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Agreement to Incorporate as a Close Corporation

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Agreement to Incorporate as a Close Corporation Powered By Docstoc
					This document is a pre-incorporation agreement designed for business owners who
plan to form a close corporation. A close corporation is a corporation with only a small
number of shareholders and whose shares are not publicly traded. The corporation is
not formed by this agreement; to incorporate the parties need to file articles of
incorporation. This pre-incorporation agreement can be changed to fit the needs of a
small business owner as they plan to incorporate their business.
                            Agreement to Incorporate Close Corporation

         Agreement to incorporate made this (date), between (Name), of (street address, city,
state, zip code), (Name), of (street address, city, state, zip code), and (Name), of (street address,
city, state, zip code), hereinafter called “Incorporators”.

        For and in consideration of the mutual covenants contained in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties agree to form a corporation under the laws of (name of state), for the purpose of
undertaking and carrying on a business or businesses of (describe).

1.      Incorporation
        Incorporators will incorporate a for-profit corporation under the laws of (name of state),
to be known as (Name of Corporation), (the “Corporation”).

2.      Corporate Purpose
        The Corporation shall have the following purpose: to transact all lawful business for
which corporations may be organized under the Model Business Corporation Act of (name of
state).

3.      Initial Stockholders
        The initial stockholders of the Corporation shall be the undersigned, who shall subscribe
for and purchase the following securities on or before (date), for the consideration indicated:

Name of Subscriber                         Subscription             Common Stock

___________________________                __________               ______________

___________________________                __________               ______________

___________________________                __________               ______________

There shall be no other securities outstanding at the time of incorporation.

4.      Close Corporation Status
        A.     The corporation shall be qualified as a close corporation. Accordingly, all things
shall be done to insure qualification of the corporation as a close corporation. If anything
necessary to qualify as a close corporation is overlooked during the organization of the
corporation or subsequently, the parties agree that they shall take such steps as are appropriate to
qualify the corporation as a close corporation.

       B.      After organization of the corporation the associates shall observe all the
requirements necessary to continue close corporation status, until such time as the close
corporation status is terminated as provided in this Agreement.

5.      Articles of Incorporation



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       The parties shall cause the execution and filing of the Articles of Incorporation of
Incorporation in the form set forth as Exhibit A which is attached to this Agreement and
incorporated by reference.

6.     Bylaws
       Attached to this Agreement as Exhibit B and incorporated by reference are a set of
Bylaws which shall be the Bylaws of this Corporation and which the parties shall cause to be
adopted after formation of the Corporation.

7.      Termination
        This Corporation shall be terminated, and the parties agree to then wind up the affairs of
the Corporation and to liquidate and dissolve the Corporation upon (e.g., 30) days’ written notice
in the event of any of the following, in which case the mutual rights and duties of the parties may
also be settled in the manner set forth in this Agreement:

       A.      Claimed breach of this Agreement, coupled with failure of the other stockholders
to negotiate and consummate a purchase of the Corporation's stock from such claimant.

        B.      Conduct of a stockholder detrimental to the Corporation, coupled with failure of
the stockholders to negotiate and consummate a purchase of the stockholder's stock pursuant to
the terms of this Agreement.

        C.     Filing of a petition in bankruptcy against a stockholder, coupled with failure of
the stockholders to negotiate and consummate a purchase of the shares of a stockholder whose
assets have become subject to a petition in bankruptcy.

        D.     Adjudication of insanity or incompetence of a stockholder coupled with failure of
the stockholders (including any guardian or conservator of an associate) to negotiate and
consummate a purchase of the incompetent stockholder's stock.

        E.      Issuance of a lien or levy of writ of attachment or writ of execution against the
shares of any stockholder without immediate removal of such lien or levy, coupled with failure
of the stockholders to negotiate and consummate a purchase of the shares of the stockholder
whose shares have been subject to such attachment or execution. Any transfer of ownership of
shares of a stockholder by operation of law pursuant to a writ of execution or otherwise shall be
deemed a breach of this Agreement.

         F.     If any stockholder attempts to transfer his or her shares in violation of the
restrictions on such transfer contained in this Agreement, the remaining parties shall have the
option and the right to cause voluntary dissolution of the Corporation at once, and shall have an
irrevocable proxy to vote the shares in favor of a voluntary dissolution of the Corporation.

9.     Continuing Obligation
       A party's withdrawal shall not release such withdrawing party from any obligation he or
she has to the Corporation or to the other parties.




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10.     Cessation of Business
        Upon termination and dissolution of the Corporation, no further business will be
transacted other than winding up of Corporation affairs, collection of outstanding accounts and
payment of outstanding liabilities, and liquidation of the Corporation.

11.     Division of Corporation Assets upon Liquidation
        Upon liquidation, Corporation assets shall be divided in the following order:

       A.      Expenses of liquidation and debts of the Corporation other than debts owing to
stockholders shall be paid first.

       B.     Next, there shall be paid debts owing to stockholders, including business loans
and advances by stockholders to or for the benefit of the Corporation.

       C.      The remaining assets shall be distributed to the stockholders of the corporation in
proportion to their rights to such assets under the Articles of Incorporation, or under the terms of
this Agreement, whichever is controlling.

12.    Restrictions on Distributions
       No dividends, distributions or payments for or upon shares shall be made by the
Corporation if such dividends, distributions or payments for or upon shares would be in violation
of any provision of the corporate laws of the (name of state). Before any dividends, distributions
or payments for or upon shares are made, the stockholders, directors and officers shall consult
with the Corporation's legal counsel and accountant to obtain their opinion as to whether such
dividends, distributions or payments for or upon shares may be made legally.

13.     Irrevocable Proxy
        A.      All parties to this Agreement shall vote their own shares. However, all parties
agree to vote their shares in favor of all actions required explicitly or implicitly to be taken under
this Agreement and against any action explicitly or implicitly contrary to this Agreement.

         B.    If any party to this Agreement should attempt to vote his or her shares contrary to
the provisions of this Agreement, such vote shall be disregarded and shall have no force and
effect, and immediately and automatically upon the attempt to vote such shares contrary to the
terms of this Agreement, the other parties shall have a proxy to vote such shares in the manner
required by the terms of this Agreement. Such proxy shall be deemed an irrevocable proxy which
continues during the term of this Agreement.

14.     Signing Articles; First Directors
        The parties to this Agreement, or so many of them as may be necessary for the purpose,
shall sign the Articles of Incorporation as Incorporators. The persons named below shall be
designated in the Articles of Incorporation as the first directors of the Corporation and shall serve
as such until their respective successors are duly elected and qualified:




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Name                                               Address

____________________________                       ________________________________

____________________________                       ________________________________

____________________________                       ________________________________

15.     Officers
        The Bylaws to be adopted at the first meeting of the Board of Directors shall provide for
the following corporate officers: president, vice-president, and secretary-treasurer. The offices
shall be filled by the Board of Directors at their first meeting by electing the following named
persons, each of whom has agreed to serve in the indicated office for the term designated in the
Bylaws and at the salary shown after his or her name, until his or her successor is duly elected
and qualified.

Office                   Name of Officer                            Monthly Salary

President                _____________________________ $____________

Vice-President           _____________________________ $____________

Secretary                 _____________________________ $____________

Treasurer                _____________________________ $____________

16.    Buy-Sell Agreement
       The parties shall enter into a Buy-Sell Agreement in substantially the same form as that
attached to this Agreement as Exhibit C.

17.    Assignment
       This Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective heirs, legal representatives, executors, administrators, successors
and assigns.

18.     Agreement to be Filed with Corporation Secretary
        A copy of this Agreement shall be filed with the secretary of the corporation for
inspection by any prospective purchaser of shares.

19.     Legend on Certificates
        Each certificate for shares issued by the Corporation shall bear a notation or legend
giving of the fact that the shares represented by the certificate are subject to restrictions upon
transfer imposed by the Stockholders' Agreement.

20.      Severability
         The invalidity of any portion of this Agreement will not and shall not be deemed to affect



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the validity of any other provision. If any provision of this Agreement is held to be invalid, the
parties agree that the remaining provisions shall be deemed to be in full force and effect as if
they had been executed by both parties subsequent to the expungement of the invalid provision.

21.    No Waiver
       The failure of either party to this Agreement to insist upon the performance of any of the
terms and conditions of this Agreement, or the waiver of any breach of any of the terms and
conditions of this Agreement, shall not be construed as subsequently waiving any such terms and
conditions, but the same shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.

22.    Governing Law
       This Agreement shall be governed by, construed, and enforced in accordance with the
laws of the State of __________.

23.     Notices
        Unless provided herein to the contrary, any notice provided for or concerning this
Agreement shall be in writing and shall be deemed sufficiently given when sent by certified or
registered mail if sent to the respective address of each party as set forth at the beginning of this
Agreement.

24.     Mandatory Arbitration
        Any dispute under this Agreement shall be required to be resolved by binding arbitration
of the parties hereto. If the parties cannot agree on an arbitrator, each party shall select one
arbitrator and both arbitrators shall then select a third. The third arbitrator so selected shall
arbitrate said dispute. The arbitration shall be governed by the rules of the American Arbitration
Association then in force and effect.

24.    Entire Agreement
       This Agreement shall constitute the entire agreement between the parties and any prior
understanding or representation of any kind preceding the date of this Agreement shall not be
binding upon either party except to the extent incorporated in this Agreement.

26.     Modification of Agreement
        Any modification of this Agreement or additional obligation assumed by either party in
connection with this Agreement shall be binding only if placed in writing and signed by each
party or an authorized representative of each party.

       The undersigned Incorporators have executed this Agreement as of the day and year first
above written.


                                                                    __________________________
                                                                    (Printed Name of Incorporator)
                                                                    (Signature of Incorporator)




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                                                                    __________________________
                                                                    (Printed Name of Incorporator)
                                                                    (Signature of Incorporator)


                                                                    __________________________
                                                                    (Printed Name of Incorporator)
                                                                    (Signature of Incorporator)




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DOCUMENT INFO
Description: This document is a pre-incorporation agreement designed for business owners who plan to form a close corporation. A close corporation is a corporation with only a small number of shareholders and whose shares are not publicly traded. The corporation is not formed by this agreement; to incorporate the parties need to file articles of incorporation. This pre-incorporation agreement can be changed to fit the needs of a small business owner as they plan to incorporate their business.