association; and such restrictions must be printed upon every certificate of stock subject thereto.

The association may, at any time, as specified in the bylaws, except when the debts of the association exceed fifty percent (50%) of the assets thereof, buy in or. purchase its common stock at the book value thereof, as conclusively determined by the board of directors, and pay for it in cash within one (1) year thereafter. (1922, c. 1, p. 1, § 14.)

8883f-15. Removal of officer or director.-Any member may bring charges against an officer or director by filing them in writing with the secretary of the association, together with a petition signed by 5 percent of the members, requesting the removal of the officer or director in question. The removal shall be voted upon at the next regular or special meeting of the association and, by a vote of a majority of the members, the association may remove the officer or director and fill the vacancy. The director or officer, against whom such charges have been brought, shall be informed in writing of the charges previous to the meeting and shall have an opportunity at the meeting to be heard in person or by counsel and to present witnesses; and the person or persons bringing the charges against him shall have the same opportunity.

In case the bylaws provide for election of directors by districts with primary elections in each district, then the petition for removal of a director must be signed by 20 percent of the members residing in the district from which he was elected. The board of directors must call a special meeting of the members residing in that district to consider the removal of the director; and by a vote of the majority of the members of that district, the director in question shall be removed from office. (1922, c. 1, p. 1, § 15.)

§ 883f-16. Referendum.-Upon demand of one-third of the entire board of directors, any matter that has been approved or passed by the board must be referred to the entire membership or the stockholders for decision at the next special or regular meeting; provided, however, that a special meeting may be called for the purpose. (1922, c. 1, p. 1, § 16.)

§ 883f-17. Marketing contract. The association and its members may make and execute marketing contracts, requiring the members to sell, for any period of time, not over 10 years, all or any specified part of their agricultural products or specified commodities exclusively to or through the association, or any facilities to be created by the association. If they contract a sale to the association, it shall be conclusively held that title to the products passes absolutely and unreservedly, except for recorded liens, to the association upon delivery; or at any other specified time if expressly and definitely agreed in the said contract. The contract may provide that the association may sell or resell the products delivered by its members, with or without taking title thereto; and pay over to its members the resale price, after deducting all necessary selling, overhead and other costs and expenses, including interest on preferred stock, not exceeding eight (8) percent per annum, and reserves for retiring the stock, if any; and other proper reserves; and interest not exceeding eight (8) percent per annum upon common stock. (1922, c. 1, p. 1, § 17.)

§ 883f-18. Remedies for breach of contract.-(a) The bylaws or the marketing contract may fix, as liquidated damages, specific sums to be paid by the member or stockholder to the association upon the breach by him of any provision of the marketing contract regarding the sale or delivery or withholding of products; and may further provide that the member will pay all costs, premiums for bonds, expenses and fees, in case any action is brought upon the contract by the association; and any such provisions shall be valid and enforceable in the courts of this state; and such clauses providing for liquidated damages shall be enforceable as such and shall not be regarded as penalties.

(b) In the event of any such breach or threatened breach of such marketing contract by a member, the association shall be entitled to an injunction to prevent the further breach of the contract and to a decree of specific performance thereof. Pending the adjudication of such an action and upon filing a verified complaint showing the breach or threatened breach, and upon filing a sufficient bond, the association shall be entitled to a temporary restraining order and preliminary injunction against the member.

(c) In any action upon such marketing agreements, it shall be conclusively presumed that a landowner or landlord or lessor is able to control the delivery of products produced on his land by tenants or others, whose tenancy or possession or work on such land or the terms of whose tenancy or possession or labor thereon were created or changed after execution by the landowner or landlord or lessor, of such a marketing agreement; and in such actions, the foregoing remedies for nondelivery or breach shall lie and be enforceable against such landowner, landlord or lessor. (1922, c. 1, p. 1, § 18.)

§ 883-19. Purchasing business of other associations, persons, firms or corporations; payment; stock issued.-Whenever an association, organized hereunder with preferred capital stock, shall purchase the stock or any property, or any interest in any property of any person, firm or corporation or association, it may discharge the obligations so incurred, wholly or in part, by exchanging for the acquired interest, shares of its preferred capital stock to an amount which at par value would equal the fair market value of the stock or interest so purchased, as determined by the board of directors. In that case the transfer to the association of the stock or interest purchased shall be equivalent to payment in cash for the shares of stock issued. (1922, c. 1, p. 1, § 19.)

§ 883f-20. Annual reports.-Each association formed under this act shall prepare and make out an annual report on forms to be furnished by the dean of the college of agriculture of the university of Kentucky, containing the name of the association; its principal place of business; and a general statement of its business operations during the fiscal year, showing the amount of capital stock paid up and the number of stockholders of a stock association or the number of members and amount of membership fees received, if a non-stock association; the total expenses of operations; the amount of its indebtedness or liabilities, and its balance sheet. (1922, c. 1, p. 1, § 20.)

§ 883f-21. Conflicting laws not to apply. Any provisions of law which are in conflict with this act shall not be construed as applying to the associations herein provided for. Any exemptions under any and all existing laws applying to agricultural products in the possession or under the control of the individual producer, shall apply similarly and completely to such products delivered by its farmer members, in the possession or under the control of the association. (1922, c. 1, p. 1, § 21.) § 883f-22. Limitation of the use of term "cooperative."-No person, firm, corporation or association, hereafter organized or doing business in this State, shall be entitled to use the word "cooperative" as part of its corporate or other business name or title for producers' cooperative marketing activities, unless it has complied with the provisions of this act.

Any person, firm, corporation, or association now organized and existing, or doing a producers' cooperative marketing business in this State and embodying the word "cooperative" as part of its corporate or other business name or title, and which is not organized in compliance with the provisions of this act, must, within 6 months from the date at which this act goes into effect, eliminate the word "cooperative" from its said corporate or other business name or title. (1922, c. 1, p. 1, § 22.)

§ 883f-23. Interest in other corporations or associations.-An association may organize, form, operate, own, control, have an interest in, own stock of, or be a member of any other corporation or corporations, with or without capital stock, and engaged in preserving, drying, processing, canning, packing, storing, handling, shipping, utilizing, manufacturing, marketing or selling of the agricultural products handled by the association, or the byproducts thereof.

If such corporations are warehousing corporations, they may issue legal warehouse receipts to the association against the commodities delivered by it, or to any other person and such legal warehouse receipts shall be considered as adequate collateral to the extent of the usual and current value of the commodity represented thereby. In case such warehouse is licensed or licensed and bonded under the laws of this state or the United States, its warehouse receipt delivered to the association on commodities of the association or its members, or delivered by the association or its members, shall not be challenged or discriminated against because of ownership or control, wholly or in part, by the association. (1922, c. 1, p. 1, § 23.)

§ 883f-24. Contracts and agreements with other associations. Any association may, upon resolution adopted by its board of directors, enter into all necessary and proper contracts and agreements and make all necessary and proper stipulations, agreements and contracts and arrangements with any other cooperative corporation, association or associations, formed in this or in any other state, for the cooperative and more economical carrying on of its business or any part or parts thereof. Any two or more associations may, by agreement between them, unite in employing and using or may separately employ and use the same personnel, methods, means and agencies for carrying on and conducting their respective businesses. (1922, c. 1, p. 1, § 24.)

§883f-25. Associations heretofore organized may adopt the provisions of this act. Any corporation or association, organized under previously existing statutes, may, by a majority vote of its stockholders or members, be brought under the provisions of this act by limiting its membership and adopting the other restrictions as provided herein. It shall make out in duplicate a statement signed and sworn

to by its directors to the effect that the corporation or association has, by a majority vote of the stockholders or members, decided to accept the benefits and be bound by the provisions of this act and has authorized all changes accordingly. Articles of incorporation shall be filed as required in K. S. § 883f-8, except that they shall be signed by the members of the then board of directors. The filing fee shall be the same as for filing an amendment to articles of incorporation.

(a) Where any association may be incorporated under this act, all contracts heretofore made by or on behalf of same by the promoters thereof in anticipation of such association becoming incorporated under the laws of this State, whether such contracts be made by or in the name of some corporation organized elsewhere and when same would have been valid if entered into subsequent to the passage of this act, are hereby validated as if made after the passage of this act. (1922, c. 1, p. 1, § 25.)

§ 883f-26. Misdemeanor to induce breach of marketing contract of cooperative association; spreading false reports about the finances or management thereof.Any person or persons or any corporation whose officers or employees knowingly induce or attempt to induce any member or stockholder of an association organized hereunder to breach his marketing contract with the association, or who maliciously and knowingly spreads false reports about the finances or management thereof, shall be guilty of a misdemeanor and be subject to a fine of not less than one hundred dollars ($100.00) and not more than one thousand dollars ($1,000.00) for each such offense; and shall be liable to the association aggrieved in a civil suit in the penal sum of five hundred dollars ($500.00) for each such offense. (1922, c. 1, p. 1, § 26.)

§ 883f-27. Warehousemen liable for damages for encouraging or permitting delivery of products in violation of marketing agreements.-Any person, firm or corporation conducting a warehouse within the State of Kentucky who solicits or persuades or permits any member of any association organized hereunder to breach his marketing contract with the association by accepting or receiving such member's products for sale or for auction or for display for sale, contrary to the terms of any marketing agreement of which said person or any member of the said firm or any active officer or manager of the said corporation has knowledge or notice, shall be liable to the association aggrieved in a civil suit in the penal sum of five hundred dollars ($500.00) for each such offense; and such association shall be entitled to an injunction against such warehouseman to prevent further breaches and a multiplicity of actions thereon. In addition, said warehouseman shall pay to the association a reasonable attorney's fee and all costs involved in any such litigation or proceedings at law.

This section is enacted in order to prevent a recurrence or outbreak of violence and to give marketing associations an adequate remedy in the courts against those who encourage violations of cooperative contracts. (1922, c. 1, p. 1, § 27.)

§ 883f-28. Associations are not in restraint of trade.-Any association organized hereunder shall be deemed not to be a conspiracy nor a combination in restraint of trade nor an illegal monopoly; nor an attempt to lessen competition or to fix prices arbitrarily or to create a combination or pool in violation of any law of this State; and the marketing contracts and agreements between the association and its members and any agreements authorized in this act shall be considered not to be illegal nor in restraint of trade nor contrary to the provisions of any statute enacted against pooling or combinations. (1922, c. 1, p. 1, § 28.)

§ 883f-29. Constitutionality.—If any section of this act shall be declared unconstitutional for any reason, the remainder of this act shall not be affected thereby. (1922, c. 1, p. 1, § 29.)2

§ 883f-30. Application of general corporation laws. The provisions of the general corporation laws of this State and all powers and rights thereunder, shall apply to the associations organized hereunder, except where such provisions are in conflict with or inconsistent with the express provisions of this act. (1922, c. 1, p. 1, § 30.)3 § 883f-31. Taxation.-The shares of corporations organized under this act shall be taxable as against the owner thereof as of the period of assessment of other personal property for taxation in this State.

Such shares will represent in the aggregate all the property held or owned by such corporation, and when taxed as against the individual owner all of the property in the name of said association will thereby be taxed.

Under existing law crops grown in the year of assessment are exempt from tax whilst owned by the producer. So much of the value of each share of said stock

2 Repealed effective June 12, 1940. (1940, c. 191, sec. 1.)

3

Omitted from Kentucky Revised Statutes 1953 as covered by general law relating to private corporations. See KRS 271.015.

as may represent the owner's proportion of crops grown by him and delivered to the association as herein provided, shall be exempt from taxation, inasmuch as it is the same thing exempted now by the constitution and laws of this State to such grower. (1922, c. 1, p. 1, § 31.)*

§ 883f-32. Filing fees.-For filing articles of incorporation, an association organized hereunder shall pay ten dollars ($10.00); and for filing an amendment to the articles, two and 50/100 dollars ($2.50). (1922, c. 1, p. 1, § 32.)

§ 8831-33. Emergency clause. Whereas, the agricultural interests of the State are of the utmost importance to the people of Kentucky; and

Whereas, a demoralized condition of the farming interests of the State exists, injuriously affecting all other business; and

Whereas, the highest interests of the State generally demand immediate relief;

and

Whereas, this act is designed and intended to afford such relief,

Therefore, an emergency is declared to exist and this act shall become effective immediately upon its passage and approval as required by law. (1922, c. 1, p. 1, 33.)

5

§ 883f-34. Foreign marketing association may use word "cooperative" in name.That any cooperative marketing association organized in any State other than Kentucky having substantially the same purposes, restrictions and limitations as provided by the Bingham Cooperative Marketing act may use the word "cooperative” as part of its corporate or other business name or title for producers' cooperative marketing activities; and any such organization shall be deemed not to be a conspiracy, nor a combination in restraint of trade nor an illegal monopoly; nor an attempt to lessen competition or to fix prices arbitrarily or to create a combination or pool in violation of any law of this State; and its marketing contracts and agreements shall be considered not to be illegal nor in restraint of trade nor contrary to the provisions of any statute enacted against pooling or combinations. (March 24,

1922, c. 109, p. 285, § 1.)

§ 883f-35. Effective date. This act shall take effect and be in full force and effect from and after its passage. (March 24, 1922, c. 109, p. 285, § 2.) 5

§ 883f-36. Association to furnish information as to members and contracts.— Upon application in writing by registered mail to any agricultural cooperative marketing association doing business under the laws of this commonwealth by any landowner, lessor or lessee of land on which any agricultural crops marketed by such association are being raised or are to be raised, asking for information as to whether a certain person or persons are members of such association, or have signed its marketing agreement or asking for information as to the terms of said contract, said association shall within 5 days after receipt of said request furnish said information in writing to the person or persons inquiring at the address given in the application. (March 1924, c. 1, p. 1, § 1.)

§ 883f-37. Form of application.-Such application shall give the full name of the person or persons concerning whom the information is requested and their post office addresses, and shall contain a return address of the person or persons to whom the information is to be sent. (March, 1924, c. 1, p. 1, § 2.)

§ 883f-38. Effect of failure to furnish information.-Unless such information as above requested shall be furnished by said association, in any litigation which may arise between such association and the person or persons inquiring, it shall be presumed, in the absence of evidence to the contrary, that the person requesting said information was without notice that the person inquired about was a member of such association or had signed such marketing contract, or that the person inquiring knew the terms of the contract. (March 1924, c. 1, p. 1, § 3.) 8883f-39. Effect of failure to request information. Unless such landlord, lessor or lessee shall have made the above inquiry and waited until the expiration of the time above set forth or until the receipt of answer thereto, in any litigation arising with such cooperative association, it shall be conclusively presumed that such person has notice of the contract or membership obligations actually existing between the association and its member or obligor. (March —, 1924, c. 1, p. 1, § 4.)

§ 883f-40. Mortgage upon growing crops.-That growers of agricultural products who have signed contracts with cooperative marketing associations, authorized by the Bingham Cooperative Marketing act, be, and they are hereby permitted to place crop mortgages upon crops in esse; but said crop mortgages shall not defeat the right of any association organized under the cooperative act to take delivery of any crop covered by a marketing contract. Any grower executing such a crop mortgage

* Pronounced unconstitutional in Burley Tobacco Growers Coop. Association v. City of Carrollton, 208 Ky. 270, 270 S. W. 749.

5

Repealed effective June 12, 1940. (1940, c. 191, sec. 1.)

may make an assignment to the mortgagee of the grower's interest in the proceeds of such crop, subject to the provision of said marketing agreement, which assignment must be accepted by any association organized under said act. (March 29,

1924, c. 7, p. 9, § 1.)

§ 883f-41. Foreclosure, attachment, etc.-In the event of foreclosure, attachment or proceeding in court concerning any crop covered by such marketing agreement and mortgage, it shall be the duty of the court to direct that the crop shall be delivered to and sold by the said marketing association according to the terms of the contract and the proceeds derived therefrom so far as may be necessary to satisfy the judgment in the case shall be paid as directed by the judgment of the court. (March 29, 1924, c. 7, p. 9, § 2.)

SUGG

Suggested Organization Forms

UGGESTED organization forms for agricultural associations of producers appear on the succeeding pages. The articles of incorporation and the bylaws provide for the organization of an association without capital stock. However, alternate paragraphs or provisions have been provided for use where the association is organized on a capital stock basis. These are indented in brackets or appear in the footnotes.

The fundamental cooperative principles discussed in the text, such as democratic control, the revolving-fund plan of financing, adequate reserves, and equitable distribution of earnings, are reflected in the forms.

Since these forms are general in character, the services of an attorney are required for adapting them to suit the needs of a particular association; and they should be checked, altered, and modified to meet the local needs and legal requirements of the State in which the association is to be incorporated. The forms should also be modified so as to best serve the business needs and methods of operation of the association.

While the forms have been prepared primarily for use in forming agricultural marketing associations of producers, they may be adapted for use in forming an association that is exclusively engaged in handling supplies. Ordinarily, such an association would not use a marketing agreement which would bind its members to patronize the association; revolving funds would be obtained by including in sales prices margins for the purpose of accumulating such funds, rather than by making deductions from sales proceeds; and certain other changes should be made.

Organization Agreement

The undersigned, a producer of agricultural products, hereinafter referred to as "Producer," together with other signers of agreements similar hereto, for the purpose of engaging in.

(In this space broadly state purposes for which association is to be organized) propose to organize a cooperative association without capital stock under the laws of the State of as hereinafter provided, and in consideration of the premises, hereby agrees for himself and for the express benefit of and for the association to be organized, as follows:

1. (a) The association shall be organized with suitable articles of incorporation and bylaws as determined by an organization committee consisting of the following persons (State names and addresses of committee members):

(b) This committee may, in the discretion of a majority thereof, increase its membership, fill any vacancy therein, and appoint any committees deemed necessary to conduct the details of its affairs. The committee, or any committee designated by it, may prescribe an organization fee to be paid by each person signing an organization agreement similar hereto and may incur necessary obligations, make necessary

If association is to be formed with capital stock, "without" should be changed to "with."