Preferred Stock Purchase Agreement (Pro-company oriented)

[Name of Company]

PREFERRED STOCK PURCHASE AGREEMENT

Dated as of ____________________

PREFERRED STOCK PURCHASE AGREEMENT

Preferred Stock Purchase Agreement (this "Agreement"), dated as of ________________, by and among __________________, a Delaware corporation (the "Company"), and the purchasers listed on Schedule 1.1 hereto (the "Purchasers").

ARTICLE 1

PURCHASE AND SALE OF STOCK

SECTION 1.1 Delivery. Subject to the provisions of this Agreement, the Purchasers agree to purchase at the Closing (as defined below), and the Company agrees to sell and issue to the Purchasers at the Closing, shares of Series A Preferred Stock (the "Shares") of the Company, for the purchase price of $_____ per share. The name and address of each Purchaser, and the number of Shares to be acquired by each Purchaser, are set forth in Schedule 1.1. The purchase and sale of Shares shall take place at the offices of the Company at 10:00 a.m. West Coast time, on ________________ or at such other time and place as the Company and a majority-in-interest of the Purchasers agree upon in writing (which time and place are designated as the "Closing" and which date is designated as the "Closing Date"). At the Closing the Company shall deliver to each Purchaser a certificate representing the Shares which such Purchaser is purchasing against delivery to the Company by such Purchaser by wire transfer, certified check or immediately available funds, or other manner of payment approved by the Company, in the amount of the purchase price therefor payable to the Company's order.

SECTION 1.2 Subsequent Sales of Shares. At any time up to 180 days following the Closing, the Company may sell up to __________ shares of additional Series A Preferred Stock to such additional investors as may be approved by the Board of Directors of the Company. All such sales shall be made on the terms and conditions set forth in this Agreement. Any Shares sold pursuant to this Section 1.2 shall be deemed to be "Series A Preferred Stock" and shall be deemed to be "Shares" sold pursuant to this Agreement, any purchasers thereof shall be deemed to be "Purchasers" for all purposes under this Agreement, and any such subsequent sale shall be deemed to occur at a "Closing" and the date of any such Closing shall be deemed to be a "Closing Date." The new purchasers shall become parties to this Agreement by signing a counterpart signature page hereto.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants that, except as set forth in the Disclosure Schedule attached hereto:

SECTION 2.1 Organization, Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and corporate authority to own, lease and operate its property and assets and to conduct its business as presently conducted and as proposed to be conducted by it. The Company has full corporate power and corporate authority to enter into and perform its obligations under this Agreement, the Rights Agreement in the form of Exhibit B hereto (the "Rights Agreement") and the Co-Sale Agreement (as defined below) (collectively, the "Transaction Documents"), and to carry out the transactions contemplated by the Transaction Documents. The nature of the Company's business and its ownership or leasing of property do not require that the Company become qualified as a foreign corporation in any state or jurisdiction other than where the failure to so qualify will not have a material adverse impact on the Company. Complete and correct copies of the Amended and Restated Certificate of Incorporation (the "Restated Certificate") and By-laws of the Company, as amended to date, have been delivered to counsel for the Purchasers.

SECTION 2.2 Capitalization.

1. The capital stock of the Company consists of:
   1. ____________ shares of authorized preferred stock, par value $.001 per share ("Preferred Stock"), ____________ shares of which are designated Series A Preferred Stock, of which no shares are issued and outstanding prior to the Closing Date.
   2. ____________ shares of authorized common stock, par value $.001 per share ("Common Stock"), of which ____________ shares are issued and outstanding as of the date of this Agreement; ____________ shares are reserved for issuance pursuant to employee stock purchase and/or option ownership plans that have been adopted by the Company for officers, directors, employees and consultants; and ____________ shares are reserved for issuance upon conversion of the Shares.
      
      
2. Set forth in Schedule 2.2 hereto is a complete and correct list of all security holders of the Company, showing their holdings of issued and outstanding shares of Company securities (including options and warrants) as of the date of this Agreement. To the knowledge of the Company, each such holder is the sole beneficial owner of all of the shares as to which such holder is the record holder. The outstanding shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable. Except as set forth in Schedule 2.2 or the Rights Agreement, holders of shares of the Company's Common Stock and Preferred Stock have no preemptive rights. Except for the transactions contemplated by this Agreement and its exhibits, and except as set forth in Schedule 2.2, there are

   1. no outstanding warrants, options, convertible securities or rights to subscribe for or purchase any capital stock or other securities from the Company,
   2. to the Company's knowledge, no voting trusts or voting agreements among, or irrevocable proxies executed by, stockholders of the Company,
   3. no existing rights of stockholders to require the Company to register any securities of the Company or to participate with the Company in any registration by the Company of its securities,
   4. to the Company's knowledge, no agreements among stockholders providing for the purchase or sale of the Company's capital stock and
   5. no obligations (contingent or otherwise) of the Company to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof.

SECTION 2.3 Validity of Stock. The Shares to be sold pursuant to this Agreement, when issued, sold, and delivered in accordance with the terms of this Agreement, will be duly and validly issued, fully paid and non-assessable. The shares of Common Stock issuable upon conversion of the Shares have been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Restated Certificate, will be duly and validly issued, fully paid and non-assessable.

SECTION 2.4 Subsidiaries. The Company does not own any capital stock, partnership interests or other equity interests of, or control, directly or indirectly, any other corporation, partnership, association or business entity.

SECTION 2.5 Financial Statements. The Company has furnished the Purchasers with its unaudited balance sheet as of ____________ (the "Current Balance Sheet") and its unaudited statement of operations and statement of cash flows for the ______ period ended _________, ____ (collectively, the "Financial Statements"). Except as set forth in Schedule 2.5, the Financial Statements are true and correct in all material respects, have been prepared in accordance with the books and records of the Company, and, except as set forth on Schedule 2.5, have been prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied, and fairly present the financial position and cash flows of the Company as of such date and the results of its operations for the periods then ended.

The tangible assets designated on the Current Balance Sheet are shown thereon at actual cost, less depreciation and amortization, and, in the case of plant and equipment, are in good operating condition and state of repair in all material respects. All accounts receivable (if any) shown on the Current Balance Sheet constitute accounts receivable resulting from the sale of goods and services in the ordinary course of business, and, to the knowledge of the Company, such accounts receivable are subject to no conditions as to payment, offsets, counterclaims, defenses of any kind, returns, allowances, or credits other than to the extent of the allowance for doubtful accounts shown thereon.

SECTION 2.6 Insurance. Set forth on Schedule 2.6 is a true and complete list of all current insurance policies of the Company.

SECTION 2.7 Authorization; Approvals. All action on the part of the Company and its stockholders necessary for the authorization, execution, delivery, and performance of all its obligations under the Transaction Documents and for the authorization, issuance, and delivery of the Shares being sold under this Agreement, has been taken. Each of the Transaction Documents constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms. The Company has obtained or will obtain prior to the Closing all necessary consents, authorizations, approvals and orders, and has made all registrations, qualifications, designations, declarations or filings with all federal, state, or other relevant governmental authorities, required on the part of the Company in connection with the consummation of the transactions contemplated by the Transaction Documents.

SECTION 2.8 No Conflict with Other Instruments. The execution, delivery and performance of each of the Transaction Documents does not and will not result in any violation of, conflict with, or constitute a default under any term or provision of (i) the Restated Certificate or Bylaws; (ii) any judgment, decree or order to which the Company is a party or by which its property is bound; (iii) any agreement, contract, understanding, indenture or other instrument to which the Company is a party, the effect of which would give rise to a material adverse effect on the Company; or (iv) any statute, rule or governmental regulation applicable to the Company or any of its property.

SECTION 2.9 Absence of Undisclosed Liabilities; Changes.

1. Except as provided in documents referred to in Section 2.15 hereto or reflected in the Current Balance Sheet, the Company has no liability or obligation, which individually or in the aggregate exceeds $50,000, absolute or contingent, including, without limiting the generality of the foregoing, any tax liabilities due or to become due, except:

   1. obligations and liabilities incurred after the date of the Current Balance Sheet in the ordinary course of business that are not individually or in the aggregate material,
   2. obligations under contracts made in the ordinary course of business and
   3. obligations under this Agreement. Without limiting the generality of the foregoing, the Company does not know of, and has no reasonable ground to believe that there is any basis for the assertion against the Company of, any material liabilities of the Company not provided for in the documents described in Section 2.15 or reflected in the Current Balance Sheet.

2. Since the date of the Current Balance Sheet, except as contemplated by this Agreement or as disclosed in the Schedules hereto, the Company has been operated in the ordinary and usual course of business, and there has not been:

   1. any material change in the (A) assets, liabilities, condition (financial or otherwise), business or prospects of the Company from that reflected in the Current Balance Sheet, or (B) operating results of the Company from that reflected in the Current Balance Sheet;
   2. any damage, destruction or loss, whether or not covered by insurance, affecting in any material way the assets, properties, condition (financial or otherwise), operating results, prospects or business of the Company (as such business is presently conducted and as it is proposed to be conducted);
   3. any waiver by the Company of a material right or of a material debt owed to it;
   4. any satisfaction or discharge....