System1 Inc

This management proposal asks stockholders to approve the issuance of 39,250 shares of Series A Cumulative Convertible Preferred Stock to participating lenders as part of a negotiated exchange intended to repay and replace the Company’s existing credit facilities. Management states the issuance is part of a larger Transaction that replaces the Existing Loans with a new $150.0 million term loan, $31.38 million in cash consideration (subject to reduction), and the Preferred Shares with an aggregate initial stated value of $39.25 million; the Preferred Shares have an initial conversion price of $10.40, which would convert into 3,775,000 shares of Class A Common Stock (approximately 37.8% of outstanding Common Stock as of the record date). The proposal is driven by NYSE Listed Company Manual Section 312.03, which requires shareholder approval prior to issuance of securities that could result in issuance equal to or in excess of 20% of outstanding voting power; management needs approval both to satisfy NYSE rules and as a closing condition to the Exchange Agreement/Stock Purchase Agreement. Key economic terms: cumulative dividends at 7.0% per annum (payable quarterly, compounding if not paid in cash), maturity January 14, 2031, registration rights for resales, transfer restrictions (including prohibitions to competitors and disqualified lenders), and customary anti-dilution and conversion-price adjustment mechanics. Notably, holders will have the right to appoint one director while at least 19,625 Preferred Shares remain outstanding and have certain consent rights while at least 9,812 shares remain outstanding; negative covenants also limit incurrence of indebtedness above specified thresholds while Preferred Shares remain. The Board recommends FOR because the Transaction is intended to materially reduce indebtedness, extend maturities, resolve pending lender litigation, and improve financial flexibility; however, approval will dilute existing stockholders materially and could shift governance influence to the Preferred holders upon conversion or while consent/board appointment thresholds persist. Approval is a condition to closing: failure to obtain stockholder approval by the outside date would terminate the Exchange Agreement and leave the Company exposed to the existing credit arrangements and pending litigation. Investors should weigh management’s liquidity and restructuring rationale against the immediate and potentially material dilution, the governance rights and consent thresholds granted to Preferred holders, and the terms (dividend/interest, maturity, covenants and registration mechanics) that govern the Preferred Shares.