ARTICLE VII

NON-PROFIT OPERATION

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 Capital in Connection with Furnishing Electric Energy

In the furnishing of electric energy the Cooperative's operations shall be so conducted that all patrons, members, or non-members, will through their patronage furnish capital for the Cooperative. In order to induce the 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, members and non-members alike, 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, members and non-members alike, 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. 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 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; provided, however, that the Board of Directors shall have the power to adopt rules providing for the separate allocation and retirement of that portion (power supply portion or other supplemental financing portion) of capital credited to the account of the Cooperative by an organization furnishing electric service or supplemental financing to the Cooperative.

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

Such rules shall:

(a) Establish a method of determining the power supply portion, the supplemental financing portion, or other 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 or the supplemental financing portion of capital credited to the Cooperative's patrons,

(c) Provide for appropriate notification to patrons with; respect to the power supply portion, the supplemental financing portion, or other portion of capital credited to their accounts, and

(d) Preclude a general retirement of the power supply portion, or the supplemental financing portion of capital credited to patrons for any fiscal year prior to the general retirement of other capital credited to the patrons for the same year or of any capital credited to patrons for any prior fiscal year.

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 liquidation, the board shall determine that the financial condition of the cooperative will not be impaired, the capital then credited to the patrons’ accounts may be retired in full or in part. Notwithstanding any other provisions of these bylaws, the board shall determine the method of allocation, basis, priority and order of retirement, if any, for all amounts furnished as patronage capital.

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 all the Cooperative unless the board acting under policies of general application shall determine otherwise.

Notwithstanding any other provisions of these bylaws, the board at its discretion shall have the power at any time upon the death of any patron, member or non‑member who is a natural person, if the legal representatives of his estate shall request in writing that the capital credited to any such patron, member or non-member, be retired prior to the time such capital would otherwise be retired under the provisions of these bylaws to retire capital credited to any such patron, member or non‑member, immediately upon such terms and conditions as the board of directors, acting under policies of general application, and the legal representatives of such patron's, member's or non‑member'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 there from any amount owing by such patron to the Cooperative, together with interest thereon at the legal rate on judgments in effect when such amount became overdue, compounded annually.

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.

SECTION 3. Assignment of Patronage Capital to the Cooperative

Notwithstanding any provisions herein contained to the contrary, the Cooperative shall recover, after a period of two (2) years, any unclaimed capital credits, patronage refunds, utility deposits, membership fees, or account balances for which the owner (member or former member) cannot be found and are the result of distributable savings of the Cooperative, giving sixty (60) days notice in a newspaper of general circulation, published in the county in which the Cooperative locates its general headquarters. Such notice shall state the owner's name and approximate amount of owner's interest, and that if not duly claimed within sixty (60) days of said notice; the same shall be turned over to the Cooperative, which shall reallocate the same to other members. If no provable claim shall have been filed within sixty (60) days after the one-time publication of said notice, the Cooperative may credit against said account any amounts due and owing the Cooperative by said member and thereafter allocate to the other members of the Cooperative on a pro rata basis. Such amounts of said members (the allocations herein contemplated) shall be allocated to those who are members as of the year and on a pro rata basis for the year in which the 60th day falls after the published notice.

ny member or former member’s who fails to claim any capital credit or other payment within two (2) years after payment has been made available to such person, shall have made an irrevocable assignment and gift to the Cooperative of such capital credits or other payments.