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Series B Preferred Stock Purchase Agreement

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BirthdayExpress.com, Inc. Series B Preferred Stock Purchase Agreement

Dated as of July 21, 1999

This Series B Preferred Stock Purchase Agreement (the "Agreement") is made as of the 21st day of July, 1999 by and between:

Company: BirthdayExpress.com, Inc., a Washington corporation

Purchasers: the investors listed on Exhibit A attached hereto

The parties hereby agree as follows:

1. PURCHASE AND SALE OF PREFERRED STOCK.

1.1 Sale and Issuance of Series B Preferred Stock.

(a) The Company shall adopt and file with the Secretary of State of the State of Washington the Amended and Restated Articles of Incorporation in the form attached as Exhibit B.

(b) Each Purchaser agrees to purchase at the Closing the shares of Series B Preferred Stock set forth opposite such Purchaser's name on Exhibit A at a purchase price of $8.32 per share.

1.2 Closing; Delivery.

(a) The purchase and sale of the Stock shall take place at the offices of Cooley Godward LLP, 5200 Carillon Point, Kirkland, Washington 98033-7356, at 10:00 a.m., on July 21, 1999 or such other time and place as agreed.

(b) At the Closing, the Company shall deliver to each Purchaser a certificate representing the Stock against payment of the purchase price therefor.

(c) If 1,580,000 shares are not sold at the Closing, the Company may sell additional shares prior to October 30, 1999 subject to execution of an Addendum Agreement.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth on Exhibit C, the Company represents and warrants as follows:

2.1 Organization, Good Standing and Qualification. The Company is duly organized and validly existing under the laws of the State of Washington.

2.2 Capitalization.

(a) Preferred Stock authorized: shares.

Series A Preferred Stock designated: shares.

Series B Preferred Stock designated: shares.

Common Stock authorized: shares.

Common Stock issued and outstanding: shares.

Reserved for Stock Plan: shares.

Options granted and exercised: shares.

Options granted and outstanding: shares.

Available for issuance: shares.

2.3 Subsidiaries. The Company does not currently own or control any interest in any other entity.

2.4 Authorization. All corporate action necessary for the authorization, execution and delivery of the Agreements has been taken or will be taken prior to Closing.

2.5 Valid Issuance of Securities. The Stock and the Common Stock issuable upon conversion will be duly and validly issued, fully paid and nonassessable.

2.6 Governmental Consents. No consent, approval, order or filing is required except applicable securities filings.

2.7 Litigation. No pending or threatened litigation is known to the Company.

2.8 Intellectual Property. The Company owns or possesses sufficient rights to its intellectual property.

2.9 Compliance with Other Instruments. The Company is not in violation or default of its governing documents or applicable laws.

2.10 Agreements; Action. There are no agreements between the Company and its officers, directors, affiliates or related parties.

2.11 Disclosure. The Company has provided all material information requested by each Purchaser.

2.12 Financial Statements. The Company has delivered unaudited financial statements for the twelve-month period ended May 31, 1999.

2.13 No Conflict of Interest. No conflict of interest exists as described in the Agreement.

2.14 Rights of Registration and Voting Rights. No registration rights have been granted except as contemplated in the Investors' Rights Agreement.

2.15 Title to Property and Assets. The Company owns its assets free and clear of liens except ordinary-course encumbrances.

2.16 Labor Agreements and Actions. No labor disputes are pending or threatened.

2.17 Permits. The Company has all necessary permits and licenses.

2.18 Qualified Small Business. The Company represents that it is a qualified small business under Section 1202(d) of the Internal Revenue Code.

3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

3.1 Authorization. Each Purchaser has full power and authority to enter into this Agreement.

3.2 Purchase Entirely for Own Account. The Securities are being acquired for investment and not with a view to resale.

3.3 Disclosure of Information. Each Purchaser has had the opportunity to review the Company's business, management and financial affairs.

3.4 Restricted Securities. The Purchaser understands the Securities have not been registered under the Securities Act.

3.5 No Public Market. No public market currently exists for the Securities.

3.6 Legends. The Securities may bear customary restrictive legends.

3.7 Accredited Investor.

Are you an accredited investor?

3.8 Foreign Investors. If applicable, the Purchaser confirms compliance with local laws and restrictions.

4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING.

4.1 Representations and Warranties. The Company's representations shall be true and correct as of Closing.

4.2 Performance. The Company shall have performed all required covenants and obligations.

4.3 Compliance Certificate. The President shall deliver a certificate confirming Sections 4.1 and 4.2.

4.4 Qualifications. Required governmental authorizations shall be effective at Closing.

4.5 Opinion of Counsel. Purchaser shall receive an opinion from Cooley Godward LLP.

4.6 Secretary's Certificate. The Company shall deliver a certificate regarding board/shareholder resolutions, Restated Articles, and Bylaws.

4.7 Minimum Subscription. The Company shall have received payment for at least 841,346 shares of Series B Preferred Stock.

4.8 Board of Directors.

Board composition confirmation:

4.9 Investors' Rights Agreement. The Company and required holders shall execute the Investors' Rights Agreement.

4.10 Voting Agreement. The Company and required holders shall execute the Voting Agreement.

4.11 Restated Articles. The Restated Articles shall have been filed and remain in effect.

4.12 Right of First Refusal Agreement. The Company and required holders shall execute the Right of First Refusal Agreement.

5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.

5.1 Representations and Warranties. Purchasers' representations shall be true and correct as of Closing.

5.2 Performance. Purchasers shall have performed their obligations in all material respects.

5.3 Qualifications. All required governmental approvals shall be obtained and effective.

5.4 Investors' Rights Agreement. The agreement shall be executed and delivered.

5.5 Voting Agreement. The agreement shall be executed and delivered.

5.6 Right of First Refusal Agreement. The agreement shall be executed and delivered.

5.7 Minimum Subscription. At least 841,346 shares shall have been purchased.

6. MISCELLANEOUS.

6.1 Survival of Warranties. The warranties, representations and covenants survive the Closing.

6.2 Transfer; Successors and Assigns. The Agreement binds and benefits the parties and their successors and assigns.

6.3 Governing Law. This Agreement is governed by the laws of the State of Washington.

6.4 Counterparts. This Agreement may be executed in counterparts.

6.5 Titles and Subtitles. Titles are for convenience only.

6.6 Notices. Notices shall be given in writing by personal delivery, courier, telegram, fax, or mail.

6.7 Finder's Fee. Each party represents it has no finder's fee obligations.

6.8 Attorney's Fees. Prevailing party entitled to reasonable attorney's fees and costs.

6.9 Amendments and Waivers. Amendments require written consent.

6.10 Severability. Unenforceable provisions shall be renegotiated or excluded.

6.11 Delays or Omissions. No waiver implied by delay or omission.

6.12 Entire Agreement. This Agreement and related documents constitute the entire agreement.

6.13 Confidentiality. Confidential information shall be kept confidential.

6.14 Exculpation Among Purchasers. Purchasers are not liable to each other for investment decisions.

6.15 Waiver of Conflicts. Purchasers consent to Cooley Godward LLP's representation as described.

6.16 Expenses. Each party pays its own expenses; the Company reimburses Purchasers' special counsel up to $10,000 if Closing occurs.

SIGNATURE PAGE FOLLOWS

COMPANY:

BIRTHDAYEXPRESS.COM, INC.

By:

Name:

Title:

Address:

PURCHASERS:

By:

Name:

Title:

Address:

Additional Purchaser Information

Effective Date:

Number of Shares:

Purchase Price Per Share:

Total Purchase Price:

Signature Date:

Comments:

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What the Series B Preferred Stock Purchase Agreement Is and When It’s Used

A Series B Preferred Stock Purchase Agreement is a binding contract between a company and investors that sets the terms for issuing Series B preferred shares. It typically covers number of shares, purchase price, liquidation preference, voting rights, anti-dilution protection, conversion mechanics, board representation, closing conditions, representations and warranties, indemnities, and customary investor covenants. The agreement is used at a priced equity financing to document investor protections, investor rights, and the company’s obligations through closing and post-closing governance changes.

Why This Agreement Matters for Founders and Investors

The Series B SPA creates legal certainty for funding terms, allocates economic and control rights, and defines closing prerequisites and remedies for breach. Clear draft provisions reduce post-closing disputes, protect investor capital, and set the framework for governance and future financings.

Why This Agreement Matters for Founders and Investors

Who Typically Prepares and Signs a Series B SPA

After signature, counsel typically coordinates closing mechanics, wire instructions, and any required corporate filings or Board resolutions.

  • Lead investor legal team and associates handling diligence and term negotiation.
  • Company general counsel or outside corporate counsel preparing the drafter version.
  • Founders, CEO, and board designees who must approve and sign corporate authorizations.

Signatory Roles and Their Responsibilities

CEO / Founder

Signs on behalf of the company after board authorization, confirms accuracy of company disclosures, and ensures operational readiness to satisfy closing conditions. May also deliver customary certificates and officer representations.

Lead Investor

Signs purchase obligations and investor-side schedules, delivers funds at closing, and enforces investor protective provisions. Often coordinates investor counsel for side letters and post-closing arrangements.

Core Components to Include in a Professional Series B SPA

A thorough Series B SPA organizes economic terms, governance rights, closing mechanics, disclosures, and post-closing covenants so each party’s expectations are explicit and enforceable.

Economic Terms

Defines purchase price per share, number of shares, aggregate consideration, liquidation preference, dividends, and conversion ratio with computational examples and rounding rules to avoid ambiguity.

Protective Provisions

Lists investor consent rights for major corporate actions such as new issuances, mergers, amendments to certificate of incorporation, and significant asset sales, with quorum and voting thresholds.

Representations & Warranties

Company and investor reps covering organization, capitalization, authority, compliance, intellectual property, tax matters, and no material adverse changes; include survival and disclosure schedules.

Closing Conditions

Conditions precedent for funding and issuance: accuracy of reps, corporate approvals, delivery of certificates, resignations, no injunctions, and receipt of wire funds and legal opinions if required.

Covenants & Covenants Compliance

Pre- and post-closing covenants such as use of proceeds, information rights, registration rights, restrictive covenants, and affirmative actions required to maintain capitalization and corporate governance.

Conversion & Anti-dilution

Conversion mechanics to common stock, protective anti-dilution formulas (weighted average or full ratchet), and mechanics for stock splits, dividends, and rights issuance.

Step-by-Step: Preparing and Executing a Series B SPA

Follow these sequential steps to move from term sheet to funded closing while preserving enforceability and regulatory compliance.

  • 01
    Negotiate Terms: Finalize economic and protective terms on a signed term sheet or LOI before drafting the SPA.
  • 02
    Draft Agreement: Company counsel prepares SPA draft and disclosure schedules based on diligence findings.
  • 03
    Board Approvals: Obtain board resolutions and, if needed, shareholder consents authorizing the issuance and filing of certificate amendments.
  • 04
    Close and File: Execute SPA, exchange funds, update capitalization records, and file required regulatory notices such as Form D.

How to Configure an Online Workflow for the SPA

Set up an electronic signing workflow that matches the closing sequence and enforces signer order and authentication requirements.

Field Configuration
Signer Order Company first or last based on negotiated closing mechanics
Authentication Email + SMS code or corporate SSO for key signers
Conditional Fields Show wire instructions only after company signature
Audit Trail Enable full audit trail capturing IP, timestamps, and attachments

Where to Send and How to Route the Signed Documents

Define a distribution plan so all parties receive executed copies, the company updates cap tables, and regulatory filings occur promptly.

  • Investor Counsel: Receive executed SPA and investor schedules for closing deliverables.
  • Company Records: Company secretary stores signed SPA, updates stock ledger, issues share certificates or electronic book entries.
  • Registrar / Transfer Agent: Send final executed SPA and closing notice when shares are certificated or book-entry is required.
  • Regulatory Filings: File Form D and any required state notices after first sale where applicable.

Digital Signing and Technical Requirements

Confirm the platform supports enterprise features you need such as bulk send for syndicates, API access for transfer agents, and BAA if HIPAA or sensitive health info intersects with investor data.

  • File Formats: PDF and DOCX supported for template preparation
  • Integrations: CRM and document storage integrations streamline cap table updates
  • Security Controls: Enable TLS, AES-256, and role-based access

Essential Data Fields to Include in the Agreement and Schedules

Share Count: Exact preferred share number
Price Per Share: U.S. dollar amount
Purchaser Entity: Legal investor name
Closing Date: MM/DD/YYYY date
Wire Instructions: Bank details for fund transfer
Disclosure Schedules: List of exceptions to reps

Practical Tips for a Smooth Series B Closing

Use these practical practices to reduce friction and avoid last-minute issues at closing.

Prepare Schedules Early
Collect and circulate disclosure schedules in draft form to give investors time to raise targeted issues before signing.
Confirm Authorization
Obtain board and, if required, shareholder approvals and include executed certificates or consents.
Coordinate Wires
Test wire instructions ahead of closing and specify currency and timing to prevent funding delays.
Use Standard Definitions
Adopt commonly accepted definitions for material adverse effect, capitalization, and related-party transactions to limit ambiguity.

Common Mistakes to Avoid

  • Late disclosure schedules causing closing postponement or re-negotiation.
  • Ambiguous anti-dilution language that triggers unintended price adjustments.
  • Missing corporate approvals or defective board resolutions.
  • Incorrect or mismatched investor wiring details delaying funding.

Legal and Financial Risks of an Incorrect Agreement

Securities Violations: Potential SEC action for improper private placement handling
Tax Consequences: Adverse tax treatment for improper characterization of consideration
Breach Liability: Damages and indemnity obligations for false reps
Cap Table Errors: Incorrect ownership stakes and dilution calculations
Funding Failure: Deal collapse if funds are not timely delivered
Contractual Ambiguity: Increased litigation risk and settlement costs

Key Deadlines and Filing Expectations

Track regulatory and corporate deadlines to meet statutory notice requirements and preserve investor rights.

Board Approval Deadline:

Obtain board resolutions prior to execution of SPA

Form D Filing:

File Form D with the SEC within 15 days after the first sale under Regulation D

Certificate Amendment Filing:

File amendment to the certificate of incorporation as required by the governing state

Tax Reporting:

Prepare for any information returns and investor tax reporting timelines

Post-Closing Deliverables:

Complete stock ledger updates and issue share certificates promptly after funding

Milestone Timeline from Term Sheet to Post-Closing

Sequential milestones help project-manage the transaction and align counsel, signatories, and accountants toward a single closing date.

01

Term Sheet Signed

Agree headline economic and governance terms to guide drafting and diligence.

02

Diligence Complete

Finish legal and financial due diligence and finalize disclosure schedules.

03

Document Execution

Sign SPA and ancillary agreements in the agreed order with required authorizations.

04

Funding and Issuance

Receive investor funds, issue shares, and circulate fully executed copies and closing certificates.

Sample Scenarios Where a Series B SPA Applies

Realistic scenarios illustrate typical document usage and key outcomes in a Series B financing.

Growth Round for SaaS Company

A SaaS founder accepts a lead investor term sheet requiring preferred liquidation preference and anti-dilution protection.

  • Lead investor negotiates board seat and information rights.
  • The SPA documents price, closing deliverables, and a timetable for filing Form D and updating cap table, enabling new product investment without disrupting operations.

Cross-Border Investor Participation

A U.S. issuer admits a foreign institutional investor subject to transfer restrictions and tax documentation.

  • Parties add tax indemnity and Section 409A considerations.
  • The SPA includes investor-specific side letters, escrow mechanics for closing conditions, and instructions for handling currency, withholding, and regulatory notices.

eSignature Vendor Pricing and Feature Snapshot for Executing SPAs

Compare baseline pricing and key capabilities that matter for Series B signings: enterprise security, HIPAA support where needed, bulk send for syndicates, and envelope caps.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial Yes, 7-day trial Varies Varies Varies Varies
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Frequently Asked Questions About Series B SPAs

Answers to common questions about negotiation, execution, and compliance for Series B Preferred Stock Purchase Agreements.


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