NY-REL Rural Electric Cooperative Law NY

Short title. This chapter shall be known as the "Rural Electric

Cooperative Law."

Definitions. As used in this chapter:

(a) "Cooperative" means any corporation organized under this chapter

or which becomes subject to this chapter in the manner hereinafter

provided;

(b) "Person" means any natural person, firm, association, corporation,

business trust, partnership, federal agency, state or political

subdivision or agency thereof, or any body politic; and

(c) "Rural areas" means any area of the state not included within the

boundaries of any city or village having a population in excess of

twenty thousand inhabitants.

Purpose. Cooperative, non-profit, membership corporations may be

organized under this chapter for the purpose of supplying electric

energy and promoting and extending the use thereof in rural areas in

accordance with the provisions of this chapter.

Incorporators. Five or more natural persons, or two or more

cooperatives, may organize a cooperative in the manner hereinafter

provided.

Name. The name of a cooperative shall include the words

"Electric" and "Cooperative," and the abbreviation "Inc.," and shall be

distinct from the name of any other cooperative or corporation organized

under the laws of, or authorized to do business in this state. Only a

cooperative or corporation doing business in this state pursuant to this

chapter shall use both the words "Electric" and "Cooperative" in its

name.

Articles of incorporation. Articles of incorporation of a

cooperative shall recite that they are executed pursuant to this chapter

and shall state: (1) the name of the cooperative; (2) the address of its

principal office; (3) the names and addresses of the incorporators; and

(4) the names and addresses of its directors; and may contain any

provisions not inconsistent with this chapter deemed necessary or

advisable for the conduct of its business. Such articles shall be signed

by each incorporator and acknowledged by at least two of the

incorporators, or on their behalf, if they are cooperatives. It shall

not be necessary to recite in the articles of incorporation of a

cooperative the purpose for which it is organized or any of its

corporate powers.

Powers. A cooperative shall have power:

(a) To sue and be sued in its corporate name;

(b) To have perpetual existence;

(c) To adopt a corporate seal and alter the same;

(d) To generate, manufacture, purchase, acquire, accumulate and

transmit electric energy, and to distribute, sell, supply, and dispose

of electric energy to its members, to governmental agencies and

political subdivisions, and to other persons not in excess of ten per

centum of the number of its members, provided, however, that such other

persons shall become members within one year after they commence taking

electric service from the cooperative; and provided, further however,

that the furnishing by a cooperative of electric cold storage or

processing plant service shall not be deemed to be distributing,

selling, supplying or disposing of electric energy, and provided,

further however, that a cooperative shall not distribute, sell, supply

or dispose of electric energy to any premises or building receiving and

using central station electric service or entitled to receive such

service as provided by section twelve of the transportation corporations

law on the effective date of this chapter or to any premises or

buildings hereafter served by any person, corporation or municipality

supplying central station electric service, if no co-operative service

is available to such premises or building at the time of such

installation, without the consent of the person, corporation, or

municipality supplying or required by said section twelve of the

transportation corporations law to supply such central station electric

service;

(e) To assist persons to whom electric energy is or will be supplied

by the cooperative in wiring their premises and in acquiring and

installing electrical and plumbing appliances, equipment, fixtures and

apparatus by making loans therefor, and in connection therewith to wire,

or cause to be wired, such premises, and to purchase, acquire, lease as

lessor or lessee, sell, distribute, install and repair such electric and

plumbing appliances, equipment, fixtures and apparatus;

(f) To assist persons to whom electric energy is or will be supplied

by the cooperative in constructing, equipping, maintaining and operating

electric cold storage or processing plants, by making loans therefor;

(g) To construct, purchase, lease as lessee, or otherwise acquire, and

to equip, maintain, and operate, and to sell, assign, convey, lease as

lessor, mortgage, pledge, or otherwise dispose of or encumber, electric

transmission and distribution lines or systems, electric generating

plants, electric cold storage or processing plants, lands, buildings,

structures, dams, plants and equipment, and any other real or personal

property, tangible or intangible, which shall be deemed necessary,

convenient or appropriate to accomplish the purpose for which the

cooperative is organized;

(h) To purchase, lease as lessee, or otherwise acquire, and to use,

and exercise and to sell, assign, convey, mortgage, pledge or otherwise

dispose of or encumber, franchises, rights, privileges, licenses and

easements;

(i) To borrow money and otherwise contract indebtedness, and to issue

notes, bonds, and other evidences of indebtedness, and to secure the

payment thereof by mortgage, pledge, or deed of trust of, or any other

encumbrance upon, any or all of its then owned or after-acquired real or

personal property, assets, franchises, revenues or income;

(j) To construct, maintain and operate electric transmission and

distribution lines along, upon, under and across publicly owned lands

and public thoroughfares, including, without limitation, all roads,

highways, streets, alleys, bridges and causeways, upon obtaining from

the state or the county, town, village or other appropriate municipality

the rights, franchises, permissions or consents therefor required by

law, provided, however, that the approval or consent of the public

service commission shall not be necessary to the obtaining of any such

right, franchise, permission or consent or to the exercise thereof or of

any right or privilege thereunder;

(k) To exercise the power of eminent domain in the manner provided by

the laws of this state for the exercise of such power by other

corporations constructing or operating electric transmission and

distribution lines or systems;

(l) To become a member of other cooperatives or corporations or to own

stock therein;

(m) To conduct its business and exercise its powers within or without

this state;

(n) To adopt, amend and repeal by-laws; and

(o) To do and perform any other acts and things, and to have and

exercise any other powers which may be necessary, convenient or

appropriate to accomplish the purpose for which the cooperative is

organized.

By-laws. The board of directors shall adopt the first by-laws of

a cooperative to be adopted following an incorporation, conversion,

merger or consolidation. Thereafter the members shall adopt, amend or

repeal the by-laws by the affirmative vote of a majority of those

members voting thereon at a meeting of the members. The by-laws shall

set forth the rights and duties of members and directors and may contain

other provisions for the regulation and management of the affairs of the

cooperative not inconsistent with this chapter or with its articles of

incorporation.

Members. Each incorporator of a cooperative shall be a member

thereof, but no other person may become a member thereof unless such

other person agrees to use electric energy or other services furnished

by the cooperative when they are made available through its facilities.

Any member of a cooperative who agrees to use electric energy shall

cease to be a member if he does not use electric energy supplied by the

cooperative within six months after it is made available to him or if

electric energy is not made available to him by the cooperative within

two years after he becomes a member, or such lesser period as the

by-laws of the cooperative may provide. A husband and wife may hold a

joint membership in a cooperative. Membership in a cooperative shall not

be transferable, except as provided in the by-laws. The by-laws may

prescribe additional qualifications and limitations in respect of

membership.

Meetings of members. (a) An annual meeting of the members of a

cooperative shall be held at such time and place as shall be provided in

the by-laws.

(b) Special meetings of the members may be called by the president, by

the board of directors, by any three directors, or by not less than ten

per centum of the members.

(c) Except as otherwise provided in this chapter written or printed

notice stating the time and place of each meeting of the members and, in

the case of a special meeting, the purpose or purposes for which the

meeting is called, shall be given to each member, either personally or

by mail, not less than ten days nor more than forty-five days before the

date of the meeting. If mailed, such notice shall be deemed to be given

when deposited in the United States mail with postage prepaid addressed

to the member at his address as it appears on the records of the

cooperative.

(d) Unless the by-laws prescribe the presence of a greater percentage

or number of the members for a quorum, a quorum for the transaction of

business at all meetings of the members of a cooperative having not more

than one thousand members, shall be five per centum of all members,

present in person or electronically, and of a cooperative having more

than one thousand members, shall be fifty members, present in person or

electronically. This provision shall not prevent a cooperative from

adopting a by-law that only allows an in-person quorum for meetings of

members. If less than a quorum is present at any meeting, a majority of

those present in person may adjourn the meeting from time to time

without further notice.

(e) Each member shall be entitled to one vote on each matter submitted

to a vote at a meeting of the members. Voting shall either be in person

or by proxy, mail, or electronic means, or any combination of the above.

If the by-laws provide for voting by proxy, mail, or electronic means,

they shall also prescribe the conditions under which such voting shall

be permitted. No person shall vote as proxy for more than three members

at any meeting of the members.

(f) Every cooperative shall keep, at the office of the cooperative,

correct and complete books and records of account and minutes of the

proceedings of its members, board and executive committees, if any, and

shall keep at such office a list or record containing the names and

addresses of all members, the class or classes of membership and amount

of patronage capital allocated and unretired to each member, as well as

the amount of any patronage capital allocated to nonmembers, and the

dates when they respectively were allocated such patronage capital. Any

of the foregoing books, minutes and records may be in written form or in

any other form capable of being converted into written form within a

reasonable time.

(g) The board of directors may, in its sole discretion, direct that

meetings of members be held partially or solely by means of electronic

communication, and the electronic service and/or platform by which a

meeting is held shall be the place of such meeting for purposes of this

section if such meeting is held solely by means of electronic

communication. Meetings conducted partially or solely by means of

electronic communication pursuant to this subdivision and any member's

electronic participation in such meetings shall be subject to such

guidelines and procedures as the board adopts, provided the board shall

implement reasonable measures to: (1) verify that each person

participating electronically is a member or a proxy of a member

according to the terms of subdivision (e) of this section; (2) provide

each member participating electronically with a reasonable opportunity

to participate in the meeting, including an opportunity to propose,

object to, and vote upon a specific action to be taken by the members,

and to see, read, or hear the proceedings of the meeting substantially

and concurrently with such proceedings; (3) record and maintain a record

of any votes or other actions taken by electronic communication at the

meeting; and (4) within a reasonable time after, but not to exceed sixty

days after the meeting, distribute minutes of such meeting to the

members of the cooperative in electronic or paper form. Members of a

cooperative shall not hold meetings by means of electronic communication

until the provisions of this subdivision have been adopted as a bylaw at

a duly held membership meeting.

Waiver of notice. Any person entitled to notice of a meeting may

waive such notice in writing either before or after such meeting. If any

such person shall attend such meeting, such attendance shall constitute

a waiver of notice of such meeting, unless such person participates

therein solely to object to the transaction of any business because the

meeting has not been legally called or convened.

Board of directors. (a) The business of a cooperative shall be

managed by a board of not less than five directors, each of whom shall

be a member of the cooperative or of another cooperative which is a

member thereof. The by-laws shall prescribe the number of directors,

their qualifications, other than those prescribed in this chapter, the

manner of holding meetings of the board of directors and of electing

successors to directors who shall resign, die, or otherwise be incapable

of acting. The by-laws may also provide for the removal of directors

from office and for the election of their successors. The cooperative

may provide a fair remuneration for its officers and directors and for

members of its executive committee.

(b) The directors of a cooperative named in any articles of

incorporation, consolidation, merger or conversion, shall hold office

until the next annual meeting of the members and until their successors

are elected and qualify. At each annual meeting or, in case of failure

to hold the annual meeting as specified in the by-laws, at a special

meeting called for that purpose, the members shall elect directors to

hold office until the next annual meeting of the members, except as

otherwise provided in this chapter. Each director shall hold office for

the term for which he is elected and until his successor is elected and

qualifies.

(c) Instead of electing all the directors annually, the by-laws may

provide that directors may serve two or three year terms.

(1) If the by-laws provide that directors may serve two year terms,

half of them, or a number as near thereto as possible, shall be elected

to serve until the next annual meeting of the members and the remaining

directors shall be elected to serve until the second succeeding annual

meeting. Thereafter, as directors' terms expire, the members shall

elect their successors to serve until the second succeeding annual

meeting after their election.

(2) If the by-laws provide that directors may serve three year terms,

one-third of them, or a number as near thereto as possible, shall be

elected to serve until the third succeeding annual meeting, one-third

shall be elected to serve until the second annual meeting and one-third

shall serve until the next annual meeting. Thereafter as directors'

terms expire, the members shall elect their successors to serve until

the third succeeding annual meeting after their election.

(3) A change in by-laws decreasing or increasing the terms of

directors may not decrease nor increase the term of a duly elected

director already in office, but shall become effective for any new term

served after the effective date of the by-law change.

(d) A majority of the board of directors shall constitute a quorum.

(e) If a husband and a wife hold a joint membership in a cooperative,

either one, but not both, may be elected a director.

(f) The board of directors may exercise all of the powers of a

cooperative not conferred upon the members by this chapter, or its

articles of incorporation or by-laws.

Conflict of interest policy. (a) Except as provided in

subdivision (d) of this section, the board of every rural electric

cooperative shall adopt, and oversee the implementation of, and

compliance with, a conflict of interest policy to ensure that its

directors, officers and employees act in the cooperative's best interest

and comply with applicable legal requirements.

(b) The conflict of interest policy shall include, at a minimum, the

following provisions:

(1) a definition of the circumstances that constitute a conflict of

interest;

(2) procedures for disclosing a conflict of interest or possible

conflict of interest to the board or to a committee of the board, and

procedure for the board or committee to determine whether a conflict

exists;

(3) a requirement that the person with the conflict of interest not be

present at or participate in the board or committee deliberation or vote

on a matter giving rise to such conflict, provided that nothing in this

section shall prohibit the board or a committee from requesting that the

person with the conflict of interest present information as background

or answer questions at a committee or board meeting prior to the

commencement of deliberation or voting relating thereto;

(4) a prohibition against any attempt by the person with the conflict

to influence improperly the deliberation or voting on the matter giving

rise to such conflict; and

(5) a requirement that the existence and resolution of the conflict be

documented in the cooperative's records, including in the minutes of any

meeting at which the conflict was discussed or voted upon.

(c) The conflict of interest policy shall require that prior to the

initial election of any director, and annually thereafter, such director

shall complete, sign and submit to the secretary of the cooperative or a

designated compliance officer a written statement identifying, to the

best of the director's knowledge, any entity of which such director is

an officer, director, trustee, member, owner (either as a sole

proprietor or a partner), or employee and with which the cooperative has

a relationship, and any transaction in which the cooperative is a

participant and in which the director might have a conflicting interest.

The policy shall require that each director annually resubmit such

written statement. The secretary of the cooperative or the designated

compliance officer shall provide a copy of all the completed statements

to the president of the board.

(d) A rural electric cooperative that has adopted and possesses a

conflict of interest policy pursuant to federal, state or local laws

that is substantially consistent with the provisions of subdivision (b)

of this section shall be deemed in compliance with provisions of this

section.

(e) Nothing in this section shall be interpreted to require a rural

electric cooperative to adopt any specific conflict of interest policy

not otherwise required by this section or any other law or rule, or to

supersede or limit any requirement or duty governing conflicts of

interest required by any other law or rule.

Whistleblower policy. (a) Except as provided in subdivision

(c) of this section, the board of every rural electric cooperative shall

adopt, and oversee the implementation of, and compliance with, a

whistleblower policy to protect from retaliation persons who report

suspected improper conduct. Such policy shall provide that no director,

officer or employee of a rural electric cooperative who in good faith

reports any action or suspected action taken by or within the

cooperative that is illegal, fraudulent or in violation of any adopted

policy or bylaw of the cooperative shall suffer intimidation,

harassment, discrimination or other retaliation or, in the case of

employees, adverse employment consequence.

(b) The whistleblower policy shall include the following provisions:

(1) procedures for the reporting of violations or suspected violations

of laws or cooperative policies or bylaws, including procedures for

preserving the confidentiality of reported information;

(2) a requirement that an employee, officer or director of the

cooperative be designated to administer the whistleblower policy and to

report to the board or an authorized committee thereof;

(3) a requirement that the person who is the subject of a

whistleblower complaint not be present at or participate in board

deliberations or vote on the matter relating to such complaint, provided

that nothing in this paragraph shall prohibit the board from requesting

that the person who is subject to the complaint present information as

background or answer questions at a board meeting prior to the

commencement of deliberations or voting relating thereto; and

(4) a requirement that a copy of the policy be distributed to all

directors, officers and employees. For purposes of this subdivision,

posting the policy on the cooperative's website or at the cooperative's

offices in a conspicuous location accessible to employees are among the

methods a cooperative may use to satisfy the distribution requirement.

(c) A rural electric cooperative that has adopted and possesses a

whistleblower policy pursuant to federal, state or local laws that is

substantially consistent with the provisions of subdivision (b) of this

section shall be deemed in compliance with provisions of this section.

(d) Nothing in this section shall be interpreted to relieve any rural

electric cooperative from any additional requirements in relation to

internal compliance, retaliation, or document retention required by any

other law or rule.

Districts. The by-laws may provide for the division of the

territory served or to be served by a cooperative into two or more

districts for any purpose, including, without limitation, the nomination

and election of directors and the election and functioning of district

delegates. In such case the by-laws shall prescribe the boundaries of

the districts, or the manner of establishing such boundaries, and the

manner of changing such boundaries, and the manner in which such

districts shall function. No member at any district meeting and no

district delegate at any meeting shall vote by proxy or by mail.

Officers. The officers of a cooperative shall consist of a

president, vice-president, secretary and treasurer, who shall be elected

annually by and from the board of directors. When a person holding any

such office ceases to be a director he shall cease to hold such office.

The offices of secretary and of treasurer may be held by the same

person. The board of directors may also elect or appoint such other

officers, agents, or employees as it deems necessary or advisable and

shall prescribe their powers and duties. Any officer may be removed from

office and his successor elected in the manner prescribed in the

by-laws.

Liability of directors in certain cases. (a) Directors of a

cooperative who vote for or concur in any of the following corporate

actions shall be jointly and severally liable to the cooperative for the

benefit of its creditors or members or the ultimate beneficiaries of its

activities, to the extent of any injury suffered by such persons,

respectively, as a result of such action, or, if there be no creditors

or members or ultimate beneficiaries so injured, to the cooperative as a

result of such action:

(1) the distribution of the cooperative's cash or property to members,

directors or officers, other than a distribution permitted under

sections thirty-five, sixty and sixty-one of this chapter; or

(2) the distribution of assets after dissolution of the cooperative in

violation of section thirty-five of this chapter or without paying or

adequately providing for all known liabilities of the cooperative.

(b) A director who is present at a meeting of the board, or any

committee thereof, at which action specified in paragraph one or two of

subdivision (a) of this section is taken shall be presumed to have

concurred in the action unless the director's dissent thereto shall be

entered in the minutes of the meeting, or unless the director shall

submit his or her written dissent to the person acting as the secretary

of the meeting before the adjournment thereof, or shall deliver or send

by registered mail such dissent to the secretary of the cooperative

promptly after the adjournment of the meeting. Such right to dissent

shall not apply to a director who voted in favor of such action. A

director who is absent from a meeting of the board, or any committee

thereof, at which such action is taken shall be presumed to have

concurred in the action unless he shall deliver or send by registered

mail his dissent thereto to the secretary of the cooperative or shall

cause such dissent to be filed with the minutes of the proceedings of

the board or committee within a reasonable time after learning of such

action.

(c) Any director against whom a claim is successfully asserted under

this section shall be entitled to contribution from the other directors

who voted for or concurred in the action upon which the claim is

asserted.

(d) Directors against whom a claim is successfully asserted under this

section shall be entitled, to the extent of the amounts paid by them to

the cooperative as a result of such claims:

(1) Upon reimbursement to the cooperative of any amount of an improper

distribution of the cooperative's cash or property, to be subrogated to

the rights of the cooperative against members, directors or officers who

received such distribution with knowledge of facts indicating that it

was not authorized by this chapter, in proportion to the amounts

received by them respectively.

(2) Upon payment to the cooperative of the claim of the attorney

general or of any creditor by reason of a violation of subdivision (a)

of this section, to be subrogated to the rights of the cooperative

against any person who received an improper distribution of assets.

(e) (1) A director or officer shall not be liable under this section

if, in the circumstances, the director discharged his or her duty to the

cooperative in good faith and with that degree of diligence, care and

skill which ordinarily prudent persons would exercise under similar

circumstances in like positions.

(2) In discharging their duties, directors and officers, when acting

in good faith, may rely on information, opinions, reports or statements

including financial statements and other financial data, in each case

prepared or presented by: (i) one or more officers or employees of the

cooperative, whom the director believes to be reliable and competent in

the matters presented, (ii) counsel, public accountants or other persons

as to matters which the directors or officers believe to be within such

person's professional or expert competence, or (iii) a committee of the

board upon which they do not serve, duly designated in accordance with a

provision of the certificate of incorporation or the bylaws, as to

matters within its designated authority, which committee the directors

or officers believe to merit confidence, so long as in so relying they

shall be acting in good faith and with that degree of care specified in

subdivision (a) of this section. Persons shall not be considered to be

acting in good faith if they have knowledge concerning the matter in

question that would cause such reliance to be unwarranted. Persons who

so perform their duties shall have no liability by reason of being or

having been directors or officers of the cooperative.

(f) This section shall not affect any liability otherwise imposed by

law upon any director or officer.

Action against directors and officers for misconduct. (a) An

action may be brought against one or more directors or officers of a

cooperative to procure a judgment for the following relief:

(1) To compel the defendant to account for his or her official conduct

in the following cases:

(i) The neglect of, or failure to perform, or other violation of his

or her duties in the management and disposition of cooperative assets

committed to his or her charge.

(ii) The acquisition by him or herself, transfer to others, loss or

waste of cooperative assets due to any neglect of, or failure to

perform, or other violation of his or her duties.

(2) To set aside an unlawful conveyance, assignment or transfer of

cooperative assets, where the transferee knew of its unlawfulness.

(3) To enjoin a proposed unlawful conveyance, assignment or transfer

of cooperative assets, where there are reasonable grounds for belief

that it will be made.

(b) An action may be brought for the relief provided in this section

and in subdivision (a) of section twenty-five of this article by the

attorney general, by the cooperative or, in the right of the cooperative

by any of the following:

(1) A director or officer of the cooperative.

(2) A receiver, trustee in bankruptcy, or judgment creditor thereof.

(3) By one or more of the members of the cooperative.

Nonexclusivity of statutory provisions for indemnification of

directors and officers. The indemnification and advancement of expenses

granted pursuant to, or provided by, this article shall not be deemed

exclusive of any other rights to which a director or officer seeking

indemnification or advancement of expenses may be entitled, whether

contained in the certificate of incorporation or the by-laws or, when

authorized by such certificate of incorporation or by-laws, (a) a

resolution of members, (b) a resolution of directors, or (c) an

agreement providing for such indemnification, provided that no

indemnification may be made to or on behalf of any director or officer

if a judgment or other final adjudication adverse to the director or

officer establishes that his or her acts were committed in bad faith or

were the result of active and deliberate dishonesty and were material to

the cause of action so adjudicated, or that he or she personally gained

in fact a financial profit or other advantage to which he or she was not

legally entitled. Nothing contained in this article shall affect any

rights to indemnification to which corporate personnel other than

directors and officers may be entitled by contract or otherwise under

law.

Authorization for indemnification of directors and officers. (a)

A cooperative may indemnify any person, made, or threatened to be made,

a party to an action or proceeding other than one by or in the right of

the cooperative to procure a judgment in its favor, whether civil or

criminal, including an action by or in the right of any other

corporation of any type or kind, domestic or foreign, or any

partnership, joint venture, trust, employee benefit plan or other

enterprise, which any director or officer of the cooperative served in

any capacity at the request of the cooperative, by reason of the fact

that he or she, his or her testator or intestate, was a director or

officer of the corporation, or served such other corporation,

partnership, joint venture, trust, employee benefit plan or other

enterprise in any capacity, against judgments, fines, amounts paid in

settlement and reasonable expenses, including attorneys' fees actually

and necessarily incurred as a result of such action or proceeding, or

any appeal therein, if such director or officer acted, in good faith,

for a purpose which he or she reasonably believed to be in, or, in the

case of service for any other corporation or any partnership, joint

venture, trust, employee benefit plan or other enterprise, not opposed

to, the best interests of the cooperative and, in criminal actions or

proceedings, in addition, had no reasonable cause to believe that his or

her conduct was unlawful.

(b) The termination of any such civil or criminal action or proceeding

by judgment, settlement, conviction or upon a plea of nolo contendere,

or its equivalent, shall not in itself create a presumption that any

such director or officer did not act, in good faith, for a purpose which

he or she reasonably believed to be in, or, in the case of service for

any other corporation or any partnership, joint venture, trust, employee

benefit plan or other enterprise, not opposed to, the best interests of

the cooperative or that he or she had reasonable cause to believe that

his or her conduct was unlawful.

(c) A cooperative may indemnify any person made, or threatened to be

made, a party to an action by or in the right of the cooperative to

procure a judgment in its favor by reason of the fact that he or she,

his or her testator or intestate, is or was a director or officer of the

cooperative or is or was serving at the request of the cooperative as a

director or officer of any other corporation of any type or kind,

domestic or foreign, of any partnership, joint venture, trust, employee

benefit plan or other enterprise, against amounts paid in settlement and

reasonable expenses, including attorneys' fees, actually and necessarily

incurred by him or her in connection with the defense or settlement of

such action, or in connection with an appeal therein, if such director

or officer acted, in good faith, for a purpose which he or she

reasonably believed to be in, or, in the case of service for any other

corporation or any partnership, joint venture, trust, employee benefit

plan or other enterprise, not opposed to, the best interests of the

cooperative, except that no indemnification under this subdivision shall

be made in respect of (1) a threatened action, or a pending action which

is settled or otherwise disposed of, or (2) any claim, issue or matter

as to which such person shall have been adjudged to be liable to the

cooperative unless and only to the extent that the court in which the

action was brought, or, if no action was brought, any court of competent

jurisdiction, determines upon application that, in view of all the

circumstances of the case, the person is fairly and reasonably entitled

to indemnity for such portion of the settlement amount and expenses as

the court deems proper.

(d) For the purpose of this action, a cooperative shall be deemed to

have requested a person to serve an employee benefit plan where the

performance by such person of his or her duties to the cooperative also

imposes duties on, or otherwise involves services by, such person to the

plan or participants or beneficiaries of the plan; excise taxes assessed

on a person with respect to an employee benefit plan pursuant to

applicable law shall be considered fines; and action taken or omitted by

a person with respect to an employee benefit plan in the performance of

such person's duties for a purpose reasonably believed by such person to

be in the interest of the participants and beneficiaries of the plan

shall be deemed to be for a purpose which is not opposed to the best

interests of the cooperative.

Payment of indemnification other than by court award. (a) A

person who has been successful, on the merits or otherwise, in the

defense of a civil or criminal action or proceeding of the character

described in section twenty-five shall be entitled to indemnification as

authorized in such section.

(b) Except as provided in subdivision (a) of this section, any

indemnification under section twenty-five of this article or otherwise

permitted by section twenty-four of this article, unless ordered by a

court under section twenty-seven of this article, shall be made by the

cooperative only if authorized in the specific case:

(1) by the board acting by a quorum consisting of directors who are

not parties to such action or proceeding upon a finding that the

director or officer has met the standard of conduct set forth in section

twenty-five of this article or established pursuant to section

twenty-four of this article, as the case may be, or,

(2) if a quorum under paragraph one of this subdivision is not

obtainable or, even if obtainable, a quorum of disinterested directors

so directs:

(i) By the board upon the opinion in writing of independent legal

counsel that indemnification is proper in the circumstances because the

applicable standard of conduct set forth in such sections has been met

by such director or officer, or

(ii) By the members upon a finding that the director or officer has

met the applicable standard of conduct set forth in such sections.

(c) Expenses incurred in defending a civil or criminal action or

proceeding may be paid by the cooperative in advance of the final

disposition of such action or proceeding upon receipt of an undertaking

by or on behalf of such director or officer to repay such amount as, and

to the extent, required by subdivision (a) of section twenty-eight of

this article.

Indemnification of directors and officers by a court. (a)

Notwithstanding the failure of a cooperative to provide indemnification,

and despite any contrary resolution of the board or of the members in

the specific case under section twenty-six of this article,

indemnification shall be awarded by a court to the extent authorized

under section twenty-five of this article, and subdivision (a) of

section twenty-six of this article. Application therefor may be made, in

every case, either:

(1) in the civil action or proceeding in which the expenses were

incurred or other amounts were paid, or

(2) to the supreme court in a separate proceeding, in which case the

application shall set forth the disposition of any previous application

made to any court for the same or similar relief and also reasonable

cause for the failure to make application for such relief in the action

or proceeding in which the expenses were incurred or other amounts were

paid.

(b) The application shall be made in such manner and form as may be

required by the applicable rules of court or, in the absence thereof, by

direction of a court to which it is made. Such application shall be

upon notice to the corporation. The court may also direct that notice be

given at the expense of the cooperative to the members and such other

persons as it may designate in such manner as it may require.

(c) Where indemnification is sought by judicial action, the court may

allow a person such reasonable expenses, including attorneys' fees,

during the pendency of the litigation as are necessary in connection

with his or her defense therein, if the court shall find that the

defendant has by his or her pleadings or during the course of the

litigation raised genuine issues of fact or law.

Other provisions affecting indemnification of directors and

officers. (a) All expenses incurred in defending a civil or criminal

action or proceeding which are advanced by the corporation under

subdivision (c) of section twenty-six of this article or allowed by a

court under subdivision (c) of section twenty-seven of this article

shall be repaid in case the person receiving such advancement or

allowance is ultimately found, under the procedure set forth in this

article, not to be entitled to indemnification or, where indemnification

is granted, to the extent the expenses so advanced by the cooperative or

allowed by the court exceed the indemnification to which he is entitled.

(b) No indemnification, advancement or allowance shall be made under

this article in any circumstance where it appears:

(1) that the indemnification would be inconsistent with a provision of

the certificate of incorporation, a by-law, a resolution of the board or

of the members, an agreement or other proper corporate action, in effect

at the time of the accrual of the alleged cause of action asserted in

the threatened or pending action or proceeding in which the expenses

were incurred or other amounts were paid, which prohibits or otherwise

limits indemnification; or

(2) if there has been a settlement approved by the court, that the

indemnification would be inconsistent with any condition with respect to

indemnification expressly imposed by the court in approving the set-

tlement.

(c) If any express or other amounts are paid by way of

indemnification, otherwise than by court order or action by the members,

the cooperative shall prepare a statement specifying the persons paid,

the amounts paid, and the nature and status at the time of such payment

of the litigation or threatened litigation, and not later than the next

annual meeting of members, unless such meeting is held within three

months from the date of such payment, and, in any event, within fifteen

months of the date of such payment, shall mail the statement to its

members of record entitled at the time to vote for the election of

directors.

(d) If any action with respect to indemnification of directors and

officers is taken by way of amendment of the by-laws, resolution of

directors, or by agreement, then the cooperative shall, not later than

the next annual meeting of members, unless such meeting is held within

three months from the date of such action, and, in any event, within

fifteen months from the date of such action, mail to its members of

record at the time entitled to vote for the election of directors a

statement specifying the action taken.

Insurance for indemnification of directors and officers. (a)

Subject to subdivision (b) of this section, a cooperative shall have

power to purchase and maintain insurance:

(1) to indemnify the cooperative for any obligation which it incurs as

a result of the indemnification of directors and officers under the

provisions of this article, and

(2) to indemnify directors and officers in instances in which they may

be indemnified by the cooperative under the provisions of this article,

and

(3) to indemnify directors and officers in instances in which they may

not otherwise be indemnified by the cooperative under the provisions of

this article provided the contract of insurance covering such directors

and officers provides, in a manner acceptable to the superintendent of

financial services, for a retention amount and for co-insurance.

(b) No insurance under subdivision (a) of this section may provide for

any payment, other than cost of defense, to or on behalf of any director

or officer:

(1) if a judgment or other final adjudication adverse to the insured

director or officer establishes that his or her acts of active and

deliberate dishonesty were material to the cause of action so

adjudicated, or that he or she personally gained in fact a financial

profit or other advantage to which he or she was not legally entitled,

or

(2) in relation to any risk the insurance of which is prohibited under

the insurance law of this state.

(c) Insurance under paragraphs one, two and three of subdivision (a)

of this section may be included in a single contract or supplement

thereto. Retrospective rated contracts are prohibited.

(d) The corporation shall, within the time and to the persons provided

in subdivision (c) of section twenty-eight of this article, mail a

statement in respect to any insurance it has purchased or renewed under

this section, specifying the insurance carrier, date of the contract,

cost of the insurance, corporate positions insured, and a statement

explaining all sums, not previously reported in a statement to members,

paid under any indemnification insurance contract.

(e) This section is the public policy of this state to spread the risk

of cooperative management, notwithstanding any other general or special

law of this state or of any other jurisdiction, including the federal

government.

Amendment of articles of incorporation. A cooperative may amend

its articles of incorporation by complying with the following

requirements: The proposed amendment shall be presented to a meeting of

the members, the notice of which shall set forth or have attached

thereto the proposed amendment. If the proposed amendment, with any

changes, is approved by the affirmative vote of not less than two-thirds

of those members voting thereon at such meeting, articles of amendment

shall be executed and acknowledged on behalf of the cooperative by its

president or vice-president and its seal shall be affixed thereto and

attested by its secretary. The articles of amendment shall recite that

they are executed pursuant to this chapter and shall state: (1) the name

of the cooperative; (2) the address of its principal office; and (3) the

amendment to its articles of incorporation. The president or

vice-president executing such articles of amendment shall make and annex

thereto an affidavit stating that the provisions of this section in

respect of the amendment set forth in such articles were duly complied

with.

Change of location of principal office. A cooperative may, upon

authorization of its board of directors or its members, change the

location of its principal office by filing a certificate reciting such

change of principal office, executed and acknowledged by its president

or vice-president under its seal attested by its secretary, in the

department of state.

Consolidation. Any two or more cooperatives (each of which is

hereinafter designated a "consolidating cooperative"), may consolidate

into a new cooperative (hereinafter designated the "new cooperative"),

by complying with the following requirements:

(a) The proposition for the consolidation of the consolidating

cooperatives into the new cooperative and proposed articles of

consolidation to give effect thereto shall be submitted to a meeting of

the members of each consolidating cooperative, the notice of which shall

have attached thereto a copy of the proposed articles of consolidation;

(b) If the proposed consolidation and the proposed articles of

consolidation, with any amendments, are approved by the affirmative vote

of not less than two-thirds of those members of each consolidating

cooperative voting thereon at each such meeting, articles of

consolidation in the form approved shall be executed and acknowledged on

behalf of each consolidating cooperative by its president or

vice-president and its seal shall be affixed thereto and attested by its

secretary. The articles of consolidation shall recite that they are

executed pursuant to this chapter and shall state: (1) the name of each

consolidating cooperative and the address of its principal office; (2)

the name of the new cooperative and the address of its principal office;

(3) a statement that each consolidating cooperative agrees to the

consolidation; (4) the names and addresses of the directors of the new

cooperative; and (5) the terms and conditions of the consolidation and

the mode of carrying the same into effect, including the manner in which

members of the consolidating cooperatives may or shall become members of

the new cooperative; and may contain any provisions not inconsistent

with this chapter deemed necessary or advisable for the conduct of the

business of the new cooperative. The president or vice-president of each

consolidating cooperative executing such articles of consolidation shall

make and annex thereto an affidavit stating that the provisions of this

section in respect of such articles were duly complied with by such

cooperative.

Merger. Any one or more cooperatives (each of which is

hereinafter designated a "merging cooperative") may merge into another

cooperative (hereinafter designated the "surviving cooperative"), by

complying with the following requirements:

(a) The proposition for the merger of the merging cooperatives into

the surviving cooperative and proposed articles of merger to give effect

thereto shall be submitted to a meeting of the members of each merging

cooperative and of the surviving cooperative, the notice of which shall

have attached thereto a copy of the proposed articles of merger;

(b) If the proposed merger and the proposed articles of merger, with

any amendments, are approved by the affirmative vote of not less than

two-thirds of those members of each cooperative voting thereon at each

such meeting, articles of merger in the form approved shall be executed

and acknowledged on behalf of each such cooperative by its president or

vice-president and its seal shall be affixed thereto and attested by its

secretary. The articles of merger shall recite that they are executed

pursuant to this chapter and shall state: (1) the name of each merging

cooperative and the address of its principal office; (2) the name of the

surviving cooperative and the address of its principal office; (3) a

statement that each merging cooperative and the surviving cooperative

agree to the merger; (4) the names and addresses of the directors of the

surviving cooperative; and (5) the terms and conditions of the merger

and the mode of carrying the same into effect, including the manner in

which members of the merging cooperatives may or shall become members of

the surviving cooperative; and may contain any provisions not

inconsistent with this chapter deemed necessary or advisable for the

conduct of the business of the surviving cooperative. The president or

vice-president of each cooperative executing such articles of merger

shall make and annex thereto an affidavit stating that the provisions of

this section in respect of such articles were duly complied with by such

cooperative.

Effect of consolidation or merger. (a) In the case of a

consolidation the existence of the consolidating cooperatives shall

cease and the articles of consolidation shall be deemed to be articles

of incorporation of the new cooperative; and in the case of a merger the

separate existence of the merging cooperatives shall cease and the

articles of incorporation of the surviving cooperative shall be deemed

to be amended to the extent, if any, that changes therein are provided

for in the articles of merger;

(b) All the rights, privileges, immunities and franchises and all

property, real and personal, including without limitation applications

for membership, all debts due on whatever account and all other choses

in action, of each of the consolidating or merging cooperatives shall be

deemed to be transferred to and vested in the new or surviving

cooperative without further act or deed;

(c) The new or surviving cooperative shall be responsible and liable

for all the liabilities and obligations of each of the consolidating or

merging cooperatives and any claim existing or action or proceeding

pending by or against any of the consolidating or merging cooperatives

may be prosecuted as if the consolidation or merger had not taken place,

but the new or surviving cooperative may be substituted in its place;

and

(d) Neither the rights of creditors nor any liens upon the property of

any of such cooperatives shall be impaired by such consolidation or

merger.

Dissolution. (a) A cooperative which has not commenced business

may be dissolved by filing in the department of state articles of

dissolution which shall be executed and acknowledged on behalf of the

cooperative by a majority of the incorporators and which shall state:

(1) the name of the cooperative; (2) the address of its principal

office; (3) that the cooperative has not commenced business; (4) that

any sums received by the cooperative, less any part thereof disbursed

for expenses of the cooperative, have been returned or paid to those

entitled thereto; (5) that no debt of the cooperative is unpaid; and (6)

that a majority of the incorporators elect that the cooperative be

dissolved.

(b) A cooperative which has commenced business may be dissolved in the

following manner: The members at any meeting shall approve, by the

affirmative vote of not less than two-thirds of the total members of the

cooperative, a proposal that the cooperative be dissolved. Upon such

approval, a certificate of election to dissolve (hereinafter designated

the "certificate"), executed and acknowledged on behalf of the

cooperative by its president or vice-president under its seal, attested

by its secretary, and stating: (1) the name of the cooperative; (2) the

address of its principal office; and (3) that the members of the

cooperative have duly voted that the cooperative be dissolved, shall,

together with an affidavit made by its president or vice-president

executing the certificate, stating that the statements in the

certificate are true, be filed in the department of state. Upon the

filing of the certificate and affidavit in the department of state, the

cooperative shall cease to carry on its business except to the extent

necessary for the winding up thereof, but its corporate existence shall

continue until articles of dissolution have been filed in the department

of state. The board of directors shall immediately cause notice of the

dissolution proceedings to be mailed to each known creditor of and

claimant against the cooperative and to be published once a week for two

successive weeks in a newspaper of general circulation in the county in

which the principal office of the cooperative is located. The board of

directors shall wind up and settle the affairs of the cooperative,

collect sums owing to it, liquidate its property and assets, pay and

discharge its debts, obligations and liabilities, and do all other

things required to wind up its business, and after paying or discharging

or adequately providing for the payment or discharge of all its debts,

obligations and liabilities, shall distribute any remaining sums among

its members and former members in proportion to the patronage of the

respective members or former members during the seven years next

preceding the date of the filing of the certificate in the department of

state, or if the cooperative has not been in existence for such period,

then during the period of its existence prior to such filing. The board

of directors shall thereupon authorize the execution of articles of

dissolution, which shall be executed and acknowledged on behalf of the

cooperative by its president or vice-president, and its seal shall be

affixed thereto and attested by its secretary. The articles of

dissolution shall recite that they are executed pursuant to this chapter

and shall state: (1) the name of the cooperative; (2) the address of its

principal office; (3) the date on which the certificate of election to

dissolve was filed in the department of state; (4) that there are no

actions or suits pending against the cooperative; (5) that all debts,

obligations and liabilities of the cooperative have been paid and

discharged or that adequate provision has been made therefor; and (6)

that the preceding provisions of this subsection have been duly complied

with. The president or vice-president executing the articles of

dissolution shall make and annex thereto an affidavit stating that the

statements made therein are true.

Conversion of existing domestic corporations. Any corporation

organized under the laws of this state and supplying or authorized to

supply electric energy may be converted into a cooperative by complying

with the following requirements and shall thereupon become subject to

this chapter with the same effect as if originally organized under this

chapter:

(a) The proposition for the conversion of such corporation into a

cooperative and proposed articles of conversion to give effect thereto

shall be submitted to a meeting of the members or stockholders of such

corporation, the notice of which shall have attached thereto a copy of

the proposed articles of conversion;

(b) If the proposition for the conversion of such corporation into a

cooperative and the proposed articles of conversion, with any

amendments, are approved by the affirmative vote of not less than

two-thirds of those members of such corporation voting thereon at such

meeting, or, if such corporation is a stock corporation, by the

affirmative vote of the holders of not less than two-thirds of those

shares of the capital stock of such corporation represented at such

meeting and voting thereon, articles of conversion in the form approved

shall be executed and acknowledged on behalf of such corporation by its

president or vice-president and its seal shall be affixed thereto and

attested by its secretary. The articles of conversion shall recite that

they are executed pursuant to this chapter and shall state: (1) the

name of the corporation and the address of its principal office prior to

its conversion into a cooperative; (2) the statute or statutes under

which it was organized; (3) a statement that such corporation elects to

become a cooperative, non-profit, membership corporation subject to this

chapter; (4) its name as a cooperative; (5) the address of the principal

office of the cooperative; (6) the names and addresses of the directors

of the cooperative; and (7) the manner in which members or stockholders

of such corporation may or shall become members of the cooperative; and

may contain any provisions not inconsistent with this chapter deemed

necessary or advisable for the conduct of the business of the

cooperative. The president or vice-president executing such articles of

conversion shall make and annex thereto an affidavit stating that the

provisions of this section were duly complied with in respect of such

articles. The articles of conversion shall be deemed to be the articles

of incorporation of the cooperative.

Foreign corporations. Any foreign non-profit or cooperative

corporation supplying or authorized to supply electric energy and owning

or operating electric transmission or distribution lines in an adjacent

state may construct or acquire extensions of such lines in this state

within an area no point of which is more than ten miles from the

boundary line of this state and operate such extensions, provided that

any such corporation shall, before constructing or operating such

extensions, by an instrument executed and acknowledged on its behalf by

its president or vice-president, under its seal attested by its

secretary, and filed in the department of state, designate the secretary

of state its agent to accept service of process on its behalf.

Thereafter, such corporation shall have all the rights, powers,

privileges and immunities of a cooperative, and shall be subject to the

provisions of this chapter. In the event any process shall be served

upon the secretary of state, he shall forthwith forward the same by

registered mail to such corporation at the address thereof specified in

the aforesaid instrument.

Filing of articles. Articles of incorporation, amendment,

consolidation, merger, conversion, or dissolution, when executed and

acknowledged and accompanied by such affidavits as may be required by

applicable provisions of this chapter, shall be filed in the department

of state. The secretary of state shall, upon the payment of the fees as

in this chapter provided, index such articles. Upon the filing of such

articles, the incorporation, amendment, consolidation, merger,

conversion, or dissolution provided for therein shall be in effect. The

provisions of this section shall also apply to certificates of election

to dissolve and affidavits executed in connection therewith pursuant to

subsection (b) of section thirty-five of this chapter.

Fees. The department of state shall charge and collect for:

(a) Filing articles of incorporation, forty dollars;

(b) Filing articles of amendment, twenty-five dollars;

(c) Filing articles of consolidation or merger, twenty-five dollars;

(d) Filing articles of conversion, twenty-five dollars;

(e) Filing certificate of election to dissolve, five dollars;

(f) Filing articles of dissolution, five dollars;

(g) Filing certificate of change of principal office, fifteen dollars;

and

(h) Filing by foreign corporation of instrument of designation for

service of process, two dollars.

Patronage capital contributions, allocations, and retirements.

(a) Each cooperative's by-laws shall, unless otherwise determined by

agreement of the members, provide for patronage capital allocations and

retirements in the manner provided by this section. Agreement by the

members for purposes of this section shall mean member approval of

by-law provisions or by a majority vote of the members voting at a duly

called meeting. Any matter set forth in this section which is subject to

determination of the board of directors shall be determined in the

exercise of such board of director's business judgment.

(b) Patronage capital shall be determined by a cooperative on an

annual basis and shall be the excess, if any, of amounts received or

receivable by such cooperative from furnishing electricity over such

cooperative's operating costs and expenses properly chargeable against

furnishing electricity, as determined using such accounting method or

methods as agreed upon by the members. Costs and expenses chargeable

against furnishing electricity shall include:

(1) expenses of the operation and maintenance of its facilities during

such fiscal year;

(2) interest obligations of the cooperative coming due in such fiscal

year;

(3) depreciation and other expenses to finance or to provide a reserve

for the financing of the construction or acquisition by the cooperative

of additional facilities to the extent determined by the board of

directors;

(4) expenses to provide a reasonable reserve for working capital as

determined by the board of directors;

(5) expenses to provide a reserve for the payment of indebtedness of

the cooperative maturing more than one year after the date of the

incurrence of such indebtedness in an amount not less than the total of

the interest and principal payments in respect thereof required to be

made during the next following fiscal year;

(6) expenses to provide a fund for education in cooperation and for

the dissemination of information concerning the effective use of

electric energy and other services made available by the cooperative;

and

(7) all other costs and expenses from and directly related to the

furnishing of electric energy to the patrons.

(c) "Patron", as referred to in subdivisions (b) through (h) of this

section, shall be defined as (1) a member and (2) a nonmember to whom

the cooperative furnishes electric energy or other services on a

patronage basis pursuant to bylaws or as agreed upon by the members.

(d) On an annual basis, patronage capital determined under subdivision

(b) of this section shall be allocated on the books of the cooperative

to each patron having furnished such capital and shall be based upon and

in proportion to:

(1) the revenue from each patron or group of similar patrons to the

cooperative's total revenue;

(2) the contribution of each patron or group of similar patrons to the

cooperative's overall patronage capital;

(3) the kilowatt-hour usage of each patron or group of similar patrons

to the total kilowatt-hour usage of all patrons;

(4) any other method which is agreed upon by the members; or

(5) any combination of paragraphs one, two, three and/or four of this

subdivision as agreed upon by the members.

(e) "Retirement" in reference to patronage capital shall mean the

redemption and payment in cash or other property, as provided by

subdivision (f) of this section, of patronage capital to the cooperative

patrons or former patrons to whom it has previously been allocated. The

allocation of patronage capital to a patron's patronage capital account

shall in no event create a vested right to the retirement of the amount

so allocated. The board of directors of a cooperative may, in its

discretion, retire patronage capital allocated on the books of the

cooperative when it determines such retirement is consistent with sound

business and management practices and the long-term financial stability

of the cooperative. Patronage capital shall be retired according to the

method chosen by the members and at the time the board of directors

shall determine as a matter of its discretion. However, patronage

capital may be retired in advance of the date when it would otherwise be

retired under the previous sentence in such circumstances and upon such

conditions as are agreed upon by the members, including, but not limited

to, upon a patron's or former patron's death, the termination of a

patron or former patron's electric service, or a patron or former

patron's filing for bankruptcy. In the event of such early retirement of

patronage capital, the amount of patronage capital allocated to the

patron or former patron on the cooperative's books may be discounted for

purposes of its retirement in accordance with such method as is agreed

upon by the members. The difference between the discounted amount and

the patron's or former patron's patronage capital may be retained by the

cooperative as part of its net savings in a manner determined by the

board of directors.

(f) When the board of directors of the cooperative has determined,

pursuant to subdivision (e) of this section, that patronage capital

shall be retired, the retirement may be accomplished by a bill credit,

by the mailing of payment or notice of payment to the patron's or former

patron's last known address of record on file with the cooperative, or

by such other method as the board of directors shall determine to be

appropriate. No interest shall be paid or payable by the cooperative on

any patronage capital. The amount of patronage capital being retired may

be reduced by any amount owed to the cooperative by the patron or former

patron.

(g) A cooperative may adopt such procedures for the assignment and

contribution of unclaimed patronage capital to the cooperative as are

agreed upon by its members. Such procedures may include providing that

patronage capital which has not been claimed by a patron or former

patron, after reasonable efforts to locate said patron or former patron,

shall be added to the net savings of the cooperative. Mailing of a check

or notice of the availability of a check to the last known address of a

patron or former patron by first class mail and publication of the list

of patrons or former patrons having unclaimed patronage capital on the

website and/or newsletter of the cooperative for a period of three years

shall be deemed reasonable effort to locate said patron or former

patron.

(h) In the event that the cooperative should engage in the business of

furnishing goods and services other than electric energy, all amounts

received and receivable therefrom which are in excess of costs and

expenses properly chargeable against the furnishing of such goods or

services shall, insofar as permitted by law, bylaws, or by approval of

the members, be prorated annually on a patronage basis and allocated to

each member and shall be retired to said member according to the method

chosen by the members and at the time that the board of directors shall

determine as a matter of its discretion. Nothing in this section,

however, prevents a cooperative from furnishing goods and services other

than electric energy on a non-patronage basis to non-members; the net

earnings of which may be retained as part of its net savings.

(i) With respect to any cooperative formed under this chapter that is

exempt from federal income taxation under paragraph twelve of subsection

(c) of section five hundred one of the internal revenue code of nineteen

eighty-six, as amended, or any corresponding provision of future federal

tax law, or any cooperative which would otherwise qualify for said

exemption but for having less than eighty-five percent (or whatever

threshold may be specified in the future for said purpose by the

internal revenue code) of income from members, this section shall in all

events be limited to and interpreted in a manner which is compliant with

the requirements of exemption under such internal revenue code section,

and any agreement by the members or determination by the board of

directors under this section with respect to the subject matter hereof

shall also be limited to and interpreted in a manner which is compliant

with such internal revenue code section.

Disposition of property. (a) The board of directors of a

cooperative shall have full power and authority, without authorization

by the members thereof, to authorize the execution and delivery of a

mortgage or mortgages or a deed or deeds of trust of, or the pledging or

encumbering of, any or all of the property, assets, rights, privileges,

licenses, franchises and permits of the cooperative, whether acquired or

to be acquired, and wherever situated, as well as the revenues and

income therefrom, all upon such terms and conditions as the board of

directors shall determine. Any such mortgage or mortgages or deed or

deeds of trust or other instruments shall be exempt from the mortgage

recording taxes imposed by article eleven of the tax law.

(b) A cooperative may not otherwise sell, mortgage, lease or otherwise

dispose of or encumber all or a substantial portion of its property

unless such sale, mortgage, lease or other disposition or encumbrance is

authorized by the affirmative vote of not less than two-thirds of the

total members of the cooperative.

Non-liability of members for debts of cooperative. No member

shall be liable or responsible for any debts of the cooperative and the

property of the members shall not be subject to execution therefor.

Recordation of mortgages; effect thereof. In case of conflict

between this section and article nine of the uniform commercial code,

the provisions of this section shall control. Any mortgage, deed of

trust or other instrument executed by a cooperative or foreign

corporation doing business in this state pursuant to this chapter, which

affects real and personal property and which is recorded in the real

property records in any county in which such property is located or is

to be located, shall have the same force and effect as if the security

interest created by such mortgage in the personal property thereby

affected, had been perfected by filing in accordance with section 9--501

of the uniform commercial code. All after-acquired property of such

cooperative or foreign corporation described or referred to as being

mortgaged or pledged in any such mortgage, deed of trust or other

instrument, shall become subject to the lien thereof immediately upon

the acquisition of such property by such cooperative or foreign

corporation, whether or not such property was in existence at the time

of the execution of such mortgage, deed of trust or other instrument.

Recordation of any such mortgage, deed of trust or other instrument

shall constitute notice and otherwise have the same effect with respect

to such after-acquired property as it has under the laws relating to

recordation, with respect to property owned by such cooperative or

foreign corporation at the time of the execution of such mortgage, deed

of trust or other instrument and therein described or referred to as

being mortgaged or pledged thereby.

The security interest in personal property created by any such

mortgage, deed of trust or other instrument shall, after recordation

thereof, continue perfected and of record without the filing of any

continuation statement as required by section 9--515 of the uniform

commercial code.

Construction standards. Construction of electric lines by a

cooperative shall, as a minimum requirement, comply with the standards

of the national electric safety code in effect at the time of such

construction.

Directors, officers or members as notaries. No person who is

authorized to take acknowledgments under the laws of this state shall be

disqualified from taking acknowledgments of instruments executed in

favor of a cooperative or to which it is a party, by reason of being an

officer, director or member of such cooperative.

License fee in lieu of all franchise, excise, income,

corporation and sales and compensating use taxes. Each cooperative and

foreign corporation doing business in this state pursuant to this

chapter shall pay annually, on or before the first day of July, to the

state tax commission, a fee of ten dollars, but shall be exempt from all

other franchise, excise, income, corporation and sales and compensating

use taxes whatsoever. The exemption from the sales and compensating use

taxes provided by this section shall not apply to the taxes imposed

pursuant to section eleven hundred seven or eleven hundred eight of the

tax law. Nothing contained in this section shall be deemed to exempt

such corporations from collecting and paying over sales and compensating

use taxes on retail sales of tangible personal property and services

made by such corporations to purchasers required to pay such taxes

imposed pursuant to article twenty-eight or authorized pursuant to the

authority of article twenty-nine of the tax law. Such annual fee shall

not be payable after January first, two thousand twenty.

Exemption from jurisdiction of public service commission and

from the provisions of the public service law. Cooperatives and foreign

corporations doing business in this state pursuant to this chapter shall

be exempt in all respects from the jurisdiction and control of the

public service commission of this state and shall not be subject to the

provisions of the public service law. Each cooperative, however, shall

file with the public service commission an annual report verified by the

oath of the president, vice-president, treasurer, secretary, general

manager, or receiver, if any. The report shall show in detail

(a) The number of its members;

(b) The amount of its bonded indebtedness and other outstanding

indebtedness;

(c) Its receipts and expenditures during the preceding year;

(d) The amount paid in reduction of its indebtedness and as interest

upon its indebtedness;

(e) The names of its officers and the aggregate amount paid as

salaries to them and the amount paid as wages to its employees;

(f) The location of its plant or plants and system, with a full

description of its property and franchises.

Exemption of securities. The provisions of article

twenty-three-a of the general business law shall not apply to any note,

bond or other evidence of indebtedness issued by any cooperative or

foreign corporation doing business in this state pursuant to this

chapter to United States of America or any agency or instrumentality

thereof, or to any mortgage, deed of trust or other instrument executed

to secure the same. The provisions of said article twenty-three-a shall

not apply to the issuance of membership certificates by any cooperative

or any such foreign corporation.

Construction. This chapter shall be construed liberally. The

enumeration of any object, purpose, power, manner, method, or thing

shall not be deemed to exclude like or similar objects, purposes,

powers, manners, methods or things.

Separability. If any provision of this chapter or the

application of such provision to any person or circumstance is held

invalid, the remainder of the chapter and the application of such

provisions to other persons or circumstances shall not be affected

thereby.

Effective date. This chapter shall take effect immediately.