ARTICLE VII - Cooperative Operation

ARTICLE VII - Cooperative Operation

SECTION 7.1 – Not-for-profit and Cooperative Operation

The Cooperative:

A. Must operate on a not-for-profit basis (but may have for-profit affiliates and subsidiaries); and

B. Must operate in accordance with cooperative principles for the mutual benefit of its Members.

SECTION 7.2 – Allocating and Crediting Capital

A. Patron. A Cooperative patron is any Class A, B, or C Member, or any Non- Member Person who:

  1. Uses, receives, or purchases any service, product or commodity from the Cooperative (“Cooperative Service”); and
  2. Receives an allocation of, and payment by credit to a Capital account for, Capital Credits and Affiliated Capital Credits (collectively, “Patron”).

B. Capital Credits. Patrons shall furnish, and the Cooperative shall receive, as capital (“Capital”) all funds and amounts received by the Cooperative from Patrons for the Cooperative’s provision of a Cooperative Service that exceed the Cooperative’s costs and expenses of providing the Cooperative Service (“Operating Margins”). For each Cooperative Service, the Cooperative shall annually allocate to each Patron, and pay by credit to a capital account for each Patron, Operating Margins from the Cooperative Service a value or quantity of the Cooperative Service used, received, or purchased by each Patron during the applicable fiscal year (“Capital Credits”). Capital Credits must be treated as though the Cooperative paid the Capital Credit amounts to each Patron in cash pursuant to a legal obligation, and each Patron furnished the Cooperative capital in the corresponding Capital Credit amounts.

All other amounts received by the Cooperative from its operations in excess of costs and expenses shall, insofar as permitted by law, be (a) used to offset any losses incurred during the current or any prior fiscal year and (b) to the extent not needed for that purpose, be retained by the Cooperative as permanent capital.

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 of Members. If, at any time prior to dissolution or liquidation, the Board shall determine that 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 in such amounts as the Board from time to time may determine.The Board shall determine the method, basis, priority and order of retirement, if any, for all amounts heretofore and hereafter furnished as capital. Provided, however, that the Board 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 shall (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 credited to their accounts and (d) permit a general retirement of the power supply portion of the capital credited to Patrons upon a receipt of payment of such capital.

The Board of the Cooperative may, at its discretion, provide for the separate retirement of capital credited to A&N Electric Cooperative by other associated organizations in a manner similar to that of a power supply organization.

Capital credited to the account of each Patron shall be assignable only on the books of the Cooperative pursuant to written instructions from the assignor and only to successors in interest or successors in occupancy in all or a part of such Patron’s premises served by the Cooperative unless the Board, acting under policies of general application, shall determine otherwise. In the event that a non-member patron shall elect to become a Member of the Cooperative the capital credited to the account of such non-member patron may be applied by the Cooperative toward the payment of a membership fee on behalf of such non-member patron.

Notwithstanding any other provision of these Bylaws, the Board, at its discretion, shall have the power at any time upon the death of any Patron who is a natural person, if the legal representatives of his estate or others authorized by law 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 provisions of these Bylaws. Any such retirement for estates of deceased Patrons shall be upon such terms and conditions as the Board, acting under policies of general application, and the legal representatives of such Patron’s estate or others authorized by law shall agree upon; provided, however, that the financial condition of the Cooperative will not be impaired thereby, and any such payments shall not violate any contractual obligations of the Cooperative.

If at any time the Cooperative undertakes to return any Capital Credits to or on behalf of a Member or a Member’s estate, the Cooperative shall first deduct and set off from the monies to be paid over to or on behalf of the Member or the Member’s estate any amount which the Member or the Member’s estate may then owe to the Cooperative.

If the patronage capital accruing to a Member or former Member’s account is sought to be returned by the Cooperative and said Member or former Member fails to claim such patronage capital for three (3) years from the date it is mailed to his last known billing address by first class mail, then such patronage capital shall be deemed to have been transferred as a gift to the Cooperative and shall thereafter be the property of the Cooperative; provided however (1) there is no spouse or next of kin identified in the records of the Cooperative for any deceased person for whom Capital Credits are being held, or (2) there is no current address on file with the Cooperative for a former Member who has terminated the service; and provided further that such credits shall be deemed gifts to the Cooperative only if the Cooperative published notice of such unclaimed Capital Credits in its regular Member publication and also in a publication of general circulation in the territory served by the Cooperative and such Capital Credits are not claimed by such Member, former Member, or next of kin within 120 days of such publication. However, the deceased Member’s personal representative, spouse or next of kin or former Member may at any time make claim to any unclaimed Capital Credits previously authorized to be paid by 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.

C. Affiliated Capital Credits. The Cooperative may separately allocate and credit to Patrons capital allocated and credited to the Cooperative by any organization
furnishing services, supplies, or products to the Cooperative (“Affiliated Capital Credits”):

  1. In proportion to the value or quantity of each service, supply, or product furnished by the organization that is used, received, or purchased by each Patron; and
  2. If the Cooperative determines, and separately identifies, the Affiliated Capital Credits.

D. Non-Operating Margins. Funds and amounts, other than Operating Margins, received by the Cooperative that exceed the Cooperative’s costs and expenses (“Non-Operating Margins”) may be:

  1. Allocated as Capital Credits to Patrons in the same manner as the Cooperative allocates Capital Credits to Patrons; or
  2. Used by the Cooperative as permanent, non-allocated capital.

E. Assignment and Notification. Unless otherwise determined by the Board or provided in these Bylaws, Capital Credits and Affiliated Capital Credits may be assigned only upon a Patron:

  1. Delivering a written assignment to the Cooperative; and 
  2. Complying with any other requirements reasonably determined by the Board.

The Cooperative shall annually notify each Patron of the dollar amount of Capital Credits or Affiliated Capital Credits allocated or credited to the Patron during the applicable fiscal year.

F. Joint Memberships. Upon the termination, conversion, or alteration of a Joint Membership, and upon the Cooperative receiving written notice and adequate proof of the Joint Membership termination, conversion, or alteration, all Capital Credits and Affiliated Capital Credits shall be allocated as follows: For any Joint Membership:

  1. Terminated or converted through the death of one (1) Joint Member, the Cooperative shall re-allocate and re-credit to the surviving Joint Member all Capital Credits and Affiliated Capital Credits previously allocated and credited to the Joint Membership; and
  2. Otherwise terminated or converted, and unless otherwise instructed by a judicial or administrative authority of competent jurisdiction, the Cooperative shall re-allocate and re-credit to each Joint Member one-half (1/2) of the Capital Credits and Affiliated Capital Credits previously allocated and credited to the Joint Membership.

SECTION 7.3 – Retiring and Refunding Capital Credit

At any time prior to the Cooperative’s dissolution or liquidation:

A. The Board may authorize the Cooperative to wholly or partially retire and refund Capital Credits to Patrons and former Patrons; or

B. After an organization furnishing services, supplies, or products to the Cooperative retires and refunds capital to the Cooperative, the Board may authorize the Cooperative to retire and refund the corresponding Affiliated Capital Credits to Patrons and former Patrons.

The Board shall determine the manner and method of retiring and refunding Capital Credits and Affiliated Capital Credits.

When there is held by the Cooperative any patronage capital to the credit of a deceased person, in an amount not exceeding $1,000, upon whose estate there shall have been no qualification, the Cooperative may after 120 days from the death of such person, pay such balance to his or her personal representative, and if none, to his/her spouse and if none, to his or her next of kin, whose receipt therefore shall be a full discharge and acquittance to the Cooperative to all persons whomsoever on account of such patronage capital.

To secure payment of any amounts owed by a Patron or former Patron to the Cooperative, including any reasonable compounded interest, and late payment fee, determined by the Board, the Cooperative has a security interest in the Capital Credits and Affiliated Capital Credits of every Patron and former Patron. Before retiring and refunding any Capital Credits or Affiliated Capital Credits, the Cooperative may deduct and set off from the Capital Credits or Affiliated Capital Credits any amounts owed to the Cooperative by the Patron or former Patron, including any reasonable compounded interest, and late payment fee, determined by the Board.

SECTION 7.4 – Donation of Unclaimed Patronage Capital

In the event there are retired Capital Credits or Affiliated Capital Credits which belong to:

A. A Deceased Patron who has no spouse or next of kin identified in the records of the Cooperative; or

B. A Patron or former Patron who has terminated service and the records of the Cooperative do not have a current address on file.

The Cooperative shall publish notice of such Capital Credits or Affiliated Capital Credits in “Cooperative Living” magazine and in a publication of general circulation. If such Capital Credits or Affiliated Capital Credits are not claimed by such Patron, former Patron or next of kin within 120 days of such publication then, in either event, such Patronage Capital shall be deemed to have been transferred as a gift to the Cooperative and shall thereafter be the property of the Cooperative.

SECTION 7.5 – Non-Member Patrons and Non-Member Non-Patrons

As a condition of using, receiving, or purchasing any Cooperative Service, and unless otherwise determined by the Board:

A. To the same extent as Members, Patrons who are not Members (“Non-Member Patrons”) and Persons using, receiving, or purchasing any Cooperative Service who are neither Members nor Patrons (“Non-Member Non-Patrons”) shall abide by, and be bound to, all the duties, obligations, liabilities, and responsibilities imposed by the Governing Documents upon Members;

B. To the same extent as Members, Non-Member Patrons shall have the rights to:

  1. Be allocated Capital Credits and Affiliated Capital Credits; and
  2. Receive retired and refunded Capital Credits and Affiliated Capital Credits, but shall have none of the other rights granted by the Governing Documents to Members; and
  3. Non-Member Non-Patrons shall have none of the rights granted by the Governing Documents to Members or Non-Member Patrons.

SECTION 7.6 – Reasonable Reserves

Based upon the Cooperative’s reasonable needs, the Cooperative may accumulate and retain Operating Margins (“Reasonable Reserves”). As provided in these Bylaws, however, the Cooperative shall allocate and credit Reasonable Reserves as Capital Credits.

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