Preferred Shares Purchase
This Preferred Shares Purchase Contract is an agreement between a company and an
initial investor wishing to purchase preferred shares in the company. Typically, preferred
shares are sold to investors early on in the startup phase under “Series A” funding. This
agreement contains all of the essential clauses and provisions but can be customized to
fit the needs of the parties. This contract can be used by individuals or small businesses
that want to buy or sell preferred shares in a company.
Preferred Shares Purchase Contract
THIS PREFERRED SHARES PURCHASE CONTRACT (the “Agreement”), entered
into this ____ day of _____________, ______ (the “Effective Date”) by and between
__________________ (the “Company”) and _______________ (the “Purchaser”).
WHEREAS the Purchaser is desirous to purchase from the Company and the Company
is desirous to sell to the Purchaser Series A Preferred Shares of the Company on the terms and
conditions set forth herein.
NOW THEREFORE in consideration of the premises and mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the Company and the Purchaser hereto, the Company and the Purchaser
hereby agree with one another as follows
1.00 PURCHASE AND SALE OF STOCK
1.01 The Purchaser shall purchase from the Company _______ (___) shares of Series A
Preferred Stock (the “Shares”) of the Company.
1.02 The Company shall authorize the sale of the Shares to the Purchaser by a resolution
passed by the Board of Directors of the Company on or prior to the Effective Date of this
2.00 PURCHASE PRICE
2.01 Upon and subject to the terms and conditions of this Agreement, the Company shall sell,
transfer, assign and issuer to the Purchaser and the Purchaser shall purchase and acquire from the
Company, at the closing date of this transaction, the Shares for the Purchase Price payable as
provided in Section 2.3.
2.02 The purchase price (the "Purchase Price") payable by the Purchaser to the Company for
the Shares shall be _______________ ($_________) Dollars. The Purchaser acknowledges that
the Purchase Price does not include taxes payable, if any, as a result of the purchase and sale of
2.04 The Purchaser shall pay and satisfy the Purchase Price by payment to the Company of
the Purchase Price, by payment on the closing date of this transaction of the Purchase Price by
way of certified check or bank draft, payable to the order of the Company.
3.00 CLOSING DATE
3.01 Time is of the essence of this Agreement. The closing of this transaction shall take place
at _______________ on the _____ day of ___________, _______ (the “Closing Date”) at the
offices of ____________________ or at such other place as may be approved in writing by the
4.00 CLOSING PROCEDURES
4.01 On or before the Closing Date, the Company and the Purchaser shall take or cause to be
taken all actions, steps, and corporate proceedings necessary or desirable to validly and
effectively approve or authorize the completion of the transaction herein provided for; and upon
fulfillment of all the conditions contained herein that have not been waived in writing as therein
provided, the Company shall deliver to the Purchaser the following:
(a) a stock certificate representing the Shares purchased by the Purchaser; and
(b) all deeds of conveyance, bills of sale, assurances, transfers, assignments, consents,
elections (and supporting documents) and other documents as the Purchaser's
considers reasonably necessary or desirable to validly and effectively complete
the transfer of the Shares to the Purchaser.
5.00 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.01 The Company represent and warrant to the Purchaser as follows:
(a) Good Standing. The Company is now and on the Closing Date will be a
(i) duly incorporated and organized, validly subsisting, and in Good Standing
under the laws of the /State of _______________; and
(ii) duly authorized and licensed to own its properties and to carry on its
business as presently owned and carried on by it.
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(b) No Breach Caused by this Agreement. Neither the execution nor delivery of this
Agreement nor the fulfillment or compliance with any of the terms hereof will conflict
with, result in a breach of the terms, conditions, or provisions of, or constitute a default
under, the articles and by-laws, as amended, of the Company or any material agreement
or instrument to which the Company is subject, or will require any consent or other action
by any administrative or governmental body.
(c) Compliance. The Company is conducting its business in compliance in all
material respects with all applicable laws, rules and regulations of each jurisdiction in
which the business is carried on and is duly licensed, registered, or qualified in all
jurisdictions in which it owns, leases or operates its property or carries on the business so
as to enable the business to be carried on as now conducted and its property and assets to
be owned, leased and operated and all such licenses, registrations and qualifications are
valid and subsisting and in good standing.
(d) Solvency. The Company is not insolvent, has not committed an act of bankruptcy,
proposed a compromise or arrangement to its creditors generally, had any petition for a
receiving order in bankruptcy filed against it, taken any proceedings with respect to a
compromise or arrangement, taken any proceedings to have itself declared bankrupt or
wound-up, taken any proceedings to have a receiver appointed over any or all of its
assets, had any encumbrancer take possession of any of its property or had any execution
or distress become enforceable or become levied upon any of its property.
6.00 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.01 The Purchaser has full power and authority to enter into this Agreement, and this
Agreement constitutes a valid and legally binding obligation of Purchaser, enforceable against it/
in accordance with its terms and conditions, except as limited by applicable bankruptcy and other
laws of general application affecting enforcement of creditors’ rights generally, as limited by
laws relating to the availability of specific performance, injunctive relief or other equitable
7.01 In the event the transactions contemplated by this Agreement are consummated, the
Company and the Purchaser agrees to indemnify and hold each other harmless against
and in respect of any loss, damage, claim, cost or expense whatsoever, including any and
all incremental out-of-pocket costs, including, without limitation, all reasonable legal and
accounting fees, which the Company or the Purchaser may incur, suffer or be required to
pay, pursuant to any Claim, that may be made or asserted against or affect the Company
or the Purchaser, provided, however, that the subject matter of any such Claim relates to
or arises out of or in connection with the following matters:
(a) any misrepresentation or breach of any warranty, agreement, covenant or obligation of
the Company or the Purchaser contained in this Agreement or in any agreement,
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schedule certificate or other document required to be entered into or delivered by the
Company or the Purchaser.
7.00 AUTHORIZED CAPITAL OF THE COMPANY
7.01 The authorized capital of the Company consists of, or will consist of at the Closing Date
of the following:
enter particulars of the authorized capital of the Company (eg. name of classes of
shares and amount issued)
7.02 The issued and outstanding Shares of Preferred Stock are all duly and validly authorized
and issued, fully paid and nonassessable, and were issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended (the “Act”), and any relevant
state securities laws, or pursuant to valid exemptions therefrom.
8.00 DUE AUTHORIZATION
8.01 Any and all required action by the Company, its officers, directors or shareholders
necessary for the authorization, execution and delivery of this Agreement and the performance of
the Company’s obligations contained herein, has occurred or will occur prior to the Closing
8.02 This Agreement constitutes a valid and legally binding obligation of the Company,
enforceable against it in accordance with the terms and conditions contained herein.
9.00 GENERAL PROVISIONS
9.01 To the best of the Company’s knowledge, there are currently no actions, suits,
proceedings or investigations pending or threatened against the Company that questions the
validity of this Agreement or the right of the Company to enter into this Agreement or to
consummate the transaction contemplated hereby, nor is the Company aware of any basis for any
of the forgoing. The Company is neither a party nor subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or instrumentality that would
affect the ability of the Company to enter into this Agreement or to consummate the transaction
9.02 Except for filings under federal and applicable state securities laws and except for
Permits (as defined below), the absence of which either individually or in the aggregate would
not have a material adverse effect on the Company, all permits, consents, approvals, orders,
authorizations of, or declarations to (collectively, “Permits”) or filings with any federal, state,
local or foreign court, governmental or regulatory authority, or other person (including third
party consents) required on the part of the Company in connection with the execution, delivery
or performance of this Agreement and the consummation of the transaction contemplated herein
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have been obtained or will be obtained prior to the Closing Date, and will be effective as of the
9.03 The share certificate issued to the Purchaser by the Company in respect of the Shares
purchased shall bear the following legend:
“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.”
9.04 Except as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and assigns of the parties
(including transferees). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
9.05 This Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and such counterparts together shall constitute one
agreement deemed to be dated as of the date hereof.
9.06 This Agreement constitutes the entire agreement between the Company and the Purchaser
with respect to the specific subject matter hereof and supersedes all prior agreements or
understandings of any kind with respect to the specific subject matter hereof.
9.07 Any notice or other communication under or for the purposes of this Agreement
shall be given or made in writing, marked Private and Confidential, and shall be served
personally or by courier or mailed by prepaid registered mail:
(a) in the case of the Company, to:
(b) in the case of any Purchaser, to the last known address of the Purchaser as
recorded in the records of the Company,
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or to such other address as any of the parties shall have last notified in the manner provided
herein. The date of receipt of any such notice or other communication shall be deemed to be the
date of delivery of such notice or other communication if served personally or by courier
(provided, however, that no notice or other communication shall be delivered by courier to a
residential address), or if mailed as aforesaid, the fourth day of business following the date of
mailing, provided that no day on which there is an interruption of postal service which would
affect such mailing shall be a day for determining whether effective notice has been given.
9.08 This Agreement enures to the benefit of and is binding upon the parties hereto and their
respective successors and assigns.
9.09 This Agreement is to be construed in accordance with and governed by the laws of the
State of ____________________.
IN WITNESS WHEREOF the Company and the Purchaser have duly executed
this Agreement under their hands and seals as of the day and year first written above.
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