DAVIS FOOD COOPERATIVE, INC.

BOARD OF DIRECTORS

EMERGENCY MEETING MINUTES

November 12, 2007

Call to Order

An emergency meeting was called to order at 6:10 pm at the Davis Food Co-op Conference Room, 620 G Street, Davis, California, by Darius Pazirandeh, President.

Roll Call:

Directors Present: Julie Cross, April Kamen, Danyal Kasapligil, Darius Pazirandeh, Steve Reynolds, Jack Young, Janie Booth, Debbie Eernisse, Lucas Frerichs, Joy Rowe

Directors Absent: Doreen Pichotti

Staff Present: Kenna Krueger, Doug Walter, Eric Stromberg

Guests Present: David Thompson

Roles:

Facilitator: Debbie

Time Keeper: Debbie

Notetaker: Julie

The Secretary determined that the meeting was duly called pursuant to Article VIII, Section 8, by Directors Lucas Frerichs, Julie Cross, and Darius Pazirandeh, and that notice of the meeting was duly provided as required by Bylaw Art. VIII §6(C), and that a quorum of Directors was present under Art. VIII §6(B).

Declaration of Patronage refund for FY 2006-07:

Motion: (tabled at November 5 Meeting) Julie moves that I. The net profit for fiscal year 06-07, listed as $259,442, is set aside in accordance with article V, Section 4B(1) for the purpose of restoring Capital. 2. The net profit for fiscal year 06-07, listed as $259,442 is set aside as a reasonable reserve for necessary business purposes. Second: Darius

Julie withdraws the motion.

Discussion:

What’s important to Drius is the money staying in the Co-op community.

Every dollar that we spend has to be replaced by a loan dollar on which we pay interest

Kenna – we need to think long term. A $175,000 liability on the balance sheet if we do retained partronage, and checks are going to be really small. About 1,000 of the checks issued in the last round weren’t cashed.

Could we replace $175,00 in liability in a few years with member loans? Yes, but youd be replacing interest-free debt with loans.

It costs $4,000 each time we issue patronage refuds, so we want to repay retained refunds all at once.

A member loan program would have to be approved by Union Bank.

David Thompson – Strongly favor retained refund. I fought against it last time only on legal grounds. If patronage refund causes work for staff, I don’t think staff should vote on this issue.

Steve – I think we’ve underestimated to cost of sending out patronage refund.

Julie – Sees no conflict of interest here, and is offended by David continually suggesting that she has a conflict of interest –

David – I said “staff”

Julie – Would like to decide patronage refund tonight based on our current situation, not possible member loans

Danyal – Can we issue the 20% as a store credit? No, IRS says it must be in cash

Joy – Can we do a capital loan program?

Darius – Why weren’t we concerned about the cost of a retained patronage refund last year? Because last year was the biggest refund ever and this is the smallest, and because 15 years is more difficult than 5.

Lucas – What is the escheat process?

Eric – Would cost us about $33,000 over the course of 15 years to send a letter each year to each person with a retained refund as a way to track them.

Kenna – No one wants to pay Federal Taxes, but the Board can’t decide just on that.

David Thompson – Doesn’t agree with Therese on declaring no refund. And money that’s being held in shares won’t escheat.

How do we get the $150,000 cost? If we pay corporate income tax it’s $100,000. If we do a 100% allocation, we pay $218,000 plus $9,300 plus staff time = $250,000 over fifteen years. So, $250,000 - $100,000 = $150,000 eventual cost if we retain earnings.

What if we did no allocation or a 80/20 split this year, then changed our bylaws for next year and did a retained refund then? Probably no refund in next 4-5 years.

Kenna – there is a 4^th option: if the Board retains a portion, say 50%, pays taxes and defers patronage refund on balance, but checks would be tiny.

We don’t have to pay the retained refund in 15 years, it could be sooner or later.

Jack – let’s pay it in 5 years.

Darius – I want to go on record as saying I don’t want to obligate the Board to release this in 5 years, but that’s our intent.

Motion: Darius moves that the net earnings of the Cooperative for each fiscal year 06-07 attributable to the patronage of members in good standing, and calculated in accordance with generally accepted accounting practices, federal and state law, IRS guidelines, and the Davis Food Co-op bylaws shall be allocated and distributed among such members as patronage refunds in proportion to their patronage. A qualified written notice of allocation shall be mailed to those eligible within eight-and-a-half months of the end of the fiscal year, including payment in cash of at least 20% of the declared refund.

As much as 80% of the declared refund shall be retained for the reasonable capital needs of the Cooperative in accordance with article V, Section 4(B) 8. Such retentions shall be credited to revolving capital accounts in the names of recipient members, shall accrue no monetary return on investment, shall not be transferable, and shall be in whole dollars only. They shall be redeemed when determined by the Board to be no longer needed for capital purposes.

Jack seconds.

Discussion:

Lucas – If we raised maximum shares right now to $400, then we’d capture most of the money.

We don’t have time to do it – 6 months to get the permit plus tons of member linkage about the increase. Key timing is date that patronage refunds must be issued, within 8 ½ months. Timing would be tight.

Jack – That 6 month figure came from Briarpatch.

Julie – I’m not comfortable costing our future selves $150,000 for a dubious benefit. Whom does this really do any good for?

In Favor: Steve, Jack, Darius, Lucas

Opposed: Janie, Danyal, Joy, Deb, Julie

motion fails

Motion: Julie moves that I. The net profit for fiscal year 06-07, listed as $259,442, is set aside in accordance with article V, Section 4B(II) for the purpose of restoring Capital. 2. The net profit for fiscal year 06-07, listed as $259,442 is set aside as a reasonable reserve for necessary business purposes. Second: Debbie

In Favor: Janie, Danyal, Joy, Deb, Julie, Darius

Opposed: Steve, Jack, Lucas

motion carries

There being no further business to come before the meeting, it was adjourned at 7:30 p.m. by a motion made by Darius, seconded by Deb, and passed unanimously.

/s/ Julie Cross, Secretary

__________________________________ ___December 3, 2007______________

Secretary, Davis Food Cooperative, Inc. Date Approved