Completed Bylaws Revision Project

During 2007 and 2008, the Wheatsville Board of Directors undertook the huge task of revising our organization’s Bylaws. During that time there were numerous efforts to educate the Owners on the meaning of the Bylaws and to keep you involved in the process of their revision. This web page was one of those efforts. Bylaw revisions must be approved by the Owners, so the proposed changes were presented on the fall 2008 election ballot and passed by an overwhelming percentage.

This web page was developed as part of our Owner outreach during the revision process. Its purpose was to post details of the project, including why we were doing it, the history of what we’d done up to that point, and information on what the future held. The web page was also an opportunity to educate the Owners about The Articles of Incorporation a document that’s closely related to the Bylaws and was also revised during the process. This web page is now presented as a history of the project and a resource for Owners to learn more about the revision and why it was necessary at this time.

We thank you for your continued interest and encourage you to contact the Board of Directors with any questions.

E-mail us at: board@wheatsville.coop

Or send snail mail to:
Wheatsville Board of Directors
3101 Guadalupe
Austin, Texas, 78705

What are the Bylaws (and Articles of Incorporation)?
Why Did We Do This?
Content and Length
The New State Statute
Who Helped Us to Get This Done?
What Specific Topics Did We Consider?
Calendar of the Revision

What are the Bylaws (and Articles of Incorporation)?

Bylaws are the governing document of an organization. They state the regulations that, subject to statutory law and the Articles of Incorporation (see below for a definition of this term), provide the basic rules of how an organization will operate. These rules include topics such as the election of directors, duties of officers, process by which decisions are made and many other issues related to our internal governance.

To see our previous Bylaws, click here.

To see our new Bylaws (2008 version), click here.

The Articles of Incorporation is the document that an organization must file with the state in order to incorporate. This document states a number of things, which typically include such items as the name and address of the organization, its general purpose and the number and type of shares of stock to be issued. This is the first legal step in forming a corporation (or cooperative).

To see our previous Articles of Incorporation, click here.

To see our new Certificate of Formation (2008) (previously called the Articles of Incorporation), click here.

As implied above, the Bylaws and Articles of Incorporation are closely linked to one another. They are the primary documents that govern our co-op and make us recognized by the State of Texas. Because these documents are so important and contain a number of legal considerations, the revision process was very complicated. The Board took the process very seriously and took our time to be sure that we got it right.

Why Did We Do This?

The Board started talking about revising the Bylaws in early 2007. We were initially motivated to undertake this project by the fact that the majority of our Bylaws were written over 30 years ago. As our co-op has evolved and we’ve learned more about the practices of other co-ops across the nation, we have realized that our current Bylaws are long and overly-prescriptive in nature. In addition, many of the provisions and practices that they contain are no longer suitable for Wheatsville in the 21st century. Lastly, in 2003 the State of Texas enacted a new statute, the Texas Business Organization Code (TBOC), which will eventually affect the way that our founding documents are organized/written. These considerations combined to convince us that now is a good time to address these concerns and start the process of revising the Wheatsville Bylaws.

The rest of this page is dedicated to discussing these motivations in more depth.

Content and Length

If you ever tried to read our old Bylaws you know that they were fairly lengthy and detailed. These characteristics were an indirect symptom which spawned our initial motivation to make some Bylaws revisions. The heart of the former document was essentially crafted at a different stage of Wheatsville’s evolution, when the organization was transitioning from being primarily volunteer-run to having employees conduct the bulk of the operational work. In the days of yore, Owners gathered together in person to discuss and make organizational decisions. Communications and other technologies were in a very different state.

There are several characteristics of ideal Bylaws. They should be written in clear and concise language so that they are easy to read and minimize the opportunity for unintended interpretations. Bylaws should comply with all applicable state and federal regulations, and include language stating the minimum legal requirements for often-needed provisions such as information standards for annual reporting to stakeholders of the organization. But it is also important to choose wisely the level of detail that should be incorporated because the lengthier the document, the more cumbersome it can be to keep track of all the provisions, and likewise the more challenging it can be to stay in compliance. In keeping with the objective of clear and concise language, Bylaws should only be as prescriptive as necessary for the organization’s needs. For example, adequate provisions for ensuring that our Ownership is empowered with decision-making mechanisms should be provided. However, they should not be written to the level of detail that the color of envelopes used for mailed-in ballots is included! While this is an extreme example of prescriptive detail we are sure that you can imagine the fine line between just the right amount of detail and excess. It is the kind of question that our board regularly explores within the policy governance system, where we should write just enough detail into policy that we will accept “any reasonable interpretation.” Speaking of which, policies are part of a tiered set of documents which are the construct of Wheatsville’s foundation and procedures. At the fundamental level, our Certificate of Formation (previously called the Articles of Incorporation) creates the base upon which our Bylaws exist. The Bylaws, which must be approved by a vote of the Ownership, in turn support policies which the board has authority to enact. Our former Bylaws were relatively lengthy, and consequently it was challenging to master their content.

The Bylaws revisions project was focused on improving one of our organizations most fundamental documents, so that it could be brought in line with modern ways, laws, and desired practices. We produced a shorter, more concise, internally (and externally!) consistent document which can now carry Wheatsville forward for the next 30 years!

The New State Statute

WV was previously incorporated under the Texas Cooperative Association Act, a statute that is scheduled to expire January 1, 2010. The Cooperative Association Act will effectively be replaced at that time by Chapter 251 of the TBOC which, as mentioned, became effective in 2006. Organizations formed under the old Cooperative Association Act (like Wheatsville) can choose to be governed by the TBOC by filing an early adoption statement with the Secretary of State, or they can continue to operate under the old law until January 1, 2010, at which time they will automatically become subject to the TBOC.

There are a number of changes that governance under the TBOC will bring to our organization. Our lawyers and consultants helped us to ensure that we understood what the changes are and that we are operating appropriately under the law. One major change that TBOC will bring is a shift in the requirements of the Articles of Incorporation, which will now be called the Certificate of Formation. As it stands, WV could have continued to operate under its old founding document (The Articles) until such time that an amendment to the document was necessary. At that time, The Articles would have to be revised to make them compliant with the new statute by converting them to the Certificate of Formation format.

As mentioned, the Bylaws and the Articles of Incorporation (or Certificate of Formation) are intimately linked. As part of the revision process (and in an effort to stay ahead of the game) the Board decided that it was in our best interest to become compliant with the TBOC at this time. We, therefore, ensured that all of our Bylaws revisions were in line with the statute and transformed our Articles of Incorporation to the Certificate of Formation format.

To see a copy of the new Certificate of Formation, click here.

Who Helped Us to Get This Done?

The Board of Directors took revision of the Bylaws and Articles of Incorporation very seriously, as it will affect the privileges and responsibilities of all Wheatsville Owners. There were also lots of legal and financial issues to sort through. So to make sure we were able to consider and ultimately recommend well-reasoned and legally and financially sound revisions, the Board retained the services of several advisors, including

The nationally renown co-op consulting firm, CDS Consulting Co-op (CDS CC). CDS CC was co-founded by former Wheatsville member Walden Swanson and we’ve used their services for many years. The CDS consultant that worked on our Bylaws revision is Thane Joyal. Thane was a more recent addition to the CDS consulting team, but has already helped a number of co-ops through successful Bylaws revision projects. She is a lawyer by training, which gives her a unique insight on how this complicated process should be undertaken.
Our primary legal help on this project was Manuel Escobar and Melissa Salhab Sykes at Austin-based McGinnis Lochridge & Kilgore. We chose to work with McGinnis based on their expertise in Texas business law and previous experience working with co-operative organizations.
For insight on some of our financial and accounting questions we consulted Wegner LLP CPAs and Consultants out of Madison, Wisconsin. Wegner specializes in consumer food co-ops and is currently serving as Wheatsville’s CPA.

What Specific Topics Did We Consider?

There are a number of specific topics within our old Bylaws that are no longer reflective of how Wheatsville operates or appropriate for the growth of our co-op over the next 30(+) years. In the space below you’ll find the details of some of these topics and what we considered as an alternative approach.

Staff Directors

There are mixed feelings in the national co-op community about the role of staff (or “internal”) directors on co-op boards. Staff directors play a unique role on a board, by providing valuable insight from an “insider’s” perspective, but also having the potential for some unique conflicts of interest. Some of these conflicts may include the additional challenge of maintaining confidentiality when you spend your days in the store, wrong impressions of other employees as to the role that you play on the board (staff directors are not “staff representatives”), and evaluating the general manager who is also your boss. In the past it has also been a challenge to find staff who were interested in serving on the board. Many staff members are reluctant to commit to spending more time at the store as a volunteer board member after working their full shift during the week.

Wheatsville’s old Bylaws required that two of our nine board members be staff directors (§ 3.1.5.1). These staff directors served one-year terms, which led to the undesirable possibility that the board could have up to 6 new directors in a single year – a situation that we were actually faced with in the 2008 election!

The board researched the pros and cons of staff directors and investigated the trends on this issue nationwide. After much research and discussion, the board developed a compromise solution where instead of requiring two staff directors on the board, we will allow up to 2 staff directors. The one-year term length is also changed so that all directors have the same term length (two years under the old Bylaws, changed to three years in the new document). Among the benefits of instituting this change is the fact that a staff director could change their employment status with the co-op and still continue to serve on the board. Overall, the hope is that this compromise is flexible enough to allow Wheatsville to continue to benefit from staff directors without tying our hands by mandating the role that staff must play.

Board Term Limits

The old Bylaws stated that Wheatsville should have a total of nine directors, two of whom were Wheatsville staff members with one-year terms (§ 3.1.5.1), and seven of whom were not on staff and had two-year term lengths (§ 3.1.5.2). This meant that each year we had the possibility of having regular turnover of five or six directors, and even more if other anomalies occur. In fact, in both 2008 and 2007 we had six open seats during our annual elections. What we call “anomalies” are associated with vacant seats that are filled by appointments. Vacant seats have typically occurred when a director has some life change that precludes them from continuing their effective participation on the Board of Directors, and in three of the past four years the board has had a vacant seat to fill. The board is permitted to appoint a director to a vacant seat until that seat can be filled by the election of a new director by the Ownership (§ 3.1.4).

The board consists of interested volunteers who come together to provide leadership and oversight of our organization. It takes time to develop the knowledge and skills, which are helpful in conducting our board’s work. Because we are owned by a large group of people rather than one individual or a small group of shareholders, the role of the board in representing all of our Owners and ensuring organizational success is very important work. With the old one- and two-year terms, there was a constant potential for a large portion of the board to turn over, which bore the risk of creating organizational instability. The process of learning and really understanding the board’s work as an individual director also takes some time. In our experience, individual directors tend to start ‘blossoming’ in their roles toward the end of their second year, just as many terms came to an end.

In an effort to provide greater continuity on the Wheatsville board, we recommended that the Bylaws be revised to allow for nine directors with three-year terms. This change will help to accomplish multiple goals:

With nine directors, three-year terms will help limit turnover to 1/3 of the board each year. This will help ensure continuity and help to maintain our ‘institutional memory.’
Three-year terms will enable our directors to progress through their initial learning period, and then to contribute the full strength of their knowledge and wisdom to our board and our organization within a single term.
Having a single term length rather than two different terms will provide simplicity and help dispel the misconception that staff directors represent staff. In conjunction with a change to the requirements for staff directors, a change to one consistent term length will allow staff directors who change employers to remain on the Board of Directors. In short we hoped to eliminate the disparity between directors based on employment at Wheatsville.

The potential disadvantage of a three-year term length is that it is more of a commitment than a two-year term. However, it generally seems advantageous to seek individuals who are interested in providing that level of commitment when it comes to the governing body of our organization! While we have been fortunate to not have a year when 2/3 of the board was newly-elected (due to incumbents choosing to run again, and being successful in their campaign), as an organizational practice it seems healthy to have a codified process for limiting the possibility for significant loss of continuity in a single year.

Decision-making Thresholds

Democratic owner control of Wheatsville means that Owners actively participate in setting policy and making decisions. This core co-operative principle translates through to a number of settings, from a general store vote to how the Board makes decisions in its governance of our co-op.

Our old Bylaws mandated a wide variety of decision-making methods and thresholds that were not always clear and may no longer have been in tune with today’s Wheatsville. For example, if, under the old Bylaws, an owner or group of Owners wanted to call a special meeting of the co-op Ownership they could do so by a petition signed by 10% of the total active Ownership (Article 2.2). Today, the total active Ownership of our co-op is over 10,000, equating to a requirement of more than 1,000 Owners to sign under this particular provision.

In keeping with the desire to simplify and modernize, the board proposed language to streamline, clarify, and standardize Wheatsville’s Bylaws. To achieve this simplification we considered decision-making methods that reflect a much larger Ownership than in the past. Using the example above, would perhaps 5% or 500 as a threshold be more realistic and achievable? What about the concept of a defined period of time for a store vote to occur, much like voters observe in general municipal or national elections? Under the old Bylaws store votes must have continued until a minimum number was achieved (§ 2.6.12). Keeping to a consistent and predictable business calendar could be difficult under that provision.

The most important aspect of decision-making is that the rights and responsibilities of Wheatsville’s Owners are maintained in such a way that is not cumbersome, that is representative, and that’s inviting and appealing to participation.

Voting Process

Democratic control by the Ownership is a fundamental cooperative principle, and § 2.6 of our old Bylaws described a process for “Store Voting” by which Owners could exercise their voice. Other sections, such as § 2.5 on Membership Meetings also contained provisions for democratic control by the Ownership.

In today’s modern world there are new technologies for communication, and it would be helpful for our Bylaws to be as accommodating as is reasonable to allow for both the protection of Owners AND the use of more convenient tools for exercising our right to democratic control. We were previously required to obtain at least 400 valid votes to complete an election; this process took an unknown amount of time generally in the range of 10-14 weeks. While the board continually strove to encourage owner participation in the election process, it was challenging to have such uncertainty around the timing of results for our annual ballot. Based on the former language, it would be possible for the election of board directors to not be completed by the beginning of the new term (not to mention the timing for our Community Action Wednesday organizations)!

There are a few options that we considered for the proposed Bylaws including:

How to provide adequate provisions for burgeoning technology while maintaining adequate protection for Owners and a high standard of integrity within the democratic process;
Whether, similar to the voting process for local and state issues, we could have a designated date and time for the close of voting;
Whether the requirements for participation (previously we required to have a minimum of 400 valid votes cast) should be modified either to be tied to a minimum number and/or percentage of Owners, or even to be based strictly on length of time (in conjunction with Bylaws provisions around minimum time and proper notification procedures), similar to our local city council and bond elections.
Discussion on this topic was also tied to the “Decision-making Thresholds” concepts.

Capital Shares

Under the old Bylaws, our basic owner investment and capitalization structure was largely left to the discretion of the Board of Directors, as set forth in board policies subject to the statutory requirements for all cooperative associations (see Articles 7, 10, 11 and 14). Our practices were codified by the board in a policy document called the Membership Administration Guidelines, which specifies categories of member Ownership and the investment requirements for each. We are not currently anticipating dramatic changes in our bylaw provisions regarding membership capital, however we continue to seek legal and financial counsel as well as advice from CDS on how other co-ops are structured to assure that we are able to take advantage of the best co-op practices and continue to be in compliance with all legal requirements.

We do have specific provisions in our Bylaws and Articles of Incorporation (and now the Certificate of Formation) authorizing “investor shares” (Article 8 of the new Bylaws), a capital investment program by which we have raised over $700,000 from approximately 170 members to help fund our expansion project. Investor shares are non-voting shares that provide a modest annual dividend to the shareholders according to contracts negotiated with each investor. These investor shares provisions were carefully drafted to comply with our enabling statute as well as securities and tax laws. The only significant change that occurred in this area was to increase the number of shares authorized to reflect the statutory maximum.

Director Compensation

Our old Bylaws said that no director could receive compensation for being a director, except such compensation as was given to all other volunteer workers of the cooperative (Article 3.1.9). They also stated that the board would determine the compensation of the officers (Article 3.2.11). Officers are identified in the Bylaws as the president, secretary, general manager, and additional officers that the board may elect. For many years it has been Wheatsville’s practice to compensate directors for their time and energy by giving them a 10% “volunteer” discount on all store purchases. (For directors who are also staff members, there is instead an additional 5% added to their 15% staff discount.) At times in the past, the board president received a 15% discount on purchases. Currently all non-staff directors receive 10%.

Many food co-ops around the country today compensate their board members by giving them a discount, an annual stipend, or both. Karen Zimbelman, (National Co-op Grocers Association Western Corridor Development Director), expresses a commonly held view that “directors take their job more seriously and are willing to live up to some basic standards of performance for the board if/when they are being compensated.” She adds, however, that the compensation should never be in an amount that it would be what motivates directors to serve on the board.

The Board proposed a revision to the old Bylaws that will allow director compensation to be set through board policy, rather than the old provision, which ties director compensation to that of “all other volunteer workers.” Director compensation will be set at a level that the board determines is appropriate to attract good board members, and more reflective of the amount of time and energy expected from them. This consideration also includes making sure that any such compensation is regularly monitored and reported to the Ownership.

Calendar of the Revision

The Board made efforts to keep you, our Owners, educated on the revision from the very start. The Breeze featured six articles over the project timeline, four presenting general information (January/February 2007, March/April 2007, Summer 2007, September/October 2007), one giving more details on the process (Summer 2008) and the Special Election Issue October 2008.

We met our goal of presenting a proposed draft of the Bylaws to the Owners in the fall of 2008. We had many opportunities to provide you with information and discuss any questions or concerns that you had. These opportunities included:

Breeze articles.
This web page: This web page was the easiest way for us to provide you with the most recent information available and to get some feedback from you.
Face-to-face interactions: The Board was present at a number of regularly scheduled events. We enjoyed the opportunity to engage in two-way conversations about what we were doing and to address any questions/concerns that you had.
- Coffee with the Board – This regular and on-going event was used to discuss the revision project. On the first Saturday of every month you had the opportunity to join us on the patio for a free flowing discussion over some coffee and pastries from the deli.
- Monthly Board meetings – Owners were (and are) always welcome at our Board meetings.
- Special Bylaws forum – The first time that we did something like this. We held the forum on a weekend morning in September and concentrated solely on this topic for our discussion.

The Board of Directors thanks you all for your participation and votes! This Bylaws revision was a major project in Wheatsville’s history and we now have a document that we can be proud of and will serve us well into the future.

Wheatsville Board of Directors, Bylaws Committee

Preface

The purpose of Wheatsville Co-op is to create a self-reliant, self-empowering community of people that will grow and promote a transformation of society toward cooperation, justice, and non-exploitation. The mission of Wheatsville Co-op is to serve a broad range of people by providing them goods and services, using efficient methods that avoid manipulation of the consumers and minimize exploitation of the producers or damage to the environment. The primary focus for this mission is supplying high-quality food and non-doctrinaire information about food to people in Austin, Texas.

Article I - Organization

1.1 Name. The name of the organization is Wheatsville Co-op (referred to in these bylaws as the “Co-op”).

1.2 Purpose. The Co-op was organized for the principal purpose of distributing goods and services for the benefit of its owners.

1.3 Cooperative Principles. The Co-op shall be operated in accordance with the cooperative principles adopted by the 1995 General Assembly of the International Co-operative Alliance, such principles being: (i) voluntary and open ownership without arbitrary discrimination; (ii) democratic governance; (iii) economic participation by owners; (iv) autonomy and independence of the Co-op; (v) providing education and training; (vi) cooperation with other cooperatives; and (vii) concern for community.

1.4 Nondiscrimination. The Co-op shall not discriminate on the basis of race, nationality, religion, age, gender, sexual orientation, political affiliation, or other arbitrary basis.

1.5 Fiscal Year. The fiscal year of the Co-op shall begin on the first day of June in each year and end on the last day of May of the succeeding year unless otherwise determined by the Board of Directors.

Article II - Ownership

2.1 Owner/Members. The terms “owner” and “ownership” shall mean “member” and “membership” (respectively) as those terms are used in the provisions of the Texas Business Organizations Code, as amended (the “Code”), applicable to cooperative associations.

2.2 Eligibility and Acceptance. A person or household, an unincorporated group or other entity organized on a cooperative basis, or a nonprofit group, upon approval of application and the receipt of any required payments, as established by the Board of Directors, may be accepted into ownership on terms established by the Board of Directors. Each owner that is not an individual shall designate a person to act on the owner’s behalf in conducting the affairs of this Co-op, which designation shall remain in effect until written notice of a properly authorized change in the designated person is received by the Co-op.

2.3 Rights. Each owner in good standing shall have one vote in the affairs of the Co-op. Each owner in good standing shall be eligible for other benefits as may be offered from time to time by the Co-op. An owner who has paid any required ownership fees and member capital in full (or is paying required ownership fees and member capital in a manner approved by the Board of Directors) shall be an owner in “good standing.” Failure by an owner to provide the Co-op with a current mailing address may result in that owner not receiving Co-op notices and loss of other owner benefits not guaranteed by law, as may be determined by the Board of Directors.

2.4 Termination. Ownership may be terminated voluntarily by an owner upon written notice to the Co-op or automatically if an owner shall fail to patronize or participate in the Co-op for a period of time not less than two years in accordance with procedures, including those for reinstatement, that may be determined by the Board of Directors. Ownership may be terminated involuntarily through the expulsion procedure provided for in Section 251.152 of the Code. Regardless of the reasons for termination, on termination all ownership rights of the terminated owner shall cease.

Article III - Meetings and Decision-Making

3.1 Decision-making Methods. There shall be two separate methods by which the general ownership of the Co-op shall make binding ownership decisions: (i) votes of the ownership at Ownership Meetings and (ii) Co-op Votes. An owner must be in good standing in order to vote.

3.2 Ownership Meetings. The Board of Directors shall call an annual meeting of owners in each fiscal year. A special meeting of the owners may be requested by a majority vote of the Board of Directors or by written petition signed by at least 500 or five percent (5%) of the total number of owners in good standing, whichever is fewer. The Secretary shall call a special meeting to be held within thirty days after receipt of a valid petition for the special meeting.

3.2.1 Notice of Meetings. Owners shall be notified of all regular and special meetings not later than the 10th day and not earlier than the 60th day before the date of the meeting. Notification of meetings shall be given in a manner prescribed by the Board of Directors in compliance with requirements of the Code and shall be posted at all Co-op locations. Notices may be delivered to electronic and/or postal addresses provided by the owners, as reflected in the ownership records of the Co-op. Each notice shall include the date and time of the meeting, the proposed agenda, and the location of the meeting, which shall be in Austin, Texas. Notice of a special meeting must specify the purpose for which the meeting is called. No business shall be transacted at any special meeting other than that referred to in the notice.

3.2.2 Voting at Meetings. Each owner shall be entitled to one vote upon any matter proposed at a meeting, and no votes by proxy shall be allowed. Owners may cast ballots in person at a meeting, or they may vote by facsimile transmission, by electronic message, or by mail as provided in Code Sections 251.256 (b) and (c), or by any combination of those methods.

3.2.3 Meeting Quorum. At any regular or special meeting of the owners, a quorum necessary for the transaction of business shall be at least 500 or five percent (5%) of the total number of owners in good standing, whichever is fewer. Votes cast by any method specified in Bylaw Section 3.2.2 above upon any question presented at a regular or special meeting shall be counted towards fulfillment of the quorum requirement, provided such votes are submitted within the designated timeframe.

3.3 Co-op Vote. The voting process described in this Bylaw Section 3.3 (a “Co-op Vote”) can be used to vote on any matter that may be considered at a regular or special meeting of the owners.

3.3.1 Procedure for Co-op Vote. The Board of Directors shall define procedures consistent with these Bylaws for Co-op Votes to assure that owners are properly informed and have a fair opportunity to participate. A Co-op Vote may be initiated by a majority of the Board of Directors, by a majority of owners voting at a regular or special ownership meeting where a quorum is present, or by petition as described in Bylaw Section 3.3.3 below. The exact content of any proposal being submitted for a Co-op Vote shall be made available to the ownership at least fourteen days before the vote commences. The vote shall terminate at a date and time specified in the notice by which the vote was initiated (described in Bylaw Section 3.3.2), not less than 60 days from commencement of the vote. The Board of Directors shall schedule a Co-op Vote Confirmation Meeting open to the ownership to be held at the conclusion of the Co-op Vote, in accordance with Board of Directors policies, at which the Co-op Vote will be concluded. The Board of Directors may provide for Co-op Votes to include ballots cast in the store, ballots cast at ownership meetings or events, votes by mail, votes by electronic transmission, or other means provided that appropriate measures shall be taken to assure that each owner has only one vote and no votes by proxy are allowed, as required by the Code.

3.3.2 Notice of Co-op Vote. Notification of Co-op Votes shall be posted on prominent signs at all locations maintained by the Co-op and shall be given in a manner prescribed by the Board of Directors in compliance with requirements of the Code for regular and special meetings. Such notice may include delivery to electronic and/or postal addresses provided by the owners, as reflected in the ownership records of the Co-op.

3.3.3 Petitions. Any matter that the owners wish to put before the ownership via a Co-op Vote may be placed on the ballot by a petition signed by at least 500 or five percent (5%) of the total number of owners in good standing, whichever is fewer. Proposals initiated by such a petition shall be included in the next regularly scheduled Co-op Vote, except that if a petition is signed by at least 1,000 or ten percent (10%) of the total number of owners in good standing, whichever is fewer, then the Co-op Vote shall be scheduled to commence no sooner than thirty days and no later than 60 days from the date the petition is submitted.

Article IV - Annual Reports and Owner Review

4.1 Annual Financial Condition Report. Within 120 days after the end of its fiscal year, Wheatsville shall have on file at its principal office an Annual Report of the Co-op’s financial condition stating, at a minimum: (1) the name of the Co-op; (2) the address of the Co-op’s principal office; (3) the name, address, occupation, and date of expiration of the term of office of each officer and director; (4) any compensation paid by the Co-op to each officer or director of the Co-op; (5) the amount and nature of the authorized, subscribed, and paid-in capital; (6) the total number of shareholders; (7) the number of shareholders who were admitted to or withdrew from the Co-op during the year; (8) the par value of the Co-op’s shares; (9) the rate at which any investment dividends have been paid; (10) the total number of owners; (11) the number of owners who were admitted to or withdrew from the Co-op during the year; and (12) the amount of ownership fees received.

4.1.1 Additional Requirements. The Annual Financial Condition Report must also (1) include a balance sheet and income and expense statement; and (2) be signed by the President and Secretary of the Co-op.

4.1.2 Filing Requirements. The Co-op must file a copy of the Annual Financial Condition Report with the Texas Secretary of State.

4.2 Annual Report to Owners. The Co-op shall provide to its owners annually and at each annual meeting an Annual Report which, at a minimum, must contain (1) a balance sheet; (2) an income and expense statement; (3) the amount and nature of the Co-op’s authorized, subscribed and paid-in capital; (4) the total number of shareholders; (5) the total number of shareholders who were admitted to or withdrew from the Co-op in the year; (6) the par value of the Co-op’s shares; (7) the rate at which any investment dividends have been paid; (8) the total number of owners; (9) the number of owners who were admitted to or withdrew from the Co-op during the year; (10) the amount of ownership fees received; and (11) any compensation paid by the Co-op to each officer or director of the Co-op.

4.3 Review Committee. The Board of Directors shall appoint a committee of owners who are not principal bookkeepers, accountants or employees of the Co-op to review the Co-op’s books and records. Such committee shall report on the quality of the Annual Report and the bookkeeping system of the Co-op at the annual meeting.

Article V - Board of Directors

5.1 Number, Eligibility. The Co-op shall have a Board of Directors consisting of nine members, each of whom shall be an owner of the Co-op in good standing.

5.1.1 Competitors’ Conflict of Interest. No person shall be eligible for nomination, election or appointment as a director if that person is determined by a majority of disinterested directors to have a substantial conflict of interest arising from an affiliation with any enterprise that is in competition with the Co-op.

5.1.2 Staff Directors. No more than two directors shall be on the staff of the Co-op.

5.2 Nominations. The Board of Directors may establish a procedure to solicit and qualify applications for nomination to the Board of Directors in accordance with policies established by the Board of Directors. Owners in good standing not qualified through the Board of Directors procedure shall be placed on the ballot upon submitting a petition signed by 100 or one percent (1%) of the total number of owners in good standing, whichever is greater.

5.3 Terms, Limits. Director’s terms shall be three years. Directors may not serve more than three consecutive 3-year terms and thereafter shall not be eligible to serve again until two full years have elapsed. No Director may serve more than eleven consecutive years within a 13-year period. At the first election of directors after adoption of these Bylaws and periodically thereafter as may be necessary, directors shall be elected for one, two or three year terms so that three terms are scheduled to expire every year.

5.4 Election. All directors shall be elected by confidential ballot in a Co-op Vote, and each owner may vote for as many nominees as there are positions to be filled. Those nominees with the most votes will be elected without a run-off, as follows: if there are any positions to be filled in addition to the three terms regularly scheduled to expire, the 3-year terms will be filled by the nominees with the most votes, and the next longest terms will be filled by the nominees with the next most votes, respectively. In case of a tie, the Board of Directors will draw straws to determine which nominee will serve on the Board of Directors and/or which term lengths will be filled by each, as necessary, unless the nominees can come to agreement on these matters amongst themselves.

5.5 Vacancies. Any vacancy on the Board of Directors may be filled by appointment by the Board of Directors. A director so appointed shall serve until the next election and seating of a director to complete the vacated term.

5.6 Meetings. Regular meetings of the Board of Directors shall be held at least quarterly, at such times and places as the Board of Directors may determine. The Board of Directors shall meet within thirty-five (35) days after the annual election of directors is concluded. The Board of Directors shall operate according to the rules and procedures decided upon by the Board of Directors, except that Robert’s Rules of Order, Revised, as amended by previous Board of Directors policy, shall be used upon request by 1/3 of the Directors present. Board of Directors decisions shall be made by majority vote, except where these Bylaws or the Rules of Order provide otherwise. Meetings of the Board of Directors shall be open to owners, except that on the determination of the Board of Directors, sessions of a meeting may be closed as to matters of a confidential or sensitive nature, including without limitation personnel matters and matters the disclosure of which could compromise business transactions of the Co-op. For all regular meetings, a draft of the meeting agenda shall be made available to owners at least four days in advance of the meeting.

5.7 Action Without a Meeting. Decisions of the Board of Directors may be made without a meeting if unanimous written consent, stating the action to be taken, is signed and dated by all directors. Any such resolution of the Board of Directors so adopted shall be filed with the Secretary in person or via electronic mail and included with the minutes of the next Board of Directors meeting.

5.8 Special Meetings. A special meeting of the Board of Directors shall be held whenever called by the president or by a majority of the directors. Each call for a special meeting shall be in writing, shall be signed by the person or persons calling the meeting, shall be addressed and delivered to the Secretary, and shall state the time and place of such meeting. Only the business specified in the written notice shall be transacted at a special meeting. For all special meetings, a meeting agenda shall be made available to owners at least four days in advance of the meeting or as soon as practicable.

5.9 Notification. Written notice of each meeting of the Board of Directors shall be given to each director by, or under the supervision of, the President or the Secretary of the Co-op not less than seventy-two (72) hours prior to the time of meeting. Notice may be waived by any director, and appearance at a meeting shall constitute a waiver of notice.

5.10 Quorum. A simple majority of the Board of Directors shall constitute a quorum at any meeting of the Board of Directors.

5.11 Compensation. The compensation, if any, of the directors shall be determined by the Board of Directors. Compensation shall be disclosed annually in the Annual Report and within a reasonable time following any change in compensation amount. Changes in director compensation shall not take effect until the beginning of the next Board of Directors term. The Co-op may reimburse directors for reasonable expenses incurred in carrying out their duties and responsibilities.

5.12 Removal. A Director who fails to attend three or more regular meetings annually may be removed by the action of the majority of the other Directors. Any Director of the Co-op may be removed from office for cause, by a 2/3 majority vote of the remainder of the Board of Directors, or by a majority vote of the owners voting at any ownership meeting where a quorum as defined in Bylaw Article III is present, provided any Director so removed shall first be given a chance to be heard at the ownership meeting.

5.13 Conflicts of Interest. Directors are under affirmative obligation to disclose any actual, potential or perceived conflicts of interest. The remaining directors by majority vote shall determine the process for participation, if any, by those with such conflicts. If a director or member of the immediate family or immediate household of any director is engaged by the Co-op in any capacity other than as a director, this capacity shall be fully disclosed in a manner sufficient for the voting owners and other Directors to determine whether a conflict of interest might arise. Directors with actual and substantial conflicts of interest may not participate in the discussion or decision in matters related to the conflict.

Article VI - Officers

6.1 Designation and Qualifications. The principal officers of the Co-op shall consist of President, Secretary and Treasurer. The Board of Directors may designate other officers or assistant officers.

6.2 Election, terms and removal. Following the annual election of the Board of Directors, officers shall be elected by and from the Board of Directors at the Board of Directors meeting when the newly elected Directors are seated. Officers shall serve for terms of one year or until the election of their successors. Officers may be removed and replaced by the Board of Directors at any time whenever the best interests of the Co-op would thereby be served.

6.3 Duties. In addition to signing or attesting to formal documents on behalf of the Co-op as authorized by the Board of Directors, officers shall have the duties described in this Bylaw Section 6.3 and such additional duties as are determined by the Board of Directors. The officers shall perform such duties as are ordinarily assigned to such officers in the normal course of business, except that the President, Secretary and Treasurer shall have authority to sign all documents only within the scope of the express authorization of the Board of Directors, the Code, and the Certificate of Formation and Bylaws of the Co-op.

Article VII - Member Capital

7.1 Authorization. The Board of Directors is authorized to establish capital investment requirements for various categories of ownership. Capital investment requirements for owners are intended to assure a sound level of capital funding and may be changed from time to time by a 2/3 majority vote of the Board of Directors.

7.2 Transfer and Refunds. Ownerships are not transferable, and membership capital may only be transferred between existing ownership accounts by written authorization of the owner of the account from which the funds are proposed to be transferred. Membership capital is refundable to owners, by request, upon termination of their ownership, provided that the total membership capital remaining is adequate to meet current and projected needs of the Co-op as determined by the Board of Directors and subject to offset by any debt owed by the owner to the Co-op. Any additional conditions and terms for the refund of membership capital that may be established by the Board of Directors shall apply to all owners equitably.

7.3 Evidence of Ownership. The Co-op is organized without a requirement for membership certificates. Ownership cards may be issued as evidence of ownership in the Co-op and the various categories of ownership. Records shall be maintained of each owner’s investment, and an accounting shall be provided within a reasonable time to any owner upon request.

Article VIII - Investor Shares

8.1 Authorization. The Board of Directors is authorized to issue investor shares upon the terms and conditions set forth in this Bylaw Article VIII.

8.2 Legal Requirements for Issuance. Prior to the issuance of any investor shares, the Board of Directors must assure itself that all legal requirements concerning the issuance of investor shares, including the provisions of Article VIII of the Certificate of Formation, as amended, have been met.

8.2.1 Written Evidence. Before any investor shares shall be issued, each prospective investor must first furnish evidence to the Board of Directors, the sufficiency of which shall be determined by the Board of Directors, that (1) the investor is an owner of the Co-op, (2) the investor is a bona fide resident of the State of Texas, and (3) the investor is acquiring the share(s) for investment purposes only and not with a view toward a public distribution of shares. The Board of Directors shall require a written statement to that effect from each prospective investor.

8.2.2 Consideration. The consideration received by the Co-op for any investor shares issued by the Co-op shall be equal at least to the par value of the share(s) to be issued.

8.3 Restriction on Transfer; Option to Repurchase. Investor shares may not be transferred, except by gift to an immediate family member, unless the shareholder first gives the Board of Directors written notice offering to sell the shares to the Co-op at par value. The Board of Directors shall have 90 days from receipt of such notice to exercise the Co-op’s right of first refusal; if the Co-op does not elect to repurchase the investor shares, or any part thereof, the investor shares not so re-purchased by the Co-op may be sold, transferred or conveyed to another owner of the Co-op, provided the proposed transferor shall have first furnished written evidence reasonably satisfactory to the Board of Directors to the effect that the proposed sale, transfer, or conveyance would not violate the Securities Act of 1933, as amended, or the Texas Securities Act, as amended, or any other applicable securities law, rule, regulation, or administrative order. Any purported transfer in violation of any provision of these Bylaws shall be void and ineffectual, shall not operate to transfer any interest or title to the purported transferee, and shall give the Co-op an immediate option to purchase such investor shares in the manner and on the conditions provided herein. Each transferee of investor shares or of any interest in investor shares shall hold such investor shares subject to the terms and provisions of these Bylaws.

8.4 Certificates. The certificates evidencing the issuance of investor shares shall contain the full corporate name of the Co-op, the fact that it is incorporated as a cooperative association under the Code, the par value for investor shares, the number of investor shares being issued, and the name of the record shareholder. The certificates shall be numbered in the order they are issued. Each investor share certificate must state plainly on its face that the shares represented by the certificate are non-assessable when fully paid, are non-voting, are without preemptive rights, and that investors must be owners. Investor share certificates shall be dated and executed by the President and by the Secretary.

8.4.1 Legend on Certificates. The following legend shall be printed on each certificate. If printed on the back of the certificate, a boldfaced reference thereto shall be printed on the front of the certificate. The restrictive legend shall include the following statement:

“These shares have not been registered for sale with either the United States Securities and Exchange Commission, the Texas Securities Board or other securities agency. The shares represented by this certificate may not be transferred except in accordance with Article VIII of the Cooperative’s Bylaws, including a 90-day right of first refusal by the cooperative, and then only if such sale would be exempt from all applicable registration requirements. During the period in which the securities represented by this certificate are part of an issue being offered and sold by the Cooperative, as issuer, and for a period of 9 months from the date of the last sale by the Cooperative of such securities, all resales of any part of the issue, by any person, shall be made only to persons resident within the State of Texas.”

8.5 Transfer of Records. Within a reasonable time after the occurrence of any authorized transfer of investor shares, the Co-op shall reflect the transfer on its share records.

8.6 Redemption and Dividend Terms. The Board of Directors shall have the power to set the redemption and dividend terms and rates for investor shares, consistent with the provisions in Bylaw Section 8.7. If the Board of Directors so specifies, the dividend rates may exceed 8% and dividends may be cumulative.

8.7 Changes in Redemption and Dividend Terms. Any change in dividend or redemption policy that applies to previously issued shares shall not take effect until 60 days after notice has been mailed to all shareholders affected by the change. To qualify as notice, such mailing must prominently show (1) the terms in the old policy that are being changed, (2) the terms adopted in their place in the new policy, and (3) the method by which shareholders can notify the Co-op that they request redemption of their shares under the terms of the old policy. If a shareholder requests redemption of some or all shares, the dividend and redemption policies that exist at the time of the redemption request will continue to apply to those shares until redeemed.

Article IX - Allocation and Distribution of Net Savings

9.1 Allocation. At least once a year, with a full reporting in the Annual Report to the ownership, the Directors shall apportion any net savings of the Co-op in the following order:

No net savings of any particular year may be distributed to patrons unless the net worth of the Co-op exceeds the amount to be distributed.
The Board of Directors may use a portion of net savings for payment of investor dividends in accordance with the Board of Directors policy and the Code.
Of the amount of net savings not needed to produce a positive retained earnings, a portion may be allocated by the Board of Directors to an education fund to be used in teaching cooperation.
A portion of the net savings may be set aside or disbursed for the general welfare of the ownership.
A portion of the net savings may be allocated to retained earnings.
Any remaining portion of the net savings shall be allocated by written notices of allocation (as defined in 26 U.S.C. 1388) at the same uniform rate to all eligible patrons in the proportion each one’s patronage bears to total patronage, provided that:
- (a) For eligible owner patrons with fully paid capital, the proportionate amount of net savings return distributed to the owner shall be in the form of cash for at least the minimum required by law and the remainder may be in the form of cash, property, ownership certificates, investment certificates, or in any combination of these.
- (b) For eligible owner patrons whose required capital investment is not yet fully paid, the proportionate amount of net savings return distributed to the owner shall be in the form of cash for at least the minimum amount required by law; the remainder may be credited to the owner’s account until the amount of the required capital investment has been fully paid. If an owner has any savings return remaining after the minimum required cash distribution and the capital investment credit, that amount shall be distributed in the same form as the distribution for owners with fully paid capital.

9.2 Tax on Owner Allocations. Each person who hereafter becomes an owner of the Co-op and each owner of the Co-op on the effective date of this Bylaw Section 9.2 who continues as an owner after that date shall, by that act alone, be deemed for all purposes to have consented and agreed that the amount of any distributions with respect to their patronage occurring after the effective date of this Bylaw Section 9.2 which are made in written notices of allocation (as defined in 26 U.S.C. 1388) and which they receive from the Co-op, will be taken into account at their stated dollar amounts in the manner provided in 26 U.S.C. 1385(a) in the taxable years in which such written notices of allocation are received from the Co-op.

9.3 Donating Owner Allocations. The Board of Directors may establish a procedure for owners to donate all or a portion of their allocations to designated organizations.

Article X - Loss or Losses

10.1 Losses. In the event that the Co-op incurs a net loss in any fiscal year, the net loss may be charged against any one or more of the several equity accounts of the Co-op as the Board of Directors, in its discretion, may deem appropriate for the business needs of the Co-op. In any event, treatment of owners similarly situated shall be equivalent. This Bylaw Section 10.1 shall not be construed or administered in such a way as to deprive the Co-op of the right to carry back or carry forward net operating losses to past or future years, in accordance with the applicable provisions of the Internal Revenue Code or any state taxing statutes.

Article XI - Interpretation and Amendment of Bylaws

11.1 Interpretation. The Board of Directors shall have the power, with or without advice of legal counsel, to interpret these Bylaws, apply them to particular circumstances, and adopt policies in furtherance of them, provided that all such actions are reasonable and consistent with these Bylaws.

11.2 Severability. In the event that any provision of these Bylaws is determined to be invalid or unenforceable under any statute or rule of law, then such provision shall be deemed inoperative to such extent and shall be deemed modified to conform with such statute or rule of law without affecting the validity or enforceability of any other provision of these Bylaws.

11.3 Amendment. These Bylaws may be adopted, amended, or repealed by a simple majority vote of the owners. Bylaws amendments may be proposed by a 2/3 vote of the Board of Directors or by ownership voting at an ownership meeting.

IN WITNESS WHEREOF, we, the undersigned officers of the Association, have executed this Amended and Restated Certificate of Formation this 1st day of January, 2009.

Dan Gillotte
General Manager

Rose Marie Klee
President

Tom Wald
Secretary

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