Bylaws of the Davis Food Co-op

Davis Food Co-op Bylaws and Articles of Incorporation
as of June 15, 2009. This includes amendments approved in the
May-June, 2009 Co-op Election.

Bylaws | Explanation of Bylaw consent provision with respect to patronage refunds

ARTICLES OF INCORPORATION of the DAVIS FOOD COOPERATIVE, INC.

I
The name of this corporation is: DAVIS FOOD COOPERATIVE, INC.

II
This corporation, which shall be composed of ultimate consumers, is formed for the following purposes:
(A) The primary purpose is to engage in the business of selling food and other household products to members, who shall be the ultimate consumers of such products.
(B) Without in any way limiting the foregoing, the objectives, purposes and powers of this Cooperative are:
(1) To promote and provide a medium whereby consumers may act together collectively to buy or otherwise acquire, own, hold, use, sell, or otherwise dispose of groceries, produce, meats, toiletries and household supplies and appliances, and any other goods or services, including but not limited to all other goods normally sold by food stores; and the earnings, savings, or benefits of which are used for the general welfare of the members, or are distributed, whether in the form of cash or evidences of indebtedness or in goods, proportionately and equitably among the members for whom it does business, upon basis of the amount of their transactions.
(2) To engage in business or activity which shall serve the economic, educational, recreational, and cultural welfare of its members and the public.
(3) To advance the consumers cooperative movement as an economic system having service as its motive; and to join, or otherwise associate itself, with cooperative societies and other organizations throughout the nation and countries abroad, for the purpose of mutual aid and the creation of a new economy.

III
This corporation shall have, exercise and possess all the rights, powers and privileges generally granted to a cooperative corporation by the laws of the State of California.

IV
This corporation is organized pursuant to the Corporation Code of the State of California, Section 12200 et. seq.

V
(A) This corporation is authorized to issue only one (1) class of shares. The total number of shares it is authorized to issue is ten million (10,000,000). The par value of all such shares is ten million dollars ($10,000,000).
(B) The maximum number of shares one shareholder may hold at one time is four percent (4%) of the total number of shares issued and outstanding at any one time. No shareholder may exercise more than one (1) vote.
(C) The amount of capital with which this corporation shall begin business is $24,000.

VI
There shall be a Board of Directors of nine (9) in number. Directors shall be elected for a term of three years, in the manner prescribed in the Bylaws. Directors' powers and duties shall be prescribed by the Bylaws.

VII
The principal office for the transaction of business of this corporation shall be in Yolo County, California.

BYLAWS OF THE DAVIS FOOD COOPERATIVE, INC.

June, 2004 (This includes amendments approved in the April-May, 2004 Co-op Election. Still current, July 2007.)

Article I. Identity
Article II. Purposes
Article III. Definitions
Article IV. Membership
Article V. Business Principles and Practices
Article VI. Government and Management
Article VII. Membership Meetings
Article VIII. Directors and Officers
Article IX. Nominations and Elections
Article X. Initiative and Referendum
Article XI. Management and Employees
Article XII. Amendments
Article XIII. Dissolution

ARTICLE I. IDENTITY.
Section 1. Name. The name of the Cooperative shall be the Davis Food Cooperative, Inc., referred to in these Bylaws as the Cooperative.
Section 2. Office and Place of Business. The principal office and place of business of the Cooperative shall be located in Yolo County, California.

ARTICLE II. PURPOSES.
Section 1. Business. The primary purpose of the Cooperative is to engage in the business of selling food and other household products to members, who shall be the ultimate consumers of these products.
Section 2. Other Objectives. Other objectives of the Cooperative shall be:
(A) Cooperative service for the benefit of members as consumers and the consuming public;
(B) Promotion of the cooperative ideal, and affiliation or cooperation with cooperative organizations in the local community, the state, the nation, and other countries;
(C) Conducting such other activities as will serve the economic, educational, recreational, and cultural welfare of its members and the public.

ARTICLE III. DEFINITIONS.
The following definitions apply to the within Bylaws:
Section 1. Person. The term "person" shall hereinafter refer to natural persons and artificial entities. The term "natural person" shall hereinafter refer to individuals (human beings) and shall exclude artificial entities.
Section 2. Shareholder. The term "shareholder" shall refer to those persons who have complied with Article IV, Section 2, parts (A) through (C) inclusive.
Section 3. Consumer shareholder. The term "consumer shareholder" shall refer to a person whose primary purchases from the Cooperative are for personal or household consumption.
Section 4. Business shareholder. The term "business shareholder" shall refer to a person whose primary purchases from the Cooperative are NOT for personal or household consumption.
Section 5. Member. The term "member" shall refer to any shareholder, or to a natural person in the household of a consumer shareholder.
Section 6. Shareholder in Good Standing. The term "shareholder in good standing" shall apply to those shareholders who have complied with Article IV, Section 3, parts (A) through (D) only.
Section 7. Working Shareholder in Good Standing. The term "working shareholder in good standing" shall apply to those shareholders who have complied with Article IV, Section 3, parts (A) through (F).
Section 8. Member in Good Standing. The term "member in good standing" shall apply to an individual in the household of any shareholder in good standing.
Section 9. Household. The term "household" shall refer to a consumer shareholder and any individuals who live, buy, and eat jointly in one dwelling with that shareholder. A single dwelling may contain more than one such household. A household may not consist of individuals from more than one dwelling.
Section 10. Required Shares. The term "required shares" shall refer to the shareholder's initial membership shares plus any shares assessed while s/he was a shareholder (Article IV, Section 7A, parts 2 & 3), less any shares from whose purchase s/he was exempted (Article IV, Section 7D).
Section 11. Proprietary Interest. A shareholder's proprietary interest in the Cooperative includes holdings of membership shares and any retained patronage distributions held by the Cooperative in the name of the shareholder. The amount of the proprietary interest in measured by its carrying value on the books of the Cooperative.

ARTICLE IV. MEMBERSHIP
Section 1. Eligibility. Any person who is a resident of California and whose purpose in seeking membership is to facilitate access to the goods and services provided by the Cooperative is eligible to become a member of the Cooperative. The Cooperative shall not discriminate on the basis of age, gender, race, nationality, political opinion, sexual preference, physical or mental handicap, or religious belief.
Section 2. Becoming a Shareholder. A person may become a shareholder by completing the steps listed in this Section. Any person, whether an individual or an artificial entity, may become either a consumer shareholder or a business shareholder.
(A) The person shall make written application on a membership form as prescribed by the Board of Directors. This form shall include, but not be limited to, a statement that the applicant agrees to:
(1) comply with, and be bound by, the terms and conditions relating to membership contained in the Articles of Incorporation, the Bylaws and amendments thereto, and regulations enacted by the Board of Directors;
(2) acquire the maximum dollar amount of membership shares of stock in the Cooperative as described in Article IV Section 7 of these Bylaws.
(B) The person shall pay a non-refundable, non-transferable membership application fee, the amount to be determined by the Board of Directors.
(C) The person shall pay ten dollars ($10) as purchase of his or her initial membership shares. In case of doubtful eligibility, membership shall be subject to approval by the Board of Directors. Should the membership application be rejected, the $10 in initial membership shares will be refunded within two weeks of the date of the application.
Section 3. Membership Responsibilities and Restrictions.
(A) A shareholder shall hold all required shares.
(B) A shareholder or member shall promptly pay any fee or debt incurred to the Cooperative. The Cooperative shall notify the member when such a fee or debt is incurred. The Board of Directors shall determine and publish the circumstances under which fees may be levied.
(C) A shareholder or member shall comply with regulations, which further the purposes of the Cooperative and are in conformity with the Bylaws, as determined and published by the Board of Directors.
(D) While on Cooperative premises, a member shall act reasonably at all times. For the purposes of this part, unreasonable conduct shall include, but not be limited to, actual or threatened violence, battery, assault, or harassment towards any Cooperative employee, member, customer, or other individual lawfully permitted on Cooperative premises.
(E) Re-registration. Each shareholder shall re-register annually in a manner approved by the Board of Directors.
(F) In order to be a working shareholder in good standing, a shareholder shall comply with parts (A) through (D) above, and in addition, he or she, or such a person as he/she may designate, shall volunteer the standard number of hours per month determined by the Board of Directors or its delegates, unless the shareholder has been exempted as described below. The type of volunteer work acceptable for work credit shall be determined by the Board.
The Board of Directors or its delegates may only grant a reduction of, or exemption from, the assessment for the work requirement for working-shareholder status to individuals who fall into hardship categories established by the Board. A hardship is a condition that makes it unduly difficult, or impossible, for an individual to volunteer the required hours. The Board of Directors shall determine and publish criteria for such exemptions.
(G) The shareholder is responsible for all actions taken under the shareholder's membership.
(H) For any change in mailing address, in composition of the household, or in authorized agents, each shareholder shall notify the Cooperative in the manner determined by the Board of Directors, within ten (10) days of such change.
(I) In any dispute between the Cooperative and any of its members or former members which cannot be resolved through informal negotiation, it shall be the policy of the Cooperative to prefer the use of mediation whereby an impartial mediator may facilitate negotiations between the parties and assist them in developing a mutually acceptable settlement. No party with a grievance against the other shall have recourse to litigation until the matter is submitted to mediation and attempted to be resolved in good faith.
Section 4. Copies of Bylaws. A copy of Bylaws Article V, Section 4(B)(7), together with the Explanation of Bylaw Consent Provision with Respect to Patronage Refunds shall be given to each shareholder. A copy of the Bylaws and Articles of Incorporation, as amended to date, shall be provided to any shareholder upon request.
Section 5. Membership Rights and Privileges.
(A) A shareholder may become a shareholder in good standing by complying with Article IV, Section 3, parts (A) through (F) inclusive, of these Bylaws.
(B) A shareholder in good standing may vote at membership meetings or by written ballot as specified in these Bylaws.
(C) A member in good standing may purchase goods through the Cooperative at member prices to be established by the Board of Directors. A working member in good standing may purchase goods through the Cooperative at working-member prices that are 5% lower than member prices. A business shareholder may only purchase goods through the Cooperative at these prices for the use and purposes of the business.
(D) No voting shareholder shall be entitled to more than one vote regardless of the number of shares owned.
(E) When a share or shares are owned by an artificial entity, the artificial entity shall be deemed a single shareholder for voting purposes. One individual duly authorized by such an entity may vote and otherwise act on behalf of the entity.
(F) A natural person who is a shareholder, and who is eligible as defined in Article VIII, Section 2, may serve on the Board of Directors.
(G) Shareholders are not entitled to receive any dividends with respect to their shareholdings.
(H) No member of this corporation may be held liable for the debts of the Cooperative beyond the amounts, if any, credited toward shares.
(I) All shareholders, whether consumer shareholders or business shareholders, constitute one class of membership as defined in the California Corporations Code.
(j) Each shareholder shall, upon request, be entitled to receive a financial report containing the information required under Section 12591 of the Consumer Cooperative Corporation Law.
Section 6. Rights and Privileges of Other Persons. Individuals over 62 years of age may purchase goods through the Cooperative at the same prices as working members in good standing of the Cooperative.
Section 7. Membership Shares.
(A) Purchase of Shares. Each share shall cost one dollar ($1) and shall be purchased in a manner determined by the Board of Directors.
(1) Maximum Dollar Amount of Shares Held By Any Member. At any time the Board shall have in effect a resolution setting the maximum dollar amount of membership shares that can be issued to or held by any member. The Board is permitted to make changes to the maximum dollar amount of membership shares either based on
(a) a change in the California law regulating share investments in consumer cooperatives, or
(b) if the Cooperative has obtained permission from the California Department of Corporations to sell additional shares.
[If neither has taken place, the maximum dollar amount of membership shares shall be increased by a minimum of $100 every ten years, beginning in January 2003.
(2) Voluntary purchase. A shareholder may voluntarily purchase shares at any time, except that no shareholder may hold more than the maximum dollar amount of membership shares, or more than 4% of the total shares issued and outstanding, whichever is less.
(3) Annual Assessed Shares. Each shareholder who owns fewer than the maximum dollar amount of membership shares shall purchase and continue to own $20 in additional shares each year until the maximum dollar amount of membership shares is reached. The assessed shares must be purchased on or before the last day of March, or another month if so designated by the Board, each year. This requirement to purchase assessed shares shall be in addition to, and not reduced by, any purchase of shares as a result of patronage refunds.
(4) Incentives for purchase of additional shares. The Board of Directors may provide incentives to attract the voluntary purchase of additional shares in addition to required shares. The Board shall publish its policy on such incentives.
(B) Shares Owned by a Business. Upon acceptance into membership and upon any assessment of shares, the Board of Directors may require a business shareholder to purchase more than the number of shares required of a consumer shareholder. The Board shall issue regulations on the number and manner of purchase of such required shares. Business shareholders must be notified of this requirement and regulations whenever they are required to buy shares.
(C) The due dates for successive share assessments shall be separated by at least ninety days.
(D) Share purchase exemption.
(1) The Board of Directors may exempt a shareholder from the requirement to purchase additional required shares:
(a) if the shareholder has first applied for membership and purchased his or her initial membership shares within ninety (90) days before the deadline for the purchase of the required shares;
(b) if the shareholder has purchased and continues to own a greater number of shares than, or the same number as, he or she would have been required to own by the deadline;
(c) if the person was not in good standing, or not a shareholder, for nine consecutive months.
(2) The Board of Directors may exempt a shareholder from the requirement to purchase additional shares, or may grant an extension of the deadline by which additional shares must be purchased if a shareholder's good standing is to be retained, upon written petition of the shareholder, in cases of extreme financial need. The Board shall publish its policy on the criteria for such exemptions or extensions.
(E) Notice of Share Assessment. Written notice shall be mailed to shareholders of the requirement to purchase additional shares as follows:
(1) Mailing date. Notices of share assessment shall be mailed at least thirty (30) days before the date by which such shares must be purchased if the shareholder is to retain his/her good standing.
(2) Who shall receive notice. A notice shall be mailed to each shareholder who is required to buy such shares as determined on the first of the month preceding the month in which notice is mailed.
(3) This notice shall contain:
(a) a statement of the procedure for purchasing shares;
(b) notice of the date by which such shares must be purchased;
(c) notice that the shareholder's good standing will be suspended on that date if the required shares have not been purchased and exemption has not been granted;
(d) a statement that the Board of Directors may grant exemption from the requirement to purchase additional shares in cases of extreme financial need, and an explanation of how a shareholder may request such exemption.
(F) Share certificates shall only be issued for fully paid shares.
Section 8. Transfer. Except as described in Section 10 below, shares are non-transferable except within the household or immediate family of a shareholder, and then only on approval of the Board of Directors, or its duly authorized representative, after written request for such transfer.
Section 9. Withdrawal. Shareholders may withdraw, partially or wholly, amounts credited toward their purchase of shares, subject to the following provisions:
(A) Shareholders must submit written notice to the Board of intent to withdraw their share credit.
(B) Complete withdrawal of share credit necessitates resignation from membership.
(C) Resignation of membership may be accomplished by filing with the Board the appropriate form. Resignation is effective when approved by the Board.
(D) Withdrawal below the required level of share purchase is permitted only for reasons of extreme need and only if at least ten dollars ($10) in shares is retained.
(E) Shares shall be redeemed following voluntary termination of membership when replacement capital is provided by other members.
(F) Re-joining. A shareholder who resigns membership, but re-joins the Cooperative within one year, must re-invest the same amount in shares as was withdrawn. The shareholder must also purchase the shares required by any assessment made since the date of resignation.
Section 10. Divorce or Separation.
(A) Upon termination of a common household by a married couple by dissolution of marriage, legal separation or actual separation, all community-property shares shall, unless both husband and wife direct otherwise, be divided equally between husband and wife, to be held by each as his or her separate property. If married shareholders living in separate households direct the Cooperative not to divide their shares, they must designate one of their households as the "buying household" and only the members of that household may exercise the privileges of household members under Article IV, Section 5C of these Bylaws.
(B) Upon dissolution of an artificial entity that is a shareholder, all shares purchased during the life of the entity shall, unless the designated voter of the entity directs otherwise, be divided equally among the participants, owners, or agents of the entity according to the Cooperative's records.
(C) Any non-shareholder receiving at least $10 in shares under the provisions of this section shall be an individual shareholder beginning with the same standing as the original shareholder's standing on the date of the transfer.
(D) Any non-shareholder receiving less than $10 in shares, under the provisions of this section, may become a new shareholder by paying to the Cooperative the remaining amount necessary to make $10. If this is not done within one (1) year, the share credit will be recalled by the Board and the option of membership by this means will be terminated.
Section 11. Inactive Status. A member who becomes delinquent in meeting his or her share purchase obligation to an extent determined by the Board, or who fails to patronize the Co-op for a period of time determined by the Board, shall, no sooner than thirty days after delivery of written notification, be placed into inactive status. His or her participation rights shall then be suspended. A member in inactive status may attain good standing only upon full correction of all delinquencies. References herein to the rights and entitlements of members shall be understood to refer only to members in good standing.
Section 12.
(A) Expulsion, Suspension, or Termination for Cause. Membership may be terminated, or members may be expelled or terminated for cause by the Board, but only when such expulsion, suspension, or termination is done in good faith. Any expulsion, suspension, or termination shall conform to the following procedures: (i) the member shall be given at least 15 days prior notice of the proposed expulsion, suspension, or termination and the reasons therefor by first class or registered mail; (ii) notice under this Section shall be given by first class or registered mail to the member's last known address as shown on the corporation's records; and (iii) the member shall have the opportunity to be heard by the Board, orally or in writing, not less than five days before the effective date of the proposed expulsion, suspension, or termination. Nothing in this Section shall be deemed to limit the ability of the Cooperative to prohibit or restrict the presence of any individual from cooperative premises for health and safety reasons, as set forth in part (C) of this Section.
(B) Definition of Cause. For purposes of this Section, cause shall include, but not be limited to, (i) ineligibility for membership, (ii) intentional or repeated violation of these bylaws, (iii) willful obstruction of any lawful purpose or activity of the Cooperative, (iv) unreasonable conduct, as defined by Article IV, Section 3, part (D) above. Upon termination of membership for any reason, all rights and interests in the Cooperative shall cease except for rights to return of capital funds pursuant to these Bylaws.
(C) Limiting access to Cooperative premises for health and safety reasons. Notwithstanding any other provision of these bylaws, the Cooperative shall have the right, at its sole discretion, to temporarily prohibit any individual from entering Cooperative premises, or limit the access of any individual to the premises to any extent, pending any procedures set forth in part (eight) of this section, if the presence of such an individual creates a health and safety concern for any cooperative employee, a member, customer, or other individual lawfully permitted on Cooperative premises. In for the purposes of this part, we “safety concerns” shall include, but not be limited to, any conduct that the cooperative Dean's actual or threatened violence, and battery, assault, hostility, or harassment towards any other Cooperative employee, member, customer, or other individuals lawfully permitted on Cooperative premises. Similarly, for the purposes of this part, “health concerns” shall include conditions that pose an immediate or ongoing health risk to other Cooperative employees, members, customers, or other individuals lawfully permitted on Cooperative premises.
Section 13. Terms of Share Redemption. Shares shall be redeemable in all circumstances at the lesser of their carrying value on the books of the Cooperative or their net book value, less a reasonable processing fee, if any, as determined by the Board. Redemption proceeds shall be subject to offset by amounts due and payable to the Cooperative by the member. No redemption shall be made when such payment would impair the ability of the Cooperative to meet its other obligations as they become due.
Section 14. Gifts of Proprietary Interests. A member may make a gift to the Cooperative of any proprietary interest by affirmatively so communicating to the Cooperative. A proprietary interest of member shall also be transferred to the Cooperative if the following procedures have been complied with: (i) at any time after such interest would otherwise escheat to the state, the Cooperative shall provide at least sixty days prior notice of the proposed transfer to the Cooperative by first-class or second-class mail to the last address of the member shown on the Cooperative's records and by publication in a newspaper of the general circulation in the county in which the Cooperative has its principal office; and (ii) no written notice objecting to the proposed transfer is received by the Cooperative from the affected member prior to the date of the proposed transfer. A member who fails to provide written notice objecting to the proposed transfer shall be deemed to have made a gift of such interest to the Cooperative as of the effective date of the transfer.

ARTICLE V. BUSINESS PRINCIPLES AND PRACTICES.
Section 1. Governing Principles.
The business of the Cooperative shall be conducted according to the following principles:
(A) Democratic control. There shall be one vote for each shareholder in good standing. No voting by proxy is permitted.
(B) Open membership. Membership is open to all as described in Article IV Section 1.
(C) No dividends on capital. No dividends shall be declared or paid with respect to membership shares.
(D) Patronage refunds based on purchases. The distribution of all patronage refunds shall be based on the price paid, including any discount, for purchases made by members in good standing.
(E) Education and promotion. Funds shall be provided for education and promotion.
(F) Neutrality. The Cooperative shall not advocate religious beliefs and shall not support any candidate for political office.
(G) Rules of Procedure. Roberts' Rules of Order shall govern membership meetings and meetings of the Board of Directors of this Cooperative.
(H) Open meetings. All meetings of the Cooperative, and of its Board of Directors, staff and committees, shall be open to all members in good standing, except in special circumstances defined in published Board regulations. The public minutes of the Cooperative shall state that such a closed meeting occurred and shall specify the regulation under which it was closed.
(I) Official Action. Unless a higher vote is required by law or by these bylaws, official action requires the vote of a majority of the voters present and voting in any meeting or election, provided such vote also constitutes at least a majority of the required quorum.
Section 2. Fiscal Year. The fiscal year shall end on the Saturday nearest to October 1st, and the succeeding fiscal year shall begin on the following Sunday.
Section 3. Annual Audit, Records, and Share Register.
(A) Audit and financial report.
(1) An annual audit of accounts shall be made by an auditor designated by the Board of Directors, and a complete financial report, including the report of the auditor, shall be available to members by February 1st of the succeeding year.
(2) Notice of capital impairment. The membership shall be notified within sixty (60) days if the capital of the Cooperative becomes impaired. All prospective shareholders shall also be notified of the impairment for the duration of the impairment. The notice shall be conspicuously featured in a regular or special newsletter available to members.
(B) Permanent records. The books, accounts, and records of the Cooperative, including the minutes of all Board meetings, membership meetings, and committee meetings, shall, subject to the limitations under California law, be made available for inspection by any member of the Cooperative at reasonable hours and upon two (2) days notice.
(C) Share register. There shall be kept and maintained at the principal office of the Cooperative a complete share register showing the names of the shareholders and their latest known addresses; the numbers and dates of the share certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. Notifications of meetings and any other items of importance shall be sent to the shareholders in good standing at their addresses as shown on such records.
Section 4. Net Surplus Savings and Earnings. At the end of each fiscal year the net surplus savings and earnings of the Cooperative (hereafter referred to as net earnings) shall be computed and applied as follows:
(A) Computation of net earnings. For purposes of this article the net earnings of the Cooperative shall be based on the annual financial report and computed, in accordance with generally accepted accounting practices, as follows:
(1) without regard to patronage refunds;
(2) before provisions for federal and state income taxes; and
(3) after allocating to the Reserve fund the net amount, after federal and state income taxes, of any gains or losses resulting from the sale or exchange of land, buildings, or equipment.
(B) Application of net earnings. The net earnings shall be applied as follows:
(1) Capital shall be restored to the extent of any impairment thereof;
(2) The Board may set aside reasonable reserves for necessary business purposes;
(3) The net earnings of the Cooperative for each fiscal year, to the extent attributable to the patronage of members in good standing, shall be allocated and distributed among such members as patronage refunds in proportion to their patronage. In determining and allocating net earnings, the Cooperative shall use a single allocation unit except to the extent that it may subsequently engage in any new and distinct line of business;
(4) Members shall retain the right to waive in whole or in part, by vote of members at a meeting, any patronage refunds to which they may be entitled;
(5) Patronage dividends shall be paid in the manner and to the extent required by the Internal Revenue Code and Treasury Department regulations to qualify for income tax deductions for the Cooperative. A qualified written notice of allocation shall be mailed to those eligible within eight-and-a-half months of the end of the fiscal year, including payment in cash of 20% or more, as determined by the Board. Any amounts not paid in cash will be credited as payment on additional shares until a shareholder owns the maximum dollar amount of membership shares, after which all amounts will be paid in cash;
(6) Any allocations of such a nominal amount as not to justify the expenses of distribution may, as determined by the Board, be excluded from distribution provided that they are not then or later distributed to other members;
(7) Persons who become or remain shareholders of this Cooperative after the adoption of this Bylaw thereby consent to include in their gross income for federal income tax purposes the stated dollar amount of any qualified written notice of allocation in the taxable year in which such notice is received, except to the extent that such a patronage refund is not income to the shareholder because: (a) it is attributable to the purchase of personal, living, or family items, or (b) it should properly be treated as an adjustment to the tax basis of property previously purchased. All terms used herein shall have the same meaning as under the Internal Revenue Code.
(8) A portion of patronage refunds, not to exceed eighty percent of the allocation, may be retained for the reasonable capital needs of the Cooperative. Such retentions shall be credited to revolving capital accounts in the names of recipient members, shall accrue no monetary return on investment, shall not be transferable, and shall be in whole dollars only. They shall be redeemed when determined by the Board to be no longer needed for capital purposes. At that time they shall be redeemed in the order of the oldest outstanding amounts and on a pro rata basis among such amounts. Retained amounts may also be redeemed under compelling circumstances as determined by the Board. Retained amounts shall be subject at all times to being offset by amounts otherwise due and payable to the Cooperative.
Section 5. Bonds. Fidelity bonds may be required of the Treasurer and of managers and employees as the Board deems advisable.
Section 6. Loans Involving Mortgages. The Board shall not accept any loan involving a mortgage on any of the property of the Cooperative which would increase aggregate loans for the fiscal year above the Board Loan Limit except as authorized at a membership meeting or by a mail ballot of at least fourteen (14) days duration, with previous notice of the proposed plan. The Board Loan Limit is $300,000 in Fiscal Year 1992-93 and shall be adjusted upward each fiscal year by five percent (5%).

ARTICLE VI. GOVERNMENT AND MANAGEMENT.
Section 1. Membership Control. The control of the Cooperative shall be vested in the membership through their election of the Board of Directors and through their voting on amendments to the Bylaws and on other matters as provided in these Bylaws. Under the Cooperative Corporations Code, the Board of Directors is the body that is held directly responsible for the corporation.
Section 2. Administration by Board of Directors. The management of the Cooperative is vested in the Board of Directors. The Board may delegate to other persons such power and duties not inconsistent with these Bylaws.
Section 3. Managers. The Board of Directors may delegate the day-to-day responsibility of managing the Cooperative to managers of their choice. These managers shall make written reports to the Board at least once a month, as the Board specifies.
Section 4. Delegates to Other Organizations. Delegates to any society of which this Cooperative is a member shall be appointed by the Board of Directors for an appropriate term. Such delegates serve at the pleasure of the Board. They shall make regular written reports to the Board, including a record of any votes cast and actions taken on behalf of this Cooperative.

ARTICLE VII. MEMBERSHIP MEETINGS.
Section 1. Date of Meetings. Regular membership meetings shall occur annually, between the first day of April and the last day of June inclusive. The time and place of each regular meeting shall be set by the Board of Directors.
Section 2. Function of Membership Meetings. The function of the membership meetings shall be primarily:
(A) to enact legislation;
(B) to conduct elections;
(C) to discuss policies and problems of administration and management;
(D) to make recommendations and directives to the Board of Directors;
(E) to enact educational programs.
Section 3. Order of Business. The suggested order of business at regular membership meetings shall be as follows:
(A) Approval of minutes.
(B) Unfinished business.
(C) New business.
(D) Election as required by Bylaws.
(E) Reports of managers and presentation of financial statements.
(F) Reports of Board, officers, and committees.
Section 4. Special Meetings. Special membership meetings may be called by the Board of Directors, or by any shareholder in good standing possessing a written petition containing the signatures of not less than five percent (5%) of the shareholders in good standing. The petition shall state the purpose of such a proposed special meeting.
Section 5. Agenda.
(A) Agenda items for any membership meeting may be proposed by the Board of Directors, or by petition of any fifty (50) shareholders in good standing. Items so proposed at least ten (10) days before the mailing of notice for such meeting shall be placed on the agenda by the Secretary of the Cooperative and included in the notice sent to shareholders in good standing. A brief statement of the nature and purpose of each agenda item shall be included in such notice.
(B) The only matters that may be voted on at a membership meeting attended by less than one-third of the shareholders in good standing are those matters notice of the general nature of which was given, as described above.
Section 6. Notice. Written notice of all membership meetings, containing the time, place, and important agenda items, shall be mailed to all shareholders in good standing not less than twenty-one (21) days nor more than (90) days in advance of such meetings. The notice shall also, whenever practicable, be posted conspicuously in the store. In the case of special meetings, the purpose of the meeting shall be specified in such notice.
Section 7. Quorum.
(A) At any membership meeting the presence in person of two hundred fifty (250) shareholders in good standing, or such lesser number of shareholders in good standing as shall equal five percent (5%) of all shareholders in good standing, constitutes a quorum for the transaction of business.
(B) Adjournment. Once the meeting has achieved a quorum, it may continue to transact business, even if the number of shareholders in good standing present later drops below a quorum. When a quorum is no longer present, any action (except adjournment) must be approved by at least a majority of the number of shareholders in good standing required to make a quorum.
(C) Adjournment to Another Time or Place. A majority of those shareholders who are present and voting may adjourn the membership meeting to a specific time or place. Neither a quorum, nor a majority of a quorum, is required to pass this motion. At the re-convened meeting, the membership may conduct any business which could have been transacted at the original meeting. The date determining eligibility for quorum and voting at the re-convened meeting is the original meeting date.
(1) Notice of Adjourned Meeting. When a meeting is adjourned in this manner to a date 45 days or less after the original date, the Election Committee shall post a prominent notice in the store before the opening of business the next day, giving the time and place of the re-convened meeting, the business to be transacted, and the date determining eligibility for voting at that meeting. If the adjournment is to a date more than 45 days after the original date, a mailed notice is required as for a special membership meeting (Article VII, Section 6).
Section 8. Voting.
(A) A shareholder shall be entitled to vote at a membership meeting if he or she is in good standing at the time of the meeting.
(B) At any election or membership meeting the vote, in a signed writing, of any absent shareholder in good standing shall be counted provided he or she has been previously notified in writing of the exact resolution, motion or nomination, and this notification is attached to the written vote.
Section 9. Results. The results of any votes taken at a membership meeting shall be posted conspicuously in the store from the first through the fourteenth day after the meeting.

ARTICLE VIII. DIRECTORS AND OFFICERS.
Section 1. Number of Directors; Election. The Board of Directors shall consist of nine directors. Each year three Directors shall be elected. Each director shall serve for a three-year term, or until a successor is installed. The term of Board members shall begin July 1.
Section 2. Eligibility.
(A) Any natural person who is a shareholder in good standing, and who has been a member in good standing for the whole of each of the nine months immediately previous to the first day of the election, and who is not disqualified by any other provision of these Bylaws, is eligible to serve on the Board of Directors.
(B) A maximum of two eligible shareholders who are paid employees of the Cooperative may serve as members of the Board (whether as two directors, two alternates, or one of each) at any one time, if they are not disqualified by any other provision of these Bylaws.
(C) The following are excluded from serving on the Cooperative's Board of Directors:
(1) The General Manager of the Cooperative.
(2) Members of the household or immediate family of the General Manager or of a director serving a concurrent term.
(3) Lessees of the Cooperative, including:
(a) Owners, lenders, employees, attorneys or real estate agents of a business operated by a lessee as a tenant of the Cooperative,
(b) Members of the household or immediate family of a lessee.
(D) Limitation on consecutive terms. No shareholder shall be eligible for election or appointment to the Board of Directors if such election or appointment would cause them to serve as a director for more than seven consecutive years. A shareholder who is ineligible for this reason, or who resigns or is removed from the Board, shall be and remain ineligible to serve as a director for one year from the date of last Board service.
(E) Before declaring candidacy for the Board or accepting nomination (Article IX, Sections 3 and 4) or appointment (Article VIII, Section 12), a shareholder is responsible for assuring that he or she will be eligible to serve on the Board.
Section 3. Alternate Members. Alternates are appointed only as follows: at each election of directors, the candidate having the highest number of votes after all vacancies on the Board of Directors have been filled shall be the first alternate, and the candidate with the next highest number of votes shall be the second alternate; or, in the absence of candidates described above in this section and in the event of vacancy, by a majority vote of the serving directors. Alternates shall serve until candidates elected in the next election of directors are installed. Alternate Board members can vote at Board meetings only as follows: the first alternate can participate in a vote only if no more than eight directors are present, and the second alternate can vote only if no more than eight other directors and alternates are present.
Section 4. Election of Officers. At the first Board meeting after new Board members take office, a President, Vice-President, Secretary and Treasurer shall be elected. Only a director who is not an interim director is eligible for election as President or Vice-President. Any shareholder in good standing is eligible for election as Treasurer or Secretary, and one person may hold both these offices. If an officer resigns or is removed from that office or from the Board, at the next Board meeting the directors shall elect a new officer as above.
Section 5. Duties of Officers. In addition to signing or attesting to formal documents on behalf of the Cooperative as authorized by the Board, officers shall have such additional duties as are determined by the Board.
Section 6. Meetings, Quorum.
(A) Dates of Meetings. The Board shall have regular meetings at least eight times yearly. The dates of regular meetings shall be set by the Board; any three (3) directors may call a special meeting of the Board.
(B) Quorum. Five (5) directors shall constitute a quorum for official business.
(C) Notice. Each director and alternate shall be notified personally at least seven days prior to each meeting. Notice of the time, place and major agenda items shall be posted in the store at least seven days prior to the meeting.
(D) Resolution by Written Consent. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
(E) Adjournment. The meeting shall be adjourned when there are no longer five directors and alternates present, or when the Board votes to adjourn, whichever comes first.
Section 7. Suggested Order of Business. The suggested order of business at regular meetings of the directors is:
(A) Minutes of the preceding meeting.
(B) Unfinished business.
(C) Communications and bills.
(D) Reports from officers, managers, and committees.
(E) New business.
Section 8. Emergency Board Meetings. The Board may hold an emergency meeting, with at least 48 hours' notice to all Board members. At the emergency meeting, the Board shall be empowered to deal only with those matters which, because of their immediacy, cannot wait for a duly called meeting of the Board. Any three (3) directors may call such a meeting and personal, telephone, or telegraph notice shall be given to all Board members. Absence from an emergency meeting of the Board shall not be deemed an absence from a Board meeting.
Section 9. Committees. The President shall appoint, with the advice and consent of the Board, and from among the directors and the membership, such committees as the Board may deem necessary. The functions and duties of these committees shall be prescribed by the Board. For the purposes of these Bylaws, "committees" shall include "task forces".
Section 10. Resignation and removal. A director may resign from office upon notice to the President. A Director shall be presumed to have resigned if he or she: (i) has ceased to meet the qualifications as a director; (ii) has accumulated three absences from meetings of the Board within any one-year period; or (iii) has been declared of unsound mind by a final order of court or convicted of a felony. A director may be removed from office by action of a majority of members.
Section 11. Removal of Director by Membership. Any director or alternate may be removed from office by a vote of a majority of the shareholders in good standing who are present and voting at a duly held membership meeting at which a quorum is present, the notice of which includes such purpose; or by a duly held written ballot as defined in Article IX of these Bylaws.
Section 12. Vacancies
(A) Interim director. In the event of a vacancy among the directors, through death, resignation, incapacity or other cause, the remaining directors shall select an interim director to serve until an elected successor is installed. If the vacating director was a paid employee of the Cooperative when elected, the Board shall if possible appoint a paid employee as interim director. Otherwise, the Board shall select the alternate who received the highest number of votes. If there are no alternates, the Board may appoint an interim director from among the shareholders eligible to serve as directors, to serve under the same terms as interim directors appointed from among the alternates.
(B) Special election. If the remainder of the term of the vacating director is fourteen months or more, a special election shall begin at the next spring membership meeting to fill the seat for the remainder of the term. The interim director shall serve until the director so elected is installed. Notice of the election shall be included in the notice of that meeting, and shall be posted conspicuously in the store at the time the notice is mailed.
(C) Short term remaining. If the remainder of the term of the vacating director is less than fourteen months, the interim director shall serve for the remainder of that term.
(D) Elections combined. If a special Board election is held, it and the regular election shall be combined and held as one election. If terms of office of different lengths are to be filled, the elected nominee receiving the fewest votes will fill the shorter term.
(E) In all other respects special elections shall be conducted in the same manner as regular elections.
Section 13. The vote of a Board member who is also a paid employee of the Cooperative shall not be counted in matters relating to the employment of the General Manager.
Section 14. Conflicts of Interest. Directors shall be under an affirmative duty to disclose their actual or potential conflicts of interest in any matter under consideration by the Board or by a committee exercising any authority of the Board, and such interest shall be made a matter of record in the minutes of the meeting. A Director having such an interest may not participate in the decision of the matter. A transaction in which a director has a material financial interest shall be prohibited unless the transaction is just and reasonable to the Cooperative and is approved in good faith by a sufficient vote of disinterested directors or committee members. Any transaction involving a material financial interest shall be reported to members annually as required by section 12592 of the Consumer Cooperative Corporation Law.
Section 15. Indemnification. To the fullest extent permitted by law, this corporation shall indemnify its directors, officers, employees, and other persons described in Section 12377(a) of the California Cooperative Corporation Law, including persons formerly occupying any such position, against all expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred by them in connection with any "proceeding", as that term is used in said Section 12377(a), and including an action by or in the right of the corporation by reason of the fact that the person is or was a person described in that Section, provided such person acted in good faith and in a manner such person reasonably believed to be in the best interests of the Cooperative and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. "Expenses" shall have the same meaning as in said Section.
To the fullest extent permitted by law and except as otherwise determined by the board in a specific instance, expenses incurred by a person seeking indemnification in defending any "proceeding" shall be advanced by the corporation before final disposition of the proceeding upon receipt by the corporation of an undertaking by or on behalf of that person to repay such amount unless it is ultimately determined that the person is entitled to be indemnified by the corporation for those expenses.
The corporation shall have power to purchase and maintain insurance to the full extent permitted by law on behalf of its officers, directors, employees, and other agents, against any liability asserted against or incurred by such persons in such capacity or arising out of the person's status as such.

ARTICLE IX. NOMINATIONS AND ELECTIONS.
Section 1. Election Committee. An Election Committee of three (3) members shall be appointed annually by the Board. Candidates for positions on the Board of Directors may not serve on this committee. The committee shall fulfill the functions of "inspectors of election" as defined in the Cooperative Corporations Code (§12483).
Section 2. Nominating Committee. A Nominating Committee may be appointed by the Board to recruit and recommend Board candidates. The committee may not recommend any of its own members, nor members of their households nor immediate families.
Section 3. Election of Directors.
(A) Election dates. The annual election of Board members shall be held between the first day of April and the last day of June, inclusive.
(B) Candidacy. A shareholder eligible to serve on the Board (Article VIII, Section 2) may become a candidate by signing and submitting a declaration of candidacy, of a form approved by the Board of Directors, to the Secretary of the Cooperative. Shareholders may declare candidacy at any time before the close of an election.
(C) Candidates' Statements. Candidates may submit a statement of up to 350 words presenting their qualifications and their involvement with, and view of, the Cooperative.
(D) Election. Election of directors shall be by plurality of votes.
(E) Tied vote. In case of a tied vote for a director's or alternate's position, the candidate who first filed a declaration of candidacy shall be deemed to have the plurality of votes.
Section 4. Voting and Election Procedures.
(A) Procedures. The same rules and procedures for notice to members, publicity, voting and balloting shall apply to all elections.
(B) Petitions. Date of record. The date of record for determining the number of shareholder signatures needed on any member petition, such as petitions for special elections, meetings, or initiatives, shall be the first day of the month preceding the month the petition is filed.
(C) Eligibility to vote. Number of votes. Each shareholder who is in good standing on the last day of balloting shall be entitled to one vote. In elections for directors, such a shareholder may cast as many votes as there are directors' seats vacant, but may cast no more than one vote for any one candidate.
(D) Quorum. Five percent (5%) of the shareholders in good standing shall constitute a quorum for any election or action reserved to the members under these bylaws, unless a larger quorum is required by law or by another provision of these bylaws. The Board may set a different quorum for advisory measures.
(E) Approval. Approval by a majority of those shareholders in good standing voting in a given election shall constitute approval by the membership, unless a larger proportion is required by law or by another provision of these bylaws. Measures which have been judged by the Board of Directors, in advance of the election, to have the effect (if passed) of increasing the requirements for, or diminishing the rights and privileges of, working members, in relation to other members, must be approved by a 2/3 vote.
(F) Voting period. An election shall close at the end of business thirty (30) days after the mailing date, or upon a later date if so specified by the Board of Directors.
(G) Votes secret. All written votes or ballots shall be secret votes.
Section 5. Advance Publicity.
(A) Any measures being considered for a member vote shall be given advance publicity, through publication, conspicuous posting in the store or other means, so that members have reasonable opportunities to make suggestions or write ballot arguments.
(B) Procedures for member initiatives shall be regularly publicized, and especially shall be publicized in a timely fashion before regular elections.
Section 6. Election Materials. The term "election materials" in this Article shall refer to the ballot, ballot envelope and voter's pamphlet for any election.
(A) Mailing date. The term "mailing date" in this Article shall refer to the date election materials are mailed to shareholders. Such materials shall be mailed on the mailing date to all shareholders who were in good standing on either of two earlier dates: (1) the last day of the month preceding the mailing date, or (2) ten days before the mailing date.
(B) Deadlines. Candidates' names, statements, and arguments that are submitted at least twenty (20) days before the mailing date shall be included in the election materials as specified below. Member initiatives (Article X, Section 2B) that qualify at least forty-five (45) days before the mailing date shall be included.
(C) Voter's pamphlet. The voter's pamphlet shall contain the following:
(1) Dates. The dates of the beginning and ending of the election, and the date results will be announced.
(2) Voting instructions. The procedures for balloting.
(3) Election of directors. The names of any candidates for election to the Board of Directors, and any candidates' statements.
(4) Ballot measures. The text of any referendum, initiative, proposed amendment, or other measure to be voted on.
(a) Analysis. With each such text must be included a brief analysis of the nature and effects of the measure by a person (or team of persons) unanimously agreed on by the Board to provide an impartial analysis.
(b) Ballot arguments. The first argument submitted for, and the first argument submitted against, any ballot measure shall be included. Arguments are limited to 350 words and must be signed by their authors. Any additional arguments submitted shall be posted in the store.
(c) Effect. The voter's pamphlet and ballot shall clearly state whether any initiative or referendum is binding or advisory in effect.
(D) Ballot. The ballot shall include:
(1) Voting instructions, notice of the closing date, and notice that complete election information may be found in the voter's pamphlet.
(2) Election of directors: The names of any candidates for election to the Board of Directors, and space where additional names can be written.
(3) Ballot measures: The title and a brief summary of each measure to be voted on, and the quorum and proportion of votes required for approval of each measure.
Section 7. Publicity.
(A) Notices. Notice of the election and the names of any candidates for election to the board of directors shall be conspicuously posted in the store for the duration of the election.
(B) Election materials. Ballots, envelopes, copies of the bylaws and voter's pamphlet, and the ballot box shall be available at a conspicuous place in the store, from the opening of business the day after election materials are mailed, until the close of the election.
(C) Equal access. Proponents and opponents of any ballot measure shall have equal and reasonable access to publicity. All candidates shall have equal and reasonable access to publicity from the date of their candidacy onward. The right of equal access to publicity includes:
(1) the statement for or against any ballot measure in the Voter’s Pamphlet;
(2) the endorsement spaces in the store and on the Co-op’s web site; and,
(3) access to the membership mailing list by candidates for director, or proponents or opponents of ballot issues, shall be granted in conformity with California Corporations Code section 12600 to a member or members possessing 5 percent or more of the voting power for a purpose reasonably related to the members’ interest as members. Where the corporation reasonably believes that the information will be used for another purpose, or where it provides a reasonable alternative, it may deny the member access to the list.
(D) Board and management restricted. Once a measure has been placed on an Election ballot by a vote of the Board, the Board or Management may no longer use Co-op resources to advocate for or against that measure.
(E) Campaigning inside and outside of store. No one may engage in leafleting, petitioning or soliciting within the store proper. Soliciting means being present for the purpose of engaging in election discussions with members and attempting to convince them to vote in a certain way. Leafleting, petitioning, or soliciting outside the store on Co-op property shall be subject to reasonable regulations.
Section 8. Balloting.
(A) Submission of ballots. Ballots may be submitted by voters in person or mailed by them to the store.
(B) Conditions for valid ballot. To be valid, a ballot must be received in a sealed envelope, signed on the outside of the envelope by a shareholder in good standing, and received or postmarked on or before the close of the election.
Section 9. Results. Election results shall be posted in the store, and all candidates notified, no later than the 5th day after the close of the election.

ARTICLE X. INITIATIVE AND REFERENDUM.
Section 1. Referendum. In the event it shall be deemed advisable for any reason, the Board of Directors may conduct a vote on a specific issue or issues.
Section 2. Initiative. An issue submitted by petitions signed by not less than five percent of shareholders in good standing which specify any lawful and proper purpose shall be presented to members within six months of such submission either at a regularly scheduled balloting or by balloting specially called for the purpose. The determination of five percent of shareholders in good standing shall be made based on the last day of the month preceding the date on which petitions are submitted.

ARTICLE XI. MANAGEMENT AND EMPLOYEES.
Section 1. Management's Conduct. The manager or managers shall conduct the business of the Cooperative in conformity with the Articles of Incorporation, the Bylaws, and policies determined by the Board of Directors and the membership and in accordance with regulations and instructions of the Board of Directors as the administrative agency of the Cooperative.
Section 2. Reports to Board; Financial Report. A manager shall attend meetings of the Board of Directors and shall make reports as requested by the Board. He or she shall submit a monthly financial report to the Board.
Section 3. Report to Membership. A manager shall attend membership meetings and make such reports as are requested by the President or by action taken in membership meetings. At the membership meetings, he or she shall present a statement of operations and a balance sheet with copies available for any members.
Section 4. Employee Grievances. Any employee or representative of employees shall have the right to present any grievances directly to the Board of Directors when all other grievance procedures established by the Board have been exhausted.
Section 5. Suspension or Termination of Employees. The management must give an employee notice of intention of terminating that employee's services as specified in the personnel policy. For serious cause as specified in that policy, such as dishonesty or other immoral conduct, the Board or the management may immediately suspend without pay an employee. In either case, the employee shall have access to the grievance procedures as established by the Board and as specified by Section 4 of this Article.

ARTICLE XII. AMENDMENTS.
Section 1. Proposal. Amendments to these Bylaws or the Articles of Incorporation may be proposed by the Board of Directors or by initiative as described in Article X, Section 2 of these Bylaws.
Section 2. Adoption of Amendment to Bylaws. Amendment to the Bylaws may be adopted by a duly conducted written ballot, or by a vote at a membership meeting duly called, the notice of which includes such purpose and the text of the proposed amendment. Amendments shall take effect as soon as approved, unless the ballot specifies a later date.
Section 3. Adoption of Amendment to Articles. The Articles of Incorporation may be amended in respect to a matter of a fundamental character only by the vote or written consent of the Board of Directors and of at least two thirds (2/3) of those shareholders in good standing voting in a duly conducted election as defined elsewhere in these Bylaws or at a duly called and conducted meeting of the membership.
Section 4. Notification of Amendments. Upon adoption of amendments to the Articles of Incorporation or Bylaws, a revised set of Articles or Bylaws shall be conspicuously posted in the store not later than seven (7) days following the final day of balloting. Copies shall be available for distribution to members not later than twenty-three (23) days thereafter.
Section 5. Correction of Bylaws. The Board of Directors may amend the Bylaws without a shareholder vote, only if the nine (9) directors unanimously agree that the word(s) proposed to be changed constitute one or more of the following:
(A) a typographical error;
(B) an error in grammar or spelling;
(C) a provision directly and clearly contrary to statute;
(D) a nonsensical statement of which the real intended import is clear;
(E) a re-numbering, re-arrangement, or re-titling of portions of the Bylaws, with no change in their meaning.
The same directors must further unanimously agree that the proposed correction is non-substantive and would in no way diminish the rights or privileges of members or shareholders.
Any such correction, and the reason for it, must be:
(1) posted with the agenda at least seven (7) days before the Board meeting where it is to be considered, and
(2) if passed, reported to the membership in the notice for the next succeeding membership meeting with a statement to the effect that shareholders will have a right to vote to repeal the amendment.
A vote at a membership meeting duly called, or a duly conducted written ballot of the shareholders, shall have the power to revoke any Board amendment.

ARTICLE XIII. DISSOLUTION.
This Cooperative may be dissolved pursuant to Sections 12630-12637of the California Consumer Co-operatives Corporations Code. Upon dissolution of the Cooperative its assets shall be distributed in the following manner and order: (i) by paying or making provision for payment of all liabilities and expenses of liquidation; [ii] by redeeming any retained patronage dividends which, if they cannot be paid in full, shall be paid in the order of the oldest outstanding amounts: (iii) by redeeming common shares, which, if they cannot be paid in full, shall be paid on a pro rata basis among all outstanding amounts; and (iv) by distributing any remaining assets to one or more cooperative organizations as determined at a meeting of the Directors.

Explanation of Bylaw Consent Provision with respect to Patronage Refunds
A provision of the Davis Food Co-op Bylaws Article V, Section 4(B) (7) requires that persons who become or remain shareholders of the Co-op after the adoption of that provision thereby consent to include in their gross incomes for income tax purposes the amounts of any patronage refund paid to them by the Co-op, except to the extent that certain exceptions apply.

The first exception states that inclusion in taxable income is not required where a shareholder's purchases from the Co-op are attributable to “personal, living, or family items.” This exception would apply to “consumer shareholders” whose purchases were for personal or household consumption. It would not apply to consumer shareholders whose purchases were for use or resale in a trade or business, or for use in other income-producing activities, nor would it apply to business shareholders.

Thus, the Bylaw consent provision is of no significance to most consumer shareholders of the Co-op, and such shareholders are not required to include the patronage refund in their taxable incomes. Inclusion of the patronage refund in taxable income is required only of business shareholders and of consumer shareholders whose purchases were for business or income-producing purposes.