The Merger of Central Co-op and Tacoma Food Co-op

SPECIAL ELECTION 2015

Update 12/22/15: Special Election Results Are In!

Total Number of Votes: 1544 (12.7% of Active Owners)

Proposition Yes No Results What was the proposition about?

1

1439
93.2%

102
6.8%
PASS To authorize the Board of Trustees to, in its discretion, complete or abandon the Plan of Merger and to approve of the Plan of Merger as presented.
2 1382
89.5%
150
10.5%
PASS To approve of the amended Articles of Incorporation and Bylaws, which include the Solidarity Co-op and other changes.

Thank you owners and staff for getting out the vote--1,544 is a record in the history of our Co-op!

Owners, stay tuned to our information outlets for further details. Watch for next month's Central Register, or sign up for our e-mail newsletter, the Central Beet.

But remember: Shopping at the Co-op tomorrow will be the same as shopping at the Co-op yesterday!

Clickable Contents

Letter to Owners
Ballot Proposals
Proposed Documents

FAQ: Proposed Merger
FAQ: Proposed Solidarity Structure
FAQ: Other Proposed Changes

More information: Read our Board's Vote Notes

 

Letter to owners from Aaron Waldkoetter, Owner Services Manager

The question of merger with Tacoma Food Co-op is whether or not we as owners authorize our Board to make a final decision regarding this matter; understanding that they will do their due diligence, and perform all of their legal duties prior to making this decision, understanding that they will not complete the plan of merger if it will have a negative impact on Central Co-op as it exists now.

The second proposal put forward by the Board is a revision to our current Articles of Incorporation and Bylaws. If approved, they will change our co-op’s structure to that of a solidarity co-op with both consumer members and worker members; it will also enable us to offer our owners non-voting preferred stock.

Both of these proposals are far-reaching in scope and will strengthen the regional economy and cooperative movement, with a dramatic impact on our immediate and long term future. We are fortunate as a Co-op to find ourselves in a moment of strength with visionary leaders, dedicated workers and owners, and enough financial stability to propose these empowering changes.

Our hope is that you, our owners, will support this vision, and remember the day that you were a part of voting for these changes that we believe will have an amazingly positive impact on the livelihoods of thousands of workers, producers, farmers, and households throughout our region.

Over almost 40 years we have strengthened our community and become the great co-op that we are today; we hope that beginning in 2016 we will build even further upon all of our collective achievements and spread the wealth of cooperation to an ever larger cooperative community.

We ask that you take some time over the coming weeks to consider these proposals and then cast your vote on them. There will be information sessions on Saturday, December 12 and Monday, December 14; please RSVP to conversation@centralcoop.coop for additional details. Our election ends online and in-store on Sunday, December 20, and you can also vote at our Special Owner Meeting on Monday, December 21 between 6:30pm and 7pm (RSVP information below). Please keep an eye out for printed Voter Guide booklets in the store and your mailbox in the coming weeks.

Thank you for your support, and thank you for voting!

In Cooperation:
Aaron Waldkoetter
Owner Services Manager

 

 

BALLOT PROPOSALS

Proposal No. 1: To authorize the Board of Trustees to, in its discretion, complete or abandon the Plan of Merger and to approve of the Plan of Merger as presented.

Central Co-op and Tacoma Food Cooperative have agreed to the Plan of Merger to strengthen both organizations and plan for the future of both. The Board of Trustees will complete the Plan of Merger only if, in their opinion, the merger would:

  • Ensure or improve the financial stability of Central Co-op
  • Prevent Central Co-op’s acquiring sizeable debt that threatens solvency
  • Avoid taking on significant risk and/or legal liabilities
  • Prevent layoffs of any current staff due to the merger
  • Ensure that Central Co-op remain in compliance with any current contracts, including those with our unions
  • Maintain Central Co-op’s commitment to strengthening our regional food system, growing the cooperative economy with good jobs, and sustainable leadership
  • Provide for local voices in each geographic area of operation to be heard and considered in decision making by the co-op

Otherwise, the Board of Trustees will abandon and terminate the Plan of Merger before it becomes effective.

Proposal No. 2: To approve of the amended Articles of Incorporation and Bylaws.

The Board of Trustees recommends adopting amendments to the Articles of Incorporation and Bylaws which include, among other things:

  • Creation of two classes of preferred (non-voting) shares that will enable the completion of the Plan of Merger and allow for the Co-op to raise capital from its members
  • A new structure under which the Co-op will have two classes of members, worker members and consumer members (a Solidarity Co-op structure), and defining the rights of each class of members
  • Changes to patronage dividends to reflect the new worker class and member classes in the Solidarity Co-op structure which would increase organizational stability and worker economic participation
  • The new Solidarity Co-op structure, including governance, rights and obligations of each class of members
  • Changes to the structure of the Nominating Committee to provide for one representative each from the worker members, the consumer members and the Board of Trustees
  • Changes to the structure of the Board of Trustees to provide for representation by three members of each of the worker class and consumer class of members, as well as to add the executive president as a voting ex-officio member of the Board of Trustees and to give the Board of Trustees discretion to appoint two additional members as trustees.  In the event of a merger or similar action, the Board would be authorized to appoint up to two other members temporarily from the merged company.

 

 

 

Proposed Documents

Amended Articles of Incorporation
http://www.centralcoop.coop/docs/Amended_Articles_of_Incorporation_2015.pdf

Amended Bylaws
http://www.centralcoop.coop/docs/Amended_Central_Co-op_Bylaws_2015.pdf

Articles of Merger
http://www.centralcoop.coop/docs/Articles_of_Merger_Tacoma_2015.pdf

Plan of Merger
http://www.centralcoop.coop/docs/Plan_of_Merger_Tacoma_2015.pdf

 

 

 

 

 

 

Click image for a larger version

 

Frequently Asked Questions

FAQ: Proposed Merger
FAQ: Proposed Solidarity Structure
FAQ: General

 

FAQ: Proposed Merger

Q: Why is our Board of Trustees considering a merger with Tacoma Food Co-op?

Merging our cooperative efforts with the Tacoma Food Co-op could help us grow our impact as a community, strengthen our regional food system, and support our cooperative economy. They believe that we would be stronger together. Updated 11/24/15

Q: What is a merger?

If our co-ops were to merge, we would combine our equity and resources and become a two-location co-op. Each consumer-member of Central Co-op and Tacoma Food Co-op would begin as equal members of the combined cooperative. Updated 11/24/15

Q: How would Central Co-op benefit from merging with another Co-op?

  • Stability: There is strength in numbers and we are vulnerable as a single store
  • Efficiency: By spreading our costs over two locations—for example, administrative burden—we reduce the overall impact of necessary services on the bottom line
  • Improved potential for growth: Greater community ownership and more great jobs

 Updated 11/24/15

Q: Why merge with the Tacoma Food Co-op?

The Tacoma Food Co-op has priorities and a long-term vision that are very closely aligned with our own. In other words, the needs that their community is trying to meet are the same as ours.  Their cooperative has dedicated people and strong growth potential, but they lack the key resources that they need to really thrive. Our communities are just 35 miles apart. Updated 11/24/15

Q: Why not just open another Seattle location?

Bringing Central Co-op and the Tacoma Food Co-op together as one would create an organization with greater resources and potential for future growth, with a minimum investment. A second Seattle location would be costly and resource-intensive to build, and Seattle is a very competitive market for natural foods and real-estate. It is also important to note that this is not an either/or proposition and the Board will still consider all opportunities that come along in Seattle. Updated 11/24/15

Q: If the vote passes, will the merger happen immediately?

Nope! Central Co-op’s Board of Trustees is asking you to authorize them to formally complete or abandon the Plan of Merger, and to approve the plan of merger as presented.  If the majority of voters vote yes to the authorization, then the Board would hold their own vote on the proposal. The Tacoma Food Co-op has a similar process in place which must succeed in order for this to happen.

Also, there are several conditions of merger which must be met. The Board of Trustees would complete the Plan of Merger only if, in their opinion, the merger would:

  • Ensure or improve the financial stability of Central Co-op;
  • Prevent Central Co-op’s acquiring sizeable debt that threatens solvency;
  • Avoid taking on significant risk and/or legal liabilities;
  • Prevent layoffs of any current staff due to the merger;
  • Ensure that Central Co-op remain in compliance with any current contracts, including those with our unions;
  • Maintain Central Co-op’s commitment to strengthening our regional food system, growing the cooperative economy with good jobs, and sustainable leadership; or
  • Provide for local voices in each geographic area of operation to be heard and considered in decision making by the co-op.

 Updated 11/24/15

Q: How does Tacoma Food Co-op feel about this idea?

They’re excited! Check out the messages from their Board President and General Manager on pages 8 and 9 of the Voter Guide. Updated 11/24/15

Q: If we were to merge, how would my experience as a Seattle Central Co-op owner change?

Not substantially. Our grocery store on Capitol Hill would be the same that you have come to know. The biggest difference would be that you’d be able to shop your own co-op in Tacoma and increase the likelihood of having a stable and productive co-op on Capitol Hill well into the future. Updated 11/24/15

Q: Will our name change?

In all likelihood, the new co-op would retain the Central Co-op brand, but nothing official has been decided at this time. Updated 11/24/15

Q: Will this impact the compensation and benefits of the Tacoma Workers?

Central Co-op has access to a much higher level of benefits than the Tacoma Food
Co-op currently does and we anticipate that Tacoma workers will benefit from the merger. Ideally, Tacoma employees will be brought to parity with Seattle but we don’t have the timeline for that yet. Updated 11/24/15

Q: What happens to the Tacoma Board?

After a process of transition there would be one governing body. The transition will be determined over time. There will be some method in place during the transition period that will ensure that the Tacoma Board has a voice. Updated 11/24/15

Q: What will happen to the members of the Tacoma Food Co-op?

Any natural person holding a membership share in the Tacoma Food Co-op would become a member of the merged co-op. Since the rule is one member, one share – people who held memberships in both co-ops would receive some equity refund. Updated 11/24/15

Q: Will any jobs be lost?

Nope! Our expectation is that this merger will actually help create more good jobs. Updated 11/24/15

Q: Is Tacoma a Union shop?

If the two co-ops do merge, Tacoma employees would have the opportunity to vote to determine whether or not to unionize. Updated 11/24/15

Q: Would a merger affect the status of union workers at Central Co-op in Seattle?

No.  Regardless of what the Tacoma workers decide to do, Central Co-op would have the same Union relationships that we currently do. Updated 11/24/15

Q: What will happen to investment at 1600 E. Madison?

In October, we signed a new 20 year lease at our 1600 location, and investment there will remain a priority. Expect to see substantial improvements at this location in 2016. Updated 11/24/15

Q: How does the decision process work on a plan of merger?

The Boards must tentatively agree on a plan of merger, then both memberships (separately) will vote to authorize the boards to decide whether to complete the Plan of Merger and to approve the Plan of Merger. If both memberships so approve and authorize their boards, the boards would then vote on the plan.  If both boards exercise the authority granted by the members, articles of merger will be filed with the state, and both co-ops become one surviving company. Updated 11/24/15

 

FAQ: Proposed Solidarity Structure

Q: What is a solidarity co-op?

A solidarity co-op is a co-op made up of multiple classes of owners. Right now, Central Co-op is a consumer co-op, 100% owned by consumers. As a solidarity co-op, Central Co-op would be owned by consumers and employees. Another term for this is multi-stakeholder co-op. Updated 11/24/15

Q: Why is it good for Central Co-op?

When employees have a greater stake in any company they tend to be more engaged and more motivated. We believe that governance would be made even more thoughtful and stronger by having a more strategic balance of voices at the table.  This builds on our distinctive value proposition to our community as a cooperative. No other stores in our area have worker-ownership as a component and this move would expand democratic voice in people’s choice of types of businesses to support. Updated 11/24/15

Q: How would ownership of the Co-op be split?

Consumer-members will own half of the co-op and worker-members will own half of the co-op. Updated 11/24/15

Q: Where did the Board get the idea?

We have staff and members that are familiar with co-ops all over the world that have thrived under this structure.  In Quebec and in Europe, this kind of co-op is far more common. Our primary model is Weaver Street Market in North Carolina. We have studied them and believe that this structure suits us better than our current structure. It has always been in our DNA as a co-op to be concerned for employees’ voices and well-being in the business. Updated 11/24/15

Q: How would this impact the management structure of the Co-op?

This change would affect the structure of the Board and our ownership, not the structure of management. Updated 11/24/15

Q: What would a change to the solidarity model mean for employees?

  • Increased democratic representation in the governance of the Co-op.
  • Greater opportunity for equity in the business and financial benefits of ownership. 

 Updated 11/24/15

Q: Does this mean that there will be consumer-owners volunteering in the store?

No. Because Central Co-op is a union-shop, we are unable to have in-store volunteering. Liabilities associated with such programs are also a concern. Updated 11/24/15

Q: Who would be eligible to be an employee-owner?

Worker membership would be voluntary. Only people employed at Central Co-op who voluntarily meet the rights and responsibilities of ownership would be eligible for employee ownership. Updated 11/24/15

Q: Would all employees have to be owners?

No, workers would not be required to participate. In keeping with Principle 1, our membership would be open and voluntary, but we hope to have a majority of workers take part as owners of the Co-op. Updated 11/24/15

Q: Would prices increase because of this change?

No. Updated 11/24/15

Q: How does the solidarity structure affect the composition of the Board?

Weaver Street Market in North Carolina is the only existing worker-consumer grocery co-op with membership in National Cooperative Grocers and has a structure very similar to what we are proposing. Using their structure as a starting point, worker owners and consumer owners would be elected to the Board with composition balanced between the two ownership classes. A full board will have three trustees elected from the worker-class, three trustees elected from the consumer class, the chief executive of the Co-op, and two board appointees from the consumer class. Current sitting trustees shall fill out their full elected terms on the board. In the future, one consumer and one worker will be elected each year.  All owners, whether worker or consumer will have the right to vote for all elected trustees.

We have added a provision that will allow for Tacoma Food Co-op to have early representation on the Board to preserve institutional knowledge, to enhance the board’s capacity during a transition period and to ensure a representative voice from the Tacoma region of our metropolitan area. The Board will appoint two members of the Tacoma Food Co-op’s leadership to join the Board upon the effect of a merger. Updated 11/24/15

 

FAQ: General

Q: Can you explain the timing of the Special Election?

One key factor in this decision is the timing of our fiscal year end/start. If the merger is finalized, we would like to begin 2016 as a single Co-op. This will make it a lot cleaner and easier administratively for such things as determining Patronage dividends and paying taxes.  Our Trustees are confident that the proposals are strong, and we have made the election longer than our regular elections which gives our owners more time to consider these important decisions. Updated 12/7/15

Q: How would patronage change under the new Articles and Bylaws?

Patronage will be handled differently under these new rules. Under the current system, only a percentage of net income attributable to sales may be allocated to owners as patronage. With these amendments, almost all net income would be available for allocation to our membership, increasing the allowable net income from roughly 75% to 100%. This expands the total pool by nearly one-third. So, despite the fact that future system would allocate 50% to workers and 50% to owners, the expanded pool would allow a similar patronage for consumers to what they get now. This would expand the amount of patronage to workers. This system reflects what is in place at other worker/consumer solidarity co-ops around the world. Updated 11/24/15

Q: What is Preferred Stock?

Our Articles are modified to allow for greater economic participation of members through non-voting shares of preferred stock. This is a method of raising capital from owners that is common among co-ops. A similar system funded the opening of Flying Bike Cooperative Brewery, and other grocery co-ops such as the Sacramento Food Co-op, and River Valley Market. Shares may earn only a limited amount of potential interest. This will help our cooperative meet its goals according to Principle 3 (Member Economic Participation). Updated 11/24/15

Q: Why did the Board amend the Co-op’s organizational purpose in the Articles?

In the amended Articles of Incorporation, our organizational purposes have been updated to reflect needs that the Board sees for our cooperative today, and into the future. The new purposes of incorporation are rooted more firmly in the cooperative identity and allow for more innovation as we discover how best to impact our community. Updated 11/24/15

Q: What will be the structure of the Nominating Committee?

The nominating committee will be changed to reflect the solidarity structure and include one consumer, one worker, and an appointed trustee to chair the committee. This will increase participation opportunities, increase communication, and provide input from the Board about skills and experience that are desired for future board candidates. Updated 11/24/15

Q: What officer positions will the new Board have?

The Chief Officer of the Board will be a Chair, and there will be a Vice-Chair. Other offices, such as President and Vice President, have some signatory authority and are required by Law. They will be appointed by the Board and will be operational entities that have no authority over governing matters, similar to Community Food Co-op in Bellingham and PCC. Updated 11/24/15

Q: Is Central Co-op going “Corporate”?

As defined by our Articles of Incorporation, we are a corporation, just like any other cooperative is a corporation, even though we are not a profit maximizing institution like you find on Wall Street. Still, as a corporation, we are required by law to have certain offices (e.g.: President) and those are reflected in the Bylaws. Updated 11/24/15

Q: How is the change to a solidarity structure related to the proposed merger, and why are we voting on them at once?

Both of those things require changes to the Articles and Bylaws, as does the adding of preferred stock. For efficiency and best results, the Board decided to pursue all of the changes together. Not only is it more efficient to make these changes together, but it also means that our cooperative becomes the best possible co-op we can be. Updated 11/24/15

 

 

Members are or may be entitled to dissenter’s rights with respect to Proposal No. 1.

REVISED CODE OF WASHINGTON

24.06.250

Exercise of right of dissent – rights and liabilities

Any member or shareholder electing to exercise such right of dissent shall file with the corporation, prior to or at the meeting of members and shareholders at which such proposed corporate action is submitted to a vote, a written objection to such proposed corporate action. If such proposed corporate action be approved by the required vote and such member or shareholder shall not have voted in favor thereof, such member or shareholder may, within ten days after the date on which the vote was taken, make written demand on the corporation, or, in the case of a merger or consolidation, on the surviving or new corporation, domestic or foreign, for payment of the fair value of such member's membership or of such shareholder's shares, and, if such proposed corporate action is effected, such corporation shall pay to such member, upon surrender of his or her membership certificate, if any, or to such shareholder, upon surrender of the certificate or certificates representing such shares, the fair value thereof as of the day prior to the date on which the vote was taken approving the proposed corporate action, excluding any appreciation or depreciation in anticipation of such corporate action. Any member or shareholder failing to make demand within the ten day period shall be bound by the terms of the proposed corporate action. Any member or shareholder making such demand shall thereafter be entitled only to payment as in this section provided and shall not be entitled to vote or to exercise any other rights of a member or shareholder.

No such demand shall be withdrawn unless the corporation shall consent thereto. The right of such member or shareholder to be paid the fair value of his or her membership or shares shall cease and his or her status as a member or shareholder shall be restored, without prejudice to any corporate proceedings which may have been taken during the interim, if:

     (1) Such demand shall be withdrawn upon consent; or

     (2) The proposed corporate action shall be abandoned or rescinded or the members or shareholders shall revoke the authority to effect such action; or

     (3) In the case of a merger, on the date of the filing of the articles of merger the surviving corporation is the owner of all the outstanding shares of the other corporations, domestic and foreign, that are parties to the merger; or

     (4) A court of competent jurisdiction shall determine that such member or shareholder is not entitled to the relief provided by this section.

     Within ten days after such corporate action is effected, the corporation, or, in the case of a merger or consolidation, the surviving or new corporation, domestic or foreign, shall give written notice thereof to each dissenting member or shareholder who has made demand as herein provided, and shall make a written offer to each such member or shareholder to pay for such shares or membership at a specified price deemed by such corporation to be the fair value thereof. Except in cases where the fair value payable to dissenters is fixed in the articles of incorporation or pursuant to RCW 24.06.255, such notice and offer shall be accompanied by a balance sheet of the corporation in which the member holds his or her membership or the dissenting shareholder holds shares, as of the latest available date and not more than twelve months prior to the making of such offer, and a profit and loss statement of such corporation for the twelve months' period ended on the date of such balance sheet.

     If the fair value payable to dissenting members or shareholders is fixed in the articles of incorporation or pursuant to RCW 24.06.255, or if within thirty days after the date on which such corporate action was effected the fair value of such shares or membership is agreed upon between any such dissenting member or shareholder and the corporation, payment therefor shall be made within ninety days after the date on which such corporate action was effected, upon surrender of the membership certificate, if any, or upon surrender of the certificate or certificates representing such shares. Upon payment of the agreed value the dissenting member or shareholder shall cease to have any interest in such membership or shares.

     If the fair value payable to dissenting members or shareholders is not fixed in the articles of incorporation or pursuant to RCW 24.06.025, and within such period of thirty days a dissenting member or shareholder and the corporation do not so agree, then the dissenting member or shareholder shall be entitled to make written demand to the corporation, within sixty days after the date on which such corporate action was effected, requesting that the corporation petition for a determination of the fair value by a court. If such a demand is not timely made on the corporation, the right of such member or shareholder to demand to be paid the fair value of his or her membership or shares shall be forfeited. Within thirty days after receipt of such a written demand from any dissenting member or shareholder, the corporation shall, or at its election at any time within ninety days after the date on which such corporate action was effected may, file a petition in any court of competent jurisdiction in the county in this state where the registered office of the corporation is located praying that the fair value of such membership or shares be found and determined. If, in the case of a merger or consolidation, the surviving or new corporation is a foreign corporation without a registered office in this state, such petition shall be filed in the county where the registered office of the domestic corporation was last located. If the corporation shall fail to institute the proceeding as herein provided, any dissenting member or shareholder may do so in the name of the corporation. All dissenting members and shareholders, wherever residing, shall be made parties to the proceeding as an action against their memberships or shares quasi in rem. A copy of the petition shall be served on each dissenting member and shareholder who is a resident of this state and shall be served by registered or certified mail on each dissenting member or shareholder who is a nonresident. Service on nonresidents shall also be made by publication as provided by law. The jurisdiction of the court shall be plenary and exclusive. All members and shareholders who are parties to the proceeding shall be entitled to judgment against the corporation for the amount of the fair value of their shares. The court may, if it so elects, appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have such power and authority as shall be specified in the order of their appointment or an amendment thereof. The judgment shall be payable only upon and concurrently with the surrender to the corporation of the membership certificate, if any, or of the certificate or certificates representing such shares. Upon payment of the judgment, the dissenting shareholder or member shall cease to have any interest in such shares or membership.

     The judgment shall include an allowance for interest at such rate as the court may find to be fair and equitable in all the circumstances, from the date on which the vote was taken on the proposed corporate action to the date of payment.

     The costs and expenses of any such proceeding shall be determined by the court and shall be assessed against the corporation, but all or any part of such costs and expenses may be apportioned and assessed as the court may deem equitable against any or all of the dissenting members and shareholders who are parties to the proceeding to whom the corporation shall have made an offer to pay for membership or shares if the court shall find that the action of such members or shareholders in failing to accept such offer was arbitrary or vexatious or not in good faith. Such expenses shall include reasonable compensation for and reasonable expenses of the appraisers, but shall exclude the fees and expenses of counsel for and experts employed by any party; but if the fair value of the memberships or shares as determined materially exceeds the amount which the corporation offered to pay therefor, or if no offer was made, the court in its discretion may award to any member or shareholder who is a party to the proceeding such sum as the court may determine to be reasonable compensation to any expert or experts employed by the member or shareholder in the proceeding.

     Within twenty days after demanding payment for his or her shares or membership, each member and shareholder demanding payment shall submit the certificate or certificates representing his or her membership or shares to the corporation for notation thereon that such demand has been made. His or her failure to do so shall, at the option of the corporation, terminate his or her rights under this section unless a court of competent jurisdiction, for good and sufficient cause shown, shall otherwise direct. If membership or shares represented by a certificate on which notation has been so made shall be transferred, each new certificate issued therefor shall bear a similar notation, together with the name of the original dissenting holder of such membership or shares, and a transferee of such membership or shares shall acquire by such transfer no rights in the corporation other than those which the original dissenting member or shareholder had after making demand for payment of the fair value thereof.