Articles of Incorporation. Effective as of April 1, Bylaws

Transcription

1 Articles of Incorporation Effective as of April 1, 1999 Bylaws Effective as of December 20, 2005

2 ARTICLES OF INCORPORATION OF MARYLAND AND VIRGINIA MILK PRODUCERS COOPERATIVE ASSOCIATION, INCORPORATED AS EFFECTIVE OF APRIL 1, 1999 These Articles are filed pursuant to the Virginia Agricultural Cooperative Association Act. ARTICLE I The name of this corporation shall be MARYLAND AND VIRGINIA MILK PRODUCERS COOPERATIVE ASSOCIATION, INCORPORATED. ARTICLE II The purposes for which this corporation is formed and the business and objects to be carried on and promoted by it on a nonprofit, cooperative basis are as follows: (1) Collectively to process, prepare for market, handle, store and market milk and dairy products produced by its members. (2) To act as selling agent for milk and dairy products produced by its members and nonmember patrons. (3) To act as purchasing agent to buy or otherwise acquire goods, equipment, supplies or services required to meet its members needs. (4) To operate and participate in the operation of dairies, manufacturing plants, warehouses and other facilities required to receive, handle, store, process, manufacture, sell and market milk and dairy products produced by its members. (5) To encourage and promote more economical and efficient methods of producing milk and dairy products. (6) To act for its members in matters affecting their common interest and welfare, and to provide educational, research, informational, public relations and other appropriate services for their benefit. (7) To devise and develop effective advertising techniques and programs to promote increased sales of milk and dairy products, and to take other appropriate actions to expand existing markets and to create new markets for milk and dairy products produced by its members and the corporation itself. (8) To assist in or arrange for the transportation and hauling of its members milk and dairy products in the best possible manner. (9) To cultivate the cooperative spirit among its members and other producers of milk and dairy products and to join and contract with other organizations established to promote and accomplish the same or similar purposes as those hereinabove set forth. (10) To carry on generally any and all other business in connection with the foregoing on a cooperative, not for profit basis in a manner consistent with the laws of the Commonwealth of Virginia. The foregoing enumeration of the purposes, objects and business of the corporation is not intended to impose any limitations upon the corporation in pursuing any other purposes, objects or businesses it may hereafter elect to pursue within the scope of its powers under the laws of the Commonwealth of Virginia. i

3 ARTICLE III This corporation shall have the following powers: (1) To buy, hold and exercise every privilege of ownership over any real or personal property necessary or convenient for or incidental to the conduct and operation of its business as a cooperative association. (2) To buy or otherwise acquire, hold, own or exercise all rights of ownership in and sell, transfer, or pledge shares of the capital stock or bonds of any cooperative or any corporation or association engaged in any related activity, including the financing of the activities of cooperatives. (3) To sue, be sued, complain and defend in all courts. (4) To engage in or finance any activity in connection with: (i) Producing, processing, handling, storing, packaging, purchasing, using, marketing, selling or delivering any milk or milk products of its members or non-member patrons or goods incidentally marketed in conjunction with those products; (ii) Manufacturing or marketing by-products of milk and dairy products produced by its members and non-member patrons; (iii) The purchase, hire or use by its members or nonmember patrons of supplies, machinery, equipment or services. (5) To assist in or arrange for the transportation of the products of its members. (6) To borrow money and give its notes, bonds or other obligations for debts, and to secure the payment of debts. (7) To make advances to its members or nonmember patrons on their deliveries prior to final settlement. (8) To act as an agent for or representative of any member or nonmember patron in any activity where that is necessary, desirable and appropriate under the laws of the Commonwealth of Virginia. (9) To deposit or invest surplus funds in any national bank or state banking institution; in any obligation of the United States or any state, county or municipal instrumentality; or in shares or certificates of deposit of any insured savings and loan association; or in any other lawful investment source. (10) To establish and accumulate reasonable reserve funds, surplus to capital funds and any other funds for any necessary purpose authorized by its bylaws. (11) To issue certificates of indebtedness, and to agree to pay interest thereon. (12) To provide by contract with its members or nonmember patrons that any money due from the corporation to them may be retained and used as necessary by the corporation. (13) To issue to members or nonmember patrons certificates or other evidence of their equity in any fund, capital investment, or other assets of the corporation, which certificates or other equity may be transferred only on the terms and conditions provided in the corporation s bylaws and printed on said certificates when issued by the corporation. (14) To do any and all other acts and things necessary, suitable or proper to accomplish the purposes, business and objects of the corporation; and to exercise each power, right and privilege necessary or incidental to the purposes for which the corporation is organized or to the activities in which it is engaged. ii

4 (15) To exercise any other right, power and privilege granted by the laws of the Commonwealth of Virginia to corporations in general and to cooperative associations. The Association shall operate on a cooperative basis for the mutual benefit of its members as producers, and it is obligated to distribute any surplus or excess funds remaining at the end of any operating year that are derived from business done with members, over and above the cost of doing business, including reasonable reserve funds, on a patronage basis to its member patrons for that year in cash, certificates or otherwise. ARTICLE IV The address of the corporation s initial registered office is 3110 Fairview Park Drive, Suite 1400, P.O. Box 12001, Falls Church, Virginia 22042, in the County of Fairfax, and the initial registered agent at that address is John J. Sabourin, Jr., a member of the Virginia State Bar and a resident of the Commonwealth of Virginia. ARTICLE V The corporation shall not have any capital stock. The voting rights of its members shall be equal and each member is entitled to only one vote. The property rights of members shall be unequal and shall be determined at any time that occasion for such determination arises on the basis of the following rules: (1) During its corporate existence, the corporation shall have full, undivided title to all property and assets of the cooperative association, and prior to dissolution of the corporation, no member shall have any enforceable ownership interest therein. (2) If, during the corporation s existence, or in connection with its merger or consolidation with some other cooperative association or associations, a member elects to withdraw from membership or membership is otherwise terminated voluntarily or involuntarily, said member shall be entitled to (a) payment of all amounts owed by the corporation for milk and dairy products accepted by the corporation prior to the termination of the membership; (b) patronage distributions made or to be made by the corporation; and (c) payment (as and when payable by the terms thereof) of any capital fund allocations or certificates of indebtedness of the corporation owned and held by or owing to such member, less any indebtedness of the member to the corporation and the amounts due on any outstanding liens, assignments, attachments or encumbrances of any kind; and no adjustment to the value of such property rights and interests shall be made for unrealized gains or losses in the value of the corporation s assets, property or business. (3) In the event of dissolution of the corporation (other than in connection with its consolidation or merger with some other cooperative association or associations), the share of all surplus assets and property of the corporation remaining after all operating expenses, debts (including debts to members) and taxes owed by the corporation have been paid, to which each member patron shall be entitled, shall be determined in the following manner: (i) the surplus shall be allocated to each of the assets held by the corporation at the time of dissolution, that portion of surplus being allocated to a particular asset which bears the same ratio to the total surplus as the fair market value of the asset bears to the fair market value of all assets of the corporation at the time of dissolution; (ii) the surplus attributable to each asset shall be allocated to the member patrons of the corporation on a cooperative basis in accordance with the amount of business done with and for such member patrons; and iii

5 (iii) the sum of the items of surplus allocated to each member patron in the manner described in (i) and (ii) shall be the amount to which the member patron is entitled upon dissolution of the corporation. In determining all property rights under this Article V, all amounts allocated each patron or evidenced by certificates of any kind shall be excluded, same having already been paid by the corporation prior to any such pro rata distribution. ARTICLE VI The board of directors shall consist of at least five (5), and not more than twenty-three (23), persons, each of whom shall be a member of the corporation, except for the director appointed by the State Agricultural Extension Service. Twenty-three directors shall constitute the initial board of directors, and the names and addresses of the persons who are to serve as the initial directors are set forth below. R. Steven Graybeal 223 Mason Dixon Road Peach Bottom, PA John D. Hardesty Harvue Farms Route 1, Box 2825 Berryville, VA Douglas C. McCulloh Mt. Pleasant Road Mercersburg, PA C. Richard Mosemann, Jr. R.D. 1, Box 725 Warfordsburg, PA Mehrle H. Ramsburg, Jr Ramsburg Road Thurmont, MD David Weitzer Sugarland Road Poolesville, MD iv

6 TABLE OF CONTENTS BYLAWS Page ARTICLE I THE GOVERNING CONCEPT...1 ARTICLE II Membership...1 SECTION 1. Member Defined...1 SECTION 2. Qualifications For Membership...1 SECTION 3. Certificates Of Membership...1 SECTION 4. Suspension Or Termination Of Membership...2 ARTICLE III MEETINGS OF MEMBERS; VOTING RIGHTS...3 SECTION 1. Annual Meeting...3 SECTION 2. Special Meetings...3 SECTION 3. Notice of Meetings...3 SECTION 4. Quorum...3 SECTION 5. Voting Rights...3 SECTION 6. Representation Of Corporate, Association, Partnership And Educational Institution Members And Deceased Members Or Their Estates At Meetings And In Other Association Affairs...3 SECTION 7. Order Of Business At Annual Meetings...4 ARTICLE IV BOARD OF DIRECTORS...4 SECTION 1. Management Of Association...4 SECTION 2. Number And General Qualifications Of Directors...4 SECTION 3. Election Of Directors...4 SECTION 4. Vacancies On The Board of Directors...5 SECTION 5. Disqualification And Removal of Directors...5 SECTION 6. Board Meetings...6 SECTION 7. Notice Of Board Meetings...6 SECTION 8. Quorum...6 SECTION 9. Compensation...6 SECTION 10. Duties Of The Board Of Directors...6 SECTION 11. Powers Of The Board of Directors...6 ARTICLE V EXECUTIVE COMMITTEE...7 ARTICLE VI FINANCE COMMITTEE...8 ARTICLE VII OFFICERS...8 ARTICLE VIII GENERAL MANAGER...8

7 ARTICLE IX DUTIES OF OFFICERS AND GENERAL MANAGER..8 SECTION 1. Duties Of The President...8 SECTION 2. Duties Of First And Second Vice-Presidents...9 SECTION 3. Duties Of The Secretary...9 SECTION 4. Duties Of The Treasurer...9 SECTION 5. Duties Of The General Manager...10 ARTICLE X FINANCING THE ASSOCIATION S OPERATIONS; PATRONAGE DISTRIBUTIONS; CAPITAL FUND...10 SECTION 1. Patron Defined...10 SECTION 2. Patronage Defined...11 SECTION 3. Operations At Cost And On A Cooperative Basis...11 SECTION 4. Patronage Distribution...11 SECTION 5. Capital Fund and Target Equity Structure...13 SECTION 6. Consent...14 SECTION 7. Business With Nonmembers...14 ARTICLE XI CONFLICT OF INTEREST REGULATIONS...14 SECTION 1. Officers, Directors, Managers And Employees...14 SECTION 2. General Counsel For The Association...15 SECTION 3. Accountants For The Association...15 ARTICLE XII MEMBERS DERIVATIVE SUIT; INDEMNIFICATION OF DIRECTORS AND OFFICERS...15 SECTION 1. Members Derivative Suits...15 SECTION 2. Indemnification Of Directors And Officers...16 ARTICLE XIII SEAL; BOOKS AND PAPERS...16 ARTICLE XIV AMENDMENTS TO BYLAWS...16

8 BYLAWS OF MARYLAND AND VIRGINIA MILK PRODUCERS COOPERATIVE ASSOCIATION, INCORPORATED AS EFFECTIVE OF MARCH 28, 2001 Maryland and Virginia Milk Producers Cooperative Association, Incorporated (hereinafter referred to as the Association ) has adopted the following bylaws for the regulation and management of its affairs. ARTICLE I THE GOVERNING CONCEPT The governing concept of these bylaws is that the Association shall operate for the mutual benefit of its members, under the democratic control of its members, and primarily for the purpose of doing business with and for its members cooperatively and as advantageously as possible. ARTICLE II MEMBERSHIP SECTION 1. Member Defined. A member of this Association shall be one who holds a current, effective certificate of membership issued by the Association, is a party to a current, effective standard marketing agreement with the Association and meets such other uniform conditions of membership as may be prescribed by the bylaws of the board of directors. SECTION 2. Qualifications For Membership. Any person, firm, partnership, corporation or association which, as farm owner or tenant, produces milk; agrees to market same cooperatively and continuously through the Association, and to sign and comply with the Association s standard marketing agreements; and to abide by these bylaws and all rules, regulations and resolutions of the board of directors or membership of this Association with reference to the production, handling and marketing of milk, is qualified to become a member of this Association. SECTION 3. Certificates Of Membership. The Association shall issue a certificate of membership to each member in such form as may be prescribed by the board of directors, but such certificate and the membership represented thereby shall not be transferable or subject to execution, attachment or inheritance by will or operation of law. The board of directors may, however, elect to waive this nontransferability restriction in good and proper cases so as to permit, for example, the purchaser of a member s land or herd or the heir, executor or administrator of a deceased member to succeed to membership in the Association, provided such successor-ininterest otherwise qualifies for membership under section 2 of this Article. The board of directors may also waive this nontransrerability restriction, as well as any of the requirements of section 2 of this Article, in cases where religious beliefs or convictions prevent or prohibit a person from signing the Association s marketing agreement and/or from accepting a certificate of membership in the Association; provided, however, that such persons and/or their successors-in-interest must produce milk and market same cooperatively and continuously through the Association, and abide by these bylaws and all rules, regulations and resolutions of the board of directors or membership of this Association with reference to the production, handling and marketing of milk. In the event of dissolution of any partnership or corporation admitted to membership in the Association, each partner or stockholder thereof who shall 1

9 thereafter continue as an individual to produce milk for marketing through the Association shall be entitled to become an individual member of the Association, provided he or she otherwise qualifies for membership under section 2 of this Article; and in such cases, the certificate of membership in the name of the dissolved partnership or corporation shall be cancelled and a new certificate shall be issued to each individual successor to that canceled membership. SECTION 4. Suspension Or Termination Of Membership. (a) Suspension A member of this Association who is unable to comply with the provisions of section 2 of this Article for any significant period in a particular year by reason of facts or circumstances beyond his control may, in the discretion of the board of directors, be suspended from membership privileges by resolution adopted by a majority of the board of directors, in which event the suspended member shall not be entitled to vote, hold office or participate in any of the benefits, meetings or affairs of the Association until such suspension is ended by the suspended member s resumed compliance with the requirements of section 2 of this Article. The membership of a suspended member, however, shall not terminate unless and until the board of directors, by majority vote, passes a specific resolution to that effect. (b) Termination For Wrongful Action By A Member The membership in this Association of a member who intentionally fails to comply with the provisions of section 2 of this Article, or who intentionally discontinues the production of milk, or who intentionally fails, neglects or refuses to market the milk he produces through the Association in the manner prescribed by the standard marketing agreement then in force, shall be terminated on the date of adoption of a resolution by a majority of the board of directors providing for such termination. On the effective date of termination, the terminated member s certificate of membership shall be canceled, his voting rights shall be terminated, and all rights and interests of the terminated member in the business, property, and assets of the Association shall cease upon payment or credit for (i) milk delivered to and accepted by the Association prior to the date of termination, (ii) patronage distributions made in accordance with section 4 of Article X prior to the date of termination, and (iii) capital fund allocations or certificates of indebtedness of the Association owned or held by such member as of the date of termination, as and when payable by the terms thereof, less any indebtedness of the member to the Association and the amounts due on any outstanding liens, assignments, attachments, or encumbrances of any kind against such payments. No adjustment to the value of such property rights and interests shall be made for unrealized gains or losses in the value of the Association s assets, property, and business. (c) Termination Upon Expiration Of A Marketing Agreement A member who terminates his marketing agreement with the Association in accordance with the terms of that Agreement shall be entitled to all benefits under that agreement and these bylaws, including benefits paid or provided after such termination. Termination of membership shall be separate from and in addition to any remedies the Association may have against a member for breach of the standard marketing agreement, including any provision therein for liquidated damages or injunctive relief. In the event a member fails or refuses to sign the Association s standard marketing agreement or any necessary amendment, modification or supplement thereto or, if after signature, any such agreement is canceled, terminated or otherwise becomes void, the membership certificate of such member shall 2

10 simultaneously lapse and his membership, voting and property rights in the Association shall thereupon terminate and such membership shall be entitled only to the termination payment arrangements hereinabove specified in this section of this Article. ARTICLE III MEETINGS OF MEMBERS; VOTING RIGHTS SECTION 1. Annual Meeting. The annual meeting of this Association for the purpose of election of directors and to transact any other business shall be held in March of each year or at such other time as the board of directors may determine, and at a place designated by the board of directors. SECTION 2. Special Meetings. A special meeting of the members of the Association may be called at any time by the President or the board of directors, or upon demand of ten percent (10%) of the members made in the manner prescribed by the laws of the Commonwealth of Virginia. No business shall be transacted at a special meeting other than as stated in the notice of meeting. SECTION 3. Notice of Meetings. Notice of each annual or special meeting shall be mailed to each member at least ten (10) days before the meeting and, if a special meeting is called, the notice shall state the purpose of the meeting. SECTION 4. Quorum. At any annual or special meeting, fifty (50) members present in person shall constitute a quorum for all purposes, including election of directors. A member who votes by mail may not be counted in computing a quorum. SECTION 5. Voting Rights. Each member of the Association is entitled to only one (1) vote. Voting by proxy is prohibited, but voting by mail is not voting by proxy. At any meeting of members of the Association, a signed written vote received by mail from any absent member may be read and received at the meeting and counted as a vote of the member if (i) the member was notified in writing of the exact motion, resolution or matter on which the vote is taken; and (ii) a copy of the motion, resolution or matter in issue is attached to the vote or ballot mailed by the member. SECTION 6. Representation Of Corporate, Association, Partnership And Educational Institution Members And Deceased Members Or Their Estates At Meetings And In Other Association Affairs. Any corporation, association, partnership or educational institution which has signed the standard marketing agreement and has become a member of the Association shall designate in writing the officer, director, stockholder, partner or employee who shall act, unless and until said designation is revoked in writing, as its representative at all meetings of the Association, including district meetings; and such person shall be entitled, while so designated, to exercise all rights of the member at such meetings and to be nominated, elected and serve as a director and officer of the Association. Revocation of the member s written designation shall terminate such person s right to participate in the affairs of the Association and his service as a director, officer or both. An heir, executor, administrator or trustee of a deceased member, duly qualified as such in the manner required by law, may temporarily represent, act in place of and exercise all voting rights and other rights of the deceased member at meetings of the Association, including district meetings, during any period reasonably required to administer and wind up the estate of the deceased 3

11 member, but such representative shall not be eligible for nomination, election or service as a director or officer of the Association. SECTION 7. Order Of Business At Annual Meetings. The order of business at annual meetings of the Association shall be: (i) Determination of quorum. (ii) Proof of due notice of meeting. (iii) Reading and disposition of minutes of prior meeting or meetings. (iv) Annual reports of officers and committees. (v) Election of directors. (vi) Unfinished business. (vii) New business. (viii) Adjournment. ARTICLE IV BOARD OF DIRECTORS SECTION 1. Management Of Association. The business, affairs and property of the Association shall be managed by the board of directors, and the board of directors shall exercise the corporate powers of the Association. SECTION 2. Number And General Qualifications Of Directors. The board of directors shall consist of at least five (5) and not more than twenty-three (23) persons, each of whom shall be a member of the Association, except that one (1) of whom shall be appointed by the Director of the State Agricultural Extension Service and need not be a member of the Association. SECTION 3. Election Of Directors. (a) Directors Terms Each director shall be elected for a term of three (3) years, and shall serve until his successor is duly elected and qualified; and as in the past, approximately one-third (1/3) of the board of directors shall be elected each year. (b) Nomination By Districts; Redistricting The directors shall be nominated by the members, and for that purpose and other purposes of local government, the territory within which the Association s members produce milk shall be divided and apportioned by the board of directors into districts determined by volume of production and number of members, which are weighted equally, such that the proportionate representation on the board of directors of each district shall be as nearly equal as possible. The board of directors may also prescribe the number of directors to be nominated in each district; and yearly, at least one hundred twenty (120) days prior to the annual meeting of the Association, the board of directors, by majority vote may redistrict the territory, adjust the number of members assigned to specific districts, or modify the representation of districts on the board of directors so as to preserve as nearly as possible the equality of representation on the board determined by volume of production and number of members, which are weighted equally; provided, however, no such redistricting, adjustments or modifications shall operate to vacate the unexpired term of a duly elected director. (c) District Meetings; Nomination Of Qualified Directors The board of directors shall, in cooperation with the members in each district, determine the time and place within each district for meetings required to 4

12 nominate directors. Such district meetings shall be scheduled such that the nomination process is completed not less than ten (10) days before the annual meeting of the Association. Notice of such district meetings, together with a statement of the purpose, shall be mailed to each member in the district at least ten (10) days prior to the meeting. Those members present shall constitute a quorum. Members in the district shall nominate as director or directors persons who (a) meet the qualifications specified by section 2, Article II or section 6, Article III of these bylaws, (b) are engaged in the marketing of milk under a current standard marketing agreement with the Association from a dairy farm located in such district, and (c) spend a substantial part of their time within such district. Members in the district shall select a nominee and an alternative nominee by vote. Voting may be conducted by mail or in person, according to the procedure outlined in the notice of the district meeting. (d) Election Of Directors At each annual meeting of the Association, directors shall be elected by the entire membership. The General Manager shall present to the meeting the name of each nominee from each district from which a director is to be elected, and all members of the Association assembled at the annual meeting shall vote for acceptance or rejection of the nominee. If the nominee is rejected, the General Manager shall present the name of the alternative nominee from that district, and all members of the Association assembled at the annual meeting shall vote acceptance or rejection of the alternate nominee. If the alternate nominee is rejected, there shall be nominations from the floor of persons eligible for the vacant directorship from such district, and the election shall be by ballot requiring the majority vote of all members present and voting. SECTION 4. Vacancies On The Board Of Directors. Whenever a vacancy occurs on the board of directors other than by expiration of a term of office, the board of directors shall fill such vacancy as soon as practicable by majority vote of the board. The board may also vote not to fill such vacancy, or to fill same by election of a new director from some other district, where necessary to redistrict territory or reapportion representation on the board under section 3(b) of this Article. SECTION 5. Disqualification And Removal Of Directors. (a) Disqualification Any director who ceases to be a member of the Association or to remain otherwise qualified under the provisions of section 2, Article II or section 6, Article III of these bylaws shall cease to be a director of the Association upon termination of the director s membership or failure to remain otherwise qualified, and his position on the board of directors shall simultaneously be vacated. (b) Removal Any director may be removed from the board of directors for misconduct or incompetency in the manner provided by the laws of the Commonwealth of Virginia. SECTION 6. Board Meetings. Regular meetings of the board of directors shall be held monthly or at such other times and at such places as the board may determine. A special meeting of the board shall be held whenever called by the President or a majority of the directors. Any and all business may be transacted at regular and special meetings. At its first regular meeting following the annual meeting of the Association each year, the board of directors shall reorganize by election of a president, a first vice-president, a second vice-president, a secretary, a treasurer, and Executive and Finance Committees. 5

13 SECTION 7. Notice Of Board Meetings. Oral or written notice of each meeting of the board shall be given each director by or under the supervision of the Secretary of the Association not less than five (5) days prior to the time of the meeting, but such notice may be waived, and appearance at the meeting shall constitute a waiver of notice. Each call for a special meeting shall be in writing, signed by the President or directors making same, addressed and delivered to the Secretary, and shall state the time and place of such meeting. On the signing of a waiver of notice of a meeting, a meeting of the board of directors may be held at any time. Any special meeting may be adjourned from time to time and from place to place until the business for which it was called is disposed of. SECTION 8. Quorum. A majority of the board of directors shall constitute a quorum at any meeting of the board. SECTION 9. Compensation. The directors shall receive such compensation for their services as the board of directors prescribes, and reimbursement for expenses incurred to attend meetings of the board of directors, and of committees of the Association and while on any other authorized business of the Association. SECTION 10. Duties Of The Board Of Directors. It shall be the duty of the board of directors: (1) To see that the business and affairs of the Association are prudently and efficiently conducted. (2) To adopt such policies, rules and regulations not inconsistent with laws, the articles of incorporation or these bylaws as it may deem advisable, necessary or desirable for the Association and its membership. (3) To cause to be kept and maintained a complete record of the board s acts and proceedings, and to present, through appropriate officers or employees of the Association at each annual meeting of the membership, reports of the conditions of the Association, its business, affairs and properties. (4) To cause certificates of membership to be issued to those who qualify for membership in the Association under the provisions of section 2, Article II of these bylaws. (5) To schedule annual meetings of the members of the Association, and to cause proper notice thereof to be mailed to all members. (6) To maintain, as nearly equal as possible, representation on the board of directors as prescribed by section 3(b) of this Article, to schedule district meetings for the nomination of directors when and where necessary, and to cause proper notice of such meetings to be mailed to all members in each such district. SECTION 11. Powers Of The Board Of Directors. The board of directors shall have the following powers and all others not reserved by law, the articles of incorporation or bylaws of the Association to members of the Association: (1) To conduct, manage and control the affairs and business of the Association, and to make rules and regulations for guidance and direction of the Association s officers and management of its operations. (2) To call special meetings of the members of the Association when such meetings are deemed necessary by the board, and in any event upon written petition of ten percent (10%) of the membership. (3) To elect and remove at pleasure all officers of the Association, prescribe their duties, fix their compensation, and require of them, if deemed advisable, security for faithful service. 6

14 (4) To employ a General Manager, define his duties, fix his compensation and require, if deemed advisable, security for faithful service. (5) To employ the accountants, who shall make the annual audit of the Association, all attorneys for the Association, all operating division managers and any independent contractors and agents to perform professional or important services for the Association and to fix and approve the compensation of all such persons and/or firms. (6) To approve the compensation of all employees, agents and other independent contractors of the Association employed by or under the direction of the General Manager, and to require, if deemed advisable, security for faithful service by such employees, agents or contractors. (7) To make or authorize the making of contracts or agreements which are necessary or advisable in the conduct of the Association s business, including agreements with other cooperative associations and members of this Association. (8) To borrow money, or to authorize the General Manager, Executive or Finance Committee to borrow money, for corporate purposes of the Association, whether such borrowing be on open account or upon security of any assets of the Association, or upon security of any property of members in the Association s possession, or upon any accounts connected therewith, or upon security of any property not yet distributed to members, such borrowings in each case to be in such amount and upon such terms and conditions as may from time to time seem to the board of directors advisable or necessary. (9) To select one or more banks to act as depository of the funds of the Association and determine the manner of receiving, depositing and disbursing the funds of the Association, the form of checks of the Association and the person or persons by whom same shall be signed, with the power reserved at all times to change such bank or banks, the form of such checks, and the persons authorized to sign same. (10) To allocate and distribute net proceeds or savings of the Association to all member patrons of the Association entitled to receive same on the basis of their patronage, such allocation to be in the manner prescribed by the laws of the Commonwealth of Virginia and these bylaws, or in any other lawful manner adopted by the board of directors. (11) To elect the members of the Executive and Finance Committees and such other committees of the board of directors as it deems necessary and advisable; to delegate to such committees such powers and functions as the board may deem advisable; and the board may authorize the President to appoint the members of such committees other than the Executive and Finance Committees as may be necessary or advisable. ARTICLE V EXECUTIVE COMMITTEE The Executive Committee shall consist of five (5) members elected each year by the board of directors from among its members. The President shall be an ex-officio member of such committee, but shall not vote except to break a tie among other committee members present and voting. The committee shall meet from time to time on call of the President, its chairman, or the board of directors, or at the request of any two (2) members thereof. The Executive Committee shall have such duties and powers as may from time to time be prescribed by the board of directors, and its duties and powers may be all the duties and powers of the board, subject to the general direction, approval and control of the board. 7

15 Copies of the minutes of Executive Committee meetings shall be mailed to all directors within twenty (20) days following each such meeting. ARTICLE VI FINANCE COMMITTEE The Finance Committee shall consist of five (5) members elected each year by the board of directors from among its members. The President shall be an ex-officio member of such committee, but shall not vote except to break a tie among other committee members present and voting. The committee shall meet from time to time on call of the President, its Chairman, or the board of directors, or at the request of any two (2) members thereof. Subject to the general control and approval of the board of directors, the Finance Committee shall investigate, study, propose and put into effect plans to finance operations of the Association, to assure maximum, efficient economics in operation, and for expansion and growth of the Association. The committee shall also oversee all financial transactions and investments of the Association, and shall take all other actions necessary to maintain proper, prudent management of the Association s financial affairs. ARTICLE VII OFFICERS The officers of the Association shall be a President, a First Vice-President, a Second Vice-President, a Secretary and a Treasurer, together with any other administrative officers the board of directors may select in its discretion by resolution entered upon its minutes. All officers shall be elected annually by the board of directors. The offices of Secretary and Treasurer may, in the board s discretion, be held by the same person, and the board may appoint one or more Assistant Secretaries and Treasurers to perform such duties as the board may delegate or assign. The Secretary, Treasurer and Assistant Secretaries and Treasurers need not be members of either the board of directors or the Association. The compensation and tenure of all officers of the Association shall be fixed by the board of directors, and the board may remove any officer at any time in the manner provided by the laws of the Commonwealth of Virginia. ARTICLE VIII GENERAL MANAGER The board of directors shall employ a General Manager who shall serve in that position on such terms and conditions as may be prescribed by the board. Subject to the general control and approval of the board of directors and committees thereof, the General Manager shall be responsible for carrying on the business of the Association, and he need not be a member of the board or the Association. ARTICLE IX DUTIES OF OFFICERS AND GENERAL MANAGER SECTION 1. Duties Of The President. The President shall: (1) Preside over all meetings of members and of the board of directors. (2) Direct and execute the affairs of the Association, subject to the advice and control of the board of directors. (3) Call meetings of the board of directors whenever necessary. (4) Sign as President, either personally or, where authorized by the board of directors, by facsimile signature, all certificates of membership and such 8

16 contracts, notes, instruments and other papers of the Association as he may be authorized or directed to sign by the board. (5) Perform all other acts and duties usually performed by an executive and presiding officer, or which may be required by law, by the board of directors, the members of the Association, or these bylaws. (6) Report to the members at each annual meeting on all significant matters and business pertaining to his office. SECTION 2. Duties Of First And Second Vice-Presidents. The First and Second Vice-Presidents shall, in that order, perform any and all duties of the President and act for and in place of the President whenever the President is disabled or otherwise unable to perform the duties of his office; and shall, in that order, succeed to the office of President to fill an unexpired term in the event the President shall die while in office. If both the First and Second Vice-Presidents are unable for any reason to act for the President or to fill that office when required to do so as aforesaid, the board of directors shall elect a member of the board to succeed to and perform the duties of the President for whatever period of time and under such conditions as may be necessary. At all other times, the First and Second Vice-Presidents shall perform such duties as may be assigned to them from time to time by the President, the board of directors, or both. SECTION 3. Duties Of The Secretary. The Secretary shall: (1) Keep a complete record of all meetings of the members of the Association, and of the board of directors and its committees. (2) Supervise and maintain the corporate seal, corporate books, records and minutes of the Association. (3) Sign as Secretary, either personally or, where authorized by the board of directors, by facsimile signature, and with the President, certificates of membership and such other contracts, notes, instruments and other papers of the Association as he may be authorized or directed to sign by the board, and affix thereto, where necessary, the corporate seal of the Association. (4) Keep a proper membership record showing the name of each member of the Association, the number and date of his membership certificate and all other information required to show whether such membership is still in full force and effect or has been suspended, terminated or transferred in the manner prescribed by these bylaws. (5) Serve all notices of meetings required by these bylaws or the laws of the Commonwealth of Virginia. (6) Perform all other acts and duties usually performed by the secretary of a cooperative association, or which may be required by law, the board of directors, the members of the Association, or these bylaws. (7) Report to the members at each annual meeting on all significant matters and business pertaining to his office. SECTION 4. Duties Of The Treasurer. The Treasurer shall: (1) Receive and deposit in its name all funds of the Association in a bank or banks designated or approved by the board of directors. (2) Invest funds of the Association in the manner authorized or approved by the board of directors. 9

17 (3) Make or authorize payments or withdrawals from funds of the Association for valid corporate purposes or to defray valid debts or obligations of the Association. (4) Account periodically to the board of directors for all Association receipts, disbursements, withdrawals, investments and balances on hand. (5) Furnish a bond in such form and in such amount as the board of directors may from time to time require, the cost thereof to be paid from funds of the Association. (6) Perform all other acts and duties usually performed by the treasurer of a cooperative association, or which may be required by law, the board of directors, the members of the Association, or these bylaws. (7) Report to the members at each annual meeting on all significant matters and business pertaining to his office. (8) Sign, personally or, where authorized by the board of directors, by facsimile signature, any checks, notes, contracts or other documents which require the Treasurer s signature. SECTION 5. Duties Of The General Manager. The General Manager shall, under the overall supervision of the board of directors: (1) Manage the business operations of the Association, including its marketing relationships with members, the marketing, handling, manufacturing and sale of all milk and dairy products of the Association and its members; the purchase and sale of equipment and supplies; and the purchase, acquisition, maintenance, improvement, utilization and sale of all property, plants, offices and facilities of the Association. (2) Employ and discharge all employees, agents and independent contractors of the Association, other than those to be employed and discharged directly by the board of directors under these bylaws, and to determine and assign the duties and functions of all such employees, agents and contractors. (3) Manage the Association s relations with federal, state and local governments, with other cooperative associations, and with other persons, firms and trade associations whenever necessary to promote, preserve and protect the best interests of the Association and its members. (4) Keep the board of directors fully advised and informed regarding all significant business operations and transactions of the Association and furnish recommendations and proposals to the board whenever necessary to enable it to perform its duties and functions in an effective, timely manner. (5) Perform all other acts and duties usually performed by the general manager of a milk producers cooperative association, or which may be required by law, the board of directors, the members of the Association, or these bylaws. (6) Report to the members at each annual meeting on all significant matters and business pertaining to his position as General Manager. ARTICLE X FINANCING THE ASSOCIATION S OPERATIONS; PATRONAGE DISTRIBUTIONS; CAPITAL FUND; TARGET EQUITY SECTION 1. Patron Defined. A patron shall be any person, firm, partnership, corporation or association, regardless of whether or not a member of the Association, that markets milk or milk products through, or purchases equipment and supplies from the Association. 10

18 SECTION 2. Patronage Defined. Patronage shall be the marketing of milk or milk products through the Association, or the purchasing of equipment and supplies from the Association by any person, firm, partnership, corporation or association, regardless of whether or not a member of the Association. SECTION 3. Operations At Cost And On A Cooperative Basis. The Association shall at all times be operated on a cooperative basis for the mutual benefit of its member patrons. It shall pay its patrons the appropriate price for all milk and dairy products sold by them to or through the Association, less charges to cover the expenses involved in the handling of milk and dairy products, which shall at all times be determined by the board of directors or pursuant to its directions. The price shall be either the actual price or a price based on the average price during any period for milk and products of the same class, type and quality. The Association may also sell goods, equipment, supplies or services obtained for its patrons at cost plus charges to cover the expense involved in handling such goods or services, which shall also be determined by the board of directors or pursuant to its directions. The above charges determined by the board of directors shall be sufficient to cover all operating and maintenance costs and expenses of every character, and to provide adequate capital for operating purposes, for erection of and payment for offices, plants and other necessary physical facilities and equipment, including the purchase of going businesses. No interest shall be paid by the Association on any capital furnished by its patrons, unless the board of directors, by resolution, specifically determines that interest will be payable on particular capital investments. The net earnings of the Association may, at the option of the board of directors, be determined by offsetting patronage losses (including any such loss carried forward from a prior year) attributable to one or more allocation units against patronage earnings of one or more other allocation units, provided that the Association shall comply with the notice requirements of 26 U.S.C. 1388(j)(3). In the event the Association incurs a net operating loss in any fiscal year, such net operating loss may, at the discretion of the board of directors, (i) be allocated to member patrons during that fiscal year, (ii) be charged against any unallocated reserve or, (iii) if the board of directors so elects, carried back or forward in accordance with the applicable provisions of the Internal Revenue Code of 1986, provided, however, that in all events such net operating loss shall be allocated among member patrons on an equitable basis consistent with the Association s operation on a cooperative basis. If, in any fiscal year, the Association shall incur a loss other than an operating loss, the board of directors shall prescribe the basis on which capital furnished by patrons shall be reduced, or how such loss shall otherwise be equitably apportioned among the patrons, subject to the limitations set forth in section 5 of this Article. SECTION 4. Patronage Distribution. Any net proceeds or savings remaining in any fiscal year from the marketing of milk or milk products of its member patrons, after the Association pays or provides for the payment of all operating and maintenance costs and expenses of every character, including depreciation and losses, and after establishment of necessary reserve accounts, the Association shall allocate and distribute pro rata among its member patrons who supplied milk and milk products for that year, the amount of each member patron s participation therein to be determined on the basis of the proportion the volume or value of milk and milk products marketed by the Association for such member patron during that fiscal year shall bear to the total volume or value of milk and milk products marketed by the Association for all member patrons during that fiscal year. 11

19 Any net proceeds or savings remaining in any fiscal year from the handling of equipment and supplies for its member patrons, after the Association pays or provides for the payment of all operating and maintenance costs and expenses of every character including depreciation and losses, pertaining to the handling of equipment and supplies, the Association shall allocate and distribute pro rata among the member patrons for whom the Association handled equipment and supplies in that fiscal year, the amount of each member patron s participation therein to be determined on the basis of the proportion, the volume or value of equipment and supplies handled by the Association for such member patron during that fiscal year shall bear to the total volume or value of equipment and supplies handled by the Association for all member patrons during the fiscal year. Any other net proceeds or savings from patronage sources received by the Association shall be excluded from allocation and distribution based on patronage by member patrons during the fiscal year as provided in the two preceding paragraphs. For this purpose, other net proceeds or savings may include non-operating gains or income from patronage sources derived from the business done with or for its member patrons, such amounts, determined at the sole discretion of the board of directors. Such other net proceeds or savings, after payment of costs and expenses pertaining thereto and establishment of necessary reserve accounts, shall be allocated and distributed insofar as is practicable within the maximum limits of Subchapter T of the Internal Revenue Code (26 U.S.C through 1388) to the member patrons or class of member patrons of the Association for which such other net proceeds or savings is attributed. The member patrons or class of member patrons to which such other net proceeds or savings is attributed shall be determined by the board of directors in its sole discretion in a manner that will provide equitable treatment to all member patrons of the Association. All other amounts and proceeds from nonpatronage sources (including from business done with nonmembers) received by the Association, in excess of the costs and expenses pertaining thereto, shall, at the discretion of the board of directors, be retained as reserve or surplus funds or allocated and distributed to the member patrons of the Association on a cooperative basis in accordance with the amount of business done with and for such member patrons. The Association is obligated to make payments of all patronage distributions in cash refunds or by credits to a capital account for each member patron, such credits to take the form of capital fund certificates, certificates of indebtedness, notices of patronage refund allocation, letters of advice, or any combination thereof, as prescribed by the board of directors. In each instance, the member patron shall, within eight and one-half (8 1 /2) months after the close of the fiscal year, be notified by the Association of the total dollar amount allocated to him and credited to his capital account in the form of a written notice of allocation (as defined in 26 U.S.C. 1388). In each fiscal year where allocations of net savings or proceeds are made, a specific portion shall be paid in cash or by qualified check of the Association, the amount thereof to be determined by the board of directors. Any interest paid by the Association on any capital furnished by its patrons in accordance with section 3 of this Article, or any allocation and distribution of amounts and proceeds from nonpatronage sources in accordance with this section 4, shall not reduce any portion of net proceeds or savings from patronage sources derived from business done with or for its member patrons as described in this section 4. Any such interest paid on capital and any allocation and distribution of amounts and proceeds from nonpatronage sources are in addition to amounts otherwise payable to member patrons under this section 4 12