Document:

Document

Exhibit 10.1

SMILEDIRECTCLUB, INC.
2019 OMNIBUS EQUITY INCENTIVE PLAN 
RESTRICTED STOCK GRANT NOTICE
SmileDirectClub, Inc., a Delaware corporation (the “Company”), pursuant to the SmileDirectClub, Inc. 2019 Omnibus Incentive Plan and any applicable sub-plan for a particular country, as applicable (together, the “Plan”), has granted to the participant set forth below (the “Participant”), as of the date set forth below (the “Date of Grant”), a restricted stock award covering the number of shares set forth below (the “Restricted Shares”). The Restricted Shares are subject to all of the terms and conditions set forth in this Restricted Stock Grant Notice (the “Grant Notice”) and the Restricted Stock Agreement (the “RS Agreement”) and the Plan, both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not explicitly defined in this Grant Notice but defined in the Plan or the RS Agreement will have the same definitions as in the Plan or the RS Agreement. In the event of any conflict between the terms of the Grant Notice and the Plan, the terms of the Plan will control.
									
		Participant:	[FULL NAME]
		Date of Grant:	[DATE]
		Total Number of Restricted Shares:	[NUMBER]
		Vesting Commencement Date:	[DATE]
	Acceptance Schedule:	By clicking “Accept” below, Grantee acknowledges receipt of a copy of the Plan and the prospectus covering the Plan and acknowledges that the award is subject to all the terms and provisions of the Plan and the RS Agreement. Grantee further agrees to accept as binding, conclusive and final all decisions and interpretations by the Committee of the Plan upon any questions arising under the Plan.  Failure to Accept this Award document within twenty-one (21) calendar days of the grant date may result in the forfeiture of the Restricted Shares, and all of the rights to and interest in the Restricted Shares shall terminate upon forfeiture without payment of consideration.
	Vesting Schedule:	The Restricted Shares shall vest on the first anniversary of the Vesting Commencement Date, subject to the terms and conditions of the Plan and the RS Agreement that are incorporated herein as reference, so long as the Participant’s Continuous Service Status does not terminate before the vesting date (and provided that no vesting shall occur following the date of termination).
	Taxes and 83(b) Election:	The Participant (and not the Company or any Affiliate) shall be responsible for Participant’s federal, state, local or foreign tax liability and any other tax consequences that may arise as a result of this award.  The Participant understands that the Participant may make an election to alter the tax treatment of the Restricted Shares, and that such election must be filed within thirty (30) days after the Grant Date to be effective.  The Participant should consult with the Participant’s own tax advisor to determine the tax consequences of acquiring the Restricted Shares and the advantages and disadvantages of filing the Code Section 83(b) election.  The Participant acknowledges that it is the Participant’s sole responsibility, and not the Company’s, to file a timely election under Code Section 83(b), even if the Participant requests the Company or its representatives to make this filing on the Participant’s behalf.  The Participant must notify the Company promptly upon making any such election.  A form 83(b) Election is attached as Exhibit A to the RS Agreement for convenience.

[Signature Page Follows]
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BY THE PARTICIPANT’S SIGNATURE BELOW, along with the signature of the Company’s representative, the Participant and the Company agree that the Restricted Shares are hereby awarded under the terms and conditions of this Grant Notice, the RS Agreement and the Plan.

SMILEDIRECTCLUB, INC.

                    
By:     [FULL NAME]
Title:    [TITLE]

PARTICIPANT

                    
Name:     [FULL NAME]

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SMILEDIRECTCLUB, INC.
2019 OMNIBUS EQUITY INCENTIVE PLAN 
RESTRICTED STOCK AGREEMENT
Pursuant to your Restricted Stock Grant Notice (the “Grant Notice”) and this Restricted Stock Agreement (the “Agreement”), SmileDirectClub, Inc., a Delaware corporation (the “Company”), has granted you (the “Participant”), as of the Date of Grant set forth in the Grant Notice, a restricted stock award covering the number of shares set forth in the Grant Notice (the “Restricted Shares”) pursuant to the Company’s 2019 Omnibus Incentive Plan and any applicable sub-plan for a particular country (together, the “Plan”). Capitalized terms not explicitly defined in this Agreement or in the Grant Notice but defined in the Plan or in the Grant Notice shall have the meaning ascribed to them in the Plan or in the Grant Notice. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan will control.
1.Restrictions on Unvested Shares.  While the Restricted Shares are unvested, Participant may not sell, transfer, pledge or assign (other than by will or by the laws of descent and distribution) the Restricted Shares.  On and after the date of vesting, the Restricted Shares will become freely transferable (subject to Applicable Laws or additional restrictions imposed by the Company as permitted under the Plan).  
2.Record of Shares.  Unless the Company otherwise determines, the Company (or its transfer agent) will make an appropriate book entry representing the Restricted Shares until such time as the Restricted Shares vest.  Upon the vesting of the Restricted Shares, the Company will transfer or release the Restricted Shares to the Participant in such manner as it deems appropriate, which may include making an appropriate book entry, removing any stop-transfer order or other restriction, as appropriate, transferring the vested Restricted Shares to a brokerage account or delivering to the Participant a stock certificate or stock certificates representing the shares.
3.Voting and Dividend Rights. At all times after the Grant Date, Participant may exercise full voting rights and will be credited with all dividends and other distributions paid with respect to the Restricted Shares, in each case so long as the Participant has not forfeited the Restricted Shares on or before the applicable record date; provided that any such dividends and other distributions will be held in the custody of the Company and will be subject to the same risk of forfeiture, restrictions on transferability and other terms of this award that apply to the Restricted Shares with respect to which such distributions were made.  All such dividends or other distributions shall be paid to the Participant within 45 days following the date the Restricted Shares vest..
4.Termination. Except as otherwise provided in the Plan, any addenda to the Plan made pursuant to Section 4(d) of the Plan, or the Grant Notice, if Participant’s Continuous Service Status terminates at any time for any reason, all Restricted Shares for which vesting is no longer possible under the terms of the Grant Notice and this Agreement shall be forfeited to the Company on the date of such termination of Continuous Service Status, and all rights of Participant to such Restricted Shares shall immediately terminate at such time. Further, unless otherwise approved by the Company, Participant’s right to vest in the Restricted Shares will terminate as of the date of termination of the Participant’s Continuous Service Status and will not be extended by any contractual notice period or any period of “garden leave” or similar notice period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any.
5.Responsibility for Taxes. As a condition to the grant and vesting of the Restricted Shares, Participant acknowledges that, regardless of any action taken by the Company or, if different, the Employer, the liability for all income tax, social security contributions (including employer’s social 
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security contributions to the extent such amounts may be lawfully recovered from the Participant), social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items (or any equivalent or similar taxes, contributions or other relevant tax-related items in any relevant jurisdiction) or required deductions, withholdings or payments legally applicable to him or her and related to the receipt or vesting of the Restricted Shares or subsequent sale of the Restricted Shares, or the participation in the Plan (“Tax-Related Items”) is and remains Participant’s sole responsibility and may exceed the amount actually withheld, if any, by the Company or the Employer. Participant further acknowledges and agrees that Participant is solely responsible for filing all relevant documentation that may be required in relation to the Restricted Shares or any Tax-Related Items (other than filings or documentation that is the specific obligation of the Company, its Parent, Subsidiaries or Affiliates (the “Company Group”) pursuant to Applicable Laws), such as, but not limited to, elections under Code Section 83(b), personal income tax returns or reporting statements in relation to the receipt or vesting of the Restricted Shares, the holding of Shares or any bank or brokerage account, the subsequent sale of Shares, and the receipt of any dividends.
Participant further acknowledges that the Company and/or the Employer: (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Shares, including, but not limited to, the receipt, vesting or sale of the Restricted Shares and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Restricted Shares to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Participant also understands that Applicable Laws may require varying Share valuation methods for purposes of calculating Tax-Related Items, and the Company assumes no responsibility or liability in relation to any such valuation or for any calculation or reporting of income or Tax-Related Items that may be required of Participant under Applicable Laws.
Further, if Participant is subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Pursuant to this Agreement and subject to Applicable Laws, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy Participant’s Tax Withholding Obligations, if any, by (i) withholding from Participant’s wages or other compensation paid to Participant by the Company or the Employer, (ii) withholding from proceeds of the sale of Restricted Shares through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization) without further consent, (iii) withholding Shares that would otherwise vest or (iv) such other method as determined by the Company.
Depending on the method of satisfying the Tax Withholding Obligations, the Company may pay, withhold or account for such Tax Withholding Obligations by considering applicable minimum statutory withholding amounts or other applicable tax or withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld or over-paid amount in cash and will have no entitlement to the applicable Restricted Share.
Participant agrees to pay to the Company or the Employer any amount of Tax Withholding Obligations that the Company or the Employer may be required to pay, withhold or account for as a result of Participant’s receipt or vesting of the Restricted Shares or the participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to remove the restrictions on the Restricted Shares and/or forfeit the Restricted Shares if Participant fails to comply with his or her obligations in connection with the Tax Withholding Obligations.
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Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s receipt, vesting or the disposition of the Restricted Shares. Participant represents that Participant has consulted any tax consultants Participant deems advisable in connection with the receipt, vesting and/or the disposition of the Restricted Shares and that Participant is not relying on the Company (or the Employer) for any tax advice.
6.Nature of Grant. In accepting the Restricted Shares, Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, is discretionary in nature, and may be amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b)the grant of the Restricted Shares is voluntary and occasional and does not create any contractual or other right to receive future grants of restricted stock or benefits in lieu of restricted stock, even if restricted stock has been granted in the past;
(c)all decisions with respect to future restricted stock grants or other grants, if any, will be at the sole discretion of the Company;
(d)Participant is voluntarily participating in the Plan;
(e)the Restricted Shares are not intended to replace any pension rights or compensation and are outside the scope of Participant’s service contract, if any;
(f)the Restricted Shares, and the income and value of same, are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of- service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(g)unless otherwise provided in the Plan or by the Company in its discretion, the Restricted Shares and the benefits evidenced by this Agreement do not create any entitlement to have the Restricted Shares or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Restricted Shares; and
(h)no entity in the Company Group shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar or the selection by the Company or any member of the Company Group in its sole discretion of an applicable foreign exchange rate that may affect the value of the Restricted Shares (or the calculation of income or Tax-Related Items thereunder) or of any amounts due to Participant pursuant to the sale of the Restricted Shares following vesting.
(i)no claim or entitlement to compensation or damages arises from forfeiture of the Restricted Shares or diminution in value of Restricted Shares and Participant irrevocably releases the Company and all Participating Companies from any such claim that may arise.  If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen then, by signing this Agreement, Participant shall be deemed irrevocably to have waived Participant’s entitlement to pursue such a claim.
7.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the 
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Plan, or Participant’s receipt, vesting or the sale of such Restricted Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan and the Restricted Shares before accepting the Restricted Shares or otherwise taking any action related to the Restricted Shares or the Plan.
8.Data Privacy.  
The following provisions shall only apply to Participant if he or she resides outside the European Economic Area:
(a)Participant voluntarily consents to the collection, use, disclosure and transfer to the United States and other jurisdictions, in electronic or other form, of his or her personal data as described in the Agreement and any other Award materials (“Data”) by and among, as applicable, the Company and any the Company, any Parents or Subsidiaries for the exclusive purpose of implementing, administering, and managing his or her participation in this Agreement.

(b)Participant understands that the Company and any Parents or Subsidiaries may collect, maintain, process and disclose, certain personal information about him or her, including, but not limited to, his or her name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all equity awards or any other entitlement to stock awarded, canceled, exercised, vested, unvested or outstanding in his or her favor, for the exclusive purpose of implementing, administering and, managing this Agreement.

(c)Participant understands that Data will be transferred to one or more service provider(s) selected by the Company, which may assist the Company with the implementation, administration and management of this Agreement.  Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country (e.g., the United States) may have different, including less stringent, data privacy laws and protections than his or her country.  Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative.  Participant authorizes the Company and any other possible recipients that may assist the Company (presently or in the future) with implementing, administering and managing this Agreement to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing his or her participation in this Agreement.

(d)Participant understands that Data will be held only as long as is necessary to implement, administer and manage his or her participation in this Agreement, including to maintain records regarding participation.  Participant understands that if he or she resides in certain jurisdictions, to the extent required by applicable laws, he or she may, at any time, request access to Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents given by accepting these Awards, in any case without cost, by contacting in writing his or her local human resources representative.  Further, Participant understands that he or she is providing these consents on a purely voluntary basis.  If Participant does not consent or if he or she later seeks to revoke his or her consent, his or her engagement as a service provider with the Company or any Parents or Subsidiaries will not be adversely affected; the only consequence of refusing or withdrawing his or her consent is that the Company will not be able to grant him or her awards under this Agreement or administer or maintain awards.  Therefore, Participant understands that refusing or withdrawing his or her consent may affect his or her ability to participate in this Agreement (including the right to retain the Awards).  Participant understands that he or she may contact his or her local human 
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resources representative for more information on the consequences of his or her refusal to consent or withdrawal of consent.
9.Miscellaneous.
(a)Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. 
(b)Jurisdiction and Venue.  THE PARTIES CONSENT TO PERSONAL JURISDICTION IN THE STATE OF DELAWARE. THE PARTIES AGREE THAT ANY ACTION OR PROCEEDING ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE BROUGHT AND TRIED EXCLUSIVELY IN THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF DELAWARE. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES EXPRESSLY ACKNOWLEDGE THAT THE STATE OF DELAWARE IS A FAIR, JUST, AND REASONABLE FORUM AND AGREE NOT TO SEEK REMOVAL OR TRANSFER OF ANY ACTION FILED BY ANY OF THE OTHER PARTIES IN SUCH COURTS. FURTHER, THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION, OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SERVICE OF ANY PROCESS, SUMMONS, NOTICE, OR DOCUMENT BY CERTIFIED MAIL ADDRESSED TO A PARTY AT THE ADDRESS DESIGNATED PURSUANT TO SECTION 8(g) SHALL BE EFFECTIVE SERVICE OF PROCESS AGAINST SUCH PARTY FOR ANY ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT. A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT MAY BE ENFORCED IN ANY OTHER COURT TO WHOSE JURISDICTION ANY OF THE PARTIES IS OR MAY BE SUBJECT.
(c)Addendum and Sub-Plans. If Participant relocates to a country for which the Company has established a sub-plan, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons.
(d)Entire Agreement; Enforcement of Rights; Amendment. This Agreement, together with the Plan and the Grant Notice, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior or contemporaneous discussions between them. Except as contemplated by the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement to the extent it would materially and adversely affect the rights of Participant. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party. 
(e)Severability. If one or more provisions of this Agreement, the Grant Notice or the Plan are held to be unenforceable under Applicable Laws, the parties agree to renegotiate such provision in good faith. In the event that the parties do not reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, the Grant Notice and the Plan, (ii) the balance of the Agreement, the Grant Notice and the Plan shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement, the Grant Notice and the Plan shall be enforceable in accordance with its terms.
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(f)Language. If Participant has received this Agreement, the Grant Notice, the Plan or any other document related to the Restricted Shares and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
(g)Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan and on the Restricted Shares, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Participant also acknowledges that the Applicable Laws of the country in which Participant is residing or working at the time of grant, vesting or sale of the Restricted Shares (including any rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject Participant to additional procedural or regulatory requirements that Participant is and will be solely responsible for and must fulfill. Such requirements may be outlined in but are not limited to the Addendum. Notwithstanding any provision herein, the Restricted Shares and Participant’s participation in the Plan shall be subject to any applicable special terms and conditions or disclosures as set forth in the Addendum.
(h)Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email or fax, or forty-eight (48) hours after being deposited in the U.S. mail or a comparable foreign mail service, as certified or registered mail with postage or shipping charges prepaid, addressed to the party to be notified at such party’s address as set forth below, as subsequently modified by written notice, or if no address is specified below, at the most recent address, email or fax number set forth in the Company’s books and records.
If to the Company, to:
SDC Financial, LLC
414 Union Street, 8th Floor Nashville, TN 37219
Attn: Chief Operating Officer 
If to Participant, to: Participant’s last residence shown on the records of the Company or its affiliates.  
(i)Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. Facsimile, email or other electronic execution and delivery of this Agreement (including but not limited to execution by electronic signature or click-through electronic acceptance) shall constitute valid and binding execution and delivery for all purposes and shall be deemed to be, and have the effect of, an original signature.
(j)Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. The rights and obligations of Participant under this Agreement may only be assigned with the prior written consent of the Company.
(k)Electronic Delivery. The Company may, in its sole discretion, decide to deliver to Participant by email or any other electronic means any documents, elections or notices related to this Agreement, the Restricted Shares, Participant’s current or future participation in the Plan, securities of the Company or any member of the Company Group or any other matter, including documents, elections and/or notices required to be delivered to Participant by applicable securities law or any other Applicable Laws or the Company’s Amended Certificate of Incorporation or Bylaws. By accepting this Agreement, 
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whether electronically or otherwise, Participant hereby consents to receive such documents and notices by such electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions.

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EXHIBIT A

SECTION 83(b) ELECTION
1.The name, taxpayer identification number, address of the undersigned, and the taxable year for which this election is being made are:
TAXPAYER’S NAME:  ________________________________
TAXPAYER’S SOCIAL SECURITY NUMBER:  ___________
ADDRESS:  __________________________________________
TAXABLE YEAR: 20__ Calendar Year 

The property which is the subject of this election is: ____ shares of restricted stock of SMILEDIRECTCLUB, INC., a Delaware Corporation.
The property was transferred to the undersigned on _______________________.
The property is subject to the following restrictions:  
The Restricted Shares are subject to automatic forfeiture to the Company if the undersigned’s service terminates before the first anniversary of the grant date (i.e., the date the property was transferred to the undersigned).  
The fair market value of the property at the time of transfer (determined without regard to any restriction other than a nonlapse restriction as defined in § 1.83-3(h) of the Income Tax Regulations) is: _____________.
For the property transferred, the undersigned paid $0 per share.
The amount to include in gross income is _____________. 

						
	

___________________________________
Signature
	

___________________________________
Date

10eex-ex44_6.htm

 

Exhibit 4.4

DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

The following is a description of the material terms of our capital stock. You are strongly encouraged, however, to read our amended and restated certificate of incorporation (as amended from time to time, our “Certificate of Incorporation”), [Second] Amended and Restated Bylaws (as amended from time to time, our “Bylaws”), and the Certificate of Designations (the “Certificate of Designations”) for our 7% Series A Convertible Participating Preferred Stock. The following is only a summary and is qualified by applicable law and by the provisions of our Certificate of Incorporation, Bylaws and such Certificate of Designations.

General

Our authorized capital stock consists of 800,000,000 shares of common stock, par value $0.01 per share and 80,000,000 shares of preferred stock, par value $0.01 per share, of which [71,446,346] have been designated 7% Series A Convertible Participating Preferred Stock (the “Series A Preferred Stock”).  

As of February [          ], 2021, [              ] shares of common stock and [71,446,346] shares of our Series A Preferred Stock were outstanding.

Our Controlling Stockholder

As of February [          ], 2021, certain investment funds managed by an affiliate of Onex Corporation (such funds, collectively, “Onex”) owned [47,058,332] shares of our common stock, representing [65.8%] of our outstanding common stock. In addition, as of February [             ], 2021, Onex owned [69,718,919] shares of our Series A Preferred Stock, representing [             ] shares of our common stock on an as-converted basis, after accounting for the accumulated paid-in-kind accreting return at a rate per annum equal to 7% on the accreted liquidation preference . Onex’s beneficial ownership of our common stock, on an as-converted basis, is approximately [85.3%.] Accordingly, Onex exercises a controlling influence over our business and affairs and has the power to determine all matters submitted to a vote of our stockholders, including the election of directors, the removal of directors with or without cause, and the approval of significant corporate transactions such as amendments to our Certificate of Incorporation, mergers, and the sale of all or substantially all of our assets. Onex could initiate corporate action even if its interests conflict with the interests of our other stockholders. This concentration of voting power could deter or prevent a change in control of us that might otherwise be beneficial to our stockholders.

Common Stock

Listing. Our common stock, par value $0.01 per share, is registered under Section 12 of the Securities Exchange Act of 1934, as amended, and listed on the New York Stock Exchange under the symbol “EEX.”

 

 

Voting Rights. Each outstanding share of common stock is entitled to one vote on all matters with respect to which the holders of our common stock are entitled to vote. See also “--7% Series A Convertible Participating Preferred Stock -- Voting and Director Designation Rights.”

Dividend Rights. Subject to preferences that may apply to shares of preferred stock, including the Series A Preferred Stock, outstanding at the time, holders of our outstanding common stock are entitled to any dividend declared by the board of directors out of funds legally available for this purpose. However, provisions of the agreements governing our indebtedness from time to time may impose restrictions on our ability to declare dividends on our common stock.

Conversion Rights. The common stock is not convertible.

Other Rights. The holders of our common stock will not have any preemptive or other similar rights to purchase any of our securities, cumulative voting, subscription, redemption or sinking fund rights.

Right to Receive Liquidation Distributions. Upon our voluntary or involuntary liquidation, dissolution or winding up, the holders of our common stock are entitled to receive, on a pro rata basis, our assets which are legally available for distribution, after payment of all debts and other liabilities and subject to the rights of any holders of preferred stock then outstanding (including the Series A Preferred Stock), to the holders of common stock.

Assessability. All shares of common stock outstanding are fully paid and nonassessable.

Preferred Stock

We have 80,000,000 shares of preferred stock, $0.01 par value, authorized, of which we have designated [71,446,346] shares of Series A Preferred Stock ([all] of which are outstanding). Any then-outstanding shares of preferred stock, including the Series A Preferred Stock, will have priority over the common stock with respect to dividends and other distributions, including the distribution of our assets upon liquidation. Unless required by law or by the rules of the New York Stock Exchange, our board of directors will have the authority without further stockholder authorization to issue from time to time shares of preferred stock in one or more series and to fix the terms, limitations, relative rights and preferences and variations of each series. Although we have no present plans to issue any further shares of preferred stock, the issuance in the future of additional shares of preferred stock, or the issuance of rights to purchase such shares, could decrease the amount of earnings and assets available for distribution to the holders of common stock, could adversely affect the rights and powers, including voting rights, of the common stock, and could have the effect of delaying, deterring or preventing a change in control of us or an unsolicited acquisition proposal.

 7% Series A Convertible Participating Preferred Stock

Term. The Series A Preferred Stock is perpetual, subject to the redemption and conversion rights summarized herein.

Ranking. The Series A Preferred Stock ranks senior to our common stock and all other forms of our equity and equity-like securities convertible into common stock, with respect to dividends 

 

 

and distributions on liquidation, winding-up and dissolution and junior to all of our existing and future indebtedness.

Liquidation Preference. Each share of Series A Preferred Stock was issued with an initial liquidation preference of $5.60, which liquidation preference accretes to include the cumulative dividends described below, to the extent not paid in cash, which we refer to as the accretion amount, and together with the amount of the initial liquidation preference, the accreted liquidation preference. Upon any liquidation or dissolution of us, before any distributions may be made with respect to our common stock and subject to the rights of holders of any Liquidation Senior Stock (as defined in the Certificate of Designation for the Series A Preferred Stock) and the rights of our creditors, the holders of Series A Preferred Stock are entitled to receive the greater of (a) the accreted liquidation preference, and (b) the amount the holders of Series A Preferred Stock would have received in respect of the number of shares of common stock that would be issuable if they had converted their Series A Preferred Stock into common stock immediately prior to such liquidation or dissolution.

Dividends. The Series A Preferred Stock accumulates an accreting return at a rate per annum equal to 7% on the accreted liquidation preference , payable quarterly in arrears (the “accretion amount”) on March 31st, June 30th, September 30th and December 31st of each year (each, a “return payment date”), beginning on September 30, 2020. Until July 1, 2023, the accretion amount will automatically be paid in-kind by adding to the accreted liquidation preference of each share the unpaid accretion amount that has accumulated on such share to, but excluding, the return payment date. On and after July 1, 2023, we may, at our option, pay the accumulated and unpaid accretion amount on the Series A Preferred Stock in cash. On any return payment date, in the event we do not pay all or any portion of the accretion amount that has accumulated since the previous return payment date, then such accretion amount will be automatically added to the accreted liquidation preference of each share of Series A Preferred Stock then outstanding. The accretion amount accrues on the accreted liquidation preference on a daily basis from the initial issuance of the Series A Preferred Stock. With respect to cash dividends, we may pay a noncumulative cash dividend on each share of the Series A Preferred Stock when, as and if declared by our board of directors and permitted under the Delaware General Corporation Law (the “DGCL”), out of funds legally available for the payment of distributions.

We may not declare or pay any dividends or distributions on our common stock prior to July 1, 2023. Thereafter we may not declare or pay any dividends or distributions on our common stock unless the entirety of the accretion amount has been, or will be concurrently, paid in full in cash, unless a majority of the holders of outstanding shares of the Series A Preferred Stock approve such dividend. In addition, holders of the Series A Preferred Stock will participate, pro-rata on an as-converted basis, in any dividends and distributions made to holders of our common stock or other equity securities (including securities convertible into equity securities on an as-converted basis).

Rights of Holders Upon Change of Control. In connection with a Change of Control (as defined below), holders of Series A Preferred Stock may elect to convert all, or any whole number of shares that is less than all, of their Series A Preferred Stock into shares of common stock at the then applicable conversion price. If such Change of Control occurs after the date on which no “person” or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) beneficially 

 

 

owns in excess of 50% of our common stock on an as converted basis, holders of shares of Series A Preferred Stock may elect to convert their Series A Preferred Stock into common stock as described in the prior sentence, or in the alternative, may elect to require us to redeem all, or any whole number of shares that is less than all, of their Series A Preferred Stock, in cash at a price per share equal to 100% of the accreted liquidation preference (the “Change of Control Repurchase Right”), provided that our obligation to make payment thereof is limited to funds legally available therefor (and in such event, we are required to redeem the maximum amount legally permissible). We are prohibited from voluntarily taking any action that would give rise to this redemption right of the holders of the Series A Preferred Stock unless sufficient funds are legally available to fully pay the maximum aggregate redemption price that would be payable if all holders of Preferred Stock made such redemption election with respect to all then-outstanding shares of Series A Preferred Stock. Prior to repurchasing the shares of Series A Preferred Stock that are subject to the Change of Control Repurchase Rights, we may elect, at our option, to make payment in full of any outstanding and unpaid principal and interest amounts on our existing Amended and Restated Senior Secured Credit Facility.

Redemption Rights

Redemption at Our Option: We have the right to redeem all, but not less than all, of the Series A Preferred Stock, subject to the rights of holders of the Series A Preferred Stock to convert the Series A Preferred Stock prior to such redemption, beginning on the six-year anniversary of June 29, 2020, which is the date on which shares of Series A Preferred Stock were first issued (such date, the “Private Placement Closing Date”) for a cash purchase price equal to (a) on or after the six-year anniversary and prior to the seven-year anniversary of the Private Placement Closing Date, 105% of the accreted liquidation preference, (b) on or after the seven-year anniversary and prior to the eight-year anniversary of the Private Placement Closing Date, 103% of the accreted liquidation preference or (c) on or after the eight-year anniversary of the Private Placement Closing Date, 100% of the accreted liquidation preference.

We will give notice of any redemption not less than 30 nor more than 60 days prior to the redemption date set forth in the notice. The redemption notice will specify, amongst other things, that the Series A Preferred Stock called for redemption may be converted at the option of the holder at any time before the close of business on the business day immediately preceding the redemption date (or, if the we fail to pay the redemption price due on such redemption date in full, at any time until such time as we pay such redemption price in full).

Redemption at Our Option Upon Change of Control. A Change of Control will be deemed to occur if: (i) a “person” or “group” (within the meaning of Section 13(d)(3) of the Exchange Act), other than Emerald Holding, Inc., its wholly owned subsidiaries or Onex or any of Onex’ affiliates become the direct or indirect beneficial owners (as determined in accordance with Rule 13d-3 of the Exchange Act) of shares of our common equity representing more than 50% of the voting power of all of our then-outstanding common equity or (ii) upon the consummation of any (x) sale, lease or other transfer, in one transaction or a series of transactions, of all or substantially all of our assets and our subsidiaries, taken as a whole, to any person or (y) transaction or series of transactions in connection with which all of our common stock is exchanged for, converted into, acquired for, or constitutes solely the right to receive, other securities, cash or other property; provided, however, that any such transaction pursuant to which 

 

 

the persons that directly or indirectly beneficially owned all classes of our common equity immediately prior to such transaction directly or indirectly beneficially own, immediately after such transaction, more than 50% of all classes of common equity of the surviving corporation or the parent thereof, in substantially the same proportions vis-à-vis each other as immediately before such transaction will be deemed not to be a Change of Control pursuant to clause (ii) (clauses (i) and (ii) together, a “Change of Control”). If there is a Change of Control prior to the six-year anniversary of the Private Placement Closing Date, we have the right to redeem all, but not less than all, of the Series A Preferred Stock, subject to the right of holders of the Series A Preferred Stock to convert the Series A Preferred Stock prior to such redemption, for a cash purchase price equal to 100% of the accreted liquidation preference, plus the net present value of the additional amount by which the accreted liquidation preference would have increased from the date of such redemption through the sixth anniversary of the Private Placement Closing Date.

 

On or before the 20th business day prior to the effective date of a Change of Control (or, if later, promptly after we discover that a Change of Control may occur) we will send to each holder a notice of such Change of Control. The Change of Control notice will specify, amongst other things, that the Series A Preferred Stock may instead be converted at the option of the holder at any time before the close of business on the business day immediately preceding the date fixed by us in the Change of Control notice for the repurchase of any Series A Preferred Stock in connection with such Change of Control.

Conversion Rights

Optional Conversion by Holders. Shares of the Series A Preferred Stock may be converted at the option of the holder thereof, in whole or in part, into a number of fully paid and non-assessable shares of our common stock equal to the (a) amount of the accreted liquidation preference, divided by (b) the applicable conversion price.

Mandatory Conversion. If, at any time following the third anniversary of the Private Placement Closing Date, the closing price of our common stock exceeds 175% of the then-applicable conversion price for a period of 20 consecutive trading days, we may, at our option, require that any or all of the then-outstanding shares of Series A Preferred Stock be converted automatically into common stock at the then-applicable conversion price, provided that such conversion will result in the issuance of unrestricted shares of common stock, the common stock is then listed (and trading is not suspended or limited in any material 

respect) on the NYSE, and we have not received a delisting or suspension notice and delisting or suspension is not reasonably likely to occur.

Conversion Price. The initial conversion price of the Series A Preferred Stock is $3.52 per share and is subject to customary anti-dilution adjustments, including downward adjustments to the conversion price in connection with certain future sales or issuances of securities by us that are below fair market value and adjustments in the case of any stock split, stock dividend, recapitalization or similar events, all as more fully described in the Certificate of Designations for the Series A Preferred Stock. Subject to obtaining any vote of stockholders required by the rules of the NYSE, if any, the conversion price may not be adjusted below $3.23 per share of 

 

 

common stock (other than as a result of any stock split, stock dividend, recapitalization or similar event).

No Fractional Shares. If, upon conversion of the Series A Preferred Stock, a holder would be entitled to receive a fractional interest in a share of our common stock (after aggregating all shares of common stock issuable upon conversion by such holder), we will, upon conversion, pay in lieu of such fractional interest, to the extent permitted under applicable law, cash based on the last reported sale price of a share of our common stock at the time of such conversion (as more fully described in the Certificate of Designations for the Series A Preferred Stock).

Voting and Director Designation Rights

Voting Generally. Holders of shares of Series A Preferred Stock will be entitled to vote with the holders of shares of our common stock and not as a separate class, at any annual or special meeting of our stockholders, and may act by written consent in the same manner as the holders of common stock, in each case, on an as-converted basis, subject to the specific Approval Rights described below.

In the event of any vote or action by written consent, each holder of shares of Preferred Stock will be entitled to that number of votes equal to the whole number of shares of common stock into which such holder’s aggregate number of shares of Series A Preferred Stock are convertible as of the close of business on the record date fixed for such vote or written consent.

Series A Preferred Stock Voting as a Separate Class. For so long as any shares of Series A Preferred Stock remain outstanding, the affirmative vote or consent of holders representing a majority of the voting power of the outstanding shares of Series A Preferred Stock is required to effect any of the following actions (the “Approval Rights”):

	
 
	
•
	
any amendment to our Certificate of Incorporation, our Bylaws or the Series A Preferred Stock Certificate of Designations that (i) authorizes or creates or increases the authorized number of shares of equity securities that are pari passu or senior to the Series A Preferred Stock or (ii) adversely affects the rights, preferences or voting powers of the Series A Preferred Stock;

	
 
	
•
	
a voluntary deregistration under the Exchange Act or delisting the common stock from the NYSE (other than in connection with a Change of Control Transaction in which shares of our common stock convert into the right to receive only cash consideration, listed common securities of the acquirer or other counterparty or a combination thereof);

	
 
	
•
	
the declaration or payments of any dividends or distributions on our common stock, unless at the time of payment of such distribution, the entirety of the accumulated and unpaid accretion amount from the last return payment date through such date has been, or will concurrently be paid in full in cash; or

 

 

	
 
	
•
	
the issuance of any convertible indebtedness, other class of preferred stock or other equity securities in each case with rights to payments or distributions in which the Series A Preferred Stock would not participate on a pro-rata, as-converted basis.

Board of Directors Representation. For so long as the Series A Preferred Stock represents a minimum percentage of the outstanding shares of common stock on an as-converted basis as described below, the holders of the Series A Preferred Stock shall have the following rights to representation on our board of directors (the “Preferred Stock Directors”):

 

	
Minimum Percentage
	
  
	
Board Representation

	
>50%
	
  
	
5 directors

	
>40%
	
  
	
4 directors

	
>30%
	
  
	
3 directors

	
>20%
	
  
	
2 directors

	
>10%
	
  
	
1 director

 

In limitation of the foregoing board representation rights, the number of directors that the holders of Series A Preferred Stock will be entitled to elect voting as a separate class will be reduced to the extent necessary to ensure that, at all times, at least two directors elected by the holders of our common stock and the Series A Preferred stock, voting together on an as-converted basis and, at any time that the minimum percentage is less than 40%, at least a majority of the board seats will be elected by the holders of our common stock and the Series A Preferred stock, voting together on an as-converted basis. In addition, for so long as the minimum percentage is greater than 50%, the size of our board may not be increased to more than nine seats, or decreased, without the approval of a majority of the Preferred Stock Directors. All decisions of our board with respect to the exercise or waiver of rights relating to the Series A Preferred Stock shall be determined by a majority of our directors that are not employees of Emerald or affiliated with Onex (“Unaffiliated Directors”), or by a committee of Unaffiliated Directors.

In addition, for so long as the outstanding shares of Series A Preferred Stock represent more than 30% of the outstanding shares of our common stock on an as-converted basis, without the approval of a majority of the Preferred Stock Directors, we may not:

	
 
	
•
	
incur new indebtedness (excluding any borrowing under our Amended and Restated Revolving Credit Facility (as defined in the Certificate of Designations)) (i) when our Adjusted EBITDA (as reported in our most recent annual report on Form 10-K or quarterly report on Form 10-Q, as adjusted to reflect the pro forma effect of any acquisitions or dispositions by us or our subsidiaries during the applicable period) for the trailing twelve months is less than $100 million, if incurring such new indebtedness would result in our gross debt to Adjusted EBITDA ratio for the trailing twelve-month period exceeding 4.50x, or (ii) when our Adjusted EBITDA (as adjusted in clause (i) hereof) for the trailing twelve months is greater than or equal to $100 million, if incurring such new indebtedness would result in our net debt to Adjusted EBITDA ratio exceeding 4.50x;

	
 
	
•
	
redeem or repurchase any of our stock junior to the Series A Preferred;

 

 

	
 
		

	
 
	
•
	
purchase or acquire any capital stock or assets of any third party, or dispose of our assets or the capital stock of our subsidiaries, in each case in any individual transaction or series of related transactions with a value in excess of $100 million;

	
 
	
•
	
hire, promote, demote or terminate our chief executive officer; or

	
 
	
•
	
make a voluntary filing for bankruptcy or commence a liquidation or dissolution of us

Provisions of Our Certificate of Incorporation, Bylaws and Delaware Law that May Have an Anti-Takeover Effect

Delaware law, our Certificate of Incorporation, our Bylaws and the Certificate of Designations for our Series A Preferred Stock contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors.

Certificate of Incorporation and Bylaws

Certain provisions in our Certificate of Incorporation, as amended from time to time, including by the Certificate of Designations for our Series A Preferred Stock, and Bylaws summarized below may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by existing stockholders. 

Among other things, our Certificate of Incorporation and Bylaws:

	
 
	
o
	
authorize the issuance of blank check preferred stock that our board of directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;

	
 
	
o
	
divide our board of directors into three classes with staggered three-year terms;

	
 
	
o
	
provide that stockholders may remove directors only “for cause” once Onex ceases to own more than 50% of all our outstanding common stock;

	
 
	
o
	
prohibit our stockholders from calling a special meeting of stockholders once Onex ceases to own more than 50% of all our outstanding common stock;

	
 
	
o
	
prohibit stockholder action by written consent once Onex ceases to own more than 50% of all our outstanding common stock, which will require that all stockholder actions be taken at a duly called meeting of our stockholders;

	
 
	
o
	
provide that the board of directors is expressly authorized to adopt, alter, or repeal our Bylaws;

 

 

	
 
	
o
	
establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and

	
 
	
o
	
require the approval of holders of at least two-thirds of the outstanding shares of common stock to amend the Bylaws and certain provisions of our Certificate of Incorporation if Onex ceases to own more than 50% of all our outstanding common stock.

Under our Bylaws and the Certificate of Designations for the Series A Preferred Stock, holders of shares of our Series A Preferred Stock are entitled to vote on an as-converted basis with the holders of shares of our common stock and not as a separate class with respect to the matters described above. In addition, holders of Series A Preferred Stock have the rights described above under “-- Series A Preferred Stock Voting as a Separate Class.” 

Delaware Takeover Statute

Subject to certain exceptions, Section 203 of the Delaware General Corporation Law (“DGCL”) prohibits a Delaware corporation from engaging in any “business combination” (as defined below) with any “interested stockholder” (as defined below) for a period of three years following the date that such stockholder became an interested stockholder, unless: (i) prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) on consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) on or subsequent to such date, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.

Section 203 of the DGCL defines “business combination” to include: (i) any merger or consolidation involving the corporation and the interested stockholder; (ii) any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; (iii) subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; (iv) any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or (v) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.

 

 

A Delaware corporation is permitted to opt-out of Section 203. In our Certificate of Incorporation, we have elected not to be governed by Section 203 of the DGCL, as permitted under and pursuant to subsection (b)(3) of Section 203.

Corporate Opportunity

Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to a corporation or its officers, directors, or stockholders. In our Certificate of Incorporation, to the fullest extent permitted by applicable law, we renounce any interest or expectancy that we have in any business opportunity, transaction, or other matter in which Onex, any officer, director, partner, or employee of any entity comprising an Onex entity, and any portfolio company in which such entities or persons have an equity interest (other than us) (each, an “Excluded Party”), participates or desires or seeks to participate in, even if the opportunity is one that we might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so. Each such Excluded Party shall have no duty to communicate or offer such business opportunity to us and, to the fullest extent permitted by applicable law, shall not be liable to us or any of our stockholders for breach of any fiduciary or other duty, as a director or officer or controlling stockholder, or otherwise, by reason of the fact that such Excluded Party pursues or acquires such business opportunity, directs such business opportunity to another person, or fails to present such business opportunity, or information regarding such business opportunity, to us. Notwithstanding the foregoing, our Certificate of Incorporation does not renounce any interest or expectancy we may have in any business opportunity, transaction or other matter that is (1) offered in writing solely to one of our directors or officers who is not also an Excluded Party, (2) offered to an Excluded Party who is one of our directors, officers or employees and who is offered such opportunity solely in his or her capacity as one of our directors, officers or employees, or (3) identified by an Excluded Party solely through the disclosure of information by or on our behalf.

Choice of Forum

Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (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, stockholder, employee or agent of the Company to us or our stockholders, (iii) any action asserting a claim against us, or our directors, officers or other employees, arising pursuant to any provision of the DGCL or our Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against us, or our directors, officers, stockholders or other employees, governed by the internal affairs doctrine. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of claims to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers and may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

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