SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FOR M 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 1, 1998.
CENEX HARVEST STATES COOPERATIVES
(Exact name of registrant as specified in its charter)
Minnesota 333-17865 41-0251095
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
5500 Cenex Drive, Inver Grove Heights, Minnesota 55077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 946-9433
HARVEST STATES COOPERATIVES
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
Pursuant to a Plan of Combination dated May 29, 1998 the ("Plan of
Combination"), CENEX, Inc. ("CENEX") and Harvest States Cooperatives ("Harvest
States Cooperatives") combined through merger on June 1, 1998 (the
"Combination"), and Harvest States Cooperatives became the surviving
corporation. In accordance with the Plan of Combination, the Articles of
Incorporation and Bylaws of Harvest States Cooperatives were restated and the
name of Harvest States Cooperatives was changed to "Cenex Harvest States
Cooperatives."
Each person serving as a director of CENEX or Harvest States Cooperatives
at the time of the Combination became a director of Cenex Harvest States
Cooperatives.
As a result of the Combination, each holder of common stock of CENEX
became a member of Cenex Harvest States Cooperatives, to the extent eligible for
membership, and all equity interests of CENEX were determined and exchanged for
equal equity interests in Cenex Harvest States Cooperatives at its stated dollar
amount on a dollar for dollar basis as more thoroughly set forth in the Plan of
Combination, a copy of which is included as Exhibit 2.1 hereto and which is
incorporated herein by reference.
The Plan of Combination contains other terms of the Combination, and the
full text of the Plan of Combination is incorporated herein by reference.
Item 4. Changes in Registrant's Certifying Accountant.
In connection with the Combination, Cenex Harvest States Cooperatives on June 3,
1998, determined to retain Coopers & Lybrand LLP, which has been the principal
independent accountant for CENEX for a number of years, as its principal
independent accountant with respect to periods beginning on or after June 1,
1998. Deloitte & Touche LLP, which has been the outside accounting firm for
Harvest States Cooperatives for a number of years, has been engaged to audit
Harvest States Cooperatives for the year ended May 31, 1998. In connection with
the Combination, the Board of Directors had previously determined that it would
retain for the combined entity either CENEX's independent accountant or Harvest
States Cooperatives independent accountant, and determined to retain Coopers &
Lybrand LLP at a meeting on June 3, 1998.
The reports of Deloitte & Touche LLP on the financial statements of
Harvest States Cooperatives for the years ended May 31, 1996 and 1997 did not
contain an adverse opinion or a disclaimer of opinion nor were they qualified as
to uncertainty, audit scope or accounting principles. During the two years ended
May 31, 1997, and subsequent interim periods, there have been (a) no
disagreements between Harvest States Cooperatives and Deloitte & Touche LLP on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which if not resolved to the satisfaction of
Deloitte & Touche LLP would have caused it to make a reference to the subject
matter of the disagreement in connection with its reports ("Disagreements") and
(b) no "reportable event" within the meaning of Item 304(a)(1)(v) of Regulation
S-K of the Securities and Exchange Commission ("Reportable Events").
<PAGE>
During the two years ended May 31, 1997, and subsequent interim periods,
neither Harvest States Cooperatives nor Cenex Harvest States Cooperatives
consulted with Coopers & Lybrand LLP regarding (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on Harvest States Cooperatives or Cenex
Harvest States Cooperatives financial statements, and either a written report
was provided to Harvest States Cooperatives or Cenex Harvest States Cooperatives
or oral advice was provided that Coopers & Lybrand LLP concluded was an
important factor considered by Harvest States Cooperatives or Cenex Harvest
States Cooperatives in reaching a decision as to the accounting, auditing or
financial reporting issue, or (ii) any matter that was either the subject of a
Disagreement with Deloitte & Touche LLP or a Reportable Event.
Item 5. Other Events
Name Change
As a result of the Combination, Harvest States Cooperatives changed its
name to "Cenex Harvest States Cooperatives."
Increase in Size of Board of Directors
As a result of the Combination, Cenex Harvest States Cooperatives
increased the number of directors to 27, subject to future reduction as set
forth in the Plan of Combination.
Restated Articles of Incorporation and Bylaws
In connection with the Combination, Harvest States Cooperatives restated
its Articles of Incorporation, a copy of which is included as Exhibit 3.1 hereto
and which is incorporated by reference herein.
In connection with the Combination, Harvest States Cooperatives restated
its Bylaws, a copy of which is included as Exhibit 3.2 hereto and which is
incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of business acquired
Financial statements of CENEX, Inc. are not currently available, but will
be filed as soon as practicable, but not later than August 14, 1998.
(b) Proforma financial information
The required pro forma financial information relative to the Combination
is not currently available, but will be filed as soon as practicable, but not
later than August 14, 1998.
(c) Exhibits
<PAGE>
2.1 Plan of Combination by and between CENEX, Inc and Harvest States
Cooperatives dated May 29, 1998
3.1 Restated Articles of Incorporation of Cenex Harvest States
Cooperatives
3.2 Restated Bylaws of Cenex Harvest States Cooperatives
16 Letter dated June 9, 1998 from Deloitte & Touche LLP to the
Securities and Exchange Commission.
Item 8. Change in Fiscal Year
In connection with the Combination, contingent upon approval of the
Internal Revenue Service, the fiscal year of Cenex Harvest States Cooperatives
will be changed from May 31 to August 31. Accordingly, Cenex Harvest States
Cooperatives will file a Form 10-K for the year ended May 31, 1998, and a Form
10-Q (constituting a transitional report) for the quarter ended August 31, 1998.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENEX HARVEST STATES COOPERATIVES
By /s/T. F. Baker
------------------------------------
T. F. Baker
Date: June 10, 1998
EXHIBIT 2.1
PLAN OF COMBINATION
THIS PLAN OF COMBINATION (the "Plan") is dated as of May 29, 1998,
and is by and between CENEX, INC. ("CENEX") and HARVEST STATES COOPERATIVES
("Harvest States"), each of which may be referred to herein as a "Constituent
Cooperative" and both of which may be collectively referred to herein as the
"Constituent Cooperatives".
WHEREAS, CENEX and Harvest States each is a cooperative association
organized under Chapter 308A of Minnesota Statutes (as amended, the "Act"); and
WHEREAS, the respective Boards of Directors of CENEX and Harvest
States and the respective members of CENEX and Harvest States each has approved
and adopted this Plan and the transactions contemplated hereby in the manner
required by Section 308A.801 of the Act and their respective Articles of
Incorporation and Bylaws.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements of the parties contained herein, the parties hereto
agree as follows:
SECTION 1. THE COMBINATION. On the Effective Time (as defined in
Section 8), CENEX and Harvest States shall combine through merger (the
"Combination") in accordance with the applicable provisions of the Act; and
Harvest States, whose name shall change to "Cenex Harvest States Cooperatives"
and whose Articles of Incorporation and Bylaws each shall be amended and
restated in their entirety as further provided herein, shall be the surviving
cooperative and shall continue to exist by virtue of, and shall be governed by,
the Act.
SECTION 2. ARTICLES OF MERGER. On or before the Effective Time,
CENEX and Harvest States each shall execute articles of merger (the "Articles of
Merger") setting forth the information required by and otherwise in compliance
with Section 308A.801 of the Act. The Articles of Merger shall be filed with the
Secretary of State of the State of Minnesota or as otherwise required by the
Act, and shall provide that the Combination shall become effective on the
Effective Time.
SECTION 3. EFFECT OF COMBINATION. From and after the Effective Time,
without any further action by the Constituent Cooperatives or any of their
respective members: (a) Cenex Harvest States Cooperatives, as the surviving
cooperative in the Combination, shall have all of the rights, privileges,
immunities and powers, and shall be subject to all the duties and liabilities,
of a cooperative organized under the Act; (b) Cenex Harvest States Cooperatives,
as the surviving cooperative in the Combination, shall possess all of the
rights, privileges, immunities and franchises, of a public as well as a private
nature, of each Constituent Cooperative, and all property, real, personal and
mixed, and all debts due on whatever account, including all choses in action,
and each and every other interest of or belonging to or due to each Constituent
Cooperative, shall be deemed to be and hereby is vested in Cenex Harvest States
Cooperatives, without further act or deed, and the title to any property, or any
interest therein, vested in either Constituent Cooperative, shall not revert or
be in any way impaired by reason of the Combination; (c) Cenex Harvest States
Cooperatives shall be responsible and liable for all of the liabilities and
obligations of each Constituent Cooperative, and any claim existing or action or
proceeding
<PAGE>
pending by or against one of the Constituent Cooperatives may be prosecuted as
if the Combination had not taken place or Cenex Harvest States Cooperatives may
be substituted in its place; (d) neither the rights of creditors nor any liens
upon the property of either of the Constituent Cooperatives shall be impaired by
the Combination; and (e) the Combination shall have any other effect set forth
in the Act and the transaction agreement dated January 29, 1998, by and between
CENEX and Harvest States (the "Transaction Agreement"); all with the effect and
to the extent provided in the applicable provisions of the Act.
SECTION 4. ARTICLES OF INCORPORATION; BYLAWS. From and after the
Effective Time, pursuant to the Articles of Merger and without any further
action by the Constituent Cooperatives or any of their respective members, (a)
the name of Harvest States, as the surviving cooperative in the Combination,
shall be changed to "Cenex Harvest States Cooperatives" and (b) the Articles of
Incorporation of Cenex Harvest States Cooperatives, as the surviving cooperative
in the Combination, shall be amended and restated in their entirety to read as
set forth in Exhibit 1 attached hereto and made a part hereof (the "Surviving
Entity Articles"). From and after the Effective Time, without any further action
by the Constituent Cooperatives or any of their respective members, the Bylaws
of Cenex Harvest States Cooperatives, as the surviving cooperative in the
Combination, shall be amended and restated in their entirety to read as set
forth in Exhibit B attached to the Transaction Agreement (the "Surviving Entity
Bylaws"), and a copy of which was provided to the respective members of each
Constituent Cooperative in connection with their consideration of the
Combination.
SECTION 5. BOARD OF DIRECTORS. From and after the Effective Time,
without any further action by the Constituent Cooperatives or any of their
respective members, each person serving as a director of one of the Constituent
Cooperatives immediately prior to the Effective Time shall become a director of
Cenex Harvest States Cooperatives, as the surviving cooperative in the
Combination, to serve in accordance with the Surviving Entity Bylaws.
SECTION 6. EXCHANGE, REDESIGNATION AND CONVERSION AND CONTINUATION
OF CAPITAL STOCK, NON-STOCK EQUITY INTERESTS, PATRONS' EQUITIES AND MEMBERSHIPS.
On the Effective Time, the manner and basis of exchanging and continuing the
shares of capital stock, non-stock equity interests, patronage equity interests
(including all entitlements to patronage refunds), any other allocated equity
interests, and unallocated and capital reserves of CENEX and Harvest States (all
such interests referred to herein as "CENEX Equity Interests" or "Harvest States
Equity Interests", respectively), and membership interests in CENEX and Harvest
States, for equal Equity Interests and membership interests in Cenex Harvest
States Cooperatives, shall be as follows:
(a) EXCHANGE AND CONTINUATION OF CENEX MEMBERSHIPS. As
of the Effective Time, without any further action by the Constituent
Cooperatives or any of their respective members, each holder of
common stock of CENEX shall become and be a member of Cenex Harvest
States Cooperatives, to the extent they are eligible for membership
under the Surviving Entity Articles and the Surviving Entity Bylaws,
in such class and with such incidents of membership as are set forth
in the Surviving Entity Articles and the Surviving Entity Bylaws.
(b) CONTINUATION OF HARVEST STATES MEMBERSHIPS. As of
the Effective Time, without any further action by the Constituent
Cooperatives or any of their
<PAGE>
respective members, each member of Harvest States shall be and
continue as a member of Cenex Harvest States Cooperatives, to the
extent they are eligible for membership under the Surviving Entity
Articles and the Surviving Entity Bylaws, in such class and with
such incidents of membership as are set forth in the Surviving
Entity Articles and the Surviving Entity Bylaws.
(c) EXCHANGE AND CONTINUATION OF CENEX EQUITY INTERESTS.
As of the Effective Time, without any further action by the
Constituent Cooperatives or any of their respective members, all
Equity Interests standing on the books of CENEX immediately prior to
the Effective Time shall be determined and exchanged for equal
Equity Interests in Cenex Harvest States Cooperatives AT ITS STATED
DOLLAR AMOUNT ON A DOLLAR-FOR-DOLLAR BASIS, including as follows:
(i) Common Stock. Each share of common stock
of CENEX issued and outstanding or otherwise standing on
the books of CENEX immediately prior to the Effective
Time shall be exchanged for one (1) Capital Equity
Certificate of Cenex Harvest States Cooperatives in a
face amount of $25.00, and in such denominations or
other designations or series so as to preserve the year
of issue (as Cenex Harvest States Cooperatives deems
necessary) and other terms and conditions of the
original issuance.
(ii) Preferred Stock. Each whole share or
fractional share of preferred stock of CENEX issued and
outstanding or otherwise standing on the books of CENEX
immediately prior to the Effective Time shall be
exchanged for a Capital Equity Certificate of Cenex
Harvest States Cooperatives in a face amount of $25.00
or fractional amount thereof to reflect the stated
dollar amount on a dollar-for-dollar basis exchange of
such interest, and in such denominations or other
designations or series so as to preserve the year of
issue (as Cenex Harvest States Cooperatives deems
necessary) and other terms and conditions of the
original issuance.
(iii) Patronage Equity Interests. All
patronage refunds and any other allocated or to be
allocated equity interests (including all entitlements
to patronage refunds) standing on the books of CENEX
immediately prior to the Effective Time which are not
otherwise evidenced by preferred stock shall be
exchanged for equal patronage refunds, allocated or to
be allocated equity interests, entitlements to patronage
refunds, or other equal equity interests on the books of
Cenex Harvest States Cooperatives, at their stated
dollar amount on a dollar-for-dollar basis, and in such
denominations or other designations or series so as to
preserve the year of issue (as Cenex Harvest States
Cooperatives deems necessary) and other terms and
conditions of the original issuance.
(iv) Deferred Patronage and Unallocated
Reserve. All deferred patronage (not exchanged above),
unallocated reserves, and any other unallocated equity
interests standing on the books of CENEX immediately
prior to the Effective Time shall be exchanged and
credited for equal
<PAGE>
deferred patronage, unallocated reserves or other equal
unallocated equity interests on the books of Cenex
Harvest States Cooperatives, at their stated dollar
amount on a dollar-for-dollar basis, and in such
denominations or other designations or series so as to
preserve the year of issue (if applicable and as Cenex
Harvest States Cooperatives deems necessary) and other
terms and conditions of the original issuance (if
applicable).
(v) Net Effect. The net effect of the
exchange of CENEX Equity Interests for equal Equity
Interests in Cenex Harvest States Cooperatives shall be
that the holders of CENEX Equity Interests standing on
the books of CENEX immediately prior to the Effective
Time shall hold and will have equal Equity Interests in
Cenex Harvest States Cooperatives immediately following
the Effective Time, in terms of stated dollar amount on
a dollar-for-dollar basis, year of issue (as determined
necessary) and any other rights and preferences, and
that the deferred patronage, unallocated reserves and
other unallocated Equity Interests of CENEX, as standing
on its books immediately prior to the Effective Time,
shall be exchanged and credited for an equal Equity
Interest in Cenex Harvest States Cooperatives
immediately following the Effective Time, in terms of
stated dollar amount on a dollar-for-dollar basis and
other rights and preferences; provided, however, that,
notwithstanding the foregoing, the Equity Interests in
CENEX that are held by Harvest States immediately prior
to the Effective Time shall be treated in accordance
with generally accepted accounting principles.
(d) CONTINUATION OF HARVEST STATES EQUITY INTERESTS. As
of the Effective Time, without any further action by the Constituent
Cooperatives or any of their respective members, all Equity
Interests standing on the books of Harvest States immediately prior
to the Effective Time shall be determined and continued as equal
Equity Interests in Cenex Harvest States Cooperatives AT ITS STATED
DOLLAR AMOUNT ON A DOLLAR-FOR-DOLLAR BASIS, including as follows:
(i) Equity Participation Units. Each Equity
Participation Unit of Harvest States issued and
outstanding or otherwise standing on the books of
Harvest States immediately prior to the Effective Time,
including without limitation all Wheat Milling EPUs and
all Oilseed Processing & Refining EPUs, shall continue
to be issued and outstanding Equity Participation Units
of Cenex Harvest States Cooperatives, at their stated
dollar amount on a dollar-for-dollar basis, along with
the other terms and conditions of the original issuance.
(ii) Patronage Equity Interests. All
patronage certificates and any other allocated or to be
allocated patronage equity interests (including all
entitlements to patronage refunds) standing on the books
of Harvest States immediately prior to the Effective
Time, including without limitation all Capital Equity
Certificates, Certificates of Indebtedness, and
Preferred Capital Certificates, shall continue to be
equal patronage certificates, allocated or to be
allocated patronage equity interests, entitlements to
<PAGE>
patronage refunds, or other equal patronage equity
interests on the books of Cenex Harvest States
Cooperatives, at their stated dollar amount on a
dollar-for-dollar basis, and in such denominations or
other designations or series so as to preserve the year
of issue (as Cenex Harvest States Cooperatives deems
necessary) and other terms and conditions of the
original issuance.
(iii) Nonpatronage Equity Interests. All
nonpatronage certificates and any other allocated or to
be allocated nonpatronage equity interests (including
all entitlements to nonpatronage refunds) standing on
the books of Harvest States immediately prior to the
Effective Time, including without limitation all
Non-Patronage Earnings Certificates, shall continue to
be equal nonpatronage certificates, allocated or to be
allocated nonpatronage equity interests, entitlements to
nonpatronage refunds, or other equal nonpatronage equity
interests on the books of Cenex Harvest States
Cooperatives, at their stated dollar amount on a
dollar-for-dollar basis, and in such denominations or
other designations or series so as to preserve the year
of issue (as Cenex Harvest States Cooperatives deems
necessary) and other terms and conditions of the
original issuance.
(iv) Patronage Payable and Capital Reserve.
All patronage payable (not continued above), capital
reserve and any other unallocated equity interests
standing on the books of Harvest States immediately
prior to the Effective Time shall continue to be equal
patronage payable, capital reserve or other equal
allocated or unallocated equity interests on the books
of Cenex Harvest States Cooperatives at their stated
dollar amount on a dollar-for-dollar basis, and in such
denominations or other designations or series so as to
preserve the year of issue (if applicable and as Cenex
Harvest States Cooperatives deems necessary) and other
terms and conditions of the original issuance (if
applicable).
(v) Net Effect. The net effect of the
continuation of Harvest States Equity Interests as equal
Equity Interests in Cenex Harvest States Cooperatives
shall be that the holders of Harvest States Equity
Interests standing on the books of Harvest States
immediately prior to the Effective Time shall hold and
will continue to have the same and equal Equity
Interests in Cenex Harvest States Cooperatives
immediately following the Effective Time, in terms of
stated dollar amount on a dollar-for-dollar basis, year
of issue (as determined necessary) and other rights and
preferences, and that the patronage payable, capital
reserve and other unallocated Equity Interests of
Harvest States, standing on its books immediately prior
to the Effective Time, shall continue to be the same
identical and equal Equity Interest in Cenex Harvest
States Cooperatives immediately following the Effective
Time, in terms of the stated dollar amount on a
dollar-for-dollar basis, and other rights and
<PAGE>
preferences; provided, however, that, notwithstanding
the foregoing, the Equity Interests in Harvest States
that are held by CENEX immediately prior to the
Effective Time shall be treated in accordance with
generally accepted accounting principles.
(e) SURVIVING ENTITY ARTICLES AND BYLAWS TO GOVERN.
Membership in Cenex Harvest States Cooperatives and all Equity
Interests in Cenex Harvest States Cooperatives issued or credited in
exchange for CENEX Equity Interests and continued and credited with
respect to Harvest States Equity as described above, shall in all
instances be governed by the provisions of the Surviving Entity
Articles and the Surviving Entity Bylaws.
(f) FURTHER ASSURANCES OF HOLDERS OF EQUITY. Each holder
of CENEX Equity Interests and each holder of Harvest States Equity
Interests shall take such action or cause to be taken such action as
Cenex Harvest States Cooperatives may reasonably deem necessary or
appropriate to effect the exchange and continuation of the equity
interests hereunder, including without limitation the execution and
delivery of any stock certificates or other evidences of equity
being exchanged or continued hereunder.
SECTION 7. FURTHER ASSURANCES. From time to time and after the
Effective Time, as and when requested by Cenex Harvest States Cooperatives, or
its successors or assigns, CENEX shall execute and deliver or cause to be
executed and delivered all such deeds and other instruments, and shall take or
cause to be taken all such further action or actions, as Cenex Harvest States
Cooperatives, or its successors or assigns, may deem necessary or desirable in
order to vest in and confirm to Cenex Harvest States Cooperatives, or its
successors or assigns, title to and possession of all of the properties, rights,
privileges, powers and franchises referred to in Section 3 of this Plan, and
otherwise to carry out the intent and purposes of this Plan. If Cenex Harvest
States Cooperatives shall at any time deem that any further assignments or
assurances or any other acts are necessary or desirable to vest, perfect or
confirm of record or otherwise the title to any property or to enforce any
claims of CENEX or Harvest States vested in Cenex Harvest States Cooperatives
pursuant to this Plan, the officers of Cenex Harvest States Cooperatives, or its
successors or assigns, are hereby specifically authorized as attorneys-in-fact
of each CENEX and Harvest States (which appointment is irrevocable and coupled
with an interest), to execute and deliver any and all such deeds, assignments
and assurances and to do all such other acts in the name and on behalf of each
CENEX and Harvest States, or otherwise, as such officer shall deem necessary or
appropriate to accomplish such purpose.
SECTION 8. EFFECTIVE DATE. The Combination shall become effective at
12:01 a.m. central time on June 1, 1998 (the "Effective Time").
SECTION 9. GOVERNING LAW. This Plan shall be governed by and
construed in accordance with the laws of the State of Minnesota.
<PAGE>
IN WITNESS WHEREOF, this Plan has been agreed to and executed by the
duly authorized representatives of CENEX and Harvest States, as of the date
first set forth above.
CENEX, INC. HARVEST STATES COOPERATIVES
By s/Elroy Webster By s/Gerald Kuster
--------------------------------- --------------------------------
Its Chairman of the Board Its Chairman of the Board
--------------------------------- --------------------------------
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
CENEX HARVEST STATES COOPERATIVES
ARTICLE I.
NAME AND PRINCIPAL PLACE OF BUSINESS
SECTION 1. The name of this cooperative corporation shall be Cenex
Harvest States Cooperatives.
SECTION 2. The principal place of business for this cooperative
shall be in the City of Inver Grove Heights, County of Dakota, State of
Minnesota. The registered office address of this cooperative shall be 5500 Cenex
Drive, Inver Grove Heights, Minnesota 55077.
ARTICLE II.
PURPOSES AND POWERS
SECTION 1. This cooperative is organized for the following purposes:
(a) to receive, handle, store, warehouse, manufacture,
process, market, purchase, sell and otherwise deal in the agricultural products
of its members, nonmember patrons and others, including without limitation the
processing and exporting of grain and other agricultural products;
(b) to manufacture, buy, sell, market, store, warehouse,
acquire, transport, distribute, process, produce, drill, mine, refine, and
otherwise deal in and procure for its members, nonmember patrons and others,
petroleum products, fuel, oil, grease, automotive parts and accessories,
supplies, services, minerals, feed, seed, fertilizer, machinery, equipment,
supplies, and other goods, products, and merchandise, primarily for use upon
farms or by farmers, or used or useful in the business of farming, recognizing
that they may also be incidentally useful to other patrons; and
(c) to engage in any activity connected with or related to any
such purposes, and to engage in any other lawful purpose.
To this end, the business and activities of this cooperative shall be conducted
on a cooperative basis, as provided in the Bylaws of this cooperative.
SECTION 2. In addition to other powers, this cooperative may perform
every act and thing necessary, proper, incidental or convenient to the conduct
of this cooperative's business or the accomplishment of the purposes of this
cooperative, and this cooperative shall have all powers, privileges and rights
conferred upon this cooperative by the laws of the State of
<PAGE>
Minnesota under which it was organized and acts amendatory thereof or
supplemental thereto, and by the laws of the United States of America. Without
limiting the foregoing, this cooperative shall have the power:
(a) To borrow money from and to loan money to its members,
nonmember patrons and others; to guarantee or stand as surety on loans made to
its members, nonmember patrons and others by lenders; to issue bonds, deeds of
trust, debentures, notes, and other obligations, and to secure the same by
pledge, mortgage, or trust deed on any property of this cooperative; to draw,
make, accept, endorse, guarantee, execute, and issue promissory notes, bills of
exchange, drafts, warrants, warehouse receipts, certificates and other
obligations, and negotiable or transferable instruments for any purpose deemed
necessary to further the objects for which this cooperative is formed;
(b) To acquire, purchase, hold, lease, encumber, sell,
exchange, and convey such real estate, buildings, and personal property as the
business of this cooperative may require;
(c) To purchase, acquire, own, mortgage, pledge, sell, assign,
transfer or otherwise dispose of, equity or debt securities created by any other
corporation or other legal entity wherever organized, with all the rights,
powers and privileges of ownership thereof;
(d) To borrow money, to incur obligations and to assume
obligations of any other person, individual, corporation or other legal entity,
in any amount; and to make contracts of hire;
(e) To issue equity and debt securities, whether certificated
or uncertificated, as further provided in Article IV hereof and in the Bylaws of
this cooperative;
(f) To join with other cooperatives, corporations,
partnerships, associations or other entities to form district, state, or
national marketing, manufacturing, purchasing and service organizations, and
other organizations engaged in the general purposes for which this cooperative
is formed, and to purchase, acquire, and hold the capital stock or other equity
interest and the notes, bonds and other obligations of such organizations;
(g) To have one or more offices, and to conduct any or all of
its operations and business, and promote its purposes within and without the
state of Minnesota without restriction as to places or amounts; and
(h) To carry on any other business in connection with the
foregoing and to engage in any of said activities on its own account or as agent
for others, or alone or in association with others; and to employ agents,
consultants and nominees to perform any or all of the powers herein enumerated.
The powers, privileges and rights specified herein shall, except where otherwise
expressed, be in no way limited or restricted by reference to or inference from
the terms of any other provision of these Articles of Incorporation. The
enumeration of powers, privileges and rights herein shall not
<PAGE>
be held to limit or restrict in any manner the general powers, privileges and
rights conferred upon this cooperative by the laws of the State of Minnesota.
SECTION 3. This cooperative shall not deal in the products, supplies
and services with or for nonmembers in an amount greater in value than the total
amount of such business transacted by it with or for members. All business
transacted by this cooperative for or on behalf of the United States or any
agency or instrumentality thereof shall be disregarded in determining the volume
of member and nonmember business transacted by this cooperative.
ARTICLE III.
DURATION
This cooperative shall have perpetual existence.
ARTICLE IV.
MEMBERSHIP AND AUTHORIZED CAPITAL INSTRUMENTS
SECTION 1. This cooperative is organized without capital stock on a
membership basis.
SECTION 2. Membership in this cooperative shall be restricted to
associations of producers of agricultural products which are organized and
operating so as to adhere to the provisions of the Agricultural Marketing Act,
12 U.S.C. ss. 1141j(a), as amended, and the Capper-Volstead Act, 7 U.S.C. ss.ss.
291-292, as amended, and to certain producers of agricultural products, which or
who in either case meet the conditions of membership as provided in this Article
IV and the Bylaws of this cooperative. For purposes of this Article IV,
"producers of agricultural products" shall mean persons (including individuals
and joint ventures, corporations, partnerships, limited liability companies,
limited liability partnerships, unincorporated associations or other legal
entities owned or controlled by individual farmers, ranchers or their family
groups) that are engaged in the production of one or more agricultural products,
including tenants of land used for the production of such products and lessors
of such land that receive as rent therefor any part of the product of such land.
The Board of Directors of this cooperative may establish a minimum amount of
business (as a percentage of purchases, in dollar volume, or otherwise) that
cooperative associations must transact with or through this cooperative to be
eligible for membership in this cooperative, and also may adopt such additional
conditions, qualifications, methods of acceptance, duties, rights and privileges
of membership in this cooperative as it may from time to time deem advisable.
The Board of Directors of this cooperative may refuse membership or provide
conditional membership to an applicant in its sole discretion. A membership in
this cooperative is transferable only with the consent and approval of the Board
of Directors.
Producers of agricultural products who transact business with the CSM locations
of this cooperative (a.k.a. "Cenex Supply and Marketing division" locations)
shall have no voting rights
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as a result of such transaction but may be eligible to conduct business with
this cooperative at such locations on a patronage basis, as provided in Section
5 of this Article IV.
SECTION 3. This cooperative shall have three (3) classes of members,
which are hereby designated as the "Cooperative Association Member" class, the
"Defined Member" class, and the "Individual Member" class, as more particularly
described in the Bylaws of this cooperative. This cooperative shall have such
additional classes of members, with such designations, and such relative rights,
preferences, privileges and limitations, as provided in the Bylaws of this
cooperative.
SECTION 4. Voting rights in this cooperative arise solely by virtue
of membership in this cooperative, and only members of this cooperative shall
have voting power in this cooperative. Each member shall have a minimum of one
(1) vote in the affairs of the cooperative, and may otherwise be entitled to
additional votes as further authorized in the Bylaws. This cooperative is a
cooperative described in Section 308A.641 of Minnesota Statutes.
SECTION 5. Associations of producers of agricultural products and
producers of agricultural products described in the first paragraph of Section 2
of this Article IV who (i) patronize this cooperative under conditions
established by the Board of Directors of this cooperative or as provided in the
Bylaws of this cooperative but (ii) who are otherwise not eligible to be members
of this cooperative may nevertheless conduct business with this cooperative on a
patronage basis as a nonmember patron, as more particularly provided in the
Bylaws of this cooperative. Such nonmember patrons are not members of this
cooperative and are not entitled to voting rights or other privileges incident
to membership in this cooperative.
SECTION 6. In addition to and not by way of limitation of the powers
granted to the Board of Directors of this cooperative by the laws of the State
of Minnesota or elsewhere in these Articles or the Bylaws of this cooperative,
the Board of Directors shall have the following authority and powers, which may
be exercised from time to time at its sole discretion:
(a) The Board of Directors by resolution may establish and
organize separate defined business units of this cooperative ("Defined Business
Unit") with respect to the operations of this cooperative, on such terms and
conditions and having such rights, preferences, privileges and limitations as
the Board of Directors deems appropriate, as may be further provided in the
Bylaws of this cooperative. The Board of Directors may sell, liquidate, dissolve
or wind up any Defined Business Unit, in which event the assets of such Defined
Business Unit shall be used first to redeem the Equity Participation Units (as
defined below) and Preferred Capital Certificates (as defined in the Bylaws of
this cooperative) of the Defined Business Unit on a pro rata basis;
(b) The Board of Directors by resolution may establish and
issue one or more than one class or series of equity participation units
("Equity Participation Units") in connection with each Defined Business Unit,
may set forth the designation of classes or series of Equity Participation
Units, and may fix the relative rights, preferences, privileges and limitations
of each class or series of Equity Participation Units, as may be further
provided in the Bylaws of this cooperative. Equity Participation Units shall not
entitle the holder to voting rights and may be
<PAGE>
issued to and held only by Defined Members of this cooperative. Equity
Participation Units may only be sold or transferred with the approval of the
Board of Directors of this cooperative; and
(c) The Board of Directors by resolution may establish and
issue to any person (whether member, nonmember patron, or other person) one or
more than one class or series of debt and/or equity instruments, may set forth
the designation of classes or series of such debt and/or equity instruments, and
may fix the relative rights, preferences, privileges and limitations of each
class or series of debt and/or equity instruments, including, without
limitation, one or more than one class or series of PREFERRED EQUITY
instruments. Dividends may be paid on the equity capital of this cooperative
which is evidenced by an equity instrument established pursuant to this Section
6(c); provided that dividends on such equity capital may not exceed eight
percent (8%) per annum. Debt or equity instruments established pursuant to this
Section 6(c) shall not entitle the holder to voting rights. Unless otherwise
expressly authorized by the Board of Directors, debt or equity instruments
established and issued pursuant to this Section 6(c) may only be sold or
transferred with the approval of the Board of Directors of this cooperative.
ARTICLE V.
NET INCOME AND LOSS
The net income of this cooperative in excess of dividends on equity
capital and additions to reserves shall be distributed to members and nonmember
patrons annually or more often on the basis of patronage and the records of this
cooperative may show the interest of members and equity holders in the reserves.
Net income may be accounted for and distributed on the basis of allocation units
that may be functional, divisional, departmental, geographic, or otherwise. Net
income may be distributed in cash, allocated patronage equities (including
without limitation Patrons' Equities), revolving fund certificates, securities
of this cooperative, other securities, or any combination thereof. Any such
allocated equity shall be redeemable only at the option of the Board of
Directors. The net loss of an allocation unit or allocation units may be offset
against the net income of other allocation units to the extent permitted by
Minnesota Statutes Section 308A.705, Subdivision 1. The net income or net loss
of this cooperative or any allocation unit may be determined by including the
cooperative's proportionate share of the net income or loss of other entities in
which the cooperative owns an equity interest. The foregoing provisions of this
Article V shall be implemented as more particularly provided in the Bylaws of
this cooperative.
ARTICLE VI.
FIRST LIEN
This cooperative shall have a first lien on all certificates of
equity, patronage capital and other equity interests standing on its books
(including any earned but not allocated capital equity to be issued to members
as patronage refunds), for all indebtedness of the respective holders or owners
thereof to this cooperative. This cooperative shall also have the right,
exercisable at the option of the Board of Directors, to set off such
indebtedness against the face amount of such
<PAGE>
equity interests; provided, however, that nothing contained herein shall give
the holder of such equity interests any right to have such set off made.
ARTICLE VII.
CERTAIN CORPORATE ACTIONS; DISSOLUTION
SECTION 1. A merger, consolidation, liquidation or dissolution
involving this cooperative, or the sale of all or substantially all of the
assets and property of this cooperative, may be authorized by the members in
accordance with the Minnesota Cooperative Law, Minnesota Statutes Chapter 308A,
upon the approval of two-thirds (2/3) of the votes cast in person or by mail
vote at an annual or special meeting of the members called for such purpose;
provided, however, in the event the Board of Directors of this cooperative
declares, by resolution adopted by a majority of the Board of Directors present
and voting, that the action involves or is related to a hostile takeover, then
the action may be adopted only upon the approval of eighty percent (80%) of the
total voting power of the members of this cooperative, whether or not present
and voting on the action. Notwithstanding Article X of these Articles of
Incorporation, this Article VII may be amended only upon the approval of eighty
percent (80%) of the total voting power of the members of this cooperative,
whether or not present and voting on the amendment.
SECTION 2. In the event of any dissolution, liquidation or winding
up of this cooperative, whether voluntary or involuntary, all debts and
liabilities of this cooperative shall be paid first according to their
respective priorities. As more particularly provided in the Bylaws, the
remaining assets shall then be paid to the holders of equity capital to the
extent of their interests therein and any excess shall be paid to the patrons of
this cooperative on the basis of their past patronage. The Bylaws may provide
more particularly for the allocation among the members and nonmember patrons of
this cooperative of the consideration received in any merger or consolidation to
which this cooperative is a party.
ARTICLE VIII.
BOARD OF DIRECTORS
SECTION 1. The business and affairs of this cooperative shall be
managed by a Board of Directors of not less than seventeen (17) directors, as
further provided in the Bylaws of this cooperative. Directors shall be elected
by the members at the annual meeting of the members of this cooperative in such
manner and for such terms as the Bylaws of this cooperative may prescribe.
SECTION 2. The names and addresses of the directors of the
transition Board of Directors of this cooperative, who shall serve for such
terms and in such manner as the Bylaws of this cooperative shall prescribe, are
as follows:
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Bruce Anderson Bob Bass
13500 - 42nd Street NE S 2276 Highway K
Glenburn, North Dakota 58740-9564 Reedsburg, Wisconsin 53959
Steven Burnet Steve Carney
94699 Monkland Lane P.O. Box 1122
Moro, Oregon 97039-9705 Scobey, Montana 59263-1122
Curt Eischens Robert Elliott
RR 1, Box 59 324 Hillcrest
Minneota, Minnesota 56264 Alliance, Nebraska 69301
Edward Ellison Sheldon Haaland
RR 1, Box 46 RR 2, Box 55
Elbow Lake, Minnesota 56531-9740 Hanley Falls, Minnesota 56245-9731
Fred Harris Jerry Hasnedl
1004 Powell Street Route 1, Box 39
Grandview, Washington 98930 St. Hilaire, Minnesota 56754
Edward Hereford Douglas Johnson
1902 Cashup Flat Road HC 89, Box 5240
Thornton, Washington 99176-9710 Sidney, Montana 59270
James Kile Gerald Kuster
P.O. Box 97 RR 1, Box 46
St. John, Washington 99171 Reynolds, North Dakota 58275-9742
Leonard Larsen Tyrone Moos
5128 11th Avenue North HCR 1, Box 1
Granville, North Dakota 58741-9595 Philip, South Dakota 57567-9601
Gaylord Olson Duane Risan
RR 1 RR 1, Box 4
Buxton, North Dakota 58218 Parshall, North Dakota 58770-9703
Denis Schilmoeller Duane Stenzel
4758 - 450th Street RR 2, Box 173
Granville, Iowa 51022 Wells, Minnestoa 56097
Michael Toelle Richard Traphagen
RR 1, Box 190 39555 124th Street
Browns Valley, Minnesota 56219 Columbia, South Dakota 57433
<PAGE>
Russell Twedt Merlin Van Walleghen
PO Box 296 24106 408th Avenue
Rudyard, Montana 59540-0296 Letcher, South Dakota 57359-6021
Elroy Webster Arnold Weisenbeck
Route 2, Box 123 6602 Highway 25
Nicollet, Minnesota 56074 Durand, Wisconsin 54736
William Zarak
3711 124th Avenue Southwest
South Heart, North Dakota 58655-9767
ARTICLE IX.
LIMITATION OF DIRECTOR LIABILITY
No director of this cooperative shall be personally liable to this
cooperative or its members 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
cooperative or its members;
(b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of 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 Article (or predecessor thereto) became effective.
It is the intention of the members of this cooperative to eliminate or limit the
personal liability of the directors of this cooperative to the greatest extent
permitted under Minnesota law. If amendments to the Minnesota Statutes are
passed after the effective date of this Article which authorize cooperatives to
act to further limit or eliminate the personal liability of directors, then the
liability of the directors of this cooperative shall be limited or eliminated to
the greatest extent permitted by the Minnesota Statutes, as so amended. Any
repeal or modification of this Article by the members of this cooperative shall
not adversely affect any right of or any protection available to a director of
this cooperative which is in existence at the time of such repeal or
modification.
<PAGE>
ARTICLE X.
AMENDMENT
These Articles of Incorporation may be amended in accordance with
the Minnesota Cooperative Law, Minnesota Statutes Chapter 308A, upon the
approval of a majority of the votes cast in person or by mail vote at an annual
or special meeting of the members called for such purpose; provided, however, in
the event the Board of Directors of this cooperative declares, by resolution
adopted by a majority of the Board of Directors present and voting, that the
amendment involves or is related to a hostile takeover, then the amendment may
be adopted only upon the approval of eighty percent (80%) of the total voting
power of the members of this cooperative, whether or not present and voting on
the amendment.
EXHIBIT 3.2
BYLAWS
OF
CENEX HARVEST STATES COOPERATIVES
ARTICLE I.
MEMBERSHIP
SECTION 1 - QUALIFICATIONS. Producers of agricultural products and
associations of producers of agricultural products who are eligible under
Article IV, Section 2 of the Articles of Incorporation of this cooperative and
who patronize this cooperative under conditions established by the Board of
Directors of this cooperative or as elsewhere provided in these Bylaws may, upon
approval or pursuant to the authorization of the Board of Directors, become
members of this cooperative. Each transaction between this cooperative and each
member shall be subject to and shall include as a part of its terms each
provision of the Articles of Incorporation of this cooperative and these Bylaws,
whether or not the same be expressly referred to in said transaction.
SECTION 2 - CLASSES OF MEMBERS. In accordance with the Articles of
Incorporation, there shall be three classes of members of this cooperative,
which are hereby designated as the "Cooperative Association" class, "Individual
Member" class and the "Defined Member" class. Membership in a particular class
of members shall be determined as follows:
(a) COOPERATIVE ASSOCIATION MEMBERS. All members which are
cooperative associations shall belong to and be part of the Cooperative
Association class of members and shall become known and be designated as
"Cooperative Association Members."
(b) INDIVIDUAL MEMBERS. All members who are individuals shall belong
to and be part of the Individual Member class of members, and shall become known
and be designated as "Individual Members;" and
(c) DEFINED MEMBERS. All members who are holders of Equity
Participation Units (as described in the Articles of Incorporation of this
cooperative) shall belong to and be part of the Defined Member class of members,
and shall become known and be designated as "Defined Members."
SECTION 3 - DEFINED MEMBERS AND DEFINED BUSINESS UNITS.
(a) DEFINED BUSINESS UNITS. Each Defined Member holding Equity
Participation Units in a Defined Business Unit (as such unit is established in
the Articles of Incorporation) shall be eligible to receive patronage
distributions from the Defined Business Unit as a separate allocation unit.
<PAGE>
(b) DELIVERY RIGHTS AND OBLIGATIONS. The delivery rights and
obligations of each Defined Member shall be as specified in the member marketing
agreement between such Defined Member and this cooperative. Each such member
marketing agreement shall at all times be subject to modification by this
cooperative upon written notice to the Defined Member in question, provided that
such modification is first approved by Defined Members holding a majority of the
voting power of the Defined Business Unit in question who are present and voting
at a meeting of Defined Members holding Equity Participation Units in such
Defined Business Unit, where the notice of such meeting contains a statement of
the proposed modification.
(c) DEFINED MEMBER BOARDS. Each Defined Business Unit shall be
represented by a Defined Member Board. The initial members of each Defined
Member Board shall be selected by the Board of Directors of this cooperative.
Subsequently, the members of the Defined Business Unit in question shall be
entitled to elect, on a one Defined Member/one vote basis, the members of the
Defined Member Board. Each Defined Member Board shall be made up of at least
five (5) but not more than ten (10) individuals. Each member of a Defined Member
Board must be (i) either a Defined Member or a representative of a Defined
Member, and (ii) in good standing as a Defined Member and in full compliance
with delivery obligations in and to such member's Defined Business Unit;
provided, however, that no employee of this cooperative may serve as a member of
any Defined Member Board. Each Defined Member Board shall be headed by a
Chairperson selected by and from the Board of Directors of this cooperative.
Each Defined Member Board shall meet at least quarterly (one of which meetings
may be its annual meeting), and shall be charged with reflecting Defined Member
concerns and providing a direct communication mechanism to the Board of
Directors of this cooperative. Individuals serving on a Defined Member Board
shall serve for staggered terms of three (3) years and until their successors
are elected and have qualified.
SECTION 4 - TERMINATION OF MEMBERSHIP. If the Board of Directors
determines that a member has become ineligible for membership in this
cooperative, such member shall have no rights or privileges on account of such
membership in the management of the affairs of this cooperative, and the
membership of such member may be terminated by the Board of Directors.
Membership may, at the discretion of the Board of Directors, be terminated
whenever the Board of Directors by resolution finds that a member has:
(a) intentionally or repeatedly violated any provision of the
Articles of Incorporation, Bylaws or Board policies of this cooperative; or
(b) failed to patronize this cooperative for a period of twelve (12)
consecutive months; or
(c) breached any contract with this cooperative; or
(d) willfully obstructed any lawful purpose or activity of this
cooperative; or
(e) remained indebted to this cooperative for ninety (90) days after
such indebtedness becomes payable; or
<PAGE>
(f) died or legally dissolved;
provided, however, that termination of any member's membership as a result of
any of the circumstances listed in paragraphs (a) through (f) above shall not be
deemed to revoke such member's consent contained in Article VIII hereof but
rather such member may only revoke such consent in writing. Upon termination of
membership said member shall thereafter have no voting rights in this
cooperative. A terminated member's patronage credits shall be revolved or
retired in the same manner as the patronage credits of members. No action taken
hereunder shall impair the obligations or liabilities of either party under any
contract with the cooperative which may be terminated only as provided therein.
ARTICLE II.
MEETINGS OF MEMBERS
SECTION 1 - ANNUAL AND SPECIAL MEETINGS. The annual meeting of the
members of this cooperative shall be held at a time and place fixed by the Board
of Directors. Special meetings of the members of this cooperative may be called
by the Board of Directors or upon the written petition of twenty percent (20%)
of the members. The special members' meeting shall be held at the time and place
specified in the notice of the meeting, and the notice shall also state the
purpose of the special members' meeting. No business shall be considered at the
special members' meeting except as mentioned in the notice of the meeting.
SECTION 2 - NOTICE OF MEETINGS. Notice of the annual meeting of the
members of this cooperative shall be published or mailed as prescribed by
Minnesota Statutes Section 308A.611, Subdivision 5. Notice of a special meeting
of the members of this cooperative shall be published or mailed as prescribed by
Minnesota Statutes Section 308A.615, Subdivision 2. The notice of meetings must
be published at least two weeks before the date of the meeting or mailed at
least 15 days before the date of the meeting. The notice shall state the date,
time, and place of the meeting, and in the case of a special meeting, the
purposes for which the meeting is called. The Secretary shall execute a
certificate which contains a copy of the notice, shows the date of mailing or
publication (as the case may be), and states the notice was mailed or published
(as the case may be) as prescribed by these Bylaws. The certificate shall be
made a part of the meeting. The failure of any member to receive notice shall
not invalidate any action which may be taken by the members at a meeting.
SECTION 3 - VOTING POWER. The voting power of the members of this
cooperative shall be exercised as follows:
(a) COOPERATIVE ASSOCIATION MEMBERS. Each Cooperative Association
Member shall be entitled to the number of permitted votes designated by the
Board of Directors of this cooperative, which shall be determined based on the
following formula:
(i) One (1) vote for each producer of agricultural
products registered and accepted as a member of such Cooperative
Association Member who patronized the
<PAGE>
Cooperative Association Member within the preceding fiscal year by
purchasing or marketing goods or services supplied by or marketed by
this cooperative; plus
(ii) One (1) vote for each $10,000, or major fraction
thereof, of the average annual business transacted with this
cooperative and with CENEX, Inc. (combined sales to and purchases
from) during the three years ending on the last day of this
cooperative's fiscal year last ended prior to the meeting; plus
(iii) One (1) vote for each $1,000, or major fraction
thereof, of equity issued by this cooperative as a patronage refund
and standing on the books of this cooperative in the name of such
Cooperative Association Member.
For purposes of Section 3(a)(ii), the dollar value of commodities delivered by a
Defined Member to a Cooperative Association Member for handling by and on behalf
of this cooperative and the Defined Member shall be included in the calculation
for determining the number of permitted votes of the Cooperative Association
Member. For purposes of Section 3(a)(iii), the face amount of any Equity
Participation Units issued to and held by a Cooperative Association Member shall
be included in the determination of the amount of equity in this cooperative
held by such Cooperative Association Member. In determining the number of
permitted votes of a Cooperative Association Member, the Board of Directors of
this cooperative shall give due consideration to the membership eligibility
criteria set forth in these Bylaws and the Articles of Incorporation of this
cooperative, and shall have the authority to suspend or adjust voting power to
reflect such criteria, including without limitation the authority to establish
reasonable procedures to address special circumstances, for example, procedures
to annualize the average annual business of Cooperative Association Members
having less than three full years of business included in the averaging period
and procedures to equitably measure the business transacted by Cooperative
Association Members that have acquired or merged with other entities that did
business with this cooperative or with CENEX, Inc. within the averaging period.
The Board of Directors of this cooperative also may require such supporting
information from Cooperative Association Members as it deems necessary or
appropriate to determine the number of permitted votes of the Cooperative
Association Members hereunder.
Each Cooperative Association Member shall be represented at members' meetings of
this cooperative by elected or appointed delegates, which delegates shall
exercise the voting rights of such Cooperative Association Member at such
meetings as hereinafter provided.
(b) INDIVIDUAL MEMBERS AND DEFINED MEMBERS. Each Individual Member
and each Defined Member shall have one (1) vote; provided, however, that, except
as such Individual Member or such Defined Member shall cast a vote individually
in person at an annual or special meeting (as hereinafter provided), or by mail
when a mail ballot has been provided for, and except for votes of Defined
Members for elections to Defined Member Boards, such Individual Member or
Defined Member may be grouped with other Individual Members and Defined Members
in local units (hereinafter referred to as "Patrons' Associations") as may be
established from time to time by the Board of Directors of this cooperative. An
Individual Member who intends to exercise such Individual Member's vote
individually hereunder shall be
<PAGE>
entitled to do so only after obtaining a certificate on a form provided by this
cooperative and signed by the manager of the line elevator, feed mill or other
facility patronized by such Individual Member, certifying that such Individual
Member is a member of this cooperative. A Defined Member who intends to exercise
such Defined Member's vote individually hereunder shall be entitled to do so
after giving notice of such intent to this cooperative on a form provided by
this cooperative. Such certificate or notice (as the case may be) shall be sent
to this cooperative by such member or manager no less than ten (10) days or more
before the annual or special meeting concerned, provided that in the discretion
of the Credentials Committee, any certificates or notices (as the case may be)
sent thereafter may also be honored.
(c) PATRONS' ASSOCIATIONS. The delegates representing Individual
Members and Defined Members (as provided herein) grouped in each Patrons'
Association shall be entitled (in the aggregate) to the number of permitted
votes designated by the Board of Directors of this cooperative, which shall be
determined based on the following formula:
(i) One (1) vote for each Individual Member and Defined
Member grouped in such Patrons' Association (minus one vote for any
Individual Member or Defined Member in such Patrons' Association who
chooses to cast a vote personally, as hereinbefore provided); plus
(ii) One (1) vote for each $10,000, or major fraction
thereof, of the average annual business transacted with this
cooperative (combined sales to and purchases from) by the Individual
Members and Defined Members grouped in such Patrons' Associations,
during the three years ending on the last day of this cooperative's
fiscal year last ended prior to the meeting; plus
(iii) One (1) vote for each $1,000, or major fraction
thereof, of equity issued by this cooperative as a patronage refund
and standing on the books of this cooperative in the name of the
Individual Members and Defined Members grouped in such Patrons'
Associations, calculated on an aggregate basis.
For purposes of Section 3(c)(iii), the face amount of any Equity Participation
Units issued to and held by an Individual Member or a Defined Member shall be
included in the determination of the amount of equity held by such members. In
determining the number of permitted votes of a Patron Association, the Board of
Directors of this cooperative shall have the authority to establish reasonable
procedures to address special circumstances. For example, procedures to
annualize the average annual business of Individual Members and Defined Members
having less than three full years of business included in the averaging period
and procedures to equitably measure the business transacted by Individual
Members and Defined Members that patronized entities that were acquired or
merged with this cooperative within the averaging period. The Board of Directors
of this cooperative also may require such supporting information from or
relating to the Individual Members and Defined Members grouped in Patrons'
Associations as it deems necessary or appropriate to determine the number of
permitted votes of the Patrons' Associations hereunder.
<PAGE>
The Individual Members and Defined Members grouped in each Patrons' Association
shall be represented at members' meetings of this cooperative by elected
delegates, which delegates shall exercise the voting rights of the Individual
Members and Defined Members grouped in such Patrons' Association at such
meetings as hereinafter provided. Such delegates and their alternates shall be
elected on a one member/one vote basis by the Individual Members and the Defined
Members grouped in the Patrons' Association, at an annual meeting of such
Patrons' Association held following reasonable notice, and pursuant to such
other procedures as the Board of Directors of this cooperative may establish
from time to time. In no instance shall managers or other employees of this
cooperative appoint such delegates or alternates. Such delegates shall exercise
the same powers at such members' meetings as the delegates of Cooperative
Association Members may exercise.
SECTION 4 - MANNER OF VOTING. At annual and special meetings of
members of this cooperative, the designated number of permitted votes of members
as hereinabove provided shall be cast in the following manner:
(a) Each Individual Member and each Defined Member who is certified
or has provided notice to vote individually as further provided in these Bylaws
shall be entitled to cast such Member's own vote in person.
(b) Each Cooperative Association Member and the Individual Members
and Defined Members grouped in each Patrons' Association shall cast its
designated number of permitted votes through duly selected delegates (or their
duly selected alternates). The maximum number of delegates that may represent a
Cooperative Association Member or the Individual Members and Defined Members
grouped in a Patrons' Association at members' meetings, and the maximum number
of votes that each delegate may carry at such meetings, shall be as authorized
by the Board of Directors. The aggregate number of permitted votes that the
delegates of a Patrons' Associations are entitled to cast in all proceedings of
a meeting shall be reduced by the number of Individual Members and Defined
Members grouped with the Patrons' Association who have registered in person at
such meeting (unless such in-person members have already been taken into account
in the calculation of the voting power of the Patrons' Association).
(c) There shall be no mail voting except in cases where, in the
notice of the meeting, the Board of Directors of this cooperative shall have
submitted a specific issue or issues for a mail vote. In such case, a mail vote
cast by a Cooperative Association Member shall be binding upon the delegates
representing such Cooperative Association Member at the meeting (if any) on the
issue or issues so submitted. The voting power of a Cooperative Association
Member may not be split between mail voting and voting in person by delegates of
the Cooperative Association Member upon an issue or issues submitted for mail
vote. No combination of mail voting and voting in person by delegates of the
same Patrons' Association upon an issue or issues submitted for mail vote shall
be permitted. An attempt by a Cooperative Association Member or delegates of a
Patrons' Association to do such splitting or combining shall be treated as
having the effect of not voting on the issue or issues so submitted. Delegates
of Cooperative Association Members and Patrons' Associations which have not cast
a vote by mail upon the issue or issues submitted for mail vote shall cast the
vote or votes of the respective members they are
<PAGE>
representing upon said issue or issues in the manner prescribed by the chairman
of said meeting. Nothing in this section shall, however, prevent an annual or
special meeting of this cooperative from considering and acting upon issues in
addition to those submitted for mail vote, to the extent permitted by law; and
such issues shall be voted upon by delegates (and alternates) in the manner
hereinabove provided for other than mail votes.
(d) The mail vote of a Cooperative Association Member shall be cast
as determined by the Board of Directors of the Cooperative Association Member
and the voting power of such mail vote may not be split between yes and no
votes, unless expressly authorized by the Board of Directors of this cooperative
in the notice of the meeting which provides for the mail vote. The mail ballot
used by a Cooperative Association Member to cast its vote shall contain the
certificate of the secretary or the president of the Cooperative Association
Member that the vote shown thereon is so cast by the direction of said member's
Board of Directors and stating such supporting information as may be prescribed
by the Board of Directors of this cooperative.
(e) The mail vote cast by each Patrons' Association shall be
determined by the delegate or delegates last certified by the Patrons'
Association to this cooperative as provided in these Bylaws. The mail ballot
used by the delegate or delegates of a Patrons' Association to cast its mail
vote shall contain the certificate of the delegate or delegates that the vote
shown thereon is so cast, and stating such supporting information as may be
prescribed by the Board of Directors of this cooperative.
(f) The mail vote cast by each Individual Member or Defined Member
of this cooperative shall be on such form of ballot as may be prescribed by the
Board of Directors of this cooperative, and shall include (i) in the case of
Individual Members, the certificate that such member is a member of this
cooperative; and (ii) in the case of a Defined Member, the notice of intent to
vote individually, in either case as provided for in Section 3(b) of this
Article II.
(g) There shall be no voting by proxy or under power of attorney at
any annual or special meeting of this cooperative.
SECTION 5 - QUORUM AND REGISTRATION.
(a) A quorum necessary to the transaction of business at any annual
or special meeting of this cooperative shall be at least ten percent (10%) of
the total number of members in this cooperative represented in person by
delegates or by mail votes when the members do not exceed five hundred (500) in
number. If the members of this cooperative exceed five hundred (500) in number,
fifty (50) members of this cooperative represented in person by delegates (or
alternates) or by mail votes shall constitute a quorum. In determining a quorum
at any meeting, on a question submitted to a vote by mail, as hereinabove
provided, members represented in person by delegates (or alternates) or
represented by mail vote shall be counted. The fact of the attendance of a
sufficient number of members to constitute a quorum shall be established by a
registration of the members of this cooperative present at such meeting, which
registration shall
<PAGE>
be verified by the Chairman and Secretary of this cooperative and shall be
reported in the minutes of the meeting.
(b) Registration of Individual Members and Defined Members and of
delegates (or alternates) of Cooperative Association Members and Patrons'
Associations shall close at such hour on the day for which an annual or special
meeting is called (or in case it is called for a series of days, at such hour on
the first day thereof) as the Board of Directors of this cooperative shall
determine and specify in the Notice of Meeting, or at such later time to which
the close of registration may be extended by majority vote of those registered
before said initial time for closing of registration. Persons otherwise eligible
to vote, either as Individual Members, Defined Members or as delegates or
alternates, but not registered as in attendance at or before said time (original
or as extended), shall have no right to vote in any of the affairs of the
meeting (including, but not limited to, election of Directors).
(c) Each Cooperative Association Member and Patrons' Association
shall certify its delegates and alternates to this cooperative, in the manner
prescribed by the Board of Directors of this cooperative. The delegates (and
alternates) so certified, and found by this cooperative to be eligible to be
seated at the meeting or meetings of this cooperative, shall represent their
Cooperative Association Members or Patrons' Associations, as the case may be, to
the extent and in the manner provided in this Article. In matters of which
advance notice has been given, such delegates and alternates shall endeavor to
inform themselves as to the views of the membership of the Cooperative
Association Member or Patrons' Association which they represent.
(d) No individual shall serve as a delegate for more than one member
of this cooperative. Delegates and alternates representing Patrons' Associations
must be an Individual Member or Defined Member grouped with such Patrons'
Association. The Board of Directors may establish such additional eligibility
criteria, procedures, standards and structure with respect to the delegate
system of this cooperative as it from time to time deems advisable. No employee
of this cooperative shall serve as a delegate or alternate at any meeting of
this cooperative; if any such person shall be certified as a delegate or
alternate of a member, such person shall nevertheless not be seated as such.
(e) Duly selected delegates and alternates certified in the manner
described above shall serve in such capacity in accordance with these Bylaws
until such delegate's (or alternate's) successor is selected and qualified, but
in no event shall such certificate of selection be valid for more than two
years; provided, further, that the election or appointment of any delegate or
alternate may be revoked by the Cooperative Association Member that a delegate
or alternate represents (effective as of the date this cooperative receives
notice of such revocation) or, in the case of delegates or alternates
representing Patrons' Associations, the election shall terminate in the event
the delegate or alternate ceases to be an Individual Member or Defined Member of
this cooperative.
(f) A cooperative association which conducts business with this
cooperative on a patronage basis as a nonmember patron in the manner prescribed
by these Bylaws may have a
<PAGE>
representative present at a meeting of the members of this cooperative only as
authorized by the Board of Directors of this cooperative. A representative so
authorized shall have no voting rights and shall only be recognized to speak at
the discretion of the Chairman of the meeting.
(g) Nothing herein shall prevent Individual Members or Defined
Members of this cooperative or of Cooperative Association Members, who are not
delegates to the annual meetings or special meetings of this cooperative from
serving as chairperson of a regional meeting or as chairperson or member of a
committee.
(h) Each member of the Board of Directors of this cooperative shall
have the right to speak on any subject during annual or special meetings of this
cooperative.
ARTICLE III.
DIRECTORS
SECTION 1 - BOARD OF DIRECTORS. The business and affairs of this
cooperative shall be governed by the Board of Directors of this cooperative.
Until the annual meeting of the members of this cooperative to be held in 1999,
the Board of Directors shall consist of 27 directors, which shall be comprised
of the 14 individuals serving on the Harvest States Cooperatives Board and the
13 individuals serving on the CENEX Board at the effective time of the
combination, designated in the Articles of Incorporation and these Bylaws as the
"transition Board of Directors." Commencing upon the election and qualification
of directors at the annual meeting of members of this cooperative following the
close of the fiscal year of this cooperative ending in calendar year 1999
(hereinafter referred to as the "1999 annual meeting"), the Board of Directors
shall consist of seventeen (17) directors, who shall be elected at the 1999
annual meeting and each subsequent annual meeting of the members as more fully
provided herein.
SECTION 2 - DIRECTOR QUALIFICATIONS. The qualifications for the
office of director shall be as follows:
(a) At the time of the election, the individual must be less than
the age of 68.
(b) The individual must be a member of this cooperative or a member
of a Cooperative Association Member.
(c) The individual must reside in the Region from which he or she is
to be elected.
(d) The individual must be an active farmer or rancher. For purposes
of this section, "active farmer or rancher" means an individual whose primary
occupation is that of a farmer or rancher.
(e) The definition of "farmer or rancher" shall not include anyone
who is a full-time employee of this cooperative, or of a Cooperative Association
Member.
<PAGE>
(f) The individual must currently be serving or shall have served at
least one full term as a director of a Cooperative Association Member of this
cooperative.
(g) The qualifications set forth in this Section 2 shall become
effective immediately upon the adoption of these Bylaws, except that the
qualifications in (f) above shall not apply to any individual serving as a
director of this cooperative on the date of said adoption.
SECTION 3 - TRANSITION BOARD OF DIRECTORS; 1999 ELECTIONS.
(a) In order to preserve continuity of governance of this
cooperative and the harmonious transition of the Board of Directors from 27
directors to 17 directors at the 1999 annual meeting, the terms of the directors
of the transition Board of Directors shall be staggered and the downsizing
accomplished through "runoff elections" at the 1999 annual meeting, as further
provided in this Section 3. One-third (or as nearly as possible) of the
directors shall be elected at each annual meeting of the members thereafter, in
the manner as provided in Section 4 of this Article III. The determination of
the staggered terms of the transition Board of Directors to achieve this result
shall be made in an impartial manner using any such fair and equitable method as
the transition Board of Directors may determine.
(b) The election of directors at the 1999 annual meeting (as
determined in accordance with paragraph (a) above) shall consist of "runoff
elections" or, in the event that fewer than six "runoff elections" are required
to accomplish the downsizing, additional open elections will be held to achieve
the requirement of staggered terms. Runoff elections shall be held in the manner
described in (c) below. "Open" elections for directors at the 1999 annual
meeting and the term of the directors elected in such open elections, shall be
for the term and held in the manner described in Section 4 of this Article III.
(c) With respect to runoff elections at the 1999 annual meeting,
members and delegates from each Region who are registered in accordance with
these Bylaws shall meet separately by Region for the purpose of electing the
directors of this cooperative from such Region involved in the elections. Runoff
elections shall be limited to eligible incumbent directors within a Region where
runoff elections are required. Where more than one director within a Region will
be elected by a runoff election at the 1999 annual meeting, each such runoff
election shall be designated a "Harvest States" runoff election or a "CENEX"
runoff election, as the case may be, and in such instance the eligible incumbent
directors for each such designated runoff election shall be limited to the
incumbent directors originally elected by the Harvest States members or CENEX
members, respectively, for such Region. Although such designations shall limit
the incumbent director participants in the runoff election, all members of this
cooperative within such Region shall be eligible to vote for such candidates in
the runoff election in the manner otherwise provided in these Bylaws for
director elections generally, without regard to prior membership.
(d) The term of the directors elected in "runoff elections" held at
the 1999 annual meeting shall be one (1), two (2), or three (3) years and until
their respective successors
<PAGE>
are elected and qualified, as shall be determined by the transition Board of
Directors to achieve the downsizing of the Board as contemplated by this
Section 3.
(e) If a director's position on the transition Board of Directors
becomes vacant, the remaining directors may fill the director's position until
the 1999 annual meeting. Any vacancy on the transition Board of Directors filled
by the remaining directors shall become a "runoff election" seat or an "open
election" seat at the 1999 annual meeting, as the transition Board of Directors
may determine with due regard to the considerations outlined in this Section 3.
SECTION 4 - ELECTION OF DIRECTORS.
(a) At the 1999 annual meeting and at each annual meeting of the
members thereafter (other than "runoff elections" in 1999 as previously
described), directors shall be elected to fill vacancies created by expired
terms. The term of office of such directors shall be three (3) years and until
their respective successors are elected and qualified.
(b) The nomination and election of directors of this cooperative
shall be by Region. The territory served by this cooperative shall be divided
into the following Regions, with the Board of Directors, effective at the 1999
annual meeting and thereafter, composed of the following number of directors
from each Region:
REGION NUMBER 1 - which shall include the State of Minnesota, and
shall be represented by five (5) persons who must be residents of Region
Number 1;
REGION NUMBER 2 - which shall include the States of Montana and
Wyoming, and shall be represented by one (1) person who must be a resident
of Region Number 2;
REGION NUMBER 3 - which shall include the State of North Dakota, and
shall be represented by (3) persons who must be residents of Region Number
3;
REGION NUMBER 4 - which shall include the State of South Dakota, and
shall be represented by two (2) persons who must be residents of Region
Number 4;
REGION NUMBER 5 - which shall include the States of Wisconsin,
Michigan and Illinois, and shall be represented by two (2) persons who
must be residents of Region Number 5;
REGION NUMBER 6 - which shall include the States of Alaska, Arizona,
California, Idaho, Oregon, Washington and Utah, and shall be represented
by two (2) persons who must be residents of Region Number 6;
REGION NUMBER 7 - which shall include the States of Iowa and
Missouri, and shall be represented by one (1) person who must be a
resident of Region Number 7; and
<PAGE>
REGION NUMBER 8 - which shall include the States of Colorado,
Nebraska, Kansas, Oklahoma and Texas, and shall be represented by one (1)
person who must be a resident of Region Number 8.
(c) From time to time, the Board of Directors shall review member
representation. Future redistricting plans shall be designed to maintain
equitable representation. Any redistricting plan shall be determined by using a
weighted formula based on sales/purchases, number of members, and equity by
Region. All future redistricting plans shall be subject to member approval at
either a special or annual meeting of the members of this cooperative.
(d) With respect to open elections at the 1999 annual meeting and at
each subsequent annual meeting of the members of this cooperative, Individual
Members, Defined Members, and delegates from each Region who are registered in
accordance with these Bylaws shall meet separately by Region for the purpose of
nominating and electing the directors of this cooperative from such Region. At
each such regional meeting, nominations for the election of directors shall be
made by the members or delegates of this cooperative and may be made by
balloting, nominating committee, petition of members or from the floor; provided
that nominations from the floor shall be requested in addition to nominations
made by petition or nominating committee. Before each annual meeting of the
members of this cooperative, the Board of Directors may appoint a nominating
committee to supervise the nominating procedure for election of directors, which
procedure shall be prescribed by the Board of Directors.
(e) When nominations have been closed, the Individual Members,
Defined Members and delegates at each regional meeting shall vote on each of the
nominees, and the director or directors from such Region shall be elected by a
majority of the votes cast at such regional meeting. The Board of Directors
shall have the power and authority to adopt a policy and procedure for assigning
to an existing Region those members who are not residents of any Region
established in Section 4(b) above. Such policy and procedure may be amended from
time to time at the discretion of the Board of Directors. Each such regional
election shall be binding upon the annual meeting and upon this cooperative,
without any ratification or right of rescission or veto by Individual Members or
Defined Members or delegates, or any combination thereof, of other Regions. A
temporary Chairman of each such regional meeting shall be selected by the
Chairman of this cooperative, to serve until a Chairman of such regional meeting
is elected by the Individual Members, Defined Members and delegates at such
regional meeting. Election of directors shall be by balloting when there are two
or more nominees for a position to be filled, or when there are more nominees
than there are positions to be filled.
SECTION 5 - VACANCIES. Subject to the provisions of Section 3 of
this Article III, each vacancy occurring on the Board of Directors may be filled
by the remaining directors until the next annual meeting of the members when the
members shall elect a director to serve for the unexpired term, provided that
vacancies on the Board created by any amendment of the Articles of Incorporation
or Bylaws shall first be filled at the annual meeting of the members next
following the adoption of such amendment unless otherwise provided in the
amendment.
<PAGE>
SECTION 6 - MEETINGS. The Board of Directors shall meet regularly at
such times and places as the Board may determine. Special meetings may be called
by the Chairman or any three directors. All meetings shall be held on such
notice as the Board may prescribe provided that any business may be transacted
at any meeting without specification of such business in the notice of such
meeting. Directors may participate in any such meeting by means of a conference
telephone conversation or other comparable method of communication by which all
persons participating in the meeting can hear and communicate with each other;
and for purposes of taking any action at the meeting, any such directors shall
be deemed present in person at the meeting.
SECTION 7 - QUORUM AND VOTING. A quorum shall consist of a majority
of the directors. A majority vote of the directors present shall decide all
questions except where a greater vote is required by the Articles of
Incorporation, by these Bylaws or by law.
SECTION 8 - ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the Board of Directors may be taken without a
meeting if all directors consent thereto in writing and the writing or writings
are held with the minutes or proceedings of the Board of Directors.
SECTION 9 - BORROWINGS. The Board of Directors shall have power to
authorize and approve the borrowing of money and the pledging and mortgaging of
any or all of the assets of this cooperative as security for the sums so
borrowed.
ARTICLE IV.
DUTIES OF DIRECTORS
SECTION 1 - GENERAL POWERS. The business and affairs of this
cooperative shall be governed by the Board of Directors of this cooperative. The
Board of Directors shall exercise all of the powers of this cooperative except
such as are by law, the Articles of Incorporation, or these Bylaws conferred
upon or reserved to the members. The Board of Directors shall adopt such
policies, rules, regulations, and actions not inconsistent with law, the
Articles of Incorporation, or these Bylaws, as it may deem advisable. The Board
of Directors may establish one or more than one committee having such powers and
authority as are delegated to it by the Board of Directors.
SECTION 2 - BONDS AND INSURANCE. The Board of Directors may require
the officers, agents, or employees charged by this cooperative with
responsibility for the custody of any of its funds or property to give adequate
bonds. Such bonds, unless cash security is given, shall be furnished by a
responsible bonding company and approved by the Board of Directors and the cost
thereof shall be paid by this cooperative. The Board of Directors shall provide
for the adequate insurance of the property of the cooperative, or property which
may be in the possession of this cooperative, or stored by it, and not otherwise
adequately insured, and in addition adequate insurance covering liability for
accidents to all employees and the public.
SECTION 3 - ACCOUNTING SYSTEM AND AUDIT. The Board of Directors
shall install and maintain an adequate system of accounts and records. At least
once in each year the books
<PAGE>
and accounts of this cooperative shall be audited and a review of such audit
shall be published annually, and a report of such audit shall in addition be
made at the next annual meeting of the members.
SECTION 4 - DEPOSITORY. The Board of Directors shall have power to
select one or more banks to act as depositories of the funds of this
cooperative, and to determine the manner of receiving, depositing, and
disbursing the funds of this cooperative, the form of checks, and the person or
persons by whom they shall be signed, with the power to change such banks and
the person or persons signing such checks and the form thereof at will.
ARTICLE V.
OFFICERS
SECTION 1 - ELECTION OF OFFICERS. Promptly following each annual
meeting of the members, the Board of Directors shall elect from its membership a
Chairman, one or more Vice Chairmen, a Secretary, a Treasurer, and such other
officers as it shall deem necessary. The Board of Directors shall also elect a
Chief Executive Officer, who need not be a director of this cooperative. Upon
the recommendation of the Chief Executive Officer, the Board of Directors may
elect a President and General Manager, a Chief Financial Officer, one or more
Vice Presidents (with such designations as recommended by the Chief Executive
Officer), Assistant Secretaries and Assistant Treasurers, and such additional
officers with such authority and duties as may be prescribed by the Board of
Directors upon the recommendation of the Chief Executive Officer, none of whom
need be a director of this cooperative. Other than the office of Chairman and
Vice Chairman, one person may hold one or more of the offices provided for
above, if eligible to hold each such office. If any vacancy shall occur among
the offices of Chairman, Vice Chairmen, Secretary or Treasurer, it shall be
filled by the Board of Directors at its next regular meeting following the
vacancy.
SECTION 2 - CHAIRMAN. The Chairman shall preside at all meetings of
the members and the Board of Directors. Except where the signature of the Chief
Executive Officer is required, the Chairman shall possess the same power as the
Chief Executive Officer to sign all certificates, contracts and other
instruments of this cooperative which may be authorized by the Board of
Directors.
SECTION 3 - VICE CHAIRMEN. In the absence or disability of the
Chairman, the Vice Chairmen, in the order designated by the Board of Directors,
shall perform the duties and exercise the powers of the Chairman. Each Vice
Chairman shall have such other duties as are assigned to such Vice Chairman from
time to time by the Board of Directors.
SECTION 4 - CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall be the chief executive officer of this cooperative, shall have general
supervision of the affairs of this cooperative, shall sign or countersign all
certificates, contracts or other instruments of this cooperative as authorized
by the Board of Directors, shall make reports to the Board of Directors and
members, shall recommend the officers of this cooperative to the Board of
Directors for
<PAGE>
election (except the offices of Chairman, Vice Chairmen, Secretary or
Treasurer), and shall perform such other duties as are incident to the Chief
Executive Officer's office or are properly required by the Board of Directors.
In the event the office of President and General Manager is not filled, the
Chief Executive Officer shall also serve as the President of this cooperative
and may exercise the authority of the office of Chief Executive Officer in
either or both capacities.
SECTION 5 - PRESIDENT AND GENERAL MANAGER. The President and General
Manager shall report to the Chief Executive Officer of this cooperative, and
shall perform such duties as the Board of Directors may prescribe upon the
recommendation of the Chief Executive Officer. In the absence or disability of
the Chief Executive Officer, the President and General Manager shall perform the
duties and exercise the powers of the Chief Executive Officer.
SECTION 6 - VICE PRESIDENTS. In the absence or disability of the
President and General Manager, the Vice Presidents, in the order designated by
the Board of Directors, shall perform the duties and exercise the powers of the
President. Each Vice President shall have such other duties as are assigned to
such Vice President from time to time by the Chief Executive Officer or the
President and General Manager.
SECTION 7 - SECRETARY. The Secretary shall keep complete minutes of
each meeting of the members and of the Board of Directors, and shall sign with
Chairman or the Chief Executive Officer all notes, conveyances and encumbrances
of real estate, capital securities and instruments requiring the corporate seal;
provided that the Secretary, in writing, may authorize any other officer or
employee to execute or sign the Secretary's name to any or all such instruments.
The Secretary shall keep a record of all business of this cooperative, prepare
and submit to the annual meeting of the members a report of the previous fiscal
year's business, and give all notice as required by law. The Secretary shall
perform such other duties as may be required by the Board of Directors. The
Board of Directors may delegate, or authorize the Secretary to delegate, to any
other officer or employee, under the supervision of the Secretary, all or any of
the duties enumerated in this section.
SECTION 8 - TREASURER. The Treasurer shall supervise the safekeeping
of all funds and property of this cooperative, supervise the books and records
of all financial transactions of this cooperative, and perform such other duties
as may be required by the Board of Directors. The Board of Directors may
delegate, or authorize the Treasurer to delegate, to any other officer or
employee, under the supervision of the Treasurer, all or any of the duties
enumerated in this section.
ARTICLE VI.
INDEMNIFICATION AND INSURANCE
SECTION 1 - INDEMNIFICATION. This cooperative shall indemnify each
person who is or was a director, officer, manager, employee, or agent of this
cooperative, and any person serving at the request of this cooperative as a
director, officer, manager, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses,
including attorneys' fees, judgments, fines, and amounts paid in settlement
actually and reasonably
<PAGE>
incurred to the fullest extent to which such directors, officers, managers,
employees or agents of an cooperative may be indemnified under the law of the
State of Minnesota or any amendments thereto or substitutions therefor.
SECTION 2 - INSURANCE. This cooperative shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, manager, employee, or agent of this cooperative, or is or was serving
at the request of this cooperative as a director, officer, manager, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against any liability asserted against that person and incurred by
that person in any such capacity.
ARTICLE VII.
METHOD OF OPERATION - PATRONAGE REFUNDS
SECTION 1 - COOPERATIVE OPERATION. This cooperative shall be
operated upon the cooperative basis in carrying out its business within the
scope of the powers and purposes defined in the Articles of Incorporation.
Accordingly, the net income of this cooperative in excess of amounts credited by
the Board of Directors to Capital Reserves and amounts of dividends, if any,
paid with respect to equity capital shall be accounted for and distributed
annually on the basis of allocation units as provided in this Article VII. In
determining the net income or net loss of this cooperative or its allocation
units, there shall be taken into account this cooperative's share of the net
income or net loss of any unincorporated entity in which it owns an equity
interest, patronage dividends distributed by other cooperatives of which it is a
patron and, to the extent determined by the Board of Directors, its share of the
undistributed net income or net loss of any corporation in which it owns an
equity interest.
Each transaction between this cooperative and each member shall be
subject to and shall include as a part of its terms each provision of the
Articles of Incorporation and Bylaws of this cooperative, whether or not the
same be expressly referred to in said transaction. Each member for whom this
cooperative markets or procures goods or services shall be entitled to the net
income arising out of said transaction as provided in this Article VII unless
such member and this cooperative have expressly agreed to conduct said business
on a nonpatronage basis. No nonmember for whom this cooperative markets or
procures goods or services shall be entitled to the net income arising out of
said transactions as provided in this Article VII unless this cooperative agrees
to conduct said business on a patronage basis.
SECTION 2 - PATRONS; PATRONAGE BUSINESS; NONPATRONAGE BUSINESS. As
used in this Article VII, the following definitions shall apply:
(a) The term "patron" shall refer to any member or nonmember
with respect to business conducted with this cooperative on a patronage basis in
accordance with Section 1 of this Article VII.
<PAGE>
(b) The term "patronage business" shall refer to business done
by this cooperative with or for patrons.
(c) The term "nonpatronage business" shall refer to business
done by this cooperative that does not constitute "patronage business."
SECTION 3 - ESTABLISHMENT OF ALLOCATION UNITS. Allocation units
shall be established by the Board of Directors on a reasonable and equitable
basis and they may be functional, divisional, departmental, geographic, or
otherwise; provided, that each Defined Business Unit shall be accounted for as a
separate allocation unit. The Board of Directors shall adopt such reasonable and
equitable accounting procedures as will, in the Board's judgment, equitably
allocate among such allocation units this cooperative's income, gains, expenses
and losses and, to the extent provided in Section 1 of this Article VII,
patronage dividends received by this cooperative and its share of income, gain,
loss and deduction of other entities in which it owns an interest.
SECTION 4 - DETERMINATION OF THE PATRONAGE INCOME OR LOSS OF AN
ALLOCATION UNIT. The net income or net loss of an allocation unit from patronage
business for each fiscal year shall be the sum of (1) the gross revenues
directly attributable to goods or services marketed or procured for patrons of
such allocation unit, plus (2) an equitably apportioned share of other items of
income or gain attributable to this cooperative's patronage business, less (3)
all expenses and costs of goods or services directly attributable to goods or
services marketed or procured for patrons of such allocation unit, less (4) an
equitably apportioned share of all other expenses or losses attributable to this
cooperative's patronage business, dividends on equity capital and distributable
net income from patronage business that is credited to the Capital Reserve
pursuant to Section 8(c) of this Article VII. The foregoing amounts shall be
determined in accordance with the accounting treatment used by the cooperative
in calculating its taxable income for federal income tax purposes; provided,
however, that the Board of Directors may prospectively adopt a reasonable
alternative method. Expenses and cost of goods or services shall include without
limitation such amounts of depreciation, cost depletion and amortization as may
be appropriate, any unit retentions provided in Section 10 of this Article VII,
amounts incurred for the promotion and encouragement of cooperative
organization, and taxes other than federal income taxes. Such net income or net
loss shall be subject to adjustment as provided in Sections 6 and 9(b) of this
Article VII relating to losses.
SECTION 5 - ALLOCATION OF PATRONAGE INCOME WITHIN ALLOCATION UNITS.
The net income of an allocation unit from patronage business for each fiscal
year, less any amounts thereof that are otherwise allocated in dissolution
pursuant to Article IX, shall be allocated among the patrons of such allocation
unit in the ratio that the quantity or value of the business done with or for
each such patron bears to the quantity or value of the business done with or for
all patrons of such allocation unit. The Board of Directors shall reasonably and
equitably determine whether allocations within any allocation unit shall be made
on the basis of quantity or value.
<PAGE>
SECTION 6 - TREATMENT OF PATRONAGE LOSSES OF AN ALLOCATION UNIT.
(a) METHODS FOR HANDLING PATRONAGE LOSSES. If an allocation unit
incurs a net loss in any fiscal year from patronage business, this cooperative
may take one or more of the following actions:
(i) Offset all or part of such net loss against the net
income of other allocation units for such fiscal year to the extent
allowed by law; provided, however, that the net income or net loss
of a Defined Business Unit shall not be offset by the net loss of
nor netted against the net income of other allocation units;
(ii) Establish accounts payable by patrons of the
allocation unit that incurs the net loss that may be satisfied out
of any future amounts that may become payable by this cooperative to
each such patron;
(iii) Carry all or part of the loss forward to be
charged against future net income of the allocation unit that incurs
the loss;
(iv) Offset all or part of such net loss against the
Capital Reserve;
(v) Cancel outstanding Patrons' Equities; provided,
however, that the net loss of a Defined Business Unit shall not be
applied in cancellation of Patrons' Equities of patrons of other
allocation units and net losses of other allocation units may not be
applied in cancellation of Patrons' Equities of patrons of Defined
Business Units;
(b) ALLOCATION OF NET LOSS AMONG PATRONS OF LOSS UNIT. Any
cancellation of equities and/or establishment of accounts payable pursuant to
this Section 6 shall be made among the patrons of an allocation unit in a manner
consistent with the allocation of net income of such allocation unit.
(c) RESTORATION OF NET LOSS OUT OF FUTURE NET INCOME. The future net
income of an allocation unit that incurs a net loss may be reduced by part or
all of such net loss that was offset against the Capital Reserve, Patrons'
Equities of patrons of another allocation unit or against the net income of
another allocation unit and may be used to restore the Capital Reserve, restore
such Patrons' Equities or to increase the future net income of such other
allocation unit; provided that reasonable notice of the intent to do so is given
to the patrons of the loss unit.
(d) BOARD DISCRETION. The provisions of this Section 6 shall be
implemented by the Board of Directors, having due consideration for all of the
circumstances which caused the net loss, in a manner that it determines is both
equitable and in the overall best interest of this cooperative.
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(e) NO ASSESSMENTS AGAINST MEMBERS OR NONMEMBER PATRONS. There shall
be no right of assessment against members or nonmember patrons for the purpose
of restoring impairments to capital caused by net losses.
SECTION 7 - DISTRIBUTION OF NET INCOME.
(a) PATRONAGE REFUNDS. The net income allocated to a patron pursuant
to Sections 5 and 9 of this Article VII shall be distributed annually or more
often to such patron as a patronage refund; provided, however, that no
distribution need be made where the amount otherwise to be distributed to a
patron is less than a de minimus amount that may be established from time to
time by the Board of Directors.
(b) FORM OF PATRONAGE REFUNDS. Patronage refunds shall be
distributed in cash, allocated patronage equities, revolving fund certificates,
securities of this cooperative, other securities, or any combination thereof
designated by the Board of Directors (all such patronage refunds referred to
collectively herein as "Patrons' Equities), including, without limitation, the
following instruments:
(i) CAPITAL EQUITY CERTIFICATES, in one or more than one
class or series, in such designations or denominations, and with
such relative rights, preferences, privileges and limitations as may
be fixed by the Board of Directors, and bearing no interest,
dividend or other annual payment.
(ii) CERTIFICATES OF INDEBTEDNESS in one or more than
one class or series, in such designations or denominations, and with
such relative rights, preferences, privileges and limitations as may
be fixed by the Board of Directors, and bearing such maturity and
rate of interest, if any, as may be fixed by the Board of Directors.
Such certificates shall be callable for payment in cash or other
assets at such times as may be determined by the Board of Directors.
(iii) NON-PATRONAGE EARNINGS CERTIFICATES, in one or
more than one class or series, in such designations or
denominations, and with such relative rights, preferences,
privileges and limitations as may be fixed by the Board of
Directors, with no maturity date, and bearing no interest, dividend
or other annual payment. Non-Patronage Earnings Certificates may be
distributed only to members and to nonmember patrons as part of the
allocation and distribution of nonpatronage income. Such
certificates shall be callable for payment in cash or other assets
at such times as may be determined by the Board of Directors.
(iv) PREFERRED CAPITAL CERTIFICATES in one or more than
one class or series, in such designations or denominations, and with
such relative rights, preferences, privileges and limitations as may
be fixed by the Board of Directors, and bearing no interest,
dividend or other annual payment.
<PAGE>
(c) WRITTEN NOTICES OF ALLOCATION. The noncash portion of a
patronage refund distribution that is attributable to patronage business shall
constitute a written notice of allocation as defined in 26 U.S.C. Section 1388
which shall be designated by the Board of Directors as a qualified written
notice of allocation, as a nonqualifed written notice of allocation or any
combination thereof as provided in said section.
(d) NO VOTING RIGHTS. Patrons' Equities shall not entitle the
holders thereof to any voting or other rights to participate in the affairs of
this cooperative (which rights are reserved solely for the members of this
cooperative), provided that Patrons' Equities held by members of this
cooperative shall be a factor in determining the voting power of such members as
more particularly provided in these Bylaws.
(e) TRANSFER RESTRICTION. Patrons' Equities may only be transferred
with the consent and approval of the Board of Directors, and by such instrument
of transfer as may be required or approved by this cooperative.
(f) BOARD AUTHORITY TO ALLOW CONVERSION. The Board of Directors of
this cooperative also shall have the authority to allow conversion of Patrons'
Equities into Equity Participation Units, Preferred Equities or such other debt
and/or equity instruments of this cooperative on such terms as shall be
established by the Board of Directors.
(g) REVOLVEMENT DISCRETIONARY. No person shall have any right
whatsoever to require the retirement or redemption of any Patrons' Equities
except in accordance with their term, or of any allocated capital reserve. Such
redemption or retirement is solely within the discretion and on such terms as
determined from time to time by the Board of Directors of this cooperative.
SECTION 8 - CAPITAL RESERVE. The Board of Directors shall cause to
be created a Capital Reserve and, except as otherwise provided in Section 9 of
this Article VII, shall annually add to the Capital Reserve the sum of the
following amounts:
(a) The annual net income of this cooperative attributable to
nonpatronage business;
(b) Annual net income from patrons who are unidentified or to whom
the amount otherwise to be distributed is less than the de minimus amount
provided in Section 7(a) of this Article VII; and
(c) An amount not to exceed 10% of the distributable net income from
patronage business. The discretion to credit patronage income to a Capital
Reserve shall be reduced or eliminated with respect to the net income of any
period following the adoption of a Board resolution that irrevocably provides
for such reduction or elimination with respect to such period.
Federal income taxes shall be charged to the Capital Reserve.
<PAGE>
SECTION 9 - ALLOCATION AND DISTRIBUTION OF NONPATRONAGE INCOME AND
LOSS.
(a) NONPATRONAGE INCOME. The Board of Directors shall have the
discretion to allocate to allocation units amounts that are otherwise to be
added to the Capital Reserve pursuant to Section 8(a) of this Article VII. Such
allocation may be made on the basis of any reasonable and equitable method.
Amounts so allocated to allocation units shall be further allocated among the
patrons thereof on a patronage basis using such method as the Board of Directors
determines to be reasonable and equitable. Amounts so allocated shall be
distributed to patrons thereof in the form of cash, property, Non-Patronage
Earnings Certificates, or any combination thereof designated by the Board of
Directors. The Board of Directors may determine whether and to what extent
nonmember patrons may share in such distributions.
(b) NONPATRONAGE LOSS. If the cooperative incurs a net loss on its
nonpatronage business or if a net loss is incurred with respect to the
nonpatronage business of an allocation unit, such net loss generally shall be
chargeable against Capital Reserve unless and to the extent the Board of
Directors, having due consideration for the circumstances giving rise to such
net loss, determines that it is reasonable and equitable to allocate all or part
of such a net loss among allocation units generally or to a specific allocation
unit or units. Any such loss allocated to an allocation unit shall reduce such
unit's net income from patronage business to the extent thereof and the excess,
if any, shall be treated generally in accordance with Section 6(a)(ii), (iii)
and (v) of this Article VII. Notwithstanding the foregoing, a net loss incurred
by a Defined Business Unit with respect to nonpatronage business conducted by
such unit shall be borne entirely by such unit and no other net loss incurred on
nonpatronage business shall be allocated to a Defined Business Unit.
SECTION 10 - DEFINED BUSINESS UNIT RETENTIONS. This cooperative may
require from time to time, investment in its capital in addition to the
investments from retained patronage and Equity Participation Units. These
investments shall be direct capital investments from a retain on a per unit
basis for the products received by the cooperative from its Defined Members, and
the same may be determined on either a Qualified or a Nonqualified basis as
defined in Subchapter T of the United States Internal Revenue Code. The per unit
retention, if required, shall be made on products delivered, in the same amount
per unit and shall not become a part of the net annual income available for
patronage.
Each member, by continuing to be such, agrees to invest in the
capital of this cooperative. Such investment shall be accounted for separately
in a unit retention account set up on the books of the cooperative. All such
amounts, from the moment of receipt by this cooperative, are received and
retained with the understanding that they are furnished by members as capital.
This cooperative is obligated to account to each member in such manner that the
amount of per unit retains furnished by each member is annually credited to an
appropriate record to the per unit retains capital account of each member.
Within a reasonable time after the close of its fiscal year, this cooperative
shall notify each member of the amount of capital retains and credit it to the
member's account by reflection upon this cooperative's books.
<PAGE>
When the Board of Directors determines in its sole
discretion that this cooperative has sufficient working capital in the
applicable Defined Business Unit, unit retains may be called for payment at the
lesser of their stated or book value. Unit retains may be paid, redeemed, or
revolved in whole or in part at a time and manner determined by the Board of
Directors.
ARTICLE VIII.
CONSENT
SECTION 1 - CONSENT. Each individual or entity that hereafter
applies for and is accepted to membership in this cooperative and each member of
this cooperative as of the effective date of this bylaw who continues as a
member after such date shall, by such act alone, consent that the amount of any
distributions with respect to its patronage which are made in written notices of
allocation (as defined in 26 U.S.C. ss.1388), and which are received by the
member from this cooperative, will be taken into account by the member at their
stated dollar amounts in the manner provided in 26 U.S.C. ss.1385(a) in the
taxable year in which such written notices of allocation are received by the
member.
SECTION 2 - CONSENT NOTIFICATION TO MEMBERS AND PROSPECTIVE MEMBERS.
Written notification of the adoption of this Bylaw, a statement of its
significance and a copy of the provision shall be given separately to each
member and prospective member before becoming a member of this cooperative.
SECTION 3 - CONSENT OF NONMEMBER PATRONS. If this cooperative
obligates itself to do business with a nonmember on a patronage basis, such
nonmember must either: (a) agree in writing, prior to any transaction to be
conducted on a patronage basis, that the amount of any distributions with
respect to patronage which are made in written notices of allocation (as defined
in 26 U.S.C. ss.1388), and which are received by the nonmember patron from this
cooperative, will be taken into account by the nonmember patron at their stated
dollar amounts in the manner provided in 26 U.S.C. ss.1385(a) in the taxable
year in which such written notices of allocation are received by the nonmember
patron and further, that any revocation of such agreement will terminate this
cooperative's obligation to distribute patronage with respect to transactions
with such nonmember that occur after the close of this cooperative's fiscal year
in which the revocation is received; or (b) consent to take the stated dollar
amount of any written notice of allocation into account in the manner provided
in 26 U.S.C. ss.1385 by endorsing and cashing a qualified check as defined in
and within the time provided in 26 U.S.C. ss.1388(c)(2)(C); provided that
failure to so consent shall cause the written notice of allocation that
accompanies said check to be canceled with no further action on the part of this
cooperative.
ARTICLE IX.
MERGER OR CONSOLIDATION; DISSOLUTION
SECTION 1 - MERGER OR CONSOLIDATION. If the terms of a merger or
consolidation of which this cooperative is a party do not provide the members
and nonmember patrons of this cooperative with an economic interest in the
surviving entity that is substantially similar to the
<PAGE>
economic interest possessed by such members and nonmember patrons in this
cooperative immediately before such merger or consolidation, the value of the
consideration received shall be divided among them in the same manner as a
comparable amount of net liquidation proceeds would distributed pursuant to
Section 2 of this Article IX. This shall not be construed to prevent issuance of
differing forms of consideration to different groups of members and nonmember
patrons to the extent allowed by law.
SECTION 2 - LIQUIDATION, DISSOLUTION AND WINDING-UP. Subject to the
Articles of Incorporation, in the event of any liquidation, dissolution or
winding up of the affairs of this cooperative, whether voluntary or involuntary,
equity capital shall be distributed to the holders thereof as follows: first to
payment of the face amount (par value) of all Preferred Equities whose priority
was so established upon the issuance of such Preferred Equities, second to
payment of the face amount (par value) of all Equity Participation Units and all
Preferred Capital Certificates, third to payment of the face amount (par value)
of all Capital Equity Certificates and other outstanding equities (other than
Non-Patronage Earnings Certificates), and fourth to payment of the face amount
(par value) of Non-Patronage Earnings Certificates; provided, however, that
assets held at such time by any Defined Business Unit shall first be used to
redeem the Equity Participation Units and Preferred Capital Certificates of the
Defined Business Unit on a pro rata basis. Any assets remaining after the
foregoing payments have been made shall be allocated among the allocation units
in such manner as the Board of Directors, having taken into consideration the
origin of such amounts, shall determine to be reasonable and equitable. Amounts
so allocated shall be paid to current and former patrons of each such allocation
unit in proportion to their patronage of such unit over such period as may be
determined to be equitable and practicable by the Board of Directors. Such
obligation to distribute shall be construed as a preexisting duty to distribute
any patronage sourced net gain realized in the winding up process to the maximum
extent allowable by law.
ARTICLE X.
SEAL
The Board of Directors may, by resolution, adopt, alter or abandon
the use of a corporate seal.
<PAGE>
ARTICLE XI.
AMENDMENTS
These Bylaws may be amended in accordance with the Minnesota
Cooperative Law, Minnesota Statutes Chapter 308A; upon the approval of a
majority of the votes cast in person or by mail vote at any annual or special
meeting of the members called in accordance with Section 1 of Article II of
these Bylaws; provided, however, in the event the Board of Directors of this
cooperative declares, by resolution adopted by a majority of the Board of
Directors present and voting, that the amendment involves or is related to a
hostile take over, then the amendment may be adopted only upon the approval of
eighty percent (80%) of the total voting power of the members of this
cooperative, whether or not present and/or voting on the amendment; and provided
further that notice of such amendment shall have been given in accordance with
Section 2 of Article II of these Bylaws to the members in or with the notice of
such meeting.
EXHIBIT 16
June 10, 1998
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, Northwest
Washington, DC 20549
Dear Sirs/Madams:
We have read and agree with the comments in the second sentence of the first
paragraph and in the second paragraph in Item 4 of Form 8-K of Harvest States
Cooperatives dated June 10, 1998. We have no basis for agreeing or disagreeing
with the comments in the other sentences in the first paragraph and in the third
paragraph in Item 4.
Yours truly,
Deloitte & Touche LLP
