<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE PERIOD ENDED MAY 31, 1998
COMMISSION FILE NUMBER: 33-83868
AMERICAN CRYSTAL SUGAR COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 84-0004720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 NORTH THIRD STREET
MOORHEAD, MINNESOTA 56560
(Address of principal executive offices)
TELEPHONE NUMBER (218) 236-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK JULY 2, 1998
--------------------- ---------------
$10 PAR VALUE 2,830
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
FORM 10-Q
INDEX
PAGE NO.
--------
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS 1
STATEMENTS OF OPERATIONS 3
STATEMENT OF CASH FLOWS 4
NOTES TO THE FINANCIAL STATEMENTS 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION 7
PART II OTHER INFORMATION 10
EXHIBIT 3(i)
SIGNATURES
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
Balance Sheets
(Unaudited)
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
May 31
---------------------- August 31,
1998 1997 1997
--------- --------- --------
<S> <C> <C> <C>
Current Assets: *
Cash and Cash Equivalents $ 35 $ 43 $ 11,551
Accounts Receivable:
Trade 50,390 52,685 60,940
Members 2,738 3,242 2,857
Other 1,667 3,811 5,618
Advances to Related Parties 29,037 18,892 15,064
Inventories 294,374 302,156 140,057
Prepaid Expenses 3,547 2,861 2,892
--------- --------- --------
Total Current Assets 381,788 383,690 238,979
--------- --------- --------
Property and Equipment:
Land 13,395 12,170 13,101
Buildings and Equipment 639,866 612,875 635,671
Construction-in-Progress 88,377 35,087 43,938
Less: Accumulated Depreciation (434,687) (412,782) (413,211)
--------- --------- --------
Net Property and Equipment 306,951 247,350 279,499
--------- --------- --------
Other Assets:
Investments in Banks for Cooperatives 15,907 15,795 14,568
Investments in Marketing Cooperatives 2,510 17,490 1,650
Investment in ProGold LLC 35,203 45,844 43,007
Other Assets 4,558 3,199 3,801
--------- --------- --------
Total Other Assets 58,178 82,328 63,026
--------- --------- --------
Total Assets $ 746,917 $ 713,368 $ 581,504
--------- --------- --------
--------- --------- --------
</TABLE>
* Derived from audited financial statements.
The Accompanying Notes are an Integral Part of These Financial Statements.
1
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
Balance Sheets
(Unaudited)
(Dollars in Thousands)
LIABILITIES AND MEMBERS' INVESTMENTS
<TABLE>
<CAPTION>
May 31
---------------------- August 31,
1998 1997 1997
-------- -------- ----------
<S> <C> <C> <C>
Current Liabilities: *
Short-Term Debt $191,527 $184,056 $ 67,960
Current Maturities of Long-Term Debt 18,800 14,300 17,800
Accounts Payable:
Trade 7,227 8,068 21,538
Other 8,510 4,918 4,359
Accrued Continuing Costs 65,026 72,723 -
Other Current Liabilities 15,397 15,598 15,515
Amounts Due Members 26,947 63,733 66,155
-------- -------- --------
Total Current Liabilities 333,434 363,396 193,327
Long-Term Debt, Excluding Current
Maturities 168,000 160,300 186,800
Deferred Income Taxes 1,540 0 1,540
Other Liabilities 25,479 23,638 23,909
-------- -------- --------
Total Liabilities 528,453 547,334 405,576
-------- -------- --------
Members' Investments
Preferred Stock 38,263 33,542 33,542
Common Stock 28 26 26
Additional Paid-in Capital 115,939 63,752 64,596
Unit Retains 97,435 88,954 105,450
Pension Liability Adjustment (4,131) (4,519) (4,131)
Retained Earnings (29,070) (15,721) (23,555)
-------- -------- --------
Total Members' Investments 218,464 166,034 175,928
-------- -------- --------
Total Liabilities and Members'
Investments $746,917 $713,368 $581,504
-------- -------- --------
-------- -------- --------
</TABLE>
* Derived from audited financial statements.
The Accompanying Notes are an Integral Part of These Financial Statements.
2
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
Statement of Operations
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended Three Months Ended
May 31 May 31
------------------------- ------------------------
1998 1997 1998 1997
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net Revenue $506,393 $489,557 $170,147 $189,092
Cost of Product Sold 9,559 (60,081) 24,022 22,041
--------- -------- -------- --------
Gross Proceeds 496,834 549,638 146,125 167,051
Selling, General & Administrative
Expenses 105,063 108,242 33,799 43,078
Accrued Continuing Costs 65,026 72,723 39,672 27,056
--------- -------- -------- --------
Operating Proceeds 326,745 368,673 72,654 96,917
--------- -------- -------- ---------
Other Income (Expenses)
Interest Income 536 62 199 (1,151)
Interest Expense (9,380) (11,886) (2,385) (4,254)
Other Income (Loss) 578 8,377 2,779 11,707
Other Expenses (4,531) (9,669) 941 (11,937)
--------- --------- -------- --------
Other Income (Expense) (12,797) (13,116) 1,534 (5,635)
--------- --------- -------- --------
Proceeds before Income Taxes 313,948 355,557 74,188 91,282
Income Taxes Provision/Benefit 0 0 0 0
--------- -------- -------- --------
Net Proceeds Resulting from
Member and Non-Member Business $313,948 $355,557 $ 74,188 $ 91,282
--------- -------- -------- --------
--------- -------- -------- --------
Distribution of Net Proceeds:
Credited/(Charged) to Member's
Investments:
Non-Member Business Income/(Loss) $ (5,515) $(10,240) $ 707 $ (5,709)
Unit Retains Declared to Members - - - -
--------- --------- -------- ---------
Net Credit/(Charge) to Members'
Investments (5,515) (10,240) 707 (5,709)
Payments to/due Members for
Sugarbeets, Net of Unit Retains - - - -
Declared 319,463 365,797 73,481 96,991
--------- --------- -------- --------
Total $313,948 $355,557 $ 74,188 $ 91,282
--------- --------- -------- --------
--------- --------- -------- --------
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
3
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
Statement of Cash Flows
(Unaudited)
(Dollars In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
May 31
-----------------------
1998 1997
-------- ---------
<S> <C> <C>
Cash Used for Operations:
Net Proceeds Resulting from Member and Non-
Member Business $ 313,948 $ 355,557
Payments to/due Members for Sugarbeets,
Including Unit Retains (319,463) (365,797)
Add/(Deduct) Noncash Items:
Depreciation and Amortization 21,513 21,157
Loss on Investment Activities 4,036 9,204
Deferred Income Taxes 0 0
(Gain)/loss on the Disposition of Property
and Equipment (377) (146)
Noncash Portion of Patronage Dividend from
Banks for Cooperatives (1,338) (618)
Deferred Gain Recognition (157) (142)
Changes in Certain Elements of Working Capital
Accounts Receivable:
Trade 10,550 (1,770)
Members 119 603
Other 3,951 (2,412)
Inventories (154,317) (229,479)
Prepaid Expenses (655) 227
Advances to Related Parties (13,973) (8,584)
Accounts Payable:
Trade (14,311) (8,992)
Other 4,151 (4,789)
Other Current Liabilities 64,908 73,189
Amount Due Growers (39,208) 16,615
-------- -------
Net Cash Used In Operations (120,623) (146,177)
-------- -------
Cash Used In Investing Activities:
Purchases of Property and Equipment (48,928) (34,528)
Proceeds from the Sale of Property and Equipment 377 146
Investment in Banks for Cooperatives 0 (0)
Investment in Marketing Coops (704) (1,880)
Investment in ProGold LLC 3,768 (1,153)
Changes in Other Assets (794) (399)
-------- -------
Net Cash Used In Investing Activities (46,281) (37,814)
-------- -------
Cash Provided by Financing Activities:
Net Proceeds (Payments) on Short-Term Debt 123,567 170,413
Proceeds from Long-Term Debt 0 12,866
Long-Term Debt Repayment (17,800) (29,190)
Changes in Other Long-Term Liabilities 1,570 1,999
Changes in Preferred Stock 4,721 1,663
Changes in Common Stock 2 2
Changes in Additional Paid-In Capital 51,343 30,711
Payment of Unit Retains (8,015) (8,237)
-------- -------
Net Cash Provided by Financing Activities 155,388 180,227
-------- -------
Decrease in Cash and Cash Equivalents (11,516) (3,764)
Cash and Cash Equivalents Beginning of Period 11,551 3,807
-------- -------
Cash and Cash Equivalents End of Period $ 35 $ 43
-------- -------
-------- -------
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
4
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 1998 AND 1997
NOTE 1: BASIS OF PRESENTATION
The unaudited financial statements contained herein have been prepared pursuant
to the rules and regulations of the Security and Exchange Commission.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles. However, in the opinion of
management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included.
The operating results for the nine month period ended May 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
August 31, 1998.
The amount paid to growers for sugarbeets (beet payment) depends on the
future selling prices of sugar and by-products as well as processing and
other costs to be incurred during the remainder of the fiscal year. For the
purposes of this report, the amount of the beet payment, future revenues and
costs have been estimated. Therefore, adjustments with respect to these
estimates may be necessary in the future as additional information becomes
available.
These financial statements should be read in conjunction with the financial
statements and notes included in the company's annual report for the year ended
August 31, 1997.
NOTE 2: INVENTORIES
The major components of inventories are as follows (In Thousands):
<TABLE>
<CAPTION>
5/31/98 5/31/97 8/31/97
-------- -------- -------
<S> <C> <C> <C>
Refined Sugar, Pulp, Molasses,
CSB and Beet Seed $275,235 $279,870 $115,026
Corn - - 3,758
Maintenance Parts & Supplies 19,139 22,286 21,273
-------- -------- --------
Total Inventories $294,374 $302,156 $140,057
-------- -------- --------
-------- -------- --------
</TABLE>
Sugar, pulp, molasses and CSB inventories are valued at estimated net realizable
value. Maintenance parts & supplies, corn and beet seed inventories are valued
the lower of average cost or market.
NOTE 3: ACCRUED CONTINUING COSTS
For interim reporting, the Net Proceeds from Member Business is determined based
on the forecasted beet payment and the percentage of the tons of sugarbeets
processed to the total estimated tons of sugarbeets to process for a given crop
year. Accrued continuing costs represents the difference between the Net
Proceeds from Member Business as determined above and actual member business
crop year revenues realized and expenses incurred through the end of the
reporting period. Accrued continuing costs are reflected in the Financial
Statements as a cost on the Statements of Operations and as a current liability
on the Balance Sheets.
5
<PAGE>
NOTE 4: MEMBERS' INVESTMENTS
<TABLE>
<CAPTION>
Shares Shares Issued
Par Value Authorized & Outstanding
---------- ---------- -------------
<S> <C> <C> <C>
Preferred Stock:
July 2, 1998 $76.77 600,000 498,570
May 31, 1998 $76.77 600,000 498,415
August 31, 1997 $76.77 600,000 436,915
May 31, 1997 $76.77 600,000 436,915
Common Stock:
July 2, 1998 $10.00 4,000 2,830
May 31, 1998 $10.00 4,000 2,795
August 31, 1997 $10.00 4,000 2,585
May 31, 1997 $10.00 4,000 2,562
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 1998 AND 1997
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 1998 AND 1997
Revenue for the nine months ended May 31, 1998, was $506.4 million, an
increase of $16.9 million from 1997. Revenue from total sugar sales
increased 4.9 percent reflecting an 8.5 percent increase in hundredweight
sold partially offset by a 3.3 percent decrease in the average selling price
per hundredweight. Revenue from pulp sales decreased 13.2 percent due to an
18.8 percent decrease in the average selling price per ton partially offset
by a 6.9 percent increase in the volume of pulp sold. Revenue from molasses
sales decreased 10.6 percent due to a 13.7 percent decrease in the average
selling price per ton partially offset by a 3.6 percent increase in the
volume of molasses sold. Revenue from the sales of Concentrated Separated
By-Product (CSB), a by-product of the molasses desugarization process,
increased 1.1 percent mainly due to a 1 percent increase in the volume of CSB
sold.
Cost of product sold, exclusive of payments for sugarbeets, increased $69.6
million. Direct processing costs for sugar and pulp increased by 1.4 percent
due to the harvesting of a larger crop. Fixed and committed expenses decreased
6.2 percent reflecting lower maintenance costs. Changes in product inventory
levels between 1998 and 1997, affected the cost of product sold unfavorably by
$77.8 million. The cost associated with sugar purchased to meet customer needs
was down $4.5 million due to the supply of our inventory.
Marketing expenses decreased $1.1 million due primarily to the lower storage
costs for pulp. General and Administrative expenses decreased $2.1 million
reflecting refunds from flood insurance claims.
The decrease in accrued continuing costs was due primarily to changes in the
volume of sugar sales and production, differences in the timing of incurring
processing costs and the amount of unsold inventory on hand.
Interest expense decreased $2.5 million due to lower interest rates and Stock
Sale.
Non-member activities resulted in the loss of $5.5 million for the nine
months ended May 31, 1998 as compared to a loss of $10.2 million for the same
period last year. The majority of the reduction of this loss is related to
reduced net loss of ProGold Limited Liability Company (ProGold) because of
lease to Cargill, Inc.
Net payments to/due members for sugarbeets decreased by $46.3 million from
$365.8 million for the first nine months in 1997, to $319.5 million for the
first nine months in 1998. This decrease is due to a lower projected per ton
beet payment this year.
7
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED MAY 31, 1998 AND 1997
Revenue for the three months ended May 31, 1998, was $170.1 million, a decrease
of $18.9 million from 1997. Revenue from total sugar sales decreased 7.5
percent reflecting a 6 percent decrease in the average selling price per
hundredweight and a 1.6 percent decrease in hundredweight sold. Revenue from
pulp sales decreased 31.5 percent due to a 7 percent decrease in the volume of
pulp sold and a 26.4 percent decrease in the average selling price per ton.
Revenue from molasses sales decreased 20 percent due to a 13.9 percent decrease
in the average selling price per ton and a 7.1 percent decrease in the volume of
molasses sold. Revenue from the sales of Concentrated Separated By-Product
(CSB), a by-product of the molasses desugarization process, decreased 16.9
percent due to a 25 percent decrease in the volume of CSB sold partially offset
by a 10.9 percent increase in the average selling price per ton.
Cost of product sold, exclusive of payments for sugarbeets, increased $2
million. Direct processing costs for sugar and pulp increased 1.1 percent due
to the harvesting of a larger crop. Fixed and committed expenses increased 9.8
percent due to higher maintenance costs for this period. Changes in product
inventory levels between 1998 and 1997, decreased the cost of product sold by
$3.9 million. The cost associated with sugar purchased to meet customer needs
was up $1.6 million due to increased sales volume of purchased sugar during this
quarter.
Selling expenses decreased $7.2 million due primarily to the lower freight and
storage costs for pulp and lower sales volume of sugar and by-products. General
and Administrative expenses decreased $2.1 reflecting refunds from flood
insurance claims.
The increase in accrued continuing costs was due primarily to changes in the
volume of sugar sales and production, differences in the timing of incurring
processing costs and the amount of unsold inventory on hand.
Interest expense decreased by $1.9 million due to lower interest rates and
Stock Sale.
Non-member activities resulted in a gain of $.7 million for the three months
ended May, 31, 1998 as compared to a loss of $5.7 million for the same period
last year. The gain is a result of improved profits of ProGold due to lease
to Cargill partially offset by lower profits from the sale of beet seed.
Net payments to/due members for sugarbeets decreased by $23.5 million from $97
million for the third quarter of 1997, to $73.5 million for the same period in
1998. This decrease is due to a lower projected per ton beet payment this year
and more tons harvested.
LIQUIDITY AND CAPITAL RESOURCES
Because American Crystal operates as a cooperative, payments for member
delivered sugarbeets, the principal raw material used in producing the sugar
and agri-products it sells, are subordinated to all member business expenses.
In addition, actual cash payments to members are spread over a period of
approximately one year following delivery of their sugarbeet crops to
American Crystal and are net of unit retains allocated to them, both of which
remain available to meet American Crystal's capital requirements. This member
financing arrangement may result in an additional source of liquidity and
reduced outside financing requirements in comparison to a similar business
operated on a non-cooperative basis.
8
<PAGE>
However, because sugar is sold throughout the year (while sugarbeets are
processed primarily in the fall and winter) and because substantial amounts of
equipment are required for its operations, American Crystal has utilized
substantial outside financing on both a seasonal and long-term basis to fund
such operations. The majority of such financing has been provided by the St.
Paul Bank for Cooperatives ("Bank"). American Crystal has a short-term line of
credit with the Bank in 1998 of $280 million.
The various loan agreements between the Bank and American Crystal obligate
American Crystal to maintain or achieve certain amounts of working capital and
certain financial ratios and impose restrictions on American Crystal. As of
May 31, 1998, American Crystal was in compliance with its loan agreements.
American Crystal anticipates that the funds required to maintain compliance
with the banks working capital requirements will be derived from depreciation
and unit retains.
The primary factor for the changes in American Crystal's financial condition
for the nine months ended May 31, 1998 was due to reduced investing
activities and proceeds from stock sales. The cash used in operations of
$120.6 million and investing activities of $46.3 million was funded through
the cash provided by financing activities and reduction in cash. The net cash
provided by financing activities was primarily comprised of the net proceeds
from short-term debt of $123.6 million and proceeds from a stock sale of $56
million, partially offset by the repayment on long-term debt of $17.8 million
and the payment of the unit retains of $8 million. Working capital has
increased $2.6 million from $45.7 million at the beginning of the year to
$48.3 million as of May 31, 1998 primarily due to increased inventories and a
lower amount due growers, partially offset by higher short-term debt.
Capital expenditures for the nine months ended May 31, 1998 were $48.9
million. American Crystal expects to obtain funds for future capital
expenditures from depreciation, unit retains and long-term borrowing.
American Crystal does not guarantee the debt for United Sugars Corporation or
ProGold Limited Liability Company. Under the terms of the ProGold Member
Control Agreement, the ProGold Board of Governors can require American
Crystal to provide additional capital contributions not to exceed $2.3
million per year. Any additional capital contributions can only be obtained
by written consent of American Crystal. American Crystal guarantees debt
totaling $2.6 million as of May 31, 1998 for Midwest Agri-Commodities.
The growth in the market for refined sugar in the late 1980's and the mid
1990's is a reversal of trends in the 1970's and early 1980's which resulted
in a reduced market for refined sugar. During the 1970's and early 1980's,
high fructose corn syrup was increasingly used as a replacement for refined
sugar in certain food products. (The prime example of this trend was the use
of high fructose corn syrup in beverages such as soft drinks.) In addition,
non-nutritive sweeteners such as aspartame were developed and used in food
products. While high fructose corn syrup and non-nutritive sweeteners
constitute a large portion of the overall sweetener market, the Company
believes that the recent trend of increased use of refined sugar results from
population growth and, more importantly, increased acceptance of the use of
sugar as a desirable natural ingredient in a normal diet.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
American Crystal is subject to various lawsuits and claims which arise in the
ordinary course of its business. While the results of such litigation and
claims cannot be predicted with certainty, management believes the disposition
of all such proceedings, individually or in the aggregate, should not have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Hillsboro Factory District Meeting on November 10, 1997, an election of a
Board of Director was held. Francis Kritzberger who sought re-election received
98 of the 98 votes cast. His three year term expires in December, 2000.
At the Drayton Factory District Meeting on November 11, 1997, an election of a
Board of Director was held. Wayne Langen who sought re-election received 235 of
the 235 votes cast. His three year term expires in December, 2000.
At the East Grand Forks Factory District Meeting on November 11, 1997, an
election of a Board of Director was held. Aime Dufault who sought re-election
received 137 of the 137 votes cast. His three year term expires in December,
2000.
At the Crookston Factory District Meeting on November 12, 1997, an election of a
Board of Director was held. Lonn Kiel who sought re-election received 153 of
the 153 votes cast. His three year term expires in December, 2000.
At the Moorhead Factory District Meeting on November 14, 1997, an election of a
Board of Director was held. Jay Nord received 96 votes and Richard Borgen
received 104 of the 200 votes cast. Richard Borgen's three year term expires in
December, 2000. Mr. Borgen replaces Paul Borgen who served the maximum
consecutive terms authorized by the Company's By-Laws.
By-Law changes were voted on by the Board of Directors. Exhibit A is attached.
ITEM 5. OTHER INFORMATION
On June 3, 1998, the company entered into a joint venture (special purpose)
entity with Newcourt Capital U.S.A., Inc. to form Crystech, LLC (Crystech).
Crystech was formed to acquire, construct, finance, operate, and maintain a
molasses desugarization facility at the company's Hillsboro, North Dakota sugar
factory together with certain sugar processing equipment located at the
Hillsboro, North Dakota and Moorhead and Crookston, Minnesota sugar factories.
The company acquired an initial 50% ownership interest in Crystech through a
$1,545,000 cash contribution. The company also funded $3.1 million in
subordinated debt to Crystech, LLC. The company records its investment in the
joint venture as related equity in net assets of the joint venture.
10
<PAGE>
Daniel J. McCarty resigned as president and chief executive officer of the
company effective June 1, 1998. James J. Horvath was elected president and
chief executive officer on May 15, 1998, effective immediately.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
By-Law changes were voted on by the Board of Directors. Exhibit 3(i) is
attached.
The Company did not file any reports on Form 8-K during the nine months ended
May 31, 1998.
11
<PAGE>
EXHIBIT 3(i)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
AMERICAN CRYSTAL SUGAR COMPANY
ARTICLE I
NAME, PURPOSE AND NATURE OF BUSINESS
SECTION 1. The name of this cooperative corporation shall be American Crystal
Sugar Company.
SECTION 2. The purpose of this corporation shall be to receive, handle,
manufacture, process and market the agricultural products of its shareholders
and other persons; to purchase, handle, and distribute agricultural supplies and
equipment to its shareholders and other persons; and to perform any and all
related services for its shareholders and other persons. To this end, all of
this corporation's activities shall be conducted upon the cooperative plan and
it shall have all of the power now or hereafter granted to such cooperative
corporations by Minnesota statutes.
SECTION 3. The general nature of the business of this corporation shall be to
engage in any activity in connection with the marketing, selling, preserving,
drying, manufacturing, processing, storing, handling, shipping or utilization of
sugarbeets and other agricultural products produced or delivered to it by its
shareholders and other persons and with the manufacturing and marketing of the
by-products thereof, to provide facilities and services therefore, and to engage
in any activities in connection with the purchasing, manufacturing, selling,
warehousing, handling, shipping, distributing, and otherwise dealing in and
procuring for its shareholders or other persons, any and all kinds of supplies
and equipment and to perform any and all services to or for its shareholders or
other persons as may be required by them in their respective operations, and in
the financing of such activities.
SECTION 4. The principal place of transacting the business of this corporation
shall be in the City of Moorhead, County of Clay and State of Minnesota. The
current registered office is: 101 North Third Street, Moorhead, Minnesota
56560.
SECTION 5. This corporation shall not market the products of non-shareholders
in an amount, the value of which exceeds the value of the products marketed for
shareholders. It shall not purchase supplies and equipment for non-shareholders
in an amount, the value of which exceeds the value of supplies and equipment
purchased for shareholders.
ARTICLE II
PERIOD
The period of duration of this corporation shall be perpetual.
<PAGE>
ARTICLE III
CAPITAL STOCK
SECTION 1. The maximum amount of authorized capital stock of this corporation
shall be $46,102,000, divided into $40,000 par value common stock and
$46,062,000 par value preferred stock. The common stock shall be divided into
4,000 shares of the par value of $10 each. The preferred stock shall be divided
into 600,000 shares of the par value of $76.77 each. No dividend shall be paid
on either the common stock or preferred stock.
SECTION 2. Only the holders of common stock shall have voting power in this
corporation. An individual person shall not be permitted to cast more than one
vote on any matter submitted for a vote of the common shareholders, whether
acting on behalf of such individual, as a voting representative of a common
shareholder which is not a natural person, or a combination of both.
SECTION 3. The ownership of the common stock in this corporation shall be
restricted to "operators" who reside in the territories served by this
corporation. The bylaws shall define the term "operator" and may further
restrict common stock ownership to operators who purchase securities of this
corporation in an amount and of a type prescribed by the board of directors.
SECTION 4. The preferred stock shall be preferred as to assets upon
dissolution. In the event of dissolution, the holders of preferred stock shall
be entitled to be paid the par value of their shares prior to any payments to
the holders of common stock.
SECTION 5. The holders of common stock shall not be entitled, as shareholders,
to any share in the savings of this corporation and the net income in excess of
additions to reserves shall be distributed to common shareholders on the basis
of patronage. Patronage refunds may be distributed in cash or credits as more
particularly provided in the bylaws. Patronage dividends distributed in credits
shall be redeemable only as directed by the board of directors. The records of
this corporation may show the interest of shareholders in the reserves. In the
event of dissolution such dividends shall be paid after the redemption of the
preferred stock but prior to redemption of the common stock.
SECTION 6. Shares of the capital stock of this corporation shall be
transferable only with the approval of the board of directors.
ARTICLE IV
DIRECTORS
SECTION 1. The governance of this corporation shall be vested in a board of not
less than five (5) directors; the exact number to be stated in the Bylaws. All
members of the board of directors shall be either common shareholders of this
corporation, or in the case of a common shareholder who is other than a natural
person, a duly appointed or elected representative of such common shareholder
who meets the qualifications for directors set forth in the Bylaws.
<PAGE>
SECTION 2. Members of the board of directors shall be elected at the factory
district meetings of the common shareholders of this corporation for such terms
and in such manner as prescribed in the bylaws. The bylaws shall provide that
directors be elected from the various geographical areas served by this
corporation, which areas shall be the factory districts.
SECTION 3. No director of this corporation shall be personally liable to this
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability:
(a) For a breach of the director's duty of loyalty to this corporation or
its shareholders;
(b) For actions or omissions not in good faith or that involve intentional
misconduct or a knowing violation of the law;
(c) For a transaction from which the director derived an improper personal
benefit; or
(d) For an act or omission occurring prior to the date when the provisions
of this section became effective.
It is the intention of the shareholders of this corporation to eliminate or
limit the personal liability of the directors of this corporation to the
greatest extent permitted under Minnesota law. If amendments to the Minnesota
Statutes are passed after this section becomes effective which authorize
cooperatives to act to further eliminate or limit the personal liability of
directors, then the liabilities of the directors of this corporation shall be
eliminated or limited to the greatest extent permitted by the Minnesota
Statutes, as so amended. Any repeal or modification of this Section by the
shareholders of this corporation shall not adversely affect any right of or any
protection available to a director of this corporation with respect to acts
which occurred prior to the time of such repeal or modification.
ARTICLE V
INCORPORATORS
The names and addresses of the incorporators of this cooperative association are
as follows:
Wilburn Brekken Crookston, Minnesota 56716
Lloyd Morwood Forest River, North Dakota 58223
Herb Anderson Hillsboro, North Dakota 58045
Walter Nyquist Route 2
Moorhead, Minnesota 56560
A.C. Bloomquist 516 South 7th Street
Moorhead, Minnesota 56560
<PAGE>
Tom Sinner Route 1
Casselton, North Dakota 58012
Alfred Jensen Stephen, Minnesota 56757
Patrick Benedict Sabin, Minnesota 56580
Morris Dahl Drayton, North Dakota 58225
Ralph Larson Route 2
E. Grand Forks, Minnesota 56721
Arnet Weinlaeder Drayton, North Dakota 58225
Armin Ross Fisher, Minnesota 56723
Harold Thorson Route 1
E. Grand Forks, Minnesota 56721
Amended August 27, 1975
Amended June 16, 1976
Amended December 7, 1989
Amended August 31, 1994
Amended and Restated April 22, 1998
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
AMERICAN CRYSTAL SUGAR COMPANY
ARTICLE I
SHAREHOLDERS
SECTION 1. QUALIFICATIONS TO BECOME A COMMON SHAREHOLDER. Any person, firm,
partnership, or corporation who is a bona fide sugarbeet farm operator in the
territory in which this corporation is engaged in business and who agrees to
purchase securities of this corporation and to abide by its Articles of
Incorporation and Bylaws, may, upon approval of the board of directors, become a
common shareholder of this corporation. The term Operator shall mean the
person, firm, partnership or corporation who is the legal owner of the sugarbeet
crop, who has a majority financial interest in the crop, and who has general
control of the sugarbeet operations on the farm where the sugarbeet crop is
grown.
SECTION 2. PURCHASE OF SECURITIES. To become a common shareholder of this
corporation an eligible person, firm, partnership or corporation must purchase
one share of common stock of this corporation and further purchase the preferred
stock of this corporation in an amount prescribed by this corporation's board of
directors, which amount will be prescribed in proportion to the acreage of
sugarbeets which the common shareholder from time to time places under contract
with this corporation.
SECTION 3. SALE AND TRANSFER OF SHARES. Whenever any shareholder desires to
sell his common and preferred stock, he shall first offer it to this corporation
for purchase by this corporation at the par value thereof. In the event such
stock is not purchased by this corporation after receipt of a written notice
from the shareholder offering the said stock for sale, then the shareholder may
sell said stock to any person, firm, partnership or corporation who will fall
within the definition of "operator" as set forth in these bylaws. Said sale and
transfer of stock shall be approved by the board of directors if:
(a) The location of the land upon which the transferee proposes to grow
the beets, in the judgment of the board of directors, does not disrupt the
beet delivery system and does not increase the beet delivery costs to this
corporation,
(b) The transfer does not, in the judgment of the board of directors,
create an uneconomic beet growing unit, and
(c) The transfer is not, in the judgment of the board of directors,
detrimental to the best interests of this corporation.
<PAGE>
A mortgage, pledge, or hypothecation of shares shall not be considered a sale or
transfer and such mortgage, pledge or hypothecation including the subsequent
foreclosure thereof or transfer to the secured party in lieu of foreclosure,
shall be deemed complete, if otherwise complete, without the necessity of
approval of the board of directors. Transfer of ownership of shares to the
secured party through foreclosure or transfer in lieu of foreclosure shall not
render the secured party an operator as to the acres of sugarbeets under a
contract supported by those preferred shares. Such secured party is a
shareholder for the purposes of this Section 3 of Article I.
SECTION 4. INELIGIBILITY OF A COMMON SHAREHOLDER. Whenever the board of
directors, by resolution, finds that a common shareholder has become ineligible
to be such, the board may refund to such common shareholder or his legal
representative, the par value of the common stock held by such shareholder and,
upon such payment, said common shareholder shall cease to have voting rights in
this corporation. Such resolution may only be adopted by the board of directors
at a meeting, 20 days written notice of which was served upon the common
shareholder alleged to be ineligible by United States Certified Mail. Said
notice shall state with particularity the grounds upon which the common
shareholder is alleged to be ineligible and such common shareholder shall be
entitled to be heard thereon. A common shareholder may be found to be
ineligible by reason of:
(a) Failure to meet the operator definition of Article I, Section 1, or
(b) Failure to abide by the Articles and Bylaws of this corporation, or
(c) Failure to abide by the terms of the marketing agreement, or
(d) Failure to abide by this corporation's agriculture regulations and
policies.
Upon redemption of the common stock as provided in this Section 4 of Article I,
the right to deliver sugarbeets to this corporation shall terminate.
SECTION 5. REDEMPTION OF PREFERRED STOCK UNIT RETAINS, AND OTHER EQUITY
INTEREST. No shareholder shall have any right whatsoever to require the
redemption of his preferred stock, unit retains, or other equity interests in
this corporation, and such redemption or retirement of preferred stock, unit
retains, or other equity interests shall be as authorized, from time to time, by
the board of directors.
SECTION 6. FIRST LIEN. This corporation shall have a first lien on all shares
of its capital stock, and on all equity, patronage capital, unit retains, and
other equity interests standing on its books, for all indebtedness of the
respective shareholders or owners thereof to this corporation. This corporation
shall also have the right, exercisable at the option of the board of directors
to set off such indebtedness against the amount of such capital stock, patronage
capital, unit retains and other equity interest standing on its books; provided,
however, that nothing contained herein shall give the holder of such interests
any right to
<PAGE>
have such set-off made. This corporation may subordinate this lien to other
indebtedness secured by such capital stock, equity, patronage capital, unit
retains, and other equity interests.
ARTICLE II
SHAREHOLDER MEETINGS
SECTION 1. ANNUAL MEETING. The annual meeting of the common shareholders of
this corporation shall be held on a date to be determined by the board of
directors in December of each year at such place within or without the State of
Minnesota as the board of directors may designate in the notice of the meeting.
Written notice of meetings of the common shareholders shall be given to each
common shareholder by mail at his last known post office address as the same
appears upon the books and records of this corporation, which notice properly
addressed, shall be placed in the United States Mail not less than fifteen (15)
days prior to the date of the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the common shareholders may
be called by a majority vote of the directors of this corporation or upon the
written petition of at least twenty (20) percent of the common shareholders, in
which case it shall be the duty of the president to cause due notice of the
meeting to be given. Notice of a special meeting of common shareholders shall
state the time, place and purpose of the special meeting and shall be issued
within ten (10) days from and after the date of presentation of such a petition,
and the special meeting shall be held within thirty (30) days from and after the
date of the presentation of such a petition. Mailed notice of a special meeting
shall be given in the same manner as prescribed for a notice of a regular
meeting of common shareholders.
SECTION 3. MAIL VOTING. Any common shareholder who is absent from any meeting
of the common shareholders may vote by mail on the ballot hereinafter
prescribed, upon any motion, resolution or amendment which the board of
directors may in its discretion submit to the common shareholders for vote by
them. Such ballot shall be in the form prescribed by the board of directors and
shall contain the exact text of the proposed motion, resolution or amendment to
be acted upon at such meeting and the date of the meeting; and shall also
contain spaces opposite the text of such motion, resolution or amendment in
which such common shareholder may indicate his affirmative or negative vote
thereon. Such common shareholder shall express his choice by making an "x" in
the appropriate space upon such ballot. Such ballot shall be signed by the
common shareholder and when received by the secretary of this corporation, shall
be accepted and counted as the vote of such absent common shareholder at such
meeting.
SECTION 4. QUORUM. At any regular, special or factory district meeting of the
common shareholders, the quorum necessary to the transaction of business shall
be ten percent of the total number of common shareholders entitled to vote at
such meeting, present in person or by mailed votes. Should the number of common
shareholders entitled to vote at such meeting exceed the number of 500, then in
that event, 50 common shareholders present in person or by mail votes shall
constitute a quorum. The fact of a quorum shall be established by a
registration of the common shareholders of this corporation present at such
meeting, which registration shall be
<PAGE>
verified by the secretary of this corporation or the presiding officer of a
factory district meeting, as the case may be, and shall be reported in the
minutes of the meeting.
SECTION 5. PROXY OR CUMULATIVE VOTING. No proxy or cumulative voting shall be
allowed at any meeting of the common shareholders of this corporation.
ARTICLE III
DIRECTORS
SECTION 1. FACTORY DISTRICTS. The election of directors of this corporation
shall be by factory districts. There shall be five factory districts which
shall be geographically described as designated on the master factory district
map on file in the company's main office. Additional factory districts may be
established by amendment to these Bylaws.
SECTION 2. NUMBER OF DIRECTORS. The board of directors of this corporation
shall consist of three directors from each of the factory districts.
SECTION 3. ELECTION OF DIRECTORS. The board of directors shall call factory
district meetings of the common shareholders belonging to that factory district
to be held at least seven days prior to the annual common shareholders' meeting.
The factory district meetings shall be presided over by the incumbent director
whose term of office is the last to expire, except that the board of directors
shall designate the person to preside over a factory district meeting when such
an incumbent director is not available. The notice of said factory district
meetings shall be given by mail in the same fashion as notice of common
shareholders' meetings specified in Article II, Section 1, of these bylaws.
Directors shall be elected by ballot at said factory district meetings.
Nominations for director may be made by petition signed by at least ten members
and submitted to the secretary at least five days prior to the date of the
district meeting. The secretary shall prepare ballots, containing such
nominations, for distribution at the district meetings. Nominations may also be
made from the floor at the factory district meetings and space shall be provided
on the ballots for nominations from the floor. Upon request common shareholder
lists by factory district shall be made available to those persons nominated for
election as a director thirty (30) days prior to the factory district meeting.
SECTION 4. DETERMINATION OF DISTRICTS. A common shareholder shall belong to
and vote in the factory district where the shareholder resides. A common
shareholder who is other than a natural person shall belong to, and its
representative shall vote in, the factory district where such common shareholder
has its principal place of business. In appropriate cases, the board of
directors may, upon request of a common shareholder, assign such common
shareholder a different factory district. The determination of the board of
directors as to a shareholder's factory district shall be in all respects,
conclusive.
SECTION 5. QUALIFICATIONS OF DIRECTORS. Directors representing a factory
district shall be elected from among the common shareholders or representatives
of such shareholders who are other than natural persons, belonging to that
district. If eligible for election under this section when elected, a director
shall remain eligible to serve out the term for which elected, notwithstanding a
change
<PAGE>
in his factory district. No common shareholder who contracts for the
delivery of sugarbeets to any processor other than this corporation shall be
eligible to serve on the board of directors of this corporation. A common
shareholder who is other than a natural person may designate an individual
representative of such common shareholder to be eligible for election as a
director of this corporation; provided, that such individual representative must
be actively operating the farm upon which the sugarbeets of the common
shareholder are grown. No person shall serve more than four (4) consecutive
three (3) year terms as a director.
SECTION 6. TERMS OF DIRECTORS. Directors shall be elected for terms of three
years, and one director shall be elected each year from each factory district.
SECTION 7. COMMENCEMENT OF TERM. Directors who are elected at the factory
district meetings shall take office immediately at the close of the next annual
meeting and shall hold office until their successors are duly elected and
qualified.
SECTION 8. ELECTION OF OFFICERS. Promptly following each annual common
shareholder's meeting, the board of directors shall convene and organize. It
shall elect from its membership, a chairman and one or more vice chairmen. The
board shall also elect a president, one or more vice presidents, a secretary, a
treasurer and such additional officers deemed necessary, none of whom need be
directors or shareholders of this corporation. Any officer elected by the board
of directors may be removed by the board for cause.
SECTION 9. QUORUM. A quorum for meeting of the board of directors shall be a
majority of the directors. A majority vote of the directors present (a quorum
being present) shall decide all questions except where a greater vote is
expressly required by law or these bylaws.
SECTION 10. VACANCIES. The common shareholders of a factory district shall
have the power at any regular or special common shareholders' meeting (whether a
factory district meeting or otherwise) to remove for cause, a director
representing that factory district and to fill the vacancy caused by such
removal from among the common shareholders of that factory district or
representatives of such shareholders who are other than natural persons. A
vacancy on the board occurring in any other manner may be filled from among the
common shareholders of the proper factory district or representatives of such
shareholders who are other than natural persons, by appointment by a majority
vote of the directors then in office. The person so appointed shall serve until
the next annual or special meeting of the common shareholders of that factory
district when a successor shall be elected to serve out the unexpired regular
term of said directorship.
SECTION 11. MEETING. The board of directors shall meet at such time and upon
such notice as the board may prescribe. Any business may be transacted at any
meeting of the board of directors without the specification of such business in
the notice of the meeting.
SECTION 12. COMPENSATION. Directors may be compensated for their services as
directors, rendered to this corporation, as authorized by the board of
directors. They shall receive expenses incurred in the performance of their
duties to this corporation.
<PAGE>
SECTION 13. AUTHORITY OF DIRECTORS. The directors are authorized to:
(a) Employ and at their pleasure, remove, all agents and employees of this
corporation and to fix their compensation, prescribe their duties and enter
into employment contracts of any kind not specifically prohibited by the
members.
(b) Conduct, manage and control the business affairs of this corporation
and make rules and regulations for the guidance of the officers, agents and
employees of this corporation.
(c) Incur indebtedness and to direct and authorize the president, vice
president, treasurer and secretary or any or all of them to execute on
behalf of this corporation, any contracts, notes, mortgages, evidences of
indebtedness, or other legal documents.
(d) The board shall provide for the adequate insurance of the property of
this corporation or property which may be in the possession of this
corporation, or stored by it, and not otherwise adequately insured. In
addition, the board shall provide adequate insurance covering liability for
accidents to all employees and the public.
(e) Have installed and maintained an adequate system of accounts and
records. At least once a year the board shall obtain the services of a
competent and disinterested public auditor or accountant who shall audit
the books and accounts of this corporation and render a report in writing
thereon, which report shall be submitted to the common shareholders of this
corporation at their annual meeting. This report shall include at least a
balance sheet, an operating statement and a source and application of funds
statement for the fiscal period under review.
(f) Do all other things permitted by law and not prohibited by these
bylaws.
SECTION 14. INFORMAL MEETINGS. The chairman of the board of directors shall
call two informal meetings of the board of directors each year to which shall be
invited the factory district boards of directors of the Red River Valley
Sugarbeet Growers Association.
ARTICLE IV
OFFICERS' DUTIES
SECTION 1. CHAIRMAN OF THE BOARD. The chairman of the board of directors shall
have supervision of the general policy of this corporation as such policy is
from time to time determined by the board of directors. He shall preside at all
meetings of shareholders and of the board of directors. He shall call meetings
of the board of directors as he deems necessary or desirable and when required
to do so by law, the Articles of Incorporation or these Bylaws.
<PAGE>
SECTION 2. VICE CHAIRMEN OF THE BOARD. The vice chairmen of the board of
directors shall, when necessary because of the chairman's death, absence or
inability to act, exercise all the powers and perform all the duties of the
chairman of the board. Should the board of directors elect more than one vice
chairman of the board, they shall be designated by the numerical order in which
they succeed to the duties of the chairman of the board.
SECTION 3. PRESIDENT. The president shall be the chief executive officer of
this corporation in all its operations subject to the control of the board. He
shall do and perform all acts incident to the position of president authorized
or required by the board, law, Articles of Incorporation or these Bylaws.
SECTION 4. THE VICE PRESIDENTS. The vice president shall have such powers and
perform such duties as the board of directors may prescribe for those offices
and as the president may delegate to those positions.
SECTION 5. SECRETARY. The secretary shall keep or cause to be kept complete
minutes of each meeting of the members and of the board of directors and of any
committees of the board. He shall be the custodian of the corporate records and
of the seal thereof, shall supervise the preparation and service of all notice
of meetings as required by law or by these Bylaws, shall submit such secretarial
reports at the annual and other meetings of the shareholders and directors as
required by the board of directors, shall execute those documents directed to be
executed by the board of directors and shall perform such other duties as the
board of directors may prescribe for that office and as the president may
delegate to the position.
SECTION 6. TREASURER. The treasurer shall have custody and control of all of
the funds and securities of this corporation, shall have authority to deposit
monies of this corporation in depositories selected by it, shall keep or cause
to be kept full and accurate accounts of the receipts and disbursements of this
corporation, shall execute those documents directed to be executed by the board
of directors and shall perform such other duties with respect to finances as the
board of directors may prescribe for that office and as the president may
delegate to that position through the chief financial officer of this
corporation.
ARTICLE V
PATRONAGE
SECTION 1. NET INCOME. That portion of the net income of this corporation
resulting from business done with or for members shall be distributed annually
on the basis of dollar volume of patronage, in cash or in the form of credits in
patronage credit accounts set up on the books of this corporation. Distribution
of patronage shall be made as soon as practicable after the close of each fiscal
year and written notice thereof shall be sent to each shareholder showing the
total amount of distribution made to such shareholder and the manner of such
distribution, setting forth the amount distributed in cash and in credits.
SECTION 2. QUALIFIED PATRONAGE DISTRIBUTION AND CONSENT BYLAW. When, in the
discretion of the board of directors, all or a portion of the net income
distributed to members pursuant to
<PAGE>
Section 1 hereof, should be qualified for exclusion from the taxable income
of this corporation pursuant to 26 U.S.C. 1382 (Internal Revenue Code), it
shall so declare by resolution, specifying the portion to be so qualified and
thereafter, there shall be paid to this corporation's shareholders entitled
thereto, in cash prior to eight and one-half months after the close of this
corporation's fiscal year, at least 20 percent (20%) of that portion of the
patronage dividend distribution so designated by the board of directors for
qualification. In such event, each shareholder of this corporation shall, by
the act of continuing as a shareholder, and by that act alone, consent that
the amount of any distributions with respect to the patronage of this
corporation qualified pursuant to this Section, which are made in written
notices of allocation (as defined in 26 U.S.C. 1388) and which are received
by such shareholder from this corporation, will be taken into account by such
shareholder at the stated dollar amount in the manner provided in 26 U.S.C.
1385 for regular tax and alternative minimum tax purposes in the taxable year
in which such written notices of allocation are received. In addition, each
shareholder of this corporation shall, by the act of continuing as a
shareholder, and by that act alone, consent that the amount of any
Alternative Minimum Tax-only (AMT-only) qualified patronage credits issued
pursuant to Section 6 of this Article which are made in written notices of
allocation (as defined in 26 U.S.C. 1388) and which are received by such
shareholder from this corporation will be taken into account by such
shareholder at the stated dollar amount in the manner provided in 26 U.S.C.
1385 in calculating his federal alternative minimum taxable income for the
taxable year in which written notice of allocation is received. The purpose
of this consent Bylaw is to make patronage distributions described in this
Section qualified written notices of allocation within the meaning of the
United States Internal Revenue Code.
SECTION 3. NONQUALIFIED PATRONAGE DISTRIBUTION. When, in the discretion of the
board of directors, all or a portion of the net income of this corporation
distributed to members pursuant to Section 1 hereof, should not be qualified for
exclusion from this corporation's taxable income pursuant to 26 U.S.C. 1382, the
board of directors shall so declare by resolution, specifying the portion to
which qualification shall not apply and upon the adoption of such resolution,
the provisions of Section 2 of this Article shall not apply to such portion of
the patronage distribution. Such determination may be made separately for
regular income tax purposes and for alternative minimum tax purposes.
SECTION 4. RETIREMENT OF PATRONAGE. Whenever in the discretion of the board of
directors, the capital represented by patronage is found to be in excess of the
amount needed for the operation of the business, such excess may be distributed
in cash; and when paid in cash, it shall be the general policy to pay the oldest
outstanding patronage first, except that the board of directors may determine to
pay either the oldest outstanding qualified patronage or the oldest outstanding
nonqualified patronage or a portion of each to facilitate corporate purposes.
At the discretion of the board of directors, a shareholder's patronage may be
paid in cash in other than the regular order when such patronage is carried on
the books of this corporation in respect of a deceased person or when earlier
payments of individual amounts will facilitate this corporation's records, aims,
purposes and good will. Patronage shall be redeemed only when such redemption
is not in violation of any agreements entered into by this corporation.
<PAGE>
SECTION 5. TRANSFER OF PATRONAGE. Patronage capital shall not be transferred
except with the approval and consent of the board of directors.
SECTION 6. ISSUANCE AND CANCELLATION OF AMT-ONLY PATRONAGE CREDITS. The
amount by which the taxable income of this corporation resulting from
business done with or for members as determined for federal alternative
minimum income tax purposes exceeds such taxable income as determined for
federal regular income tax purposes, shall be distributed annually on the
basis of dollar volume of patronage in the form of AMT-only patronage
credits. Written notice thereof shall be sent to each shareholder showing
the total amount of such AMT-only patronage credits. The board of directors
shall have discretion comparable to that granted in Sections 2 and 3 of this
Article to designate all or a portion of AMT-only patronage credits as
AMT-only qualified patronage credits or AMT-only nonqualified patronage
credits; provided, that AMT-only qualified patronage credits may be issued
only if the cash portion of the distribution made pursuant to Section 1 of
this Article is increased by 20% of the amount of any AMT-only qualified
patronage credits and is paid in the manner and within time provided in
Section 2 of this Article. AMT-only patronage credits shall be separate and
distinct from patronage credits issued pursuant to Section 1 of this Article.
AMT-only patronage credits shall not be redeemable by this corporation and
shall automatically be cancelled with no further action required on the part
of this corporation when and to the extent that the taxable income of this
corporation resulting from business done with or for members as determined
for federal regular income tax purposes exceeds such taxable income as
determined for federal alternative minimum income tax purposes (excluding
income, if any, attributable to cancellation of AMT-only patronage credits
and AMT-only unit retains) for a fiscal year. AMT-only patronage credits
shall not be subject to Section 4 of this Article, Article XI, nor to any
other reference herein to patronage credits and, notwithstanding Section 5 of
this Article, shall be deemed transferred proportionately with any transfer
of stock pursuant to Section 3 of Article I.
ARTICLE VI
UNIT RETAINS
SECTION 1. UNIT RETAINS. This corporation, by action of its board of
directors, may require investment in its capital in addition to the investments
from retained patronage. These investments shall be direct capital investments
from a retain on a per ton basis of sugarbeets purchased from its common
shareholders, not to exceed 10 percent (10%) of the weighted average gross per
ton payment for beets delivered to this corporation (calculated by dividing the
total dollar amount required for beet payments by the number of net tons
delivered). The unit retains, if required, shall be made on all sugarbeets
delivered, in the same amount per ton. Each shareholder, by continuing to be
such, agrees that he will invest in the capital of this corporation as
prescribed in this Article. Such investments shall be accounted for separately
in a unit retain account set up on the books of this corporation.
<PAGE>
SECTION 2. QUALIFIED UNIT RETAINS AND CONSENT BYLAW. Each shareholder of this
corporation by the act of continuing as a shareholder and by that act alone
agrees that the amount of any unit retain charged such shareholder as provided
in Section 1 of this Article and qualified by appropriate action of this
corporation pursuant to 26 U.S.C. 1388 will be taken into account by such
shareholder at its stated dollar amount in the manner provided in 26 U.S.C. 1385
for regular tax and alternative minimum tax purposes and will be reported by
such shareholder in his income tax returns for the taxable year in which
qualified written notice of such retain is received. In addition, each
shareholder of this corporation shall, by the act of continuing as a
shareholder, and by that act alone, consent that the amount of any AMT-only
qualified unit retain issued pursuant to Section 6 of this Article and qualified
by appropriate action of this corporation pursuant to 26 U.S.C. 1388 will be
taken into account by such shareholder at its stated dollar amount in the manner
provided in 26 U.S.C. 1385 in calculating such shareholder's alternative minimum
taxable income and will be reported by such shareholder in his income tax
returns for the taxable year in which a qualified written notice of such retain
is received. The purpose of this consent Bylaw is to make such a unit retain
described in this Section 2 a "qualified per unit retain" within the meaning of
the United States Internal Revenue Code.
SECTION 3. NONQUALIFIED UNIT RETAINS. When, in the discretion of the board of
directors, all or a portion of any unit retain charged as provided in this
Article should not be qualified for exclusion from this corporation's taxable
income pursuant to 26 U.S.C. 1382, the board of directors shall so declare by
resolution, specifying the portion to which qualification shall not apply and
upon the adoption of such resolution, the provisions of Section 2 of this
Article shall not apply to such portion of the unit retain. Such determination
may be made separately for regular income tax purposes and for alternative
minimum tax purposes.
SECTION 4. RETIREMENT OF UNIT RETAINS. Whenever in the discretion of the board
of directors the capital represented by the unit retain is found to be in excess
of the amount needed for the operation of the business, then it shall distribute
such excess in cash, and when paid in cash it shall be the general policy to pay
the oldest outstanding unit retains first except that the board of directors may
determine to pay either the oldest outstanding qualified unit retains or the
oldest outstanding nonqualified unit retains or a portion of each to facilitate
corporate purposes. At the discretion of the board of directors, unit retains
may be paid in cash in other than the regular order when such retains are
carried on the books of this corporation in respect of a deceased person, or
when earlier payment of other individual amounts will facilitate this
corporation's records, aims, purposes and good will. Unit retains shall be
redeemed only when such redemption is not in violation of any agreements entered
into by this corporation.
SECTION 5. TRANSFER OF UNIT RETAINS. Unit retains shall not be transferred
except with the approval and consent of the board of directors.
SECTION 6. ISSUANCE AND CANCELLATION OF AMT-ONLY UNIT RETAINS. If the taxable
income of this corporation resulting from business done with or for members as
determined for federal alternative minimum income tax purposes (before patronage
distributions) exceeds such taxable income as determined for federal regular
income tax purposes for a fiscal year, in its discretion, the board of directors
may declare an AMT-only unit retain in the amount of some or all of such
<PAGE>
excess which shall be allocated among the shareholders on the basis of all
sugarbeets delivered, in the same amount per ton. Written notice thereof
shall be sent to each shareholder showing the total amount of AMT-only unit
retain. The board of directors shall have discretion comparable to that
granted in Sections 2 and 3 of this Article to designate all or a portion of
the AMT-only unit retains as AMT-only qualified unit retains or AMT-only
nonqualified unit retains. AMT-only unit retains shall be separate and
distinct from unit retains issued pursuant to Section 1 of this Article.
AMT-only unit retains shall not be redeemable by this corporation and shall
automatically be cancelled with no further action required on the part of
this corporation when and to the extent that the taxable income of this
corporation resulting from business done with or for members as determined
for federal regular income tax purposes exceeds such taxable income as
determined for federal alternative minimum income tax purposes (excluding
income, if any, attributable to cancellation of AMT-only unit retains) for a
fiscal year. AMT-only per unit retains shall not be subject to Section 4 of
this Article, Article XI, nor to any other reference herein to unit retains
and, notwithstanding Section 5 of this Article, shall be deemed transferred
proportionately with any transfer of stock pursuant to Section 3 of Article I.
ARTICLE VII
LOSSES
That portion of any net loss of this corporation resulting from business done
with or for members shall be distributed to shareholders on the basis of dollar
volume patronage for the year of the loss or shall be charged to unallocated
surplus as the board of directors may determine. Should the board of directors
determine to distribute the loss to shareholders on the basis of dollar volume
of patronage such loss shall be charged to shareholders' accounts as the board
of directors may determine to be fair and equitable.
ARTICLE VIII
NON-PATRONAGE
All amounts received by this corporation from non-patronage sources, in excess
of costs and expenses related to such non-patronage sources, or net income
derived from business done by persons who are not common shareholders, net of
taxes thereon, shall become property of this corporation.
ARTICLE IX
FISCAL YEAR
The fiscal year of this corporation shall commence on the first day of September
in each year and shall end on the last day of the following August of each year.
<PAGE>
ARTICLE X
INDEMNIFICATION OF CORPORATE AGENTS
This corporation shall, to the full extent permitted or required by Minnesota
Statute Section 300.082 and Acts amendatory thereof or supplementary thereto,
and in the manner set forth therein, indemnify any director, officer, employee
or agent of this corporation against his expenses, including attorney's fees,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by such shareholder in connection with any proceedings involving such
director, officer, employee or agent of this corporation by reason of his being
or having been such director, officer, employee or agent.
ARTICLE XI
DISSOLUTION
Upon dissolution, after (1) all debts and liabilities of this corporation
shall have been paid, (2) the par value of the preferred shareholders' shares
returned, (3) all capital furnished through patronage and unit retains shall
have been retired without priority as to year on a pro rata basis, (4) all
paid-in surplus theretofore allocated to particular shareholders or former
shareholders has been returned and (5) the par value of common shareholders'
shares returned, the liquidated value of the remaining property and assets of
this corporation shall be distributed among the preferred shareholders in
proportion to the preferred stock held by each. In the event that the
liquidated value of the remaining property and assets of this corporation
after satisfying all debts and liabilities shall be insufficient to satisfy
items (2) through (5) above, such items shall be satisfied in the order
stated before making a distribution of the next item.
ARTICLE XII
AMENDMENTS
These bylaws may be amended at any regular or special meeting at which a quorum
is registered as being present or represented by mail vote, by a majority of the
shareholders so present or represented by mail vote, where the notice of such
meeting contains a summary statement of the proposed amendment.
Adopted April 26, 1973
Amended December 10, 1974
Amended August 27, 1975
Amended June 16, 1976
Amended December 8, 1976
Amended December 5, 1979
Amended April 26, 1995 (To be effective September 1, 1995)
Amended and Restated April 22, 1998
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENT OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
AMERICAN CRYSTAL SUGAR COMPANY
(REGISTRANT)
DATE: JULY 1, 1998 /S/ SAMUEL S. M. WAI
-------------- -------------------------
SAMUEL S. M. WAI
CORPORATE CONTROLLER
DULY AUTHORIZED OFFICER AND
PRINCIPAL FINANCIAL OFFICER
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