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October 4, 2017

 

BTCS Inc. (the “Company”)

 

Dear

 

You invested in the Company’s May 2017 financing and/or the October 2017
financing (collectively the “Financings”). The Company has signed a non-binding
letter of intent to merge with Blockchain Global Ltd. (“BCG”) as publicly
disclosed in a Form 8-K on August 21, 2017. In order for the Company to proceed
with the aforementioned merger (the “Merger”) BCG requires that certain of BTCS’
anti-dilution protection and other terms of the Financings be waived by the
Financings’ investors effective as of the closing of the Merger or in one
respect as of the 91st day following the consummation of the Merger.

 

The Company is asking you and each other investor in the Financings (any, a
“Holder”) to: i) conditionally exchange your Series C and Series C-1 preferred
stock for Series B stock, and ii) conditionally waive certain other rights as
expressly set forth herein (the “Letter Agreement”). By signing this Letter
Agreement, you agree to the issuance of the Series C-1 preferred stock and waive
the provisions of any other agreements in which you are a party to the contrary.

 

By signing this Letter Agreement, you hereby agree that on the 91st calendar day
following the closing of the Merger (the “Exchange Date”) all of your then
outstanding shares of Series C and Series C-1 preferred stock will be exchanged
for shares of Series B preferred stock in accordance with and subject to the
Series B Certificate of Designations, the form of which is attached hereto as
Exhibit A. This Letter Agreement shall also serve as an irrevocable instruction
to the Company’s transfer agent to issue you Series B shares and cancel your
Series C and Series C-1 preferred shares. The following table sets forth the
Series C and Series C-1 preferred shares to be automatically exchanged for
Series B shares on the Exchange Date (the “Newly Issued Series B”), which shall
be updated accordingly to account for any conversions of Series C or Series C-1
preferred shares which occur prior to the Exchange Date:

 

   # of
Securities   # of Common
Underlying
Securities   Exchange Ratio per
each Share (Series C
or C-1:Series B)   # of Series B
Being Issued   # of Common
Underlying Series B  Series C Convertible Preferred Stock                    
Series C-1 Convertible Preferred Stock                     Total             
      

 

BTCS Inc.

 

 

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By accepting this Letter Agreement, you further agree to following conditions,
which shall be deemed effective immediately prior to the closing of the
Company’s October 4, 2017 financing:

 

  ● You agree that all terms and conditions of the Company’s May 25, 2017
Financing Securities Purchase Agreement (the “May SPA”) are of no further force
of effect except for the representations and warranties made in Section 2, and
the provisions of Sections 4(i) (except as contemplated in connection with the
Merger), 4(n) and 9(k) of the May SPA. Nine months after the closing of the
Merger, Section 4(n) shall expire.         ● You consent to the increase in the
number of shares designated as Series B preferred stock, to be determined in the
sole discretion of the Company, consistent with the terms of this Letter
Agreement         ● You consent to the designation and issuance of one or more
new classes of preferred stock, including Series B, in connection with the
Merger.         ● You agree and confirm that the Merger will not constitute a
“Triggering Event” as defined in and pursuant to the Series C preferred stock
Certificate of Designations or the Series C-1 preferred stock Certificate of
Designation or any other related financing document.         ● You agree and
confirm that any securities issued in connection with the Merger will constitute
“Excluded Securities” and will not constitute a “Dilutive Issuance” as such
terms are defined in the May SPA including all related financing documents and
the October SPA including all related financing documents.         ● You agree
and confirm that securities issued in connection with the October SPA shall not
constitute a Dilutive Issuance for purposes of the May SPA, the Series A
Warrant, the Additional Warrant and the Bonus Warrant.         ● You agree to
the designation and issuance of the Series C-1 preferred stock, subject to a
Certificate of Designation in the form which is attached as Exhibit C.         ●
You agree to waive, with respect to the Merger, in its entirety Section 7 of the
Series C Certificate of Designation which covers a Fundament Transaction.      
  ● You agree to waive, with respect to the Merger, in its entirety Section 3f
of the Series A Warrant which covers a Fundament Transaction.         ● You
agree to waive, with respect to the Merger, in its entirety Section 3f of the
Additional Warrant which covers a Fundament Transaction.         ● You agree to
waive, with respect to the Merger, in its entirety Section 3d of the Bonus
Warrant which covers a Fundament Transaction.

 

On the Exchange Date:

 

  ● You agree that Section 4(i) of the May SPA shall expire.         ● You agree
that all terms and conditions of the Company’s October 4, 2017 Financing
Securities Purchase Agreement (the “October SPA”) are of no further force of
effect except for the representations and warranties as outlined in Section 2
and Section 9(k) of the October SPA.         ● You agree to the removal of all
anti-dilution protection and price protection and other covenants from the
Series A Warrant, Additional Warrant, Bonus Warrant, and Series B Warrant.
Specifically, in the Additional Warrant Sections 3b, 3d, 3e, and 3f; in the
Series A Warrant Sections 3b, 3d, 3e, and 3f; in the Bonus Warrant Sections 3b,
3c, and 3d; and in the Series B Warrant Sections 3b, 3d, and 3e. You further
agree to surrender the original copies of your warrants on the Exchange Date
such that the Company can re-issue you the same amount of new warrants in the
form attached hereto as Exhibit B.         ● You agree that all share reserves
letters from the Financings will be of no further force or effect; provided,
however that on the Exchange Date the Company will issue a new share reserve
letter to its transfer agent on the Exchange Date which is materially similar to
the share reserve letters from the Financings except that the number of shares
reserved shall equal the number of shares issuable on the exercise of all
outstanding warrants and the conversion of the Series B preferred.

 

BTCS Inc.

 

 

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Notwithstanding any terms in this Letter Agreement to the contrary, the Company
agrees that during the period from the ninety first (91st) day after the closing
of the Merger until the expiration of the ninth (9th) month following the
closing of the Merger, the occurrence of any of clauses (1) through (11) listed
below shall be deemed a “Triggering Event.” Upon such Triggering Event and after
the expiration of any cure period, the Company shall issue to you additional
shares of Series B preferred stock in an amount of shares equal to 20% of the
then outstanding Newly Issued Series B held by the Holder and issued in
connection with the exchange of Series C and Series C-1 preferred stock (the
“Exchanged Securities”). For the avoidance of doubt, the Company shall not be
required to issue any additional shares of Series B preferred stock in
connection with shares of Series B preferred stock that were not issued for the
Exchanged Securities. For each Holder, these Triggering Event provisions will be
of no further force or effect after the first Triggering Event occurs with
respect to such Holder, and the Triggering Event with respect to one Holder
shall not constitute a Triggering Event with respect to any other Holder, except
for a Triggering Event that by its terms applies to all Holders. The following
are the Triggering Events for purposes of this Letter Agreement:

 

  (1) The suspension from trading or failure of the Common Stock to be trading,
listed or quoted (as applicable) on the Principal Market for a period of twenty
(20) consecutive Trading Days;         (2) The Company’s (A) failure to cure a
Conversion Failure or a Delivery Failure (as defined in the Warrants) by
delivery of the required number of shares of Common Stock within three (3)
Trading Days after the applicable Conversion Date or exercise date (as the case
may be) or (B) notice, written or oral, to any holder of the Newly Issued Series
B or Warrants, including, without limitation, by way of public announcement or
through any of its agents, at any time, of its intention not to comply, as
required, with a request for conversion of any Preferred Shares into shares of
Common Stock that is requested in accordance with the provisions of the
applicable certificate of designation or a request for exercise of any Warrants
for shares of Common Stock in accordance with the provisions of the Warrants;  
      (3) The Company fails to remove any restrictive legend on any certificate
or any shares of Common Stock issued to the Holder upon conversion or exercise
(as the case may be) of any Newly Issued Series B or Warrants, unless otherwise
then prohibited by applicable federal securities laws, and any such failure
remains uncured for at least five (5) days;         (4) Any Bankruptcy
Triggering Event occurs;         (5) The Company or any Subsidiary breaches any
material representation or warranty in any material respect (other than
representations or warranties subject to material adverse effect or materiality,
which may not be breached in any respect) or any material covenant or other
material term or material condition of any Transaction Document; provided, that
such covenant or condition, in each instance, has not been waived in this
Agreement;

 

BTCS Inc.

 

 

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  (6) A false or inaccurate certification (including a false or inaccurate
deemed certification) by the Company as to whether any Triggering Event has or
has not occurred;         (7) The Company’s failure to pay any amount when and
as due under any of its certificate of designation, any of its securities
purchase agreements related to the Financings or any other Transaction Document
or any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated thereby;         (8) At any time
during the period commencing on the date hereof if (A) a registration statement
is not available for the resale of all of the Securities, if the Company shall
(i) fail for any reason to satisfy the requirements of Rule 144(c)(1),
including, without limitation, the failure to satisfy the current public
information requirement under Rule 144(c) or (ii) if the Company becomes an
issuer described in Rule 144(i)(1)(i), and the Company shall fail to satisfy any
condition set forth in Rule 144(i)(2), and (B) any such failure continues for
more than fifteen (15) Trading Days (a “Public Information Failure”) then, as
partial relief for the damages to any Holder of the Newly Issued Series B by
reason of any such delay in or reduction of its ability to sell the Securities
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Company shall pay to each such Holder an amount in cash equal to
one percent (1.0%) of the aggregate Purchase Price of such holder’s Newly Issued
Series B(less all Newly Issued Series B converted to Common Stock) on the day of
a Public Information Failure and on every thirtieth day (pro-rated for periods
totaling less than thirty days) thereafter until the earlier of (i) the date
such Public Information Failure is cured and (ii) such time that such public
information is no longer required pursuant to Rule 144. The payments to which a
holder shall be entitled pursuant the foregoing are referred to herein as
“Public Information Failure Payments.” Public Information Failure Payments shall
be paid on the earlier of (I) the last day of the calendar month during which
such Public Information Failure Payments are incurred and (II) the third
Business Day after the event or failure giving rise to the Public Information
Failure Payments is cured. In the event the Company fails to make Public
Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1% per month (prorated for partial
months) until paid in full.         (9)  Be deemed an investment company under
the Investment Company Act of 1940 (the “40 Act”) by the Securities and Exchange
Commission and upon the date immediately proceeding the date the Company is
first required to register in accordance with the 40 Act;

 

BTCS Inc.

 

 

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  (10) If the Company issues any variable rate securities while any of the Newly
Issued Series B are outstanding; or         (11) The Company fails to post XBRL
links on its website (i) on the same calendar day as such XBRL’s related
periodic report is filed with the U.S. Securities and Exchange Commission, or,
(ii) if such periodic report filing is made prior to 4:00pm New York time, the
Company fails to post such XBRL links on its website simultaneously with the
filing of the periodic report. Provided, however that a Triggering Event will
not be deemed to have occur if the Company is not delinquent with regard to
filing Forms 10-Q and 10-K with the Securities and Exchange Commission and Rule
144 is available to the Holder for the sale of common stock.

 

Notwithstanding any terms in this Letter Agreement to the contrary, the Company
agrees that during the period beginning on the date hereof and ending on the
91st date following the closing of the Merger, the following shall also be
deemed a “Triggering Event” and the provisions above shall apply:

 

  (12) If at any time following the tenth (10th) consecutive day that a Holder’s
Authorized Share Allocation is less than 300% of the number of shares of Common
Stock that such Holder would be entitled to receive upon a conversion, in full,
of all of the Newly Issued Series B and Warrants then held by such Holder
(without regard to any limitations on conversion set forth in the applicable
certificate of designations). After the 91st day following the Merger, if the
Company does not establish a share reserve sufficient to satisfy the full
exercise/conversion of the Warrants and Newly Issued Series B.

 

Provided, however, the events contemplated by this Letter Agreement shall not be
deemed to create any Triggering Event Conversion feature as contained in Section
4(e) of the Series C-1 Preferred Stock Certificate of Designation (the “COD”) or
construed to cause a redemption under Section 6 of the COD, or under any other
series of preferred stock. Finally, each of clauses (1), (2), (3), (8), (11) or
(12) above shall be subject to tolling regarding a Force Majure event. As used
in this Letter agreement, Force Majeure shall mean strikes, labor disputes,
freight embargoes, interruption or failure in the Internet, telephone or other
telecommunications service or related equipment, material interruption in the
mail service or other means of communication within the United States, in each
case in the event that the Company shall have sustained a material or
substantial loss by fire, flood, accident, hurricane, earthquake, theft,
sabotage, or other calamity or malicious act, whether or not such loss shall
have been insured, acts of God, outbreak or material escalation of hostilities
or civil disturbances, national emergency or war (whether or not declared), or
other calamity or crises including a terrorist act or acts affecting the United
States, future laws, rules, regulations or acts of any government (including any
orders, rules or regulations issued by any official or agency of such
government), or any cause beyond the reasonable control of the Company.

 

This offer is being made on the same terms to all Holders. And is subject to
execution by all Holders. By your signature, you represent that you have not
transferred any of the securities you purchased in the Financings.

 

BTCS Inc.

 

 

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To accept this Letter Agreement you must execute and return to the Company a
copy of this letter by 5:00 p.m. EST on or before October 5, 2017 (the
“Expiration Deadline”). The Company may extend the Expiration Deadline in its
sole discretion.

 

BTCS Inc.

 

 

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If you choose to accept the terms of this Letter Agreement, please indicate your
acceptance by signing below and return a copy to Charles Allen at
c.allen@btcs.com.

 

Sincerely,

 

BTCS INC.         By:     Name: Charles Allen   Title: Chief Executive Officer  

 

We Agree to and Accept this Letter Agreement:

 

            By:   Name:   Title:  

 

We hereby certify that we are an “accredited investor” as defined Rule 501 under
the Securities Act of 1933, as amended.

 

The Undersigned Agrees to and Confirms:

 

Upon the closing of the Merger, ‘s rights to designate a director as provided by
Section 4(w) of both the May SPA and October SPA shall terminate.

 

            By:     Name:   Title:  

 

BTCS Inc.

 

 

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Exhibit A - Form of Series B Preferred Stock

 

BTCS Inc.

 

 

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Exhibit B - Form of Exchange Warrants

 

BTCS Inc.

 

 

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Exhibit C - Form of Series C-1 Preferred Stock Certificate of Designation

 

BTCS Inc.