ORGANIZATION AGREEMENT

Section 1. Purpose. The undersigned, a producer of agricultural products, hereinafter referred to as "Producer," together with other signers of agreements similar hereto, propose to organize a cooperative association under the laws of the State of *, for the purpose of _________________.

Section 2. Organization Committee. The association shall be organized with suitable articles of incorporation and bylaws as determined by an organizational committee consisting of the following persons:

Name                                                 Address

_______________                            __________________________

This committee may, by vote of a majority of its members, increase its membership, fill any vacancy therein, and appoint any subcommittees deemed necessary to conduct its affairs. The committee, or any subcommittee designated by it, may prescribe an organization fee to be paid by each person signing an organization agreement and may incur necessary obligations, make necessary expenditures, and take any such action as may, in its discretion, be deemed advisable to further the organization of the association.

Section 3. Patronage Commitment. (3 options presented at the end of this sample document and is only for Marketing Cooperatives)

Section 4. Financial Commitment. (If a cooperative is organized as a non-stock corporation, the sample language might be altered to call for payment of a membership fee, rather than purchase of a share of common stock, and payment of an additional sum into an equity account, rather than purchase of nonvoting preferred stock.)

Producer agrees to purchase one share of voting common stock of the association, par value $__ , payable on demand following a favorable vote by the signees of agreements similar hereto to incorporate the association.

Producer further agrees to purchase shares of nonvoting preferred stock of the association, par value $___ each, and agrees to pay for same as follows:

$____ cash on demand following incorporation of the association,

$____ on or before , 20__ , and $____ on or before , 20__ .

Producer expressly understands that this stock subscription agreement is an irrevocable legally binding obligation which will be relied upon by the association, other producers who subscribe to its stock, and lending institutions from which the association will seek financing to implement its cooperative purposes.

Section 5. Calling of Membership Meeting. (two options presented)

If, on or before *, 20__ , the organization committee is of the opinion that sufficient sign up has been obtained to enable the association to operate efficiently, the committee shall set a time and place for a meeting of those persons who have signed this agreement to determine, by majority vote, whether to proceed with the formation and operation of the association, and to consider such other business as may be deemed appropriate.

Not less than ten days before the meeting, notice of the time and place of the meeting shall be sent to all signees by first class mail, and an appropriate notice shall be published in one or more newspapers of general circulation in the area in which those who signed agreements like this one reside.

* * * * * * * * * * *

If, on or before *, 20__ , bona fide producers of agricultural products otherwise eligible to become members in the association agree to execute marketing agreements covering (units) of (product) and subscribe to provide equity to the association equal to the sum of at least dollars ($__ ), the organization committee shall set a time and place for a meeting ... (continue as above).

Section 6. Accounting. The organization committee shall keep detailed, accurate accounts of all receipts and of all expenditures of every kind. It shall have such accounts audited and render a written report thereof to the board of directors of the association when organized. And it shall thereupon turn over to the association any balance remaining in its hands free of obligation. If the association is not organized, such unexpended balance shall be prorated among, and returned to, those who contributed to the organization fund.

Date , 200_ .

Producer's: name

address

telephone number

social security number

Producer's signature

Chairman's signature, association organization committee

For Use with Marketing Cooperatives

Section 3. Patronage Commitment. (3 options presented and only for Marketing Cooperatives)

(Full Production)

Producer agrees to sign a marketing agreement to commit all (product) produced by Producer, on land owned or leased by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. Producer estimates such production will total (units) in (year).

* * * * * * * * * * *

(Defined Volume)

Producer agrees to sign a marketing agreement to commit (units) of (product), produced by Producer, on land owned or leased by producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit.

* * * * * * * * * * *

(Set Acreage)

Producer agrees to sign a marketing agreement to commit all (product) produced by Producer on acres of land, owned or leased by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. Producer estimates such production will total (units) in (year).

(If the cooperative is likely to have a minimum quality standard that must be met before product will be accepted, that standard should also be explained and the person or entity judging quality should be named.)

DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS

STATE OF *

IN THE MATTER OF THE INCORPORATION 

OF 

(NAME OF COOPERATIVE )

ARTICLES OF INCORPORATION

We, the undersigned, all of whom are engaged in the production of agricultural products, do hereby voluntarily associate ourselves together for the purpose of forming a cooperative association, with (or without) capital stock, under the provisions of the Agricultural Cooperative Associations Act (Chapter *,* Revised Statutes) of the State of *.

ARTICLE I. NAME

The name of the association shall be *.

ARTICLE II. PRINCIPAL PLACE OF BUSINESS

The association shall have its principal place of business in the city of *, County of * , State of *. The mailing address shall be *.

ARTICLE III. PURPOSES

The association is formed for the following purposes:

1. to market for its members and other producers any and all agricultural products or any products derived therefrom;

2. to engage in any activity in connection with the picking, gathering, harvesting, receiving, assembling, handling, grading, cleaning, shelling, standardizing, packing, preserving, drying, processing, transporting, storing, financing, advertising, selling, marketing, or distribution of any such agricultural products or any products derived therefrom;

3. to purchase for its members and others farm supplies and equipment;

4. to manufacture, process, sell, store, handle, ship, distribute, furnish, supply, and procure any and all such farm supplies and equipment;

5. to acquire long-term tenure to agricultural farming land for its membership;

6. and for all other purposes as allowed by applicable law.

ARTICLE IV. POWERS

This association shall have the following powers:

1. To borrow money without limitation as to amount of corporate indebtedness or liability; to give a lien on any of its property as security therefore in any manner permitted by law; and to make advance payments and advances to members and other producers.

2. To act as the agent or representative of any member or members in any of the activities mentioned in Article III hereof.

3. To buy, lease, hold, and exercise all privileges of ownership over such real or personal property as may be necessary or convenient for the conduct and operation of the business of the association, or incidental thereto.

4. To draw, make, accept, endorse, guarantee, execute, and issue promissory notes, bills of exchange, drafts, warrants, certificates, and all kinds of obligations and negotiable or transferable instruments for any purpose that is deemed to further the objects for which this association is formed, and to give a lien on any of its property as security therefore.

5. To acquire, own, and develop any interest in patents, trade- marks, and copyrights connected with, or incidental to, the business of the association.

6. To cooperate with other similar associations in creating central, regional, or national cooperative agencies, for any of the purposes for which this association is formed, and to become a member or stockholder of such agencies as now are or hereinafter may be in existence.

7. To establish a processing facility on any real property owned or controlled by it,

8. To approve or reject any and all matters relating to the acquisition or disposal of agricultural farming land under its control,

9. To have and exercise, in addition to the foregoing, all powers, privileges, and rights conferred on ordinary corporations and cooperative marketing associations by the laws of this State and all powers and rights incidental or conducive to carrying out the purpose for which this association is formed, except such as are inconsistent with the express provisions of the act under which this association is incorporated, and to do any such thing anywhere; and the enumeration of the foregoing powers shall not be held to limit or restrict in any manner the general powers which may by law be possessed by this association, all of which are hereby expressly claimed.

ARTICLE V. PERIOD OF DURATION

This association shall have perpetual existence.

ARTICLE VI. INCORPORATORS, INITIAL DIRECTORS AND OFFICERS

This association shall have at least directors, which number may be changed from time to time by the bylaws, who shall be elected in the manner and for the terms provided in the bylaws.

The powers and authorities of this association are vested in and may be exercised by the board of directors of the association, subject to the laws of the State of *, to these articles, and to any provisions of the bylaws, provided that no bylaws so made shall invalidate any prior action of the directors which would have been valid if such bylaws had not been made.

The names and addresses of the incorporators and those who are to serve as the initial officers and directors are:

NAME                                                         ADDRESS

Director and President (if a stock coopertive, list the shares and type of share here)

Director and Vice-President (if a stock coopertive, list the shares and type of share here)

Director and Secretary (if a stock coopertive, list the shares and type of share here)

Director and Treasurer (if a stock coopertive, list the shares and type of share here)

Director (if a stock coopertive, list the shares and type of share here)

Director (if a stock coopertive, list the shares and type of share here)

etc., etc., etc.

At least two-thirds (2/3's) of the directors shall be members of the association or officers, directors, or members of a member association.

ARTICLE VII. CAPITAL STRUCTURE

Section 1. Classes and Authorized Amounts of stock. The capital stock of the association shall consist of shares of common stock with a par value of $__  per share, and shares of preferred stock with a par value of $__  per share.

Section 2. Common Stock. The common stock of this association may be purchased, owned, or held only by agricultural producers who (1) patronize the association in accordance with uniform terms and conditions prescribed by it, and (2) have been approved by the board of directors.

'Producer' shall mean and include persons (natural or corporate) engaged in the production of (product), or other agricultural products, including tenants of land used for the production of any such product, and lessors of such land who receive as rent therefore part of any such product of such land, and cooperative associations (corporate or otherwise) of such producers.

Each member shall hold only one share of common stock and each eligible holder of common stock shall be entitled to only one vote in any meeting of the stockholders upon each matter submitted to vote at a meeting of the stockholders.

In the event the board of directors of the association shall find, following a hearing, that any of the common stock of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, such holder shall have no rights or privileges on account of such stock, or vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution. The association shall repurchase such stock for par value. If such holder fails to deliver any certificate evidencing the stock, the association may cancel such certificate on its books and records, and the certificate is thereby null and void.

The common stock of this association may be transferred only with the consent of the board of directors of the association and on the books of the association, and then only to persons eligible to hold it. No purported assignment or transfer of common stock shall pass to any person not eligible to hold it, nor the rights or privileges on account of such stock, nor a vote or voice in the management of the affairs of the association.

This association shall have a lien on all of its issued common stock for all indebtedness of the holders thereof to the association.

No dividends shall be paid on the common stock.

Section 3. Preferred Stock. The preferred stock of this association may be issued to any person, association, partnership, or corporation. Preferred stock shall carry no voting rights.

Noncumulative dividends not to exceed eight percent (8%) per year may be paid on preferred stock at the absolute discretion of the board of directors.

Preferred stock may be transferred only on the books of the association. It may be redeemed in whole or in part on a pro rata basis at par, plus any dividends declared and unpaid, at any time on thirty (30) days' notice by the association, provided said stock is redeemed in the same order as originally issued by years. If the owner fails to deliver any certificate evidencing such stock, the association may cancel the stock on its books.

This association shall have a lien on all of its issued preferred stock for all indebtedness of the holders thereof to the association.

Upon dissolution or distribution of the assets of the association, the holders of all preferred stock shall be entitled to receive the par value of their stock, plus any dividend declared and unpaid, before any distribution is made on the common stock.

* * * * * * * * * * *

The association shall not have capital stock but shall admit applicants to membership in the association upon such uniform conditions as may be prescribed in its bylaws. This association shall be operated on a cooperative basis for the mutual benefit of its members as producers. Membership in the association shall be restricted to producers and associations of producers who shall patronize the association.

The voting rights of the members of the association shall be equal, and no member shall have more than one vote upon each matter submitted to a vote at a meeting of the members.

The property rights and interests of each member in the association shall be unequal and shall be determined and fixed on a patronage basis, and the net proceeds from the business of the association shall be allocated to member-patrons in the proportion that the patronage of each member bears to the total patronage of all the members of the association.

ARTICLE VIII. AMENDMENT

These articles shall be subject to amendment from time to time, in accordance with law, and the association shall be subject to all general laws now in force or hereafter enacted with regard to cooperative associations.

We certify that we have read the above statements and that the same are true and correct to the best of our knowledge and belief.

Signed this day of , 20__ , by the undersigned incorporators, all of whom are engaged in agriculture as bona fide producers of agricultural products.

BYLAWS

(NAME OF COOPERATIVE)

ARTICLE I. MEMBERSHIP

Section 1. Qualifications. Any person, firm, partnership, corporation or association, including both landlord and tenant in share tenancies, who is a bona fide producer of agricultural products in the territory in which the association is engaged in business, and who agrees to be a patron of the association, signs a marketing agreement with the association, (purchases one share of common stock), and meets such other conditions as may be prescribed by the board of directors, may become a member of the association.

All applications for membership must be approved by the board of directors. Member status is effective as of the time the board approves the application for membership.

* * * * * * * * * * *

Section 2. Suspension or Termination. In the event the board of directors of the association shall find, following a hearing, that any of the common stock of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, or that such holder has not marketed through the association the products covered by a marketing agreement with the association, or not otherwise patronized the association for a period of ( ) year(s), or otherwise violated the articles of incorporation, bylaws, or other agreements made with the association, the association may suspend such holder's rights as a member and terminate the membership.

When a membership is terminated, the association shall repurchase the member's share of common stock for par value. The holder shall return to the association the certificate evidencing the holder's share of stock. If such holder fails to deliver the certificate, the association may cancel such certificate on its books and records, and the certificate is then null and void.

A suspended or terminated member shall have no rights or privileges on account of any stock held, nor vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution.

* * * * * * * * * * *

Section 2. Membership Certificates. Upon the approval of the Board of Directors, the association shall issue a certificate of membership to each member. The membership certificate shall be in such form as may be prescribed by the directors and shall not be transferable or assignable.

Section 3. Membership Nontransferable. No certificate of membership can or shall be assigned, either voluntarily or involuntarily, or by operation of law, nor can any membership or membership rights, or property rights of a member in the association be assigned, transferred, alienated, or encumbered in any manner or by any means whatsoever. Any purported or attempted assignment, transfer, alienation, or encumbrance of either the certificate of membership, or of the membership, or membership and property rights, shall be null and void and confer no rights upon the purported assignee, transferee or claimant.

Section 4. Suspension or Termination. In the event the board of directors of the association shall find, following a hearing, that a membership certificate of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, or that such holder has not marketed through the association the products covered by a marketing agreement with the association, or not otherwise patronized the association for a period of one (1) year, or otherwise violated the Agricultural Cooperative Association Act of the State of *, articles of incorporation, bylaws, or other agreements made with the association, the association may suspend such holder's rights as a member and terminate the membership.

When a membership is terminated, the association shall return the membership fee, and there shall be no interest paid on the fee. The holder shall return to the association the certificate evidencing the holder's membership. If such holder fails to deliver the certificate, the association may cancel such certificate on its books and records, and the certificate is then null and void.

A suspended or terminated member shall have no rights or privileges on account of any membership certificate held, nor vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution.

Termination as provided in the foregoing shall not affect any lien or right which the association has or may have against the terminating member or his property until his indebtedness to the association is fully paid.

ARTICLE II. MEETINGS OF MEMBERS

Section 1. Annual Meeting. The annual meeting of the members of this association shall be held in the State of *, during the month of , at such time and in such place as the board of directors shall designate.

Section 2. Special Meetings. Special meetings of the members of the association may be called at any time by order of the board of directors and shall be called upon written request of at least ten percent (10%) of the membership.

Section 3. Notice of Meetings. Written notice of every regular and special meeting of members shall be prepared and mailed to the last known post office address of each member not less than not less than 10 (ten) days before such meeting. Such notice shall state the nature of the business expected to be conducted and the time and place of the meeting. No business shall be transacted at any special meeting other than that referred to in the notice.

Section 4. Voting. Unless otherwise stated in the articles of incorporation, or these bylaws, or required by applicable law, all questions shall be decided by a vote of a majority of the members voting thereon.

Each member shall be entitled to only one vote. Voting by mail shall not be permitted. Proxy voting shall be allowed. Each proxy shall be in writing, and no member shall vote more than one proxy. Cumulative voting is not permitted.

If a membership is held by a partnership, corporation, or other legal entity, the member shall designate in writing the person who shall vote on behalf of the member. That designation shall remain in effect until written notice of a properly authorized change in the designated voter shall be received by the association.

Section 5. Quorum. ( ) members or percent ( %) of the membership, whichever is a larger number, shall constitute a quorum at any properly called annual or special membership meeting.

ARTICLE III. DIRECTORS AND OFFICERS

Section 1. Number and Qualification of Directors. The association shall have a board of directors of ( ) members. Each director elected shall be a member of this association in good standing.

No person shall be eligible to be a director if that person is in competition with, or is affiliated with any enterprise that is in competition with, the association. If a majority of the board of directors of the association finds at any time following a hearing that any director is so engaged or affiliated that person shall thereupon cease to be a director.

No director after having served for ( ) consecutive full term(s) shall be eligible to succeed himself or herself, but after a lapse of ( ) year(s) shall again be eligible.

Section 2. Election of Directors. At the first annual meeting of the members of this association, directors shall be elected to succeed the incorporating directors. director(s) shall be elected for one (1) year; directors for two (2) years and directors for three (3) years. At each annual meeting thereafter, new directors shall be elected, for a term of three (3) years each, to succeed those directors whose terms are expiring.

All directors shall be elected by secret ballot, and the nominee(s) receiving the greatest number of votes shall be elected.

Section 3. Election of Officers. The board of directors shall meet within seven (7) days after the first election and within seven (7) days after each annual election and shall elect by ballot a president, vice president, secretary, and treasurer, each of whom shall hold office until the election and qualification of a successor, unless earlier removed by death, resignation, or for cause.

The president and vice president shall be members of the board of directors. The secretary and treasurer need not be directors or members of the association.

Section 4. Vacancies. Whenever a vacancy occurs in the board of directors, other than from the expiration of a term of office, the remaining directors shall appoint a member to fill the vacancy until the next regular meeting of the members. If the term of the vacating director does not expire at that regular member meeting, a special election shall be held to select a director to fill the year or years remaining in that term.

If one or more officer positions become vacant, such offices shall be filled by the board of directors, through election by ballot, at either a regular or special meeting of the board.

Section 5. Regular Board Meetings. In addition to the meetings mentioned above, regular meetings of the board of directors shall be held monthly, or at such other times and at such places as the board may determine.

Section 6. Special Board Meetings. A special meeting of the board of directors shall be held whenever called by the president or by a majority of the directors. Only the business specified in the written notice shall be transacted at a special meeting. 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.

Section 7. Notice of Board Meetings. Oral or written notice of each meeting of the board of directors shall be given each director by, or under the supervision of, the secretary of the association not less than seventy-two (72) hours prior to the time of meeting. But such notice may be waived by all the directors, and their appearance at a meeting shall constitute a waiver of notice.

Section 8. Quorum. A majority of the board of directors shall constitute a quorum at any meeting of the board.

Section 9. Reimbursement and Compensation. The association shall reimburse directors for all reasonable expenses incurred in carrying out their duties and responsibilities.

The compensation, if any, of the members of the board of directors shall be determined by the members of the association at any annual or special meeting of the association.

No member of the board of directors, or member of the immediate family of any board member, shall occupy any position in the association on regular salary.

Section 10. Removal of Directors. Whenever any director shall fail to meet the qualifications as described in Section 1 of this Article, or fails to attend three (3) consecutive board meetings, either regular or special, without just cause and provided that notice of such meetings has been given in accordance with these bylaws, then it shall be the duty of the board to remove said director and to fill the vacancy in accordance with Section 4 of this Article.

Any member may ask for the removal of a director by filing charges with the secretary or president of the association, together with a petition signed by at least five percent of the members requesting the removal of the director in question. The removal shall be voted upon at the next meeting of the members, and by two-thirds of the voting power voting thereon the association may remove the director. The director whose removal is requested shall be served with a copy of the charges not less than ten days prior to the meeting and shall have an opportunity at the meeting to be heard in person and by counsel and to present evidence; and the persons requesting the removal of a director shall have the same opportunity. Any vacancy resulting from such action shall be filled by nomination and vote of members at such meeting.

ARTICLE IV. DUTIES OF DIRECTORS

Section 1. Management of Business. The board of directors shall have general supervision and control of the business and the affairs of the association and shall make all rules and regulations not inconsistent with law, the articles of incorporation, or bylaws for the management of the business and the guidance of the members, officers, employees, and agents of the association.

Section 2. Employment of Manager. The board of directors shall have power to employ, define duties, fix compensation, and dismiss a manager with or without cause at any time. The board shall authorize the employment of such other employees, agents, and counsel as it from time to time deems necessary or advisable in the interest of the association. The manager shall have charge of the business of the association under the direction of the board of directors.

Section 3. Bonds and Insurance. The board of directors shall require the manager and all other officers, agents, and employees charged by the association with responsibility for the custody of any of its funds or negotiable instruments to give adequate bonds. Such bonds, unless cash security is given, shall be furnished by a responsible bonding company and approved by the board of directors, and the cost thereof shall be paid by the association.

The board of directors shall provide for the adequate insurance of the property of the association, or property which may be in the possession of the association, or stored by it, and not otherwise adequately insured, and, in addition, adequate insurance covering liability for accidents to all employees and the public.

Section 4. Accounting System and Audits. The board of directors shall have installed an accounting system which shall be adequate to meet the requirements of the business and shall require proper records to be kept of all business transactions.

At least once in each year the board of directors shall secure the services of a competent and disinterested public auditor or accountant, who shall make a careful audit or review of the books and accounts of the association and render a report in writing thereon, which report shall be submitted to the directors and the manager of the association and made available to the members of the association.

This report shall include at least a balance sheet showing the true assets and liabilities of the association, and an operating statement for the fiscal period under review.

Section 5. Depository. The board of directors shall select one or more banks to act as depositories of the funds of the association and determine the manner of receiving, depositing, and disbursing the funds of the association and the form of checks and the person or persons by whom they shall be signed, with the power to change such banks and the person or persons signing such checks and the form thereof at will.

Section 6. Committees. The board may, at its discretion, appoint from its own membership an executive committee of members, and determine their tenure of office and their powers and duties. The board may delegate to the executive committee all or any stated portion of the functions and powers of the board, subject to the general direction, approval, and control of the board. Copies of the minutes of any meeting of the executive committee shall be mailed to all directors within seven (7) days following such meeting.

The board of directors may, at its discretion, appoint such other committees as it deems appropriate.

ARTICLE V. DUTIES OF OFFICERS

Section 1. Duties of President. The president shall (1) preside over all meetings of the association and of the board of directors; (2) call special meetings of the board of directors; (3) appoint such committees as the board of directors may deem advisable for the proper conduct of the cooperative; and (4) perform all acts and duties usually performed by a presiding officer.

Section 2. Duties of Vice President. In the absence or disability of the president, the vice president shall perform the duties of the president, provided, however, that in case of death, resignation, or disability of the president, the board of directors may declare the office vacant and elect any eligible person president.

Section 3. Duties of Secretary. The secretary shall keep a complete record of all meetings of the association and of the board of directors and shall have general charge and supervision of the books and records of the association. The secretary shall sign papers pertaining to the association as authorized or directed by the board of directors. The secretary shall serve all notices required by law and by these bylaws and shall make a full report of all matters and business pertaining to the office to the members at the annual meeting. The secretary shall keep the corporate seal and all books of blank certificates, complete and countersign all certificates issued, and affix the corporate seal to all papers requiring a seal; shall keep complete stock ownership records; shall make all reports required by law; and shall perform such other duties as may be required by the association or the board of directors. Upon the election of a successor, the secretary shall turn over all books and other property belonging to the association.

Section 4. Duties of Treasurer. The treasurer shall be responsible for the keeping and disbursing of all monies of the association, and shall keep accurate books of accounts of all transactions of the association. The treasurer shall perform such duties with respect to the finances of the association as may be prescribed by the board of directors. At the expiration of his term of office, the treasurer shall promptly turn over to his successor all monies, property, books, records, and documents pertaining to his office or belonging to the association.

ARTICLE VI. OPERATION AT COST AND MEMBERS' CAPITAL

Section 1. Operation at Cost. The association shall at all times be operated on a cooperative service-at-cost basis for the mutual benefit of its member patrons.

Section 2. Margin Allocation. In order to induce patronage and to assure that this association will operate on a service-at-cost basis in all its transactions with its members, the association is obligated to account on a patronage basis to all member patrons on an annual basis for all amounts received from business conducted with members on a patronage basis, over and above the cost of providing such services, making reasonable additions to reserves, and redeeming capital credits. Such allocation shall be on the basis of the volume (or dollar value) of product marketed through (and/or purchased from) the association.

The association is hereby obligated to pay all such amounts to the patrons in cash or by credits to a capital account of each member patron.

Section 3. Per-Unit Retains. Each member also agrees to provide capital in such amounts as determined by the board of directors based on physical units of product marketed through the association. Such per-unit retains shall be allocated to the member's capital credit account.

Section 4. Dividends. No dividends shall be paid on any capital credits.

Section 5. Records and Documentation. The books and records of the association shall be set up and kept in such a manner that at the end of each fiscal year, the amount of capital, if any, so furnished by each member is clearly reflected and credited in an appropriate record to the capital account of each member.

The association shall, within 8-1/2 months after the close of each fiscal year, notify each member of the capital so credited to the member's account. The notice shall be in the form of a written notice of allocation or per-unit retain certificate (as those terms are used in Subchapter T of the Internal Revenue Code) or other appropriate written document. The board shall have discretion to issue such notices and certificates in either "qualified" or "non- qualified" form as permitted by the Internal Revenue Code and other applicable law.

Section 6. Fiscal Year. The fiscal year of this association shall commence on the first day of (month) and end on the last day of (preceding month).

ARTICLE VII. EQUITY REDEMPTION

Section 1. Regular Redemption.

If at any time the board of directors determines that the financial condition of the association will not be impaired thereby, capital credited to members' accounts may be redeemed in full or in part. Any such redemption of capital shall be made in order of priority according to the year in which the capital was furnished and credited, the capital first received by the association being the first redeemed.

It shall be the policy of the association, when other redemption priorities set forth herein have been met, and when funds are available, to redeem in cash a percentage of each member patron's capital credits, rather than ratably by year. The time and method of any such redemption shall be determined by the board of directors.

Section 2. Discretionary Special Redemptions. Notwithstanding any other provision of these bylaws, the board, at its absolute discretion, shall have the power to retire any capital credited to members' accounts on such terms and conditions as may be agreed upon by the parties in any instance in which the interests of the association and its members are deemed to be furthered thereby and funds are determined by the board to be available for such purposes.

Section 3. Specified Special Redemptions. The association shall give priority to redemption of members' capital credits held by deceased persons for the settlement of their estate. The association shall thereafter grant priority redemption to capital credits of former members who have attained their 65th birthday and are no longer actively engaged in agricultural production as actual producers or landlords in share tenancy. The time and method of such redemption shall be determined solely by the board of directors, dependent upon the financial condition of the association. In the case of redemption of the equities of those persons who have attained age 65 and retired from farming, preference may be given to the oldest retirees in establishing the order of priority among those eligible.

In the case of a corporation or partnership holder of members' capital credits, such corporation or partnership shall be considered eligible for priority treatment to the same extent as the individual stockholders of such corporation or partners of the partnership would have qualified, if each individual stockholder or partner were an individual member-patron of this association. Any redemption shall be made to the corporation or partnership, and not to the individual stockholder or partner thereof.

Each corporation or partnership shall report to the association the percentage of ownership interest in the corporation or partnership of each of its stockholders or partners. Failure to report accurately the percentage of individual ownership interest shall disqualify any allocations made to the corporation or partnership by this association from redemption priority. If a corporation or partnership should dissolve, its capital credits in this association shall be prorated among, and transferred to, the individual stockholders or partners and considered for redemption on an individual ownership basis. The amount of any redemption or prorate related to a corporate or partnership member shall be determined by the percentage of ownership interest as reported by the corporation or partnership.

When two or more persons are holders of capital credits as tenants in common, without a designation of rights of survivorship, they shall be deemed by this association to be acting as partners and shall be subject to the same requirements as a partnership.

Capital credits held in joint tenancy with rights of survivorship shall be considered for priority of redemption according to the qualifying status of the youngest member of the joint tenancy or, in the event of death of one of the joint tenants, of the survivor.

ARTICLE VIII. CONSENT

Each person who hereafter applies for and is accepted to membership in this association, and each member of this association on the effective date of this bylaw who continues as a member after such date, shall, by such act alone, consent that the amount of any distributions with respect to his patronage occurring after the effective date of this bylaw, which are made in qualified written notices of allocation or qualified per-unit retain certificates (as defined in 26 U.S.C. 1388), and which are received by him from the cooperative, will be taken into account by him at their stated dollar amounts in the manner provided in 26 U.S.C. 1385 (a) in the taxable year in which such written notices of allocation and per-unit retain certificates are received by him.

Written notification of the adoption of this Article, a statement of its significance, and a copy of the provision shall be given separately to each member and prospective member before membership in the association.

ARTICLE IX. NONMEMBER BUSINESS

This association may conduct business with nonmembers on either a patronage or non-patronage basis. However, this association shall not market the products of nonmembers in an amount the value of which exceeds the value of the products marketed for members. It shall not purchase supplies and equipment for nonmembers in an amount the value of which exceeds the value of the supplies and equipment purchased for members. It shall not purchase supplies and equipment for persons who are neither members nor producers of agricultural products in an amount the value of which exceeds fifteen percent (15%) of all its purchases. Business done for the United States or any of its agencies shall be disregarded in determining the limitations imposed by this section. (for Section 521 Cooperatives only).

ARTICLE X. NON-PATRONAGE INCOME

The non-patronage income of the association shall be its gross receipts derived from all sources which under law do not qualify as patronage income, less all expenses properly attributable to the production of such non-patronage sourced income and all income taxes payable on such receipts by the association. Non-patronage income shall be used in behalf of the association and its members in accordance with such lawful purposes, including assignment to an unallocated reserve account and allocation in whole or in part to members, as may be determined by the board of directors.

ARTICLE XI. LOSSES

Section 1. Patronage Losses. In the event the association suffers a loss during any year on business conducted with or for patrons, such loss may be apportioned among the patrons during the year of loss so that such loss will, to the extent practicable, be borne by the patrons of the loss year on an equitable basis. The board shall have full authority to prescribe the basis on which capital furnished by patrons may be reduced or such loss otherwise equitably apportioned among the patrons. In the event of a patronage loss in one or more departments or divisions of the operation of this association, but not so much as to cause an overall loss for the fiscal year, such loss or losses may be prorated against each of the remaining profitable departments on the basis of their respective percentage of the net margins during such fiscal year.

Section 2. Non-patronage Losses. If in any fiscal year the association shall incur a loss other than on patronage operations, such loss may be charged against any reserve accumulated from non-patronage earnings in prior years.

Section 3. General Provisions. The board shall have no authority to make assessments against members. This section shall not be construed to deprive the association of the right to carry backward or forward losses from any source whatsoever in accordance with the Internal Revenue Code or state taxing statutes.

ARTICLE XII. DISSOLUTION AND PROPERTY INTEREST OF MEMBERS

Upon dissolution, after all debts and liabilities of the association shall have been paid, all shares of preferred stock and common stock redeemed, and all capital furnished through patronage shall have been retired without priority on a pro rata basis, the remaining property and assets of the association shall be distributed among the members and former members in the proportion which the aggregate patronage of each member bears to the total patronage of all such members insofar as practicable, unless otherwise provided by law.

ARTICLE XIII. INDEMNIFICATION

The association shall indemnify its officers, directors, employees, and agents to the fullest extent possible under the provisions of the Agricultural Cooperative Associations Act (Chapter ____, * Revised Statutes as amended) as supplemented by relevant provisions of the * corporations law (Chapters * and *, * Revised Statutes as amended with particular reference to sections 415-5 and 415-B, * Revised Statutes as amended).

The association may purchase liability insurance coverage for any person serving as an officer, director, employee or agent to the extent permitted by applicable State law.

ARTICLE XIV. AMENDMENT

If notice of the character of the amendment proposed has been given in the notice of meeting, these bylaws may be altered or amended at any regular or special meeting of the members at which there is a quorum present by the affirmative vote of a majority of the members present or voting by proxy.

I certify that this is a true and correct copy of the Bylaws of the *.

Dated: , (State), , 200_ .

Secretary

Appendix A. Election of Directors by Districts (bylaw provision)

ARTICLE III. DIRECTORS AND OFFICERS

Section 2. Election of Directors by Districts. (Insert this language between the two paragraphs of this section located on page 16, main text:)

The territory in which the association has members shall be divided into (same number as number of directors) districts. The respective districts and their boundaries shall be established by resolution of the board of directors.

The board of directors may from time to time change the boundaries of one or more districts by adding territory not included within any district, by adding to one district territory previously included in another district, or by excluding from a district a part of its territory.

There shall be as many directors as there are districts, one director to be elected by the members of each district. However, when the number of districts is an even number, there shall be one additional director to be known as a director-at-large and to be elected by all members of the association. A district director must be a resident of, or be a producer of agricultural products in, the district for which such director is elected or appointed.

Any questions as to the effect of any changes made in district boundaries, or the number or identity or districts, shall be conclusively determined by the board of directors.

Nominations for directors, either for a district or at large, shall be made by petition addressed to the secretary of the association requesting placement on the ballot of the name of the person so nominated. Such a petition nominating a district director shall be signed by not less than members of that district. Such a petition nominating a director-at-large shall be signed by not less than members of the association.

Appendix B. Base Capital Plan (bylaw provision)

ARTICLE VII. EQUITY REDEMPTION

Section 1. Members' Equity Requirements. Each year the board of directors shall determine the amount of equity capital necessary for successful operation of the cooperative.

The total amount of member volume and the volume each member as marketed through the association during the past ( ) years shall be calculated.

Each member's equity requirement is equal to the amount of equity, determined necessary by the board of directors, multiplied by the member's proportion of the association's total member volume during the base year period.

Section 2. Member Investment. Members can invest equity to meet their requirements by direct cash investment, allocated patronage refunds, and per-unit capital retains.

Section 3. Member Account Adjustments. At the end of each fiscal year the association shall recalculate each member's capital credits account to include all per-unit retains for the year and each member's share of patronage refunds for the year.

(a) If a member's total capital credits are less than the member's equity requirement for that year, cash returns on business done with the association will be limited to those required by the Internal Revenue Code or other applicable law.

(b) If the member's capital credits, less any cash that must be refunded to comply with the Internal Revenue Code or other applicable law, are greater than the member's equity requirement for that year, the excess shall be redeemed in cash within 8-1/2 months after the close of the association's fiscal year.

MARKETING AGREEMENT

THIS AGREEMENT, made as of this day of , 20__ , by and between *, herein referred to as "Producer," and

*, an agricultural cooperative having an office at *, herein referred to as "Association".

RECITALS

A. Association is an agricultural cooperative organized under the laws of the State of *.

B. Producer is a member of the Association who produces .

C. Producer has purchased one share of common voting stock and paid to Association the sum of dollars ($__ ), calculated at the rate of $___ per (unit) of (product) as specified in Producer's membership application, receipt of which is acknowledged as an equity investment in the Association. This entitles Producer to all the benefits of membership in the Association as long as Producer complies with the articles of incorporation and bylaws of the Association and the provisions of this agreement.

In consideration of the mutual covenants and obligations contained herein, the parties agree as follows:

Section 1. Sale of (product). Association agrees to buy and Producer agrees to sell to Association (number) (units) of (product) as defined by USDA standards and grown by Producer. This agreement is intended by the parties to pass an absolute title to

(number) (units) of (product) grown by Producer as soon as they have a potential existence but such (product) shall be at the risk of Producer until delivery.

Section 2. Payment to Producer. (two options presented)

Association shall market Producer's (product) and Producer shall accept as payment for Producer's (product) a price based on the current market price in the area for (product) of like grade and quality.

Association shall pay the amount due Producer, less deductions authorized in Section 6 of this agreement, not more than days after delivery of (product) to Association or Association's prescribed buying location.

* * * * * * * * * * *

The Association may at any time pool any or all (product) of Producer with any other

(product) of a similar kind and grade. Producer shall receive, for (product) pooled, a unit price equal to the average net unit price obtained for the pooled (product), less deductions authorized in Section 6 of this agreement.

Association shall make an advance payment to Producer of percent of the current market price in the area for (product) of like grade and quality not more than days after delivery of (product) to Association or Association's prescribed buying location.

Section 3. Delivery. All (product) shall be delivered by Producer at Producer's expense at the earliest reasonable time after harvesting, or at such time as called for by Association, to Association's principal place of business or to one of Association's authorized buying locations as prescribed by Association. The Association will use its best efforts to locate buying locations within a reasonable distance from Producer's farm.

Section 4. Inspection and Grading. Prior to acceptance by Association, all (product) shall be inspected and graded by the USDA in accordance with USDA standard rules and regulations.

All purchases and/or marketings of (product) received by Association from Producer shall be based upon USDA grade, and Producer agrees to accept the grading established by USDA.

Section 5. Loans and Security. Association shall have the power to borrow money for any purpose on the security of the (product) delivered to Association, the products derived thereupon, and evidence of such products or by-products, or cash or accounts arising from the sale thereof, and to give a lien, either legal or equitable, thereon as the absolute owner and/or marketing agent thereof. Association may commingle such products and by-products with other products and by-products of like grade and variety and shall exercise all other rights of ownership without limitation.

Section 6. Deductions. Association agrees to purchase from and/or market for Producer the

(product) set forth in Section 1 and to pay to Producer for said (product) the price set forth in Section 1, less the following deductions authorized by Producer:

a. An amount to be determined annually by the board of directors, in the sole discretion of the board, to meet the general contingencies of the business of the Association including operating expenses.

b. A $__ per (unit) capital retain deduction by the Association on the purchase price of each (unit) of (product) received from Producer.

Section 7. Liens. Producer shall notify the Association of any lien on any (product) covered by this agreement. Producer shall obtain permission from the lien holder for Association to market such (product) and to retain any deductions from the payments to Producer authorized hereunder and under the articles of incorporation and bylaws of the Association. After any such deductions, Producer authorizes the Association to apply the balance of the sale proceeds, or so much thereof as necessary, for payment of the lien.

Section 8. Liquidated Damages. The remedy at law would be inadequate and it would be impracticable and difficult to determine the actual damages to the Association should Producer fail to deliver the (product) covered by this agreement. Therefore, regardless of the cause of such failure, Producer agrees to pay to the Association for all such (product) delivered or disposed of by Producer, other than in accordance with the terms of this agreement, a sum equal to *% of the fair market value of the product at the close of business on the day the product should have been delivered to the Association, as liquidated damages for the breach of this agreement.

All parties agree that this agreement is one of a series dependent for its true value on the adherence of all the contracting parties to all of the agreements, but the cancellation of any other similar agreement or the failure of any of the parties thereto to comply therewith shall not affect the validity of this agreement.

Failure to deliver the (product) committed herein due to ACTS OF GOD shall not constitute a breach of this agreement.

Section 9. Specific Performance. Producer agrees that in the event of a breach or threatened breach by Producer of any provisions of this marketing agreement regarding delivery of

(product), the Association shall be entitled to a preliminary restraining order and an injunction to prevent breach or further breach hereof and to a decree of specific performance hereof. The parties agree that this is a contract for the purchase and sale of personal property under special circumstances and conditions and that the Association may, but shall not be obligated to, go into the open markets and buy (product) to replace any that Producer may fail to deliver.

Section 10. Legal Costs and Expenses. If the Association brings any action whatsoever by reason of a breach or threatened breach of this agreement, Producer shall pay to the Association all court costs, costs for bonds, travel expenses and all other expenses arising out of or caused by the litigation, including reasonable attorney's fees expended or incurred by Association in such proceedings, and all such costs and expenses shall be included in the judgment.

Section 11. Termination and Renewal. After this agreement has been in effect one year from the date of execution, either party may terminate it in any year by notifying the other party in writing between (date) and (date). It is mutually agreed that failure to so terminate in any year shall constitute conclusive evidence that the parties have renewed this agreement for another year.

Section 12. Nonconforming Agreements. Association may enter into agreements with other growers differing in terms from those contained herein, consistent with the bylaws of the Association, without invalidating this agreement, provided that Producer at Producer's request may sign a similar agreement as a substitute for this agreement.

Section 13. No Contrary Agreements. Producer warrants that Producer has not contracted to sell, market, consign, or deliver and will not contract to sell, market, consign, or deliver any

(product) during the term of this agreement to any person, firm or corporation, contrary to this agreement.

Section 14. Forfeiture of Membership. Violation of this agreement in any material respect by Producer shall be grounds for the board of directors to terminate Producer's membership in the Association.

Section 15. Articles and Bylaws. Producer agrees to conform to and observe the articles of incorporation and bylaws of the Association now in force and as they may be amended hereafter.

Section 16. Assignment. This agreement may be assigned by the Association in its sole discretion. Producer may assign this agreement, but only upon written authorization granted by the board of directors of the Association.

Section 17. Entire Agreement. It is agreed that the articles of incorporation and the bylaws of the Association, now or hereafter in effect, and this marketing agreement constitute the entire agreement between the Association and Producer, and that there are no oral or other conditions, promises, covenants, representations, or inducements in addition to, or at variance with, any terms of this agreement.

Section 18. Governing Law. This agreement shall be governed by the laws of the State of *.

IN WITNESS WHEREOF, these parties have executed this agreement as of the day, month and year first above written:

Producer

(Cooperative name)

By

President Secretary

MEMBERSHIP APPLICATION

Applicant's Statement. I hereby apply for membership in and agree to abide by the articles of incorporation and bylaws of the association, now and hereafter in effect, copies of which have been presented to me for inspection. I certify that I am a producer of , have tendered the purchase price of one share of common voting stock, have signed a marketing agreement, and met such other qualifications for membership as have been explained to me.

After my membership shall have been in effect for one year from the date of its acceptance by the association, either party may terminate it by notifying the other party in writing of this intention between

(date) and (date) of any year. If neither of the parties to this agreement so notifies the other, it is mutually agreed that this shall constitute conclusive evidence that the parties have renewed this agreement for another year.

Date , 200_ .

Applicant's: name

address

telephone number

social security number

Applicant's signature

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Acceptance.

This certifies that is a member of and is entitled to all of the rights, benefits, and privileges of membership in the association.

Date , 200_ .

President:

Secretary:

Last Revised: August 27, 2001

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