[LOGO] CENEX HARVEST STATES
WE GROW VALUE
CENEX HARVEST STATES COOPERATIVES SHARE OPTION PLAN
Before electing to participate in the plan, eligible employees or members of the
Board of Directors should carefully consider the items set forth under the
heading, "What Are The Risks Of Participating?", on page 6 in addition to plan
information found elsewhere in this brochure.
The plan is available only to a limited number of key employees and members of
the Board of Directors of Cenex Harvest States Cooperatives. These key
individuals are selected by the Cenex Harvest States Cooperatives Share Option
Plan Committee and only pursuant to the plan and an Option Agreement between
Cenex Harvest States Cooperatives and the participating individual. The
agreement must contain representations by the participant as to his or her
suitability to participate in the plan.
The plan is subject to termination or modification by Cenex Harvest States
Cooperatives without notice. Option agreements, in some such cases, may be
required to be exercised immediately if the plan termination is in connection
with needed compliance with, or changes made to, any applicable federal or state
law or regulation. Cenex Harvest States Cooperatives reserves the right, in its
sole discretion, to reject any request to participate in the plan.
Options under the plan are subject to the terms and conditions contained in the
Option Agreement between Cenex Harvest States Cooperatives and the participant
and to the terms of the plan. A copy of the plan document is available on
request to the Human Resources Department or Legal Department.
All descriptions herein of the Option Agreement and the Plan are qualified by
reference to such documents. No person has been authorized to give any
information or to make any representations other than those contained in this
brochure in connection with the plan and participation by Cenex Harvest States
Cooperatives employees and Board Members, and if given or made, such information
or representations must not be relied upon as having been authorized by Cenex
Harvest States Cooperatives.
This brochure does not constitute an offer to sell or a solicitation of an offer
to buy securities by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so.
The contents of this brochure are not to be construed as legal, investment or
tax advice. Participants should consult their advisors as to legal, investment,
tax and related matters concerning participation in the plan.
In making an investment decision, eligible employees and Board members must rely
on their own examination of Cenex Harvest States Cooperatives, the investment
prospectuses, and the terms of the plan and their option agreements, including
the merits and risks involved. Participation in the plan has not been
recommended by any federal or state securities commission or regulatory
authority. Furthermore, the foregoing authorities have not confirmed the
accuracy or determined the accuracy of this document. Any representation to the
contrary is a criminal offense.
CENEX HARVEST STATES COOPERATIVES
SHARE OPTION PLAN
Here is an overview of the Share Option Plan offered by
Cenex Harvest States Cooperatives ("Cenex Harvest
States") as well as several questions and answers about
the plan. For more information, contact the Human
Resources Department or Legal Department.
After being nominated to participate in the Share Option
Plan, you can decide:
* whether to participate in the plan
* the amount of bonus, salary, or Board of
Directors' fees you want to exchange for option
grants under the plan, and
* when to exercise your options and how much taxable
income to realize in any year.
The plan provides you with the opportunity to exceed the
annual contribution limits set by the Internal Revenue
Code for qualified savings plans. In this way, the plan
serves many of the same purposes as a deferred
compensation plan, but it's structured differently to
meet IRS regulations for stock option plans.
Designed to work in conjunction with our broader
compensation program, the Share Option Plan lets you
exchange your future compensation for options to
purchase mutual funds. If you decide to participate in
the plan, portions of annual variable pay, other
eligible compensation, or Board of Directors' fees will
be applied toward options to purchase selected mutual
This brochure is a summary of the Cenex Harvest States
Cooperatives Share Option Plan. The rights and benefits
of participants and their beneficiaries are determined
exclusively by the provisions of the plan and the option
agreements issued thereunder.
WHO IS ELIGIBLE TO Participation in the Share Option Plan is based on
PARTICIPATE? selection by Cenex Harvest States Cooperatives Share
Option Plan Committee (the "Committee"). Participants
are executives and members of the Board of Directors of
Cenex Harvest States who are determined to have the
capability of making a substantial contribution to the
success of Cenex Harvest States. Participation begins on
the next January 1, April 1, July 1, or October 1,
following selection by the Committee. Participation for
former Cenex key employees selected by the Committee
begins on or about October 1, 1998. Participation by
members of the Board of Directors begins on or about
November 1, 1998
For plan purposes, "participation" means the time when
future salary or annual variable pay exchanges begin.
HOW DOES AN To understand how an option plan works, you need to be
OPTION WORK? aware of three key phases:
GRANTING OF OPTION. This is the time that you receive
the RIGHT to buy an investment at a specific price.
EXERCISE OF OPTION. This is the time at which you
actually BUY the investment. You determine (within plan
limits) when to exercise your option. Once you exercise
your option, you own the underlying investment.
SALE OF INVESTMENT. At this time, you will LIQUIDATE the
investment you previously purchased upon exercise. You
choose the timing of the sale.
Keep these phases in mind as you review the details of
how the Share Option Plan works.
HOW DOES THE CENEX The Share Option Plan gives you the opportunity to
HARVEST STATES exchange compensation for an option. You decide how much
COOPERATIVES SHARE of your future base salary you wish to exchange for an
OPTION PLAN WORK? option, up to 30%, or Board of Directors' fees. You may
also exchange all or part of your future annual variable
pay, if applicable, for an option. By electing not to
receive current compensation, you delay taxes on those
You also may indicate a preference for the mutual
fund(s) underlying your option. The ultimate choice of
funds, however, remains with the Committee. (See page 5
and Attachment A for more on investment funds.)
OPTION PRICING Any option you elect to receive will be priced at a
discount to the current market price of the mutual fund
or funds. The dollar value of the discount will equal
the dollar value of the compensation you are exchanging.
FOR EXAMPLE, IF YOU CHOOSE TO EXCHANGE $75 OF
COMPENSATION FOR AN OPTION, YOU WOULD RECEIVE AN OPTION
WITH AN UNDERLYING MARKET PRICE OF $100. SO THE AMOUNT
YOU WOULD PAY TO PURCHASE THE INVESTMENT (THE EXERCISE
PRICE) WOULD BE $25.
UNDERLYING STOCK Under the Share Option Plan, the underlying stock will
be comprised of shares of selected mutual funds, which
are briefly described in Attachment A to this brochure,
and described in greater detail in the mutual fund
prospectuses. The underlying stock will be automatically
increased to account for reinvestment of dividends and
distributions with respect to stock. They are rounded to
the nearest one-thousandth of a share, and will be added
to the underlying stock subject to the option.
EXERCISE PRICE Your exercise price will be 25% of the market price of
the underlying stock on the date the option is granted.
The option's exercise price will remain unchanged.
PARTICIPATION When you are nominated to participate in the plan, you
AGREEMENT will receive a Participation Agreement. If you choose to
participate in the plan, you must indicate the amount of
future base compensation or Board of Directors' fees you
wish to exchange for an option under the plan. You may
also indicate the percentage of any future annual
variable pay you wish to exchange, if applicable.
Options received in exchange for annual variable pay are
granted on the first quarterly grant date after the end
of the fiscal year, once Cenex Harvest States has
determined the amount of your annual variable pay, if
OPTION AGREEMENT With each option you are granted, you will receive a
written agreement called an Option Agreement. This
agreement, which must be signed by both you and a
representative of the Committee, will explain the terms
and conditions of the grant. In cases where the
Committee makes a special award of an option to you for
reasons other than your specified exchange of future
compensation, you may be required to agree to remain
employed for a designated period of time following the
GRANTING OF OPTION Your options will be granted on or about October 15,
1998, of the first plan year and quarterly thereafter on
or about December 31, March 31, June 30, and September
30. The option will reflect actual salary or Board fee
exchanges through the end of the calendar quarter of the
calendar year for which the agreement was made. Your
annual variable pay, if applicable, may also be
exchanged for an option. (If applicable, a Participation
Agreement regarding the annual variable pay must be
filed prior to Cenex Harvest States Cooperatives' fiscal
year beginning September 1, and the option which
includes these exchanges will be granted once the annual
variable pay is determined after the end of that fiscal
HOLDING YOUR OPTIONS Before exercising your option, you must hold it at least
six months after receipt. No advance election is
required prior to exercising your option.
WHEN DO I DECIDE Before the start of each calendar year (or before the
WHETHER TO start of each fiscal year, in the case of annual
PARTICIPATE? variable pay), you'll have the opportunity to indicate
the amount of salary, Board fees and/or annual variable
pay you wish to exchange for an option to purchase
shares of selected mutual funds.
Before you agree to participate in this plan, carefully
read all the information provided. You may wish to
consult a tax advisor or financial planner as well.
WHAT MUTUAL FUNDS The funds offered under this plan are many of the same
WILL BE OFFERED? funds offered under the Cenex Harvest States 401(k)
plan, which may change from time to time. A description
of the current funds available in this plan can be found
in Attachment A.
Neither Cenex Harvest States nor the Committee can
guarantee a specific rate of return, nor can they
protect you from the risk of loss.
Fund prospectuses are available upon request, and are
incorporated by reference into this brochure.
CAN I CHANGE THE In general, no. Your option must continue to cover the
INVESTMENTS ON mutual funds selected for you by the Committee unless
WHICH MY OPTIONS the Committee permits the substitution of securities.
ARE BASED? Once you exercise your option, however, you may decide
to sell the securities and purchase a different
HOW DO I EXERCISE Here's an outline of the steps to follow at the time of
MY OPTIONS? exercise:
* determine that you are ready to incur a taxable
event (compensation income)
* verify the exercise price
* notify Cenex Harvest States that you want to
exercise an option in whole or in part, subject to
minimum exercise requirements
* pay the exercise price and any tax withholding
WHAT ARE THE TAX Here's an overview of the tax consequences of the Share
CONSEQUENCES AT Option Plan by looking at four separate events.
EACH PHASE OF
EVENT TAX CONSEQUENCE
ELECTION TO At the time you choose to participate,
PARTICIPATE taxes are postponed on the compensation
exchanged. This is true only if the
agreement is filed prior to the service
period in which the compensation is
earned. No tax is due on this date.
OPTION Because you are receiving an option under
GRANT the plan, you do not have income at the
DATE option grant date. No tax is due on the
amount of your exchanged compensation.
OPTION You realize taxable income in the year
EXERCISE you exercise the option. Your taxable
DATE compensation (TAXED AS ORDINARY income)
equals the market price of the security
less the exercise price you pay.
SALE OF If you sell the security after the option
PROPERTY exercise date, you will have capital gain
or loss income. The tax rate for your
gain will depend upon your holding
period. The gain or loss is calculated by
taking the value of the property at sale
less the value of the property on the
option exercise date (SOMETIMES CALLED
WHAT ARE THE RISKS There are a number of risks to consider before deciding
OF PARTICIPATING? to participate in the Share Option Plan. You should
consider and review all the available information about
the mutual funds offered under this plan. The value of
your option upon exercise will be determined by the
value of the underlying stock. If the value of the
underlying stock increases, you will share in that gain.
However, Cenex Harvest States does not guarantee a
specific rate of return, nor can Cenex Harvest States
protect you from the risk of loss.
In addition, once your election has been made, there is
a market risk that the underlying stock will lose value.
There is always a risk of receiving poor financial
planning advice or no financial planning advice at all.
Cenex Harvest States cannot provide you with such
advice. Consider your option in the context of your
overall investment portfolio to ensure investment
diversity and balance. Contact your financial planner
for advice related to your situation before
participating in the plan.
On or about March 31, July 31, September 30, and
December 31, of each calendar year (and on the next
option grant date following the determination of your
annual variable pay for the preceding fiscal year, if
applicable), the Company will deposit with the trustee
of a grantor trust established by the Company the
salary, variable annual pay, or Board of Directors' fees
amounts which are being exchanged for options in
accordance with the terms and conditions of the plan.
The funds deposited into such trust and the underlying
stock, however, remain subject to the claims of the
general creditors of the Company as if such funds were
general assets of the Company. If the Company becomes
insolvent, there can be no assurance of the Company's
ability to meet its obligations under the Option
Agreement. In such a scenario, your status would be that
of an unsecured creditor.
WHAT HAPPENS IF I As a general rule, your option will expire on the
SEPARATE FROM earliest of: 90 days after separation from service with
SERVICE WITH CENEX Cenex Harvest States for cause, 120 months after
HARVEST STATES separation from service as an employee or as a member of
COOPERATIVES? WHAT the Board of Directors for any other reason, or 20 years
HAPPENS IF I DIE? after being granted.
In addition, any option granted will be adjusted as
* If your separation from service occurs before your
option has been granted, you will not receive an
option but instead will receive compensation
equivalent to the amount of the compensation
* If your separation from service occurs after your
option has been granted, the number of shares
applicable to an option granted to you in the form
of an outright award or in exchange for a
surrender or termination of a deferred
compensation account with the Employer, if
applicable, will be adjusted in the manner
prescribed in your option agreement. You will only
be permitted to exercise a prorata number of
shares indicated in the option agreement. The
remainder of the shares will be forfeited.
When first enrolling in the plan, you should complete a
Beneficiary Designation Form. Upon death, any options
you may own become the property of your beneficiary.
Anyone, including a trust for the benefit of a spouse
and/or lineal descendant, may be named as a beneficiary.
This beneficiary designation may be changed at any time
and requires no spousal consent or other authorization.
If no beneficiary designation is made, your beneficiary
automatically will be your spouse if you are lawfully
married on the date of death, or your estate if you are
not married on the date of death.
OTHER PLAN Plan assets comprised of Cenex Harvest States
INFORMATION contributions and securities underlying each option
agreement will be held in trust by a trustee to be
designated by Cenex Harvest States. The trustee will
hold the plan assets and execute the exercise of
participants' options. The trustee will receive
information regarding the mutual funds and will provide
periodic reports on the value of the funds.
The Committee will maintain certain records, including
copies of your option agreements. It will select an
outside vendor to provide recordkeeping services.
Cenex Harvest States will pay the cost of outside trust
and recordkeeping fees. Investment management fees will
be paid from the trust assets.
Cenex Harvest States is not required to complete an
annual form 5500 filing for this plan under the Employee
Retirement Income Security Act of 1974 (ERISA).
INCORPORATION OF The following documents filed by Cenex Harvest States
CERTAIN INFORMATION pursuant to the Securities Exchange Act of 1934 are
BY REFERENCE incorporated in and made a part of this Prospectus by
(a) Annual Report on Form 10-K for the fiscal year
ended May 31, 1997 filed by Cenex Harvest States
on August 26, 1997;
(b) Quarterly Report on Form 10-Q for the quarter
ended (i) August 31, 1997 filed by Cenex Harvest
States on October 10, 1997; (ii) November 30, 1997
filed by Cenex Harvest States on January 12, 1998;
and (iii) February 28, 1998 filed by Cenex Harvest
States on April 7, 1998.
(c) Form S-8 dated November 17, 1997 filed by Cenex
Harvest States on December 12, 1997.
(d) Form 8-K dated June 1, 1998 and filed by Cenex
Harvest States on June 10, 1998 and Form 8-K/A
dated June 1, 1998 and filed by Cenex Harvest
States on August 13, 1998.
(e) Annual Report on Form 10-K for the fiscal year
ended May 31, 1998 filed by Cenex Harvest States
on August 13, 1998.
(f) Form 10-Q Transition Report for transition period
of June 1, 1998 to August 31, 1998 filed by Cenex
Harvest States on October 14, 1998.
Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent
that a statement contained herein modifies or supersedes
such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Cenex Harvest States will provide without charge to each
person, including any beneficial owner, to whom a copy
of this Prospectus is delivered, upon the written or
oral request of any such person, a copy of any and all
of the documents referred to above or elsewhere herein
which have been incorporated by reference in this
Prospectus, other than exhibits to such documents
(unless such exhibits are specifically incorporated by
reference into the information that this Prospectus
incorporates by reference). Written requests for such
copies should be directed to Cenex Harvest States
Cooperatives, 5500 Cenex Drive, Inver Grove Heights, MN
55077, Attention: Legal Department, telephone number