RESOLUTIONS
of the
BOARD OF DIRECTORS
of
HARVEST STATES COOPERATIVES
---
CREATING
the
OILSEED PROCESSING AND REFINING
DEFINED BUSINESS UNIT
and
EQUITY PARTICIPATION UNITS (PROCESSING AND REFINING)
RESOLVED, pursuant to the authority conferred by the Amended
and Restated Articles of Incorporation and the Amended and Restated Bylaws of
the Association, as follows:
Section 1. There is hereby created, as a separate defined
business unit of the Association, the Oilseed Processing and Refining Defined
Business Unit (the "Processing and Refining Business Unit") for the purpose of
purchasing soybeans and crude soybean oil and the processing and sale thereof
into meal, flour, oil and various byproducts to carry on the operations of the
Processing and Refining Division.
Section 2. The Processing and Refining Business Unit shall be
created effective at the close of business on May 31, 1997, and on that date
there shall be allocated to the Processing and Refining Business Unit the assets
and liabilities, including commitments, contingencies and obligations,
appropriately belonging to the Processing and Refining Division. The Association
shall withdraw sufficient cash from the Processing and Refining Business Unit to
bring its net worth to $53,400,000 (representing its equity at May 31, 1996).
Section 3. There is hereby created an issue of up to
15,300,000 Equity Participation Units (Processing and Refining) (the "Units")
having the rights, preferences and privileges set forth herein to be sold to
Defined Members of the Processing and Refining Business Unit at a price of $4.00
per Unit in cash or partially in cash and partially upon conversion of
outstanding Capital Equity Certificates. Units may be purchased and held only by
Defined Members, who shall be either persons actually engaged in the production
of agricultural products or associations of producers of agricultural products.
The Association shall be deemed to hold Equity Participation Units equal to the
capacity of the Processing and Refining Business Unit not held by Defined
Members.
Section 4. Prior to the sale of any Unit to any person, such
person shall enter into a Member Marketing Agreement in substantially the form
of Exhibit 1 hereto, which gives the right and obligation to such person to
deliver the number of bushels of soybeans as shall equal the number of Units to
be purchased by such Defined Member.
Section 5. With the approval of the Board of Directors, Units
may be transferred only to other Members of the Association who enter into a
Member Marketing Agreement equal to the number of Units being transferred. No
producer may purchase Units representing more than such producer's current
anticipated annual production of soybeans. No holder of a Unit may hold fewer
than 1,500 Units. No one Defined Member may own more than 1% of the outstanding
capacity of the Processing and Refining Business Unit. The officers of the
Association are authorized to adopt processes, regulations and forms with
respect to the transfer of Units.
Section 6. Revenues from the sale of products of the
Processing and Refining Business Unit shall be credited to the Processing and
Refining Business Unit, and all direct expenses incurred by the Processing and
Refining Business Unit shall be charged against the Processing and Refining
Business Unit. Corporate, general and administrative expenses of the Association
shall be allocated to the Processing and Refining Business Unit in a reasonable
manner based on the utilization by the Processing and Refining Business Unit.
Intracompany accounts shall be established for the advancements to, and the loan
of funds by, the Processing and Refining Business Unit, with interest thereon
imputed at prevailing rates. Income taxes shall be allocated to the Processing
and Refining Business Unit as if it were a separate taxpayer. The Processing and
Refining Business Unit shall perform and be responsible for commitments,
contingencies and obligations allocated to the Processing and Refining Business
Unit.
Section 7. Patronage sourced income from the operations of the
Processing and Refining Business Unit, excluding patronage sourced income from
the refining of crude oil purchased from others and excluding patronage sourced
income from Ventura Foods, will be allocated by the Association as patronage
refunds based on the total amount of soybeans processed, giving effect to Units
held and Units deemed to be held by the Association. As between holders of the
Units, patronage sourced income will be allocated to each Defined Member
proportionate to the number of bushels of soybeans delivered pursuant to the
Member Marketing Agreement. Defined Members may also receive, upon allocation by
the Board of Directors, nonpatronage income from operations of the Company,
including operations of the Processing and Refining Business Unit generating
nonpatronage income.
Section 8. With respect to each year, the total net income
from the Processing and Refining Business Unit will be withdrawn by the
Association from the Processing and Refining Business Unit, except to the extent
that patronage dividends are not paid in cash and are retained in the Processing
and Refining Business Unit as equity. The Association shall be responsible for
the allocation of net income arising from operations of the Processing and
Refining Business Unit between Defined Members and the remainder of the
Association's operations.
Section 9. Upon the acquisition by the Association from a
third party of any assets (whether by means of an acquisition of assets or
stock, merger, consolidation or otherwise) reasonably related to the Processing
and Refining Business Unit, such assets and related liabilities, including
commitments, contingencies and obligations, shall be allocated to the Processing
and Refining Business Unit and the aggregate cost or fair market value of such
assets and liabilities shall be paid by the Processing and Refining Business
Unit. Such allocation and determination of fair market value may be made by the
Board of Directors taking into account such matters as it and its advisers, if
any, deem relevant, and any such allocation and determination of fair market
value shall be final and binding for all purposes whatsoever.
Section 10. Upon any sale, transfer, assignment or other
disposition by the Association of any or all assets of the Processing and
Refining Business Unit (whether by means of a disposition of assets, merger,
consolidation, liquidation or otherwise), all proceeds (including non-cash
consideration received) or the fair market value from such disposition shall be
allocated to the Processing and Refining Business Unit. If an asset is allocated
to more than one Business Unit, the proceeds or the fair market value of the
disposition shall be allocated among all Business Units based upon their
respective interests in such assets. Such allocation and determination of fair
market value shall be made by the Board of Directors taking into account such
matters as the Board of Directors and its advisers, if any, deem relevant, and
any such allocation and determination of fair market value shall be final and
binding for all purposes whatsoever.
Section 11. The Board of Directors may from time to time
reallocate any asset from the Processing and Refining Business Unit to the
Association or any other Business Unit of the Association at fair market value.
Such determination of fair market value shall be made by the Board of Directors
taking into account such matters as the Board of Directors and its advisers, if
any, deem relevant, and any such allocation and determination of fair market
value shall be final and binding for all purposes whatsoever.
Section 12. The Association shall not enter into any agreement
by which the net patronage sourced earnings of the Processing and Refining
Business Unit shall be allocated to any person except to a person who owns or is
deemed to own Units proportionate to the patronage being so allocated.
Section 13. In connection with the merger, consolidation,
liquidation or sale of all or substantially all of the assets of the Association
as an entirety or upon the sale of all or substantially all of the assets of the
Processing and Refining Business Unit, all, but not less than all, Units of the
Processing and Refining Business Unit shall be redeemed at their original
purchase price of $4.00, provided that the Preferred Capital Certificates or
unit retains of the Processing and Refining Business Unit not previously paid
are also redeemed in connection therewith; that such payments include any pro
rata profit (or loss) associated with disposition of the assets of the
Processing and Refining Business Unit as though the assets, subject to the
liabilities, of the Processing and Refining Business Unit had been sold in
connection with such event at their fair market value; and that provision is
made for the allocation of patronage sourced income arising prior to such
transaction. Any determination of fair market value shall be made by the Board
of Directors taking into account such matters as the Board of Directors and its
advisers, if any, deem relevant. For purposes of this Section 13, sale of more
than 75% of the assets or earning power will be deemed "all or substantially
all" of the assets of the Company or the Processing and Refining Business Unit.
Section 14. The Board of Directors is authorized to establish
and designate one or more series of Preferred Capital Certificates of the
Association that may have a priority in payment over the Units and to fix (and
to increase and decrease) the amount, the designations, and the relative powers,
rights, preferences and limitations of such series.
Section 15. Defined Members who hold Units of the Processing
and Refining Business Unit shall have the right to elect a Defined Member Board
comprised of between five and ten individuals. The members of the Defined Member
Board must be either Defined Members or representatives of Defined Members and
in good standing and in full compliance with all delivery obligations with
respect to the Processing and Refining Business Unit; provided, however, no
employee of the Association may serve as a member of the Defined Member Board.
The initial Defined Member Board shall consist of five persons designated by the
Company's Board of Directors and shall hold such office until the Association's
1997 Annual Meeting and until their successors are duly elected and qualified.
Thereafter the Defined Member Board shall be elected by the Defined Members of
the Processing and Refining Business Unit on a one Defined Member/one vote
basis. The Chairperson shall be selected by and from the Association's Board of
Directors. Individuals serving on a Defined Member Board shall serve staggered
three-year terms, divided into classes as nearly equal in number as possible.
The terms of two members of the Defined Member Board elected at the 1997 Annual
Meeting shall expire in 2000, two in 1999 and one in 1998, to be determined by
lot. The Defined Member Board shall meet at least quarterly and shall be charged
with reflecting Defined Member concerns and providing a direct communication
mechanism to the Association's Board of Directors.
Section 16. Holders of Units shall have no voting rights
except as Members of the Association and as provided in Sections 15 and 21.
Section 17. The Board of Directors from time to time may
authorize the sale by the Association of Units deemed owned by the Association
for the account of the Association provided that sales shall be at fair market
value determined by the Board of Directors taking into account such matters as
the Board of Directors and its financial advisers, if any, deem relevant.
Section 18. The Association may, if authorized by the Board of
Directors, purchase Units at such price as it shall determine from time to time
for its own account, or for the account of the Processing and Refining Business
Unit. Units purchased for the account of the Association shall be deemed
outstanding Units of the Processing and Refining Business Unit. Units purchased
by the Processing and Refining Business Unit shall be cancelled and shall no
longer be deemed outstanding by the Processing and Refining Business Unit.
Section 19. The Board of Directors may authorize the creation,
issuance and sale of additional Equity Participation Units from time to time on
such terms and for such consideration as it shall deem appropriate. Any proceeds
from the sale of such additional Units shall be allocated to the Processing and
Refining Business Unit.
Section 20. Holders of Units shall have no preemptive rights
to subscribe for or purchase additional Units or any other securities issued by
the Processing and Refining Business Unit or the Association.
Section 21. The operations of the Processing and Refining
Business Unit shall be carried out by the Association through the Board of
Directors, officers and management of the Association. The capital assets of the
Processing and Refining Business Unit may be disposed of in the ordinary course
of business and the disposition of any substantial portion of the assets of the
Processing and Refining Business Unit as an entirety may be authorized by the
Board of Directors. The Board of Directors may determine to sell the assets and
operations of the Processing and Refining Business Unit or to abandon or shut
down the operations of the Processing and Refining Business Unit. Abandonment or
shutting down the operations of a Business Unit (other than on a temporary
basis) will be considered sale of all of the assets of the Business Unit.
Abandonment or shutting down the operations of a Business Unit (other than on a
temporary basis) will be considered sale of all of the assets of the Business
Unit.
Section 22. These resolutions may be amended from time to time
by the Board of Directors of the Association, except for Sections 6 through 13,
which may be amended only with the approval of a majority of Defined Members
owning Units not held or deemed held by the Association.