Ricky Schmidt and Suzetta J. Schmidt - Page 4

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               The Schmidts raise corn and operate a dairy on the Schmidt             
          farm.  In the dairy operation, cows are milked twice daily.  In             
          addition, the cows are bred once a year (usually in the winter).            
          When the cows are calving (especially with first-time calving               
          heifers), they must be checked at least every 4 hours, usually on           
          a 24-hour basis.                                                            
               In addition to the Schmidt farm, Mr. Schmidt individually              
          owns 80 additional acres which he acquired in 1987.  The 80 acres           
          are farmed by Mr. Schmidt as a sole proprietor.                             
          B.   Hillside Dairy                                                         
               On January 7, 1993, Hillside Dairy was incorporated under              
          the laws of the State of South Dakota.3  Hillside Dairy was                 
          organized primarily to raise grain and operate a dairy.                     
               The Schmidts have been the sole shareholders, officers, and            
          directors of Hillside Dairy since its incorporation.  Mr. Schmidt           
          has been president, treasurer, and a director, and Mrs. Schmidt             
          has been vice president, secretary, and a director, of Hillside             
          Dairy.                                                                      
               Article IV, section 10, of the bylaws of Hillside Dairy                
          provides:                                                                   
                    SECTION 10.  Repayment of Disallowed Expenses.                    
               Any expense paid by the Corporation which is finally                   
               determined as a personal expense of any officer or                     
               employee and disallowed as Corporation expense shall be                

               3Douglas Bleeker, counsel for petitioners, prepared the                
          articles of incorporation, bylaws, minutes of meetings, and other           
          corporate documents for Hillside Dairy.                                     




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