Article VIII

ARTICLE VIII – NON-PROFIT OPERATION

Section 8.01 – 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 8.02 – Patronage Capital in Connection with Furnishing Electric Energy. Not inconsistent with 1978 New Mexico Statutes Ann. Section 62-15-20, in the furnishing of electric energy the cooperative's operations shall be so conducted that all patrons will, through their 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 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. The books and records of the cooperative shall be set up and kept in such a manner that at the end of

the 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: PROVIDED, that individual notices of such amounts furnished by each patron shall not be required if the cooperative notifies all patrons of the aggregate amount of such excess and provides a clear explanation of how each patron may compute and determine the specific amount of capital so credited. 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. 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 a part of the capital credited to the accounts of patrons, as herein provided. 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: PROVIDED, that insofar as gains may at that time be realized from the sale of any appreciated asset, such gains shall be distributed to all persons who were patrons during the period the asset was owned by the cooperative in proportion to the amount of business done by such patrons during that period, insofar as is practicable, as determined by the Board of Trustees, before any payments are made on account of property rights of members. If, at any time prior to dissolution or liquidation, the Board of Trustees shall determine that the financial condition of the cooperative will not be impaired thereby, the capital then credited to the patrons' accounts may be retired in full or in part. Any such retirements of capital 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 the Board of Trustees shall have the power to adopt rules providing for the separate retirement of that portion of capital credited to the accounts of patrons which corresponds to capital credited to the account of the cooperative by an organization furnishing power supply or any other service or supply to the cooperative. Such rules shall (a) establish a method for determining the portion of such capital credited to each patron for each applicable fiscal year, (b) provide for separate identification on the cooperative's books of such portion of capital credited to the cooperative's patrons, (c) provide for appropriate notification to patrons with respect to such portions of capital credited to their accounts and (d) preclude a general retirement of such portions 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. 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 Trustees, acting under policies of general application, shall determine otherwise. The cooperative, before retiring any capital credited to any patron's account, shall deduct therefrom any amount owing by such patron to the cooperative, together with interest thereon at the New Mexico legal rate on judgments in effect when such amount becomes 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 offices.

Section 8.03 – Special Right to Assign. Any member or patron may assign all or any portion of his/her patronage capital earned or credited or expected to be earned or credited in the future, to a charitable tax exempt trust or foundation, to be named by the Board of Trustees of the cooperative, effective as of the date of assignment, subject in all cases to the cooperative's prior lien for unpaid charges.

Section 8.04 – Assignment by Failure to Provide Address. Notwithstanding any other Bylaw provisions, capital credits and capital credit payments, notice or delivery of which cannot be made for failure of a patron or former patron to claim the same in person, or to furnish an effective mailing address, for a period of two years after the cooperative has mailed with sufficient postage to the last known address and to the last address provided to the cooperative, or after the cooperative has in good faith attempted to deliver such notice or payment, shall be and constitute an irrevocable gift by the patron to the charitable tax exempt trust or foundation, of such credit or payment remaining after the cooperative's prior claim for charges due has been satisfied.

Section 8.05 – Charitable Trust. It shall be the duty of the cooperative to take the necessary steps to name and establish said tax exempt charitable trust or foundation and to obtain approval of the Internal Revenue Service of the United States and the Taxation and Revenue Department and cause to be named as trustees the officers from time to time of the cooperative, being the President, Vice President, the Secretary/Treasurer, who are to serve as trustees without compensation.

Section 8.06 – Priority of Cooperative’s Claim for Amounts Due From Patron. Nothing contained in this Article shall be construed to deprive the cooperative of its first lien against any capital credits to satisfy any unpaid electric bill of the patron; only that portion of a capital credit or payment which is not needed to satisfy an unpaid balance for electric service may be transferred to the charitable tax exempt trust or foundation under the provisions hereof for the purpose of educational grants to our present active members' immediate families.

Section 8.07 – Patronage Refunds in Connection with Furnishing Other Services. 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 patrons from whom such amounts were obtained at such time and in such order of priority as the Board of Trustees shall determine.

Section 8.08 – Savings Clause. If any portion of this Article shall be held invalid or not effective to accomplish its purpose, the remaining portions of the Article shall not be affected thereby, and in no event shall this Article be construed to adversely affect the exemption of the cooperative from liability for payment of income taxes on its revenues from the distribution of electricity to its patrons.

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