$131$ point

Answer questions $13$ to $15$ using this information.

$1.)$ Max is a private equity investor and Sam is an entrepreneur. Max pays $$3$ million for $30$ percent of Sam's startup company, SS Co$.$

If the deal is structured as convertible preferred, and PredatoryPurchaser then offers $$5$ million for the entirety of the company. Would Max convert to common and how

much will be her payoff $($net of $$3M$ initial investment$)$

Yes, $$600K$

Yes, $$1\mathrm{.}5M$

No$,$ $$5M$

No$,$ $$0$

$141$ point

$2.)$ Which statement is TRUE?

Sam is always worse off if participating added to convertible preferred.

Max is better off adding liquidation preference of $1\mathrm{.}5x$ than participating to the convertible preferred if she believes that the valuation end up being below $$5M.$

Max is better off adding liquidation preference of $1\mathrm{.}5x$ than participating to the convertible preferred if she believes that the valuation end up being $$9M.$

If Sam believes that the valuation will be greater than $$7\mathrm{.}5M,$ he would prefer adding $1\mathrm{.}5x$ liquidation preference than participating to the convertible preferred.

$151$ point

$3.)$ If Max wants to provide her LPs the highest protection from dilution if the next financing round will happen at a lower share price than what Max paid for SS$,$ Max:

Would request no antidilution protection

Would request weighted average antidilution provision

Would request $5x$ liquidation preference

Would request full$-$ratchet antidilution provision