SEC Division of Corporation Finance no-action letter: Minnesota Soybean Processors — SEC — US

Minneapolis • Denver• Sioux Falls
Michael L. Weaver
(612) 371-3987 mweaver@lindquist.com www.lindquist.com Lindquist & Vennum PLLP 4200 IDS Center 80 South Eighth Street Minneapolis, MN 55402-2274 Phone: (612) 371-3211 Fax: (612) 371-3207 Office of Chief Counsel 100 F Street, NE Washington, D.C. 20549 Re: Availability of Section 2(a)(1) and Section 2(a)(3) for Amendments to Organizational Documents of Minnesota Soybean Processors to be Governed by Chapter 308B of Minnesota Statutes Ladies and Gentlemen:
On behalf of Minnesota Soybean Processors (“MnSP”), we hereby request that the Division of Corporation Finance not recommend any enforcement action to the Securities and Exchange Commission (the "Commission") if MnSP proceeds with amending its organizational documents to be governed by
Chapter 308B of Minnesota Statutes as described below without registration under the Securities Act of
1933, as amended (the "Securities Act"). This request is based on our opinion that (1) its existing shares of common stock, Class A preferred stock and patronage equities, and its proposed common units, Class A preferred units and patronage equities following amendment, do not constitute securities within the meaning of Section 2(a)(1) of the Securities Act, and (2) that the conversion of its existing shares of Class B preferred stock into Class B preferred units under the amendments does not constitute a sale within the meaning of Section 2(a)(3) of the Securities Act and Rule 145 thereunder. Background MnSP is an agricultural marketing cooperative organized in 1999 under Chapter 308A of Minnesota Statutes, and is primarily engaged in the business of processing soybeans of its members into soybean oil, soybean meal, and bio-diesel renewable fuel products at its soybean crush facility and biodiesel operation in Brewster, Minnesota. MnSP is owned by over 2,300 growers in Minnesota and various other states throughout the Midwestern United States who market their soybeans through MnSP. MnSP’s mission is to provide the maximum value-added return to its members by combining the latest soybean processing technologies with proven management and to provide a high quality feed product for America’s producers as well as providing a high quality renewable fuel source. MnSP conducts its business and activities as a cooperative, as more particularly provided for in MnSP’s Articles of Incorporation and Bylaws, copies of which are attached to this no-action request. As such, MnSP does not make a profit for its own account from its processing and marketing activities.

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Rather, the net income of MnSP in excess of dividends on equity capital and additions to reserves is distributed to members annually or more often on the basis of patronage. See Article V of the Articles of Incorporation and Bylaw VII of the Bylaws. MnSP is a membership cooperative. Producers of agricultural products and associations of such producers may become a member of MnSP by, among other things: (a) becoming the holder of one (1) share of common stock, which is the membership stock of MnSP; (b) becoming the holder of a minimum number of shares of Class A preferred stock prescribed by the Board of Directors (currently prescribed at 2,500 shares); (c) entering into a uniform marketing and delivery agreement with MnSP; and (d) meeting other membership criteria or requirements established from time to time by the Board of Directors. No person may hold more than one share of common stock. Each member of MnSP has one vote in the affairs of MnSP (i.e., each holder of common stock has one vote), regardless of the number of shares of non-voting Class A preferred stock held by such member. One member, one vote is a hallmark of cooperative operations and cooperative principles since adoption of the Capper-Volstead Act and the Agricultural Marketing Act of 1929. In keeping with its cooperative operations and structure, MnSP applied for and was granted exempt cooperative status under
Section 521 of the Internal Revenue Code (the “Code”) in 2000. As a consequence of qualifying as a
Section 521 cooperative, MnSP has been exempt from the registration requirements of the Securities Act
by virtue of the exemption for farmer’s cooperative organizations contained in Section 3(a)(5). Under the uniform marketing and delivery agreement, members are entitled and obligated to deliver and market soybeans through MnSP in proportion to and based on the number of shares of Class A preferred stock they hold. In other words, the common stock of MnSP is its membership stock, and the Class A preferred stock is the delivery stock of MnSP. See Bylaw I of the Bylaws. We also attach a copy of MnSP’s uniform marketing and delivery agreement to this no-action request. Membership in MnSP may be terminated by the Board of Directors in their discretion if the Board determines among other things that a member has: (a) become ineligible for membership for any reason; (b) failed to patronize the cooperative for a period of one year or more; (c) intentionally or repeatedly violated any provision of the Articles, Bylaws or board policies; or (d) breached any contract with the cooperative, including the uniform marketing and delivery agreement. In the event of membership termination, the Board may redeem or convert the common stock into a nonvoting certificate of interest at an amount equal to the value of the consideration for which the stock was issued. Upon such redemption or conversion, such ineligible holder ceases to be a member of the cooperative and ceases to have voting rights. In addition, the Board may terminate the ineligible holder’s rights to deliver products to the cooperative under the uniform marketing and delivery agreement. In the event MnSP exercises its right to convert the common stock into a nonvoting certificate of interest, MnSP shall have no obligation to redeem such nonvoting certificate of interest, nor shall the holder of such interest have any right to demand the redemption thereof. Like the common stock from which it was converted, nonvoting certificates of interest are non-transferable and may never be redeemed for more than the value of the consideration for which the common stock was issued. See Article IV of the Articles of Incorporation and Bylaw I of the Bylaws. In the event of any dissolution, liquidation or winding up of MnSP, all debts and liabilities of MnSP shall be paid according to their respective priorities, and any 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

Office of Chief Counsel patrons of MnSP on the basis of their past patronage. See Article VI of the Articles of Incorporation and
Section 9.02 of Bylaw IX of the Bylaws.
In summary, MnSP’s Articles and Bylaws restrict membership in the cooperative to agricultural producers who deliver soybeans to the cooperative pursuant to uniform marketing and delivery agreements, provide for termination of membership for failure to do so, and mandate that net income of the cooperative is returned to members on the basis of patronage, not share ownership, both out of current earnings and in liquidation. Purpose of Request MnSP is presently a cooperative organized under and governed by Chapter 308A of Minnesota Statutes. MnSP is considering amending its organizational documents to be governed by and becoming a Minnesota Chapter 308B cooperative to establish certainty regarding its tax treatment. Minnesota
Chapter 308B cooperative associations are taxed as partnerships under Subchapter K of the Code, which
preserves single-level tax treatment on earnings and gains for the cooperative and its members and eliminates any uncertainty regarding the risk of double taxation. MnSP’s proposed conversion from a Minnesota Chapter 308A cooperative to a 308B cooperative, and the accompanying change from being taxed under Subchapter T to Subchapter K of the Code, will result in the loss of MnSP’s exempt cooperative status under Section 521 of the Code. As a consequence, MnSP’s capital stock will no longer be exempt from the registration requirements of the Securities Act under Section 3(a)(5) which relates only to securities issued by a farmer’s cooperative organization exempt from tax under Section 521 of the Code. A cooperative organized under Minnesota Chapter 308A may convert and become subject to Minnesota Chapter 308B by amending its organizational documents to conform to the requirements of
Chapter 308B. The loss of the Section 3(a)(5) Securities Act exemption makes it necessary for MnSP to
request that the Division of Corporation Finance not recommend any enforcement action to the Commission if MnSP proceeds with amending its organizational documents to be governed by Chapter 308B of Minnesota Statutes without registration under the Securities Act. We are of the opinion that the approval by its members of the required amendments to its Articles and Bylaws to be governed by
Chapter 308B does not constitute an offer or sale of a security for purposes of Section 5 of the Securities
Act because (1) its existing shares of common stock, Class A preferred stock and patronage equities, and its proposed common units, Class A preferred units and patronage equities following amendment, do not constitute securities within the meaning of Section 2(a)(1) of the Securities Act, and (2) the conversion of its existing shares of Class B preferred stock into Class B preferred units under the amendments does not constitute a sale within the meaning of Section 2(a)(3) of the Securities Act and Rule 145 thereunder. Existing Membership and Capital Structure MnSP is a cooperative organized on a capital stock basis. The authorized capital stock of MnSP consists of: 5,000 shares of common stock, with a par value of $.01 per share; 50,000,000 shares of nonvoting Class A preferred stock, with a par value of $.01 per share; and 10,000,000 shares of nonvoting Class B preferred stock, with a par value of $.01 per share. The authorized capital stock of MnSP currently issued and outstanding consists of 2,392 shares of membership common stock, 21,218,620 shares of nonvoting Class A preferred stock and 1,793,000 shares of nonvoting Class B preferred stock.

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Common Stock.
Ownership. The common stock of MnSP is its membership stock. Membership in MnSP is restricted to the holders of common stock. Each member must hold one share of common stock and no person may hold more than one share of common stock. Holders of common stock are restricted to producers of agricultural products and associations of such producers who meet the requirements and conditions of membership as provided in MnSP’s Articles of Incorporation and Bylaws. Voting. Holders of common stock are the only holders of stock in MnSP with voting power. Because each holder of common stock is restricted to one share, each holder of common stock has one vote in the affairs of MnSP regardless of the number of shares of nonvoting Class A preferred stock held by such common stockholder. Stock Dividends. No dividends may be paid on the common stock. Patronage Dividends. No patronage dividends are paid to the holders of common stock by virtue of their ownership of common stock, because members are not entitled or obligated to deliver soybeans to the cooperative on the basis of common stock. Transferability. The common stock is non-transferable and cannot be pledged. Redemption/Liquidation. The common stock may never appreciate in value. No holder of common stock has any right to require the redemption of its common stock. The common stock may be redeemed only at the option of the Board of Directors in accordance with the provisions of MnSP’s Articles and the Bylaws. The Board of Directors has the authority to establish a redemption policy on terms and conditions it deems advisable in its sole discretion; provided, however, that the common stock may never by redeemed for more than the value of the consideration for which the common stock was issued. In the event of liquidation of the cooperative or by operation of a merger, holders of the common stock may never receive more than the value of the consideration for which the shares of common stock were issued. Class A Preferred Stock. Ownership. The Class A preferred stock is the delivery stock of MnSP. Members deliver soybeans to MnSP in proportion to the number of shares of Class A preferred stock held by such member. MnSP establishes the number of bushels of soybeans per share of Class A preferred stock to be delivered annually under the uniform marketing and delivery agreement each year, based on the estimated number of bushels it anticipates it will process and market that year. Holders of Class A preferred stock are restricted to producers of agricultural products and associations of such producers. MnSP’s Bylaws establish additional conditions, requirements and limitations of holding Class A preferred stock, such as entry into the uniform marketing and delivery agreement and the minimum number of shares of Class A preferred stock that must be held for membership. Voting. The Class A preferred stock is nonvoting, and holders of Class A preferred stock are not entitled to voting rights in MnSP by virtue of
their ownership of the Class A preferred stock. Stock Dividends. No dividends on equity capital may be paid on the Class A preferred stock.

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Patronage Dividends. Patronage dividends from the net income of MnSP in excess of dividends on equity capital and additions to reserves are paid to members annually or more often on the basis of patronage i.e., in proportion to the amount of business done with or for members, which is the quantity of soybeans delivered. Patronage dividends may be paid in the form of cash or allocated patronage equities. As stated, members deliver soybeans in proportion to the number of shares of Class A preferred stock held by such member. If a member does not deliver soybeans (or in the case of membership termination, MnSP has terminated the right to deliver), it cannot participate or share in the net income of MnSP. Because no dividends are paid on the Class A preferred stock , the only method to derive value from ownership of the Class A preferred stock is through delivery by the holder. See Article V of the Articles of Incorporation and Bylaw VII of the Bylaws. Transferability. The transferability of the Class A preferred stock is restricted. Shares of the Class A preferred stock are transferable only with the approval of the Board of Directors, and then only to persons eligible to hold the Class A preferred stock. In addition, under Chapter 308A, the Bylaws must provide (and do so provide) that the cooperative has the first privilege of purchasing Class A preferred stock offered for sale by a stockholder. MnSP has established a bulletin board for members to post their interest in selling or buying shares of Class A preferred stock, but since inception of the cooperative in 2000, less than ½ of 1 % of the outstanding shares of Class A preferred stock have been sold, and none have been sold at more than the price at which the shares were originally issued. Redemption/Liquidation . MnSP’s Class A preferred stock may be redeemed only at the option of the Board of Directors in accordance with the provisions of MnSP’s Articles and Bylaws. The Board of Directors has the authority to establish a redemption policy on terms and conditions it deems advisable in its sole discretion. In the event of liquidation of the cooperative or by operation of a merger, holders of the Class A preferred stock may never receive more than the value of the consideration for which the shares of Class A preferred stock were issued (allocated patronage equities are paid in liquidation at face amount after payment of preferred stock and common stock; any surplus is paid to the current and former patrons in proportion to their patronage over the period determined to be equitable and practicable by the Board of Directors). Because liquidating or merger payments may never exceed the value for which the shares of Class A preferred stock were issued, the only method to derive value from ownership of the Class A preferred stock is through delivery. See Bylaw IX of the Bylaws. Bundling . In order to avoid fragmented ownership of the cooperative’s class A preferred stock and any entitlements of the
holder of said stock based on patronage (i.e., based on delivery) whether entitlements to current patronage earnings, past patronage earnings paid as allocated patronage equities, or entitlements paid in liquidation or merger based on patronage over a determined period (the surplus distribution provision referenced above), MnSP’s Bylaws provide that such entitlements vest automatically in the transferee with respect to any transfer of Class A preferred stock. See section 11.06 of Bylaw XI of the Bylaws. This bundling does not impair or prevent the fundamental tenet that the only method to derive value from ownership of Class A preferred stock is through delivery. Class B Preferred Stock. Ownership. Class B preferred stock may be issued to any person or entity whether or not involved in agricultural production. Voting. Class B preferred stock is nonvoting stock.

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Stock Dividends. Dividends on equity capital may be paid on Class B preferred stock as determined by the Board of Directors. Dividends on the Class B preferred stock may not exceed 8% annually on the value of the consideration for which the stock was issued, and the dividends may be cumulative. Patronage Dividends. No patronage dividends are paid to the holders of Class B preferred stock by virtue of their ownership of Class B preferred stock, because holders of such stock are not entitled or obligated to deliver soybeans to the cooperative on the basis of Class B preferred stock owned. Transferability. The transferability of the Class B preferred stock is restricted. Shares of the Class B preferred stock are transferable only with the approval of the Board of Directors. In addition, under Chapter 308A, the Bylaws must provide (and do so provide) that the cooperative has the first privilege of purchasing Class B preferred stock offered for sale by a stockholder. MnSP has established a bulletin board for members to post their interest in selling or buying shares of Class B preferred stock, but since inception of the cooperative in 2000, less than 1/10 of 1 % of the outstanding shares of Class B preferred stock have been sold, and none have been sold at more than the price at which the shares were originally issued. Redemption/Liquidation . The Board of Directors has the authority to establish a redemption policy on terms and conditions it deems advisable in its sole discretion, subject to the terms of issue of any series of Class B preferred stock (e.g., the current series are redeemable at option of the Board at issue price + cumulated but unpaid dividends). In the event of liquidation of the cooperative or by operation of a merger, holders of the Class B preferred stock are entitled to receive the value of the consideration for which the shares of Class B preferred stock were issued, plus, in the case of a series whose terms includes rights to cumulative dividends on liquidation, the amount equal to the dividends accumulated and unpaid thereon. Patronage Equities. Ownership. Patronage equities are non-cash patronage dividends from MnSP’s earnings that are issued to members annually based on the quantity of business they have done with MnSP during each fiscal year. Voting. Patronage equities have no voting rights. Dividends. No dividends may be paid on patronage equities. Transferability/Redemption. Patronage equities may only be transferred with the consent and approval of the Board of Directors. No person shall have any right whatsoever to require the retirement or redemption of any patronage equities. The redemption or retirement is solely within the discretion and on the terms as prescribed from time to time by the Board of Directors of the cooperative. Patronage equities may never be redeemed for more than their face value. In the event of liquidation of the cooperative or by operation of a merger, allocated patronage equities are paid in
liquidation at face amount after payment of preferred stock and common stock. Because liquidating or merger payments may never exceed the face amount of the patronage equities, patronage equities will never appreciate in value over the face amount at which they were paid. See Bylaw VII of the Bylaws.

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Bundling. In order to avoid fragmented ownership of the cooperative’s class A preferred stock and allocated patronage equities, MnSP’s Bylaws provide that allocated patronage equities vest automatically in the transferee with respect to any transfer of Class A preferred stock. See section 11.06 of Bylaw XI of the Bylaws. This bundling does not impair or prevent the fundamental tenet that patronage equities may never appreciate in value over the face amount at which they were paid. Proposed Amendments to Organizational Documents to be Governed by Chapter 308B; MnSP will be the Same Entity under State Law As stated above, MnSP is considering amending its organizational documents to be governed by
Chapter 308B of Minnesota Statutes instead of Chapter 308A. A summary comparison of Minnesota’s
two cooperative statutes, Chapter 308A and Chapter 308B, is attached to this no-action request. Under Minnesota Statutes Section 308B.225, a cooperative organized under Chapter 308A “may convert and become subject to this chapter by amending its organizational documents to conform to the requirements of this chapter.” The proposed amendments to be governed by Chapter 308B will not be effected by merger, transfer of assets, or other corporate restructuring transaction. Thus, by operation of law, the proposed conversion transaction will not result in a “new” entity being formed or created or the termination of the existing cooperative legal entity, but will occur solely as a consequence of MnSP amending its Articles of Incorporation and Bylaws to become subject to the provisions of Minnesota
Chapter 308B rather than Chapter 308A. The converted cooperative is the same entity for all purposes
under Minnesota law. Both under state law and under an evaluation of the economic and membership rights, powers, and privileges before and after the conversion transaction, MnSP is simply electing to be governed by a different chapter of Minnesota cooperative laws by amending its Articles and Bylaws to conform with the governing chapter. Accordingly, in our opinion, MnSP as a legal entity will remain in existence as the same legal entity following conversion and will continue as the same legal entity following conversion. Purpose of Proposed Amendments to be Governed by Chapter 308B The primary purpose for MnSP’s proposed conversion is to establish certainty regarding its tax treatment. MnSP is currently taxed as an exempt 521 cooperative under Subchapter T of the Code. As a cooperative, MnSP is not taxed on patronage sourced income allocated to its members. These amounts are instead taxed directly to its members. Through this allocation of patronage sourced income to its members and the cooperative level deduction that is allowed for this allocation, MnSP and its members are able to achieve single-level taxation of MnSP’s patronage sourced income. As an exempt cooperative under Section 521 of the Code, MnSP can also achieve single-level taxation of its non-patronage sourced income. This single-level taxation on all earnings is an important economic result of MnSP’s operations as an exempt cooperative. From time to time the Internal Revenue Service challenges the tax status of various cooperatives, sometimes taking the position that the entities are not operating on a cooperative basis and therefore not entitled to cooperative tax treatment, sometimes challenging the classification of income as patronage sourced (only allocations of patronage sourced income are eligible to be deducted by non-exempt cooperatives in determining their taxable income), sometimes challenging the mechanics of allocating the patronage sourced income or the technical requirements of the allocation to constitute a deductible allocation). If MnSP is unable to maintain its Subchapter T tax status or the single-level tax treatment of its patronage sourced and non-patronage sourced earnings, it would be taxed as a corporation under

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Subchapter C of the Code, with taxation at both the entity level and member level, resulting in reduced economic benefits to its members. Upon completion of the proposed conversion to a Minnesota Chapter 308B cooperative association, MnSP will continue to operate as a cooperative, but it will be taxed as a partnership under Subchapter K of the Code for federal and state income tax purposes. This partnership tax treatment will preserve the single-level tax treatment for MnSP and its members on all earnings (both patronage sourced and non-patronage sourced income) and eliminate any uncertainty regarding the aforementioned risk of double taxation. Proposed Conversion is NOT a Merger The provisions of Sections 308B.225 and 308A.141 should not be confused with statutory provisions that cover merger and consolidation transactions. MnSP’s proposed conversion is not a merger or other type of corporate transaction. Minnesota Statutes Section 308B.225 provides that a cooperative organized under Chapter 308A may convert to a Chapter 308B cooperative association by amending its organizational documents to conform to the requirements of this chapter. Before proceeding with the conversion transaction, the Board of Directors, by a majority vote, must pass a resolution that includes the text of the proposed amendment. MnSP must then provide its members with notice of a special meeting to vote on the amendment, including a disclosure statement summarizing the member’s rights and obligations, the capital structure of MnSP and a copy of the resolutions to effect amendment of MnSP’s Articles to comply with Chapter 308B. Minnesota Statutes Section 308B.221 requires a majority vote of the members to adopt the proposed amendment, provided that a quorum of members are present or represented by alternative vote at the meeting. Following approval of the amendment by its members, MnSP would file a certificate and amended articles meeting the requirements of Chapter 308B with the Minnesota Secretary of State. Upon filing of the certificate and amended articles with the Secretary, MnSP would automatically convert to a cooperative association and be governed by
Chapter 308B of the Minnesota Statutes.
Minnesota Statutes Section 308B.225 expressly states that in a conversion from a Chapter 308A cooperative to a Chapter 308B cooperative association, the rights, securities, or interests in the 308A cooperative may be exchanged or converted into rights, property, securities, or interests in the 308B cooperative association. The converted cooperative is the same entity for all purposes under Minnesota law.1 Minnesota Statutes Section 308A.141 contains a similar election procedure whereby a corporation or association organized and doing business under other Minnesota statutes or under the laws of another state may become subject to the provisions of Minnesota Chapter 308A by simply amending 1 This is similar to Sections 265 and 266 of the Delaware General Corporation Law (“DGCL”) which state that when another entity has been converted into a Delaware corporation pursuant to Section 265 or a corporation has been converted to another entity or business form pursuant to Section 266, the corporation or converted entity, for all purposes of the laws of the State of Delaware, will be “deemed to be the same entity” as the converting other entity or corporation and the rights, privileges, powers, duties, assets and liabilities of the converting other entity or corporation shall remain vested and attached to the converted corporation or other entity.

Office of Chief Counsel its articles of incorporation to conform to the requirements of Chapter 308A and making the necessary filings with the Secretary of State. Major Similarities in MnSP Following the Proposed Amendments to be Governed by Chapter 308B In addition to the statutory effect of MnSP continuing as the same legal entity and merely amending its organizational documents to be governed by Chapter 308B, MnSP will continue to conduct its business and operations on a cooperative plan, and the rights, privileges, powers and duties of the members of MnSP and the holders of its nonvoting class B preferred stock will remain identical and unchanged both before and after the conversion transaction. Organization/Operations. The proposed conversion will not change MnSP’s basic organizational structure or entity type, and MnSP will remain the same legal entity for state law purposes, simply governed under a different cooperative statute. MnSP will remain a Minnesota cooperative with the same officers, management team and board of directors. Members of MnSP will enjoy the same rights and privileges and have the same delivery obligations under the uniform marketing and delivery agreement between MnSP and its patron members. MnSP’s business and operations before and after the proposed conversion will also remain the same. MnSP will continue operating its soybean crush facility and biodiesel business. The proposed conversion will not affect MnSP’s rights, privileges or powers or its obligations or liabilities. Further, there will be no impairment or reversion of title on any of MnSP’s assets, including real or personal property, debts due to MnSP or any causes of action. Membership. MnSP will continue as a membership cooperative. Patron members will continue to be governed by a uniform marketing and delivery agreement, and will continue to have the same delivery rights and obligations to MnSP as they currently have. Patron membership will remain restricted to persons who are eligible to be patron members under MnSP’s amended Articles and Bylaws including becoming the holder of one (1) common unit and entering into a uniform marketing and delivery agreement. Patron members will continue to have the same voting rights (one member, one vote) under MnSP’s amended Articles and Bylaws. Patron members will continue to share in the net income of MnSP on the basis of patronage, and not on the basis of investment. No member (whether patron or nonpatron) may hold more than one common unit. Capital Structure. The capital structure of MnSP will remain the same both before and after the proposed conversion transaction. Common units and Class A preferred delivery units will be subject to the same restrictions on dividends, transferability, pledging, and redemption as they currently are under MnSP’s Chapter 308A Articles and Bylaws. Class B preferred units will have the identical rights and limitations as the Class B preferred stock. To-wit:

Each share of common stock will be exchanged for one common unit, which will continue to
be the membership units of MnSP under its amended 308B Articles and Bylaws, and no member may hold more than one common unit. o Common units will remain nontransferable, and may never be redeemed for more than the value of the consideration for which they were issued. o No dividends may be paid on Common units.

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Each share of nonvoting Class A preferred stock will be exchanged for one nonvoting Class
A preferred unit, which will remain nonvoting and continue to be subject to the same restrictions on dividends, transfers, pledging, and redemptions. o Class A preferred units may only be transferred to persons eligible to hold the units, and no dividends on capital may be paid on Class A preferred units. o Class A preferred units will have same priority and liquidation rights as they currently enjoy, and may not receive more than the value for which they were issued in liquidation or merger. o The value derived by the holder of Class A preferred units will still be entirely dependent on delivery of soybeans by such holder, and not merely by virtue of holding the Class A preferred units.
Each share of nonvoting Class B preferred stock will be exchanged for one nonvoting Class B
preferred unit. o The nonvoting Class B preferred units may still be issued to any person or entity and each Class B preferred unit will remain nonvoting and continue to be subject to the same restrictions on transfers and redemptions. o MnSP may still pay dividends on Class B preferred units, as determined by the Board of Directors, and the dividends may be cumulative. o Dividends on Class B preferred units will remain subject to the 8% annual limit.
Patronage equities will be exchanged for equal patronage equities, at their stated dollar
amount on a dollar-for-dollar basis and in such denominations or series so as to preserve the year of issue and conditions of the original issuance.
All unallocated capital reserves of MnSP will continue as unallocated capital reserves of
MnSP following the conversion.
Single-Level Taxation. Notwithstanding the change from tax Subchapter T to Subchapter K of the Code, MnSP and its members, patrons and nonpatrons, will continue to be taxed on a single-level “pass-through” basis, which means that MnSP will pay no federal income tax at the entity level and members will pay tax on their allocable share of MnSP’s net income. Obligations and Liabilities. The conversion of MnSP to a 308B cooperative will not affect any obligations or liabilities of MnSP before the conversion or the personal liability of any person incurred before the conversion. Under Section 308B.225, subd. 2 of Minnesota Statutes, the conversion of a cooperative organized under Chapter 308A to a cooperative governed by Chapter 308B does not affect any obligations or liabilities of the cooperative before the conversion or the personal liability of any person incurred before the conversion. When the conversion is effective, the rights, privileges, and powers of the cooperative, real and personal property of the cooperative, debts due to the cooperative, and causes of action belonging to the cooperative, remain vested in the cooperative and are the property of the cooperative as converted and governed by Chapter 308B. Title to real property vested by deed or otherwise in the cooperative organized under Chapter 308A does not revert and is not impaired by reason

Office of Chief Counsel of the cooperative being converted and governed by Chapter 308B. Rights of creditors and liens upon property of the cooperative are preserved unimpaired, and debts, liabilities, and duties of the cooperative remain attached to the cooperative as converted and governed by Chapter 308B and may be enforced against the cooperative as converted and governed by Chapter 308B to the same extent as if the debts, liabilities, and duties had originally been incurred or contracted by the cooperative as organized under
Chapter 308B. The rights, privileges, powers, and interests in property of the cooperative under Chapter
308A, as well as the debts, liabilities, and duties of the cooperative are not deemed, as a consequence of the conversion, to have been transferred for any purpose of the laws of the State of Minnesota. Principal Differences in MnSP Following the Proposed Amendments to be Governed by Chapter 308B Terminology. Current members of MnSP will become patron members under the 308B cooperative terminology, and will continue to hold membership common stock and nonvoting Class A preferred delivery stock under MnSP’s amended Articles and Bylaws. However, because a 308B cooperative is an unincorporated association, the common stock will be referred to as “common units” and the nonvoting Class A preferred stock will be referred to as “Class A preferred units.” Tax Treatment. A 308A cooperative is an incorporated corporation that is taxed as a cooperative under Subchapter T of the Code. A 308B cooperative is an unincorporated association and is treated and taxed as a partnership under Subchapter K of the Code. Each member will be required to report on their income tax return their distributive share of MnSP’s income, gains, losses and deductions without regard to whether cash distributions are received. MnSP will provide each member with an annual Schedule K-1 indicating the member’s share of MnSP’s income, loss and their separately stated components. Additionally, for tax purposes only, the 308B conversion will be treated as a constructive taxable liquidation of MnSP and distribution of its assets, subject to all of its liabilities, to its shareholders, followed immediately by a constructive contribution by those shareholders of the assets and liabilities to MnSP. This tax treatment of the conversion transaction is due to MnSP being taxed as a partnership under the Code following the conversion, versus being taxed as a cooperative corporation under the Code prior to the conversion. The tax treatment does not impact or affect the approval of the conversion transaction under Chapter 308A or 308B or the rights of members under 308A or 308B. Nonpatron Members. A 308B cooperative allows for nonpatron members. Nonpatron members may share in the net income of the cooperative on the basis of investment rather than on the basis of patronage, if nonpatron membership interests are authorized by the Articles (patron members of the 308B cooperative continue to share in the net income of the cooperative allocable to the patron members collectively on the basis of patronage and not investment). This means that a 308B cooperative may pay more than the 8% annual dividend limitation on equity capital that is imposed on 308A cooperatives on any equity capital it receives in consideration for issuing nonpatron membership interests. MnSP’s amended Articles will allow for the issuance of nonpatron memberships. However, MnSP is not issuing any non-patron membership interests pursuant to the proposed conversion and any such future issuance of nonpatron membership interests would
require registration or an exemption under the Securities Act. In particular, the holders of the nonvoting Class B preferred units following the conversion transaction (currently the holders of nonvoting Class B preferred stock) will not be members of the MnSP under 308B (they will hold neither patron or nonpatron membership interests), will not have any of the rights or privileges of members, including no membership voting rights, and will continue to have only those rights under the Class B preferred units of MnSP under 308B that they currently have under the Class B preferred stock of MnSP under 308A.

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Following Conversion, There will be No Material Change in Applicable Law or Governing Documents and No Material Change in Rights or Obligations or Economic Interests of MnSP Stockholders We have outlined the major similarities in MnSP following the conversion, including:

Operations continue on a cooperative basis
MnSP continues a membership cooperative
Voting rights of patron members remain the same
Capital Structure of outstanding equity interests remains the same
Marketing and Delivery of Soybeans remain the same
Members still enjoy single-level taxation on all earnings of MnSP
We have also identified the principal differences in MnSP following the conversion, namely the tax treatment under subchapter K instead of subchapter T of the Code, and the state law authority of MnSP to issue non-patron membership interests. However, as discussed below in the “no sale of security” section of this no-action request, these differences do not result in “value” accruing to MnSP or its stockholders within the meaning of Section 2(a)(3). Similarly, while there are differences between an entity taxed under Subchapter K and one that is taxed under Subchapter T, the conversion will not result in any material change in the economic interests of the stockholders in MnSP. In addition to the statutory effect of MnSP continuing as the same legal entity and merely amending its organizational documents to be governed by Chapter 308B, MnSP will continue to conduct its business and operations on a cooperative plan, and the rights, privileges, powers and duties of the members of MnSP and the holders of its nonvoting class B preferred stock will remain identical and unchanged both before and after the conversion transaction under the amended organizational documents. In sum, there will be no material change in applicable law or governing documents of MnSP following the conversion. The MnSP stockholders will receive interests in the 308B cooperative that are identical in rights and obligations to the interests they currently hold in all material respects. There will be no change in the cooperative operations of MnSP or the rights and obligations of members and the holders of the nonvoting class B preferred stock following the conversion. In our opinion, the conversion will not result in any material change in the economic interests of the MnSP stockholders in MnSP.

MnSP’s Existing Shares of Common Stock, Class A Preferred Stock and Patronage Equities and its Proposed Common Units, Class A Preferred Units and Patronage Equities Are Not Securities We are of the opinion that MnSP’s common stock, Class A preferred stock and patronage equities, and the common units, Class A preferred units and patronage equities that will exist following the adoption of the amendments to be governed by Chapter 308B do not constitute “securities” within the meaning of Section 2(a)(1) of the Securities Act. In arriving at this conclusion, we particularly note the following: (1) no stock dividends may be paid on either the common stock, the Class A preferred stock, or the patronage equities of MnSP, either before or after the conversion; (2) MnSP’s income is not and will not be distributed to members in proportion to the number of shares held or Class A preferred units held or the face amount of patronage equities held but rather is and will be distributed on the basis of

Office of Chief Counsel patronage; (3) MnSP’s common stock and common units are and will be nontransferable, and can never appreciate in value; (4) because no stock dividends are paid or will be paid on the Class A preferred stock / preferred units, the only method to derive value from ownership of the Class A preferred stock and units and patronage equities is through delivery of soybeans by the holder; (5) because liquidating or merger payments may never exceed the value for which the shares of Class A preferred stock / preferred units were issued, the only method to derive value from ownership of the Class A preferred stock / preferred units or patronage equities is through delivery of soybeans by the holder; (6) no person has any right whatsoever to require the redemption or retirement of patronage equities and their redemption or retirement is solely within the discretion and on the terms as prescribed from time to time by the Board of Directors, provided patronage equities may never be redeemed for more than their face value; (7) patronage equities confer no voting rights on its holders; (8) in the event of liquidation of the cooperative or by operation of a merger, patronage equities are paid at face amount after payment of preferred stock and common stock; (9) because redemption/retirement or liquidating/merger payments may never exceed the face amount of the patronage equities, patronage equities can never appreciate in value; (10) the transfer of MnSP’s Class A preferred stock and patronage equities is and will continue to be greatly restricted and, in the case of the Class A preferred stock / preferred units (to which patronage equities are and will be bundled by operation of the bylaws), may only be transferred to persons who are or are eligible to be a patron member, which requires entering into a uniform marketing and delivery agreement; and (11) the overall benefits derived from ownership of MnSP’s shares are attributable primarily to the assurance that members will have a value-added market to whom they can deliver and sell their soybeans, and does require active delivery to receive those benefits. Two leading cases for the proposition that shares of capital stock in a cooperative do not constitute “securities” are United Housing Foundation, Inc. v. Forman2 and B. Rosenberg & Sons, Inc. v. St. James Sugar Coop., Inc. 3 In Forman, part of the construction cost of a cooperative housing project was financed by advance deposits given by those wanting to lease apartments in the project. Shares of “stock” were given in return for the deposits. The Supreme Court held that the stock was not a security under the federal securities laws because it lacked the normal incidents of a security investment: (i) it did not entitle its holders to receive dividends contingent upon an apportionment of profits; (ii) it was nonnegotiable; (iii) it could not be pledged; (iv) it conferred no voting rights; and (v) it could not appreciate in value. The
stock had no investment purpose and was merely a deposit which was fully recoverable from the cooperative when the stockholder left the apartment. In St. James Sugar, a sugar grower's cooperative was organized to assist farmers in marketing their sugar cane and to obtain favorable prices for supplies and equipment. To become a member, each farmer had to purchase one share of the cooperative's common stock. The District Court extended Forman's application to membership participation in an agricultural cooperative when it held that the common stock required to be purchased to become a member was not a security. The District Court noted that the stock was nonnegotiable, bore no dividends and entitled each member to only one vote. The only distributions made were patronage dividends, which “are not profits similar to income from ordinary stock investments but are rebates or refunds to members based solely on patronage and not on the amount of money invested in the stock.” 447 F.Supp. at 4. Unlike typical securities transactions, patronage dividends and other benefits based on the members' patronage of the cooperative are not directly related to the initial investment in the cooperative. Rather, members of cooperatives entitled to 2 421 U.S. 837 (1975). 3 447 F.Supp. 1 (E.D. La. 1976).

Office of Chief Counsel such patronage dividends expect a refund which comes from their own labor and efforts and not from their original investments of capital. With respect to MnSP’s patronage equities both before and after the adoption to be governed by
Chapter 308B, under the principles identified in Forman and St. James Sugar, we believe the patronage
equities are not securities under the federal securities laws because they lack the normal incidents of a security investment. Unlike typical securities transactions, the patronage equities are issued automatically in amounts proportionate to a member's quantity of business with MnSP, without such member having to decide whether to acquire the patronage equities or not. Under such circumstances, there is no “investor” to be protected because the recipient of the patronage equities makes no investment decision whether or not to receive a patronage equity refund. The decision to accept patronage equities is made by the member when they make a decision to become a member and not when the member does business with MnSP or when the patronage refund is made. The patronage equities confer no voting rights on their holders. The patronage equities can never appreciate in value. No interest or dividends are paid on the patronage equities. The transfer of the patronage equities is greatly restricted, and through the bundling provisions of MnSP’s Bylaws may only be transferred along with the Class A preferred stock to those persons who are or are eligible to be a patron member, which requires entering into a uniform marketing and delivery agreement. Accordingly, we are of the opinion that MnSP’s patronage equities both before and after the adoption to be governed by Chapter 308B do not constitute securities under the federal securities laws and therefore would not require registration. With respect to MnSP’s common stock and Class A preferred stock and the common units and Class A preferred units that will exist following the adoption of the amendments to be governed by
Chapter 308B, the Staff's position on membership stock in cooperatives has been generally consistent
with the Forman and St. James Sugar decisions. The majority of requests for no-action letters involving the issuance of unregistered stock by cooperatives are sought under Section 2(a)(1), based on the opinion that cooperative stock does not constitute a security.4 Associated Grocers Co-Op and American Hardware Supply both involve instances where a cooperative argued that no securities were involved when stock was purchased as a requirement to become a member in a cooperative and to receive the cooperative's goods or services. No interest or dividends were paid, other than patronage dividends, which in an economic sense represent adjustments to the purchase price of the cooperative's services rather than gain or loss on an investment. The Staff granted no-action letters in both cases noting that the stock did not possess the characteristics of a security, such as transferability, ordinary dividend rights and appreciation in value. American Crystal Sugar involved an agricultural cooperative that argued its preferred stock was not a security. The Staff granted a no-action relief, noting in particular that: (1) the preferred stock paid no dividends, and income was not distributed to members in proportion to the number of shares held; (2) the transfer of preferred stock was greatly restricted; and (3) the benefits derived from ownership of the cooperative's shares were attributable to the assurance that shareholders would have a purchaser to whom they could deliver their crops. In one case, the Staff denied no action relief to a cooperative arguing that its common stock was not a security.5 Mutual Service involved a cooperative that served as the channel through which three 4 See e.g. Associated Grocers Co-Op, Inc., SEC No-Action Letter, 1984 WL 45337 (June 8, 1984); American Hardware Supply Co., SEC No-Action Letter, 1984 WL 44919 (Jan. 9, 1984); and ); American Crystal Sugar Co., SEC No-Action Letter, 1984 WL 45677 (Feb. 19, 1984). 5 See Mutual Service Coop., SEC No-Action Letter, 1981 WL 25127 (Jul. 27, 1981).

Office of Chief Counsel insurance companies were controlled under a complex governance structure. In its denial of no action relief, the Staff stated that the transferability, capital appreciation and dividend features attendant to the cooperative’s shares suggest that they may constitute securities, particularly noting that: (1) the payment of dividends was permitted notwithstanding the cooperative’s representation that such dividends were unlikely to be paid; (2) the shares of the cooperative's common stock could be transferred with the approval of the Board of Directors; and (3) such stock could be resold at a profit. Unlike Mutual Service Cooperative, no dividends may be paid on MnSP’s common stock and Class A preferred stock. Additionally, MnSP’s common stock is non-transferable and may be redeemed only at the option of the Board of Directors for no more than the value of the consideration for which the common stock was issued. Although MnSP’s Class A preferred stock is transferable with the approval of the Board of Directors, MnSP has the first privilege of purchasing any Class A preferred stock offered for sale by a stockholder. Additionally, there is essentially no market for MnSP’s Class A preferred stock because stockholders are limited to eligible agricultural producers and holders must grow and deliver soybeans in order to derive any economic benefit from owning the Class A preferred stock. This no market is borne out by the fact that since inception in 2000, less than ½ of 1% of MnSP’s Class A preferred stock has been sold. As in Forman, MnSP's existing common and Class A preferred stock and proposed common and Class A preferred units represent a membership deposit for the use of MnSP's marketing services. MnSP's members are not motivated by a desire to profit from an investment of capital in purchasing MnSP's common and Class A preferred stock, but instead by a return from their own labor and efforts by participating in a marketing cooperative. The financial benefits of MnSP's business activity, reflected in the patronage equities, accrue to its members in relationship to their patronage activity and not as a result of their holdings of capital stock. As in St. James Sugar, where it was held that no security was involved, MnSP's common stock should not be a security because (i) it is issuable only to members; (ii) it is not transferable, and cannot be pledged; (iii) it does not entitle members to any dividends; and (iv) no more than the aggregate consideration for which the stock was issued is returned to a member upon withdrawal from MnSP or upon the liquidation or merger of MnSP. Furthermore, because no member may hold more than one share of common stock, each member has the same number of votes, regardless of the volume of a member's business with MnSP. Further, as in St. James Sugar, where it was held that no security was involved, MnSP's Class A preferred stock should not be a security because (i) it is issuable only to
members; (ii) it is transferable only to eligible members, and only upon approval and acceptance of the board of directors; (iii) it does not entitle members to any dividends other than patronage equities; and (iv) no more than the aggregate consideration for which the stock was issued is returned to a member upon liquidation and dissolution of MnSP. The value of membership and the sharing of earnings of MnSP comes through membership and patronage, and not on the basis of how many shares are owned. In sum, the foregoing Article and Bylaw provisions constitute MnSP’s operations on a cooperative plan and result in its common stock, Class A preferred stock and patronage equities not constituting a “security.” Following its election to become a Chapter 308B cooperative, MnSP’s amended Articles and Bylaws will contain the same provisions mandating operations on a cooperative plan for its patron members, and thus the common and Class A preferred units of MnSP and patronage equities will not constitute a security. In arriving at this position, we particularly note the following: (1) no stock dividends may be paid on either the common stock, the Class A preferred stock, or the patronage equities of MnSP, and MnSP’s income is not distributed to members in proportion to the number of shares held but rather is distributed on the basis of patronage; (2) MnSP’s common stock in

Office of Chief Counsel nontransferable, and the transfer of MnSP’s Class A preferred stock and patronage equities is greatly restricted; (3) the benefits derived from ownership of MnSP’s shares are attributable primarily to the assurance that members will have a value-added market to whom they can deliver and sell their soybeans; (4) all members of MnSP immediately prior to the conversion will become patron members of MnSP under Chapter 308B; and (5) patron members will be subject to these same restrictions and benefits under MnSP’s amended Articles and Bylaws under Chapter 308B. Accordingly, we are of the opinion that MnSP’s existing shares of common stock and Class A preferred stock, and its proposed common units and Class A preferred units, are not subject to registration under the Securities Act because the common and Class A preferred stock and common and Class A preferred units merely evidence membership in MnSP rather than a security under Section 2(a)(1) of the Securities Act. The Conversion of Class B Preferred Stock of MnSP into Class B Preferred Units of MnSP Does Not Involve the Sale of a Security under Section 2(a)(3) of the Securities Act. We are of the opinion that the proposed conversion, as it relates to the Class B preferred stock of MnSP, will not involve the offer for sale or sale6 of a security because (1) the holders of the Class B preferred stock will have no vote with respect to the conversion of their shares into Class B preferred units and (2) no “value” will accrue to MnSP or the holders of the Class B preferred stock within the meaning of Section 2(a)(3) as a result of the conversion. Accordingly, we request that the Staff advise MnSP that the Staff will not recommend that any enforcement action be taken by the Commission if MnSP undertakes and completes the conversion with respect to the Class B preferred stock and Class B preferred Units without registration under the 1933 Act as described in this request. In making this request, we would like to point out that this no vote arises not from the structure of the conversion, but rather from the terms of the original issuance of the Class B preferred stock, and thus can be distinguished from Rule 145 transactions structured to avoid a vote of security holders. Here, the holders of Class B preferred stock simply have no right to vote on the conversion, and were fully-aware and informed of the nonvoting nature of the Class B preferred stock in connection with the original issuance of the stock.

From 1951 through 1972, corporate mergers, acquisitions, consolidations and reclassifications generally were exempt from registration under Rule 133 of the Commission on the theory that such transactions were acts by corporate entities rather than individual equity holders and that, as to the holders, no “sale” was involved in these transactions. Rule 145 of the Commission under the 1933 Act was adopted effective January 1, 1973 to reverse the “no-sale” position that prevailed with respect to securities offered in corporate mergers, acquisitions, consolidations and reclassifications under Rule 133.7 6 Section 5 of the Securities Act provides as follows: “Sec. 5. (a) Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly — (1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise; …” Section 2(a)(3) of the Securities Act of 1933 defines the terms “sale” and “sell” as follows: “(3) The term “sale” or “sell” shall include every contract of sale or disposition of a security or interest in a security, for value. The term “offer to sell”, “offer for sale”, or “offer” shall include every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value. ….” 7 Securities Act Release 33-5316 (October 6, 1972), which announced the adoption of Rule 145, stated:
“Transactions of the character described in Rule 133 do not ... occur solely by operation of law and without the element of individual stockholder volition.” Rather, “[t]he corporate action [involved in such transactions] . . . is

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As such, Rule 145 clarified the definition of “sale” contained in Section 2(a)(3) as it would apply or not apply to mergers, acquisitions, consolidations and reclassifications. Rule 145 provides as follows:
“(a) Transactions within this section. An offer, offer to sell, offer for sale, or sale shall be deemed to be involved, within the meaning of section 2(3) of the Act, so far as the security holders of a corporation or other person are concerned where, pursuant to statutory provisions of the jurisdiction under which such corporation or other person is organized, or pursuant to the provisions contained in its certificate of incorporation or similar controlling instruments, or otherwise, there is submitted for the vote or consent of such security holders a plan or agreement for (1) Reclassifications. A reclassification of securities of such corporation or other person, other than a stock split, reverse stock split, or change in par value, which involves the substitution of a security for another security; (2) Mergers or consolidations. A statutory merger or consolidation or similar plan or acquisition in which securities of such corporation or other person held by such security holders will become or be exchanged for securities of any person, unless the sole purpose of the transaction is to change an issuer’s domicile solely within the United States; or (3) Transfers of assets. A transfer of assets of such corporation or other person, to another person in consideration of the issuance of securities of such other person or any of its affiliates ….” While the conversion of MnSP from a Chapter 308A cooperative to a Chapter 308B cooperative may involve a reclassification of the Class B preferred stock of MnSP to Class B preferred units, it is a reclassification without substance or affect on the holders of the Class B preferred interests (the Class B preferred stock and the Class B preferred units will have identical rights and privileges). As a result, we are of the opinion that Rule 145 does not apply to the conversion of the Class B preferred stock of MnSP into Class B preferred units of MnSP because, as to the holders of the Class B preferred stock and Class B preferred units, there is no sale involved in the transaction. The holders of the Class B preferred stock have no vote on the conversion transaction. In the plain language of Rule 145, a sale occurs with respect to “security holders of a corporation or other person” when “there is submitted for the vote or consent of such security holders a plan or agreement ….” In the case of the holders of the MnSP Class B preferred stock, because such holders have no voting rights with respect to the derived from the individual consent given by each stockholder in voting on a proposal to merge or consolidate a business or reclassify a security. In voting, each consenting stockholder is expressing his voluntary and individual acceptance of the new security, and generally the disapproving stockholder is deferring his decision as to whether to accept the new security or, if he exercises his dissenter’s rights, a cash payment. The corporate action in these circumstances, therefore, is not some type of
independent fiat, but is only the aggregate effect of the voluntary decisions made by the individual stockholders to accept or reject the exchange.” In addition, the Release said that Rule 145 was intended to “operate to inhibit the creation of public markets in securities of issues concerning which adequate current information is not available to the public.”

Office of Chief Counsel transaction, nothing is being submitted for their vote or consent. If nothing is submitted for their vote or consent, under Rule 145 there is no sale. This makes complete sense from both a conceptual and a practical viewpoint under the Act. If there is no vote on the part of the holders of the Class B preferred stock, they have no investment decision to make with respect to the transaction or the receipt by them of the Class B preferred units. If there is no investment decision to be made by them, there is no reason to provide them with information in the form of a registration statement that would provide them with the disclosure protections afforded by the Securities Act. This reasoning was adopted and clearly stated by the Commission at the time of the adoption of Rule
145. As the preliminary note to Rule 145 of the Securities Act states, “Rule 145 is designed to make available the
protection provided by registration under the Securities Act of 1933 ... to persons who are offered securities in a business combination of the type described in paragraphs (a)(1), (2) and (3) of the rule ... pursuant to which [offer] such holders are required to elect, on the basis of what is in substance a new investment decision, whether to accept a new or different security in exchange for their existing security.” The proposed conversion simply does not present the holders of MnSP Class B preferred stock with an investment decision to which Rule 145 and
Section 5 of Securities Act are intended to apply, under both the plain language of the statute and the rule as well
as under conceptual and practical viewpoints. There is simply no reason to assign a “sale” interpretation under Rule 145 contrary to its plain language to holders of a nonvoting stock that are neither entitled to vote on the conversion nor ever intended to have voting rights. This reasoning has been accepted in interpretations and no-action letters issued by the Staff and in federal court cases since the adoption by the Commission of Rule 145. For instance, Section II, Illustration F in Securities Act Release No. 33-5463, issued shortly after the adoption of Rule 145, infers that shareholder approval is necessary to trigger Rule 145 registration requirements. In the case of a spin-off that would not have required a stockholder vote under state law or the company’s articles or bylaws, the Staff stated: “Accordingly, inasmuch as the board of directors in its discretion has determined to submit the matter to stockholders, Rule 145 is applicable and the transaction may be registered on Form S-14 or S-1.”8 In the no-action letter addressed to General Electric Capital Corporation, 9 both the reasoning of the request and the conclusion of the Staff illustrated the proper analysis and application of the provisions of the statute and regulations. In GE Capital, the company proposed a reincorporation merger that would transform an investment company incorporated under the provisions of the New York Banking Law into a business corporation organized under the Delaware General Corporation Law. GE Capital had two classes of stock:
voting common stock, all of which was held by a single owner, and non-voting variable cumulative preferred stock, issued in a total of 40 series and held by approximately 175 stockholders. Mindful of the significant changes being made in the structure of the entity, the counsel for GE Capital argued that the change of domicile exception to Rule 145 should apply with respect to the voting common stock10 but relied entirely on the no-sale 8 Securities Act Release No. 5463 (Feb. 28, 1974), 1974 WL 161682, at * 6, illus. F. 9 General Electric Capital Corporation (July 26, 2000). 10 The request letter cited several prior no-action letters to demonstrate that “every change in corporate domicile … necessarily involves changes in the interests of stockholders,” including significant “organic changes” that could not have been accomplished under the law of the original domicile.

Office of Chief Counsel analysis with respect to the preferred stock. As the request stated, “We believe that the absence of voting or appraisal rights on the part of the holders of the [preferred stock] in connection with the Reincorporation Merger not only causes the issuance of the [new preferred stock] to fall outside of Rule 145 but similarly results in such issuance not being a ‘sale’ for purposes of Section 5 of the Securities Act.” The conclusion of the Staff was concise: “The Division will not recommend enforcement action to the Commission if, in reliance on your opinion of counsel that the transaction is not a sale within the meaning of Section 2(a)(3) of the Securities Act of 1933, GE Capital Delaware issues its shares to stockholders of GE Capital in the Reincorporation Merger.” We are of the opinion that the proposed conversion by MnSP is similar to GE Capital in that the no-sale analysis should apply to the conversion of MnSP’s Class B preferred stock into Class B preferred units just as it applied to the exchange of the GE Capital preferred stock for new preferred stock. We also are of the opinion that while an analysis of the differences between the pre-existing entity and successor should not be relevant in a no-sale context, to the extent that such an analysis might be considered relevant, the differences discussed above between MnSP prior to and following the conversion are less significant than the substantial organic change being made in the GE Capital reincorporation. We are of the opinion that the conclusion of GE Capital’s counsel that “the relative rights, powers and preferences of the holders of capital stock of GE Capital . . . will not vary to any significant degree” and that an analysis of the changes affecting the interests of stockholders, which were discussed at length in GE Capital, can be even more forcefully applied in the case of MnSP. A similar result was obtained in New Street Capital Corporation. 11 New Street was a Delaware corporation that proposed to reincorporate into a new Delaware corporation principally in an effort to escape the effects of a history of felonies and bankruptcy that tainted New Street as successor to the Drexel Burnham Lambert Group. A trust held 99% of the common stock and the approval of other holders of common stock was not necessary. There were no dissenters’ or appraisal rights. There were also a number of warrant holders with no voting rights. Counsel argued, alternatively, that the Section 3(a)(9) exemption should apply or the transaction should not be considered to involve a sale. The Section 3(a)(9) analysis was somewhat forced because there were clearly two entities involved; counsel argued that the bankruptcy court’s view of the two companies as being the same entity might be persuasive.12 The no-sale analysis was presented forcefully, emphasizing the lack of a shareholder vote or appraisal rights, that no investment decision was being made by anyone other than the Trust,
that shareholder rights would not change, and that no public market would be created as a consequence of the transaction. Without specifying the basis for its decision and without necessarily agreeing with counsel’s analysis, the Staff concluded it would not recommend enforcement action. Again, we believe that the MnSP conversion compares favorably to the facts and analysis presented in the New Street letter. The salient facts supporting the no-sale conclusion are similar, and we are of the opinion that the same entity analysis applies even more strongly in the case of MnSP since, under Minnesota law, MnSP will truly be the same entity both before and after the conversion. We view the GE Capital and New Street transactions as true reorganizations because they do not fit neatly into any other category of analysis under Section 2(a)(3) or Rule 145. 11 New Street Capital Corporation (July 7, 1993) 12 No serious argument was made that the bankruptcy exception might apply because it was acknowledged that the bankruptcy was essentially completed.

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In the case of the MnSP conversion from a cooperative subject to Chapter 308A to a cooperative subject to Chapter 308B, the holders of the Class B preferred stock have neither voting rights nor dissenters’ rights under the terms of the stock as it was originally issued. This is not a selective derogation of rights generally available to the holders of MnSP Class B preferred stock. They have no rights to force redemption of their shares or otherwise opt out of the conversion. Thus, there is no investment decision whatsoever to be made by them. Requiring registration of the transaction to provide disclosure to the holders of the Class B preferred stock would serve no purpose, under the Act or otherwise. The no-sale logic has also been adopted in court decisions. One example is Isquith by Isquith v. Caremark International, Inc.13, where a spin-off not subject to shareholder approval was held not to involve a sale for purposes of maintaining a suit under Rule 10b-5. Baxter International, Inc., the company effecting the spin-off, had previously obtained a no-action letter for the transaction.14 The 7th Circuit stated:
“[The securities laws] create a remedy … for someone who is induced by (‘relied on,’ the courts usually say) a misrepresentation or a misleading omission to buy or sell a stock …. This presupposes that the someone had a choice, a choice distorted by the fraud. The members of the class in this case had no choice. They made no investment decision. They therefore cannot have been induced by the alleged fraud to buy or sell any securities even if the spinoff can somehow be thought of as effecting a sale of their shares in Baxter.” 15 The Court concluded that “… there can be no suit under the securities laws by someone who has not made an investment decision, that is, who has not made a choice, a voluntary decision albeit one induced by the fraud, to buy or sell securities.” 16 The reasoning and policy views inherent in the foregoing Staff pronouncements, no-action letters and decisions is rooted in the original views of the Federal Trade Commission, the predecessor of the Commission, prior to the adoption of Rule 133, that a “sale” is “involved in the submission of a plan or agreement for reorganization…when an opportunity to assent or to dissent or withdraw from a plan or agreement for reorganization is given on such terms that a person so assenting or failing to dissent or withdraw within a limited time will be bound, so far as he personally is concerned, to accept such securities….”17 In Addition to Not Constituting a Sale Under Rule 145, the Conversion Transaction Will Not Result in a Material Change in the Economic Interests of the Holders of Class B Preferred Stock or in “Value” Accruing to MnSP or to the Holders of Class B Preferred Stock Within the Meaning of
Section 2(a)(3)
13 136 F.3d 531 (7th Cir. 1998). See also additional cases cited therein.
14 Baxter International, Inc. (September 11, 1992).
15 136 F3d at 534 (citations omitted).
16 Id. at 536.
17 Federal Trade Commission Release No. 167, May 16, 1934, quoted in an address by Manuel F. Cohen, Chief Counsel, Division of Corporation Finance, before The Association of the Bar of the City of New York Section on Banking, Corporation and Business Law and Section on Administrative Law, February 24, 1959.

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We understand that the Staff has adopted the position, including in certain re-domestication cases, that transactions involving the disposition of securities for certain benefits (or detriments), including tax advantages (or disadvantages), or transactions where there are material changes in the rights of shareholders or where shareholders are giving up certain rights, constitute “value” within the meaning of
Section 2(a)(3) of the Securities Act of 1933 and the definition of “sale” thereunder, notwithstanding the
fact that the holders of such securities have no vote or other investment decision to make in the transaction. The principal differences in MnSP and its governing documents following conversion from a
Chapter 308A cooperative to a Chapter 308B cooperative will not constitute “value” within the meaning
of Section 2(a)(3). There will be no changes of any substance in the conversion that result in certain “value” accruing to MnSP or the holders of the Class B preferred stock within the meaning of
Section 2(a)(3). In particular, unlike the re-domestication cases, there will be no tax advantages to the
holders of the Class B preferred stock of MnSP in the conversion, immediate or otherwise, that would constitute “value” within the meaning of Section 2(a)(3). The MnSP conversion will simply preserve the single-level taxation on MnSP’s earnings currently enjoyed by MnSP and the holders of its stock (as an IRC Section 521 exempt cooperative, both patronage and non-patronage earnings are eligible for singlelevel taxation), and will not result in a material change in the economic interests of the stockholders. Moreover, any dividends paid on the Class B preferred units following the conversion will continue to be taxed at the same ordinary income tax rates as dividends paid on the Class B preferred stock currently are (as an IRC Section 521 exempt cooperative, dividends paid by MnSP on its Class B preferred stock are not “qualified dividends” and are not eligible for the lower tax rate on qualified dividends). Also, “value” within the meaning of Section 2(a)(3) does not accrue to MnSP or its stockholders as a result of the conversion simply because MnSP may issue non-patronage membership interests under
Chapter 308B. While some practitioners cite the ability of a 308B cooperative to issue non-patronage
equity interests as an advantage of a 308B cooperative over a 308A cooperative, the MnSP conversion will result in no (zero) non-patronage equity interests being issued. Achieving certainty on its single-level taxation of earnings is the reason or purpose of the conversion, not to issue non-patronage equity interests. MnSP has no current plans or present intent to issue any type of equity interests following the conversion, and has no current plans to issue non-patronage equity interests following the conversion. MnSP may never issue non-patronage equity interests. While issuance of non-patronage equity interests may be permitted under Chapter 308B, it would be unfair to characterize this possibility as “value” accruing to MnSP or its stockholders (including holders of the Class B preferred stock) from the conversion within the meaning of Section 2(a)(3). In the preceding sections of this letter and in the Comparison of Minnesota Cooperative Statutes provided with this request, we outline the major similarities and principal differences in MnSP that will exist or arise as a consequence of being governed by Chapter 308B instead of Chapter 308A. None of these differences result in “value” accruing to MnSP or its stockholders within the meaning of Section 2(a)(3) that would result in the conversion constituting a “sale” of a security with respect to the holders of the Class B preferred stock. The two principal differences between Minnesota Statutes Chapter 308A and
Chapter 308B, namely partnership tax treatment and the authority to issue non-patronage equity interests,
do not result in a material change in the economic interest of the MnSP stockholders or “value” accruing to MnSP or the holders of its Class B preferred stock. Therefore, the conversion transaction does not result in any “value” accruing to MnSP or the holders of the Class B preferred stock within the meaning of Section 2(a)(3) that would cause the conversion transaction to constitute a sale of a security under

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Section 2(a)(3) with respect to such holders notwithstanding the fact that they have no vote on the
transaction.
The Conversion Does Not Result in Tax Advantages to MnSP or the Holders of Class B Preferred Stock The principal purpose of the conversion is to assure the preservation of the single-level taxation on MnSP’s earnings presently enjoyed by MnSP and the holders of its stock. As an IRC Section 521 exempt cooperative, both patronage and non-patronage earnings of MnSP are presently eligible for singlelevel taxation. While the conversion to a Chapter 308B cooperative for a non-exempt cooperative would extend single-level taxation to earnings derived from non-patronage sources (non-exempt cooperatives are not entitled to patronage dividend deduction from non-patronage income), that is not the case for MnSP. MnSP is an exempt cooperative under IRC Section 521 and is already eligible for single-level taxation on both patronage and non-patronage earnings. Consequently, the conversion does not bestow a tax advantage to MnSP by expanding pass-through taxation to non-patronage earnings. Further, MnSP has not received any notice from the Internal Revenue Service questioning its tax treatment under Subchapter T of the Internal Revenue Code or its standing as a Section 521 exempt cooperative. Thus, we conclude that there is no material tax advantage to MnSP in the conversion, but rather the conversion simply preserves the single-level taxation of MnSP’s earnings. Where a transaction does involve the disposition of securities for certain benefits, including tax advantages accruing to the company or its shareholders, the Staff has found such advantages would constitute “value” within the meaning of Section 2(a)(3). 18 In Caci, Inc., the Staff declined to give noaction relief to the parent company in a subsidiary spin-off request, and specifically noted that tax advantages to the parent company would constitute “value” within the meaning of Section 2(a)(3). Unlike the transaction in Caci, the conversion of MnSP to a Chapter 308B cooperative will not result in tax advantages for MnSP; as an exempt cooperative, it already is able to pass 100% of its income, both patronage-sourced and nonpatronage-sourced, through to its patrons. The change in taxation of MnSP from subchapter T of the Internal Revenue Code to subchapter K following conversion would simply preserve the single-level taxation of MnSP’s earnings. Consequently, unlike in Caci, Inc., the conversion transaction does not result in “value” accruing to MnSP within the meaning of Section 2(a)(3). Similar to the foregoing “no tax advantages to MnSP from the conversion” conclusion, the change in taxation of MnSP’s earnings from subchapter T to subchapter K following the conversion will not result in a tax benefit to the holders of Class B preferred stock either. For the stockholders of MnSP, and specifically for the holders of Class B preferred stock, preserving single-level taxation is not a new benefit or advantage received in or resulting from the conversion. Rather, the conversion simply assures the
preservation of single-level taxation. Neither does the conversion transaction result in a tax disadvantage or detriment to the holders of Class B preferred stock. As noted above, MnSP is an IRC 521 exempt cooperative. As a 521 exempt cooperative, dividends paid by MnSP on its Class B preferred stock are not “qualified dividends” and are not eligible for the lower tax rate on qualified dividends. Consequently, the holders of Class B preferred stock currently pay ordinary income tax rates on dividends paid on the Class B preferred stock. Following conversion, any dividends paid on the Class B preferred units will continue to be taxed at the same ordinary income tax rates. As a result, unlike in Caci, Inc., the exchange of Class B preferred stock for Class B preferred units by the holders thereof in the conversion 18 See e.g. Caci, Inc., SEC No-Action Letter, (Nov. 14, 1977) (tax benefits accruing to the parent).

Office of Chief Counsel transaction does not involve the disposition of securities for certain benefits that would constitute “value” within the meaning of Section 2(a)(3). Further, while the conversion of MnSP from a 308A cooperative to a 308B cooperative will be treated as a taxable liquidation of MnSP followed by a re-contribution of assets to the 308B cooperative, the holders of Class B preferred stock will recognize no material tax consequences in the conversion and the tax treatment of the conversion does not impact or affect the conversion under 308A or 308B or the rights of members thereunder. In preparation for the conversion, MnSP has engaged a third-party appraiser to determine fair market value of MnSP and its assets and liabilities. Based on that preliminary appraisal, it appears that the fair market value of MnSP’s assets will not exceed MnSP’s tax basis in those assets at the effective time of the conversion. Consequently, we do not believe that the conversion will result in tax liability for the holders of common stock, Class A preferred stock or Class B preferred stock. Moreover, regardless of the final outcome of the appraisal, the holders of nonvoting Class B preferred stock will receive identical, nonvoting Class B preferred units that would be unaffected in terms of fair market value by the appraisal, such that we expect such holders to have no material tax consequence in the conversion. In sum, we conclude that no “value” will accrue to either MnSP or the holders of Class B preferred stock in the conversion transaction within the meaning of Section 2(a)(3). Other Considerations We recognize that the Staff often takes into consideration factors extrinsic to the precise provisions of the Act and applicable rules in determining whether to issue a no-action letter. In the case of the proposed conversion, MnSP will provide a disclosure statement that substantially complies with the requirements of Regulation 14C to all of MnSP’s stockholders (including holders of the non-voting Class A preferred stock and non-voting Class B preferred stock in addition to the holders of common stock) prior to the stockholders’ meeting to be held to approve the conversion. Holders of all classes of stock will be invited to the special meeting which will consider the proposal, and holders of all classes will be invited to participate in the meeting, again notwithstanding the fact that only holders of common stock will be entitled to vote. MnSP intends to continue its policies of openness, inclusiveness and disclosure with the holders of all of its units of every class following the conversion. It is also relevant to note that in the event MnSP chooses to offer and sell another class of equity security in the future, as would be permitted under the terms of Chapter 308B and the amended Articles of Organization of MnSP, that offering would require either registration or an exemption from registration under the Act. This would not be the case if MnSP
remained a Chapter 308A cooperative exempt from the requirements of the Act by virtue of its tax status as a Chapter 321 cooperative. In that event, MnSP would also become subject to compliance with the Securities Exchange Act of 1934, either under Section 15(d) or because registration becomes required under Section 12(g). Unless and until MnSP issues additional securities that are required to be registered under the Securities Act, MnSP would like to avoid the added expense associated with the detailed and burdensome process of maintaining filings under the 1934 Act which would result from a registration under the Securities Act. The fact that trading of the common units, Class A preferred units and Class B preferred units of MnSP will be limited to the point of almost complete restriction should lead to the conclusion that compliance with the requirements of the 1934 Act should be unnecessary.

Office of Chief Counsel
Finally, we urge that the Staff give all due consideration to the realities of operating an enterprise as a cooperative and to the statutory framework for cooperatives provided by Minnesota law and by the laws of many other states. As a cooperative, MnSP operates, and will continue to operate, in a manner that, either by specific rule and exemption or from a practical standpoint, has been treated as distinct from ordinary business corporations under the securities laws. A favorable response to our request would continue the Staff’s recognition that these distinctions remain significant for purposes of the Securities Act. Conclusion For the reasons set forth above, we respectfully request the Staff to confirm that it would not recommend enforcement action if MnSP proceeds with the proposed conversion of MnSP from a Chapter 308A cooperative to a Chapter 308B cooperative as described above without registration under the Securities Act in reliance on our opinion that MnSP’s existing shares of common stock, Class A preferred stock and patronage equities, and its proposed common units, Class A preferred units and allocated profits, are not securities within the meaning of Section 2(a)(1) of the Securities Act, and that the conversion of existing shares of its Class B preferred stock into Class B preferred units does not constitute a sale within the meaning of Section 2(a)(3) and Section 5 of the Securities Act and Rule 145 thereunder.

We would appreciate your response to this request at the Staff's earliest convenience. If, for any reason, it does not appear the Staff will be able to concur with MnSP's position as stated in this letter, we would greatly appreciate the opportunity to discuss this matter with the Staff prior to the issuance of a formal response. If you have questions or need additional information, please contact the undersigned at (612) 371-3987. Sincerely, /s/ Michael L. Weaver Michael L. Weaver

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EXHIBIT B
BYLAWS
OF
MINNESOTA SOYBEAN PROCESSORS
A COOPERATIVE ORGANIZED UNDER
MINNESOTA STATUTES, CHAPTER 308A

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BYLAWS
OF
MINNESOTA SOYBEAN PROCESSORS
A Cooperative Organized Under
Minnesota Statutes, Chapter 308A
______________________________________________________ BYLAW I.
MEMBERSHIP
Section 1.01. Eligibility for Membership. Producers of agricultural products and
associations of such producers who (i) are eligible to become a common stockholder of this cooperative and (ii) patronize this cooperative under uniform conditions as may be established by the Articles of Incorporation (the "Articles"), the Bylaws (the "Bylaws") or the Board of Directors (the "Board of Directors") of this cooperative may, upon the approval of the Board of Directors of this cooperative, become a member of this cooperative by:
(a) becoming the holder of one (1) share of common stock of this cooperative; and (b) becoming the holder of a minimum number of shares of Class A preferred stock prescribed by the Board of Directors by the date established by the Board of Directors as the date on and after which holding such minimum number of shares of Class A preferred stock becomes a requirement of membership; and (c) entering into an uniform delivery and marketing agreement with this cooperative by the date established by the Board of Directors as the date on and after which entering into such agreement becomes a requirement of membership; and (d) receiving from this cooperative written notification and a copy of the consent bylaw providing for consent to take patronage distributions and per unit retains into income; and (e) meeting other membership criteria or requirements established from time to time by the Board of Directors.
Section 1.02. Termination of Membership. Membership in this cooperative may be
terminated by the Board of Directors in their discretion if the Board of Directors determines that a member has:

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(a) become ineligible for membership for any reason; (b) failed to patronize this cooperative for a period of one year or more; (c) not paid any required membership fees; (d) died or ceased to exist as a legal entity and leaves no successor; or (f) the Board of Directors by resolution finds that a member has:
(1) intentionally or repeatedly violated any provision of the Articles, the Bylaws, or Board policies of this cooperative; (2) taken actions that will impede this cooperative from accomplishing its purposes; (3) takes or threatens actions that adversely affect the interests of this cooperative or its members; (4) willfully obstructed any lawful purpose or activity of this cooperative; or (5) breached any contract with this cooperative. The Board of Directors may only terminate the membership of a member at a meeting of the Board of Directors, 20 days written notice of which was served upon the member alleged to be ineligible by United States Certified Mail. Said notice shall state with reasonable particularity the grounds upon which the member is alleged to be ineligible and such member shall be entitled to heard thereon at such meeting.
Section 1.03. Consequences of Membership Termination.
(a) In the event the Board of Directors shall find that any common stock of this cooperative has come into the hands of any person who is not eligible to own common stock or who has otherwise become ineligible for membership in this cooperative, the Board of Directors of this cooperative shall have the right, at its option, (i) to redeem the common stock at an amount equal to the value of the consideration for which the common stock was issued; or (ii) to convert the common stock into a nonvoting certificate of interest or other nonvoting equity credit at an amount equal to the value of the consideration for which the common stock was issued. Upon such redemption or conversion, such ineligible holder of common stock shall cease to be a member of this cooperative and shall cease to have voting rights in this cooperative. Further, upon such redemption or conversion, the Board of Directors shall have the right, but not the obligation, to terminate such ineligible holder's right and obligation to deliver agricultural products to this cooperative under any contract with this cooperative; provided, however, that nothing herein or in any such contract shall give the ineligible holder any right to have such delivery rights and obligations so terminated.

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(b) In exercising its right to redeem or to convert the common stock under the preceding paragraph, this cooperative may cancel the certificate or certificates of such common stock on its books in the event the holder fails to deliver the certificate or certificates evidencing such common stock to the cooperative. In the event this cooperative exercises its right to convert the common stock into a nonvoting certificate of interest or other nonvoting equity credit, this cooperative shall have no obligation to redeem such nonvoting equity interest, nor shall the holder of such interest have any right to demand the redemption thereof. (c) Other than as provided in Section 1.03(a), the termination of membership or other action taken by this cooperative with respect to a member or the member's common stock shall not modify the obligations and liabilities of any holder thereof to this cooperative under any uniform marketing and delivery contract or other contract between the holder and this cooperative, nor impair the rights of this cooperative under such contracts. BYLAW II. MEETINGS OF MEMBERS
Section 2.01. Annual Meetings. The annual meeting of the members of this cooperative
shall be held at such time and place as shall be determined by the Board of Directors following the close of each fiscal year of this cooperative. The notice of the meeting shall state the date, place and hour of the meeting. The Secretary shall give notice of annual members' meetings in the manner prescribed herein. The officers of this cooperative must submit reports to the members at the annual meeting covering the business of this cooperative for the previous fiscal year that show the condition of this cooperative at the close of the fiscal year. At the annual meeting, the members shall elect directors of this cooperative for the terms of office and in the manner prescribed by the Bylaws and transact such other business as may properly come before the meeting pursuant to the cooperative’s notice of the meeting or by or at the direction of the Board of Directors.
Section 2.02. Special Member Meetings.
(a) Special meetings of the members of this cooperative shall be held at the place specified in the notice of the meeting. The notice shall state the time, place and purpose of the special members' meeting. A special meeting of the members may be called by a majority vote of the Board of Directors, or upon the written petition of at least 20% of the members submitted to the President of this cooperative. The President shall give notice of a special members' meeting in the manner prescribed herein. In the event a special members' meeting is called by the written petition of members, the notice of the special members' meeting shall be given within ten (10) days from and after the date of the presentation of the members' petition, and the special members' meeting must be held by thirty (30) days after the date of the presentation of the members' petition. No business shall be considered at a special members' meeting except as covered in the notice of the meeting.

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(b) In order for a special member meeting to be called by a written petition of members pursuant to Section 2.02(a) or applicable law, the member or members sponsoring such petition must be in good standing and must deliver to the President of this cooperative not later than seventy-five (75) days nor earlier than one hundred twenty (120) days prior to the day that the petition is first circulated or sent to members a written statement containing: (i) a brief description of the business desired to be brought before the special meeting, the text of the proposal or business (including text of any resolutions proposed for consideration on and in the event that such business includes a proposal to amend the Articles of Incorporation or Bylaws of this cooperative, the language of the proposed amendment), reasons for conducting such business at the special meeting and any material interest in such business of such member or members sponsoring such petition, if any, or of any member on whose behalf the proposal is made; (ii) the name, address of such member or members sponsoring such petition as they appear on this cooperative’s books; (iii) the class and number of shares of capital stock owned by such member or members sponsoring such petition and entitled to vote at the special meeting; (iv) a representation that the member or members sponsoring such petition is a holder of record of stock of the Cooperative entitled to vote at a special meeting and intends to appear in person at the special meeting to propose such business; and (v) the disclosure statement or other information, if any, that will accompany the petition to be circulated or sent to members. The petition and all information or statements that accompany the petition must not make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. The cooperative may require the member or members sponsoring such petition to submit additional information as the cooperative may reasonably require to determine the eligibility or appropriateness of such proposal for action by the members or to otherwise provide adequate information for members to make an informed decision on whether or not to support the petition. The cooperative shall have the opportunity to provide information on the petition to the member or members sponsoring the petition under the same standards of disclosure, which information shall accompany the petition that is circulated or sent to the members. Petitions circulated or sent to members that do not meet the procedures set forth in this Section 2.2(b) or otherwise in accordance with the Bylaws shall not constitute valid petitions for the purpose of the calling of a special member meeting. Only such business as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.2(b) and otherwise in
accordance with the Bylaws shall be conducted at a special meeting of members called by written petition of the members.
Section 2.03. Notice. Notice of all annual and special members' meetings shall be given
by:
(a) publication in a legal newspaper published in the county of the principal place of business of this cooperative; (b) publication in a magazine, periodical, or other publication of this cooperative that is regularly published by or one behalf of this cooperative and circulated generally among members;

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(c) mailing the notice of the meeting to each member personally at the member's last known post office address, which for a member cooperative means notice mailed to the secretary of the member cooperative; or (d) otherwise providing notice in a manner prescribed by applicable law. Failure of a member to receive notice of an annual or special members' meeting shall not invalidate an action that is taken by the members at a members' meeting. The Secretary shall execute a certificate containing a correct copy of the mailed or published notice; the date of mailing or publishing the notice; and a statement that the notices were mailed or published as prescribed by
Section 308A.611, subd. 5, or Section 308A.615, subd. 2. The certificate shall be made a part of the
record of the meeting.
Section 2.04. Quorum. At any annual or special members' meeting, a quorum necessary for
the transaction of business shall be ten percent (10%) of the total number of members if the cooperative has 500 or fewer members; or fifty (50) members if the cooperative has more than 500 members. In determining a quorum at a meeting, on a question submitted to a vote by mail, members present in person or represented by mail vote shall be counted. The attendance of a sufficient number of members to constitute a quorum shall be established by a registration of the members present in person or by mail ballot at the meeting. The registration shall be verified by the President and Secretary of this cooperative and shall be reported in the minutes of the meeting.
Section 2.05. Voting. Each member shall be entitled to only one vote, regardless of the
number of shares of Class A preferred stock held by such member. A member's vote at a members' meeting must be in person or may be by mail if a mail vote is authorized by the Board of Directors. Voting by proxy and cumulative voting shall not be permitted; provided that the spouse of the member may vote on behalf of the member unless the member has indicated otherwise in writing to this cooperative. Members that are not individual persons must designate a representative (and may also designate an alternate representative) authorized to cast their vote in the affairs of this cooperative. The designation must be in writing, must be properly authorized by the member, and must be provided to the Secretary of this cooperative at or before the member meeting. The written designation will remain effective until it is superseded by a more recent written designation meeting the same criteria. Except where a higher percentage is specified in the Bylaws or required by applicable law, members shall take action on all matters submitted to them by the affirmative vote of a majority of the votes cast at a duly held meeting, either in person or by mail vote if a mail ballot has been authorized by the Board of Directors.
Section 2.06. Mail Vote. A member who is absent from a members' meeting may vote by
mail on the ballot prescribed hereunder on any motion, resolution, or amendment that the Board of Directors submits for vote by mail to the members. The mail vote must be cast on a ballot that is in the form prescribed by the Board of Directors, that contains the exact text of the proposed motion, resolution or amendment to be acted upon at the meeting, that contains spaces in which the member

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DOCS-#1922932-v6 may indicate an affirmative or negative vote thereon, and that otherwise meets the requirements of Minnesota law. The ballot, when completed by an absent member and received by this cooperative in the manner prescribed by the Board of Directors, shall be counted as the vote of the member at the meeting.
Section 2.07. Order of Business. Insofar as practical, the order of business at the annual
members' meeting and, where applicable, at all other meetings of the members shall be:

Registration of Members
Proof of Notice of Meeting
Reading of Minutes of Prior Meeting
Reports of Officers and Committees
Election of Directors
Unfinished Business
New Business
Adjournment
BYLAW III
DIRECTORS
Section 3.01. Number, Qualifications and Terms of Office. The business and affairs of
this cooperative shall be governed by the Board of Directors. The number of directors shall be established by the Board of Directors, having due consideration for equitable representation of the membership, provided that the number of directors shall not be less than five (5) directors nor greater than twenty-one (21) directors, and provided that no resolution shall shorten the term of a director previously elected. All directors must be a member of this cooperative or an elected or appointed representative of a non-individual member of this cooperative. Except as otherwise provided herein, all directors shall serve three-year terms and until their successors are duly elected and qualified. Directors shall not be permitted to serve more than three, consecutive, full three-year terms. In order to preserve continuity of governance and the harmonious transition of the initial Board of Directors to the elected Board of Directors, the terms of the directors of the initial Board of Directors shall be staggered such that one-third of the directors (or as nearly as possible) shall be elected at the annual members' meeting following the date on which the Board of Directors determines that the initial membership in this cooperative has been established and at each annual meeting thereafter. The Board of Directors shall adopt a procedure to achieve the desired staggered effect prescribed by the Bylaws.
Section 3.02. Districts. The nomination and election of directors of this cooperative shall
be on a district basis. For the purpose of nominating and electing directors, following the date on which the Board of Directors determines that the initial membership in this cooperative has been established and before the next annual members' meeting following such date, the initial Board of

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Directors shall divide the territory encompassing the location of the members of this cooperative into districts, having due consideration for equitable representation of the membership. The boundary lines of each district shall generally follow state, county, portion of county, or combination of county lines. From time to time, but no more often than once every three years, the Board of Directors shall review member representation and may appoint members to a redistricting committee, and any future redistricting plans shall be designed to maintain equitable representation. No member of the Board of Directors may serve on any redistricting committee.
Section 3.03. Nomination and Election of Directors.
(a) Nominations by district for the election of directors may be made by balloting, by petition signed by at least ten members residing within a district and submitted to the Secretary at least ten days prior to the annual members' meeting, from the floor at the district meeting or annual members' meeting by a member residing within a district, or by nominating committee; provided that nominations from the floor shall be requested in addition to nominations made by petition or nominating committee. Before each annual members' meeting, the Board of Directors may appoint a nominating committee to supervise the nominating procedure for election of directors established by the Board of Directors. In order to promote nominations by members and to provide information to the membership, the Board of Directors may call district meetings of the members to be held at least seven days prior to the annual members' meeting. If called, the district meeting shall be presided over by the incumbent director of that district whose term of office is the last to expire, except that the Board of Directors shall designate the person to preside over a district meeting when such incumbent director is not available. Notice of any district meetings shall be given in the same manner as a notice of an annual or special members' meeting. (b) Each district shall be represented by an equal number of directors (or as nearly as possible), and the staggered terms of the directors shall be established such that the terms of one director from each district (or as nearly as possible) shall expire at the next annual members' meeting and at each annual members' meeting thereafter. Directors shall be elected at the annual members' meeting by a vote of the members of the district to be represented by the director (and not by a vote of the entire membership), and the Board of Directors may adopt such registration or other voting procedures to further implement this election procedure.
Section 3.04. Member Assignment. Each member shall be assigned to a district in which
such member's principal farm is located. A member who is other than a natural person shall be assigned to the district where such member has its principal place of business. In appropriate cases, the Board of Directors reserves the right, upon request of a member, to assign such member to a different district. The determination by the Board of Directors as to a member's district shall in all cases be final and conclusive.
Section 3.05. Annual Meeting. Within thirty (30) days after each annual members'
meeting, the Board of Directors shall meet for the purpose of electing officers of this cooperative and

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DOCS-#1922932-v6 for the transaction of such other business as shall come before the meeting. The annual meeting of the Board of Directors shall be held at such time and place as may be fixed by resolution adopted by the Board of Directors.
Section 3.06. Regular Meeting. Regular meetings of the Board of Directors shall be held
from time to time at such time and place as may be fixed by resolution adopted by the Board of Directors.
Section 3.07. Special Meetings. Special meetings of the Board of Directors may be called
by the President, the Secretary or by any three (3) of the directors and shall be held from time to time at a time and place as may be designated in the notice of the meeting.
Section 3.08. Notice of Meetings. Notice of each annual, regular or special meeting of the
Board of Directors shall be given by the President or Secretary who shall give at least five (5) days prior notice of the meeting to each director by mail, telephone, telephonic facsimile transmission, telegram, electronic mail or in person unless, a shorter time period is otherwise agreed to. Notice shall be deemed given upon mailing, if notice is given by mail.
Section 3.09. Waiver of Notice. Notice of any meeting of the Board of Directors may be
waived either before, at or after the meeting, in writing signed by each director. A director, by attendance at any meeting of the Board of Directors, shall be deemed to have waived notice of such meeting, except when a director attends the meeting and objects to the transaction of business because the meeting was not lawfully convened.
Section 3.10. Quorum; Board Action. A majority of the members of Board of Directors
shall constitute a quorum for the transaction of business except that, when a vacancy or vacancies exist, a majority of the remaining directors shall constitute a quorum. The Board of Directors shall take action by the affirmative vote of a majority of the directors present at a duly held meeting.
Section 3.11. Action Without a Meeting. Any action required or permitted to be taken at a
meeting of the Board of Directors may be taken by written action signed by all of the directors. The written action is effective when signed by all of the directors, unless a different effective time is provided in the written action.
Section 3.12. Electronic Communications. Any meeting of the Board of Directors may be
conducted by telephonic or other electronic means of communication through which the directors may simultaneously hear one another.
Section 3.13. Vacancies. If a director's position is vacant, the Board of Directors may
appoint a member of this cooperative from the district of the vacant director position to fill the directors position until the next annual or special members' meeting. At the next annual or special

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DOCS-#1922932-v6 members' meeting, the members from the district of the vacant director's position shall elect a director to fill the unexpired term of the vacant director's position.
Section 3.14. Removal. Members of a district may remove a director from their district at a
members' meeting for cause related to the duties of the position of the director and fill the vacancy caused by the removal.
Section 3.15. Compensation. Directors who are not salaried officers of this cooperative
shall receive such fixed sum per meeting attended or such fixed annual sum as shall be determined, from time to time, by resolution of the Board of Directors. All directors shall receive their expenses, if any, of attendance at meetings of the Board of Directors or any committee thereof. Nothing in these Bylaws shall be construed to preclude any director from serving this cooperative in any other capacity and receiving proper compensation for the service. BYLAW IV DUTIES OF DIRECTORS
Section 4.01. General Powers. The Board of Directors shall govern the business and
affairs of this cooperative and shall exercise all of the powers of this cooperative, except those powers that are conferred upon or reserved to the members by law, the Articles of Incorporation, or these Bylaws. The Board of Directors shall adopt such policies, rules, and regulations and shall take such actions as it may deem advisable, provided that the Board of Directors does not act in a manner inconsistent with law, the Articles of Incorporation, or these Bylaws.
Section 4.02. Committees. By resolution, the Board of Directors may designate three or
more directors, one of whom shall be the President of this cooperative, to constitute an Executive Committee. The Executive Committee shall have and exercise only such authority of the Board of Directors in the management of this cooperative to the extent provided in the resolution. The Board of Directors may establish such other committees from time to time as it deems advisable, having such authority as provided by the Board of Directors. Committees are subject at all times to the direction and control of the Board of Directors.
Section 4.03. Employment of CEO. Following the date established by the Board of
Directors, the Board of Directors shall select, employ, and fix the compensation of the Chief Executive Officer ("CEO") of this cooperative, who shall not be a member of the Board of Directors. The CEO shall have responsibility for all administrative and operational aspects of this Cooperative, and shall perform any other duties that may be assigned by the Board of Directors. The Board of Directors may terminate the employment of the CEO with or without cause at any time, subject to the terms of any written employment contract, if any, between this cooperative and the CEO.

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Section 4.04. Bonds and Insurance. The Board of Directors may require all officers,
agents, and employees charged by this cooperative with responsibility for the custody of any of its funds or property to give bonds. Bonds shall be furnished by a responsible bonding company and approved by the Board of Directors, and the cost shall be paid by this cooperative. The Board of Directors shall provide for insurance of the property of this cooperative and its affiliates, or property which may be in the possession of this cooperative or its affiliates and not otherwise adequately insured by the owner of the property, unless such insurance is otherwise provided for by an affiliate. In addition, the Board of Directors shall provide for insurance covering liability of this cooperative or its affiliates to all employees and the public, unless such insurance is otherwise provided for by an affiliate.
Section 4.05. Accounting System. The Board of Directors shall install and maintain an
adequate system of accounts and records. At least once each year, the financial records of this cooperative shall be audited, and a report of the audit shall be made at the annual meeting of the members.
Section 4.06. Financial Matters. The Board of Directors shall have the power to select one
or more banks or other financial institutions to act as depositories of the funds of this cooperative, and to determine the person or persons who shall have authority to sign checks and other instruments. BYLAW V OFFICERS
Section 5.01. Officers. The officers of this cooperative shall be a President, a Vice
President, a Secretary and a Treasurer, who shall be elected in the manner as provided in Section
5.07 of these Bylaws. The offices of the Secretary and Treasurer may be combined and when so
combined shall be termed "Secretary-Treasurer." Except for the Secretary-Treasurer, no offices may be held concurrently by the same person. The President and Vice President must be directors and members of this cooperative. The Board of Directors may elect other officers from time to time as it deems advisable or as required by these Bylaws, and in such event shall establish appropriate duties and responsibilities for any such other officers. The Treasurer, Secretary and any such additional officers need not be directors or members.
Section 5.02. President. The President shall see that all orders and resolutions of the Board
of Directors are carried into effect and shall preside at all meetings of the members and directors. The President shall be the official representative of this cooperative to all outside associations or organizations of which this cooperative is a member, unless another person is appointed by the President or other action is taken by the Board of Directors. The President shall sign and deliver in the name of this cooperative any deeds, mortgages, bonds, contracts and other instruments pertaining to the business of this cooperative, except in cases in which the authority to sign and deliver is

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DOCS-#1922932-v6 required by law to be exercised by another person or is expressly delegated by the Articles or the Bylaws or the Board to some other officer or agent of this cooperative. This broad signing authority shall not be construed so as to preclude the Board of Directors from authorizing any other officer or agent of this cooperative to sign any deeds, mortgages, bonds, contracts and other instruments pertaining to the business of this cooperative on behalf of this cooperative. The President shall have such other duties as may, from time to time, be assigned by the Board of Directors.
Section 5.03. Vice President. The Vice-President shall have powers and perform duties as
may be specified in the Bylaws or prescribed by the Board of Directors or by the President. In the event of the absence or disability of the President, the Vice-President shall perform the duties and exercise the powers of the President.
Section 5.04. Secretary. The Secretary shall attend all meetings of the members and Board
of Directors; record all votes at and keep minutes of all the meetings; and record all proceedings of the meetings in the minute book of this cooperative. The Secretary shall give proper notice of meetings of the members and of the Board of Directors. The Secretary shall perform such other duties as may, from time to time, be prescribed by the Board of Directors or by the President.
Section 5.05. Treasurer. The Treasurer shall be the custodian of all funds, securities and
properties of this cooperative and shall perform such other duties with respect to the finances of this cooperative as may be prescribed by the Board of Directors or by the President.
Section 5.06. Compensation. The officers of this cooperative shall receive compensation
for their services as may be determined, from time to time, by resolution of the Board of Directors. No officer who is a director may take part in the vote on his or her salary for services rendered to the cooperative.
Section 5.07. Election of Officers. At its annual meeting, the Board of Directors shall elect
from its members a President and one or more Vice-Presidents. Election for persons to fill any other offices established by these Bylaws or by the Board of Directors pursuant to Section 5.01 of these Bylaws shall be held at the annual meeting of the Board of Directors or at any other meeting of the Board of Directors, provided that notice of such election has been given in the notice of such meeting if other than the annual meeting. The officers shall hold their offices until their successors have been elected and have qualified, subject to any removal provisions of these Bylaws.
Section 5.08. Removal of Officers. The members may remove an officer at a members'
meeting for cause related to the duties of the position of the officer and fill the vacancy caused by the removal. In addition, any officer may be removed by the Board of Directors whenever in its judgment the best interests of the cooperative will be served. Any vacancy among the officers caused by such removal shall be filled by the Board of Directors. No election or appointment to an office of this cooperative shall itself create any contract rights.

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BYLAW VI
INDEMNIFICATION AND INSURANCE
Section 6.01. 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, judgements, fines, and amounts paid in settlement actually and reasonably incurred to the extent to which such directors, officers, managers, employees or agents of this cooperative may be indemnified under the law of Minnesota.
Section 6.02. Insurance. This cooperative shall have the 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 against liability asserted against and incurred by the person in the person's capacity as a director, officer, manager, employee or agent, or arising from the person's status as a director, officer, manager, employee, or agent of the cooperative. BYLAW VII OPERATIONS ON A COOPERATIVE BASIS
Section 7.01. 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 authorized by the Board of Directors) as provided in this bylaw. 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 (including without limitation, limited liability companies and partnerships, whether general or limited) in which it owns an equity interest, patronage dividends distributed by other cooperatives of which this cooperative is a patron and, to the extent prospectively determined by the Board of Directors, its share of the undistributed net income or net loss of any corporation in which this cooperative 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 Articles of Incorporation or the Bylaws are expressly referred to in the transaction or the transactions documentation. Except in the case of emergency or sideline purchases, each member or nonmember for whom this cooperative markets or procures goods or

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DOCS-#1922932-v6 services shall be entitled to the net income arising out of said transaction as determined on a patronage basis.
Section 7.02. Patrons; Patronage Business; Nonpatronage Business. As used in this
bylaw, 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 7.01. (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 7.03. Establishment of Allocation Units. Allocation units may be established by
the Board of Directors on a reasonable and equitable basis and they may be functional, divisional, departmental, geographic, or otherwise. Until different allocation units are established by the Board of Directors, the entire business of this cooperative shall be considered one and the only allocation unit. The Board of Directors shall adopt reasonable and equitable accounting procedures as will, in the Board's judgment, equitably allocate among the allocation units this cooperative's income, gains, expenses and losses and, to the extent provided in Section 7.01, patronage dividends received by this cooperative and its share of income, gain, loss and deduction of other entities in which this cooperative owns an interest.
Section 7.04. Determination of the Patronage Income or Loss of an Allocation Unit.
The net income 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 the 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 the 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 7.08. The foregoing amounts shall be determined in accordance with the accounting treatment used by the cooperative in calculating its taxable income for federal income tax purposes; provided, however, that the Board of Directors may prospectively adopt a reasonable alternative method. Expenses and cost of goods or services shall include without limitation such amounts of depreciation, cost depletion and amortization as may be appropriate, any unit retentions provided in Bylaw IX, 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 7.06 and 7.09(b) relating to losses.

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Section 7.05. Allocation of Patronage Income Within Allocation Units. The net income
of an allocation unit from patronage business for each fiscal year, less any amounts that are otherwise allocated in dissolution pursuant to Bylaw IX, shall be allocated among the patrons of the allocation unit in the ratio that the quantity or value of the business done with or for each patron bears to the quantity or value of the business done with or for all patrons of the 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 7.06. Treatment of Patronage Losses of an Allocation Unit.
(a) Methods of 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 the net loss against the net income of other allocation units for the fiscal year to the extent allowed by law. (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 the 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 the net loss against the Capital Reserve; (v) Cancel outstanding Patrons' Equities. (b) Allocation of Net Loss Among Patrons of Loss Unit. Any cancellation of equities and/or establishment of accounts payable pursuant to this Section 7.06 shall be made among the patrons of an allocation unit in a manner consistent with the allocation of net income of the 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 the 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 the Patrons' Equities or to increase the future net income of other allocation units; 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 7.06 shall be implemented by the Board of Directors, having due consideration for all of the circumstances which caused the net loss, in a manner that it determines is both equitable and in the overall best interest of this cooperative.

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(e) No Assessments against Members or Nonmember Patrons. There is no right of assessment against members or nonmembers patrons for the purpose of restoring impairments to capital caused by net losses.
Section 7.07. Distribution of Net Income.
(a) Patronage Refunds. The net income allocated to a patron pursuant to Sections 7.05 and 7.09 shall be distributed annually or more often to the 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, capital stock, allocated patronage equities, revolving fund certificates, securities of this cooperative, other securities, or any combination thereof designated by the Board of Directors (all except cash and other securities referred to collectively in these Bylaws as "Patrons' Equities"), including, without limitation, the following instruments:
(i) Equity Certificatesin one or more than one class or series, in the designations or denominations, and with the 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) Debt Certificates in one or more than one class or series, in the designations or denominations, and with the relative rights, preferences, privileges and limitations as may be fixed by the Board of Directors, and bearing the maturity and rate of interest, if any, as may be fixed by the Board of Directors. Debt certificates shall be callable for payment in cash or other assets at 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 the designations or denominations, and with 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. The certificates shall be callable for payment in cash or other assets at the times as may be determined by the Board of Directors. (c) Written Notice 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

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DOCS-#1922932-v6 notice of allocation, as a nonqualified written notice of allocation or any combination thereof as provided in that section. (d) No Voting Rights. Patrons' Equities shall not entitle the holders 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). (e) Transfer Restriction. Patrons' Equities may only be transferred with the consent and approval of the Board of Directors, and by an instrument of transfer as may be required or approved by the Board of Directors. (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 other debt and/or equity instruments of this cooperative on the terms as shall be established by the Board of Directors. (g) Revolvement Discretionary. No person or entity 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. The redemption or retirement is solely within the discretion and on the terms as described from time to time by the Board of Directors of this cooperative.
Section 7.08. Capital Reserve. The Board of Directors shall cause to be created a Capital
Reserve and, except as otherwise provided in Section 7.09, 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 7.07(a); 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 of Directors resolution that irrevocably provides for the reduction or elimination with respect to such period. Federal income taxes shall be charged to the Capital Reserve. Such reserves shall be credited to the allocation units and the patrons thereof in the same manner as patronage income is allocated within the allocation unit.
Section 7.09. Allocation and Distribution of Nonpatronage Income and Loss.

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(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 7.08(a). The 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 of the allocation units on a patronage basis using a method that the Board of Directors determines to be reasonable and equitable. Amounts so allocated shall be distributed to those patrons in the form of cash, property, Non-Patronage Earnings Certificates, or any combination thereof designated by the Board of Directors. (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, the 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 the net loss, determines that it is reasonable and equitable to allocate all or part of the net loss among one or more allocation units and shall reduce the unit's net income from patronage business to the extent of the allocated loss and the excess, if any, shall be treated generally in accordance with Sections 7.06(a)(ii), (iii), and (v). BYLAW VIII CONSENT
Section 8.01. Consent to Take Patronage Distributions Into Income. Each person who
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 the written notices of allocation are received by the member.
Section 8.02. 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 on or before becoming a member of this cooperative.
Section 8.03. Consent of Nonmember Patrons. If this cooperative obligates itself to do
business with a nonmember on a patronage basis, the 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. § 1395(a) in the taxable year in which such written notices of allocation are received by the

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DOCS-#1922932-v6 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. BYLAW IX MERGER OR CONSOLIDATION; DISSOLUTION
Section 9.01. 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 9.02. 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 9.02. 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, all debts and liabilities of this cooperative shall be paid first according to their respective priorities. The remaining assets shall be distributed in the following manner and order of preference: (1) first to the holders of shares of Class B preferred stock in an amount equal to the sum of the value of the consideration for which the shares of Class B preferred stock were issued, plus, in the case of a series of Class B preferred stock whose terms includes rights to cumulative dividends on liquidation, the amount equal to the dividends accumulated and unpaid thereon to the date of final distribution to such holders, in such priority of series of such shares as may have been established upon the issuance of the shares and on a pro rata basis within a series if necessary; (2) second to the holders of shares of Class A preferred stock in an amount equal to the value of the consideration for which the shares of Class A preferred stock were issued, without priority and on a pro rata basis if necessary; (3) third to the holders of shares of common stock in an amount equal to the value of the consideration for which the shares of common stock were issued, without priority and on a pro rata basis if necessary; (4) fourth to payment of the stated dollar amount of all Patrons' Equities (other than Non-Patronage Earnings Certificates), in chronological order of year beginning with the oldest outstanding Patrons' Equities first and on a pro rata basis within a year if necessary; (5) fifth to payment of the stated dollar amount of NonPatronage Earnings Certificates, in chronological order of year beginning with the oldest outstanding Non-Patronage Earnings Certificates first and on a pro rata basis within a year if necessary; and (6)

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DOCS-#1922932-v6 sixth to the patrons in accordance with their interest in Capital Reserves. Any assets remaining after the foregoing payments have been made shall be allocated among the allocation units in the manner as the Board of Directors, having taken into consideration the origin of the 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 the unit over the period as may be determined to be equitable and practicable by the Board of Directors. The 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. BYLAW X UNIT RETENTIONS
Section 10.01. Unit Retain. This cooperative may require investment in its capital in
addition to the investments from retained patronage. These investments shall be direct capital investments from a retain on a per unit basis of the products purchased from its members. The unit retention, if required, shall be made on all products delivered, in the same amount per unit and shall at no time become a part of net annual savings available for patronage. Each member, by continuing to be such, agrees to invest in the capital of this cooperative as prescribed in this Bylaw X. Such investments shall be accounted for separately in a unit retention account set up on the books of this cooperative. Only the Board of Directors shall have the authority and power to require investment in the capital of this cooperative as prescribed in this Bylaw X, and the Board of Directors shall only have such authority upon the approval by a 60% majority of the votes cast by members at a duly held meeting of the members called for that purpose. No receiver, trustee or similar officer of any property of this cooperative shall have the authority or the power to require investment in the capital of this cooperative as prescribed in this Bylaw X, and any assignment for the benefit of creditors or any commencement of any proceeding under any bankruptcy, insolvency, receivership, dissolution, liquidation or similar law by or against this cooperative shall terminate the authority of the Board of Directors to require investment in the capital of this cooperative as prescribed in this Bylaw X. The power and authority of the Board of Directors to require investment in the capital of this cooperative as prescribed in this Bylaw X shall be subject to the minimum cash payment provisions expressly provided for in any uniform delivery and marketing agreement between this cooperative and its members, if any. The Board of Directors shall have the power to designate any unit retain certificate as a "qualified per unit retain certificate" or a "non-qualified per unit retain certificate" within the meaning of the Internal Revenue Code.
Section 10.02. Consent to Take Qualified Per Unit Retains Into Income. Each person
who 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 per-unit retain certificate authorized by this bylaw and designated by the Board of Directors to constitute a "qualified per-unit retain certificate," and which are received by the member from this cooperative, will be taken into account by the member at its

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DOCS-#1922932-v6 stated dollar amount in the manner provided in 26 U.S.C. §1385(a) in the taxable year in which the qualified per-unit retain certificates are received by the member. The purpose of this consent bylaw is to make a per-unit retain certificate so designated by the Board of Directors a "qualified per-unit retain certificate" within the meaning of 26 U.S.C. § 1388. BYLAW XI STOCK CERTIFICATES; RESTRICTIONS ON SALES AND TRANSFERS
Section 11.01. Stock Certificates. Certificates of stock shall be issued to each holder of
fully paid capital stock as determined by the Board of Directors. On the stock certificate, there shall be stated the name of the cooperative, the class of stock, the par value of the stock, the number of shares represented, the name of the member to which issued. This cooperative shall conspicuously note any transfer restrictions in legend form on such stock certificates. Each certificate shall bear the signature of the President and the Secretary or Secretary-Treasurer. A record of the stock certificate issued shall be kept on the stub of the stock certificate.
Section 11.02.Replacement of Stock Certificates. When existing stock certificates are to
be replaced, they must be surrendered before new certificates are issued. Each surrendered certificate and the stub of the certificate shall be canceled, with the date of cancellation noted on the certificate. In the event that any stock certificate has been lost or destroyed, the registered owner of the certificate shall be required to deliver appropriate indemnification commitments to this cooperative before this cooperative issues a replacement certificate for the lost or destroyed certificate.
Section 11.03.Restrictions on Transfer. For purposes of this Bylaw, the term "transfer"
shall mean, as a noun, any voluntary or involuntary transfer, sale, assignment, or other disposition and, as a verb, to voluntarily or involuntarily transfer, sell, assign or otherwise dispose of. A mortgage, pledge, or hypothecation of shares of preferred stock shall not be considered a transfer, provided that any subsequent foreclosure thereof or transfer to the secured party in lieu of foreclosure shall be deemed to be a transfer and subject to the transfer restrictions contained in this Bylaw. The common stock of this cooperative is nontransferable and may not be pledged. No holder of preferred stock of this cooperative may transfer all or any portion of such holder's shares except as otherwise expressly permitted by these Bylaws. The preferred stock of this cooperative may not be sold or transferred without the approval of the Board of Directors, and then only if the conditions and restrictions described in Section 11.04 and 11.05 (as applicable) are met. No preferred stock shall be transferred unless any and all indebtedness owed to this cooperative by the holder of the stock shall first be paid. Any purported transfer other than a transfer in accordance with these Bylaws shall be null and void and of no force or effect whatever. The Board of Directors may withhold its consent and approval to proposed transfers of preferred stock in its sole discretion.

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Section 11.04.General Conditions. No transfer shall be permitted unless and until each of
the following conditions and requirements is satisfied:
(a) the transferee is an agricultural producer or an association of such producers who resides in the area served by this cooperative and who meets each of the membership criteria established in or pursuant to the Articles and these Bylaws; and (b) the transfer would not in the opinion of the Board of Directors have a material adverse impact on this cooperative or its operations; and (c) the transfer is entered on the books of this cooperative.
Section 11.05. First Right to Purchase Preferred Stock. In addition to any other
conditions and restrictions on transfer, this cooperative shall have the first privilege of purchasing any shares of preferred stock offered for sale by a stockholder, as prescribed below. This first privilege shall not apply to transfers without consideration to (i) the spouse, parent, child (or spouse of child), brother or sister (or spouse of brother or sister) of the shareholder or (ii) a family farm corporation or other legal entity consisting of the shareholder's family in which the shareholder is a shareholder or (iii) a partnership in which the shareholder is a partner. Whenever any shareholder desires to sell any or all of its shares of preferred stock, the shareholder shall first give the cooperative the first privilege of purchasing such shares by giving this cooperative written notice of the proposed sale which sets forth the name and address of the proposed transferee, the number of shares of preferred stock to be sold and all terms and conditions of the proposed sale. The Board of Directors on behalf of this cooperative shall have 45 days following receipt of said written notice to exercise the right of this cooperative to purchase such shares on the same terms and conditions of the proposed sale, by providing written notice to the shareholder of such exercise. In the event this cooperative does not exercise its option to purchase the shares, the shareholder may sell the shares on the terms and conditions stated in the written notice of the proposed sale, provided that such proposed transfer must nevertheless meet the other conditions and requirements of transfer described herein and further provided that such sale must be consummated within thirty (30) days of approval of the Board of Directors.
Section 11.06. Entitlements Based on Patronage.
(a) When all or a portion of a member’s Class A preferred stock is validly transferred, the transferee also shall succeed to any entitlement of the transferor that is based on patronage of the transferor (or any predecessor owner of the transferred interest), including undistributed patronage dividends with respect to transactions occurring prior to the effective date of the transfer, written notices of allocation, unit retains and any residual claim to distributions out of capital reserves or in liquidation, dissolution and winding-up of this cooperative under these Bylaws, in proportion to and to the extent such entitlements relate to delivery obligations associated with the

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DOCS-#1922932-v6 transferred Class A preferred stock. Upon the effective date of the transfer, any such entitlements shall vest automatically in the transferee by operation of these Bylaws, without reversion or impairment of the entitlement as a result of such transfer, without any requirement of action or execution of documents by any of the parties thereto. As part of the transfer of entitlements, the transferor must report as taxable income any patronage dividends distributed with respect to patronage transactions during the fiscal year of this cooperative immediately preceding the fiscal year in which the effective date of the transfer occurs, and the transferee must report as taxable income any patronage dividends distributed with respect to patronage transactions occurring during the fiscal year of this cooperative in which the effective date of the transfer occurs, and such amounts will be reflected in information returns filed by the cooperative with state and federal taxing authorities. (b) Notwithstanding the foregoing, if this cooperative distributes a patronage dividend with respect to patronage transactions occurring during its fiscal year immediately preceding the fiscal year in which the effective date of the transfer occurs, the transferor shall be entitled to receive the portion of that patronage dividend that is paid in cash on or before the 15 th day of the ninth month of the fiscal year in which the effective date of the transfer occurs, and such cash shall be excluded from the entitlements which are automatically assigned to the transferee by operation of these Bylaws. BYLAW XII FISCAL YEAR The Board of Directors may by resolution adopt a fiscal year of this cooperative from time to time. BYLAW XIII AMENDMENTS These Bylaws may be amended as provided by law.

Adopted by the Board of Directors on December 1, 1999, at a time when this cooperative did not have any members or stockholders with voting rights. Amended by the Members on March 13, 2004. Amended by the Members on March 12, 2005. Amended by the Members on March 15, 2008. Amended by the Members on March 19, 2011.

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FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MINNESOTA SOYBEAN PROCESSORS A COOPERATIVE ORGANIZED UNDER MINNESOTA STATUTES, CHAPTER 308A

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FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MINNESOTA SOYBEAN PROCESSORS A COOPERATIVE ORGANIZED UNDER MINNESOTA STATUTES, CHAPTER 308A

ARTICLE I
NAME AND PRINCIPAL PLACE OF BUSINESS
The name of this cooperative is Minnesota Soybean Processors. The principal place of business for this cooperative is the city of Worthington, Minnesota, in the county of Nobles County, Minnesota. The registered office address of this cooperative is 1121 Third Avenue, Worthington, Minnesota 56187.
ARTICLE II
PURPOSES AND POWERS
Section 2.1 Purposes. This cooperative is organized for the following purposes:
(a) to receive, handle, store, warehouse, manufacture, process, market, buy, sell and otherwise deal in the agricultural products and services of its members and nonmember patrons; (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, feed, grain, fertilizer, chemicals, livestock, machinery, equipment, supplies, and other goods, products, merchandise and services used or useful in farming and the agricultural industry; (c) to engage in activities involving agricultural education, research and development, legislation and economic or social conditions pertaining to farmers and the agricultural industry; (d) to engage in the financing of the activities described above; and (e) 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 more particularly provided in these Articles of Incorporation (these "Articles") and the Bylaws (the "Bylaws") of this cooperative.

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Section 2.2 Powers. In addition to other powers, this cooperative may perform every act
and thing necessary, proper, incidental or convenient to the conduct of its business or the accomplishment of its purposes. This cooperative shall have all powers, privileges and rights conferred upon it by applicable law. 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 real or personal 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 for hire; (e) to issue equity and debt securities, whether certificated or uncertificated, as further provided in the Articles and in the Bylaws; (f) to join with other cooperatives, limited liability companies, 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 interests 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 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 described or referred to herein.

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Section 2.3 Limitation on Nonmember Business. This cooperative shall not market the
products of nonmembers in an amount the value of which exceeds the value of the products marketed for members. It shall not purchase supplies and equipment for nonmembers in an amount the value of which exceeds the value of the supplies and equipment purchased for members. It shall not purchase supplies and equipment for persons who are neither members nor producers of agricultural products in an amount the value of which exceeds fifteen percent (15%) of all its purchases. Business done for the United States or any of its agencies shall be disregarded in determining the limitations imposed by this section.
ARTICLE III
DURATION
This cooperative shall have perpetual existence.
ARTICLE IV
MEMBERSHIP AND CAPITAL STOCK
Section 4.1 Authorized Capital Stock. This cooperative is organized on a capital stock
basis. The authorized capital stock of this cooperative shall consist of: Five Thousand (5,000) shares of common stock, with a par value of $.01 per share; Fifty Million (50,000,000) shares of Class A preferred stock, with a par value of $.01 per share; and Ten Million (10,000,000) shares of Class B preferred stock, with a par value of $.01 per share. Except as may be limited by applicable law, these Articles or the Bylaws, the Board of Directors of this cooperative (the "Board of Directors") shall have the authority and power to establish and issue one or more than one series of shares within a class, to set forth the designation of series of such shares, to fix the relative rights, preferences, privileges and limitations of each series of shares; and to establish and maintain such capital reserve, nonstock revolving capital, unit retains, and other types of equity credits as further provided in these Articles and the Bylaws.
Section 4.2 Membership and Common Stock.
(a) Membership in this cooperative is restricted to the holders of the common stock of this cooperative, and each member of this cooperative must hold one share of common stock. No person may hold more than one share of common stock. Only common stockholders shall have voting power in this cooperative. Holders of the common stock shall be restricted to producers of agricultural products and associations of such producers who meet the requirements and

MINNESOTA SOYBEAN PROCESSORS FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION Doc# 1922930\3 conditions of membership as provided in these Articles and in the Bylaws. Each holder of common stock shall have one vote in the affairs of this cooperative regardless of the number of shares of Class A preferred stock held by such common stockholder. (b) The common stock is non-transferable and cannot be pledged. No holder of common stock shall have any right whatsoever to require the redemption of its common stock. The common stock may be redeemed only at the option of the Board of Directors in accordance with the provisions of these Articles and the Bylaws. The Board of Directors shall have the authority to establish a redemption policy on terms and conditions it deems advisable in its sole discretion; provided, however, that the common stock may never by redeemed for more than the value of the consideration for which the common stock was issued. No dividends shall be paid on the common stock of this cooperative. (c) The Board of Directors shall have the authority to establish such additional terms and conditions, qualifications, methods of acceptance, duties, rights and privileges of holding common stock of this cooperative as it may from time to time deem advisable. The Board of Directors may refuse membership or provide conditional membership to an applicant in its sole discretion. (d) For purposes of these Articles and the Bylaws, "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.
Section 4.3 Class A Preferred Stock. Holders of the Class A preferred stock shall be
restricted to producers of agricultural products and associations of such producers. The Bylaws may establish additional conditions, requirements or limitations of holding Class A preferred stock. The Class A preferred stock is nonvoting, and holders of Class A preferred stock are not entitled to voting rights in this cooperative solely by virtue of their ownership of the Class A preferred stock. No dividends shall be paid on the Class A preferred stock. Shares of the Class A preferred stock shall be transferable only with the approval of the Board of Directors, and then only to persons eligible to hold the Class A preferred stock. No purported assignment or transfer of any Class A preferred stock to any person not eligible to hold such shares shall pass any rights or privileges on account of such shares. The Class A preferred stock may be redeemed only at the option of the Board of Directors in accordance with the provisions of these Articles and the Bylaws. No holder of Class A preferred stock shall have any right whatsoever to require the redemption of its Class A preferred stock. The Board of Directors shall have the authority to establish a redemption policy on terms and conditions it deems advisable in its sole discretion. The Board of Directors shall have the authority to establish such additional terms and conditions, qualifications, methods of acceptance,

MINNESOTA SOYBEAN PROCESSORS FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION Doc# 1922930\3 duties, rights and privileges of holding Class A preferred stock as it may from time to time deem advisable.
Section 4.4 Class B Preferred Stock. Class B preferred stock may be issued to any
person or entity. Class B preferred stock is nonvoting stock, and the holders of Class B preferred stock shall have no voting rights. Dividends on Class B preferred stock may be paid as determined by the Board of Directors. Dividends on the Class B preferred stock shall not exceed eight percent (8%) annually on the value of the consideration for which the stock was issued, and the dividends may be cumulative. As further provided herein, the Board of Directors shall have the authority and power to establish and issue one or more than one series of Class B Preferred Stock, to set forth the designation of series of such shares, and to fix the relative rights, preferences, privileges and limitations of each series of shares of Class B preferred stock. The Board of Directors shall have the authority to establish a redemption policy with respect to each series of shares of Class B preferred stock on terms and conditions it deems advisable in its sole discretion. Shares of the Class B preferred stock shall be transferable only with the approval of the Board of Directors. .
Section 4.5 Ineligibility of a Common Stockholder.
(a) As may be more particularly provided for in the Bylaws, in the event the Board of Directors shall find that any common stock of this cooperative has come into the hands of any person who is not eligible to own common stock or who has otherwise become ineligible for membership in this cooperative, the Board of Directors of this cooperative shall have the right, at its option, (1) to redeem the common stock at an amount equal to the value of the consideration for which the common stock was issued; or (2) to convert the common stock into a nonvoting certificate of interest or other nonvoting equity credit at an amount equal to the value of the consideration for which the common stock was issued. Upon such redemption or conversion, such ineligible holder of common stock shall cease to be a member of this cooperative and shall cease to have voting rights in this cooperative. (b) In exercising its right to redeem or to convert the common stock under the preceding paragraph, this cooperative may cancel the certificate or certificates of such common stock on its books in the event the holder fails to deliver the certificate or certificates evidencing such common stock to the cooperative. In the event this cooperative exercises its right to convert the common stock into a nonvoting certificate of interest or other nonvoting equity credit, this cooperative shall have no obligation to redeem such nonvoting equity interest, nor shall the holder of such interest have any right to demand the redemption thereof. (c) Except as specifically provided for in the Bylaws, no action taken by this cooperative with respect to its common stock shall modify the obligations and liabilities of any holder thereof to this cooperative under any uniform marketing and delivery contract or other contract between the holder and this cooperative, nor impair the rights of this cooperative under such contracts.

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Section 4.6 Nonmember Patronage Transactions. Producers of agricultural products
and associations of such producers who patronize this cooperative under conditions established by the Board of Directors or as provided in the Bylaws but who are otherwise ineligible 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 or by policies and procedures established by the Board of Directors. Such nonmember patrons are not members and are not entitled to voting rights or other rights and privileges incident to membership.
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 nonmember patrons 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, capital stock credits, allocated patronage 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 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 shall be implemented as more particularly provided in the Bylaws of this cooperative.
ARTICLE VI
LIQUIDATION
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.

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ARTICLE VII
FIRST LIEN
This cooperative shall have a first lien on all capital stock, equity credits, and other interests standing on its books for all indebtedness of the respective holders or owners thereof to the cooperative. This cooperative shall also have the right, exercisable at the option of the Board of Directors, to set off such indebtedness against the amount of such capital stock, equity credits, or other interests standing on its books; provided, however, that nothing contained herein shall give the owners of capital stock, equity credits, or other interests any right to have such set off made.
ARTICLE VIII
BOARD OF DIRECTORS
Section 8.1 Number and Board. The business and affairs of this cooperative shall be
managed by a board of directors of not less than five (5) persons, as further provided in the Bylaws. Directors shall be elected by the members at the annual meeting of the common stockholders of this cooperative in such manner and for such terms as the Bylaws shall prescribe. The names and addresses of the members of the first Board of Directors of this cooperative, who shall serve for such terms and in such manner as the Bylaws shall prescribe, are as follows:
Name Address
Robert Kirchner RR1, Box 176
Brewster, MN 56119
Ron Obermoller RR2, Box 80
Brewster, MN 56119
Tim Baumgarn RR2, Box 145
Round Lake, MN 56167
Paul Henning RR3, Box 4A
Okabena, MN 56161
Loren Tusa RR1
Alpha, MN 56111
Bruce Hill RR 3, Box 117
Worthington, MN 56187
David Kolsrud RR 1, Box 58
Beaver Creek, MN 56119

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Section 8.2 Limitation on Liability. No director of this cooperative shall be personally
liable to the 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 became effective.
It is the intention of the members of this cooperative to eliminate or limit the personal liability of the directors of the cooperative to the greatest extent permitted under Minnesota law. If amendments to the Minnesota Statutes are passed after this Article becomes effective which authorize cooperatives to act to eliminate or further limit the personal liability of directors, then the liability of the directors of this cooperative shall be eliminated or limited to the greatest extent permitted by the Minnesota Statutes, as so amended. Any repeal or modification of this Article by the common stockholders 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 the repeal or modification.
ARTICLE IX
AMENDMENTS
These Articles of Incorporation may be amended in accordance with the Minnesota Cooperative Law, Chapter 308A, Minnesota Statutes, upon the approval of a majority of the votes cast in person or by mail ballot at an annual or special meeting of the common stockholders of this cooperative.

Adopted by the Board of Directors on November 17th, 1999 at a time when this cooperative did not have any members or stockholders with voting rights. Amended by the Members on March 12, 2005.