k) plan, would be required to take place at a price no greater than the appraised fair market value of such stock, and all sales of stock by the ESOP would be required to take place at a price no less than such appraised fair market value. Participants in the ESOP would also be given the right to direct the Trustee with respect to the voting of shares of company stock held in their account.

Conditions to Closing

The restructuring is subject to approval of the stockholders and will proceed only if a majority of Class A common shares voting, a majority of Class B common shares voting and a majority of preferred shares voting all vote to approve it.

Material U.S. Federal Income Tax Consequences

The following discussion summarizes material U.S. federal income tax consequences of the restructuring pursuant to the plan of conversion (herein referred to as the “conversion”) to the company’s stockholders and members. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service and other applicable authorities, all as in effect on the date of this document and all of which are subject to change or differing interpretations, possibly with retroactive effect.

This discussion is limited to persons who hold shares of the company’s common and preferred stock and patronage-based rights (herein referred to as “membership interests”) as capital assets for federal income tax purposes.

This discussion does not address all the U.S. federal income tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders who may be subject to special treatment under U.S. federal income tax laws, such as tax-exempt organizations, foreign persons or entities, financial institutions, insurance companies, broker-dealers, persons who hold shares of the company’s common or preferred stock or membership interests as part of a hedge, straddle, wash sale, synthetic security, conversion

transaction, or other integrated investment comprised of the company’s common or preferred stock or membership interest and one or more investments, holders with a “functional currency” (as defined by the Code) other than the U.S. dollar, and persons who acquired shares of the company’s common or preferred stock or membership interests in compensatory transactions.

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of common or preferred stock or the beneficial owner of a membership interest, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. Holders of shares of common or preferred stock or membership interests that are partnerships and partners in such partnerships are urged to consult their tax advisors regarding the U.S. federal income tax consequences of owning and disposing of common and preferred stock and membership interests in the conversion.

Further, this discussion does not address any aspect of state, local or foreign taxation. No ruling has been or will be obtained from the Internal Revenue Service regarding any matter relating to the conversion and no assurance can be given that the Internal Revenue Service will not assert, or that a court will not sustain, a position contrary to any aspect of this discussion.

Holders are urged to consult their own tax advisors as to the U.S. federal income tax consequences of the plan of conversion, as well as the effects of state, local and foreign tax laws in light of their own situations.

In connection with the completion of the proposed restructuring, McDermott Will & Emery LLP has delivered an opinion to the company to the effect that, for U.S. federal income tax purposes, the plan of conversion will be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code.

The opinion of McDermott Will & Emery LLP is based upon the U.S. federal income tax law in effect as of the date of the opinion. Such laws are subject to change, possibly with retroactive effect. An opinion of counsel is not binding on the Internal Revenue Service or any court and no assurance can be given that the Internal Revenue Service will not assert, or that a court will not sustain, a position contrary to any aspect of the opinion. In rendering the opinion, McDermott Will & Emery LLP has relied upon certain assumptions, including assumptions regarding the absence of changes in facts and the completion of the conversion in accordance with the plan of conversion and in the manner described in this document. The opinion also relies upon certain representations of the management of the company and assumes that the representations are true, correct and complete. If any of these assumptions or representations are inaccurate in any way, the opinion could be adversely affected.

Tax Consequences of the Conversion to Holders of the Company’s Common and Preferred Stock and Memberships. Assuming that the conversion qualifies as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, the exchange (i) by holders of their existing shares of the Class A and Class B common stock for shares of new common stock of the company, (ii) by holders of their existing shares of preferred stock for shares of new common stock of the company, and (iii) by holders of their membership interests for shares of new common stock of the company and for nontransferable subscription rights to purchase shares of new common stock of the company will generally be tax-free for U.S. federal income tax purposes.

Persons participating in a reorganization generally are required to recognize gain (but not loss) in an amount equal to the lesser of (a) the amount of cash or the value of other property received in the reorganization, and (b) the amount, if any, by which the sum of the fair market value, as of the effective date of the reorganization, of the shares of the stock and cash and other consideration received in the reorganization exceeds the stockholder’s adjusted tax basis in his or her shares surrendered in the reorganization. In the conversion, holders of the company’s Class A and Class B common stock and preferred stock are entitled to receive only shares of new common stock of the company. In the conversion, holders of membership interests are entitled to receive only

shares of new common stock of the company and subscription rights for shares of new common stock of the company, which are not treated as other property for this purpose. No cash or other property will be distributed in the conversion.

A company stockholder will generally have an aggregate tax basis in the new common shares of the company and subscription rights received in the conversion equal to the aggregate adjusted tax basis in shares of common and preferred stock and its membership interest surrendered in the conversion. The holding period of the new common stock of the company and subscription rights received by a stockholder pursuant to the conversion will include the holding period of shares of common and preferred stock and of the membership interest surrendered in the conversion.

Basis generally will be determined separately for each class of securities held. The basis and holding period of a stockholder in its shares of Class A or B common stock will carryover to the shares of new common stock of the company received in exchange for the common stock. The basis and holding period of a stockholder in its shares of preferred stock will carryover to the shares of new common stock of the company received in exchange for the preferred stock. The basis and holding period of a stockholder in its membership interest will carryover to the shares of new common stock of the company and to the subscription rights received in exchange for the membership interest.

Each stockholder will need to make its own basis and holding period determinations. Stockholders are urged to consult with their own tax advisors. Company stockholders, who purchased their common shares from the company, should generally have a basis in those shares equal to what was paid, which generally was the par value. Company stockholders should generally have a basis in shares of preferred stock received as patronage dividends from the company in an amount equal to the stated dollar amount (par value) of those shares. Company stockholders should generally have no basis in their membership interests.

Interests of Certain Persons in the Transaction

ESOP. The company plans to adopt an employee stock ownership plan, or ESOP, following the consummation of the restructuring. Officers and employees of the company will participate in the ESOP, which will acquire shares at the appraised value of new common stock of the company, which will be held for the benefit of the officers and employees. The board of directors believes that the ESOP will better align the interests of the officers and employees with those of the stockholders. In addition, the ESOP’s acquisition of new common stock will increase the company’s capital.

Other Equity-Based Plans. Following the restructuring, the company may consider additional equity-based incentive plans for its officers, directors and employees. These plans are not currently available to the company due to its cooperative structure. The Board has no current plans to adopt any such equity-based incentive plan.

Indirect Director Interests. Each director of the company has an indirect interest in the approval of the restructuring. Each director of the company is a manager of a member of the company. In most cases, these members do a significant amount of business with the company and have significant patronage-based rights. Because these patronage-based rights will convert into new common stock upon consummation of the restructuring, the proportionate voting power and proportionate ownership interest of these members may increase as a result of the restructuring.

Certain Possible Anti-Takeover Effects of the Amendment to the Articles of Incorporation and the Bylaws

Limitations on Beneficial Ownership of Stock. Our amended articles of incorporation will contain provisions placing limitations on the amount of common stock that may be beneficially owned by a single person, other than the company or any compensation plan maintained by the company. In the event that any person, or group of persons acting in concert, becomes the beneficial owner of more than 5% of the common stock of the company,

the shares in excess of 5% will be entitled to one-hundredth ( ¹ / 100 ) of one vote per share. In addition, our articles will authorize the company to refuse to recognize any transfer or attempted transfer of common stock to any person who beneficially owns, or who the company believes would, by virtue of the transfer or attempted transfer would become the beneficial owner of, more than 5% of the common stock of the company. The board of directors will be authorized to adopt regulations and procedures not inconsistent with these provisions for the administration of these provisions. The board of directors will also have the right to demand that the beneficial owner of more than 5% of the common stock supply factual information that would allow the board to determine the applicability of these provisions. Our articles will provide that any applications, interpretations, constructions or other determinations made by the board of directors in good faith and on the basis of information reasonably available will be conclusive and binding on the company and its stockholders. These provisions will not apply to any offer or sale of common stock by the company to an underwriter in connection with the public offering of the common stock or to certain transactions undertaken by the company which do not have the effect of changing the beneficial ownership interests of the stockholders.

Limitations on Certain Business Combinations. Our articles of incorporation will require the affirmative vote of at least 80% of all the outstanding shares of common stock and at least 50% of the common stock not held by the beneficial owner (and any associate or affiliate of such a beneficial owner) of 5% or more of the common stock to approve any business combination with the beneficial owner of 5% or more of the company’s common stock. If the business combination has been approved by a majority of the disinterested directors then in office, these provisions will not apply.

Limitations on Transferability of Stock. Our articles of incorporation will provide that shares of the company’s common stock will not be transferable, except to (a) any other holder of common shares (unless the transferee holds more than 5% of issued and outstanding shares of common stock after the transfer); (b) any person approved in advance by the board of directors; and (c) any employee stock ownership plan as permitted in such plan.

Classified Board of Directors . Our articles of incorporation will provide for a board of directors that is divided into three groups serving three-year staggered terms. All directors hold office until their successors are elected and qualified. No decrease in the number of directors may have the effect of shortening the term of an incumbent director.

Blank Check Preferred Stock . Our articles of incorporation will authorize our board of directors to issue 20,000,000 shares of preferred stock without the necessity of further notice to, or authorization by, our stockholders. All of these preferred shares will remain unissued, unreserved and available for issuance at the discretion of the board. The unissued and unreserved preferred stock may be issued from time to time in one or more series and may have such voting powers, preferences, relative rights, designations, qualifications and limitations as our board of directors may fix by resolution at the time of issuance. One of the effects of the existence of authorized, unissued and unreserved preferred stock could be to enable our board of directors to issue shares to persons friendly to current management which could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management. Such additional shares also could be used to dilute the stock ownership of persons seeking to obtain control of us.

Resales of Common Stock

Prior to this offering, there has been no public market for our common stock, and even after completion of the offering, since there are limitations on the transfer of stock and the company’s common stock is not being listed on an exchange or other public trading system, there will continue to be no public market for the company’s common stock.

Sale of the common stock will be subject to significant restrictions on transfer. The proposed articles of incorporation authorize restrictions on the transfer of shares to be contained in the bylaws. The proposed

amended and restated bylaws provide that shares of the company’s common stock will not be transferable, except to (a) any other holder of common shares (unless the transferee holds more than 5% of issued and outstanding shares of common stock after the transfer), or (b) any person approved in advance by the board of directors. The board of directors currently intends to use the discretion granted by the bylaws to limit the transfer of common stock to cooperatives and the ESOP.

The proposed articles of incorporation authorize the board of directors to redeem shares issued as a part of the restructuring. The shares may be redeemed by the company at book value of such shares if the board of directors determines that the holder of such shares has not done business with the company for a period of two years. This right will not apply to any shares of new common stock purchased pursuant to a subscription right or to any other shares of stock except those received in the conversion effected by the restructuring. Shares issued to the ESOP would not be subject to this right of redemption. The company has no obligation to exercise this redemption right, and the board has no current plans to exercise such redemption right if it becomes available. The redemption right expires if not exercised on or before August 31, 2009.

In addition, it is the current intention of the board of directors to redeem a limited number of common shares every year, although the board will not be obligated to redeem any shares and has not yet established the terms of a plan of redemption.

Please also see “— Federal Securities Law Consequences,” above, for further discussion of restrictions on the resale of common stock.

Appraisal

Since the fair market value of the company is very important in evaluating the proposed restructuring, the company considered several recommended appraisal firms, then interviewed and selected the firm of RSM McGladrey, Inc. RSM McGladrey is a national business services firm continually engaged in the appraisal of businesses for a variety of purposes. The company has had no prior relationship with RSM McGladrey. Such firm was paid an hourly fee which was not in any way dependent on the results of the appraisal. The total fee for the appraisal is estimated to be $50,000. The company has agreed to indemnify RSM McGladrey for amounts incurred in judgments or settlements resulting from services performed in connection with the appraisal.

The company instructed RSM McGladrey to appraise the fair market value of the equity of the company and placed no limitations on the appraisal.

RSM McGladrey has concluded its appraisal of the equity of the company and determined that, in its opinion, the fair market value of 100% of the equity of the company as of August 31, 2004, was $43.1 million. This value is divided by $10.00 to establish the total number of shares of new common stock to be issued in the restructuring — 4.31 million shares, not including shares issuable upon the exercise of subscription rights. The shares remaining after the conversion of common stock, common stock subscriptions and preferred stock will be distributed in exchange for patronage-based rights under a formula which is based on Class A patronage during the three fiscal years ending August 31, 2004, August 31, 2003 and August 31, 2002 and Class B round turns traded during the same period. The result of the appraisal determines the number of shares to be distributed on a patronage basis and this will affect the proportionate share of existing members of the new common stock after the restructuring. The appraisal was made as of August 31, 2004, and takes into account results of operations through such date and the final patronage dividend payable by the company.

The appraisal considered all elements pertaining to the valuation of closely held businesses per Internal Revenue Service Revenue Ruling 59-60, including consideration of these elements:

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The nature of the business and history of the enterprise from inception

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The economic outlook in general and the condition and outlook of the specific industry in particular.

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The book value of the stock and the financial condition of the business.

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The earning capacity of the company.

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The dividend-paying capacity.

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Whether or not the enterprise has goodwill or other intangible value.

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Sales of the stock and the size of the block of stock to be valued.

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The market price of stocks of corporations engaged in the same or similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter.

The appraisal and written report has been conducted in accordance with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation, the Principles of Appraisal Practice and Code of Ethics and the Business Valuation Standards of the American Society of Appraisers.

“Fair Market Value” to be used in the appraisal is defined as the price at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts (American Society of Appraiser Business Valuation Standards).

In making the appraisal, RSM McGladrey considered various appraisal methods within the market approach, the income approach, and the asset approach. After analyzing the specific facts and circumstances of the company, they relied primarily upon the capitalization of earnings method within the income approach, giving some consideration to the asset approach, and utilizing market data as support for the income approach, as they were unable to employ a market method directly as a means of establishing value.

While the appraisal process calls for the application of stringent standards and precise calculations, the valuation of a closely held business is an art rather than an exact science because of the judgment involved in applying the various valuation methods, and ultimately in using one or more of those methods to determine a reasonable estimate of value.

The written appraisal report will be made available for inspection and copying at the principal executive offices of the company during regular business hours by any interested stockholder of the company or representative designated in writing. A copy of the written report will be sent by the company to any interested security holder or representative who has been so designated in writing upon written request and at the expense of the requesting security holder. The appraisal report has also been filed as an exhibit with the Securities and Exchange Commission and a copy is available at the SEC’s website (http://www.sec.gov).

USE OF PROCEEDS

We will not receive any proceeds from the issuance of the new common stock in the conversion of the existing Class A common stock and subscriptions, Class B common stock, preferred stock and patronage-based rights. Accordingly, the conversion of the existing shares of stock into shares of new common stock will not result in any change in our total capitalization.

It is impossible to estimate the proceeds we will receive from the exercise of subscription rights. We have estimated that the maximum proceeds that we could receive from such exercise, if every stockholder exercised all of its rights, would be $13.3 million. It is highly unlikely, however, that the subscription rights will be exercised at such level. All of the proceeds we receive from the exercise of subscription rights will be used for the purchase of securities to be held by our FCM, FCStone, LLC, to increase adjusted net capital pursuant to applicable CFTC regulations.


Application of Proceeds	Assuming 10% Exercise of Estimated Subscriptions		Assuming 50% Exercise of Estimated Subscriptions		Assuming 100% Exercise of Estimated Subscriptions
Increase of adjusted net capital of FCStone, LLC	$	1,330,000	$	6,650,000	$	13,300,000

DIVIDEND POLICY

We currently pay dividends to our members based on their patronage rather than on their equity interests in the company. After the closing of the restructuring, our status as a cooperative will be terminated. A final patronage dividend has been declared and paid for the fiscal year ending August 31, 2004, but no patronage dividends will be paid thereafter. A regular dividend payable on a per share basis to holders of new common stock may be declared and paid at the discretion of the board of directors. If our financial results and condition are adequate, the board anticipates payment of a regular annual dividend in the future. It is the board’s current intention to pay dividends that approximate the patronage dividends historically paid and approximately 50% of net income annually. The board believes that an annual dividend of not less than $0.50 per share, which represents less than 50% of our net income for fiscal year 2004, will be paid if the company’s earnings continue to be at or above current levels, and no unforeseen financial contingencies arise.

THE SPECIAL MEETING

Date, Time, Place and Purpose

This proxy statement is being furnished to stockholders of the company in connection with the special meeting of the stockholders to be held on March 1, 2005 at 10:00 a.m., local time, at the West Des Moines Marriott, 1250 74th Street, West Des Moines, Iowa, and any adjournments or postponements of the special meeting. At the special meeting, stockholders who own shares of issued and outstanding stock of the company as of the close of business on January 3, 2005 will be eligible to vote on a proposal to approve the restructuring. Subscribers are not entitled to vote.

This proxy statement is first being mailed to stockholders on or about January 7, 2005.

Matter to be Considered

The sole purpose of the special meeting will be to consider and vote upon a proposal to approve amendments to the articles of incorporation and plan of conversion effecting the proposed restructuring as described above. Through the restructuring, the existing stock of the company and the patronage-based rights of the members will be converted into new common stock and nontransferable subscriptions rights to purchase additional shares of new common stock. The patronage dividend payment obligation of the cooperative to its members will automatically cease. The transaction will result in an offering of the company’s new common stock to its members. No public market currently exists for these securities, and none is expected to develop as a result of the restructuring.

Record Date

The company has fixed January 3, 2005 as the record date for determining the stockholders entitled to receive notice of and to vote at the special meeting. As of that date, there were 422 shares of Class A common stock issued and outstanding, 5 shares of Class B common stock issued and outstanding and 13,880 shares of preferred stock issued and outstanding. Only holders of record of the company’s shares on the record date are entitled to receive notice of and to vote at the special meeting, and any adjournment or postponement of the special meeting. Each eligible holder of issued and outstanding fully-paid common stock will be entitled to one vote. Holders of preferred stock are entitled to vote the number of preferred shares held.

How You Can Vote; Proxies

You can vote on the proposed restructuring by attending the special meeting, which will be held on March 1, 2005 at 10:00 a.m., and submitting your vote on the ballot provided at that time or by completing the enclosed proxy card, including signature and date, and mailing it to the company. If you sign and return a written proxy card without instructions marked on the card, the shares represented by the proxy will be counted as voting for the restructuring. You may revoke proxies at any time before the special meeting in one of three ways. First, you can send a written notice stating you would like to revoke the proxy. Second, you can complete and submit a new proxy card. Third, you can attend the special meeting and vote in person by requesting a ballot and voting at the meeting. Simply attending the meeting without voting, however, will not revoke the proxy.

Quorum; Vote Required

A quorum of stockholders eligible to vote must exist at the special meeting to approve the restructuring. If at least a majority of the company’s Class A common stockholders, at least a majority of the company’s Class B common stockholders, and at least a majority of the company’s preferred stockholders are present at the special meeting, a quorum will exist. The affirmative vote of a majority of the votes cast at the special meeting by each class of stockholders is required to approve the restructuring. Pursuant to the company’s bylaws, holders of subscribed but not fully paid shares of Class A common stock will not be entitled to vote at the special meeting. Abstentions will be counted as present for the purposes of determining the presence of a quorum at the special meeting. Abstentions will not be counted as votes cast.

Directors and Officers

As of the record date, the directors who are affiliated with a member represented approximately 2.1% of the Class A common shares, 20% of the Class B common shares, and 6.4% of the preferred shares and votes entitled to be cast. The officers of the company own no common or preferred shares.

No Other Business; Adjournments

Under Iowa law and our bylaws, the business to be conducted at the special meeting will be limited to the purpose stated in the notice to company stockholders provided with this proxy statement-prospectus. Adjournments may be made for the purpose of, among other things, soliciting additional stockholders to attend the meeting.

INFORMATION REGARDING THE COMPANY

The company will continue to operate its existing business after the restructuring, and the following discussion of the business, as it applies to the company operating as a cooperative, is equally applicable to the company after the restructuring, and vice versa.

Business

General

The company is engaged in the commodity business with an emphasis on commodity risk management services. We were organized in 1978 as Farmers Commodities Corporation, a subsidiary of Agri Industries. In 1986, we became a stand-alone organization. On July 1, 2000, we purchased certain assets of Saul Stone and Company and River Brokerage, Inc., a clearing firm with operations at the Chicago Mercantile Exchange, the New York Board of Trade and the New York Mercantile Exchange. We were reorganized into a holding company form in connection with the July 1, 2000, transaction. We changed our name to FCStone Group, Inc. on January 15, 2002. Our goal is to provide customers with the platforms, instruments and information to initiate and execute strategies that enhance their operations by minimizing commodity risk and maximizing operational margins.

Services Provided

We operate through a number of wholly owned and majority-owned subsidiaries with offices and facilities in twelve states and in Canada. See Note 15 to our consolidated financial statements for a description of segment financial information. Our principal business activities consist of four operating segments as follows:

Commodity and Risk Management Services

We work with a broad spectrum of domestic and international customers to help manage commodity-related risks. Commodity and risk management services represented 60.6% of our total income before income taxes, minority interest and corporate expenses for the fiscal year ended August 31, 2004. Initially, we targeted grain marketing for domestic elevators, but our current programs currently handle a much broader client base, including: grain and livestock producers; ingredient users; handlers, processors and manufacturers; companies involved in the energy complex; commodity end users; and others with commodity-related activities.

Our primary business in this segment is to offer commodity risk management services to our customers using futures, options and other derivative instruments. Our principal operating subsidiary is FCStone, LLC, a wholly owned Iowa limited liability company, registered with the Commodity Futures Trading Commission (“CFTC”) as a Futures Commission Merchant, or FCM. Customer accounts maintained in this segment are primarily used by customers for hedging as a part of their commodity merchandising and acquisition programs. FCStone, LLC also acts as a broker for physical grain, fertilizer, and energy commodities and offers related transportation services. “Over-the-counter” commodity swaps and trade options are brokered by FCStone, LLC with our wholly owned limited liability company, FCStone Trading, LLC, as counterparty. We offer a full range of consulting, brokerage and transaction services through our staff of risk management consultants, supported by systems used to gather, disseminate and utilize commodity market information and intelligence.

We provide clearing and execution services on each of the major U.S. futures exchanges to commercial, professional, institutional and retail clients. We are registered as a Futures Commission Merchant with the CFTC, a member of the National Futures Association (“NFA”) and are members of the following exchanges: Chicago Board of Trade, the Clearing Corporation, EUREX, Chicago Mercantile Exchange, NY Clearing Corporation, New York Board of Trade, its divisions: Coffee, Sugar and Cocoa Exchange, Inc., and the New York Cotton Exchange, the New York Futures Exchange, FINEX, the New York Mercantile Exchange and its divisions; New York Mercantile Exchange and Commodity Exchange, Inc., the Minneapolis Grain Exchange and the Kansas City Board of Trade.

We serve our clients by providing access to the over-the-counter and physical markets, primarily through FCStone Trading, LLC. We consolidate the buying and selling power of our clients, enabling them to conduct physical fuels transactions and off-exchange transactions where we act as principal, which are in turn offset by corresponding transactions with leading trading companies, financial institutions and market makers. Although we act as principal in these transactions, we do not take physical or derivative positions for our own account. Rather, we place transactions “back to back” on behalf of our customers and the larger firms with which we maintain relationships. We obtain credit risk insurance or credit risk swap coverage with respect to our major derivative counterparties to protect against the possibility that a counter-party does not perform on its commitment. This protection lessens the risk associated with off-exchange commodity transactions.

A major component of our risk management services is consulting with customers to develop risk management programs by analyzing and assessing each customer’s individual business operations and specific needs. The most comprehensive level of service offered is provided under the Integrated Risk Management Program (“IRMP”). The IRMP is a fee-based program which is based on the philosophy of providing conservative risk management products to manage commodity and financial risk as well as adding profitability to the customer’s bottom line. There are currently approximately 500 accounts that are part of the IRMP domestically and internationally. IRMP is a program that initially quantifies the commodity and financial risks of the customer by determining relevant factors including historic revenues and expenses, physical outputs and usage, operating capacity and annual volumes. The company then takes that information and constructs a strategic marketing plan that covers the next 12 months of business. The company consultants are then responsible for providing recommendations and helping to manage the strategies.

We also provide transportation risk management services and other information used to manage the logistics of transporting commodities. We hold short-term contracts and manage long-term contracts for significant transportation assets, allowing us to reach broader markets and obtain optimum pricing for clients requiring commodities transportation services.

We have various subsidiaries which support our commodity and risk management business by offering related services, including: (1) brokerage of customer funds into money market mutual funds; (2) a specialized introducing broker program which allows customers to introduce futures accounts for farm producers; (3) a real-time quote service offered in the People’s Republic of China; and (4) retail foreign exchange trading.

Clearing and Execution Services

We offer low-cost clearing and direct execution services to professional, commercial, institutional and retail customers in the Stone Division of FCStone, LLC, including a program of direct execution under the service mark Futures Direct ^® . Clearing and execution services represented 25.7% of our total income before income taxes, minority interest and corporate expenses for the fiscal year ended August 31, 2004. The Stone Division primarily provides execution and clearing services to commodities firms, fund operators, commodities traders and other sophisticated individuals and firms. The Futures Direct ^® program provides qualified clients direct access to the trading floor. This format provides an efficient method of order entry for these customers.

Grain Merchandising

We act as a dealer in, and manager of, physical grain and fertilizer through a majority interest in FGDI, LLC, a Delaware limited liability company. Grain merchandising represented 17.1% of our total income before income taxes, minority interest and corporate expenses for the fiscal year ended August 31, 2004. FGDI, LLC acts as a grain dealer in domestic and international markets, primarily in Canada, Latin America and the Far East. FGDI also manages a pool of grain originated by a group of elevators in Texas. FGDI links suppliers and purchasers of grain products through its network of contacts in the industry. Specifically, FGDI serves manufacturers, processors and other users of grain products by assembling grain requirements and providing delivery thereof, both domestically and internationally. FGDI also has access to a large network of agriculture

origination sources allowing it to assemble and deliver specialty crops in quantities demanded by large-scale processors and end-users. FGDI maintains physical control over the grains at each critical stage in the assembling and shipping process, allowing it to meet the quality control standards of its customers. FGDI’s activities are supported by facilities, the most significant of which are a leased export terminal facility at the port of Mobile, Alabama and a fleet of leased rail cars.

FGDI is a joint venture between the company and a subsidiary of Mitsubishi Corporation (“Mitsubishi”). We own 70% percent of the joint venture and have the right to appoint four members of the management committee. Mitsubishi owns the remaining 30% interest in the venture and has the right to appoint one member of the management committee. We are in charge of the day-to-day operations of FGDI and generally control the venture. Mitsubishi must, however, consent before the commencement of any of the following actions: changes in FGDI’s business purposes or risk management policies; amendments to FGDI’s governance documents; capital calls; changes in FGDI’s membership; expenses, investments, acquisitions or divestitures in any year having an aggregate value greater than $1 million; mergers where FGDI is not the survivor; adoption of the annual budget; capital expenditures of more than $1 million above the annual budget; borrowing, guaranteeing or incurring new indebtedness in an amount more than fifteen times FGDI’s equity; distributions of more than 35% of free cash flow; petitioning for bankruptcy; or dissolution of FGDI except in accordance with FGDI’s operating agreement. Mitsubishi is a significant customer for grain sold by FGDI accounting for 6%, 10%, and 11% of consolidated total revenues for the fiscal years ending August 31, 2004, 2003 and 2002, respectively. Mitsubishi is contractually obligated to support use of FGDI’s Mobile, Alabama facility by providing a minimum volume of transactions.

See Note 15 of the notes to consolidated financial statements for a table showing a summary of the company’s consolidated revenues by geographic area.

Financial Services

We offer financing and facilitation for customers to carry commodities through our wholly-owned subsidiary, FCStone Financial, Inc., and our majority ownership of FCStone Merchant Services, LLC. Financial services represented (3.4%) of our total income before income taxes, minority interest and corporate expenses for the fiscal year ended August 31, 2004. The primary activity of FCStone Financial is sale/repurchase agreements whereby it purchases grain evidenced by warehouse receipts subject to a simultaneous agreement to resell such grain back to the seller at a later date. FCStone Financial also has railcars under lease which it subleases to our customers, but the margin from such activity is included in the Commodity and Risk Management Services segment. FCStone Merchant Services expects to do similar transactions in energy, grain and other commodities, as well as transactions where it shares in commodity profits with customers in exchange for financial support, but is newly formed and does not have any material operating history.

Regulatory Matters

We are regulated by several agencies and self-regulatory organizations in connection with various aspects of our business. Compliance with these regulations is material to our operations. The following discussion describes the material licenses and registrations that we maintain.

FCStone, LLC is a registered FCM with the CFTC and a member of the NFA both of which have regulatory authority over the company. FCStone, LLC is also a member of all major U.S. futures exchanges. The Chicago Mercantile Exchange is its Designated Self-Regulatory Organization for regulatory purposes and the company considers the Chicago Mercantile Exchange to be its primary regulator. The Chicago Mercantile Exchange performs an annual audit of FCStone, LLC’s activities.

FCStone Investments, Inc., is registered as a commodity pool operator with the NFA. FCStone Advisory, Inc. is registered with the NFA as a commodity trading advisor for market commentary.

FCStone Forex, LLC, is subject to limited regulations as a retail foreign exchange dealer because it is considered a material affiliated person of FCStone, LLC, a registered FCM.

FCC Futures, Inc., and Westown Commodities, LLC, are guaranteed introducing brokers registered with the NFA.

FCC Investments, Inc. is a registered broker-dealer with the Securities and Exchange Commission (“SEC”) and the National Association of Securities Dealers (“NASD”). FCC Investments must file annual FOCUS reports with the SEC and is subject to the various rules and regulations of the NASD.

FGDI is licensed as a grain dealer in North Dakota, South Dakota, Nebraska, Minnesota, Indiana, Michigan, Ohio, Kentucky, Georgia, Alabama and Ontario, Canada. FGDI also has a Canadian Federal License for grain dealing. FGDI is registered as an exporter of grain with the United States Department of Agriculture.

In addition, the company is subject to the general legal and regulatory provisions applicable to trading services and commodities dealing .

Sales and Marketing

We have a comprehensive sales and marketing program that is primarily implemented by our staff of brokers, known as risk management consultants. Our brokers are compensated on a commission basis and are responsible for developing new customers and providing services to new and existing customers. However, our top management also engages in significant sales activity.

Sales efforts are primarily centered on consulting services and on presenting our ability to obtain and utilize commodity intelligence information to support customer needs and improve customer profitability. Specifically, we emphasize our Integrated Risk Management Program, or IRMP, which provides the most comprehensive level of service offered by company. Sales efforts are supported by systems, staff and resources, including current commodity information and intelligence systems, communications systems, archives of commodity basis and pricing information and related presentation and analytical tools, marketing materials, an internet web site and educational materials.

We engage in direct sales efforts to seek new customers with a strategy of extending our services from our existing customer base to similar customers not yet served and to different kinds of customers that have risk management needs similar to those of our existing customer base. We seek to serve not only those customers that currently use risk management methods, but also those customers that we feel should use risk management methods. We are expanding our services into new business segments and are expanding our services geographically into foreign markets, particularly in Canada, Asia and Latin America.

We stay in regular contact with existing customers to provide commodity information and services, usually on a daily basis which include direct personal contact and current market commentary by fax or e-mail. We also offer educational programs on risk management methods and regular outlook meetings for our customers as well as the customers of our customers.

Competition

We compete with a large number of firms in the exchange traded futures and options execution sector and in the over-the-counter transaction sector. We compete primarily on the basis of price and value of service. Our competitors in the exchange-traded futures and options sector include international brokerage firms, national brokerage firms, regional brokerage firms (both cooperatives and non-cooperatives) as well as local introducing brokers, with competition driven by price and level and quality of service. Many of these competitors offer over-the-counter programs as well. In addition, there are a number of financial firms and physical commodities firms that participate in the over-the-counter markets, both directly in competition with us and indirectly through firms such as us. We compete in the over-the-counter market by making specialized over-the-counter transactions available to our customers in lot sizes smaller than those usually offered by major counterparties.

On the consulting side of our business, we are not aware of any firm that provides a service equivalent to that available from the company. Our employees are in constant contact with their customers and make frequent recommendations that are designed for the purpose of educating the customer on how to best use the available tools and strategies to manage their risk and maximize their bottom line margins.

The grain merchandising business segment competes for both the purchase and sale of grain. Competition is intense and margins are low. Our major competitors have substantially greater financial resources than us, but we believe that our relationships with cooperative customers gives us a broad origination capability.

The grain merchandising business segment competes for grain sales based on price, services and ability to provide the desired quantity and quality of grains. Our grain merchandising operations compete with numerous grain merchandisers, including major grain merchandising companies such as Archer Daniels Midland, Cargill, Incorporated, CHS Inc., ConAgra, Bunge and Louis Dreyfus, each of which handle grain volumes of more than one billion bushels annually.

In the Financial Services segment we compete with traditional lenders, including banks and asset based lenders. In addition, we also compete with specialized investment groups that seek to earn an investment return based on commodities transactions. We compete on price and service and by managing commodity risks that traditional lenders may seek to avoid. We are an extremely small participant in the financial services industry, which consists of a very large number of large and small firms. We do not attempt to compete generally in this industry. Rather, we focus our energies on filling a specific niche with respect to supporting commodities transactions.

Technology

We utilize front end electronic trading, mid office, back office and accounting systems that process transactions on a daily basis. These systems are integrated to provide record keeping, trade reporting to exchange clearing, internal risk controls, and reporting to government entities, corporate managers, risk managers and customers. Our futures back office system is maintained by a service bureau which is located in Chicago with a disaster recovery site in New York. All other systems are maintained in our West Des Moines headquarters data center and system backups are stored off-site.

All of these systems are accessed through a wide area network. All systems are protected by a firewall and require proper security authorization for access. Our wide area network is managed by a service bureau which has redundant data facilities in Kansas City. We are currently building a disaster recovery plan to utilize the Des Moines and Kansas City data centers to house redundant systems.

Our risk managers access market information from network-based software systems. Market information includes real-time quotes, market history (futures/cash), news and commentaries. Market information also includes our historic database of market pricing and trend information used in the IRMP program. This information is used to analyze the markets to help risk managers determine the best strategy for a customer to minimize risk and maximize profit margins, especially when used in conjunction with the IRMP.

We use the RISC back office trade system to process exchange traded futures and options trades. We also use the FOCUS back office trade system to process over-the-counter/derivative trades. We use Globex, RANorder and York electronic trading/order routing platforms.

Employees

As of August 31, 2004, we employed 400 people. This total is broken down by business segments as follows: Commodity and Risk Management Services had 180 employees; Clearing and Execution Services had 103 employees; Grain Merchandising had 85 employees; Financial Services had 2 employees and Corporate had 30 employees. We believe our relationship with our employees is good, and we have not suffered any work stoppages or labor disputes. None of our employees operate under a collective bargaining agreement. Many of

our employees are subject to employment agreements. It is the current policy of the company to obtain an employment agreement containing noncompetition provisions from each risk management consultant, but there are some with whom we do not have such agreements.

Properties and Locations

We lease office space for our principal business operations. Our corporate headquarters is located in West Des Moines, Iowa and our leased space is approximately 18,600 square feet. This lease is in place until December 31, 2009. The company has other offices in Chicago, Illinois; New York, New York; Kansas City, Missouri; St. Louis, Missouri; Omaha, Nebraska; Minneapolis, Minnesota; Bloomington, Illinois; Roy, Utah; Atlanta, Georgia; Indianapolis, Indiana; Spirit Lake, Iowa; Bowling Green, Ohio; and Summit, New Jersey. We have established representative offices in Beijing and Dalian in the People’s Republic of China. All of our offices and other principal business properties are leased.

We have a major leased grain facility located at the port of Mobile, Alabama, and other leased grain facilities located in Indiana and Ontario, Canada. We own an additional facility located in Columbus Grove, Ohio.

The Mobile facility consists of facilities for unloading rail shipments, temporary storage, and loading ocean-going vessels. The facility is leased from the State of Alabama for a term expiring December 1, 2012. An expansion of the storage available at Mobile is currently under construction, financed by an offering of $5.5 million in industrial development revenue bonds which is recognized as a capitalized lease for accounting purposes, supported by the lease and letters of credit which FGDI has guaranteed. The expansion project is being constructed under a design/build type contract. On October 15, 2004, after major construction was complete, but before acceptance of the project, the foundation of one of the bins subsided during initial bin filling operations, causing significant damage to the affected bin, its foundation and other structures. The company expects to be able to hold its contractors and subcontractors and their insurers responsible for remediation of the damage, but the cost and specifics of such remediation are not yet established or ascertainable.

Our obligations at Mobile are supported by an agreement with FGDI’s minority owner to purchase a minimum volume of grain through the facility.

Legal Proceedings

The company, from time to time, is involved in various legal matters considered normal in the course of its business. It is the company’s policy to accrue for amounts related to these matters if it is probable that a liability has been incurred and an amount can be reasonably estimated. Although the outcome of such matters cannot be predicted with certainty and no assurances can be given with respect to such matters, the company believes that the outcome of these matters in which it is currently involved will not have a materially adverse effect on its results of operations, liquidity, or financial position except as discussed below.

On August 21, 2003, August 21, 2003, September 23, 2003, October 16, 2003, and July 16, 2004, Euro-Maritime Chartering, Inc. filed five separate claims under the arbitration facility established by the London Maritime Arbitrators Association of London, England, alleging a breach by FGDI, LLC of charter party agreements regarding four vessels and seeking to recover damages of $242,655, $311,663, $769,302, and $561,854 respectively. The amount of the July 16, 2004 claim is not yet stated. Euro-Maritime Chartering alleges that these damages arise from detention and demurrage encountered at China ports with respect to cargos that FGDI sold to Chinese buyers. FGDI claims that, under the sales contracts with the Chinese buyers, any detention and demurrage charges were for the account of the buyers. FGDI does not dispute the demurrage claims, which are estimated to total approximately $690,000. FGDI has collected deposits from the Chinese buyers in the total amount of $669,436, which is being held pending resolution of the detention claims. FGDI intends to vigorously defend the detention claims and believes that it has meritorious defenses. If the claimant prevails on any of the

detention claims, or otherwise in amounts above the corresponding deposit, FGDI expects to seek collection of such amounts from the buyers.

On December 13, 2003, Liaoyang Edible Oils filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong alleging a breach of a sales contract by FGDI and seeking to recover damages of $1,125,000. Liaoyang Edible Oils alleges that these damages arise out of disputes related to the final pricing of the contract. FGDI intends to vigorously defend this claim.

Management is currently unable to predict the outcome of these claims and believes that their current status does not warrant accrual under the guidance of Financial Accounting Standards No. 5, Accounting for Contingencies , since the amount of any liability is neither probable nor reasonably estimable. As such, no amounts have been accrued in the financial statements. Management intends to vigorously defend these claims and will continue to monitor the result of arbitration and assess then need for future accruals.

SELECTED FINANCIAL DATA


	Year Ended August 31,
	2004		2003		2002		2001		2000
	(dollars in thousands)
Statement of Operations Data:
Total revenues	$	1,623,587	$	1,232,008	$	895,942	$	689,591	$	446,230
Costs and expenses:
Cost of grain and fuel sold		1,521,925		1,154,103		830,188		633,367		404,394
Employee compensation and broker commissions		28,502		24,111		21,835		18,022		14,845
Pit brokerage and clearing fees		26,743		16,152		11,557		7,903		3,888
Introducing broker commissions		10,016		7,881		7,802		6,441		3,118
Interest		4,790		3,192		1,297		1,217		835
Depreciation and amortization		833		803		850		711		625
Other operating expenses		21,758		19,700		17,145		14,130		10,899

Total costs and expenses		1,614,567		1,225,942		890,674		681,791		438,604

Income before income tax expense and minority interest		9,020		6,066		5,268		7,800		7,626
Minority interest		576		561		600		242		—

Income after minority interest and before income taxes		8,444		5,505		4,668		7,558		7,626
Income tax expense		2,030		1,200		1,280		1,590		1,370

Net income	$	6,414	$	4,305	$	3,388	$	5,968	$	6,256

Balance Sheet Data (at end of period):
Total assets	$	603,827	$	504,733	$	399,526	$	271,911	$	234,851	(1)
Notes payable and subordinated debt		47,281		76,548		66,013		24,179		8,702
Obligations under capital leases		4,675		5,363		—		—		—
Minority interest		5,488		4,109		3,758		3,243		—
Capital stock and equity		39,829		35,827		35,172		35,068		31,069

(1)	The company acquired the assets of a futures brokerage business on July 1, 2000 with assets of $118 million.

PRO FORMA FINANCIAL INFORMATION


	Year Ended August 31, 2004
	(unaudited)
	(dollars in thousands, except per share data)
Total revenues	$	1,623,587
Total costs and expenses		1,614,567

Income before income tax expense and minority interest		9,020
Minority interest		576

Income before income tax expense		8,444
Pro forma adjustments (1)		483

Income before income tax expense, after pro forma adjustments		7,961
Pro forma income tax expense (2)		3,000

Pro forma net income	$	4,961

Pro forma shares outstanding (3)		4,310,000

Pro forma basic and diluted earnings per share	$	1.15

(1)

(2)	Income tax expense without patronage dividend deduction.

(3)

The following unaudited pro forma data estimates the amount and number of shares to be distributed to Class A and Class B members.


	(1) August 31, 2004 Stock Amount (a)		(2) Three Year Patronage		(3) Patronage-Based Rights Value Distributed (b)		(1) & (3) Appraisal Allocation Value		Total Number of Shares Outstanding after Restructuring (c)
Class A common and preferred stock	$	14,668,833	$	4,643,854	$	25,104,773	$	39,773,606	3,977,361
Class B common and preferred stock		2,069,689		232,464		1,256,705		3,326,394	332,639

Totals	$	16,738,522	$	4,876,318	$	26,361,478	$	43,100,000	4,310,000

(a)

(b)

(c)

No effect of shares potentially issued under subscription rights has been assumed.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition, results of operations and liquidity and capital structure for the years ended August 31, 2004, 2003 and 2002. This section should be read together with our audited consolidated financial statements and related notes included elsewhere in this proxy statement-prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this proxy statement-prospectus, including information with respect to our plans and strategies for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this proxy statement-prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, the forward-looking statements contained in this proxy statement-prospectus.

Overview

We are a commodities risk management and trading company headquartered in West Des Moines, Iowa. Risk management is designed to identify and then limit and control the potential factors that could negatively impact the success of a business. Our chief function is to research, recognize and quantify the potential risks involved in our customers’ operations, then plan and execute programs that effectively mitigate those risks by capping operational expenses and maximizing margin opportunities. While the company’s initial business was centered on the risks of grain marketing of domestic elevators, today’s programs are designed to serve a much broader commodity spectrum including grain and livestock, dairy, the entire energy complex, ingredient users, food processors, and other commodity end-users. The company utilizes all of the tools of the commodities marketplace, including exchange-traded futures and options, cash and physical commodity trades, and over-the-counter derivatives to provide risk management services to our customers for their businesses. We also offer direct execution clearing services to commodities firms, traders, fund operators and others. Our grain merchandising operations facilitate the movement of grain from an originator to fill the demand of an end-user. This approach offers opportunities to add value for our customers by merchandising their inventories as far into the marketing pipeline as possible.

Our revenues are derived from: (1) commissions for futures and option trades, (2) service and consulting fees, (3) brokerage mark-ups on over-the-counter and commodities trades, (4) fees for clearing customers’ direct trades, (5) the sale of grain and fuel, and (6) interest income on margin funds on deposit with the various commodity exchanges. As a service company, our expenses primarily consist of employee compensation and broker commissions and their related fringe benefits and payroll taxes. As commission expenses are directly related to revenues, they are for the most part a variable expense, as are the pit brokerage and clearing fees expense as they are directly related to the number of futures exchange trades. Other significant operating expenses consist of communications, marketing information, travel, office and equipment rent and marketing and promotion.

Recent Developments, Market Trends and Capital

We have realized a significant increase in our “nonmember” business revenues, especially over the last five years. This increase is a result of the company expanding our risk management services into other commodities in addition to our traditional grain marketing base. We expect this trend to continue at an accelerated rate as we offer more risk management programs and services to other industries and companies to help them manage their commodity risks. We have also seen a consolidation in the commodity exchange clearing business, which has allowed us to capture additional customers and business, and we believe this trend will continue.

Customer deposits and accounts receivable related to our Commodity and Risk Management Services and Clearing and Execution Services segments have grown from $127 million at the beginning of FY 2001 to $352

million at August 31, 2004. As these segments continue to grow, we anticipate needing additional regulatory capital to meet CFTC guidelines. As a result of the restructuring, we expect to raise between $5 million and $10 million in additional equity capital through the member subscription rights exercised and the initial ESOP investment. Although the expansion of our services to other industries and to foreign markets does require additional personnel and related expenses, it does not generally require any significant capital expenditures. Our primary capital concern is meeting CFTC regulatory requirements from our anticipated increased business. With the ESOP in place, we also expect to raise an additional $1 million annually in equity capital from ESOP common stock purchases. This amount, plus our ability to better control annual dividends based upon net earnings, should provide the company with significant annual capital resources. With the additional $5 million to $10 million in estimated capital noted above and the expected annual capital resources generated through the ESOP and operations, we anticipate meeting our expected growth capital needs for the next several years.

With our new structure in place, we also would have much greater flexibility to raise capital through a stock or debt offering in a timely manner to our current stockholders or others approved by our board of directors. Although we have no current plans for such an offering, the availability of having an offering will allow the company to remain more flexible and competitive in the future.

With the restructuring, we expect the commission rate paid by Class B members to be reduced (see Note 1 of the pro forma financial information on pages 10 and 46.) This should have less than a $500,000 impact on future annual net earnings.

Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America applied on a consistent basis. The preparation of these financial statements requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. We evaluate these estimates and assumptions on an ongoing basis. We base these estimates on the information currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary materially from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the more significant estimates and assumptions used in the preparation of our financial statements.

Commodity Deposits and Accounts Receivable/Payable

Commodity accounts include equities and deficits in open futures and option contracts and funds received to margin or guarantee commodity transactions. The company is obligated to fund margin calls on open contracts and, in turn, receives reimbursement from customers for maintenance of their respective margins. Customer funds received to margin, guarantee, and/or secure commodity futures transactions are segregated and accounted for separately, in accordance with the Commodity Futures Trading Commission’s regulations. While the company has not historically experienced significant losses in respect of its credit exposures, there is a need to regularly evaluate accounts receivable for the adequacy of the allowance for doubtful accounts.

Commission Revenue

Commissions on futures contracts are recognized when the related open commodity futures transaction is closed. Commissions on option contracts are recognized upon the purchase or sale of the option. Commissions and fees on our Clearing and Execution Services operation are charged when each trade is made (opened and closed).

Inventories

Grain inventories are carried at market value, which is net realizable value (NRV). NRV is determined by estimating selling prices and related costs of disposal in the ordinary course of business. Management’s judgments in determining NRV involve considerations of the grading of the commodity and the basis adjustment for location and expected costs to sell. Realized and unrealized gains and losses on futures contracts are credited or charged to current costs of sales.

Open Contracts and Hedge Policy — Grain

Open cash and futures contracts for the purchase and sale of grain are reported at market value, and the resulting gains or losses are recognized currently in earnings. The company is exposed to risks that it may not have sufficient grain to deliver into its contracts and thus would be obligated to purchase grain at prevailing market rates in order to meet such commitments. The company follows the policy of hedging its grain transactions through the use of those cash and futures contracts in order to minimize risk due to market fluctuations. Hedge margin accounts are carried at net liquidating valuations as of the balance sheet date.

Pensions

The company has noncontributory defined pension plans for most of its employees. The company’s funding policy for the U.S. plans is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Security Act of 1974, plus any additional amount the company may deem to be appropriate. The company accounts for its defined benefit pension plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions,” which requires that amounts recognized in financial statements be determined on an actuarial basis. A minimum liability is required to be established in the Consolidated Statements of Financial Condition representing the amount of unfunded accrued pension cost. This represents the difference between the accumulated benefit obligation and the fair value of plan assets and is recorded as a reduction to members’ equity through accumulated other comprehensive income, net of tax, in the Consolidated Statements of Financial Condition. As of August 31, 2004, the company has recorded an accumulated reduction to members’ equity of approximately $3.0 million.

To account for its defined benefits pension plan in accordance with SFAS No. 87, the company must make three main determinations at the end of each year: First, it must determine the actuarial assumptions for the discount rate used to reflect the time value of money in the calculation of the projected benefit obligations for the end of the current year and to determine the net periodic pension cost for the subsequent year. For guidance in determining the rate, the company looks at rates of return on high-quality fixed-income investments and periodic published rate ranges. See Note 4 to the Consolidated Financial Statements for a listing of the discount rates used.

Second, the company must determine the actuarial assumption for rates of increase in compensation levels used in the calculation of the accumulated and projected benefit obligation for the end of the current year and to determine the net periodic pension cost for the subsequent year. See Note 4 to the Consolidated Financial Statements for a table showing the rates used.

Third, the company must determine the expected long-term rate of return on assets assumption that is used to determine the expected return on plan assets component of the net periodic pension cost for the subsequent year. See the table in Note 4 to the Consolidated Financial Statements for the expected long-term rates used.

Results of Operations

Revenues

Year Ended August 31, 2004 Compared to Year Ended August 31, 2003

Revenues totaled $1,623.6 million for the year ended August 31, 2004 compared to $1,232.0 million for the year ended August 31, 2003, an increase of $391.6 million, or 31.8%. The FY2004 revenue increase over FY2003 was primarily a result of increased grain and fuel sales of $371.4 million over FY2003. This increase was a result of the increase in bushels merchandised from 248 million in 2003 to 258 million in FY2004, along with much higher grain prices in FY2004 over FY2003, and fuel sales increasing by $40.5 million over FY2003. Additional futures trading volume from existing and new customers in both our Clearing and Execution Services segment and our Commodity and Risk Management segment accounted for $18.4 million of the revenue increase. The additional volume in this segment is due to high commodities prices and resulting increased trading activity. Our combined trade volume increased from 36.5 million trades in FY2003 to 56.2 million trades in FY2004. Service, consulting and brokerage fees were $12.6 million in FY2004 up from $11.2 million in FY2003 primarily due to increased energy and grain risk management brokerage and additional customers on our fee-based risk management program. Other revenues were higher due to the gain on the sale of Board of Trade Clearing Corp. stock of $0.8 million. Interest income was down by $0.4 million primarily due to lower short-term interest rates.

Year Ended August 31, 2003 Compared to Year Ended August 31, 2002

Revenues totaled $1,232 million for the year ended August 31, 2003 compared to $896.0 million for the year ended August 31, 2002, an increase of $336.0 million or 37.5%. The FY2003 revenue increase over FY2002 was primarily a result of increased grain and fuel sales of $326.6 million over FY2002. This increase was a result of the increase in bushels merchandised from 218 million in FY2002 to 248 million in FY2003, along with slightly higher grain prices in FY2003 over FY2002 and fuel sales increasing by $25.5 million over FY2002. Additional trading volume from existing and new customers in our Clearing and Execution Services segment caused a trade volume increase from 24.2 million trades in FY2002 to 36.5 million trades in FY2003 and increased revenues by $7.0 million. Service, consulting and brokerage fees were up to $11.2 million in FY2003 from $10.8 million in FY2002 due to both increased energy risk management brokerage and additional customers on our fee-based risk management program. Interest income was also $1 million higher with the start of operations of our Financial Services segment.

Costs and Expenses

Year Ended August 31, 2004 Compared to Year Ended August 31, 2003

Cost of Grain and Fuel Sold. Cost of grain and fuel sold totaled $1,521.9 million for the year ended August 31, 2004 compared to $1,154.1 million for the year ended August 31, 2003, an increase of $367.8 million, or 31.9%. The increase was primarily a result of the increase in bushels merchandised from 248 million in FY2003 to 258 million in FY2004, along with much higher grain prices in FY2004 over FY2003, resulting in higher purchase costs per bushel. Additionally, fuel purchases increased by $40.7 million over FY2003.

Employee Compensation and Broker Commissions. Employee compensation and broker commissions were $28.5 million in FY2004 compared to $24.1 million in FY2003, an increase of $4.4 million or 18.3%. This volume-related increase was primarily due to increased broker commissions from our revenue volume increases and additional personnel in our Clearing and Execution and Financial Services segments.

Pit Brokerage and Clearing Fees. The increase of pit brokerage and clearing fees from $16.2 million in FY2003 to $26.7 million in FY2004 is directly related to increased commissions and increased clearing and transaction fee revenues. Additionally, the increase of pit brokerage and clearing fees is related to increased transaction fees charged by exchanges.

Introducing Broker Commissions. Introducing broker commissions expenses are directly related to the commission income generated by the introducing broker customers of the company. Such expense increased from $7.9 million in FY2003 to $10.0 million in FY2004 due to the increase in commission revenues from such customers.

Interest. Interest expense increased to $4.8 million in FY2004 from $3.2 million in FY2003 due to the increase in bushels handled in our grain merchandising operations, the increase in export-related bushels, and higher grain prices.

Other Operating Expenses. Other operating expenses were $21.8 million for FY2004 compared to $19.7 million in FY2003, an increase of $2.1 million. This increase was primarily due to increased employee benefits and payroll taxes expenses of $1.1 million related to higher employee compensation and broker commissions, including rate increases in our pension and medical insurance plans and to increased employee travel related expenses of $0.4 million. The increase was offset by a reduction in other operating expenses of $0.6 million resulting from subrogation payments for legal expenses incurred in previous years in connection with legal proceedings involving the company.

Year Ended August 31, 2003 Compared to Year Ended August 31, 2002

Cost of Grain and Fuel Sold. Cost of grain and fuel sold totaled $1,154.1 million for the year ended August 31, 2003 compared to $830.2 million for the year ended August 31, 2002, an increase of $323.9 million, or 39.0%. The increase was primarily a result of the increase in bushels merchandised from 218 million in FY2002 to 248 million in FY2003, along with slightly higher grain prices in FY2003 over FY2002, resulting in higher purchase costs per bushel. Additionally, fuel purchases increased by $25.2 million over FY2002.

Employee Compensation and Broker Commissions. Employee compensation and broker commissions were $24.1 million in FY2003 compared to $21.8 million in FY2002, an increase of $2.3 million or 10.6%. This increase was due to the additional volume and new customers in our Clearing and Execution Services segment which increased costs by approximately $0.7 million, increased broker commissions due to volume increases and additional personnel in the Risk Management Services segment of approximately $0.6 million, additional personnel in Grain Merchandising due primarily to a full year’s operations in FY2003 of new offices opened in FY2002 amounting to approximately $0.7 million.

Pit Brokerage and Clearing Fees. The increases of pit brokerage and clearing fees from $11.6 million in FY2002 to $16.2 million in FY2003 is entirely related to increased commissions and increased clearing and transaction fee revenues.

Introducing Broker Commissions. Introducing Broker commissions’ expenses are directly related to the commission income generated by the introducing broker customers of the company. Such expenses increased slightly from $7.8 million in FY2002 to $7.9 million in FY2003 due to the small increase in revenues from such customers.

Interest. Interest expense increased to $3.2 million in FY2003 from $1.3 million in FY2002 due to the increase in bushels handled in our grain merchandising operations, the increase in export related bushels and the start of the repurchase program in the Financial Services segment.

Other Operating Expenses. Other operating expenses were $19.7 million for FY2003 compared to $17.1 million in FY2002, an increase of $2.6 million or 15%. This increase was primarily due to increased employee benefits and payroll taxes expenses related to higher employee compensation and broker commissions of $1.2 million and additional office rent and related expenses due to opening several new locations of $0.8 million.

Income Tax Expense

Year Ended August 31, 2004 Compared to Year Ended August 31, 2003

Our provision for income taxes increased to $2.0 million in FY2004 from $1.2 million in FY2003 due to higher earnings in general and higher earnings in our nonmember business, which are fully taxable. As a result, the effective rate was 24.0% in 2004, up from 21.8% in FY2003.

Year Ended August 31, 2003 Compared to Year Ended August 31, 2002

Our provision for income taxes decreased to $1.2 million in FY2003 from $1.3 million in FY2002 despite higher earnings due to the increased member patronage dividend deduction from higher member-related earnings in FY2003 over FY2002. The effective rate was 21.8% in FY2003, down from 27.4% in FY2002.

Operating Segments

Our reportable operating segments consist of Commodity and Risk Management Services, Clearing and Execution Services, Grain Merchandising and Financial Services. We include the earnings of equity affiliates that are closely associated with our operating segments in the respective segment’s net income. Segment amounts exclude revenues, expenses and equity earnings not specifically identifiable to segments. These amounts are included in the Corporate and Other disclosure.

We prepared the financial results for our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We have allocated certain common expenses among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. Segment income before income taxes may not be consistent with measures used by other companies. The accounting policies of our operating segments are the same as those applied in the consolidated financial statements.

Commodity and Risk Management Services

Our Commodity and Risk Management Services segment offers commodity services to our customers, with an emphasis on risk management using futures, options and other derivative instruments. The following table provides operating and other data for this segment.


	Year Ended August 31,
	2004		2003		2002
	(dollars in thousands)
Revenues	$	154,743	$	107,527	$	81,462
Operating expenses		146,836		100,851		75,871

Income before income taxes	$	7,907	$	6,676	$	5,591

Total identifiable assets at end of period	$	205,308	$	121,489	$	135,257

Year Ended August 31, 2004 Compared to Year Ended August 31, 2003

Revenues increased from $107.5 million in FY2003 to $154.7 million in FY2004, an increase of $47.2 million. With strong grain commodity prices in FY2004, trading volume was up considerably over FY2003 with commissions $5.4 million higher in FY2004 than FY2003. Service, consulting and brokerage fees were $1.8 million higher in FY2004 from FY2003 primarily due to increased energy and grain risk management brokerage and additional customers using our fee-based risk management programs. Fuel sales increased from $71.1 million in FY2003 to $111.6 million in FY2004, an increase of $40.5 million. Lower short-term interest rates reduced interest income by $0.8 million in FY2004 from FY2003. The segment also had a $0.8 million gain on sale of CBOT Clearing Corp. stock in FY2004 and a $0.3 million gain in FY2003.

Operating expenses were higher at $146.8 million in FY2004 compared to $100.9 million in FY2003, an increase of $45.9 million. Volume related employee compensation and commissions and related employee benefits were $3.5 million of this increase, and volume related pit brokerage and introducing broker commissions were $1.9 million of this increase. Fuel purchases increased by $40.7 million over FY2003.

Year Ended August 31, 2003 Compared to Year Ended August 31, 2002.

Revenues increased from $81.5 million in FY2002 to $107.5 million in FY2003, an increase of $26.0 million. This increase was primarily a result of slightly higher commissions of $0.7 million due to higher trading volume and higher service, consulting and brokerage fees of $0.9 million due to increased energy brokerage and additional customers on our fee-based risk management program. Fuel sales increased from $45.6 million in FY2002 to $71.1 million in FY2003, an increase of $25.5 million. Interest income was approximately $0.4 million lower due to lower short-term interest rates.

Operating expenses were higher at $100.9 million in FY2003 compared to $75.9 million in FY2002, an increase of $25.0 million. The company had increased broker commissions due to revenue increases and additional personnel. Employee benefits were also higher with the increased commissions and compensation and with rate increases in our pension and medical plans. These increases were offset by lower introducing broker commissions as more of our revenue increase was from company brokers. Fuel purchases increased by $25.2 million over FY2002.

Clearing and Execution Services

The Clearing and Execution Services segment offers low-cost clearing and direct execution services to commodities firms, fund operators, commodities traders and others. The following table provides operating and other data for this segment.


	Year Ended August 31,
	2004		2003		2002
	(dollars in thousands)
Revenues	$	39,401	$	25,988	$	19,293
Operating expenses		36,042		25,041		18,430

Income before income taxes	$	3,359	$	947	$	863

Total identifiable assets at end of period	$	289,651	$	265,796	$	169,775

Year Ended August 31, 2004 Compared to Year Ended August 31, 2003

Revenues were $39.4 million for FY2004 compared to $26.0 million for FY2003, an increase of $13.4 million. With the increase in prices for energy, grain and metals commodities in FY2004, our customers’ trading volume was up substantially over FY2003. Total trade volume increased from 35.1 million trades in FY2003 to 54.5 million trades in FY2004, increasing commission and fee revenue by $13.3 million in FY2004 over FY2003. With higher customer margin deposits, our interest income was up $0.1 million despite lower short-term interest rates.

Operating expenses were higher at $36.6 million for FY2004 compared to $25.0 million in FY2003, an increase of $11.6 million. This increase was primarily a result of volume related additional pit brokerage and clearing fees of $10.0 million, introducing broker commissions of $0.7 million and increased salaries and wages of $0.6 million.

Year Ended August 31, 2003 Compared to Year Ended August 31, 2002.

Revenues increased from $19.3 million in FY2002 to $26.0 million in FY2003, an increase of $6.7 million. This increase was primarily a result of additional trading volume from both new and existing customers. Such trade volume increased from 24.2 million trades in FY2002 to 35.1 million trades in FY2003 and increased revenues by $6.4 million. Due to the additional margin deposits from such customers, interest income increased from $1.0 million in FY2002 to $1.3 million in FY2003 despite lower short-term interest rates.

Operating expenses increased from $18.4 million in FY2002 to $25.0 million in FY2003, an increase of $6.6 million. This increase was primarily due to (1) additional personnel to handle increased volume and new customers and related employee benefits — $1.0 million, (2) increased volume related pit brokerage and clearing fees — $5.0 million, and (3) additional volume related introducing broker commissions expense on customers trading through such introducing brokers — $1.0 million.

Grain Merchandising

The Grain Merchandising segment acts as a dealer in, and manager of, physical grain and fertilizer through a majority interest in FGDI, LLC. FGDI acts as a grain dealer in the United States and international markets, primarily in Canada, Latin America and the Far East and also manages a pool of grain originated by a group of elevators in Texas.

The following table provides operating and other data for this segment.


	Year Ended August 31,
	2004		2003		2002
	(dollars in thousands)
Sales	$	1,426,846	$	1,096,014	$	794,808
Cost of sales		1,412,270		1,084,754		785,796

Gross profit	$	14,575	$	11,260	$	9,012
Operating expenses		12,345		9,391		7,010

		2,230		1,869		2,002
Minority interest		669		561		600

Income (loss) before income taxes	$	1,561	$	1,308	$	1,401

Total identifiable assets at end of period	$	98,306	$	99,770	$	75,797

Year Ended August 31, 2004 Compared to Year Ended August 31, 2003

Gross profit for FY2004 was $14.6 million compared to $11.3 million in FY2003, an increase of $3.3 million. This increase was due to both the increase in bushels merchandised from 248 million in FY2003 to 258 million in FY2004 and an approximate 24% increase in margins per bushel due primarily to additional higher margin export bushels.

Operating expenses were $12.3 million in FY2004 and $9.4 million in FY2003, an increase of $2.9 million. This increase was primarily a result of (1) higher interest expense of $1.3 million due to the increase in bushels handled, high commodity prices and additional export bushels that require additional inventory and receivable carrying time, (2) higher employee compensation and employee benefits due to expanded operations in the last year of $0.7 million and (3) increase in bad debts of $0.5 million.

Year Ended August 31, 2003 Compared to Year Ended August 31, 2002.

Gross profit was $11.3 million for FY2003 and $9.0 million for FY2002, an increase of $2.3 million. This increase was primarily due to the increase in bushels merchandised from 218 million in FY2002 to 248 million in FY2003 and an approximate 10% increase in the margin per bushel handled.

Operating expenses rose from $7.0 million in FY2002 to $9.4 million in FY2003, an increase of $2.4 million. This increase was primarily a result of additional personnel and related employee benefits due to our expanded operations of $1.1 million and higher interest expense of $0.8 million despite lower rates due to both the increase in total bushels handled and the increase in export-related bushels handled that require additional inventory carrying time. Due to our expanded operations, other operating expenses increased also.

Financial Services

The Financial Services segment offers financing and facilitation for customers to carry commodities. The primary activity of this segment has consisted of sale/repurchase agreements whereby we purchase grain evidenced by warehouse receipts subject to a simultaneous agreement to resell such grain to the seller at a later date. The following table provides operating and other data for this segment.


	Year Ended August 31,
	2004			2003		2002
	(dollars in thousands)
Revenues	$	2,517		$	2,287	$	322
Operating expenses		2,964			2,178		322

		(447	)		109		—
Minority interest		93			—		—

Income (loss) before income taxes	$	(354	)	$	109	$	—

Total identifiable assets at end of period	$	4,726		$	13,110	$	15,516

Year Ended August 31, 2004 Compared to August 31, 2003.

Revenues for FY2004 and FY2003 were $2.5 million and $2.3 million. Operating expenses were much higher for FY2004 at $3.0 million compared to $2.2 million in FY2003 primarily due to personnel added in late FY2003 to expand this segment’s business.

Year Ended August 31, 2003 Compared to Year Ended August 31, 2002.

Revenues were $2.3 million for FY2003 compared to $0.3 million in FY2002. The Financial Services segment operations were started in late FY2002, and FY2003 was its first full year of operations. Revenues are the interest income from repurchase agreements with customers for financing their grain inventories with expenses being primarily salaries and interest expense on financing such agreements. Amounts outstanding for such repurchase agreements at August 31, 2003 were $11.8 million.

Corporate and Other

The Corporate segment consists of equity in investments in other companies and overall corporate level expenses primarily related to employee compensation and benefits, travel, MIS, professional fees, director fees and general insurance. Corporate net expenses for the three years ended August 31, 2004, were as follows: $4,029 for FY2004, $3,535 for FY2003, and $3,188 for FY2002. The primary reason for the increase in the above periods is employee compensation and the related benefits cost of such due to additional personnel and for FY2004 additional incentive plan costs due to the company’s increased earnings over FY2003. Pension and medical plans also had significant rate increases over the last three years. During FY2004, the company incurred costs relating to the registration statement of approximately $415,000 which have been recorded as other assets pending consummation of these transactions.

Liquidity and Capital Resources

The following table presents a summary of cash flows for the three years ended August 31, 2004.


	Year Ended August 31,
	2004			2003			2002
	(dollars in thousands)
Cash flows provided by (used for):
Operating Activities	$	16,979		$	(7,767	)	$	(25,090	)
Investing Activities		10,658			2,385			(15,301	)
Financing Activities		(24,800	)		7,845			38,567

Net Increase (decrease) in cash and cash equivalents	$	2,837		$	2,463		$	(1,824	)

We have had substantial growth for the last 3 years in each segment of our operations. Customer deposits and accounts receivable assets related to futures and options trading have grown from $145 million at the beginning of FY2002 to $352.0 million at August 31, 2004. The related commodity and customer regulated accounts payable has also increased from $178 million at the beginning of 2002 to $411 million at August 31, 2004. Accounts receivable and inventories primarily related to our grain merchandising operations have increased from $50 million at the beginning of FY2002 to $119.1 million at August 31, 2004. The cash flows used in operations shown above primarily related to our grain merchandising operation as the accounts receivable and inventories increases have been largely financed by our lines of credit, with such outstanding notes payable increasing from $24 million at the beginning of FY2002 to $41.5 million at August 31, 2004. The cash flows used for investing activities above are a result of the growth of the financial services business segment started in 2002. Cash flows provided by financing activities noted above were primarily proceeds from notes payable used to finance the growth in the grain merchandising and financial services operations which both had decreased activity towards the end of FY2004 resulting in a significant repayment of notes payable.

The accounts of our grain merchandising segment include amounts due with respect to shipments to a customer located in Mexico. Payment of the accounts from this debtor are partially insured under a credit insurance policy issued by Export Import Bank of the United States that is applicable to United States origin goods. Payments are also partially insured by a commercial credit insurance policy in the maximum amount of $18 million that is applicable to shipments not insured under the Export Import Bank policy. In fiscal year 2004 FGDI entered into master purchase agreements with CoBank, ACB, under which it may sell, and has sold, at a discount insured receivables under the above policies, with limited recourse. CoBank currently holds $8.0 million of the outstanding receivables owed by this customer. These sales of receivables accelerate the receipt of funds, and enable us to utilize the increase in the line of credit available to generate additional sales. Aggregate sales of receivables were $21.7 million in FY2004.

During the first quarter of fiscal year 2005, the customer located in Mexico discussed above failed to make timely payment on a portion of the $24.5 million owed to the company and CoBank, $16.5 million of which is owed to the company. Management currently believes that this debtor may not pay the remaining receivables when they are due, and is uncertain as to whether these receivables will be collectable in the future. It is expected that the company and CoBank will file claims under an Export Import Bank policy and a commercial credit insurance policy, and management expects that $23.5 million should be recovered from these insurers. In communications with the insurers to date, there has been no indication that the policies would not provide coverage. If the company recovers such amount from its credit insurers, total exposure to the company resulting from this default will be $1.0 million. Until the company recovers these claims from its credit insurers, these unpaid balances will utilize a part of our credit capacity under the credit facilities of the grain merchandising segment, and could affect growth in this segment if the company desires to utilize the full capacity of such facilities. Additionally, failure to recover the insurance claims from our credit insurers would have a material adverse effect on our financial condition.

Due to the terms of the existing lines of credit in our grain merchandising segment, we expect our growth in this business segment will be limited by the capital it can retain from annual operations. We do not expect to use any additional capital from the exercise of subscription rights and sales of stock to the ESOP to support additional growth in this business segment. Our line of credit for this segment was expanded during 2004 from $90 million to $120 million primarily as a result of the impact of higher commodity prices in early 2004, then reduced back to $97.5 million. We do not anticipate that this reduction in our line of credit will have any material impact on our operations as we intend to concentrate more on domestic business that, along with current lower commodity prices, should result in reduced financing requirements for this segment.

The company has substantial lines of credit available (see “Financing Activities”) and annual cash flow from operations to support continued additional growth in most segments of our operations. In addition, we anticipate the expected $5 million to $10 million in additional capital as a result of the restructuring from the exercise of stock subscription rights and the initial sale of stock to the ESOP will provide substantial capital to

fund significant growth for the next several years. Our primary need for such capital is to meet expected CFTC regulatory capital guidelines as a result of our increased growth in the Commodity and Risk Management Services and Clearing and Execution Services segments of our business. Our restructuring will not trigger any repayment of debt or impact our compliance with any debt covenants. We expect such additional capital will enable us to increase our lines of credit above current levels.

Financing Activities

The company maintains a number of lines of credit to support operations. A summary of such lines is noted below.


Creditor	Renewal/ Expiration Date	Use	Amount Available		Amount Outstanding at August 31, 2004
Deere Credit, Inc.	March 1, 2005	Margin Calls	$38.8 million		-0-
Deere Credit, Inc.	March 1, 2005	Repurchase Agreements	$46.0 million		$1.3 million
Deere Credit, Inc.	Dec. 1, 2005	Subordinated Debt for Regulatory Capital	$7.0 million		$4.0 million
Deere Credit, Inc.	Oct. 1, 2006	General Corporate	$8.2 million		$8.2 million

Total Deere			$100.0 million		$13.5 million


CoBank, ACB	April 1, 2005	Grain Merchandising	$97.5 million	⁽¹⁾	$26.5 million
CoBank, ACB	June 30, 2006	OTC & Fuel Operations	$15.0 million		$2.0 million
CoBank, ACB	May 1, 2005	Repurchase Agreements	$75.0 million		-0-

Total CoBank			$187.5 million		$28.5 million

Harris Bank	March 10, 2005	Margin Calls	$15.0 million		-0-
AFG Trust Finance Limited	May 26, 2005	Grain Merchandising	$15.0 million		$3.5 million
Industrial Revenue Bonds (Capitalized Lease Obligations)	Annual payments to 2013	Mobile, Alabama facility additional storage	$5.5 million		$4.7 million
Sowood Commodity Partners Fund, LP.	March 4, 2006	Junior, secured revolving credit facility — Financial Services operations	$30.0 million		-0-
Fortis Capital Corp.	Demand	Financial Services operations	$20.0 million		-0-
RZB Finance, LLC	Demand	Financial Services operations	$5.0 million		-0-
Subordinated Debt	Oct. 1, 2004 to June 30, 2005	Regulatory Capital	$1.8 million		$1.8 million

(1)	Amount was amended subsequent to August 31, 2004 from $120 million to $97.5 million.

We carry significant open futures positions on behalf of our customers in the Commodity and Risk Management Services and the Clearing and Execution Services segments of our business. The above lines of credit in place for margin calls are rarely used, but necessary to cover any abnormal commodity market fluctuations and the margins calls they may produce. With the company and customer funds on deposit and the available credit lines noted above, management believes we have adequate capital reserves to meet any foreseeable market fluctuations based upon current commodity market activities.

Our Grain Merchandising segment has a $97.5 million line of credit with CoBank available to finance its operations. The segment can also utilize part of the Deere Credit repurchase agreement line to carry inventories when considered appropriate. As this segment of our business carries significant accounts receivable and inventory, the CoBank line is utilized to a great extent. The CoBank loan agreements require compliance with certain financial covenants, including compliance with minimum net worth, working capital, financial ratios and

borrowing base limits. More specifically, under FGDI’s revolving credit facilities, if the amount outstanding under the revolving credit commitments exceeds the borrowing base set forth in the loan agreement, FGDI must notify CoBank of the breach and repay amounts necessary to reduce the outstanding amount. For the months ended February 29, 2004 to June 30, 2004, FGDI’s amount outstanding exceeded the borrowing base as determined by CoBank, but FGDI did not make the repayments necessary under the loan agreements. CoBank agreed to waive these violations of the terms of the loan agreements. The waiver as of June 30, 2004 was in exchange for FGDI’s agreement to a reduction of the aggregate available credit amount from $120 million to $97.5 million. At August 31, 2004, the company was in compliance with the borrowing base limit.

The above lines of credit are generally reviewed and renewed on an annual basis.

In 2001 we sold a 30% interest in our grain merchandising subsidiary for $3 million in order to better capitalize such operations and increase its line of credit to support the expanding operations.

We formed FCStone Merchant Services, LLC, a joint venture with Sowood Commodity Partners Fund, LP, in March 2004. The company invested $2.0 million and owns 70% of the joint venture while Sowood owns the remaining 30%. Sowood provided $1.0 million in a capital investment in the joint venture, along with a $30 million junior, secured revolving credit line. The joint venture also has a $20 million line of credit with Fortis Capital Corp. and a $5.0 million line of credit with RZB Finance, LLC to support its operations.

Off-balance Sheet Financing Activities

During fiscal year 2004, the company’s grain merchandising subsidiary, FGDI, began participating in a bank program to provide liquidity through the sale of insured receivables, with limited recourse. FGDI’s business purpose for entering into this program was to accelerate the receipt of funds and enable FGDI to utilize the increase in the line of credit available as a result of this program to generate additional sales. Aggregate sales of receivables during the fiscal year ended August 31, 2004 were $21.7 million. We believe that this program is not very important in respect to the company’s and FGDI’s liquidity and capital resources so long as FGDI’s borrowings remain below its borrowing limits under its line of credit. We do not anticipate that this program will have a material impact on our operations as we intend to concentrate more on domestic business that, along with current lower commodity prices, should result in reduced financing requirements for this segment. This program expires February 17, 2005 and the company expects to discontinue use of this program after such date.

The Company grants the purchaser a security interest in all of the Company’s rights, title, and interest in receivables sold. Additionally, the Company has authorized the purchaser to assign and transfer, and grant participation in, any purchase documents. In the event that any receivable is not paid in full on its stated due date, FGDI shall take any and all actions required by the policies, which may lead to the timely filing of a claim as required under the insurance policies, or at its option, repurchase of the receivable from the purchaser. In the event it is necessary to determine whether to file a claim under the insurance policies or repurchase the receivables, FGDI would seek advice from legal counsel in selecting the option that would be most advantageous. FGDI accounts for sales of receivables under these agreements as sales in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities .

Specific invoices to certain customers are eligible for this program. Upon sale of the receivable, FGDI is funded, based on the particular agreement, either 95% or 98% of the invoice value, less a discount. The accounts receivable balance is reduced by the value of the amount funded. The unfunded amount of the invoice value, approximately $581,000 at August 31, 2004, remains as an accounts receivable balance reported on the balance sheet. The discount paid is charged to operations as a loss on sale of receivable immediately, in the period in which the sale is initiated. FGDI shall notify the customers obligated under the receivables of the sale and assignment of such receivables to the purchaser and instruct the customer to make payment directly to the purchaser.

Payments of the amounts due from these debtors are partially insured under a credit insurance policy issued by Export Import Bank of the United States (EXIM) that is applicable to United States origin goods. Payments are also partially insured by a commercial credit insurance policy in the maximum amount of $18 million that is applicable to shipments not insured under the EXIM policy. The amount uninsured is the unfunded amount included in accounts receivable referred to above.

Limited recourse, as it pertains to the two agreements, obligates FGDI to repurchase the receivables, at the request of the purchaser, only under the following circumstances listed in the purchase agreements: (1) in the event the goods relating to a receivable are not accepted by the buyer; (ii) if a dispute regarding the goods or payment of any receivables arises between the foreign buyer and the seller or the loss relates to a contractual warrant or products; (iii) if the loss relates to any action or inaction taken by the seller or its agents (including, but not limited to, the failure to timely pay insurance premiums, failure to file a claim on time or failure to file a claim properly); (iv) if the insurer fails to pay any claim on the insurance policy on the basis that the seller or its agents caused the loss; (v) if the loss relates to any other insurance policy claims that the insurer will not pay; or (vi) upon the occurrence of a breach of any of the seller’s representations or warranties pertaining to the receivable. In the event of repurchase, the transaction would be accounted for as a purchase of assets from the former purchaser in exchange for cash. FGDI would recognize in its financial statements, the assets purchased, and measure those assets at fair value on the date of the repurchase.

Contractual Obligations

The following table describes the company’s cash payment obligations as of August 31, 2004:


	Payments Due by Period
	(in thousands)
	Total		Less than 1 Yr		1-3 Years		4-5 Years		After 5 yrs
Subordinated Debt	$	5,750	$	1,750	$	4,000	$	—	$	—
Obligation under capital lease		4,675		550		1,100		1,100		1,925
Notes payable		41,531		41,531		—		—		—
Operating leases		19,881		5,593		6,083		4,417		3,788

Total	$	71,837	$	49,424	$	11,183	$	5,517	$	5,713

Based upon our current operations, we believe that cash flow from operations, available cash and available borrowings under our lines of credit will be adequate to meet our future liquidity needs.

Inflation

We believe that our results of operations are not materially affected by moderate changes in the general inflation rate. Inflation did not have a material affect on our operations in the fiscal years ended August 31, 2004, 2003 and 2002. Severe increases in inflation, however, that would affect the global and U.S. economies could have an adverse affect on our business, financial condition and results of operation.

Seasonality and Fluctuations in Operating Results

We generally experience seasonality in our operations with the first quarter typically being our strongest period as a result of the U.S. grain harvest. However, with global political factors and their effect on the commodities markets, we are seeing more frequent trading volume spikes throughout the year.

Market Risk Disclosures

Commodity Price Risk

As part of our trading activity, we utilize futures and option contracts offered through regulated commodity exchanges to reduce risk. The company follows the policy of hedging its grain transactions and physical fuel through the use of cash and futures contracts in order to minimize risk due to market fluctuations. The commodity price risk associated with physical fuel is not material and is for the account of our customers. Inventories and purchases and sales contracts are hedged 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 commodity. The company is exposed to risk of loss in the market value of net open commodity positions, which are calculated by aggregating grain inventories and grain subject to contract for purchase and sale. The following table presents the number of bushels in inventory, under purchase and sales contracts, and in futures positions by commodity at August 31, 2004:


	Bushels
	Corn		Soybeans		Wheat		Oats & Barley
Inventory	560,871		85,962		2,110,124		156,912

Purchase contracts	27,257,290		24,483,243		268,988		1,266,516
Sales contracts	(9,814,733	)	(22,358,880	)	(699,614	)	(1,353,848	)

Futures long	57,765,000		2,000		—		30,000
Futures short	(75,708,000	)	(2,335,000	)	(1,631,000	)	(55,000	)

Net open position	60,428		(122,675	)	48,498		44,580

Bushel information is used to calculate the net open commodity position, which is sensitive to changes in commodity prices. Open cash and futures contracts for the purchase and sale of grain are reported at market value; therefore the net open commodity position multiplied by the year-end market price approximates fair value.

A hypothetical 10% increase (or decrease) in the market price of corn from the year-end 2004 level of $2.28 per bushel would result in a gain (or loss) to future earnings of $14,000.

A hypothetical 10% increase (or decrease) in the market price of soybeans from the year-end 2004 level of $6.27 per bushel would result in a gain (or loss) to future earnings of $(77,000).

A hypothetical 10% increase (or decrease) in the market price of wheat from the year-end 2004 level of $3.30 per bushel would result in a gain (or loss) to future earnings of $16,000.

A hypothetical 10% increase (or decrease) in the market price of oats and barley from the year-end 2004 level of $1.44 per bushel would result in a gain (or loss) to future earnings of $6,000.

The company’s commodity price risk associated with physical fuels is not material and is held for the account of our customers.

Interest Rate Risk

The company manages interest expense using fixed and floating rate debt. The debt instruments are carried at amounts approximating estimated fair value. Of our normal borrowing, greater than 90% of the outstanding balance at August 31, 2004 has a variable interest rate, and except for the industrial revenue development bonds associated with the Mobile facility, practically all of our borrowing is on a short-term basis.

Short-term debt used to finance inventories and receivables is represented by notes payable within thirty days or less so that the blended interest rate to the company for all such notes approximates current market rates.

In the financing of grain, as interest rates increase, the spread between future option months generally becomes wider, allowing larger incomes in grain margins to offset the potential increases in interest expense. A portion of the outstanding balance of variable rate debt is used to finance certain notes receivable to customers. The interest charged on the notes receivable is also at a variable rate, therefore eliminating the interest rate risk on that amount of debt. Of the variable rate debt, the average outstanding balance subject to interest rate risk of the past year is $67 million. A hypothetical 100 basis point increase (or decrease) in interest rates would result in a (loss) or gain to future earnings of $670,000.

Market risk on variable rate long-term debt in the amount of $5 million is not material to the financial statements. We believe the risk associated with these borrowings will not have an adverse effect on our financial position, results of operations or cash flows.

Foreign Currency Risk

The company conducts most of its business in U.S. dollars but does have minor risk regarding foreign currency fluctuations. The company hedges foreign currency risk to the extent practicable on those transactions involving foreign currency. Foreign currency fluctuations do, however, impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply.

Recently Issued Accounting Standards

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments imbedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of this standard did not impact the company’s consolidated financial statements

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how companies classify and measure certain financial instruments with characteristics of both liabilities and equity. It requires companies to classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of this standard did not impact our consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This Interpretation elaborates on the disclosures required by guarantors in their interim and annual financial statements. It also requires a guarantor to recognize a liability at the date of inception for the fair value of the obligation it assumes under the guarantee. The disclosure requirements were effective for periods ending after December 15, 2002. The initial recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002. We have not guaranteed indebtedness of others, and therefore, adoption of this statement did not have an impact on our consolidated financial condition, consolidated results of operations or cash flows.

In December 2003, the FASB issued Interpretation No. 46 (Revised) to address certain implementation issues associated with Interpretation No. 46, Consolidation of Variable Interest Entities. This interpretation addresses consolidation by business enterprises of certain variable interest entities. This statement was effective for periods ending after December 15, 2003 or March 15, 2004, depending on the type of entity. There was no material impact on the company’s financial position or results of operations from the adoption or implementation of this accounting standard.

COMPANY MANAGEMENT AND DIRECTORS

Senior Management and Members of the Board of Directors

The company’s business and affairs are governed by its board of directors. The board of directors currently consists of ten directors. The board of directors has full authority to act on behalf of the company. The board of directors acts collectively through meetings, committees and senior management members it appoints. In addition, the company employs a staff of executives to manage the day-to-day business of the company. The members of the board of directors and the senior members of the executive team are identified below.


Name and Address	Age	Position	Term Expires
Bruce Krehbiel ⁽¹⁾	51	Chairman of the Board, Class I Director	2005
Rolland Svoboda	44	Class I Director	2006
Eric Parthemore ⁽¹⁾⁽²⁾	55	Secretary, Treasurer, Class I Director	2004
Tom Leiting	49	Class I Director	2005
Brent Bunte ⁽²⁾	47	Class II Director	2005
Jack Friedman ⁽¹⁾	47	Vice Chairman, Class I Director	2004
Dave Reinders	48	Class III Director	2006
Ron Hunter ⁽²⁾	54	Class I Director	2004
Doug Derscheid	54	Class I Director	2005
Kenneth Hahn	51	Class I Director	2006
Paul G. (Pete) Anderson	51	President and Chief Executive Officer	—
Stephan Gutierrez	54	Executive Vice President and Chief Operating Officer	—
Jeff Soman	53	Executive Vice President of FCStone, LLC	—
Robert V. Johnson	56	Executive Vice President and Chief Financial Officer	—
Steven J. Speck	45	President and Chief Executive Officer of FGDI, LLC	—

(1)	Executive Committee member

(2)	Audit Committee member

Bruce Krehbiel has served as a director of the company since 1988 and is our Chairman. Mr. Krehbiel is the manager of the Kanza Cooperative in Iuka, Kansas, and he has worked for the Kanza Cooperative since 1986. Mr. Krehbiel has held director positions on the boards of the Midwest Chapter of the National Society of Accountants for Cooperatives, CenKan, LLC, and Agri-Business Benefit Group.

Rolland Svoboda has previously served as a director from January 1999 to January 2002 and is currently serving a term as director that commenced in January 2004. Mr. Svoboda is the general manager of Pro Cooperative in Gilmore City, Iowa. He has been with Pro Cooperative since 1999. Prior to his current position, Mr. Svoboda served for five years as the general manager of Farmers Coop in Hemingford, Nebraska.

Eric Parthemore has served as a director since 1996 and is our Secretary and Treasurer. Mr. Parthemore is the president and chief executive officer of the Farmers Commission Company in Upper Sandusky, Ohio and has held that position since 1996. For the previous five years, he was the general manager of U.S. Commission Company. Mr. Parthemore is currently a member of the Ohio Agricultural Economic Development Council and was appointed in January 2004 to serve on the Ohio Agricultural Commodity Advisory Commission by the Secretary of Agriculture in the State of Ohio. Mr. Parthemore is a director on the Ohio Agra Business Association and serves as a trustee of the OABA Education Trust.

Tom Leiting has served as a director since 1997. Mr. Leiting is the manager of the River Valley Cooperative in Clarence, Iowa. He has been employed by River Valley or one of its parent companies for the past 17 years. Prior to his position with River Valley, Mr. Leiting was employed by Swiss Valley Farms Services for eight years. Mr. Leiting is currently a member of the Associated Benefits Corporation board of directors. He is an advisory committee member for Land O’Lakes.

Brent Bunte has served as a director since 2000. Mr. Bunte is the manager of the New Cooperative in Fort Dodge, Iowa, a Class B member of the company, and has been with New Cooperative for 20 years. Mr. Bunte has held directorships with First American Bank and Associated Benefits Corporation.

Jack Friedman has served as a director since 1996 and is our Vice Chairman. Mr. Friedman is the manager of the Swiss Valley Ag Center in Monticello, Iowa and has been with that group for 28 years. For the past 12 years, Mr. Friedman has served as manager of Swiss Valley. Mr. Friedman has held directorships on the following boards: Industrial Telecommunications Association Board and the Land O’Lakes Feed Advisory Council. He currently serves on the board of the Iowa Institute of Cooperatives and the Dyersville Planning and Zoning Board.

Dave Reinders has served as a director since 2001. Mr. Reinders is the general manager of Sunray Co-op in Sunray, Texas and has held that position since January 2004. Prior to his service at Sunray Co-op, Mr. Reinders was general manager of United Farmers Coop in George, Iowa, for ten years. Mr. Reinders was formerly a director of the Iowa Institute of Coops, the Iowa Agri Business Association and Land O’Lakes.

Ron Hunter has served as a director since 2002. Mr. Hunter is the general manager of Ag Valley Cooperative in Edison, Nebraska and has been with Ag Valley since 1997. Prior to his service with Ag Valley, Mr. Hunter worked for Crestland Cooperative from 1990 to 1997. Mr. Hunter is currently a director on the board of NIK Nonstock Marketing Cooperative. He has also previously held a directorship with the Nebraska Coop Managers Association.

Doug Derscheid has served as a director since 2003. Mr. Derscheid is the manager of the Central Valley Ag Cooperative in O’Neill, Nebraska and has been with Central Farmers Cooperative for the past 12 years. Prior to his work with Central Farmers, Mr. Derscheid was the general manager of Farmers Cooperative Elevator in Plymouth, Nebraska for seven years. Mr. Derscheid is currently Chairman of the Board of Cooperative Mutual Insurance Company and is the treasurer for the O’Neill Airport Authority. Mr. Derscheid is also a board member of the Nebraska Propane Gas Association and a Trustee for the Nebraska Managers Association.

Kenneth Hahn has served as a director since 2002. Mr. Hahn is the general manager of Planters Cooperative in Lone Wolf, Oklahoma and has been with Lone Wolf for a total of 30 years, 22 years as manager and 8 years as assistant manager. Mr. Hahn has held director positions with the Coop Retirement Board, Oklahoma Coop Ginners Board, and Oklahoma Grain and Feed Association.

Pete Anderson has been employed by the company since 1988 and has served as President and CEO since 1999. Prior to becoming president, Mr. Anderson was the Vice President of Operations. Mr. Anderson is the past president of the Kansas Cooperative Council and past founding chairman of the Arthur Capper Cooperative Center at Kansas State University. Mr. Anderson sits on the board of directors of Associated Benefits Corporation and is a member of National Council of Farmer Cooperatives, the National Feed and Grain Association and several other state associations.

Stephan Gutierrez has been employed as Executive Vice President and Chief Operating Officer of the company since 2002. He also serves as president of the company’s subsidiary, FCStone Trading, LLC. Prior to his positions with FCStone, Mr. Gutierrez worked at Cargill as a trader and trading manager. Mr. Gutierrez has 29 years of experience in trading, risk and asset management with respect to multiple commodities.

Jeff Soman has been employed as Executive Vice President of FCStone, LLC since 2000. Mr. Soman has over 25 years of experience managing the clearing, internal risk management and brokerage facilities of several major brokerage firms. During the last 15 years he has worked in this capacity for FCStone, LLC or one of its predecessor companies.

Robert V. Johnson has been employed as the Chief Financial Officer of the company since 1987. Prior to his position with the company, Mr. Johnson was the corporate controller for Heritage Communications, Inc. a

publicly traded cable television company. Mr. Johnson is a member of Financial Executives International, the Iowa Society of CPAs and the American Institute of CPAs.

Steven Speck has served as the President and CEO of FGDI since 2001. Prior to 2001 he served as the Vice President-Specialty Crops of the company for nine years.

Board of Directors

Under our current amended and restated bylaws, there are ten directors divided into three classes. Class I has eight directors, who are nominated by the holders of Class A and Class B common stock. Class II has one director, who is nominated by the twelve largest stockholders of the company (“Large Stockholders”), such stockholders being determined on the basis of the combined par value of the common and preferred stock held. Class III has one director, who is nominated by the board of directors.

Class I directors are nominated by stockholders on a regional basis. All Class I directors must be residents of the region from which they are nominated and be employees of stockholders from such region. One Class I Director is a resident of and nominated by the Eastern Region, which includes Florida, Georgia, Alabama, South Carolina, North Carolina, Virginia, Tennessee, Kentucky, West Virginia, Maryland, Delaware, Pennsylvania, New York, Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, Maine, Ohio, Indiana, Michigan and Ontario, Canada. Three Class I Directors are residents of and nominated by the Central Region, which includes Louisiana, Mississippi, Arkansas, Missouri, Illinois, Iowa and Wisconsin. Two Class I Directors are residents of and nominated by the Northwestern Region, which includes Minnesota, North Dakota, South Dakota, Nebraska, Colorado, Wyoming, Montana, Idaho, Nevada, California, Oregon, Washington, Alaska, and Hawaii. It also includes Manitoba, Saskatchewan, Alberta and British Columbia, Canada. Two Class I Directors shall be residents of and nominated by the Southwestern Region, which includes Kansas, Oklahoma, Texas, New Mexico, Arizona and Mexico. The areas making up each region are set forth in the company’s bylaws. At least three months prior to the annual meeting of stockholders, the board of directors appoints a nominating committee for each region that will be electing a board member at that election. The nominating committee for each region consists of three individuals who meet the qualifications to be a Class I director for such region and are employed by a stockholder. The nominating committee, after consideration of any person put forth by a stockholder of their region or any person that it otherwise deems qualified, provides the board at least two and not more than three director candidates for their region. These nominees are then placed on a written nominating ballot for the region it represents. The nominating ballot is delivered at least 10 days and no more than 60 days prior to the annual meeting of stockholders with an instruction for each stockholder to vote for one nominee and return the ballot to the company by a specified date before the annual meeting. The person receiving the highest number of votes on the nominating ballot is nominated for election at the annual meeting. In the event of a tie, the Chairman of the Board will provide the tie-breaking vote.

The Class II Director also has a unique nomination process. To nominate Class II directors, we solicit each of the Large Stockholders for nominations for election. Any person nominated by at least two Large Stockholders is placed on a written nominating ballot. The nominating ballot is delivered at least 10 days and no more than 60 days prior to the annual meeting of stockholders with an instruction for each Large Stockholder to vote for one nominee and return the ballot to the company by a specified date before the annual meeting. The person receiving the highest number of votes on the nominating ballot nominated for election at the annual meeting. In the event of a tie, the Chairman of the Board will provide the tie-breaking vote.

The Class III director is nominated by the board of directors. There are no specific qualifications for the Class III nominee.

After the nomination process is completed and the individuals are placed on the ballot for election at the annual meeting, the directors are elected by a majority vote of stockholders in the aggregate (one vote for each share of common stock) and not on the basis of region or ownership percentage. We solicit proxies to vote in favor of the nominations established in the above-described process.

The board of directors has an executive committee and an audit committee. The executive committee has been delegated and may exercise any of the powers of the board of directors in the management of the company’s business when the board is not in session. However, the executive committee does not have the power pursuant to this delegation to authorize distributions, approve or propose actions to the stockholders, fill vacancies, amend the articles of incorporation or bylaws, approve a plan of merger that does not require stockholder approval or approve the reacquisition of shares. The executive committee also acts as a compensation committee for the Chief Executive Officer. The executive committee consists of Bruce Krehbiel, Eric Parthemore and Jack Friedman. Mr. Krehbiel serves as Chairman of the Board, Mr. Friedman as Vice-Chairman and Mr. Parthemore as Secretary and Treasurer. None of the executive committee members are current or former employees of the company. The audit committee consists of Eric Parthemore, Brent Bunte and Ron Hunter. The audit committee oversees the company’s audit process and engages independent auditors. The board of directors has not adopted a formal written charter for its audit committee, but intends to adopt one following the restructuring.

Class I, Class II and Class III directors are further divided into three groups to serve three-year staggered terms. All directors hold office until their successors are elected and qualified. No decrease in the number of directors may have the effect of shortening a term of an incumbent director.

After the restructuring, we will maintain the current structure of our board of directors. However, the nomination ballots distributed to stockholders for Class I and Class II directors will only indicate a preference for a proposed candidate. The nominees for director will actually be selected by the board of directors after considering the results of the preference ballot.

Compensation of Directors

The board of directors meets from time to time at such time and place as may be fixed by resolution adopted by a majority of the whole board of directors. Members of the board of directors receive a per diem payment of $300 for each activity on behalf of the company, as well as direct reimbursement of travel expenses related to service on the board of directors.

EXECUTIVE COMPENSATION

The goal of the company’s executive compensation policy has been, and will continue to be, to ensure that an appropriate relationship exists between executive pay, our financial performance and the creation of member/stockholder value, while at the same time motivating and retaining key employees. Individual salaries are also based upon an evaluation of other factors, such as individual past performance, potential with the company and level and scope of responsibility.

Upon completion of the restructuring, the current senior management of the company will continue to hold the comparable offices with the company on a full-time basis. The following table shows the compensation paid by the company in fiscal year 2004 indicated to its Chief Executive Officer and the four other individuals who were serving as named executive officers of the company at the end of fiscal year 2004.

Summary Compensation Table


Name and Principal Position	Salary ($)	Bonus ($)		Other Annual Compensation ($)(1)
Pete Anderson, President & Chief Executive Officer	320,000	365,128	⁽²⁾	—	⁽¹⁾

Steve Speck, President & Chief Executive Officer-FGDI	175,000	221,423	⁽³⁾ ⁽⁴⁾	—	⁽¹⁾

Stephan Gutierrez, Executive Vice President & Chief Operating Officer	174,583	209,935	⁽⁵⁾ ⁽⁴⁾	—	⁽¹⁾

Jeff Soman, Executive Vice President-FCStone, LLC	165,000	163,567	⁽⁶⁾ ⁽⁴⁾	—	⁽¹⁾

Robert Johnson, Executive Vice President & Chief Financial Officer	145,000	143,740	⁽⁷⁾ ⁽⁴⁾	—	⁽¹⁾

(1)	None of the perquisites or other benefits paid exceeded the lesser of $50,000 or 10% of the total annual salary and bonus received by the executive.

(2)	Represents $339,847 paid under the Executive Short-Term Management Incentive Plan and $25,281 awarded under the deferred compensation provisions provided for in Mr. Anderson’s employment agreement.

(3)	Represents $189,514 paid under the FGDI CEO Short-Term Incentive Plan and $31,909 awarded under the Mutual Commitment Compensation Plan.

(4)	Bonuses awarded under the Mutual Commitment Compensation Plan vest at the end of the fifth year after the bonus was awarded. Participants receive 50% of the vested amount in his or her account in cash at the end of every plan year.

(5)	Represents $185,411 paid under the Executive Short-Term Management Incentive Plan and $24,524 awarded under the Mutual Commitment Compensation Plan.

(6)	Represents $140,389 paid under the Executive Short-Term Management Incentive Plan and $23,178 awarded under the Mutual Commitment Compensation Plan.

(7)	Represents $123,372 paid under the Executive Short-Term Management Incentive Plan and $20,368 awarded under the Mutual Commitment Compensation Plan.

Pension Plan

We have a noncontributory defined benefit pension plan. The following table shows the approximate annual retirement benefits that participating executive officers are expected to receive under the plan based on their pay and years of credited service.


	Years of Service
Remuneration	10		15		20		25		30		35
$125,000	$	15,625	$	23,438	$	31,250	$	39,063	$	46,875	$	54,688
$150,000	$	18,750	$	28,125	$	37,500	$	46,875	$	56,250	$	65,625
$175,000	$	21,875	$	32,813	$	43,750	$	54,688	$	65,625	$	76,563
$200,000	$	25,000	$	37,500	$	50,000	$	62,500	$	75,000	$	87,500
$225,000	$	28,125	$	42,188	$	56,250	$	70,313	$	84,375	$	98,438
$250,000	$	31,250	$	46,875	$	62,500	$	78,125	$	93,750	$	109,375
$300,000	$	37,500	$	56,250	$	75,000	$	93,750	$	112,500	$	131,250
$400,000	$	50,000	$	75,000	$	100,000	$	125,000	$	150,000	$	175,000
$500,000	$	62,500	$	93,750	$	125,000	$	156,250	$	187,500	$	218,750

The company defined benefit pension plan covers all compensation subject to the regulatory limit of annual compensation, which for 2004 was $205,000. The Chief Executive Officer also has a supplementary non-qualified pension plan that has the same provisions as the defined benefit pension plan except that it covers all compensation above the regulatory limit.

The estimated current credited years of service for each executive officer are as follows: Pete Anderson-17 years; Steve Speck-13 years; Stephan Gutierrez-3 years; Jeff Soman-4 years; and Robert Johnson-23 years.

Above benefits are based on a straight-life annuity and are not subject to any Social Security or other offsets.

The monthly benefit formula for the company defined benefit pension plan is 1.25% times the highest consecutive 5 year average monthly earnings times the number of years of service.

401(k) Plan and Employee Stock Ownership Plan

subject to certain requirements contained in the Internal Revenue Code of 1986, as amended (the “Code”), and the Employee Retirement Income Security Act of 1974 (“ERISA”). By definition, an ESOP must be designed to invest primarily in stock of the sponsoring employer.

Historically, employees of the company and certain subsidiaries and affiliates have participated in The Restated Thrift/Profit Sharing Plan for Cooperatives (the “401(k) Plan”). Pursuant to the terms of the 401(k) Plan, eligible employees may make 401(k) elective deferrals to the plan (“401(k) contributions”), and the company has historically made matching contributions to the plan in an amount equal to 50% of each participant’s 401(k) contributions, subject to a maximum matching contribution in an amount equal to 4% of the participant’s compensation.

We anticipate that participants in the 401(k) Plan that are eligible to participate in the ESOP will be given a one-time opportunity to elect to transfer up to 33% of the assets in their 401(k) Plan account to the ESOP. We expect that such funds would subsequently be invested in company stock at a price not less than the same $10.00 per share price that is offered to the members pursuant to the subscription rights. We also anticipate that, following the establishment of the ESOP, company matching contributions for all eligible ESOP participants would no longer be made to the 401(k) Plan, but would, instead, be made to the ESOP where they would be invested in company stock.

Long Term Incentive Plan

The FCStone Group, Inc. Long-Term Incentive Plan covers the five named executive officers listed in the Summary Compensation table. The Plan which went into effect on September 1, 2003, provides for awards to the covered officers at the end of the five year life cycle of the Plan. These awards will be based on increases in the Class A Equity, plus common and preferred stock redemption and after patronage distribution, tax and accrual for award, over the five-year life of the Plan. The threshold level of increase is a compounded 11% return on equity, at which point the participants are eligible to receive an award equal to 50% of their base salary at the beginning of the five-year life of the Plan. At the threshold level, the total award to the five participants is equal to 2.0% of the increase in the Class A Equity. As the Class A Equity increases over the threshold level, the total awards increase as a percentage of the increase in Class A Equity until the maximum level, which is based on a compounded 16% compounded return on equity, is reached. At the maximum level, the participants are eligible to receive an award equal to 200% of their base salary at the beginning of the Plan, which represents 4.9% of the increase in Class A Equity over the life of the Plan.

The Plan is administered by the Chairman of the Board, who retains the discretion to amend or terminate the Plan. At the termination of a participant’s employment, either by the company or the participant, all rights under the Plan are forfeited, except that a participant may receive a prorated award if the participant terminates employment or retires after three years with the company’s consent. A participant may also receive a prorated award upon the participant’s death, disability or retirement.

The participants are eligible for prorated awards in the event the Plan is terminated before the completion of the five-year life cycle. The prorated awards are based on the level of performance attained at the termination of the Plan and are payable immediately following the termination of the Plan. In the year ended August 31, 2004, the Company recorded an expense of $200,000 for the Plan, but made no payments to any participants under the Plan.

Employment Agreements

CEO Agreement. Pete Anderson, our CEO, has signed an employment agreement that runs for unlimited successive annual terms. Each annual term ends on the date of the company’s annual meeting. Either party may either terminate the agreement or convert it into an employment at will arrangement by notifying the other party

of such intention within 10 days after the date of the annual meeting. During an annual term, the agreement may be terminated by the company for cause, by the CEO for good reason, or upon the death of the CEO. Mr. Anderson receives a base salary which is determined annually by the executive committee of the board of directors and participates in a short-term incentive plan which provides for his annual bonus. The agreement also provides that Mr. Anderson be paid deferred compensation in the amount of 15% of the annual bonus paid to the CEO. Each annual contribution to the deferred compensation plan vests over a period of 5 years. If Mr. Anderson leaves the Company for any reason other than total disability, death or retirement, he loses the right to any unvested portion of the deferred compensation. Upon the termination of the agreement, Mr. Anderson retains no right to his annual salary or bonus, he only retains the right to the vested portion of his deferred compensation plan. There is no provision of the agreement that provides for any other severance payments to the CEO upon termination of the agreement.

Agreements of Other Executive Officers . All of our other named executive officers have signed agreements that provide that their employment is “at will.” These agreements may be terminated at any time and we are not obligated to make severance payments to any of these officers. The agreements contain a non-competition provision that runs for periods ranging from one year to eighteen months after termination.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Each of our directors is an executive officer of a member cooperative that is a stockholder of the company. Each of these member cooperatives uses the services of the company, and as a result, the company pays each of these member cooperatives patronage dividends based upon the business conducted with the company by the member. The following table sets forth the amounts paid by these member cooperatives for our services during our fiscal year ended August 31, 2004, and the amount of patronage dividends paid to these member cooperatives during such period.


Board Member	Board Member’s Cooperative	Amounts Paid by the Member Cooperative to the Company for Services		Patronage Paid by the Company to the Member Cooperative
Brent Bunte	New Cooperative	$	218,895	$	134,605
Jack Friedman	Swiss Valley Ag Center		86,009		14,130
Bruce Krehbiel	Kanza Cooperative		102,235		15,518
Tom Leiting	River Valley Cooperative		147,529		22,041
Eric Parthemore	Farmers Commission Company		38,272		6,616
Dave Reinders	Sunray Co-op		230,030		38,930
Rolland Svoboda	Pro Cooperative		154,619		25,847
Doug Derscheid	Central Valley Ag Cooperative		169,204		28,904
Ron Hunter	Ag Valley Cooperative		139,124		23,246
Kenneth Hahn	Planters Cooperative		140,022		20,698

Pursuant to an Asset Purchase Agreement dated April 11, 2000, we acquired certain assets of Saul Stone and Company, L.L.C. and River Brokerage, Inc. As part of that transaction, we agreed to pay the four owners of River Brokerage additional annual amounts based on future earnings related to the acquired assets (the “earn-out arrangement”). Jeff Soman, who serves as an executive vice-president of the company, is one of the four former owners of River Brokerage who has received payments from us under this earn-out arrangement. In each of the years 2002 and 2003, Mr. Soman received cash payments from us of $83,333 pursuant to the terms of the earn-out arrangement contained in the Asset Purchase Agreement. No further earn-out payments will be made for 2004 or any later year.

The company’s policy is that all transactions between the company and its officers, directors and/or five percent stockholders will be on terms no more favorable to those related parties than the terms provided to other customers of the company.

SECURITY OWNERSHIP OF THE COMPANY

BEFORE AND AFTER THE RESTRUCTURING

The following table furnishes information, as of August 31, 2004 before taking into effect the restructuring and on a pro forma basis after taking into effect the restructuring regarding beneficial ownership of the company’s common and preferred stock by each person known by us to beneficially own more than 5% of the company’s issued and outstanding common and preferred stock, each of the company’s directors and senior management (who will continue to serve as the company’s directors and senior management after the restructuring), and all of the company’s directors and senior management as a group.


	Beneficial Ownership Before Restructuring												Pro Forma Beneficial Ownership of Common Stock after Restructuring (1)
	Class A Common Stock				Class B Common Stock				Preferred Stock
Name and Address of Beneficial Owner (2)	Number		Percentage		Number		Percentage		Number		Percentage (3)		Number	Percentage
Heartland Cooperative 2829 Westown Parkway West Des Moines, Iowa 50266	—		—		1		20	%	117.72		*		57,856	1.3	%
Farmers Cooperative Co. P.O. Box 35 Farnhamville, Iowa 50538	—		—		1		20	%	160.00		1.2	%	27,687	*
West Central Cooperative Box 68 Ralston, Iowa 51459	—		—		1		20	%	236.40		1.7	%	83,771	1.9	%
Farmland Industries P.O. Box 20111 Kansas City, Missouri 64116	—		—		1		20	%	931.33		6.7	%	103,920	2.4	%
New Cooperative P.O. Box 818 Fort Dodge, Iowa 50501	—		—		1		20	%	112.60		*		57,432	1.3	%

Directors and Officers:
Brent Bunte	—		—		1	⁽⁴⁾	20	%	112.60	⁽⁴⁾	*		57,432	1.3	%
Jack Friedman	1	⁽⁵⁾	*		—		—		80.98	⁽⁵⁾	*		26,298	*
Bruce Krehbiel	1	⁽⁶⁾	*		—		—		75.02	⁽⁶⁾	*		23,033	*
Tom Leiting	1	⁽⁷⁾	*		—		—		102.98	⁽⁷⁾	*		32,420	*
Eric Parthemore	1	⁽⁸⁾	*		—		—		36.97	⁽⁸⁾	*		10,748	*
Dave Reinders	1	⁽⁹⁾	*		—		—		54.08	⁽⁹⁾	*		40,719	*
Rolland Svoboda	1	⁽¹⁰⁾	*		—		—		131.33	⁽¹⁰⁾	*		41,683	*
Doug Dercheid	1	⁽¹¹⁾	*		—		—		150.00	⁽¹¹⁾	1.1	%	53,495	1.2	%
Ron Hunter	1	⁽¹²⁾	*		—		—		104.04	⁽¹²⁾	*		38,734	*
Kenneth Hahn	1	⁽¹³⁾	*		—		—		46.32	⁽¹³⁾	*		23,054	*
Paul G. Anderson	—		—		—		—		—		—		—	—
Steve Speck	—		—		—		—		—		—		—	—
Stephan Gutierrez	—		—		—		—		—		—		—	—
Jeff Soman	—		—		—		—		—		—		—	—
Robert Johnson	—		—		—		—		—		—		—	—
Officers and Directors as a group (15 persons)	9		2.1	%	1		20	%	894.32		6.4	%	347,616	8.1	%

*	Less than one percent.

(1)	Does not include shares of new common stock issuable upon exercise of the subscription rights.

(2)	The address of all of the named individuals is c/o FCStone Group, Inc., 2829 Westown Parkway, Suite 200, West Des Moines, Iowa 50266.

(3)	Based on 13,880 shares of preferred stock issued and outstanding.

(4)	Represents shares held by New Cooperative in Fort Dodge, Iowa, of which Mr. Bunte is Manager.

(5)	Represents shares held by Swiss Valley Ag Center in Monticello, Iowa, of which Mr. Friedman is Manager.

(6)	Represents shares held by Kanza Cooperative in Iuka, Kansas, of which Mr. Krehbiel is Manager.

(7)	Represents shares held by River Valley Cooperative in Clarence, Iowa, of which Mr. Leiting is Manager.

(8)	Represents shares held by The Farmers Commission Company in Upper Sandusky, Ohio, of which Mr. Parthemore is President and CEO.

(9)	Represents shares held by Sunray Coop in Sunray, Texas, of which Mr. Reinders is General Manager.

(10)	Represents shares held by Pro Cooperative in Gilmore City, Iowa, of which Mr. Svoboda is General Manager.

(11)	Represents shares held by Central Valley Ag Cooperative in O’Neill, Nebraska, of which Mr. Derscheid is Manager.

(12)	Represents shares held by Ag Valley Cooperative in Edison, Nebraska, of which Mr. Hunter is General Manager.

(13)	Represents shares held by Planters Cooperative in Lone Wolf, Oklahoma, of which Mr. Hahn is Manager.

DESCRIPTION OF CAPITAL STOCK AFTER RESTRUCTURING

The rights of stockholders in the company are, and after the restructuring will continue to be governed by Iowa law, the articles of incorporation and the bylaws. The rights of holders of the new common stock of the company will be different in several respects from the rights of holders of the existing Class A and Class B common stock and preferred stock of the company. The following summary of the material features of the new common stock of the company does not purport to be complete and is qualified in its entirety by reference to the proposed amended and restated articles of incorporation, attached as Appendix A to this document, and the proposed amended and restated bylaws, attached as Appendix B to this document. We urge you to read these Appendices.

Capitalization

The amended and restated articles of incorporation of the company after the restructuring will provide for 40,000,000 authorized shares of stock. These will be equally divided between new common stock and preferred stock. Not all of the authorized shares will be issued. The company will issue only such shares of new common stock as are necessary to complete the restructuring, form the ESOP and issue shares pursuant to the subscription rights, and will not at this time issue preferred stock. A total of 4.31 million shares of new common stock plus shares issuable upon exercise of subscription rights not to exceed 1.33 million shares of new common stock will be issued. The board of directors will have the authority to issue additional shares of common stock or preferred stock.

Common Stock

Shares of new common stock represent an ownership interest in the company. Holders of new common stock shall have the right to vote on such matters as properly come before the stockholders for decision, shall have the right to receive dividends declared by the board of directors, and shall have rights in liquidation. Iowa law also grants holders of new common stock the right to access and review certain information regarding the company and its business affairs.

Patronage-based Rights

After the restructuring, we will no longer be considered a cooperative under Subchapter T of the Internal Revenue Code of 1986, as amended, and will not be eligible to pay patronage dividends. No patronage-based rights of any kind will accrue to members for business done with the company after August 31, 2004.

Redemption Right of the Company

We will retain the right to redeem from stockholders that do not transact any business with or through the company for two consecutive years the shares of new common stock received in the restructuring, for a period of five years from the closing of the restructuring. This redemption right will not apply to shares purchased pursuant to the subscription rights offering.

We will also retain a lien on issued common stock for indebtedness of the holder to the corporation or any of its subsidiaries or affiliates.

Potential Future Classes of Stock

We may, by resolution of our board of directors, issue shares of preferred stock. The board of directors may establish classes of preferred stock. Any other class may have designations, preferences, limitations and special rights that may be different from common stock or any other class of preferred stock.

Qualifications to Hold Stock

Following the restructuring, the articles of incorporation will no longer limit ownership of new common stock to agricultural cooperatives. Ownership of new common stock will be available to any individual,

corporation or other entity which properly acquires such shares subject to the transfer requirements for the company’s common stock set forth in the bylaws.

Voting Rights

Holders of new common stock will vote on matters such as the election or removal of directors, mergers, sales of all or substantially all of the assets of the company, dissolution of the company and certain amendments to the Amended and Restated Articles of Incorporation. On such voting matters, each share of new common stock will have one vote, except to the extent the common stock held exceeds five percent of the issued and outstanding shares. Any shares held in excess of five percent are entitled to only 1/100 ^th of a vote per share. Voting at a meeting of stockholders may be done either in person or, if authorized by the board of directors, by mail ballot or by proxy. Shares of preferred stock issued hereafter will have no voting rights unless required by law.

Meetings of Stockholders and Quorum

Under our bylaws, the annual meeting of the stockholders of the company will be held on a date and at a time and place fixed by the board of directors. Special meetings may be called by the board of directors or by an officer of the company upon the request of twenty-five percent of the stockholders entitled to cast a vote. Twenty-five percent of the shares of new common stock entitled to vote at an annual meeting of stockholders will constitute a quorum.

Dividends

Dividends may be, but are not required to be, paid on the new common stock. Any decision to grant dividends, including the size and timing of dividends, is subject to the discretion of the board of directors.

Restrictions on Transfer of Stock

The bylaws may establish certain restrictions on the ability of stockholders to transfer shares. Our new bylaws will allow the transfer of shares of new common stock to: (a) any other holder of new common stock, provided that the transferee will not hold more than five percent (5%) of the issued and outstanding common shares of the company after the transfer, and (b) any transferee approved in advance by the board of directors. New common stock issued pursuant to the restructuring is not otherwise transferable. Shares held by the ESOP will be transferable as provided in the plan.

Dissolution

A proposal for dissolution will require the affirmative vote of three-fourths of the outstanding shares of common stock. Upon dissolution of the company, subject to any priority distributions of any future class of preferred stock, the assets of the company will be distributed first to cover debts, obligations and liabilities of the company, and then the balance, if any, to the holders of common stock.

Amendments to the Articles of Incorporation and Bylaws

Our articles of incorporation may be amended from time to time by proposal of the board of directors to the stockholders that is approved by the stockholders. Any amendment to the provision of the articles requiring a three-fourths vote of the stockholders to adopt a proposal for dissolution requires the affirmative vote of three-fourths of the outstanding common shares. At any meeting of the stockholders at which a proposed amendment is duly submitted to the meeting in the manner prescribed by law, modifications or revisions of such proposed amendment may be submitted, voted upon and adopted at such meeting in the same manner, and to the same effect, as the original proposed amendment. Our bylaws may be amended from time to time by the board of directors.

DESCRIPTION OF SUBSCRIPTION RIGHTS

Any member who receives shares of new common stock pursuant to the conversion of patronage based rights under Article IV of the plan of conversion will also receive a nontransferable subscription right, which is a limited time right to purchase additional shares of new common stock. Each subscription right gives the holder the right to purchase 100 shares of new common stock for each 200 shares of new common stock received in the restructuring in exchange for patronage-based rights. The subscription rights will be issued in 100 share blocks, rounded up to the next highest multiple of 100. After taking into account the effect of rounding up to the next highest multiple of 100, subscription rights for the purchase of approximately 1.3 million shares of new common stock will be distributed.

The subscription rights must generally be exercised in full. Partial exercises are only allowed if the subscription is for at least 1,000 shares of new common stock. The exercise price of subscription rights will be $10.00 per share.

A stockholder who wishes to exercise subscription rights granted as part of the restructuring will be required to do so within 60 days after the distribution date of shares of new common stock for existing patronage based rights, as provided in Article IV of the plan of conversion. We expect the distribution date to be on or about March 3, 2005 giving each holder until approximately May 2, 2005 to exercise its subscription rights. The subscription rights of a particular holder, if not exercised, will terminate at the end of the 60-day exercise period.

Upon exercise, the member will receive shares of new common stock of the company. These shares will be identical to those issued pursuant to the conversion of Class A common stock, Class B common stock, preferred stock and patronage based rights, except that they will not be subject to redemption for failure to patronize the company. For a description of the capital stock received pursuant to the exercise of subscription rights, see “Description of Capital Stock after Restructuring.”

COMPARATIVE RIGHTS OF MEMBERS AND STOCKHOLDERS

The rights of our stockholders currently are governed by Iowa corporate law, and the existing articles of incorporation and bylaws. Upon completion of the restructuring, the rights of our stockholders will be governed by the same Iowa law and the amended and restated articles of incorporation and the bylaws. The rights of holders of new common stock in the company will be different in several respects from the rights of holders of the existing Class A and Class B common stock and preferred stock of the company.

The following is a summary of the material differences between the new common stock of the company and the company’s existing common stock. This summary is not intended to be a complete discussion of, and is qualified in its entirety by reference to, Iowa law governing corporations, and the existing articles of incorporation and bylaws of the company and the articles of incorporation and bylaws of the company, as proposed to be amended. Copies of the proposed amended and restated articles of incorporation and proposed bylaws of the company are attached as Appendices A and B to this document. You may obtain copies of the existing articles of incorporation and bylaws of the company from the company, without charge, by contacting the company at its offices.


	New Common Stock Issued by the Company	Existing Shares Issued by the Company
Classes of Stock	One class of common stock, the new common stock, will be issued. The issuance of preferred stock is authorized and we may issue preferred stock in the future.	We have issued Class A and Class B shares of common stock and have issued shares of preferred stock in two series.

Patronage Dividends	We will not pay patronage dividends	Under the cooperative structure, each of our stockholders is a customer of the company, holding a share of Class A or Class B common stock and entitled to receive patronage-based distributions.

Distributions	Future distributions, if any, will be made in the form of dividends or other distributions with respect to share ownership in accordance with our articles of incorporation, bylaws and applicable law	We do not pay regular, non-patronage dividends.

Cooperative Status	Upon completion of the restructuring, each member of the cooperative will become a holder of common stock of the company, and will cease to be a member of the company	We operate as a cooperative.

Voting	Stockholders have one vote for each share of new common stock held.	Each stockholder has one share of common stock and one vote.

Quorum Requirements	There will be no change in the quorum requirements after the restructuring.	A quorum of stockholders necessary to conduct business at a meeting will be present if 25% or more of the total number of stockholders is present (in person or by proxy).

Capitalization	We will have authorized 20,000,000 shares of common stock and 20,000,000 shares of preferred stock. Our board of directors will have complete discretion to issue and assign rights and preferences to the preferred stock, also referred to as “blank check” preferred stock.	We have two classes of common stock, Class A and Class B, and two series of preferred stock. There are 422 shares of Class A common stock outstanding (plus 125 partially-paid subscriptions), five shares of Class B common stock outstanding and 13,880 shares of preferred stock outstanding.


	New Common Stock Issued by the Company	Existing Shares Issued by the Company
	Assuming completion of the restructuring as described in this proxy statement-prospectus and the appraised value of $43.1 million, we will have issued and outstanding 4.31 million shares of common stock prior to the exercise of the subscription rights.

Restrictions on Transfer	Shares may be transferred to any other holder of less than 5% of the common stock and to any transferee approved by the board of directors. ESOP shares will be transferable as provided in the plan.	Shares are not transferable except as an incident to membership.

Composition of the Board of Directors	We will maintain the current structure of our board of directors. However, the nomination ballots distributed to stockholders will only indicate a preference for a proposed candidate. The nominees for director will actually be selected by the board of directors after considering the results of the preference ballot.	Directors are nominated on a regional basis and each director must be a resident of the region from which he is nominated. After a person is nominated for a region, he or she is placed a regional nominating ballot. The nominee obtaining the most votes is nominated for election at the annual meeting. Directors serve three-year terms. Directors’ terms are staggered so that approximately ¹ / 3 of the directors are elected each year.

Individual Stockholder Participation in Director Nominations	The board of directors or applicable nominating committee will consider proposed nominees suggested by individual stockholders. In addition, stockholders may formally nominate individuals for the board of directors pursuant to the advance notice requirements of the bylaws. Nominations must be in writing and provided to the company at least 120 days before the annual meeting. If the election is to take place at a special meeting, the nomination must be received not later than the close of business on the 7th day following the date on which public announcement of the date of such meeting is first made.	Nominations may be made from the floor of the annual meeting.

Indemnification	The indemnification provisions of our articles of incorporation will be unaffected by the restructuring. We will continue to indemnify the directors and officers to the fullest extent permitted by Iowa law.	We indemnify the directors and officers to the fullest extent permitted by Iowa law.

Mandatory Redemption	The existing mandatory redemption provisions will apply to the new common stock received in the restructuring for a period of five years from the closing of the restructuring. There will be no mandatory redemption of shares purchased pursuant to the subscription rights offering.	The rights of stockholders are subject to a mandatory redemption upon the call of the board of directors in the event that a member does not patronize the company for a period of two years.


	New Common Stock Issued by the Company	Existing Shares Issued by the Company

Voluntary Redemption by the Company	We intend to redeem, from time to time, a limited number of shares of stockholders who wish to sell their interests in the company but are unable to transfer them to another stockholder or an approved purchaser. We are under no legal obligation to redeem shares, however.	We accept written requests for redemption from stockholders. The board of directors has full discretion to accept or reject the request for redemption.

Annual Meetings	We will hold our annual meeting within 180 days after the end of our fiscal year. Stockholders will have one vote for each share of new common stock held.	We hold our annual meeting within 180 days after the end of our fiscal year. Each stockholder has one common share and one vote.

Financial Reporting and Other Reports to Stockholders	As a company subject to the reporting requirements of the Securities Exchange Act, we will make annual and quarterly reports on Forms 10-K and 10-Q, provide a proxy statement, and such other reports as required by applicable law.	The company makes an annual report to stockholders

Business Combinations	At least 80% of all stockholders or at least 50% of disinterested stockholders must vote to approve a business combination with any beneficial owner of more than 5% of the issued and outstanding shares, or any affiliate or associate of such a beneficial owner.

Taxation of dividends compared with taxation of patronage dividends	A recipient of a dividend is generally required to include the dividend in ordinary income for federal income tax purposes. Distributions taxed as dividends received by stockholders taxed as C corporations generally qualify for the 70% dividends-received deduction, provided certain holding period and other requirements are met. Distributions taxed as dividends received by individual stockholders from domestic corporations are currently taxed at a reduced maximum federal income tax rate of 15%. The reduced rate is scheduled to expire in 2009.	A recipient of a patronage dividend is generally required to include the patronage dividend in ordinary income for federal income tax purposes in the year received. Recipients are required to include in income not only the amount of cash received as part of a patronage dividend, but also the fair market value of any property received and the stated dollar amount of any portion of the patronage dividend paid in qualified written notices of allocation. Under these rules, to the extent our patronage dividends have been paid in preferred stock, recipients have been required to include in income the par value of the preferred stock received.

LEGAL MATTERS

The validity of the common stock to be issued in connection with the restructuring will be passed upon by Dickinson, Mackaman, Tyler & Hagen P.C. An opinion regarding tax matters described under “The Restructuring—Material U.S. Federal Income Tax Consequences” will be issued by McDermott Will & Emery LLP.

EXPERTS

The consolidated financial statements and schedules of FCStone Group, Inc. and subsidiaries as of August 31, 2004 and 2003 and for each of the years in the three-year period ended August 31, 2004, have been included in this proxy statement-prospectus in reliance on the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein and upon the authority of said firm as experts in accounting and auditing.

A description of the appraisal of the value of the equity of FCStone Group, Inc. as of August 31, 2004 has been included in this proxy statement-prospectus in reliance on the report of RSM McGladrey, Inc. and upon the authority of said experts in business valuation.

FUTURE STOCKHOLDER PROPOSALS

Stockholders may submit business for consideration at annual or special meetings of the stockholders in accordance with the procedures set forth in the proposed bylaws. To be properly brought before a meeting of the stockholders, a proposal must be submitted by a stockholder of the company who is entitled to vote at the meeting and has given timely notice of the proposal in writing to the secretary of the company. For a regularly scheduled annual meeting of the stockholders, the secretary must receive notice of the proposal not less than 120 days prior to the date of such meeting. For a rescheduled annual meeting or other meeting, the secretary must receive the notice by the later of 10 calendar days following announcement of the date of the meeting or 120 days in advance of the meeting. The notice of proposal must set forth a brief description of the proposal, the reasons for conducting such business at a stockholder meeting, any material interest in the proposal the proposing stockholder may have, the name, address and share ownership of the proposing stockholder, and all other information with respect to such matter as would have been required to be included in any proxy statement filed pursuant to Regulation 14A.

Stockholders may also submit proposals for director nominations for consideration by the board of directors or applicable regional nominating committee. The board of directors or nominating committee, however, is not required to propose the recommended candidate for inclusion on the nominating ballot.

Stockholders may directly nominate directors at a meeting provided that the stockholder has provided written notice of its intention to make such nomination, addressed to the Secretary of the company, not later than (i) 120 days in advance of the annual meeting, or (ii) with respect to elections held at a special meeting of stockholders, by the close of business on the 7th day following public notice of such special meeting. The written notice must be sent via United States mail, postage prepaid. Email or fax submissions will not be accepted. The written notice must provide: (a) the name and address of the person making the nomination and the name of the proposed candidate; (b) a statement that the person making the nomination is a stockholder of record entitled to vote and that such person intends to appear at the meeting in person or by proxy to make the nomination; (c) the name and address of the nominating person, as they appear on the company’s books and records; (d) the amount of the nominating person’s beneficial ownership; (e) a description of any arrangement or understanding between the nominating person and each nominee; (f) information regarding the nominee sufficient to meet the requirements of Regulation 14A of the Securities and Exchange Act of 1934; (g) consent of the nominee to serve

as a director; (h) a statement by the nominating person representing that the nominee possesses the minimum requirements to serve as a director and describing the expected contributions of the nominee to the board of directors and governance of the company; (i) a statement regarding whether, in the view of the nominating person, the nominee would represent all the stockholders and not advance or favor the positions of any particular stockholder or constituent of the company. The written notice must be accompanied by a consent, from the nominee, to be interviewed by the board of directors or applicable nominating committee. Any nominee proposed for a Class I director position must meet the qualifications for such position as provided in the bylaws. Under the bylaws, the nominee must be a resident of the region from which he or she is nominated and be an employee of a stockholder of such region.

WHERE YOU CAN FIND MORE INFORMATION

The company has not filed any annual, quarterly and current reports with the SEC, but will do so after the restructuring. You may read and copy any reports that the company files at the SEC’s Public Reference Room at 450 Fifth Street, N.W. in Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The reports also will be available from commercial document retrieval services and at the SEC’s web site (http://www.sec.gov). Information found on our website is not a part of this proxy statement-prospectus.

You should rely only on the information contained in this document to vote on the restructuring. We have not authorized anyone to provide you with information that is different from what is contained in this document. This document is dated , 2005. You should not assume that the information contained in this document is accurate as of any other date, and neither the mailing of this document to stockholders nor the issuance of common stock in the restructuring shall create any implication to the contrary.

INDEX TO COMPANY FINANCIAL STATEMENT S


FCStone Group, Inc. and Subsidiaries
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Statements of Financial Condition as of August 31, 2004 and 200 3		F-2
Consolidated Statements of Operations for the Years Ended August 31, 2004, 2003 and 200 2		F-3
Consolidated Statements of Members’ Equity and Comprehensive Income for the Years Ended August 31, 2004, 2003 and 200 2		F-4
Consolidated Statements of Cash Flows for the Years Ended August 31, 2004, 2003 and 200 2		F-5
Notes to Consolidated Financial Statements		F-6

Report of Independent Registered Public Accounting Firm

The Board of Directors

FCStone Group, Inc.:

We have audited the accompanying consolidated statements of financial condition of FCStone Group, Inc. and subsidiaries (the Company) as of August 31, 2004 and 2003 and the related consolidated statements of operations, members’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended August 31, 2004. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedules I and II for each of the years in the three-year period ended August 31, 2004. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FCStone Group, Inc. and subsidiaries as of August 31, 2004 and 2003 and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Des Moines, Iowa

November 19, 2004, except for note 17, as to which the date is December 29, 2004

F-1

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share and per share amounts)


	August 31,
	2004			2003
ASSETS
Cash and cash equivalents:
Unrestricted	$	7,943		$	5,106
Restricted		1,403			1,400
Segregated		42,786			5,668
Commodity deposits and accounts receivable:
Commodity exchanges and clearing organizations — customer segregated, including United States treasury bills and notes of $364,040 in 2004, $233,599 in 2003		292,597			208,625
Proprietary commodity accounts		20,879			16,114
Customer regulated accounts in deficit secured by U.S. Treasury bills and notes of $36,634 in 2004 and $89,699 in 2003 included above		38,964			91,630

Total commodity deposits and accounts receivable		352,440			316,369


Marketable securities, at fair value — Customer segregated and other (including other of $299 in 2004 and $100 in 2003)		57,799			34,658
Accounts receivable and advances on grain		106,867			87,244
Notes receivable		2,079			11,810
Inventories — grain and fuel		12,198			23,030
Exchange memberships, at cost (fair value of $2,785 in 2004, $1,410 in 2003) (note 2)		1,155			1,155
Investment in clearing firms stock, at cost		67			1,079
Furniture, equipment, and improvements, net of accumulated depreciation of $3,734 in 2004 and $4,336 in 2003		8,652			3,025
Construction in progress (note 6)		—			5,569
Deferred income taxes (note 3)		2,710			2,886
Investments in affiliates and others		1,701			1,635
Investments in cooperatives		1,452			1,166
Other assets		4,575			2,933

	$	603,827		$	504,733

LIABILITIES AND MEMBERS’ EQUITY
Liabilities:
Checks written in excess of bank balance	$	8,022		$	—
Commodity and customer regulated accounts payable		411,660			327,861
Trade accounts payable and advances		68,807			38,654
Accrued expenses		16,196			14,942
Notes payable (note 8)		41,531			76,048
Subordinated debt (note 10)		5,750			500
Patronage refunds payable in cash		1,869			1,429
Obligations under capital leases		4,675			5,363

Total liabilities		558,510			464,797

Minority interest (note 1)		5,488			4,109

Members’ equity (notes 5 and 7) :
Preferred stock, nonvoting; $1,000 par value per share, nondividend-bearing, authorized 50,000 shares:
Series I issued 12,972.35 shares in 2004; 13,101.33 shares in 2003		12,972			13,102
Series II issued 897.61 in 2004; 904.16 shares in 2003		898			904
Common stock:
Class A, voting; $5,000 par value per share, nondividend-bearing, authorized 2,000 shares		2,369			2,753
Class B, voting; $100,000 par value, nondividend-bearing, authorized 100 shares `		500			500
Accumulated other comprehensive loss (note 4)		(3,039	)		(3,932	)
Retained earnings		26,129			22,500

Total members’ equity		39,829			35,827

Commitments and contingencies (notes 6, 9, and 11)

	$	603,827		$	504,733

See accompanying notes to consolidated financial statements.

F-2

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)


	Year Ended August 31,
	2004		2003		2002
Revenues:
Commissions — commodity futures and options	$	50,443	$	41,034	$	37,201
Service, consulting and brokerage fees		12,622		11,162		10,834
Clearing and transaction fees		16,041		7,013		3,824
Interest		4,354		4,762		3,634
Other		2,334		1,483		469
Sales of grain and fuel		1,537,793		1,166,554		839,980

Total revenues		1,623,587		1,232,008		895,942

Costs and expenses:
Cost of grain and fuel sold		1,521,925		1,154,103		830,188
Employee compensation and broker commissions		28,502		24,111		21,835
Pit brokerage and clearing fees		26,743		16,152		11,557
Introducing broker commissions		10,016		7,881		7,802
Employee benefits and payroll taxes (note 4)		6,850		5,725		4,498
Office, equipment and facilities rent and expenses (note 6)		4,552		4,461		3,666
Communications and marketing information		2,831		2,804		2,689
Interest		4,790		3,192		1,297
Travel and related		2,049		1,624		1,630
Depreciation and amortization		833		803		850
Other operating expenses		5,476		5,086		4,662

Total costs and expenses		1,614,567		1,225,942		890,674

Income before income tax expense and minority interest		9,020		6,066		5,268
Minority interest (note 1)		576		561		600

Income after minority interest and before income tax expense		8,444		5,505		4,668

Income tax expense (note 3)		2,030		1,200		1,280

Net income	$	6,414	$	4,305	$	3,388

See accompanying notes to consolidated financial statements.

F-3

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY AND COMPREHENSIVE INCOME

(in thousands)


	Preferred Stock			Common Stock					Accumulated Other Comprehensive Loss			Retained Earnings			Total Members’ Equity
	Preferred Stock			Class A			Class B		Accumulated Other Comprehensive Loss			Retained Earnings			Total Members’ Equity
Balance at August 31, 2001	$	13,622		$	2,863		$	500	$	—		$	18,083		$	35,068
Net income		—			—			—		—			3,388			3,388
Pension adjustment		—			—			—		(1,927	)		—			(1,927	)

Total comprehensive income																1,461
Transfer of Class A to preferred stock due to member reorganizations		88			(88	)		—		—			—			—
Patronage refunds:
Payable in cash:
Class A		—			—			—		—			(548	)		(548	)
Class B		—			—			—		—			(391	)		(391	)
Application of current year patronage to common and preferred stock		303			32			—		—			(335	)		—
Cash received on shares issued and subscribed		—			1			—		—			—			1
Cash disbursed on shares retired		(393	)		(26	)		—		—			—			(419	)

Balance at August 31, 2002		13,620			2,782			500		(1,927	)		20,197			35,172

Net income		—			—			—		—			4,305			4,305
Pension adjustment		—			—			—		(2,005	)		—			(2,005	)

Total comprehensive income																2,300
Transfer of Class A to preferred stock due to member reorganizations		67			(67	)		—		—			—			—
Patronage refunds:
Payable in cash:
Class A		—			—			—		—			(948	)		(948	)
Class B		—			—			—		—			(482	)		(482	)
Application of current year patronage to common and preferred stock		525			47			—		—			(572	)		—
Cash received on shares issued and subscribed		—			2			—		—			—			2
Cash disbursed on shares retired		(206	)		(11	)		—		—			—			(217	)

Balance at August 31, 2003		14,006			2,753			500		(3,932	)		22,500			35,827

Net earnings		—			—			—		—			6,414			6,414
Pension adjustment		—			—			—		893			—			893

Total comprehensive income		—			—			—								7,307
Transfer of Class A to preferred stock due to member reorganizations
		49			(49	)		—		—			—			—
Patronage refunds:
Payable in cash:
Class A		—			—			—		—			(1,420	)		(1,420	)
Class B		—			—			—		—			(449	)		(449	)
Application of current year patronage to common and preferred stock
		851			65			—		—			(916	)		—
Cash received on shares issued and subscribed
Cash received on shares issued and subscribed		—			1			—		—			—			1
Cash disbursed on shares retired		(1,036	)		(401	)		—		—			—			(1,437	)

Balance at August 31, 2004	$	13,870		$	2,369		$	500	$	(3,039	)	$	26,129		$	39,829

See accompanying notes to consolidated financial statements.

F-4

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Year Ended August 31,
	2004			2003			2002
Cash flows from operating activities:
Net income	$	6,414		$	4,305		$	3,388
Depreciation and amortization, including amounts in cost of grain and fuel sold of $28 in 2004; $34 in 2003; and $34 in 2002		861			837			884
Gain on disposal of Chicago Board of Trade Clearing Corporation Stock		(833	)		(263	)		—
Equity in earnings of affiliates		(66	)		(175	)		(43	)
Minority interest, net of distributions		1,380			351			516
Change in commodity accounts receivable/payable, marketable securities and customer segregated funds, net		(12,535	)		(576	)		(701	)
Increase in accounts receivable and advances on grain		(19,622	)		(25,845	)		(23,981	)
Decrease (increase) in inventory — grain and fuel		10,831			(7,197	)		(3,747	)
Increase in other assets		(1,627	)		(1,202	)		(50	)
Increase (decrease) in accounts payable		30,152			20,389			(2,459	)
Increase in accrued expenses		2,147			1,609			1,103

Net cash used in operating activities		17,102			(7,767	)		(25,090	)

Cash flows from investing activities:
Purchase of furniture, equipment, and improvements		(918	)		(767	)		(978	)
Net change in investment in marketable securities		—			1			(8	)
Collections (issuance) of notes receivable		9,732			2,503			(14,314	)
Purchase of exchange seat		—			—			(1	)
Purchase of CME clearing firm stock		(68	)		—			—
Proceeds from sale of Chicago Board of Trade Clearing Corporation Stock		1,912			648			—

Net cash provided by (used in) investing activities		10,658			2,385			(15,301	)

Cash flows from financing activities:
Increase in checks written in excess of bank balance		8,022			—			—
(Payments on) proceeds from note payable, net		(34,517	)		11,035			40,834
Proceeds from issuance of Class A common stock		1			2			1
Payment for redemption of stock		(1,437	)		(217	)		(419	)
Payment of prior year patronage		(1,429	)		(937	)		(1,849	)
Payments under capital lease		(688	)		(138	)		—
Proceeds from subordinated debt		5,750			—			—
Payment of subordinated debt		(500	)		(500	)		—
Monies deposited in escrow		—			(1,400	)		—
Debt issuance costs		(125	)		—			—

Net cash (used in) provided by financing activities		(24,923	)		7,845			38,567

Net increase (decrease) in cash and cash equivalents — unrestricted		2,837			2,463			(1,824	)

Cash and cash equivalents — unrestricted — at beginning of year		5,106			2,643			4,467

Cash and cash equivalents — unrestricted — at end of year	$	7,943		$	5,106		$	2,643

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	4,785		$	3,154		$	1,226
Income taxes		2,057			1,187			1,386


Supplemental disclosure of noncash investing and financing activities:
Application of current year patronage to common and preferred stock		916			572			335
Transfer of Class A common stock to preferred stock, due to member reorganizations		49			67			88
Transfer of retained earnings to patronage payable, due to patronage refunds		1,869			1,430			939

See accompanying notes to consolidated financial statements.

F-5

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

ORGANIZATION

The accompanying consolidated financial statements include the financial statements of FCStone Group, Inc. and its wholly owned subsidiaries, FCStone, L.L.C. (FCStone); FCC Investments, Inc. (FCC Investments); FCStone Trading L.L.C. (FCStone Trading); FCC Futures, Inc.; FCStone Financial, Inc. (FCStone Financial); FCStone Forex LLC; and 70% owned FGDI, L.L.C. (FGDI); and 70% owned FCStone Merchant Services, LLC (FCStone Merchant Services) (collectively, the Company). All significant intercompany balances and transactions have been eliminated in consolidation.

FCStone is a commodity futures commission merchant servicing customers primarily in grain and energy related businesses. FCC Investments is registered as a securities broker-dealer. FCStone Trading provides risk management services, acts as a dealer in over-the-counter derivative contracts on physical commodities, and operates a division that purchases and sells liquid fuels to participating members. FCC Futures, Inc. acts as a guaranteed introducing broker of FCStone and is registered with the National Futures Association. FCStone Financial provides railcar services to grain companies through leasing and subleasing of railcars. FCStone Financial also enters into sale/repurchase agreements with grain companies for the purchase and sale of certain commodities. FCStone Forex LLC provides over-the-counter interbank currency dealing services to self-directed and professionally managed client accounts. FGDI’s primary purpose is providing grain companies services relating to grain merchandising. FCStone Merchant Services provides specialized financing through inventory repurchase arrangements, transactional commodity finance arrangements, and processing and tolling arrangements.

The Company’s investment in Farmers Commodities Transportation Company, LLC (FCTC) represents 10% of the outstanding member units and is reported under the equity method at August 31, 2004 and 2003. FCTC provides railcar service through the leasing and subleasing of railcars and brokering the usage of these cars. FCStone provides management services, including accounting, administrative, personnel, and office space, to FCTC and has two members on FCTC’s board of directors. The Company also has minority holdings in two other entities, Lehi Mills L.L.C. and Hurley & Associates, both of which are carried under the equity method.

USE OF ESTIMATES

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

COMMODITY DEPOSITS AND ACCOUNTS RECEIVABLE/PAYABLE

Commodity accounts include equities and deficits in open futures and option contracts and funds received to margin or guarantee commodity transactions. The Company is obligated to fund margin calls on open contracts and, in turn, receives reimbursement from customers for maintenance of their respective margins. In accordance with the Commodity Futures Trading Commission’s regulations, customer funds received to margin, guarantee, and/or secure commodity futures transactions are segregated and accounted for separately. Commodity deposits and receivables with clearing organizations and commodity customer payables are reported gross except where a right of offset exists.

F-6

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

MARKETABLE SECURITIES

Marketable securities consist of short-term overnight investments in U.S. Treasury and U.S. Government Agency repurchase agreements and money market funds allowed by the Commodities Futures Trading Commission’s regulations for segregated customer funds. These securities are reported at market value, which approximates cost given their short-term nature. Unrealized gains and losses are recognized in other comprehensive income.

TRADE ACCOUNTS RECEIVABLE

The Company records trade receivables due from its customers at the time sales are recorded in accordance with its revenue recognition policy. The future collectibility of these amounts can be impacted by the Company’s collection efforts, the financial stability of its customers, and the general economic climate in which it operates. The Company applies a consistent practice of establishing an allowance for accounts that it believes may become uncollectible through reviewing the historical aging of its receivables and by monitoring the financial strength of its customers. If the Company becomes aware of a customer’s inability to meet its financial obligations (e.g., where it has filed for bankruptcy), the Company establishes a specific allowance for the potential bad debt to reduce the net recognized receivable to the amount it reasonably believes will be collected.

INVENTORIES

Grain inventories are carried at market value, which is net realizable value (NRV). NRV is determined by estimating selling prices in the applicable market location and related costs of disposal in the ordinary course of business. Realized and unrealized gains and losses on futures contracts are credited or charged to current cost of sales.

In fiscal year 2003, FCStone Trading adopted EITF 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities . The impact of the implementation of EITF 02-3 on the financial statements for the fiscal year ended 2003 was applied prospectively, as the effects were not significant to the Company.

Fuel inventory is recorded at the lower of cost or market using the first-in, first-out (FIFO) method. Additionally, FCStone Trading has minimum line fill requirements at two pipeline companies totaling 588,000 gallons of liquid fuels. If such line fill requirements are not met, the Company cannot deliver product again until they are met. FCStone Trading is required by certain fuel suppliers to make payment for fuel prior to line fills. Such payments have been reported as inventory and amounted to $1,327,000 and $0 at August 31, 2004 and 2003 respectively.

A summary of inventories as of August 31, 2004 and 2003 are as follows:


	2004		2003
Grain	$	9,164,408	$	19,329,769
Fuel		3,034,270		3,699,981

	$	12,198,678	$	23,029,750

OPEN CONTRACTS AND HEDGE POLICY – GRAIN

Open cash and futures contracts for the purchase and sale of grain are reported at market value, and the resulting gains or losses are recognized currently in earnings. The Company is exposed to risks that it may

F-7

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

not have sufficient grain to deliver into its contracts and thus would be obligated to purchase grain at prevailing market rates in order to meet such commitments. The Company follows the policy of hedging its grain transactions through the use of those contracts in order to minimize risk due to market fluctuations. Hedge margin accounts are carried at net liquidating valuations as of the balance sheet date. The value of the underlying contracts are $2,874,592 and $1,273,029 at August 31, 2004 and 2003, respectively.

HEDGE POLICY – FUEL

The Company follows the policy of hedging its fuel purchases made on behalf of its customers to minimize the risk due to market fluctuations. The gains and losses relating to closed hedge positions are either billed to or returned to the participant members and are allocated based upon their respective volume of business. The Company is exposed to credit risk of participating members, to the extent they fail to settle their obligations.

Balances receivable from or due to Fuel Alliance members under these hedging contracts are reported at market value based on publicly available third-party pricing services and reflected as other receivables or accounts payable – customers in the financial statements and the related unrealized gain or loss is recorded in cost of fuel sold.

FURNITURE, EQUIPMENT, SOFTWARE, AND IMPROVEMENTS

Furniture, equipment, software, and improvements are recorded at cost. Expenditures for maintenance, repairs, and minor replacements are charged to operations, while expenditures for major replacements and betterments are capitalized.

FGDI had leased property, primarily comprised of grain bins, under a capital lease with an asset balance of $5,568,750 at August 31, 2004 and 2003 (see note 6).

Depreciation expense is provided using the straight-line method over the estimated useful lives of the assets. Furniture, equipment, and leasehold improvements are depreciated over five to forty years. Software is depreciated over a useful life of three years. Capital leases for grain bins are depreciated over a useful life of 10 years.

CASH AND CASH EQUIVALENTS — UNRESTRICTED

Cash equivalents consist of investments with original maturities of three months or less and include money market funds totaling $3,261,900 and $2,246,423 at August 31, 2004 and 2003, respectively.

CASH AND CASH EQUIVALENTS — RESTRICTED

FCStone Trading and FGDI have deposited monies into an escrow account held at a financial institution, in connection with FGDI’s capital lease obligation (see note 6). The deposited funds, and all earnings, are required to be held in escrow until repayment of the bond sinking fund.

CASH AND CASH EQUIVALENTS — SEGREGATED

Pursuant to requirements of the Commodity Exchange Act, funds deposited by customers relating to futures contracts in regulated commodities must be carried in separate accounts which are designated as segregated customers’ accounts. At August 31, 2004 and 2003, cash and cash equivalents – segregated included an interest bearing cash account of $35,118,576 and $0, respectively, for deposit of customer funds.

F-8

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

MINORITY INTERESTS

Minority interest in net assets and income reflected in the accompanying consolidated financial statements consists of:

a) A 30% minority interest held by an unaffiliated third party in FGDI, a U.S. Limited Liability Company, for 2004, 2003, and 2002.

b) A 30% minority interest held by an unaffiliated third party in FCStone Merchant Services, a U.S. Limited Liability Company for 2004.

The following tables set forth the components of minority interest in the consolidated balance sheets:


	August 31
	2004		2003
FGDI, LLC	$	4,581,418	4,108,796
FCStone Merchant Services, LLC		906,921	—

Total	$	5,488,339	4,108,796

COMMISSION REVENUE AND EXPENSE

SERVICE AND CONSULTING FEES

Risk management service and consulting fees are billed and recognized as revenue on a monthly basis when such services are provided. Such agreements are generally for one-year periods but are cancelable by either party with a 30-day notice.

CLEARING AND TRANSACTION FEES

Clearing and transaction fees are charged when each trade is made (opened and closed).

REVENUE RECOGNITION ON PURCHASE AND SALE OF GRAIN AND FUEL

The Company recognizes revenue on sales when the agricultural products or fuel are shipped and/or the customer takes ownership and assumes risk of loss. In addition, in accordance with accounting principles generally accepted in the United States of America, revenues from certain activities should be reported gross with a separate display of cost of sales. Revenues from our grain merchandising and fuel sales have been presented gross. These grain merchandising and fuel sales include activities in which we are the primary obligor responsible for fulfillment, act as principal, change the product or perform part of the service, take title to the inventory and assume the risk and rewards of ownership, such as the risk of loss for collection and delivery.

OTHER REVENUES

The Company reports its equity in the earnings of unconsolidated affiliates as other revenue. This amounted to $65,569, $185,304, and $43,358 in 2004, 2003, and 2002, respectively.

F-9

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company recorded a gain on the sale of its investment in The Clearing Corporation stock of $832,880 in 2004 and $263,015 in 2003.

PATRONAGE REFUNDS

The Company operates on a cooperative basis; accordingly, substantially all savings arising from business transacted with or for members are allocated to them in the form of cash or members’ equity.

INCOME TAXES

The Company operates as a nonexempt cooperative under Sections 1381 through 1388 of the Internal Revenue Code. Accordingly, federal income taxes are based on nonmember savings and the portion of member savings not allocated as patronage refunds, if any. The companies file a consolidated income tax return, and income taxes are allocated to the companies on the basis of their taxable income.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

RECLASSIFICATIONS

Certain amounts, as reported in the prior year’s financial statements, have been reclassified to conform with the current year presentation.

2. EXCHANGE MEMBERSHIPS

The costs of the Company’s exchange memberships include seats on the Chicago Board of Trade, the Board of Trade of Kansas City, Missouri, Inc., the Minnesota Grain Exchange, and the Chicago Mercantile Exchange. These memberships cost the Company $991,150, $111,000, $10,500, and $42,000, respectively.

3. INCOME TAXES

Income tax expense consists of current and deferred taxes as follows:


	2004		2003		2002
Current:
Federal	2,425,700		1,164,800		1,137,300
State and local	256,300		75,200		102,700

Total current	2,682,000		1,240,000		1,240,000

Deferred:
Federal	(615,700	)	(37,800	)	36,600
State and local	(36,300	)	(2,200	)	3,400

Total deferred	(652,000	)	(40,000	)	40,000

Total income tax expense	2,030,000		1,200,000		1,280,000

F-10

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Total income tax expense differs from the “expected” tax expense computed by applying the federal income tax rate of 34% to earnings before income tax expense as follows:


	2004			2003			2002
“Expected” tax expense	$	2,870,937		$	1,871,799		$	1,586,960
Patronage refund deduction		(1,002,609	)		(680,678	)		(430,171	)
State income tax		145,300			48,169			70,000
Other		16,372			(39,290	)		53,211

Income tax expense	$	2,030,000		$	1,200,000		$	1,280,000

The tax effects of temporary differences that give rise to deferred income tax assets are:


	2004		2003
Pension liability	$	1,295,000	$	2,123,000
Deferred compensation		1,036,700		609,300
Bad debt reserve		124,200		115,200
All other assets		254,100		38,500

Net deferred tax assets	$	2,710,000	$	2,886,000

Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

4. RETIREMENT PLANS

The Company has a noncontributory retirement plan, which is a defined benefit plan that covers substantially all employees. The Company’s policy is to fund amounts that are intended to provide for benefits attributed to service to date.

The following table presents changes in, and components of, the Company’s net liability for retirement costs:


Changes in Benefit Obligation	2004			2003
Benefit Obligation at beginning of year	$	16,604,588		$	11,215,691
Service Cost with interest		1,624,129			1,157,413
Interest Cost		988,797			838,582
Assumption Changes		(769,016	)		3,373,469
Actuarial (gain)/loss		245,927			268,711
Benefits Paid		(262,405	)		(249,278	)

Benefit Obligation at end of year		18,432,020			16,604,588

Changes in Plan Assets
Fair Value at beginning of year		7,217,997			6,403,797
Actual Return		1,391,001			83,496
Employer Contribution		2,188,322			979,982
Benefits Paid		(262,405	)		(249,278	)

Fair Value at end of year		10,534,915			7,217,997

Funded Status		(7,897,105	)		(9,386,591	)
Unrecognized actuarial (gain)/loss		7,189,412			9,006,087
Contributions from Measurement Date to Fiscal Year End		867,120			916,555
Minimum Liability		(3,755,667	)		(5,853,525	)

Accrued pension cost	$	(3,596,240	)	$	(5,317,474	)

F-11

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The retirement benefit obligation was based upon an annual measurement date of June 30 and was determined using the following weighted-average assumptions:


	2004	2003
Weighted-average assumptions:
Discount rate—end of year	6.25%	6.00%
Expected return on assets	8.50%	8.50%
Rate of compensation increase—based on age graded scale	3.50% to 7.20%	3.50% to 7.20%

The components of retirement benefit costs recognized in the consolidated statements of operations were as follows:


	2004		2003			2002
Service cost	$	1,624,129	$	1,157,413		$	631,341
Interest cost		988,797		838,582			563,144
Less: Actual return on assets		1,391,001		83,496			(472,896	)
Net amortization and deferral		1,293,586		(124,990	)		(1,001,118	)

	$	2,515,511	$	1,787,509		$	666,263

A change in the minimum pension liability resulted in a $893,234 after-tax reduction to other comprehensive loss in 2004 and a $2,004,985 after-tax charge to other comprehensive loss in 2003.

The following table sets forth the actual asset allocation for the years ended August 31, 2004 and 2003, and the target asset allocation for the Company’s plan assets:


	August 31,				Target Asset Allocation (1)
	2004		2003		Target Asset Allocation (1)
Equity securities	71	%	64	%	60% to 65%
Debt securities	29	%	36	%	35% to 40%

Total	100	%	100	%

(1)

The long-term goal for equity exposure and for fixed income exposure is considered to be a maximum of 65% and 40%, respectively, of the fund at market value. The exact allocation at any point in time is at the discretion of the investment manager, but should recognize the need to satisfy both the volatility and the rate of return objectives for equity exposure, and satisfy the objective of preserving capital for the fixed income exposure.

The assets of the qualified pension plan are managed in a way that reflects the uniqueness of the Plan:

•

Over the long-term, the risk of owning equities has been, and should continue to be, rewarded with a somewhat greater return than that available from fixed income investments.

•

The role of fixed income investments are recognized as vehicles with the potential for dampening the volatility of rates of return, while producing a predictable stream of income.

The following Investment Objectives are believed to be reasonable and achievable within the guidelines of the Investment Philosophy:

•

Over the long-term, the Plan should achieve a minimum average total rate of return of four percentage points (4.0%) above the rate of inflation as measured by the Consumer Price Index.

F-12

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

•

The real rate of return goal assumes the following: real rate of return for equities of 6.0% and a real rate of return for fixed income of 2.0%.

•

The fund variability should be no greater than the average variability of the markets themselves.

•

Relative and comparative performance will also be a factor in the evaluation of the quality of investment management services rendered.

The Company expects to contribute approximately $2 million to the pension plan during 2005.

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


Fiscal Year	Pension Benefits
2005	$	307,390
2006		351,889
2007		389,750
2008		460,784
2009		540,878
2010 - 2014		4,853,708

The Company participates in a 401(k) plan in the Thrift/Savings Plan for Cooperatives, a defined contribution plan. The Company contributed approximately $813,000, $710,000, and $660,000 to the 401(k) plan during 2004, 2003, and 2002, respectively.

5. ADJUSTED NET CAPITAL REQUIREMENTS

Pursuant to the rules, regulations, and requirements of the Commodity Futures Trading Commission and other regulatory agencies, FC Stone is required to maintain certain minimum net capital as defined in such rules, regulations, and requirements. Net capital and the related net capital requirement may fluctuate on a daily basis. FC Stone’s adjusted net capital and minimum net capital requirement at August 31, 2004 and 2003 were as follows:

The rules, regulations, and requirements of the Commodity Futures Trading Commission prohibit the withdrawal of equity if, after giving effect to such withdrawal and capital reductions which are scheduled to occur within six months, adjusted net capital is less than the greater of $375,000 or 7% of the amount required to be segregated.

FCC Investments, Inc. is required to maintain certain net capital as defined by the Securities and Exchange Commission. At August 31, 2004 and 2003, FCC Investments net capital was $346,898 and $183,116, respectively. The minimum net capital requirement was $250,000 and $5,000 at August 31, 2004 and 2003, respectively.

6. COMMITMENTS

The Company leases office space, equipment, automobiles, and an airplane under noncancelable operating leases which expire on various dates through 2007. Most of the Company’s leases provide that the Company pay

F-13

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

taxes, maintenance, insurance, and other operating expenses. At August 31, 2004, minimum rental payments due under operating leases were as follows: 2005, $1,903,000; 2006, $1,579,000; 2007, $1,298,000; 2008, $1,079,000; and 2009, $967,000.

The rental expense under the above operating leases was approximately $1,862,000, $1,968,000, and $1,688,000 in 2004, 2003, and 2002, respectively.

FCStone Financial leases covered hopper cars and, in turn, subleases these cars to a railroad company. The original operating lease expired on September 30, 2002, and FCStone Financial continues to lease the cars on a month-to-month basis as allowed under the original lease terms. Rental expense under this lease totaled approximately $642,000, $620,000, and $588,000 in 2004, 2003, and 2002, respectively. The original sublease also expired on September 30, 2002 and was renewed on a cancelable basis for a three year period beginning October 1, 2002. Annual lease rentals under this agreement are expected to be approximately $757,000 in 2005. Sublease rental income totaled approximately $830,000, $795,000, and $764,000 in 2004, 2003, and 2002, respectively.

During the year ended August 31, 2003, FGDI entered into a lease agreement for grain bins that were under construction, and recorded a capitalized asset and capital lease obligation of $5.5 million. Construction of the grain bins was completed in August 2004, and testing of the facilities was on-going at August 31, 2004. The capitalized asset will be placed into service during the 1 ^st fiscal quarter of 2005. FGDI made payments on the lease equal to $687,500 and $137,500 during 2004 and 2003, respectively. The lease expires December 1, 2012 and annual minimum lease payments are equal to $550,000. FGDI also leases grain storage facilities under various operating leases with expiration dates ranging from August 31, 2005 through September 30, 2013. FGDI leases covered hopper cars for use in its Ohio operations under various operating leases from unrelated parties, with term ranging from twelve to sixty months. Rental expenses under these leases, which are included in cost of sales, totaled approximately $1,987,000, $1,647,000, and $1,486,000 in 2004, 2003, and 2002, respectively.

FGDI’s approximate future minimum rental payments for the above facilities and railcars for subsequent fiscal years are as follows: 2005, $4,169,000; 2006, $2,400,000; 2007, $1,785,000; 2008, $1,752,000; and 2009, $1,719,000.

FGDI leases various office space and grain storage facilities under year-to-year operating leases. Rental expense for these offices and facilities was approximately $191,000, $303,000, and $217,000 in 2004, 2003, and 2002, respectively. FGDI also leases office space in North Carolina. Under this agreement, the Company has future minimum rental payments of $5,425 in fiscal year 2005. FGDI also rents equipment periodically throughout the year under day-to-day agreements. Rent expense for equipment was approximately $32,000, $19,000, and $44,000 in 2004, 2003, and 2002, respectively.

At August 31, 2004 and 2003, FCStone Trading has entered into 45,651 and 55,456 swap or option contracts, respectively, for energy related products and grain products with customers and has entered into offsetting contracts with counterparty energy producers and others. The notional value at August 31, 2004 and 2003 relating to these swap and option contracts was approximately $312 million and $263 million, respectively. The customers are required to maintain margin accounts with FCStone Trading regarding the swap contracts. In the event the counterparty was unable to meet its contractual obligations, FCStone Trading may be exposed to the risk of purchasing energy related products at prevailing market prices. To mitigate this risk, FCStone Trading has purchased credit swap derivatives that provide coverage of at least 1.43 times the counterparty exposure level. The unrealized gains and losses on the swap and option contracts are reported at gross, included in Accounts receivable and advances on grain and Trade accounts payable and advances, respectively, in the accompanying statement of financial condition.

FCStone Merchant Services has a noncancelable operating lease for office space in New Jersey. The lease is for an initial three year term expiring on June 30, 2007. The lease contains a renewal option for an additional five

F-14

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

year term and requires payment of all executory costs, such as maintenance and liability insurance. Rent expense associated with this lease totaled approximately $11,000 in 2004. Future minimum lease payments under the lease for each of the three years subsequent to August 31, 2004 are: $66,000 in 2005, $66,000 in 2006, and $55,000 in 2007.

7. MEMBERS’ EQUITY

The Company has an equity plan whereby each member’s individual contribution to equity is determined by reference to its individual volume of futures business with FCStone or grain merchandising business with FGDI. This is achieved by the distribution of noncash current patronage in the form of preferred stock. Current patronage is paid 40% in cash, with the balance allocated first to offset amounts unpaid on subscriptions for Class A common stock (Class B common stock is paid in full as a condition of membership); second, paid in the form of distribution of Series I preferred stock to meet minimum Series I preferred stock requirements as provided in the plan; third, paid in the form of distribution of Series II preferred stock for remaining FGDI patronage to meet minimum Series II preferred stock requirements as provided in the plan; and fourth, any remaining balance is payable in cash to the extent the board of directors determines that the Company has sufficient resources to make such payment consistent with prudent business practice.

Following is a reconciliation of Class A and Class B common stock issued and subscribed at August 31, 2004 and 2003:


	2004					2003
	Class A			Class B		Class A			Class B
549 shares in 2004 and 722 shares in 2003 (424 shares issued in 2004, 482 shares in 2003, and 125 shares subscribed in 2004, 240 shares in 2003) at $5,000 par value	$	2,745,000		$	—	$	3,610,000		$	—
5 shares at $100,000 par value					500,000		—			500,000
Stock subscriptions to be satisfied by future patronage and/or cash		(376,435	)		—		(856,745	)		—

8. NOTES PAYABLE

During 2004, the Company entered into an unsecured line of credit agreement with Deere Credit in the amount of $8,250,000. The availability of the line of credit is subject to annual review. The continued availability of this line of credit is subject to the Company’s financial condition and operating results continuing to be satisfactory to Deere Credit. Borrowings under this line are on a demand basis and bear interest at the prime rate established by Citibank, N.A. The Company’s borrowings outstanding under this line of credit at August 31, 2004 was $8,250,000.

FCStone has an unsecured line of credit with Harris Trust and Savings Bank, Chicago, Illinois (Harris) in the amount of $15.0 million. The availability of the line of credit at Harris is subject to annual review. The continued availability of this line of credit is subject to the Company’s financial condition and operating results continuing to be satisfactory to Harris. Borrowings under this line are on a demand basis and bear interest at the prime rate as announced by Harris. There were no borrowings outstanding under this line of credit at August 31, 2004 or 2003.

FCStone has unsecured lines of credit with Deere Credit, Inc. in the amount of $45,750,000. The lines are comprised of a $38,750,000 margin call line, expiring March 1, 2005, and a $7.0 million subordinated debt line, expiring December 1, 2005. The margin call line of credit is subject to annual review, and continued availability

F-15

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of this line of credit is subject to the Company’s financial condition and operating results continuing to be satisfactory to Deere Credit, Inc. Borrowings under this line are on a demand basis and bear interest at 0.35% under the Prime rate or base rate of interest established by Citibank, N.A. There were no borrowings outstanding under this line of credit at August 31, 2004 and 2003. The subordinated revolving line of credit bears interest at the rate of 4.8% in excess of LIBOR. Unused portions of the credit facility require a commitment fee of ½ percent on the unused commitment. Borrowings outstanding under this line of credit were $4,000,000 at August 31, 2004. There were no borrowings outstanding under this line of credit at August 31, 2003.

On September 9, 2004, FGDI amended the line of credit with National Bank for Cooperatives (CoBank). FGDI’s amended line of credit with CoBank is for an amount of up to $97,500,000. The commitment expires April 1, 2005 and carries an interest rate on a variable basis indexed to CoBank’s national variable rate, as defined in the agreement. The interest rate was 3.31% at August 31, 2004. The line of credit is secured by inventories, accounts receivable, and intangible properties. The line of credit requires FGDI to maintain an excess of total assets over total liabilities of not less than $9,000,000 at the end of each month and a ratio of total debt to working capital not to exceed 10:1 at the end of each month. The Company was not in compliance with the borrowing base limit from February 29, 2004 to June 30, 2004, but received a written waiver from CoBank. The Company was in compliance with such borrowing base limit at August 31, 2004. The loan agreement with CoBank requires the Company to acquire and maintain non-voting participation certificates in CoBank, in amounts determined in accordance with CoBank’s bylaws and capital plan. The borrowings outstanding under this line of credit at August 31, 2004 and 2003 were $26,504,115 and $58,776,605, respectively.

During 2004, FGDI entered into agreements with AFG Trust Finance Limited and AFG Trust Assets Limited for a United States dollar (USD) credit facility and a Chinese RenMinBi (RMB) credit facility, as well as an USD investment facility and a RMB investment facility. The USD credit facility is for an amount up to $15,000,000 and the RMB credit facility is for an amount up to 120,000,000 RMB. The commitment expires May 26, 2005 and the USD credit facility carries an interest rate of the aggregate of the prime rate, as published by The Asian Wall Street Journal and .75% per annum. The credit facility is secured by all of the interest and rights in respect of the USD and RMB investment facilities with AFG Trust Assets Limited. The aggregate principal amounts of all the borrowings outstanding shall not exceed the lesser of the facility amount and the available limit, to be calculated as defined in the agreement. The borrowings outstanding under the USD credit facility at August 31, 2004 were $3,499,306. There have been no borrowings outstanding under the RMB credit facility.

On June 29, 2004, FCStone Trading entered into a revolving credit facility with National Bank for Cooperatives, ACB (CoBank), in the amount of $15 million, which will expire on June 30, 2005. The purpose of this commitment is to provide funding for commodities risk management services that FCStone Trading provides to its members, primarily the payment of option premiums and margin calls on hedge and swap transactions entered into by the Company on behalf of members. It is also to provide funding for working capital requirements in funding hedged fuel inventory and accounts receivable under the Fuel Alliance Program. Amounts outstanding under these credit facilities will bear interest at ¼ of 1% below the National Variable Rate established by CoBank from time to time. Unused portions of the credit facility require a commitment fee of ¼ of 1% per annum. FCStone Trading is required to maintain at the end of each quarter $2.4 million in current assets in excess of current liabilities and $2.4 million of total assets in excess of total liabilities. FCStone Trading was not in compliance with the minimum adjusted working capital covenant as of August 31, 2004. FCStone Trading has received a written waiver from CoBank covering the period from August 31, 2004 through November 30, 2004. The borrowings outstanding under this line of credit at August 31, 2004 and 2003 were $1,950,000 and $2,000,000, respectively.

F-16

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On April 15, 2002, FCStone Financial entered into a line of credit agreement with John Deere Credit, Inc. in the amount of $46.0 million, which expires on March 1, 2005. The line of credit carries an interest rate on a variable basis calculated based on the collateral quality of advances requested by the Company as defined in the agreement. The line of credit is secured by inventories and accounts receivable. FCStone Financial is required to maintain at the end of each month $1.0 million in current assets in excess of current liabilities as well as total assets in excess of total liabilities. In addition, the FCStone Financial must obtain a Guaranty from the Company to meet minimum net worth levels of not less than $3.0 million at the end of each month and of not less than $3.5 million at the end of each fiscal year. The Company maintains a limited corporate guarantee with Deere Credit to meet this obligation. There were borrowings outstanding of approximately $1,328,000 and $15,271,500 under this line of credit at August 31, 2004 and 2003. As of August 31, 2004, FCStone Financial was not in compliance with the minimum working capital requirements. FCStone Financial obtained a waiver dated October 13, 2004 from the lender regarding this violation. The waiver covers all periods from August 31, 2004 through the investment of $25,000 by FCStone Group, Inc., which occurred on October 29, 2004.

On February 28, 2003, FCStone Financial entered into a line of credit agreement with CoBank, ACB in the amount of $75.0 million, which expires on May 1, 2005. Interest under the agreement will be determined separately at the time advances are requested. Under a subordination agreement dated February 28, 2003, borrowings under the line of credit with Deere Credit, discussed above, are subordinate to those under the line of credit with CoBank. FCStone Financial is required to maintain equity in excess of $0.75 million. In addition, the Company maintains a guarantee of payment agreement with CoBank with a maximum obligation of $1.5 million. The loan agreement requires FCStone Financial to acquire and maintain non-voting participation certificates in CoBank in amounts determined in accordance with CoBank’s bylaws and capital plan. These certificates are reported as other investments. There are no commitment fees associated with this line of credit, and as of August 31, 2004 and 2003, there were no borrowings outstanding under the agreement.

On March 4, 2004, FCStone Merchant Services entered into a junior, secured revolving credit facility with Sowood Commodity Partners Fund LP (Sowood), a related party, in the amount of $30.0 million. The purpose of this credit facility is to fund purchase, storage, hedging, financing and sale of commodities. In accordance with the agreement, any financing debt under this credit facility that is incurred by FCStone Merchant Services in the ordinary course of business to fund the purchase or financing of any permitted commodity is subordinated in right of payment to any senior debt. The maturity date for each advance is on, or prior to, the 364 ^th day after the closing date of the advance. Each advance accrues daily interest at a rate of the greater of (i) the interest rate specified in the borrowing request; or (ii) the interest rate agreed to in writing by Sowood and FCStone Merchant Services prior to the closing date for the advance. A commitment fee, based on the amount requested multiplied by 1%, is due to Sowood only in instances where a borrowing that has been approved does not occur. FCStone Merchant Services is required to maintain at all times, tangible net worth, as defined per agreement, of not less than $1.5 million and net working capital of not less than $1.5 million. There were no borrowings outstanding under this credit facility at August 31, 2004.

On May 13, 2004, FCStone Merchant Services entered into a line of credit agreement with RZB Finance (RZB) in the amount of $5.0 million. The purpose of this credit facility is for short-term advances (Loans) and issuance of commercial letters of credit (L/C’s), which shall be used to finance the purchase of inventory and accounts receivable arising from the sale of inventory. Each Loan is payable on demand, and in no event shall be outstanding for more than 180 days. Interest on Loans is payable at sum of 2.5% plus the offered rate quoted by The Chase Manhattan Bank in the interbank Eurodollar market in New York City or London, England, divided by one minus the Reserve Percentage, determined in accordance with the terms of the agreement. Each L/C shall have an expiration date not more than 180 days after its date of issuance. Each L/C is charged a fee, upon issuance, in an amount equal to the greater of: (i) a flat fee of $500 or (ii) a fee equal to 2.5% of the maximum

F-17

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

face amount of the L/C. FCStone Merchant Services is required to maintain at all times tangible net worth, as defined per agreement, of $2,500,000. There were no borrowings outstanding under this line of credit at August 31, 2004.

On May 10, 2004, FCStone Merchant Services entered into an uncommitted line of credit agreement with Fortis Capital Corp. (Fortis) in the amount of $20.0 million, to be used for loans, documentary letters of credit and standby letters of credit. Each loan or letter of credit shall be used to finance self-liquidating transactions involving the purchase, storage, hedging, and sale of grains, crude oil, natural gas, and petroleum products that are traded on commodities exchanges, as well as, repurchase agreements with counterparties acceptable to Fortis. All loans are payable on demand, and in no event shall be outstanding for more than 74 days after the date made, unless agreed by Fortis. Loans under the facility bear interest at a rate equal to not less than, at FCStone Merchant Services’s option, 2.50% in excess of LIBOR or 2.50% in excess of Fortis’ cost of funds using funding sources, as Fortis shall determine from time to time. All letters of credit shall have expiration dates not later than 74 days after the issuance date, unless agreed by Fortis. The fees for issuing a documentary letter of credit under the facility are: the greater of $500 or ¼ of 1% flat per 74-day period or part thereof, payable in advance. In addition, a negotiation fee of 1/10 of 1% of the amount of each drawing under each letter of credit, payable upon drawing. The fees for issuing each trade standby letter of credit and each financial standby letter of credit shall be not less than a fee at a rate of 2.0% and 2.50%, respectively, of the daily average maximum undrawn face amount of each such standby letter of credit during the period from the date of issuance through the date of expiration. FCStone Merchant Services is required to maintain at all times, working capital of not less than $2.5 million and the ratio of total outstanding loans and extensions of credit from all banks and institutions to tangible net worth, as defined per agreement, not to exceed 12.5 to 1.0. There are no commitment fees associated with this uncommitted line of credit, and there were no borrowings outstanding under this line of credit at August 31, 2004.

9. LETTERS OF CREDIT

FCStone Trading is required to provide letters of credit to certain customers and counterparties that can be drawn upon if there is a loss on the over-the-counter contracts. FCStone Trading has provided these letters of credit under agreements with CoBank. As of January 29, 2002, an agreement was entered into for $3,000,000, which matures on October 31, 2004. As of August 6, 2002, another agreement was entered into for $500,000, which matures on September 30, 2004. The final agreement was entered into on July 30, 2004, for $1,250,000, which matures on January 31, 2005. To date, FCStone Trading has not drawn down on these facilities. Under the agreements, FCStone Trading is required to pay commitment fees in advance, which are recorded as prepaid expenses and recognized over the life of the respective letters of credits. Expenses amounted to approximately $62,000 in 2004.

FCStone Merchant Services provides credit support on behalf of certain customers using arrangements such as documentary and standby letters of credit (see note 8). These arrangements enable customers to execute transactions or obtain desired financial arrangements with third parties. Should the customer fail to perform under the terms of the transaction or financing arrangement, FCStone Merchant Services would be required to perform on their behalf. The length of these credit support arrangements parallels the length of the related financing arrangements or transactions. FCStone Merchant Services has issued letters of credit in the amount of $4,950,000 at August 31, 2004.

10. SUBORDINATED DEBT

In addition to the $4,000,000 subordinated debt with Deere Credit (see note 8), during 2004, FCStone entered into several subordinated notes with various individuals, amounting to $1,750,000 (see note 13). The

F-18

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

notes are variable rate notes, and bear interest at a rate equal to the prime rate as published in The Wall Street Journal , which was 4.75% at August 31, 2004. The notes have maturity dates ranging from October 1, 2004 to June 30, 2005, and are subordinated as defined by Commodity Futures Trading Commission Regulations.

11. CONTINGENCIES

The Company, from time to time, is involved in various legal matters considered normal in the course of its business. It is the Company’s policy to accrue for amounts related to these matters if it is probable that a liability has been incurred and an amount can be reasonably estimated. Although the outcome of such matters cannot be predicted with certainty and no assurances can be given with respect to such matters, the Company believes that the outcome of these matters in which it is currently involved will not have a materially adverse effect on its results of operations, liquidity, or financial position except as discussed below.

During 2004, FCStone LLC received approximately $600,000 in subrogation payments which were reimbursements for legal expenses incurred in previous years. Such amounts are reflected as a reduction of other operating expenses in the accompanying statement of operations.

On August 21, 2003, August 21, 2003, September 23, 2003, October 16, 2003, and July 16, 2004, Euro-Maritime Chartering, Inc. filed five separate claims under the arbitration facility established by the London Maritime Arbitrators Association of London, England, alleging a breach by FGDI, LLC of charter party agreements regarding four vessels and seeking to recover damages of $242,655, $311,663, $769,302, and $561,854, respectively. The amount of the July 16, 2004 claim is not yet stated. Euro-Maritime Chartering alleges that these damages arise from detention and demurrage encountered at China ports with respect to cargos that FGDI sold to Chinese buyers. FGDI claims that, under the sales contract with the Chinese buyers, any detention and demurrage charges were for the account of the buyers. FGDI does not dispute the demurrage claims, which are estimated to total approximately $690,000. FGDI has collected deposits from the Chinese buyers in the total amount of $669,436, which is being held pending resolution of the detention claims. FGDI intends to vigorously defend the detention claims. If the claimant prevails on any of the detention claims, or otherwise in amounts above the corresponding deposit, FGDI expects to seek collection of such amounts from the buyers.

On December 13, 2003, Liaoyang Edible Oils filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds, and Fats Association Ltd. of Hong Kong alleging breach of a sales contract by FGDI and seeking to recover damages of $1,125,000. Liaoyang Edible Oils alleges that these damages arise out of disputes related to the final pricing of the contract. FGDI intends to vigorously defend the claim.

Management is currently unable to predict the outcome of these claims and believes their current status does not warrant accrual under the guidance of Statement on Financial Accounting Standards No. 5, Accounting for Contingencies , since the amount of any liability is neither probable nor reasonably estimable. As such, no amounts have been accrued in the financial statements. Management intends to vigorously defend these claims and will continue to monitor the result of arbitration and assess the need for future accruals.

12. SALE OF ACCOUNTS RECEIVABLE

During fiscal year 2004, FGDI began participating in a bank program to provide liquidity through the sale of insured receivables, with limited recourse, which expires February 17, 2005. The Company grants the purchaser a security interest in all of the Company’s rights, title, and interest in receivables sold. Additionally, the Company has authorized the purchaser to assign and transfer, and grant participation in, any purchase documents. In the event that any receivable is not paid in full on its stated due date, FGDI shall take any and all actions

F-19

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

required by the policies, which may lead to the timely filing of a claim as required under the insurance policies, or at its option, repurchase of the receivable from the purchaser. In the event it is necessary to determine whether to file a claim under the insurance policies or repurchase the receivables, FGDI would seek advice from legal counsel in selecting the option that would be most advantageous. FGDI accounts for sales of receivables under these agreements as sales in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities .

Cash flows between FGDI and the third-party purchaser during the fiscal year ended August 31, 2004 consist of proceeds from sale of receivables of $21.7 million.

13. TRANSACTIONS WITH AFFILIATED COMPANIES

FCStone has entered into an agreement with FCTC to provide management services, including accounting, administrative, personnel, and office space. The Company receives a monthly fee plus 15% of net earnings of FCTC, which totaled approximately $207,000, $180,000, and $260,000 in 2004, 2003, and 2002, respectively.

During 2004, the Company loaned $1,000,000 to two individuals who subsequently loaned the monies in the form of subordinated debt to FCStone LLC creating a financial interest. FCStone LLC executes transactions through seats held by these individuals on the Chicago Mercantile Exchange.

F-20

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, commodity and accounts and note receivables, marketable securities and payables contained in the Consolidated Statements of Financial Condition approximates their fair values due to the short-term nature of these instruments. Short-term borrowings and obligations under capital lease have variable rates which approximate fair value.

The fair value estimates presented herein are based on pertinent information available to management as of August 31, 2004 and 2003. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may be different significantly from the amounts presented herein.

15. OPERATING SEGMENT INFORMATION

The Company reports its operating segments based on services provided to customers, which includes Commodity and Risk Management Services, Clearing and Execution Services, Grain Merchandising, and Financial Services. The Commodity and Risk Management Services segment offers commodity services to its customers, with an emphasis on risk management using futures, options, and other derivative instruments. The Clearing and Execution Services segment offers low-cost clearing and direct execution services to commodities firm, fund operators, commodities traders and others. The Grain Merchandising segment acts as a dealer in, and manager of, physical grain and fertilizer in the United States and international markets. The Financial Services segment offers financing and facilitation for customers to carry grain evidenced by warehouse receipts.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates individual segment performance based on segment income or loss defined as the respective segment’s portion of the total Company’s income before taxes and minority interest.

F-21

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table represents the significant items by operating segment for the results of operations for the years ended August 31, 2004, 2003, and 2002, respectively:


	Commodity & Risk Management Services		Clearing & Execution Services		Grain Merchandising		Financial Services			Corporate & Other			Total
	(in thousands)
2004
Total revenues	$	154,743	$	39,401	$	1,427,846	$	2,517		$	80		$	1,623,587
Interest revenue		1,329		1,428		68		1,519			10			4,354
Interest expense		98		209		3,168		1,262			53			4,790
Income (loss) before minority interest and income taxes		7,907		3,359		2,230		(447	)		(4,029	)		9,020
Total assets		205,308		289,651		98,306		4,726			5,836			603,827

2003
Total revenues	$	107,527	$	25,988	$	1,096,014	$	2,287		$	192		$	1,232,008
Interest revenue		2,101		1,307		51		1,303			—			4,762
Interest expense		110		40		1,907		1,133			2			3,192
Income (loss) before minority interest and income taxes		6,676		947		1,869		109			(3,535	)		6,066
Total assets		121,489		265,796		99,770		13,110			4,568			504,733

2002
Total revenues	$	81,462	$	19,293	$	794,808	$	322		$	57		$	895,942
Interest revenue		2,464		1,058		102		—			10			3,634
Interest expense		156		50		1,091		—			—			1,297
Income (loss) before minority interest and income taxes		5,591		863		2,002		—			(3,188	)		5,268
Total assets		135,257		169,775		75,797		15,516			3,181			399,526

A summary of the Company’s consolidated revenues by geographic area is presented below:


	Consolidated Revenues (1)(000’s)
	2004		2003		2002
United States	$	881,851	$	581,281	$	443,692
China		434,430		289,425		57,456
Japan		90,009		205,505		200,443
Canada		79,874		76,497		46,452
Mexico		96,661		41,111		74,361
Other countries		40,762		38,189		73,538

	$	1,623,587	$	1,232,008	$	895,942

(1)	Revenues are attributed to countries based on location of customer.

All long-lived assets consisting of property, plant, and equipment net of accumulated depreciation, construction in process, and other certain long-term assets are located in the United States.

Mitsubishi is a significant customer for grain sold by FGDI, accounting for 6%, 10%, and 11% of consolidated total revenues for the years ending August 31, 2004, 2003, and 2002, respectively.

F-22

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly data is set forth in the following table (in thousands).


	Quarter
	First		Second		Third		Fourth		Total
2004
Total revenues	$	458,616	$	405,101	$	414,612	$	345,258	$	1,623,587
Income (loss) before minority interest and income taxes		2,697		2,688		2,843		792		9,020
Net income		2,008		2,035		1,983		388		6,414

2003
Total revenues	$	281,908	$	332,124	$	246,527	$	371,449	$	1,232,008
Income (loss) before minority interest and income taxes		2,314		910		849		1,993		6,066
Net income		1,851		619		460		1,375		4,305

17. SUBSEQUENT EVENT

During the first quarter of fiscal year 2005, a customer located in Mexico failed to make timely payment on a portion of its $24.5 million of receivables. An $8.0 million portion of these receivables was previously sold to CoBank leaving $16.5 million of receivables with the Company (see note 12). Management currently believes that this debtor may not pay the remaining receivables when they are due, and is uncertain as to whether these receivables will be collectable in the future. It is expected that the Company and CoBank will file claims under an Export Import Bank policy and a commercial credit insurance policy, and management expects that $23.5 million will be recovered from these insurers. In communications with the insurers to date, there has been no indication that the policies would not provide coverage. If the Company recovers such amounts from its credit insurers, total exposure to the Company resulting from this default will be $1.0 million. Until the Company recovers these claims from its credit insurers, these unpaid balances will utilize a part of our credit capacity under the credit facilities of the grain merchandising segment, and could affect growth in this segment if the company desires to utilize the full capacity of such facilities. Additionally, failure to recover the insurance claims from our credit insurers would have a material adverse effect on our financial condition.

F-23

APPENDIX A

ARTICLES OF RESTATEMENT AND AMENDMENT OF

FCSTONE GROUP, INC.

TO THE SECRETARY OF STATE

OF THE STATE OF IOWA:

Pursuant to section 1007 of the Iowa Business Corporation Act, the undersigned Corporation delivers these Articles of Restatement and Amendment of FCStone Group, Inc. for filing with the Secretary of State.

1. The name of the Corporation is FCStone Group, Inc. and the effective date of its incorporation was August 1, 1977.

2. The Corporation’s Amended and Restated Articles of Incorporation are attached hereto as Exhibit 1.

3. The Amended and Restated Articles of Incorporation contain new amendments, which were duly approved by the shareholders in the manner required by the Iowa Business Corporation Act and the Articles of Incorporation.

4. The amendments effect a change in the character of the Corporation and its issued and outstanding common and preferred shares as set forth in the Plan of Conversion attached hereto as Exhibit 2.

5. The date of adoption of the Amended and Restated Articles of Incorporation and the amendments contained therein was , 2005.

IN WITNESS WHEREOF , the undersigned officer has executed these Articles of Restatement and Amendment on this day of , 2005.

Paul G. Anderson, President

The undersigned, Paul G. Anderson, President of FCStone Group, Inc., hereby certifies in accordance with Section 1007(3) of the Iowa Business Corporation Act that the attached Amended and Restated Articles of Incorporation consolidate all amendments into a single document.

Paul G. Anderson

EXHIBIT 1

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

FCSTONE GROUP, INC.

ARTICLE I

NAME OF THE CORPORATION

The name of the Corporation is FCStone Group, Inc.

ARTICLE II

PURPOSES

The Corporation shall have unlimited power to engage in, and to do any lawful act concerning, any or all lawful businesses for which Corporations may be organized under the Iowa Business Corporation Act.

ARTICLE III

AUTHORIZED SHARES

The Corporation shall have authority to issue two classes of stock in the aggregate amounts and with par values as follows:


Number Authorized	Class Designation	Par Value Per Share
20,000,000 shares	Common Stock	No Par Value
20,000,000 shares	Preferred Stock	$10.00

ARTICLE IV

COMMON STOCK

Section 1 . Each share of common stock shall have equal rights with each other common share in respect of dividends, voting and in liquidation, except as provided in Section 3 of this Article and in Article VII.

Section 2 . The common stock of the Corporation may be transferred only as provided in the Bylaws and on the books of the Corporation, and then only to persons eligible to hold it. No purported assignment or transfer of common stock, the rights or privileges attaching to such stock, or any vote or voice in the management of the affairs of the Corporation, shall pass to any person, unless and until such transfer in accordance with the Bylaws has been completed on the books of the Corporation. The Corporation may require that any certificate or statement of share ownership representing shares of common stock bear a conspicuous legend concerning such restrictions on transfer. Unless otherwise agreed, the Corporation shall have a lien on its issued common stock for indebtedness of the holders thereof to the Corporation or any of its subsidiaries or affiliates.

A-2

Section 3. As used in this Section 3, “Conversion Shares” shall mean common shares issued by the Corporation pursuant to Articles III and IV of the “Plan of Conversion” dated as of August 31, 2004 and adopted by the Corporation at the same time as these Amended and Restated Articles of Incorporation, but shall not include any shares issued pursuant to Subscription Rights under Article V of such Plan, or to any other shares. In the event the Board of Directors of the Corporation shall find that any Conversion Shares are held by a holder that has not, for a period of two (2) years, done business with the Corporation, the Corporation shall have the right at its option to purchase all of the common shares of such holder at its book value. In the event that the Corporation exercises its right to purchase such common stock, and the holder of the common stock fails to deliver a certificate, if any, evidencing the common stock, the Corporation may cancel any such certificate on its books and issue a new certificate for such shares of common stock, to the party entitled thereto. The right provided by this Section 3 shall expire if not exercised by the Corporation on or before August 31, 2009.

ARTICLE V

PREFERRED STOCK

Pursuant to Section 602 of the Iowa Business Corporation Act and in the manner provided therein, but subject to the limitations prescribed by law and the provisions of these Articles, the Board of Directors of the Corporation is hereby authorized to provide by resolution for the issuance of preferred stock in one or more series, to establish the number of shares to be included in each such series and to fix and state the designations, preferences and relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, applicable to the shares of each series. As provided in Section 602, the Board shall file articles of amendment with the Secretary of State before issuing shares hereunder which designate the terms of the series of preferred shares to be issued, and such articles of amendment shall be referred to in these Articles as a “Certificate of Designation.” The shares of each series of preferred stock authorized by the Board of Directors hereunder may vary from the shares of any other series as to rights, privileges, qualifications, limitations or restrictions applicable thereto.

ARTICLE VI

VOTING AND QUORUM

Section 1. Common stock shall be entitled to vote on all matters coming before the shareholders for decision. Except as provided in Article VII, each share of common stock shall be entitled to one vote in any meeting of the shareholders.

Section 2. Preferred stock shall have only those voting rights as may be required by law or specified for such shares in the Certificate of Designation adopted by the Board of Directors pursuant to Article V.

Section 3. Twenty-five percent (25%) of the shares of common stock entitled to vote at a shareholders meeting shall constitute a quorum. The quorum for preferred shares shall be as provided in the Certificate of Designation adopted by the Board of Directors pursuant to Article V.

ARTICLE VII

LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK

Section 1. No Person, other than the Corporation or any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of the employees of the Corporation, or any trust or custodial arrangement established in connection with any such plan, shall directly or indirectly acquire or hold the beneficial ownership of more than five percent (5%) of the issued and outstanding common stock of the Corporation. Any Person so prohibited whom directly or indirectly acquires or holds the beneficial ownership of more than five percent (5%) of the issued and outstanding common stock in violation of this Section 1 shall be

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subject to the provisions of Sections 2 and 3 of this Article VII. The Corporation is authorized to refuse to recognize a transfer or attempted transfer of any common stock to any Person who beneficially owns, or who the Corporation believes would become by virtue of such transfer the beneficial owner of, more than five percent (5%) of the common stock.

Section 2. If, notwithstanding the foregoing prohibition, a Person shall, voluntarily or involuntarily, become or attempt to become the purported beneficial owner (the “Purported Owner”) of shares of common stock in excess of five percent (5%) of the issued and outstanding shares of common stock, the number of shares in excess of five percent (5%) shall be deemed to be “Excess Shares,” and shall be entitled to cast one hundredth (1/100) of one vote per share for each Excess Share, for so long as the shares are held or claimed to be held by the Purported Owner.

Section 3. The Board of Directors may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by Bylaw or otherwise, regulations and procedures not inconsistent with the express provisions of this Article VII for the orderly application, administration and implementation of the provisions of this Article VII. Such procedures and regulations shall be kept on file with the Secretary of the Corporation and, upon request, shall be mailed to any holder of common stock of the Corporation.

Section 4. When it appears that a particular Person has become a Purported Owner of Excess Shares in violation of Section 1 of this Article VII, or of the rules and regulations of the Board of Directors with respect to this Article VII, and that the provisions of this Article VII require application, interpretation, or construction, then a majority of the directors of the Corporation shall have the power and duty to interpret all of the terms and provisions of this Article VII, and to determine on the basis of information known to them after reasonable inquiry of all facts necessary to ascertain compliance with this Article VII, including, without limitation, (i) the number of shares of common stock beneficially owned by any Person or Purported Owner, (ii) whether a Person or Purported Owner is an Affiliate or Associate of, or is acting in concert with, any other Person or Purported Owner, (iii) whether a Person or Purported Owner has an agreement, arrangement or understanding with any other Person or Purported Owner as to the voting or disposition of any shares of the common stock, (iv) the application of any other definition or operative provision of this Article VII to the given facts, or (v) any other matter relating to the applicability or effect of this Article VII.

Section 5. The Board of Directors shall have the right to demand that any Person who is reasonably believed to be a Purported Owner of Excess Shares (or who holds of record common stock beneficially owned by any Person reasonably believed to be a Purported Owner in excess of such limit) supply the Corporation with complete information as to (i) the record owner(s) of all shares of common stock beneficially owned by such Person or Purported Owner and (ii) any other factual matter relating to the applicability or effect of this Article VII as may reasonably be requested of such Person or Purported Owner.

Section 6. Any applications, interpretations, constructions or any other determinations made by the Board of Directors pursuant to this Article VII, in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its shareholders and neither the Corporation nor any of its shareholders shall have the right to challenge any such construction, application or determination.

Section 7. In the event any provision (or portion thereof) of this Article VII shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Article VII shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of this Corporation and its shareholders that each such remaining provision (or portion thereof) of this Article VII remain, to the fullest extent permitted by law, applicable and enforceable as to all shareholders, including Purported Owners, if any, notwithstanding any such finding.

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Section 8. This Article VII shall not apply to (a) any offer or sale with a view towards public resale made exclusively by the Corporation to any underwriter or underwriters acting on behalf of the Corporation, or to the selling group acting on such underwriter’s or underwriters’ behalf, in connection with a public offering of the common stock; or (b) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its subsidiaries or any other transaction or reorganization that does not have the effect, directly or indirectly, of changing the beneficial ownership interests of the Corporation’s shareholders, other than pursuant to the exercise of any dissenters’ appraisal rights, except as a result of immaterial changes due to fractional share adjustments, which changes do not exceed, in the aggregate, one percent (1%) of the issued and outstanding shares of such class of equity or convertible securities.

Section 9. The restrictions set forth in this Article VII shall be noted conspicuously on all certificates evidencing ownership of Common stock.

Section 10. For the purposes of this Article VII, the terms “Person,” “Beneficial Owner,” “Affiliate” and “Associate” shall have the meanings as defined in Section 3 of Article IX.

ARTICLE VIII

BOARD OF DIRECTORS

The Board of Directors shall consist of not more than fifteen (15) members. The precise number of directors shall be specified in the Bylaws. The qualifications of directors shall be as specified in the Bylaws. Directors shall serve staggered terms as provided in the Bylaws and shall be divided into three groups for this purpose. Members of the Board of Directors shall be nominated and elected for such terms and in such manner as may be prescribed in the Bylaws, with each common share, other than Excess Shares, entitled to one vote for each director to be elected on a non-cumulative basis. Excess Shares shall have the votes provided in Article VII, section 2 of these Articles. A director may be removed, with or without cause, at a meeting called expressly for that purpose by a vote of a majority of common shares then entitled to vote at an election of directors for a director to fill the vacancy which would be created by the removal of such director.

ARTICLE IX

CERTAIN BUSINESS COMBINATIONS

Section 1. In addition to any affirmative vote required by law, by these Articles, or by the provisions of any series of preferred stock that may at the time be outstanding, and except as otherwise expressly provided for in Section 2 of this Article IX, any Business Combination, as hereinafter defined, shall require (i) the affirmative vote of not less than eighty percent (80%) of the total number of votes eligible to be cast by the holders of all outstanding shares of common stock, voting together as a single class (it being understood that for purposes of this Article IX each share of the common stock shall have the number of votes granted to it pursuant to Article VI and Article VII of these Articles or in any resolution or resolutions of the Board of Directors for issuance of shares of preferred stock) and (ii) the affirmative vote of at least fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the common stock not beneficially owned by an Interested Shareholder or any Affiliate or Associate thereof, voting together as a single class. Such affirmative votes shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise.

Section 2. The provisions of Section 1 of this Article IX shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law or any other provision of these Articles, if the Business Combination shall have been approved by a majority of the Disinterested Directors then in office.

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Section 3. For purposes of this Article IX, the following terms shall have the following meanings:

(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of filing by the Secretary of State of the State of Iowa of these Articles, whether or not the Corporation was then subject to such rule.

(b) A Person shall be deemed the “beneficial owner,” or to have “beneficial ownership,” of any shares of common stock that:

(i)

such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or

(ii)

such Person or any or its Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (but a Person shall not be deemed to be the beneficial owner of any common stock solely by reason of an agreement, arrangement or understanding with the Corporation to effect a Business Combination) or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote, or to direct the vote of, pursuant to any agreement, arrangement or understanding; or

(iii)

is beneficially owned, directly or indirectly, by any other Person with which such first mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of common stock; provided, however , that no director or officer of the Corporation (nor any Affiliate or Associate of any such director or officer) (y) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any common stock of the Corporation beneficially owned by any other such director or officer (or any Affiliate or Associate thereof) or (z) shall be deemed to beneficially own any common stock of the Corporation owned by any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of employees of the Corporation and/or any subsidiary, or any trust or custodial arrangement established in connection with any such plan, not specifically allocated to such Person’s personal account.

(c) The term “Business Combination” shall mean any transaction that is referred to in any one or more of the following paragraphs (i) through (vi):

(i)

any merger, consolidation or share exchange of the Corporation with (A) any Interested Shareholder, or (B) any other entity (whether or not such other entity is itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of any Interested Shareholder; or

(ii)

any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder of any assets of the Corporation having an aggregate Fair Market Value equal to five percent (5%) or more of the total assets of the Corporation as of the end of its most recent fiscal year ending prior to the time the determination is being made; or

(iii)

the issuance or transfer by the Corporation (in one transaction or a series of transactions) of any securities of the Corporation to any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder other than (A) on a pro rata basis to all holders of common stock, (B) in connection with the exercise or conversion of securities issued pro rata that are exercisable for, or convertible into, securities of the Corporation or (C) the issuance or transfer of such securities having an aggregate Fair Market Value equal to less than one percent (1%) of the aggregate Fair Market Value of all of the outstanding Capital Stock; or

(iv)

the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or

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(v)

any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of equity or convertible securities of the Corporation or any subsidiary that is directly or indirectly owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder, except as a result of immaterial changes due to fractional share adjustments, which changes do not exceed, in the aggregate, 1% of the issued and outstanding shares of such class or series of equity or convertible securities; or

(vi)

the acquisition by the Corporation of any securities of an Interested Shareholder or its Affiliates or Associates.

(d) “Determination Date” shall mean the date on which the Interested Shareholder became an Interested Shareholder.

(e) “Disinterested Director” shall mean any member of the Board of Directors of the Corporation who is not an Affiliate or Associate of, or otherwise affiliated with, the Interested Shareholder and who either was a member of the Board of Directors prior to the Determination Date, or was recommended for election by a majority of the Disinterested Directors in office at the time such director was nominated for election.

(f) “Fair Market Value” shall mean (i) in the case of stock, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the Nasdaq Stock Market or any system then in use, or if no such quotation is available, the fair market value on the date in question of a share of such stock as determined in good faith by a majority of the Disinterested Directors then in office, in each case with respect to any class of stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Disinterested Directors then in office.

(g) “Interested Shareholder” shall mean any Person (other than the Corporation, or any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of employees of the Corporation, or any trust or custodial arrangement established in connection with any such plan) who or which:

(i)

is the beneficial owner of five percent (5%) or more of the common stock; or

(ii)

is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of five percent (5%) or more of the then outstanding common stock; or

(iii)

is an assignee of or has otherwise succeeded to any shares of common stock that were at any time within the two-year period immediately prior to the date in question beneficially owned by any other Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended, and not executed on any exchange or in the over-the-counter market through a registered broker or dealer.

In determining whether a Person is an Interested Shareholder pursuant to this subsection (g), the number of shares of common stock deemed to be outstanding shall include shares deemed owned through application of subsection (b) of this Section 3 but shall not include any other shares of common stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

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(h) “Person” shall mean any corporation, limited liability company, partnership, trust, unincorporated organization or association, syndicate, any other entity or a natural person, together with any Affiliate or Associate of such person or any other person acting in concert with such person.

Section 4. When it appears that a particular Person may be an Interested Shareholder and that the provisions of this Article IX need to be applied or interpreted, then a majority of the directors of the Corporation who qualify as Disinterested Directors shall have the power and duty to interpret all of the terms and provisions of this Article IX, and to determine on the basis of information known to them after reasonable inquiry of all facts necessary to ascertain compliance with this Article IX, including, without limitation, (a) whether a Person is an Interested Shareholder, (b) the number of shares of common stock beneficially owned by any Person, (c) whether a Person is an Affiliate or Associate of another, (d) the Fair Market Value of (i) the assets that are the subject of any Business Combination, (ii) the securities to be issued or transferred by the Corporation in any Business Combination, (iii) the consideration other than cash to be received by holders of shares of any class or series of common stock or common stock other than common stock in any Business Combination, (iv) the outstanding capital stock, or (v) any other item the Fair Market Value of which requires determination pursuant to this Article IX, and (e) whether all of the applicable conditions set forth in Section 2 of this Article IX have been met with respect to any Business Combination.

Any constructions, applications, or determinations made by the Board of Directors or the Disinterested Directors pursuant to this Article IX, in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its shareholders, and neither the Corporation nor any of its shareholders shall have the right to challenge any such construction, application or determination.

Section 5. Nothing contained in this Article IX shall be construed to relieve any Interested Shareholder from any fiduciary obligations imposed by law.

Section 6. Notwithstanding any other provisions of these Articles or the Bylaws (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles or the Bylaws of the Corporation), in addition to any affirmative vote required by applicable law and any voting rights granted to or held by holders of preferred stock, any amendment, alteration, repeal or rescission of any provision of this Article IX must also be approved by either (i) a majority of the Disinterested Directors, or (ii) the affirmative vote of not less than eighty percent (80%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the common stock, voting together as a single class, together with the affirmative vote of not less than fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the common stock not beneficially owned by any Interested Shareholder or Affiliate or Associate thereof, voting together as a single class.

ARTICLE X

AMENDMENTS

The Corporation reserves the right from time to time to amend, alter, repeal or to add any provision to its Articles in the manner now or hereafter prescribed by law. At any meeting of the shareholders at which a proposed amendment is duly submitted to the meeting in the manner prescribed by law, modifications or revisions of such proposed amendment may be submitted, voted upon and adopted at such meeting in the same manner, and to the same effect, as the original proposed amendment.

ARTICLE XI

BYLAWS

The Bylaws of the Corporation shall be adopted by its Board of Directors. The power to alter, amend or repeal the Bylaws or adopt new Bylaws shall be vested in the Board of Directors. The Bylaws may contain provisions restricting the transfer of shares.

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ARTICLE XII

PREEMPTIVE RIGHTS

Except as may otherwise be provided by the Board of Directors, no holders of any shares of any class of stock of the Corporation shall have any preemptive right to purchase, subscribe for, or otherwise acquire any unissued or treasury shares of any class of stock of the Corporation now or hereafter authorized, or any securities exchangeable for or convertible into such shares, or any warrants or other instruments evidencing rights or options to subscribe for, purchase or otherwise acquire such shares.

ARTICLE XIII

LIMITATION OF LIABILITY OF DIRECTORS

A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for any action taken or failure to take any action as a director, except for (1) the amount of a financial benefit received by a director to which the director is not entitled; (2) an intentional infliction of harm on the Corporation or the shareholders; (3) a violation of section 833 of the Iowa Business Corporation Act; or (4) an intentional violation of law. If the Iowa Business Corporation Act is hereafter amended to permit further limitation on or elimination of the personal liability of the Corporation’s directors, then a director of the Corporation shall be exempt from such liability to the full extent permitted by the Iowa Business Corporation Act as so amended from time to time. Any repeal or modification of the foregoing provisions of this Article XIV, or the adoption of any provision inconsistent herewith, shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission of such director occurring prior to such repeal, modification, or adoption of an inconsistent provision. This Article XIII shall not limit the liability of any director for any act or omission occurring prior to the date these Articles become effective.

ARTICLE XIV

DISSOLUTION

Any resolution to dissolve the corporation shall require for its adoption the affirmative vote of the holders of at least three-fourths (3/4) of the outstanding shares of common stock. The affirmative vote of the holders of at least three-fourths (3/4) of the outstanding shares of common stock entitled to vote thereon shall also be required for the adoption of any amendment altering this provision.

ARTICLE XV

EFFECTIVE DATE

These Amended and Restated Articles of Incorporation shall become effective on September 1, 2004, or the date of filing with the Secretary of State of the State of Iowa, which ever date is later.


FCSTONE GROUP, INC.

By
		Paul G. Anderson, President

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EXHIBIT 2

FCSTONE GROUP, INC.

PLAN OF CONVERSION

AUGUST 31, 2004

ARTICLE I

PURPOSE

FCStone Group, Inc. (the “Corporation”) was formed to do business as a cooperative on August 1, 1977, and has been owned and operated by its members holding its Class A and Class B common shares. As of the Effective Date stated herein, the Corporation shall cease to operate as a cooperative and all ownership rights and interests of its members shall be converted into common shares of the Corporation, as set forth in this Plan of Conversion.

ARTICLE II

TERMINATION OF COOPERATIVE STATUS

Section 1 . As of the Conversion Date, the Corporation shall no longer operate on a cooperative basis and no further patronage based rights of any kind shall accrue to its members for business done on and after the Conversion Date.

Section 2 . The termination of cooperative status shall be effected by amendment of the Articles of Incorporation in the form of Amended and Restated Articles of Incorporation of FCStone Group, Inc., which accompany this Plan. Conforming changes to the Bylaws of the Corporation shall be adopted by the Board of Directors, to be effective as of the Conversion Date.

ARTICLE III

CONVERSION OF EXISTING COMMON SHARES,

PREFERRED SHARES, AND SUBSCRIBER RIGHTS

Section 1 . As used herein, “New Common Stock” shall mean the common shares authorized by the Amended and Restated Articles of Incorporation adopted herewith.

Section 2 . Each issued and outstanding share of existing Class A common stock shall be converted into 500 shares of the New Common Stock.

Section 3 . Each issued and outstanding share of existing Class B common stock shall be converted into 10,000 shares of the New Common Stock.

Section 4 . The subscription rights of each subscriber for existing Class A common Stock shall be converted on the basis of the amount shown credited to subscriber’s account as of the Effective Date. One share of New Common Stock shall be issued for each $10.00 credited to the account of each Subscriber.

Section 5 . All issued and outstanding shares of preferred stock, including all fractional preferred shares, shall be converted into shares of New Common Stock. One share of New Common Stock shall be issued for each $10.00 in par value of each preferred share. For this purpose, the par value of fractional preferred shares shall be proportional to the par value of a whole share.

Section 6 . In exchanging shares, no fractional shares or scrip shall be issued. The dollar credited to each subscriber and preferred shareholder on the stock records of the Corporation shall be rounded up to the next highest multiple of $10.00 for the purpose of issuance of shares.

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Section 7 . All conversions shall be deemed to occur on the Conversion Date, but shall be determined on the basis of the records of the Corporation after giving effect to the distribution of patronage for the year ending August 31, 2004, in the form of common stock and preferred stock credits as provided by the Corporation’s Bylaws as in effect up to the Conversion Date. The shares of New Common Stock shall be distributed on the Distribution Date.

ARTICLE IV

CONVERSION OF PATRONAGE-BASED RIGHTS

Section 1 . All of the patronage-based rights of the members of the Corporation shall be terminated or converted into New Common Stock and Subscription Rights on the basis of the formulas provided in this Article IV. Such termination and conversion shall be deemed to occur as of the Conversion Date, with the shares distributed on the Distribution Date. Without limiting the generality of the foregoing, the rights so terminated or converted shall include, but not be limited to: (a) the rights of members to any patronage-based distributions attributable to business done on or after the Conversion Date; (b) all patronage-based rights other than for patronage dividends previously distributed accruing for business before the Conversion Date; (c) all rights in and to the Corporation’s undistributed member surplus; and (d) all rights to share in the proceeds of liquidation on a patronage basis.

Section 2 . The value of 100% of the equity of the Corporation has been determined by appraisal to be $43.1 million. The value so determined shall be referred to herein as the “Appraised Value”.

Section 3 . The Appraised Value shall be divided by ten (10) to arrive at a number of shares of New Common Stock to be issued pursuant to this Plan of Conversion. Such number of shares is referred to herein as the “Total New Common Shares.”

Section 4 . The number of shares of New Common Stock to be distributed in exchange for patronage-based rights under this Article IV shall be the Total New Common Shares minus the number of shares of New Common Stock issued pursuant to the exchange under Sections 2, 3, 4 and 5 of Article III. Such number shall be referred to as the “Number of Patronage-Based Shares”.

Section 5 . The Number of Patronage-Based Shares of New Common Stock shall be distributed to members owning stock as of August 31, 2004 in proportion to the Patronage of the Corporation during the fiscal years ending August 31, 2004, August 31, 2003 and August 31, 2002 (the “Computation Period”), computed as follows:

(a) The total Patronage received (cash and stock) by each Class A member during the Computation Period, including both commission and interest pool amounts, shall be determined.

(b) The total of $1.35 per round turn trade completed by each Class B member during the Computation Period shall be determined.

(c) The amounts for Class A and Class B members so determined under subparagraph (a) and subparagraph (b) shall be added together.

(d) A fraction shall be determined for each Class A and Class B member by dividing their individual amount as determined above by the total of all amounts for all Class A and Class B members.

(e) Such fraction shall be applied to the Number of Patronage-Based Shares to determine the number of shares of New Common Stock shares to be distributed to each Class A and Class B member in exchange for all of their patronage-based rights.

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(f) No patronage-based shares shall be distributed to any member, which did not patronize the Corporation during the Computation Period.

(g) The Patronage credited to each member shall include any patronage of any entity to which such member is a successor by merger, acquisition or distribution.

Section 6. In addition to New Common Shares each member shall receive Subscription Rights as provided in Article V as additional consideration for its patronage based rights.

Section 7 . No fractional shares or scrip shall be issued. The number of shares of New Common Stock to be distributed to members shall be rounded to the nearest whole number of shares.

Section 8 . All conversions shall be deemed to occur on the Conversion Date, but shall be determined on the basis of the records of the Corporation after giving effect to the distribution of patronage for the year ending August 31, 2004, in the form of common stock and preferred stock credits as provided by the Corporation’s Bylaws as in effect up to the Conversion Date. The shares of New Common Stock shall be distributed on the Distribution Date.

ARTICLE V

SUBSCRIPTION RIGHTS

Section 1 . Each member to whom New Common Shares are distributed under Article IV of this Plan of Conversion shall also receive a nontransferable Subscription Right, which gives the member a limited time right to purchase additional shares of New Common Stock of the Corporation. The terms of the Subscription Right shall be as provided in section 2, below.

Section 2 . Each Subscription Right shall give the holder the right to purchase one hundred (100) shares of New Common Stock for each two hundred (200) shares of New Common Stock distributable to such holder under Article IV of this Plan of Conversion. Subscription Rights shall be issued in multiples of one hundred (100) shares, rounded up to the next highest multiple of one hundred (100) shares. Such right shall be subject to terms and conditions established by the Board of Directors, shall be exercised at a price of $10.00 per share, and shall expire if not exercised within sixty (60) days of the Distribution Date. Partial exercises of subscription rights shall be allowed, so long as the subscription is for not less than one thousand (1000) shares of New Common Stock. Full exercises shall not be subject to any minimum.

ARTICLE VI

RESTRICTIONS ON TRANSFER

Section 1 . New Common Shares issued under the terms of this Plan of Conversion shall be subject to restrictions on transfer as follows which shall be set forth in the Bylaws:

(a) New Common Shares of the Corporation issued under the provisions of this Plan may be transferred to any other holder of New Common Shares, provided that the transferee does not hold more than five percent (5%) of the issued and outstanding common shares of the Corporation after the transfer;

(b) New Common Shares issued under the provisions of this Plan may be transferred to any transferee approved in advance by the Board of Directors;

(c) New Common Shares issued under the provisions of this Plan may be transferred to any successor, by merger, reorganization or purchase of substantially all the assets of any holder of New Common Shares;

(d) New Common Shares issued under the provisions of this Plan are not otherwise transferable.

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Section 2 . The Board of Directors shall have the right to modify such restrictions by amendment to the Bylaws and shall also have the right to issue other common and preferred shares after the Distribution Date which are subject to different restrictions on transfer or which are freely transferable.

ARTICLE VII

EFFECTIVE DATE, CONVERSION DATE, DISTRIBUTION DATE

Section 1 . The Effective Date shall be the beginning of business on September 1, 2004, or the date of the filing of Restated Articles of Incorporation with the Iowa Secretary of State, whichever date is later.

Section 2. The Conversion Date shall be the beginning of business on September 1, 2004.

Section 3 . The Distribution Date shall be December 1, 2004, or such later date as may be selected by the Board of Directors, after the Appraised Value has been determined and distribution of patronage dividends for the year ending August 31, 2004 has occurred.

Section 4 . It is intended that the Conversion pursuant to this Plan of Conversion will qualify as a recapitalization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended, and that this Plan of Conversion will constitute a plan of reorganization for that purpose.

ARTICLE VIII

EMPLOYEE STOCK OWNERSHIP PLAN

The Corporation reserves the right to establish an Employee Stock Ownership Plan on or after the Effective Date and to issue New Common Shares to the Plan with rights of transfer which are different than the rights provided herein for shares issued hereunder.

ARTICLE IX

TRANSITION PROVISIONS

Section 1 . This Plan of Conversion shall take effect on the Effective Date, but shall be applied as of the Conversion Date.

Section 2. This Plan of Conversion is subject to approval of the common and preferred shareholders of the Corporation and shall be null and void if not approved by vote of such shareholders on or before August 31, 2005.

Section 3 . The rights of members existing as of the date of adoption of this Plan of Conversion are subject to redemption upon the call of the Board of Directors in the event that a member does not patronize the Corporation for a period of two (2) years. Such right to redeem shall be applied to the New Common Stock issued under Article III and Articled IV of this Plan of Conversion, but not to shares subscribed under Article V and shall continue for a period of five (5) years from the Conversion Date.

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APPENDIX B

AMENDED AND RESTATED BYLAWS

FCSTONE GROUP, INC.

Adopted June 30, 2004

Revised August 26, 2004

Effective September 1, 2004

ARTICLE I

OFFICES

The principal office of the Corporation in the State of Iowa shall be located in the City of West Des Moines, Polk County. The Corporation may have such other offices, within or without the State of Iowa, as the business of the Corporation may require from time to time.

The registered office of the Corporation required by the Iowa Business Corporation Act to be continuously maintained in Iowa shall be as recorded in the records of the Secretary of State of the State of Iowa and shall be subject to change from time to time by resolution of the Board of Directors and filing of a statement of said change as required by the Iowa Business Corporation Act.

ARTICLE II

SHAREHOLDERS

SECTION 1. ANNUAL MEETING.

1.1 The annual meeting of Stockholders shall be held on such date as the Board of Directors shall by resolution specify within 180 days following the end of the Corporation’s fiscal year. An election of the directors shall take place at each annual meeting. If the election of directors shall not be held on the day designated for any annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a meeting of the Stockholders as soon thereafter as it may conveniently be held. Other business as shall have been properly brought before the meeting as provided in these Bylaws may also be conducted at the annual meeting.

1.2 To be properly brought before an annual meeting of the Stockholders, business must be (a) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a Stockholder of the Corporation, who is a Stockholder of record who is entitled to vote at the annual meeting, and who complies with the notice procedures set forth in these Bylaws. For business to be properly brought before an annual meeting by a Stockholder, the Stockholder must have given a timely notice thereof in writing to the Secretary of the Corporation. To be timely, a Stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 120 days prior to the date of such meeting; provided however, that if no annual meeting of Stockholders was held in the previous year, or the date of the annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year’s proxy statement, then to be timely such notice by the Stockholder must be so received not later than the close of business on the later of: (i) 120 calendar days in advance of the annual meeting, or (ii) 10 calendar days following the date on which public announcement of the date of the meeting is first made. Such Stockholder’s notice addressed to the Secretary of the Corporation shall set forth: (a) a brief description of the business desired to be brought before the annual meeting, (b) the reasons for conducting such business at the annual meeting, and any material interest in such business of such Stockholder and the beneficial owner (as such term is defined in Rule 13d-3 as then in effect under the Securities Exchange Act of

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1934, as amended (or any successor thereto) (the “Exchange Act”)), if any, on whose behalf the proposal is made, (d) the name and address (as they appear on the Corporation’s books) of the Stockholder giving the notice and of the beneficial owner, if any, on whose behalf the proposal is made; (c) the class and number of shares of the Corporation that are beneficially owned (as such term is defined in Rule 13d-3 as then in effect under the Exchange Act) and of record by such Stockholder and such beneficial owner; and (d) all other information with respect to each such matter as would have been required to be included in a proxy statement filed pursuant to Regulation 14A, as then in effect under the Exchange Act, had proxies been solicited by the Board of Directors with respect thereto. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this subparagraph 1.2 and Rule 14a-8, as then in effect under the Exchange Act. The Presiding Officer at the annual meeting of the Stockholders shall, if the facts warrant, have the power and duty to determine whether the business proposed to be brought before the meeting, was not made in accordance with the provisions of this subparagraph 1.2 and Rule 14a-8, as then in effect under the Exchange Act, and if he should so determine, he shall have the power and duty to declare at the meeting that such business not properly brought before the meeting shall be disregarded and not transacted.

1.3 Notwithstanding the foregoing provisions of subparagraph 1.2 and Section 7 of Article III if (a) any class or series of stock has the right, voting separately by class or series, to elect Directors at an annual or Special Meeting of the Stockholders, such Directors shall be nominated and elected pursuant to the terms of such class or series of stock, and (b) a Stockholder also complies with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in subparagraph 1.2 or Section 2 of Article III, such Directors shall be nominated and elected pursuant to the terms of such class or series of stock. To the extent subparagraph 1.2 shall be deemed by the Board of Directors or the Securities and Exchange Commission, or adjudged by a court of competent jurisdiction, to be inconsistent with the rights of Stockholders to request inclusion of a proposal in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, such rule shall prevail.

SECTION 2. SPECIAL MEETINGS. Special meetings of the Stockholders may be called by the President, by the Chairman of the Board, by the Board of Directors or by any four (4) or more directors. The holders of shares having not less than twenty-five percent (25%) of all the votes entitled to be cast on any issue may cause a special meeting of the Stockholders to be held upon compliance with the requirements of Section 702(1)(b) of the Iowa Business Corporation Act.

SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place, either within or without the State of Iowa, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the registered office of the Corporation in the State of Iowa.

SECTION 4. NOTICE OF MEETINGS. Written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Board of Directors or the officer or persons calling the meeting, to each Stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the Stockholder at its address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid.

SECTION 5. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For the purpose of determining Stockholders entitled to notice of or to vote at any meeting of Stockholders or any adjournment thereof or in order to make a determination of Stockholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, sixty (60) days. If the stock transfer books shall be closed for the purpose of determining Stockholders entitled to notice of or to vote at any meeting of Stockholders, such books shall be closed for at least ten (10) days

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immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of Stockholders; such date in any case to be not more than seventy (70) days and, in case of a meeting of Stockholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of Stockholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of Stockholders, the date on which notice of the meeting is mailed shall be the record date for such determination of Stockholders.

When a determination of Stockholders entitled to vote at any meeting of Stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

SECTION 6. STOCK LEDGER AND VOTING LIST. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make an alphabetical list of the Stockholders entitled to vote at such meeting or any adjournment thereof, by voting group (and within such voting group by class or series of shares), with the address of and the number of shares held by each. Such list shall be kept on file at the principal office of the Corporation and shall be subject to inspection by any Stockholder at any time during usual business hours beginning two (2) days after notice of the meeting is given. Such record shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any Stockholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the Stockholders entitled to examine such list or transfer books or to vote at any meeting of Stockholders. Failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting. The original or duplicate stock ledger shall be the only evidence as to who are the Stockholders entitled to examine the list required under this Article I, or the books of the Corporation, or to vote in person or by proxy at any meeting of Stockholders.

SECTION 7. QUORUM OF SHAREHOLDERS. Unless otherwise provided in the Iowa Business Corporation Act, one-fourth (1/4) of the total number of shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of Stockholders. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the Stockholders, unless the vote of a greater number or voting by classes is required by the Iowa Business Corporation Act, the Restated and Amended Articles of Incorporation or the Bylaws. If there shall not be a quorum at any meeting of the Stockholders, the holders of a majority of the shares entitled to vote present at such meeting, in person or by proxy, may adjourn such meeting from time to time, without further notice to the Stockholders other than an announcement at such meeting, until holders of the amount of shares required to constitute a quorum shall be present in person or by proxy.

SECTION 8. PROXIES. At all meetings of the Stockholders, a Stockholder may vote either in person or by proxy executed in writing by the Stockholder or by his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.

SECTION 9. VOTING OF SHARES. Subject to the provisions of Section 10 of this Article and to any terms to the contrary in the Articles of Incorporation or any Certificate of Designation, each outstanding share of common stock shall be entitled to one vote upon each matter submitted to vote at a meeting of the Stockholders. No share shall be considered outstanding unless and until fully paid and officially issued by the Corporation. Whenever any corporate action, other than the election of Directors, is to be taken by vote of the Stockholders, it shall, except as otherwise required by law or by the Articles of Incorporation, be authorized by a majority of the votes cast with respect to such action at a meeting of the Stockholders by the holders of shares entitled to vote thereon. Unless otherwise required by law or by the Articles of Incorporation, Directors of the Corporation shall be elected by a majority of the votes cast by the holders of shares entitled to vote in the election of Directors at a meeting of the Stockholders at which a quorum is present.

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SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of this Corporation owned directly or indirectly by another corporation shall not be voted at any meeting except as permitted by law if a majority of the shares entitled to vote for election of directors of such other corporation is held directly or indirectly by this Corporation.

If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a Stockholder, the Corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the Stockholder.

If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of a Stockholder, the Corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the Stockholder as permitted by Section 724(2) of the Iowa Business Corporation Act.

The Corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the Secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the Stockholder.

The Corporation and its officer or agent who accept or reject a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of Section 724 of the Iowa Business Corporation Act are not liable in damages to the Stockholder for the consequences of the acceptance or rejection.

Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under Section 724 of the Iowa Business Corporation Act is valid unless a court of competent jurisdiction determines otherwise.

SECTION 11. ACTION WITHOUT MEETING OF SHAREHOLDERS. Any action required or permitted by the Iowa Business Corporation Act to be taken at a meeting of the Stockholders may be taken without a meeting or vote if one or more written consents describing the action so taken and bearing the date of signature, are signed within a period of sixty (60) days by the holders of outstanding shares having not less than ninety percent (90%) of the votes entitled to be cast at a meeting at which all shares entitled to vote on the action were present and voted, and are delivered to the Corporation for inclusion in the minutes or filing with the corporate records. Written notice shall be given to all Stockholders at least ten (10) days before the action is taken if required by Section 704(5) of the Iowa Business Corporation Act. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those Stockholders who have not consented to the corporate action in writing.

SECTION 12. PROCEDURE AT MEETINGS.

12.1 Meetings of the Stockholders shall be presided over by the Chairman of the Board, if any; or, in his or her absence by the Vice Chairman of the Board, if any; or, in his or her absence, by the President, if any; or, in his or her absence by the most senior Vice President in attendance, if any; or, in the absence of a designation by a chairman chosen at the meeting by the vote of a majority in interest of the stockholders present in person or represented by proxy and entitled to vote thereat, the Secretary; or, in his or her absence, an Assistant Secretary; or, in the absence of the Secretary and all Assistant Secretaries, a person whom the chairman of the meeting shall appoint, shall act as a secretary of the meeting and keep a record of the proceedings thereof.

12.2 The Board of Directors of the Corporation shall be entitled to make such rules or regulations for the conduct of meetings of the Stockholders, as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the Chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such Chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without

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limitation, establishing an agenda or order of business for the meeting, rules and procedure for maintaining order at the meeting and the safety of those present, limitations on participation on such meeting to the Stockholders of records of the Corporation and their duly authorized and constituted proxies, and such other persons as the Chairman of the meeting shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot consistent with Section 708(4) of the Iowa Business Corporation Act. Unless, and to the extent determined by the Board of Directors or the Chairman of the meeting, meetings of the Stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

12.3 Voting on any question or in any election may be by voice vote unless the presiding officer shall order or any Stockholder shall demand that voting be by ballot.

12.4 The Board of Directors may appoint one or more Inspectors of Election to serve at every meeting of the Stockholders at which Directors are to be elected.

SECTION 13. ADJOURNMENT. When any meeting of the Stockholders is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. At the adjourned meeting any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if, after such adjournment the Board of Directors shall fix a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at such meeting.

ARTICLE III

DIRECTORS

SECTION 1. GENERAL POWERS. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors.

SECTION 2. NUMBER CLASSES OF DIRECTORS. The number of directors shall be ten (10). The Board of Directors shall be divided into three (3) classes, which are hereby designated Class I, Class II and Class III for the purposes of qualification to serve and the nomination process set forth in this Article III. There shall be eight (8) Class I directors to be qualified and nominated as provided in Sections 3, 4 and 5 of this Article III. There shall be one (1) Class II director to be qualified and nominated as provided in Section 6(a) of this Article III. There shall be one (1) Class III director to be nominated by the Board of Directors as provided in Section 6(b) of this Article III.

SECTION 3. REGIONAL QUALIFICATION AND NOMINATION OF CLASS I DIRECTORS. Class I directors shall be divided into subclasses and shall be qualified to serve, and shall be nominated, on a regional basis. The territory served by the Corporation is divided into four (4) regions shown on the map that is Exhibit A to these Bylaws for this purpose. Each Class I director shall be a resident of the region for which he or she is nominated and shall be an employee of a common Stockholders from such region at the time of nomination. One (1) Class I director position, the “Eastern Regional Director”, shall be nominated from among the residents of the Eastern Region. Three (3) of the Class I directors, the “Central Regional Directors”, shall be nominated from among the residents of the Central Region. Two (2) Class I directors, the “Northwestern Regional Directors”, shall be nominated from among the residents of the Northwestern Region. Two (2) of the Class I directors, the “Southwestern Regional Directors”, shall be nominated from among the residents of the Southwestern Region. Employees of Large Stockholders are eligible to be Class I directors. The Trustee of any Employee Stock Ownership Plan established by the Company shall be deemed to be located within the Central Region for all purposes under this Article III.

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SECTION 4. CLASS I NOMINATING COMMITTEES. Not later than four (4) months prior to each annual meeting of Stockholders, the Board of Directors shall appoint a nominating committee for each region for which a Class I director term is to expire at such annual meeting. Each regional nominating committee shall have the authority to select candidates for election as a Class I director from such region at the next annual meeting of Stockholders. Each regional nominating committee shall consist of three (3) persons meeting the qualifications required to be a Class I director from such region and employed by a common Stockholder. Each regional nominating committee shall deliver its report to the Board of Directors at least ninety (90) days prior to the annual meeting of Stockholders and in doing so, shall provide at least two (2) candidates, but not more than three (3) candidates, for each Class I director from that region to be elected. In addition to the names of candidates provided by any common Stockholder from such region for consideration by the regional nominating committee, such committee may also consider other persons the committee considers qualified.

SECTION 5. CLASS I NOMINATING BALLOTS. The candidates selected by each such Class I nominating committee shall be listed on a separate written preference ballot for each region. A single regional preference ballot shall be delivered not less than sixty (60) nor more than ninety (90) days before the date of the annual meeting of Stockholders, either personally or by mail, to each common Stockholder of record located within the region for which candidates have been selected together with an instruction to return such preference ballot by mail to a firm of certified public accountants designated by the notice on or before a specified date which shall be not less than thirty (30) days before the date of the annual meeting. Each such preference ballot shall entitle the recipient Stockholder of record to express his or her preference with respect to each candidate, without regard to the number of shares held by such Stockholder. A preference ballot must be received on or before the specified date to be counted. The preference ballot delivered to each common Stockholder shall permit such common Stockholder to express his or her preference for any listed candidate selected by the applicable nominating committee or for any other person eligible for nomination to be a Class I director for such common Stockholder’s region. The designated firm of accountants shall tabulate the results of the preference ballots and report such results to the Chairman of the Board of Directors. After considering such results, the Board of Directors shall have authority for selecting nominees for each position as a Class I director, for placing the names of such individuals into nomination and for soliciting proxies for the election of such nominees. Large Shareholders of record as defined in Section 6(a) of this Article III shall also be entitled to express their preference for nominees on a regional basis under this Section.

SECTION 6. QUALIFICATION AND NOMINATION OF CLASS II AND CLASS III DIRECTORS.

(a) Class II Director.

“Large Stockholders” shall mean the twelve (12) largest holders of Common Stock having active accounts with the Company computed on the basis of the number of shares of Common Stock held (“Large Stockholders”) and shall also include the Trustee of any Employee Stock Ownership Plan established by the Company. At least four (4) months prior to any annual meeting at which a Class II director term is to expire, the officers of the Company shall request that each of the Large Stockholders submit candidates for election to such position. Any person proposed by at least two (2) of the Large Stockholders shall be listed on a director preference ballot. The applicable preference ballot shall be delivered no less than sixty (60) nor more than ninety (90) days before the date of the annual meeting of Stockholders, either personally or by mail, to each Large Stockholder of record with an instruction to return such ballot by mail to a firm of certified public accountants designated by the notice on or before a specified date which shall be not less than thirty (30) days before the date of the annual meeting. Each such ballot shall entitle the recipient Stockholder of record to one vote, and only one vote, without regard to number of shares held. A ballot must be received on or before the specified date to be counted. The nominating ballot delivered to each Large Stockholder shall permit such Large Stockholder to cast one vote for any listed candidate or for any other person eligible to be a Class II director. The designated firm of accountants shall tabulate the nominating ballots and report the results to the Chairman of the Board of Directors. After considering such results, the Board of Directors shall have the authority to select the nominee for the position of Class II director, and place such individual into nomination and solicit proxies for the election of such nominee. Any person employed by a common Stockholder shall be eligible to be a Class II director.

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(b) Class III Director.

The Board of Directors shall, prior to any annual meeting at which a Class II director term is set to expire, nominate a person to serve as a Class III director, and place such individual into nomination and solicit proxies for the election of such nominee. Any person selected by the Board of Directors shall be eligible to be a Class III director.

SECTION 7. INDIVIDUAL SHAREHOLDER PARTICIPATION IN NOMINATIONS. The Board of Directors or a Nominating Committee will accept for consideration submissions for the nomination of Directors from any Stockholder entitled to generally vote in the election of Directors at a meeting of the Stockholders at which Directors will be elected. Acceptance of a recommendation for consideration does not imply that the Nominating Committee or the Board of Directors will propose the recommended candidate in a nominating ballot. Stockholder may directly nominate one or more persons for election as Directors at a meeting, only if written notice of such Stockholder’s intent to make such nomination or nominations has been given, either by personal delivery or by the United States mail, postage prepaid, (e-mail submissions will not be considered), addressed to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of the Stockholders, 120 days in advance of the date of such meeting (as set forth in Section 1 of Article II of these Bylaws), and (ii) with respect to an election to be held at a Special Meeting of the Stockholders for the election of Directors, the close of business on the 7th day following the date on which public announcement of the date of such meeting is first made. Each such notice shall set forth: (a) the name and address of the Stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the Stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) the name and address, as they appear on the Corporation’s books, of such Stockholder; (d) the class and number of shares of the Corporation which are beneficially owned (as defined in Rule 13d-3 as then in effect under the Exchange Act) by the nominating Stockholder and each nominee proposed by such Stockholder; (e) a description of all arrangements or understandings between the nominating Stockholder and each nominee and any other person or persons, including but not limited to, the Corporation’s competitors, suppliers, customers, labor unions or other persons with special interests regarding the Corporation, (naming such person or persons) pursuant to which the nomination or nominations are to be made by the Stockholder; (f) such other information regarding each nominee proposed by such Stockholder as would have been required to be included in a proxy statement filed pursuant to Regulation 14A, as then in effect under the Exchange Act, had the nominee been nominated, or intended to be nominated, by the Board of Directors, including but not limited to, nominee’s name, address, prior experience in the past five years, any legal proceedings in the past five years involving nominee and the Corporation, any ownership of stock in the Corporation, disclosure of any transactions between the Corporation and the nominee; (g) the consent of each nominee to serve as a Director of the Corporation if so elected; (h) a statement by the recommending Stockholder supporting, in the view of the Stockholder, that the proposed nominee possesses the minimum qualifications prescribed by the Board of Directors or the Nominating Committee for nominees, with brief description of contributions that the nominee would be expected to make to the Board of Directors and to the governance of the Corporation; (i) a statement whether, in the view of the Stockholder, the nominee would represent all Stockholders and not serve for the purpose of advancing or favoring any particular Stockholder or other constituent of the Corporation. The nominating recommendation must be accompanied by the consent of the proposed nominee to be interviewed by the Board of Directors or the Nominating Committee, if they choose to do so in their discretion (with nominee’s contact information). A nominee proposed under this Section 7 for any Class I Director position must meet the qualifications for such position stated in Section 3 of this Article III. A nominee proposed under this Section 7 for a Class II Director position must meet the qualifications for such position stated in Section 6(b) of this Article III. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

SECTION 8. ELECTION OF DIRECTORS. Nominees for each position as a director as determined in accordance with the nominating procedure set forth in Sections 2, 3, 4, 5, and 6 of this Article III shall be

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reported to, and shall be placed in nomination before, the annual meeting of Stockholders. Other nominations may be made as provided in Section 7 of this Article III. Election of directors shall be by majority of the votes, cast in person or by proxy at the annual meeting.

SECTION 9. TERMS OF DIRECTORS. The terms of the directors shall be staggered, and the directors shall be divided into three groups for this purpose as provided in the Articles of Incorporation as follows:

Director group A shall consist of three Class I directors whose terms shall expire at the annual meeting of Stockholders held following the end of the fiscal year ending in 2004 and at every third succeeding annual meeting of Stockholders holders thereafter.

Director group B shall consist of three Class I directors and one Class II director whose terms shall expire at the annual meeting of Stockholders held following the end of the fiscal year ending in 2005 and at every third succeeding annual meeting of Stockholders holders thereafter.

Director group C shall consist of two Class I directors and one Class III director whose terms shall expire at the annual meeting of Stockholders held following the end of the fiscal year ending in 2006 and at every third succeeding annual meeting of Stockholders holders thereafter.

At the annual meeting at which the term of a director expires, such director’s successor shall be elected by the holders of shares of Common Stock entitled to vote thereon, to serve until the third succeeding annual meeting of Stockholders and until a successor has been elected and qualified. No decrease in the number of directors shall give the effect of shortening the terms of office of any incumbent director.

SECTION 10. REGULAR MEETINGS. Unless specified to the contrary by a resolution of the Board at least thirty (30) days before the annual meeting of Stockholders, specifying a different time and place and providing notice thereof to be given to each director, a regular meeting of the Board of Directors shall be held without other notice than this Bylaw, immediately after, and at the same place as, the annual meeting of Stockholders. The Board of Directors may provide by resolution the time and place, either within or without the State of Iowa for the holding of additional regular meetings without other notice than such resolution.

SECTION 11. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the President or any director. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Iowa, as the place for holding any special meeting of the Board of Directors called by them.

SECTION 12. NOTICE. Notice of any special meeting shall be given at least three (3) days prior thereto by written notice, unless oral notice is reasonable under the circumstances, of the date, time and place. Written notice may be given by facsimile transmission. If mailed, such notice must be deposited in the United States mail correctly addressed and postage prepaid at least eight (8) days prior to the date of the meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

SECTION 13. QUORUM. A majority of directors qualified and serving shall constitute a quorum for the transaction of business; provided, that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

SECTION 14. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors except to the extent otherwise provided in the Articles of Incorporation.

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SECTION 15. VACANCIES. Any vacancy among the directors occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors or by the affirmative vote of a majority of the Stockholders. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, if any. A vacancy that will occur at a specific later date, by reason of a resignation effective at a later date, or otherwise, may be filled before the vacancy occurs, but the new director shall not take office until the vacancy occurs.

SECTION 16. COMPENSATION. The Board of Directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors or other persons for services to the Corporation as directors, officers or otherwise. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board.

SECTION 17. PRESUMPTION OF ASSENT. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless (i) he objects at the beginning of the meeting or promptly upon his arrival to holding the meeting or transacting business at it; (ii) his dissent or abstention from the action taken is entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the presiding officer of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the Corporation immediately after the adjournment of the meeting. Such right to dissent or abstention shall not apply to a director who voted in favor of such action.

SECTION 18. ACTION WITHOUT MEETING OF THE BOARD OF DIRECTORS. Any action required by the Iowa Business Corporation Act to be taken at a meeting of directors of the Corporation, or any action which may be taken at a meeting of the directors or of a committee of directors, may be taken without a meeting if a consent in writing setting forth the action so taken, shall be signed by all of the directors or all of the members of the committee of directors, as the case may be, and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this section is effective when the last director signs the consent unless the consent specifies a different effective date. A consent signed under this section has the effect of a meeting vote and may be described as such in any document.

SECTION 19. TELEPHONE CONFERENCE MEETINGS. Subject to other applicable provisions contained in these Bylaws, any action required by the Iowa Business Corporation Act to be taken at a meeting of directors of the Corporation, or any action which may be taken at a meeting of the directors, or a committee of directors, may be taken by means of a conference telephone or similar communications equipment through which all persons participating in the meeting can hear each other, and the participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

ARTICLE IV

OFFICERS

SECTION 1. NUMBER. The officers of the Corporation shall consist of a Chairman of the Board, a Vice Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer, and such Assistant Treasurers, Assistant Secretaries or other officers as may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person.

SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of Stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until his successor shall have been duly elected and qualified or

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until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Election or appointment of an officer or agent shall not of itself create contract rights.

SECTION 3. REMOVAL AND RESIGNATIONS OF OFFICERS. (a) Any officer or agent may be removed by the Board of Directors with or without cause, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. (b) An officer may resign at any time by delivering notice to the Corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. If the Corporation accepts the future effective date, its Board of Directors may fill the pending vacancy before the effective date if the Board of Directors provides that the successor does not take office until the effective date.

SECTION 4. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.

SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall preside at all meetings of the Board of Directors and of the Stockholders. He shall be the principal officer of the Board of Directors and as such shall regularly advise and consult with the President to the end that the President may supervise and control the business and affairs of the Corporation within the framework and bounds of the orders, resolutions and policies from time to time enacted and established by the Board of Directors. The Chairman of the Board of Directors shall from time to time report to the Board of Directors all matters affecting the interests of the Corporation which, in his judgment, should be brought to the attention of the Board of Directors.

SECTION 6. THE VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman of the Board, or in the event of his inability or refusal to act, the Vice Chairman of the Board shall perform the duties of the Chairman of the Board, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board. The Vice Chairman of the Board shall perform such other duties as from time to time may be assigned to him by the Chairman of the Board or by the Board of Directors.

SECTION 7. THE PRESIDENT. The President shall be the chief executive officer of the Corporation and shall in general supervise and control all of the business and affairs of the Corporation, subject to the general powers of the Board of Directors. He may sign, with the Secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, deeds, mortgages, bonds, notes, contracts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed. In general, he shall perform all duties incident to the office of the President and such other duties as may be prescribed by the Board of Directors from time to time.

SECTION 8. THE VICE PRESIDENT(S). In the absence of the President, or in the event of his inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President shall perform such other duties as from time to time may be assigned to him by the Chairman of the Board, the President or by the Board of Directors.

SECTION 9. THE TREASURER. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall have charge and custody of and be responsible for all funds and securities of the Corporation; receive and give receipts for monies due and payable to the Corporation; and deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article V of these Bylaws. He shall in general perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chairman of the Board, the President or by the Board of Directors.

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SECTION 10. THE SECRETARY. The Secretary shall keep the minutes of the Stockholders and of the Board of Directors meetings in one or more books provided for that purpose; see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; be custodian of the corporate records; keep a register of the post office address of each Stockholder which shall be furnished to the Secretary by each Stockholder; have general charge of the stock transfer books of the Corporation; and in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the

SECTION 11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Treasurers and Assistant Secretaries, in general, shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the Chairman of the Board, the President or the Board of Directors.

SECTION 12. SALARIES. The salary of the President shall be fixed from time to time by the Board of Directors. Salaries of other officers may be fixed by the President, subject to such review by the Board of Directors as it determines to exercise.

ARTICLE V

CONTRACTS, LOANS, CHECKS

AND DEPOSITS

SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

SECTION 2. LOANS. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.

SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents, of the Corporation, and in such manner as shall from time to time be determined by resolution of the Board of Directors.

SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select.

ARTICLE VI

CERTIFICATES FOR SHARES

AND THEIR TRANSFER

SECTION 1. NO CERTIFICATES. The shares of the Corporation shall be issued without certificates as provided in Section 626 of the Iowa Business Corporation Act. In lieu of any certificates the Corporation shall issue a written statement of the information required on share certificates within a reasonable time after the issue or transfer of any of the Corporation’s shares. This provision shall not apply to any outstanding certificate representing shares of the Corporation until such certificate is surrendered to the Corporation. Upon the surrender of any share represented by a certificate for transfer, such share shall be reissued without a certificate as herein provided.

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SECTION 2. RECORD OWNERSHIP. The Corporation shall maintain records of share ownership which shall set forth the name of the person to whom the shares are issued, with the number of shares held and date of issue, and in the case of a share evidenced by a certificate, the number of the certificate. Such record shall be deemed conclusive evidence of share ownership rights.

SECTION 3. PREVIOUSLY ISSUED CERTIFICATES. No shares represented by a previously issued certificate shall be transferred or redeemed until the certificate shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate, a transfer or redemption may occur upon such terms and indemnity to the Corporation as the Board of Directors may prescribe.

SECTION 4. RESTRICTIONS ON TRANSFER OF SHARES.

4.1 Common shares shall be subject to restrictions on transfer as follows:

(a)

Common shares of the Corporation may be transferred to any other holder of common shares, provided that the transferee does not hold more than five percent (5%) of the issued and outstanding common shares of the Corporation after the transfer;

(b)

Common shares issued may be transferred to any transferee approved in advance by the Board of Directors;

(c)

Common shares issued to any Employee Stock Ownership Plan shall be transferable as provided in such Plan; and

(d)

Common shares are not otherwise transferable.

4.2 The foregoing notwithstanding, restrictions on the transfer of shares owned by any trust created by an employee stock ownership plan adopted by the Board of Directors shall be governed by the terms of the plan and the trust, not by section 4.1.

4.3 Preferred shares shall be subject to such restrictions on transfer as may be established by the Board of Directors upon their issuance.

SECTION 5. TRANSFERS OF SHARES. Subject to the restrictions on transfer contained in the Restated and Amended Articles of Incorporation and Bylaws of the Corporation, transfers of shares of the Corporation shall be made only on the books of the Corporation by the holder of record thereof, or by its legal representative, who shall furnish proper evidence of authority to transfer, or by its attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and in the case of shares evidenced by certificate, only on surrender for cancellation of the certificate for such share certificate. Except as otherwise provided by law, the person in whose name shares stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation.

ARTICLE VII

FISCAL YEAR

The fiscal year of the Corporation shall begin on the first day of September in each year and shall end on the last day of August in each year.

ARTICLE VIII

NO PATRONAGE RIGHTS

Effective as of September 1, 2004, no common Stockholder shall be entitled to any rights based on membership or patronage of the Company on or after such date.

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The provisions of Article IX of the Corporation’s Bylaws, as in effect on August 31, 2004, shall remain in effect for patronage dividend distributions made by the Corporation with respect to its fiscal year ended August 31, 2004. Thereafter, those provisions shall have no effect. Section 4 of Article VIII of the Corporation’s Bylaws, as in effect on August 31, 2004, shall remain in effect for patronage dividend distributions made by the Corporation with respect to fiscal year ended August 31, 2004 and with respect to prior fiscal years. Thereafter, that section shall have no effect.

ARTICLE IX

DIVIDENDS

SECTION 1. COMMON STOCK DIVIDENDS. Dividends shall be paid on common stock to the extent declared by the Board of Directors.

SECTION 2. PREFERRED STOCK DIVIDENDS. Dividends on preferred stock shall be paid as provided by the Board of Directors at the time of their issuance.

ARTICLE X

SEAL

This Corporation shall have no corporate seal.

ARTICLE XI

WAIVER OF NOTICE

SECTION 1. WAIVER OF NOTICE BY SHAREHOLDERS. A Stockholder may waive any notice required by the Iowa Business Corporation Act, the Articles of Incorporation, or the Bylaws before or after the date and time stated in the notice. The waiver must be in writing, be signed by the Stockholder entitled to the notice, and be delivered to the Corporation for inclusion in the minutes or filing with the corporate records.

A Stockholder’s attendance at a meeting:

a. Waives objection to lack of notice or defective notice of the meeting, unless the Stockholder at the beginning of the meeting or promptly upon the Stockholder’s arrival objects to holding the meeting or transacting business at the meeting.

b. Waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the Stockholder objects to considering the matter when it is presented.

SECTION 2. WAIVER OF NOTICE BY DIRECTORS.

a. A director may waive any notice required by the Iowa Business Corporation Act, the Articles of Incorporation, or Bylaws before or after the date and time stated in the notice. Except as provided by subsection b, the waiver must be in writing, signed by the director entitled to the notice, and filed with the minutes or corporate records.

b. A director’s attendance at or participation in a meeting waives any required notice to that director of the meeting unless the director at the beginning of the meeting or promptly upon the director’s arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

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ARTICLE XII

AMENDMENTS

These Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any meeting of the Board of Directors of the Corporation at which a quorum is present, by a majority vote of the directors present at the meeting. These Bylaws may also be altered, amended or repealed, or new Bylaws may be adopted, at any meeting of the Stockholders of the Corporation at which a quorum is present, by a majority vote of the Stockholders present at the meeting.

ARTICLE XIII

VOTING OF STOCK IN OTHER CORPORATIONS AND OF INTERESTS

IN PARTNERSHIPS OR LIMITED LIABILITY COMPANIES

In the absence of a resolution of the Board of Directors to the contrary, the Chairman of the Board, the Vice Chairman of the Board, the President or the Vice President of this Corporation is authorized and empowered to act for and on behalf of the Corporation by attending meetings, voting shares, executing proxies, waiving notice, executing any formal consent, or taking similar or related actions, all respecting stock of other corporations or interests in partnerships or limited liability companies which are owned by the Corporation, all without further authority than as herein contained. The Board of Directors may, in its discretion, designate any officer or person as a proxy or attorney-in-fact to vote the shares of stock in any other corporation or interests in partnerships or limited liability companies in which this Corporation may own or hold shares of stock or interests.

ARTICLE XIV

INDEMNIFICATION

SECTION 1. OFFICERS AND DIRECTORS. Service on the Board of Directors of the Corporation, or as an officer of the Corporation, or any such service at the request of the Corporation in a like position on behalf of any other corporation, partnership, limited liability company, joint venture, trust, or other entity, is deemed by the Corporation to have been undertaken and carried on in reliance by such persons on the full exercise by the Corporation of all powers of indemnification which are granted to it under the Iowa Business Corporation Act as amended from time to time. Accordingly, the Corporation shall exercise all of its permissive powers as often as necessary and to the fullest extent possible to indemnify such persons. Such indemnification shall be limited or denied only when and to the extent that the Iowa Business Corporation Act or other applicable legal principles limit or deny the Corporation’s authority to so act. This bylaw and the indemnification provisions of the Iowa Business Corporation Act (to the extent not otherwise governed by controlling precedent) shall be construed liberally in favor of the indemnification of such persons. In addition, except as otherwise expressly provided by the Iowa Business Corporation Act, indemnification provided for under the Iowa Business Corporation Act shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any provision in the Articles of Incorporation or Bylaws, agreements, vote of Stockholders or disinterested directors or otherwise.

SECTION 2. EMPLOYEES. Employees of the Corporation who are not officers or directors shall be indemnified by the Corporation only if the Board of Directors determines, in its sole discretion, that such indemnification is permissible under the Iowa Business Corporation Act and that such indemnification is in the best interests of the Corporation in each particular circumstance. In the exercise of its discretion the Board of Directors will consider such factors as it deems appropriate, but ordinarily will not authorize indemnification in any circumstance when the employee seeking indemnification has incurred liability to the Corporation for such circumstance under the Corporation’s errors and deficits policy applicable to such employee.

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ARTICLE XV

EXECUTIVE COMMITTEE

SECTION 1. CREATION. The Board of Directors may by resolution create an Executive Committee, and may by like action abolish the same at any time. If created, the Executive Committee shall consist of three (3) members who shall be the Chairman, Vice Chairman and Secretary-Treasurer of the Corporation. The resolution creating or abolishing the Executive Committee shall be adopted by not less than a majority of the number of directors fixed by these Bylaws. The existence of the Executive Committee shall be confirmed annually at the annual meeting of the Board of Directors.

SECTION 2. AUTHORITY. The Executive Committee shall possess and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation when the Board of Directors is not in session. The creation of the Executive Committee and the delegation thereto of the authority herein granted does not alone constitute compliance by a director with the standards of conduct described in Section 830 of the Iowa Business Corporation Act.

Committee may not, however:

Authorize dividends or other distributions to Stockholders;

Approve or propose to Stockholders action that the Iowa Business Corporation Act requires be approved by Stockholders;

Fill vacancies on the Board of Directors or on any of its committees;

Amend the Articles of Incorporation pursuant to section 1002 of the Iowa Business Corporation Act;

Adopt, amend or repeal Bylaws;

Approve a plan of merger not requiring Stockholder approval;

Authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; or

Authorize or approve the issuance or sale or contract for sale of shares or determine the designation and relative rights, preferences and limitations of a class or series of shares, except as may be done within limits specifically prescribed by the Board of Directors.

SECTION 3. COMMITTEE PROCEEDINGS. The Executive Committee shall select its own Chairman. The Executive Committee shall hold such regular meetings at such time and place as it may determine. Special meetings of the Executive Committee shall be held upon not less than twenty-four (24) hours written notice. Special meetings may be called by the Chairman or any two (2) members of the Executive Committee. The act of the majority of the members present at a meeting at which a quorum is present shall be the act of the Executive Committee.

SECTION 4. REPORTS. Minutes of all proceedings of the Executive Committee shall be maintained, and the Executive Committee shall report all business transacted by it to the Board of Directors at the meeting of the Board of Directors next succeeding any action taken by the Executive Committee. The Board of Directors shall review said minutes or other reports of the Executive Committee and shall take such action thereon as the Board of Directors may deem appropriate.

SECTION 5. INFORMAL ACTION. Any action required to be taken at a meeting of the Executive Committee, or any other action which may be taken at a meeting of the Executive Committee, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all members of the

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Executive Committee, and included in the minutes or filed with the corporate records reflecting the action taken. Such action is effective when the last committee member signs the consent, unless the consent specifies a different effective date.

SECTION 6. QUORUM. All members of the Executive Committee shall constitute a quorum for the transaction of business; provided, that if not all members are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

ARTICLE XVI

ESOP

The Company may establish an Employee Stock Ownership Plan, but it shall not acquire more than 20% of the issued and outstanding shares of common stock of the Company.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

Sections 490.850-490.859 of the Iowa Business Corporation Act permit corporations to indemnify directors, officers, employees and agents against liability under certain circumstances. Our existing articles of incorporation and bylaws provide for indemnification of directors, officers and employees to the full extent provided by the Iowa Business Corporation Act. These provisions will be continued in the proposed amended and restated articles of incorporation and bylaws if the restructuring is approved.

As permitted by Section 490.202 of the Iowa Business Corporation Act and Article XIII of the Articles of Incorporation, no director shall be personally liable to the company or its stockholders for money damages for any action taken, or any failure to take any action, as a director, except liability for any of the following: (1) the amount of a financial benefit received by a director to which the director is not entitled; (2) an intentional infliction of harm on the company or its stockholders; (3) a violation of section 490.833 (relating to certain unlawful distributions to stockholders); or (4) an intentional violation of criminal law.

The Registrant maintains directors and officers liability insurance for the benefit of its directors and certain of its officers, and intends to enter into indemnification agreements (in the form to be filed as Exhibit 10.9 hereto) for the benefit of its directors and certain of its officers.

Item 21. Exhibits and Financial Statement Schedules

(a) Exhibits

See exhibits listed on the Exhibit Index following the signature page of this Form S-4, which is incorporated herein by reference.

(b) Financial Statement Schedules

The following schedules are filed as part of this Registration Statement but are not included in this prospectus:


FCStone Group, Inc. and Subsidiaries
Schedule I – Condensed financial information of registrant		S-1
Schedule II – Valuation and qualifying accounts		S-4

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 22. Undertakings

The undersigned Registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities

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offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act, and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of such request, and to send the incorporated documents by first class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of this registration statement through the date of responding to the request.

The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all the information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Des Moines, State of Iowa, on December 30, 2004.


FCSTONE GROUP, INC.
By:		/ S / P AUL G. A NDERSON
		Paul G. Anderson, President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.


	Signature	Title	Date

By:	/ S / P AUL G. A NDERSON Paul G. Anderson	President and Chief Executive Officer (principal executive officer)	December 30, 2004

By:	/ S / R OBERT V. J OHNSON Robert V. Johnson	Executive Vice President and Chief Financial Officer (principal financial and accounting officer)	December 30, 2004

By:	* Bruce Krehbiel	Chairman of the Board, Director	December 30, 2004

By:	* Jack Friedman	Vice Chairman, Director	December 30, 2004

By:	* Eric Parthemore	Secretary, Director	December 30, 2004

By:	* Brent Bunte	Director	December 30, 2004

By:	* Doug Derscheid	Director	December 30, 2004

By:	* Kenneth Hahn	Director	December 30, 2004

By:	* Ron Hunter	Director	December 30, 2004

By:	* Tom Leiting	Director	December 30, 2004

By:	* Dave Reinders	Director	December 30, 2004

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EXHIBIT INDEX


Exhibit No.		Description of Document

2.1		Plan of Conversion—included in Appendix A to the Proxy Statement-Prospectus

3.1		Amended and Restated Articles of Incorporation of FCStone Group, Inc. (as currently in effect) (1)

3.2		Bylaws of FCStone Group, Inc. (as currently in effect) (1)

3.3		Form of Amended and Restated Articles of Incorporation of FCStone Group, Inc. (to be filed with the Iowa Secretary of State prior to the closing of the offering)—included in Appendix A to the Proxy Statement-Prospectus

3.4		Form of Amended and Restated Bylaws of FCStone Group, Inc. (to be adopted prior to the closing of the transaction)—included in Appendix B to the Proxy Statement-Prospectus

4.1		Form of Subscription Notice (1)

5.1		Opinion of Dickinson, Mackaman, Tyler & Hagen P.C.

8.1		Opinion of McDermott Will & Emery LLP

10.1		Employment Agreement, dated as of February 22, 2002, by and among FCStone, LLC and Paul G. Anderson (1)

10.2		Employment Agreement, dated as of January 5, 2004, by and among FCStone Group, Inc. and Jeff Soman (1)

10.3		Employment Agreement, dated as of April 18, 1988, by and among Farmers Commodities Corporation and Robert V. Johnson (1)

10.4		Employment Agreement, dated as of May 9, 2003, by and among FCStone, LLC and Steve Gutierrez (1)

10.5		Employment Agreement, dated as of July 8, 1996, by and among Farmers Commodities Corporation, Farmers Grain Dealers, Incorporated and Steve Speck (1)

10.6		CEO Deferred Compensation Plan for Paul G. Anderson dated February 22, 2002 (1)

10.7		Farmers Commodities Corporation Supplemental Nonqualified Pension Plan (3)

10.8		Short-term Incentive Plan (3)

10.9		Form of Director Indemnification Agreement

10.10		Statused Revolving Term Loan Supplement, dated May 5, 2004, between FGDI, LLC and CoBank, ACB ($80,000,000) (2)

10.11		Master Loan Agreement, dated November 3, 2003, between FCStone Group, Inc and Deere Credit, Inc. (1)

10.12		Unsecured Revolving Term Note, dated November 3, 2003, between FCStone Group, Inc. and Deere Credit, Inc., due on October 1, 2006 (1)

10.13		Change in Terms Agreement to the Unsecured Revolving Term Note, dated July 9, 2004, between FCStone Group, Inc. and Deere Credit, Inc. (1)

10.14		Master Loan Agreement, dated April 15, 2002, between FCStone Financial, Inc. and Deere Credit, Inc. (1)

10.15		First Amendment to the Master Loan Agreement, dated November 3, 2003, between FCStone Financial, Inc. and Deere Credit Inc. (1)

10.16		Revolving Statused Operating Note, dated April 15, 2002, between FCStone Financial, Inc. and Deere Credit, Inc. (1)

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Exhibit No.		Description of Document

10.17		Limited Corporate Guaranty, dated April 16, 2002, between FCStone Financial, Inc. and Deere Credit, Inc. (1)

10.18		Change in Terms Agreement to the Revolving Statused Operating Note, dated May 24, 2004, between FCStone Financial, Inc. and Deere Credit, Inc. (1)

10.19		Letter Agreement Extending the Term of the $50 Million Credit Facility, dated February 24, 2004 between FCStone Financial, Inc. and Deere Credit, Inc. (1)

10.20		Revolving Subordinated Loan Agreement, dated November 21, 2002, between FCStone, LLC and Deere Credit, Inc. (1)

10.21		First Amendment to the Revolving Subordinated Loan Agreement, dated November 3, 2003, between FCStone, LLC and Deere Credit, Inc. (1)

10.22		Unsecured Revolving Subordinated Note, dated November 21, 2002, between FCStone, LLC and Deere Credit, Inc., due on December 1, 2005 (1)

10.23		First Amendment to the Unsecured Revolving Subordinated Note, dated November 3, 2003, between FCStone, LLC and Deere Credit, Inc. (1)

10.24		Master Loan Agreement, dated February 15, 2001, between FCStone, LLC and Deere Credit, Inc. (1)

10.25		Unsecured Revolving Operating Note, dated March 15, 2002, between FCStone, LLC and Deere Credit, Inc., due on March 1, 2004 (1)

10.26		Letter Agreement Extending the Term of the Unsecured Revolving Operating Note to March 1, 2005 (1)

10.27		Change in Terms Agreement, dated June 28, 2004, Between FCStone, LLC and Deere Credit, Inc. (3)

10.28		Letter Agreement for $15 Million Credit Facility, dated March 5, 2003, between FCStone, LLC and Harris Trust Savings Bank (1)

10.29		Unsecured Demand Note, dated September 15, 2000, between FCStone, LLC and Harris Trust Savings Bank (1)

10.30		Trust Indenture for Industrial Revenue Bonds, dated December 1, 2003 (3)

10.31		Master Loan Agreement dated February 28, 2003 between FCStone Financial, Inc. and CoBank ACB (2)

10.32		Uncommitted Revolving Credit Supplement and Promissory Note to the Master Loan Agreement between FCStone Financial, Inc. and CoBank ACB (2)

10.33		Guarantee of Payment, dated February 28, 2003, between FCStone Group, Inc. and CoBank ACB (2)

10.34		Master Loan Agreement dated September 1, 1999, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

10.35		Amendment to Master Loan Agreement, dated September 3, 1999, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

10.36		Amendment to Master Loan Agreement, dated February 25, 2000, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

10.37		Amendment to Master Loan Agreement, dated November 28, 2001, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

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Exhibit No.		Description of Document

10.38		Amendment to Master Loan Agreement, dated January 27, 2002, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

10.39		Amendment to Master Loan Agreement, dated July 31, 2003, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

10.40		Amendment to Master Loan Agreement, dated June 29, 2004, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

10.41		Revolving Term Loan Supplement, dated September 1, 1999, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

10.42		Statused Revolving Credit Supplement, dated June 29, 2004, between FCStone Trading LLC (formerly Petrous, L.L.C.) and CoBank ACB (2)

10.43		Master Loan Agreement, dated May 5, 2004, between FGDI, LLC and CoBank, ACB (2)

10.44		Statused Revolving Term Loan Supplement, dated May 5, 2004, between FGDI, LLC and CoBank, ACB ($10,000,000) (2)

10.45		Statused Revolving Term Loan Supplement, dated May 5, 2004, between FGDI, LLC and CoBank, ACB ($30,000,000) (2)

10.46		Letter Agreement modifying CoBank Commitment levels, dated September 9, 2004 (2)

10.47		Purchase Agreement (Eximbank Insurance), effective June 22, 2004, between FGDI, LLC and CoBank, ACB (3)

10.48		Purchase Agreement, (Private Insurance), effective June 22, 2004, between FGDI, LLC and CoBank, ACB (3)

10.49		Long-term Incentive Plan (3)

10.50		Cash Subordinated Loan Agreement, dated September 29, 2003, between FCStone, LLC and Michael Walsh. (3)

10.51		Cash Subordinated Loan Agreement, dated June 30, 2004, between FCStone, LLC and Allan J. Hirsch. (3)

10.52		Cash Subordinated Loan Agreement, dated June 30, 2004, between FCStone, LLC and Gerald Hirsch. (3)

10.53		Cash Subordinated Loan Agreement, dated December 12, 2003 between FCStone, LLC and William Shepard. (3)

10.54		Lease Agreement, dated December 1, 2002, between the Industrial Development Board of the City of Mobile, Alabama and FGDI, LLC (3)

10.55		Letter Agreement, dated March 31, 2004, between FCStone Merchant Services, LLC and Fortis Capital Corp. for $20,000,000 credit facility (3)

10.56		Promissory Note ($20,000,000), dated May 10, 2004, between FCStone Merchant Services, LLC and Fortis Capital Corp. (3)

10.57		Continuing Security Agreement between FCStone Merchant Services, LLC and Fortis Capital Corp. (3)

10.58		Letter Agreement, dated February 17, 2004, between FCStone Merchant Services, LLC and RZB Finance LLC for $5,000,000 credit facility

10.59		Promissory Note ($5,000,000), dated February 17, 2004, between FCStone Merchant Services, LLC and RZB Finance LLC

10.60		General Security Agreement and Supplement, dated February 17, 2004, between FCStone Merchant Services, LLC and RZB Finance LLC.

II-7


Exhibit No.		Description of Document

10.61		Credit Agreement, dated March 4, 2004, between FCStone Merchant Services, LLC and Harvard Private Capital Properties III, Inc. for $30,000,000 credit facility

10.62		Security Agreement, dated March 4, 2004, between FCStone Merchant Services, LLC and Harvard Private Capital Properties III, Inc.

10.63		FGDI Incentive Plan

10.64		FCStone Group, Inc. Amended and Restated Mutual Commitment Compensation Plan (3)

10.65		Change in Terms Agreement, dated July 9, 2004, between FCStone, LLC and Deere Credit, Inc.

10.66		Change in Terms Agreement, dated August 23, 2004, between FCStone, LLC and Deere Credit, Inc.

10.67		Change in Terms Agreement, dated August 23, 2004, between FCStone Group, Inc. and Deere Credit, Inc.

10.68		Investment Facility Letter Agreement, dated May 26, 2004, between FGDI, LLC and AFG Trust.

10.69		Credit Facility Letter Agreement, dated May 26, 2004, between FGDI, LLC and AFG Trust

20.1		Appraisal of FCStone Group, Inc. by RSM McGladrey, Inc. (3)

21.1		Subsidiaries of the Registrant (1)

23.1		Consent of KMPG LLP

23.2		Consent of Dickinson, Mackaman, Tyler & Hagen P.C. (included in Exhibit 5.1)

23.3		Consent of McDermott Will & Emery LLP (included in Exhibit 8.1)

23.4		Consent of RSM McGladrey, Inc.

24.1		Powers of Attorney (included in the signature pages hereto) (1)

99.1		Form of Proxy

(1)	Previously filed as an exhibit to the Registration Statement on Form S-4 filed by FCStone Group, Inc. on August 18, 2004

(2)	Previously filed as an exhibit to Amendment No. 1 to the Registration Statement on Form S-4 filed by FCStone Group, Inc. on October 6, 2004

(3)	Previously filed as an exhibit to Amendment No. 2 to the Registration Statement on Form S-4 filed by FCStone Group, Inc. on December 9, 2004

II-8

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENT OF FINANCIAL CONDITION

Parent Company Only

August 31, 2004 and 2003

(in thousands)


ASSETS	2004			2003
Cash and cash equivalents	$	—		$	47
Accounts receivable		17			—
Notes receivable		1,250			—
Notes receivable—subsidiary		5,000			—
Deferred income taxes		2,710			2,886
Investments in affiliates and others		45,368			40,046

	$	54,345		$	42,979

LIABILITIES AND MEMBERS’ EQUITY
Liabilities:
Checks written in excess of bank balance	$	124		$	—
Accounts payable		15			—
Accrued expenses:
Accrued pension liability		3,596			5,317
Income taxes payable		379			406
Other		283			—
Notes payable		8,250			—
Patronage refunds payable in cash		1,869			1,429

Total liabilities		14,516			7,152

Members’ equity:
Preferred stock, nonvoting; $1,000 par value:
Series I		12,972			13,101
Series II		898			904
Common stock:
Class A, voting; $5,000 par value		2,369			2,753
Class B, voting; $100,000 par value `		500			500
Accumulated other comprehensive loss		(3,039	)		(3,932	)
Retained earnings		26,129			22,500

Total members’ equity		39,829			35,827

	$	54,345		$	42,979

S-1

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENT OF OPERATIONS

Parent Company Only

Years Ended August 31, 2004, 2003 and 2002

(in thousands)


	2004		2003		2002
Revenues:
Interest	$	10	$	—	$	10
Equity in earnings of affiliates		9,063		6,068		5,259

Total revenues		9,073		6,068		5,269

Costs and expenses:
Interest		53		2		—
Bank charges and miscellaneous		—		—		—

Total costs and expenses		53		2		—

Income before minority interest and income tax expense		9,020		6,066		5,269
Minority interest		576		561		601

Income before income tax expense		8,444		5,505		4,668
Income tax expense		2,030		1,200		1,280

Net income	$	6,414	$	4,305	$	3,388

S-2

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENTS OF CASH FLOWS

Parent Company Only

Years Ended August 31, 2004, 2003 and 2002

(in thousands)


	2004			2003			2002
Cash flows from operating activities:
Net income	$	6,414		$	4,305		$	3,388
Equity in earnings of affiliates		(9,108	)		(6,068	)		(5,259	)
Minority interest, net of distributions		380			351			516
(Decrease) increase in deferred income taxes		(236	)		(120	)		40
Increase in accounts receivable and advances on grain		(17	)		—			—
Increase (decrease) in other assets		—			32			(32	)
(Decrease) increase in accounts payables		15			—			(440	)
Increase (decrease) in income taxes payable		(27	)		133			(146	)

Net cash provided by (used in) operating activities		(2,579	)		(1,367	)		(1,933	)

Cash flows from investing activities:
Distributions from affiliates		5,373			2,512			4,376
Capital contribution in affiliate		(2,100	)		—			(1,000	)

Net cash provided by investing activities		3,273			2,512			3,376

Cash flows from financing activities:
Increase in checks written in excess of bank balance		124			—			—
Proceeds from issuance of Class A common stock		1			2			2
Payment for redemption of stock		(1,437	)		(217	)		(420	)
Payment of prior year patronage		(1,429	)		(937	)		(1,849	)
Issuance of notes receivable		(6,250	)		—			—
Proceeds from notes payable		8,250			—			—

Net cash provided by (used in) financing activities		(741	)		(1,152	)		(2,267	)

Net increase (decrease) in cash and cash equivalents—unrestricted		(47	)		(7	)		(824	)
Cash and cash equivalents—unrestricted—at beginning of year		47			54			878

Cash and cash equivalents—unrestricted—at end of year	$	0		$	47		$	54

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	53		$	2		$	—
Income taxes		2,057			1,187			1,386

S-3

SCHEDULE II

FCSTONE GROUP, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

(dollars in thousands)


	Balance at Beginning of Period		Additions				Deductions			Balance at End of Period
Those reserves which are deducted in the Consolidated Financial Statements from Receivables	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Deductions			Balance at End of Period
Fiscal year ended August 31, 2004
Reserve for doubtful accounts	$	445	$	716	$	—	$	(191	)	$	970

Fiscal year ended August 31, 2003
Reserve for doubtful accounts	$	425	$	76	$	—	$	(56	)	$	445

Fiscal year ended August 31, 2002
Reserve for doubtful accounts	$	405	$	310	$	—	$	(290	)	$	425

S-4

Exhibit 5.1

LOGO


Helen C. Adams	Richard A. Malm	Of Counsel:	Washington, D.C. Office
Brent R. Appel	Arthur F. Owens	Des Moines, Iowa
Joseph A. Cacciatore	Mollie Pawlosky	Janet G. Huston	1660 L Street N.W.
Tracy L. Deutmeyer	Bridget R. Penick	John R. Mackaman	Suite 506
Bret A. Dublinske	David M. Repp		Washington, D.C.
Rebecca Boyd Dublinske	Russell L. Samson	Washington, D.C.	20036-5603
Gregory G.T. Ervanian	Charles M. Schneider	Gene C. Lange*	(202) 463-6330
Joan M. Fletcher	Curtis W. Stamp	John W. Thomas**	Fax (202) 463-6328
Howard O. Hagen	Philip E. Stoffregen
Jennifer L. Hodge	Jon P. Sullivan	* Licensed only in D.C.
Paul E. Horvath	Krista K. Tanner	** Licensed only in D.C.
Jill R. Jensen-Welch	Paul R. Tyler	& Virginia
Jeffrey A. Krausman	John K. Vernon
Alan P. Kress	J. Marc Ward
F. Richard Lyford

December 28, 2004

FCStone Group, Inc.

2829 Westown Parkway, Suite 200

West Des Moines, IA 50266

Ladies and Gentlemen:

We have acted as counsel to FCStone Group, Inc., an Iowa corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission of the Company’s Registration Statement on Form S-4, File No. 333-118342 (as amended, the “Registration Statement”), under the Securities Act of 1933, as amended (the “Securities Act”), relating to the offering of up to 6,050,000 shares (the “Shares”) of Common Stock, no par value per share, of the Company, together 1,450,000 subscription rights for Shares (the “Subscription Rights”). The Shares and Subscription Rights are being issued pursuant to a restructuring as described in the Registration Statement.

In so acting, we have examined originals or copies (certified or otherwise identified to our satisfaction) of (i) the Articles of Incorporation of the Company (as amended and currently in effect), filed as Exhibit 3.1 to the Registration Statement; (ii) the Bylaws of the Company (as amended and currently in effect), filed as Exhibit 3.2 to the Registration Statement; (iii) the form of Articles of Restatement and Amendment of the Company (the “Articles of Restatement”) (to be filed with the Iowa Secretary of State prior to closing of the offering of the Shares and Subscription Rights), as filed as part of Appendix A to the proxy-statement prospectus; (iv) the form of Amended and Restated Bylaws of the Company (to be adopted prior to the closing of the offering of the Shares), filed as Appendix B to the proxy-statement prospectus; (v) the Registration Statement; (vi) the proxy-statement prospectus contained within the Registration Statement; and (vii) such corporate records, agreements, documents and other instruments, and such certificates or comparable documents of public officials and of officers and representatives of the Company, and have made such inquiries of such officers and representatives, as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth.

LOGO

DICKINSON, MACKAMAN, TYLER & HAGEN, P.C.

FCStone Group, Inc.

December 28, 2004

Page 2

In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies and the authenticity of the originals of such latter documents. We have also assumed that, other than with respect to the Company, at such times as the respective Shares are issued, all of the documents referred to in this opinion will have been duly authorized, executed, delivered and countersigned by, and will constitute the valid, binding and enforceable obligations of, all of the parties to such documents, that all of the signatories to such documents will have been duly authorized and all parties will be duly organized and validly existing and have the power and authority (corporate or other) to execute, deliver, countersign and perform such documents. As to all questions of fact material to this opinion that have not been independently established, we have relied upon certificates or comparable documents of officers and representatives of the Company and have assumed the correctness and accuracy of all such certificates.

For the purpose of this opinion, we assume that the restructuring will be approved and consummated in the manner described in the Registration Statement and that the Articles of Restatement will be duly filed with the Secretary of State of Iowa.

Based on the foregoing, and in reliance thereon, and subject to the assumptions, comments, qualification, limitations and exceptions set forth herein, we are of the opinion that: (i) The Shares (other than the Shares issued pursuant to Subscription Rights) when issued in accordance with the Plan of Conversion, as defined in the Articles of Restatement, will be validly issued, fully paid and nonassessable; and (ii) The Shares, if and when issued upon exercise of Subscription Rights in exchange for payment in the manner described in the Registration Statement, will be validly issued, fully paid and nonassessable.

The opinion expressed herein is limited to the corporate laws of the State of Iowa, and we express no opinion as to the effect on the matters covered by this letter of the laws of any other jurisdiction.

We hereby consent to the filing of this letter as an exhibit to the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the prospectus which is a part of the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission.

Very truly yours,

Dickinson, Mackaman, Tyler & Hagen, P.C.

/ S / R ICHARD A. M ALM

By: Richard A. Malm

LOGO

Boston Brussels Chicago Düsseldorf London Los Angeles Miami Milan

Munich New York Orange County Rome San Diego Silicon Valley Washington. D.C.

December 29, 2004

FCStone Group, Inc.

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

Re:	Plan of Conversion

Ladies and Gentlemen:

You have asked our opinion as to certain U.S. federal income tax consequences of the restructuring (the “Restructuring”) of FCStone Group, Inc., an Iowa corporation operating on a cooperative basis (the “Company”), pursuant to proposed amendments to the Articles of Incorporation of the Company and a Plan of Conversion included as Appendix A to the Proxy Statement (together, the “Plan of Conversion”). Following the Plan of Conversion, the Company will no longer be organized and operating on a cooperative basis. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan of Conversion.

In formulating our opinion, we have examined the Plan of Conversion, the Registration Statement on Form S-4 of the Company and the Proxy Statement-Prospectus (the “Proxy Statement”) included therein that was filed with the Securities and Exchange Commission and will be delivered to the Company’s shareholders, and such other documents as we deem relevant for purposes of this opinion.

In addition, we have assumed with your consent that (i) the Restructuring will be consummated in the manner contemplated by the Registration Statement and the Proxy Statement and in accordance with the provisions of the Plan of Conversion and none of the terms and conditions contained therein have been or will be modified in any respect relevant to this opinion; (ii) the statements concerning the Restructuring set forth in the Registration Statement, including the purposes of the parties for consummating the Restructuring, are true, accurate and complete; (iii) the representations made to us by the Company in connection with the Restructuring (in the form of an officer’s certificate dated as of the date hereof) and delivered to us for purposes of this opinion are, and as of the Effective Time, will be true, accurate and complete; (iv) no actions have been (or will be) taken that are inconsistent with any representation or other statement contained in the officer’s certificate; and (v) original documents (including signatures) are authentic, documents submitted to us as copies conform to the original documents, and there has been (or will be, by the Effective Time) due execution and delivery of all documents where due execution and delivery are prerequisites to the effectiveness thereof.

Other than obtaining the representations set forth in the officer’s certificate, we have not independently verified any factual matters relating to the Restructuring in connection with, or apart from, our preparation of this opinion. Accordingly, our opinion does not take into account any matters not set forth herein that might have been disclosed by independent verification. In the course of preparing our opinion,

U.S. practice conducted through McDermott Will & Emery LLP.

227 West Monroe Street Chicago Illinois 60606-5096 Telephone: 312.372.2000 Facsimile: 312.984.7700 www.mwe.com

FCStone Group, Inc.

December 29, 2004

Page 2

nothing has come to our attention that would lead us to believe that any of the facts, representations or other information on which we have relied in rendering our opinion is incorrect.

Based upon the foregoing and subject to the exceptions, qualifications and limitations set forth herein, we are of the opinion that, for U.S. Federal income tax purposes, the Restructuring will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

This opinion relates solely to the U.S. Federal income tax consequences of the Restructuring, and no opinion is expressed as to the tax consequences under any foreign, state or local tax law. This opinion does not apply to, and no opinion is expressed concerning, the tax consequences to any person who receives shares of new Company Common Stock in exchange for shares of Company common or preferred stock (or options thereon) received by such person as compensation for services or upon the exercise of stock options or rights received therefore.

This opinion is based on current U.S. federal income tax law and administrative practice in effect as of the date hereof. It represents our best legal judgment as to the matters addressed herein, and is not binding on the Internal Revenue Service or the courts. Accordingly, no assurance can be given that this opinion, if contested, would be sustained by a court. Furthermore, the authorities on which we rely are subject to change either prospectively or retroactively, and any such change, or any variation or difference in the facts from those on which we rely and assume as correct, as set forth above, might affect the conclusions stated herein. By rendering this opinion, we undertake no responsibility to advise you as to any changes or new developments in U.S. federal income tax laws or the application or interpretation thereof.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We also consent to the use of our name under the heading “Material United States Federal Income Tax Consequences” and “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder.

Very truly yours,

/s/ McDermott Will & Emery LLP

McDermott Will & Emery LLP

Exhibit 10.9

INDEMNIFICATION AGREEMENT

THIS AGREEMENT is made this day of , 2004, between FCStone Group, Inc., an Iowa corporation (the “ Company ”), and (the “ Indemnitee ”).

WHEREAS, it is important to the Company to attract and retain as directors and officers the most capable persons available; and

WHEREAS, as amended the Articles of Incorporation, as amended (the “ Articles ”) and the Bylaws of the Company (the “ Bylaws ”) provide for the indemnification of the directors, officers, employees and agents of the Company as authorized by I.C. §§ 490.851 and 490.856 of the Iowa Business Corporation Act (the “ State Statutes ”); and

WHEREAS, such Articles, Bylaws and the State Statutes specifically provide that they are not exclusive, and thereby contemplate that contracts may be entered into between the Company and its directors and officers with respect to indemnification of such directors and officers; and

WHEREAS, in accordance with the authorization provided by the Articles, the Bylaws and the State Statutes, the Company has purchased and presently maintains a policy or policies of Directors and Officers Liability Insurance (“ D&O Insurance ”), covering certain liabilities which may be incurred by its directors and officers in the performance of their services for the Company; and

WHEREAS, in order to resolve such questions and thereby induce the Indemnitee to agree to serve or continue to serve as a director and/or officer of the Company, the Company has determined and agreed to enter into this contract with the Indemnitee;

NOW, THEREFORE, in consideration of the premises and of Indemnitee’s agreeing to serve or continuing to serve as a director and/or officer of the Company, the parties hereto agree as follows:

1. Indemnity . The Company hereby agrees to hold harmless and indemnify the Indemnitee to the full extent permitted by law:

(a) Against any and all expenses (including attorneys’ fees), judgments, fines, penalties and amounts paid in settlement (including, without limitation, all interest, assessments and other charges paid or payable in connection therewith) actually and reasonably incurred by the Indemnitee in connection with any threatened, pending or completed action, suit or proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, to which the Indemnitee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that the Indemnitee is, was or at any time becomes a director, officer, employee, agent or fiduciary of the Company, or is or

was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other entity or enterprise, or by reason of anything done or not done by Indemnitee in any such capacity, whether prior to or subsequent to the date of this Agreement; and

(b) Against any and all expenses (including attorneys’ fees) actually and reasonably incurred by the Indemnitee in serving or preparing to serve as a witness or other participant in any threatened, pending or completed action, suit or proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, if Indemnitee is such a witness or participant by reason of the fact that the Indemnitee is, was or at any time becomes a director, officer, employee, agent or fiduciary of the Company or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other entity or enterprise.

2. Specific Limitations on Indemnity . Indemnitee shall not be entitled to indemnification under this Agreement:

(a) In respect to remuneration paid to or advantage gained by the Indemnitee if it shall be determined by a final judgment or other final adjudication that the Indemnitee was not legally entitled to such remuneration or advantage;

(b) On account of the Indemnitee’s conduct which is determined by a final judgment or other final adjudication to have been knowingly fraudulent, deliberately dishonest or willful misconduct;

(c) Prior to a Change in Control (as defined in Section 4(e)), in respect of any action, suit or proceeding initiated by the Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such action, suit or proceeding, except (i) as set forth in Section 12(b) hereof, (ii) in respect of any counterclaims made against Indemnitee in any such action, suit or proceeding, and (iii) to the extent Indemnitee seeks contribution or apportionment of an award or settlement against Indemnitee and against the Company and/or any other director or officer of the Company;

(d) On account of any matter determined by a final judgment or other final adjudication to be a violation by the Indemnitee of the provisions of Section 16 of the Securities Exchange Act of 1934, as amended (the “ Act ”), or the rules and regulations promulgated thereunder, as amended from time to time; or

(e) With respect to any matter if it shall be determined by a final judgment or other final adjudication that such indemnification is not lawful.

3. Advance of Expenses and Payment of Indemnification . Upon the written request of Indemnitee, expenses that are subject to indemnification under this Agreement shall be advanced by the Company within five (5) business days of receipt of such request. Subject to Section 4(a), indemnification shall be made under this

Agreement no later than sixty (60) days after receipt by the Company of the written request of Indemnitee, which written request shall identify the judgments, fines, penalties and amounts paid in settlement that are subject to indemnification under this Agreement and for which indemnification is requested. A written request shall be deemed received three days after the date postmarked if sent by prepaid mail properly addressed to the Company at the address set forth in Section 11(a) hereof.

4. Determination of Indemnification .

(a) Notwithstanding any other provision of this Agreement (i) the obligations of the Company under Section 1 shall be subject to the condition that the Reviewing Party shall have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 4(c) is involved) that Indemnitee would be permitted to be indemnified under this Agreement, (ii) the obligation of the Company to make an expense advance pursuant to Section 3 shall be subject to the condition that, if, when and to the extent that it is finally determined that Indemnitee would not be permitted to be indemnified for such expenses under this Agreement, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees and undertakes to reimburse the Company) for all such amounts theretofore paid, and (iii) the obligation of the Company to make an expense advance pursuant to Section 3 shall be made without regard to the Indemnitee’s ability to repay the amount advanced and without regard to the Indemnitee’s ultimate entitlement to indemnification under this Agreement or otherwise. Indemnitee’s obligation to reimburse the Company for expense advances shall be unsecured and no interest shall be charged thereon.

(b) The Reviewing Party shall be selected by the Board of Directors, provided, however, that if there has been a Change in Control (other than a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control) the Reviewing Party shall be the Independent Legal Counsel referred to in Section 4(c). If there has been no determination by the Reviewing Party within the sixty (60) day period referred to in Section 3, the Reviewing Party shall be deemed to have made a determination that it is permissible to indemnify Indemnitee under this Agreement.

(c) The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control) then Independent Legal Counsel shall be selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld) and such Independent Legal Counsel shall determine whether the director or officer is entitled to indemnification for expenses, judgments, fines, penalties and amounts paid in settlement (including, without limitation, all interest, assessments and other charges paid or payable in connection therewith) under this Agreement or any other agreement or the Articles or Bylaws of the Company now or hereafter in effect relating to indemnification. Such Independent Legal Counsel shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee will be permitted to be indemnified for expenses, judgments, fines, penalties and amounts paid in settlement (including, without limitation, all interest, assessments and other charges

paid or payable in connection therewith). The Company agrees to pay the reasonable fees of the Independent Legal Counsel and to indemnify fully such Independent Legal Counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or the engagement of Independent Legal Counsel pursuant hereto.

(d) If a determination denying Indemnitee’s claim is made by a Reviewing Party (other than Independent Legal Counsel), notice of such determination shall disclose with particularity the reasons for such determination. If a determination denying Indemnitee’s claim is made by Independent Legal Counsel, the notice shall include a copy of the related legal opinion of such counsel.

(e) “ Change in Control ” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 15% or more of the total voting power represented by the Company’s then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 85% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the assets of the Company.

(f) “ Reviewing Party ” shall mean any appropriate person or body consisting of a member or members of the Board of Directors of the Company or any other person or body appointed by the Board who is not a party to the particular action, suit or proceeding with respect to which Indemnitee is seeking indemnification, or Independent Legal Counsel.

(g) “ Independent Legal Counsel ” shall mean an attorney, selected in accordance with the provisions of Section 4(c), who shall not have otherwise performed services for the Company or Indemnitee within the last five years (other than in connection with seeking indemnification under this Agreement). Independent Legal Counsel shall not be any person who, under the applicable standards of professional

conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement, nor shall Independent Legal Counsel be any person who has been sanctioned or censured for ethical violations of applicable standards of professional conduct.

(h) “ Voting Securities ” shall mean any securities of the Company which vote generally in the election of directors.

5. Partial Indemnity . If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines, penalties and amounts paid in settlement (including, without limitation, all interest, assessments and other charges paid or payable in connection therewith) incurred by the Indemnitee, but not for the total amount thereof, the Company shall indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on merits or otherwise in defense of any or all actions, suits or proceedings relating in whole or in part to an event subject to indemnification hereunder or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against expenses incurred in connection with such action, suit, proceeding, issue or matter, as the case may be.

6. Non-exclusivity . The rights of the Indemnitee under this Agreement shall be in addition to any other rights Indemnitee may have under the Articles, the Bylaws, any other agreement of the Company, the Iowa Business Corporation Act (“ IBCA ”), D&O Insurance or otherwise. To the extent that any change in the IBCA (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Articles and the Bylaws of the Company and this Agreement, it is the intent of the parties hereto that Indemnitee shall by this Agreement be entitled to the greater benefits so afforded by such change.

7. Liability Insurance . To the extent the Company maintains D&O Insurance, the Company shall maintain coverage for Indemnitee under such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage provided under such policy or policies in effect for any other director or officer of the Company.

8. No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment in connection with any claim against the Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder or to the extent that Indemnitee is entitled to be indemnified directly by any insurance company under the individual directors’ and officers’ liability provisions of any D&O Insurance maintained by the Company.

9. No Presumption . For purposes of this Agreement, the termination of any claim, actions, suit or proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its

equivalent, shall not of itself create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

10. Continuation of Indemnity . All agreements and obligations of the Company contained herein shall continue during the period the Indemnitee is a director, officer, employee, agent or fiduciary of the Company, or is serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other entity or enterprise, and shall continue thereafter so long as the Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal or investigative, by reason of the fact that the Indemnitee was a director or officer of the Company or serving in any other capacity referred to herein.

11. Notification of Proceedings; Consent to Settlements: Defense .

(a) Promptly after receipt by the Indemnitee of notice of the commencement of any action, suit or proceeding, the Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof. Notice shall be in writing and shall be addressed as follows:

FCStone Group, Inc.

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

Attn:

Such notice shall be deemed received if sent by prepaid mail properly addressed. Indemnitee and the Company shall cooperate fully with each other in the defense of any such action, suit or proceeding and each shall provide the other with such information as the other may reasonably require. The Company shall not be liable to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any action, suit or proceeding effected without its prior written consent (which consent shall not be unreasonably withheld).

(b) Except as otherwise provided below, the Company may, at its option, assume the defense of such action, suit or proceeding with legal counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of an action, suit or proceeding, the Company will not be liable to the Indemnitee for expenses incurred by the Indemnitee in connection with such action, suit or proceeding under this Agreement, including Section 3 hereof, other than Indemnitee’s reasonable costs of investigation or participation in such action, suit or proceeding (including, without limitation, travel expenses) and except as provided below. The Indemnitee shall have the right to employ Indemnitee’s own counsel in any such action, suit or proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense of such action, suit or proceeding shall be at the expense of the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been authorized by the

Company, (ii) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of such action, suit or proceeding, or (iii) the Company shall not in fact have employed counsel to assume the defense of such action, suit or proceeding, in each of which cases the fees and expenses of the Indemnitee’s counsel shall be advanced by the Company as provided in Section 3 hereof. The Company shall not be entitled to assume the defense of any such action, suit or proceeding brought by or on behalf of the Company.

(c) If two or more persons, including the Indemnitee, may be entitled to indemnification from the Company as parties to any action, suit or proceeding, the Company may require the Indemnitee to use the same legal counsel as the other parties. The Indemnitee shall have the right to use separate legal counsel in such action, suit or proceeding, but the Company shall not be liable to the Indemnitee under this Agreement, including Section 3 hereof, for the fees and expenses of separate legal counsel incurred after notice from the Company of the requirement to use the same legal counsel as the other parties, unless the Indemnitee reasonably concludes that there may be a conflict of interest between the Indemnitee and any of the other parties required by the Company to be represented by the same legal counsel.

(d) The Indemnitee shall permit the Company to settle any action, suit or proceeding that the Company assumes the defense of , except that the Company shall not, without the Indemnitee’s written consent, settle any action, suit or proceeding unless such settlement includes a provision whereby the parties to the settlement unconditionally release Indemnitee from all liabilities, damages, fines, penalties, costs and expenses in respect of claims by reason of the settlement or release of the parties in such action, suit or proceeding.

12. Enforcement .

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce the Indemnitee to agree to serve or to continue to serve as a director and/or officer of the Company and acknowledges that the Indemnitee is relying upon this Agreement in agreeing to serve or continuing to serve in such capacity.

(b) The right to indemnification provided by this Agreement shall be enforceable by Indemnitee in any court in the State of Iowa having subject matter jurisdiction thereof and in which venue is proper. The Indemnitee shall have the right to commence litigation in any such court challenging any determination by the Reviewing Party or any aspect thereof, or the legal or factual bases therefor. The Company shall reimburse Indemnitee for any and all reasonable expenses (including attorneys’ fees) incurred by Indemnitee in connection with any claim asserted or action brought by Indemnitee to enforce rights or to collect moneys due under this Agreement, the Certificate of Incorporation or the Bylaws of the Company or any other agreement with the Company nor or hereafter in effect relating to indemnification, or any D&O Insurance purchased and maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance

expense payment or insurance coverage, as the case may be, unless the court determines that the claim or action is frivolous or that assertions made therein were made with no reasonable basis.

(c) In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

13. Severability . Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof.

14. Governing Law; Binding Effect; Amendment and Termination .

(a) This Agreement shall be interpreted and enforced in accordance with the laws of the State of Iowa without giving effect to the principles of conflicts of laws thereof.

(b) This Agreement shall be binding upon the Indemnitee and upon the Company, its successors and assigns (including any transferee of all or substantially all of the assets of the Company and any successor by merger or operation of law), and shall inure to the benefit of the Indemnitee, his or her heirs, personal representatives and assigns and to the benefit of the Company, its successors and assigns. The Company shall require and cause any successor to all or substantially all of its assets, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place.

(c) No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof, and no such waiver shall constitute a continuing waiver.

15. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of such Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

16. Change in Other Rights. The Company will not adopt any amendment to the Articles or Bylaws of the Company the effect of which would be to deny, diminish or encumber the Indemnitee’s rights to indemnification, advancement of expenses, exculpation or maintenance of the D&O Insurance hereunder, under such other documents or under applicable law, as applied to any act or failure to act occurring

in whole or in part prior to the date upon which any such amendment was approved by the Board of Directors or the stockholders, as the case may be. Notwithstanding the foregoing, if the Company adopts any amendment to the Articles or Bylaws the effect of which is to so deny, diminish or encumber such rights, such amendment will apply only to acts or failures to act occurring entirely after the effective date thereof.

17. Savings Clause . If this Agreement or any provision hereof is invalidated on any ground by any court of competent jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any expenses, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by the Indemnitee in connection with any action, suit or proceeding to the fullest extent permitted by any applicable provision of this Agreement that has not been invalidated and to the fullest extent permitted by Iowa law.

18. Deposit of Funds in Trust . In the event that the Company decides to voluntarily dissolve or to file a voluntary petition for relief under applicable bankruptcy, moratorium or similar laws, then not later than ten (10) days prior to such dissolution or filing, the Company shall deposit in trust for the exclusive benefit of Indemnitee a cash amount equal to all amounts previously authorized to be paid to Indemnitee hereunder, such amounts to be used to discharge the Company’s obligations to Indemnitee hereunder. Any amount in such trust not required for such purpose shall be returned to the Company.

19. Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.


FCSTONE GROUP, INC.

By:
		Name: Title:


INDEMNITEE:

By:
		Name:

Exhibit 10.58

[RZB Finance Logo]

February 17, 2004

FCStone Merchant Services, LLC

1 North End Avenue, Suite 1129

New York, NY 10282

Attention: Mr. Allan J. Lee

Gentlemen:

We wish to advise you of the terms and conditions upon which RZB Finance LLC (“RZB”) may in its sole discretion extend credit to FCStone Merchant Services, LLC, (the “Borrower”).

(a) Subject to the provisions hereof, the Borrower may utilize this credit facility for short term advances (“Loans”) and issuance of commercial letters of credit (“L/C’s”) in the aggregate principal sum and face amount of up to Five Million Dollars ($5,000,000) at any one time outstanding. Notwithstanding the foregoing, and without in any way limiting RZB’s sole and absolute discretion to determine whether to make any loan or issue any limiting RZB’s sole and absolute discretion to determine whether to make any loan or issue any L/C, or refrain therefrom (as more fully set forth below), and without in any way limiting RZB’s absolute right to demand payment of any Loan at any time in RZB’s sole discretion, the Borrower acknowledges that with respect to each specific transaction of the Borrower financed by RZB pursuant hereto, the sum of (i) the Loans made by RZB in connection with each transaction, and, (ii) the aggregate face amount of L/C’s issued in connection therewith whall not exceed a percentage of the value of the assets of the Borrower being financed by RZB in such transaction, such percentage and value to be determined by RZB in its sole and absolute discretion from time to time.

(b) For purposes hereof: “Advance Rates” shall mean, with respect to percentages of the Borrower’s accounts receivable which are the subject of such transaction (provided, however, that RZB reserves the right to change any or all of the following percentages or categories of assets in any way whatsoever, at its sole and absolute discretion, at any time and from time to time, with or without notice to the Borrower): 90% of the net face amount of the Borrower’s eligible accounts receivable (as such eligibility shall be determined from time to time by RZB in its sole and absolute discretion).

(c) The Loans shall be evidenced by, and subject to the terms and conditions contained in, a single grid promissory note (the “Note”) made by the Borrower in form and substance satisfactory to RZB. Interest on the Loans shall be payable at the rate specified in the Note (the “Interest Rate”).

RZB Finance LLC 113 Avenue of the Americas, 16 ^th Floor, New York, N.Y 10036 • Telephone: (212) 845-4100 •Fax: (212) 944-2093 Telex: 6738478 RZBLLCNY • A WHOLLY OWNED SUBSIDIARY OF RAIFFEISEN ZENTRALBANK ÖSTERREICH AG (RZB-AUSTRIA) • Head Office: A-1030 Vienna, Am Stadtpark 9, Postal Address: A-1011 Vienna, P.O. Box 50 • Member of UNICO Banking Group

(d) Each Loan hereunder shall be payable on demand, and in no event shall any Loan be outstanding for more than 180 days.

(e) Each L/C shall be in form and substance satisfactory to RZB, and shall have an expiration date not more than 180 days after its date of issuance. The Borrower shall pay to RZB a fee with respect to each L/C in an amount equal to the greater of: (i) a flat fee of $500 or (ii) a fee at a rate per annum equal to 2.5% of the maximum face amount of the L/C (without regard to whether conditions to drawing may then be satisfied) or (iii) such higher amount or percentage as shall be agreed to by the Borrower and RZB with respect to L/Cs issued after the date of such agreement. The fee provided for in clauses (i), (ii) and (iii) shall be payable upon issuance of each L/C.

(f) The Borrower shall reimburse RZB for the amount of each drawing under each L/C on demand, and shall pay interest on the unreimbursed portion of each drawing as provided in the Continuing Agreement for Letters of Credit between Borrower and RZB.

(g) This credit facility may be terminated at any time at the sole and absolute discretion of RZB.

(h) Without in any way limiting RZB’s sole and absolute discretion to make any Loan or issue any L/C, or refrain therefrom (as more fully set forth below), and without in any way limiting RZB’s right to demand payment of any Loan at any time in its sole and absolute discretion, the Borrower agrees that: they shall, from time to time, pay the Loans and reimbursement obligations in respect of L/C’s and shall deliver cash collateral in respect of outstanding L/C’s, as and when necessary to cause: the sum of (1) the outstanding balance of Loans advanced by RZB in connection with a specific transaction of the Borrower financed pursuant hereto, (2) the aggregate face amount of outstanding L/C’s issued in connection with such transaction, and (3) the aggregate unreimbursed amount of all drawings under L/C’s issued in connection with such transaction (as such sum may be reduced by the amount of cash collateral pledged in respect of such outstanding L/C’s) not to exceed, on any date, the amount obtained by applying the Advance Rates (as such value shall be determined by RZB in its sole discretion) of all the assets then owned by the Borrower (without double counting) which are the subject of transactions financed by RZB pursuant hereto and are subject to a perfected first priority security interest in favor of RZB; and

2. The proceeds of the Loans and the L/C’s shall be used to finance the purchase of inventory by the Borrower or by the Borrower’s customers from suppliers and accounts receivable arising from the sale of inventory.

3. Requests for Loans under this Agreement and directions as to the disposition of the proceeds of Loans shall be given in writing (including by telecopy) by the Borrower to RZB, or may be given orally (including by telephone), provided any such oral communication shall be confirmed promptly to RZB in writing. Requests for L/C’s under this Agreement shall be given in writing (including telecopy) by the Borrower to RZB by the execution and delivery of an application satisfactory in form and substance to RZB. Any such Loan so made or L/C issued shall be conclusively presumed to have been made to or for the

benefit of, or for the account of, the Borrower when made in accordance with any such request or direction. RZB may rely on any such request or direction which it believes to be genuine, and RZB shall be fully protected in so doing without any duty to make any further inquiry as to such genuineness or to otherwise act in good faith in the premises.

4. The Borrower agrees and acknowledges that, notwithstanding anything to the contrary contained or implied in this Agreement, RZB shall have no obligation to make any Loan or issue any L/C, and RZB shall have the sole and absolute discretion to make any Loan or issue any L/C or refrain from making any Loan or issuing any L/C. The Borrower further agrees and acknowledges that, notwithstanding anything to the contrary contained or implied in this Agreement, all of the Loans shall be payable on demand, and RZB may demand payment of any Loan at any time in its sole and absolute discretion.

5. All payments of principal, interest, and other sums in connection with the Loans and L/C’s shall be payable to RZB at such account as RZB shall designate, or in the absence of such designation, to RZB at its office at 1133 Avenue of the Americas, New York, New York 10036, in lawful money of the United States in immediately available funds and without setoff or deduction. Interest and fees shall be computed on the basis of a 360 day year and the actual number of days elapsed.

6. Without limiting the discretionary nature of the credit facility hereunder, the making of each Loan and the issuance of each L/C shall be subject to the fulfillment (to the satisfaction of RZB) of the following conditions precedent:

(a) The Borrower shall have executed and delivered to RZB the Note evidencing the Loans and a Continuing Agreement for Letters of Credit in form and substance satisfactory to RZB;

(b) The Borrower shall have complied and shall then be in compliance with all of the terms, covenants and conditions of this Agreement and the Loan Documents (as hereinafter defined in Section 9(c);

(c) The representations and warranties of the Borrower contained in each of the Loan Documents shall be true and correct on the date of such Loan;

(d) RZB’s continuing review of and continuing satisfaction with the business, operations, prospects, properties, and condition, financial or otherwise, of the Borrower;

(e) RZB shall have received (i) a copy of all corporate action taken by the Borrower to authorize the execution and delivery of the agreements, instruments and documents pursuant hereto or in connection herewith, and (ii) if requested by RZB, a legal opinion of counsel to the Borrower, together with such opinions of special counsel to the Borrower as RZB shall request, and each such opinion shall be satisfactory in form and substance to RZB.

(f) The Borrower shall have executed and delivered to RZB a general security agreement (the “Borrower Security Agreement”) and related UCC-1 financing statements granting RZB a first priority perfected lien (except as otherwise provided in the Intercreditor Agreement referred to below) on the Collateral (as defined therein) in form and substance satisfactory to RZB;

(g) RZB shall have entered into the Intercreditor Agreement with such other lenders to the Borrower as RZB shall deem appropriate, and such Intercreditor Agreement shall be satisfactory in form and substance to RZB.

(h) The Borrower upon request by RZB shall have delivered such evidence of a Tripartite Agreement with FCStone LLC, Subordination Agreement with Harvard Private Capital Properties III, Inc. entity, in addition to insurance and loss payable endorsements as RZB may require;

(i) The Borrower shall have delivered to RZB such documents of title and other instruments and documents, pertaining to the transaction of the Borrower which is being financed in connection with such loan or L/C, as RZB shall require, and all of the foregoing shall be in form and substance, and contain such endorsements, as shall be satisfactory to RZB in all respects;

(j) All legal matters incident to such Loan or L/C shall be reasonably satisfactory to counsel to RZB.

7. As long as any of the Loans or L/Cs or any other obligations hereunder shall be outstanding, the Borrower shall:

(a) Furnish to RZB within 120 days after the end of each fiscal year a copy of its audited financial statements prepared in conformity with generally accepted accounting principles consistently applied and certified without qualification by the Borrower’s independent public accountants along with the CEO’s report of operating highlights with comparisons to budget.

(b) Furnish to RZB, each certified as true and complete in all respects by the Borrower’s chief financial officer or the person acting in such capacity, on a monthly basis if not later than 30 days following the end of the month, a copy of the financial statements of the Borrower for the preceding month along with the CEO’s report as stated above.

(c) Furnish, to RZB such other information concerning the Borrower’s business, properties, condition or operations, financial or otherwise, as RZB may from time to time reasonably request.

(d) Maintain and preserve their corporate existence, and remain in the same lines of business as on the date hereof.

(e) Maintain, at all times: Tangible Net Worth (as herein defined) including sub debt of $2,500,000.

Tangible Net Worth shall mean the sum of capital surplus, earned surplus and capital stock, plus Subordinated Debt minus deferred charges, intangibles, treasury stock and investments in affiliates, all as determined in accordance with generally accepted accounting principles consistently applied.

(f) Not declare or pay any dividends or make any distributions to shareholders in any fiscal year without the prior written consent of RZB except the Borrower shall be permitted to pay quarterly dividends to its members in amounts sufficient to pay federal, state and local income taxes payable by such members and arising solely from their ownership of equity interests in the Company.

8. The Borrower represents and warrants to RZB and covenants and agrees with RZB that, with respect to each account receivable of the Borrower financed by RZB pursuant hereto, there is not nor will there be at any time, any counterclaim, dispute or any other matter or circumstance whatsoever which could give rise to a right of set-off or other adverse claim that could be asserted by the account debtor to reduce its obligation to pay under such account receivable.

9.(a) No delay on the part of RZB in exercising any of its options, powers or rights, or partial or single exercise thereof, irrespective of any course of dealing, shall constitute a waiver thereof. The options, powers and rights or RZB specified in the Loan Documents (as hereinafter defined in Section 9(c)) are in addition to those otherwise created by law or under any other agreement between the Borrower and RZB. No amendment, modification or waiver of any provision of any Loan Document to which the Borrower is a party, nor consent to any departure by the Borrower therefrom, shall be effective, unless the same shall be in writing and signed by RZB. Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No consent to or demand on the Borrower in any case shall, of itself, entitle the Borrower to any other or further notice or demand in similar or other circumstances.

(b) This Agreement and the other loan Documents embody the entire agreement and understanding between RZB and the Borrower and supersedes all prior agreements and understandings relating to the subject matter hereof.

(c) The Borrower agrees to pay all costs and expenses incurred or payable by RZB in connection with the preparation, administration, interpretation, enforcement or collection of this Agreement, the Note, the L/C’s and any applications or other agreements pertaining to the issuance thereof, the Borrower Security Agreement and all other documents executed and delivered in connection herewith or therewith (such agreements and documents, including all amendments, modifications and supplements of or to all such agreements and documents are herein referred to as the “Loan Documents”), including, without limitation, costs of examination and audit of the Borrower’s books and records and of the collateral security for the Loans and L/C reimbursement obligations up to a maximum of two audits within any 12 month period, and court costs and reasonable attorneys’ fees and disbursements.

(d)(i) If RZB shall have determined that the applicability of any law, rule, regulation or guideline (domestic or foreign) adopted (whether before or after the date

hereof) pursuant to or arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled “International Convergence of Capital Measurement and Capital Standards”, or the adoption after the date hereof of any other law, rule, regulation or guideline (domestic or foreign) regarding capital adequacy, or any change in any of the foregoing or in the enforcement or interpretation or administration of any of the foregoing by any court of any governmental authority, central bank or comparable agency charged with the enforcement or interpretation or administration thereof, or compliance by RZB or any corporation or other entity which directly or indirectly controls RZB (each such corporation or other entity is hereinafter referred to as a “Controlling Person”)(or any lending office of RZB or any Controlling Person), with any request or directive regarding capital adequacy (whether or not having the force of law) of any such court, authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on RZB’s capital or on the capital of a Controlling Person, if any, as a consequence of its issuance or maintenance of any L/C or its commitment or obligations (if any ) under this Agreement to a level below that which RZB or such Controlling Person could have achieved by for such applicability, adoption, change or compliance (talking into consideration RZB’s policies and the policies of such Controlling Person with respect to capital adequacy) by an amount deemed by RZB to be material, then , upon demand by RZB, Borrower shall pay to RZB from time to time as specified by RZB such additional amount or amounts as will compensate RZB or such Controlling Person for any such reduction suffered.

(ii) If any change in law, rule, regulation or guideline (domestic or foreign) or in the enforcement, interpretation or administration thereof by any court or any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof shall at any time (a) impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, pursuant to Regulation D of the Board of Governors of the Federal Reserve System) against letters of credit issued by RZB or (b) subject letters of credit issued by RZB to any assessment or other cost imposed by the Federal Deposit Insurance Corporation or any successor thereto or (c) impose on RZB any other or similar condition regarding this Agreement or any L/C, the commitment or obligations of RZB hereunder and the result of any event referred to in clause (a), (b) or (c) above shall be to increase the cost to RZB of agreeing to issue, issuing or maintaining or confirming any L/C or making, funding or maintaining (or agreeing to fund or maintain) drawings under any L/C by an amount which RZB shall deem to be material (which increase in cost shall be the result of the reasonable allocation by RZB of the aggregate of such cost increases resulting from such events), then , upon demand by RZB, Borrower shall pay to RZB from time to time as specified by RZB, additional amount or amounts as will compensate RZB for such increased cost from the date of such change. The Borrower’s obligation to pay compensation contained in this subsection (ii) shall be applicable as well to any financial institution which confirms or advises any L/C and which incurs or is subjected to any increased cost as a result of the imposition, modification or applicability of any such reserve, special deposit or similar requirement, the subjecting of L/Cs to any such assessment or other cost, or the imposition of any such other or similar condition.

(iii) The provisions of this subsection (d) shall survive the termination of this Agreement.

(e) The Loan Documents to which the Borrower is a party shall be binding on the Borrower and its successors and assigns, and shall inure to the benefit of RZB and its successors and assigns, provided that the Borrower shall not have the right to assign its rights hereunder or thereunder or any interest herein or therein without RZB’s prior written consent.

(f) In addition to the rights granted to it by applicable law, RZB has the right to set-off and apply to any of the Borrower’s obligations hereunder any amount received by it for the Borrower.

(g) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).

Contrary to the express agreement of the parties in this Section 9(g) hereof, if the laws of any state other than New York, including the laws of the state of Texas, shall be determined to be applicable to this Agreement, the Note or the other Loan Documents, it is the intent of the parties hereto to comply with all applicable usury laws and to limit all interest contracted for, reserved, charged or received under the Loan Documents to the maximum nonusurious rate of interest permitted by applicable law. If the applicable common law and principles of equity and constitutions, statutes, rules, regulations and orders of governmental bodies and authorities, and orders, writs, decisions, injunctions and decrees of all courts, arbitrators and governmental instrumentalities (the “Applicable Law”) is ever judicially interpreted so as to render usurious any amount called for under or in connection with the Notes, this Agreement and the Loan Documents, or contracted for, charged, taken, reserved or received with respect to the transactions referred to herein or therein, or if demand of or acceleration of the maturity of the Note or if any prepayment by Borrower results in Borrower or any other Person having paid any interest (however denominated) in excess of that permitted by laws for the actual period the Note and the obligations of the Borrower are outstanding, then it is the Borrower’s and RZB’s intent that all excess amounts theretofore received by RZB shall be credited on the principal balance of the Note (or, if the Note has been or would thereby be paid in full, refunded to the Borrower), and the provisions of the Note and this Agreement immediately shall be deemed reformed and the amounts thereafter collectible under the Note, this Agreement and the other Loan Documents reduced, without the necessity of the execution of any new documents, so as to comply with the Applicable Law, but so as to permit the recovery of the fullest amount otherwise called for under the Note, this Agreement and the other Loan Documents for the actual period the Note and other obligations of the Borrower are outstanding.

(h) The Borrower hereby agrees that ANY LEGAL ACTION OR PROCEEDING AGAINST THE BORROWER WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK as RZB may elect, and, by execution and delivery hereof, the Borrower accepts and consents to, for itself and in respect to its property, generally and unconditionally, the jurisdiction of the aforesaid courts and agree that such jurisdiction shall be exclusive, unless waived by RZB in writing, with respect to

any action or proceeding brought by it against RZB and any questions relating to usury. Nothing herein shall limit the right of RZB to bring proceedings against the Borrower in the courts of any other jurisdiction. The Borrower agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Agreement and, to the maximum extent permitted by law, waives any right to stay or to dismiss any action or proceeding brought before said courts on the basis of forum non conveniens .

(i) AFTER REVIEWING THIS PROVISION SPECIFICALLY WITH ITS RESPECTIVE COUNSEL, THE BORROWER AND RZB HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASE ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR RZB. THIS PROVISION IS A MATERIAL INDUCEMENT FOR RZB MAKING THE LOANS TO THE BORROWER.


Very truly yours,

RZB FINANCE LLC

By:		/s/ Pearl Geffers
		Pearl Geffers, First Vice President

By:		/s/ Frank J. Yautz
		Frank J. Yautz, First Vice President


Accepted and Agreed to on this 13 day of May, 2004

FCStone Merchant Services, LLC

By:		/s/ Allan J. Lee

By:		/s/ Michael Altneu

Exhibit 10.59

PROMISSORY NOTE

PROMISSORY NOTE (the “ Note ”) of the Borrower named below delivered to RZB FINANCE LLC (“ RZB ”) dated February 17, 2004.

1.	SPECIAL TERMS

The following terms and provisions shall apply to this Note: definitions of terms in this or other sections of this Note expressed in the singular shall include the plural and vice versa .

Borrower : FCStone Merchant Services, LLC

(Specify jurisdiction of organization)

Principal Amount of this Note :

Five Million Dollars

($5,000,000)

Margin : 2.5% p.a.

Available Interest Periods for Eurodollar Loans :

Up to 180 days

Loan Documents : Line Letter dated February 17, 2004, between the Borrower and RZB, General Security Agreement dated February 17, 20004, between the Borrower and RZB, Continuing Agreement for Letters of Credit dated February 17,2004, between the Borrower and RZB, and all other agreements from time to time executed by the Borrower for the benefit of RZB, in each case as amended, modified or supplemented from time to time.

Minimum Eurodollar Amount : NA

Minimum Repayment Amount : NA

PRINCIPAL

FOR VALUE RECEIVED, the Borrower promises to pay to the order of RZB, ON DEMAND, the Principal Amount of this Note specified in Section 1 or, if less, the then-outstanding principal amount of all loans (each a “ Loan ” and collectively, the “ Loans ”) made to the Borrower by RZB pursuant to the Loan Documents. In no event shall the maturity date of any Loan be more than 180 days after the date such Loan is made.

INTEREST

The Borrower promises to pay interest on the unpaid principal amount of each Loan (after as well as before judgment) at a rate per annum which, during each Interest Period of such Loan, shall be equal to the Margin specified in Section 1 plus the Quoted Rate for such Interest Period. Such interest shall be payable on the last day of each Interest Period; provided that if any Interest Period in respect of a Loan is longer than three months, such interest prior to maturity shall be paid on the last Business Day of each three-month interval within such Interest Period as well as on the last day of such Interest Period.

Notwithstanding the preceding paragraph, the Borrower shall also pay interest at a rate per annum which shall be the greater of (A) 2% in excess of the Base Lending Rate from time to time in effect, or (B) 2% in excess of the rate which would otherwise be applicable pursuant to the terms hereof, on any principal of the Loan and, to the extent permitted by law, on any interest or other amount payable by the Borrower hereunder which shall not be paid in full when due (whether on demand, by acceleration or otherwise) from such due date until paid in full (after as well as before judgment), such interest to be payable on demand

All interest shall be computed on the basis of the number of days actually elapsed in a 360-day year.

Definitions .

The term “ Interest Period ,” when used with respect to any Loan, means (i) initially, the period commencing on the date of such Loan, and (ii) thereafter, each of the successive periods occurring while such Loan is outstanding, with such successive periods commencing on the same day as the last day of the immediately preceding period. The duration of an Interest Period commencing prior to maturity (by demand, acceleration or otherwise) shall be:

3.a. one of the periods specified as Available Interest

Periods in Section 1, as selected by the

Borrower not later than 11:00 A.M. (New

York time) three Business Days prior to

the commencement of such Interest Period, or

3.b. absent a timely selection by the Borrower, the

shortest of the periods specified as

Available Interest Periods in Section 1.

The duration of an Interest Period commencing on or after the due date for full payment hereunder (whether on demand, by acceleration or otherwise) shall be such period as RZB may reasonably select. Any Interest Period which would otherwise expire on a day other than a Business Day shall be (i) extended to the next following Business Day or (ii) if the next following Business Day is in a new calendar month, shortened to the next preceding Business Day.

The term “ Quoted Rate ,” when used with respect to an Interest Period for any Loan, means the quotient of (i) the offered rate quoted by The Chase Manhattan Bank (the “Bank”) in the interbank Eurodollar market in New York City or London, England on or about 11:00 A.M. (New York or London time, as the case may be) two Business Days prior to such Interest Period for U.S. dollar deposits of an amount comparable to the

principal balance of such Loan and for a period comparable to such Interest Period, divided by (ii) one minus the Reserve Percentage. For purposes of this definition, (a) “ Reserve Percentage ” shall mean with respect to any Interest Period, the percentage which is in effect on the first day of such Interest Period under Regulation D as the maximum reserve requirement for member banks of the Federal Reserve System in New York City with deposits comparable in amount to those of the Bank against Eurocurrency Liabilities. The Quoted Rate for the applicable period shall be adjusted automatically on and as of the effective date of any change in the applicable Reserve Percentage; (b) “ Regulation D ” shall mean Regulation D of the Board of Governors of the Federal Reserve System, as it may be amended from time to time; and (c) “ Eurocurrency Liabilities ” has the meaning assigned to that term in Regulation D, as in effect from time to time.

The term “ Business Day ” means any day on which banks are open for dealings by and between banks in U.S. dollar deposits in the interbank Eurodollar market in New York City and London, England, other than a Saturday, Sunday or any day which shall be in London, England or New York City a legal holiday or a day on which banking institutions are authorized by law to close.

The term “ Base Lending Rate ” means, for any day, the higher of (i) the rate announced by the Bank from time to time at its principal office in New York, New York as its prime rate for domestic (United States) commercial loans in effect on such day and (ii) the Federal Funds Rate in effect on such day plus 1/2%. (Such Base Lending Rate is not necessarily intended to be the lowest rate of interest charged by the Bank in connection with extensions of credit.) Each change in the Base Lending Rate shall result in a corresponding change in the interest rate and such change shall be effective on the effective date of such change in the Base Lending Rate.

The term “ Federal Funds Rate ” means, for any day, the overnight federal funds rate in New York City, as published for such day (or, if such day is not a New York Business Day, for the next preceding New York Business Day) in the Federal Reserve Statistical Release H.15 (519) or any successor publication, or if such rate is not so published for any day which is a New York Business Day, the average of the quotations for such day on overnight federal funds transactions in New York City received by the Bank from three federal funds brokers of recognized standing selected by the Bank.

4.	ADDITIONAL PAYMENTS

If any event shall occur (whether in the form of reserve requirements not included in the computation of the Quoted Rate, exchange control regulations, governmental charges or changes in the interbank Eurodollar market or the position of RZB or any financial institution that provides financing to RZB (a “funding source”) in such market or otherwise) which shall result in RZB or such funding source not receiving interest with respect to any Loan at the effective rate of the margin (plus 2% after demand) in excess of the costs incurred by RZB or such funding source in making, funding or maintaining such Loan, then , the Borrower shall pay to RZB, upon demand, such additional amounts as may be necessary to compensate RZB or such funding source, as the case may be, for any such deficiency or reduction. Each demand for compensation pursuant to the preceding sentence shall be accompanied by a certificate of RZB in reasonable detail setting forth the computation of such compensation (including the reason therefor), which certificate shall be conclusive, absent manifest error.

5.	PREPAYMENTS

The Borrower agrees that it shall have no right to repay all or any portion of a Loan except on the last day of an Interest Period applicable to such Loan, and then only if RZB has received written notice of such repayment not later than 11:00 A.M. (New York time) three Business Days prior to such repayment; any such notice shall be irrevocable. All partial repayments shall be in an amount not less than the Minimum Repayment Amount. All repayments pursuant to this paragraph shall be accompanied by the payment of all accrued interest on the principal amount so paid.

Without limiting the foregoing, the Borrower agrees that if for any reason any Loan (or any portion thereof) is not made after RZB or its funding source has arranged funding therefor, or, if for any reason (including as a result of demand) any Loan is repaid on a day other than the last day of an Interest Period therefor, the Borrower shall pay to RZB, upon demand, any unrecovered expenses or losses (including losses resulting from the re-employment of funds) incurred by RZB or its funding source as the result of such failure to borrow or repayment. RZB’s determination as to additional amounts due under this paragraph shall be conclusive, absent manifest error.

6.	ALL PAYMENTS

Each payment by the Borrower pursuant to this Note shall be made prior to 1:00P.M. (New York time) on the date due and shall be made without set-off or counterclaim to RZB at such account as RZB shall designate, or in the absence of such designation to RZB at its office, presently located at 1133 Avenue of the Americas, New York, NY 10036, or as RZB may otherwise direct and in such amounts as may be necessary in order that all such payments (after withholding for or on account of any present or future taxes, levies, imposts, duties or other similar charges of whatsoever nature imposed by any government or any political subdivision or taxing authority thereof, other than any tax on or measured by the net income of RZB pursuant to the income tax laws of the jurisdiction where RZB’s principal or lending office is located) shall not be less than the amounts otherwise specified to be paid under this Note. Each such payment shall be made in lawful currency of the United States of America and in immediately available funds. If the stated due date of any payment required hereunder is other than a Business Day, such payment shall be made on the next succeeding Business Day and interest at the applicable rate shall accrue thereon during such extension.

7.	REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants that all acts, filings, conditions and things required to be done and performed and to have happened (including, without limitation, the obtaining of necessary governmental approvals) precedent to the issuance of this Note to constitute this Note the duly authorized, legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, have been done, performed and have happened in due and strict compliance with all applicable laws.

DEFAULT

Without limiting the right of RZB to demand payment of the Loans evidenced hereby at any time in its sole discretion, if any of the following events shall occur: default in payment of any amount due hereunder to the holder hereof, whether on demand or otherwise; suspension or liquidation by the Borrower of its usual business or suspension or expulsion of the Borrower from any exchange; calling of a meeting of creditors; assignment by the Borrower for the benefit of creditors; dissolution, bulk sale or notice thereof effected or given by the Borrower; creation of a security interest in any assets of the Borrower which are or shall be subject to liens granted to the holder hereof by the Borrower without consent of the holder hereof; insolvency of any kind, attachment, distraint, garnishment, levy, execution, judgment, application for or appointment of a receiver or custodian, filing of a voluntary or involuntary petition under any provision of the U.S. Bankruptcy Code or amendments thereto, of, by or against the Borrower for any relief under any bankruptcy or insolvency laws or any laws relating to the relief of debtors, readjustment of indebtedness, reorganizations, compositions or extensions; any governmental authority or any court at the instance of any governmental authority shall take possession of any substantial part of the property of the Borrower or shall assume control over the affairs or operations of the Borrower; any statement, representation or warranty made by the Borrower in any document, agreement or financial statement delivered to RZB shall prove to be false in any material respect when made; failure of the Borrower or any other party thereto to comply with any term of any of the Loan Documents; failure of the Borrower, on request, to furnish to RZB any financial information, or to permit inspection by RZB of any books or records; any change in, or discovery with regard to, the condition or affairs of the Borrower which, in RZB’s opinion, increases its credit risk; or if RZB for any other reason deems itself insecure; then, the indebtedness evidenced by this Note, and all accrued interest thereon shall become absolute, due and payable without demand or notice to the Borrower. Upon default in the due payment of this Note, or whenever the same or any installment of principal or interest hereof shall become due in accordance with any of the provisions hereof (whether on demand or otherwise), RZB may, but shall not be required to, exercise any or all of its rights and remedies, whether existing by contract, law or otherwise, with respect to any collateral security delivered in respect of the indebtedness evidenced hereby.

9.	MISCELLANEOUS

This Note is delivered pursuant to, and entitled to the benefits of, the Loan Documents.

The Loans and principal repayments thereof and the interest rate and Interest Period applicable to each Loan may be recorded on the records of RZB and, prior to any transfer of, or any action to collect, this Note, the outstanding principal amount of each Loan shall be endorsed on this Note, together with the date of such endorsement. Any such recordation or endorsement shall constitute prima facie evidence of the accuracy of the information so recorded or endorsed (provided, however, that the failure of RZB to record any of the foregoing shall not limit or otherwise affect the obligation of the Borrower to repay all the Loans (including interest thereon) and its other obligations hereunder and under the Loan Documents). The Bank may charge any account of the Borrower with the Bank for amounts payable under this Note.

Each payment of principal of, or interest on, the Loans shall constitute an acknowledgment of the indebtedness of the Borrower under the Loan Documents and this Note. The Borrower:

a. waives presentment, demand, protest and other

notice of any kind in connection with this

Note; and

b. agrees to pay to the holder hereof, on demand, all

costs and expenses (including

reasonable legal fees) incurred in

connection with the enforcement and

collection of this Note.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW), BUT THIS SHALL NOT LIMIT THE RATE OF INTEREST WHICH MAY BE CHARGED BY RZB UNDER OTHER APPLICABLE LAW.

The Borrower hereby agrees that ANY LEGAL ACTION OR PROCEEDING AGAINST THE BORROWER WITH RESPECT TO THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK as RZB may elect, and, by execution and delivery hereof, the Borrower accepts and consents to, for itself and in respect to its property, generally and unconditionally, the jurisdiction of the aforesaid courts and agrees that such jurisdiction shall be exclusive, unless waived by RZB in writing, with respect to any action or proceeding brought by it against RZB and any questions relating to usury. Nothing herein shall limit the right of RZB to bring proceedings aginst the Borrower in the courts of any other jurisdiction. Service of process out of any such courts may be made by mailing copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address for notices as specified herein and will become effective 30 days after such mailing. The Borrower agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Note and, to the maximum extent permitted by law, waives any right to stay or to dismiss any action or proceeding brought before said courts on the basis of forum non conveniens .

AFTER REVIEWING THIS PROVISION SPECIFICALLY WITH ITS RESPECTIVE COUNSEL, EACH OF THE BORROWER AND RZB HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR RZB. THIS PROVISION IS A MATERIAL INDUCEMENT FOR RZB MAKING THE LOANS TO BORROWER.

Nothing contained in this Note shall be deemed to establish or require the payment of a rate of interest in excess of the maximum rate permitted by applicable law (the “ Maximum Rate ”). If the amount of interest payable for any interest payment period ending on any interest payment date calculated in accordance with the provisions of this Note (said amount, the “ Calculated Interest ”) exceeds the amount of interest that would be payable for such interest payment period had interest for such interest payment period been calculated at the maximum Rate, there shall be paid on such interest payment date an amount of interest calculated on the basis of the Maximum Rate for such interest payment period. If on any subsequent interest payment date, (i) the Calculated Interest for the interest payment period ending on such subsequent interest payment date (the “ Current Interest Payment Period ”) is less than the amount of interest that would be payable for such Current Interest Period had interest for such current Interest Period been calculated on the basis of the Maximum Rate and (ii) any portion of the excess (if any) of Calculated Interest for any prior interest payment period over interest calculated at the Maximum Rate for such prior interest payment period (the “ Outstanding Interest Amount ”) remains unpaid, then on such subsequent interest payment date there shall be paid, as provided herein, additional interest for such Current Interest Period in an amount equal to the lesser of (i) the theretofore unpaid Outstanding Interest Amounts for all prior interest payment periods or (ii) an amount that, when added to the amount of Calculated Interest payable for such Current Interest Period, results in the payment of interest for such Current Interest Period at the Maximum Rate.

IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed and delivered by its duly authorized officer(s).


FCStone Merchant Services, LLC

By:	/s/ Allan J. Lee
	Name:	Allan J. Lee
	Title:	President



By:	/s/ Michael D. Altneu
	Name:	Michael D. Altneu
	Title:	Senior VP

Address of Borrower for Notices:

1.	One North End Avenue, Suite 1129, NY, NY 10282

2.	2829 Westown Parkway, Suite 200, West Des Moines, IA 50266 Attn: Robert Johnson

Exhibit 10.60

GENERAL SECURITY AGREEMENT

In consideration of loans, credit or other financial accommodations extended or continued from time to time to, or on the guaranty, endorsement or other assurance of, the undersigned (“Obligor”) by RZB Finance LLC (together with its successors and assigns, “RZB”), Obligor hereby agrees as follows:

1.	Security Interest .

a. To secure the full and punctual payment and performance of all of the Obligations (as hereinafter defined), Obligor hereby grants to RZB a continuing security interest in, and assigns and pledges to RZB, the Collateral (as hereinafter defined).

b. “Obligations” shall mean and include all indebtedness, liabilities, obligations, covenants and duties of Obligor to RZB or any Affiliate of RZB (including those which RZB or such Affiliate may have acquired from others) of every kind, nature and description, direct or indirect, absolute or contingent, due or not due, contractual or tortuous, liquidated or unliquidated, arising by operation of law or otherwise, now existing or hereafter arising, and whether or not evidenced by any note or other instrument or agreement and whether or not for the payment of money, but not limited to, indebtedness, obligations and liabilities to RZB or such Affiliate of Obligor as a member of any partnership, syndicate, association or other group.

c. Affiliate and certain other terms used herein are defined in Section 15 hereof.

d. As used herein, the term “Collateral” means the property described opposite the box(es) checked below together with the property described in Section 1(f) below:

x A. All Personal Property. All of the personal property and fixtures of the Obligor wherever located and whether now owned or in existence or hereafter acquired or created, of every kind and description, tangible or intangible, including without limitation all inventory (including, without limitation, inventory as defined in Section 1(d)(C) hereof), goods and accessions thereto, equipment and accessions thereto, farm products, documents, chattel paper (whether tangible or electronic), accounts (including, without limitation, accounts as defined in Section 1(d)(D) hereof), contract rights, securities and other investment property, general intangibles, tax refund claims, patents, trademarks, intellectual property, payment intangibles, supporting obligations, instruments, promissory notes, letters of credit and proceeds thereof, advices of credit, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, credits, deposits, cash, deposit accounts (general or special), and certificates of deposit. Each of such terms which is defined in the New York Uniform Commercial Code as in effect form time to time shall have the meaning ascribed thereto therein when used in this Agreement.

¨ B. Equipment. Equipment (of any nature and description), now owned or hereafter acquired and wherever located, employed in the operation of the Obligor’s business, and all proceeds thereof and products of such equipment in any form whatsoever. As used herein, the term “equipment” shall also mean and include all spare parts therefore, all present and future additions, attachments and accessions thereto, all substitutions therefor and replacements

thereof. Nothing herein shall be construed as giving a right to the Obligor to sell any equipment which is the subject of this Agreement.

¨ C. Inventory. All of the inventory of the Obligor, of every type or description, now owned or hereafter acquired and wherever located, whether raw, in process or finished, all goods usable in processing the same and all documents, documents of title and receipts covering any inventory (hereinafter, referred to as “inventory”), and all proceeds thereof and products of such inventory in any form whatsoever, including but not limited to accounts and chattel paper (whether tangible or electronic) and cash proceeds.

¨ D. Accounts and Chattel Paper. All of the Obligor’s present and future accounts (including, without limitation, health-care-insurance receivables), contract rights, letters of credit, letter-of-credit rights, general intangibles, tax refund claims, payment intangibles, software, supporting obligations, instruments, promissory notes, and chattel paper (whether tangible or electronic) and all other rights to the payment of money, whether or not arising out of the sale (or lease) of goods or services (herein referred to in the plural as “accounts” and in the singular as “account”), all proceeds thereof and all liens, securities, guarantees, remedies, and privileges pertaining thereto, together with all rights and liens of the Obligor in and to such goods, including returned or repossessed goods, and all rights and property of any kind forming the subject matter of any of the accounts, including the right of stoppage in transit.

¨ E. Other.

See Schedule A annexed hereto and made a part hereof.

If no box is checked, Clause A (All Personal Property) shall be deemed applicable for all purposes of this Agreement. If the Clause A box is checked, checking also the Clause B and/or Clause C and/or Clause D and/or Clause E box(es) is not intended, and shall not be construed, to limit the generality or legal effect of the description contained in Clause A.

e. (i) If the Obligor shall at any time acquire a commercial tort claim, as defined in Article 9 of the Uniform Commercial Code as in effect in the State of New York (“NY UCC Article 9”), which the Obligor reasonably believes based upon then-current information is likely to result in a judgment in favor of the Obligor in excess of $25,000, the Obligor shall promptly notify RZB in a writing signed by the Obligor of the brief details thereof and grant to RZB in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to RZB.

(ii) RZB may at any time and from time to time file financing statements, continuation statements and amendments thereto that describe the Collateral as all assets of the Obligor or words of similar effect and which contain any other information required by NY UCC Article 9 or revised Article 9 of the Uniform Commercial Code in the form or substantially in the form approval in 1998 by the American Law Institute and the National Conference of Commissioners on Uniform State Laws (“Revised Article 9”) as adopted in any other jurisdiction (including Part 5 thereof) for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether the Obligor is an organization, the type of organization and any organization identification number issued to the

Obligor. The Obligor agrees to furnish any such information to RZB promptly upon request. Any such financing statements, continuation statements or amendments may be signed by RZB on behalf of the Obligor and may be filed at any time with or without any signature of the Obligor or RZB in any jurisdiction whether or not NY UCC Article 9 or Revised Article 9 is then in effect in that jurisdiction.

(iii) The Obligor shall at any time and from time to time, whether or not NY UCC Article 9 or Revised Article 9 is in effect in any particular jurisdiction, take such steps as RZB may request for RZB to (i) obtain an acknowledgement, in form and substance satisfactory to RZB, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for RZB, (ii) obtain “control” of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such terms are defined in NY UCC Article 9 with corresponding provisions in Section 9-104, 9-105, 9-106 and 9-107, relating to what constitutes “control” for such items of Collateral), with any agreements establishing control to be in form and substance satisfactory to RZB, and (iii) otherwise insure the continued perfection and priority of RZB’s security interest in any of the Collateral and of the preservation of its rights therein, whether in anticipation of or following the effectiveness of NY UCC Article 9 in New York or Revised Article 9 in any other jurisdiction.

f. Any and all deposits or other sums at any time credited by or due from RZB to the Obligor; and any and all monies, securities and other property of the Obligor, and the proceeds thereof now or hereafter held or received by or in transit to RZB from or for the Obligor, whether for safekeeping, custody, pledge, transmission, collection or otherwise, shall at all times constitute security for any and all Obligations.

2.	Rank and Perfection of Security Interest .

a. Obligor will not create or permit to exist, nor shall there exist, any security interest in, lien, attachment, levy or encumbrance upon, or assignment or pledge as security of, any of the Collateral, except the security interest of and assignment and pledge to RZB hereunder and Permitted Liens.

b. (i) Obligor will from time to time, at its expense, take all action requested by RZB, or which may be necessary or desirable, to perfect, continue, evidence, preserve, protect or validate the security interest of and assignment and pledge to RZB hereunder to enable RZB to exercise and enforce its rights hereunder, including, but not limited to, (A) executing and delivering one or more notices, financing statements, agreements or other writings, and (B) delivering to RZB, and stamping or otherwise marking, in such manner as RZB may specify, any and all chattel paper, instruments, letters and advice of credit and documents constituting part of the Collateral, in each case endorsed or accompanied by such instruments of assignment as RZB may specify.

(ii) Obligor hereby authorizes RZB, at its option but without any obligation so to do, to file financing and continuation statements and amendments to financing statements, naming Obligor as debtor, with respect to any of the Collateral without the signature of Obligor, and agrees that a carbon, photographic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. Obligor shall pay the costs of any recording or

filing of any financing or continuation statements, or amendments thereto, concerning the Collateral.

3.	Covenants .

a. Obligator shall at all times: (i) be the sole owner of each and every item of Collateral, (ii) defend the Collateral against the claims and demands of all persons and (iii) in the case of tangible property constituting part of the Collateral, (A) properly maintain and keep in good order and repair such property and (B) keep such property fully insured with responsible companies acceptable to RZB against such risks as such Collateral may be subject to, or as RZB may request, under policies containing loss payable clauses naming RZB as loss payee as its interests may appear and otherwise in form and substance satisfactory to RZB, and providing that: (1) all proceeds thereof shall be payable to RZB, (2) such insurance shall not be affected by any act or neglect of Obligor or other owner of the property described in such policy, and (3) such policy and loss payable clause may not be cancelled or amended except upon ten days’ prior written notice to RZB.

b. Obligor will comply with the requirements of all leases, mortgages and other instruments relating to premises where any Collateral is located.

c. Obligor will not sell or otherwise dispose of any of the Collateral, except that, if the same constitute Collateral, until notice terminating such authority is given by RZB to Obligor, (i) accounts may be collected in the ordinary course of business as heretofore conducted and (ii) inventory or farm products may be sold in the ordinary course of business as heretofore conducted.

d. Obligor will give RZB not less than 30 days prior written notice of (i) any change in (A) its name, identity or corporate structure, (B) the location of its chief executive office or any other place of business, or (C) the location of any of the Collateral or its books and records concerning any accounts, (ii) the location of each new place of business opened by Obligor, and (iii) each new location of any Collateral. Obligor will give RZB prompt Notice of any loss or depreciation in the value of any collateral. Set forth on Schedule A annexed hereto are all trade names or trade styles used by Obligor, the location of Obligor’s chief executive office, all locations of Collateral and all locations of Obligor’s books and records.

e. At any time and from time to time (i) RZB may and is hereby authorized to transfer into or register in the name of itself or its nominee any instruments, investment property or documents constituting a part of the Collateral without notice to Obligor, (ii) RZB may receive and retain all Distributions (as hereinafter defined in Section 15), (iii) Obligor will permit representatives of RZB during normal business hours to inspect its premises and books and records pertaining to the Collateral and make extracts from and copies of such books and records, and (iv) upon request, Obligor will enter into warehousing, lockbox or other custodial arrangements satisfactory to RZB.

f. If any Collateral is at any time in the possession or control of any warehouseman, bailee or any of Obligor’s agents or processors, Obligor shall, and RZB shall also have the right to, notify such warehouseman, bailee, agent or processor of the security interests created hereby

and obtain the agreement of all such persons that they hold and will hold possession of such Collateral for the benefit or RZB and deliver the same at the direction of RZB without further consent of the Obligor.

g. Obligor shall keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as RZB may reasonably require in order to reflect the security interest granted hereby.

h. Obligor will immediately deliver and pledge to RZB or RZB’s agent each instrument, now owned or hereafter acquired, appropriately endorsed to RZB or RZB’s agent.

i. Obligor shall use its best efforts to cause to be collected from its account debtors and other obligors, as and when due, any and all amounts owing under or on account of each account, each general intangible, each payment intangible, each supporting obligation, each right to payment of money, each chattel paper and each instrument (including, without limitation, all of the foregoing items which are delinquent, such delinquent items to be collected in accordance with lawful collection procedures) and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such items. Upon RZB’s request at any time, any such amounts so collected by Obligor shall be promptly remitted to RZB, in precisely the form received (except for endorsement by Obligor when required), and until so remitted to RZB, shall be held by Obligor in trust for RZB, and shall not be commingled with other funds or property of Obligor, and RZB shall be entitled to apply such amounts to the Obligations in such manner as RZB in its sole discretion shall determine. Obligor will not renew or extend the time of payment of, or consent or agree to any reduction of the amount payable with respect to, any account or other item mentioned above in this paragraph without the written consent of RZB. The costs and expenses (including, without limitation, attorneys’ fees) of collection, whether incurred by Obligor or RZB, shall be borne by Obligor.

j. Upon request by RZB, Obligor will promptly notify (and Obligor hereby authorizes RZB so to notify) each account debtor or obligor in respect of any account, general intangible, payment intangible, supporting obligation, right to payment of money, chattel paper or instrument that such Collateral has been assigned to RZB hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to RZB or its designee.

k. Obligor will, promptly upon request, provide to RZB all information and evidence it may reasonably request concerning the Collateral, and in particular the accounts, to enable RZB to enforce the provisions of this Agreement.

General Authority . Obligor hereby irrevocably appoints RZB its true and lawful attorney, with full power of substitution, in the name of Obligor, RZB, or otherwise, for the sole use and benefit of RZB, but at Obligor’s expense, to the extent permitted by law to exercise, at any time and from time to time while an Event of Default (as hereinafter defined) exists, all or any of the following powers with respect to all or any of the Collateral:

a. to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due thereon or by virtue thereof,

b. to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto,

c. to take any action or do any thing which Obligor is required to do hereunder,

d. to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto, and

e. to do all other acts and things necessary and advisable in the sole discretion of RZB to carry out and enforce this Agreement.

Events of Default . Without limiting the right of RZB to demand payment of any or all of the Obligations at any time in its sole discretion, it shall be an Event of Default if any of the following events shall occur: (i) default in payment of any of the Obligations when due, whether on demand or otherwise; or (ii) the occurrence of any “Event of Default” or “default” as defined or specified in any agreement, instrument or document evidencing or providing for the Obligations or any guaranty thereof.

6.	Remedies upon Event of Default Rights . Upon the occurrence of an Event of Default and at any time or from time to time thereafter:

a. RZB may declare, by notice to Obligor, any and all of the Obligations immediately due and payable, without any other presentment, demand, protest or notice of any kind, anything in any other agreement to the contrary notwithstanding, and in the case of any bankruptcy, insolvency or similar proceeding relating to Obligor or its property, all of the Obligations shall automatically become due and payable (provided, however, that the foregoing shall not be deemed to limit or impair in any way whatsoever the absolute right of RZB to demand payment of the Obligations at any time in its sole discretion, to the extent the agreements and instruments pertaining to such Obligations provide for such demand);

b. RZB shall have no obligation to make further loans, extensions of credit or other financial accommodations to or on behalf of Obligor, anything in any other agreement to the contrary notwithstanding (provided, however, that the foregoing shall not be deemed to limit or impair in any way whatsoever the sole and absolute discretion of RZB to make or refrain from making such loans, extensions of credit or financial accommodations to the extent the agreements and instruments pertaining thereto provide for such discretion);

c. RZB may exercise all other rights to which it is entitled hereunder or under applicable law;

d. RZB may exercise all rights of a secured party under the UCC (whether or not in effect in the jurisdiction where such rights are exercised) and, in addition, RZB may sell the Collateral or any part thereof at public or private sales, for cash, upon credit or for future delivery, and at such price or prices as RZB may deem satisfactory. RZB may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale) and thereafter hold the same, absolutely, free from any right or claim of whatever kind. Obligor will execute and deliver such documents and take

such other action as RZB deems necessary or advisable in order that any such sales may be made in compliance with law. Upon any such sales RZB shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sales shall hold the Collateral so sold to it absolutely, free from any claim or right of whatever kind, including any equity or right of redemption of Obligor, and to the extent permitted by law, Obligor hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice (if any) of such sale required herein shall (i) in the case of a public sale, state the time and place fixed for such sale, and (ii) in the case of private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as RZB may fix in the notice of such sale. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, RZB will give Obligor reasonable notice of the time and place of any such public sale or of the time after which any private sale or any other intended disposition thereof is to be made, and Obligor agrees that five (5) days prior notice shall be deemed reasonable notice. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as RZB may determine. RZB shall not be obligated to make any such sale pursuant to any such notice. RZB may without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of Collateral on credit or for future delivery, the Collateral sold may be retained by RZB until the selling price is paid by the purchase thereof, but RZB shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. RZB, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the security interests granted herein and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction.

e. For the purposes of enforcing any and all rights and remedies under this Agreement, RZB may (i) require Obligor to, and Obligor agrees that it will, at its expense and upon the request of RZB, forthwith assemble all or any part of the Collateral as directed by RZB and make it available at a place designated by RZB which is, in its opinion, reasonably convenient to RZB whether at the premises of Obligor or otherwise, (ii) to the extent permitted by applicable law, enter, with or without process of law and without breach of the peace, any premises where any of the Collateral is or may be located, and without charge or liability to it, sieze and remove such Collateral from such premises, (iii) have access to and use Obligor’s books and records relating to the Collateral and (iv) prior to the disposition of the Collateral, store or transfer it without charge in or by means of any storage or transportation facility owned or leased by Obligor or any other person, corporation or other entity, process, repair or recondition it or otherwise prepare it for disposition in any manner and to the extent RZB deems appropriate and, in connection with such preparation and disposition, use without charge any trademark, trade name, copyright, patent or technical process used by Obligor.

f. If the Collateral consists in whole or in part of instruments or other investment property and RZB elects to sell or otherwise dispose of such instruments or other investment property, (i) Obligor will, if it controls the issuer of such instruments or other investment property, or it otherwise has the right to effect such registration, and if RZB deems such

registration to be desirable, cause such instruments or other investment property to be registered under the Securities Act of 1933, as amended, and take all other action, including but not limited to complying with the “blue sky” or securities laws of the several states and delivering to RZB appropriate quantities of prospectuses, necessary or appropriate so as to permit the public sale or other disposition thereof by RZB in such jurisdictions as RZB may select, and indemnify, in the form then customary, all persons who are underwriters, statutory or otherwise, of such instruments or other investment property in connection with such sale or disposition, such indemnity, to the extent applicable to RZB, to be in addition to that afforded RZB under Section 10(c) hereof, and (ii) RZB may elect not to exercise its rights under clause (i) and in that event may, if in its judgment it shall be necessary or desirable so to do, restrict the number of prospective bidders so as to comply with the provisions of Section 5 of such Securities Act, and restrict such prospective bidders to persons who will represent and agree that they are purchasing the instruments or other investment property in question for their own account for investment and not with a view to the distribution or release of any thereof and who will further agree that such instruments or other investment property purchased by them may bear and appropriate restrictive legend to that effect.

Limitation on Duty of RZB in Respect of Collateral . Beyond the safe custody thereof, RZB shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or as to any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. RZB shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for nay diminution in value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by RZB in good faith.

Application of Proceeds . Upon any demand for payment of any or all of the Obligations or upon the occurrence and during the continuance of any other Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied by RZB in the following order of priority:

a. to payment of the expenses of such sale or other realization, including reasonable compensation to (and costs and disbursements of) agents and counsel for RZB, and all expenses, liabilities and advances incurred or made by RZB in connection therewith, and any other unreimbursed expenses for which RZB is to be reimbursed pursuant to the documents or instruments evidencing or governing any of the Obligations;

b. to the payment of accrued but unpaid interest on the Obligations in accordance with the provisions of any promissory note, letter of credit reimbursement agreement or other agreement or instrument evidencing any of the Obligations;

c. to the payment of unpaid principal of the Obligations;

d. to the payment of all other Obligations, until all Obligations shall have been paid in full; and

e. to payment to Obligor or its successors or assigns, or to whomsoever may be entitled thereto, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.

If, upon the sale, lease or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which RZB is legally entitled, Obligor will remain liable for the deficiency, together with interest thereon at the rate provided for post-maturity interest in the agreements and instruments evidencing the Obligations.

9.	General Representations, Warranties and Agreements . Obligor hereby represents, warrants and agrees that:

a. The execution, delivery and performance of this Agreement are within its powers, corporate or otherwise, have been duly authorized by all required action and do not and will not contravene any law or any agreement or undertaking to which it is a party or by which it may in any way be bound or, if Obligor is a corporation, its certificate of incorporation or by-laws.

b. Each of the representations and warranties contained herein is true and correct on the date hereof and all other information, including financial statements and projections, furnished to RZB at any time by or on behalf of Obligor was and will be complete and correct in all respects to the extent necessary for the purpose of presenting the subject matter thereof fairly to RZB.

c. The Obligor is the sole owner of each of the accounts and other items of Collateral referred to in Section 3(i) above and no one has or claims to have any interest of any kind therein or thereto; each of the debtors and other obligors named in or obligated under every such account and other items of Collateral referred to in Section 3(i) above is indebted to the Obligor in the amount and on the terms indicated in the invoice or other evidence of such account or such other item of collateral and any schedule of accounts, each account and other item of collateral referred to in Section 3(i) above is bona fide and arises out of the completed performance of labor or services or the sale and delivery or lease of merchandise or both; and none of the accounts or such other item of collateral is now, nor will at any time in the future become contingent upon the fulfillment of any contract or conditions whatsoever, nor subject to any defense, recoupment, offset or counterclaim.

10. Expenses of Obligor’s Duties; RZB’s Rights to Perform on Obligor’s Behalf; RZB’s Expenses and Indemnification .

a. Obligor’s agreements and duties hereunder shall be performed by it at its sole cost and expense.

b. If Obligor shall fail to do any act or thing which it has covenanted to do hereunder, RZB may (but shall not be obligated to) do the same or cause it to be done, either in its name or in the name and on behalf of Obligor, and Obligor hereby irrevocably authorizes RZB so to act.

c. Obligor agrees to reimburse RZB for all costs and expenses, including attorneys’ fees and disbursements, incurred, and to indemnify and hold RZB harmless from and against all

losses suffered by RZB in connection with (i) RZB’s exercise of any right or remedy granted to it hereunder, (ii) any claim and the prosecution or defense thereof arising out of or in any way connected with this Agreement, and (iii) the collection or enforcement of the Obligations.

d. Amounts payable by Obligor under this Section 10 shall constitute Obligations which shall be payable on demand.

11.	No Waivers of Rights Hereunder; Rights Cumulative .

a. No delay by RZB in exercising any right hereunder, or under any of the other Obligations, shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude other or further exercises thereof or the exercise of any other right. No waiver or amendment of any provision of this Agreement or of any of the other agreements, instruments or documents evidencing the Obligations shall be enforceable against RZB unless it shall be in writing, be signed by RZB, and expressly refer to the provision affected; any such waiver shall be limited solely to the specific event waived.

b. All rights granted to RZB hereunder shall be cumulative and shall be supplementary of and in addition to those granted or available to RZB with respect to the other Obligations or under applicable law and nothing herein shall be construed as limiting any such other right.

12.	Assignment, Participations .

a. RZB may assign any or all of the Obligations and may transfer therewith any or all of the Collateral therefor and the transferee shall have the same rights with respect thereto as had RZB. Upon such transfer, RZB shall be released from all responsibility for the Collateral so transferred.

b. RZB may from time to time sell or otherwise grant participations in any of the Obligations and any Collateral for the Obligations. Obligor agrees that each such holder of a participation may exercise any and all rights of banker’s lien, set-off and counterclaim with respect to its participation in the Obligations as fully as though Obligor were directly indebted to such holder in the amount of such participation.

13. Continuing Agreement; Termination .

a. This Agreement shall be a continuing agreement and shall apply to all present and future Obligations, notwithstanding that at any particular time all of the Obligations then outstanding shall have been paid in full.

b. This Agreement shall continue in full force and effect until written notice of termination shall have been signed by RZB.

14.	Governing Law; Jurisdiction; Certain Waivers .

a. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW.

b. OBLIGOR HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST OBLIGOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS RZB MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, OBLIGOR ACCEPTS AND CONSENTS TO, FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY RZB IN WRITING, WITH RESPECT TO ANY ACTION OR PROCEEDING BROUGHT BY IT AGAINST RZB. NOTHING HEREIN SHALL LIMIT THE RIGHT OF RZB TO BRING PROCEEDINGS AGAINST OBLIGOR IN THE COURTS OF ANY OTHER JURISDICTION. OBLIGOR AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THIS AGREEMENT AND, TO THE MAXIMUM EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS .

c. Obligor waives personal service of process and consents that service of process upon it may be made by certified or registered mail, return receipt requested, directed to Obligor at its address last specified for notices hereunder, and service so made shall be deemed completed five days after the same shall have been so mailed.

d. EACH OF RZB AND OBLIGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF OBLIGOR OR RZB. THIS PROVISION IS A MATERIAL INDUCEMENT FOR RZB’S EXTENDING CREDIT TO OBLIGOR.

15.	Definitions . As used herein:

a. Except as otherwise specifically defined or provided herein, all terms defined in Article 1 or 9 of the New York Uniform Commercial Code as in effect on the date of this Agreement (other than the term “Collateral”) are used herein with the meanings therein given.

b. The following terms shall have the indicated meanings:

“Affiliate” of RZB shall mean a corporation that directly or indirectly controls or is controlled by, or is under common control with, RZB.

“Distributions” shall mean cash dividends and other distributions and interest paid in cash, in each case with respect to all instruments, investment property and securities constituting part of the Collateral.

“Guarantor” shall mean any maker, drawer, acceptor, endorser, guarantor, surety, accommodation party or other person liable upon or for any of the Obligations.

“Permitted Liens” shall mean liens specifically consented to by RZB in writing, and liens of any other financial institution which is a party to an intercreditor agreement with RZB in form and substance satisfactory to RZB.

16.

Notices . Any notice or request hereunder may be given to Obligor or to RZB at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section. Any notice or request hereunder may be given by, in the case of notices or requests to Obligor, mail, commercial courier service, telex, or telegram, or by telephone subsequently confirmed by mail, commercial courier service, return receipt requested, or by and in the case of notices to RZB, registered mail, telex or telegram, subsequently confirmed by such registered mail. Notices and requests to Obligor shall, in the case of those by mail, commercial courier service, telex or telegram, be deemed to have been given when deposited in the mail, first-class postage prepaid, or delivered to such courier service, the telegraph office or telex operator, addressed as provided in this Section, and in the case of those by telephone, when so communicated to Obligor; notices to RZB shall be deemed to have been given only when actually received by RZB at its address determined as provided in this Section. Any requirement under applicable law of reasonable notice of RZB to Obligor of any event shall be met if notice is given to Obligor in the manner prescribed above at least seven days before (a) the date of such event or (b) the date after which such event will occur.

17.

General .

a. If this Agreement is executed by two or more Obligors, they shall be jointly and severally liable hereunder, all provisions hereof regarding the Obligations or the Collateral shall apply to the Obligations and Collateral of any or all of them and the termination of this Agreement as to one or more of such Obligors shall not terminate this Agreement as to any remaining Obligors.

b. This Agreement shall be binding upon the heirs, executors, administrators, assigns or successors of each of the undersigned Obligors and shall inure to the benefit of and be enforceable by RZB, its successors, transferees and assigns.

c. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of RZB in order to carry out the intentions of the parties hereto as nearly as may be possible, and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.


Dated: February 17, 2004

FCStone Merchant Services, LLC

By:		/s/ Allan J. Lee
Title:		President



By:		/s/ Michael Altneu
Title:		Senior VP

Address of FCStone Merchant Services, LLC:


FCStone Merchant Services, LLC	Telephone:	(212) 791-2791
1 North End Avenue, Suite 1129	Telefax:	(212) 791-2761
New York, NY 10282	Telex:

Accepted: , 2004


RZB FINANCE LLC

By:

Title:

By:

Title:

Address of RZB:


RZB FINANCE LLC		Telephone:
1133 Avenue of the Americas		Telefax:
New York, NY 10036		Telex:

SCHEDULE A

1.	Trade Names or Trade Styles used by Obligor .

None.

2.	Obligor’s Chief Executive Office .

One North End Avenue, Suite 1129, New York, NY 10282

3.	All Locations of Collateral .

None.

4.	All Locations of Obligor’s Books and Records .

One North End Avenue, Suite 1129, New York, NY 10282.

2829 Westown Parkway, Suite 200, West Des Moines, IA 50266

SUPPLEMENT TO GENERAL

SECURITY AGREEMENT

Agreement dated as of February 17, 2004, between the undersigned (the “Debtor”) and RZB FINANCE LLC (“RZB”).

R E C I T A L S :

A. The Debtor has executed a General Security Agreement dated the date hereof (the “Security Agreement”) in favor of RZB;

B. The Debtor and RZB desire to supplement the Security Agreement to include in the Security Agreement provisions reflecting that the Debtor has granted to other lenders security interests in the Collateral as defined in the Security Agreement);

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in the Security Agreement and herein, the Debtor and RZB hereby agree as follows:

1. Notwithstanding anything to the contrary contained in the Security Agreement, the Debtor shall be permitted to grant liens and security interests in the Collateral to other lenders with the prior written consent of RZB. RZB hereby consents to the grant of liens and security interests in the Collateral to other lenders who shall execute an intercreditor agreement in form and substance satisfactory to RZB.

2. On and after the date hereof, (a) this Supplement shall be a part of the Security Agreement, (b) all references to the Security Agreement in the Security Agreement and in any documents related thereto shall be deemed to refer to the Security Agreement as supplemented hereby, and (c) the term “this Agreement” and the words “hereof”, “herein”, “hereunder” and words of similar import as used in the Security Agreement shall mean the Security Agreement as supplemented hereby. The Security Agreement, as supplemented hereby, is hereby ratified, approved and confirmed in all respects.

3. This Supplement shall be governed by and construed in accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the Debtor and RZB have caused this Supplement to be duly executed as of the date and year first above written.



FCStone Merchant Services, LLC
(Debtor)



By:		/s/ Allan J. Lee

By:		/s/ Michael Altneu

RZB FINANCE LLC

By:

By:

Exhibit 10.61

Execution Counterpart

FCSTONE MERCHANT SERVICES, LLC

CREDIT AGREEMENT

Dated as of March 4, 2004

HARVARD PRIVATE CAPITAL PROPERTIES III, INC., as Lender

TABLE OF CONTENTS


1.	DEFINITIONS; CERTAIN RULES OF CONSTRUCTION		1

2.	THE CREDIT		13

	2.1.	Advances	13
	2.2.	Borrowing Requests	14
	2.3.	Note	14
	2.4.	Application of Proceeds	14

3.	INTEREST; COMMITMENT FEE; ETC.		14

	3.1.	Interest	14
	3.2.	Commitment Fee	15
	3.3.	Changes in Circumstances; Yield Protection	15
	3.4.	Computations of Interest and Fees	16
	3.5.	Maximum Lawful Interest Rate	16

4.	PAYMENT		16

	4.1.	Payment at Maturity	16
	4.2.	Mandatory Prepayments	17
	4.3.	Voluntary Prepayments	17
	4.4.	Reborrowing; Application of Payments, etc.	17

5.	CONDITIONS TO EXTENDING CREDIT.		17

	5.1.	Conditions on Initial Closing Date	17
	5.2.	Conditions to Each Extension of Credit	19

6.	GENERAL COVENANTS		19

	6.1.	Taxes and Other Charges; Accounts Payable	19
	6.2.	Conduct of Business, etc.	20
	6.3.	Insurance	21
	6.4.	Financial Statements and Reports	21
	6.5.	Certain Financial Tests	24
	6.6.	Indebtedness	24
	6.7.	Liens	26
	6.8.	Investments and Acquisitions	27
	6.9.	Distributions	27
	6.10.	Asset Dispositions and Mergers	28
	6.11.	No Subsidiaries	28
	6.12.	Voluntary Prepayments of Other Indebtedness	28
	6.13.	Derivative Contracts	28
	6.14.	Negative Pledge Clauses	28
	6.15.	ERISA, etc.	29

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	6.16.	Transactions with Affiliates	29
	6.17.	Environmental Laws	29
	6.18.	Hedging Requirements	29

7.	REPRESENTATIONS AND WARRANTIES		29

	7.1.	Organization and Business	29
	7.2.	Material Agreements	30
	7.3.	Agreements Relating to Financing, Debt, Investments, etc.	30
	7.4.	Changes in Condition	31
	7.5.	Title to Assets	31
	7.6.	Operations in Conformity with Law, etc.	31
	7.7.	Litigation	31
	7.8.	Authorization and Enforceability	32
	7.9.	No Legal Obstacle to Agreements	32
	7.10.	Defaults	32
	7.11.	Licenses, etc.	32
	7.12.	Tax Returns	33
	7.13.	Certain Business Representations	33
	7.14.	Pension Plans	34
	7.15.	Environmental Regulations	34
	7.16.	Government Regulation; Margin Stock	35
	7.17.	Disclosure	35

8.	DEFAULTS		35

	8.1.	Events of Default	35
	8.2.	Certain Actions Following an Event of Default	37
	8.3.	Annulment of Defaults	38
	8.4.	Waivers	39

9.	EXPENSES; INDEMNITY		39

	9.1.	Expenses	39
	9.2.	General Indemnity	39

10.	SUCCESSOR AND ASSIGNS; LENDER ASSIGNMENTS AND PARTICIPATIONS		40

11.	CONFIDENTIALITY		40

12.	NOTICES		41

13.	COURSE OF DEALING; WAIVERS, CONSENTS AND AMENDMENTS		42

14.	GENERAL PROVISIONS		42

	14.1.	Defeasance	42

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EXHIBITS


2.2	-	Borrowing Request

2.3	-	Note

5.1.2	-	Security Agreement

5.2.1	-	Officer’s Certificate

6.2.1	-	Commodities Business

6.4	-	Compliance Certificate

6.18	-	Hedging Requirements

7.1	-	Borrower

7.2	-	Material Agreements

7.3	-	Financing Debt, Certain Investments, etc.

7.15	-	Hazardous Material Sites

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FCSTONE MERCHANT SERVICES, LLC

CREDIT AGREEMENT

THIS CREDIT AGREEMENT, dated as of March 4, 2004, is between FCStone Merchant Services, LLC, a Delaware limited liability company (the “ Borrower ”), and Harvard Private Capital Properties III, Inc., a Delaware corporation (the “ Lender ”). The parties agree as follows:

WHEREAS, the Borrower desires that the Lender extend to the Borrower a credit facility in the aggregate principal amount of $30,000,000 in order to fund the Borrower’s purchase, storage, hedging, financing and sale of commodities;

WHEREAS, the Lender is willing to extend to the Borrower such credit facility on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereby agree as follows:

1. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. Certain capitalized terms are used in this Agreement and in the other Credit Documents with the specific meanings defined below in this Section 1. Except as otherwise explicitly specified to the contrary or unless the context clearly requires otherwise, (a) the capitalized term “Section” refers to Sections of this Agreement, (b) the capitalized term “Exhibit” refers to exhibits to this Agreement, (c) references to a particular Section include all subsections thereof, (d) the word “including” shall be construed as “including without limitation,” (e) accounting terms not otherwise defined herein have the meaning provided under GAAP, (f) references to a particular statute or regulation include all rules and regulations thereunder and any successor statute, regulation or rules, in each case as from time to time in effect, (g) references to a particular Person include such Person’s successors and assigns to the extent not prohibited by this Agreement and the other Credit Documents, (h) references to “$” mean United States Funds and (i) references to “the date hereof” mean the date first set forth above.

“ Administrative Services Agreement ” means the Administrative and Support Services Agreement dated as of March 4, 2004, as amended and in effect from time to time, between FCStone Group and the Borrower.

“ Advance ” is defined in Section 2.1.

“ Affiliate ” means, with respect to the Borrower (or other specified Person), any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with the Borrower (or such specified Person), and shall include (a) any officer or director or general partner of the Borrower (or such specified Person), (b) any Person of which the Borrower (or such specified Person) or any Affiliate (as defined in clause (a) above) of the Borrower (or such specified Person) shall, directly or indirectly, beneficially own either (i) at least 10% of the outstanding equity securities having the general power to vote or (ii) at least 10% of all equity

interests and (c) any Person directly or indirectly controlling the Borrower (or such specified Person) through a management agreement, voting agreement or other contract.

“ Agreement ” means this Credit Agreement as from time to time amended, modified and in effect.

“ Applicable Rate ” means, with respect to any Advance:

(a) on any date on which no Event of Default exists, the greater of (i) the interest rate specified in the Borrowing Request for such Advance or (ii) the interest rate for such Advance agreed to in writing by the Borrower and the Lender prior to the Closing Date for such Advance; and

(b) on any date on which any Event of Default exists, the sum of (i) the greater of (A) the interest rate specified in the Borrowing Request for such Advance or (B) the interest rate for such Advance agreed to in writing by the Borrower and the Lender prior to the Closing Date for such Advance, plus (ii) 4%.

“ Bankruptcy Code ” means Title 11 of the United States Code.

“ Bankruptcy Default ” means an Event of Default referred to in Section 8.1.9.

“ Borrower ” is defined in the preamble to this Agreement.

“ Borrowing Request ” is defined in Section 2.2.

“ Business Day ” means any day other than Saturday, Sunday or a day on which banks in Boston, Massachusetts are authorized or required by law or other governmental action to close.

“ By-laws ” means all written by-laws, rules, regulations and all other documents relating to the management, governance or internal regulation of any Person other than an individual, all as from time to time in effect.

“ Capital Expenditures ” means, for any period, amounts added or required to be added to the property, plant and equipment or other fixed assets account on the balance sheet of the Borrower, prepared in accordance with GAAP, including expenditures in respect of (a) the acquisition, construction, improvement or replacement of land, buildings, machinery, equipment, leaseholds and any other real or personal property, (b) to the extent not included in clause (a) above, materials, contract labor and direct labor relating thereto (excluding amounts properly expensed as repairs and maintenance in accordance with GAAP) and (c) software development costs to the extent not expensed; provided , however , that Capital Expenditures shall not include expenditures made in accordance with this Agreement with the proceeds of insurance claims or condemnation awards.

“ Capitalized Lease ” means any lease which is required to be capitalized on the balance sheet of the lessee in accordance with GAAP, including Statement Nos. 13 and 98 of the Financial Accounting Standards Board.

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“ Capitalized Lease Obligations ” means the amount of the liability reflecting the aggregate discounted amount of future payments under all Capitalized Leases calculated in accordance with GAAP, including Statement Nos. 13 and 98 of the Financial Accounting Standards Board.

“ Cash Equivalents ” means:

(a) negotiable certificates of deposit, time deposits (including sweep accounts), demand deposits and bankers’ acceptances having a maturity of nine months or less and issued by any United States financial institution having capital and surplus and undivided profits aggregating at least $100,000,000 and rates at least Prime-1 by Moody’s or A-1 by S&P;

(b) corporate obligations having a maturity of nine months or less and rated at least Prime-1 by Moody’s or A-1 by S&P;

(c) any direct obligation of the United States of America or any agency or instrumentality thereof, or of any state or municipality thereof, which (i) has a remaining maturity at the time of purchase of not more than one years or is subject to a fully collateralized repurchase agreement with the Lender or any financial institution referred to in clause (a) above exercisable within one year from the time of purchase and (ii) in the case of obligations of any state or municipality, is rated at least AAA by Moody’s or AAA by S&P; and

(d) any mutual fund or other pooled investment vehicle rated at least AA by Moody’s or AA by S&P which invests principally in obligations described above.

“ CERCLA ” means the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980.

“ Charter ” means the articles of organization, certificate of incorporation, statute, constitution, joint venture agreement, partnership agreement, trust indenture, limited liability company agreement or other charter document of any Person other than an individual, each as from time to time in effect.

“ Closing Date ” means the Initial Closing Date and each other date on which any extension of credit is made pursuant to Section 2.1.

“ Code ” means the federal Internal Revenue Code of 1986.

“ Commitment ” means the Lender’s obligations to make the extensions of credit contemplated by Section 2.1 and its interests in such extensions of credit at any time.

“ Computation Covenants ” means Sections 6.5, 6.6.2, 6.6.9, 6.6.10, 6.6.13 and 6.10.1.

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“ Credit Documents ” means:

(a) this Agreement, the Note, the Security Agreement, each Intercreditor Agreement and each Financial Hedge Agreement provided by the Lender (or an Affiliate of the Lender) to the Borrower, each as from time to time in effect; and

(b) any other present or future agreement or instrument from time to time entered into between the Borrower or any other Obligor, on one hand, and the Lender, on the other hand, relating to, amending or modifying this Agreement or any other Credit Document referred to above or which is stated to be a Credit Document, each as from time to time in effect.

“ Credit Obligations ” means all present and future liabilities, obligations and Indebtedness of the Borrower or any other Obligor owing to the Lender (or any Affiliate of the Lender) under or in connection with this Agreement or any other Credit Document, including obligations in respect of principal, interest, reimbursement obligations under Financial Hedge Agreements provided by the Lender (or an Affiliate of the Lender) at the time of the issuance thereof, commitment fees, amounts provided for in Sections 3.3 and 9 and other fees, charges, indemnities and expenses from time to time owing hereunder or under any other Credit Document (all whether accruing before or after a Bankruptcy Default and regardless of whether allowed as a claim in bankruptcy or similar proceedings).

“ Credit Security ” means all assets now or from time to time hereafter subjected to a security interest, mortgage or charge (or intended or required so to be subjected pursuant to the Security Agreement or any other Credit Document) to secure the payment or performance of any of the Credit Obligations on a pari passu, ratable basis among the holders of the Credit Obligations, including the assets described in section 2.1 of the Security Agreement.

“ Currency Exchange Agreement ” means any currency swap, foreign exchange contract or similar arrangement providing for protection against fluctuations in currency exchange rates, either generally or under specific contingencies.

“ Default ” means any Event of Default and any event or condition which with the passage of time or giving of notice, or both, would become an Event of Default, including the filing against the Borrower or any other Obligor of a petition commencing an involuntary case under the Bankruptcy Code.

“ Distribution ” means, with respect to the Borrower:

(a) the declaration or payment of any dividend or distribution on or in respect of any shares of any class of capital stock of or other equity interests in the Borrower;

(b) the purchase, redemption or other retirement of any shares of any class of capital stock of or other equity interest in the Borrower, or of options, warrants or other rights for the purchase of such shares, directly, indirectly through a corporate parent or otherwise;

(c) any other distribution on or in respect of any shares of any class of capital stock of or equity or other beneficial interest in the Borrower;

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(d) any payment of principal, interest or fees with respect to, or any purchase, redemption or defeasance of, any Financing Debt of the Borrower which by its terms or the terms of any agreement is subordinated to the payment of the Credit Obligations; and

(e) any payment, loan or advance by the Borrower to, or any other Investment by the Borrower in, the holder of any shares of any class of capital stock of or equity interest in the Borrower, or any Affiliate of such holder (including the payment of management and transaction fees and expenses);

provided , however , that the term “Distribution” shall not include (a) payments in respect of the Credit Obligations, (ii) dividends payable in, or conversion of securities into, perpetual common stock of or other similar equity interests in the Borrower, (iii) the issuance of PIK Interest or (iv) payments in the ordinary course of business in respect of (A) reasonable compensation paid to employees, officers and directors (including bonuses paid to Allan Lee pursuant to the Employment Agreement as in effect on the date hereof), (B) advances and reimbursements to employees for travel expenses, drawing accounts, relocation costs and similar expenditures or (C) rent paid to, or accounts payable for services rendered or goods sold by, non-Affiliates that own capital stock of or other equity interests in the Borrower.

“ Employment Agreement ” means the Employment Agreement dated as of June 26, 2003, as amended and in effect from time to time, between FC Stone Financial, Inc., an Iowa corporation and Allan J. Lee.

“ Environmental Laws ” means all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment, including the federal Occupational Health and Safety Act.

“ ERISA ” means the federal Employee Retirement Income Security Act of 1974.

“ Event of Default ” is defined in Section 8.1.

“ FCStone Group ” means FCStone Group, Inc., an Iowa corporation.

“ Final Advance Date ” means February 4, 2006.

“ Final Maturity Date ” means March 4, 2006.

“ Financial Hedge Agreement ” means, collectively, Currency Exchange Agreements and Interest Rate Protection Agreements.

“ Financial Officer ” means, with respect to the Borrower, its chief executive officer, chief financial officer, chief operating officer, chairman, president, treasurer, controller or any of its vice presidents whose primary responsibility is for its financial affairs, in each case whose incumbency and signatures have been certified to the Lender by the secretary or other appropriate attesting officer of the Borrower.

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“ Financing Debt ” means each of the items described in clauses (a) through (f) of the definition of the term “Indebtedness” and, without duplication, any Guarantees of such items.

“ GAAP ” means generally accepted accounting principles as from time to time in effect, including the statements and interpretations of the United States Financial Accounting Standards Board; provided , however , that (a) for purposes of compliance with Section 6 (other than Section 6.4) and the related definitions, “GAAP” means such principles as in effect on the date hereof and as consistently applied by the Borrower in the preparation of the financial statements of the Borrower without giving effect to any subsequent changes thereto and (b) in the event of a change in generally accepted accounting principles after such date, either the Borrower or the Lender may request a change in the definition of “GAAP”), in which case the parties hereto shall negotiate in good faith with respect to an amendment of this Agreement implementing such change.

“ Guarantee ” means, with respect to the Borrower:

(a) any guarantee by the Borrower of the payment of performance of, or any contingent obligation by the Borrower in respect of, any Indebtedness or other obligation of any primary obligor;

(b) any other arrangement whereby credit is extended to a primary obligor on the basis of any promise or undertaking of the Borrower, including any binding “comfort letter” or “keep well agreement” written by the Borrower, to a creditor or prospective creditor of such primary obligor, to (i) pay the Indebtedness of such primary obligor, (ii) purchase an obligation owed by such primary obligor, (iii) pay for the purchase or lease of assets or services regardless of the actual delivery thereof or (iv) maintain the capital, working capital, solvency or general financial condition of such primary obligor;

(c) any liability of the Borrower as a general partner of a partnership in respect of Indebtedness or other obligations of such partnership;

(d) any liability of the Borrower as a joint venturer of a joint venture in respect of Indebtedness or other obligations of such joint venture;

(e) any liability of the Borrower with respect to the tax liability of others as a member of a group that is consolidated for tax purposes; and

(f) reimbursement obligations, whether contingent or matured, of the Borrower with respect to letters of credit, bankers acceptances, surety bonds, other financial guarantees and Financial Hedge Agreements;

In each case whether or not any of the foregoing are reflected on the balance sheet of the Borrower or in a footnote thereto; provided , however , that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee and the amount of Indebtedness resulting from such Guarantee shall be the maximum amount that the guarantor may become obligated to pay in respect of the obligations (whether or not such obligations are outstanding at the time of computation).

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“ Hazardous Material ” means any petroleum fraction, pollutant, contaminant or toxic or hazardous material or waste, including any “hazardous substance” as defined in section 101(14) of CERCLA or any other Environmental Law, which is regulated as toxic or hazardous, or may result in liability, under any Environmental Law.

“ Hedge Agreement ” means, collectively, Financial Hedge Agreements and Non-Financial Hedge Agreements.

“ Indebtedness ” means all obligations, contingent or otherwise, which in accordance with GAAP are required to be classified upon the balance sheet of the Borrower as liabilities, but in any event including (without duplication):

(a) indebtedness for borrowed money;

(b) indebtedness evidenced by notes, debentures or similar instruments;

(d) the deferred purchase price of assets, services or securities, including related noncompetition, consulting and stock repurchase obligations (other than ordinary trade accounts payable on customary terms in the ordinary course of business), and any long-term contractual obligations for the payment of money;

(e) mandatory redemption, repurchase or dividend rights on capital stock or other equity interests, including provisions that require the exchange of such capital stock or other equity interests for Indebtedness from the issuer;

(f) reimbursement obligations, whether contingent or matured, with respect to letters of credit, bankers acceptances, surety bonds, other financial guarantees and Financial Hedge Agreements (without duplication of other Indebtedness supported or guaranteed thereby);

(g) unfunded pension liabilities;

(h) obligations that are immediately and directly due and payable out of the proceeds of or production from property;

(i) liabilities secured by any Lien existing on property owned or acquired by the Borrower, whether or not the liability secured thereby shall have been assumed; and

(j) all Guarantees in respect of Indebtedness of others.

“ Indemnified Party ” is defined in Section 9.2.

“ Initial Closing Date ” means March 4, 2004 or such other date prior to April 30, 2004 agreed to by the Borrower and the Lender as the first Closing Date hereunder.

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“ Interest Rate Protection Agreement ” means any interest rate swap, interest rate cap, interest rate hedge or other contractual arrangement that converts variable interest rates into fixed interest rates, fixed interest rates into variable interest rates or other similar arrangements.

“ Intercreditor Agreement ” means each intercreditor agreement dated on or after the date hereof, as amended and in effect from time to time, among the Borrower, any Senior Lender (or group of Senior Lenders) and the Lender.

“ Investment ” means, with respect to the Borrower:

(a) any share of capital stock, partnership or other equity interest, evidence of Indebtedness or other security issued by any other Person;

(b) any loan, advance or extension of credit to, or contribution to the capital of, any other Person;

(d) any acquisition of all, or any division or similar operating unit of, the business of any other Person or the assets comprising such business, division or unit; and

(e) any other similar investment.

The investments described in the foregoing clauses (a) through (e) shall be included in the term “Investment” whether they are made or acquired by purchase, exchange, issuance of stock or other securities, merger, reorganization or any other method; provided , however , that the term “Investment” shall not include (i) trade and customer accounts receivable for property leased, goods furnished or services rendered in the ordinary course of business and payable within one year in accordance with customary trade terms, (ii) deposits, advances or prepayments to suppliers for property leased or licensed, goods furnished and services rendered in the ordinary course of business, (iii) advances to employees for relocation and travel expenses, drawing accounts and similar expenditures, (iv) stock or other securities acquired in connection with the satisfaction or enforcement of Indebtedness or claims due to the Borrower or as security for any such Indebtedness or claim or (v) demand deposits in banks or similar financial institutions.

In determining the amount of outstanding Investments:

(A) the amount of any Investment shall be the cost thereof minus any returns of capital in cash on such Investment (determined in accordance with GAAP without regard to amounts realized as income on such Investment);

(B) the amount of any Investment in respect of a purchase described in clause (d) above shall include the amount of any Financing Debt assumed in connection with such purchase or secured by any asset acquired in such purchase (whether or not any Financing Debt is assumed) or for which any Person that is merged into or consolidated with the Borrower is liable on the date on which such merger or consolidation occurs; and

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(C) no Investment shall be increased as the result of an increase in the undistributed retained earnings of the Person in which the Investment was made or decreased as a result of an equity interest in the losses of such Person.

“ Junior Debt ” means all Financing Debt (other than the Credit Obligations) that (a) is incurred by the Borrower in the ordinary course of business to fund the purchase or financing by the Borrower of any Permitted Commodity and (b) is subordinated in right of payment to any Senior Debt.

“ Legal Requirement ” means any present or future requirement imposed upon the Borrower or the Lender by any law, statute, rule, regulation, directive, order, decree or guideline (or any interpretation thereof by courts or of administrative bodies) of the United States of America or any state or political subdivision thereof, governmental or administrative agency, central bank or monetary authority of the United States of America, any jurisdiction where the Borrower owns property or conducts its business, or any political subdivision of any of the foregoing. Any such law, statute, rule, regulation, directive, order, decree, guideline or interpretation imposed on the Lender not having the force of law shall be deemed to be a Legal Requirement for purposes of Section 3 if the Lender reasonably believes that compliance therewith is customary commercial practice.

“ Lender ” is defined in the preamble to this Agreement.

“ Lien ” means, with respect to the Borrower:

(a) any lien, encumbrance, mortgage, pledge, charge or security interest of any kind upon any property or assets of the Borrower, whether now owned or hereafter acquired, or upon the income or profits therefrom (excluding in any event a financing statement filed by a lessor under an operating lease not intended to be a secured financing);

(b) the acquisition of, or the agreement to acquire, any property or asset upon conditional sale or subject to any other title retention agreement, device or arrangement (including a Capitalized Lease and a Synthetic Lease);

(c) the sale, assignment, pledge or transfer for security of any accounts, general intangibles or chattel paper of the Borrower, with or without recourse;

(d) in the case of securities, any purchase option, call or similar purchase right of a third party;

(e) the existence for a period of more than 120 consecutive days of any Indebtedness against the Borrower which if unpaid would by law or upon a Bankruptcy Default be given priority over general creditors.

“ LLC Agreement ” means the Limited Liability Company Agreement Between the Members of FCStone Merchant Services, LLC dated as of March 4, 2004, as amended and in effect from time to time, between FCStone Group and the Lender.

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“ Loan ” is defined in Section 2.3.

“ Margin Stock ” means “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System.

“ Material Adverse Change ” means, since any specified date or from the circumstances existing immediately prior to the happening of any specified event, a material adverse change in (a) the business, assets, financial condition, income or prospects of the Borrower, whether as a result of (i) general economic conditions affecting the industry or market for any commodity, (ii) difficulties in obtaining supplies and raw materials, (iii) fire, flood or other natural calamities, (iv) environmental pollution, (v) regulatory changes, judicial decisions, war or other governmental action or (vi) any other event or development, whether or not related to those enumerated above, or (b) the ability of any Obligor to perform material obligations under the Credit Documents or (c) the rights and remedies of the Lender under the Credit Documents.

“ Material Agreements ” means (a) the Charter and By-laws of each of the Borrower and any other Obligor, (b) each Senior Debt Document, (c) the Administrative Services Agreement, (d) the Employment Agreement and (e) all other agreements and instruments material to the Borrower.

“ Material Financing Debt ” means any Financing Debt (other than the Credit Obligations) outstanding in an aggregate amount of principal (whether or not due) and accrued interest exceeding $100,000.

“ Maturity Date ” means, with respect to any Advance, any date which (a) is on or prior to each of (i) the 364 ^th day after the Closing Date for such Advance and (ii) the Final Maturity Date and (b) is specified as the maturity date for such Advance on the Borrower Request for such Advance.

“ Moody’s ” means Moody’s Investors Service, Inc.

“ Net Income ” means, for any period, the net income (or loss) of the Borrower, determined in accordance with GAAP; provided , however , that Net Income shall not include:

(a) the income (or loss) of any Person accrued prior to the date such Person is merged into or consolidated with the Borrower;

(b) the income (or loss) of any Person in which the Borrower has an ownership interest; provided , however , that (i) Net Income shall include amounts in respect of the income of such Person when actually received in cash by the Borrower in the form of dividends or similar Distributions and (ii) Net Income shall be reduced by the aggregate amount of all Investments, regardless of the form thereof, made by the Borrower in such Person for the purpose of funding any deficit or loss of such Person;

(c) all amounts included in computing such net income (or loss) in respect of (i) the write-up of any asset, including a write-up required by Statement of Financial Accounting Standards No. 115 (regarding mark-to-market of securities), or (ii) the retirement of any Indebtedness or equity at less than face value; and

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(d) extraordinary and nonrecurring gains and gains from the sale of assets (other than assets which are Permitted Commodities) or investment activities.

“ Net Working Capital ” means, at any date, the amount (whether positive or negative) equal to (a) all amounts carried as current assets on the balance sheet of the Borrower determined in accordance with GAAP minus (b) all amounts that are or should be carried as current liabilities on the balance sheet of the Borrower determined in accordance with GAAP.

“ Non-Financial Hedge Agreement ” means weather insurance, derivatives relating to weather risk, commodity derivative contracts and commodity hedging arrangements.

“ Note ” is defined in Section 2.3.

“ Obligor ” means the Borrower and each other Person guaranteeing or providing collateral for the Credit Obligations.

“ Payment Default ” means an Event of Default referred to in Section 8.1.1.

“ Permitted Commodity ” means grains, fertilizers, ethanol, lumber, livestock, poultry, sugar, orange juice, coffee, cocoa, milk, crude oil, refined petroleum products, natural gas, petrochemicals, power, ferrous metals and minerals, non-ferrous metals and minerals and precious metals.

“ Person ” means any present or future natural person or any corporation, association, partnership, joint venture, limited liability, joint stock or other company, business trust, trust, organization, business or government or any governmental agency or political subdivision thereof.

“ PIK Interest ” means any accrued interest payments on Financing Debt that are postponed or made through the issuance of “payment-in-kind” notes or other similar securities (including book-entry accrual with respect to such postponed interest payments), all in accordance with the terms of such Financing Debt; provided , however , that in no event shall PIK Interest include payments made with cash or Cash Equivalents.

“ Plan ” means, at any date, any employee benefit plan (including any pension benefit plan subject to Title IV of ERISA) maintained, or to which contributions have been made or are required to be made, by the Borrower.

“ RCRA ” means the federal Resource Conservation and Recovery Act, 42 U.S.C. section 690, et seq.

“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.

“ Security Agreement ” means the Security Agreement dated as of March 4, 2004, as amended and in effect from time to time, between the Borrower and the Lender.

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“ Senior Debt ” means all Financing Debt that (a) is incurred by the Borrower in the ordinary course of business to fund the purchase or financing by the Borrower of any Permitted Commodity and (b) is not subordinated in right of payment to any other Financing Debt incurred by the Borrower to fund the purchase or financing by the Borrower of such Permitted Commodity.

“ Senior Debt Documents ” means:

(a) each credit agreement, note, debenture or other similar agreement or instrument under which the Borrower incurs any Senior Debt, each as from time to time; and

(b) any other present or future agreement or instrument from time to time entered into between the Borrower or any other Obligor, on one hand, and any Senior Lender, on the other hand, relating to, amending or modifying any agreement or instrument referred to in clause (a) above, each as from time to time in effect.

“ Senior Lender ” means any lender (other than the Lender) that provides Senior Debt to the Borrower.

“ Subsidiary ” means any Person of which the Borrower shall at the time, directly or indirectly, (a) own at least 50% of the outstanding capital stock (or other shares of beneficial interest) entitled to vote generally, (b) hold at least 50% of the partnership, limited liability company, joint venture or similar interests or (c) be a general partner, manager or joint venturer.

“ Synthetic Lease ” means a lease by the Borrower that is treated as an operating lease under GAAP and as a loan or other financing for federal income tax purposes.

“ Synthetic Lease Obligations ” means the aggregate amount of future rental payments under all Synthetic Leases, discounted as if such Synthetic Leases were Capitalized Leases.

“ Tangible Net Worth ” means, at any date, the total of:

(a) members’ equity of the Borrower determined in accordance with GAAP, excluding the effect of any foreign currency translation adjustments; minus

(b) the amount by which such members’ equity has been increased after the date hereof by:

(i) the income of any Person accrued prior to the date such Person is merged into or consolidated with the Borrower;

(ii) the income of any Person in which the Borrower has an ownership interest; provided , however , that (A) such members’ equity may include amounts in respect of the income of such Person when actually received in cash by the Borrower in the form of dividends or similar Distributions and (ii) such members’ equity shall be reduced by the aggregate amount of all Investments, regardless of

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the form thereof, made by the Borrower in such Person for the purpose of funding any deficit or loss of such Person;

(iii) the write-up of any asset other than a write-up required by Statement of Financial Accounting Standards No. 115 (regarding mark-to-market securities);

(iv) the retirement of any Indebtedness or equity at less than face value; and

(v) extraordinary and nonrecurring gains and gains from the sale of assets (other than assets which are Permitted Commodities) or investment activities; minus

(c) to the extent not already deducted from the amount in clause (a) above, (i) treasury equity, (ii) receivables due from an employee equity ownership plan and (iii) Guarantees of Indebtedness incurred by an employee equity ownership plan; minus

(d) the amount of intangible assets carried on the balance sheet of the Borrower determined in accordance with GAAP, including goodwill, patents, patent applications, copyrights, trademarks, tradenames, research and development expense, organizational expense, unamortized debt discount, deferred financing charges and debt acquisition costs.

“ Tax ” means any present or future tax, levy, duty, impost, deduction, withholding or other charges of whatever nature at any time required by any Legal Requirement (a) to be paid by the Lender or (b) to be withheld or deducted from any payment otherwise required hereby to be made to the Lender, in each case on or with respect to its obligations hereunder, the Loan or any payment in respect of the Credit Obligations; provided , however , that the term “Tax” shall not include taxes imposed upon or measured by the net income of the Lender or franchise taxes in lieu of net income taxes, in each case imposed by the jurisdiction in which the Lender’s principal place of business in the United States of America is located; provided , further , that the term “Tax” shall include withholding taxes in any event.

“ Termination Date ” means the date on which (a) all Credit Obligations have been paid, performed and reasonably determined by the Lender to have been indefeasibly discharged in full and (b) the Lender’s commitment to extend credit under this Agreement and the other Credit Documents has been irrevocably terminated.

“ United States Funds ” means such coin or currency of the United States of America as at the time shall be legal tender therein for the payment of public and private debts.

2. THE CREDIT.

2.1. Advances . Subject to all the terms and conditions of this Agreement and so long as no Default exists, from time to time on and after the Initial Closing Date and prior to the Final Advance Date the Lender will make loans (each, an “ Advance ”) to the Borrower in such amounts as may be requested by the Borrower in accordance with Section 2.2. the sum of the

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aggregate principal amount of the Advances made under this Section 2.1 at any one time outstanding shall in no event exceed $30,000,000.

2.2. Borrowing Requests . The Borrower may from time to time request an Advance under Section 2.1 by providing to the Lender a borrowing request in substantially the form of Exhibit 2.2 (each, a “ Borrowing Request ”). Such Borrowing Request must be received by the Lender not later than noon (Boston time) on the fifth Business Day prior to the requested Closing Date for such Advance. Such Borrowing Request must specify: (a) the amount of the requested Advance, which shall be not less than $1,000,000 and an integral multiple of $100,000; (b) the requested interest rate for such Advance; (c) the requested Closing Date for such Advance, which shall be a Business Day; (d) the Maturity Date for such advance; (e) the type and quantity of the Permitted Commodity to be purchased with the proceeds of such Advance; and (f) the terms of all financing, purchase, hedging and sale contracts and arrangements (i) which relate to the Permitted Commodity to be purchased with the proceeds of such Advance and (ii) to which the Borrower is or will be party. Upon receipt of such Borrowing Request, the Lender (A) shall, in its sole and absolute discretion, consider the Borrower’s request for such Advance and (B) shall provide the Borrower a written notice which approves or rejects such Borrowing Request no later than five Business Days after receipt of such Borrowing Request; provided , however , that if the Lender shall have failed to provide such written notice within five Business Days after receipt of such Borrowing Request, then the Lender shall be deemed to have rejected such Borrowing Request. If the Lender, in its sole and absolute discretion, approves such Borrowing Request, then, subject to all the other terms and conditions of this Agreement and so long as no Default exists, the Lender shall, on the Closing Date for such Advance specified in such Borrowing Request, make such Advance by wire transfer of immediately available funds to the account of the Borrower designated on Exhibit 2.2. In connection with each such Advance, the Borrower shall furnish to the Lender a certificate in substantially the form or Exhibit 5.2.1.

2.3. Note . The aggregate principal amount of the Advances outstanding from time to time under this Section 2 is referred to as the “ Loan ”. The Borrower’s obligations to pay the Loan to the Lender shall be evidenced by a note of the Borrower in substantially the form of Exhibit 2.3 (the “ Note ”), payable to the Lender.

2.4. Application of Proceeds . Subject to the last sentence of this Section 2.4, the Borrower will apply the proceeds of each Advance only to finance the purchase of the type and quantity of the Permitted Commodity specified in the Borrowing Request for such Advance. The Borrower will not, directly or indirectly, apply any part of the proceeds of any extension of credit made pursuant to the Credit Documents to purchase or to carry Margin Stock or to any transaction prohibited by the Credit Documents or by Legal Requirements applicable to the Lender.

3. INTEREST; COMMITMENT FEE; ETC.

3.1. Interest . Each Advance shall accrue and bear daily interest at a rate per annum which shall at all times equal the Applicable Rate for such Advance. On the Maturity Date for any Advance, the Borrower will pay the accrued and unpaid interest on such Advance. On the Final Maturity Date or any accelerated maturity of the Loan, the Borrower will pay all accrued and unpaid interest on the Loan. Upon the occurrence and during the continuance of an Event of

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Default, the Lender may require accrued interest on any Advance to be payable on demand or at regular intervals.

3.2. Commitment Fee . If (a) the Lender approves any Borrowing Request for any Advance in accordance with Section 2.2 and (b) the Closing Date for such requested Advance does not occur (other than as a result of the Lender’s failure to fund such Advance as required by the terms of this Agreement) within 45 days after the date on which the Lender receives such Borrowing Request from the Borrower, then, in consideration of the Lender’s commitment to make such requested Advance, the Borrower will, within 45 days after the date on which the Lender receives such Borrowing Request from the Borrower, pay to the Lender a commitment fee in an amount equal to the product of (i) the amount of such requested Advance multiplied by (ii) 1%.

3.3. Changes in Circumstances; Yield Protection .

3.3.1 Taxes . All payments of the Credit Obligations shall be made without set-off or counterclaim and free and clear of any deductions, including deductions for Taxes, unless the Borrower is required by law to make such deductions. If (a) the Lender shall be subject to any Tax with respect to any payment of the Credit Obligations or its obligations hereunder or (b) the Borrower shall be required to withhold or deduct any Tax on any payment on the Credit Obligations, then the Lender may claim compensation from the Borrower under Section 3.3.3. Whenever Taxes must be withheld by the Borrower with respect to any payments of the Credit Obligations, the Borrower shall promptly furnish to the Lender official receipts (to the extent that the relevant governmental authority delivers such receipts) evidencing payment of any such Taxes so withheld. If the Borrower fails to pay any such Taxes when due or fails to remit to the Lender the required receipts evidencing payment of any such Taxes so withheld or deducted, the Borrower shall indemnify the Lender for any incremental Taxes and interest or penalties that may become payable by the Lender as a result of any such failure. In the event the Lender receives a refund of any Taxes for which it has received payment from the Borrower under this Section 3.3.1, the Lender shall promptly pay the amount of such refund to the Borrower, together with any interest thereon actually earned by the Lender.

3.3.2 Regulatory Changes . If the Lender shall determine that (a) any change in any Legal Requirement (including any new Legal Requirement) after the date hereof shall directly or indirectly (i) reduce the amount of any sum received or receivable by the Lender with respect to the Loan the return to be earned by the Lender on the Loan or (ii) require the Lender or any Affiliate of the Lender to make any payment on, or calculated by reference to, the gross amount of any amount received by the Lender under any Credit Document (other than Taxes or income or franchise taxes imposed by the jurisdiction in which the Lender’s principal place of business in the United States of America is located) and (b) such reduction, increased cost or payment shall not be fully compensated for by an adjustment in the Applicable Rate, then the Lender may claim compensation from the Borrower under Section 3.3.3.

3.3.3 Compensation Claims . Within 15 days after the receipt by the Borrower of a certificate from the Lender setting forth why it is claiming compensation under this

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Section 3.3 and computations (in reasonable detail) of the amount thereof, the Borrower shall pay to the Lender such additional amounts as the Lender sets forth in such certificate as sufficient fully to compensate it on account of the foregoing provisions of this Section 3.3, together with interest on such amount from the 15th day after receipt of such certificate until payment in full thereof at the Applicable Rate. The determination by the Lender of the amount to be paid to it and the basis for computation thereof hereunder shall be conclusive so long as (a) such determination is made in good faith, (b) no manifest error appears therein and (c) the Lender uses reasonable averaging and attribution methods.

3.3.4 Mitigation . The Lender shall take such commercially reasonable steps as it may determine are not disadvantageous to it, including changing lending offices to the extent feasible, in order to reduce amounts otherwise payable by the Borrower to the Lender pursuant to this Section 3.3. In addition, the Borrower shall not be responsible for costs under this Section 3.3 arising more than 90 days prior to receipt by the Borrower of the certificate from the Lender pursuant to this Section 3.3.

3.4. Computations of Interest and Fees . For purposes of this Agreement, interest (and any other amount expressed as interest) shall be computed on the basis of a 365-day year for actual days elapsed. If any payment required by this Agreement becomes due on any day that is not a Business Day, such payment shall, be made on the next succeeding Business Day. If the due date for any payment of principal is extended as a result of the immediately preceding sentence, interest shall be payable for the time during which payment is extended at the Applicable Rate.

3.5. Maximum Lawful Interest Rate . All Credit Documents are expressly limited so that in no event, including the acceleration of the maturity of the Credit Obligations, shall the amount paid or agreed to be paid in respect of interest on the Credit Obligations (or fees or other amounts deemed payment for the use of funds) exceed the maximum permissible amount under applicable law, as in effect on the date hereof and as subsequently amended or modified to allow a greater amount of interest (or fees or other amounts deemed payment for the use of funds) to be paid under the Credit Documents. If for any reason the amount in respect of interest (or fees or other amounts deemed payment for the use of funds) required by the Credit Documents exceeds such maximum permissible amount, the obligation to pay interest under the Credit Documents (or fees or other amounts deemed payment for the use of funds) shall be automatically reduced to such maximum permissible amount and any amounts in respect of interest (or fees or other amounts deemed payment for the use of funds) previously paid to the Lender in excess of such maximum permissible amount shall be automatically applied to reduce the amount of the Loan.

4. PAYMENT.

4.1. Payment at Maturity . On the Final Maturity Date or any accelerated maturity of the Loan, the Borrower will pay to the Lender an amount equal to the Loan, together with all accrued and unpaid interest and fees with respect thereto and all other Credit Obligations then outstanding.

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4.2. Mandatory Prepayments .

4.2.1 Excess Credit Exposure . If at any time the Loan exceeds the limit set forth in Section 2.1, the Borrower shall within one Business Day pay to the Lender as a prepayment of the Loan the amount of such excess.

4.2.2 Advances . On the Maturity Date for any Advance, the Borrower will pay to the Lender as a prepayment of the Loan an amount equal to such Advance.

4.3. Voluntary Prepayments . In addition to the prepayments required by Section 4.2, the Borrower may from time to time prepay all or any portion of the Loan (in a minimum amount of $500,000 and an integral multiple of $100,000, or such lesser amount of any Advance as is then outstanding), without premium or penalty of any type. The Borrower shall give the Lender at least one Business Day’s prior notice of its intention to prepay the Loan under this Section 4.3, specifying (a) the date of payment, (b) the total amount of the Loan to be paid on such date, (c) the Advances to which such prepayment should be applied and (d) the amount of interest to be paid with such prepayment.

4.4. Reborrowing; Application of Payments, etc.

4.4.1 Reborrowing . The amounts of the Loan prepaid pursuant to Sections 4.2.2 and 4.3 may be reborrowed from time to time prior to the Final Advance Date in accordance with Section 2, subject to the limits set forth therein. No portion of the Loan prepaid pursuant to Section 4.2.1 may be reborrowed.

4.4.2 Order of Application . Any prepayment of the Loan pursuant to Section 4.2 shall be applied to the Advances in the chronological order of the respective maturities thereof.

4.4.3 Payment with Accrued Interest, etc. Upon all prepayments of the Loan, the Borrower shall pay to the Lender, together with the principal amount to be prepaid, unpaid interest in respect thereof accrued to the date of prepayment. Notice of prepayment having been given in accordance with Section 4.3, and whether or not notice is given of prepayments pursuant to Section 4.2, the amount specified to be prepaid shall become due and payable on the date specified for prepayment.

5.	CONDITIONS TO EXTENDING CREDIT.

5.1. Conditions on Initial Closing Date . The obligation of the Lender to make the initial Advance pursuant to Section 2 shall be subject to the satisfaction, on or before the Initial Closing Date, of the conditions set forth in this Section 5.1 as well as the further conditions in Section 5.2. If the conditions set forth in this Section 5.1 are not met on or prior to the Initial Closing Date, the Lender shall have no obligation to make any Advance hereunder.

5.1.1 Note . The Borrower shall have duly authorized, executed and delivered to the Lender a Note.

5.1.2 Security Agreement . The Borrower shall have duly authorized, executed and delivered to the Lender the Security Agreement, which shall be in substantially the form of Exhibit 5.1.2.

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5.1.3 Perfection of Security . The Borrower shall have duly authorized, executed, acknowledged, delivered, filed, registered and recorded such security agreements, notices, financing statements, memoranda of intellectual property security interests and other instruments as the Lender may have reasonably requested in order to perfect the Liens purported or required pursuant to the Credit Documents to be created in the Credit Security and shall have paid all filing or recording fees or taxes required to be paid in connection therewith, including any recording, mortgage, documentary, transfer or intangible taxes.

5.1.4 Capitalization . The Lender shall be satisfied with the ownership, legal structure and capitalization of the Borrower, including the terms and conditions of the Charter and By-laws of, and the membership interests and other equity interests issued by, the Borrower and any agreements relating thereto.

5.1.5 Solvency, etc. After giving effect to the incurrence of the Credit Obligations, the Borrower:

(a) will be solvent;

(b) will have assets having a fair saleable value in excess of the amount required to pay its probable liability on its existing debts as such debts become absolute and mature;

(d) will have the ability to pay its debts from time to time incurred as such debts mature.

The Borrower shall have furnished to the Lender a certificate, signed by a Financial Officer, to these effects.

5.1.6 Legal Opinion . The Lender shall have received from Dickinson, Mackaman, Tyler & Hagen, PC, special counsel for the Borrower, a legal opinion with respect to the transactions contemplated by the Credit Documents, which opinion shall be in form and substance reasonably satisfactory to the Lender. The Borrower authorizes and directs its special counsel to furnish such opinion.

5.1.7 Payment of Fees . The Borrower shall have paid all fees and expenses of the Lender (including reasonable fees and disbursements of counsel to the Lender) which the Borrower is required to pay pursuant to this Agreement and for which statements have been rendered on or prior to the Initial Closing Date.

5.1.8 Proper Proceedings . This Agreement, each other Credit Document and the transactions contemplated hereby and thereby shall have been authorized by all necessary limited liability company or other proceedings. All necessary consents, approvals and authorizations of any governmental or administrative agency or any other Person of any of the transactions contemplated hereby or by any other Credit Document shall have been obtained and shall be in full force and effect.

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5.1.9 General . All legal and limited liability company proceedings in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Lender and the Lender shall have received copies of all documents, including certified copies of the Charter and By-Laws of the Borrower, records of corporate proceedings, certificates as to signatures and incumbency of officers and opinions of counsel, which the Lender may have reasonably requested in connection therewith, such documents where appropriate to be certified by proper corporate or governmental authorities.

5.2. Conditions to Each Extension of Credit . The obligation of the Lender to make any Advance pursuant to Section 2 shall be subject to the satisfaction, on or before the Closing Date for such Advance, of the following conditions:

5.2.1 Officer’s Certificate . The representations and warranties contained in Section 7 shall be true and correct on and as of such Closing Date with the same force and effect as though made on and as of such date (except as to any representation or warranty which refers to a specific earlier date); no Default shall exist on such Closing Date prior to or immediately after giving effect to the requested Advance; no Material Adverse Change shall have occurred since October 27, 2003; and the Borrower shall have furnished to the Lender in connection with the requested Advance a certificate to these effects, in substantially the form of Exhibit 5.2.1, signed by a Financial Officer.

5.2.2 Intercreditor Agreement . If the Borrower will apply any proceeds of any Senior Debt, as well as the proceeds of such Advance, to finance the purchase of the Permitted Commodity specified in the Borrowing Request for such Advance, then each of the Borrower and each Senior Lender providing such Senior Debt shall have duly authorized, executed and delivered to the Lender an intercreditor agreement in form and substance satisfactory to the Lender.

5.2.3 Legality, etc. The making of the requested extension of credit shall not (a) subject the Lender to any penalty or special tax (other than a Tax for which the Borrower is required to reimburse the Lender under Section 3.3), (b) be prohibited by any Legal Requirement or (c) violate any credit restraint program of the executive branch of the government of the United States of America, the Board of Governors of the Federal Reserve System or any other governmental or administrative agency so long as the Lender reasonably believes that compliance therewith is customary commercial practice.

6. GENERAL COVENANTS. The Borrower covenants with the Lender that, until the Termination Date, the Borrower will comply with the following provisions:

6.1. Taxes and Other Charges; Accounts Payable .

6.1.1 Taxes and Other Charges . The Borrower shall duly pay and discharge, or cause to be paid and discharged, before the same becomes in arrears, all taxes, assessments and other governmental charges imposed upon the Borrower and its properties, sales or activities, or upon the income or profits therefrom, as well as all claims for labor, materials or supplies which if unpaid might by law become a Lien upon

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any of its property; provided , however , that any such tax, assessment, charge or claim need not be paid if the validity or amount thereof shall at the time be contested in good faith by appropriate proceedings and if the Borrower shall, in accordance with GAAP, have set aside on its books adequate reserves with respect thereto; and provided , further , that the Borrower shall pay or bond, or cause to be paid or bonded, all such taxes, assessments, charges or other governmental claims immediately upon the commencement of proceedings to foreclose any Lien which may have attached as security therefor (except to the extent such proceedings have been dismissed or stayed).

6.1.2 Accounts Payable . The Borrower shall promptly pay when due, or in conformity with customary trade terms, all accounts payable incident to the operations of the Borrower not referred to in Section 6.1.1; provided , however , that any such accounts payable need not be paid if the validity or amount thereof shall at the time be contested in good faith and if the Borrower shall, in accordance with GAAP, have set aside on its books adequate reserves with respect thereto.

6.2. Conduct of Business, etc.

6.2.1 Types of Business . The Borrower shall engage only in (a) the business of (i) purchasing, transporting, storing, processing, hedging, financing and selling commodities on the terms specified in Exhibit 6.2.1 and (ii) providing risk management advisory services to clients and (b) other activities related thereto.

6.2.2 Maintenance of Properties . The Borrower:

(a) shall keep its properties in such repair, working order and condition, and shall from time to time make such repairs, replacements, additions and improvements thereto, as are necessary for the efficient operation of its businesses and shall comply at all times in all material respects with all material franchises, licenses and leases to which it is party so as to prevent any loss or forfeiture thereof or thereunder, except where (i) compliance is at the time being contested in good faith by appropriate proceedings and (ii) failure to comply with the provisions being contested has not resulted, and does not create a material risk of resulting, in the aggregate in any Material Adverse Change; and

(b) shall do all things necessary to preserve, renew and keep in full force and effect and in good standing its legal existence and authority necessary to continue its business.

6.2.3 Compliance with Legal Requirements . The Borrower shall comply in all material respects with all valid Legal Requirements applicable to it, except where (a) compliance therewith shall at the time be contested in good faith by appropriate proceedings and (b) failure so to comply with the provisions being contested has not resulted, and does not create a material risk of resulting, in the aggregate in any Material Adverse Change.

6.2.4 Compliance with Material Agreements . The Borrower shall comply in all material respects with the Material Agreements (to the extent not in violation of the other provisions of this Agreement or any other Credit Document). Without the prior written

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consent of the Lender, no Material Agreement shall be amended, modified, waived or terminated in any manner that would have in any material respect an adverse effect on the interests of the Lender.

6.3. Insurance .

6.3.1 Property Insurance . The Borrower shall keep its assets which are of an insurable character insured by financially sound and reputable insurers against theft and fraud and against loss or damage by fire, explosion and hazards insured against by extended coverage to the extent, in amounts and with deductibles at least as favorable as those generally maintained by businesses of similar size engaged in similar activities.

6.3.2 Liability Insurance . The Borrower shall maintain with financially sound and reputable insurers insurance against liability for hazards, risks and liability to persons and property to the extent, in amounts and with deductibles at least as favorable as those generally maintained by businesses of similar size engaged in similar activities; provided , however , that it may effect workers’ compensation insurance or similar coverage with respect to operations in any particular state or other jurisdiction through an insurance fund operated by such state or jurisdiction or by meeting the self-insurance requirements of such state or jurisdiction.

6.4. Financial Statements and Reports . The Borrower shall maintain a system of accounting in which correct entries shall be made of all transactions in relation to its business and affairs in accordance with generally accepted accounting practice. The fiscal year of the Borrower shall end on August 31 in each year and the fiscal quarters of the Borrower shall end on February 28, May 31, August 31 and November 30 in each year.

6.4.1 Annual Reports . The Borrower shall furnish to the Lender as soon as available, and in any event within 120 days after the end of each fiscal year of the Borrower, the balance sheet of the Borrower as at the end of such fiscal year, the statements of income, of changes in members’ equity and of cash flows of the Borrower for such fiscal year (all in reasonable detail) and comparative figures for the immediately preceding fiscal year, all accompanied by:

(a) Reports of independent certified public accountants of recognized national standing reasonably satisfactory to the Lender, containing no material qualification, to the effect that they have audited the foregoing financial statements in accordance with generally accepted auditing standards and that such financial statements present fairly, in all material respects, the financial position of the Borrower at the date thereof and the results of its operations for the period covered thereby in conformity with GAAP.

(b) The statement of such accountants that they have caused this Agreement to be reviewed and that in the course of their audit of the Borrower no facts have come to their attention that cause them to believe that any Default exists and in particular that they have no knowledge of any Default under the Computation Covenants or, if such is not the case, specifying such Default and the nature thereof. This statement is furnished by such accountants with the understanding that the examination of such accountants cannot be

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relied upon to give such accountants knowledge of any such Default except as it relates to accounting or auditing matters within the scope of their audit.

(c) A certificate of the Borrower signed by a Financial Officer to the effect that such Financial Officer has caused this Agreement to be reviewed and has no knowledge of any Default, or if such Financial Officer has such knowledge, specifying such Default and the nature thereof, and what action the Borrower has taken, is taking or proposes to take with respect thereto.

(d) Computations by the Borrower comparing the financial statements referred to above with the most recent budget for such fiscal year furnished to the Lender in accordance with Section 6.4.4.

(e) Computations by the Borrower in substantially the form of Exhibit 6.4 demonstrating, as of the end of such fiscal year, compliance with the Computation Covenants, signed by a Financial Officer.

(f) Supplements to Exhibits 7.1, 7.3 and 7.15 showing any changes in the information set forth in such exhibits not previously furnished to the Lender in writing, which supplements must be reasonably satisfactory to the Lender, as well as any changes in the Charter, Bylaws or incumbency of officers of the Obligors from those previously certified to the Lender.

(g) In the event of a change in GAAP, computations by the Borrower, signed by a Financial officer, reconciling the financial statements referred to above with financial statements prepared in accordance with GAAP as applied to the other covenants in Section 6 and related definitions.

(h) In reasonable detail, management’s discussion and analysis of the results of operations and the financial condition of the Borrower as at the end of and for the year covered by such financial statements.

6.4.2 Quarterly Reports . The Borrower shall furnish to the Lender as soon as available and, in any event, within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, the internally prepared balance sheet of the Borrower as of the end of such fiscal quarter, the statements of income, of changes in shareholders’ equity and of cash flows of the Borrower for such fiscal quarter and for the portion of the fiscal year then ended (all in reasonable detail) and comparative figures for the same period in the preceding fiscal year, all accompanied by:

(a) A certificate of the Borrower signed by a Financial Officer to the effect that such financial statements have been prepared in accordance with GAAP and present fairly, in all material respects, the financial position of the Borrower at the date thereof and the results of their operations for the period covered thereby, subject only to normal year-end audit adjustments and the addition of footnotes.

(b) A certificate of the Borrower signed by a Financial Officer to the effect that such officer has caused this Agreement to be reviewed and has no knowledge of any

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Default, or if such officer has such knowledge, specifying such Default and the nature thereof and what action the Borrower has taken, is taking or proposes to take with respect thereto.

(c) Computations by the Borrower comparing the financial statements referred to above with the most recent budget for the period covered thereby furnished to the Lender in accordance with Section 6.4.4.

(d) Computations by the Borrower in substantially the form of Exhibit 6.4 demonstrating, as of the end of such quarter, compliance with the Computation Covenants, signed by a Financial Officer.

(e) Supplements to Exhibits 7.1, 7.3 and 7.15 showing any changes in the information set forth in such exhibits not previously furnished to the Lender in writing, which supplements must be reasonably satisfactory to the Lender, as well as any changes in the Charter, Bylaws or incumbency of officers of the Obligors from those previously certified to the Borrower.

(f) In reasonable detail, management’s discussion and analysis of the results of operations and financial condition of the Borrower as at the end of and for the fiscal period covered by the financial statements referred to above.

6.4.3 Monthly Reports . The Borrower shall furnish to the Lender as soon as available and, in any event, within 30 days after the end of each month, the internally prepared balance sheet of the Borrower as at the end of such month and the statement of income of the Borrower for such month (all in reasonable detail), all accompanied by a certificate of the Borrower signed by a Financial Officer to the effect that such financial statements have been prepared in accordance with GAAP and present fairly, in all material respects, on a summary basis the financial position of the Borrower at the date thereof and the results of its operations for the period covered thereby, subject only to normal year-end audit adjustments and the addition of footnotes.

6.4.4 Other Reports . The Borrower shall promptly furnish to the Lender:

(a) As soon as prepared and in any event before the beginning of each fiscal year, an annual budget and operating projections for such fiscal year of the Borrower, prepared in a manner consistent with the manner in which the financial projections for the previous fiscal year were prepared.

(b) Any material updates of such budget and projections.

(d) All budgets, projections, statements of operations and other reports furnished generally to the members of the Borrower.

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(e) Such registration statements, proxy statements and reports, including Forms S-1, S-2, S-3, S-4, 10-K, 10-Q and 8-K, as may be filed by the Borrower with the Securities and Exchange Commission.

(f) Any 90-day letter or 30-day letter from the federal Internal Revenue Service (or the equivalent notice received from state or other taxing authorities) asserting tax deficiencies against the Borrower.

6.4.5 Notice of Litigation, Defaults, etc . The Borrower shall promptly furnish to the Lender notice of any litigation or any administrative or arbitration proceeding (a) which creates a material risk of resulting, after giving effect to any applicable insurance, in the payment by the Borrower of more than $100,000 or (b) which results, or creates a material risk of resulting, in a Material Adverse Change. Promptly upon acquiring knowledge thereof, the Borrower shall notify the Lender of the existence of any Default or Material Adverse Change, specifying the nature thereof and what action the Borrower has taken, is taking or proposes to take with respect thereto.

6.4.6 Other Information . From time to time at reasonable intervals upon request of any authorized officer of the Lender, the Borrower shall furnish to the Lender such other information regarding the business, assets, financial condition, income or prospects of the Borrower as such officer may reasonably request, including copies of all tax returns, licenses, agreements, leases and instruments to which the Borrower is party. The Lender’s authorized officers and representatives shall have the right during normal business hours upon reasonable notice and at reasonable intervals to examine the books and records of the Borrower and to make copies and notes therefrom for the purpose of ascertaining compliance with or obtaining enforcement of this Agreement or any other Credit Document. The Lender, at the expense of the Borrower at any time a Default exists and otherwise at the expense of the Lender, may, upon reasonable advance notice, undertake to have the Borrower reviewed by the Lender’s commercial financial examiners and fixed asset appraisers.

6.5. Certain Financial Tests .

6.5.1 Tangible Net Worth . Tangible Net Worth shall at all times equal or exceed $1,500,000.

6.5.2 Net Working Capital . Net Working Capital shall at all times equal or exceed $1,500,000.

6.6. Indebtedness . The Borrower shall not create, incur, assume or otherwise become or remain liable with respect to any Indebtedness, including Guarantees of Indebtedness of others and reimbursement obligations, whether contingent or matured, under letters of credit or other financial guarantees by third parties, (or become contractually committed to do so), except the following:

6.6.1 Indebtedness in respect of the Credit Obligations.

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6.6.2 To the extent permitted by Section 6.7.2, Indebtedness in respect of Capitalized Lease Obligations, Synthetic Lease Obligations or secured by purchase money security interests; provided , however , that the aggregate principal amount of all Indebtedness permitted by this Section 6.6.2 at any one time outstanding shall not exceed $100,000.

6.6.3 Current liabilities, other than Financing Debt, incurred in the ordinary course of business or in accordance with Hedge Agreements permitted by the other provisions of this Agreement.

6.6.4 To the extent that payment thereof shall not at the time be required by Section 6.1.1, Indebtedness in respect of taxes, assessments, governmental charges and claims for labor, materials and supplies.

6.6.5 Indebtedness secured by Liens of carriers, warehouses, mechanics, landlords and other Persons permitted by Sections 6.7.4 and 6.7.5.

6.6.6 Indebtedness in respect of judgments or awards (a) which have been in force for less than the applicable appeal period or (b) in respect of which the Borrower shall at the time in good faith be prosecuting an appeal or proceedings for review and, in the case of each of clauses (a) and (b), the Borrower shall have taken appropriate reserves therefore in accordance with GAAP and execution of such judgment or award shall not be levied.

6.6.7 Indebtedness in respect of deferred taxes arising in the ordinary course of business.

6.6.8 Indebtedness outstanding on the date hereof and described in Exhibit 7.3 and all refinancings and extensions thereof not in excess of the amount thereof outstanding immediately prior to such refinancing or extension.

6.6.9 Senior Debt; provided , however , that: (a) the aggregate amount of all Senior Debt at any one time outstanding shall not exceed $300,000,000; and (b) upon 90 days’ prior written notice from the Lender to the Borrower after the occurrence and during the continuance of any Payment Default, the Lender shall not incur any additional Senior Debt.

6.6.10 Junior Debt; provided , however , that: (a) the aggregate amount of all Junior Debt at any one time outstanding shall not exceed $30,000,000; (b) in no event shall the Borrower apply the proceeds of each of (i) any Junior Debt and (ii) any Advance, to finance the same purchase of any Permitted Commodity, unless such Junior Debt is subordinated to the prior payment of such Advance on terms that are satisfactory to the Lender, in its sole and absolute discretion; and (c) upon 90 days’ prior written notice from the Lender to the Borrower after the occurrence and during the continuance of any Payment Default, the Lender shall not incur any additional Junior Debt.

6.6.11 Obligations of the Borrower to repurchase equity interests in the Borrower in accordance with sections 4.01(b), 4.03 and 6.02(b) of the LLC Agreement, and

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Indebtedness evidenced by promissory notes issued by the Borrower in accordance with section 4.03 of the LLC Agreement to satisfy such repurchase obligations.

6.6.12 Obligations of the Borrower in respect of any deposit (including any cash collateral) or other pledge granted by any Person to the Borrower to secure the performance by such Person of any bid, tender, contract or lease.

6.6.13 Indebtedness (other than Financing Debt) in addition to the foregoing; provided , however , that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $100,000.

6.7. Liens . The Borrower shall not create, incur or enter into, or suffer to be created or incurred or to exist, any Lien (or become contractually committed to do so), except the following:

6.7.1 Liens on the Credit Security that secure the Credit Obligations.

6.7.2 Liens constituting (a) purchase money security interests (including mortgages, conditional sales, Capitalized Leases, Synthetic Leases and any other title retention or deferred purchase devices) in real property, interests in leases or tangible personal property (other than inventory) existing or created on the date on which such property is acquired or within 60 days thereafter and (b) the renewal, extension or refunding of any security interest referred to in the foregoing clause (a) in an amount not to exceed the amount thereof remaining unpaid immediately prior to such renewal, extension or refunding; provided , however , that (i) each such security interest shall attach solely to the particular item of property so acquired, and the principal amount of Indebtedness (including Indebtedness in respect of Capitalized Lease Obligations and Synthetic Lease Obligations) secured thereby shall not exceed the cost (including all such Indebtedness secured thereby, whether or not assumed) of such item of property; and (ii) the aggregate principal amount of all Indebtedness secured by Liens permitted by this Section 6.7.2 shall not exceed the amount permitted by Section 6.6.2.

6.7.3 Deposits or pledges made (a) in connection with, or to secure payment of, workers’ compensation, unemployment insurance, old age pensions or other social security, (b) in connection with casualty insurance maintained in accordance with Section 6.3, (c) to secure the performance of bids, tenders, contracts (other than contracts relating to Financing Debt) or leases, (d) to secure statutory obligations or surety or appeal bonds, (e) to secure indemnity, performance or other similar bonds in the ordinary course of business or (f) in connection with contested amounts to the extent that payment thereof shall not at that time be required by Section 6.1.

6.7.4 Liens of carriers, warehouses, mechanics and similar Liens, in each case (a) in existence less than 90 days from the date of creation thereof or (b) being contested in good faith by the Borrower in appropriate proceedings (so long as the Borrower shall, in accordance with GAAP, have set aside on its books adequate reserves with respect thereto).

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6.7.5 Encumbrances in the nature of (a) zoning restrictions, (b) easements, (c) restrictions of record on the use of real property, (d) landlords’ and lessors’ Liens on rented premises and (e) restrictions on transfers or assignment of leases, which in each case do not materially detract from the value of the encumbered property or impair the use thereof in the business of the Borrower.

6.7.6 Liens to secure taxes, assessments and other governmental charges, to the extent that payment thereof shall not at the time be required by Section 6.1.

6.7.7 Restrictions under federal and state securities laws on the transfer of securities.

6.7.8 The sale of doubtful accounts receivable for collection in the ordinary course of business.

6.7.9 Liens as in effect on the date hereof described in Exhibit 7.3 (and renewals and replacements thereof) and securing Indebtedness permitted by Section 6.6.8.

6.7.10 Liens on Permitted Commodities to secure Senior Debt permitted by Section 6.6.9; provided , however , that each such Lien shall attach solely to the particular Permitted Commodity purchased with the proceeds of such Senior Debt.

6.7.11 Liens on Permitted Commodities to secure Junior Debt permitted by Section 6.6.10; provided , however , that (a) each such Lien shall attach solely to the particular Permitted Commodity purchased with the proceeds of such Junior Debt and (b) in no event shall the Borrower grant Liens on such particular Permitted Commodity to secure each of (i) such Junior Debt and (ii) any Advance, unless the Lien securing such Junior Debt is subordinated to the Lien securing such Advance on terms that are satisfactory to the Lender, in its sole and absolute discretion.

6.8. Investments and Acquisitions . The Borrower shall not have outstanding, acquire or hold any Investment (including any Investment consisting of the acquisition of any business) (or become contractually committed to do so), except Investments in Cash Equivalents and Hedge Agreements permitted by the other provisions of this Agreement.

6.9. Distributions . The Borrower shall not make any Distribution (or become contractually committed to do so), except the following:

6.9.1 The Borrower may make Distributions to its members to the extent and at the times necessary for such members to pay their respective federal (and, if applicable, state) income taxes arising from such members’ respective allocable shares of the Borrower’s income taxable directly to such members for federal (and, if applicable, state) income tax purposes; provided , however , that such Distributions may be made only to the extent that the member in question has realized income arising from such allocable share of the Borrower’s income in excess of such member’s previously realized losses arising from such member’s allocable share of the Borrower’s losses applicable to such member for federal (and, if applicable, state) income tax purposes.

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6.9.2 The Borrower may make Distributions to its members to the extent required to satisfy its repurchase obligations under sections 4.01(b), 4.03 and 6.02(b) of the LLC Agreement.

6.9.3 The Borrower may make payments to FCStone Group pursuant to the Administrative Services Agreement as in effect on the date hereof; provided , however , that (a) during the fiscal year of the Borrower ending on August 31, 2004, the aggregate amount of such payments shall not exceed $36,000 and (b) during any fiscal year of the Borrower ending after August 31, 2004, the aggregate amount of such payments shall not exceed an amount that is satisfactory to, and approved in writing by, the Lender, in its sole and absolute discretion.

6.10. Asset Dispositions and Mergers . The Borrower shall not merge or enter into a consolidation or sell, lease, exchange, sell and lease back, sublease or otherwise dispose of any of its assets (or become contractually committed to do so), except the following:

6.10.1 The Borrower may sell or otherwise dispose of: (a) inventory (including Permitted Commodities) and Cash Equivalents in the ordinary course of business; (b) assets (i) that will be replaced in the ordinary course of business within 12 months by other assets of equal or greater value or (ii) that are no longer used or useful in the business of the Borrower; provided , however that the aggregate fair market value (book value, if greater) of all assets sold under this clause (b) in any fiscal year shall not exceed $10,000; and (c) doubtful accounts receivable for collection purposes in the ordinary course of business.

6.10.2 Licensing or leasing of assets for fair value in the ordinary course of business (so long as such assets are still available to be used by the Borrower to the extent necessary to its business).

6.11. No Subsidiaries . The Borrower shall not have any Subsidiaries.

6.12. Voluntary Prepayments of Other Indebtedness . The Borrower shall not make any voluntary prepayment of principal of, or interest on, any Financing Debt (other than the Credit Obligations) or make any voluntary redemptions or repurchases of Financing Debt (other than the Credit Obligations), in each case except in order to facilitate a refinancing of Indebtedness permitted by Section 6.6.

6.13. Derivative Contracts . The Borrower shall not enter into any Hedge Agreement (including futures contracts and forward contracts) except to provide hedge protection for an underlying economic transaction in the ordinary course of business.

6.14. Negative Pledge Clauses . The Borrower shall not enter into any agreement, instrument, deed or lease which prohibits or limits the ability of the Borrower to create, incur, assume or suffer to exist any Lien upon any of its properties, assets or revenues, whether now owned or hereafter acquired, or which requires the grant of any collateral for such obligation if collateral is granted for another obligation, except for (a) this Agreement and the other Credit Documents and (b) covenants in documents creating Liens permitted by Section 6.7 prohibiting further Liens on the assets encumbered thereby.

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6.15. ERISA, etc. The Borrower (a) shall not maintain any Plan and (b) shall not have any liability under any Plan or under ERISA or any other applicable law relating to compensation or employee benefit plans.

6.16. Transactions with Affiliates . The Borrower shall not effect any transaction with any of its Affiliates (other than the Lender) on a basis less favorable to the Borrower than would be the case if such transaction had been effected with a non-Affiliate.

6.17. Environmental Laws .

6.17.1 Compliance with Law and Permits . The Borrower shall use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep in effect all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws.

6.17.2 Notice of Claims, etc . The Borrower shall immediately notify the Lender and provide copies upon receipt, of all written claims, complaints, notices or inquiries from governmental authorities relating to the condition of its facilities and properties or compliance with Environmental Laws, and shall promptly cure and have dismissed with prejudice to the reasonable satisfaction of the Lender any actions and proceedings relating to compliance with Environmental Laws.

6.18. Hedging Requirements . The Borrower shall not effect any transaction unless such transaction (a) has no material price-fluctuation risk or (b) is hedged with a counterparty whose (i) long-term unsecured debt obligations are rated at least Aa by Moody’s or AA by S&P, (ii) commercial paper is rated at least Prime-1 by Moody’s or A-1 by S&P or (iii) creditworthiness is approved in writing by the Lender, in its sole and absolute discretion. The Borrower shall comply with the hedging requirements set forth in Exhibit 6.18.

7. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender to extend credit to the Borrower hereunder, the Borrower represents and warrants as follows:

7.1. Organization and Business .

7.1.1 Borrower . The Borrower is a duly organized and validly existing limited liability company, in good standing under the laws of Delaware, with all power and authority, corporate or otherwise, necessary (a) to enter into and perform this Agreement and each other Credit Document to which it is party, (b) to grant the Lender the security interests in the Credit Security owned by it to secure the Credit Obligations and (c) to own its properties and carry on the business now conducted or proposed to be conducted by it. Certified copies of the Charter and By-laws of the Borrower have been previously delivered to the Lender and are correct and complete. Exhibit 7.1, as from time to time hereafter supplemented in accordance with Sections 6.4.1 and 6.4.2, sets forth, as of the later of the date hereof or the end of the most recent fiscal quarter for which financial statements are required to be furnished in accordance with Sections 6.4.1 and 6.4.2, (i) the jurisdiction of organization, the organizational identification number issued by such

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jurisdiction and the federal taxpayer identification number of the Borrower, (ii) the address of the Borrower’s principal executive office and chief place of business, (iii) each name, including any trade name, under which the Borrower conducts its business, and (iv) the jurisdictions in which the Borrower owns or leases real or tangible personal property and, in the case of real property, whether such real property is owned or leased by the Borrower.

7.1.2 No Subsidiaries . The Borrower has no Subsidiaries.

7.1.3 Qualification . The Borrower is duly and legally qualified to do business as a foreign limited liability company and is in good standing in each state or jurisdiction in which such qualification is required and is duly authorized, qualified and licensed under all laws, regulations, ordinances or orders of public authorities, or otherwise, to carry on its business in the places and in the manner in which it is conducted, except for failures to be so qualified, authorized or licensed which would not in the aggregate result, or create a material risk of resulting, in any Material Adverse Change.

7.1.4 Capitalization . Except as set forth in the LLC Agreement, no options, warrants, conversion rights, preemptive rights or other statutory or contractual rights to purchase equity securities of the Borrower now exist, nor has the Borrower authorized any such right, nor is the Borrower obligated in any other manner to issue equity securities.

7.2. Material Agreements . Each of the Material Agreements is listed on Exhibit 7.2. The Borrower has previously furnished to the Lender correct and complete copies, including all exhibits, schedules and amendments thereto, of all Material Agreements, each as in effect on the date hereof.

7.3. Agreements Relating to Financing, Debt, Investments, etc . Exhibit 7.3, as from time to time hereafter supplemented in accordance with Sections 6.4.1 and 6.4.2, sets forth:

(a) the amounts (as of the dates indicated in Exhibit 7.3, as so supplemented) of all Financing Debt of the Borrower and all agreements, Liens and Guarantees which relate to such Financing Debt;

(b) the amounts (as of the dates indicated in Exhibit 7.3, as so supplemented) of all Investments of the Borrower, all agreements which relate to such Investments and all agreements which directly or indirectly require the Borrower to make any Investment;

(c) all material license agreements with respect to the products of the Borrower, including the parties thereto and the expiration dates thereof;

(d) all copyrights owned by the Borrower that are registered with the United States Copyright Office (or any office maintaining registration of copyrights in any foreign jurisdiction) and all applications for such registration;

(e) all trademarks and service marks owned by the Borrower that are registered with the United States Patent and Trademark Office (or any office maintaining

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registration of trademarks and service marks in any state of the United States of America or any foreign jurisdiction) and all applications for such registration;

(f) all United States and foreign patents and patent applications owned by the Borrower;

(g) all internet domain names owned by the Borrower and the related registry information;

(h) all commercial tort claims owned by the Borrower and related information with respect to the status of the proceedings; and

(i) all bank and deposit accounts owned by the Borrower.

The Borrower has furnished the Lender correct and complete copies of any agreements described above in this Section 7.3 requested by the Lender.

7.4. Changes in Condition . Since October 27, 2003, no Material Adverse Change has occurred. Between October 27, 2003 and the date hereof, the Borrower has not entered into any material transaction outside the ordinary course of business, except for the transactions contemplated by this Agreement and the Material Agreements.

7.5. Title to Assets . The Borrower has good and marketable title to all assets necessary for or used in the operations of its business as now conducted by it and reflected in the balance sheet most recently furnished to the Lender pursuant to Section 6.4.1 or 6.4.2, and to all assets acquired subsequent to the date of such balance sheet, subject to no Liens other than Liens permitted by Section 6.7 and except for assets disposed of as permitted by Section 6.10.

7.6. Operations in Conformity with Law, etc . The operations of the Borrower as now conducted or proposed to be conducted are not in violation of, nor is the Borrower in default under, any Legal Requirement presently in effect, except for such violations and defaults as do not and will not, in the aggregate, result, or create a material risk of resulting, in any Material Adverse Change. The Borrower has not received any notice of any such violation or default and has no knowledge of any basis on which the operations of the Borrower, as now conducted and as currently proposed to be conducted, would be held so as to violate or to give rise to any such violation or default.

7.7. Litigation . No litigation, at law or in equity, or any proceeding before any court, board or other governmental or administrative agency or any arbitrator is pending or, to the knowledge of the Borrower, threatened which (a) involves any material risk of any final judgment, order or liability which, after giving effect to any applicable insurance, has resulted, or creates a material risk of resulting, in any Material Adverse Change or (b) seeks to enjoin the consummation, or questions the validity, of any of the transactions contemplated by this Agreement or any other Credit Document. No judgment, decree or order of any court, board or other governmental or administrative agency or any arbitrator has been issued against or binds the Borrower which has resulted, or creates a material risk of resulting, in any Material Adverse Change.

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7.8. Authorization and Enforceability . Each Obligor has taken all corporate action required to execute, deliver and perform each Credit Document to which it is party. No consent of the equityholders of any Obligor is necessary in order to authorize the execution, delivery or performance of any Credit Document to which such Obligor is party. This Agreement and each other Credit Document constitutes the legal, valid and binding obligation of each Obligor party thereto and is enforceable against such Obligor in accordance with its terms.

7.9. No Legal Obstacle to Agreements . Neither the execution and delivery of this Agreement or any other Credit Document, nor the making of any borrowings hereunder, nor the guaranteeing of the Credit Obligations, nor the securing of the Credit Obligations with the Credit Security, nor the consummation of any transaction referred to in or contemplated by this Agreement or any other Credit Document, nor the fulfillment of the terms hereof or thereof or of any other agreement, instrument, deed or ease contemplated by this Agreement or any other Credit Document, has constituted or resulted in or will constitute or result in:

(a) any breach or termination of the provisions of (i) any agreement, instrument, deed or lease to which any Obligor is a party or by which it is bound or (ii) the Charter or By-laws of any Obligor;

(b) the violation of any law, statute, judgment, decree or governmental order, rule or regulation applicable to any Obligor;

(c) the creation under any agreement, instrument, deed or lease of any Lien (other than Liens on the Credit Security which secure the Credit Obligations) upon any of the assets of any Obligor, or

(d) any redemption, retirement or other repurchase obligation of any Obligor under any Charter, By-law, agreement, instrument, deed or lease.

Except for filings necessary to perfect the Lender’s security interest in the Credit Security, no approval, authorization or other action by, or declaration to or filing with, any governmental or administrative authority or any other Person is required to be obtained or made by any Obligor in connection with the execution, delivery and performance of this Agreement or any other Credit Document, the transactions contemplated hereby or thereby, the making of any borrowing hereunder, the guaranteeing of the Credit Obligations or the securing of the Credit Obligations with the Credit Security.

7.10. Defaults . The Borrower is not in default under any provision of its Charter or By-laws or of this Agreement or any other Credit Document. The Borrower is not in default under any provision of any agreement, instrument, deed or lease to which it is party or by which it or its property is bound so as to result, or create a material risk of resulting, in any Material Adverse Change.

7.11. Licenses, etc . The Borrower has all patents, patent applications, patent licenses, patent rights, trademarks, trademark rights, trade names, trade name rights, copyrights, licenses, franchises, permits, authorizations and other rights as are reasonably necessary for the conduct of the business of the Borrower as now conducted by it. All of the foregoing are in full force and effect in all material respects, and the Borrower is in substantial compliance with the foregoing

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without any known conflict with the valid rights of others which has resulted, or creates a material risk of resulting, in any Material Adverse Change. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such license, franchise or other right or which affects the rights of the Borrower thereunder so as to result, or to create a material risk of resulting, in any Material Adverse Change.

7.12. Tax Returns . The Borrower has filed all material tax and information returns which are required to be filed by it and has paid, or made adequate provision for the payment of, all taxes which have or may become due pursuant to such returns or to any assessment received by it, other than taxes and assessments being contested by the Borrower in good faith by appropriate proceedings and for which adequate reserves have been taken in accordance with GAAP. The Borrower does not know of any material additional assessments or any basis therefor. The Borrower reasonably believes that the charges, accruals and reserves on the books of the Borrower in respect of taxes or other governmental charges are adequate.

7.13. Certain Business Representations .

7.13.1 Labor Relations . No dispute or controversy between the Borrower and any of its employees has resulted, or is reasonably likely to result, in any Material Adverse Change, and the Borrower does not anticipate that its relationships with its unions or employees will result, or are reasonably likely to result, in any Material Adverse Change. The Borrower is in compliance in all material respects with all federal and state laws with respect to (a) non-discrimination in employment with which the failure to comply, in the aggregate, has resulted, or creates a material risk of resulting, in a Material Adverse Change and (b) the payment of wages.

7.13.2 Antitrust . The Borrower is in compliance in all material respects with all federal and state antitrust laws relating to its business and the geographic concentration of its business.

7.13.3 Consumer Protection . The Borrower is not in violation of any rule, regulation, order or interpretation of any rule, regulation or order of the Federal Trade Commission (including truth-in-lending), with which the failure to comply, in the aggregate, has resulted, or creates a material risk of resulting, in a Material Adverse Change.

7.13.4 Extraordinary Obligations . The Borrower is not party to or bound by any agreement, instrument, deed or lease, and is not subject to any Charter, By-law or other restriction, commitment or requirement, which, in the opinion of the management of the Borrower, is so unusually burdensome as in the foreseeable future to result, or create a material risk of resulting, in a Material Adverse Change.

7.13.5 Future Expenditures . The Borrower does not anticipate that the future expenditures, if any, by the Borrower needed to meet the provisions of any federal, state or foreign governmental statutes, orders, rules or regulations will be so burdensome as to result, or create a material risk of resulting, in any Material Adverse Change.

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7.14. Pension Plans . The Borrower (a) does not maintain any Plan or (b) have any liability under any Plan or under ERISA or any other applicable law relating to compensation or employee benefit plans.

7.15. Environmental Regulations .

7.15.1 Environmental Compliance . The Borrower is in compliance in all material respects with each Environmental Law in effect in any jurisdiction in which any properties of the Borrower are located or in which the Borrower conducts its business, and with all applicable published rules and regulations (and applicable standards and requirements) of the federal Environmental Protection Agency and of any similar agencies in states or foreign countries in which the Borrower conducts its business other than those which in the aggregate have not resulted, and do not create a material risk of resulting, in a Material Adverse Change.

7.15.2 Environmental Litigation . No suit, claim, action or proceeding of which the Borrower has been given notice or otherwise has knowledge is now pending before any court, governmental agency or board or other forum, or to the knowledge of the Borrower, threatened by any Person (nor, to the knowledge of the Borrower, does any factual basis exist therefor) for, and the Borrower has not received written correspondence from any federal, state or local governmental authority with respect to:

(a) noncompliance by the Borrower with any Environmental Law;

(b) personal injury, wrongful death or other tortious conduct relating to materials, commodities or products used, generated, sold, transferred or manufactured by the Borrower (including products made of; containing or incorporating asbestos, lead or other Hazardous Material); or

(c) the release into the environment by the Borrower of any Hazardous Material generated by the Borrower whether or not occurring at or on a site owned, leased or operated by the Borrower.

7.15.3 Hazardous Material . Exhibit 7.15 (as from time to time hereafter supplemented in accordance with Sections 6.4.1 and 6.4.2) (a) contains a list as of the date hereof of all waste disposal or dump sites (i) at which Hazardous Material generated by the Borrower has been disposed of directly by the Borrower and all independent contractors to whom the Borrower has delivered any such Hazardous Material and (ii) to the knowledge of the Borrower, where any such Hazardous Material finally came to be located, and (b) indicates all such sites which are or have been included (including as a potential or suspect site) in any published federal, state or local “superfund” or other list of hazardous or toxic waste sites. Any waste disposal or dump sites (A) at which Hazardous Material generated by the Borrower has been disposed of directly by the Borrower and all independent contractors to whom the Borrower has delivered any such Hazardous Material or (B) to the knowledge of the Borrower, where any such Hazardous Material finally came to be located, has not resulted, and does not create a material risk of resulting, in a Material Adverse Change.

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7.15.4 Environmental Condition of Properties . None of the properties owned or leased by the Borrower has been used as a treatment, storage or disposal site for Hazardous Material, other than as disclosed in Exhibit 7.15 (as from time to time hereafter supplemented in accordance with Sections 6.4.1 and 6.4.2). No Hazardous Material is present in any real property currently or formerly owned or operated by the Borrower except that which has not resulted, and does not create a material risk of resulting, in a Material Adverse Change.

7.16. Government Regulation; Margin Stock .

7.16.1 Government Regulation . Neither the Borrower nor any Person controlling the Borrower or under common control with the Borrower is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Investment Company Act, the Interstate Commerce Act or any other statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) that regulates the incurring by the Borrower of Financing Debt as contemplated by this Agreement and the other Credit Documents.

7.16.2 Margin Stock . The Borrower owns no Margin Stock.

7.17. Disclosure . Neither this Agreement nor any other Credit Document nor any financial statement, report, notice, mortgage, assignment or certificate furnished or to be furnished to the Lender by or on behalf of the Borrower in connection with the transactions contemplated hereby or by such Credit Document contains any untrue statement of material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. No fact is actually known to the Borrower which has resulted, or in the future (so far as the Borrower can reasonably foresee) will result, or creates a material risk of resulting, in any Material Adverse Change, except to the extent that present or future general economic conditions may result in a Material Adverse Change.

8. DEFAULTS.

8.1. Events of Default . The following events are referred to as “ Events of Default” :

8.1.1 Payment . The Borrower shall fail to make any payment in respect of: (a) interest or any fee on or in respect of any of the Credit Obligations owed by it as the same shall become due and payable, and such failure shall continue for a period of three Business Days or (b) principal of any of the Credit Obligations owed by it as the same shall become due, whether at maturity or by acceleration or otherwise.

8.1.2 Specified Covenants . The Borrower shall fail to perform or observe any of the provisions of Section 6.4.5 or Sections 6.5 through 6.18.

8.1.3 Other Covenants . The Borrower or any other Obligor shall fail to perform or observe any other covenant, agreement or provision to be performed or observed by it under this Agreement or any other Credit document, and such failure shall not be rectified or cured to the written satisfaction of the Lender within 30 days after the earlier

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of (a) notice thereof by the Lender to the Borrower or (b) a Financial Officer shall have actual knowledge thereof.

8.1.4 Representations and Warranties . Any representation or warranty of or with respect to the Borrower or any other Obligor made to the Lender in, pursuant to or in connection with this Agreement or any other Credit Document, or in any financial statement, report, notice, mortgage, assignment or certificate delivered to the Lender by the Borrower or any other Obligor in connection herewith or therewith, shall be false in any material respect on the date as of which it was made.

8.1.5 Material Financing Debt Cross Default, etc.

(a) the Borrower shall fail to make any payment when due (after giving effect to any applicable grace periods) in respect of any Material Financing Debt;

(b) the Borrower shall fail to perform or observe the terms of any agreement or instrument relating to any Material Financing Debt, and such failure shall continue, without having been duly cured, waived or consented to, beyond the period of grace, if any, specified in such agreement or instrument, and such failure shall permit the acceleration of such Material Financing Debt;

(c) all or any part of any Material Financing Debt of the Borrower shall be accelerated or shall become due or payable prior to its stated maturity for any reason whatsoever (except with respect to voluntary prepayments or mandatory contingent payments that do not result from a default thereunder or the occurrence of an event similar to an Event of Default hereunder);

(d) any Lien on any property of the Borrower securing any Material Financing Debt shall be enforced by foreclosure or similar action; or

(e) any holder of any Material Financing Debt shall exercise any right of rescission with respect to the issuance thereof or put, mandatory prepayment or repurchase rights against the Borrower with respect to such Material Financing Debt (other than any such rights that may be satisfied with “payment in kind” notes or other similar securities).

8.1.6 Ownership; Liquidation; etc.

(a) FCStone Group shall cease to own, beneficially and of record, at least 50% of the membership interests of the Borrower;

(b) Allan J. Lee shall cease to be actively involved in the executive management of the Borrower; or

(c) the Borrower or any other Obligor shall initiate any action to dissolve, liquidate or otherwise terminate its existence.

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8.1.7 Enforceability, etc. Any Credit Document shall cease for any reason (other than the scheduled termination thereof in accordance with its terms) to be enforceable in accordance with its terms or in full force and effect; or any party to any Credit Document shall so assert in a judicial or similar proceeding; or the security interests created by this Agreement or any other Credit Departments shall cease to be enforceable and of the same effect and priority purported to be created hereby.

8.1.8 Judgments . A final judgment (a) which, with other outstanding final judgments against the Borrower, exceeds an aggregate of $100,000 in excess of applicable insurance coverage shall be rendered against the Borrower or (b) which grants injunctive relief that results, or creates a material risk of resulting, in a Material Adverse Change and in either case if (i) within 30 days after entry thereof, such judgment shall not have been discharged or execution thereof stayed pending appeal or (ii) within 30 days after the expiration of any such stay, such judgment shall not have been discharged.

8.1.9 Bankruptcy, etc. The Borrower or any other Obligor shall:

(a) commence a voluntary case under the Bankruptcy Code or authorize, by appropriate proceedings of its board of directors or other governing body, the commencement of such a voluntary case;

(b) (i) have filed against it a petition commencing an involuntary case under the Bankruptcy Code that shall not have been dismissed within 60 days after the date on which such petition is filed or (ii) file an answer or other pleading within such 60-day period admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided or (iii) have entered against it an order for relief in any involuntary case commenced under the Bankruptcy Code;

(c) seek relief as a debtor under any applicable law, other than the Bankruptcy Code, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or consent to or acquiesce in such relief;

(d) have entered against it an order by a court of competent jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or approving its liquidation or reorganization as a debtor or any modification or alteration of the rights of its creditors or (iii) assuming custody of, or appointing a receiver or other custodian for, all or a substantial portion of its property; or

(e) make an assignment for the benefit of, or enter into a composition with, its creditors, or appoint, or consent to the appointment of, or suffer to exist a receiver or other custodian for, all or a substantial portion of its property.

8.2. Certain Actions Following an Event of Default . If any one or more Events of Default shall occur and be continuing, then in each and every such case:

8.2.1 Terminate Obligation to Extend Credit . The Lender may terminate its obligations to make any further extensions of credit under the Credit Documents by

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furnishing notice of such termination to the Borrower; provided , however , that if a Bankruptcy Default shall have occurred, the obligations of the Lender to make any further extensions of credit under the Credit Documents shall automatically terminate.

8.2.2 Specific Performance; Exercise of Rights . The Lender may proceed to protect and enforce its rights by suit in equity, action at law and/or other appropriate proceeding, either for specific performance of any covenant or condition contained in this Agreement or any other Credit Document (other than Financial Hedge Agreements) or in any instrument or assignment delivered to the Lender pursuant to this Agreement or any other Credit Document (other than Financial Hedge Agreements), or in aid of the exercise of any power granted in this Agreement or any other Credit Document (other than Financial Hedge Agreements) or any such instrument or assignment.

8.2.3 Acceleration . The Lender may by notice in writing to the Borrower declare all or any part of the unpaid balance of the Credit Obligations (other than amounts under Financial Hedge Agreements) then outstanding to be immediately due and payable; provided , however , that if a Bankruptcy Default shall have occurred, the unpaid balance of the Credit Obligations (other than amounts under Financial Hedge Agreements) shall automatically become immediately due and payable.

8.2.4 Enforcement of Payment; Credit Security; Setoff . The Lender may proceed to enforce payment of the Credit Obligations in such manner as it may elect and to realize upon any and all rights in the Credit Security. The Lender may offset and apply toward the payment of the Credit Obligations (and/or toward the curing of any Event of Default) any Indebtedness from the Lender to the respective Obligors, including any Indebtedness represented by deposits in any account maintained with the Lender, regardless of the adequacy of any security for the Credit Obligations. The Lender shall have no duty to determine the adequacy of any such security in connection with any such offset.

8.2.5 Cumulative Remedies . To the extent not prohibited by applicable law which cannot be waived, all of the Lender’s rights hereunder and under each other Credit Document shall be cumulative.

8.3. Annulment of Defaults . Once an Event of Default has occurred, such Event of Default shall be deemed to exist and be continuing for all purposes of the Credit Documents (other than Financial Hedge Agreements) until the Lender shall have waived such Event of Default in writing, stated in writing that the same has been cured to the Lender’s reasonable satisfaction or entered into an amendment to this Agreement which by its express terms cures such Event of Default, at which time such Event of Default shall no longer be deemed to exist or to have continued. No such action by the Lender shall extend to or affect any subsequent Event of Default or impair any rights of the Lender upon the occurrence thereof. The making of any extension of credit during the existence of any Default or Event of Default shall not constitute a waiver thereof.

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8.4. Waivers . To the extent that such waiver is not prohibited by the provisions of applicable law that cannot be waived, the Borrower waives:

(a) all presentments, demands for performance, notices of nonperformance (except to the extent required by this Agreement or any other Credit Document), protests, notices of protest and notices of dishonor;

(b) any requirement of diligence or promptness on the part of the Lender in the enforcement of its rights under this Agreement or any other Credit Document;

(c) any and all notices of every kind and description which may be required to be given by any statute or rule of law; and

(d) any defense (other than indefeasible payment in full) which it may now or hereafter have with respect to its liability under this Agreement or any other Credit Document or with respect to the Credit Obligations.

9.	EXPENSES; INDEMNITY.

9.1. Expenses . Whether or not the transactions contemplated hereby shall be consummated, the Borrower will pay:

(a) 50% of all reasonable expenses (including the reasonable fees and disbursements of the counsel to the Lender) incurred by the Lender on or prior to the date hereof in connection with the negotiation, preparation and duplication of this Agreement and each other Credit Document and the transactions contemplated hereby and thereby; provided , however , that in no event shall the aggregate amount of expenses that the Borrower is required to pay pursuant to this clause (a) exceed $50,000;

(b) all reasonable expenses (including the reasonable fees and disbursements of the counsel to the Lender) incurred by the Lender after the date hereof in connection with the transactions contemplated by this Agreement and each other Credit Document and amendments, waivers, consents and other operations hereunder and thereunder;

(c) all recording and filing fees and transfer and documentary stamp and similar taxes at any time payable in respect of this Agreement, any other Credit Document, any Credit Security or the incurrence of the Credit Obligations; and

(d) all other reasonable expenses incurred by the Lender or the holder of any Credit Obligation in connection with the enforcement of any rights hereunder or under any other Credit Document or any work-out negotiations relating to the Credit Obligations, including costs of collection and reasonable attorneys’ fees (including a reasonable allowance for the hourly cost of attorneys employed by the Lender on a salaried basis) and expenses.

9.2. General Indemnity . The Borrower shall indemnify the Lender and hold the Lender harmless from any liability, loss or damage resulting from the violation by the Borrower of Section 2.4. In addition, the Borrower shall indemnify the Lender and each of its directors, officers, employees, agents, attorneys, accountants, consultants and Affiliates (the Lender and each of its directors, officers, employees, agents, attorneys, accountants, consultants and Affiliates is referred to as an “ Indemnified Party ”) and hold each of them harmless from and

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against any and all claims, damages, liabilities and reasonable expenses (including reasonable fees and disbursements of counsel with whom any Indemnified Party may consult in connection therewith and all reasonable expenses of litigation or preparation therefor) which any Indemnified Party may incur or which may be asserted against any Indemnified Party in connection with (a) the Indemnified Party’s compliance with or contest of any subpoena or other process issued against it in any proceeding involving the Borrower or any of its Affiliates, (b) any litigation or investigation involving the Borrower or any of its Affiliates, or any officer, director or employee thereof, (c) the existence or exercise of any security rights with respect to the Credit Security in accordance with the Credit Documents or (d) this Agreement, any other Credit Document or any transaction contemplated hereby or thereby; provided , however , that the foregoing indemnity shall not apply to any Indemnified Party to the extent such claims, damages, liabilities and expenses are determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s own gross negligence or willful misconduct. THE BORROWER EXPRESSLY ACKNOWLEDGES THAT IT MAY BE REQUIRED TO INDEMNIFY PERSONS AGAINST THEIR OWN NEGLIGENCE.

10. SUCCESSOR AND ASSIGNS; LENDER ASSIGNMENTS AND PARTICIPATIONS. Any reference to this Agreement or any other Credit Document to any party hereto shall be deemed to include the successors and assigns of such party, and all covenants and agreements by or on behalf of the Borrower or the Lender that are contained in this Agreement or any other Credit Document shall bind and inure to the benefit of their respective successors and assigns; provided , however , that (a) the Borrower may not assign its rights or obligations under this Agreement or any other Credit Document and (b) the Lender shall be entitled to assign, or grant participations in, its rights and obligations under this Agreement or any other Credit Document without the consent of the Borrower or any other Person.

11. CONFIDENTIALITY. The Lender will maintain the confidential nature of all non-public information furnished to it by the Borrower in accordance with the Lender’s customary procedures for maintaining the confidential nature of information of this nature; provided , however , that such information may be disclosed:

(a) to any parent or corporate Affiliate of the Lender;

(b) pursuant to any statutory or regulatory requirement or any court order, subpoena or other legal process and to any regulatory authority, including state and federal bank and insurance regulators and the National Association of Insurance Commissioners;

(c) to any participant, proposed participant or proposed assignee; provided , however , that any such Person shall agree to comply with the restrictions set forth in this Section 11 with respect to such information;

(d) to its independent counsel, auditors and other professional advisors with an instruction to such Persons to keep such information confidential;

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(e) in connection with the enforcement of this Agreement or any other Credit Document or any litigation or other proceeding relating to this Agreement or any other Credit Document; and

(f) with the prior written consent of the Borrower, to any other Person.

In addition, the Lender and its Affiliates may include references to the Borrower and its Affiliates, their trade names, trademarks and logos and the credit facility provided hereby in connection with any advertising or marketing undertaken by the Lender or its Affiliates. Notwithstanding the foregoing, except as reasonably necessary to comply with applicable securities laws, the Lender (and each employee, representative, agent or advisor of the Lender) may disclose to any and all Persons, without limitations of any kind, the United States tax treatment and United States tax structure of this transaction and all materials of any kind (including opinions or other tax analyses) that are provided to the Lender relating to such tax treatment and tax structure.

12. NOTICES. Except as otherwise specified in this Agreement or any other Credit Document, any notice required to be given pursuant to this Agreement or any other Credit Document shall be given in writing. Any notice, consent, approval, demand or other communication in connection with this Agreement or any other Credit Document shall be deemed to be given if given in writing (including by telecopy) addressed as provided below (or to the addressee at such other address as the addressee shall have specified by notice actually received by the addressor), and if either (a) actually delivered in fully legible form to such address or (b) in the case of a letter, unless actual receipt of the notice is required by any Credit Document five days shall have elapsed after the same shall have been deposited in the United States mails, with first-class postage prepaid and registered or certified.

If to the Borrower, to it at:

FCStone Merchant Services, LLC

One North End Avenue, Suite 1129

New York, New York 10282

Attention: President

with a copy to:

FCStone Group, Inc.

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

Attention: Chief Financial Officer

If to the Lender, to it at:

Harvard Private Capital Properties III, Inc.

c/o Harvard Management Company, Inc.

600 Atlantic Avenue

Boston, MA 02210

Attention: Megan Kelleher

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13. COURSE OF DEALING; WAIVERS, CONSENTS AND AMENDMENTS. No course of dealing between the Borrower or any other Obligor, on one hand, and the Lender, on the other hand, shall operate as a waiver of any of the Lender’s rights under this Agreement or any other Credit Department or with respect to the Credit Obligations. In particular, no delay or omission on the part of the Lender in exercising any right under this Agreement or any other Credit Document or with respect to the Credit Obligations shall operate as a waiver of such right or any other right hereunder or hereunder. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. No waiver, consent or amendment with respect to this Agreement or any other Credit Document shall be binding unless it is in writing and signed by the Lender.

14. GENERAL PROVISIONS.

14.1. Defeasance . On the Termination Date, this Agreement and the other Credit Documents shall terminate and, at the Borrower’s written request, accompanied by such certificates and other items as the Lender shall reasonably deem necessary, the Credit Security shall revert to the Obligors and the right, title and interest of the Lender therein shall terminate. Thereupon, on the Obligors’ demand and at their cost and expense, the Lender shall execute proper instruments, acknowledging satisfaction of and discharging this Agreement and the other Credit Documents, and shall redeliver to the Obligors any Credit Security then in its possession; provided , however , that Sections 3.3, 9, 11 and 14 shall survive the termination of this Agreement.

14.2. No Strict Construction . The parties have participated jointly in the negotiation and drafting of this Agreement and the other Credit Documents with counsel sophisticated in financing transactions. In the event an ambiguity or question of intent or interpretation arises, this Agreement and the other Credit Documents shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement and the other Credit Documents.

14.3. Certain Obligor Acknowledgements . The Borrower acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents;

(b) the Lender has no fiduciary relationship with or duty to the Obligors arising out of or in connection with this Agreement or any other Credit Document, and the relationship between the Obligors, on one hand, and the Lender, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture between the Borrower and the Lender is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby or thereby.

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14.4. Venue; Service of Process; Certain Waivers . Each of the Borrower and the Lender:

(a) irrevocably submits to the nonexclusive jurisdiction of the state courts of The Commonwealth of Massachusetts and to the nonexclusive jurisdiction of the United States District Court for the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement or any other Credit Document or the subject matter hereof or thereof;

(b) waives to the extent not prohibited by applicable law that cannot be waived, and agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding brought in any of the above-named courts, any claim that it is not subject personally to the jurisdiction of such court, that its property is exempt or immune from attachment or execution, that such proceeding is brought in an inconvenient forum, that the venue of such proceeding is improper, or that this Agreement or any other Credit Document, or the subject matter hereof or thereof, may not be enforced in or by such court;

(c) consents to service of process in any such proceeding in any manner at the time permitted by Chapter 223A of the General Laws of The Commonwealth of Massachusetts and agrees that service of process by registered or certified mail, return receipt requested, at its address specified in or pursuant to Section 12 is reasonably calculated to give actual notice; and

(d) waives to the extent not prohibited by applicable law that cannot be waived any right it may have to claim or recover in any such proceeding any special, exemplary, punitive or consequential damages.

14.5. WAIVER OF JURY TRIAL . TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE BORROWER AND THE LENDER WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF OR RELATING OT THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE CONDUCT OF THE PARTIES HERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. The Borrower acknowledges that it has been informed by the Lender that the foregoing sentence constitutes a material inducement upon which the Lender has relied and will rely in entering into this Agreement and any other Credit Document. The Borrower or the Lender may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of the Borrower and the Lender to the waiver of their rights to trial by jury.

14.6. Interpretation; Governing Law; etc . Time is (and shall be) of the essence in this Agreement and the other Credit Documents. All covenants, agreements, representations and warranties made in this Agreement or any other Credit Document or in certificates delivered pursuant hereto or thereto shall be deemed to have been relied on by the Lender, notwithstanding any investigation made by the Lender on its behalf, and shall survive the execution and delivery to the Lender hereof and thereof. The invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision hereof, and any invalid or unenforceable provision shall be modified so as to be enforced to the maximum extent of its

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validity or enforceability. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement and the other Credit Documents constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous understandings and agreements, whether written or oral, with respect to such subject matter. This Agreement may be executed in any number of counterparts which together shall constitute one instrument. This Agreement may be executed in any number of counterparts which together shall constitute one instrument. This Agreement, and any issue, claim or proceeding arising out of or relating to this Agreement or any other Credit Document or the conduct of the parties hereto, whether now existing or hereafter arising and whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws (other than the conflict of laws rules) of The Commonwealth of Massachusetts.

[The rest of this page is intentionally blank.]

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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be executed and delivered by its duly authorized officer as an agreement under seal as of the date first above written.


BORROWER:	FCSTONE MERCHANT SERVICES, LLC

	By	/s/ Allan J. Lee
		Name: Allan Lee
		Title: President


LENDER:	HARVARD PRIVATE CAPITAL PROPERTIES III, INC.

	By	/s/ Michael S. Pradko
		Name: Michael S. Pradko
		Title: Authorized Signatory

	By	/s/ Stu Porter
		Name: Stu Porter
		Title: Authorized Signatory

FCSTONE MERCHANT SERVICES, LLC

EXHIBITS



2.2	-	Borrowing Request

2.3	-	Note

5.1.2	-	Security Agreement

5.2.1	-	Officer’s Certificate

6.2.1	-	Commodities Business

6.4	-	Compliance Certificate

6.18	-	Hedging Requirements

7.1	-	Borrower

7.2	-	Material Agreements

7.3	-	Financing Debt, Certain Investments, etc.

7.15	-	Hazardous Material Sites

Exhibit 2.2

[LETTERHEAD OF FCSTONE MERCHANT SERVICES, LLC]

, 200

Harvard Private Capital Properties III, Inc.

c/o Harvard Management Company, Inc.

600 Atlantic Avenue

Boston, MA 02210

Attention: Megan Kelleher

Ladies and Gentlemen:

Pursuant to Section 2.2 of the Credit Agreement dated as of March 4, 2004, as now in effect (the “ Credit Agreement ”), between FCStone Merchant Services, LLC, a Delaware limited liability company (the “ Borrower ”), and Harvard Private Capital Properties III, Inc., a Delaware corporation (the “ Lender ”), the Borrower hereby requests the following Advance:


Principal amount:

Interest rate:

Closing Date (which shall be a Business Day):

Maturity Date:

Type and quantity of Permitted Commodity to be purchased with the proceeds:

Terms of all financing, purchase, hedging and sale contracts and arrangements (a) which relate to the Permitted Commodity to be purchased with the proceeds and (b) to which the Borrower is or will be party:

Capitalized terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined.

This borrowing request has been duly executed by a duly authorized Financial Officer of the Borrower this day of , 200 .


FCSTONE MERCHANT SERVICES, LLC

By
		Name:
		Title:

The foregoing request is hereby approved

as of this day of , 200 :


HARVARD PRIVATE CAPITAL PROPERTIES III, INC.

By
		Name:
		Title:

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Exhibit 2.3

TERM NOTE


T-1		March 4, 2004

FOR VALUE RECEIVED, the undersigned FC Stone Merchant Services LLC, a Delaware limited liability company (the “ Borrower ”), hereby promises to pay Harvard Private Capital Properties III, Inc., a Delaware corporation (the “ Lender ”), or order, on the Final Maturity Date, the principal amount of Thirty Million Dollars ($30,000,000) or such lesser aggregate unpaid principal amount of the Loan made by the Lender to the Borrower pursuant to the Credit Agreement dated as of March 4, 2004, as from time to time in effect (the “ Credit Agreement ”), between the Borrower and the Lender. Capitalized terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined.

The Borrower promises to pay interest from the date hereof, computed as provided in the Credit Agreement, on the aggregate principal amount of the Loan from time to time unpaid at the per annum rate applicable to such unpaid principal amount as provided in the Credit Agreement, all such interest being payable at the times specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof.

Payments hereunder shall be made to the Lender c/o Harvard Management Company, Inc. at 600 Atlantic, Avenue, Boston, Massachusetts 02210.

All Advances made by the Lender pursuant to the Credit Agreement and all repayments of the principal thereof shall be recorded by the Lender and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding shall be endorsed by the Lender on the schedule attached hereto or on a continuation of such schedule attached to, and made a part of, this Note; provided , however , that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower under this Note, the Credit Agreement or any other Credit Document.

This Note evidences borrowings under, and is entitled to the benefits of, and is subject to the provisions of, the Credit Agreement. The principal of this Note is prepayable in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement.

In case an Event of Default shall occur and be continuing, the entire principal of this Note may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement.

This Note and any issue, claim or proceeding arising out of or relating to this Note or the conduct of the parties hereto, whether now existing or hereafter arising and whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws (other than the conflict of laws rules) of The Commonwealth of Massachusetts.

The parties hereto, including the Borrower and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with

the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment, forbearance or other indulgence without notice.


FCSTONE MERCHANT SERVICES, LLC

By
		Name:
		Title:

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LOANS AND PAYMENTS OF PRINCIPAL


Date	Amount of Loan	Amount of Principal Repaid	Unpaid Principal Balance	Notation Made By

Exhibit 10.62

FCSTONE MERCHANT SERVICES, LLC

SECURITY AGREEMENT

THIS SECURITY AGREEMENT, dated as of March 4, 2004, is between FCStone Merchant Services, LLC, a Delaware limited liability company (the “ Borrower ”), and Harvard Private Capital Properties III, Inc., a Delaware corporation (the “ Lender ”).

WHEREAS, on the date hereof, the Borrower and the Lender are entering into the Credit Agreement (as defined below); and

WHEREAS, it is a condition to the willingness of the Lender to make Advances (as defined below) to the Borrower under the Credit Agreement that the parties enter into this Agreement;

NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereby agree as follows:

1. REFERENCE TO CREDIT AGREEMENT; DEFINITIONS; ETC. Reference is made to the Credit Agreement dated as of March 4, 2004, as amended and in effect from time to time (the “ Credit Agreement) , between the Borrower and the Lender. Capitalized terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. Certain other capitalized terms are used in this Agreement as specifically defined below in this Section 1. Except as the context otherwise explicitly requires, (a) the capitalized term “Section” refers to sections of this Agreement, (b) references to a particular Section shall include all subsections thereof, (c) the word “including” shall be construed as “including without limitation”, (d) terms defined in the UCC and not otherwise defined herein have the meanings provided under the UCC, (e) references to a particular statute or regulation include all rules and regulations thereunder and any successor statute, regulation or rules, in each case as from time to time in effect, (f) references to a particular Person include such Person’s successors and assigns to the extent not prohibited by this Agreement and (g) references to “the date hereof’ mean the date first set forth above.

“ Accounts ” is defined in Section 2.1.2.

“ Agreement ” means this Security Agreement as from time to time amended, modified and in effect.

“ Borrower ” is defined in the preamble to this Agreement.

“ Credit Agreement ” is defined in the first sentence of this Section 1.

“ Credit Security ” is defined in Section 2.1.

“ Intellectual Property ” is defined in Section 2.3.8.

“ Lender ” is defined in the preamble to this Agreement.

“ Pledged Indebtedness ” is defined in Section 2.1.6.

“ Pledged Rights ” is defined in Section 2.1.5.

“ Pledged Securities ” means the Pledged Stock, the Pledged Rights and the Pledged Indebtedness, collectively.

“ Pledged Stock ” is defined in Section 2.1.4.

“ Securities Act ” means the federal Securities Act of 1933.

“ UCC ” means the Uniform Commercial Code as in effect in The Commonwealth of Massachusetts on the date hereof; provided , however , that with respect to the perfection of the Lender’s Lien on the Credit Security and the effect of nonperfection thereof, the term “UCC” means the Uniform Commercial Code as in effect in any jurisdiction the laws of which are made applicable by section 9-301 of the Uniform Commercial Code as in effect in The Commonwealth of Massachusetts.

2. SECURITY.

2.1 Credit Security . As security for the payment and performance of the Credit Obligations, the Borrower mortgages, pledges and collaterally grants and assigns to the Lender and the holders from time to time of any Credit Obligation, and creates a security interest in favor of the Lender and such holders in, all of the Borrower’s right, title and interest in and to (but none of its obligations or liabilities with respect to) the items and types of present and future property described in Sections 2.1.1 through 2.1.14 (subject, however, to Section 2.1.15), whether now owned or hereafter acquired, all of which shall be included in the term “ Credit Security ”:

2.1.1 Tangible Personal Property . All goods, machinery, equipment, inventory and all other tangible personal property of any nature whatsoever, wherever located, including raw materials, work in process, finished parts and products, supplies, spare parts, replacement parts, merchandise for resale, computers, tapes, disks and computer equipment.

2.1.2 Rights to Payment of Money . All rights to receive the payment of money, including accounts and receivables, health care insurance receivables, rights to receive the payment of money under contracts, franchises, licenses, permits, subscriptions or other agreements (whether or not earned by performance), and rights to receive payments from any other source. All such rights, other than Financing Debt, are collectively referred to as “ Accounts ”.

2.1.3 Intangibles . All of the following (to the extent not included in Section 2.1.2): (a) contracts, franchises, licenses, permits, subscriptions and other agreements and all rights thereunder, (b) rights granted by others which permit the Borrower to sell or market items of personal property, (c) United States and foreign common law and statutory copyrights and rights in literary property and rights and licenses thereunder; (d) trade names, United States and foreign trademarks, service marks, internet domain names, registrations of any of the foregoing and related good will; (e) United States and foreign patents and patent

applications; (f) computer software, designs, models, know-how, trade secrets, rights in proprietary information, formulas, customer lists, backlog, orders, subscriptions, royalties, catalogues, sales material, documents, good will, inventions and processes; (g) judgments, causes in action, commercial tort claims set forth from time to time on exhibit 7.3 to the Credit Agreement or any supplements thereto provided pursuant to section 6.4.1 or 6.4.2 of the Credit Agreement or otherwise and other claims, whether or not inchoate; and (h) all other general intangibles, payment intangibles and intangible property and all rights thereunder, including such items set forth from time to time on exhibit 7.3 to the Credit Agreement or any supplements thereto provided pursuant to section 6.4.1 or 6.4.2 of the Credit Agreement or otherwise.

2.1.4 Pledged Stock . (a) All shares of capital stock or other evidence of beneficial interest in any corporation, business trust or limited liability company, (b) all limited partnership interests in any limited partnership, (c) all general partnership interests in any general or limited partnership, (d) all joint venture interests in any joint venture and (e) all options, warrants and similar rights to acquire such capital stock or such interests. All such capital stock, interests, options, warrants and other rights are collectively referred to as the “ Pledged Stock ”.

2.1.5 Pledged Rights . All rights to receive profits or surplus of, or other Distributions (including income, return of capital and liquidating distributions) from, any partnership, joint venture or limited liability company, including any distributions by any such Person to partners, joint venturers or members. All such rights are collectively referred to as the “ Pledged Rights ”.

2.1.6 Pledged Indebtedness . All Financing Debt from time to time owing to the Borrower from any Person. All such Financing Debt is collectively referred to as the “ Pledged Indebtedness ”.

2.1.7 Chattel Paper, Instruments, etc . All chattel paper (whether tangible or electronic), non-negotiable instruments, negotiable instruments, documents, securities and investment property.

2.1.8 Leases . All leases of personal property, whether the Borrower is the lessor or the lessee thereunder.

2.1.9 Deposit Accounts . All general or special deposit accounts, including any demand, time, savings, passbook or similar account maintained by the Borrower with any bank, trust company, savings and loan association, credit union or similar organization, and all money, cash and cash equivalents of the Borrower, whether or not deposited in any such deposit account.

2.1.10 Credit Support . All collateral granted by third parties to, or held by, the Borrower, and all letter of credit rights (whether or not the letter of credit is evidenced in writing) and other supporting obligations of the Borrower.

2.1.11 Books and Records . All books and records, including books of account and ledgers of every kind and nature, all electronically recorded data (including all computer programs, disks, tapes, electronic data processing media and software used in connection with maintaining the Borrower’s books and records), all files, correspondence and all containers for the foregoing.

2.1.12 Insurance . All insurance policies which insure against any loss or damage to any other Credit Security or which are otherwise owned by the Borrower.

2.1.13 All Other Property . All other property, assets and items of value of every kind and nature, tangible or intangible, absolute or contingent, legal or equitable.

2.1.14 Proceeds and Products . All proceeds, including insurance proceeds, and products of the items of Credit Security described or referred to in Sections 2.1.1 through 2.1.13 and, to the extent not included in the foregoing, all Distributions with respect to the Pledged Securities.

2.1.15 Excluded Property . Notwithstanding Sections 2.1.1 through 2.1.14, the payment and performance of the Credit Obligations shall not be secured by:

(a) any contract, license, permit or franchise that validly prohibits the creation by the Borrower of a security interest in such contract, license, permit or franchise (or in any rights or property obtained by the Borrower under such contract, license, permit or franchise); provided , however , that the provisions of this Section 2.1.15 shall not prohibit the security interests created by this Agreement from extending to the proceeds of such contract, license, permit or franchise (or such rights or property) or to the monetary value of the good will and other general intangibles of the Borrower relating thereto;

(b) any rights or property to the extent that any valid and enforceable law or regulation applicable to such rights or property prohibits the creation of a security interest therein; provided , however , that the provisions of this Section 2.1.15 shall not prohibit the security interests created by this Agreement from extending to the proceeds of such rights or property or to the monetary value of the good will and other general intangibles of the Borrower relating thereto;

(c) any rights or property to the extent that such rights or property secure purchase money financing therefor permitted by the Credit Agreement and the agreements providing such purchase money financing prohibit the creation of a further security interest therein; provided , however , that the provisions of this Section 2.1.15 shall not prohibit the security interests created by this Agreement from extending to the proceeds of such rights or property or to the monetary value of the good will and other general intangibles of the Borrower relating thereto;

(d) Margin Stock unless the applicable requirements of Regulations T, U and X of the Board of Governors of the Federal Reserve System have been satisfied; or

(e) the items described in Section 2.2 (but only in the event and to the extent the Lender has not specified that such items be included in the Credit Security pursuant thereto).

In addition, in the event the Borrower disposes of assets to third parties in a transaction permitted by Section 6.10 of the Credit Agreement, such assets, but not the proceeds or products thereof, shall be released from the Lien of the Credit Security.

2.2 Additional Credit Security . As additional Credit Security, the Borrower covenants that it will mortgage, pledge and collaterally grant and assign to the Lender and the holders from time to time of any Credit Obligation, and will create a security interest in favor of the Lender and such holders in, all of its right, title and interest in and to (but none of its obligations with respect to) such of the following present or future items as the Lender may from time to time specify by notice to the Borrower, whether now owned or hereafter acquired, and the proceeds and products thereof, except to the extent consisting of rights or property of the types referred to in Section 2.1.15(a) through (e), subject only to Liens permitted by Section 2.3.3, all of which shall thereupon be included in the term “ Credit Security ”:

2.2.1 Real Property . All real property and immovable property and fixtures, leasehold interests and easements wherever located, together with all estates and interests of the Borrower therein, including lands, buildings, stores, manufacturing facilities and other structures erected on such property, fixed plant, fixed equipment and all permits, rights, licenses, benefits and other interests of any kind or nature whatsoever in respect of such real and immovable property.

2.2.2 Motor Vehicles and Aircraft . All motor vehicles and aircraft.

2.3 Certain Covenants with Respect to Credit Security . The Borrower covenants that:

2.3.1 Pledged Stock . All shares of capital stock, limited partnership interests, membership interests and similar securities included in the Pledged Stock shall be at all times duly authorized, validly issued, fully paid and (in the case of capital stock and limited partnership interests) nonassessable. The Borrower will deliver to the Lender certificates representing any Pledged Stock held by the Borrower, accompanied by a stock transfer power executed in blank and, if the Lender so requests, with the signature guaranteed, all in form and manner reasonably satisfactory to the Lender. Pledged Stock that is not evidenced by a certificate held by the Borrower will be described in appropriate control statements and UCC financing statements provided to the Lender, all in form and substance reasonably satisfactory to the Lender. In the event the Pledged Stock includes uncertificated equity interests in a limited liability company, limited partnership, general partnership or other entity, except with the prior written consent of the Lender, which consent may not be unreasonably withheld, the Borrower shall take all action within its power to prevent such limited liability company, limited partnership, general partnership or other entity from (a) opting to have such uncertificated equity interests treated as “securities” for purposes of Article 8 of the UCC or (b) issuing certificates for such uncertificated equity interests. Upon the occurrence and during the continuance of an Event of Default, the Lender may transfer into its name or the name of its nominee any Pledged Stock. In the event the Pledged Stock includes any Margin Stock, the Borrower will furnish to the Lender Federal Reserve Form U-1 and take such other action as the Lender may reasonably request to ensure compliance with applicable laws.

2.3.2 Accounts and Pledged Indebtedness . The Borrower will, immediately upon the receipt thereof, deliver to the Lender any promissory note or similar instrument representing any Account or Pledged Indebtedness, after having endorsed such promissory note or instrument in blank.

2.3.3 No Liens or Restrictions on Transfer or Change of Control . All Credit Security shall be free and clear of any Liens and restrictions on the transfer thereof, including contractual provisions which prohibit the assignment of rights under contracts, except for Liens permitted by section 6.7 of the Credit Agreement or by this Section 2.3.3. Without limiting the generality of the foregoing, the Borrower will use commercially reasonable efforts to exclude from agreements, instruments, deeds or leases to which it becomes a party after the date hereof provisions that would prevent the Borrower from creating a security interest in such agreement, instrument, deed or lease or any rights or property acquired thereunder as contemplated hereby. None of the Pledged Stock shall be subject to any option to purchase or similar rights of any Person. Except with the written consent of the Lender, which consent will not be unreasonably withheld, the Borrower will use commercially reasonable efforts to exclude from any agreement, instrument, deed or lease provisions that would restrict the change of control or ownership of the Borrower or the creation of a security interest in the ownership of the Borrower.

2.3.4 Jurisdiction of Organization . The Borrower shall at all times maintain its jurisdiction of organization as set forth in exhibit 7.1 to the Credit Agreement as in effect on the date hereof or, so long as the Borrower shall have taken all steps reasonably necessary to perfect the Lender’s security interest in the Credit Security with respect to such new jurisdiction, in such other jurisdiction as the Borrower may specify by notice actually received by the Lender not less than 10 Banking Days prior to such change of jurisdiction of organization.

2.3.5 Location of Credit Security . The Borrower shall at all times keep its records concerning the Accounts at its chief executive office and principal place of business, which office and place of business shall be as set forth in exhibit 7.1 to the Credit Agreement (as from time to time supplemented in accordance with sections 6.4.1 and 6.4.2 of the Credit Agreement) or at such other address as the Borrower may specify by notice actually received by the Lender prior to such change of address. The Borrower shall not at any time keep tangible personal property of the type referred to in Section 2.1.1 in any jurisdiction other than the jurisdictions specified in such exhibit 7.1 (as so supplemented) or other jurisdictions as the Borrower may specify by notice actually received by the Lender prior to moving such tangible personal property into such other jurisdiction.

2.3.6 Trade Names . The Borrower will not adopt or do business under any name other than its name or names designated in exhibit 7.1 to the Credit Agreement (as from time to time supplemented in accordance with sections 6.4.1 and 6.4.2 of the Credit Agreement) or any other name specified by notice actually received by the Lender not less than 10 Banking Days prior to the conduct of business under such additional name. Since its inception, the Borrower has not changed its name or adopted or conducted business under any trade name other than a name specified in such exhibit 7.1 (as so supplemented).

2.3.7 Insurance . Each insurance policy included in, or insuring against loss or damage to, the Credit Security, or insuring against liabilities of the Borrower, shall name the Lender as additional insured party or as loss payee, as the case may be. No such insurance policy shall be cancelable or subject to termination or reduction in amount or scope of coverage until after at least 30 days’ prior written notice from the insurer to the Lender. At least 10 days prior to the expiration of any such insurance policy for any reason, the Borrower shall furnish the Lender with reasonably satisfactory evidence of a renewal or replacement policy and payment of

the premiums therefor to the extent due. The Borrower grants to the Lender full power and authority as its attorney-in-fact, effective upon notice to the Borrower after the occurrence and during the continuance of an Event of Default, to obtain, cancel, transfer, adjust and settle any such insurance policy and to endorse any drafts thereon. Any amounts that the Lender receives under any such policy (including return of unearned premiums) when no Event of Default has occurred and is continuing shall be delivered to the Borrower for the replacement, restoration and maintenance of the Credit Security in the case of property insurance or for reimbursing insured liabilities in the case of liability insurance. Any such amounts that the Lender receives after the occurrence and during the continuance of an Event of Default shall, at the Lender’s option, be applied to payment of the Credit Obligations or to the replacement, restoration and maintenance of the Credit Security in the case of property insurance or to the reimbursement of insured liabilities in the case of liability insurance. If the Borrower fails to provide insurance as required by this Agreement, the Lender may, at its option, purchase such insurance, and the Borrower will on demand pay to the Lender the amount of any payments made by the Lender for such purpose, together with interest at the Applicable Rate on the amounts so disbursed from five Banking Days after the date demanded until payment in full thereof.

2.3.8 Intellectual Property . Exhibit 7.3 to the Credit Agreement (as supplemented from time to time in accordance with sections 6.4.1 and 6.4.2 of the Credit Agreement) shall set forth the following items (collectively, the “ Intellectual Property ”):

(a) all copyrights owned by the Borrower that are registered with the United States Copyright Office (or any office maintaining registration of copyrights in any foreign jurisdiction) and all applications for such registration;

(b) all trademarks, trade names, service marks and service names owned by the Borrower that are registered with the United States Patent and Trademark Office (or any office maintaining registration of such items in any state of the United States of America or any foreign jurisdiction) and all applications for such registration,

(d) all internet domain names owned by the Borrower and the registry with which each such domain name is registered.

The Borrower shall duly authorize, execute and deliver to the Lender separate memoranda of security interests provided by the Lender with respect to the foregoing Intellectual Property for filing in the United States Copyright Office (or any office maintaining registration of copyrights in any foreign jurisdiction), the United States Patent and Trademark Office (or any office maintaining registration of trademarks and service marks in any state of the United States of America or any foreign jurisdiction) or any other applicable office. Upon (i) the registration of any additional Intellectual Property (or the filing of applications therefor) in such offices, (ii) the filing by the Borrower of any additional patent application or (iii) the issuance of any additional patent to the Borrower, the Borrower shall (at least quarterly, as contemplated by sections 6.4.1 and 6.4.2 of the Credit Agreement) notify the Lender and duly authorize, execute and deliver to the Lender separate memoranda of security interests provided by the Lender and covering such

additional Intellectual Property for filing in such offices. The Borrower hereby appoints and constitutes the Lender as its attorney with full power and authority, in its place and stead, after the occurrence and during the continuance of an Event of Default, to register with the United States Copyright Office, the United State Patent and Trademark Office or any other applicable governmental authority the assignment by the Borrower to the Lender of the Intellectual Property.

2.3.9 Deposit Accounts . The Borrower shall keep all its bank and deposit accounts only with the financial institutions listed on exhibit 7.3 to the Credit Agreement (as from time to time supplemented in accordance with sections 6.4.1 and 6.4.2 of the Credit Agreement). Upon the request of the Lender, the Borrower shall use reasonable efforts to cause such financial institutions to enter into account control agreements with the Lender in form and substance reasonably satisfactory to the Lender.

2.3.10 Modifications to Credit Security . Except with the prior written consent of the Lender, which consent will not be unreasonably withheld, the Borrower shall not amend or modify, or waive any of its rights under or with respect to, any material Accounts, general intangibles, Pledged Securities or leases if the effect of such amendment, modification or waiver would be to reduce the amount of any such items or to extend the time of payment thereof, to waive any default by any other party thereto, or to waive or impair any remedies of the Borrower or the Lender under or with respect to any such Accounts, general intangibles, Pledged Securities or leases, in each case other than consistent with past practice in the ordinary course of business and on an arm’s-length basis. The Borrower will promptly give the Lender written notice of any request by any Person for any material credit or adjustment with respect to any Account, general intangible, Pledged Securities or leases.

2.3.11 Delivery of Documents . Upon the Lender’s reasonable request, the Borrower shall deliver to the Lender, promptly upon the Borrower’s receipt thereof, copies of any agreements, instruments, documents or invoices comprising or relating to the Credit Security. Pending such request, the Borrower shall keep such items at its chief executive office and principal place of business (as specified pursuant to Section 2.3.5).

2.3.12 Perfection of Credit Security .

(a) This Agreement creates and shall create in favor of the Lender a legal, valid and enforceable first priority security interest in the Credit Security described herein, subject only (in the case of Credit Security other than Pledged Stock) to Liens permitted by section 6.7 of the Credit Agreement.

(b) The Lender may at any time and from time to time execute and file UCC financing statements, continuation statements and amendments thereto that describe the Credit Security and contain any information required by the UCC or the applicable filing office with respect to any such UCC financing statement, continuation statement or amendment thereof, including the execution and filing of a UCC financing statement covering all assets of the Borrower.

(c) Upon the Lender’s reasonable request from time to time, the Borrower will execute and deliver, and file and record in the proper filing and recording places, all such instruments, including UCC financing statements, collateral assignments of copyrights, trademarks and patents, mortgages or deeds of trust, notations on certificates of title and written confirmation of the grant of a security interest in commercial tort claims, and will take all such other action, as the Lender deems reasonably necessary for perfecting or otherwise confirming to it the Credit Security or to carry out any other purpose of this Agreement or any other Credit Document.

(d) In furtherance of the foregoing the Borrower shall use reasonable efforts to obtain (i) a written acknowledgment, in form and substance reasonably satisfactory to the Lender, from any bailee having possession of any Credit Security that such bailee holds such Credit Security for the benefit of the Lender and (ii) control of any investment property, deposit accounts, letter of credit rights or electronic chattel paper, with any agreements establishing such control to be in form and substance reasonably satisfactory to the Lender.

2.4 Administration of Credit Security . The Credit Security shall be administered as follows, and if an Event of Default shall have occurred and be continuing, Section 2.5 shall also apply.

2.4.1 Use of Credit Security . Until the Lender provides written notice to the contrary, the Borrower may use, commingle and dispose of any part of the Credit Security in the ordinary course of its business, all subject to Section 6.10 of the Credit Agreement.

2.4.2 Accounts . To the extent specified by prior written notice from the Lender after the occurrence and during the continuance of an Event of Default, all sums collected or received and all property recovered or possessed by the Borrower in connection with any Credit Security shall be received and held by the Borrower in trust for and on the Lender’s behalf, shall be segregated from the assets and funds of the Borrower, and shall be delivered to the Lender for the benefit of the Lender. Without limiting the foregoing, upon the Lender’s request after the occurrence and during the continuance of an Event of Default, the Borrower shall institute depository collateral accounts, lock-box receipts and similar credit procedures providing for the direct receipt of payment on Accounts at a separate address, the segregation of such proceeds for direct payment to the Lender and appropriate notices to Account debtors. Upon the Lender’s request after the occurrence and during the continuance of an Event of Default, the Borrower will cause its accounting books and records to be marked with such legends and segregated in such manner as the Lender may specify.

2.4.3 Distributions on Pledged Securities .

(a) Until an Event of Default shall occur and be continuing, the Borrower shall be entitled, to the extent permitted by the Credit Documents, to receive all Distributions on or with respect to the Pledged Securities (other than Distributions constituting additional Pledged Securities or liquidating Distributions). All Distributions constituting additional Pledged Securities or liquidating Distributions will be retained by the Lender (or if received by the Borrower shall be held by the Borrower in trust and shall be immediately delivered by the

Borrower to the Lender in the original form received, endorsed in blank) and held by the Lender as part of the Credit Security.

(b) If an Event of Default shall have occurred and be continuing, all Distributions on or with respect to the Pledged Securities shall be retained by the Lender (or if received by the Borrower shall be held by the Borrower in trust and shall be immediately delivered by it to the Lender in the original form received, endorsed in blank) and held by the Lender as part of the Credit Security or applied by the Lender to the payment of the Credit Obligations in accordance with Section 2.5.6 .

2.4.4 Voting Pledged Securities .

(a) Until an Event of Default shall occur and be continuing and the Lender shall have delivered a notice contemplated by Section 2.4.4(b), the Borrower shall be entitled to vote or consent with respect to the Pledged Securities in any manner not inconsistent with the terms of any Credit Document, and the Lender will, if so requested, execute appropriate revocable proxies therefor.

(b) If an Event of Default shall have occurred and be continuing, if and to the extent that the Lender shall so notify in writing the Borrower, only the Lender shall be entitled to vote or consent or take any other action with respect to the Pledged Securities (and the Borrower will, if so requested, execute appropriate proxies therefor).

2.5 Right to Realize upon Credit Security . Except to the extent prohibited by applicable law that cannot be waived, this Section 2.5 shall govern the rights of the Lender to realize upon the Credit Security if any Event of Default shall have occurred and be continuing. The provisions of this Section 2.5 are in addition to any rights and remedies available at law or in equity and in addition to the provisions of any other Credit Document. In the case of a conflict between this Section 2.5 and any other Credit Document, this Section 2.5 shall govern.

2.5.1 Assembly of Credit Security; Receiver . The Borrower shall, upon the Lender’s request, assemble the Credit Security and otherwise make it available to the Lender. The Lender may have a receiver appointed for all or any portion of the Borrower’s assets or business which constitutes the Credit Security in order to manage, protect, preserve, sell and otherwise dispose of all or any portion of the Credit Security in accordance with the terms of the Credit Documents, to continue the operations of the Borrower and to collect all revenues and profits therefrom to be applied to the payment of the Credit Obligations, including the compensation and expenses of such receiver.

2.5.2 General Authority . To the extent specified in written notice from the Lender to the Borrower, the Borrower grants the Lender full and exclusive power and authority, subject to the other terms hereof and applicable law, to take any of the following actions (for the sole benefit of the Lender and the holders from time to time of any Credit Obligations, but at the Borrower’s expense):

(a) to ask for, demand, take, collect, sue for and receive all payments in respect of any Accounts, general intangibles, Pledged Securities or leases which the Borrower could otherwise ask for, demand, take, collect, sue for and receive for its own use;

(b) to extend the time of payment of any Accounts, general intangibles, Pledged Securities or leases and to make any allowance or other adjustment with respect thereto;

(c) to settle, compromise, prosecute or defend any action or proceeding with respect to any Accounts, general intangibles, Pledged Securities or leases and to enforce all rights and remedies thereunder which the Borrower could otherwise enforce;

(d) to enforce the payment of any Accounts, general intangibles, Pledged Securities or leases, either in the name of the Borrower or in its own name, and to endorse the name of the Borrower on all checks, drafts, money orders and other instruments tendered to or received in payment of any Credit Security;

(e) to notify the third party payor with respect to any Accounts, general intangibles, Pledged Securities or leases of the existence of the security interest created hereby and to cause all payments in respect thereof thereafter to be made directly to the Lender; provided , however , that whether or not the Lender shall have so notified such payor, the Borrower will at its expense render all reasonable assistance to the Lender in collecting such items and in enforcing claims thereon; and

(f) to use, operate, sell, transfer, assign or otherwise deal in or with any Credit Security or the proceeds thereof as fully as the Borrower otherwise could do.

2.5.3 Marshaling, etc . The Lender shall not be required to make any demand upon, or pursue or exhaust any of its rights or remedies against, the Borrower or any other guarantor, pledgor or any other Person with respect to the payment of the Credit Obligations or to pursue or exhaust any of its rights or remedies with respect to any collateral therefor or any direct or indirect guarantee thereof. The Lender shall not be required to marshal the Credit Security or any guarantee of the Credit Obligations or to resort to the Credit Security or any such guarantee in any particular order, and all of its rights hereunder or under any other Credit Document shall be cumulative. To the extent it may lawfully do so, the Borrower absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Lender, any valuation, stay, appraisement, extension, redemption or similar laws now or hereafter existing which, but for this provision, might be applicable to the sale of any Credit Security made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise. Without limiting the generality of the foregoing, the Borrower (a) agrees that it will not invoke or utilize any law which might prevent, cause a delay in or otherwise impede the enforcement of the rights of the Lender in the Credit Security, (b) waives its rights under all such laws and (c) agrees that it will not invoke or raise as a defense to any enforcement by the Lender of any rights and remedies relating to the Credit Security or the Credit Obligations any legal or contractual requirement with which the Lender may have in good faith failed to comply. In addition, the Borrower waives any right to prior notice (except to the extent expressly required by this Agreement) or judicial hearing in connection with foreclosure on or disposition of any Credit Security, including any such right which the Borrower would otherwise have under the Constitution of the United States of America, any state or territory thereof or any other jurisdiction.

2.5.4 Sales of Credit Security . All or any part of the Credit Security may be sold for cash or other value in any number of lots at public or private sale, without demand, advertisement or notice; provided ; however , that unless the Credit Security to be sold threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Lender shall give the Borrower 10 days’ prior written notice of the time and place of any public sale, or the time after which a private sale may be made, which notice each of the Borrower and the Lender agrees to be reasonable. At any sale or sales of Credit Security, the Lender or any of its officers acting on its behalf; or the Lender’s assigns, may bid for and purchase all or any part of the property and rights so sold, may use all or any portion of the Credit Obligations owed to the Lender as payment for the property or rights so purchased, and upon compliance with the terms of such sale may hold and dispose of such property and rights without further accountability to the Borrower, except for the proceeds of such sale or sales pursuant to Section 2.5.6. The Borrower acknowledges that any such sale will be made by the Lender on an “as is” basis with disclaimers of all warranties, whether express or implied (including warranties with respect to title, possession, quiet enjoyment and other similar warranties). The Borrower will execute and deliver or cause to be executed and delivered such instruments, documents, assignments, waivers, certificates and affidavits, will supply or cause to be supplied such further information and will take such further action, as the Lender shall reasonably request in connection with any such sale.

2.5.5 Sale Without Registration . If, at any time when the Lender shall determine to exercise its rights hereunder to sell all or part of the securities included in the Credit Security, the securities in question shall not be effectively registered under the Securities Act (or other applicable law), the Lender may, in its sole discretion, sell such securities by private or other sale not requiring such registration in such manner and in such circumstances as the Lender may deem necessary or advisable in order that such sale may be effected in accordance with applicable securities laws without such registration and the related delays, uncertainty and expense. Without limiting the generality of the foregoing, in any event the Lender may, in its sole discretion, (a) approach and negotiate with a single purchaser or one or more possible purchasers to effect such sale, (b) restrict such sale to one or more purchasers each of whom will represent and agree that such purchaser is purchasing for its own account, for investment and not with a view to the distribution or sale of such securities and (c) cause to be placed on certificates representing the securities in question a legend to the effect that such securities have not been registered under the Securities Act (or other applicable law) and may not be disposed of in violation of the provisions thereof. The Borrower agrees that such manner of disposition is commercially reasonable, that it will upon the Lender’s request give any such purchaser access to such information regarding the issuer of the securities in question as the Lender may reasonably request and that the Lender shall not incur any responsibility for selling all or part of the securities included in the Credit Security at any private or other sale not requiring such registration, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration under the Securities Act (or other applicable law) or until made in compliance with certain other rules or exemptions from the registration provisions under the Securities Act (or other applicable law). The Borrower acknowledges that no adequate remedy at law exists for breach by it of this Section 2.5.5 and that such breach would not be adequately compensable in damages and therefore agrees that this Section 2.5.5 may be specifically enforced.

2.5.6 Application of Proceeds . The proceeds of all sales and collections in respect of any Credit Security or other assets of the Borrower, all funds collected from the Borrower and any cash contained in the Credit Security, the application of which is not otherwise specifically provided for herein, shall be applied as follows:

(a) first, to the payment of the costs and expenses of such sales and collections, the reasonable expenses of the Lender and the reasonable fees and expenses of its special counsel;

(b) second, any surplus then remaining to the payment of the Credit Obligations in such order and manner as the Lender may in its reasonable discretion determine; and

(c) third, any surplus then remaining shall be paid to the Borrower, subject, however, to any rights of the holder of any then existing Lien who has duly presented to the Lender an authenticated demand for proceeds before the Lender’s distribution of the proceeds is completed.

2.6 Custody of Credit Security . Except as provided by applicable law that cannot be waived, the Lender will have no duty as to the custody and protection of the Credit Security, the collection of any part thereof or of any income thereon or the preservation or exercise of any rights pertaining thereto, including rights against prior parties, except for the use of reasonable care in the custody and physical preservation of any Credit Security in its possession. The Lender will not be liable or responsible for any loss or damage to any Credit Security, or for any diminution in the value thereof, by reason of the act or omission of any agent selected by the Lender acting in good faith.

2.7 Further Assurances . The Borrower will, promptly upon the request of the Lender from time to time, execute, acknowledge and deliver, and file and record, all such instruments, and take all such action, as the Lender deems reasonably necessary or advisable to carry out the intent and purpose of this Agreement.

3. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to the benefit of the Lender and its successors and assigns and shall be binding upon the Borrower and its successors and assigns. The Borrower may not assign its rights or obligations under this Agreement without the written consent of the Lender.

4. NOTICES. Except as otherwise specified in this Agreement, any notice required to be given pursuant to this Agreement shall be given in writing. Any notice, consent, approval, demand or other communication in connection with this Agreement shall be deemed to be given if given in writing (including by telecopy) addressed as provided below (or to the addressee at such other address as the addressee shall have specified by notice actually received by the addressor), and if either (a) actually delivered in fully legible form to such address or (b) in the case of a letter, unless actual receipt of the notice is required by this Agreement, five business days shall have elapsed after the same shall have been deposited in the United States mails, with first-class postage prepaid and registered or certified.

If to the Borrower, to it at:

FCStone Merchant Services, LLC

One North End Avenue, Suite 1129

New York, New York 10282

Attention: President

with a copy to:

FCStone Group, Inc.

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

Attention: Chief Financial Officer

If to the Lender, to it at:

Harvard Private Capital Properties III, Inc.

c/o Harvard Management Company, Inc.

600 Atlantic Avenue

Boston, Massachusetts 02210

Attention: Megan Kelleher

5. COURSE OF DEALING; NO IMPLIED WAIVERS; WAIVERS AND AMENDMENTS. No course of dealing between the Borrower or any other Obligor, on one hand, and the Lender, on the other hand, shall operate as a waiver of any of the rights of the Lender under this Agreement or any other Credit Document or with respect to the Credit Obligations. In particular, no delay or omission on the part of the Lender in exercising any right under this Agreement or any other Credit Document or with respect to the Credit Obligations shall operate as a waiver of such right or any other right hereunder or thereunder. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. No waiver, consent or amendment with respect to this Agreement shall be binding unless it is in writing and signed by the Lender.

6. GENERAL PROVISIONS.

6.1 Defeasance . On the Termination Date, this Agreement shall terminate and, at the Borrower’s written request, accompanied by such certificates and other items as the Lender shall reasonably deem necessary, the Credit Security shall revert to the Borrower and the right, title and interest of the Lender therein shall terminate. Thereupon, on the Borrower’s demand and at its cost and expense, the Lender shall execute proper instruments, acknowledging satisfaction of and discharging this Agreement, and shall redeliver to the Borrower any Credit Security then in its possession; provided , however , that Section 6 shall survive the termination of this Agreement.

6.2 No Strict Construction . The parties have participated jointly in the negotiation and drafting of this Agreement and the other Credit Documents with counsel sophisticated in financing transactions. In the event an ambiguity or question of intent or interpretation arises, this Agreement and the other Credit Documents shall be construed as if drafted jointly by the

parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement and the other Credit Documents.

6.3 Certain Acknowledgments . The Borrower acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents;

(b) the Lender has no fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any other Credit Document, and the relationship between the Borrower, on one hand, and the Lender, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture between the Borrower and the Lender is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby or thereby.

6.4 Venue; Service of Process . Each of the Borrower and the Lender:

(b) waives to the extent not prohibited by applicable law that cannot be waived, and agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding brought in any of the above-named courts, any claim that it is not subject personally to the jurisdiction of such court, that its property is exempt or immune from attachment or execution, that such proceeding is brought in an inconvenient forum, that the venue of any such proceeding is improper, or that this Agreement or any other Credit Document, or the subject matter hereof or thereof; may not be enforced in or by such court;

(c) consents to service of process in any such proceeding in any manner at the time permitted by Chapter 223A of the General Laws of The Commonwealth of Massachusetts and agrees that service of process by registered or certified mail, return receipt requested, at its address specified in or pursuant to Section 4 is reasonably calculated to give actual notice; and

6.5 WAIVER OF JURY TRIAL . TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE BORROWER AND THE LENDER WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE

CONDUCT OF THE PARTIES HERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. The Borrower acknowledges that it has been informed by the Lender that the foregoing sentence constitutes a material inducement upon which the Lender has relied and will rely in entering into this Agreement and any other Credit Document. The Borrower or the Lender may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of the Borrower and the Lender to the waiver of their rights to trial by jury.

6.6 Interpretation; Governing Law; etc . Time is (and shall be) of the essence in this Agreement and the other Credit Documents. All covenants, agreements, representations and warranties made in this Agreement or any other Credit Document or in certificates delivered pursuant hereto or thereto shall be deemed to have been relied on by the Lender, notwithstanding any investigation made by the Lender on its behalf; and shall survive the execution and delivery to the Lender hereof and thereof. The invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision hereof, and any invalid or unenforceable provision shall be modified so as to be enforced to the maximum extent of its validity or enforceability. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement and the other Credit Documents constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous understandings and agreements, whether written or oral, with respect to such subject matter. This Agreement may be executed in any number of counterparts, which together shall constitute one instrument. This Agreement, and any issue, claim or proceeding arising out of or relating to this Agreement or any other Credit Document or the conduct of the parties hereto, whether now existing or hereafter arising and whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws (other than the conflict of laws rules) of The Commonwealth of Massachusetts.

[The rest of this page is intentionally blank]

IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be executed and delivered by its duly authorized officer as an agreement under seal as of the date first above written.


FCSTONE MERCHANT SERVICES, LLC

By:		/s/ Allan J. Lee
		Name: Allan Lee
		Title: President


HARVARD PRIVATE CAPITAL PROPERTIES III, INC.

By:		/s/ Michael S. Pradko
		Name: Michael S. Pradko
		Title: Authorized Signatory

By:		/s/ Stu Porter
		Name: Stu Porter
		Title: VP

Exhibit 10.63

FGDI LLC

A N FCS TONE G ROUP , INC . C OMPANY

PO Box 149, 19901 N. Dixie Highway

Bowling Green, OH 43402 (419) 373-6311

FGDI Incentive Plan

The purpose of the incentive plan is to provide additional salary flow to the revenue-producing employees of FGDI and also allow support and administrative personnel to participate in the wealth of the company through a discretionary bonus program.

The monetary distributions are unrestricted to revenue producing employees and capped for support and administrative employees at a maximum of 50% of the employees’ annual salary or wage.

Distributions Will be determined as follows:


FGDI – President & CEO:		See Schedule I

FGDI – Chief Financial Officer:		See Schedule II

FGDI – Executive VP & COO:		See Schedule II

Individual FGDI office pool allocation:		See Schedule III

Designated office managers:		See Schedule III

The President & CEO of FGDI will administrate this program and make adjustments or modifications as needed.

The Chairman of the FGDI management committee will be responsible for review and administration of the FGDI- President & CEO.


Paul Anderson				Steve Speck

/s/ Paul Anderson				/s/ Steve Speck
Chairman – FGDI management committee				FGDI – President & CEO

Dated: August 1, 2003

Schedule I


FGDI – President & CEO:		8.5% of FGDI income before overhead and taxes

Exhibit 10.65

CHANGE IN TERMS AGREEMENT

This Change in Terms Agreement (“Agreement”) is entered into as of July 9, 2004, between Deere Credit, Inc., a Delaware corporation (“Deere”) and FC Stone L.L.C., West Des Moines, Iowa 50266, an Iowa corporation (the “Borrower”).

Whereas , Deere is currently providing Borrower an Amended and Restate Unsecured Revolving Operating Facility (“Loan”) in the amount of $39,500,000 as governed by a Master Loan Agreement, dated February 15, 2001 as amended by the Change in Terms Agreement to Master Loan Agreement dated March 15, 2002 and evidenced by an Amended and Restate Unsecured Revolving Operating Note (“Note”) in the amount of $40,000,000, dated March 15, 2002, and

Whereas , the Borrower requested modifications to the Loan granted by Deere including the request for a decrease of $500,000 in the amount of the Loan and Deere approved the requested decrease making a total amended Loan of $39,500,000, as reflected in a certain Change in Terms Agreement dated June 28, 2004, which decreased the amount of the Note to $39,500,000, and

Whereas , the Borrower has requested modifications to the Loan granted by Deere including the request for a decrease of $500,000 in the amount of the Loan and Deere has approved the requested decrease making a total amended Loan of $39,000,000.

Therefore , the amount of the Loan will be decreased by the amount of $500,000 making a total Loan of $39,000,000 and the amount of the Note shall be decreased to $39,000,000 wherein the principal paragraph of said Note shall be amended to read as follows:

FOR VALUE RECEIVED, FC STONE, L.L.C., an Iowa Corporation, of West Des Moines, Iowa (the “Borrower”), promises to pay to the order of Deere Credit, Inc., a Delaware corporation (the “Lender”), at Lender’s office at such place as Lender may designate in writing, the principal sum of Thirty-Nine Million and 00/100 DOLLARS ($39,000,000), together with interest as provided in this Note, all in lawful money of the United States of America.

Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first shown above.


Deere Credit, Inc.		FC Stone L.L.C.

By:	/s/ Jack Harris	By:	/s/ Robert V. Johnson

Title:	Agribusiness Portfolio Admin.	Title:	CFO

Exhibit 10.66

CHANGE IN TERMS AGREEMENT

This Change in Terms Agreement (“Agreement”) is entered into as of August 23, 2004, between Deere Credit, Inc., a Delaware corporation (“Deere”) and FC Stone L.L.C., West Des Moines, Iowa 50266, an Iowa corporation (the “Borrower”).

Whereas , the Borrower requested modifications to the Loan granted by Deere including the request for a decrease of $500,000 in the amount of the Loan and Deere approved the requested decrease making a total amended Loan of $39,000,000, as reflected in a certain Change in Terms Agreement dated July 9, 2004, which decreased the amount of the Note to $39,000,000, and

Whereas , the Borrower has requested modifications to the Loan granted by Deere including the request for a decrease of $250,000 in the amount of the Loan and Deere has approved the requested decrease making a total amended Loan of $38,750,000, now

Therefore , the amount of the Loan will be decreased by the amount of $250,000 making a total Loan of $39,000,000 and the amount of the Note shall be decreased to $38,750,000 wherein the principal paragraph of said Note shall be amended to read as follows:

FOR VALUE RECEIVED, FC STONE, L.L.C., an Iowa Corporation, of West Des Moines, Iowa (the “Borrower”), promises to pay to the order of Deere Credit, Inc., a Delaware corporation (the “Lender”), at Lender’s office at such place as Lender may designate in writing, the principal sum of Thirty Eight Million Seven Hundred Fifty Thousand and 00/100 DOLLARS ($38,750,000), together with interest as provided in this Note, all in lawful money of the United States of America.

Page 1 of 2

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first shown above.


Deere Credit, Inc.		FC Stone L.L.C.

By:	/s/ Jack Harris	By:	/s/ Robert V. Johnson

Title:	Agribusiness Portfolio Admin.	Title:	Exec. V.P. & CFO

Page 2 of 2

Exhibit 10.67

CHANGE IN TERMS AGREEMENT

UNSECURED REVOLVING TERM LOAN NOTE

This Change in Terms Agreement (“Agreement”) is entered into as of August 23, 2004, between Deere Credit, Inc., a Delaware corporation (“Deere”) and FCStone Group, Inc., West Des Moines, Iowa 50266, an Iowa corporation (the “Borrower”).

Whereas , Deere initially granted Borrower an Unsecured Revolving Term Loan Facility (“Loan”) in the amount of $3,000,000 as governed by a Master Loan Agreement, dated November 3, 2003 and evidenced by an Unsecured Revolving Term Note (“Note”) in the amount of $3,000,000, dated November 3, 2003, and

Whereas , the Borrower requested modifications to the Loan granted by Deere including the request for an increase of $1,000,000 in the amount of the Loan and Deere approved the requested increase making a total amended Loan of $4,000,000, as reflected in a certain Change in Terms Agreement dated March 19, 2003, which increased the amount of the Note to $4,000,000, and

Whereas , the Borrower requested modifications to the Loan granted by Deere including the request for an increase of $1,000,000 in the amount of the Loan and Deere approved the requested increase making a total amended Loan of $5,000,000, as reflected in a certain Change in Terms Agreement dated April 12, 2004, which increased the amount of the Note to $5,000,000, and

Whereas , the Borrower requested modifications to the Loan granted by Deere including the request for an increase of $2,000,000 in the amount of the Loan and Deere approved the requested increase making a total amended Loan of $7,000,000, as reflected in a certain Change in Terms Agreement dated May 24, 2004, which increased the amount of the Note to $7,000,000, and

Whereas , the Borrower requested modifications to the Loan granted by Deere including the request for an increase of $500,000 in the amount of the Loan and Deere approved the requested increase making a total amended Loan of $7,500,000, as reflected in a certain Change in Terms Agreement dated June 28, 2004, which increased the amount of the Note to $7,500,000, and

Whereas , the Borrower requested modifications to the Loan granted by Deere including the request for an increase of $500,000 in the amount of the Loan and Deere approved the requested increase making a total amended Loan of $8,000,000, as reflected in a certain Change in Terms Agreement dated July 9, 2004, which increased the amount of the Note to $8,000,000, and

Page 1 of 2

Whereas , the Borrower has now requested modifications to the Loan granted by Deere including the request for an increase of $250,000 in the amount of the Loan and Deere has approved the requested increase making a total amended Loan of $8,250,000.

Therefore , the amount of the Loan will be increased by the amount of $250,000 making a total Loan of $8,250,000 and the amount of the Note shall be increase to $8,250,000 wherein the principal paragraph of said Note shall be amended to read as follows:

FOR VALUE RECEIVED, FCStone Group, Inc., of West Des Moines, IA (the “Borrower”), promises to pay to the order of Deere Credit, Inc., a Delaware corporation (the “Lender”), at Lender’s office at such place as Lender may designate in writing, the principal sum of Eight Million Two Hundred Fifty Thousand and 00/100 DOLLARS ($8,250,000.00), together with interest as provided in this Note, all in lawful money of the United States of America.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first shown above.


Deere Credit, Inc.		FCStone Group, Inc.

By:	/s/ Jack Harris	By:	/s/ Robert V. Johnson

Title:	Agribusiness Portfolio Admin.	Title:	Exec. V.P. & CFO

Page 2 of 2

Exhibit 10.68

INVESTMENT FACILITY LETTER

Date: May 26, 2004

To: FGDI L.L.C (“ Client ”)

Address for notice to the Client: 2829 Westown Parkway Suite 200 West Des Moines,

Iowa, USA 50266

Fax: 001-419-352-6710

AFG Trust Assets Limited (“ AFG Trust ”) (address for notice to AFG Trust: Level 26, PricewaterhouseCoopers Tower, 188 Quay Street, Auckland, New Zealand. Fax: + 64 9 353 1202) offers an USD and RMB investment facility (“ Facility ”) to the Client on the terms and conditions contained in this Facility Letter and the AFG Trust Investment Services Terms and Conditions attached hereto.

INVESTMENT


Investment:		When the Client intends to make an investment, it shall send the money to an USD or RMB account nominated by AFG Trust from time to time.

Expiry Date:		Twelve months from the date of this letter.

Withdrawal:		Subject to the conditions precedent set out below, the Client may make a withdrawal by giving at least three Business Days written notice to AFG Trust.

Condition Precedent:		No withdrawal can be made unless all of the following conditions have been met:

		• The amount of that withdrawal is no less than USD250,000.00 (in respect of USD withdrawals) or RMB2,000,000.00 (in respect of RMB withdrawals).

		• he total amount of investment* immediately after the withdrawal shall be no less than the minimum security mount calculated as follows

		MSA = LA x 105%

		Where

		MSA means the minimum security amount;

		LA means the total amount of the USD and RMB loans* by the Client with AFG Trust Finance Limited (“ ATFL ”) under the credit facility agreement (“ Credit Facility Agreement ”) dated on or about the date of this letter entered into the Client and ATFL.

		* For purpose of this clause, the amounts of the RMB investments under the Facility and RMB loans under the Credit Facility Agreement shall be converted into USD amount by the base USD/RMB exchange rate published by the Bank of China on the proposed date of the intended withdrawal.


		To the extent that the total amount of investment falls below minimum security amount at any time due to the fluctuation of exchange rate between RMB and USD or any other reason, AFG Trust is entitled to request the Client to make additional investments within two Business Days to ensure that the total amount of investment after such investment being made will be no less than the minimum security amount calculated as above.

Average Balance:		The Client shall ensure that the average daily balance of the USD and RMB investment under the Facility within any three months period shall be no less than USD4,000,000.00.*

		* For purpose of this clause, the amounts of the RMB investments under the Facility shall be converted into USD amount by the base USD/RMB exchange rate published by the Bank of China from time to time.

Cancellation:		The Client may cancel the Facility by at least 10 Business Days written notice if all amounts owing under this Agreement and the Credit Facility Agreement have been paid in full.

INTEREST

Interest Rate:		1.35% per annum for USD investment; and 0.97% per annum for RMB investment.

Calculation of Interest:		The amount of interest payable by AFG Trust to the Client will be calculated by multiplying each daily total outstanding amount by the daily percentage rate of interest (which is calculated by dividing the Interest Rate by 365). Interest will be paid to the Client or capitalized at the end of each month.

PAYMENT

Any payment by the Client to AFG Trust under this Agreement may be made by direct debit from the Client’s bank account, cheque, or any other method agreed to between the parties.

SET-OFF

The Client authorizes AFG Trust to apply part or all of the RMB and USD investments under the Facility to discharge any indebtedness owed by the Client to ATFL under the Credit Facility Agreement where such indebtedness becomes due and payable.

LIMITATION TO CLAUSE 5

The provisions of Clause 5 of the AFG Trust Investment Services Terms and Conditions are subject to the limitation that the authorized actions of the attorneys so appointed shall be limited to actions which are consistent with the provisions of the Credit Facility Agreement. In particular the attorneys shall not be authorized to do anything such that ATFL’s recourse against the Client will go beyond the investment held under this Agreement.

Signed on behalf of AFG Trust by:


/s/ Bin Lu	Bin Lu	Director
Signature	Name	Title


SIGNED by the Client : FGDI L.L.C.				in the presence of

/s/ Steven J. Speck				/s/ Robert Obrock
Signature				Signature of witness

Date: July 12, 2004				Robert Obrock
				Name of witness

				VP
				Occupation

				Bowling Green, Ohio
				City/town of residence

AFG TRUST INVESTMENT SERVICES TERMS AND CONDITIONS

1.	INTERPRETATION

1.1	Definitions: In this Agreement the following definitions apply:

“AFG Trust Group” means all legal or commercial entities the ownership of which is controlled by AFG Trust Limited N.V. (including, but not limited to, AFG Trust Assets Limited, AFG Trust Finance Limited, AFG Trust Private Wealth Limited, AFG Trust Fund Limited, AFG Investment Management (Shanghai) Limited and AFG Global Services Limited).

“AFG Trust Group Account Terms and Conditions” means the account terms and conditions applicable to the accounts opened by the Client with AFG Trust Group.

“this Agreement” means this AFG Trust Investment Services Terms and Conditions, the Facility Letter and any other agreement between the Client and AFG Trust in respect of the Facility.

“Business Day” means a day (other than a Saturday or Sunday) on which registered banks are open for business in Auckland.

“Facility” means the investment facility granted by AFG Trust to the Client under this Agreement.

“Facility Letter” means the facility letter which sets out the commercial terms of the Facility and to which this AFG Trust Investment Services Terms and Conditions is attached.

1.2	Interpretation: In this Agreement, unless the context otherwise requires:

(a)

a reference to any law or legislation or legislative provision includes any statutory modification, amendment or re-enactment, and any subordinate legislation or regulations issued under that legislation or legislative provision;

(b)

a reference to any agreement or document is to that agreement or document as amended, novated, supplemented or replaced from time to time;

(c)

a reference to a clause, part, schedule or attachment is a reference to a clause, part, schedule or attachment of or to this Agreement unless otherwise stated; and

(d)

an expression importing a natural person includes any company, trust, partnership, joint venture, association, corporation, body corporate or governmental agency.

2.	REPRESENTATIONS AND WARRANTIES

2.1	The Client represents and warrants that:

(a)

(where applicable) it is a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation;

(b)

it is the legal and beneficial owner of the principal amount of the investment it intends to make under this Agreement;

(c)

its investment with AFG Trust under the Facility is legal and valid under the laws of the jurisdiction in which the Client domiciles;

(d)

it understands the terms and condition of this Agreement and the risks that may apply;

(e)

it is not relying upon any advice or representation of AFG Trust (other than those contained in this Agreement) in making the decision to enter into this Agreement;

(f)

its obligations under this Agreement are legally binding and enforceable in accordance with the terms, subject to generally applicable limitations on the enforcement of remedies at law, general equitable principles and to bankruptcy, insolvency or other laws affecting creditors’ rights generally;

(g)

neither its entry into this Agreement, nor the exercises of any right or the performance or observance of any obligation under this Agreement, nor any transaction contemplated thereby, will:

(i)

violate or contravene any law to which it is subject; or

(ii)

conflict with, or result in a breach of, any agreement, document, arrangement or obligation to which it is a party;

(h)

the information provided by it to AFG Trust at any time in connection with this Agreement was true and accurate in all material respects and not misleading in any material respects as at the date on which it was provided (whether by the omission of facts known to it or otherwise) and all projections provided by it were based on reasonable assumptions; and

(i)

it is not party to any litigation, tax claim or administrative or arbitration proceedings before or of any court, tribunal, arbitrator or government agency, or to any dispute with any government agency, which, if adversely determined, would have a material adverse effect on its ability to perform its obligations under this Agreement.

2.2	The Client will be deemed to repeat the warranties in clause 2.1 on each day until AFG Trust has given notice releasing it.

3.	UNDERTAKINGS

3.1	The Client undertakes to AFG Trust that it shall:

(a)

comply with its obligations under this Agreement;

(b)

comply with and observe all laws to which it is subject; and

(c)

promptly advise AFG Trust if it becomes aware of:

(i)

anything which might have a material adverse effect on its ability to perform its obligations under this Agreement;

(ii)

anything which might have a material adverse effect on AFG Trust’s rights under this Agreement;

(iii)

anything happening which would make any of the representations and warranties in clause 2.1 untrue; or

(iv)

any material change in respect of any of the information provided by it to AFG Trust at any time in connection with this Agreement.

4.	TERMINATION

4.1	AFG Trust may terminate this Agreement at any time by paying the principal amount of the investment by the Client under the Facility, and interest thereof, to the Client.

5.	APPOINTMENT OF ATTORNEYS

5.1	For valuable consideration, the Client irrevocably appoints as its separate attorneys AFG Trust and each of AFG Trust’s officers and managers. Each attorney has power to do any one or more of the following:

(a)

anything the Client is required to do under this Agreement; and

(b)

anything the attorney thinks necessary to protect AFG Trust’s rights under this Agreement or to exercise any power that AFG Trust has under this Agreement.

In particular, the Client authorises AFG Trust to apply part or all of the Investment to discharge any obligations owed by the Client to AFG Trust Group.

5.2

An attorney appointed under this Agreement is not liable for any liability, loss, damage or expense the Client incurs or suffers as a result of the attorney’s actions. The Client must indemnify each attorney against any liability, loss, damage or expense incurred or suffered while acting as the Client’s attorney.

6.	PAYMENTS

6.1	Payments: All payments made by one party to the other under this Agreement must be made free of any restriction or condition, and (as far as legally possible) clear of deduction or withholding, whether for tax, by way of set-off or counterclaim, or otherwise.

6.2	Time and place of payment

(a)

Payments by the Client must be made by the time and at the place AFG Trust specifies in immediately available funds.

(b)

If a payment is due to be made on a day which is not a Business Day, it must be made on the next Business Day and all other provisions of this Agreement will be read and construed accordingly.

7.	TAXES ON PAYMENTS

7.1

Deduction or withholding to be made up: If the Client is required to deduct or withhold anything from an amount payable under this Agreement, the Client must increase the amount paid to the extent necessary for AFG Trust to receive and retain the amount it would have received but for the deduction or withholding. The amount paid must be free from any liability except a tax or charge imposed on, or calculated by reference to, the net income of AFG Trust.

7.2

Client to notify requirement to deduct or withhold: The Client must promptly notify AFG Trust if it is required by law to make a deduction or withholding from an amount payable by it under this Agreement. It must also do so if there is a change in the way a deduction or withholding is calculated.

7.3

Client to comply with legal requirements: The Client must comply with any legal requirement concerning paying to the taxation or other authority a deduction or withholding from an amount payable under this Agreement. The Client must also deliver to AFG Trust any evidence required by AFG Trust of the receipt by the authority of the deduction or withholding when AFG Trust requires it to do so.

COSTS

8.1	Payment of costs: On written request by AFG Trust, the Client must pay any fees, charges, taxes and costs (including legal costs on a full indemnity basis) AFG Trust incurs in connection with:

(a)

preparing, negotiating, executing and enforcing this Agreement; or

(b)

any consent or release in connection with this Agreement; or

(c)

AFG Trust performing any obligation of the Client under this Agreement which the Client does not perform.

9.	NOTICES

9.1

Notices etc only by authorised signatories: A notice, consent, information, application, demand or request that must or may be given or made by a party to this Agreement is only given or made if it is executed by that party or signed by an authorised signatory of that party. A person is an authorised signatory if he or she is a solicitor, director or company secretary of the relevant party, or if he or she is authorised in writing by that party.

9.2

Giving notices: A notice, consent, information application, demand or request that must or may be given or made to a party under this Agreement is only given or made if it is delivered or posted to that party at the address stated in the Facility Letter; or faxed to that party at the fax number stated in the Facility Letter.

However, if a party gives another party 3 Business Days written notice of a change of that, or a subsequent, address or fax number, a notice, consent, information or request is only given or made by that other party if it is delivered, posted or faxed to the latest address or to the latest fax number. If no notice of change of address has been received, then the latest notified address is the address for the purposes of serving any notice.

9.3	Time notice is given: A notice, consent, information, application, demand or request is to be treated as given or made at the following time:

(a)

if it is delivered, when it is left at the relevant address;

(b)

if it is sent by post, 5 Business Days; or

(c)

if it is sent by fax, as soon as the sender receives from the sender’s fax machine a report of an error free transmission to the correct fax number.

If a notice, consent, information, application or request is delivered, or an error free transmission report in relation to it is received, after the normal business hours of the party to whom it is sent, it is to be treated as having been given or made at the beginning of the next Business Day.

9.4	Non-applicability to proceedings: The parties agree that the provisions of clauses 9.1 to 9.3 will not apply in relation to the service of any legal process.

10.

GOVERNING LAW

10.1	This Agreement shall be construed and governed by New Zealand law.

11.

MISCELLANEOUS

11.1

Joint and several liabilities: If the Client consists of more than one person, each reference to “the Client” is to be treated as a reference to each of those persons individually, and to each of those persons jointly with any one or more of the others. Each of those persons is jointly and severally liable to AFG Trust. This means AFG Trust can take action against any number of those persons together or against one of those persons alone.

11.2

Entire agreement: Subject to clause 11.8, this Agreement contains everything AFG Trust has agreed on in relation to the matters it deals with. The Client cannot rely on an earlier document, or anything said or done by AFG Trust or by a director, officer, agent or employee of AFG Trust, before this Agreement was executed, save as permitted by law.

11.3	Execution of separate documents: This Agreement is properly executed if each party executes either this Agreement or an identical document. In the latter case, this Agreement takes effect when the documents are exchanged between the parties.

11.4	Language:

(a)

This Agreement is drawn up in the English language. If this Agreement is translated into any language other than English, the English language text shall prevail.

(b)

Each notice, instrument, certificate or other communication to be given by one party to another under or in connection with this Agreement is be in the English language (being the language of negotiation of this Agreement) and in the event that such notice, instrument, certificate or other communication or this Agreement is translated into any other language, the English language text shall prevail.

11.5	Other rights unaffected: AFG Trust’s rights under this Agreement are in addition to any rights that AFG Trust may have apart from them.

11.6

Severability: If a clause or part of a clause of this Agreement can be read in a way that makes it illegal, unenforceable or invalid, but can also be read in a way that makes it legal, enforceable and valid, it must be read in the latter way. If any clause or part of a clause is illegal, unenforceable or invalid, that clause or part is to be treated as removed from this Agreement, but the rest of this Agreement is not affected.

11.7

Waiver: The fact that AFG Trust fails to do, or delays in doing, something AFG Trust is entitled to do under this Agreement, does not amount to a waiver of any obligation of, or breach of obligation by, the Client. A waiver by AFG Trust is only effective if it is in writing, and it is only effective in relation to the particular obligation or breach in respect of which it is given. It is not to be taken as an implied waiver of any other obligation or breach or as an implied waiver of that obligation or breach in relation to any other occasion.

11.8	AFG Trust Group Account Terms and Conditions: Both parties acknowledge that the terms and conditions contained in this Agreement are subject to the AFG Trust Group Account Terms and Conditions.

Exhibit 10.69

CREDIT FACILITY LETTER

Date: May 26, 2004

To: FGDI L.L.C (“ Client ”)

Address for notice to the Client: 2829 Westown Parkway Suite 200 West Des Moines,

Iowa, USA 50266

Fax: 001-419-352-6710

AFG Trust Finance Limited (“ AFG Trust ”) (address for notice to AFG Trust: Level 26, PricewaterhouseCoopers Tower, 188 Quay Street, Auckland, New Zealand. Fax: + 64 9 353 1202) offers an USD credit facility (“ USD Facility ”) and an RMB credit facility (“ RMB Facility ”) to the Client on the terms and conditions contained in this Facility Letter and the AFG Trust Credit Services Terms and Conditions attached hereto.

FACILITIES


Facility Amount:		USD15,000,000.00 (in respect of the USD Facility) and RMB120,000,000.00 (in respect of the RMB Facility). The total amount outstanding under each Facility at any time must not exceed the relevant Facility Amount. Where it does exceed the relevant Facility Amount, the difference between the total amount outstanding and the relevant Facility Amount shall be repaid to AFG Trust immediately. Before that amount is repaid, AFG Trust will charge interest at the Default Interest Rate on a daily basis on that amount until the date it is actually paid. AFG Trust may, from time to time and in its absolute sole discretion and without any reason whatsoever, increase or decrease the Facility Amount by giving the Client at least 2 Business Days’ written notice of the date on which the Facility Amount will be increased or decreased.

Expiry Date:		Twelve months from the date of this Agreement.

Cancellation:		The Client may cancel either or both Facilities by at least 5 Business Days written notice if all amounts owing under this Agreement have been paid in full. For the avoidance of doubt, any Establishment Fee paid in advance is not refundable.

Condition Precedent:		No drawdown can be made unless AFG Trust has confirmed to the Client that the following conditions have been met:

		• AFG Trust has received a fully executed copy of this Agreement.

		• The Client has paid the Establishment Fee to AFG Trust.

		• No Event of Default has happened and remains unremedied.


		• AFG Trust has received a fully executed copy of the investment facility agreement (“ Investment Facility Agreement ”) dated on or about the date of this Agreement between the Client and AFG Trust Assets Limited (“ ATAL ”).

Drawdown:		Once AFG Trust has confirmed to the Client that all conditions precedent have been met, the Client may drawdown at any time by giving at least three Business Days notice specifying the date on which the Drawing will be made and its the principal amount subject to the following conditions:

		• The principal amount for the Drawing intended is no less than USD250,000.00 (for an USD Drawing) or RMB2,000,000.00 (for an RMB Drawing).

		• The aggregate principal amounts of all the Drawings outstanding* and the Drawing which the Client intends to make shall not exceed the lesser of the Facility Amount and the Available Limit (to be calculated as follows):

		Available Limit = IA / 105%

		Where

		IA means the total amount of the USD and RMB Investment by the Client with ATAL under the Investment Facility Agreement*

		* For purpose of this clause, the amounts of the RMB Drawings under this Agreement and RMB Investment under the Investment Facility Agreement shall be converted into USD amount by the base USD/RMB exchange rate published by the Bank of China on the proposed Drawdown Date of the intended Drawing.

Repayment:		The Client may repay part or all of the outstanding amount under either Facility at any time by giving one Business Day notice. However, all the amounts outstanding must be repaid prior to or on the Expiry Date. In addition, notwithstanding any other clause in this Agreement, the Client must repay the principal and any interest thereon immediately to AFG Trust if AFG Trust demands the Client to do so where the Client fails to maintain the minimum security amount in accordance with the Investment Facility Agreement.

Security:		The Client grants a security interest in all of its interests and rights in respect of the USD and RMB investment with ATAL (“Collateral”) under the Investment Facility Agreement to secure its obligations under this Agreement. The Client undertakes not to grant any security interest over the Collateral to any other party.

FEE


Establishment Fee:		A non-refundable establishment fee of USD10,000.00 is payable within 5 Business Days after the date of this Agreement.

INTEREST


Interest Rate:		In respect of Drawings under the USD Facility: the aggregate of (i) the prime rate as published in The Asian Wall Street Journal from time to time; and (ii) 0.75% per annum;

		In respect of Drawings under the RMB Facility: the aggregate of (i) the interest rate of RMB loan for six months or less published by Bank of China from time to time; and (ii) 1% per annum.

Default Interest Rate:		8.75% per annum for the USD Facility and 10.04% per annum for the RMB Facility.

Calculation of Interest:		The amount of interest the Client must pay will be calculated by multiplying each daily total outstanding amount by the daily percentage rate of interest (which is calculated by dividing the Interest Rate by 365). Interest will be capitalized at the end of each month.

PAYMENT

Any payment by the Client to AFG Trust under this Agreement may be made by direct debit from the Client’s bank account, cheque, or (in the case of Establishment Fee or the Line of Credit Fee only) by direct debit from the account set up under the Facility by AFG Trust for the Client, or any other method agreed to between the parties.

NON-RECOURSE


Non-recourse:		Advances made under the USD Facility and/or RMB Facility shall be non-recourse to the Client. AFG Trust’s sole recourse in the event of non repayment of any amount advanced under the USD Facility and/or RMB Facility shall resort to the Collateral held under the Investment Facility Agreement.

Limitation to clause 5:		The provisions of Clause 5 of the AFG Trust Credit Services Terms and Conditions, are subject to the limitation that the authorized actions of the attorneys so appointed shall be limited to actions which are consistent with the agreements between the parties, and in particular that the attorneys shall not be authorized to do anything to establish recourse against the Client going beyond the Collateral held under the Investment Facility Agreement.

Signed on behalf of AFG Trust by:


/s/ Bin Lu	Bin Lu	Director
Signature	Name	Title


SIGNED by the Client : FGDI L.L.C.				in the presence of

/s/ Steven J. Speck				/s/ Robert Obrock
Signature of [ ]				Signature of Witness

Date: July 12, 2004				Robert Obrock
				Name of witness

				VP
				Occupation

				Bowling Green, Ohio
				City/town of residence

AFG TRUST CREDIT SERVICES TERMS AND CONDITIONS

1.	INTERPRETATION

1.1	Definitions: In this Agreement the following definitions apply:

“AFG Trust Group Account Terms and Conditions” means the account terms and conditions applicable to the accounts opened by the Client with AFG Trust Group.

“this Agreement” means this AFG Trust Credit Services Terms and Conditions, the Facility Letter and any other agreement between the Client and AFG Trust in respect of the Facility.

“Business Day” means a day (other than a Saturday or Sunday) on which registered banks are open for business in Auckland.

“Default Interest Rate” means default interest rate specified in the Facility Letter.

“Drawing” means a cash advance made under the Facility or, as the context may require, the principal amount thereof for the time being outstanding.

“Event of Default” means one of the events listed in clause 4.1.

“Facility” means the facility granted by AFG Trust to the Client under this Agreement.

“Facility Amount” means the facility amount specified in the Facility Letter.

“Facility Letter” means the facility letter which sets out the commercial terms of the Facility and to which this AFG Trust Credit Services Terms and Conditions is attached.

“Penalty Interest Rate” means the penalty interest rate specified in the Facility Letter.

1.2	Interpretation: In this Agreement, unless the context otherwise requires:

(a)

(b)

a reference to any agreement or document is to that agreement or document as amended, novated, supplemented or replaced from time to time;

(c)

a reference to a clause, part, schedule or attachment is a reference to a clause, part, schedule or attachment of or to this Agreement unless otherwise stated; and

(d)

an expression importing a natural person includes any company, trust, partnership, joint venture, association, corporation, body corporate or governmental agency.

2.	REPRESENTATIONS AND WARRANTIES

2.1	The Client represents and warrants that:

(a)

(where applicable) it is a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation;

(b)

(c)

neither its entry into this Agreement, nor the exercises of any right or the performance or observance of any obligation under this Agreement, nor any transaction contemplated thereby, will:

(i)

violate or contravene any law to which it is subject; or

(ii)

conflict with, or result in a breach of, any agreement, document, arrangement or obligation to which it is a party;

(d)

(e)

(f)

(where applicable) it is not an undischarged bankrupt.

2.2	The Client will be deemed to repeat the warranties in clause 2.1 on each day until AFG Trust has given notice releasing it.

3.	UNDERTAKINGS

3.1	The Client undertakes to AFG Trust that it shall:

(a)

comply with its obligations under this Agreement;

(b)

comply with and observe all laws to which it is subject; and

(c)

promptly advise AFG Trust if it becomes aware of:

(i)

an Event of Default happening;

(ii)

anything happening which would, if a notice were given or a time period set out in the relevant event of default ended, become an Event of Default;

(iii)

anything which might have a material adverse effect on its ability to perform its obligations under this Agreement;

(iv)

anything which might have a material adverse effect on AFG Trust’s rights under this Agreement;

(v)

anything happening which would make any of the representations and warranties in clause 2.1 untrue; or

(vi)

any material change in respect of any of the information provided by it to AFG Trust at any time in connection with this Agreement.

4.	ENFORCEMENT

4.1	If any one of the events set out below happens, whether or not within the control of the Client:

(a)

the Client fails to pay any part of a Drawing, or any interest thereof, in the manner and in the currency required on its due date; or

(b)

the Client fails to pay any other amount due under this Agreement in the manner and in the currency required within two Business Days after its due date; or

(c)

the Client fails to pay any amount owed to any member of AFG Trust Group under any agreement other than this agreement in the manner and in the currency required on its due date; or

(d)

the Client commits any breach of, or omits to observe, any of its material undertakings or obligations under this Agreement (other than those referred to in clause 4.1(a) or 4.1(b)) and, in respect of any such breach or omission which is capable of being remedied, such breach or omission is not remedied within 5 Business Days of the Client becoming aware of the breach or omission; or

(e)

AFG Trust becomes aware that something the Client told AFG Trust is not true, and that fact is material to AFG Trust; or

(f)

any amount the Client owes to someone other than AFG Trust is not paid on time in the required way (unless, in good faith, the Client disputes its obligation to pay); or

(g)

any person becomes entitled to require the Client to pay an amount owing earlier than originally agreed; or

(h)

the Client calls a meeting of its creditors or enters into an arrangement with its creditors (including making an assignment for the benefit of its creditors and entering into a formal arrangement or compromise); or

(i)

distress, execution or some other process is levied or enforced against the Client; or

(j)

a step is taken which might lead to the appointment of a receiver, receiver and manager, or some other person with similar powers in respect of the Client or any of its assets; or

(k)

an order or judgement requiring the Client to pay an amount is not complied with within 5 Business Days (unless, in good faith, the Client appeals against the order or the judgment); or

(l)

a government official, creditor’s committee, investigating accountant or person with similar powers is appointed to investigate the Client’s affairs; or

(m)

a part of this Agreement is illegal or unenforceable; or

(n)

it becomes illegal or impossible for the Client to comply with its obligations under this Agreement; or

(o)

anything else happens which, in AFG Trust’s opinion, has a material adverse effect on either the Client’s ability to comply with its obligations under this Agreement or AFG Trust’s rights under this Agreement; or

(p)

any of the things listed in clause 4.1(a) - 4.1(o) happens in respect of someone other than the Client who has guaranteed the Client’s obligations under this Agreement,

then at any time thereafter, without prejudice to any other remedies which AFG Trust may have, AFG Trust may by notice to the Client cancel the Facility whereupon the Facility Amount shall be reduced to zero and the Client shall repay all the Drawings outstanding, and any interest thereof, to AFG Trust immediately.

5.	APPOINTMENT OF ATTORNEYS

5.1	For valuable consideration, the Client irrevocably appoints as its separate attorneys AFG Trust and each of AFG Trust’s officers and managers. Each attorney has power to do any one or more of the following:

(a)

anything the Client is required to do under this Agreement; and

(b)

anything the attorney thinks necessary to protect AFG Trust’s rights under this Agreement or to exercise any power that AFG Trust has under this Agreement.

5.2

6.	PAYMENTS

6.1	Payments: All payments made by the Client to AFG Trust under this Agreement must be made free of any restriction or condition, and (as far as legally possible) clear of deduction or withholding, whether for tax, by way of set-off or counterclaim, or otherwise.

6.2	Time and place of payment

(a)

Payments by the Client must be made by the time and at the place AFG Trust specifies in immediately available funds.

(b)

If a payment is due to be made on a day which is not a Business Day, it must be made on the next Business Day and all other provisions of this Agreement will be read and construed accordingly.

6.3	Interest on late payments and judgments: If:

(a)

the Client does not pay any amount it has to pay under this Agreement on time or in the manner required by this Agreement; or

(b)

an amount the Client must pay under this Agreement becomes merged in a court order; then the Client must, as a separate obligation, pay interest on that amount from the date the amount became payable until it is paid at the Default Interest Rate or, if applicable, the rate in the court order if that rate is higher. The default interest is calculated daily and is payable on demand. If it is not paid on time it will be capitalised at the end of each month. This obligation is not affected by any court order.

6.4	Repayment of payments received by AFG Trust

(a)

If AFG Trust repays a payment which AFG Trust received from the Client, AFG Trust may rely on AFG Trust’s rights against the Client under this Agreement as if the original payment had not been made. This applies whether or not AFG Trust was legally required to hand over the payment.

(b)

The Client must do everything required to restore AFG Trust to AFG Trust’s position before the original payment was made, including providing AFG Trust with a security interest over any of the assets of the Client.

6.5	Application of payments

(a)

AFG Trust may apply any money paid by the Client towards meeting any part of the Client’s liability to AFG Trust in AFG Trust’s absolute discretion. If AFG Trust does not make an election as to the application of the money paid, the Client must assume AFG Trust has applied that payment in AFG Trust’s best interests.

(b)

AFG Trust may place any payments received from the Client into a suspense account until AFG Trust has received all money owed to it by the Client.

7.	TAXES ON PAYMENTS

7.1

7.2

7.3

COSTS

8.1	Payment of costs : On written request by AFG Trust, the Client must pay any fees, charges, taxes and costs (including legal costs on a full indemnity basis) AFG Trust incurs in connection with:

(a)

preparing, negotiating, executing and enforcing this Agreement; or

(b)

any consent or release in connection with this Agreement; or

(c)

AFG Trust performing any obligation of the Client under this Agreement which the Client does not perform; or

(d)

the happening of an Event of Default.

8.2	Increased costs

(a)

If because of any change in law or in its interpretation or administration or because of compliance with any request from or requirement of any fiscal, monetary or other authority:

(i)

AFG Trust incurs a cost as a result of its having entered into or performed its obligations under this Agreement or as a result of any Drawing being outstanding; or

(ii)

there is any increase in the cost to AFG Trust of funding or maintaining the Facility; or

(iii)

the amount of principal or interest or any other amount payable to AFG Trust or the effective return to AFG Trust under this Agreement is reduced; or

(iv)

AFG Trust becomes liable to make any payment (not being a payment of tax on its overall net income) on or calculated by reference to the amount of any Drawing,

the Client must on demand indemnify AFG Trust against that cost, increased cost, reduction or liability. If AFG Trust has acted in good faith it is no defence that the cost, increased cost, reduction or liability could have been avoided by AFG Trust.

(b)

A certificate from AFG Trust as to the amount of, and basis for arriving at, any cost, increased cost, reduction or liability is conclusive and binding on the Client in the absence of manifest error.

(c)

If a demand for additional amounts is made under clause 8.2(a), AFG Trust must use reasonable endeavours for a period of not less than 30 days to make the Facility available by alternative means so the increase in cost no longer applies and no other additional expense arises as a result.

9.	NOTICES

9.1

9.2

9.3	Time notice is given: A notice, consent, information, application, demand or request is to be treated as given or made at the following time:

(a)

if it is delivered, when it is left at the relevant address;

(b)

if it is sent by post, 5 Business Days; or

(c)

if it is sent by fax, as soon as the sender receives from the sender’s fax machine a report of an error free transmission to the correct fax number.

9.4	Non-applicability to proceedings: The parties agree that the provisions of clauses 9.1 to 9.3 will not apply in relation to the service of any legal process.

10.

GOVERNING LAW

10.1	This Agreement shall be construed and governed by New Zealand law.

11.

MISCELLANEOUS

11.1

Joint and several liabilities : If the Client consists of more than one person, each reference to “the Client” is to be treated as a reference to each of those persons individually, and to each of those persons jointly with any one or more of the others. Each of those persons is jointly and severally liable to AFG Trust. This means AFG Trust can take action against any number of those persons together or against one of those persons alone.

11.2

11.3	Execution of separate documents: This Agreement is properly executed if each party executes either this Agreement or an identical document. In the latter case, this Agreement takes effect when the documents are exchanged between the parties.

11.4	Language:

(a)

This Agreement is drawn up in the English language. If this Agreement is translated into any language other than English, the English language text shall prevail.

(b)

11.5	Other rights unaffected: AFG Trust’s rights under this Agreement are in addition to any rights that AFG Trust may have apart from them.

11.6

11.7

Waiver : The fact that AFG Trust fails to do, or delays in doing, something AFG Trust is entitled to do under this Agreement, does not amount to a waiver of any obligation of, or breach of obligation by, the Client. A waiver by AFG Trust is only effective if it is in writing, and it is only effective in relation to the particular obligation or breach in respect of which it is given. It is not to be taken as an implied waiver of any other obligation or breach or as an implied waiver of that obligation or breach in relation to any other occasion.

11.8	AFG Trust Group Account Terms and Conditions : Both parties acknowledge that the terms and conditions contained in this Agreement are subject to the AFG Trust Group Account Terms and Conditions.

11.9

Certificate conclusive : Certificate given by AFG Trust shall be the conclusive evidence of the amount of a Drawing. A certificate from AFG Trust as to the amount of, and basis for arriving at, any cost, increased cost, reduction or liability is conclusive and binding on the Client in the absence of manifest error

11.10

Summary judgment : The Client acknowledges that where an Event of Default has happened, AFG Trust may seek a summary judgment (or any other judicial process of a similar nature) to recover any amount owed by the Client to AFG Trust under this Agreement. The Client undertakes that it shall not oppose in any way to the use of such procedure. The Client further undertakes to waive any defence available to the Client to the fullest extent possible under law.

11.11

Amendment : AFG Trust may amend the terms of this AFG Trust Credit Services Terms and Conditions from time to time without having to obtain the Client’s further agreement. The most recent AFG Trust Credit Services Terms and Conditions will be published at AFG Trust Group’s website (www.afgtrust.com) from time to time. The Client acknowledges that it is the Client’s responsibility to obtain the most recent version of the AFG Trust Credit Services Terms and Conditions from that website. Where the Client does not accept the changes, it may cancel the Facility in accordance with the Facility Letter.

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

FCStone Group, Inc. and subsidiaries:

We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the proxy statement-prospectus.

/s/ KPMG LLP

Des Moines, Iowa

December 30, 2004

Exhibit 23.4

RSM McGladrey

RSM McGladrey, Inc.

400 Locust Street, Ste. 640, Des Moines, IA 50309-2372

O 515.558.6600 F 515.284.1545

www.rsmmcgladrey.com

Consent of Business Valuation/Appraisal Firm

The Board of Directors

FCStone Group, Inc. and subsidiaries:

We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the proxy statement-prospectus.

/s/ RSM McGladrey

Des Moines, Iowa

December 30, 2004

Exhibit 99.1

PROXY

FCSTONE GROUP, INC.

Special Meeting of Stockholders

, 2005, at 10:00 a.m.

West Des Moines Marriott

1250 74th Street, West Des Moines, Iowa

You, the undersigned, hereby appoint Bruce Krehbiel, Paul G. Anderson, Robert V. Johnson and David A. Bolte, and each of them, as Proxies, with full power of substitution, to vote all shares of FCStone Group, Inc. (the “Company”) Class A Common Stock, Class B Common Stock and Preferred Stock held by you on January 3, 2005, at the Special Meeting of Stockholders of FCStone Group, Inc. (the “Company”) to be held on March 1, 2005 at 10:00 a.m. local time, at the West Des Moines Marriott, 1250 74th Street, West Des Moines, Iowa, and any and all adjournments or postponements thereof. They will vote exactly as you have indicated on this Proxy. However, if you do not indicate on this proxy how you would like your shares to be voted, the proxy will be voted FOR approval of the restructuring of the Company and according to the discretion of the proxies on any other matters that may properly come before the meeting.

This Proxy is being solicited by the Board of Directors of the Company for the Special Meeting to be held on March 1, 2005. The Board recommends that you vote FOR approval of the restructuring of the Company.

To approve the restructuring of the Company by approving the Amended and Restated Articles of Incorporation and the Plan of Conversion attached as Appendix A to the Company’s Proxy Statement-Prospectus dated , 2005.

¨ FOR ¨ AGAINST ¨ ABSTAIN

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof, in the discretion of the proxy holder.

¨ GRANT ¨ WITHHOLD

This proxy will be voted at the Special Meeting of Stockholders or any adjournment or postponement thereof. If no specifications are made, this proxy will be voted FOR Proposal No. 1. This proxy hereby revokes all prior proxies given with respect to the shares of the undersigned.

*Mailing Label w/ Shareholder Name and Address

SHARES HELD

Class A Common

Class B Common

Preferred

Date: , 2005

_________________________________
(Signature)

_________________________________
(Please print your name)

Please sign name as fully and exactly as it appears hereon. When signing in a fiduciary or representative capacity, please give full title as such. When more than one owner, each owner should sign. Proxies executed by a corporation should be signed in full corporate name by a duly authorized officer. If a partnership, please sign in partnership name by an authorized person. You may revoke your proxy with respect to any proposal at any time prior to completion of the vote, by following the procedures set forth in the accompanying Proxy Statement-Prospectus.

PLEASE MARK, SIGN, DATE AND MAIL TO THE COMPANY IN THE RETURN ENVELOPE PROVIDED TO KPMG LLP, PO BOX 772, Des Moines, IA 50303-9979.