Purchase Agreement
(Preferred Shares)

Summary

This template is a purchase agreement used for purchasing newly issued preferred shares from an issuer corporation. The preferred shares are also convertible into shares of common stock in the corporation. This template includes practical guidance and drafting notes. The securities sold under this agreement are not registered under the Securities Act of 1933, as amended (Securities Act), and are sold in reliance upon the exemption from registration provided by Section 4(a)(2) under the Securities Act and/or Regulation D. Accordingly, both the preferred stock and common stock described in this template are restricted securities (i.e., they are not freely transferable under securities laws). However the common stock is subject to a separate registration rights agreement (an agreement that gives the purchaser the right to request that the corporation register the resale of the stock under the Securities Act), a common arrangement that allows the shares to be resold in the future if certain conditions are met. The template should be adjusted to match the properties of the stock to be sold in the transaction (e.g., references to the “Underlying Common Stock” should be removed if the shares are not convertible into common stock). This agreement also gives the purchaser the right in certain circumstances to purchase a pro rata share of any new shares issued after the consummation of this agreement, so that its interest in the company is not diluted. The template is not state-specific, thus applicable state law should be consulted in order to conform the template to local requirements. For more resources on private placements, see Private Placements Resource Kit. For a full listing of key content covering Regulation D offerings, see Regulation D Resource Kit. For additional resources related to start-up seed financing, see Start-Up Seed Financing Resource Kit. For a template of registration rights agreement, see Registration Rights Agreement.