-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HitqWSsX33if9kr5osC15CzbOeFtim/cntSblxQtp3Qv5c/PNNIRU4M5+sNDr0MX kqOpMMU0U42Oz7OTzz7WQA== 0000897101-03-000012.txt : 20030114 0000897101-03-000012.hdr.sgml : 20030114 20030109165026 ACCESSION NUMBER: 0000897101-03-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20021130 FILED AS OF DATE: 20030109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENEX HARVEST STATES COOPERATIVES CENTRAL INDEX KEY: 0000823277 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-FARM PRODUCT RAW MATERIALS [5150] IRS NUMBER: 410251095 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-17865 FILM NUMBER: 03509452 BUSINESS ADDRESS: STREET 1: 5500 CENEX DRIVE CITY: INVER GROVE HEIGHTS STATE: MN ZIP: 55077 BUSINESS PHONE: 6129469433 MAIL ADDRESS: STREET 1: 5500 CENEX DRIVE CITY: INVER GROVE HEIGHTS STATE: MN ZIP: 55077 FORMER COMPANY: FORMER CONFORMED NAME: HARVEST STATES COOPERATIVES DATE OF NAME CHANGE: 19961212 10-Q 1 cenex026059_10q.txt CENEX HARVEST STATES COOPERATIVES FORM 10Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 10-Q ----------------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2002. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER 333-17865 ----------------- CENEX HARVEST STATES COOPERATIVES (Exact name of registrant as specified in its charter) MINNESOTA 41-0251095 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5500 CENEX DRIVE, (651) 451-5151 INVER GROVE HEIGHTS, MN 55077 (Registrant's telephone number (Address of principal executive offices including area code) and zip code) ----------------- Include by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES_X_ NO ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. (Number of shares outstanding at (Class) November 30, 2002) ------- -------------------------------- NONE NONE ================================================================================ INDEX PAGE NO. ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of November 30, 2002 (unaudited), August 31, 2002 and November 30, 2001 (unaudited) ....................... 2 Consolidated Statements of Operations for the three months ended November 30, 2002 and 2001 (unaudited) .................................. 3 Consolidated Statements of Cash Flows for the three months ended November 30, 2002 and 2001 (unaudited) .................................. 4 Notes to Consolidated Financial Statements (unaudited) .................. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................... 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk ...... 14 Item 4. Controls and Procedures ......................................... 14 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders ............. 15 Item 6. Exhibits and Reports on Form 8-K ................................ 15 SIGNATURE PAGE ........................................................... 16 SECTION 302 CERTIFICATIONS ............................................... 17 i PART I. FINANCIAL INFORMATION SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that may cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. These factors include those set forth in Exhibit 99.1, under the caption "Cautionary Statement" to this Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2002. 1 CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of the consolidated financial statements (unaudited). 2 CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED NOVEMBER 30, ----------------------------- 2002 2001 (DOLLARS IN THOUSANDS) ------------- ------------- REVENUES: Net sales .................................... $2,626,628 $1,871,952 Patronage dividends .......................... 166 721 Other revenues ............................... 35,089 32,076 ---------- ---------- 2,661,883 1,904,749 Cost of goods sold ............................ 2,562,794 1,804,364 Marketing, general and administrative ......... 43,148 42,898 ---------- ---------- OPERATING EARNINGS ............................ 55,941 57,487 Interest ...................................... 12,813 10,815 Equity income from investments ................ (8,165) (3,942) Minority interests ............................ 5,431 3,036 ---------- ---------- INCOME BEFORE INCOME TAXES .................... 45,862 47,578 INCOME TAXES .................................. 5,506 6,223 ---------- ---------- NET INCOME .................................... $ 40,356 $ 41,355 ========== ========== The accompanying notes are an integral part of the consolidated financial statements (unaudited). 3 CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

The accompanying notes are an integral part of the consolidated financial statements (unaudited). 4 CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS) NOTE 1. ACCOUNTING POLICIES The unaudited consolidated balance sheets as of November 30, 2002 and 2001, and the statements of operations and cash flows for the three months ended November 30, 2002 and 2001 reflect, in the opinion of management of Cenex Harvest States Cooperatives (the Company), all normal recurring adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods presented. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full fiscal year because of, among other things, the seasonal nature of the Company's businesses. The consolidated balance sheet data as of August 31, 2002 has been derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries and limited liability companies. The effects of all significant intercompany accounts and transactions have been eliminated. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended August 31, 2002, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 25, 2002. GOODWILL AND OTHER INTANGIBLE ASSETS The Company has $27.5 million of goodwill as of November 30, 2002, and during the three months then ended, the Company disposed of $0.4 million due to sales of related assets in the Energy segment. Intangible assets subject to amortization primarily include trademarks, tradenames, customer lists and non-compete agreements, and are amortized on a straight-line basis over the number of years that approximate their respective useful lives (ranging from 2 to 15 years). The gross carrying amount of these intangible assets is $43.1 million with total accumulated amortization of $8.5 million as of November 30, 2002. Intangible assets of $0.4 million were acquired during the three months ended November 30, 2002. Total amortization expense for intangible assets during the three-month period ended November 30, 2002 was approximately $1.2 million. The estimated amortization expense related to intangible assets subject to amortization for the next five years will approximate $4.0 million annually. RECENT ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company is in the process of finalizing its analysis of adopting this standard. The Company's Energy segment operates oil refineries and related pipelines for which the Company would be subject to Asset Retirement Obligations (ARO) if such assets were to be dismantled. The Company, however, expects to operate its refineries and related pipelines indefinitely. Since the time period to dismantle these assets is indeterminate, a corresponding ARO is not currently estimable and therefore has not been recorded. The Company continues to assess whether any other ARO's exist related to its remaining operations, however, based on available information to date, no other ARO's have been identified. As such, the Company believes that the effects of adopting this standard do not have a material effect on the Company. 5 NOTE 2. RECEIVABLES

NOTE 3. INVENTORIES

NOTE 4. INVESTMENTS The following provides summarized unaudited financial information for the Company's unconsolidated significant subsidiaries Ventura Foods, LLC and Agriliance, LLC, of which the Company has a 50% and 25% equity ownership, respectively, for the three-month periods as indicated below. VENTURA FOODS, LLC FOR THE THREE MONTHS ENDED NOVEMBER 30, ------------------------- 2002 2001 ----------- ----------- Net sales ............ $287,025 $258,400 Gross profit ......... 49,728 41,101 Net income ........... 20,791 15,244 AGRILIANCE, LLC FOR THE THREE MONTHS ENDED NOVEMBER 30, ------------------------- 2002 2001 ----------- ----------- Net sales ............ $ 592,730 $ 677,047 Gross profit ......... 48,522 45,904 Net income ........... (20,110) (21,152) NOTE 5. DEBT In October 2002, the Company entered into a private placement with several insurance companies for long-term debt in the amount of $175.0 million which was layered into two series. The first series of $115.0 million has an interest rate of 4.96% and will be repaid in equal semi-annual installments of approximately $8.8 million during the years 2007 through 2013. The second series of $60.0 million has an interest rate of 5.60% and will be repaid in equal semi-annual installments of approximately $4.6 million during fiscal years 2012 through 2018. NOTE 6 EQUITIES As of November 30, 2002 the Company had $9.5 million (9,454,874 shares) of 8% Preferred Stock outstanding, and expenses related to the issuance of the shares were $3.5 million. Sales of the preferred shares have been suspended, as the Company is in the process of registering a new offering as noted below. 6 The Board of Directors authorized the sale and issuance of up to 2,875,000 shares of 8% Cumulative Redeemable Preferred Stock at a price of $25.00 per share. The Company filed a registration statement on Form S-2 on December 17, 2002 with the Securities and Exchange Commission registering the preferred shares, however, the registration statement is not yet effective. NOTE 7. COMPREHENSIVE INCOME For the three months ended November 30, 2002 and 2001, total comprehensive income amounted to $34.6 million and $42.4 million, respectively. Accumulated other comprehensive loss on November 30, 2002, August 31, 2002 and November 30, 2001 was $57.7 million, $51.9 million and $0.9 million, respectively. NOTE 8. NON-CASH FINANCING ACTIVITIES During the three months ended November 30, 2002 and 2001 the Company accrued patronage dividends and equity retirements payable of $18.0 million and $20.7 million, respectively. NOTE 9. SEGMENT REPORTING Segments, which are based on products and services, include Agronomy, Energy, Country Operations, Grain Marketing and Processed Grains and Foods. Reconciling Amounts represent the elimination of intracompany sales between segments. Due to cost allocations and intersegment activity, management does not represent that these segments, if operated independently, would report the income before income taxes and other financial information as presented. 7 Segment information for the three months ended November 30, 2002 and 2001 is as follows:

NOTE 10. COMMITMENTS AND CONTINGENCIES The Company expects to incur capital expenditures related to the Environmental Protection Agency low sulfur fuel regulations required by 2006. These expenditures are expected to be approximately $387.0 million in total for the Company's Laurel, Montana and NCRA's McPherson, Kansas refineries over the next three years, of which $9.5 million has been spent so far at NCRA. It is expected that approximately 80% of the costs will be incurred at NCRA. The Company expects to fund the refinery expenditures with a combination of cash, future earnings and additional borrowings. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cenex Harvest States Cooperatives (CHS Cooperatives, CHS or the Company) is one of the nation's leading integrated agricultural companies. As a cooperative, the Company is owned by farmers, ranchers and their local cooperatives from the Great Lakes to the Pacific Northwest and from the Canadian border to Texas. CHS Cooperatives buys commodities from, and provides products and services to members and other customers. The Company provides a wide variety of products and services, from initial agricultural inputs such as fuels, farm supplies and crop nutrients, to agricultural outputs that include grains and oilseeds, grain and oilseed processing, and food products. The Company has five distinct business segments: Agronomy, Energy, Country Operations, Grain Marketing and Processed Grains and Foods. Summary data for each of these segments for the three months ended November 30, 2002 and 2001 is shown in Note 9. Many of the Company's businesses are highly seasonal. As a result, operating income will vary throughout the year, but overall revenues remain fairly constant, partly because the Company does not consolidate revenues in the Agronomy segment. Overall, the Company's income is generally lowest during the second fiscal quarter and highest during the third fiscal quarter. Certain business segments are subject to varying seasonal fluctuations. For example, Agronomy and Country Operations segments experience higher volumes and income during the spring planting season and in the fall, which corresponds to harvest. The Grain Marketing segment, as well, is somewhat subject to fluctuations in revenue and earnings based on producer harvests, world grain prices and demand. The Company's Energy segment generally experiences higher revenues and profitability in certain operating areas, such as refined products, in the summer when gasoline and diesel usage is highest. Other energy products, such as propane, typically experience higher revenues and profitability during the winter heating and crop drying seasons. While the Company's sales and operating earnings are derived from businesses and operations which are wholly-owned and majority-owned, a portion of business operations are conducted through companies in which the Company holds ownership interests of 50% or less and does not control the operations. The Company accounts for these investments primarily using the equity method of accounting, wherein CHS Cooperatives records as equity income from investments its proportionate share of income or loss reported by the entity, without consolidating the revenues and expenses of the entity in the Company's consolidated statements of operations. These investments principally include the Company's 25% ownership in Agriliance, LLC (Agriliance), the 50% ownership in TEMCO, LLC, the 50% ownership in United Harvest, LLC, the 24% ownership in Horizon Milling, LLC (Horizon) and the 50% ownership in Ventura Foods, LLC (Ventura). RESULTS OF OPERATIONS COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 2002 AND 2001 NET INCOME. Consolidated net income for the three months ended November 30, 2002 was $40.4 million compared to $41.4 million for the three months ended November 30, 2001, which represents a $1.0 million (2%) decrease. Although net income slightly decreased in total, the net income from the various business segments had changed. Reduced income in the Energy segment was partially offset by increased income in the Country Operations segment compared to the three months ended November 30, 2001. NET SALES. Consolidated net sales of $2.6 billion for the three months ended November 30, 2002 increased $754.7 million (40%) compared to the three months ended November 30, 2001. Energy net sales of $887.6 million increased $347.3 million (64%) during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. Sales for the three months ended November 30, 2002 and 2001 were $911.6 million and $554.2 million, respectively. The Company eliminated all intracompany sales from the Energy segment to the Country Operations segment of $24.0 million and $13.9 million for the three months ended November 30, 2002 and 2001, respectively. The increase was primarily a result of increased refined fuels volumes of 66% and an average sales price 9 increase of $0.08 per gallon compared to the three months ended November 30, 2001. In addition, propane sales volumes increased 75%, which was partially offset by an average sales price decrease of $0.03 per gallon compared to the three months ended November 30, 2001. Refined fuels and propane volume increases were primarily a result of the acquisition of the wholesale energy business of Farmland Industries, Inc. (Farmland), as well as all interest in Country Energy, LLC a joint venture formerly with Farmland at a purchase price of $39.2 million. In addition, there was increased demand for propane due to a strong crop drying season. Country Operations farm supply sales of $154.5 million increased by $22.2 million (17%) during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. The increase is primarily due to increased volumes from an acquisition and volume and price increases for feed and agronomy products. Company-wide grain and oilseed net sales of $1.5 billion increased $434.4 million (42%) during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. Sales for the three months ended November 30, 2002 were $1,387.2 million and $334.5 million from Grain Marketing and Country Operations segments, respectively. Sales for the three months ended November 30, 2001 were $981.9 million and $242.3 million from Grain Marketing and Country Operations segments, respectively. The Company eliminated all intracompany sales from the Country Operations segment to the Grain Marketing segment, of $251.1 million and $188.0 million, for the three months ended November 30, 2002 and 2001, respectively. The net increase in sales was primarily due to an increase of $1.98 (64%) per bushel in the average sales price of all grain and oilseed marketed by the Company, which was partially offset by a decrease in grain volume of 13% compared to the three months ended November 30, 2001. Processed Grains and Foods net sales of $113.8 million decreased $49.2 million (30%) during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. The net decrease in sales is primarily due to the formation of Horizon, a wheat flour milling and processing joint venture that was formed in January 2002. After that date, the Company has accounted for operating results of Horizon under the equity method of accounting. The Company has a 24% interest in Horizon, and Cargill, Incorporated (Cargill) has a 76% interest. The Company is leasing its five mills and related equipment to Horizon under an operating lease. PATRONAGE DIVIDENDS. Patronage dividends received of $0.2 million decreased $0.6 million (77%) during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. OTHER REVENUES. Other revenues of $35.1 million increased $3.0 million (9%) during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. The most significant changes were due to increased service revenues within the Country Operations segment compared to the three months ended November 30, 2001. COST OF GOODS SOLD. Cost of goods sold of $2.6 billion increased $758.4 million (42%) during the three months ended November 30, 2002, compared to the three months ended November 30, 2001. The cost of all grains and oilseed procured by the Company through its Grain Marketing and Country Operations segments increased $424.2 million (43%) compared to the three months ended November 30, 2001 primarily due to a $1.95 (64%) average cost per bushel increase, which was partially offset by a 13% decrease in volume. The Energy segment cost of goods sold increased by $362.4 million (73%) during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. The volumes of refined fuels increased by 66%, primarily the result of acquisitions, and the average cost increased by $0.11 per gallon compared to the three months ended November 30, 2001. Propane volumes increased by 75%, which was partially offset by an average cost decrease of $0.03 per gallon compared to the three months ended November 30, 2001. These volume increases were primarily the result of acquisitions and increased propane demand due to a strong crop drying season. Country Operations segment farm supply cost of goods sold increased by $16.8 million (15%) during the three months ended November 30, 2002 compared to the three months ended November 30, 2001 primarily due to an acquisition and volume and cost increases on feed and agronomy products. These increases were partially offset by decreased cost of goods sold in the Processed Grains and Foods segment of 10 $45.8 million (30%) compared to the three months ended November 30, 2001, primarily due to the formation of Horizon, as previously discussed. MARKETING, GENERAL AND ADMINISTRATIVE. Marketing, general and administrative expenses of $43.1 million for the three months ended November 30, 2002 increased by $0.3 million (1%) compared to the three months ended November 30, 2001. Although marketing, general and administrative expenses were essentially unchanged in total, expenses attributable to the Company's various business segments changed. Marketing, general and administrative in the Energy segment increased due to the wholesale energy acquisition and Processed Grains and Foods segment decreased due to the formation of Horizon as previously discussed. INTEREST. Interest expense of $12.8 million for the three months ended November 30, 2002 increased by $2.0 million (18%) compared to the three months ended November 30, 2001. The average level of short-term borrowings increased $249.0 million to finance working capital needs, primarily due to increases in inventories in the Grain Marketing, Country Operations and Energy segments, related to higher grain prices and the purchase of Farmland's wholesale energy business, discussed previously. The average short-term interest rate decreased 0.7% during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. Long-term debt borrowings increased due to an additional $175.0 million of private placement debt which was issued in October 2002. EQUITY INCOME FROM INVESTMENTS. Equity income from investments of $8.2 million for the three months ended November 30, 2002 increased by $4.2 million (107%) compared to the three months ended November 30, 2001. The increase was primarily attributable to increased earnings from Ventura, a Processed Grains and Foods segment investment. In addition, the Energy segment recorded losses from the Country Energy investment in the prior fiscal year. MINORITY INTERESTS. Minority interests of $5.4 million for the three months ended November 30, 2002 increased by $2.4 million (79%) compared to the three months ended November 30, 2001. The change in minority interests was primarily a result of more profitable operations within the Company's majority-owned subsidiaries during the three months ended November 30, 2002 compared to the three months ended November 30, 2001. Substantially all minority interests relate to National Cooperative Refinery Association (NCRA), an approximately 74.5% owned subsidiary. INCOME TAXES. Income tax expense of $5.5 million for the three months ended November 30, 2002 decreased $0.7 million (12%) compared to the three months ended November 30, 2001, resulting in effective tax rates of a 12.0% and 13.1%, respectively. The federal and state statutory rate applied to nonpatronage business activity was 38.9% for the three months ended November 30, 2002 and 2001. The income taxes and effective tax rate vary each period based upon profitability and nonpatronage business activity during each of the comparable periods. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS FROM OPERATIONS Operating activities of the Company provided net cash of $2.1 million during the three months ended November 30, 2002. Net income of $40.4 million and net non-cash expenses of $23.8 million were partially offset by increased working capital requirements of $62.1 million. The increase in working capital requirements is primarily due to higher commodity prices and increased grain inventory balances. Operating activities of the Company provided net cash of $23.7 million during the three months ended November 30, 2001. Net income of $41.4 million and net non-cash expenses of $35.5 million were partially offset by increased working capital requirements of $53.2 million. CASH FLOWS FROM INVESTING ACTIVITIES For the three months ended November 30, 2002 and 2001, the net cash flows used in the Company's investing activities totaled $31.9 million and $38.9 million, respectively. The acquisition of property, plant and equipment comprised the primary use of cash totaling $40.6 million and $21.8 million for the three months ended November 30, 2002 and 2001, respectively. For the year ended August 31, 2003 the Company expects to spend approximately $216.8 million for the 11 acquisition of property, plant and equipment, which includes $57.0 million of expenditures for the construction of an oilseed processing facility in Fairmont, Minnesota. Total expenditures related to the construction of the facility are projected to be approximately $90.0 million, of which $32.2 million was used for construction through November 30, 2002. Capital expenditures primarily related to the Environmental Protection Agency low sulfur fuel regulations required by 2006, are expected to be approximately $387.0 million in total for the Company's Laurel, Montana and NCRA's McPherson, Kansas refineries over the next three years, of which $9.5 million has been spent so far at NCRA. It is expected that approximately 80% of the costs will be incurred at NCRA. The Company expects to fund the refinery expenditures with a combination of cash, future earnings and additional borrowings. Investments made during the three months ended November 30, 2002 and 2001 totaled $1.4 million and $6.1 million, respectively. Acquisitions of intangibles were $0.4 million and $27.5 million for the three months ended November 30, 2002 and 2001, respectively. During the three months ended November 30, 2001, the acquisitions of intangibles were primarily related to the purchase of Farmland's interest in its wholesale energy business, as previously discussed, and represents trademarks, tradenames and non-compete agreements. During the three months ended November 30, 2002 the changes in notes receivable resulted in a decrease in cash flows of $11.2 million primarily from related party notes receivables at NCRA from its minority owners, Growmark, Inc. and MFA Oil Company. During the three months ended November 30, 2001 the changes in notes receivable resulted in a decrease of $2.2 million. Distributions to minority owners for the three months ended November 30, 2002 and 2001 were $0.5 million and $4.0 million, respectively, and were primarily related to NCRA. Partially offsetting cash outlays in investing activities were proceeds from the disposition of property, plant and equipment of $4.7 million and $6.1 million for the three months ended November 30, 2002 and 2001, respectively. Also partially offsetting cash usages were distributions received from joint ventures and investments totaling $17.0 million and $15.4 million for the three months ended November 30, 2002 and 2001, respectively. CASH FLOWS FROM FINANCING ACTIVITIES The Company finances its working capital needs through short-term lines of credit with a syndication of banks. In May 2002, the Company renewed its 364-day credit facility of $550.0 million committed. In addition to these lines of credit, the Company has a 364-day credit facility dedicated to NCRA, with a syndication of banks in the amount of $30.0 million committed. On November 30, 2002, August 31, 2002 and November 30, 2001, the Company had total short-term indebtedness outstanding on these various facilities and other short-term notes payable totaling $246.1 million, $332.5 million and $110.8 million, respectively. The increase in 2002 is primarily due to increases in inventories in the Grain Marketing, Country Operations and Energy segments, related to higher grain prices and the purchase of Farmland's wholesale energy business, discussed previously. In October 2002, $175.0 million received from private placement proceeds was used to pay down the Company's 364-day credit facility. In June 1998, the Company established a five-year revolving credit facility with a syndication of banks, with $200.0 million committed. The Company had outstanding balances on this facility of $75.0 million on November 30, 2002, August 31, 2002 and November 30, 2001, respectively. The Company has financed its long-term capital needs, primarily for the acquisition of property, plant and equipment, with long-term agreements through the banks for cooperatives. In June 1998, the Company established a long-term credit agreement through the cooperative banks. This facility committed $200.0 million of long-term borrowing capacity to the Company, with repayments through fiscal year 2009. The amount outstanding on this credit facility was $142.7 million, $144.3 million and $149.2 million on November 30, 2002, August 31, 2002 and November 30, 2001, respectively. Repayments of $1.6 million were made on this facility during each of the three months ended November 30, 2002 and 2001. Also in June 1998, the Company issued a private placement with several insurance companies for long-term debt in the amount of $225.0 million. Repayments will be made in equal annual installments of $37.5 million each in the years 2008 through 2013. 12 In January 2001, the Company entered into a note purchase and private shelf agreement with Prudential Insurance Company. The long-term note in the amount of $25.0 million will be repaid in equal annual installments of approximately $3.6 million, in the years 2005 through 2011. A subsequent note for $55.0 million was issued in March 2001, related to the private shelf facility. The $55.0 million note will be repaid in equal annual installments of approximately $7.9 million, in the years 2005 through 2011. In October 2002, the Company entered into a private placement with several insurance companies for long-term debt in the amount of $175.0 million which was layered into two series. The first series of $115.0 million has an interest rate of 4.96% and will be repaid in equal semi-annual installments of approximately $8.8 million during the years 2007 through 2013. The second series of $60.0 million has an interest rate of 5.60% and will be repaid in equal semi-annual installments of approximately $4.6 million during fiscal years 2012 through 2018. The Company, through NCRA, had revolving term loans outstanding of $17.3 million, $18.0 million and $20.3 million for the periods ended November 30, 2002, August 31, 2002 and November 30, 2001, respectively. Repayments of $0.8 million were made during each of the three months ended November 30, 2002 and 2001. On November 30, 2002, the Company had total long-term debt outstanding of $743.2 million, of which $251.4 million was bank financing, $480.0 million was private placement proceeds and $11.8 million was industrial development revenue bonds and other notes and contracts payable. The aggregate amount of long-term debt payable presented in Management's Discussion and Analysis in the Company's Annual Report on Form 10-K for the year ended August 31, 2002 has not materially changed during the three months ended November 30, 2002 other than for the $175.0 million of private placement debt discussed previously, of which repayments will not start until 2007. The Company is in compliance with all debt covenants and restrictions as of November 30, 2002. During the three months ended November 30, 2002 and 2001, the Company borrowed on a long-term basis $175.0 million and $30.0 million, respectively, and during the same periods repaid long-term debt of $3.9 million and $5.8 million, respectively. In accordance with the bylaws and by action of the Board of Directors, annual net earnings from patronage sources are distributed to consenting patrons following the close of each fiscal year. Effective September 1, 2000, patronage refunds are calculated based on earnings for financial statement purposes rather than based on amounts reportable for federal income tax purposes as had been the Company's practice prior to this date. This change was authorized through a bylaw amendment at the Company's annual meeting on December 1, 2000. The patronage earnings from the fiscal year ended August 31, 2002 are expected to be distributed during the second quarter of fiscal year 2003. The cash portion of this distribution, deemed by the Board of Directors to be 30%, is expected to be approximately $26.2 million and is classified as a current liability on the November 30, 2002 and August 31, 2002 consolidated balance sheets. The current equity redemption policy, as authorized by the Board of Directors, allows for the redemption of capital equity certificates held by inactive direct members and patrons and active direct members and patrons at age 72 or death that were of age 61 or older on June 1, 1998. For active direct members and patrons who were of age 60 or younger on June 1, 1998, and member cooperatives, equities older than 10 years will be redeemed annually based on a prorata formula where the numerator is dollars available for such purpose as determined by the Board of Directors, and the denominator is the sum of the patronage certificates older than 10 years held by such eligible members and patrons. Total redemptions related to the year ended August 31, 2002, to be distributed in fiscal year 2003, are expected to be approximately $30.3 million, of which $2.4 million was redeemed during the three months ended November 30, 2002. During the three months ended November 30, 2001 the Company redeemed $1.8 million of equity. As of November 30, 2002 the Company had $9.5 million (9,454,874 shares) of 8% Preferred Stock outstanding, and expenses related to the issuance of the shares were $3.5 million. Sales of the preferred shares have been suspended, as the Company is in the process of registering a new offering as noted below. 13 The Board of Directors authorized the sale and issuance of up to 2,875,000 shares of 8% Cumulative Redeemable Preferred Stock at a price of $25.00 per share. The Company filed a registration statement on Form S-2 on December 17, 2002 with the Securities and Exchange Commission registering the preferred shares, however, the registration statement is not yet effective. OFF BALANCE SHEET FINANCING ARRANGEMENTS LEASE COMMITMENTS: The Company's lease commitments presented in Management's Discussion and Analysis in the Company's Annual Report on Form 10-K for the year ended August 31, 2002 have not materially changed during the three months ended November 30, 2002. GUARANTEES: The Company is a guarantor for lines of credit for related companies totaling up to $86.2 million, of which $39.0 million was outstanding as of November 30, 2002. The Company's bank covenants allow maximum guarantees of $100.0 million. All outstanding loans with respective creditors are current as of November 30, 2002. DEBT: There is no material off balance sheet debt. CRITICAL ACCOUNTING POLICIES The Company's Critical Accounting Policies are presented in the Company's Annual Report on Form 10-K for the year ended August 31, 2002. EFFECT OF INFLATION AND FOREIGN CURRENCY TRANSACTIONS The Company believes that inflation and foreign currency fluctuations have not had a significant effect on its operations. RECENT ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company is in the process of finalizing its analysis of adopting this standard. The Company's Energy segment operates oil refineries and related pipelines for which the Company would be subject to Asset Retirement Obligations (ARO) if such assets were to be dismantled. The Company, however, expects to operate its refineries and related pipelines indefinitely. Since the time period to dismantle these assets is indeterminate, a corresponding ARO is not currently estimable and therefore has not been recorded. The Company continues to assess whether any other ARO's exist related to its remaining operations, however, based on available information to date, no other ARO's have been identified. As such, the Company believes that the effects of adopting this standard do not have a material effect on the Company. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For the period ended November 30, 2002 the Company did not experience any adverse changes in market risk exposures that materially affect the quantitative and qualitative disclosures presented in the Company's Annual Report on Form 10-K for the year ended August 31, 2002. ITEM 4. CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation within 90 days of the filing date of this report, that the Company's disclosure controls and procedures are adequately designed to ensure that information required to be disclosed by the Company 14 in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in applicable rules and forms. There have not been any significant changes in the Company's internal controls or in other factors that could significantly affect those controls, subsequent to the date of such evaluation, including any corrective actions taken with regard to significant deficiencies and material weaknesses. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting held on December 5-6, 2002, the following directors were re-elected to the Board of Directors: Bruce Anderson, Curt Eischens, Robert Grabarski, Jerry Hasnedl, Glen Keppy and Richard Owen. The following director was newly elected to the Board of Directors, replacing Steven Burnet: David Bielenberg. The following directors' terms of office continued after the meeting: Robert Bass, Dennis Carlson, Robert Elliott, James Kile, Randy Knecht, Leonard Larsen, Duane Stenzel, Michael Toelle, Merlin Van Walleghen and Elroy Webster. At the same Annual Meeting, Members adopted a resolution amending Articles II and III of the Company's Bylaws to eliminate producer-members from the vote calculation and to instead base the vote calculation on sales and equity, beginning with votes occurring in 2003. A copy of the amended Bylaws is attached as Exhibit 3.2. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT DESCRIPTION - ------- ----------- 3.1 Articles of Incorporation of the Company, as amended 3.2 Bylaws of the Company, as amended 99.1 Cautionary Statement 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.3 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K None. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CENEX HARVEST STATES COOPERATIVES --------------------------------- (Registrant) DATE SIGNATURE ---- --------- January 9, 2003 /s/ JOHN SCHMITZ -------------------------- ------------------------------------- (Date) John Schmitz Executive Vice President and Chief Financial Officer 16 SECTION 302 CERTIFICATION I, John D. Johnson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Cenex Harvest States Cooperatives; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 9, 2003 /s/ JOHN D. JOHNSON ------------------------------------- John D. Johnson President and Chief Executive Officer 17 SECTION 302 CERTIFICATION I, John Schmitz, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Cenex Harvest States Cooperatives; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 9, 2003 /s/ JOHN SCHMITZ ------------------------------------- John Schmitz Executive Vice President and Chief Financial Officer 18 EX-3.1 3 cenex026059_ex3-1.txt ARTICLES OF INCORPORATION AND AMENDMENTS 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 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 2 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 3 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 4 cooperative. Equity Participation Units shall not entitle the holder to voting rights and may be 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 5 option of the Board of Directors, to set off such indebtedness against the face amount of such 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: 6 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 56245-973 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 1 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 7 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. 8 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. 9 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF CENEX HARVEST STATES COOPERATIVES John Schmitz and Nanci L. Lilja, Executive Vice President and Assistant Secretary, respectively, of Cenex Harvest States Cooperatives, a cooperative association existing under Section 308A of Minnesota Statutes, as amended, hereby certify that: On September 7, 2000 a majority of the Board of Directors of Cenex Harvest States Cooperatives adopted resolutions stating the full texts of proposed amendments to Article IV, Section 6(c) and Article VIII of the Articles of Incorporation of this Association. On November 1, 2000, notices were mailed to all members of this Association containing an exact copy of the resolutions to be voted upon at the Annual Meeting of Members, and designating the time and place of that meeting to be held on November 30 and December 1, 2000 in Minneapolis, Minnesota. At that Annual Meeting of Members, on December 1, 2000, a quorum being present, a majority of the members adopted resolutions amending Article IV, Section 6(c) and Article VIII of the Articles of Incorporation of this Association to read as follows: ARTICLE IV, SECTION 6(C) "(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. Dividends may be cumulative. 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 VIII "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." Date: December 20, 2000 CENEX HARVEST STATES COOPERATIVES By: /s/ John Schmitz ---------------------------- John Schmitz Executive Vice President By: /s/ Nanci L. Lilja ---------------------------- Nanci L. Lilja Assistant Secretary STATE OF MINNESOTA ) ) ss. COUNTY OF DAKOTA ) The foregoing was acknowledged before me this 20th day of December, 2000 by John Schmitz and Nanci L. Lilja, the Executive Vice President and Assistant Secretary, respectively, of Cenex Harvest States Cooperatives, a cooperative association under the laws of the State of Minnesota, on behalf of the association. /S/ Esther I. Longseth ---------------------------- Notary Public EX-3.2 4 cenex_ex3-2.htm BYLAWS Cenex Harvest States - Exhibit 13

EXHIBIT 3.2

BYLAWS

OF

CENEX HARVEST STATES COOPERATIVES

(Effective December 7, 2002)

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.

(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

(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

(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 $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

(ii) 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)(i), 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)(ii), 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 or a Defined Member grouped in a Patrons’ Association may, however, elect to exercise such Individual Member’s or Defined Member’s vote individually in which case such Individual Member shall have one (1) vote 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.

If an Individual Member or a Defined Member elects to cast their vote individually, such Member’s business transacted with and equity held by such Member in this Company shall be excluded from determining the number of votes held by such Member’s Patrons’ Association pursuant to Sections 3(c)(i) and 3(c)(ii) below.

Each Defined Member shall have one (1) vote for the election of Defined Member Boards, which shall be cast individually in person at an annual or special meeting (as hereinafter provided), or by mail when a mail ballot has been provided for.

(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 $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

(ii) 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)(ii), 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.

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.

(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 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 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 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, which shall consist of seventeen (17) directors.

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.

(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.

(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 — Election of Directors.

(a) At each annual meeting of the members of this Association, 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, 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

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 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 elections at each 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 3(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 4 — Vacancies. 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.

Section 5 — 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 6 — 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 7 — 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 8 — 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 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 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 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.

(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 using the accounting methods and principles used by the cooperative in preparation of its annual audited financial statements; 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.

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.

(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.

(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.

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.

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. §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. §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. §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. §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. §1385 by endorsing and cashing a qualified check as defined in and within the time provided in 26 U.S.C. §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 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.

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.

EX-99.1 5 cenex026059_ex99-1.txt CAUTIONARY STATEMENT EXHIBIT 99.1 CAUTIONARY STATEMENT CENEX HARVEST STATES COOPERATIVES (THE "COMPANY", "WE", "OUR", "US") AND ITS REPRESENTATIVES AND AGENTS MAY FROM TIME TO TIME MAKE WRITTEN OR ORAL "FORWARD-LOOKING STATEMENTS" AS DEFINED UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE ACT). WORDS AND PHRASES SUCH AS "WILL LIKELY RESULT," "ARE EXPECTED TO," "WILL CONTINUE," "IS ANTICIPATED," "ESTIMATE," "PROJECT" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. THE COMPANY WISHES TO CAUTION READERS NOT TO PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. THE COMPANY'S FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. THIS CAUTIONARY STATEMENT IS FOR THE PURPOSE OF QUALIFYING FOR THE "SAFE HARBOR" PROVISIONS OF THE ACT AND IS INTENDED TO BE A READILY AVAILABLE WRITTEN DOCUMENT THAT CONTAINS FACTORS WHICH COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS, FINANCIAL OR OTHERWISE, OF THE COMPANY. REFERENCE TO THIS CAUTIONARY STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT SHALL BE DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE WHICH MIGHT BE PROJECTED, FORECASTED, ESTIMATED OR BUDGETED BY THE COMPANY IN THE FORWARD-LOOKING STATEMENT OR STATEMENTS: THE FOLLOWING FACTORS ARE IN ADDITION TO ANY OTHER CAUTIONARY STATEMENTS, WRITTEN OR ORAL, WHICH MAY BE MADE OR REFERRED TO IN CONNECTION WITH ANY FORWARD-LOOKING STATEMENT. THE FOREGOING REVIEW OF FACTORS PURSUANT TO THE ACT SHOULD NOT BE CONSTRUED AS EXHAUSTIVE OR AS AN ADMISSION REGARDING THE ADEQUACY OF DISCLOSURES MADE BY THE COMPANY PRIOR TO THE EFFECTIVE DATE OF THE ACT. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE ANY FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES. OUR REVENUES AND OPERATING RESULTS COULD BE ADVERSELY AFFECTED BY CHANGES IN COMMODITY PRICES. Our revenues and earnings are affected by market prices for commodities such as crude oil, natural gas, grain, oilseeds, and flour. Commodity prices generally are affected by a wide range of factors beyond our control, including the weather, disease, insect damage, drought, the availability and adequacy of supply, government regulation and policies, and general political and economic conditions. Increases in market prices for commodities that we purchase without a corresponding increase in the prices of our products or our sales volume or a decrease in our other operating expenses could reduce our revenues and net income. We are also exposed to fluctuating commodity prices as the result of our inventories of commodities, typically grain and crude oil, and purchase and sale contracts at fixed or partially fixed prices. At any time, our inventory levels and unfulfilled fixed or partially fixed price contract obligations may be substantial. OUR OPERATING RESULTS COULD BE ADVERSELY AFFECTED IF OUR MEMBERS WERE TO DO BUSINESS WITH OTHERS RATHER THAN WITH US. We do not have an exclusive relationship with our members and our members are not obligated to supply us with their products or purchase products from us. Our members often have a variety of distribution outlets and product sources available to them. If our members were to sell their products to other purchasers or purchase products from other sellers, our revenues would decline and our results of operations could be adversely affected. WE PARTICIPATE IN HIGHLY COMPETITIVE BUSINESS MARKETS IN WHICH WE MAY NOT BE ABLE TO CONTINUE TO COMPETE SUCCESSFULLY. We operate in several highly competitive business segments. Competitive factors include price, service level, proximity to markets, product quality and marketing. In some of our business segments, such as Energy, we compete with companies that are larger, better known and have greater marketing, financial, personnel and other resources. Our competitors may succeed in developing new or enhanced products that are better than ours, and may be more successful in marketing and selling their products than we are with ours. As a result, we may not be able to continue to compete successfully with our competitors. CHANGES IN FEDERAL INCOME TAX LAWS OR IN OUR TAX STATUS COULD INCREASE OUR TAX LIABILITY AND REDUCE OUR NET INCOME. Current federal income tax laws, regulations and interpretations regarding the taxation of cooperatives, which allow us to exclude income generated through business with or for a member (patronage income) from our taxable income, could be changed. If this occurred, or if in the future we were not eligible to be taxed as a cooperative, our tax liability would significantly increase and our net income significantly decrease. WE INCUR SIGNIFICANT COSTS IN COMPLYING WITH APPLICABLE LAWS AND REGULATIONS. ANY FAILURE TO MAKE THE CAPITAL INVESTMENTS NECESSARY TO COMPLY WITH THESE LAWS AND REGULATIONS COULD EXPOSE US TO FINANCIAL LIABILITY. We are subject to numerous federal, state and local provisions regulating our business and operations. We incur and expect to incur significant capital and operating expenses to comply with these laws and regulations, but may be unable to pass on those expenses to customers without experiencing volume and margin losses. For example, in the next three years, we anticipate spending approximately $387 million in total at NCRA's McPherson, Kansas refinery and our Laurel, Montana refinery on upgrading the facilities, largely to comply with regulations requiring the reduction of sulfur levels in refined petroleum products, of which $9.5 million has been spent so far at NCRA. It is expected that approximately 80% of the costs will be incurred at the McPherson refinery. We establish reserves for the future cost of meeting known compliance obligations, such as remediation of identified environmental issues. However, these reserves may prove inadequate to meet our actual liability. Moreover, amended, new or more stringent requirements, stricter interpretations of existing requirements or the future discovery of currently unknown compliance issues may require us to make material expenditures or subject us to liabilities that we currently do not anticipate. Our failure to comply with applicable laws and regulations could subject us to administrative penalties and injunctive relief, civil remedies including fines and injunctions, and recalls of our products. We cannot predict what impact, if any, future laws or regulations may have on our potential business and operations. ENVIRONMENTAL LIABILITIES COULD ADVERSELY AFFECT OUR RESULTS AND FINANCIAL CONDITION. Many of our current and former facilities have been in operation for many years and, over that time, we and other operators of those facilities have generated, used, stored and disposed of substances or wastes that are or might be considered hazardous under applicable environmental laws, including chemicals and fuels stored in underground and above-ground tanks. Any past or future actions in violation of those environmental laws could subject us to administrative penalties, fines and injunctions. Moreover, future or unknown past releases of hazardous substances could subject us to private lawsuits claiming damages and to adverse publicity. ACTUAL OR PERCEIVED QUALITY, SAFETY OR HEALTH RISKS ASSOCIATED WITH OUR PRODUCTS COULD SUBJECT US TO LIABILITY AND DAMAGE OUR BUSINESS AND REPUTATION. If any of our food products became adulterated or misbranded, we would need to recall those items and could experience product liability claims if consumers were injured as a result. A widespread product recall or a significant product liability judgment could cause our products to be unavailable for a period of time or a loss of consumer confidence in our products. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others. In addition, general public perceptions regarding the quality, safety or health risks associated with particular food products, such as the concern in some quarters regarding genetically modified crops, could reduce demand and prices for some of the products associated with our businesses. To the extent that consumer preferences evolve away from products that our members or we produce for health or other reasons, such as the growing demand for organic food products, and we are unable to develop products that satisfy new consumer preferences, there will be a decreased demand for our products. OUR OPERATIONS ARE SUBJECT TO BUSINESS INTERRUPTIONS AND CASUALTY LOSSES; WE DO NOT INSURE AGAINST ALL POTENTIAL LOSSES AND COULD BE SERIOUSLY HARMED BY UNEXPECTED LIABILITIES. Our operations are subject to business interruptions due to unanticipated events such as explosions, fires, pipeline interruptions, transportation delays, equipment failures, crude oil or refined product spills, inclement weather or labor disputes. For example: o Our oil refineries and other facilities are potential targets for terrorist attacks that could halt or discontinue production. o Our inability to negotiate acceptable contracts with unionized workers in our operations could result in strikes or work stoppages. o The significant inventories that we carry could be damaged or destroyed by catastrophic events, extreme weather conditions or contamination. We maintain insurance against many, but not all, potential losses or liabilities arising from these operating hazards, but uninsured losses or losses above our coverage limits are possible. Uninsured losses and liabilities arising from operating hazards could have a material adverse effect on our financial position or results of operations. OUR COOPERATIVE STRUCTURE LIMITS OUR ABILITY TO ACCESS EQUITY CAPITAL. As a cooperative, we may not sell common equity in our company. In addition, existing laws and our articles of incorporation and bylaws contain limitations on dividends of 8% of any preferred stock that we may issue. These limitations restrict our ability to raise equity capital and may adversely affect our ability to compete with enterprises that do not face similar restrictions. CONSOLIDATION AMONG THE PRODUCERS OF PRODUCTS WE PURCHASE AND CUSTOMERS FOR PRODUCTS WE SELL COULD ADVERSELY AFFECT OUR REVENUES AND OPERATING RESULTS. Consolidation has occurred among the producers of products we purchase, including crude oil and grain. Consolidation could increase the price of these products and allow suppliers to negotiate pricing and other contract terms that are less favorable to us. Consolidation also may increase the competition among consumers of these products to enter into supply relationships with a smaller number of producers. Consolidation among purchasers of our products and in wholesale and retail distribution channels has resulted in a smaller customer base for our products and intensified the competition for these customers. For example, ongoing consolidation among distributors and brokers of food products and food retailers has altered the buying patterns of these businesses, as they have increasingly elected to work with product suppliers who can meet their needs nationwide rather than just regionally or locally. If these distributors, brokers, and retailers elect not to purchase our products, our sales volumes, revenues, and profitability could be significantly reduced. FLUCTUATIONS IN PRICES FOR CRUDE OIL AND REFINED FUEL PRODUCTS MAY ADVERSELY AFFECT OUR EARNINGS. Prices for crude oil and for gasoline, diesel fuel, and other refined petroleum products fluctuate widely. The profitability of our energy operations depends largely on the margin between the cost of crude oil that we refine and the selling prices that we obtain for our refined products. Factors influencing these prices, many of which are beyond our control, include: o levels of worldwide and domestic supplies; o capacities of domestic and foreign refineries; o the ability of the members of OPEC to agree to and maintain oil price and production controls, and the price and level of foreign imports generally; o political instability or armed conflict in oil-producing regions; o the level of consumer demand; o the price and availability of alternative fuels; o the availability of pipeline capacity; and o domestic and foreign governmental regulations and taxes. The long-term effects of these and other conditions on the prices of crude oil and refined petroleum products are uncertain and ever-changing. Accordingly, we expect our margins on and the profitability of our energy business to fluctuate, possibly significantly, over time. IF OUR CUSTOMERS CHOSE ALTERNATIVES TO OUR REFINED PETROLEUM PRODUCTS OUR REVENUES AND PROFITS MAY DECLINE. Numerous alternative energy sources currently are being developed that could serve as alternatives to our gasoline, diesel fuel and other refined petroleum products. If any of these alternative products become more economically viable or preferable to our products for environmental or other reasons, demand for our energy products would decline. Demand for our gasoline, diesel fuel and other refined petroleum products also could be adversely affected by increased fuel efficiencies. OUR AGRONOMY BUSINESS IS DEPRESSED AND COULD CONTINUE TO UNDERPERFORM IN THE FUTURE. Demand for agronomy products in general has been adversely affected in recent years by drought and poor weather conditions, depressed grain prices, idle acreage and development of insect and disease-resistant crops. These factors could cause Agriliance, LLC, an agronomy marketing and distribution venture in which we own a minority interest, to be unable to operate at profitable margins. In addition, these and other factors, including fluctuations in the price of natural gas and other raw materials, an increase in recent years in domestic and foreign production of fertilizer and intense competition within the industry, in particular from lower-cost foreign producers, have created particular pressure on producers of fertilizers. As a result, CF Industries, Inc. a fertilizer manufacturer in which we hold a minority cooperative interest, has suffered significant losses in recent years as it has incurred increased prices for raw materials but has been unable to pass those increased costs on to its customers. TECHNOLOGICAL IMPROVEMENTS IN AGRICULTURE COULD DECREASE THE DEMAND FOR OUR AGRONOMY PRODUCTS. Improved technological advances in agriculture could decrease the demand for crop nutrients, and other crop input products and services. Genetically engineered seeds that resist disease and insects or meet certain nutritional requirements could affect the demand for crop nutrients and crop protection products, as well as the demand for fuel to operate application equipment. WE OPERATE SOME OF OUR BUSINESS THROUGH JOINT VENTURES IN WHICH OUR RIGHTS TO CONTROL BUSINESS DECISIONS ARE LIMITED. Several parts of our business, including in particular our agronomy business segment and portions of our grain marketing, wheat milling and foods businesses, are operated through joint ventures with unaffiliated third parties. Operating a business through a joint venture means that we have less control over business decisions than we have in our wholly owned businesses. In particular, we generally cannot act on major business initiatives in our joint ventures without the consent of the other party or parties in that venture. EX-99.2 6 cenex_ex99-2.htm CERTIFICATION OF CEO Cenex Harvest States - Exhibit 99.2

EXHIBIT 99.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Cenex Harvest States Cooperatives (the “Company”), on Form 10-Q for the period ended November 30, 2002 as filed with the Securities and Exchange Commission on January 9, 2003 (the “Report”), I, John D. Johnson, President and Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ John D. Johnson
John D. Johnson
President and Chief Executive Officer
January 9, 2003

EX-99.3 7 cenex_ex99-3.htm CERTIFICATION OF CFO Cenex Harvest States - Exhibit 99.3

EXHIBIT 99.3

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Cenex Harvest States Cooperatives (the “Company”), on Form 10-Q for the period ended November 30, 2002 as filed with the Securities and Exchange Commission on January 9, 2003 (the “Report”), I, John Schmitz, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ John Schmitz
John Schmitz
Executive Vice President and Chief Financial Officer
January 9, 2003

-----END PRIVACY-ENHANCED MESSAGE-----

EXHIBIT 3.2

BYLAWS

OF

CENEX HARVEST STATES COOPERATIVES

(Effective December 7, 2002)

ARTICLE I. Membership

ARTICLE II. Meetings of Members

ARTICLE III. Directors

ARTICLE IV. Duties of Directors

ARTICLE V. Officers

ARTICLE VI. Indemnification and Insurance

ARTICLE VII. Method of Operation — Patronage Refunds

ARTICLE VIII. Consent

ARTICLE IX. Merger or Consolidation; Dissolution

ARTICLE X. Seal

ARTICLE XI. Amendments

EXHIBIT 99.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

EXHIBIT 99.3

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

ARTICLE I.
Membership

ARTICLE II.
Meetings of Members

ARTICLE III.
Directors

ARTICLE IV.
Duties of Directors

ARTICLE V.
Officers

ARTICLE VI.
Indemnification and Insurance

ARTICLE VII.
Method of Operation — Patronage Refunds

ARTICLE VIII.
Consent

ARTICLE IX.
Merger or Consolidation; Dissolution

ARTICLE X.
Seal

ARTICLE XI.
Amendments

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)