Summary of Terms of Series C-1 Financing of BitTorrent, Inc. (the “Company”) Securities Being Sold Amount Series C-1 Preferred Stock
Initial Closing $2 million – DAG Ventures (“DAG”) $5 million – Accel Partners and DCM Total in Initial Closing: $7 million Additional Closing (if other Company shareholders elect to participate) Up to $804,342 – Other Series B investors Total in all closings: Up to $7,804,342
$28 million. Price per share of Series C-1 is approximately $0.3217877 based on a fully-diluted pre-money shares number that includes an increase in the option pool for a number of shares equal to 33.3% of the fully diluted shares of the Company following the initial closing (the “Initial Closing”). Immediately prior to the Initial Closing and the Conversion (defined below), the Company and investors in the prior Series C Preferred Stock financing (DAG, DCM and Accel) will effect a rescission of the prior Series C Preferred Stock sales (the “Rescission”) and enter into mutual release agreements.1 Immediately following the Rescission and prior to the Initial Closing, all outstanding shares Series A and Series B Preferred Stock will be converted into one (1) share of Common Stock (the “Conversion”).2 Each Company investor who held shares of the Company’s Series A and/or Series B Preferred Stock immediately prior to the Conversion who participates in the Series C-1 financing (each, a “Participating Holder”) will have the right to exchange approximately 1/3 of the shares of Common Stock it received in the Conversion into shares of Series C-2 Preferred Stock at a rate of approximately 15 shares of Series C-2 Preferred Stock for each share of Common Stock. The liquidation preference per share of the Series C-2 Preferred Stock is approximately $0.4196. Assuming a $7 million financing, the issued shares of Series C-2 Preferred Stock will have an aggregate liquidation preference of $13 million. To the extent that additional Company shareholders participate in the additional closing of the financing for their respective pro rata shares, this aggregate liquidation preference amount could increase up to approximately $15.35 million.
Rescission of Prior Series C Preferred Stock Financing
Conversion of All Preferred Stock into Common Stock Pull Up of Liquidation Preferences into Series C-2 Preferred Stock
The liquidation preference of the Series C-2 Preferred Stock will be on equal
These investors do not include Quilvest as the Company and Quilvest have already effected a rescission of Quilvest’s purchase of shares of Series C Preferred Stock. 2 No shares of Series C Preferred Stock will be outstanding at this point because of the immediately preceding Rescission.
and Privileges of the Series C-2 Preferred Stock
priority with the Series C-1 Preferred Stock as to liquidation and otherwise have the same rights, preferences and privileges as the Series C-1 Preferred Stock. Each share of Series C-2 Preferred Stock will initially be convertible into one (1) share of Common Stock and, for purposes of any future price-based anti-dilution adjustments, will have an initial conversion price equal to the initial conversion price of the Series C-1 Preferred Stock. The authorized number of directors shall remain set at seven (7), consisting of (i) three (3) directors elected by holders of the Series C-1 and Series C-2 Preferred Stock, one of which will be appointed by DAG Ventures (initially John Cadeddu), one by Accel (initially Ping Li) and one by DCM (initially David Chao), (ii) two (2) directors elected by the holders of Common Stock, one of whom will be the then-current CEO of the Company (initially Eric Klinker) and one of whom will be the individual elected by holders of a majority of the Common Stock (initially Bram Cohen), and (iii) two (2) of independent directors selected by the unanimous consent of the other members of the Board, one of whom shall initially be Brad Templeton, with the second one initially vacant. Following the financing, the Company may, should it so elect, offer to repurchase outstanding shares of Common Stock held by founders and other holders of Common Stock (excluding Common Stock issued upon conversion of Preferred Stock in connection with the financing) who are accredited or otherwise sophisticated for a maximum total amount of $750,000 at a price per share to be determined.
Board of Directors
Purchase of Common Stock following the Closing