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follow the lead of other venture-capital bidders who called for Fanning's complete removal.

With Hilbers's industrywide settlement shot down, Hummer Winblad was in a mood to sell. But the figures discussed were a far cry from what the venture firm had hoped Napster would bring. Instead of hundreds of millions of dollars, Bertelsmann was offering $15 million and would forgive the amount that Napster owed Bertelsmann. That offer was probably low enough by itself to enrage Fanning, never one to underestimate Napster's worth. But that was just the start of it.

Two years before, as the negotiations for Hummer Winblad's investment in Napster had dragged on and the stock market began sinking, the terms had been revised several times. In the end, Hummer Winblad won what is known as a liquidation preference in the contract. Not uncommon in venture deals, the clause meant that when a liquidation event occurred—be it a bankruptcy, an acquisition, or something more pleasant—Hummer and the smaller investors in that last Series C round would get 84 cents of every dollar received until the total reached $17.1 million, the amount everyone had invested over Napster's life. Unless they had sold shares privately, most investors who had got in early and cheaply would at least lose the benefit of those discounts. If Bertelsmann was going to pay only $15 million, Hummer would get the lion's share, and John Fanning, Shawn Fanning, Sean Parker, and Eileen Richardson would get nothing at all for their Series A Junior and common shares.

Bertelsmann had even raised the prospect of buying just Hummer Winblad's stake, an idea that confirmed to Fanning that Barry and John Hummer were looking out for themselves at the expense of the rest of Napster's shareholders, including loyal employees. (Bertelsmann Direct Group CFO Bill Sorenson testified later that the idea originated at Hummer Winblad, but Barry and another person in the talks denied that.) That discussion eventually led to the plan to buy all of Napster, according to Sorenson and the other party. "There was a series of back and forth relative to purchasing either Hummer Winblad's equity or all of the equity of Napster," Sorenson said. The very real possibility of being left with worthless paper instead of IPO riches made Shawn, who was a significant stockholder, and many other holders working for Napster very unhappy.

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