Series A Preferred Stock Purchase Agreement

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Series A Preferred Stock Purchase Agreement Powered By Docstoc
					A Series A Preferred Stock Purchase Agreement is an agreement between a company
and a party wishing to purchase Series A Preferred Stock of the company. The stock is
issued to the purchasing party on certain terms and conditions and is the first round of
stock offered for sale. This document contains numerous standard provisions that are
commonly included in these types of agreements, and may be customized to fit the
specific needs of the contracting parties. This Agreement can be used by small
businesses or other entities that want to issue Series A Preferred Stock to new
purchasers.
                SERIES A PREFERRED STOCK PURCHASE AGREEMENT

THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (hereinafter “Agreement”) is made
as    of    ____       [Month]   ____       [Date],   20___    [Year],        by    and       between
_______________________________ [Instruction: Insert name of company] (hereinafter
“Company”),        a    _________________       corporation,   with    its   principal    office   at
___________________________ [Instruction: Insert the address of company], and
_____________________ [Instruction: Insert name of purchaser] (hereinafter “Purchaser”),
with registered address at _____________________________________ [Instruction: Insert
address of purchaser]. The Company and the Purchaser may individually be referred to as
“Party”, or collectively as “Parties”.

     WHEREAS, the Company has authorized the sale and issuance of up to an aggregate of
____________ [Instruction: Insert the number of shares the Company has authorized
issuance and sale of] shares of its Series A Preferred Stock (hereinafter “Shares”); and

     WHEREAS, the Company and the Purchaser desire to enter into an agreement regarding the
purchase of the Shares on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, and covenants hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto
agree as follows:

1. AGREEMENT TO SELL AND PURCHASE
        a. Authorization of Shares
        The Shares shall have the rights, preferences, privileges, and restrictions set forth in the
        amended and restated Articles of Incorporation of the Company, in the form attached
        hereto as Exhibit A (the “Restated Charter”). The Shares shall be sold at one or more
        closings (each, a “Closing”), provided that no Closing shall occur more than six months
        after the date of this Agreement.

        b. Sale and Purchase




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        Subject to the terms and conditions hereof, at the initial Closing the Company hereby
        agrees to issue and sell to the Purchaser, and the Purchaser agrees to purchase from the
        Company the Shares at a purchase price of $_________ [Instruction: Insert the
        purchase price of shares] per share.

        c. Warrants
        As further consideration for the purchase of the Shares, the Company shall issue to the
        Purchaser, at the Closing, a warrant, in the form attached hereto as Exhibit B (hereinafter
        “Warrant”), to purchase the same number of Shares the Purchaser is purchasing at the
        Closing.

2. CLOSING, DELIVERY AND PAYMENT
    a. Closing
           i. The closing of the sale and purchase of the Shares under this Agreement (the “Initial
              Closing”) shall take place at the offices of the Company, or at such other time or
              place as the Company and the Purchaser may mutually agree (such date is hereinafter
              referred to as the “Initial Closing Date”). Subsequent Closings shall take place at
              such places and times as the Company and the Purchaser participating in such
              Closings shall mutually agree, provided that no Closing shall occur after ____
              [Month] ____ [Date], 20___ [Year].
        ii. Subsequent Closing: Any sale and issuance in a subsequent Closing shall be on the
              same terms and conditions as those contained herein, and the purchaser shall, upon
              execution and delivery of the relevant signature pages, be bound by this Agreement,
              without the need for an amendment to the Agreement and shall have the rights and
              obligations hereunder, in each case as of the date of the applicable Subsequent
              Closing.
      i.      Delivery: At the Initial Closing, subject to the terms and conditions hereof, the
              Company will deliver to the Purchaser a certificate representing the number of Shares
              to be purchased at the Initial Closing by the Purchaser, together with the Purchaser’s
              Warrant, against payment of the purchase price there for by check, wire transfer made
              payable to the order of the Company, cancellation of indebtedness, or any
              combination of the foregoing.



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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
    The Company hereby represents and warrants to the Purchaser as of the date of this
    Agreement and as of each Closing as set forth below:

        a. Organization, Good Standing, and Qualification

        The Company is a corporation duly organized, validly existing and in good standing
        under the laws of the State of _________________. The Company has all requisite
        corporate power and authority to own and operate its properties and assets, to carry on its
        business as presently conducted, to execute and deliver this Agreement, and to issue and
        sell the Shares and the shares of Common Stock issuable upon conversion of the Shares
        (the “Conversion Shares”).

        b. Subsidiaries

        The Company does not own or control, directly or indirectly, any interest in any
        corporation, partnership, limited liability Company, association, or other business entity.

        c. Capitalization; Voting Rights

        The authorized capital stock of the Company, immediately prior to the Initial Closing
        (and after the filing of the Restated Charter), consists of ____________ [Instruction:
        Insert the authorized capital stock of the Company prior to Initial Closing] shares, of
        which _______________ [Instruction: Insert the number of shares designated as
        shares of Common Stock, without par value] shares are designated as shares of
        Common Stock, without par value and ____________ [Instruction: Insert the number
        of shares designated as Series A Preferred Stock] shares are designated as Series A
        Preferred Stock. Except for the foregoing, and except as may be granted pursuant to, or as
        contemplated by, this Agreement, there are no outstanding options, warrants, rights
        (including conversion or preemptive rights and rights of first refusal), proxy or
        shareholder agreements, or agreements of any kind for the purchase or acquisition from
        the Company of any of its securities.

        d. Authorization




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        All corporate action on the part of the Company and its directors, officers, and
        shareholders necessary for the authorization, execution, and delivery of the Agreement by
        the Company, the authorization, sale, issuance, and delivery of the Shares and the
        conversion Shares, and the performance of all of the Company’s obligations under the
        Agreement has been taken or will be taken prior to the Initial Closing. This Agreement,
        when executed and delivered by the Company, shall constitute the valid and binding
        obligation of the Company, enforceable in accordance with its terms, except (i) as limited
        by laws of general application relating to bankruptcy, insolvency, and the relief of
        debtors, and (ii) as limited by rules of law governing specific performance, injunctive
        relief, or other equitable remedies and by general principles of equity.

        e. Financial Condition

        The Company has furnished to the Purchaser an unaudited balance sheet of the Company
        dated ____ [Month] ____ [Date], 20___ [Year] (the "Financial Statements"). Subject to
        the information in this section, the Company warrants that the Company’s Financial
        Statements are correct in all material respects and present fairly the financial condition of
        the Company as of the date indicated therein. Except as shown on the Financial
        Statements, the Company has no material liabilities and, to the best of its knowledge,
        knows of no material contingent liabilities not disclosed in the Financial Statements,
        except current liabilities incurred in the ordinary course of business since the date of the
        Financial Statements, which have not been, either in any individual case or in the
        aggregate, material to the financial condition or operating results of the Company. Since
        the date of the Financial Statements, there has not been, to the Company’s knowledge,
        any change in the assets, liabilities, financial condition, prospects, or operations of the
        Company from that reflected in the Financial Statements, other than changes in the
        ordinary course of business, none of which individually or in the aggregate has had or is
        reasonably expected to have a material adverse effect on such assets, liabilities, financial
        condition, prospects, or operations of the Company;

        f. Intellectual Property:




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       i.   The Company owns or possesses sufficient legal rights to all patents, trademarks,
            service marks, trade names, copyrights, trade secrets, licenses, information, and other
            proprietary rights and processes necessary for its business as now conducted and as
            presently proposed to be conducted, without any known conflict with, or infringement
            of, the rights of others.
      ii.   The Company has not received any communications alleging that the Company has
            violated or, by conducting its business as presently proposed, would violate any of the
            patents, trademarks, service marks, trade names, copyrights, or trade secrets or other
            proprietary rights of any other person or entity, nor is the Company aware of any
            basis there for.
         g. Compliance with Laws; Permits

         The Company is not in violation of any applicable statute, rule, regulation, order, or
         restriction of any domestic or foreign government or any instrumentality or agency
         thereof in respect of the conduct of its business or the ownership of its properties which
         violation would materially and adversely affect the business, assets, liabilities, financial
         condition, operations, or prospects of the Company. No governmental orders,
         permissions, consents, approvals, or authorizations are required to be obtained and no
         registrations or declarations are required to be filed in connection with the execution and
         delivery of this Agreement and the issuance of the Shares or the shares of Common Stock
         issuable upon conversion of the Shares (the “Conversion Shares”), except such as has
         been duly and validly obtained or filed, or with respect to any filings that must be made
         after the Closing, as will be filed in a timely manner. The Company has all franchises,
         permits, licenses, and any similar authority necessary for the conduct of its business as
         now being conducted by it, the lack of which could materially and adversely affect the
         business, properties, prospects, or financial condition of the Company and believes it can
         obtain, without undue burden or expense, any similar authority for the conduct of its
         business as planned to be conducted.

         h. Full Disclosure

         The Company has provided the Purchaser with all information requested by him in
         connection with his decision to purchase the Shares, including all information the


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        Company believes is reasonably necessary to make such investment decision. Neither
        this Agreement nor any other document delivered by the Company to Purchaser or his
        attorney or agent in connection herewith or therewith or with the transactions
        contemplated hereby or thereby, contain any untrue statement of a material fact nor omit
        any material fact necessary in order to make the statements contained herein or therein
        not misleading. To the Company’s knowledge, there are no facts which (individually or
        in the aggregate) materially adversely affect the business, assets, liabilities, financial
        condition, prospects, or operations of the Company that have not been set forth in the
        Agreement or in other documents delivered to the Purchaser or                his attorney in
        connection herewith.

4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
    The Purchaser hereby represents and warrants to the Company as follows (such
    representations and warranties do not lessen or obviate the representations and warranties of
    the Company set forth in this Agreement):

       a. Requisite Power and Authority
        The Purchaser has all necessary power and authority under all applicable provisions of
        law to execute and deliver this Agreement and to carry out its provisions. Upon its
        execution and delivery, this Agreement will be valid and binding obligation of the
        Purchaser, enforceable in accordance with its terms, except (i) as limited by applicable
        bankruptcy, insolvency, reorganization, moratorium, or other laws of general application
        affecting enforcement of creditors’ rights, or (ii) as limited by general principles of equity
        that restrict the availability of equitable remedies.

       b. Investment Representations
        The Purchaser understands that neither the Shares nor the Conversion Shares have been
        registered under the Securities Act. The Purchaser also understands that the Shares are
        being offered and sold pursuant to an exemption from registration contained in the
        Securities Act based in part upon the Purchaser’s representations contained in the
        Agreement. The Purchaser hereby represents and warrants as follows:

      i.    Purchaser Bears Economic Risk



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            The Purchaser has substantial experience in evaluating and investing in private
            placement transactions of securities in companies similar to the Company so that he is
            capable of evaluating the merits and risks of his investment in the Company and has
            the capacity to protect his own interests. The Purchaser must bear the economic risk
            of this investment indefinitely unless the Shares (or the Conversion Shares) are
            registered pursuant to the Securities Act, or an exemption from registration is
            available. The Purchaser understands that the Company has no present intention of
            registering the Shares, the Conversion Shares, or any shares of its Common Stock.
            The Purchaser also understands that there is no assurance that any exemption from
            registration under the Securities Act will be available and that, even if available, such
            exemption may not allow the Purchaser to transfer all or any portion of the Shares or
            the Conversion Shares under the circumstances, in the amounts or at the times the
            Purchaser might propose.

      ii.   Acquisition for Own Account
            The Purchaser is acquiring the Shares and the Conversion Shares for his own account
            for investment only, and not with a view towards their distribution.

     iii.   Purchaser Can Protect His Interest
            The Purchaser represents that by reason of his, or of his management’s business or
            financial experience, he has the capacity to protect his own interests in connection
            with the transactions contemplated in this Agreement. Further, the Purchaser is aware
            of no publication of any advertisement in connection with the transactions
            contemplated in the Agreement.

     iv.    Accredited Investor
            The Purchaser represents that he is an accredited investor within the meaning of
            Regulation D under the Securities Act, in that he is a director or executive officer of
            the Company, or has a net worth of not less than $1,000,000.

      v.    Company Information
            The Purchaser has had an opportunity to discuss the Company’s business,
            management, and financial affairs with directors, officers, and management of the



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              Company and has had the opportunity to review the Company’s operations and
              facilities. The Purchaser has also had the opportunity to ask questions to and receive
              answers from, the Company and its management regarding the terms and conditions
              of this investment.

     vi.      Rule 144
              The Purchaser acknowledges and agrees that the Shares, and if issued, the Conversion
              Shares, must be held indefinitely unless they are subsequently registered under the
              Securities Act or an exemption from such registration is available. The Purchaser has
              been advised or is aware of the provisions of Rule 144 promulgated under the
              Securities Act as in effect from time to time, which permits limited resale of shares
              purchased in a private placement subject to the satisfaction of certain conditions,
              including, among other things: the availability of certain current public information
              about the Company, the resale occurring following the required holding period under
              Rule 144 and the number of shares being sold during any three-month period not
              exceeding specified limitations.

5. CONDITIONS TO THE PURCHASER’S OBLIGATIONS TO CLOSE
    The Purchaser’s obligation to purchase the Shares at a Closing is subject to the fulfillment on
    or before the Closing of each of the following conditions, unless waived in writing by the
    Purchaser purchasing the Shares in such Closing:

    a. Representations and Warranties
           The representations and warranties made by the Company in Section 3 shall be true and
           correct as of the date of such Closing.

    b. Covenants
           The Company shall have performed or complied with all covenants, agreements, and
           conditions contained in this Agreement to be performed or complied with by the
           Company on or prior to the Closing.

    c. Blue Sky




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        The Company shall have obtained all necessary _________________ Blue Sky law
        permits and qualifications, or have the availability of exemptions there from, required by
        any state for the offer and sale of the Shares and the Conversion Shares.

     d. Restated Charter
        The Restated Charter shall have been duly authorized, executed and filed with and
        accepted by the Secretary of State of the State of _________________.

6.      MISCELLANEOUS
        a. Governing Law
        This Agreement shall be governed in all respects by the laws of the State of
        _________________ as such laws are applied to agreements between _______________
        [Instruction: Insert the State] residents entered into and performed entirely in
        _______________ [Instruction: Insert the State].

        b. Survival
        The representations, warranties, covenants, and agreements made herein shall survive any
        investigation made by the Purchaser and the closing of each of the transactions
        contemplated hereby. All statements as to factual matters contained in any certificate or
        other instrument delivered by or on behalf of the Company pursuant hereto in connection
        with the transactions contemplated hereby shall be deemed to be representations and
        warranties by the Company hereunder solely as of the date of such certificate or
        instrument.

        c. Successors and Assigns
        Except as otherwise expressly provided herein, the provisions hereof shall inure to the
        benefit of, and be binding upon, the successors, assigns, heirs, executors, and
        administrators of the Parties hereto and shall inure to the benefit of and be enforceable by
        each person who shall be a holder of the Shares from time to time.

        d. Entire Agreement
        This Agreement and the other documents delivered pursuant hereto constitute the full and
        entire understanding and agreement between the Parties with regard to the subjects hereof




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         and no Party shall be liable or bound to any other in any manner by any representations,
         warranties, covenants, and agreements except as specifically set forth herein and therein.

         e. Severability
         In case any provision of the Agreement shall be invalid, illegal, or unenforceable, the
         validity, legality, and enforceability of the remaining provisions shall not in any way be
         affected or impaired thereby.

         f. Amendment and Waiver:
       i.   This Agreement may be amended or modified only upon the written consent of the
            Company and holders of at least sixty-six and two-thirds percent (66 2/3%) of the
            outstanding Shares (treated as if converted and including any Conversion Shares into
            which the Shares have been converted that have not been sold to the public).
      ii.   The obligations of the Company and the rights of the holders of the Shares and the
            Conversion Shares under the Agreement may be waived only with the written consent
            of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the Shares
            (treated as if converted and including any Conversion Shares into which the Shares
            have been converted that have not been sold to the public).
         g. Delays or Omissions
         It is agreed that no delay or omission to exercise any right, power, or remedy accruing to
         any Party, upon any breach, default, or noncompliance by another Party under this
         Agreement or the Restated Charter, shall impair any such right, power, or remedy, nor
         shall it be construed to be a waiver of any such breach, default, or noncompliance, or any
         acquiescence therein, or of or in any similar breach, default, or noncompliance thereafter
         occurring. It is further agreed that any waiver, permit, consent, or approval of any kind
         or character on the Purchaser’s part of any breach, default, or noncompliance under this
         Agreement or under the Restated Charter or any waiver on such Party’s part of any
         provisions or conditions of the Agreement or the Restated Charter must be in writing and
         shall be effective only to the extent specifically set forth in such writing. All remedies,
         either under this Agreement the Restated Charter, by law, or otherwise afforded to any
         Party, shall be cumulative and not alternative.




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        h. Notices
        All notices required or permitted hereunder shall be in writing and shall be deemed
        effectively given: (i) upon personal delivery to the Party to be notified, (ii) when sent by
        confirmed telex or facsimile if sent during normal business hours of the recipient, if not,
        then on the next business day, (ii) ___________ (___) [Instruction: Insert number of
        days e.g., five (◊ 5)] days after having been sent by registered or certified mail, return
        receipt requested, postage prepaid, or (iv) ___________ (___) [Instruction: Insert
        number of days e.g., one (◊ 1)] day after deposit with a nationally recognized overnight
        courier, specifying next day delivery, with written verification of receipt.            All
        communications shall be sent to the Company and the Purchaser at the address as set
        forth on the signature page hereof or at such other address as the Company or the
        Purchaser may designate by ___________ (___) [Instruction: Insert number of days
        e.g., ten (◊ 10)] days advance written notice to the other Party hereto.

        i. Expenses
        Each Party shall pay all costs and expenses that it incurs with respect to the negotiation,
        execution, delivery, and performance of the Agreement.

        j. Attorneys’ Fees
        In the event that any suit or action is instituted to enforce any provision in this
        Agreement, the prevailing Party in such dispute shall be entitled to recover from the
        losing Party all fees, costs, and expenses of enforcing any right of such prevailing Party
        under or with respect to this Agreement, including without limitation, such reasonable
        fees and expenses of attorneys and accountants, which shall include, without limitation,
        all fees, costs, and expenses of appeals.

        k. Titles and Subtitles
        The titles of the sections and subsections of the Agreement are for convenience of
        reference only and are not to be considered in construing this Agreement.

        l. Counterparts
        This Agreement may be executed in any number of counterparts, each of which shall be
        an original, but all of which together shall constitute one instrument.



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        m. Confidentiality
        Each Party hereto agrees that, except with the prior written consent of the other Party, it
        shall at all times keep confidential and not divulge, furnish, or make accessible to anyone
        any confidential information, knowledge, or data concerning or relating to the business or
        financial affairs of the other Party to which such Party has been or shall become privy by
        reason of this Agreement, discussions or negotiations relating to this Agreement, the
        performance of its obligations hereunder, or the ownership of the Shares purchased
        hereunder. The provisions of this Section shall be in addition to, and not in substitution
        for, the provisions of any separate nondisclosure agreement executed by the Parties
        hereto.

        n. Pronouns
        All pronouns contained herein, and any variations thereof shall be deemed to refer to the
        masculine, feminine, or neutral, singular or plural, as to the identity of the Parties hereto
        may require.

        o. _________________ Corporate Securities Law
        THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS
        AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
        CORPORATIONS OF THE STATE OF _________________ AND THE ISSUANCE
        OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
        CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION
        IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
        QUALIFICATION BY ___________________________________________ OF THE
        _________________ CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
        THIS      AGREEMENT         ARE     EXPRESSLY         CONDITIONED          UPON       SUCH
        QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

IN WITNESS WHEREOF, the Parties hereto have executed the SERIES A PREFERRED STOCK
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.




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 COMPANY                          PURCHASER




Signature:                      Signature:




Print Name:                     Print Name:




Title:                          Title:




Address:                        Address:




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                                    EXHIBIT A




                                RESTATED CHARTER




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                                  EXHIBIT B




                                WARRANT FORM




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Description: A Series A Preferred Stock Purchase Agreement is an agreement between a company and a party wishing to purchase Series A Preferred Stock of the company. The stock is issued to the purchasing party on certain terms and conditions and is the first round of stock offered for sale. This document contains numerous standard provisions that are commonly included in these types of agreements, and may be customized to fit the specific needs of the contracting parties. This Agreement can be used by small businesses or other entities that want to issue Series A Preferred Stock to new purchasers.