Document:

Exhibit 4.2

 

DESCRIPTION OF THE COMPANY’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF
THE SECURITIES

EXCHANGE ACT OF 1934, AS AMENDED

 

Pursuant to our second amended and
restated certificate of incorporation, we are authorized to issue 100,000,000 shares of Class A common stock and 10,000,000
shares of Class B common stock, as well as 1,000,000 shares of preferred stock, $0.0001 par value each. The following description
summarizes certain terms of our securities as set out more particularly in our second amended and restated certificate of incorporation.
Because it is only a summary, it may not contain all the information that is important to you.

 

Common Stock

 

17,433,900, consisting of:

 

		·	13,570,000 shares of our Class A common stock offered in our initial public offering, including shares sold upon
the exercise by the underwriters of their over-allotment option;

 

		·	471,400 shares of Class A common stock, sold in a private placement that closed simultaneously with the closing of our
initial public offering; and

 

		·	3,392,500 shares of Class B common stock held by our sponsor and certain of our directors.

 

The ownership of founder shares by
our initial stockholders is approximately 20% of the issued and outstanding shares of our common stock following the consummation
of our initial public offering.

 

Common stockholders of record are entitled
to one vote for each share held on all matters to be voted on by stockholders. With respect to any matter submitted to a vote of
our stockholders, including any vote in connection with our initial business combination, except as required by law or the applicable
rules of Nasdaq then in effect, holders of our shares of Class A common stock and shares of Class B common stock will
vote together as a single class on all matters submitted to a vote of our stockholders. Unless specified in our second amended
and restated certificate of incorporation or bylaws, or as required by applicable provisions of the Delaware General Corporate
Law, or the DGCL, or applicable stock exchange rules, the affirmative vote of a majority of our shares of Class A common stock,
on an as converted basis, entitled to vote on any matters that are voted on such matter is required to approve any such matter.
There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the
shares voted for the election of directors can elect all of the directors. Our stockholders are entitled to receive ratable dividends
when, as and if declared by the board of directors out of funds legally available therefor.

 

Because our second amended and
restated certificate of incorporation authorizes the issuance of up to 100,000,000 shares of Class A common stock, if we
were to enter into a business combination, we may (depending on the terms of such a business combination) be required to
increase the number of shares of Class A common stock which we are authorized to issue at the same time as our
stockholders vote on the business combination to the extent we seek stockholder approval in connection with our business
combination.

 

     

     

    

 

In accordance with Nasdaq corporate
governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year
end following our listing on Nasdaq. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting
of stockholders for the purposes of electing directors in accordance with our bylaws, unless such election is made by written consent
in lieu of such a meeting.

 

We will provide our stockholders
with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business
combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of
two business days prior to the consummation of our initial business combination including interest earned on the funds held
in the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then
outstanding public shares, subject to the limitations described herein. The amount in the trust account is approximately
$10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be
reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor and our directors and executive
officers have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights
with respect to any founder shares, private placement shares and any public shares held by them in connection with the
completion of our business combination. However, if our sponsor or directors or executive officers acquired public shares in
connection with or after our initial public offering, they will be entitled to liquidating distributions from the trust
account with respect to such public shares if we fail to consummate an initial business combination within 24 months
from the closing of our initial public offering. Unlike many blank check companies that hold stockholder votes and conduct
proxy solicitations in conjunction with their initial business combinations and provide for related redemptions of public
shares for cash upon completion of such initial business combinations even when a vote is not required by law, if a
stockholder vote is not required by law and we do not decide to hold a stockholder vote for business or other legal reasons,
we will, pursuant to our second amended and restated certificate of incorporation, conduct the redemptions pursuant to the
tender offer rules of the SEC, and file tender offer documents with the SEC prior to completing our initial business
combination. Our second amended and restated certificate of incorporation requires these tender offer documents to contain
substantially the same financial and other information about the initial business combination and the redemption rights as is
required under the SEC's proxy rules. If, however, stockholder approval of the transaction is required by law, or we decide
to obtain stockholder approval for business or other legal reasons, we will, like many blank check companies, offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If we
seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of
common stock voted are voted in favor of the business combination. A quorum for such meeting will consist of the holders
present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting
power of all outstanding shares of capital stock of the company entitled to vote at such meeting. However, the participation
of our sponsor or its advisors or affiliates in privately-negotiated transactions (as described in this prospectus), if any,
could result in the approval of our business combination even if a majority of our public stockholders vote, or indicate
their intention to vote, against such business combination. For purposes of seeking approval of the majority of our
outstanding shares of common stock voted, non-votes will have no effect on the approval of our business combination once a
quorum is obtained. We intend to give approximately 30 days (but not less than 10 days nor more than 60 days)
prior written notice of any such meeting, if required, at which a vote shall be taken to approve our business combination.
These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we
will consummate our initial business combination.

 

     

     

    

 

If we seek stockholder approval of
our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the
tender offer rules, our second amended and restated certificate of incorporation provides that a public stockholder, together with
any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a "group"
(as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than
an aggregate of 15% of the shares of common stock sold in our initial public offering, which we refer to as the Excess Shares.
However, we would not be restricting our stockholders' ability to vote all of their shares (including Excess Shares) for or against
our business combination. Our stockholders' inability to redeem the Excess Shares will reduce their influence over our ability
to complete our business combination, and such stockholders could suffer a material loss in their investment if they sell such
Excess Shares on the open market. Additionally, such stockholders will not receive redemption distributions with respect to the
Excess Shares if we complete the business combination. And, as a result, such stockholders will continue to hold that number of
shares exceeding 15% and, in order to dispose such shares would be required to sell their stock in open market transactions, potentially
at a loss.

 

If we seek stockholder approval in
connection with our business combination, our sponsor has agreed to vote its founder shares and any public shares purchased by
it during or after our initial public offering in favor of our initial business combination. As a result, in addition to the founder
shares and private placement shares, we would need 4,853,051, or 35.8%, of the 13,570,000 public shares sold in our initial public
offering to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have our initial business
combination approved. Additionally, each public stockholder may elect to redeem its public shares irrespective of whether they
vote for or against the proposed transaction (subject to the limitation described in the preceding paragraph).

 

Pursuant to our second amended
and restated certificate of incorporation, if we are unable to complete our business combination within 24 months from
the closing of our initial public offering, we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available
funds therefor, redeem the public shares, at a per share price, payable in cash, equal to the aggregate amount then on
deposit in the trust account including interest earned on the funds held in the trust account and not previously released to
us to pay our franchise taxes, divided by the number of then outstanding public shares, which redemption will completely
extinguish public stockholders' rights as stockholders (including the right to receive further liquidating distributions, if
any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Our sponsor
and our directors and executive officers have entered into a letter agreement with us, pursuant to which they have agreed to
waive their rights to liquidating distributions from the trust account with respect to any founder shares or private
placement shares held by them if we fail to complete our business combination within 24 months from the closing of our
initial public offering. However, if our sponsor, directors or executive officers acquire public shares in or after our
initial public offering, they will be entitled to liquidating distributions from the trust account with respect to such
public shares if we fail to complete our business combination within the prescribed time period.

 

     

     

    

 

In the event of a liquidation, dissolution
or winding up of the company after a business combination, our stockholders are entitled to share ratably in all assets remaining
available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having
preference over the common stock. Our stockholders have no preemptive or other subscription rights. There are no sinking fund provisions
applicable to the common stock, except that we will provide our stockholders with the opportunity to redeem their public shares
for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account, upon the completion of our
initial business combination, subject to the limitations described herein.

 

Founder Shares and Private Placement
Shares

 

The founder shares are identical
to the shares of Class A common stock sold in our initial public offering, and holders of the founder shares and private
placement shares have the same stockholder rights as public stockholders, except that (i) the founder shares and private
placement shares are subject to certain transfer restrictions, as described in more detail below, (ii) holders of the
founder shares and private placement shares have entered into an agreement with us, pursuant to which they have agreed
(A) to waive their redemption rights with respect to any founder shares, private placement shares and any public shares
held by them in connection with the completion of our business combination, (B) to waive their rights to liquidating
distributions from the trust account with respect to any founder shares or private placement shares held by them if we fail
to complete our business combination within 24 months from the closing of our initial public offering, although they
will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail
to complete our business combination within such time period, (C) not to propose any amendment to our second amended and
restated certificate of incorporation that would modify the substance or timing of our obligation to redeem 100% of our
public shares if we do not complete our initial business combination within 24 months from the closing of our initial
public offering or with respect to any other material provisions relating to stockholders' rights or pre-initial business
combination activity, unless we provide our public stockholders with the opportunity to redeem their shares, (iii) the
founder shares are shares of our Class B common stock that will automatically convert into shares of our Class A
common stock at the time of our initial business combination, or at any time prior thereto at the option of such holder, on a
one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described herein and (iv) are
subject to registration rights. If we submit our business combination to our public stockholders for a vote, holders of the
founder shares and private placement shares have agreed to vote any founder shares and private placement shares held by them
and any public shares purchased during or after our initial public offering in favor of our initial business combination.

 

     

     

    

 

The shares of Class B common stock
will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one
basis (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like), and subject to
further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in our initial public offering and related to the closing of the business
combination, including pursuant to a specified future issuance, the ratio at which shares of Class B common stock shall convert
into shares of Class A common stock will be adjusted (unless holders of such shares agree to waive such adjustment with respect
to any such issuance or deemed issuance, including a specified future issuance) so that the number of shares of Class A common
stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
20% of the sum of the total number of all shares of common stock outstanding upon completion of our initial public offering plus
all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the business combination
(after giving effect to any redemptions of shares of Class A common stock by public stockholders) (excluding any shares or
equity-linked securities issued, or to be issued, to any seller in the business combination and the private placement shares).
Holders of the founder shares may also elect to convert their shares of Class B common stock into an equal number of shares
of Class A common stock, subject to adjustment as provided above, at any time.

 

With certain limited exceptions, the
founder shares and private placement shares are not transferable, assignable or salable (except to our officers and directors and
other persons or entities affiliated with our sponsor, each of whom will be subject to the same transfer restrictions) until the
earlier of (A) one year after the completion of our initial business combination or (B) subsequent to our initial business
combination, (x) if the last sale price of our shares of Class A common stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we
complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our
stockholders having the right to exchange their shares of common stock for cash, securities or other property.

 

Preferred Stock

 

There are no shares of preferred
stock outstanding. Our certificate of incorporation filed with the State of Delaware will authorize the issuance of 1,000,000
shares of preferred stock with such designation, rights and preferences as may be determined from time to time by our board
of directors. No shares of preferred stock were issued or registered in our initial public offering. Accordingly, our board
of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other rights of the holders of common stock.

 

     

     

    

 

However, the underwriting agreement
prohibits us, prior to a business combination, from issuing preferred stock which participates in any manner in the proceeds of
the trust account, or which votes as a class with the common stock on our initial business combination. We may issue some or all
of the preferred stock to effect our initial business combination. In addition, the preferred stock could be utilized as a method
of discouraging, delaying or preventing a change in control of us. Although we do not currently intend to issue any shares of preferred
stock, we reserve the right to do so in the future. No shares of preferred stock were issued or registered in our initial public
offering.

 

Dividends

 

We have not paid any cash dividends
on our common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment
of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial
condition subsequent to completion of a business combination. The payment of any cash dividends subsequent to a business combination
will be within the discretion of our board of directors at such time. Further, if we incur any indebtedness, our ability to declare
dividends may be limited by restrictive covenants we may agree to in connection therewith.

 

Our Transfer Agent

 

The transfer agent for our common stock
is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust
Company in its roles as transfer agent, its agents and each of its stockholders, directors, officers and employees against all
claims and losses that may arise out of acts performed or omitted for its activities in that capacity, except for any claims and
losses due to any gross negligence or intentional misconduct of the indemnified person or entity.

 

Second amended and restated Certificate
of Incorporation

 

Our second amended and restated certificate
of incorporation contains certain requirements and restrictions relating to our initial public offering that will apply to us until
the completion of our initial business combination. These provisions cannot be amended without the approval of the holders of at
least 65% of all then outstanding shares of our common stock. Holders of the founder shares, who beneficially owns 20% of our common
stock upon the closing of our initial public offering (excluding the private placement shares and assuming such holders did not
purchase any shares in our initial public offering), may participate in any vote to amend our second amended and restated certificate
of incorporation and will have the discretion to vote in any manner it chooses.

 

Specifically, our second amended and
restated certificate of incorporation provides, among other things, that:

 

     

     

    

 

§

If we do not complete our
initial business combination within 24 months from the closing of our initial public offering, we will (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days
thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
trust account, including interest earned on the funds held in the trust account and not previously released to us to fund our working
capital requirements (less taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of
then outstanding public shares, which redemption will completely extinguish public stockholders' rights as stockholders (including
the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject in
each case to our obligations under Delaware law to provide for claims of creditors and in all cases subject to the requirements
of other applicable law;

 

§

Prior to our initial business
combination, other than the private placement shares we may not issue additional securities that would entitle the holders thereof
to (i) receive funds from the trust account or (ii) vote as a class with our public shares (a) on our initial business
combination or (b) to approve an amendment to our second amended and restated certificate of incorporation to (x) extend
the time we have to consummate a business combination beyond 24 months from the closing of our initial public offering or
(y) amend the foregoing provisions;

 

§

Although we do not intend
to enter into a business combination with a target business that is affiliated with our sponsor, our directors or our executive
officers, we are not prohibited from doing so. In the event we enter into such a transaction, we, or a committee of independent
directors, will obtain an opinion from an independent investment banking firm which is a member of FINRA or a valuation or appraisal
firm that such a business combination is fair to our company from a financial point of view;

 

§

If a stockholder vote on
our initial business combination is not required by law and we do not decide to hold a stockholder vote for business or other legal
reasons, we will offer to redeem our public shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, and
will file tender offer documents with the SEC prior to completing our initial business combination which contain substantially
the same financial and other information about our initial business combination and the redemption rights as is required under
Regulation 14A of the Exchange Act. Whether or not we maintain our registration under the Exchange Act or our listing on Nasdaq,
we will provide our public stockholders with the opportunity to redeem their public shares by one of the two methods listed above;

 

§

We must complete one or
more business combinations having an aggregate fair market value of at least 80% of the assets held in the trust account
(excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of
the agreement to enter into the initial business combination;

 

     

     

    

 

§

If our stockholders approve
an amendment to our second amended and restated certificate of incorporation to modify the substance or timing of our obligation
to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing
of our initial public offering, or with respect to any other material provisions relating to stockholders' rights or pre-initial
business combination activity, we will provide our public stockholders with the opportunity to redeem all or a portion of their
shares of Class A common stock upon such approval at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to
us to pay our taxes and up to $100,000 of interest to pay dissolution expenses, divided by the number of then outstanding public
shares, subject to the limitations described herein; and

 

§

We will not effectuate our
initial business combination with another blank check company or a similar company with nominal operations.

 

In addition, our second amended and
restated certificate of incorporation provides that under no circumstances will we redeem our public shares in an amount that would
cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment
of deferred underwriters' commission.

 

Certain Anti-Takeover Provisions
of Delaware Law and our Certificate of Incorporation and By-Laws

 

We are subject to the provisions of
Section 203 of the DGCL regulating corporate takeovers. This statute prevents certain Delaware corporations, under certain
circumstances, from engaging in a "business combination" with:

 

§

a stockholder who owns 10%
or more of our outstanding voting stock (otherwise known as an "interested stockholder");

 

§

an affiliate of an interested
stockholder; or an associate of an interested stockholder, for three years following the date that the stockholder became an interested
stockholder.

 

A "business combination"
includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:

 

     

     

    

 

§

our board of directors approves
the transaction that made the stockholder an "interested stockholder," prior to the date of the transaction;

 

§

after the completion of the
transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting
stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or

 

§

on or subsequent to the date
of the transaction, the business combination is approved by our board of directors and authorized at a meeting of our stockholders,
and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested
stockholder.

 

Exclusive forum for certain lawsuits

 

Our second amended and restated certificate
of incorporation requires, unless we consent in writing to the selection of an alternative forum, that (i) any derivative
action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director,
officer or other employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers
or employees arising pursuant to any provision of the DGCL or our second amended and restated certificate of incorporation or bylaws,
or (iv) any action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine,
may be brought only in the Court of Chancery in the State of Delaware, except any claim (A) as to which the Court of Chancery
of the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery
(and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such
determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for
which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act,
as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction.
If an action is brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process
on such stockholder's counsel. Although we believe this provision benefits us by providing increased consistency in the application
of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to
the extent it is enforceable, the provision may have the effect of discouraging lawsuits against our directors and officers, although
our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.

 

Notwithstanding the foregoing,
our second amended and restated certificate of incorporation provides that the exclusive forum provision will not apply to
suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have
exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to
enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.

 

     

     

    

 

Special Meeting of Stockholders

 

Our bylaws provide that special meetings
of our stockholders may be called only by a majority vote of our board of directors, by our chief executive officer or by our chairman.

 

Advance Notice Requirements for
Stockholder Proposals and Director Nominations

 

Our bylaws provide that stockholders
seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election as directors at our
annual meeting of stockholders must provide timely notice of their intent in writing. To be timely, a stockholder's notice will
need to be delivered to our principal executive offices not later than the close of business on the 90th day nor earlier than
the opening of business on the 120th day prior to the scheduled date of the annual meeting of stockholders. Our bylaws also
specify certain requirements as to the form and content of a stockholders' meeting. These provisions may preclude our stockholders
from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting
of stockholders.

 

Authorized but Unissued Shares of
Common Stock and Preferred Stock

 

Our authorized but unissued common
stock and preferred stock are available for future issuances without stockholder approval and could be utilized for a variety of
corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence
of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt
to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

 

Registration and Stockholder Rights

 

The holders of the founder shares and
private placement shares are entitled to registration rights pursuant to a registration and stockholder rights agreement signed
in connection with our initial public offering. The holders of these securities are entitled to make unlimited demands that we
register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration
statements filed subsequent to our completion of our initial business combination. However, the registration and stockholder rights
agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until
termination of the applicable lock-up period, which occurs in the case of the founder shares and private placement shares, as described
in the following paragraph. We will bear the expenses incurred in connection with the filing of any such registration statements.

 

Except as described herein, our
sponsor and our directors and executive officers have agreed not to transfer, assign or sell any of their founder shares or
private placement shares until (a) one year after the completion of our initial business combination, or
(b) following the completion of the Company's initial business combination, the date on which we complete a liquidation,
merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having
the right to exchange their shares of Class A common stock for cash, securities or other property. Any permitted
transferees will be subject to the same restrictions and other agreements of our sponsor with respect to any founder shares
or private placement shares. We refer to such transfer restrictions throughout this prospectus as the lock-up.
Notwithstanding the foregoing, if the closing price of our shares of Class A common stock equals or exceeds $12.00 per
share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing at least 150 days after our initial business combination, the
founder shares and private placement shares will be released from the lock-up.

 

Listing of Securities

 

Our Class A common stock is listed
on the Nasdaq Capital Market under the symbol "RACA."ethe-ex46_9.htm

 

Exhibit 4.6

DESCRIPTION OF SECURITIES REGISTERED UNDER SECTION 12 OF THE SECURITIES

EXCHANGE ACT OF 1934

The following is a summary of the rights of the common units of fractional undivided beneficial interest (the “Shares”) of Grayscale Ethereum Trust (ETH) (the “Trust”), which is the only class of securities of the Trust that is registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”). The description is intended as a summary, and is qualified in its entirety by reference the Amended and Restated Declaration of Trust and Trust Agreement, as amended by Amendments No. 1 and No. 2 thereto, copies of which have been filed as exhibits to this annual report on Form 10-K. Terms used but not defined herein have the meaning set forth in the Glossary of Terms in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2020, of which this exhibit is a part.

General

The Trust operates pursuant to the Amended and Restated Declaration of Trust and Trust Agreement between Delaware Trust Company (formerly known as CSC Trust Company of Delaware), a Delaware trust company and Delaware trustee of the Trust (the “Trustee”) and Grayscale Investments, LLC (the “Sponsor”), as amended by Amendments No. 1 and No. 2 thereto and as the same may be amended from time to time (as so amended, the “Trust Agreement”). Under the Trust Agreement, the Trust is authorized to create and issue an unlimited number of Shares. Shares will be issued only in Baskets (a Basket equals a block of 100 Shares) in connection with creations. The Shares represent units of fractional undivided beneficial interest in and ownership of the Trust and have no par value. The Shares are quoted on OTCQX under the ticker symbol “ETHE.”

Description of Limited Rights

The Shares do not represent a traditional investment and should not be viewed as similar to “shares” of a corporation operating a business enterprise with management and a board of directors. A shareholder will not have the statutory rights normally associated with the ownership of shares of a corporation. Each Share is transferable, is fully paid and non-assessable and entitles the holder to vote on the limited matters upon which shareholders may vote under the Trust Agreement. For example, shareholders do not have the right to elect directors and will not receive dividends. The Shares do not entitle their holders to any conversion or pre-emptive rights or, except as discussed below, any redemption rights or rights to distributions.

Voting and Approvals

The shareholders take no part in the management or control of the Trust. Under the Trust Agreement, shareholders have limited voting rights. For example, in the event that the Sponsor withdraws, a majority of the shareholders may elect and appoint a successor sponsor to carry out the affairs of the Trust. In addition, no amendments to the Trust Agreement that materially adversely affect the interests of shareholders may be made without the vote of at least a majority (over 50%) of the Shares (not including any Shares held by the Sponsor or its affiliates). However, the Sponsor may make any other amendments to the Trust Agreement in its sole discretion without shareholder consent provided that the Sponsor provides 20 days’ notice of any such amendment.

Derivative Actions

Under Delaware law, a shareholder may bring a derivative action if the shareholder is a shareholder at the time the action is brought and either (i) was a shareholder at the time of the transaction at issue or (ii) acquired the status of shareholder by operation of law or the Trust’s governing instrument from a person who was a shareholder at the time of the transaction at issue. Additionally, Section 3816(e) of the Delaware Statutory Trust Act specifically provides that “a beneficial owner’s right to bring a derivative action may be subject to such additional standards and restrictions, if any, as are set forth in the governing instrument of the statutory trust, including, without limitation, the requirement that beneficial owners owning a specified beneficial interest in the statutory trust join in the bringing of the derivative action.” In addition to the requirements of applicable law, Section 7.4 of the Trust Agreement provides that no Shareholder will have the right, power or authority to bring or maintain a derivative action, suit or other proceeding on behalf of the Trust unless two or more Shareholders who (i) are not affiliates of one another and (ii) collectively hold at least 10.0% of the outstanding Shares join in the bringing or maintaining of such action, suit or other proceeding. The Trust selected the 10.0% ownership threshold because the Trust believed that this was a threshold that investors would be comfortable with based on market precedent. 

This provision applies to any derivative action brought in the name of the Trust other than claims brought under the federal securities laws or the rules and regulations thereunder, to which Section 7.4 does not apply. Due to this additional requirement, a Shareholder attempting to bring a derivative action in the name of the Trust will be required to locate other Shareholders with which it is not affiliated and that have sufficient Shares to meet the 10.0% threshold based on the number of Shares outstanding on the date the claim is brought and thereafter throughout the duration of the action, suit or proceeding.

 

 

Distributions

Pursuant to the terms of the Trust Agreement, the Trust may make distributions on the Shares in-cash or in-kind, including in such form as is necessary or permissible for the Trust to facilitate shareholders’ access to any Incidental Rights or to IR Virtual Currency.

In addition, if the Trust is terminated and liquidated, the Sponsor will distribute to the shareholders any amounts of the cash proceeds of the liquidation remaining after the satisfaction of all outstanding liabilities of the Trust and the establishment of reserves for applicable taxes, other governmental charges and contingent or future liabilities as the Sponsor will determine. See “Item 1. Business—Description of the Trust Agreement—The Trustee—Termination of the Trust” in the Trust’s Annual Report on Form 10-K, of which this exhibit is a part. Shareholders of record on the record date fixed by the Transfer Agent for a distribution will be entitled to receive their pro rata portions of any distribution.

Appointment of Agent

Pursuant to the terms of the Trust Agreement, by holding the Shares, shareholders will be deemed to agree that the Sponsor may cause the Trust to appoint an agent (any person appointed in such capacity, an “Agent”) to act on their behalf in connection with any distribution of Incidental Rights and/or IR Virtual Currency if the Sponsor has determined in good faith that such appointment is reasonably necessary or in the best interests of the Trust and the shareholders in order to facilitate the distribution of any Incidental Rights and/or IR Virtual Currency. The Sponsor may cause the Trust to appoint Grayscale Investments, LLC (acting other than in its capacity as Sponsor) or any of its affiliates to act in such capacity.

Any Agent appointed to facilitate a distribution of Incidental Rights and/or IR Virtual Currency will receive an in-kind distribution of Incidental Rights and/or IR Virtual Currency on behalf of the shareholders of record with respect to such distribution, and following receipt of such distribution, will determine, in its sole discretion and without any direction from the Trust, or the Sponsor, in its capacity as Sponsor of the Trust, whether and when to sell the distributed Incidental Rights and/or IR Virtual Currency on behalf of the record date shareholders. If the Agent is able to do so, it will remit the cash proceeds to the record date shareholders. There can be no assurance as to the price or prices for any Incidental Rights and/or IR Virtual Currency that the Agent may realize, and the value of the Incidental Rights and/or IR Virtual Currency may increase or decrease after any sale by the Agent.

Any Agent appointed pursuant to the Trust Agreement will not receive any compensation in connection with its role as agent. However, any Agent will be entitled to receive from the record-date shareholders, out of the distributed Incidental Rights and/or IR Virtual Currency, an amount of Incidental Rights and/or IR Virtual Currency with an aggregate fair market value equal to the amount of administrative and other reasonable expenses incurred by the Agent in connection with its activities as agent of the record-date shareholders, including expenses incurred by the Agent in connection with any post-distribution sale of such Incidental Rights and/or IR Virtual Currency.

The Sponsor currently expects to cause the Trust to appoint Grayscale Investments, LLC, acting other than in its capacity as Sponsor, as Agent to facilitate any distribution of Incidental Rights and/or IR Virtual Currency to shareholders. The Trust has no right to receive any information about any distributed Incidental Rights and/or IR Virtual Currency or the disposition thereof from the record date shareholders, their Agent or any other person.

Creation of Shares

The Trust creates Shares such times and for such periods as determined by the Sponsor, but only in one or more whole Baskets. A Basket equals 100 Shares. See “Item 1. Business—Description of Creation of Shares” in the Trust’s Annual Report on Form 10-K, of which this exhibit is a part. The creation of a Basket requires the delivery to the Trust of the number of ETH represented by one Share immediately prior to such creation multiplied by 100. The Trust may from time to time halt creations for a variety of reasons, including in connection forks, airdrops and other similar occurrences.

Redemption of Shares

The Trust Agreement also provides for the redemption procedures. However, redemption of Shares are currently not permitted and the Trust is unable to redeem Shares. Subject to receipt of regulatory approval from the SEC and approval by the Sponsor in its sole discretion, the Trust may in the future operate a redemption program. Because the Trust does not believe that the SEC would, at this time, entertain an application for the waiver of rules needed in order to operate an ongoing redemption program, the Trust currently has no intention of seeking regulatory approval from the SEC to operate an ongoing redemption program.

Even if such relief is sought in the future, no assurance can be given as to the timing of such relief or that such relief will be granted. If such relief is granted and the Sponsor approves a redemption program, the Shares will be redeemable only in accordance with the provisions of the Trust Agreement and the relevant Participant Agreement. See “Item 1A. Risk Factors—Risk Factors Related to the Trust and the Shares—Because of the holding period under Rule 144, the lack of an ongoing redemption program and the Trust’s 

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ability to halt creations from time to time, there is no arbitrage mechanism to keep the price of the Shares closely linked to the Index Price and the Shares have historically traded at a substantial premium over the Digital Asset Holdings per Share” in the Trust’s Annual Report on Form 10-K, of which this exhibit is a part.

Transfer Restrictions

Shares purchased in the private placement are restricted securities that may not be resold except in transactions exempt from registration under the Securities Act of 1933 (the “Securities Act”) and state securities laws and any such transaction must be approved by the Sponsor. In determining whether to grant approval, the Sponsor will specifically look at whether the conditions of Rule 144 under the Securities Act and any other applicable laws have been met. Any attempt to sell Shares without the approval of the Sponsor in its sole discretion will be void ab initio.

Pursuant to Rule 144 under the Securities Act (“Rule 144”), a minimum six-month holding period applies to all Shares purchased from the Trust.

On a bi-weekly basis, the Trust aggregates the Shares that have been held for the requisite holding period under Rule 144 by non-affiliates of the Trust to assess whether the Rule 144 transfer restriction legends may be removed. Any Shares that qualify for the removal of the Rule 144 transfer restriction legends are presented to outside counsel, who may instruct the Transfer Agent to remove the transfer restriction legends from the Shares, allowing the Shares to then be resold without restriction, including on OTCQX U.S. Premier marketplace. The outside counsel requires that certain representations be made, providing that:

 

	
 
	
•
	
the Shares subject to each sale have been held for the requisite holding period under Rule 144 by the selling Shareholder;

 

	
 
	
•
	
the Shareholder is the sole beneficial owner of the Shares;

 

	
 
	
•
	
the Sponsor is aware of no circumstances in which the Shareholder would be considered an underwriter or engaged in the distribution of securities for the Trust;

 

	
 
	
•
	
none of the Shares are subject to any agreement granting any pledge, lien, mortgage, hypothecation, security interest, charge, option or encumbrance;

 

	
 
	
•
	
none of the identified selling Shareholders is an affiliate of the Sponsor;

 

	
 
	
•
	
the Sponsor consents to the transfer of the Shares; and

 

	
 
	
•
	
outside counsel and the Transfer Agent can rely on the representations.

In addition, because the Trust Agreement prohibits the transfer or sale of Shares without the prior written consent of the Sponsor, the Sponsor must provide a written consent that explicitly states that it irrevocably consents to the transfer and resale of the Shares. Once the transfer restriction legends have been removed from a Share and the Sponsor has provided its written consent to the transfer of that Share, no consent of the Sponsor is required for future transfers of that particular Share.

Book-Entry Form

Shares are held primarily in book-entry form by the Transfer Agent. The Sponsor or its delegate will direct the Transfer Agent to credit the number of Creation Baskets to the applicable Authorized Participant. The Transfer Agent will issue Creation Baskets. Transfers will be made in accordance with standard securities industry practice. The Sponsor may cause the Trust to issue Shares in certificated form in limited circumstances in its sole discretion.

Share Splits

In its discretion, the Sponsor may direct the Transfer Agent to declare a split or reverse split in the number of Shares outstanding and to make a corresponding change in the number of Shares constituting a Basket. For example, if the Sponsor believes that the per Share price in the secondary market for Shares has risen or fallen outside a desirable trading price range, it may declare such a split or reverse split.

 

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