Article IX

Revenues and Receipts

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 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 (which may be referred to as “operating margins”) 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 attributable to the purchase and sale of electric energy by the Cooperative. 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. Further, such books and records of the Cooperative shall, in addition, separately identify that portion of capital credited to a patron’s account which corresponds to such patron’s prorata share of capital credited to the account of the Cooperative by an organization furnishing electric service to the Cooperative (which is hereinafter called “power supply capital” or “power supply capital credits” as distinguished from a patron’s “electric energy capital credits”). The Cooperative shall, within a reasonable time after the close of the fiscal year, notify each electric energy patron of the amount of capital so credited to such patron’s account, separately designating that portion of electric energy capital credits which is credited as power supply capital credits. All amounts credited to a capital account of any patron shall have the same status as though such amounts had been paid to the patron in cash, pursuant to 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 its operations in excess of costs and expenses (which may be referred to as “non-operating margins”) 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, at the discretion of the Board of Directors, either allocated to its patrons on a patronage basis in accordance with the provisions of this Article IX, or set aside in whole or in part for contingencies or future replacement of plant facilities. In the event of dissolution or liquidation of the Cooperative, after all outstanding indebted ness of the Cooperative shall have been paid, outstanding capital credits, including power supply 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 of directors shall determine that the financial condition of the Cooperative will not be impaired thereby, capital credits, including power supply capital, then credited to patrons’ accounts may be retired in full or in part; provided that, no power supply capital for any given year shall be retired prior to a general retirement of other capital credited to patrons for that year or any year prior thereto.

Any such retirements of capital credits 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, provided, however, that cash made available for retirement in any year may be used to retire capital furnished by all patrons during the most recent fiscal year, subject to the requirements that at least fifty percent of such cash shall be applied to the retirement of the oldest outstanding capital credits or delayed patronage credits as hereinabove provided. In any case, however, the board of directors shall have the power to adopt from time to time rules providing for the separate retirement of power supply capital credits, so long as such rules are consistent with the foregoing prohibition that precludes a general retirement of the power supply portion of capital credited to patrons for any fiscal year prior to the general retirement of other capital credited to patrons for the same year or of any capital credited to patrons for any prior fiscal year.

Not withstanding any other provision of these bylaws, the board of directors, at its discretion, shall have the power at any time upon the death of any natural person who was a member and patron, if the legal representatives of his 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 provisions of these bylaws, to retire capital credited to any such person immediately upon the terms and conditions as the board of directors, acting under policies of general application, and the legal representatives of such person’s estate shall agree upon; provided, however, that the financial condition of the Cooperative will not be impaired thereby. In making retirement of capital credited to the account of the estate of a deceased person, any power supply capital credits not previously retired by payment thereof by the power supplier to the Cooperative may be separately treated, and, under policies of general application, may be withheld and not paid over until the Cooperative makes a general retirement of such power supply capital under the provisions of this article and section.

To secure the payment of an indebtedness of a member or patron to the Cooperative, the Cooperative shall have a first lien upon all properties, interests, capital investments, net margins and any and all capital or capital credits allocated to and held for the benefit or account of any such member or patron. As a means of enforcing its lien, the cooperative shall be entitled to offset or recoup any debt of a patron to the cooperative with a corresponding amount of the patron’s capital credits and with any other of patron’s property rights and interests in the cooperative. 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 of directors, acting under policies of general application, shall determine other wise. 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 by-laws shall be called to the attention of each patron of the Cooperative by posting in a conspicuous place in the Cooperative’s office.