30 BULLETIN 
conditions in the absence of the cooperative company, would seem 
to be a better method. This might be followed by an attempt to 
protect and maintain the company in operation by means of a special 
contract arrangement. Companies that wish to incorporate into 
their by-laws a substitute for the so-called penalty clause may pro- 
vide therein that each member upon uniting with the association 
shall sign and enter into a contract of the form presented in the 
Appendix of this bulletin. (Form No. 8.) 
It is believed that such an agreement when signed by the members 
will be much more effective and will withstand legal objections to a 
much greater extent than will any liquidated damage or penalty 
clause which can be devised and incorporated into the by-laws. 
Unlike the usual penalty or liquidated damage clause, it does not 
rest upon any assumption of damage, but upon a tangible and valu- 
able service which is sold to the member for a charge. The rate 
of charge varies with the kind of service rendered and is applied 
to all grain marketed by a member, with the exception, that upon 
grain sold to the association, the charge is included with the usual 
buying margin and is not applied separately. 
EMERGENCY CAPITAL. 
The means whereby emergency capital is being provided by many 
companies deserves some attention. Comparatively few organiza- 
tions have sufficient capital to carry them over the periods of heavy 
marketing without having to resort to loans. This is especially true 
of the new company which has not had an opportunity to accumulate 
surplus funds. The capital required at such times often exceeds 
the corporate borrowing power. It is neither necessary nor always 
desirable that an organization should have sufficient capital of its 
own to meet these emergencies, but frequently directors are required 
to pledge their own personal credit for these loans, which manifestly 
is unfair. The directors in many cases are placed in the position of 
having exceeded their corporate authority, and in the event of 
financial difficulty might be placed in an embarrassing situation. 
Sometimes the more prosperous members are prevailed upon to post- 
pone grain settlements until after the period of heavy movement. 
This is equally unfair, since they are then placed in the position of 
unsecured creditors and are thereby required to assume individual 
responsibilities and risks not shared by the membership as a whole. 
Emergency capital is necessitated by the business in its entirety and 
should be furnished by the entire membership. If each member can 
be induced to give his accommodation note for a just proportion 
of the emergency capital requirements, and such note be made avail- 
able for the purpose of collateral security to support emergency loans 
