Section 1. General Powers

The business and affairs of the cooperative shall be managed by a board of seven (7) directors which shall exercise all of the powers of the cooperative except such as are by law or by the articles of incorporation of the cooperative or by these bylaws conferred upon or reserved to the members.

Section 2. Qualifications and Tenure

The territory served by the cooperative shall be divided into four districts, and the directors shall be energy member residents of the respective districts as hereafter provided.

• District No. 1 shall include all territory lying South and West of a line beginning at the boundary between the United States and Canada, Northeast of Stuart Island; thence running in a Southeasterly direction to the East of Stuart and Spieden Islands through San Juan Channel; thence proceeding Southerly between Cattle and Davis Points through Middle Channel.

• District No. 2 shall include all territory lying East and North of a line beginning on the boundary between the United States and Canada Northeast of Stuart Island and running thence Southeasterly to the East of Stuart and Spieden Islands and West of Flattop Island to a point West of Jones Island; thence Easterly to the North of Jones Island through Spring Passage and thence Easterly through North Pass and Pole Pass to the South of Orcas Island through Harney Channel; thence Southeasterly to the West of Blakely Island and through Thatcher Pass to the Skagit County line.

• District No. 3 shall include all territory lying West of the Skagit County line and North of the Island County line and East of the East boundary of District No. 1, with the North boundary thereof commencing at the Skagit County line East of Blakely Island and running thence Westerly through Thatcher Pass; thence Northwesterly to the intersection of Harney Channel and Upright Channel North of Upright Head; thence Southwesterly through Upright Channel to its intersection with San Juan Channel.

• District No. 4 shall include all territory, which is bounded on the South and West of District No. 1, on the North by District No. 2 and on the Southeast by District No. 3.

Each director shall serve for a term of three years, or until his successor shall have been elected and qualified, subject to the provisions of these bylaws with respect to the removal of directors. The election of directors and their terms of office shall be staggered as follows: upon the expiration of the terms of the present directors, new directors shall be elected who are residents of their districts for three year terms and shall be elected every third year thereafter (at this time the terms are: District No. 1 Directors, 2 years; District No. 2 Directors, 3 years; District No. 3 Directors, 1 year; and District No. 4 Director, 1 year.) Nominations for directors shall be made each year as hereafter provided from persons residing in the respective districts from which directors are to be elected in that year. No energy member shall be eligible to become or remain a director of the cooperative who is not a bona fide resident in the district of the cooperative he is to represent, or who is employed by the cooperative, or who is in any way employed by or financially interested in a competing enterprise or business primarily engaged in selling electrical or plumbing appliances, fixtures, or supplies to members of the cooperative.

When a membership is held jointly by a husband and wife, either one, but not both, may be elected a director, provided, however, that neither one shall be eligible to become or remain a director or to hold a position of trust in the cooperative unless both shall meet the qualifications hereinabove set forth. Nothing in this section contained shall, or shall be construed to, affect, in any manner whatsoever, the validity of any action taken at any meeting of the Board of Directors.

Section 3. Nominations and Election of Directors

1. Nominations: It shall be the duty of the Board of Directors to appoint, not less than sixty (60) days nor more than ninety (90) days before the date of a meeting of the energy members at which directors are to be elected, a committee on nominations consisting of not less than three (3) nor more than five (5) energy members from each of the voting districts for which a director is to be elected. No officer or member of the Board of Directors shall be appointed a member of such committee. The committee shall prepare and post in the lobby at the principal office of the cooperative at least sixty (60) days before the meeting a list of its nominations for directors, but any fifteen (15) or more energy members may make other nominations from their particular district, but not otherwise, by petition with their signatures, filed at the principal office of the cooperative at Eastsound, Washington, not less than forty-five (45) days prior to the meeting, and the secretary shall cause the same to be posted at the place where a list of nominations made by the committee is posted. The secretary shall publish a legal notice in the local newspaper(s) which carries legal notices, said notice to announce names of director candidates. The notice must be submitted to the newspaper(s) within three working days of the posting of nominations. The committee should nominate at least two (2) but not more than five (5) members for each position for which a director is to be elected, one of whom shall be the incumbent director, unless such director does not wish to be considered for reelection. The secretary shall mail with the notice of the meeting a statement of the number of directors to be elected from each district and showing separately the nominations made by petition, if any.

2. Election of Directors. Not less than ten (10) nor more than thirty-five (35) days before an annual or special meeting of the energy members at which directors are to be elected, the secretary of the cooperative shall mail to each energy member a printed ballot marked “Ballot for Directors” containing the names of all nominees for the respective districts to be arranged alphabetically, together with a notice of said meeting, containing appropriate information and instructions relative to voting by absentee ballot or at the meeting. The ballot shall indicate thereon the number of directors to be elected from each district and shall also show separately nominations made by the nominating committee and the nominations made by petition. Each energy member of the cooperative present at the meeting shall be entitled to cast his vote for the election of directors unless he had heretofore voted by an absentee ballot. Any energy member who is absent from any such meeting may vote by absentee ballot for directors by recording on the ballot a mark opposite the names of the number of candidates to be elected in each district under the procedure established in Article II, Section 6.

Each energy member is entitled to vote for each position for which a director is to be elected, and the candidate receiving the most votes in each position is deemed to be elected; provided, where two directors are to be elected for a particular district, the two persons receiving the greatest number of votes shall be deemed elected.

Section 4. Vacancies

Subject to the provisions of these bylaws with respect to the removal of directors, a vacancy occurring in the Board of Directors shall be filled by the election of an energy member resident of the same district as the director whose office is vacated, by a majority vote of the remaining directors, and a director thus elected shall serve for the unexpired portion of the term or until his successor shall have been elected and shall have qualified.

Section 5. Compensation

Directors as such shall not receive any salary for their services, but by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for serving as a director at meetings on behalf of the cooperative. Close relatives of a director shall not receive compensation for serving the cooperative, unless such compensation shall be specifically authorized by a vote of the members.

Section 6. Rules and Regulations

The Board of Directors shall have power to make and adopt such rules and regulations, not inconsistent with law, the articles of incorporation of the cooperative or these bylaws, as it may deem advisable for the management, administration and regulation of the business and affairs of the cooperative.

Section 7. Accounting System and Reports

The Board of Directors shall cause to be established and maintained a complete accounting system, which, among other things, subject to applicable laws and rules and regulations of any regulatory body, shall conform to such accounting system as may from time to time be designated by the Administrator of the Rural Utilities Service of the United States of America. The board shall also, after the close of each fiscal year, cause to be made an audit of the accounts, books, records and the financial condition of the cooperative. Said audit is to be conducted by a certified public accounting firm that is acceptable to the Rural Utilities Service. A summary of such audit report shall be submitted to the members at the following annual meeting. Accounts of the cooperative may be examined by a committee of the Board of Directors at any time it feels it advantageous to do so.

Section 8. Changes in Rates

Written notice shall be given to the Administrator of the Rural Utilities Service of the United States of America within ninety (90) days after board approval of any change in the rates charged by the cooperative for electric energy.

Section 9. Absences of Directors

In the event that any director shall miss three (3) consecutive regular meetings without a valid excuse, at the discretion of the remaining directors, the seat of the absent director may be declared vacant and a replacement named by the remaining directors