Article III – Directors

Section 1.  General Powers.  The business and affairs of the Cooperative shall be managed by a board of 11 directors which shall exercise all the powers of the Cooperative excepting such as are by law or by the Articles of the Cooperative or by the bylaws conferred upon or reserved to the members.  The territory served by the Cooperative shall be divided into 6 directorate districts.  The districts and the number of directors who shall represent each district are described as follows:

Section 2.  Qualifications and Tenure.  Directors shall be so nominated and elected that one director from or with respect to each of directorate districts numbers four, five, and six shall be elected for three-year terms at an annual member meeting; one director from or with respect to each of directorate districts nos. one, three, four and five shall be elected for three-year terms at the next succeeding annual member meeting; and one director from or with respect to each of directorate districts nos. two, three, four and five shall be elected for three-year terms at the next succeeding annual member meeting, and so forth, provided that the terms of no two directors from the same directorate district shall coincide.  Upon their election, directors shall, subject to the provisions of these bylaws with respect to the removal of directors, serve until the annual meeting of the members of the year in which their terms expire or until their successors shall have been elected and shall have qualified.  If for any reason an election of directors shall not be held at an annual meeting of the members duly fixed and called pursuant to these bylaws, such election may be held at an adjournment of this meeting of the members.  Failure of an election for a given year shall allow the incumbents whose directorships would have been voted on to hold over only until the next member meeting at which a quorum is present.

To initiate the staggered terms described above the directors from districts three, four, and five shall draw by lot to determine their respective terms of office, a separate drawing being held for each district.

To be eligible for election or appointment to, and to serve on, the Cooperative’s Board of Directors, a person shall:

1. Be an individual with the capacity to enter legally binding contracts;
2. Be a member in good standing of the Cooperative for at least twelve (12) consecutive months prior to and including March 15 of the year of election or appointment;
3. Have within the service territory served by the cooperative (i) his/her principal place of residence for which his/her residence homestead exemption is claimed pursuant to Chapter 11 of the Texas Tax Code; or (ii) if he/she claims no residence homestead exemption, his/her principal residence, as defined under 26 C.F.R. §1.121-1(b)(2);
4. Not be engaged in any business, nor employed by or materially affiliated with any individual or entity:
   1. Regularly, directly, and substantially competing with the Cooperative or a Cooperative Subsidiary;
   2. Regularly selling goods or services to the Cooperative or a Cooperative Subsidiary; or
   3. Otherwise possessing a substantial conflict of interest with the Cooperative or a Cooperative Subsidiary;
5. Not be an incumbent of or candidate for an elective public office in connection with which a salary is paid, other than members of a School Board or County Commissioner’s Court;
6. Not be an individual that has been an employee of the Cooperative within two (2) years prior to serving on the Cooperative’s Board of Directors; and
7. Except as otherwise provided by the Board of Directors for good cause, receive a Credentialed Cooperative Director (CCD) designation, or similar certification from the National Rural Electric Cooperative Association (NRECA) within three years after becoming a director.

Members of the Board of Directors having been elected to 4 terms of service on said Board (regardless of whether such terms are consecutive) shall be ineligible for election to the Board of Directors. As indicated in Article III, Section 2 of the bylaws, a term shall last 3 years.  Notwithstanding the foregoing, a Member of the Board of Directors with 12 consecutive years of service on said Board shall be eligible for appointment to the Board of Directors for the purpose of filling a Director Vacancy in accordance with Article III, Section 4 of the Bylaws.

Married individuals shall not both be eligible to serve on the Board of Directors at the same time.

Nothing in this Section contained shall, or shall be construed to, affect in any manner whatsoever, the validity of any action taken at any meeting of the Board of Directors.

The Board of Directors shall not authorize the employment of a chief executive officer, assistant chief executive officer, attorney, assistant attorney, who is related in the second degree by affinity or the third degree by consanguinity to any director, retained Cooperative attorney, chief executive officer and/or assistant chief executive officer of the Cooperative.

Director Disqualification and/or Removal:  After being elected or appointed, if a Director does not comply with (a) the Director Qualifications existing when the Director was elected or appointed; or (b) confidentiality requirements, conflict of intrest policies, or other governance policies adopted by the Board in the CTEC Code of Ethics and Conduct, Bylaws or Board Policies then except as otherwise provided by the Board for good cause, the Board, by two-thirds vote, shall disqualify and/or remove the Director and the individual is no longer a Director if: (1) the Board notifies the Director in writing of the basis for, and provides the Director an opportunity to comment regarding, the Board’s proposed disqualification or removal; and (2) within 45 days after the Board notifies the Director of the proposed disqualification or removal, the director neither complies with nor meets the Director Qualification or otherwise cures the policy violation to the resonable satisfaction of the Board.  If a majority of Directors authorized by these Bylaws complies with the Director Qualifications and approves a Board action, then the failure of a Director to comply with the Director Qualifications or Board Policies does not affect the validity of the Board action.

Section 3.  Nominations and Elections.  Director elections will take place at the annual meeting of members held on the third Tuesday of August of each year. The names of all candidates nominated for election to the board of directors in accordance with these bylaws, and whose eligibility is confirmed by the C & E Committee, shall be published in the notice of meeting mailed to the members of the cooperative, along with a proxy ballot including the names of all such nominated candidates for director.

Methods of Nominating.  Nominations to serve as a director may be made: (1) by the members at a district meeting as provided in subsection (a) of this section or (2) by member petition delivered to the Cooperative as provided in subsection (b) of this section.

(a) District Meetings.  Between May 20 and June 20 of each year, the Board of Directors shall convene a separate meeting of the members of each district at a suitable place designated by the Board of Directors. Notice of the meeting shall be mailed to each member located in such district and shall indicate the district to which the member belongs.  If a director is to be selected from the district, the notice shall state that the members in attendance at the meeting shall select the district’s nominee for director.  The meeting shall be open for discussion of any other matters pertaining to the business of the Cooperative, regardless of whether or not such matters were listed in the notice of the meeting. However, the district meeting does not constitute a meeting of members of the Cooperative as described in these bylaws, and no formal action may be taken, other than the selection of the district’s nominee for director.

On or before March 15 (or the next following day that is not a Saturday, Sunday or legal holiday) of each year, each member seeking to become his or her district’s nominee for director must deliver to the Cooperative a Cooperative-approved application confirming that the member satisfies bylaw requirements to serve as director, along with a petition meeting the following requirements:

1. Listing, on each page, the name of the member seeking to become the district meeting nominee;
2. Indicating, on each page, the director position for which the member will run; and
3. Containing the printed names, addresses, telephone numbers, and original dated signatures of at least ten Cooperative members receiving electric service from the Cooperative in the district in question.

The C & E Committee shall review all applications and petitions submitted by members seeking nomination at a district meeting to confirm that the requirements of these bylaws have been satisfied, and further confirming that each such member satisfies bylaw eligibility requirements to serve as director. The C & E Committee shall report its findings to the President of the Board of Directors in writing on or before March 30 of each year. The names of all candidates seeking district meeting nominations whose eligibility is confirmed by the C & E Committee shall be included in the District Meeting Notice.

The President of the Board of Directors shall designate a chairperson to preside over each district meeting. The district meeting shall be called to order by the chairperson, who shall appoint a secretary to act for the duration of the meeting.  Members of other districts present at the meeting may be heard but shall have no vote.

The district meeting shall select one and only one member to be the nominee of the district meeting to serve on the Board of Directors.  Such person shall be considered at the meeting of the members as the nominee of the district meeting.  Voting by mail and voting by proxy shall not be allowed at the district meeting.  If only one candidate is seeking to become the district’s nominee for director, he or she may be elected by acclamation.  If more than one candidate is seeking to become the district meeting nominee at the district meeting, voting by ballot shall be conducted.  If one candidate receives more than 50% of the vote, that candidate shall be declared to be the official nominee of the district meeting from such district.  If no candidate receives more than 50% of the votes, runoff ballots shall be conducted until one candidate receives more than 50% of the vote. The two candidates receiving the highest number of votes on the preceding ballot shall be included in the succeeding runoff ballot. In the event of ties, more than two candidates may be included in a runoff ballot.  In the event there are three runoff ballots with no candidate receiving more than 50% of the vote, the nominee of the district meeting shall be selected by lot from among the candidates included on the final runoff ballot.  One member shall be declared to be the official nominee of the district meeting from such district.

The minutes of each district meeting shall set forth, among other matters; the name of each candidate seeking to become the district meeting nominee and the number of votes received by each, and shall specify the official nominee of the district meeting.  A copy of the minutes, signed and certified to by the chairperson and secretary of the district meeting, shall be delivered to the secretary of the Cooperative within 10 days after such district meeting.  No informality or defect in such minutes, or in the proceedings had, shall void the nominations so made or affect the validity of the election of directors at the meeting of the members of the Cooperative.

District Meeting Record Date. A “Record Date” is the date for determining the members entitled to (1) receive notice of a district meeting, and (2) vote at a district meeting. In order to exercise these privileges, an individual or entity must be accepted for membership in the Cooperative by the Board of Directors in accordance with Article I, Section 1 of these bylaws on or before the Record Date. Any membership transfer to create a joint membership in accordance with Article I, Section 7(b) of these bylaws must be accepted by the Board of Directors on or before the Record Date in order for such membership transfer to be given effect at a district meeting. If a member is suspended after the Record Date, that member is not entitled to receive notice or exercise the right to vote at a district meeting.

Unless otherwise designated by the Board of Directors, the Record Date for purposes of determining the members entitled to (1) receive notice of a district meeting and (2) vote at a district meeting shall be the second Tuesday in May immediately preceding such district meeting.

(b) Nomination by Petition.  In addition to district meeting nominations, a Cooperative member may place his or her name in nomination to run for election to a director position at an annual meeting of members by member petition and application. On or before June 25 (or the next day that is not a Saturday, Sunday, or legal holiday) of each year, a member seeking to be nominated in this manner must deliver to the Cooperative a Cooperative-approved application confirming that the member satisfies bylaw requirements to serve as director, along with a petition meeting the following requirements:

1. Listing, on each page, the name of the member being placed in nomination;
2. Indicating, on each page, the director position for which the nominee will run; and
3. Containing the printed names, addresses, telephone numbers, and original dated signatures of at least 1% of the Cooperative members as of the date the petition is submitted.

The C & E Committee shall review all applications and petitions submitted by members seeking to place their name in nomination for a director position at an annual meeting to confirm that the requirements of these bylaws have been satisfied, and further confirming that each such member satisfies bylaw eligibility requirements to serve as director. The C & E Committee shall report its findings to the President of the Board of Directors in writing on or before June 30 of each year.

(c) Notice of Nominations.  The Secretary shall mail with the notice of the meeting, or separately, but at least 10 days prior to the meeting, a statement of the number of directors to be elected and showing the nominations made by the district meetings and nominations by petition.  Notwithstanding anything in this section contained, failure to comply with any of the provisions of this section shall not affect in any manner whatsoever the validity of any election of directors.

(d) Elections. Members present in person and by proxy at the annual member meeting shall elect directors from each directorate district in which a director election is being held. Each member may cast one vote in each such district, without regard to the district or districts where the member resides or receives electric service from the Cooperative. Directors shall be elected from the District Meeting Nominations and Member Petition Nominations. If only one candidate is nominated in a district, he or she may be elected by acclamation. Members may not vote for write-in candidates. The candidate receiving the most votes in each district shall be declared the winner of the election.

Section 4. Director Vacancy.  Unless otherwise provided in these bylaws, a vacancy occurring in the Board of Directors shall be filled by a majority vote of the remaining directors within 120 days after such occurrence. Any director elected in this manner shall serve the un-expired director term of the vacant director position or until his or her successor shall have been elected and shall have qualified.

Section 5.  Compensation.  Directors as such shall not receive any salary for their services but by resolution of the Board of Directors may receive reasonable compensation including a fixed sum and expenses of attendance, if any, as may be allowed for attendance at each meeting of the Board of Directors.

Section 6.  Rules and Regulations.  The Board of Directors shall have power to make and adopt such rules and regulations not inconsistent with law, the Articles of Incorporation of the Cooperative or these bylaws, as it may deem advisable for the management, administration and regulation of the business and affairs of the Cooperative.

Section 7.  Accounting System and Reports.  The Board of Directors shall cause to be established and maintained a complete account system which, among other things, subject to the applicable laws and rules and regulations of any regulatory body, shall conform to such accounting system as may from time to time be designated by the National Rural Utilities Cooperative Finance Corporation (CFC).  The Board of Directors shall also no later than 30 days after December 31st of each year engage qualified auditors to perform a full and complete audit of the accounts, books and financial condition of the Cooperative.  Such audit reports shall be submitted to the members at the following annual meeting.

Section 8.  Change in Rates.  The Board of Directors may authorize any change in rates in conformity with the applicable laws.