UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 8, 2024
THE CONTAINER STORE GROUP, INC.
(Exact name of registrant as specified in its
charter)
Delaware |
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001-36161 |
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26-0565401 |
(State
or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(IRS
Employer
Identification No.) |
500
Freeport Parkway
Coppell,
TX |
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75019 |
(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number,
including area code: (972) 538-60000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if
the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions
(see General Instruction A.2. below):
| ¨ | Written communications pursuant
to Rule 425 under the Securities Act (17 CFR 230.425) |
| x | Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, $0.01 Par Value |
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TCS |
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New York Stock Exchange |
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Preferred Stock Purchase Rights
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— |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company ¨
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01. Entry Into a
Material Definitive Agreement
Issuance and Sale of
Series B Convertible Preferred Stock
On October 15,
2024, The Container Store Group, Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement
(the “Purchase Agreement”) with Beyond, Inc., a Delaware corporation (the “Purchaser”). Pursuant to the Purchase
Agreement (and subject to the conditions contained therein), the Company has agreed to issue and sell to the Purchaser and the Purchaser
has agreed to purchase from the Company (the “Equity Investment”) (a) 40,000 shares of a new class of its capital stock
titled its “Series B Convertible Preferred Stock” (the “Series B Convertible Preferred Stock”) with
an initial conversion price of $17.25 plus (b) the number of shares of Series B Convertible Preferred Stock attributable
to the Purchaser’s expenses incurred in connection with the Purchase Agreement and the Equity Investment (not to exceed $500,000)
for an aggregate purchase price of $40,000,000. In connection with the issuance of the Series B Convertible Preferred Stock, the
Company will file a Certificate of Designations (the “Certificate of Designations”) with the Secretary of State of the State
of Delaware designating, authorizing an aggregate of 40,500 shares, and establishing the terms, of the Series B Convertible Preferred
Stock.
The Purchase
Agreement contains customary representations, warranties and covenants of the Company and the Purchaser, including covenants relating to
the conduct of the Company’s business between the date of the signing of the Purchase Agreement (the “Signing” and such
date of Signing, the “Signing Date”) and the closing of the Equity Investment (the “Closing” and such date of
Closing, the “Closing Date”). Such covenants include, among other things, restrictions on the Company’s ability to issue
equity interests or incur indebtedness for borrowed money, in each case, outside the ordinary course of business between the Signing Date
and the Closing Date (such period, the “Interim Period”). The Purchase Agreement also provides that during the Interim Period,
the Company is prohibited from initiating, soliciting or encouraging change of control proposals from third parties, other than the Purchaser.
The Equity
Investment is subject to certain closing conditions, including the Company refinancing or amending its existing secured credit facilities
in a manner that is acceptable to the Purchaser in its sole discretion.
The Purchase
Agreement contains termination rights for the Company and the Purchaser, including, among others, by either the Company or the Purchaser
if the Closing does not occur before January 31, 2025 by reason of the failure of any of the applicable closing conditions set forth
in the Purchase Agreement to be satisfied.
Restrictions on Transfer
Following the Closing
Date, the Purchaser may not transfer any of the Series B Convertible Preferred Stock to any person, except to affiliates of Purchaser
and in connection with certain financings.
Designations of Series B
Convertible Preferred Stock
The Series B Convertible Preferred Stock
will have a par value of $0.01 per share and a liquidation preference of $1,000 per share (the “Liquidation Preference”).
The Series B Convertible Preferred Stock will rank senior to the Company’s common stock, $0.01 par value per share (the “Common
Stock”), with respect to the payment of dividends and the distribution of assets upon the Company’s liquidation, dissolution
or winding up. If the Company liquidates, dissolves or winds up, whether voluntarily or involuntarily, then the holders of the Series B
Convertible Preferred Stock will be entitled to receive payment of the Change of Control Repurchase Price (as defined below) out of the
Company’s assets or funds legally available for distribution to its stockholders, before any such assets or funds are distributed
to, or set aside for the benefit of, holders of the Common Stock or other junior stock.
The Series B Convertible Preferred
Stock will accumulate cumulative dividends at a rate per annum equal to 10% on the Liquidation Preference thereof (the
“Regular Dividend Rate”), regardless of whether or not declared or funds are legally available for their payment (such
dividends that accumulate on the Series B Convertible Preferred Stock pursuant to this sentence, “Regular
Dividends”); provided, however,
that if the “Requisite Stockholder Approval” (as defined in the Certificate of Designations to cover certain approvals
under the New York Stock Exchange Listing Standards relating to the voting and conversion rights of the Series B Convertible
Preferred Stock) has not been obtained or the “Financing Change of Control Amendment” (as defined in the Certificate of
Designations, which generally refers to the amendment of certain change of control provisions (or negotiation of such provisions, in
the case of a refinancing) of the Company’s credit agreements, permitting the Purchaser and its affiliates to own more than
35% of the Company’s voting equity securities) has not been effectuated on or before December 31, 2024 (the
“Requisite Approvals Deadline Date”), then on the Requisite Approvals Deadline Date, and on each one (1) year
anniversary thereto (if the Requisite Stockholder Approval has not been obtained, or the Financing Change of Control Amendment has
not been effectuated, by such anniversary), the Regular Dividend Rate will be increased by an additional 100 basis points until such
time that the Requisite Stockholder Approval is obtained and the Financing Change of Control Amendment is effectuated, at which time
the Regular Dividend Rate will be adjusted to 10% per annum. Dividends will accumulate, quarterly in arrears (each a “Regular
Dividend Payment Date”), beginning on the first applicable date following the Closing Date. On each Regular Dividend Payment
Date, the dollar amount (expressed as an amount per share of Series B Convertible Preferred Stock) of dividends that have
accumulated on the Series B Convertible Preferred Stock during a “Regular Dividend Period” (as defined in the
Certificate of Designations) will (automatically and without the need of any action on the part of the Company or any other person)
be added to the Liquidation Preference of each share of Series B Convertible Preferred Stock outstanding as of such time.
Dividends will not be paid in cash except to the extent included in the “Change of Control Repurchase Price” (as defined
in the Certificate of Designations) or the Redemption Price (as defined below) for the Series B Convertible Preferred
Stock.
Unless previously converted, repurchased or
redeemed, each outstanding share of Series B Convertible Preferred Stock will, subject to the availability of sufficient funds
legally available, automatically be redeemed (the “Mandatory Redemption”) for a cash purchase price equal to
(i) the Liquidation Preference of such share as of the close of business on the date that is five (5) years from the
initial issuance date (the “Mandatory Redemption Date”) for such Mandatory Redemption; plus (ii) accumulated and
unpaid Regular Dividends on such share to, but excluding, such Mandatory Redemption Date (to the extent such accumulated and unpaid
Regular Dividends are not included in such Liquidation Preference) (the “Redemption Price”).
Subject to certain exceptions, the holders of
the Series B Convertible Preferred Stock will have the right to convert all or any portion of their shares of Series B Convertible
Preferred Stock at any time before the Mandatory Redemption into a number of shares of Common Stock equal to the quotient obtained by
dividing (i) the Liquidation Preference of such share of Series B Convertible Preferred Stock immediately before the close of
business on the conversion date for such conversion plus accumulated and unpaid dividends, if any, not included in such Liquidation Preference;
by (ii) the conversion price in effect immediately before the close of business on such conversion date (the “Conversion Consideration”).
The initial conversion price is equal to $17.25, which is subject to customary anti-dilution adjustment provisions.
In addition, the Series B Convertible Preferred
Stock will automatically convert in certain circumstances and subject to certain conditions if the Company amends the maturity date of
its senior secured term loans to a date no earlier than January 31, 2028 or if a “Change of Control” (as defined in the
Certificate of Designations) occurs and the Company elects to cause the Series B Convertible Preferred Stock to convert.
If a Change of Control occurs, then the holders
of the Series B Convertible Preferred Stock will have the right, subject to the availability of sufficient funds legally available,
to require the Company to repurchase all, or any whole number of shares that is less than all, of such holder’s Series B Convertible
Preferred Stock for a cash purchase price equal to the product of (i) 115% and (ii) the sum of (A) Liquidation Preference
of such share at the close of business on the repurchase date for such Change of Control and (B) accumulated and unpaid Regular
Dividends on such share to, but excluding, such repurchase date for such Change of Control (to the extent such accumulated and unpaid
Regular Dividends are not included in such Liquidation Preference) (the “Change of Control Repurchase Price”).
The Series B Convertible Preferred Stock
will have voting rights with respect to certain amendments to the Company’s Amended and Restated Certificate of Incorporation or
the Certificate of Designations, certain business combination transactions and certain other matters. Subject to certain limitations,
holders of the Series B Convertible Preferred Stock will also have the right to vote on an as-converted basis, together as a single
class with the holders of the Common Stock on each matter submitted for a vote or consent by the holders of the Common Stock.
Stockholders Agreement
In
connection with the Equity Investment, at the Closing, the Company and the Purchaser will enter into a Stockholders Agreement (the
“Stockholders Agreement”).
Purchaser’s Directors
and Nominees
After
the Closing Date and until the date that the Series B Convertible Preferred Stock is required to convert into Common Stock in accordance
with the Certificate of Designations (the “Conversion Date”), for so long as the Purchaser’s percentage ownership of
the Company (measured on an as-converted basis) (the “Share Percentage Ownership”) is at least 10%, the Purchaser will have
the right to nominate one (1) director for election to the board of directors of the Company (the “Board”).
After
the Conversion Date, for so long as the Purchaser’s Share Percentage Ownership is (a) at least 20%, the Purchaser will have
the right to nominate two (2) directors for election to the Board or (b) less than 20% but greater than 10%, the Purchaser will
have the right to nominate one (1) director for election to the Board.
If the
Purchaser’s Share Percentage Ownership is less than 10%, it will not have the right to nominate any directors for election to the
Board.
In
addition, prior to the Conversion Date, the Purchaser has the right to designate one (1) non-voting observer to the Board.
Standstill
Subject
to certain customary exceptions, until the earlier of (i) one (1) year anniversary of the Conversion Date and
(ii) the date that the Commercial Agreement (as defined below) is validly terminated by the Purchaser due to a material breach
by the Company of the terms thereof (the “Standstill Expiration Date”), the Purchaser will be prohibited from, among
other things, (i) acquiring equity securities of the Company, (ii) effecting an acquisition, by tender or exchange offer,
merger, amalgamation or a similar business combination, of the Company, (iii) soliciting proxies or seeking a
director/management change in the Company, (iv) forming, joining or participating in any “group” (as defined
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), (the "Exchange Act") with respect to the Company and
(v) nominating candidates for election to the Board or otherwise seeking representation on the Board (subject to the
Purchaser’s nomination rights) or seeking removal of any member of the Board (except for such person nominated by the
Purchaser).
Voting
Rights
Subject
to the Purchaser’s rights to nominate a director to the Board, until the Standstill Expiration Date, at each annual or special
meeting of the stockholders of the Company, the Purchaser will agree to vote all of the shares of Series B Convertible
Preferred Stock, shares of Common Stock issued upon conversion of such Series B Convertible Preferred Stock, and other shares
of Common Stock owned, directly or indirectly, of record or beneficially by the Purchaser (i) in favor of each director
nominated or recommended by the Board for election at any such meeting, and against the removal of any director who has been elected
following nomination or recommendation by the Board and (ii) against any stockholder nomination for director that is not
approved and recommended by the Board for election at any such meeting. The Purchaser also will agree to be present, in person or
by proxy, at all meetings of the stockholders of the Company.
Information
Rights
For
so long as the Purchaser’s Share Ownership Percentage is at least 10%, the Purchaser will be entitled to customary information
rights, including, audited annual and unaudited quarterly financial statements of the Company.
Participation
and Notification Rights
The
Stockholders Agreement also will grant the Purchaser certain participation and notification rights, including, among other things
(i) from and after Closing Date, until the Standstill Expiration Date, the Company is required to provide the Purchase written
notice of any unsolicited acquisition proposal regarding a potential fundamental change or change of control and (ii) so long
as the Purchaser’s Share Ownership Percentage is at least 10%, if the Company determines to initiate a strategic alternatives
process that could reasonably be expected to give rise to a change of control transaction or other extraordinary transaction, the
Company will be required to provide the Purchaser written notice and provide the Purchaser a bona fide opportunity to participate in
such strategic alternatives process (but the Company will not be obligated to enter into a strategic alternative transaction with
the Purchaser in connection with such process).
Registration Rights
Pursuant
to the Stockholders Agreement, the Company also will grant, among other things, the Purchaser certain registration rights. Pursuant
to these rights, the Company will be required to use its reasonable best efforts to cause the registration of the shares of Common
Stock issued or issuable upon conversion of the Series B Convertible Preferred Stock.
Voting Agreement
On October 15,
2024, in connection with the Equity Investment, the Company, the Purchaser and certain of the Company’s stockholders (including
Leonard Green & Partners, L.P.) and the Company’s directors and officers (each, a “Specified Company Stockholder”
and collectively, the “Specified Company Stockholders”) each entered into a Voting Agreement (the “Voting Agreement”)
pursuant to which each Specified Company Stockholder agreed to refrain from taking certain corporate actions regarding the Company and
agree to vote all of their shares of Common Stock (and other equity interests of the Company then-owned) in favor of the proposal to remove
the 19.9% cap at the Stockholder Meeting.
Rights Plan Amendment
On October 15,
2024, the Company and Equiniti Trust Company (the “Rights Agent”) entered into an Amendment (the “Rights Agreement Amendment”)
to the Rights Agreement, by and between the Company and the Rights Agent, dated as of October 8, 2024 (the “Rights Agreement”),
which provides that none of the Purchaser or its Permitted Transferees (as defined in the Purchase Agreement) will be deemed an “Acquiring
Person” (as defined in the Rights Agreement), either individually or together, solely by virtue of or as a result of, (i) the
approval, adoption, execution, delivery or performance of the Transaction Documents (as defined in the Purchase Agreement), (ii) the
acquisition or right to acquire beneficial ownership of the Common Stock, as a result of the execution and entry into of the Transaction
Documents, including any conversion of the shares of Series B Convertible Preferred Stock into Common Stock acquired pursuant thereto,
or (iii) the announcement or consummation of any of the transactions contemplated by the Transaction Documents. The Rights Agreement
otherwise remains in full force an effect in accordance with the terms previously disclosed by the Company.
The foregoing
description of the Rights Agreement Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the
full text of the Rights Agreement Amendment, a copy of which is being filed as Exhibit 10.1 hereto and is incorporated by reference
herein.
Credit
Agreement Amendment
On October 8, 2024, The Container Store, Inc.
(“TCS”), a wholly-owned subsidiary of the Company, entered into Amendment No. 9 (the “Amendment”) to that
certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, extended, restated, replaced, or supplemented prior to
the effectiveness of the Amendment, the “Existing Term Loan Credit Agreement”) among TCS, the guarantors party thereto, including
the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, which constituted the Required Lenders
(as defined in the Existing Term Loan Credit Agreement).
The Amendment amends
the Existing Term Loan Credit Agreement to, among other things: (i) waive the testing of the consolidated leverage ratio covenant
(defined in the Existing Term Loan Credit Agreement as the ratio of total debt to consolidated EBITDA) for the second quarter of fiscal
year 2024, (ii) add a covenant for the Company to enter into a qualified financing transaction, subject to the approval of the Required
Lenders by November 15, 2024 (as such date may be extended by the Required Lenders), and (iii) amend certain of the covenants
in the Existing Credit Term Loan Agreement, which, among other things, further restrict the Company and its subsidiaries’ ability
to incur additional indebtedness or engage in certain non-ordinary course transactions. In connection with the Amendment, a customary
fee was paid in-kind to consenting lenders.
Item
2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information
contained in Item 1.01 with respect to the Amendment is incorporated by reference into this Item 2.03.
Item
3.02. Unregistered Sales of Equity Securities
The
information contained in Item 1.01 with respect to the Purchase Agreement is incorporated by reference into this Item 3.02. The
issuance and sale of 40,500 shares of Series B Convertible Preferred Stock (together with the amount of shares attributable to
the Purchaser's expenses, as described above) by the Company to the Purchaser pursuant to the Purchase Agreement is exempt from
registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The
Purchaser has represented to the Company that it is an “accredited investor” as defined in Rule 501 of the
Securities Act and that the Series B Convertible Preferred Stock are being acquired for investment purposes and not with a view
to, or for sale in connection with, any distribution thereof, and appropriate legends will be affixed to any certificates evidencing
shares of Series B Convertible Preferred Stock or shares of Common Stock issued in connection with any future conversion of the
Series B Convertible Preferred Stock.
The shares
of Common Stock issuable to the Purchaser upon conversion of shares of the Series B Convertible Preferred Stock will be issued in
reliance upon the exemption from registration in Section 3(a)(9) of the Securities Act or pursuant to another available exemption.
Item
3.03. Material Modification to Rights of Security Holders
The information
contained in Item 1.01, other than with respect to the Credit Agreement Amendment, is incorporated by reference into this Item
3.03.
Item
5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
The information
contained in Item 1.01 with respect to the Certificate of Designations is incorporated by reference into this Item 5.03.
Item
7.01. Regulation FD Disclosure
On October 15,
2024, the Company issued a press release (the “Press Release”) announcing the Company’s execution of the Purchase Agreement
and the Amendment. The full text of the Press Release is attached as Exhibit 99.1 to this Current Report and is incorporated by reference
herein.
The information
disclosed in this Item 7.01 (including Exhibit 99.1) shall not be deemed “filed” for purposes of the Exchange Act , or otherwise subject to the liabilities of that section,
nor shall it be deemed incorporated by reference in any filing under the Securities Act, or the Exchange Act, except
as expressly provided by specific reference in such a filing.
Item 8.01. Other Events
Collaboration
Agreement
On October 15,
2024, in connection with the Equity Investment, the Company and the Purchaser entered into a Collaboration Agreement (the “Collaboration
Agreement”) pursuant to which each of the Company and the Purchaser desire to work together to identify, evaluate and prioritize
collaboration opportunities which are mutually beneficial to their respective business, including, among other things, (i) reducing
customer acquisition costs and increasing marketing ROI through sharing customer data (where possible) and joint marketing efforts across
their respective organizations and affiliates, (ii) enhancing mutual assortments by leveraging relevant brands, products, and channels
across their respective organizations and affiliates, (iii) optimizing the .com experience by sharing technical resources and services,
as well as products, branding and creative content across their respective organizations and affiliates, (iv) capturing benefits
of scale by sharing resources (i.e., technical, product, data, vendor, people, etc.) across their respective organizations and affiliates
and (v) delivering better customer experiences, convenience, and value by offering cross-company programs (i.e., offers, integrated
loyalty program, credit card).
If the
Purchase Agreement is terminated prior to the Closing, the Collaboration Agreement will automatically terminate.
Item 9.01. Financial Statements and Exhibits
(d)
Exhibits
About The Container Store Group, Inc.
The Container Store Group, Inc.
The Container Store Group, Inc. (NYSE: TCS)
is the nation’s leading specialty retailer of organizing solutions, custom spaces, and in-home services – a concept they originated
in 1978. Today, with locations nationwide, the retailer offers more than 10,000 products designed to transform lives through the power
of organization.
Visit www.containerstore.com for more
information about products, store locations, services offered and real-life inspiration.
Follow The Container Store on Facebook, X, Instagram,
TikTok, YouTube, Pinterest, and LinkedIn.
Additional Information About the Transaction
and Where to Find It
This communication relates to, among other things,
the proposed transaction of the issuance of preferred stock by the Company pursuant to the definitive documents, which provides that
the Company shall use efforts to call and hold a special meeting of the stockholders of the Company, as promptly as reasonably practicable
following the closing of the transaction, to seek stockholder approval. In connection with the proposed special meeting of stockholders
to seek stockholder approval, the Company will file relevant materials with the Securities Exchange Commission (the “SEC”),
including the Company’s proxy statement on Schedule 14A (the “Proxy Statement”). This communication is not a substitute
for the Proxy Statement or any other document that the Company may file with the Securities Exchange Commission or send to its stockholders
in connection with the proposed transaction. INVESTORS AND STOCKHOLDERS OF THE CONTAINER STORE ARE URGED TO READ THE DEFINITIVE PROXY
STATEMENT AND OTHER RELEVANT MATERIALS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE CONTAINER STORE AND THE PROPOSED TRANSACTION. Investors may obtain a free copy of these materials (when they are
available) and other documents filed by The Container Store with the SEC at the SEC’s website at www.sec.gov or from The
Container Store at its website at https://investor.containerstore.com.
Participants in the Solicitation
The Container Store and certain of its directors,
executive officers and other members of management and employees may be deemed to be participants in soliciting proxies from its stockholders
in connection with the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be considered
to be participants in the solicitation of The Container Store’s stockholders in connection with the proposed transaction will be
set forth in The Container Store’s definitive proxy statement for its stockholder meeting at which the proposed transaction will
be submitted for approval by The Container Store’s stockholders. You may also find additional information about The Container Store’s
directors and executive officers in The Container Store’s Annual Report on Form 10-K for the fiscal year ended March 30,
2024, which was filed with the SEC on May 28, 2024, The Container Store’s Definitive Proxy Statement for its 2024 annual meeting
of stockholders, which was filed with the SEC on July 9, 2024, and in subsequently filed Current Reports on Form 8-K and
Quarterly Reports on Form 10-Q.
Forward Looking Statements
This communication contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this communication that do not
relate to matters of historical fact should be considered forward-looking statements, including statements regarding the terms and potential
benefits of our collaboration with Beyond; expectations regarding positive same store sales growth, improved profitability and creating
shareholder value; Beyond’s potential equity investment, the potential amendment or refinancing of our debt; and our strategies,
priorities, challenges and initiatives and growth opportunities. These forward-looking statements are based on management’s current
expectations. These statements are neither promises nor guarantees but involve known and unknown risks, uncertainties and other important
factors that may cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements, including, but not limited to, risks relating to our collaboration
with Beyond; the equity investment by Beyond is subject to conditions, including our ability to amend or refinance our debt in a manner
commercially acceptable to Beyond; and the other important factors discussed under the caption “Risk Factors” in our Annual
Report on Form 10-K on May 28, 2024 filed with the Securities and Exchange Commission (the “SEC”) and our other
reports filed with the SEC. These factors could cause actual results to differ materially from those indicated by the forward-looking
statements made in this communication. Any such forward-looking statements represent management’s estimates as of the date of this
communication. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to
do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing
our views as of any date subsequent to the date of this communication.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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The Container Store Group, Inc. |
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(Registrant) |
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Date: October 15, 2024 |
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By: |
/s/ Satish Malhotra |
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Name: |
Satish Malhotra |
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Title: |
President & Chief Executive Officer |
Exhibit 10.1
Amendment
No. 1 TO RIGHTS AGREEMENT
THIS Amendment
No. 1 (the “Amendment No. 1”), dated as of October 15, 2024, to the Rights Agreement (as amended
or modified from time to time, the “Rights Agreement”), dated October 8, 2024, between The Container Store
Group, Inc., a Delaware corporation (the “Company”), and Equiniti Trust Company, LLC (the “Rights
Agent”), is being executed at the direction of the Company and shall be effective immediately prior to the Company’s
entry into that certain Securities Purchase Agreement (as it may be amended or modified from time to time, the “Securities
Purchase Agreement”) to be entered into by and between the Company and Beyond, Inc., a Delaware corporation; provided, however,
if the Securities Purchase Agreement is not executed as of the date herewith, this Amendment No. 1 shall terminate, in either such
case, immediately (without any further action or notice required), and shall be of no further force and effect. Capitalized terms
used in this Amendment No. 1 and not otherwise defined herein shall have the meanings given them in the Rights Agreement.
WHEREAS, Section 26
of the Rights Agreement provides that, for so long as the Rights are then redeemable, the Company may and the Rights Agent shall, if the
Company so directs, supplement or amend any provision of the Rights Agreement without the approval of any holders of Rights or Common
Stock, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent;
WHEREAS, pursuant to
Section 26 of the Rights Agreement, the Company has delivered to the Rights Agent a certificate signed by an appropriate officer
of the Company certifying that the proposed amendment of the Rights Agreement is in compliance with the terms of Section 26 of the
Rights Agreement; and
WHEREAS, as of the
date of this Amendment No. 1, to the knowledge of the Company, no Trigger Event has occurred and the Rights are redeemable in accordance with
the Rights Agreement.
NOW, THEREFORE, in
consideration of the foregoing and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:
| 1. | Section 1.1 of the Rights Agreement is hereby amended by adding the following sentences to the end
of such Section 1.1: |
Notwithstanding anything in this Agreement
to the contrary, none of the Beyond Holders shall be deemed to be an Acquiring Person, either individually or collectively, by virtue
of or as a result of (i) the approval, adoption, execution, delivery or performance of the Transaction Documents, (ii) the
acquisition or the right to acquire beneficial ownership of the Common Stock as a result of the execution of and entry into the Transaction
Documents, including upon any conversion of Preferred Shares (as defined therein) acquired pursuant thereto, or (iii) the announcement
or consummation of any of the transactions contemplated by the Transaction Documents (collectively the “Permitted Events”
and each a “Permitted Event”).
| 2. | Section 1.3 of the Rights Agreement is hereby amended by adding the following sentence to the end
of such Section 1.3: |
Notwithstanding anything in this Section 1.3
or this Agreement to the contrary, the Beyond Holders, either individually or together, shall not be, and shall not be deemed to be, a
‘Beneficial Owner’ of, or to ‘Beneficially Own,’ any securities solely by virtue of, or as a result of, any Permitted
Event.
| 3. | Section 1 of the Rights Agreement is hereby amended by adding the following new Section 1.16
immediately following Section 1.15: |
1.16 The
following additional terms shall have the meanings indicated:
(a) “Beyond”
shall mean Beyond, Inc., a Delaware corporation.
(b) “Securities
Purchase Agreement” shall mean that certain Securities Purchase Agreement dated as of October 15, 2024 by and between the Company
and Beyond, as amended or modified from time to time in accordance with the terms thereof.
(c) “Beyond
Holders” shall mean Beyond, together with its Permitted Transferees (as defined in the Securities Purchase Agreement) who acquire
Series B Preferred Shares (as defined in the Securities Purchase Agreement) pursuant to and in accordance with the terms and conditions
of the Securities Purchase Agreement or Common Stock due to the conversion of such Preferred Shares into shares of Common Stock, and
each of their respective Affiliates and Associates.
(d) “Transaction
Documents” shall have the meaning ascribed to such term in the Securities Purchase Agreement.
4. The
following is added as a new Section 35 of the Rights Agreement:
Section 35. Transaction Documents.
Notwithstanding anything in this Agreement to the contrary, none of Permitted Events shall result in, (x) the deemed occurrence of
any of a Trigger Event, a Stock Acquisition Date or a Distribution Date or (y) the separation of the Rights from the Common Stock.
4. Other
than as expressly provided in this Amendment No. 1, the Rights Agreement shall not otherwise be supplemented or amended by virtue of this Amendment No. 1,
but shall remain in full force and effect. This Amendment No. 1 may be executed in one or more counterparts, including by facsimile or PDF copy,
all of which shall be considered one and the same amendment and each of which shall be deemed an original.
5. Section 32
of the Rights Agreement shall apply to this Amendment No. 1 mutatis mutandis.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF,
the parties hereto have caused this Amendment No. 1 to be duly executed and attested, all as of the day and year first above written.
THE CONTAINER STORE GROUP, INC. |
|
EQUINITI TRUST COMPANY, LLC, as Rights Agent |
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|
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By: |
/s/ Satish Malhotra |
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By: |
/s/ Michael Legregin |
Name: |
Satish Malhotra |
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Name: |
Michael Legregin |
Title: |
President & Chief Executive Officer |
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Title: |
Senior Vice President, Corporate Actions Relationship Management & Operations |
SIGNATURE
PAGE TO Amendment No. 1 TO RIGHTS AGREEMENT
Exhibit 99.1
Filed by The Container Store Group, Inc.
Pursuant to Rule 14a-12 under the Securities Exchange
Act of 1934
Subject Company: The Container Store Group, Inc.
Commission File No.: 001-36161
The Container Store Group, Inc. and Beyond,
Inc. Announce Strategic Partnership Leveraging Both
the Iconic Bed Bath and Beyond Brand and The Container Store
Beyond, Inc. enters into agreement to Invest
$40 million in The Container Store Group, Inc. through Preferred Equity Transaction
Coppell,
TX & Midvale, Utah – October 15, 2024 – The Container Store Group, Inc. (NYSE: TCS) (“The Container Store”
or “the Company”), the nation’s leading specialty retailer offering custom spaces, organizing solutions, and
in-home services and Beyond, Inc. (NYSE:BYON) (“Beyond”), owner of Bed Bath & Beyond, Overstock, Zulily, and other online
retail brands designed to unlock your home’s potential, today announced that the companies have entered into a strategic partnership
with the objective to improve customary experience utilizing both the Iconic Bed Bath and Beyond Brand and The Container Store.
The companies intend for the partnership to position The Container
Store to return to profitable comparable store growth over time by utilizing and benefitting from Beyond’s IP, customer data, network
of brands and affiliate relationships.
The companies expect key aspects of the partnership to include:
| · | Utilizing The Container Store’s world class real estate locations and utilizing the Bed Bath & Beyond brand to launch appropriately
sized spaces that showcase the iconic Bed Bath & Beyond assortment for kitchen, bath and bedroom which will be co-branded. With this
collaboration, the companies expect to drive increased traffic for The Container Store’s core assortment and its high margin, solution
driven Custom Spaces services business; |
| · | Beyond will offer a global loyalty program, multiple payment solutions and ancillary insurance and protection products through The
Container Store brick-and-mortar locations and website to capitalize on the whitespace opportunity for Custom Spaces and increase conversion
of design leads to drive growth through the well-established, vertically integrated model; |
| · | Beyond to integrate The Container Store’s differentiated and proprietary Custom Spaces offering, including its Elfa and Preston
product lines, across Beyond’s portfolio of e-commerce banners as well as other ventures where Bed Bath and Beyond future licensed
stores exist globally This will service to drive improved revenue, inventory turns and margins and improved customer experience for both
companies ; |
| · | The Container Store will join Beyond’s growing data platform and both companies will benefit from enhanced customer analytics
that The Container Store will use to improve conversion, drive traffic and reduce both customer acquisition and retention costs; and |
| · | Beyond to assist with expanded and renewed e-commerce platforms and strategies driving improved customer experience, customer conversion,
traffic monetization and profitability. |
As part of the terms of the collaboration, Beyond, Inc. has agreed
to invest $40 million in The Container Store through a preferred equity transaction subject to certain terms and conditions, including
an amendment or refinancing of The Container Store’s credit facilities in a manner commercially acceptable to Beyond.
“We are excited about the opportunities this partnership unfolds
for us. We believe its benefits will further our strategic initiatives including deepening our relationship with customers, expanding
our reach and strengthening our capabilities while accelerating our return to positive same store sales growth and profitability. This
agreement will enable us to harness Beyond’s data platform and analytics to better identify and target customers at critical points
in their purchase journeys and enhance communications with new and existing customers. It will allow us to expand our reach across our
combined network, and position us to leverage Beyond’s e-commerce expertise to further our own omni-channel tools and capabilities,”
said Satish Malhotra, CEO of The Container Store. “Beyond’s enthusiasm for this collaboration is reflected in the investment
they plan to make in The Container Store that will strengthen our financial position, allow us to continue to execute on our growth strategy
and deliver a best-in-class experience for our customers. We look forward to sharing more on our upcoming earnings call.”
Marcus Lemonis, Executive Chairman of Beyond, Inc., commented, “We
see tremendous whitespace for The Container Store’s best-in-class, solution-based offering across the entire Beyond portfolio, particularly
within its high margin Custom Spaces offering through the proprietary Elfa and Preston lines. We will build a lead management and conversion
model coupled with various consumer financial products to gain share and tap into a well-oiled, vertically integrated manufacturing platform
that has plenty of untapped capacity. Through the licensing of the Bed Bath and Beyond brand, The Container Store will enhance their store
format and current general merchandise offering by incorporating the most popular Bed Bath & Beyond products to drive improved financial
performance while providing customers a more fulsome product offering for their home and organizational needs.”
Lemonis added, “Partnerships like this further support the value
of iconic brands leveraging each other’s assets and core competencies while improving customer conversion and retention, enhancing
margins and optimizing marketing expenses which are the principal drivers in delivering value creation and profitable growth.”
Transaction Terms
Pursuant to the securities purchase agreement and contingent upon the
Company refinancing or amending its secured credit facilities, The Container Store will issue approximately 40,000 shares of a
newly created series of the Company’s preferred stock (the “Series B Preferred Shares”) to Beyond for an aggregate purchase
price of $40,000,000.
Following a refinancing or amendment of the Company’s credit
facilities and the approval by shareholders pursuant to a shareholder vote in Q4 2024 or Q1 2025, and subject to certain other conditions,
the Preferred stock would convert to Common Stock at a price of $17.25 which would result in ownership of approximately 40% of The Container
Store common equity by Beyond.
Latham & Watkins LLP served as legal counsel to The Container Store
and JP Morgan served as their financial advisor. King & Spaulding LLP served as legal counsel to Beyond and Goldman Sachs served as
their financial advisor.
In
addition, The Container Store announced that it has entered into an amendment of its existing term loan credit agreement, dated as of
April 6, 2012 with JPMorgan Chase Bank, N.A., as agent and the lenders party thereto.
Additional details of the transactions are included in a Form 8-K
filed with the SEC.
About The Container Store Group, Inc.
The Container Store Group, Inc. (NYSE: TCS) is
the nation’s leading specialty retailer of organizing solutions, custom spaces, and in-home services – a concept they originated
in 1978. Today, with locations nationwide, the retailer offers more than 10,000 products designed to transform lives through the power
of organization.
Visit
www.containerstore.com for more information about products, store locations, services offered and real-life inspiration.
Follow The Container Store on Facebook, X, Instagram,
TikTok, YouTube, Pinterest, and LinkedIn.
About Beyond
Beyond, Inc. (NYSE: BYON), based in Midvale, Utah,
is an ecommerce expert with a singular focus: connecting consumers with products and services that unlock their families’ and homes’
potential. The Company owns Overstock, Bed Bath & Beyond, Baby & Beyond, Zulily, and other related brands and associated intellectual
property. Its suite of online shopping brands features millions of products for various life stages that millions of customers visit each
month. Beyond regularly posts information about the Company and other related matters on the Newsroom and Investor Relations pages on
its website, Beyond.com.
Beyond, Bed Bath & Beyond, Welcome Rewards,
Zulily, Overstock and Backyard are trademarks of Beyond, Inc. Other service marks, trademarks and trade names which may be referred to
herein are the property of their respective owners.
Additional Information About the Transaction and Where to Find It
This communication relates to, among other things, the proposed transaction
of the issuance of preferred stock by the Company pursuant to the definitive documents, which provides that the Company shall use efforts
to call and hold a special meeting of the stockholders of the Company, as promptly as reasonably practicable following the closing of
the transaction, to seek stockholder approval. In connection with the proposed special meeting of stockholders to seek stockholder approval,
the Company will file relevant materials with the Securities Exchange Commission (the “SEC”), including the Company’s
proxy statement on Schedule 14A (the “Proxy Statement”). This communication is not a substitute for the Proxy Statement or
any other document that the Company may file with the Securities Exchange Commission or send to its stockholders in connection with the
proposed transaction. INVESTORS AND STOCKHOLDERS OF THE CONTAINER STORE ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT
MATERIALS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE CONTAINER
STORE AND THE PROPOSED TRANSACTION. Investors may obtain a free copy of these materials (when they are available) and other documents
filed by The Container Store with the SEC at the SEC’s website at www.sec.gov or from The Container Store at its website at https://investor.containerstore.com.
Participants in the Solicitation
The Container Store and certain of its directors, executive officers
and other members of management and employees may be deemed to be participants in soliciting proxies from its stockholders in connection
with the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be considered to be participants
in the solicitation of The Container Store’s stockholders in connection with the proposed transaction will be set forth in The Container
Store’s definitive proxy statement for its stockholder meeting at which the proposed transaction will be submitted for approval
by The Container Store’s stockholders. You may also find additional information about The Container Store’s directors and
executive officers in The Container Store’s Annual Report on Form 10-K for the fiscal year ended March 30, 2024, which
was filed with the SEC on May 28, 2024, The Container Store’s Definitive Proxy Statement for its 2024 annual meeting of stockholders,
which was filed with the SEC on July 9, 2024, and in subsequently filed Current Reports on Form 8-K and Quarterly Reports on
Form 10-Q.
Forward-Looking Statements
This
press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements
contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including
statements regarding the terms and potential benefits of our collaboration with Beyond; expectations regarding positive same store sales
growth, improved profitability and creating shareholder value; Beyond’s potential equity investment, the potential amendment or
refinancing of our debt; and our strategies, priorities, challenges and initiatives and growth opportunities. These forward-looking statements
are based on management’s current expectations. These statements are neither promises nor guarantees but involve known and unknown
risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited
to, risks relating to our collaboration with Beyond; the equity investment by Beyond is subject to conditions, including our ability
to amend or refinance our debt in a manner commercially acceptable to Beyond; and the other important factors discussed under the caption
“Risk Factors” in our Annual Report on Form 10-K on May 28, 2024 filed with the Securities and Exchange Commission (the “SEC”)
and our other reports filed with the SEC. These factors could cause actual results to differ materially from those indicated by the forward-looking
statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date
of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation
to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing
our views as of any date subsequent to the date of this press release.
Investors:
ICR, Inc. Farah Soi/Caitlin Churchill
203-682-8200
Farah.Soi@icrinc.com
Caitlin.Churchill@icrinc.com
Media:
ICR, Inc. Phil Denning/Lee Pacchia
332-242-4366
Phil.Denning@icrinc.com
Lee.Pacchia@icrinc.com
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