Section 1. Interest or Dividends on Capital Prohibited

The cooperative shall at all times be operated on a cooperative nonprofit basis for the mutual benefit of its members. No interest or dividends shall be paid or payable by the cooperative on any capital furnished by its members.

Section 2. Members’ Patronage Capital in Connection with Furnishing Electric Energy

Except as provided in Article I, Section 4, in the furnishing of electric energy, the cooperative’s operations shall be so conducted that all members will, through their patronage, furnish capital for the cooperative. In order to induce patronage and to assure that the cooperative will operate on a nonprofit basis, the cooperative is obligated to account on a patronage basis to all its members for all amounts received and receivable from 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 members as capital. The cooperative is obligated to pay by credits to a capital account for each member all such amounts in excess of operating costs and expenses. 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 member is clearly reflected and credited in an appropriate record to the capital account of each member, and the cooperative shall, within a reasonable time after the close of the fiscal year, notify each member of the amount of capital so credited to his account. Notwithstanding the patronage capital provisions by these bylaws, any member who fails to remain an active member for twelve consecutive months shall forfeit all rights to patronage capital received or receivable. All such amounts credited to the capital account of any member shall have the same status as though they had been paid to the member in cash in pursuant of a legal obligation to do so and the member had then furnished the cooperative corresponding amounts for 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 energy members. Thereafter, any payments made on account of property rights of members shall be made to all energy members (including former members) in the proportion which the aggregate patronage of each member bears to the total patronage of all such members. If, at any time prior to the dissolution or liquidation, the Board of Directors shall determine that the financial condition of the cooperative will not be impaired thereby, the capital then credited to energy members’ accounts may be retired in full or in part. Each such retirement of capital shall, in the sole discretion and determination of the Board of Directors, be made pursuant to resolution of general application of the Board of Directors in the following manners:

1. By payment to members in order of priority according to the year in which the capital was furnished and credited, the first received by the cooperative being the first retired; or

2. By payment to all members on the basis of the ratio that the unpaid capital credits standing in the name of each member on the books of the cooperative bears to the total unpaid capital credits of all members as shown on the books of the cooperative. No active member who fails by this method to get a check for the minimum amount would have that amount deducted from his capital credit account; or

3. By discounting of estate payments to dissolved corporations or associations when capital credits are to be retired prior to the time such capital credits would otherwise normally be retired; or

4. By the Board of Directors determining the method, basis, priority and order of retirement.

Capital credited on the account of each energy member shall be assignable only on the books of the cooperative pursuant to written instruction from the assignor and only to successors in the interest or successors in occupancy in all or a part of such member’s 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 sole discretion, shall have the power at any time upon the death or withdrawal of any energy member, or upon the dissolution of any corporation or association, to authorize payment of capital credits to the party or parties in title thereto; if the board authorizes payment of capital credits pursuant to this section, the remittance of those credits shall take place in a manner agreed upon by the board of directors and the representative; if the legal representatives of the estate, the dissolved corporation or the association shall request in writing that the capital credited to any such member, corporation or association be retired prior to the time such capital credit would otherwise be retired under the provisions of these bylaws, to retire capital credited to any such member, corporation or association immediately upon such terms and conditions, including such discount as the board shall deem proper, provided, however, that the financial condition of the cooperative shall not be impaired by the payments herein permitted as determined by the board of directors in its sole discretion.

Section 3. Binding Effect of Articles of Incorporation, Bylaws, Tariffs and Rules of the Cooperative

All members of the cooperative, by dealing with the cooperative, acknowledge that the terms and provisions of the articles of incorporation, bylaws, tariffs and rules of the cooperative and any future amendments thereof, shall constitute and be a contract between the cooperative and each member, and both the cooperative and such members are bound by such contract, as fully as though each member 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 member of the cooperative by posting in a conspicuous place in the cooperative’s office.

Section 4. Patronage Refunds in Connection with Furnishing Other Services

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, allocated to its members on a patronage basis, and any amount so allocated shall be included as a part of the capital credited to the accounts of members, as herein provided.

In the event that the cooperative should engage in the business of furnishing goods or services other than electric energy, all amounts received and receivable therefrom which are in excess of costs and expenses properly chargeable against the furnishing of such goods or services shall, insofar as permitted by law, be prorated annually on a patronage basis and returned to those members from whom such amounts were obtained. Such goods and services may include, without limitation, the provision of fiber optic telecommunications infrastructure and services.

Section 5. Transfer of Credits or Refunds to "Education and Promotion Fund" or "Retirement and Replacement Fund"

In the event total capital credits or membership fee refund due any inactive member or member is less than $2.00, or the member has forfeited his rights to capital credits for failure to remain an active member for twelve (12) consecutive months, or in the event the cooperative is unable to make payment to any inactive member or member of capital credits or membership fee refund due such inactive member or member because of inability to locate the inactive member or member, the incapacity of the inactive member or member to receive the same, or any other cause beyond the control of the cooperative, then, after the lapse of a period of two (2) years from the date prescribed for payment or delivery of such capital credit or membership fee refund, such capital credit or membership fee refund shall be transferred by the cooperative to either a special fund known as the “Education and Promotion Fund” or to a special fund known as the “Retirement and Replacement Fund”, as the Board of Directors shall by resolution determine. Each member and each member of the cooperative hereby grants and gives to the cooperative as a free and voluntary gift of all such moneys, rights, and interests as of said date of transfer. The moneys transferred to the “Education and Promotion Fund” shall be used by the cooperative for such research and educational purposes as the cooperative’s Board of Directors may determine to be for the benefit and advance of the industry in cooperation and in the effective use and marketing of electricity. The moneys transferred to the “Retirement and Replacement Fund” shall be used to pay for losses sustained as a result of retirement and replacement.

Section 6. Priority of Cooperative’s Claim for Amounts Due from Member

Nothing contained in this article shall be construed to deprive the cooperative of its first lien against any capital credits to satisfy any unpaid bill of the energy member. Only that portion of a capital credit or payment which is not needed to satisfy any unpaid balance for electric service shall be paid to the energy member, provided that the financial condition of the cooperative shall not be impaired by the payments herein permitted as determined by the board of directors in its sole discretion.