Section 1. Interest or Dividends on Capital Prohibited.
The cooperative shall at all times be operated on a cooperative non-profit basis for the mutual benefit of its patrons. No interest or dividends shall be paid or payable by the cooperative on any capital furnished by its patrons.
Section 2. Patronage of Capital in Connection with Furnishing Electric Energy.
In the furnishing of electric energy the cooperative's operations shall be so conducted that all patrons will, through their patronage, furnish capital for the cooperative. In order to induce patronage and to assure that the cooperative will operate on a non-profit basis, the cooperative is obligated to account, on a patronage basis, to all its patrons for all amounts received and receivable from the furnishing of electric energy in excess of operating costs and expenses properly chargeable against the furnishing of electric energy. All such amounts in excess of operating costs and expenses at the moment of receipt by the cooperative are received with the understanding that they are furnished by the patrons as capital. The cooperative is obligated to pay, by credits, to a capital account for each patron all such amounts in excess of operating costs and expenses, in proportion to the amounts of their respective purchases of electric energy and goods from the cooperative during the fiscal year, as hereinafter provided, except that there shall be charged against the fund, which is available for distribution by credits to the capital accounts of the patrons, an amount equal to the cost per year per member to defray the subscription expense of a rural electrification publication which will be mailed to each member of the cooperative, and such charge and deduction will be made before such capital credits are extended to the account of each patron. The books and records of the cooperative shall be set up and kept in such a manner that at the end of each fiscal year the amount of capital, if any, so furnished by each patron is clearly reflected and credited in an appropriate record to the capital account of each patron, and the cooperative shall, within a reasonable time after the close of the fiscal year, notify each patron of the amount of capital so credited to his/her account. All such amounts credited to the capital account of any patron shall have the same status as though they had been paid to the patron in cash in pursuance of a legal obligation to do so and the patron had then furnished the cooperative corresponding amounts for capital.
All other amounts received by the cooperative from sources other then operations may be a.) Used to offset any losses incurred during the current or any prior fiscal year b.) At the discretion of the board of directors, credited to a general unallocated reserve or c.) To the extent not needed for that purpose, allocated to its patrons on a patronage basis and any amount so allocated shall be included as a part of the capital credited to accounts of patrons as herein provided.
In the event of dissolution or liquidation of the cooperative, after all outstanding indebtedness of the cooperative shall have been paid, outstanding capital credits shall be retired without priority, on a pro rata basis, before any payments are made on account of property rights to members. If, at any time prior to dissolution or liquidation, the board of directors shall determine the financial condition of the cooperative will not be impaired thereby, the capital then credited to patrons accounts may be retired in full, or in part. Any such retirements of capital furnished prior to January 1, 1978, shall be made in order of priority according to the year in which the capital was furnished and credited, the capital first received by the cooperative being first retired. After December 31, 1977, the board of directors shall determine the method, basis, priority and order of retirement, if any, for all amounts thereafter furnished as capital. Without limiting the generality of the board of directors' power to determine the method, basis, priority and order of retirement of capital, the board of directors shall have the power to adopt rules providing for the separate retirement of that portion ("power supply portion") of capital credited to the accounts of patrons which corresponds to capital credited to the account of the cooperative by an organization furnishing electric service to the cooperative. Such rules may (a) establish a method for determining the power supply portion of capital credited to each patron for each applicable fiscal year, (b) provide for separate identification on the cooperative's books of the power supply portion of capital credited to the cooperative's patrons, (c) provide for appropriate notifications to patrons with respect to the power supply portion of capital to their accounts, and (d) provide for the power supply portion of capital credited to patrons for any fiscal year to not be retired, when other capital credited for the same fiscal year is retired.
Capital credited to the account of each patron shall be assignable only on the books of the cooperative pursuant to written instruction from the assignor and only to successors in interest or successors in occupancy in all or a part of such patrons premises served by the cooperative unless the board of directors, acting under policies of general application, shall determine otherwise.
Notwithstanding any other provisions of these bylaws, the board of directors, at its discretion, shall have the power at any time upon the death of any patron, including patrons who were members of a partnership that was or is a member of the cooperative and corporations which have become civilly dead by formal dissolution or become bankrupt, leaving an estate to be administered for the benefit of its shareholders and creditors, if the legal representative(s) of their estate shall request in writing that the capital credited to any such patron be retired prior to the time such capital would otherwise be retired under the provision of these bylaws, to retire capital credited to any such patron immediately upon such terms and conditions as the board of directors, acting under the policies of general application, and the legal representative(s) of such patron's estate shall agree upon; provided, however, that the financial condition of the cooperative will not be impaired thereby.
The cooperative, before retiring any capital credited to any patron's account, shall deduct therefrom any amount owing by such patron to the cooperative, together with interest thereon at a reasonable rate as from time to time established by the board and in effect when such amount became overdue, compounded annually.
Notwithstanding any other provisions of these bylaws, should member file bankruptcy and there shall be outstanding capital credits which have been allocated upon the books of cooperative to the account of member, and said member shall have an amount owed to cooperative for electrical energy provided to member, or amounts owed to cooperative on accounts other than electrical energy provided by cooperative, cooperative shall retain the capital credits to offset any amounts owed to cooperative and any remaining balance over and above this amount shall be retained in the capital credit account of member to be paid under the policies set by the board of directors.
The board of directors, at its discretion, shall have the power to convert all patronage equities of a member credited to a specific metered account to be accounted and held as contributed capital in aid of the cost of construction of the electrical system facilities necessary to serve the account of such member if service to such account is terminated to permit the delivery of electricity by another central station power supplier or by their own generation absent the written consent of the Cooperative.
The patrons of the cooperative, by dealing with the cooperative acknowledge that the terms and provisions of the articles of incorporation and bylaws shall constitute and be a contract between the cooperative and each patron, and both the cooperative and the patrons are bound by such contract, as fully as though each patron had individually signed a separate instrument containing such terms and provisions. The provisions of this Article of the bylaws shall be called to the attention of each patron of the cooperative by posting in a conspicuous place in the cooperative's office.