UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ______
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
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 |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of September 9, 2021, the registrant had
Table of Contents
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Page |
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PART I. |
1 |
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Item 1. |
1 |
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European Wax Center, Inc. |
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1 |
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2 |
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EWC Ventures, LLC and Subsidiaries |
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Condensed Consolidated Balance Sheets as of June 26, 2021 and December 26, 2020 |
5 |
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6 |
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7 |
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8 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
9 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
34 |
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Item 4. |
35 |
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PART II. |
36 |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 2. |
36 |
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Item 3. |
36 |
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Item 4. |
36 |
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Item 5. |
36 |
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Item 6. |
37 |
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38 |
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i
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
EUROPEAN WAX CENTER, INC.
Balance Sheets
(Unaudited)
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June 26, |
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April 1, |
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ASSETS |
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Cash |
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$ |
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$ |
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Total assets |
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$ |
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$ |
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STOCKHOLDER’S EQUITY |
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Common stock, par value $ |
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$ |
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$ |
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Additional paid-in capital |
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Total stockholder’s equity |
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$ |
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$ |
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The accompanying notes are an integral part of these balance sheets.
1
EUROPEAN WAX CENTER, INC.
Notes to BALANCE sHEETS
(Unaudited)
1. Nature of business and organization
European Wax Center, Inc. (the “Corporation”) was formed as a Delaware corporation on April 1, 2021. The Corporation was formed for the purpose of completing a public offering and related transactions in order to carry on the business of EWC Ventures, LLC and subsidiaries (the “Company”). The Corporation will be the sole managing member of the Company and will operate and control all of the businesses and affairs of the Company and continue to conduct the business now conducted by the Company.
2. Summary of significant accounting policies
Basis of accounting
The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Separate statements of operations, comprehensive income, changes in stockholder’s equity, and cash flows have not been presented in the financial statements because the Corporation has had no activities.
3. Stockholder’s equity
The Corporation is authorized to issue
4. Subsequent events
Reorganization Transactions
On August 4, 2021, we completed an internal reorganization which is referred to as the ("Reorganization Transactions.") The Reorganization Transactions are more fully described in our prospectus dated August 4, 2021, filed with the Securities and Exchange Commission (the "SEC") on August 6, 2021 pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended (the "Prospectus"). The following actions were taken as a result of the Reorganization Transactions:
2
Initial Public Offering and Debt Refinancing
On August 4, 2021, the Corporation’s registration statement on Form S-1 was declared effective by the SEC related to the IPO of its Class A common stock. In connection with the closing of the IPO on August 9, 2021, the following actions were taken:
Following the Reorganization Transactions, IPO and debt refinancing transactions described above our capital structure consisted of the following:
3
Immediately following the Reorganization Transactions and the closing of the IPO, the Company is the predecessor of the Corporation for financial reporting purposes. The Corporation is a holding company, and its sole material asset is its equity interest in the Company. As the sole managing member of the Company, the Corporation operates and controls all of the businesses and affairs of the Company and has a substantial financial interest in the Company. As such, the Corporation will consolidate the Company on its consolidated financial statements and will record a noncontrolling interest on its consolidated balance sheets and consolidated statements of operations and comprehensive income (loss) to reflect the entitlement of the EWC Ventures Post-IPO Members to a portion of the Company’s net income (loss). The Reorganization Transactions will be accounted for as a reorganization of entities under common control and the Corporation will recognize the assets and liabilities received in the reorganization at their historical carrying amounts as reflected in the historical consolidated financial statements of the Company.
Equity-based Compensation
In connection with our IPO, our board of directors adopted our 2021 Omnibus Incentive Plan (the “2021 Incentive Plan”) which became effective upon consummation of our IPO. The 2021 Incentive Plan provides for an aggregate of
In connection with our IPO, we granted
In connection with the Reorganization Transactions and the pricing of the IPO, all of the Company's outstanding equity interests, including its Class B Units, were reclassified into EWC Ventures Units, based on a hypothetical liquidation of EWC Ventures at the initial public offering price per share of our Class A common stock. In addition, all of EWC Management Holdco LLC's ("EWC Management Holdco") Class B Units were reclassified into the number of vested and unvested common units of EWC Management Holdco equal to the number of EWC Ventures Units into which such Class B Units would have been reclassified pursuant to the prior sentence.
Prior to the consummation of the IPO,
4
EWC Ventures, LLC and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands, except unit and per unit amounts)
(Unaudited)
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June 26, |
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December 26, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventory |
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Prepaid expenses and other current assets |
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Advances to related parties |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES, MEZZANINE EQUITY, AND MEMBERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued liabilities |
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$ |
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$ |
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Long-term debt, current portion |
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Deferred revenue, current portion |
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Other current liabilities |
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Total current liabilities |
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Long-term debt, net |
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Deferred revenue, net of current portion |
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Other long-term liabilities |
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Total liabilities |
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(Note ) |
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Mezzanine equity: |
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Class A Founders’ Units ( |
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Class D Units ( |
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Members’ equity: |
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Class A Units ( |
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Class B Unit ( |
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Class C Units ( |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total liabilities, mezzanine equity, and members’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements
5
EWC Ventures, LLC and Subsidiaries
CoNDENSED Consolidated Statements of Operations and Comprehensive Income (LOSS)
(Amounts in thousands, except unit and per unit amounts)
(Unaudited)
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For the Thirteen Weeks Ended |
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For the Twenty-Six Weeks Ended |
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June 26, 2021 |
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June 27, 2020 |
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June 26, 2021 |
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June 27, 2020 |
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REVENUE |
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Product sales |
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$ |
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$ |
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$ |
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$ |
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Royalty fees |
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Marketing fees |
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Other revenue |
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Total revenue |
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OPERATING EXPENSES |
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Cost of revenue |
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Selling, general and administrative(1) |
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Advertising |
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Depreciation and amortization |
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Total operating expenses |
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Income (loss) from operations |
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( |
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Interest expense |
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NET INCOME (LOSS) |
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$ |
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$ |
( |
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$ |
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$ |
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Items included in other comprehensive income (loss): |
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Unrealized gain on cash flow hedge |
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TOTAL COMPREHENSIVE INCOME (LOSS) |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Basic and diluted net income (loss) per unit |
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Class A Founders’ Units |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Class A Units |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Basic and diluted weighted average units outstanding |
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Class A Founders’ Units |
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Class A Units |
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(1) Includes the following amounts paid to related parties, see Note 11 |
$ |
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$ |
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$ |
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$ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
EWC Ventures, LLC and Subsidiaries
CONDENSED Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
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For the Twenty-Six Weeks Ended |
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June 26, 2021 |
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June 27, 2020 |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash provided by (used in) |
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Depreciation and amortization |
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Amortization of deferred financing costs |
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Provision for bad debts |
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— |
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Equity compensation |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Inventory |
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( |
) |
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( |
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Prepaid expenses and other assets |
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( |
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( |
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Accounts payable and accrued liabilities |
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( |
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Deferred revenue |
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( |
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Other long-term liabilities |
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( |
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Net cash provided by (used in) operating activities |
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( |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
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( |
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Reacquisition of area representative rights |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Proceeds on line of credit |
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— |
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Proceeds on long-term debt |
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— |
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Principal payments on long-term debt |
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( |
) |
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( |
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Deferred loan costs |
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— |
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( |
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Distributions to members |
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— |
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( |
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Contributions from members |
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Repurchase of Class A Units |
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( |
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— |
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Net cash (used in) provided by financing activities |
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( |
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Net (decrease) increase in cash |
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( |
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Cash, beginning of period |
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Cash, end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Non-cash investing activities: |
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Reacquired rights purchased included in accounts payable and accrued liabilities |
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$ |
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$ |
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Non-cash financing activities: |
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Non-cash equity distributions |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
7
EWC Ventures, LLC and Subsidiaries
CONDENSED Consolidated Statements of Mezzanine Equity and Members’ Equity
(Amounts in thousands, except unit and per unit amounts)
(Unaudited)
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Accumulated |
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MEZZANINE EQUITY |
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MEMBERS’ EQUITY |
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Additional |
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other |
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Total |
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Class A Founders’ Units |
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Class D Units |
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Class A Units |
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Class B Units |
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Class C Units |
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paid-in |
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Accumulated |
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comprehensive |
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members’ |
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Units |
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Amount |
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Units |
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Amount |
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Units |
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Amount |
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Units |
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Amount |
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Units |
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Amount |
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capital |
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deficit |
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loss |
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equity |
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Balance at December 26, |
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$ |
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$ |
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$ |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Equity compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchase of Class A |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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Contributions |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Unrealized gain on cash |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Accretion of Class A |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
) |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 27, |
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$ |
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$ |
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$ |
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$ |
— |
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|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||||||
Equity compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Unrealized gain on cash |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Accretion of Class A |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at June 26, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
|
|
MEZZANINE EQUITY |
|
|
MEMBERS’ EQUITY |
|
|
Additional |
|
|
|
|
|
other |
|
|
Total |
|
||||||||||||||||||||||||||||||||||||||
|
|
Class A Founders’ Units |
|
|
Class D Units |
|
|
Class A Units |
|
|
Class B Units |
|
|
Class C Units |
|
|
paid-in |
|
|
Accumulated |
|
|
comprehensive |
|
|
members’ |
|
|||||||||||||||||||||||||||||
|
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
loss |
|
|
equity |
|
||||||||||||||
Balance at December 28, |
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||||
Equity compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized loss on cash |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Reduction of Class A |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at March 28, |
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||||
Equity compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other Contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Contribution from issuance |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Unrealized gain on cash |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Reduction of Class A |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 27, 2020 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
EWC Ventures, LLC and Subsidiaries
Notes to CONDENSED Consolidated Financial Statements
(Amounts in thousands, except unit and per unit amounts)
(Unaudited)
1.
EWC Ventures, LLC (the “Company” or “EWC Ventures”) was organized on December 12, 2012 as a limited liability company in the State of Delaware. Through its wholly owned subsidiaries, the Company is engaged in selling franchises of European Wax Center, distributing facial and body waxing products to franchisees and providing waxing services directly to consumers at various locations throughout the United States.
On August 8, 2018, the Company entered into an Agreement and Plan of Merger (“Merger”) with General Atlantic (EW) Collections, L.P. (“GA Collections”), an entity controlled by affiliates of General Atlantic LLC (“General Atlantic”), and EWC Merger Sub, LLC pursuant to which, GA Collections agreed to acquire a controlling interest in the Company. The merger closed on September 25, 2018 (the “GA Acquisition”) and the Company became a subsidiary of GA Collections on that date.
The Company operates on a fiscal calendar which, in a given year, consists of a 52 or 53 week period ending on the Saturday closest to December 31st. The quarters ended June 26, 2021 and June 27, 2020 both consisted of 13 weeks.
These unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates that the Company will realize its assets and satisfy its liabilities in the ordinary course of business and as such, include no adjustments that might be necessary in the event that the Company is unable to operate on this basis.
2. Summary of significant accounting policies
(a) Basis of presentation and consolidation
The accompanying unaudited condensed consolidated financial statements have been presented in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The condensed consolidated balance sheet as of December 26, 2020 is derived from the audited consolidated financial statements but does not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 26, 2020 included in our prospectus dated August 4, 2021, filed with the SEC on August 6, 2021 pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended (referred to herein as the “Prospectus”).
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation.
Accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the audited consolidated financial statements and the related notes thereto for the year ended December 26, 2020 included in our Prospectus.
(b) Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the financial statements include revenue recognition, inventory reserves, the expected life of franchise agreements, the useful life of reacquired rights, valuation of equity-based compensation awards, and the evaluation of the recoverability of goodwill and long-lived assets, including indefinite-lived intangible assets. Actual results could differ from those estimates.
(c) COVID-19 pandemic
The Company is continuing to monitor the ongoing COVID-19 pandemic and its impact on its business. Beginning in March 2020, in response to the COVID-19 pandemic, most franchisees temporarily closed their centers in order to promote the health and safety of its
9
members, team members and their communities. In April 2020, the entire franchise network was temporarily closed. Beginning in May 2020, certain governors announced steps to restart non-essential business operations in their respective states and certain centers began to re-open. As of June 2021, all of the Company’s nationwide network had re-opened. However, there is a significant amount of uncertainty about the effects a resurgence in COVID-19 cases could have on our business, our industry and overall economic activity.
(d) Implications of being an Emerging Growth Company
The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards.
(e) Recently adopted accounting pronouncements
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. Under this standard, companies will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. The adoption of this new guidance prescribes the balance sheet, statement of operations, and cash flow classification of the capitalized implementation costs and related amortization expense, and additional quantitative and qualitative disclosures. This standard is effective for fiscal years beginning after December 15, 2021. This standard may be applied either prospectively to eligible costs incurred on or after the date of the new guidance or retrospectively. The Company adopted this standard on December 27, 2020 (the beginning of its fiscal year 2021) on a prospective basis. The adoption of this standard did not have a significant impact on our financial statements.
(f) Recently issued accounting pronouncements not yet adopted
In February 2016, the FASB issued ASU 2016-02, Leases and established ASC Topic 842, Leases (“ASC 842”), which supersedes ASC Topic 840, Leases. ASC 842 requires a lessee to recognize a lease right-of-use (“ROU”) asset and a corresponding lease liability on its balance sheet along with additional qualitative and quantitative disclosures. ROU assets and lease liabilities are recognized at the commencement date based on the present value of future payments. ASC 842 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the effect the adoption of this standard will have on its financial statements, including the materiality of the addition of ROU assets and lease liabilities on its balance sheet.
In June 2017, the FASB issued ASU 2016-13, Financial Instruments (Topic 326)—Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The standard replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13, and related amendments, are effective for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on its financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update, as well as subsequently issued amendments, provide temporary, optional guidance to ease the burden in accounting for reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The amendments primarily include relief related to contract modifications and hedging relationships. The relief provided by this ASU does not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. However, hedging relationships that apply certain optional expedients prior to December 31, 2022, will be retained through the end of the hedging relationship, including for periods after December 31, 2022. We will evaluate the impact of this guidance as contracts are modified through December 2022.
3. Fair value measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to their present value on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the
10
assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. These two types of inputs create a three-tier fair value hierarchy that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
GAAP categorizes inputs used in fair value measurements into three broad levels as follows:
The Company uses interest rate caps to manage its interest rate exposure. These interest rate caps are recorded at fair value. Changes in fair value of our interest rate caps are recognized as a component of accumulated other comprehensive loss on the condensed consolidated balance sheets. The Company has elected to use the income approach to value the interest rate cap, using observable Level 2 market expectations at measurement dates and standard valuation techniques to convert future amounts to a single present discounted amount reflecting current market expectations about those future amounts. Level 2 inputs for derivative valuations are limited to inputs other than those quoted prices that are observable for the asset or liability (specifically LIBOR swap rates and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient. Derivatives are discounted to present value at the measurement date at overnight index swap rates. Refer to Note 8—Derivative instruments and hedging activity for additional discussion.
Fair value measurements are summarized below:
|
|
Fair |
|
|
Quoted prices |
|
|
Significant |
|
|
Significant |
|
||||
Interest rate cap |
|
|
|
|
|
|
|
|
|
|
|
|
||||
June 26, 2021 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
December 26, 2020 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
4. Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following:
|
|
June 26, 2021 |
|
|
December 26, 2020 |
|
||
Prepaid inventory |
|
$ |
|
|
$ |
|
||
Deferred IPO fees |
|
|
|
|
|
|
||
Prepaid other & other current assets |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The prepaid other & other current assets amounts are primarily composed of prepaid technology, marketing and maintenance contracts, sales taxes, insurance and rent.
11
5. Intangible assets, net
A summary of intangible assets as of June 26, 2021 and December 26, 2020 is as follows:
|
|
June 26, 2021 |
|
|||||||||||||
|
|
Weighted Average |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||
Franchisee relationships |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Reacquired rights |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Favorable lease assets |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Indefinite-lived intangible: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trade name |
|
N/A |
|
|
|
|
|
|
|
|
|
|
||||
Total intangible assets |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
December 26, 2020 |
|
|||||||||||||
|
|
Weighted Average |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||
Franchisee relationships |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Reacquired rights |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Favorable lease assets |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Indefinite-lived intangible: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trade name |
|
N/A |
|
|
|
|
|
|
|
|
|
|
||||
Total intangible assets |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Area representative rights represent an agreement with area representatives to sell franchise licenses and provide support to franchisees in a geographic region. From time to time, the Company enters into agreements to reacquire certain area representative rights. During the 26 weeks ended June 26, 2021, reacquisition costs totaled $
During the 26 weeks ended June 27, 2020, reacquisition costs totaled $
The initial term of the area representative agreements is
Franchisee relationships are amortized on a straight-line basis over the estimated useful life of the asset. Amortization expense for franchisee relationships was $
Favorable lease assets are amortized on a straight-line basis over the estimated useful life of the asset. Amortization of favorable lease assets of $
12
Future expected amortization expense of the Company’s intangible assets as of June 26, 2021 is as follows:
Fiscal Years Ending |
|
Franchisee |
|
|
Reacquired |
|
|
Favorable |
|
|||
2021 (from June 27, 2021) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2022 |
|
|
|
|
|
|
|
|
|
|||
2023 |
|
|
|
|
|
|
|
|
|
|||
2024 |
|
|
|
|
|
|
|
|
|
|||
2025 |
|
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
6. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consisted of the following:
|
|
June 26, 2021 |
|
|
December 26, 2020 |
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued inventory |
|
|
|
|
|
|
||
Accrued compensation |
|
|
|
|
|
|
||
Accrued taxes and penalties |
|
|
|
|
|
|
||
Accrued lease termination costs |
|
|
|
|
|
|
||
Accrued technology and subscription fees |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
||
Total Accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
7. Long-term debt, net
Long-term debt consists of the following:
|
|
June 26, 2021 |
|
|
December 26, 2020 |
|
||
Term Loan |
|
$ |
|
|
$ |
|
||
Revolving Credit Facility |
|
|
|
|
|
|
||
Less: current portion |
|
|
( |
) |
|
|
( |
) |
Total long-term debt |
|
|
|
|
|
|
||
Less: unamortized deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Total long-term debt, net |
|
$ |
|
|
$ |
|
||
In September 2018, EW Holdco, LLC, a wholly owned subsidiary of the Company, entered into the Term Loan and Revolving Credit Facility (the "Senior Secured Credit Facility") with a maturity date of
Borrowings under the Term Loan bear interest at an index rate as defined in the credit agreement governing the Senior Secured Credit Facility plus an applicable margin of
The Revolving Credit Facility has a maximum borrowing capacity of $
13
The credit agreement governing our Senior Secured Credit Facility requires the Company to comply with a number of affirmative and negative covenants, including certain restrictions on additional indebtedness, liens against the Company’s and its subsidiaries assets, sales of assets, and other restrictions on payments. The credit agreement also contains a quarterly maintenance covenant that requires us to maintain a net leverage ratio (as defined in the credit agreement) that does not exceed
8. Derivative instruments and hedging activities
In December 2018, the Company entered into an interest rate cap derivative instrument which was designated as a cash flow hedge. The Company’s objective is to mitigate the impact of interest expense fluctuations on the Company’s profitability resulting from interest rate changes by capping the LIBOR component of the interest rate at
Changes in the cash flows of interest rate cap derivatives designated as hedges are expected to be highly effective in offsetting the changes in interest payments on a principal balance equal to the designated derivative’s notional amount, attributable to the hedged risk. Changes in the fair value of the interest rate cap are recognized in other comprehensive income and are reclassified out of accumulated other comprehensive income and into interest expense when the hedged interest obligations affect earnings. Cash flows related to derivatives qualifying as hedges are included in the same section of the condensed consolidated statements of cash flows as the underlying assets and liabilities being hedged. Refer to Note 3—Fair value measurements for information on the fair value of the Company’s interest rate cap derivative instrument.
Our cash flow hedge position related to the interest rate cap derivative instrument is as follows:
|
|
Balance Sheet |
|
June 26, 2021 |
|
|
December 26, 2020 |
|
||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
||
Interest rate cap, current portion |
|
Other current liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
Interest rate cap, non-current portion |
|
Other long-term liabilities |
|
|
( |
) |
|
|
( |
) |
Total derivative liabilities designated as |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
The table below presents the net unrealized gain recognized in other comprehensive income (“OCI”) resulting from fair value adjustments of hedging instruments:
|
|
Net Unrealized Gain |
|
|||||||||||||
|
|
Thirteen Weeks |
|
|
Thirteen Weeks |
|
|
Twenty-Six |
|
|
Twenty-Six |
|
||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate cap |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
14
9. Commitments and contingencies
Exit or Disposal Activities
During fiscal year 2019, the Company relocated its corporate headquarters from Hallandale Beach, Florida to Plano, Texas. As a result of this relocation, the Company vacated a portion of its leased properties in Hallandale Beach and recognized an exit obligation charge and related exit obligation liability on the cease-use date, in accordance with ASC 420, Exit or Disposal Cost Obligations. In fiscal year 2020, the Company vacated the remaining portion of the leased property in Hallandale Beach and recognized an exit obligation charge and related liability on the cease-use date for the remaining portion of the property.
|
|
Exit Cost |
|
|
Exit cost obligation at December 26, 2020 |
|
$ |
|
|
Accretion |
|
|
|
|
Payments |
|
|
( |
) |
Exit cost obligation at June 26, 2021 |
|
$ |
|
|
The charges, recorded as selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss), primarily included the present value of the remaining lease obligation on the cease use dates, net of estimated sublease income.
The current and non-current components of the exit liabilities related to the leased property were included within accounts payable and accrued liabilities and other long-term liabilities on the condensed consolidated balance sheets, respectively, as follows:
|
|
June 26, 2021 |
|
|
December 26, 2020 |
|
||
Accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total exit cost obligation |
|
$ |
|
|
$ |
|
||
Litigation
The Company is exposed to various asserted and unasserted potential claims encountered in the normal course of business. Although the outcomes of potential legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material effect on its financial position, results of operations, or cash flow.
10. Revenue from contracts with customers
Contract liabilities consist of deferred revenue resulting from franchise fees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement. Also included are service revenues from corporate-owned centers, including customer prepayments in connection with the Wax Pass program. Contract liabilities are classified as deferred revenue on the condensed consolidated balance sheets.
Deferred franchise fees are reduced as fees are recognized in revenue over the term of the franchise license for the respective center. Deferred service revenues are recognized over time as the services are performed.
|
|
Contract liabilities |
|
|
Balance at December 26, 2020 |
|
$ |
|
|
Revenue recognized that was included in the contract liability at the beginning |
|
|
( |
) |
Increase, excluding amounts recognized as revenue during the period |
|
|
|
|
Balance at June 26, 2021 |
|
$ |
|
|
The weighted average remaining amortization period for deferred revenue is
15
The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 26, 2021. The Company has elected to exclude short term contracts, sales-based royalties and any other variable consideration recognized on an “as invoiced” basis.
Contract liabilities to be recognized in: |
|
Amount |
|
|
2021 (from June 27, 2021) |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
The summary set forth below represents the balances in deferred revenue as of June 26, 2021 and December 26, 2020:
|
|
June 26, 2021 |
|
|
December 26, 2020 |
|
||
Franchise fees |
|
$ |
|
|
$ |
|
||
Service revenue |
|
|
|
|
|
|
||
Total deferred revenue |
|
|
|
|
|
|
||
Long-term portion of deferred revenue |
|
|
|
|
|
|
||
Current portion of deferred revenue |
|
$ |
|
|
$ |
|
||
11. Related party transactions
12. Net income (loss) per unit
Net income (loss) per unit is computed using the “two-class” method by dividing the net income applicable to each respective class by the weighted average number of units outstanding during the period. The Company’s participating securities consist of incentive units underlying the Class B Unit and the Class D Units. There were no potential common units outstanding during the 13 or 26 weeks ended June 26, 2021 and June 27, 2020, respectively. As such, weighted average outstanding units are the same for both basic and diluted net income per unit.
16
Income per unit for the periods presented is computed as follows:
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
||||||||||
|
|
June 26, 2021 |
|
|
June 27, 2021 |
|
|
June 26, 2021 |
|
|
June 26, 2021 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Less: preferred return on Class D Units |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Less: net income allocated to participating securities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net income (loss) applicable to common unitholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net income (loss) applicable by class of common units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A Founder Units |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Class A Units |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net income (loss) applicable to common unitholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Basic and diluted weighted average outstanding units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A Founder Units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A Units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted net income (loss) per unit applicable to |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A Founder Units |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Class A Units |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
13. Subsequent Events
Reorganization Transactions
On August 4, 2021, we completed an internal reorganization which is referred to as the ("Reorganization Transactions.") The Reorganization Transactions are more fully described in our prospectus dated August 4, 2021, filed with the SEC on August 6, 2021 pursuant to rule 424(b)(4) of the Securities Act of 1933, as amended. The following actions were taken as a result of the Reorganization Transactions:
17
Initial Public Offering and Debt Refinancing
On August 4, 2021, the Corporation’s registration statement on Form S-1 was declared effective by the SEC related to the IPO of its Class A common stock. In connection with the closing of the IPO on August 9, 2021, the following actions were taken:
Following the Reorganization Transactions, IPO and debt refinancing transactions described above our capital structure consisted of the following:
18
Immediately following the Reorganization Transactions and the closing of the IPO, the Company is the predecessor of the Corporation for financial reporting purposes. The Corporation is a holding company, and its sole material asset is its equity interest in the Company. As the sole managing member of the Company, the Corporation operates and controls all of the businesses and affairs of the Company and has a substantial financial interest in the Company. As such, the Corporation will consolidate the Company on its consolidated financial statements and will record a noncontrolling interest on its consolidated balance sheets and consolidated statements of operations and comprehensive income (loss) to reflect the entitlement of the EWC Ventures Post-IPO Members to a portion of the Company’s net income (loss). The Reorganization Transactions will be accounted for as a reorganization of entities under common control and the Corporation will recognize the assets and liabilities received in the reorganization at their historical carrying amounts as reflected in the historical consolidated financial statements of the Company.
Equity-based Compensation
In connection with our IPO, the Corporation's board of directors adopted the European Wax Center, Inc. 2021 Omnibus Incentive Plan (the “2021 Incentive Plan”) which became effective upon consummation of the IPO. The 2021 Incentive Plan provides for an aggregate of
In connection with the IPO, the Corporation granted
In connection with the Reorganization Transactions and the pricing of the IPO, all of the Company's outstanding equity interests, including its Class B Units, were reclassified into EWC Ventures Units, based on a hypothetical liquidation of EWC Ventures at the initial public offering price per share of the Corporation's Class A common stock. In addition, all of EWC Management Holdco LLC's ("EWC Management Holdco") Class B Units were reclassified into the number of vested and unvested common units of EWC Management Holdco equal to the number of EWC Ventures Units into which such Class B Units would have been reclassified pursuant to the prior sentence.
Prior to the consummation of the IPO,
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our historical performance, financial condition and future prospects in conjunction with the management’s discussion and analysis of financial conditions and results of operations and the audited consolidated financial statements included in our prospectus dated August 4, 2021, filed with the Securities and Exchange Commission (the "SEC") on August 6, 2021 pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended (referred to herein as the “Prospectus”). The following discussion and analysis should also be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this quarterly report on Form 10-Q. The information provided below supplements, but does not form part of, our predecessor’s financial statements. This discussion contains forward-looking statements that are based on the views and beliefs of our management, as well as assumptions and estimates made by our management. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact our future operating performance or financial condition, see the sections titled “Risk Factors” and “Forward-Looking Statements” included in our Prospectus.
We conduct substantially all of our activities through our direct, wholly owned subsidiary, EWC Ventures, LLC and its subsidiaries. We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to December 31. Our fiscal quarters are composed of 13 weeks each, except for 53-week fiscal years for which the fourth quarter will be composed of 14 weeks.
Overview
We are the largest and fastest-growing franchisor and operator of out-of-home (“OOH”) waxing services in the United States by number of centers and system-wide sales. We delivered over 21 million waxing services in 2019 and over 13 million waxing services in 2020 generating $687 million and $469 million of system-wide sales, respectively, across our highly-franchised network. We have a leading portfolio of centers operating in 815 locations across 44 states as of June 26, 2021. Of these locations, 810 are franchised centers operated by franchisees and five are corporate-owned centers.
The European Wax Center brand is trusted, efficacious and accessible. Our culture is obsessed with our guest experience and we deliver a superior guest experience relative to smaller chains and independent salons. We offer guests high-quality, hygienic waxing services administered by our licensed, EWC-trained estheticians (our “wax specialists”), at our accessible and welcoming locations (our “centers”). Our technology-enabled guest interface simplifies and streamlines the guest experience with automated appointment scheduling and remote check-in capabilities, ensuring guest visits are convenient, hassle-free, and consistent across our network of centers. Our well-known, pre-paid Wax Pass program makes payment easy and convenient, fostering loyalty and return visits. Guests view us as a non-discretionary part of their personal-care and beauty regimens, providing us with a highly predictable and growing recurring revenue model.
Our asset-light franchise platform delivers capital-efficient growth, significant cash flow generation and resilience through economic cycles. Our centers are 99% owned and operated by our franchisees who benefit from superior unit-level economics, with mature centers generating annual cash-on-cash returns in excess of 60%. The highly consistent and recurring demand for our services and the competitive advantages provided by our scale have resulted in ten consecutive years of same-store sales and system-wide sales growth through 2019.
In partnership with our franchisees, we fiercely protect our points of differentiation that attract new guests, build meaningful relationships and promote lasting retention. Our net promoter score (“NPS”) demonstrates our guests’ devotion to our brand. We are so confident in our ability to delight that we have always offered all of our guests their first wax free.
Hair removal solutions are consistently in demand, given the recurring nature of hair growth. The OOH waxing market is the fastest-growing hair removal solution in the United States, defined by a total addressable market of $18 billion with annualized growth that is approximately twice as high as other hair removal alternatives. European Wax Center has become the category-defining brand within this rapidly growing market and became so by professionalizing a highly fragmented sector where service consistency, hygiene, and customer trust were not historically offered. We are approximately six times larger than the next largest waxing-focused competitor by center count and approximately ten times larger by system-wide sales. Our unmatched scale enables us to drive broader brand awareness, ensures our licensed wax specialists are universally trained at the highest standards and drive consistent financial performance across each center.
Under the stewardship of our CEO, David Berg, and the other management team members, we have prioritized building a culture of performance, success, and inclusivity. Additionally, we have intensified our focus on enhancing the guest experience and have invested significantly in our corporate infrastructure and marketing capabilities to continue our track record of sustainable growth. The foundation for our next chapter of growth is firmly in place.
20
Growth Strategy and Outlook
We plan to grow our business primarily by opening new franchised centers and then additionally increasing our same-store sales and leveraging our corporate infrastructure to expand our profit margins and generate robust free cash flow.
We believe our franchisees’ track record of successfully opening new centers and consistently generating attractive unit-level economics validates our strategy to expand our footprint and grow our capacity to serve more guests. We aspire to grow between 7% to 10% of our center count each year. Our center count grew 6% and 5% during fiscal year 2020 and fiscal year 2019, respectively, and has grown each year since 2010. Our thoughtful approach to growth ensures each center is appropriately staffed with the high-quality team and licensed, highly-trained wax specialists that our brand has been known for since our initial opening. None of our existing markets are fully penetrated, and we believe we have a significant whitespace opportunity of approximately 3,000 locations for our standard center format across the United States. Our centers have a long track record of sustained growth delivering ten consecutive years of positive same-store sales growth through 2019 with resilient performance through economic cycles. We intend to continue increasing our same-store sales growth by, among other things:
• driving brand awareness to accelerate guest acquisition;
• increasing our Wax Pass adoption rates;
• expanding our share of our guests’ personal-care expenditures;
• increasing our transaction attachment rate, which we define as the percentage of transactions that include the purchase of a retail product to the total number of transactions; and
• driving greater guest engagement using data analytics.
Our straightforward, asset-light franchise platform and our proven track record of increasing profitability will continue to drive EBITDA margin accretion and free cash flow generation as we expand our national footprint. We have invested in building our scalable support infrastructure, and we currently have the capabilities and systems in place to drive revenue growth and profitability across our existing and planned franchise centers.
Key Business Metrics
We track the following key business metrics to evaluate our performance, identify trends, formulate financial projections, and make strategic decisions. Accordingly, we believe that these key business metrics provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. These key business metrics are presented for supplemental information purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled metrics or measures presented by other companies.
Number of Centers. Number of centers reflects the number of franchised and corporate-owned centers open at the end of the reporting period. We review the number of new center openings, the number of closed centers and the number of relocations of centers to assess net new center growth, and drivers of trends in system-wide sales, royalty and franchise fee revenue and corporate-owned center sales.
System-Wide Sales. System-wide sales represent sales from same day services, retail sales and cash collected from wax passes for all centers in our network, including both franchisee-owned and corporate-owned centers. While we do not record franchised center sales as revenue, our royalty revenue is calculated based on a percentage of franchised center sales, which are 6.0% of sales, net of retail product sales, as defined in the franchise agreement. This measure allows us to better assess changes in our royalty revenue, our overall center performance, the health of our brand and the strength of our market position relative to competitors. Our system-wide sales growth is driven by net new center openings as well as increases in same-store sales.
Same-Store Sales. Same-store sales reflect the change in year-over-year sales from services performed and retail sales for the same-store base. We define the same-store base to include those centers open for at least 52 full weeks. This measure highlights the performance of existing centers, while excluding the impact of new center openings and closures. We review same-store sales for corporate-owned centers as well as franchisee-owned centers. Same-store sales growth is driven by increases in the number of transactions and average transaction size.
21
New Center Openings. The number of new center openings reflects centers opened during a particular reporting period for both franchisee-owned and corporate-owned centers, less centers closed during the same period. Opening new centers is an integral part of our growth strategy, and we expect the majority of our future new centers to be franchisee-owned. Before we obtain the certificate of occupancy or report any revenue from new corporate-owned centers, we incur pre-opening costs, such as rent expense, labor expense and other operating expenses. Some of our centers open with an initial start-up period of higher-than-normal marketing and operating expenses, particularly as a percentage of monthly revenue.
Average Unit Volume (“AUV”). AUV consists of the average annual system-wide sales of all centers that have been open for a trailing 52-week period or longer. This measure is calculated by dividing system-wide sales during the applicable period for all centers being measured by the number of centers being measured. AUV allows management to assess our franchisee-owned and corporate-owned center economics. Our AUV growth is primarily driven by increases in services and retail product sales as centers fill their books of reservations, which we refer to as maturation of centers.
Wax Pass Utilization. We define Wax Pass utilization as the adoption of our Wax Pass program by guests, measured as a percentage of total transactions conducted using a Wax Pass. Wax Pass utilization allows management to better assess the recurring nature of our business model because it is an indication of the magnitude of transactions by guests who have made a longer-term commitment to our brand by purchasing a Wax Pass.
(in thousands, except operating data and percentages) |
|
Thirteen Weeks |
|
|
Thirteen Weeks |
|
|
Twenty-Six |
|
|
Twenty-Six |
|
||||
Number of system-wide centers (at period |
|
|
815 |
|
|
|
774 |
|
|
|
815 |
|
|
|
774 |
|
System-wide sales |
|
$ |
218,499 |
|
|
$ |
40,252 |
|
|
$ |
375,462 |
|
|
$ |
198,256 |
|
Same-store sales(1) |
|
|
6.9 |
% |
|
|
(76.3 |
)% |
|
|
1.3 |
% |
|
|
(44.3 |
)% |
New center openings |
|
|
7 |
|
|
|
8 |
|
|
|
19 |
|
|
|
24 |
|
(1) Same-store sales increase for the 13 and 26 weeks ended June 26, 2021 is calculated in comparison to the 13 and 26 weeks ended June 29, 2019 due to the significant decline in our sales in 2020 due to COVID-19. We believe this presents a more meaningful comparison of same-store sales. As described below, we typically remove stores from our calculation of same-store sales if they are closed for more than six consecutive days. However, given the widespread and unprecedented impact of COVID-19 same-store sales for the 13 and 26 weeks ended June 27, 2020 were calculated without removing stores that were closed for longer than six days due to COVID-19.
The table below presents changes in the number of system-wide centers for the periods indicated:
|
|
For the Thirteen |
|
|
For the Twenty-Six |
|
||||||||||
|
|
June 26, |
|
|
June 27, |
|
|
June 26, |
|
|
June 27, |
|
||||
System-wide Centers |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning of Period |
|
|
808 |
|
|
|
766 |
|
|
|
796 |
|
|
|
750 |
|
Openings |
|
|
8 |
|
|
|
10 |
|
|
|
21 |
|
|
|
26 |
|
Closures |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
End of Period |
|
|
815 |
|
|
|
774 |
|
|
|
815 |
|
|
|
774 |
|
Recent Developments
As more fully described in the notes to condensed consolidated financial statements included in this quarterly report on Form 10-Q, in August 2021 we completed a series of transactions including:
For additional information regarding these transactions, see the notes to condensed consolidated financial statements (Note 13—Subsequent Events) included in this quarterly report on Form 10-Q.
22
COVID-19 Impact
The Company is continuing to monitor the ongoing COVID-19 pandemic and its impact on its business. Beginning in March 2020, in response to the COVID-19 pandemic, most franchisees temporarily closed their centers in order to promote the health and safety of its members, team members and their communities. In April 2020, the entire franchise network was temporarily closed. Beginning in May 2020, certain governors announced steps to restart non-essential business operations in their respective states and certain centers began to re-open. As of June 2021, all of the Company’s nationwide network of centers had re-opened.
There is a significant amount of uncertainty about the duration and severity of the consequences caused by the COVID-19 pandemic. While governmental and non-governmental organizations are engaging in efforts to combat the spread and severity of the COVID-19 pandemic and related public health issues, the full extent to which outbreaks of COVID-19 could impact our business, results of operations and financial condition is still unknown and will depend on future developments, including new variants of the virus and spikes in cases in the areas where we operate, which are highly uncertain and cannot be predicted. However, such effects may be material. Our financial statements reflect judgments and estimates that could change in the future as a result of the COVID-19 pandemic.
Significant Factors Impacting Our Financial Results
We believe there are several important factors that have impacted, and that we expect will continue to impact, our business and results of operations. These factors include:
New Center Openings. We expect that new centers will be a key driver of growth in our future revenue and operating profit results. Opening new centers is an important part of our growth strategy, and we expect the majority of our future new centers will be franchisee-owned. Our results of operations have been and will continue to be materially affected by the timing and number of new center openings each period. As centers mature, center revenue and profitability increase significantly. The performance of new centers may vary depending on various factors such as the effective management and cooperation of our franchisee partners, whether the franchise is part of a multi-unit development agreement, the center opening date, the time of year of a particular opening, the number of licensed wax specialists recruited, and the location of the new center, including whether it is located in a new or existing market. Our planned center expansion will place increased demands on our operational, managerial, administrative, financial, and other resources. Managing our growth effectively will require us to continually attract strong and well capitalized franchisee partners into our development pipeline and to enhance our center management system controls and information systems.
Same-Store Sales Growth. Same-store sales growth is a key driver of our business. Various factors affect same-store sales, including:
• consumer preferences and overall economic trends;
• the recurring, non-discretionary nature of personal-care services and purchases;
• our ability to identify and respond effectively to guest preferences and trends;
• our ability to provide a variety of service offerings that generate new and repeat visits to our centers;
• the guest experience we provide in our centers;
• the availability of experienced wax specialists;
• our ability to source and deliver products accurately and timely;
• changes in service or product pricing, including promotional activities;
• the number of services or items purchased per center visit;
• center closures in response to state or local regulations due to the COVID-19 pandemic or other health concerns; and
• the number of centers that have been in operation for more than 52 full weeks.
A new center is included in the same-store sales calculation beginning 52 full weeks after the center’s opening. If a center is closed for greater than six consecutive days, the center is deemed a closed center and is excluded from the calculation of same-store sales until it has been reopened for a continuous 52 full weeks.
Overall Economic Trends. Macroeconomic factors that may affect guest spending patterns, and thereby our results of operations, include employment rates, business conditions, changes in the housing market, the availability of credit, interest rates, tax rates and fuel and energy costs. However, we believe that our guests see our services as non-discretionary in nature, given the rebound in performance in the second half of fiscal year 2020 despite the COVID-19 pandemic. Therefore, we believe that overall economic trends and related
23
changes in consumer behavior have less of an impact on our business than they may have for other industries subject to fluctuations in discretionary consumer spending.
Guest Preferences and Demands. Our ability to maintain our appeal to existing guests and attract new guests depends on our ability to develop and offer a compelling assortment of services responsive to guest preferences and trends. We estimate that more than two-thirds of OOH waxing consumers start waxing by age 29 or earlier. We also believe that OOH waxing is a recurring need that brings guests back for services on a highly recurring basis which is reflected in the predictability of our financial performance over time. Our guests’ routine personal-care need for OOH waxing is further demonstrated by the top 20% of guests who visit us, on average, nearly every four weeks.
Our Ability to Source and Distribute Products Effectively. Our revenue and operating income are affected by our ability to purchase our products and supplies in sufficient quantities at competitive prices. While we believe our vendors have adequate capacity to meet our current and anticipated demand, our level of revenue could be adversely affected in the event we face constraints in our supply chain, including the inability of our vendors to produce sufficient quantities of some products or supplies in a manner that matches market demand from our guests, leading to lost revenue. We depend on two key suppliers to source our proprietary wax and one key supplier to source our branded retail products and we are thus exposed to concentration of supplier risk.
Our Ability to Recruit and Retain Qualified Licensed Wax Specialists for our Centers. Our ability to operate our centers is largely dependent upon our ability to attract and retain qualified, licensed wax specialists. Our unmatched scale enables us to ensure that we universally train our wax specialists at the highest standards, ensuring that our guests experience consistent level of quality, regardless of the specific center they visit. The combination of consistent service delivery, across our trained base of wax specialists, along with the payment ease and convenience of our well-known, pre-paid Wax Pass program fosters loyalty and return visits across our guest base. Over time, our ability to build and maintain a strong pipeline of licensed wax specialists is important to preserving our current brand position.
Seasonality. Our results are subject to seasonality fluctuations in that services are typically in higher demand in periods leading up to holidays and the summer season. The resulting demand trend yields higher system-wide sales in the second and fourth quarter of our fiscal year. In addition, our quarterly results may fluctuate significantly, because of several factors, including the timing of center openings, price increases and promotions, and general economic conditions.
Components of Results of Operations
Revenue
Product Sales: Product sales consist of revenue earned from sales of proprietary wax, other products consumed in administering our wax services and retail merchandise to franchisees, as well as retail merchandise sold in corporate-owned centers. Revenue on product sales is recognized upon transfer of control. Our product sales revenue comprised 55.4% and 63.3% of our total revenue for the 13 weeks ended June 26, 2021 and June 27, 2020, respectively, and 55.7% and 57.7% of our total revenue for the 26 weeks ended June 26, 2021 and June 27, 2020, respectively.
Royalty Fees: Royalty fees are earned based on a percentage of the franchisees’ gross sales, net of retail product sales, as defined in the applicable franchise agreement, and recognized in the period the franchisees’ sales occur. The royalty fee is 6.0% of the franchisees’ gross sales for such period and is paid weekly. Our royalty fees revenue comprised 25.1% and 19.4% of our total revenue for the 13 weeks ended June 26, 2021 and June 27, 2020, respectively, and 24.7% and 25.2% of our total revenue for the 26 weeks ended June 26, 2021 and June 27, 2020, respectively.
Marketing Fees: Marketing fees are earned based on 3.0% of the franchisees’ gross sales, net of retail product sales, as defined in the applicable franchise agreement, and recognized in the period the franchisees’ sales occur. Additionally, the Company charges a fixed monthly fee to franchisees for search engine optimization and search engine marketing services, which is due on a monthly basis and recognized in the period when services are provided. Our marketing fees revenue comprised 13.8% and 11.3% of our total revenue for the 13 weeks ended June 26, 2021 and June 27, 2020, respectively, and 13.7% and 11.0% of our total revenue for the 26 weeks ended June 26, 2021 and June 27, 2020, respectively.
Other Revenue: Other revenue primarily consists of service revenues from our corporate-owned centers and franchise fees, as well as technology fees, annual brand conference revenues and training, which together represent 5.7% and 6.0% of our total revenue for the 13 weeks ended June 26, 2021 and June 27, 2020, respectively, and 5.9% and 6.1% of our total revenue for the 26 weeks ended June 26, 2021 and June 27, 2020, respectively. Service revenues from our corporate-owned centers are recognized at the time services are provided. Amounts collected in advance of the period in which service is rendered are recorded as deferred revenue. Franchise fees are paid upon commencement of the franchise agreement and are deferred and recognized on a straight-line basis commencing at contract inception through the end of the franchise license term. Franchise agreements generally have terms of ten years beginning on the date the center is opened, which is an average of two years from the date the franchise agreement is signed. Therefore, the franchise fees are typically amortized over a 12-year period. Deferred franchise fees expected to be recognized in periods greater than 12 months from the
24
reporting date are classified as long-term on the condensed consolidated balance sheets. Technology fees, annual brand conference revenues and training are recognized as the related services are delivered and are not material to the overall business.
Costs and Expenses
Cost of Revenue: Cost of revenue primarily consists of the direct costs associated with wholesale product and retail merchandise sold, including distribution and outbound freight costs and inventory obsolescence charges, as well as the cost of materials and labor for services rendered in our corporate-owned centers.
Selling, General and Administrative Expenses: Selling, general and administrative expenses primarily consist of wages, benefits and other compensation-related costs, rent, software, and other administrative expenses incurred to support our existing franchise and corporate-owned centers, as well as expenses attributable to growth and development activities. Also included in selling, general and administrative expenses are accounting, legal, marketing operations, and other professional fees.
Advertising Expenses: Advertising expenses consist of advertising, public relations, and administrative expenses incurred to increase sales and further enhance the public reputation of the European Wax Center brand.
Depreciation and Amortization: Depreciation and amortization includes depreciation of property and equipment and capitalized leasehold improvements, as well as amortization of intangible assets, including franchisee relationships and reacquired area representative rights. Area representative rights represent an agreement with area representatives to sell franchise licenses and provide support to franchisees in a geographic region. From time to time, the Company enters into agreements to reacquire certain area representative rights.
Interest Expense: Interest expense consists of interest on our long-term debt, including amounts outstanding under our revolving credit facility, as well as the amortization of deferred financing costs.
Post-Offering Non-Controlling Interest and Expenses
In connection with the Reorganization Transactions and our initial public offering described under “Recent Developments” and in the notes to the condensed consolidated financial statements included in this quarterly report on Form 10-Q, we were appointed as the sole managing member of EWC Ventures. Because we manage and operate the business and control the strategic decisions and day-to-day operations of EWC Ventures and also have a substantial financial interest in EWC Ventures, we will consolidate the financial results of EWC Ventures, and a portion of our net income (loss) will be allocated to the non-controlling interest to reflect the entitlement of the EWC Ventures Post-IPO Members to a portion of EWC Ventures’ net income (loss).
Following the consummation of this offering, we became subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of EWC Ventures and will be taxed at the prevailing corporate tax rates. In addition to tax expenses, we also will incur new expenses related to our operations as a public company, plus payments under the Tax Receivable Agreement.
See “Unaudited Pro Forma Consolidated Financial Information” in the Prospectus for more information regarding the post- offering non-controlling interest and expenses.
25
Results of Operations
The following tables presents our condensed consolidated statements of operations for each of the periods indicated (amounts in thousands, except percentages):
|
|
For the Thirteen Weeks Ended |
|
|
|
|
|
|
|
|||||||
|
|
June 26, |
|
|
June 27, |
|
|
$ |
|
|
% |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales |
|
$ |
26,524 |
|
|
$ |
6,838 |
|
|
$ |
19,686 |
|
|
|
287.9 |
% |
Royalty fees |
|
|
12,030 |
|
|
|
2,101 |
|
|
|
9,929 |
|
|
|
472.6 |
% |
Marketing fees |
|
|
6,632 |
|
|
|
1,225 |
|
|
|
5,407 |
|
|
|
441.4 |
% |
Other revenue |
|
|
2,716 |
|
|
|
649 |
|
|
|
2,067 |
|
|
|
318.5 |
% |
Total revenue |
|
|
47,902 |
|
|
|
10,813 |
|
|
|
37,089 |
|
|
|
343.0 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
|
11,540 |
|
|
|
3,717 |
|
|
|
7,823 |
|
|
|
210.5 |
% |
Selling, general and administrative |
|
|
12,212 |
|
|
|
6,340 |
|
|
|
5,872 |
|
|
|
92.6 |
% |
Advertising |
|
|
6,515 |
|
|
|
2,603 |
|
|
|
3,912 |
|
|
|
150.3 |
% |
Depreciation and amortization |
|
|
5,271 |
|
|
|
5,040 |
|
|
|
231 |
|
|
|
4.6 |
% |
Total operating expenses |
|
|
35,538 |
|
|
|
17,700 |
|
|
|
17,838 |
|
|
|
100.8 |
% |
Income (loss) from operations |
|
|
12,364 |
|
|
|
(6,887 |
) |
|
|
19,251 |
|
|
|
279.5 |
% |
Interest expense |
|
|
4,635 |
|
|
|
4,485 |
|
|
|
150 |
|
|
|
3.3 |
% |
Net income (loss) |
|
$ |
7,729 |
|
|
$ |
(11,372 |
) |
|
$ |
19,101 |
|
|
|
168.0 |
% |
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
June 26, |
|
|
June 27, |
|
|
$ |
|
|
% |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales |
|
$ |
47,141 |
|
|
$ |
25,183 |
|
|
$ |
21,958 |
|
|
|
87.2 |
% |
Royalty fees |
|
|
20,880 |
|
|
|
11,002 |
|
|
|
9,878 |
|
|
|
89.8 |
% |
Marketing fees |
|
|
11,566 |
|
|
|
4,784 |
|
|
|
6,782 |
|
|
|
141.8 |
% |
Other revenue |
|
|
4,972 |
|
|
|
2,667 |
|
|
|
2,305 |
|
|
|
86.4 |
% |
Total revenue |
|
|
84,559 |
|
|
|
43,636 |
|
|
|
40,923 |
|
|
|
93.8 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
|
21,471 |
|
|
|
12,395 |
|
|
|
9,076 |
|
|
|
73.2 |
% |
Selling, general and administrative |
|
|
23,278 |
|
|
|
16,718 |
|
|
|
6,560 |
|
|
|
39.2 |
% |
Advertising |
|
|
11,399 |
|
|
|
6,291 |
|
|
|
5,108 |
|
|
|
81.2 |
% |
Depreciation and amortization |
|
|
10,409 |
|
|
|
9,938 |
|
|
|
471 |
|
|
|
4.7 |
% |
Total operating expenses |
|
|
66,557 |
|
|
|
45,342 |
|
|
|
21,215 |
|
|
|
46.8 |
% |
Income (loss) from operations |
|
|
18,002 |
|
|
|
(1,706 |
) |
|
|
19,708 |
|
|
|
1,155.2 |
% |
Interest expense |
|
|
9,171 |
|
|
|
8,707 |
|
|
|
464 |
|
|
|
5.3 |
% |
Net income (loss) |
|
$ |
8,831 |
|
|
$ |
(10,413 |
) |
|
$ |
19,244 |
|
|
|
184.8 |
% |
26
The following table presents the components of our condensed consolidated statements of operations for each of the periods indicated, as a percentage of revenue:
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
|
|
June 26, |
|
|
June 27, |
|
|
June 26, |
|
|
June 27, |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales |
|
|
55.4 |
% |
|
|
63.3 |
% |
|
|
55.7 |
% |
|
|
57.7 |
% |
Royalty fees |
|
|
25.1 |
% |
|
|
19.4 |
% |
|
|
24.7 |
% |
|
|
25.2 |
% |
Marketing fees |
|
|
13.8 |
% |
|
|
11.3 |
% |
|
|
13.7 |
% |
|
|
11.0 |
% |
Other revenue |
|
|
5.7 |
% |
|
|
6.0 |
% |
|
|
5.9 |
% |
|
|
6.1 |
% |
Total revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
|
24.1 |
% |
|
|
34.4 |
% |
|
|
25.4 |
% |
|
|
28.4 |
% |
Selling, general and administrative |
|
|
25.5 |
% |
|
|
58.6 |
% |
|
|
27.5 |
% |
|
|
38.3 |
% |
Advertising |
|
|
13.6 |
% |
|
|
24.1 |
% |
|
|
13.5 |
% |
|
|
14.4 |
% |
Depreciation and amortization |
|
|
11.0 |
% |
|
|
46.6 |
% |
|
|
12.3 |
% |
|
|
22.8 |
% |
Total operating expenses |
|
|
74.2 |
% |
|
|
163.7 |
% |
|
|
78.7 |
% |
|
|
103.9 |
% |
Income (loss) from operations |
|
|
25.8 |
% |
|
|
(63.7 |
)% |
|
|
21.3 |
% |
|
|
(3.9 |
)% |
Interest expense |
|
|
9.7 |
% |
|
|
41.5 |
% |
|
|
10.9 |
% |
|
|
20.0 |
% |
Net income (loss) |
|
|
16.1 |
% |
|
|
(105.2 |
)% |
|
|
10.4 |
% |
|
|
(23.9 |
)% |
Comparison of the Thirteen Weeks Ended June 26, 2021 and June 27, 2020
Revenue
Total revenue increased $37.1 million, or 343.0%, to $47.9 million during the 13 weeks ended June 26, 2021, compared to $10.8 million for the 13 weeks ended June 27, 2020. The increase in total revenue was largely due to our results for the 13 weeks ended June 27, 2020 being severely impacted by center closures stemming from the COVID-19 pandemic. In addition, we had 41 new center openings which became operational during the period from June 27, 2020 to June 26, 2021.
Product Sales
Product sales increased $19.7 million, or 287.9%, to $26.5 million during the 13 weeks ended June 26, 2021, compared to $6.8 million for the 13 weeks ended June 26, 2020. The increase in product sales during the 13 weeks ended June 26, 2021 was primarily due to the negative impact of center closures resulting from the COVID-19 pandemic on product sales during the 13 weeks ended June 27, 2020. In addition, the increase in product sales was also partially attributable to new center openings which became operational during the period from June 27, 2020 to June 26, 2021.
Royalty Fees
Royalty fees increased $9.9 million, or 472.6%, to $12.0 million during the 13 weeks ended June 26, 2021, compared to $2.1 million for the 13 weeks ended June 26, 2020. The increase in royalty fees during the 13 weeks ended June 26, 2021 was the result of the negative impact of the COVID-19 pandemic on network revenues during the 13 weeks ended June 27, 2020. In addition, the increase in royalty fees was also partially attributable to new center openings which became operational during the period from June 27, 2020 to June 26, 2021.
Marketing Fees
Marketing fees increased $5.4 million, or 441.4%, to $6.6 million during the 13 weeks ended June 26, 2021, compared to $1.2 million for the 13 weeks ended June 27, 2020. Marketing fees increased primarily due to the negative impact of the COVID-19 pandemic on network revenues during the 13 weeks ended June 27, 2020.
27
Other Revenue
Other revenue increased $2.1 million or 318.5%, to $2.7 million during the 13 weeks ended June 26, 2021, compared to $0.6 million for the 13 weeks ended June 27, 2020. The increase in other revenue during the 13 weeks ended June 26, 2021 was primarily due to the negative impact of corporate-owned center closures resulting from the COVID-19 pandemic on other revenue during the 13 weeks ended June 27, 2020. In addition, we waived technology fees for closed centers in 2020 to provide relief to our franchisees from the adverse impact of the COVID-19 pandemic.
Costs and Expenses
Cost of Revenue
Cost of revenue increased $7.8 million, or 210.5%, to $11.5 million during the 13 weeks ended June 26, 2021, compared to $3.7 million for the 13 weeks ended June 27, 2020. The increase in cost of revenue was largely the result of higher revenues in the current year period as compared to our revenues for the 13 weeks ended June 27, 2020, which were severely impacted by center closures stemming from the COVID-19 pandemic.
Selling, General and Administrative
Selling, general and administrative expenses increased $5.9 million, or 92.6%, to $12.2 million during the 13 weeks ended June 26, 2021, compared to $6.3 million for the 13 weeks ended June 27, 2020. The increase in selling, general and administrative expenses was primarily due to increased payroll and benefits expense resulting from our reduction and temporary furlough of certain corporate employees in the prior year and increased professional fees in the current year arising from preparations for our initial public offering.
Advertising
Advertising expenses increased $3.9 million, or 150.3%, to $6.5 million during the 13 weeks ended June 26, 2021, compared to $2.6 million for the 13 weeks ended June 27, 2020. The increase in advertising expense was largely attributable to our suspension of marketing activities in the prior year commensurate with the center closures caused by the COVID-19 pandemic.
Depreciation and Amortization
Depreciation and amortization increased $0.2 million, or 4.6%, to $5.3 million during the 13 weeks ended June 26, 2021, compared to $5.0 million for the 13 weeks ended June 27, 2020. The increase in depreciation and amortization expense was primarily driven by an increase in amortization expense for the additional reacquired rights from area representatives completed during fiscal years 2020 and 2021.
Interest Expense
Interest expense increased $0.2 million, or 3.3%, to $4.6 million during the 13 weeks ended June 26, 2021, compared to $4.5 million for the 13 weeks ended June 27, 2020. The increase in interest expense was primarily due to the additional $10.0 million borrowed under our revolving credit facility in May 2020, which was outstanding during the entire period in the current year.
Comparison of the Twenty-Six Weeks Ended June 26, 2021 and June 27, 2020
Revenue
Total revenue increased $40.9 million, or 93.8%, to $84.6 million during the 26 weeks ended June 26, 2021, compared to $43.6 million for the 26 weeks ended June 27, 2020. The increase in total revenue was largely due to our results for the 26 weeks ended June 27, 2020 being severely impacted by center closures stemming from the COVID-19 pandemic. In addition, we had 41 new center openings which became operational during the period from June 27, 2020 to June 26, 2021.
Product Sales
Product sales increased $22.0 million, or 87.2%, to $47.1 million during the 26 weeks ended June 26, 2021, compared to $25.2 million for the 26 weeks ended June 26, 2020. The increase in product sales during the 26 weeks ended June 26, 2021 was primarily due to the negative impact of center closures resulting from the COVID-19 pandemic on product sales during the 26 weeks ended June 27, 2020. In addition, the increase in product sales was also partially attributable to shipments of a new product line to franchisees in the current year and new center openings which became operational during the period from June 27, 2020 to June 26, 2021.
28
Royalty Fees
Royalty fees increased $9.9 million, or 89.8%, to $20.9 million during the 26 weeks ended June 26, 2021, compared to $11.0 million for the 26 weeks ended June 26, 2020. The increase in royalty fees during the 26 weeks ended June 26, 2021 was the result of the negative impact of the COVID-19 pandemic on network revenues during the 26 weeks ended June 27, 2020. In addition, the increase in royalty fees was also partially attributable to new center openings which became operational during the period from June 27, 2020 to June 26, 2021.
Marketing Fees
Marketing fees increased $6.8 million, or 141.8%, to $11.6 million during the 26 weeks ended June 26, 2021, compared to $4.8 million for the 26 weeks ended June 27, 2020. Marketing fees increased primarily due to the negative impact of the COVID-19 pandemic on network revenues during the 26 weeks ended June 27, 2020.
Other Revenue
Other revenue increased $2.3 million or 86.4%, to $5.0 million during the 26 weeks ended June 26, 2021, compared to $2.7 million for the 26 weeks ended June 27, 2020. The increase in other revenue during the 26 weeks ended June 26, 2021 was primarily due to the negative impact of corporate-owned center closures resulting from the COVID-19 pandemic on other revenue during the 26 weeks ended June 27, 2020. In addition, we waived technology fees for closed centers in 2020 to provide relief to our franchisees from the adverse impact of the COVID-19 pandemic.
Costs and Expenses
Cost of Revenue
Cost of revenue increased $9.1 million, or 73.2%, to $21.5 million during the 26 weeks ended June 26, 2021, compared to $12.4 million for the 26 weeks ended June 27, 2020. The increase in cost of revenue was largely the result of higher revenues in the current year period as compared to our revenues for the 26 weeks ended June 27, 2020, which were severely impacted by center closures stemming from the COVID-19 pandemic
Selling, General and Administrative
Selling, general and administrative expenses increased $6.6 million, or 39.2%, to $23.3 million during the 26 weeks ended June 26, 2021, compared to $16.7 million for the 26 weeks ended June 27, 2020. The increase in selling, general and administrative expenses was primarily due to increased payroll and benefits expense resulting from our reduction and temporary furlough of certain corporate employees in the prior year and increased professional fees and corporate reorganization costs in the current year arising from preparations for our initial public offering. These increases were partially offset by a decrease in commissions resulting from the reacquisition of rights from certain area representatives and a decrease in relocation costs in the first 26 weeks of 2021 compared to the first 26 weeks of 2020.
Advertising
Advertising expenses increased $5.1 million, or 81.2%, to $11.4 million during the 26 weeks ended June 26, 2021, compared to $6.3 million for the 26 weeks ended June 27, 2020. The increase in advertising expense was largely attributable to our suspension of marketing activities in the prior year commensurate with the center closures caused by the COVID-19 pandemic.
Depreciation and Amortization
Depreciation and amortization increased $0.5 million, or 4.7%, to $10.4 million during the 26 weeks ended June 26, 2021, compared to $9.9 million for the 26 weeks ended June 27, 2020. The increase in depreciation and amortization expense was primarily driven by an increase in amortization expense for the additional reacquired rights from area representatives completed during fiscal years 2020 and 2021.
Interest expense
Interest expense increased $0.5 million, or 5.3%, to $9.2 million during the 26 weeks ended June 26, 2021, compared to $8.7 million for the 26 weeks ended June 27, 2020. The increase in interest expense was primarily due to the additional $10.0 million borrowed under our revolving credit facility in May 2020, which was outstanding during the entire period in the current year.
29
Non-GAAP Financial Measures
In addition to our GAAP financial results, we believe the non-GAAP financial measures EBITDA and Adjusted EBITDA are useful in evaluating our performance. Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are presented for supplemental information purposes only and may be different from similarly titled metrics or measures presented by other companies. A reconciliation of the non-GAAP financial measures to the most directly comparable financial measure stated in accordance with GAAP and a further discussion of how we use non-GAAP financial measures is provided below.
EBITDA and Adjusted EBITDA. We define EBITDA as net income (loss) before interest, taxes, depreciation and amortization. We believe that EBITDA, which eliminates the impact of certain expenses that we do not believe reflect our underlying business performance, provides useful information to investors to assess the performance of our business. We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation and amortization, adjusted for the impact of certain additional non-cash and other items that we do not consider in our evaluation of ongoing performance of our core operations. These items include exit costs related to leases of abandoned space, IPO-related costs, non-cash equity-based compensation expense, corporate headquarters office relocation, and other one-time expenses. We believe that Adjusted EBITDA is an appropriate measure of operating performance in addition to EBITDA because it eliminates the impact of other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors in comparing the core performance of our business from period to period. EBITDA and Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in methods of calculation.
A reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is set forth below for the periods indicated:
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
||||||||||
|
|
June 26, |
|
|
June 27, |
|
|
June 26, |
|
|
June 27, |
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
7,729 |
|
|
$ |
(11,372 |
) |
|
$ |
8,831 |
|
|
$ |
(10,413 |
) |
Interest expense |
|
|
4,635 |
|
|
|
4,485 |
|
|
|
9,171 |
|
|
|
8,707 |
|
Provision for income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Depreciation |
|
|
413 |
|
|
|
400 |
|
|
|
841 |
|
|
|
771 |
|
Amortization |
|
|
4,858 |
|
|
|
4,640 |
|
|
|
9,568 |
|
|
|
9,167 |
|
EBITDA |
|
$ |
17,635 |
|
|
$ |
(1,847 |
) |
|
$ |
28,411 |
|
|
$ |
8,232 |
|
Exit costs - lease abandonment(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
159 |
|
Corporate headquarter relocation(2) |
|
|
— |
|
|
|
63 |
|
|
|
— |
|
|
|
546 |
|
Share-based compensation(3) |
|
|
259 |
|
|
|
419 |
|
|
|
557 |
|
|
|
1,246 |
|
IPO-related costs(4) |
|
|
1,859 |
|
|
|
100 |
|
|
|
2,982 |
|
|
|
100 |
|
Other compensation-related costs(5) |
|
|
43 |
|
|
|
186 |
|
|
|
380 |
|
|
|
350 |
|
Adjusted EBITDA |
|
$ |
19,796 |
|
|
$ |
(1,079 |
) |
|
$ |
32,330 |
|
|
$ |
10,633 |
|
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital needs, capital expenditures, contractual obligations and debt service with cash flows from operations and other sources of funding. Our primary sources of liquidity and capital resources are cash provided from operating activities, cash and cash equivalents on hand, proceeds from our secured term loan and revolving credit facility and proceeds from the issuance of equity to our members. We had cash and cash equivalents of $35.2 million as of June 26, 2021.
30
In August 2021, concurrent with our initial public offering, we entered into a new credit agreement providing for a new $180.0 million term loan and a $40.0 million revolving credit facility. The proceeds from the new term loan were used together with proceeds from our initial public offering to fully repay and terminate the Senior Secured Credit Facility. See the notes to the condensed consolidated financial statements (Note 13—Subsequent Events) contained elsewhere in this quarterly report on Form 10-Q for more information.
We believe that our sources of liquidity and capital will be sufficient to finance our continued operations and growth strategy for at least the next twelve months. Our primary requirements for liquidity and capital are working capital, capital expenditures to grow our network of centers, debt servicing costs, and general corporate needs. We have in the past, and may in the future, refinance our existing indebtedness with new debt arrangements and utilize a portion of borrowings to return capital to our stockholders. We anticipate additional cash obligations as a result of the Tax Receivable Agreements described in the notes to condensed consolidated financial statements included in Item 1 of this quarterly report on Form 10-Q. During the 26 weeks ended June 26, 2021 there were no material changes in our contractual obligations from those described in the Prospectus.
Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results and our future capital requirements could vary because of many factors, including our growth rate, the timing and extent of spending to acquire new centers and expand into new markets, and the expansion of sales and marketing activities. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services and technologies. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations and financial condition would be adversely affected.
Senior Secured Credit Facility
Our Senior Secured Credit Facility consists of a $245.0 million term loan and a revolving credit facility. Borrowings under the term loan bear interest at an index rate as defined in the credit agreement plus an applicable margin of 5.5% (6.5% at June 26, 2021), payable quarterly through December 28, 2019 and monthly thereafter. The term loan requires principal payments equal to approximately $2.4 million per fiscal year, payable in quarterly installments with the final scheduled principal payment on the outstanding term loan borrowings due on September 25, 2024. Beginning in fiscal year 2020, additional principal payments could become due in May of each year, which are based upon a calculation of Excess Cash Flow, as defined by the credit agreement. No such additional principal payments were required in May 2021 or 2020.
In May 2020, we amended the Senior Secured Credit Facility to increase the borrowing capacity under the revolving credit facility by $10.0 million, to an aggregate amount of up to $30.0 million. Borrowings under the revolving credit facility bear interest at an index rate defined in the credit agreement plus an applicable margin of 3.5% (4.25% at June 26, 2021), payable monthly. The revolving credit facility was fully drawn as of June 26, 2021 and expires on September 25, 2024.
In consideration of the increased capacity on the revolving credit facility, the applicable margin on the term loan increased by 1.0%, to 5.5%. Additionally, beginning with the month ended June 27, 2020 and for the 12 months thereafter, we are required to maintain $6.0 million of minimum liquidity, as defined by the credit agreement. During such period, the financial covenant requiring us to maintain a maximum net leverage ratio (as described below) is not in effect.
The credit agreement governing our Senior Secured Credit Facility requires us to comply with a number of affirmative and negative covenants, including certain restrictions on additional indebtedness, liens against our assets, sales of our assets and other restrictions on payments. The credit agreement also contains a quarterly maintenance covenant that requires us to maintain a net leverage ratio (as defined in the credit agreement) that does not exceed 8.75 to 1.00. As described above and in accordance with the terms of the May 2020 amendment to the credit agreement, this maintenance covenant is not in effect beginning with the month ended June 27, 2020 and for the 12 months thereafter. The requirement to be in compliance with the maintenance covenant will resume beginning with the fiscal period beginning June 27, 2021. Failure to comply with our covenants would result in an event of default under our Senior Secured Credit Facility unless waived by our Senior Secured Credit Facility lenders. An event of default under our Senior Secured Credit Facility can result in the acceleration of our indebtedness under the facility. As of June 26 2021, the minimum net leverage ratio covenant was not in effect as a result of the amendment to the credit agreement described above. For additional information regarding our long-term debt activity, see the notes to the condensed consolidated financial statements (Note 7—Long-term debt, net) contained elsewhere in this quarterly report on Form 10-Q.
31
Derivative Instruments and Hedging Activities
In December 2018, we entered an interest rate cap derivative instrument which was designated as a cash flow hedge at inception. Our objective is to mitigate the impact of interest expense fluctuations on our profitability resulting from interest rate changes by capping the LIBOR component of the interest rate at 4.5% on $175.0 million of our long-term debt, as the interest rate cap provides for payments from the counterparty when LIBOR rises above 4.5%. The interest rate cap has a $175.0 million notional amount and is effective December 31, 2018, for the monthly periods from and including January 31, 2019 through September 25, 2024. The interest rate cap has a deferred premium; accordingly, the Company will pay a monthly premium for the interest rate cap over the term of the agreement. The annual premium is equal to 0.11486% on the notional amount.
Changes in the cash flows of interest rate cap derivatives designated as hedges are expected to be highly effective in offsetting the changes in interest payments on a principal balance equal to the designated derivative’s notional amount, attributable to the hedged risk.
We recognize as assets or liabilities at fair value the estimated amounts we would receive or pay upon a termination of the interest rate cap prior to the scheduled maturity date. As of June 26, 2021, the fair value of the interest rate cap derivative instrument was estimated to be a liability of $0.3 million, with $0.2 million classified within Other current liabilities and $0.1 million within Other long-term liabilities on the condensed consolidated balance sheet. The fair value is based on information that is model-driven and whose inputs were observable.
Tax Receivable Agreement
Generally, we are required under the Tax Receivable Agreement, which is described more fully in “Risk Factors—Risks Related to Our Organization and Structure—We will be required to pay the Company’s pre-IPO members for certain tax benefits we may claim, and the amounts we may pay could be significant” and “Certain Relationships and Related Party Transactions—Tax Receivable Agreement” in the Prospectus to make payments to the Company’s pre-IPO members that are generally equal to 85% of the applicable cash tax savings, if any, that we actually realize (or are deemed to realize, calculated using certain assumptions) as a result of (i) increases in our allocable share of certain existing tax basis of the Company’s assets resulting from the Corporation’s acquisition of EWC Ventures Units in the IPO and future Share Exchanges and Cash Exchanges (ii) our utilization of certain tax attributes of the Blocker Companies (including the Blocker Companies' allocable share of certain existing tax basis of the Company's assets) and (iii) certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize in full the potential tax benefit described above, we estimate that payments under the Tax Receivable Agreement would aggregate to approximately $234.8 million over 18 years from the date of the completion of our IPO, based on the initial public offering price of $17.00 per share of Class A common stock and assuming all future Share Exchanges and Cash Exchanges occurred on the date of our IPO. The actual amounts we will be required to pay may materially differ from these hypothetical amounts, because potential future tax savings that we will be deemed to realize, and the Tax Receivable Agreement payments made by us, will be calculated based in part on the market value of our Class A common stock at the time of each Share Exchange or Cash Exchange and the prevailing applicable federal tax rate (plus the assumed combined state and local tax rate) applicable to us over the life of the Tax Receivable Agreement and will depend on our generating sufficient taxable income to realize the tax benefits that are subject to the Tax Receivable Agreement. Subject to the discussion in the following paragraph below, payments under the Tax Receivable Agreement will occur only after we have filed our U.S. federal and state income tax returns and realized the cash tax savings from the favorable tax attributes. The first payment would be due after the filing of our tax return for the year ended December 25, 2021, which is due March 15, 2022, but the due date can be extended until September 15, 2022. Future payments under the Tax Receivable Agreement in respect of future Share Exchanges and Cash Exchanges would be in addition to these amounts. We currently expect to fund these payments from cash flow from operations generated by our subsidiaries as well as from excess tax distributions that we receive from our subsidiaries. To the extent we are unable to make payments under the Tax Receivable Agreement for any reason (including because our credit agreement restricts the ability of our subsidiaries to make distributions to us), under the terms of the Tax Receivable Agreement such payments will be deferred and accrue interest until paid. If we are unable to make payments due to insufficient funds, such payments may be deferred indefinitely while accruing interest until paid, which could negatively impact our results of operations and could also affect our liquidity in future periods in which such deferred payments are made.
32
Under the Tax Receivable Agreement, as a result of certain types of transactions and other factors, including a transaction resulting in a change of control, we may also be required to make payments to the Company’s pre-IPO members in amounts equal to the present value of future payments we are obligated to make under the Tax Receivable Agreement. If the payments under the Tax Receivable Agreement are accelerated, we may be required to raise additional debt or equity to fund such payments. To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason (including because our credit agreement restricts the ability of our subsidiaries to make distributions to us), under the terms of the Tax Receivable Agreement such payments will be deferred and will accrue interest until paid. If we are unable to make payments due to insufficient funds to make such payments, such payments may be deferred indefinitely while accruing interest until paid, which could negatively impact our results of operations and could also affect our liquidity in future periods in which such deferred payments are made.
Summary Statements of Cash Flows
The following table sets forth the major components of our consolidated statements of cash flows for the periods presented (amounts in thousands):
|
|
For the Twenty-Six Weeks Ended |
|
|||||
|
|
June 26, |
|
|
June 27, |
|
||
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
7,860 |
|
|
$ |
(17,180 |
) |
Investing activities |
|
|
(7,917 |
) |
|
|
(35,295 |
) |
Financing activities |
|
|
(1,428 |
) |
|
|
63,451 |
|
Net (decrease) increase in cash |
|
$ |
(1,485 |
) |
|
$ |
10,976 |
|
Operating Activities
During the 26 weeks ended June 26, 2021, net cash provided by operating activities was $7.9 million compared to net cash used in operating activities of $17.2 million for the 26 weeks ended June 27, 2020, an increase of $25.0 million. This improvement was largely attributable to our improved operating results in the first 26 weeks of 2021 compared to the first 26 weeks of 2020, which was severely impacted by the COVID-19 pandemic. In addition, the increase in working capital requirements in the first 26 weeks of 2021 was less than the working capital increase in the first 26 weeks of 2020. The increase in working capital in 2021 was primarily attributable to increases of $6.7 million and $9.5 million in accounts receivable and inventory, respectively, resulting from our improved performance in 2021. In addition, prepaid expenses and other assets increased $7.6 million largely due to deferred charges relating to our initial public offering. These increases in working capital were partially offset by a $10.3 million increase in accounts payable and accrued expenses largely driven by increased inventory purchases and accrued professional fees.
Investing Activities
During the 26 weeks ended June 26, 2021 and June 27, 2020, we used $7.6 million and $33.0 million of cash, respectively, for the reacquisition of area representative rights. Investing activities related to capital expenditures were $0.3 million in in the first 26 weeks of 2021 and $2.3 million in the first 26 weeks of 2020, respectively.
Financing Activities
Financing activities during the 26 weeks ended June 26, 2021 primarily consisted of $1.2 million in principal payments on our term loan and $0.9 million in repurchases of Class A Units. Financing activities during the 26 weeks ended June 27, 2020 primarily consisted of additional funding obtained to optimize our cash position in preparation for a potential, prolonged impact of the COVID-19 pandemic on our business, and to support our investments in the reacquisition of area representative rights. In the first 26 weeks of 2020 we drew down $27.0 million on our revolving credit facility and increased our term loan by $15.0 million. In addition, we received $24.9 million in contributions from members in exchange for the issuance of the Class D units during the 26 weeks ended June 27, 2020.
33
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. There have been no material changes to our critical accounting policies and use of estimates from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Prospectus.
JOBS Act
The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. We have elected to use the extended transition period for complying with new or revised accounting standards. This may make it difficult to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Recent Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements included in this quarterly report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption and our assessment, to the extent we have made one, of the potential impact of the pronouncements on our financial condition and results of operations and cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our term loan and revolving credit facility bear interest at a variable rate.
Our term loan and revolving credit facility bear interest at a variable index rate plus an applicable margin, as defined in the credit agreement. Accordingly, increases in the variable index rate could increase our interest payments under the term loan and revolving credit facility. An increase of 100 basis points in the variable index rate would not have a material impact on our financial position or results of operations.
To mitigate our exposure to rising interest rates, we entered into an interest rate cap agreement in December 2018 to limit the variable index rate (1-month LIBOR) to 4.5% on $175.0 million of principal outstanding on our term loan. The agreement was effective on December 31, 2018 and applies to interest payments from and including January 31, 2019 through September 25, 2024.
Foreign Currency Risk
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with foreign vendors. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.
Commodity Price Risk
We are exposed to market risk related to changes in commodity prices. Our primary exposure to commodity price risk is the pricing of our proprietary wax purchased from our significant suppliers, which may be adjusted upwards or downwards based on changes in prices of certain raw materials used in the production process. To date, there have been no price adjustments due to changes in raw material prices.
34
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.
Based on that evaluation, our CEO and CFO concluded that as of June 26, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting that occurred during the 13 weeks ended June 26, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
35
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
We may be the defendant from time to time in litigation arising during the ordinary course of business, including, without limitation, employment-related claims, claims based on theories of joint employer liability, data privacy claims, claims involving anti-poaching allegations and claims made by former or existing franchisees or the government. In the ordinary course of business, we are also subject to regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations, and threatened legal actions and proceedings. Although the outcomes of potential legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material effect on its financial position, results of operations, or cash flow.
Item 1A. Risk Factors
We have disclosed under the heading “Risk Factors” in our Prospectus the risk factors that materially affect our business, financial condition or results of operations. There have been no material changes in our risk factors from those disclosed in the Prospectus. You should carefully consider the risk factors set forth in the Prospectus and the other information set forth in this quarterly report on Form 10-Q. You should be aware that these risk factors and other information may not describe every risk that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Use of Proceeds from Initial Public Offering of Class A Common Stock
On August 11, 2021, we completed the initial public offering of our Class A common stock pursuant to a Registration Statement (File No. 333-257874), which was declared effective on August 4, 2021.
Under the Registration Statement, we and the selling stockholders sold 12,190,000 shares of our Class A common stock at a price of $17.00 per share. This included 1,590,000 shares sold by us and the selling stockholders pursuant to the underwriters' option to purchase additional shares of Class A common stock. Morgan Stanley & Co. LLC, BofA Securities, Inc. and Jefferies LLC acted as representatives of the underwriters for the offering.
We received net proceeds of $155.4 million after deducting underwriting discounts and commissions and prior to paying any offering expenses No payments were made by us to directors, officers or persons owning 10% or more of our Class A common stock or to their associates, or to our affiliates. The offering terminated after the sale of all securities registered pursuant to the Registration Statement.
We used the net proceeds from this offering as described in the notes to the condensed consolidated financial statements included in this quarterly report on Form 10-Q. There was no material change in the use of the proceeds from our IPO as described in the Prospectus.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
36
Item 6. Exhibits
Exhibit Number |
|
Description |
2.1* |
|
|
2.2* |
|
|
2.3* |
|
|
3.1 |
|
|
3.2 |
|
|
10.1 |
|
|
10.2 |
|
|
10.3* |
|
|
10.4* |
|
|
10.5* |
|
|
10.6* |
|
|
10.7* |
|
|
10.8* |
|
|
10.9* |
|
|
10.10* |
|
|
10.11* |
|
European Wax Center, Inc. 2021 Omnibus Incentive Plan, effective as of August 4, 2021. |
10.12+ |
|
|
10.13+ |
|
|
31.1* |
|
|
31.2* |
|
|
32.1** |
|
|
32.2** |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** European Wax Center, Inc. is furnishing, but not filing, the written statement pursuant to Title 18 United States
Code 1350, as added by Section 906 of the Sarbanes Oxley Act of 2002, of David P. Berg, our Chief Executive Officer and Jennifer C. Vanderveldt, our Chief Financial Officer.
+ Indicates management contract or compensatory plan.
37
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 thereunto duly authorized.
|
|
European Wax Center, Inc. |
|
|
|
|
|
Date: September 14, 2021 |
|
By: |
/s/ DAVID P. BERG |
|
|
|
David P. Berg |
|
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
Date: September 14, 2021 |
|
By: |
/s/ JENNIFER C. VANDERVELDT |
|
|
|
Jennifer C. Vanderveldt |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
38
Exhibit 2.1
REORGANIZATION AGREEMENT
Dated as of August 4, 2021
TABLE OF CONTENTS
Page
Article I DEFINITIONS |
1 |
|
1.1 |
Certain Defined Terms |
1 |
1.2 |
Terms Defined Elsewhere in this Agreement |
4 |
1.3 |
Other Definitional and Interpretative Provisions |
5 |
Article II THE REORGANIZATION |
5 |
|
2.1 |
Transactions |
5 |
2.2 |
Consent to Reorganization Transactions |
9 |
2.3 |
No Liabilities in Event of Termination; Certain Covenants |
10 |
Article III REPRESENTATIONS AND WARRANTIES |
10 |
|
3.1 |
Representations and Warranties |
10 |
Article IV MISCELLANEOUS |
11 |
|
4.1 |
Amendments and Waivers |
11 |
4.2 |
Successors and Assigns |
12 |
4.3 |
Notices |
12 |
4.4 |
Further Assurances |
13 |
4.5 |
Entire Agreement |
13 |
4.6 |
Governing Law |
13 |
4.7 |
Jurisdiction |
13 |
4.8 |
WAIVER OF JURY TRIAL |
14 |
4.9 |
Severability |
14 |
4.10 |
Enforcement |
14 |
4.11 |
Counterparts; Facsimile Signatures |
14 |
4.12 |
Expenses |
14 |
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Exhibits
Exhibit A Amended and Restated Certificate of Incorporation
Exhibit B Amended and Restated Bylaws
Exhibit C GA Collections Restructuring
Exhibit D Tax Receivable Agreement
Exhibit E Merger Agreement 1
Exhibit F Merger Agreement 2
Exhibit G Subscription Agreement
Exhibit H Exchange Agreement
Exhibit I Company LLC Agreement
Exhibit J Stockholders Agreement
Exhibit K Registration Rights Agreement
Exhibit L Management Holdco LLC Agreement
Exhibit M Exchange and Redemption Agreement
Exhibit N Class C Purchase Agreement
Exhibit O Company Holder Purchase Agreement
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REORGANIZATION AGREEMENT
REORGANIZATION AGREEMENT (this “Agreement”), dated as of August 4, 2021, by and among European Wax Center, Inc., a Delaware corporation (“Pubco”), EWC Merger Sub 1, Inc., a Delaware corporation (“Merger Sub 1”), EWC Merger Sub 2, Inc., a Delaware corporation (“Merger Sub 2”), EWC Ventures, LLC, a Delaware limited liability company (the “Company”), EWC Management Holdco, LLC, a Delaware limited liability company (“Management Holdco”), EWC Holdings, Inc., a Florida corporation (“EWC Holdings”), the GA Parties (as defined below), and the individuals designated as the “Other Members” on the signature pages hereto.
RECITALS
WHEREAS, the Board of Directors of Pubco (the “Board”) has determined to effect an underwritten initial public offering (the “IPO”) of Pubco’s Class A Common Stock (as defined below);
WHEREAS, the parties hereto desire to effect the Reorganization Transactions (as defined below) in contemplation of the IPO; and
WHEREAS, in connection with the consummation of the Reorganization Transactions and the IPO, the applicable parties hereto intend to enter into the Reorganization Documents (as defined below).
NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises hereinafter set forth, the parties hereto hereby agree as follows:
Article I
DEFINITIONS
1.1 Certain Defined Terms. As used herein, the following terms shall have the following meanings:
“Blockers” means, collectively, GAPCO Blocker and GA Blocker.
“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by applicable law to close.
“Class A Common Stock” shall mean Class A Common Stock, par value $0.00001 per share, of Pubco, having the rights set forth in the Amended and Restated Certificate of Incorporation.
“Class A Units” means Class A Units, as such term is defined in the Existing Company LLC Agreement.
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“Class B Common Stock” shall mean Class B Common Stock, par value $0.00001 per share, of Pubco, having the rights set forth in the Amended and Restated Certificate of Incorporation.
“Class B Units” means Class B Units, as such term is defined in the Existing Company LLC Agreement.
“Class C Units” means Class C Units, as such term is defined in the Existing Company LLC Agreement.
“Class D Units” means Class D Units, as such term is defined in the Existing Company LLC Agreement.
“Company Common Units” means Common Units, as such term is defined in the Company LLC Agreement.
“Discounted Price” means (i) the IPO Price Per Share less (ii) the underwriting discount per share paid to the underwriters in the IPO.
“Exchange Act” means the Securities Exchange Act of 1934.
“Existing Company LLC Agreement” means the Fourth Amended and Restated Limited Liability Company Agreement of the Company, dated as of June 15, 2020 and effective as of May 7, 2020, by and among the Company and the other Persons listed on the signature pages thereto.
“Form 8-A Effective Time” means the date and time on which the Registration Statement becomes effective, which will occur after the Pricing, on such date and at such time as determined by Pubco.
“GA AIV” means General Atlantic Partners AIV (EW), L.P., a Delaware limited partnership.
“GA AIV-1” means GA AIV-1 B Interholdco (EW), L.P., a Delaware limited partnership.
“GA Blocker” means General Atlantic AIV (EW) Blocker, LLC, a Delaware limited liability company.
“GA Collections” means General Atlantic (EW) Collections, L.P., a Delaware limited partnership.
“GA Company Holders” means, collectively, GA AIV-1, GA AIV and GAPCO AIV.
“GA Parties” means, collectively, GAPCO AIV, GA AIV-1, GA Blocker, GAPCO Blocker, GA Collections, GA AIV and General Atlantic GenPar (EW), L.P., a Delaware limited partnership.
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“GAPCO AIV” means GAPCO AIV Interholdco (EW), L.P., a Delaware limited partnership.
“GAPCO Blocker” means GAPCO AIV Blocker (EW), LLC, a Delaware limited liability company.
“Incentive Plan” means the Equity Incentive Plan of Management Holdco, as amended, restated, supplemented or otherwise modified from time to time, pursuant to which Class B Units of Management Holdco may be issued.
“IPO Closing” means the initial closing of the sale of the Class A Common Stock in the IPO.
“IPO Offering Expenses” means the amount of any IPO offering expenses borne by Pubco (as agreed in writing by Pubco and the Company, for which email shall be sufficient).
“IPO Price Per Share” means the per share public offering price for the Class A Common Stock.
“Management Holdco Common Units” means common limited liability company units in Management Holdco.
“Management Holdco Equity Agreements” means the award agreements by and among Management Holdco and those Persons who prior to the IPO held Management Holdco Class B Units pursuant to the Incentive Plan.
“Management Holdco LLC Agreement” means the limited liability company agreement of Management Holdco, as it may be amended, restated or otherwise modified from time to time.
“Management Holdco Partners” means each Person who prior to the IPO held Management Holdco Class B Units pursuant to the Incentive Plan.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, estate, joint venture, governmental authority or other entity.
“Pricing” means such date and time as the Board or the pricing committee thereof prices the IPO.
“Primary Amount” means an amount equal to the product of (i) the IPO Price Per Share multiplied by (ii)(x) the number of shares of Class A Common Stock sold at the IPO Closing less (y) the number of Secondary Securities purchased immediately following the IPO Closing.
“Registration Statement” means the registration statement on Form 8-A filed by Pubco under the Exchange Act with the SEC to register the Class A Common Stock.
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“Reorganization Documents” means each of the documents attached as an exhibit hereto and all other agreements and documents entered into in connection with the Reorganization Transactions.
“SEC” means the Securities and Exchange Commission.
“Secondary Securities” means the Company Common Units purchased by Pubco pursuant to the Company Holder Purchase Agreement.
“Unvested Company Common Units” means Unvested Common Units, as such term is defined in the Company LLC Agreement.
1.2 Terms Defined Elsewhere in this Agreement. Each of the following terms is defined in the Section set forth opposite such term:
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Term |
Section |
Agreement |
Preamble |
Amended and Restated Certificate of Incorporation |
2.1(a)(i) |
Blocker Mergers |
2.1(b)(iv) |
Board |
Recitals |
Class B Subscriber |
2.1(b)(vi) |
Class C Purchase Agreement |
2.1(c)(ii) |
Company |
Preamble |
Company Holder Purchase Agreement |
2.1(c)(ii) |
Company LLC Agreement |
2.1(b)(vi) |
Company Member Schedule |
2.1(b)(viii) |
Exchange Agreement |
2.1(b)(vii) |
Exchange and Redemption Agreement |
2.1(b)(xiii) |
Former Class C Unitholders |
2.1(b)(xiii) |
GA Parties |
Preamble |
Hypothetical Liquidation Value |
2.1(b)(viii) |
IPO |
Recitals |
Management Holdco |
Preamble |
Management Holdco LLC Agreement |
2.1(b)(xii) |
Merger Agreement 1 |
2.1(b)(iv) |
Merger Agreement 2 |
2.1(b)(iv) |
Merger Sub 1 |
Preamble |
Merger Sub 2 |
Preamble |
Mergers |
2.1(b)(v) |
Post-Reorg Company Members |
2.1(b)(viii) |
Pubco |
Preamble |
Registration Rights Agreement |
2.1(b)(x) |
Reorganization Transaction |
2.1 |
Reorganization Transactions |
2.1 |
Stockholders Agreement |
2.1(b)(ix) |
Subscription Agreement |
2.1(b)(vi) |
Tax Receivable Agreement |
2.1(b)(ii) |
1.3 Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable
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terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event of an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
Article II
THE REORGANIZATION
2.1 Transactions. Subject to the terms and conditions hereinafter set forth, and on the basis of and in reliance upon the representations, warranties, covenants and agreements set forth herein, the parties hereto shall take the actions described in this Section 2.1 (each, a “Reorganization Transaction” and, collectively, the “Reorganization Transactions”):
(a) On or prior to the Pricing, the applicable parties shall take the actions set forth below (or cause such actions to take place):
(i) Pubco shall adopt and file with the Secretary of State of the State of Delaware an amended and restated certificate of incorporation of Pubco, in the form attached hereto as Exhibit A (the “Amended and Restated Certificate of Incorporation”).
(ii) The Board shall adopt amended and restated by‑laws of Pubco in the form attached hereto as Exhibit B.
(b) Immediately following Pricing and prior to the Form 8-A Effective Time, the applicable parties shall take the actions set forth below (or cause such actions to take place) in the order set forth below:
(i) GA Collections, together with certain of their affiliates, shall undertake an internal restructuring, as described on Exhibit C hereto.
(ii) As a condition to the Mergers (as defined below), Pubco, the Blockers and certain of the Post-Reorg Company Members (other than Pubco) shall enter into a Tax Receivable Agreement in the form attached hereto as Exhibit D (the “Tax Receivable Agreement”).
(iii) The Company shall sell to Pubco, and Pubco shall repurchase from the Company, all of the Company’s outstanding shares of Class A Common Stock for $100.
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(iv) Immediately following the transaction set forth in Section 2.1(b)(iii) above, pursuant to a Merger Agreements each in the form attached hereto as Exhibit E (the “Merger Agreement 1”) and Exhibit F (the “Merger Agreement 2”), Merger Sub 1 and Merger Sub 2 shall simultaneously merge with and into GA Blocker and GAPCO Blocker respectively, with GA Blocker and GAPCO Blocker surviving the mergers, and pursuant to which GA AIV-1 and GAPCO AIV shall each receive shares of Class A Common Stock and the right to receive payments under the Tax Receivable Agreement (the mergers described in this clause (b)(iv), the “Blocker Mergers”).
(v) Immediately following the Blocker Mergers, GA Blocker and GAPCO Blocker shall each merge with and into Pubco sequentially, with Pubco surviving each merger (the mergers described in clause (b)(iv) and this clause (b)(v), the “Mergers”).
(vi) As a condition to receiving Company Common Units in the reclassification described in clause (viii)(x) below, each of the Post-Reorg Company Members (other than Pubco) shall enter into a Subscription Agreement in the form attached hereto as Exhibit G (the “Subscription Agreement”), whereby such Post-Reorg Company Member (each, a “Class B Subscriber”) shall subscribe for, and Pubco shall issue to each such Class B Subscriber upon payment therefor, the number of shares of Class B Common Stock equal to the number of Company Common Units set forth opposite such Post-Reorg Company Member’s name on the Company Member Schedule.
(vii) As a condition to receiving Company Common Units in the reclassification described in clause (viii)(x) below, each of the Post-Reorg Company Members (other than Pubco) shall enter into an Exchange Agreement with the Company and Pubco in the form attached hereto as Exhibit H (the “Exchange Agreement”), whereby each such Post-Reorg Company Member shall be permitted to exchange with Pubco its Company Common Units and shares of Class B Common Stock, for shares of Class A Common Stock or cash, at Pubco’s option, as the managing member of the Company.
(viii) The Company shall: (x) amend and restate its limited liability company agreement in the form attached hereto as Exhibit I (the “Company LLC Agreement”) so that, among other things, (I) all Class A Units, Class B Units, Class C Units and Class D Units outstanding as of immediately following Pricing shall be reclassified into the number of Company Common Units (rounded up or down to the nearest whole number) having a value equal to the amount that would have been distributed in respect thereof pursuant to Section 6.4(b) of the Existing Company LLC Agreement had the Company been liquidated on the date of the Pricing and gross proceeds from such liquidation been distributed to the members of the Company immediately following Pricing pursuant to Section 6.4(b) of the Existing Company LLC Agreement in an aggregate amount equal to the total equity value of all Class A Units, Class B Units, Class C Units and Class D Units immediately following Pricing that is implied by the IPO Price Per Share (with
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respect to each Class A Unit, Class B Unit, Class C Unit and Class D Unit, its “Hypothetical Liquidation Value”), as set forth on Exhibit A to the Company LLC Agreement; provided that certain of such Company Common Units will continue to be subject to vesting on terms set forth in the Management Holdco Equity Agreements pursuant to which such units were originally granted (as amended); (II) Pubco shall become the sole managing member of the Company and (III) after giving effect to the reclassification described in clause (I) above and the contribution and exchange described in clause (iii) below, each of the Persons (the “Post-Reorg Company Members”) listed on the Register of Members (as such term is defined in the Company LLC Agreement) (the “Company Member Schedule”) shall be or become members of the Company and shall own the number of Company Common Units set forth opposite such Post-Reorg Company Member’s name on the Company Member Schedule; and (y) as soon as reasonably practicable, provide written notice to each Post-Reorg Company Member setting forth the Hypothetical Liquidation Value attributable to the Class A Units, Class B Units, Class C Units and Class D Units previously held thereby and the resulting number of Company Common Units then owned thereby.
(ix) Pubco and the GA Company Holders shall enter into a Stockholders Agreement in the form attached hereto as Exhibit J (the “Stockholders Agreement”).
(x) Pubco, the GA Company Holders, EWC Holdings and the other parties thereto shall enter into the Registration Rights Agreement in the form attached hereto as Exhibit K (the “Registration Rights Agreement”).
(xi) Management Holdco shall reclassify each Class A Unit, Class B Unit, Class C Unit and Class D Unit (as such terms are defined in the Management Holdco LLC Agreement) outstanding as of the Pricing into a number of Management Holdco Common Units equal to the number of Company Common Units into which such Class A Units, Class B Units, Class C Units and Class D Units shall be reclassified pursuant to Section 2.1(b)(viii), provided that all such Management Holdco Common Units which result from the reclassification of Class B Units in Management Holdco that remained subject to contractual vesting conditions, as set forth in the Management Holdco Equity Agreement pursuant to which such interests were originally granted (as amended), will continue to be subject to the same vesting conditions.
(xii) The Company and the Management Holdco Partners shall enter into a limited liability company agreement in the form attached hereto as Exhibit L (the “Management Holdco LLC Agreement”) so that, among other things, (I) each of the Management Holdco Partners shall own the number of Management Holdco Common Units set forth opposite such Management Holdco Partner’s name on the schedule set forth therein and (II) at any time after the date of the Exchange Agreement, subject to certain restrictions (including any transfer restrictions set forth in the Management Holdco Equity Agreements), each Management Holdco Partner can elect to (A) cause Management Holdco to
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distribute the vested Company Common Units indirectly owned by such Management Holdco Partner to such Management Holdco Partner (along with the corresponding shares of Class B Common Stock held indirectly by such Management Holdco Partner) in redemption of its corresponding Management Holdco Common Units, (B) exchange such Company Common Units and corresponding shares of Class B Common Stock for shares of Class A Common Stock or cash, at Pubco’s option, as the managing member of the Company, and (C) if such Management Holdco Partner receives shares of Class A Common Stock, transfer such shares of Class A Common Stock.
(xiii) Pursuant to an Exchange and Redemption Agreement in the form attached hereto as Exhibit M (the “Exchange and Redemption Agreement”), Management Holdco shall distribute a number of Company Common Units, along with their corresponding Class B Common Stock, to certain members of Management Holdco who held Class C Units in the Company before the recapitalization in Section 2.1(b)(viii) (such members, the “Former Class C Unitholders”) in redemption of a corresponding number of Management Holdco Common Units.
(c) Immediately following the IPO Closing, the applicable parties shall take the actions set forth below (or cause such actions to take place):
(i) Pubco shall acquire a number of Company Common Units (rounded up or down to the nearest whole number) equal to the quotient of (A) the Primary Amount divided by (B) the IPO Price Per Share (such that the Company shall be responsible for the underwriting discount per share paid in the IPO Closing with respect to the Primary Amount); provided that for administrative convenience and subject to the following sentence, the net amount per Company Common Unit paid to the Company by Pubco shall be the Discounted Price. The aggregate purchase price for such Company Common Units will be paid in cash by Pubco to, or at the direction of, the Company; provided that Pubco may reduce the amount paid thereby by the amount of any IPO Offering Expenses borne by Pubco and not otherwise reimbursed.
(ii) Using a portion of the proceeds from the IPO, (1) pursuant to a Purchase Agreement in the form attached hereto as Exhibit N (the “Class C Purchase Agreement”), the Company shall purchase from each of the Former Class C Unitholders the number of Company Common Units and shares of Class B Common Stock listed opposite their respective names on Schedule I thereto for an aggregate price of $20,000,000, which shares of Class B Common Stock shall thereafter be automatically cancelled and cease to exist and (2) pursuant to a Purchase Agreement in the form attached hereto as Exhibit O (the “Company Holder Purchase Agreement”), Pubco shall purchase from each of the GA Company Holders and the other Persons party thereto the number of Company Common Units and shares of Class B Common Stock listed opposite their respective names on Schedule I thereto at a price of the Discounted Price per Company Common Unit.
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2.2 Consent to Reorganization Transactions.
(a) Each of the parties hereto hereby acknowledges, agrees and consents to all of the Reorganization Transactions. Each of the parties hereto shall take all reasonable action necessary or appropriate in order to effect, or cause to be effected, to the extent within its control, each of the Reorganization Transactions and the IPO.
(b) The parties hereto shall deliver to each other, as applicable, prior to or at the time immediately following Pricing, each of the Reorganization Documents to which it is a party, together with any other documents and instruments necessary or appropriate to be delivered in connection with the Reorganization Transactions.
2.3 No Liabilities in Event of Termination; Certain Covenants.
(a) In the event that the IPO is abandoned or, unless the Board, the Company and the GA Parties otherwise agree, the IPO Closing has not occurred by September 30, 2021, (a) this Agreement shall automatically terminate and be of no further force or effect except for this Section 2.3 and Sections 4.1, 4.2, 4.3, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11 and 4.12 and (b) there shall be no liability on the part of any of the parties hereto, except that such termination shall not preclude any party from pursuing judicial remedies for damages and/or other relief as a result of the breach by the other parties of any representation, warranty, covenant or agreement contained herein prior to such termination.
(b) In the event that this Agreement is terminated for any reason after the consummation of any Reorganization Transaction, but prior to the consummation of all of the Reorganization Transactions, the parties agree, as applicable, to cooperate and work in good faith to execute and deliver such agreements and consents and amend such documents and to effect such transactions or actions as may be necessary to re-establish the rights, preferences and privileges that the parties hereto had prior to the consummation of the Reorganization Transactions, or any part thereof, including, without limitation, voting any and all securities owned by such party in favor of any amendment to any organizational document and in favor of any transaction or action necessary to re-establish such rights, powers and privileges and causing to be filed all necessary documents with any governmental authority necessary to reestablish such rights, preferences and privileges (it being understood and agreed that if such termination occurs subsequent to the events described in Section 2.1(b)(viii) hereof, the parties agree to amend the Company LLC Agreement so that the governance, transfer restrictions, liquidity rights and other related provisions therein with respect to Pubco, Pubco’s subsidiaries and Pubco’s and the Company’s securities correspond in all substantive respects with the provisions contained in the Existing Company LLC Agreement as in effect on the date hereof).
(c) For the avoidance of doubt, each party hereto acknowledges and agrees that until the consummation of the Reorganization Transactions: (i) the parties hereto shall not receive or lose any voting, governance or similar rights in connection with this Agreement or the Reorganization Transactions and (ii) the rights of the parties hereto under the Existing Company LLC Agreement shall not be affected.
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Article III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties. Each party hereto hereby represents and warrants to all of the other parties hereto as follows:
(a) The execution, delivery and performance by such party of this Agreement and of the applicable Reorganization Documents, to the extent a party thereto, has been or prior to the time immediately following Pricing will be duly authorized by all necessary action. If such party is not an individual, such party is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization or incorporation;
(b) Such party has or prior the time immediately following Pricing will have the requisite power, authority, legal right and, if such party is an individual, legal capacity, to execute and deliver this Agreement and each of the Reorganization Documents, to the extent a party thereto, and to consummate the transactions contemplated hereby and thereby, as the case may be;
(c) This Agreement and each of the Reorganization Documents to which it is a party has been (or when executed will be) duly executed and delivered by such party and constitutes the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing; and
(d) Neither the execution, delivery and performance by such party of this Agreement and the applicable Reorganization Documents, to the extent a party thereto, nor the consummation by such party of the transactions contemplated hereby or thereby, nor compliance by such party with the terms and provisions hereof or thereof, will, directly or indirectly (with or without notice or lapse of time or both), (i) if such party is not an individual, contravene or conflict with, or result in a breach or termination of, or constitute a default under (or with notice or lapse of time or both, result in the breach or termination of or constitute a default under) the organizational documents of such party, (ii) constitute a violation by such party of any existing requirement of law applicable to such party or any of its properties, rights or assets or (iii) require the consent or approval of any Person, except, in the case of clauses (ii) and (iii), as would not reasonably be expected to result in, individually or in the aggregate, a material adverse effect on the ability of such party to consummate the transactions contemplated by this Agreement or the applicable Reorganization Documents.
Article IV
MISCELLANEOUS
4.1 Amendments and Waivers. This Agreement (including the Exhibits) may be modified, amended or waived only with the written approval of Pubco, the Company and the GA
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Parties; provided, however, that any modification, amendment or waiver that would affect any other party hereto in a manner materially and disproportionately adverse to such party shall be effective against such party so materially and adversely affected only with the prior written consent of such party, such consent not to be unreasonably withheld or delayed. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. Notwithstanding anything to the contrary in this Section 4.1, nothing in this Section 4.1 shall be deemed to contradict the provisions of Section 2.3 hereof.
4.2 Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.
4.3 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission and e-mail transmission, so long as a receipt of such e-mail is requested and not received by automated response). All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt. All such notices, requests and other communications to any party hereunder shall be given to such party as follows:
If to any of the GA Parties addressed to it at:
c/o General Atlantic LLC
55 East 52nd Street, 33rd Floor
New York, NY 10055
Attention: Christopher Lanning, Managing Director, Chief Legal Officer and General Counsel
Facsimile: (212) 759-5708
E-mail: clanning@generalatlantic.com
With copies (which shall not constitute notice) to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Facsimile: (212) 757-3990
Attention: Matthew W. Abbott
John C. Kennedy
Monica K. Thurmond
E-mail: mabbott@paulweiss.com
jkennedy@paulweiss.com
mthurmond@paulweiss.com
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If to Pubco, the Company or Management Holdco addressed to it at:
European Wax Center, Inc.
5830 Granite Parkway, 3rd Floor
Plano, TX 75024
Attention: Gavin O’Connor, Chief Legal Officer
E-mail: gavin.oconnor@myewc.com
With copies (which shall not constitute notice) to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Facsimile: (212) 757-3990
Attention: Matthew W. Abbott
John C. Kennedy
Monica K. Thurmond
E-mail: mabbott@paulweiss.com
jkennedy@paulweiss.com
mthurmond@paulweiss.com
If to any other party, at the address, facsimile number or e-mail address specified for such party on the Company Member Schedule or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.
4.4 Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.
4.5 Entire Agreement. Except as otherwise expressly set forth herein, this Agreement, together with the Reorganization Documents, embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way.
4.6 Governing Law. This Agreement shall be governed in all respects by the laws of the State of Delaware, without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State.
4.7 Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its affiliates or against any party or any of its affiliates) shall be brought in the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to
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the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 4.3 shall be deemed effective service of process on such party.
4.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
4.9 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
4.10 Enforcement. Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right, without posting a bond, to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof.
4.11 Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Agreement may be executed by facsimile, e-mail or .pdf format signature(s).
4.12 Expenses. Unless otherwise provided in the Reorganization Documents, all costs and expenses incurred in connection with the negotiation and execution of this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such cost or expense.
xvii
IN WITNESS WHEREOF, the parties hereto have executed this Reorganization Agreement as of the date first above written.
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
EWC VENTURES, LLC
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Chief Legal Officer and Corporate Secretary
EWC MANAGEMENT HOLDCO, LLC
By: General Atlantic (SPV) GP, LLC,
its manager
By: General Atlantic, L.P.,
its sole member
By: /s J. Frank Brown
Name: J. Frank Brown
Title: Managing Director
xviii
EWC HOLDINGS, INC.
By: /s/ David Coba
Name: David Coba
Title: President
xix
EWC MERGER SUB 1, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
EWC MERGER SUB 2, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
GA PARTIES:
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
xx
GA AIV-1 B INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: Michael Gosk
Name: Michael Gosk
Title: Managing Director
GENERAL ATLANTIC AIV (EW) BLOCKER, LLC
By: GA AIV-1 B Interholdco (EW), L.P.,
its sole member
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
xxi
GAPCO AIV BLOCKER (EW), LLC,
By: GAPCO AIV Interholdco (EW), L.P.,
its sole member
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GENERAL ATLANTIC (EW) COLLECTIONS, L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
xxii
GENERAL ATLANTIC PARTNERS AIV (EW), L.P.
By: General Atlantic GenPar (EW), L.P.,
its general partner
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GENERAL ATLANTIC GENPAR (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
xxiii
OTHER MEMBERS:
/s/ Sanjeev Khanna
Sanjeev Khanna
/s/ Govind Agrawal
Govind Agrawal
xxiv
Exhibit A
Amended and Restated Certificate of Incorporation
See attached.
xxv
Exhibit B
Amended and Restated Bylaws
See attached.
xxvi
Exhibit C
GA Collections Restructuring
See attached.
xxvii
Exhibit D
Tax Receivable Agreement
See attached.
xxviii
Exhibit E
Merger Agreement 1
See attached.
xxix
Exhibit F
Merger Agreement 2
See attached.
xxx
Exhibit G
Subscription Agreement
See attached.
xxxi
Exhibit H
Exchange Agreement
See attached.
xxxii
Exhibit I
Company LLC Agreement
See attached.
xxxiii
Exhibit J
Stockholders Agreement
See attached.
xxxiv
Exhibit K
Registration Rights Agreement
See attached.
xxxv
Exhibit L
Management Holdco LLC Agreement
See attached.
xxxvi
Exhibit M
Exchange and Redemption Agreement
See attached.
xxxvii
Exhibit N
Class C Purchase Agreement
See attached.
xxxviii
Exhibit O
Company Holder Purchase Agreement
See attached.
xxxix
Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this “Agreement”), dated as of August 4, 2021, by and among General Atlantic AIV (EW) Blocker, LLC, a Delaware limited liability company (“GA Blocker”), EWC Merger Sub 1, Inc., a Delaware corporation (“Merger Sub” and, together with GA Blocker, the “Constituent Entities”), European Wax Center, Inc., a Delaware corporation (“Pubco”), and GA AIV-1 B Interholdco (EW), L.P., a Delaware limited partnership (“GA Holder”).
W I T N E S S E T H:
WHEREAS, Pubco plans to effectuate an initial public offering (“IPO”) of Pubco’s Class A Common Stock, par value $0.00001 per share (“Class A Stock”), as contemplated by Pubco’s Registration Statement on Form S-1, as amended (File No. 333-257874) (the “Registration Statement); and
WHEREAS, the board of directors of each of Pubco and Merger Sub and the sole member of GA Blocker have each deemed it advisable and in the best interests of the Constituent Entities and their respective equityholders that (i) Merger Sub merge with and into GA Blocker under and pursuant to the provisions of the Delaware General Corporation Law (the “DGCL”) and the Delaware Limited Liability Company Act (the “DLLCA”) and (ii) immediately following such merger, GA Blocker merge with and into Pubco under and pursuant to the provisions of the DGCL and the DLLCA.
NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
THE MERGERS
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14741202v10
2
3
4
5
6
CONDITIONS PRECEDENT TO THE CLOSING; THE CLOSING
7
MISCELLANEOUS
8
[Remainder of page intentionally left blank]
9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be duly executed as of the date first written above.
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
EWC MERGER SUB 1, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
10
GENERAL ATLANTIC AIV (EW) BLOCKER, LLC
By: GA AIV-1 B Interholdco (EW), L.P.,
its sole member
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GA AIV-1 B INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
11
EXHIBIT A-1
CERTIFICATE OF MERGER
OF
EWC MERGER SUB 1, INC.
(a Delaware corporation)
INTO
GENERAL ATLANTIC AIV (EW) BLOCKER, LLC
(a Delaware limited liability company)
Pursuant to the provisions of Section 18-209 of the Delaware Limited Liability Company Act (the “Act”) and Section 264 of the Delaware General Corporation Law (the “DGCL”), the undersigned DO HEREBY CERTIFY THAT:
12
IN WITNESS WHEREOF, this certificate has been executed as of [____] ___, 2021 by the undersigned.
EWC MERGER SUB 1, INC.
By:
Name:
Title:
13
GENERAL ATLANTIC AIV (EW) BLOCKER, LLC
By: GA AIV-1 B Interholdco (EW), L.P.,
its sole member
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic LLC,
its sole member
By:
Name:
Title:
14
EXHIBIT A-2
CERTIFICATE OF MERGER
OF
GENERAL ATLANTIC AIV (EW) BLOCKER, LLC
(a Delaware limited liability company)
INTO
EUROPEAN WAX CENTER, INC.
(a Delaware corporation)
Pursuant to the provisions of Section 18-209 of the Delaware Limited Liability Company Act (the “Act”) and Section 264 of the General Corporation Law of the State of Delaware (the “DGCL”), the undersigned DO HEREBY CERTIFY THAT:
15
IN WITNESS WHEREOF, this certificate has been executed as of [____] ___, 2021 by the undersigned.
EUROPEAN WAX CENTER, INC.
By:
Name:
Title:
16
GENERAL ATLANTIC AIV (EW) BLOCKER, LLC
By: GA AIV-1 B Interholdco (EW), L.P.,
its sole member
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic LLC,
its sole member
By:
Name:
Title:
17
Exhibit 2.3
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this “Agreement”), dated as of August 4, 2021, by and among GAPCO AIV Blocker (EW), LLC, a Delaware limited liability company (“GAPCO Blocker”), EWC Merger Sub 2, Inc., a Delaware corporation (“Merger Sub” and, together with GAPCO Blocker, the “Constituent Entities”), European Wax Center, Inc., a Delaware corporation (“Pubco”), and GAPCO AIV Interholdco (EW), L.P., a Delaware limited partnership ( “GAPCO Holder”).
W I T N E S S E T H:
WHEREAS, Pubco plans to effectuate an initial public offering (“IPO”) of Pubco’s Class A Common Stock, par value $0.00001 per share (“Class A Stock”), as contemplated by Pubco’s Registration Statement on Form S-1, as amended (File No. 333-257874) (the “Registration Statement); and
WHEREAS, the board of directors of each of Pubco and Merger Sub and the sole member of GAPCO Blocker have each deemed it advisable and in the best interests of the Constituent Entities and their respective equityholders that (i) Merger Sub merge with and into GAPCO Blocker under and pursuant to the provisions of the Delaware General Corporation Law (the “DGCL”) and the Delaware Limited Liability Company Act (the “DLLCA”) and (ii) immediately following such merger, GAPCO Blocker merge with and into Pubco under and pursuant to the provisions of the DGCL and the DLLCA.
NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
THE MERGERS
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14878280v10
2
3
4
5
6
CONDITIONS PRECEDENT TO THE CLOSING; THE CLOSING
7
MISCELLANEOUS
8
9
[Remainder of page intentionally left blank]
10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be duly executed as of the date first written above.
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
EWC MERGER SUB 2, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
11
GAPCO AIV BLOCKER (EW), LLC
By: GAPCO AIV Interholdco (EW), L.P.,
its sole member
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
12
EXHIBIT A-1
CERTIFICATE OF MERGER
OF
EWC MERGER SUB 2, INC.
(a Delaware corporation)
INTO
GAPCO AIV BLOCKER (EW), LLC
(a Delaware limited liability company)
Pursuant to the provisions of Section 18-209 of the Delaware Limited Liability Company Act (the “Act”) and Section 264 of the Delaware General Corporation Law (the “DGCL”), the undersigned DO HEREBY CERTIFY THAT:
13
IN WITNESS WHEREOF, this certificate has been executed as of [____] ___, 2021 by the undersigned.
EWC MERGER SUB 2, INC.
By:
Name:
Title:
14
GAPCO AIV BLOCKER (EW), LLC
By: GAPCO AIV Interholdco (EW), L.P.,
its sole member
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic LLC,
its sole member
By:
Name:
Title:
15
EXHIBIT A-2
CERTIFICATE OF MERGER
OF
GAPCO AIV BLOCKER (EW), LLC
(a Delaware limited liability company)
INTO
EUROPEAN WAX CENTER, INC.
(a Delaware corporation)
Pursuant to the provisions of Section 18-209 of the Delaware Limited Liability Company Act (the “Act”) and Section 264 of the General Corporation Law of the State of Delaware (the “DGCL”), the undersigned DO HEREBY CERTIFY THAT:
16
IN WITNESS WHEREOF, this certificate has been executed as of [____] ___, 2021 by the undersigned.
EUROPEAN WAX CENTER, INC.
By:
Name:
Title:
17
GAPCO AIV BLOCKER (EW), LLC
By: GAPCO AIV Interholdco (EW), L.P.,
its sole member
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic LLC,
its sole member
By:
Name:
Title:
18
Exhibit 10.3
STOCKHOLDERS’ AGREEMENT
by and among
EUROPEAN WAX CENTER, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
Dated as of August 4, 2021
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
Table of Contents
Page
ARTICLE I DEFINITIONS |
1 |
|
Section 1.1 |
Certain Definitions |
1 |
Section 1.2 |
Interpretive Provisions |
5 |
ARTICLE II CORPORATE GOVERNANCE |
5 |
|
Section 2.1 |
The Board of Directors |
5 |
Section 2.2 |
Major Actions |
8 |
ARTICLE III OTHER COVENANTS AND AGREEMENTS |
10 |
|
Section 3.1 |
Indemnification Agreements |
10 |
Section 3.2 |
Company Charter; Company By-Laws; Corporate Opportunities |
13 |
Section 3.3 |
Conflicting Organizational Document Provisions |
13 |
Section 3.4 |
Information Rights |
13 |
Section 3.5 |
Confidentiality |
14 |
Section 3.6 |
Transfers |
15 |
ARTICLE IV GENERAL |
15 |
|
Section 4.1 |
Assignment |
15 |
Section 4.2 |
Termination |
15 |
Section 4.3 |
Severability |
16 |
Section 4.4 |
Entire Agreement; Amendment |
16 |
Section 4.5 |
Counterparts |
16 |
Section 4.6 |
Governing Law |
16 |
Section 4.7 |
Jurisdiction |
17 |
Section 4.8 |
Waiver of Jury Trial |
17 |
Section 4.9 |
Specific Enforcement |
17 |
Section 4.10 |
Notices |
17 |
Section 4.11 |
Binding Effect; Third Party Beneficiaries |
18 |
Section 4.12 |
Further Assurances |
19 |
Section 4.13 |
Table of Contents, Headings and Captions |
19 |
Section 4.14 |
No Recourse |
19 |
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
Exhibits and Annexes
Exhibit I – Company Charter
Exhibit II – Company By-Laws
Annex A – Form of Joinder Agreement
Annex B – Form of Spousal Consent
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
STOCKHOLDERS’ AGREEMENT
This STOCKHOLDERS’ AGREEMENT (as amended, supplemented or restated from time to time, this “Agreement”) is entered into as of August 4, 2021, by and among European Wax Center, Inc., a Delaware corporation (the “Company”), and the Persons designated as “Stockholders” on the signature pages hereto (the “Stockholders”).
RECITALS
WHEREAS, pursuant to the terms of the Reorganization Agreement (the “Reorganization Agreement”), dated as of the date hereof, by and among the Company, the Stockholders and the other Persons party thereto, the parties hereto have agreed to enter into this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Definitions. As used in this Agreement, the following definitions shall apply:
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person; provided that no party shall be deemed to be an Affiliate of any other party or any of its Affiliates solely by virtue of such party’s ownership of Company Securities. Notwithstanding the foregoing, no Stockholder shall be considered an Affiliate of any portfolio company in which the direct or indirect equityholders of such Stockholder or any of their affiliated investment funds have made a debt or equity investment (or vice versa).
“Affiliated Transferee” means (i) in the case of any Person that is an individual, any transferee of Company Securities of such Person that is (a) a family member of such Person, (b) a trust, family-partnership or estate-planning vehicle for the benefit of such Person and/or any of such Person’s family members, (c) a charitable institution controlled by such Person and/or such Person’s family members, (d) an individual mandated under a qualified domestic relations order, (e) a legal or personal representative of such Person and/or such Person’s family member in the event of the death or disability thereof, or (f) otherwise an Affiliate of such Person or (ii) in the case of any Person that is a corporation, partnership, limited liability company or other entity, any transferee of Company Securities of such Person that is (w) a family member of the individual that controls a majority of the voting or economic interest in such Person, (x) a trust, family-partnership or estate-planning vehicle for the benefit of such individual
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
and/or any of its family members, (y) otherwise an Affiliate of such Person or (z) in the case of a Stockholder, any investment fund managed, sponsored, controlled or advised by, or managed accounts of, GA or any of its Affiliates.
“Agreement” has the meaning set forth in the preamble.
“Amended and Restated EWC Ventures LLC Agreement” means the Fifth Amended and Restated Limited Liability Company Agreement of EWC Ventures, dated as of the date hereof.
“Board” means the board of directors of the Company.
“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by applicable law to close.
“Change of Control” means any transaction or series of related transactions (whether by merger, consolidation, recapitalization, liquidation or sale or transfer of equity securities or assets (including equity securities of Subsidiaries) or otherwise) as a result of which any Person or group, within the meaning of Section 13(d)(3) of the Exchange Act (other than the Stockholders and their respective Affiliates, any group of which the foregoing are members and any other members of such a group), obtains ownership, directly or indirectly, of (i) equity securities of the Company that represent more than 50% of the total voting power of the outstanding capital stock of the Company or any applicable successor entity or (ii) all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
“Class A Common Stock” means Class A common stock, $0.00001 par value per share, of the Company.
“Class B Common Stock” means Class B common stock, $0.00001 par value per share, of the Company.
“Common Unit” means a non-voting common limited liability company interest in EWC Ventures.
“Company” has the meaning set forth in the preamble.
“Company By-Laws” means the Amended and Restated By-Laws of the Company, a copy of which is attached hereto as Exhibit II.
“Company Charter” means the Amended and Restated Certificate of Incorporation of the Company, a copy of which is attached hereto as Exhibit I.
“Company Common Stock” means all classes and series of common stock of the Company, including the Class A Common Stock and Class B Common Stock.
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
“Company Securities” means (i) the Company Common Stock, (ii) securities then convertible into, or exercisable or exchangeable for, Company Common Stock (including Common Units and shares of Class B Common Stock exchangeable pursuant to the Exchange Agreement) and (iii) all shares of Company Common Stock directly or indirectly issued or issuable with respect to the securities referred to in clauses (i) or (ii) above by way of unit or stock dividend or unit or stock split, or in connection with a combination of units or shares, recapitalization, merger, consolidation or other reorganization.
“Confidential Information” means any information related to the Company or its Subsidiaries that a Stockholder or its Stockholder Parties may acquire from or on behalf of the Company, other than information that (i) is already available through publicly available sources of information (other than as a result of an unauthorized disclosure by such Stockholder or its Stockholder Parties), (ii) was available to a Stockholder or its Stockholder Parties on a non-confidential basis prior to its disclosure to such Stockholder or Stockholder Party by the Company or (iii) becomes available to a Stockholder or a Stockholder Party on a non-confidential basis from a third party; provided such third party is not known by such Stockholder or Stockholder Party, after reasonable inquiry, to be bound by this Agreement or another confidentiality agreement or confidentiality obligation with the Company.
“control” (including its correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of a Person.
“e-mail” has the meaning set forth in Section 4.10.
“EWC Ventures” means EWC Ventures, LLC, a Delaware limited liability company.
“Exchange Act” means the Securities Exchange Act of 1934.
“Exchange Agreement” means the Exchange Agreement, dated as of the date hereof, by and among the Company, EWC Ventures and the holders of Common Units and shares of Class B Common Stock from time to time party thereto.
“family member” shall mean with respect to any natural person, the spouse, parents, grandparents, lineal descendants, siblings of such person or such person's spouse, and lineal descendants of siblings of such person or such person's spouse. Lineal descendants shall include adopted persons, but only so long as they are adopted during minority.
“Fund Indemnitors” has the meaning set forth in Section 3.1(b)(iii).
“GA” means General Atlantic LLC and any successor thereto.
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
“GA Director” has the meaning set forth in Section 2.1(a).
“Independent Director” means a director of the Company that is independent for purposes of Nasdaq Equity Rule 5605(a)(2) or the governance requirements of any other securities exchange upon which the Class A Common Stock is traded.
“IPO” means the initial public offering of Company Common Stock.
“Losses” has the meaning set forth in Section 3.1(b)(i).
“Necessary Action” means, with respect to a specified result, all actions necessary to cause such result, including (i) voting or providing a written consent or proxy with respect to the Company Securities, whether at any annual or special meeting, by written consent or otherwise, (ii) causing the adoption of stockholders’ resolutions and amendments to organizational documents of the Company, (iii) causing members of the Board, to the extent such members were elected, nominated or designated by the Person obligated to undertake the Necessary Action, to act (subject to any applicable fiduciary duties) in a certain manner or causing them to be removed in the event they do not act in such a manner, (iv) executing agreements and instruments and (v) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, estate, joint venture, governmental authority or other entity.
“Registration Rights Agreement” means the Registration Rights Agreement by and among the Company and the stockholders party thereto, dated as of the date hereof.
“Reorganization Agreement” has the meaning set forth in the recitals.
“Securities Act” means the Securities Act of 1933.
“Stockholder Indemnitee” has the meaning set forth in Section 3.1(b)(i).
“Stockholder Parties” has the meaning set forth in Section 3.5(a).
“Stockholders” has the meaning set forth in the preamble.
“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which: (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, representatives or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; or (ii) if a limited liability company, partnership, association or other business entity, a majority of the total voting power of stock (or equivalent
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
ownership interest) of the limited liability company, partnership, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing member, managing director or other governing body or general partner of such limited liability company, partnership, association or other business entity.
“transfer” means, any direct or indirect sale, exchange, assignment, pledge, hypothecation, mortgage, gift or other transfer, disposition or encumbrance, in each case, whether in its own right or by its representative, whether voluntary or involuntary or by operation of law, including by a direct or indirect transfer of equity, ownership or economic interests, or options, warrants or other contractual rights to acquire an equity, ownership or economic interest, in any Person.
“Unaffiliated Director” has the meaning set forth in Section 2.1(a).
Section 1.2 Interpretive Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event of an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
ARTICLE II
CORPORATE GOVERNANCE
Section 2.1 The Board of Directors.
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
(a) Prior to the IPO, the Company and the Stockholders shall take all Necessary Action to cause the Board to be comprised of six (6) directors, who shall be divided into three (3) classes of directors in accordance with the terms of the Company Charter, and (i) three (3) of whom shall be designated by the Stockholders (each, together with any replacement directors designated by the Stockholders in accordance with Section 2.1(b) or (c), a “GA Director”) and (ii) three (3) of whom shall be an Independent Director who meets the independence criteria set forth in Rule 10A-3 under the Exchange Act (each, an “Unaffiliated Director”). The foregoing directors shall be divided into such classes as follows:
(i) the initial class I directors shall be Alexa Bartlett and Shaw Joseph;
(ii) the initial class II directors shall be Laurie Ann Goldman and Dorvin D. Lively; and
(iii) the initial class III directors shall be David P. Berg and Andrew Crawford.
The initial term of the class I directors shall expire immediately following the Company’s 2022 annual meeting of stockholders at which directors are elected. The initial term of the class II directors shall expire immediately following the Company’s 2023 annual meeting of stockholders at which directors are elected. The initial term of the class III directors shall expire immediately following the Company’s 2024 annual meeting at which directors are elected. For the avoidance of doubt, this Section 2.1(a) is applicable solely to the initial composition of the Board (except that (i) a director shall remain a member of the class of directors to which he or she was assigned in accordance with this Section 2.1(a) and (ii) the initial terms of each class of directors shall expire as set forth in this Section 2.1(a)). Following the IPO, upon the written request of the Stockholders, which request shall be made no later than the one-year anniversary of the date of effectiveness of the Company’s registration statement with respect to the IPO, the Company and the Stockholders shall take all Necessary Action to cause the Board to be comprised of seven (7) directors, (i) four (4) of whom shall be GA Directors and (ii) three (3) of whom shall be Unaffiliated Directors.
(b) For so long as the Stockholders beneficially own in the aggregate a number of shares of Class A Common Stock representing at least the percentage of shares of Class A Common Stock (determined on an “as-converted” basis taking into account any and all securities then convertible into, or exercisable or exchangeable for, shares of Class A Common Stock (including Common Units and shares of Class B Common Stock exchangeable pursuant to the Exchange Agreement)) issued and outstanding shown below, there shall be included in the slate of nominees recommended by the Board for election as directors at each applicable annual or special meeting of stockholders at which directors are to be elected that number of individuals designated by the Stockholders, that, if elected, will result in the Stockholders having the number of directors serving on the Board that is shown below.
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
|
|
|
Percent |
|
Number of Directors |
50% or greater |
|
4 |
Less than 50% but greater than or equal to 30% |
|
3 |
Less than 30% but greater than or equal to 15% |
|
2 |
Less than 15% but greater than or equal to 10% |
|
1 |
Upon any decrease in the number of directors that the Stockholders are entitled to designate for election to the Board, the Stockholders shall take all Necessary Action to cause the appropriate number of directors designated by the Stockholders to offer to tender resignation. If such resignation is then accepted by the Board, the Company and the Stockholders shall cause the authorized size of the Board to be reduced accordingly unless a majority of the Board (including, so long as the Stockholders are entitled to designate at least one director for election to the Board, at least one director designated by the Stockholders) determine not to reduce the authorized size of the Board.
(c) Except as provided in Section 2.1(b), (i) the Stockholders shall have the exclusive right to remove its designees from the Board, and the Company shall take all Necessary Action reasonably available within its power to cause the removal of any such director at the request of the Stockholders and (ii) the Stockholders shall have the exclusive right to designate for election to the Board directors to fill vacancies created by reason of the permanent disability, death, removal or resignation of its designees to the Board, and the Company shall take all Necessary Action reasonably available within its power to cause any such vacancies to be filled by replacement directors designated by the Stockholders as promptly as reasonably practicable; provided, that, for the avoidance of doubt and notwithstanding anything to the contrary in this Section 2.1(c), the Stockholders shall not have the right to designate a replacement director, and the Company and the Stockholders shall not be required to take any action to cause any vacancy to be filled by any such designee, to the extent that election or appointment of such designee to the Board would result in a number of directors designated by the Stockholders in excess of the number of directors that the Stockholders are then entitled to designate for membership on the Board pursuant to Section 2.1(b).
(d) The Stockholders shall use commercially reasonable efforts to cause their designees to the Board at all times to comply with the Company’s corporate policies, including its code of ethics, and the Stockholders shall promptly remove any of their designees to the Board who fails to comply with such corporate policies (provided, that (i) the Company has provided such designees a written copy of such corporate policies reasonably in advance of the date on which such designees are obligated to comply therewith, (ii) such corporate policies apply to all members of the Board in an equal manner and do not apply differently or disproportionately to such designees as compared to each other or other members of the Board, (iii) such corporate policies are enforced by the Company against all members of the Board equally and to the same extent, (iv) such corporate policies do not conflict with or are otherwise inconsistent with
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
any agreement entered into by the Stockholders (x) with the Company, EWC Ventures or any of EWC Ventures’ Subsidiaries in connection with the IPO, including this Agreement, or (y) with the underwriters to the IPO in connection with the IPO and (v) such corporate policies do not otherwise create any liability or obligation of such designees that is not reasonable or customary for public companies whose boards of directors include professionals from private equity firms or financial sponsors) after reasonable notice from the Company is provided to the Stockholders, and their designees are given a reasonable opportunity to comply with such corporate policies.
(e) Except as otherwise provided in this Section 2.1, all directors of the Company shall be nominated or elected by the Board upon the recommendation of the nominating and corporate governance committee of the Board. Notwithstanding any other provision of this Section 2.1, if necessary due to requirements under applicable federal or state securities laws or the rules of The Nasdaq Stock Market (or any other securities exchange upon which the Class A Common Stock is traded), the Board shall be expanded to include additional Independent Directors to comply with such laws or rules with such Independent Directors selected in accordance with the preceding sentence.
(f) Subject to applicable laws or the rules of The Nasdaq Stock Market (or any other securities exchange upon which the Class A Common Stock is traded), the Stockholders shall have the right to have a representative appointed to serve on each committee of the Board for so long as the Stockholders have the right to designate at least one (1) director for election to the Board.
(g) The Company shall reimburse each Director and Unaffiliated Director for all reasonable and documented out-of-pocket costs and expenses incurred in connection with such director’s attendance or participation in the meetings of the Board or any committee of the Board, including reasonable travel, lodging and meal expenses.
Section 2.2 Major Actions.
(a) In addition to any voting requirements contained in the Company Charter or the Company By-Laws (or similar governing documents of the Company or any of its Subsidiaries), the following actions shall not be taken by the Company or any of its Subsidiaries, directly or indirectly (including by merger, consolidation, reorganization or similar event), including any proposal by the Board to put to the vote of the stockholders of the Company with respect thereto, without the prior written consent of the Stockholders for so long as the Stockholders beneficially own shares of Class A Common Stock (determined on an “as-converted” basis taking into account any and all securities then convertible into, or exercisable or exchangeable for, shares of Class A Common Stock (including Common Units and shares of Class B Common Stock exchangeable pursuant to the Exchange Agreement)) representing at least 25% of the Class A Common Stock (determined on an “as-converted” basis taking into account any and all securities then convertible into, or exercisable or exchangeable for, shares of Class A Common Stock (including Common Units and shares of Class B Common Stock exchangeable pursuant to the Exchange Agreement)) then outstanding:
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
(i) any transaction or series of related transactions involving, or entering into any agreement providing for, (a) the purchase, lease, license, exchange or other acquisition by the Company or its Subsidiaries of any assets and/or equity securities for consideration having a fair market value (as reasonably determined by the Board) in excess of $100 million and/or (b) the sale, lease, license, exchange or other disposal by the Company or its Subsidiaries of any assets and/or equity securities having a fair market value or for consideration having a fair market value (in each case as reasonably determined by the Board) in excess of $100 million; in each case, other than transactions solely between or among the Company and one or more of its direct or indirect wholly-owned Subsidiaries;
(ii) any entry into or effectuation of a Change of Control;
(iii) incurrence of (or extension or modification of the material terms of) any indebtedness for borrowed money (including any refinancing of existing indebtedness), assuming, guaranteeing, endorsing or otherwise as an accommodation becoming responsible for the obligations of any other Person (other than the Company or any of its Subsidiaries), or the entry into (or extension or modification any of the material terms of) any agreement under which the Company or any Subsidiary may incur indebtedness for borrowed money in the future, in each case, resulting in an aggregate principal amount in excess of $150 million other than a drawdown of amounts committed (including under a revolving facility) under a debt agreement that previously received the prior written consent of the Stockholders or that was entered into on or prior to the date hereof;
(iv) appointment or removal of the Chief Executive Officer of the Company;
(v) any increase or decrease in the size of the Board;
(vi) any initiation of a voluntary liquidation, dissolution, receivership, bankruptcy or other insolvency proceeding, recapitalization or reorganization involving the Company or any Subsidiary of the Company;
(vii) any redemption, repurchase or other acquisition by the Company of its equity securities or any declaration thereof, other than (i) the redemption, repurchase or other acquisition by the Company of any equity securities of any director, officer, independent contractor or employee in connection with the termination of the employment or services of such director, officer, independent contractor or employee as contemplated by the applicable equity compensation plan or award agreement with respect to such equity securities, or (ii) pursuant to an offer made to all stockholders of the Company pro rata with respect to such equity securities (regardless of whether any or all of such stockholders elect to participate in such redemption, repurchase or other acquisition);
(viii) any payment or declaration of any dividend or distribution on any equity securities of the Company or any of its Subsidiaries or entering
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
into a recapitalization transaction the primary purpose of which is to pay a dividend or distribution, other than dividends or distributions required to be made pursuant to the terms of any outstanding preferred stock of the Company or distributions expressly permitted under Sections 4.1(c), 4.1(d) or 4.1(f) of the Amended and Restated EWC Ventures LLC Agreement;
(ix) any entry, directly or indirectly, into a joint venture or similar business alliance involving, or entering into any agreement providing for, the investment, contribution or disposition by the Company or its Subsidiaries of assets (including stock of Subsidiaries) having a fair market value (as reasonably determined by the Board) in excess of $100 million, other than transactions solely between or among the Company and one or more of its direct or indirect wholly-owned Subsidiaries; or
(x) any adoption, approval or issuance of any “poison pill,” stockholder or similar rights plan by the Company or its Subsidiaries or any amendment, restatement, modification or waiver of such plan after the adoption thereof has been approved by the Stockholders in accordance with this Section 2.2.
(b) For so long as the Stockholders beneficially own any shares of Class A Common Stock (taking into account any and all securities then convertible into, or exercisable or exchangeable for, shares of Class A Common Stock (including Common Units and shares of Class B Common Stock exchangeable pursuant to the Exchange Agreement)) issued and outstanding, the Company shall not, and shall cause its Subsidiaries not to, amend (including by merger, consolidation, reorganization or similar event) the Company Charter, Company By-Laws or similar governing documents of the Company or any of its Subsidiaries if such change is adverse to the rights of the Stockholders (including, for the avoidance of doubt, the advance waiver of corporate opportunities) or agree to, enter into or adopt any plan with respect thereto without the prior approval (which approval may be in the form of an action by written consent or any other written instrument or writing) of the Stockholders.
ARTICLE III
OTHER COVENANTS AND AGREEMENTS
Section 3.1 Indemnification Agreements.
(a) Director Indemnification. The Company has entered into and shall at all times maintain in effect an indemnification agreement with each Director, in such form as has been previously agreed to by each of the Company and such director.
(b) Stockholder Indemnification.
(i) The Company agrees to indemnify and hold harmless each Stockholder, its respective directors, officers, partners, members, managers, Affiliates and controlling persons (each, an “Stockholder Indemnitee”) from and against any and all liability, including, without limitation, all obligations, costs, fines, claims, actions, injuries, demands, suits, judgments, proceedings, investigations, arbitrations (including stockholder claims, actions, injuries, demands, suits, judgments, proceedings,
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
investigations or arbitrations) and reasonable expenses, including reasonable accountant’s and reasonable attorney’s fees and expenses (together the “Losses”), incurred by such Stockholder Indemnitee before or after the date of this Agreement to the extent arising out of, resulting from, or relating to (i) such Stockholder Indemnitee’s purchase and/or ownership of any Company Common Stock or Common Unit or (ii) any litigation to which any Stockholder Indemnitee is made a party in its capacity as a stockholder or owner of securities (or as a director, officer, partner, member, manager, Affiliate or controlling person of any Stockholder) of the Company; provided, that the foregoing indemnification rights in this Section 3.1(b)(i) shall not be available to the extent that (a) any such Losses are incurred as a result of such Stockholder Indemnitee’s willful misconduct or gross negligence; (b) any such Losses are incurred as a result of non-compliance by such Stockholder Indemnitee with any laws or regulations applicable to it; or (c) subject to the rights of contribution provided for below, to the extent indemnification for any Losses would violate any applicable law or public policy. For purposes of this Section 3.1(b)(i), none of the circumstances described in the limitations contained in the proviso in the immediately preceding sentence shall be deemed to apply absent a final non-appealable judgment of a court of competent jurisdiction to such effect, in which case to the extent any such limitation is so determined to apply to any Stockholder Indemnitee as to any previously advanced indemnity payments made by the Company under this Section 3.1(b)(i), then such payments shall be promptly repaid by such Stockholder Indemnitee to the Company. The rights of any Stockholder Indemnitee to indemnification hereunder will be in addition to any other rights any such party may have under any other agreement or instrument to which such Stockholder Indemnitee is or becomes a party or is or otherwise becomes a beneficiary or under law or regulation. In the event of any payment of indemnification pursuant to this Section 3.1(b)(i), to the extent that any Stockholder Indemnitee is indemnified for Losses, except as set forth in Section 3.1(b)(iii), the Company will be subrogated to the extent of such payment to all of the related rights of recovery of the Stockholder Indemnitee to which such payment is made against all other Persons. Such Stockholder Indemnitee shall execute all papers reasonably required to evidence such rights. The Company will be entitled at its election to participate in the defense of any third party claim upon which indemnification is due pursuant to this Section 3.1(b)(i) or to assume the defense thereof, with counsel reasonably satisfactory to such Stockholder Indemnitee unless, in the reasonable judgment of the Stockholder Indemnitee, a conflict of interest between the Company and such Stockholder Indemnitee may exist, in which case such Stockholder Indemnitee shall have the right to assume its own defense and the Company shall be liable for all reasonable expenses therefor. Except as set forth above, should the Company assume such defense all further defense costs of the Stockholder Indemnitee in respect of such third party claim shall be for the sole account of such party and not subject to indemnification hereunder. The Company will not without the prior written consent of the Stockholder Indemnitee (which consent shall not be unreasonably withheld) effect any settlement of any threatened or pending third party claim in which such Stockholder Indemnitee is or could have been a party and be entitled to indemnification hereunder unless such settlement solely involves the payment of money by the Company and includes an unconditional release of such Stockholder Indemnitee from all liability and claims that are the subject matter of such claim. If the indemnification provided for above
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
is unavailable in respect of any Losses, then the Company, in lieu of indemnifying an Stockholder Indemnitee, shall, if and to the extent permitted by law, contribute to the amount paid or payable by such Stockholder Indemnitee in such proportion as is appropriate to reflect the relative fault of the Company and such Stockholder Indemnitee in connection with the actions which resulted in such Losses, as well as any other equitable considerations.
(ii) The Company agrees to pay or reimburse the Stockholders (i) for all reasonable costs and expenses (including reasonable attorneys’ fees, charges, disbursement and expenses) incurred in connection with any amendment, supplement, modification or waiver of or to any of the terms or provisions of this Agreement or any related agreements and (ii) for all costs and expenses of the Stockholders (including reasonable attorneys’ fees, charges, disbursement and expenses) incurred in connection with (1) the consent to any departure by the Company or any of its Subsidiaries from the terms of any provision of this Agreement or any related agreements and (2) the enforcement or exercise by the Stockholders of any right granted to it or provided for hereunder.
(iii) The Company hereby acknowledges that the Stockholder Indemnitee may have certain rights to advancement and/or indemnification by certain Affiliates of the Stockholder (collectively, the “Fund Indemnitors”). In all events, (i) the Company hereby agrees that it is the indemnitor of first resort (i.e., its obligation to a Stockholder Indemnitee to provide advancement and/or indemnification to such Stockholder Indemnitee are primary and any obligation of the Fund Indemnitors (including any Affiliate thereof other than the Company) to provide advancement or indemnification hereunder or under any other indemnification agreement (whether pursuant to contract, by-laws or charter), or any obligation of any insurer of the Fund Indemnitors to provide insurance coverage, for the same expenses, liabilities, judgments, penalties, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such expenses, liabilities, judgments, penalties, fines and amounts paid in settlement) incurred by such Stockholder Indemnitee are secondary and it irrevocably waives any claims against the Fund Indemnitors for contribution, subrogation, reimbursement or any other recovery of any kind for which the Company is liable pursuant to this Agreement and the Company’s by-laws or charter and (ii) if any Fund Indemnitor (or any Affiliate thereof, other than the Company) pays or causes to be paid, for any reason, any amounts otherwise indemnifiable hereunder or under any other indemnification agreement (whether pursuant to contract, by-laws or charter) with such Stockholder Indemnitee, then (x) such Fund Indemnitor (or such Affiliate, as the case may be) shall be fully subrogated to all rights of such Stockholder Indemnitee with respect to such payment and (y) the Company shall fully indemnify, reimburse and hold harmless such Fund Indemnitor (or such other Affiliate, as the case may be) for all such payments actually made by such Fund Indemnitor (or such other Affiliate, as the case may be).
Section 3.2 Company Charter; Company By-Laws; Corporate Opportunities. The Company Charter, as may be amended, supplemented and/or restated from time to time, shall provide for a renunciation of corporate opportunities presented to
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
the Stockholders (and their respective Affiliates and director nominees) to the maximum extent permitted by Section 122(17) of the Delaware General Corporations Law and substantially on the terms and conditions set forth in Article 10 of the Company Charter as in effect on the date hereof.
Section 3.3 Conflicting Organizational Document Provisions. Each Stockholder shall vote all of its Company Securities and execute proxies or written consents, as the case may be, and shall take all Necessary Action reasonably available within their power, to ensure that the Company Charter and Company By-Laws both (i) facilitate, and do not at any time conflict with, any provision of this Agreement and (ii) permit the parties hereof to receive the benefits to which they are entitled under this Agreement. In the event of any ambiguity or conflict arising between the terms of this Agreement and those of the Company Charter and/or Company By-Laws, the Company and the Stockholders shall take all Necessary Action reasonably available within their power to amend the Company Charter and/or Company By-laws, as the case may be, to eliminate such ambiguity or conflict such that the terms of this Agreement shall prevail. The parties hereto acknowledge and agree that the Company Charter, in the form attached hereto as Exhibit I, and Company By-Laws, in the form attached hereto as Exhibit II, (x) do not conflict with any provision of this Agreement and (y) permit the parties hereof to receive the benefits to which they are entitled under this Agreement.
Section 3.4 Information Rights. So long as the Stockholders beneficially own, in the aggregate, at least five percent (5%) of the outstanding shares of Class A Common Stock (determined on an “as-converted” basis taking into account any and all securities then convertible into, or exercisable or exchangeable for, shares of Class A Common Stock (including Common Units and shares of Class B Common Stock exchangeable pursuant to the Exchange Agreement)), the Company shall provide the Stockholders or its authorized representatives with (i) reasonable access to visit and inspect any of the properties of the Company or any of its Subsidiaries, including its and their books of account, monthly management reports, operating and capital expenditure budgets, periodic information packages relating to the operations and cash flows of the Company and other records, and to discuss the Company’s or its subsidiaries’ affairs, finances and accounts with its and their officers, during normal business hours following reasonable notice and (ii) for so long as the Company is not a public reporting company, (x) an unaudited consolidated balance sheet of the Company as of the end of each completed fiscal quarter in each year following the date hereof and (y) an audited annual consolidated balance sheet of the Company as of the end of the fiscal year in each year following the date hereof and the related audited consolidated statements of income, changes in stockholders’ equity and cash flow for the fiscal years then ended, including the notes thereto.
Section 3.5 Confidentiality.
(a) Except to the extent permitted by Section 3.5(c), each of the Stockholders shall, and shall direct those of its directors, officers, members, stockholders, partners, employees, attorneys, accountants, consultants, trustees, Affiliates (excluding, for the avoidance of doubt, the Company and its Subsidiaries) and other representatives
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
(the “Stockholder Parties”) who have access to Confidential Information to (x) keep confidential and not disclose any Confidential Information and (y) use any Confidential Information solely in connection with Company matters and in connection with the maintenance of its Company Securities, in each case of clauses (x) and (y), unless:
(i) such disclosure shall be (A) required by applicable law, governmental rule or regulation, court order, administrative or arbitral proceeding or (B) requested in the course of routine supervisory examinations or regulatory oversight by regulatory authorities not targeting the Company or the Confidential Information;
(ii) such disclosure is reasonably required in connection with any tax audit involving the Company or any Stockholder;
(iii) such disclosure is reasonably required in connection with any litigation against or involving the Company or any Stockholder;
(iv) such disclosure is reasonably required in connection with any proposed transfer of all or any part of such Stockholder’s Company Securities; provided, that with respect to any such use of any Confidential Information referred to in this clause (iv), advance notice must be given to the Board so that it may require any proposed transferee that is not a Stockholder to enter into a confidentiality agreement with terms substantially similar to the terms of this Section 3.5 (excluding this clause (iv)) prior to the disclosure of such Confidential Information;
(v) in the case of the Stockholders, such disclosure is customary disclosure by the Stockholders and their Affiliates that are private equity or other investment funds provided to current and potential investors who are subject to customary confidentiality restrictions; or
(vi) the Board provides its prior written consent.
(b) In the event that any Stockholder or any Stockholder Party of such Stockholder is required to disclose any of the Confidential Information by judicial or administrative process or by other requirement of law or the applicable requirements of any regulatory agency or relevant stock exchange, such Stockholder shall use commercially reasonable efforts to provide the Company with prompt written notice (provided that no such notice shall be required in respect of disclosures requested or required in the course of routine supervisory examinations or regulatory oversight by regulatory authorities not targeting the Company or the Confidential Information) so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement, and such Stockholder shall use commercially reasonable efforts to cooperate with the Company in any effort any such Person undertakes to obtain a protective order or other remedy. In the event that such protective order or other remedy is not obtained, or that the Company waives compliance with the provisions of this Section 3.5, such Stockholder and its Stockholder Parties shall furnish only that portion of the Confidential Information that its or their counsel advises is legally required and shall exercise all reasonable efforts at the Company’s expense to
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
obtain reasonably reliable assurance that the Confidential Information shall be accorded confidential treatment. Each Stockholder shall be liable for breach of this Section 3.5 by any of its Stockholder Parties, except for Stockholder Parties that are not directors, officers or employees of such Stockholder or its Affiliates and who have agreed in writing to be directly liable to the Company for any such breach.
(c) The Company recognizes that the GA Directors will from time to time receive Confidential Information and may share such Confidential Information with other Persons associated with the Stockholders (other than portfolio companies of Affiliates of the Stockholders). Notwithstanding anything in this Agreement to the contrary, the Company hereby irrevocably consents to such sharing. For the avoidance of doubt, each Stockholder agrees that it shall be comply with, and shall use reasonable best efforts to cause the other individuals who receive Confidential Information pursuant to this Section 3.5(c) to comply with, the provisions of Section 3.5(a) and Section 3.5(b) with respect to the Confidential Information receives pursuant to this Section 3.5(c).
Section 3.6 Transfers. If any Stockholder transfers, directly or indirectly, any Company Securities to any Affiliated Transferee of such Stockholder, such Stockholder shall, as a condition to any such transfer, require such transferee (to the extent not already a party thereto) to enter into a Joinder Agreement in the form attached hereto as Annex A to become a party to this Agreement and be deemed a “Stockholder” for all purposes herein. If any such transferee is an individual and married, such Stockholder shall, as a condition to such transfer, cause such transferee to deliver to the Company and the other Stockholders a copy of a Spousal Consent in the form attached hereto as Annex B duly executed by the spouse of such transferee.
ARTICLE IV
GENERAL
Section 4.1 Assignment. The rights and obligations hereunder shall not be assignable without the prior written consent of the Stockholders and the Company. Any attempted assignment of rights or obligations in violation of this Section 4.1 shall be null and void.
Section 4.2 Termination. If not otherwise stipulated, this Agreement shall terminate automatically (without any action by any party hereto) on the date as of when the Stockholders no longer have the right to nominate any GA Directors to the Board pursuant to Article II hereof; provided, that (i) no such termination shall relieve any party for any breach of this Agreement prior to its termination and (ii) the provisions of Section 3.5 and this Article 4 shall survive any such termination.
Section 4.3 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other governmental authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.
Section 4.4 Entire Agreement; Amendment; Waiver.
(a) This Agreement sets forth the entire understanding and agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement. This Agreement or any provision hereof may only be amended or modified, in whole or in part, at any time by an instrument in writing signed by the Company and the holders of a majority in interest of the voting power of the Company Securities held by all Stockholders.
(b) No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is expressly made in writing and executed and delivered to the Company and the other Stockholders by the party against whom such waiver is claimed. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. Except as otherwise expressly provided herein, no failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
Section 4.5 Counterparts. This Agreement may be signed in any number of counterparts (including via facsimile or e-mail in.pdf format), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).
Section 4.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State.
Section 4.7 Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 4.10 shall be deemed effective service of process on such party.
Section 4.8 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.
Section 4.9 Specific Enforcement. The parties hereto acknowledge that the remedies at law of the other parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond, and in addition to all other remedies that may be available, shall be entitled to equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available.
Section 4.10 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received by non-automated response). All such notices, requests and other communications shall be delivered in person or sent by facsimile, e-mail or nationally recognized overnight courier and shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt. All such notices, requests and other communications to any party hereunder shall be given to such party as follows:
If to any of the Stockholders, addressed to it at:
General Atlantic LLC
55 East 52nd Street, 33rd Floor
New York, NY 10055
Attention: Christopher Lanning, Managing Director, Chief Legal Officer and General Counsel
Facsimile: (212) 759-5708
E-mail: clanning@generalatlantic.com
With copies (which shall not constitute actual or constructive notice) to:
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attention: Matthew W. Abbott
John C. Kennedy
Monica K. Thurmond
Facsimile: (212) 757-3990
E-mail: mabbott@paulweiss.com
jkennedy@paulweiss.com
mthurmond@paulweiss.com
If to the Company, addressed to it at:
European Wax Center, Inc.
5830 Granite Parkway, 3rd Floor
Plano, TX 75024
Attention: Gavin O’Connor, Chief Legal Officer
E-mail: gavin.oconnor@myewc.com
With copies (which shall not constitute actual or constructive notice) to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attention: Matthew W. Abbott
John C. Kennedy
Monica K. Thurmond
Facsimile: (212) 757-3990
E-mail: mabbott@paulweiss.com
jkennedy@paulweiss.com
mthurmond@paulweiss.com
or to such other address or to such other Person as either party shall have last designated by such notice to the other party.
Section 4.11 Binding Effect; Third Party Beneficiaries. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Except as provided in Section 4.14, no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns. Notwithstanding the foregoing, each GA Director and Unaffiliated Director shall be a third party beneficiary of the provisions of Section 2.1(h) and shall be entitled to enforce such provisions directly.
Section 4.12 Further Assurances. The parties hereto will sign such further documents, cause such meetings to be held, resolutions passed, exercise their votes and do and perform and cause to be done such further acts and things necessary,
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
proper or advisable in order to give full effect to this Agreement and every provision hereof.
Section 4.13 Table of Contents, Headings and Captions. The table of contents, headings, subheadings and captions contained in this Agreement are included for convenience of reference only, and in no way define, limit or describe the scope of this Agreement or the intent of any provision hereof.
Section 4.14 No Recourse. This Agreement may only be enforced against, and any claims or cause of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement may only be made against the entities that are expressly identified as parties hereto and no past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, stockholder, controlling person, fiduciary, agent, attorney or representative of any party hereto, or any past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, stockholder, controlling person, fiduciary, agent, attorney or representative of any of the foregoing shall have any liability for any obligations or liabilities of the parties to this Agreement or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby.
[Signatures on Next Page]
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
IN WITNESS WHEREOF, each of the parties hereto has caused this Stockholders’ Agreement to be executed by its duly authorized officers as of the day and year first above written.
COMPANY:
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
STOCKHOLDERS:
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GA AIV-1 B INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GENERAL ATLANTIC PARTNERS AIV (EW), L.P.
By: General Atlantic GenPar (EW), L.P.,
its general partner
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
Company Charter
[See attached.]
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
Company By-Laws
[See attached.]
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
FORM OF
JOINDER AGREEMENT
The undersigned is executing and delivering this Joinder Agreement pursuant to that certain Stockholders’ Agreement, dated as of August 4, 2021 (as amended, restated, supplemented or otherwise modified in accordance with the terms thereof, the “Stockholders’ Agreement”) by and among European Wax Center, Inc., a Delaware corporation, the Persons designated as “Stockholders” on the signature pages thereto and any other Persons thereto or who become a party thereto in accordance with the terms thereof. Capitalized terms used but not defined in this Joinder Agreement shall have the respective meanings ascribed to such terms in the Stockholders’ Agreement.
By executing and delivering this Joinder Agreement to the Stockholders’ Agreement, the undersigned hereby adopts and approves the Stockholders’ Agreement and agrees, effective commencing on the date hereof and as a condition to the undersigned’s becoming the beneficial owner and/or transferee of Company Securities, to become a party as a Stockholder to, and to be bound by and comply with the provisions of, the Stockholders’ Agreement applicable to a Stockholder in the same manner as if the undersigned were an original signatory to the Stockholders’ Agreement.
The undersigned acknowledges and agrees that Article IV of the Stockholders’ Agreement is incorporated herein by reference, mutatis mutandis.
Accordingly, the undersigned has executed and delivered this Joinder Agreement as of the __ day of ____________, _____.
____________________________________________
(Signature of Stockholder Affiliated Transferee)
____________________________________________
(Print Name of Stockholder Affiliated Transferee)
Address: ____________________________________
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
____________________________________________
____________________________________________
Telephone: __________________________________
Facsimile: ___________________________________
Email: ______________________________________
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
AGREED AND ACCEPTED
as of the ____ day of ____________, _____.
EUROPEAN WAX CENTER, INC.
By: __________________________________
Name:
Title:
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.3
FORM OF
SPOUSAL CONSENT
In consideration of the execution of that certain Stockholders’ Agreement, dated as of August 4, 2021, (as amended, restated, supplemented or otherwise modified in accordance with the terms thereof, the “Stockholders’ Agreement”) by and among by and among European Wax Center, Inc., a Delaware corporation, the Persons designated as “Stockholders” on the signature pages thereto and any other Persons thereto or who become a party thereto in accordance with the terms thereof, I, ____________________, the spouse of _____________, who is a party to the Stockholders’ Agreement, do hereby join with my spouse in executing the foregoing Stockholders’ Agreement and do hereby agree to be bound by all of the terms and provisions thereof, in consideration of the issuance, acquisition or receipt of Company Securities and all other interests I may have in the shares and securities subject thereto, whether the interest may be pursuant to community property laws or similar laws relating to marital property in effect in the state or province of my or our residence as of the date of signing this consent. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Stockholders’ Agreement.
Dated as of _______ __, ____
(Signature of Spouse)
(Print Name of Spouse)
DOCPROPERTY Keywords \* MERGEFORMAT Doc#: US1:14579730v12
Exhibit 10.4
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this “Agreement”), dated as of August 4, 2021, by and among EWC Ventures LLC, a Delaware limited liability company (the “Company”), European Wax Center, Inc., a Delaware corporation (“Pubco”), and the holders of Common Units (as defined below) and shares of Class B Common Stock (as defined below) from time to time party hereto (each, a “Holder”).
W I T N E S S E T H:
WHEREAS, on the date hereof, the Company, Pubco and certain of the Holders entered into the LLC Agreement (as defined below); and
WHEREAS, the parties hereto desire to provide for the exchange of Common Units and corresponding surrender for cancellation of Class B Shares, as applicable for, in Pubco’s sole discretion as the Managing Member of the Company, either, (a) shares of Class A Common Stock (as defined below) or (b) cash, on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein made and other good and valuable consideration, the parties hereto hereby agree as follows:
DEFINITIONS AND USAGE
“Affiliated Transferee” means (i) in the case of any Holder that is an individual, any transferee of Units of such Holder that is (a) a Family Member of such Holder, (b) a trust, family-partnership or estate-planning vehicle for the benefit of such Holder and/or any of such Holder’s Family Members, (c) a charitable institution controlled by such Holder and/or such Holder’s Family Members, (d) an individual mandated under a qualified domestic relations order, (e) a legal or personal representative of such Holder and/or such Holder’s Family Member in the event of the death or disability thereof, or (f) otherwise an Affiliate of such Holder or (ii) in the case of any Holder that is a corporation, partnership, limited liability company or other entity, any transferee of Units of such Holder that is (w) a Family Member of the individual that controls a majority of the voting or economic interest in such Holder, (x) a trust, family-partnership or estate-planning vehicle for the benefit of such individual and/or any of its Family Members, (y) otherwise an Affiliate of such Holder or (z) in the case of a Sponsor Member, any investment fund managed, sponsored, controlled or advised by, or managed accounts of, General Atlantic LLC and any successor thereto or any of its Affiliates.
“Applicable Law” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority or Regulatory Agency that is binding upon or applicable to such Person or its assets, as amended unless expressly specified otherwise.
“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.
“Class A Common Stock” means Class A common stock, $0.00001 par value per share, of Pubco.
“Class B Common Stock” means Class B common stock, $0.00001 par value per share, of Pubco.
“Code” means the Internal Revenue Code of 1986.
“Common Unit” means a Common Unit (as such term is defined in the LLC Agreement).
“Deliverable Common Stock” means with respect to Paired Interests, Class A Common Stock.
“Employee Equity Agreements” means those Employee Equity Agreements, dated as of the date hereof, by and between Employee Holdco and the parties named therein.
“Employee Holdco” means EWC Management Holdco, LLC.
“Exchange Act” means the Securities Exchange Act of 1934.
“Exchange Date” means the date of effectiveness of an Exchange.
“Exchange Rate” means with respect to Paired Interests the number of shares of Class A Common Stock for which one Paired Interest is entitled to be Exchanged. On the date of this Agreement, the Exchange Rate for the purposes of the Paired Interests shall be one (1) share, subject to adjustment pursuant to Section 2.03 of this Agreement.
“Exchanging Holder” means a Holder effecting an Exchange pursuant to this Agreement.
“Fair Market Value” means with respect to any Exchange, the arithmetic average of the volume weighted average prices for a share of Class A Common Stock on the Principal Market on which the Class A Common Stock trades, as reported by Bloomberg, L.P., or its successor, for each of the five (5) consecutive full Trading Days ending on and including the last full Trading Day immediately prior to the related Exchange Date, subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the Class A Common Stock. If the Class A Common Stock no longer trades on a Principal Market, then the Fair Market Value shall be determined in good faith by a majority of the disinterested members of the board of directors of Pubco or a committee of disinterested directors of the board of directors of Pubco.
“Family Member” means any immediate family member of an individual, including parents, grandparents, lineal descendants, siblings or spouse of such individual, and lineal descendants of siblings of such individual or of such individual’s spouse.
“Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.
“LLC Agreement” means the Fifth Amended and Restated Limited Liability Company Agreement of the Company, dated on or about the date hereof, as such agreement may be amended from time to time.
“Market Disruption Event” means a failure by the Principal Market to open for trading during its regular trading session.
“NASDAQ” means The Nasdaq Stock Market LLC.
“Paired Interest” means one Common Unit together with one share of Class B Common Stock, subject to adjustment pursuant to Section 2.03(a).
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, estate, joint venture, Governmental Authority or other entity.
“Principal Market” means (i) NASDAQ if the Class A Common Stock is listed on NASDAQ, (ii) the principal U.S. national or regional securities exchange on which the Class A Common Stock is listed, if the Class A Common Stock is not listed on NASDAQ or (iii) the principal market on which the Class A Common Stock is then traded, if the Class A Common Stock is not listed on NASDAQ or any other U.S. national or regional securities exchange.
“Pubco Charter” means the Amended and Restated Certificate of Incorporation of Pubco.
“Registration Rights Agreement” means the Registration Rights Agreement by and among Pubco and the stockholders party thereto, dated on or about the date hereof.
“Regulatory Agency” means the United States Securities and Exchange Commission, Financial Industry Regulatory Authority, Inc., the Financial Services Authority, any non-U.S. regulatory agency and any other regulatory authority or body (including any state or provincial securities authority and any self-regulatory organization) with jurisdiction over the Company or any of its subsidiaries.
“Securities Act” means the United States Securities Act of 1933.
“Sponsor Member” means any of (i) General Atlantic Partners AIV (EW), LP, (ii) GAPCO AIV Interholdco (EW), LP, and (iii) any Affiliated Transferee to whom any of them transfers any of the Common Units.
“Tax Receivable Agreement” shall have the meaning given to such term in the LLC Agreement.
“Trading Day” means a day on which (i) trading in securities generally occurs on the Principal Market, (ii) a volume weighted average price for the Class A Common Stock is able to be calculated with respect to the Principal Market and (iii) there is no Market Disruption Event with respect to the Principal Market.
Term |
Section |
Agreement |
Preamble |
Company |
Preamble |
4.03 |
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Exchange |
2.01 |
Exchange Agent |
2.02(a) |
Holder |
Preamble |
Notice of Exchange |
2.02(a) |
Permitted Transferee |
4.01 |
Process Agent |
4.05(b) |
Pubco |
Preamble |
Pubco Offer |
Section 2.04 |
EXCHANGE
THE TRANSFER OF THESE SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND MAY NOT BE SOLD OR TRANSFERRED OTHER THAN IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (OR OTHER APPLICABLE LAW), OR AN EXEMPTION THEREFROM.
REPRESENTATIONS AND WARRANTIES
MISCELLANEOUS
(a) if to Pubco, to:
European Wax Center Corporate Office
5830 Granite Pkwy
3rd Floor
Plano, TX 75024
Attention: Gavin O’Connor, Chief Legal Officer & Corporate Secretary
(b) if to the Company, to:
European Wax Center Corporate Office
5830 Granite Pkwy
3rd Floor
Plano, TX 75024
Attention: Gavin O’Connor, Chief Legal Officer & Corporate Secretary
(c) if to any Holder, to the address and other contact information set forth in the records of Pubco or the Company from time to time, or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. New York City time on a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.
In the event that this Agreement is amended, whether or not the prior written consent of the relevant Sponsor Member or a majority in interest of such disproportionately affected Holder or Holders are required, the Company and Pubco shall make a copy of such amendment available to all Holders.
[signature pages follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above.
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
EWC VENTURES, LLC
By: European Wax Center, Inc.,
its managing member
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
HOLDERS:
EWC MANAGEMENT HOLDCO, LLC
By: European Wax Center, Inc.,
its manager
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GENERAL ATLANTIC PARTNERS AIV (EW), L.P.
By: General Atlantic GenPar (EW), L.P.,
its general partner
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
EWC HOLDINGS, INC.
By: /s/ David Coba
Name: David Coba
Title: President
/s/ Sanjeev Khanna
Name: Sanjeev Khanna
/s/ Govind Agrawal
Name: Govind Agrawal
EXHIBIT A
[FORM OF]
NOTICE OF EXCHANGE
European Wax Center, Inc.
European Wax Center Corporate Office
5830 Granite Pkwy
3rd Floor
Plano, TX 75024
Attention: Gavin O’Connor, Chief Legal Officer & Corporate Secretary
EWC Ventures, LLC
European Wax Center Corporate Office
5830 Granite Pkwy
3rd Floor
Plano, TX 75024
Attention: Gavin O’Connor, Chief Legal Officer & Corporate Secretary
Reference is hereby made to the Exchange Agreement, dated as of [ ], 2021 (the “Exchange Agreement”), by and among European Wax Center, Inc., a Delaware corporation (“Pubco”), EWC Ventures, LLC, a Delaware limited liability company (the “Company”), and the holders of Common Units and shares of Class B Common Stock from time to time party hereto (each, a “Holder”). Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement.
The undersigned desires to transfer to the Company the number of shares of Class B Common Stock plus Common Units set forth below (the “Paired Interests”) in exchange for, at the election of Pubco, in its capacity of the Managing Member of the Company, (i) shares of Class A Common Stock (the “Deliverable Common Stock”) to be issued in its name as set forth below or (ii) cash, in each case, in accordance with the terms of the Exchange Agreement.
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The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Notice of Exchange and to perform the undersigned’s obligations hereunder; (ii) this Notice of Exchange has been duly executed and delivered by the undersigned and is the legal, valid and binding obligation of the undersigned enforceable against it in accordance with the terms thereof or hereof, as the case may be, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and the availability of equitable remedies; (iii) the Paired Interests subject to this Notice of Exchange are being transferred to the Company free and clear of any pledge, lien, security interest, encumbrance, equities or claim; (iv) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having jurisdiction over the undersigned or the Paired Interests subject to this Notice of Exchange is required to be obtained by the undersigned for the transfer of such Paired Interests to the Company; and (v) the applicable representations and warranties made by the undersigned in Article III of the Exchange Agreement and that certain Subscription Agreement, dated as of [ ], by and between Pubco, the undersigned and the other subscribers listed therein/the undersigned’s Employee Equity Agreement will be true and correct as of the Exchange Date.
The undersigned hereby irrevocably constitutes and appoints any officer of Pubco as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to transfer to the Company the Paired Interests subject to this Notice of Exchange and to deliver to the undersigned the shares of Deliverable Common Stock or cash, as applicable, to be delivered in Exchange therefor.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice of Exchange to be executed and delivered by the undersigned or by its duly authorized attorney.
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EXHIBIT B
[FORM OF]
JOINDER AGREEMENT
This Joinder Agreement (“Joinder Agreement”) is a joinder to the Exchange Agreement, dated as of [ ], 2021 (the “Agreement”), among European Wax Center, Inc., a Delaware corporation (“Pubco”), EWC Ventures, LLC, a Delaware limited liability company (the “Company”), and the holders of Common Units and shares of Class B Common Stock from time to time party hereto (each, a “Holder”). Capitalized terms used but not defined in this Joinder Agreement shall have their meanings given to them in the Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State. In the event of any conflict between this Joinder Agreement and the Agreement, the terms of this Joinder Agreement shall control.
The undersigned, having acquired shares of Class B Common Stock and Common Units, hereby joins and enters into the Agreement. By signing and returning this Joinder Agreement to Pubco, the undersigned (i) accepts and agrees to be bound by and subject to all of the terms and conditions of and agreements of a Holder contained in the Agreement, with all attendant rights, duties and obligations of a Holder thereunder and (ii) makes each of the representations and warranties of a Holder set forth in Section 3.02 of the Agreement as fully as if such representations and warranties were set forth herein. The parties to the Agreement shall treat the execution and delivery hereof by the undersigned as the execution and delivery of the Agreement by the undersigned and, upon receipt of this Joinder Agreement by Pubco and by the Company, the signature of the undersigned set forth below shall constitute a counterpart signature to the signature page of the Agreement.
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Exhibit 10.5
EUROPEAN WAX CENTER, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of August 4, 2021 among European Wax Center, Inc., a Delaware corporation (the “Company”), the General Atlantic Holders (as defined herein), EWC Holdings, Inc., a Florida corporation (“EWC Holdings”), and each other Person listed on the signature pages hereto under the caption “Other Holders” or who executes a Joinder as an “Other Holder” (collectively, the “Other Holders”). Except as otherwise specified herein, all capitalized terms used in this Agreement are defined in Exhibit A attached hereto.
In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
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European Wax Center, Inc.
5830 Granite Parkway, 3rd Floor
Plano, Texas 75024
Attn: Chief Legal Counsel
Email: gavin.oconnor@myewc.com
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attn: John C. Kennedy
Monica K. Thurmond
Email: jkennedy@paulweiss.com
mthurmond@paulweiss.com
Facsimile: 212-757-3990
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Any request or consent made under this Agreement must be in writing (electronic mail will suffice).
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* * * * *
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Chief Legal Officer and Corporate Secretary
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INVESTORS:
GA AIV-1 B INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By:/s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By:/s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GENERAL ATLANTIC PARTNERS AIV (EW), L.P.
By: General Atlantic GenPar (EW), L.P.,
its general partner
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By:/s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
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EWC Holdings, inc.
By:/s/ David Coba
Name: David Coba
Title: President
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OTHER HOLDERS:
/s/ Sanjeev Khanna
Name: Sanjeev Khanna
/s/ Govind Agrawal
Name: Govind Agrawal
/s/ Sherry Baker
Name: Sherry Baker
/s/ Jonathan Biggert
Name: Jonathan Biggert
/s/ Marc Brody
Name: Marc Brody
/s/ Mark Gramm
Name: Mark Gramm
/s/ Rebecca Jones
Name: Rebecca Jones
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/s/ Mark Novell
Name: Mark Novell
/s/ Robb Thomas
Name: Robb Thomas
/s/ David Willis
Name: David Willis
/s/ David Berg
Name: David Berg
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EXHIBIT A
DEFINITIONS
Capitalized terms used in this Agreement have the meanings set forth below.
“Affiliate” of any Person means any other Person controlled by, controlling or under common control with such Person; provided, however, that portfolio companies in which any Person or any of its Affiliates has an investment shall not be deemed an Affiliate of such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any Person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” has the meaning set forth in the recitals.
“Automatic Shelf Registration Statement” has the meaning set forth in Section 1(a).
“Business Day” means a day that is not a Saturday or Sunday or a day on which banks in New York City are closed.
“Class A Common Stock” means shares of the Company’s Class A common stock, $0.00001 par value per share.
“Class B Common Stock” means shares of the Company’s Class B common stock, $0.00001 par value per share.
“Common Equity” means the Class A Common Stock.
“Company” has the meaning set forth in the preamble and shall include its successor(s) by merger, acquisition, reorganization or otherwise.
“Company Indemnitee” has the meaning set forth in Section 6.
“Demand Registrations” has the meaning set forth in Section 1(a).
“End of Suspension Notice” has the meaning set forth in Section 1(f)(ii).
“EWC Holdings” has the meaning set forth in the recitals.
“EWC Ventures” means EWC Ventures, LLC, a Delaware limited liability company, of which the Company is the managing member.
“EWC Ventures Units” means the non-voting common interest units in EWC Ventures.
“Exchange” means the exchange of shares of Class B Common Stock together with EWC Ventures Units for shares of Class A Common Stock, pursuant to the Exchange Agreement.
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“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor federal law then in force, together with all rules and regulations promulgated thereunder.
“Exchange Agreement” means the Exchange Agreement, dated as of August 4, 2021, by and among the Company, EWC Ventures and the holders of EWC Ventures Units and Class B Class B Common Stock party thereto.
“Excluded Registration” means any registration (i) pursuant to a Demand Registration (which is addressed in Section 1(a)), (ii) in connection with registrations on Form S‑4 or S‑8 promulgated by the SEC (or any successor or similar forms) or (iii) on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities or that does not permit the registration of Registrable Securities.
“FINRA” means the Financial Industry Regulatory Authority.
“Free Writing Prospectus” means a free-writing prospectus, as defined in Rule 405.
“General Atlantic Holders” means GA AIV-1 B Interholdco (EW), L.P., GAPCO AIV Interholdco (EW), L.P. and General Atlantic Partners AIV (EW), L.P.
“Holdback Period” has the meaning set forth in Section 3(a).
“Holder” means a holder of Registrable Securities who is a party to this Agreement (including by way of Joinder).
“Indemnified Parties” has the meaning set forth in Section 6(a).
“Investors” means the General Atlantic Holders, EWC Holdings, and any Permitted Assignees.
“Investor Registrable Securities” means (i) any Common Equity held (directly or indirectly) by an Investor or any of its Affiliates, and (ii) any Common Equity issued or issuable with respect to other securities of the Company or any of its Subsidiaries by way of dividend, distribution, split or combination of securities, conversion, exchange, or any recapitalization, merger, consolidation or other reorganization.
“Joinder” has the meaning set forth in Section 9(a).
“Long-Form Registrations” has the meaning set forth in Section 1(a).
“Losses” has the meaning set forth in Section 6(c).
“Majority Investors” means the Investors that are holders of a majority of all Investor Registrable Securities, measured by reference to shares of Common Equity beneficially owned or issuable upon conversion of an Investor Registrable Security.
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“Majority Participating Investors” means the Participating Investor or Participating Investors who hold a majority of the Investor Registrable Securities to be included within such Demand Registration, Shelf Offering, Piggyback Registration or Underwritten Block Trade.
“Other Holders” has the meaning set forth in the recitals.
“Other Registrable Securities” means (i) any Common Equity held (directly or indirectly) by any Other Holders or any of their Affiliates, and (ii) any Common Equity issued or issuable with respect to other securities of the Company or any of its Subsidiaries by way of dividend, distribution, split or combination of securities, conversion, exchange, or any recapitalization, merger, consolidation, reorganization or certain other corporate transactions.
“Other Securities” has the meaning set forth in Section 3(a).
“Participating Investor” or “Participating Investors” means any Investor(s) participating in the request for a Demand Registration, Shelf Offering, Piggyback Registration or Underwritten Block Trade.
“Permitted Assignee” has the meaning set forth in Section 11(e).
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“Piggyback Registrations” has the meaning set forth in Section 2(a).
“Potential Participant” has the meaning set forth in Section 1(d).
“Public Offering” means any sale or distribution by the Company, one of its Subsidiaries and/or Holders to the public of Common Equity or other securities convertible into or exchangeable for Common Equity pursuant to an offering registered under the Securities Act.
“Qualified Independent Underwriter” has the meaning set forth by FINRA in Section 5121(f)(12), or any successor provision thereto.
“Registrable Securities” means Investor Registrable Securities and Other Registrable Securities. As to any particular Registrable Securities, such securities will cease to be Registrable Securities when (a) they have been sold or distributed pursuant to a Public Offering, (b) they have been sold in compliance with Rule 144 following the consummation of the Company’s initial Public Offering, (c) they have been distributed to the direct or indirect partners or members of an investor except for a distribution or assignment permitted pursuant to Section 4(e) or (d) they have been repurchased by the Company or a Subsidiary of the Company. For purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities, and the Registrable Securities will be deemed to be in existence, whenever such Person has the right to acquire, directly or indirectly, such Registrable Securities (upon conversion or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected, and such Person will be entitled to exercise the rights of a holder of Registrable Securities hereunder
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(it being understood that a holder of Registrable Securities may only request that Registrable Securities in the form of Common Equity be registered pursuant to this Agreement). Notwithstanding the foregoing, following the consummation of an initial Public Offering, any Registrable Securities held by any Person (other than an Investor or its Affiliates) that may be sold under Rule 144(b)(1)(i) without limitation under any of the other requirements of Rule 144 will be deemed not to be Registrable Securities.
“Registration Expenses” has the meaning set forth in Section 5.
“Rule 144”, “Rule 158”, “Rule 405”, “Rule 415”, “Rule 403B” and “Rule 462” mean, in each case, such rule promulgated under the Securities Act (or any successor provision) by the SEC, as the same will be amended from time to time, or any successor rule then in force.
“Sale Transaction” has the meaning set forth in Section 3(a).
“SEC” means the United States Securities and Exchange Commission.
“Securities” has the meaning set forth in Section 3(a).
“Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor federal law then in force, together with all rules and regulations promulgated thereunder.
“Shelf Offering” has the meaning set forth in Section 1(d)(i).
“Shelf Offering Notice” has the meaning set forth in Section 1(d)(i).
“Shelf Registration” has the meaning set forth in Section 1(a).
“Shelf Registrable Securities” has the meaning set forth in Section 1(d)(i).
“Shelf Registration Statement” has the meaning set forth in Section 1(d).
“Short-Form Registrations” has the meaning set forth in Section 1(a).
“Subsidiary” means, with respect to the Company, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by the Company or one or more of the other Subsidiaries of the Company or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the limited liability company, partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by the Company or one or more Subsidiaries of the Company or a combination thereof. For purposes hereof, a Person or Persons will be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons will be allocated a majority of limited liability company, partnership, association or other
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business entity gains or losses or will be or control the managing director or general partner of such limited liability company, partnership, association or other business entity.
“Suspension Event” has the meaning set forth in Section 1(f)(ii).
“Suspension Notice” has the meaning set forth in Section 1(f)(ii).
“Suspension Period” has the meaning set forth in Section 1(f)(i).
“Underwritten Block Trade” has the meaning set forth in Section 1(c)(ii).
“Violation” has the meaning set forth in Section 6(a).
“WKSI” means a “well-known seasoned issuer” as defined under Rule 405.
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EXHIBIT B
The undersigned is executing and delivering this Joinder pursuant to the Registration Rights Agreement dated as of __________________, 2021 (as amended, modified and waived from time to time, the “Registration Agreement”), among European Wax Center, Inc., a Delaware corporation (the “Company”), and the other persons named as parties therein (including pursuant to other Joinders). Capitalized terms used herein have the meaning set forth in the Registration Agreement.
By executing and delivering this Joinder to the Company, the undersigned hereby agrees to become a party to, to be bound by, and to comply with the provisions of, the Registration Agreement as a Holder in the same manner as if the undersigned were an original signatory to the Registration Agreement, and the undersigned will be deemed for all purposes to be a Holder, an [Investor // Other Holder thereunder] and the undersigned’s ____ Common Equity will be deemed for all purposes to be [Investor // Other] Registrable Securities under the Registration Agreement.
Accordingly, the undersigned has executed and delivered this Joinder as of the ___ day of ____________, 202___.
____________________________________
Signature
____________________________________
Print Name
Address:
Agreed and Accepted as of
________________, 202_:
EUROPEAN WAX CENTER, INC.
By: ________________________
Name:
Title:
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Exhibit 10.6
TAX RECEIVABLE AGREEMENT
between
EUROPEAN WAX CENTER, INC.
and
THE PERSONS NAMED HEREIN
Dated as of [ ], 2021
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS |
2 |
|
Section 1.1. |
Definitions |
2 |
ARTICLE II DETERMINATION OF CERTAIN REALIZED TAX BENEFIT |
12 |
|
Section 2.1. |
Basis Schedule |
12 |
Section 2.2. |
Tax Benefit Schedule |
13 |
Section 2.3. |
Procedures, Amendments |
14 |
ARTICLE III TAX BENEFIT PAYMENTS |
15 |
|
Section 3.1. |
Payments |
15 |
Section 3.2. |
No Duplicative Payments |
16 |
Section 3.3. |
Pro Rata Payments |
16 |
Section 3.4. |
Payment Ordering |
17 |
ARTICLE IV TERMINATION |
17 |
|
Section 4.1. |
Early Termination of Agreement; Breach of Agreement |
17 |
Section 4.2. |
Early Termination Notice |
19 |
Section 4.3. |
Payment upon Early Termination |
19 |
ARTICLE V SUBORDINATION AND LATE PAYMENTS |
19 |
|
Section 5.1. |
Subordination |
19 |
Section 5.2. |
Late Payments by the Corporate Taxpayer |
20 |
ARTICLE VI NO DISPUTES; CONSISTENCY; COOPERATION |
20 |
|
Section 6.1. |
Participation in the Corporate Taxpayer’s and OpCo’s Tax Matters |
20 |
Section 6.2. |
Consistency |
20 |
Section 6.3. |
Cooperation |
21 |
ARTICLE VII MISCELLANEOUS |
21 |
|
Section 7.1. |
Notices |
21 |
Section 7.2. |
Counterparts |
22 |
Section 7.3. |
Entire Agreement; No Third Party Beneficiaries |
22 |
Section 7.4. |
Governing Law |
22 |
Section 7.5. |
Severability |
22 |
Section 7.6. |
Successors; Assignment; Amendments; Waivers |
22 |
Section 7.7. |
Titles and Subtitles |
23 |
Section 7.8. |
Resolution of Disputes |
23 |
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Section 7.9. |
Reconciliation |
24 |
Section 7.10. |
Withholding |
25 |
Section 7.11. |
Admission of the Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets |
25 |
Section 7.12. |
Confidentiality |
26 |
Section 7.13. |
Change in Law |
27 |
Section 7.14. |
TRA Party Representative |
27 |
Section 7.15. |
Partnership Agreement.. |
28 |
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Exhibit 10.6
TAX RECEIVABLE AGREEMENT
This TAX RECEIVABLE AGREEMENT (this “Agreement”), is dated as of [ ], 2021, and is between European Wax Center, Inc., a Delaware corporation (including any successor corporation, “PubCo”), each of the undersigned parties, and each of the other persons from time to time that become a party hereto (each, excluding PubCo, a “TRA Party” and together the “TRA Parties”).
RECITALS
WHEREAS, the TRA Parties directly or indirectly hold limited liability company interests in OpCo (as defined below) (the “Units”), which is classified as a partnership for U.S. federal income Tax (as defined below) purposes;
WHEREAS, after the IPO (as defined below), PubCo will be the managing member of OpCo, and holds and will hold, directly and/or indirectly, Units;
WHEREAS, each of the Blockers (as defined below), EWC Merger Sub 1, Inc. and EWC Merger Sub 2, Inc. is classified as an association taxable as a corporation for U.S. federal income Tax purposes;
WHEREAS, (i) the Blocker Shareholders (as defined below) hold all of the outstanding units of the Blockers (the “Blocker Units”), and (ii) following certain restructuring transactions, the Blockers hold Units;
WHEREAS, in connection with the IPO, pursuant to the provisions of that certain Reorganization Agreement, dated on or about the IPO Date (as defined below), among PubCo and the parties named therein, in connection with the IPO, among other things, (i) (x) EWC Merger Sub 1, Inc. will merge with and into GA Blocker (as defined below), with GA Blocker surviving, and immediately thereafter, (y) GA Blocker will merge with and into PubCo, with PubCo surviving (“Merger 1”), (ii) EWC Merger Sub 2, Inc. will merge with and into GAPCO Blocker, with GAPCO Blocker surviving, and immediately thereafter, (y) GAPCO Blocker will merge with and into PubCo, with Pubco surviving (“Merger 2,” together with Merger 1, the “Mergers”), and (iii) the Blocker Units held by the Blocker Shareholders will convert into (x) shares of Class A common stock, $0.00001 par value per share, of PubCo (the “Class A Shares”), and (y) rights to receive payments hereunder;
WHEREAS, as a result of the Mergers, the Corporate Taxpayer (as defined below) will (i) be entitled to utilize Pre-Merger NOLs (as defined below) and (ii) obtain the benefit of the Blocker Transferred Basis (as defined below);
WHEREAS, in connection with the IPO, PubCo will (directly or indirectly) acquire IPO Units (as defined below) for a contribution of cash to OpCo not treated as part of a disguised sale under Section 707(a) of the Code (the “IPO Exchange”);
WHEREAS, the Units held by the TRA Parties may be exchanged for Class A Shares, in accordance with and subject to the provisions of the OpCo Agreement (as defined below) and the Exchange Agreement (as defined below) and/or for other cash or other property;
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WHEREAS, OpCo and each of its direct and indirect Subsidiaries (as defined below) treated as a partnership for U.S. federal income Tax purposes will have in effect an election under Section 754 of the Code, for each Taxable Year (as defined below) that includes the IPO Date and for each Taxable Year in which a taxable acquisition (including a deemed taxable acquisition under Section 707(a) of the Code) or non-taxable acquisition of Units by the Corporate Taxpayer from any of the TRA Parties (an “Exchanging Holder”) for Class A Shares and/or other consideration (to the extent permitted by the governing documents of OpCo or its applicable subsidiary) or redemption by OpCo, in each case, in connection with the IPO or after the IPO Date (any such acquisition, including any deemed taxable acquisition under Section 707(a) of the Code, or redemption, excluding, for the avoidance of doubt, the IPO Exchange, an “Exchange”) occurs;
WHEREAS, as a result of an Exchange, the Corporate Taxpayer will be entitled to use the Basis Adjustments (as defined below) relating to such Units exchanged in the Exchange;
WHEREAS, the income, gain, loss, expense and other Tax items of the Corporate Taxpayer may be affected by the (i) Pre-Merger NOLs, (ii) Blocker Transferred Basis, (iii) Basis Adjustments, (iv) Common Basis and (v) Imputed Interest (as defined below) (collectively, the “Tax Attributes”); and
WHEREAS, the parties to this Agreement desire to provide for certain payments and make certain arrangements with respect to the effect of the Tax Attributes on the liability for Taxes of the Corporate Taxpayer.
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).
“Acquired Units” means the Units acquired by the Corporate Taxpayer in the Mergers.
“Actual Tax Liability” means, with respect to any Taxable Year, the sum of (i) the sum of (A) the liability for U.S. federal income Taxes of the Corporate Taxpayer and (B) without duplication, the portion of any liability for U.S. federal income Taxes imposed directly on OpCo (and OpCo’s applicable subsidiaries) under Section 6225 or any similar provision of the Code that is allocable to the Corporate Taxpayer under Section 704 of the Code, in each case, (a) using the same methods, elections, conventions and similar practices used on the relevant IRS Form 1120 (or any successor form) and (b) calculating the amount in clause (A) by treating the Corporate Taxpayer as having only paid an amount of state and local Taxes equal to the amount in prong (ii) of this definition (rather than any actual amount of state, local and foreign tax liabilities paid) for such Taxable Year to the extent state and local taxes are deductible for the
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applicable entity, (ii) the product of the amount of the U.S. federal taxable income (calculated assuming that state and local taxes are not deductible) for such taxable year reported on the Corporate Taxpayer’s IRS Form 1120 (or any successor form) and the Blended Rate.
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
“Agreed Rate” means a per annum rate of LIBOR plus 100 basis points.
“Agreement” has the meaning set forth in the Preamble to this Agreement.
“Amended Schedule” has the meaning set forth in Section 2.3(b) of this Agreement.
“Attributable” means the portion of any Tax Attribute of the Corporate Taxpayer that is “Attributable” to the Blocker Shareholders or to any present or former Unit Holder, as the case may be, determined under the following principles:
(i) any Pre-Merger NOLs shall be determined separately with respect to each Blocker and are Attributable to the Blocker Shareholders of each Blocker that, but for the participation of a Blocker and the relevant Blocker Shareholder in the Mergers, the Corporate Taxpayer would not have had the use of such Pre-Merger NOLs;
(ii) any Blocker Transferred Basis shall be determined separately with respect to each Blocker and is Attributable to the Blocker Shareholders of each Blocker proportionately based on the Blocker Shareholders’ proportionate ownership of total equity interests of the Blockers immediately prior to the Mergers;
(iii) the Basis Adjustments and the Common Basis in any Reference Asset transferred in an Exchange shall be determined separately with respect to each Exchanging Holder and are Attributable to each Exchanging Holder in an amount equal to the total Basis Adjustment and the Common Basis relating to such Units delivered to the Corporate Taxpayer by such Exchanging Holder in the Exchange (for the avoidance of doubt, with respect to any Basis Adjustments and the Common Basis attributable to a distribution or redemption, the Exchanging Holder shall be the Unit Holder relinquishing its interest in the Reference Asset); and
(iv) any deduction to the Corporate Taxpayer with respect to a Taxable Year in respect of Imputed Interest is Attributable to the Person that is required to include the Imputed Interest in income (without regard to whether such Person is actually subject to Tax thereon).
“Basis Adjustment” means the adjustment to the tax basis of a Reference Asset under Sections 732, 734(b), 707(a), 737, 755 and/or 1012 of the Code (in situations where, as a result of one or more Exchanges, OpCo becomes an entity that is disregarded as separate from its owner for U.S. federal income Tax purposes) or under Sections 704(c)(1)(B), 707, 734(b) 737(c)(2), 743(b), 754, 755 and/or 1012 of the Code (in situations where, following an Exchange, OpCo remains in existence as an entity treated as a partnership for U.S. federal
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income Tax purposes) and, in each case, analogous sections of U.S. state and local Tax laws, as a result of an Exchange and the payments made pursuant to this Agreement in respect of such Exchange. For the avoidance of doubt, the amount of any Basis Adjustment resulting from an Exchange of one or more Units shall be determined without regard to any Pre-Exchange Transfer of such Units and as if any such Pre-Exchange Transfer had not occurred. The amount of any Basis Adjustment shall be determined using the Market Value at the time of the Exchange.
“Basis Schedule” has the meaning set forth in Section 2.1 of this Agreement.
“Beneficial Owner” means, with respect to any security, a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security; and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.
“Blended Rate” means, with respect to any Taxable Year, the sum of the apportionment-weighted effective rates of Tax imposed on the aggregate net income of the Corporate Taxpayer or OpCo, as applicable, in each state or local jurisdiction in which the Corporate Taxpayer or OpCo, as applicable, files Tax Returns for such Taxable Year, with the maximum effective rate in any state or local jurisdiction being equal to the product of (i) the apportionment factor on the income or franchise Corporate Taxpayer Return in such jurisdiction for such Taxable Year and (ii) the maximum applicable corporate Tax rate in effect in such jurisdiction in such Taxable Year. As an illustration of the calculation of the Blended Rate for a Taxable Year, if the Corporate Taxpayer solely files Tax Returns in State 1 and State 2 in a Taxable Year, the maximum applicable corporate Tax rates in effect in such states in such Taxable Year are 6.5% and 5.5%, respectively, and the apportionment factors for such states in such Taxable Year are 55% and 45% respectively, then the Blended Rate for such Taxable Year is equal to 6.05% (i.e., 6.5% multiplied by 55% plus 5.5% multiplied by 45%).
“Blockers” means GAPCO Blocker and GA Blocker, and each, individually, a Blocker.
“Blocker Shareholder” means, a Person who, prior to the Mergers, holds equity interests of a Blocker, and as a result of the Mergers, holds Class A Shares.
“Blocker Transferred Basis” means OpCo’s tax basis in the Reference Assets that is amortizable under Section 197 of the Code or that is otherwise amortizable or depreciable for United States federal income tax purposes, including from any adjustments under Section 734(b) or 743(b) of the Code immediately following the Mergers.
“Blocker Units” has the meaning set forth in the Preamble to this Agreement.
“Board” means the Board of Directors of PubCo.
“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York are authorized or required by law to close.
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“Change of Control” means the occurrence of any of the following events:
(i) any Person or any group of Persons acting together that would constitute a “group” for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended or any successor provisions thereto (excluding (a) a corporation or other entity owned, directly or indirectly, by the stockholders of the Corporate Taxpayer in substantially the same proportions as their ownership of stock of the Corporate Taxpayer or (b) a Person or group of Persons in which one or more Affiliates of the General Atlantic Funds, directly or indirectly hold Beneficial Ownership of securities representing more than 50% of the total voting power in such Person or held by such group) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporate Taxpayer representing more than 50% of the combined voting power of the Corporate Taxpayer’s then outstanding voting securities; or
(ii) the following individuals cease for any reason to constitute a majority of the number of directors of the Corporate Taxpayer then serving: individuals who, on the IPO Date, constitute the Board and any new director whose appointment or election by the Board or nomination for election by the Corporate Taxpayer’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the IPO Date or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or
(iii) there is consummated a merger or consolidation of the Corporate Taxpayer with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, either (x) the Board immediately prior to the merger or consolidation does not constitute at least a majority of the board of directors of the company surviving the merger or, if the surviving company is a Subsidiary, the ultimate parent thereof, or (y) the voting securities of the Corporate Taxpayer immediately prior to such merger or consolidation do not continue to represent or are not converted into more than 50% of the combined voting power of the then outstanding voting securities of the Person resulting from such merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof; or
(iv) the stockholders of the Corporate Taxpayer approve a plan of complete liquidation or dissolution of the Corporate Taxpayer or there is consummated an agreement or series of related agreements for the sale, lease or other disposition, directly or indirectly, by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s assets, other than such sale or other disposition by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s assets to an entity at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Corporate Taxpayer in substantially the same proportions as their ownership of the Corporate Taxpayer immediately prior to such sale.
Notwithstanding the foregoing, except with respect to clause (ii) and clause (iii)(x) above, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of
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the shares of the Corporate Taxpayer immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in, and voting control over, and own substantially all of the shares of, an entity which owns, directly or indirectly, all or substantially all of the assets of the Corporate Taxpayer immediately following such transaction or series of transactions.
“Class A Shares” has the meaning set forth in the Recitals of this Agreement.
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Common Basis” means the Tax basis in any Reference Asset that is amortizable under Section 197 of the Code or that is otherwise amortizable or depreciable for United States federal income tax purposes Attributable to Units acquired by the Corporate Taxpayer upon an Exchange. For the avoidance of doubt, Common Basis shall (i) take into account any Section 734(b) adjustment that has not been otherwise included in Basis Adjustments and (ii) shall not be duplicative of any amount with respect to such Reference Asset that is included in any Basis Adjustment with respect to such Reference Asset.
“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“Corporate Taxpayer” means PubCo and any company that is a member of any consolidated Tax Return of which European Wax Center, Inc. (or a successor thereto) is a member, where appropriate.
“Corporate Taxpayer Return” means the U.S. federal and/or state and/or local Tax Return, as applicable, of the Corporate Taxpayer filed with respect to Taxes of any Taxable Year.
“Covered Person” has the meaning set forth in Section 7.14 of this Agreement.
“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporate Taxpayer, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriment for the same period. The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedules or Amended Schedules, if any, in existence at the time of such calculation; provided, that, for the avoidance of doubt, the computation of the Cumulative Net Realized Tax Benefit shall be adjusted to reflect any applicable Determination with respect to any Realized Tax Benefits and/or Realized Tax Detriments.
“Default Rate” means a per annum rate of LIBOR plus 500 basis points.
“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state, foreign or local Tax law, as applicable, or any other event (including the execution of IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.
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“Dispute” has the meaning set forth in Section 7.8(a) of this Agreement.
“Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.
“Early Termination Effective Date” means the date on which an Early Termination Schedule becomes binding pursuant to Section 4.2.
“Early Termination Notice” has the meaning set forth in Section 4.2 of this Agreement.
“Early Termination Payment” has the meaning set forth in Section 4.3(b) of this Agreement.
“Early Termination Rate” means the lesser of (i) 6.5% per annum, compounded annually, and (ii) LIBOR plus 100 basis points.
“Early Termination Schedule” has the meaning set forth in Section 4.2 of this Agreement.
“Exchange” has the meaning set forth in the Recitals of this Agreement.
“Exchange Agreement” means the Exchange Agreement, dated on or about the date hereof, between the Corporate Taxpayer, OpCo and the holders of Units from time to time party thereto, as amended from time to time.
“Exchange Date” means the date of any Exchange.
“Exchanging Holder” has the meaning set forth in the Recitals of this Agreement.
“Expert” has the meaning set forth in Section 7.9 of this Agreement.
“Future TRAs” has the meaning set forth in Section 5.1 of this Agreement.
“GA Blocker” means General Atlantic AIV (EW) Blocker, LLC.
“GAPCO Blocker” means GAPCO AIV Blocker (EW), LLC.
“General Atlantic Funds” means, individually or collectively, any investment fund, co-investment vehicles and/or other similar vehicles or accounts, in each case managed by an Affiliate of General Atlantic, or any of their respective successors.
“Hypothetical Tax Liability” means, with respect to any Taxable Year, the sum of (i) the sum of (A) the liability for U.S. federal income Taxes of the Corporate Taxpayer and (B) without duplication, the portion of any liability for U.S. federal income Taxes imposed directly on OpCo (and OpCo’s applicable subsidiaries) under Section 6225 or any similar provision of the Code that is allocable to the Corporate Taxpayer under Section 704 of the Code, in each case, (a) using the same methods, elections, conventions and similar practices used on the relevant IRS Form 1120 (or any successor form) and (b) calculating the amount in clause (A) by treating the Corporate Taxpayer as having only paid an amount of state and local Taxes equal to the amount in prong (ii) of this definition (rather than any amount of state, local and foreign tax liabilities
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paid) for such Taxable Year to the extent state and local taxes are deductible for the applicable entity, and (ii) the product of the U.S. federal taxable income (calculated assuming that state and local taxes are not deductible) for such taxable year reported on the Corporate Taxpayer’s IRS Form 1120 (or any successor form) and the Blended Rate, but, in the determination of the liability in clauses (i) and (ii), above, (a) without taking into account Pre-Merger NOLs, if any, (b) using the Non-Blocker Transferred Basis as reflected on the Basis Schedule including amendments thereto for the Taxable Year, (c) using the Non-Stepped Up Tax Basis as reflected on the Basis Schedule including amendments thereto for the Taxable Year, and (d) excluding any deduction attributable to Imputed Interest attributable to any payment made under this Agreement for the Taxable Year. For the avoidance of doubt, Hypothetical Tax Liability shall be determined without taking into account the carryover or carryback of any Tax item (or portions thereof) that is attributable to a Tax Attribute as applicable. For the avoidance of doubt, the basis of the Reference Assets in the aggregate for purposes of determining the Hypothetical Tax Liability can never be less than zero.
“Imputed Interest” in respect of a TRA Party shall mean any interest imputed under Sections 1272, 1274 or 483 or other provision of the Code and any similar provision of state and local Tax law with respect to the Corporate Taxpayer’s payment obligations in respect of such TRA Party under this Agreement.
“Interest Amount” has the meaning set forth in Section 3.1(b) of this Agreement.
“IPO” means the initial public offering of Class A Shares by the Corporate Taxpayer (including any greenshoe related to such initial public offering).
“IPO Date” means the initial closing date of the IPO.
“IPO Exchange” has the meaning set forth in the Recitals of this Agreement.
“IPO Units” means the Units acquired by the PubCo with the net proceeds from the IPO (excluding any Units acquired in an Exchange).
“IRS” means the U.S. Internal Revenue Service.
“LIBOR” means during any period, an interest rate per annum equal to the one-year LIBOR reported, on the date two days prior to the first day of such period, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBOR01” or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such period; provided, however, that if at any time a majority of the Corporate Taxpayer’s then-outstanding loan and/or other agreements governing material secured, floating rate indebtedness discontinue the use of LIBOR in determining pricing or interest rates and apply an alternative benchmark rate (such agreements that have discontinued the use of LIBOR, the “Discontinued Agreements”), then, during any period, all references in this Agreement to LIBOR shall automatically and without further action by any party refer to the sum of (1) the alternative benchmark rate applied in such period in the majority of the Discontinued Agreements (the “Successor Benchmark”) and (2) the weighted average mathematical spread adjustment (which may be zero, negative or positive and shall be determined based on the aggregate principal amount of financing provided under each such
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Discontinued Agreement, whether utilized or unutilized at the time that Successor Benchmark is adopted) applied to such Successor Benchmark in the Discontinued Agreements.
“Market Value” shall mean the closing price of the Class A Shares on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Shares are then traded or listed, as reported by the Wall Street Journal; provided, that if the closing price is not reported by the Wall Street Journal for the applicable Exchange Date, then the Market Value shall mean the closing price of the Class A Shares on the Business Day immediately preceding such Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Shares are then traded or listed, as reported by the Wall Street Journal; provided, further, that if the Class A Shares are not then listed on a national securities exchange or interdealer quotation system, “Market Value” shall mean the cash consideration paid for Class A Shares, or the fair market value of the other property delivered for Class A Shares, as determined by the Board in good faith. Notwithstanding anything to the contrary in the above sentence, to the extent property is exchanged for cash in a transaction, the Market Value shall be determined by reference to the amount of cash transferred in such transaction.
“Material Objection Notice” has the meaning set forth in Section 4.2 of this Agreement.
“Merger 1” has the meaning set forth in the Recitals of this Agreement.
“Merger 2” has the meaning set forth in the Recitals of this Agreement.
“Mergers” has the meaning set forth in the Recitals of this Agreement.
“Net Tax Benefit” has the meaning set forth in Section 3.1(b) of this Agreement.
“Non-Blocker Transferred Basis” means, with respect to any Reference Asset that is amortizable under Section 197 of the Code or that is otherwise amortizable or depreciable for United States federal income tax purposes at the time of the Mergers, the tax basis that such Reference Asset would have had if the Blocker Transferred Basis at the time of the Mergers was equal to zero.
“Non-Stepped Up Tax Basis” means, with respect to any Reference Asset at the time of an Exchange, the tax basis that such asset would have had at such time if no Basis Adjustments had been made and the Common Basis in any Reference Assets that is amortizable under Section 197 of the Code or that is otherwise amortizable or depreciable for United States federal income tax purposes was equal to zero.
“Objection Notice” has the meaning set forth in Section 2.3(a) of this Agreement.
“OpCo” means EWC Ventures, LLC, a Delaware limited liability company.
“OpCo Agreement” means the Fifth Amended and Restated Limited Liability Company Agreement of OpCo, dated on or about the date hereof, as such agreement may be further amended, restated, supplemented and/or otherwise modified from time to time.
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“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.
“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.
“Pre-Exchange Transfer” means any transfer (including upon the death of an Unit Holder) or distribution in respect of one or more Units (or any predecessor to such Units) (i) that occurs prior to an Exchange of such Units, and (ii) to which Section 734(b) or 743(b) of the Code applies.
“Pre-Merger NOLs” means, without duplication, the net operating losses, capital losses, research and development credits, excess Section 163(j) limitation carryforwards, charitable deductions, foreign Tax credits and any Tax attributes subject to carryforward under Section 381 of the Code that the Corporate Taxpayer is entitled to utilize as a result of the Blockers’ participation in the Mergers that relate to periods (or portions thereof) prior to the Mergers; provided, however, that in order to determine whether any such Tax attribute is a Pre-Merger NOL, the Taxable Year of the Corporate Taxpayer that includes the effective date of the Mergers shall be deemed to end as of the close of such effective date. Notwithstanding the foregoing, the term “Pre-Merger NOL” shall not include any Tax attribute of a Blocker that is used to offset Taxes of such Blocker, if such offset Taxes are attributable to taxable periods (or portion thereof) ending on or prior to the date of the Mergers.
“PubCo” has the meaning set forth in the Preamble to this Agreement.
“Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the Actual Tax Liability. If all or a portion of the Actual Tax Liability for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.
“Realized Tax Detriment” means, for a Taxable Year, the excess, if any, of the Actual Tax Liability over the Hypothetical Tax Liability. If all or a portion of the Actual Tax Liability for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.
“Reconciliation Dispute” has the meaning set forth in Section 7.9 of this Agreement.
“Reconciliation Procedures” has the meaning set forth in Section 2.3(a) of this Agreement.
“Reference Asset” means an asset that is held by OpCo, or by any of its direct or indirect Subsidiaries treated as a partnership or disregarded entity (but only if such indirect Subsidiaries are held only through Subsidiaries treated as partnerships or disregarded entities) for purposes of the applicable Tax, at the time of the Mergers, the IPO, the IPO Exchange or an Exchange, as
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relevant. A Reference Asset also includes any asset that is “substituted basis property” under Section 7701(a)(42) of the Code with respect to a Reference Asset.
“Schedule” means any of the following: (i) a Basis Schedule; (ii) a Tax Benefit Schedule; or (iii) the Early Termination Schedule.
“Section 734(b) Exchange” means any Exchange that results in a Basis Adjustment under Section 734(b) of the Code.
“Senior Obligations” has the meaning set forth in Section 5.1 of this Agreement.
“Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting power or other similar interests or the sole general partner interest or managing member or similar interest of such Person.
“Tax Attributes” has the meaning set forth in the Recitals of this Agreement.
“Tax Benefit Payment” has the meaning set forth in Section 3.1(b) of this Agreement.
“Tax Benefit Schedule” has the meaning set forth in Section 2.2(a) of this Agreement.
“Tax Return” means any return, declaration, report or similar statement filed or required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.
“Taxable Year” means a taxable year of the Corporate Taxpayer as defined in Section 441(b) of the Code or comparable section of state or local Tax law, as applicable (and, therefore, for the avoidance of doubt, may include a period of less than twelve (12) months for which a Tax Return is made), ending on or after the IPO Date.
“Taxes” means any and all U.S. federal, state, local and foreign taxes, assessments or similar charges that are based on or measured with respect to net income or profits, and any interest related to such Tax.
“Taxing Authority” means any domestic, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.
“Threshold Exchange Units” has the meaning set forth in Section 3.6 of this Agreement.
“TRA Party” has the meaning set forth in the Preamble to this Agreement.
“TRA Party Representative” means, General Atlantic Partners AIV (EW), LP, a Delaware limited partnership.
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“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.
“Unit Holder” means holders of Units other than the Corporate Taxpayer.
“Units” has the meaning set forth in the Recitals of this Agreement.
“Unvested Units” has the meaning set forth in the OpCo Agreement.
“Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that in each Taxable Year ending on or after such Early Termination Date, (1) the Corporate Taxpayer will have taxable income sufficient to fully utilize (i) the Tax items arising from the Tax Attributes during such Taxable Year or future Taxable Years (including, for the avoidance of doubt, Basis Adjustments and Imputed Interest that would result from future payments made under this Agreement that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available, and (ii) any Pre-Merger NOLs or loss carryovers generated by deductions arising from any Tax Attributes or Imputed Interest that are available as of the date of such Early Termination Date, (2) the U.S. federal income tax rates and state, local, and non-U.S. income tax rates for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the date of the Early Termination Payment and the Blended Rate will be calculated based on such rates and the apportionment factors applicable in the most recently ended Taxable Year, except to the extent any change to such Tax rates for such Taxable Year have already been enacted into law, (3) any non-amortizable assets will be disposed of on the fifteenth (15th) anniversary of the applicable Exchange and any cash equivalents will be disposed of twelve (12) months following the Early Termination Date; provided, that in the event of a Change of Control, such non-amortizable assets shall be deemed disposed of at the time of sale (if applicable) of the relevant asset in the Change of Control (if earlier than such fifteenth (15th) anniversary) (4) any payment obligations pursuant to this Agreement will be satisfied on the date that any Tax Return to which such payment obligation relates is required to be filed excluding any extensions and (5) if, at the Early Termination Date, there are Units that have not been Exchanged, then each such Unit, shall be deemed Exchanged for the Market Value of the Class A Shares and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date (and therefore, for the avoidance of doubt any outstanding Threshold Exchange Units held by a Unitholder shall also be deemed Exchanged on the Early Termination Date).
“Vested Units” has the meaning set forth in the OpCo Agreement.
ARTICLE II
DETERMINATION OF CERTAIN REALIZED TAX BENEFIT
Section 2.1. Basis Schedule. Within one hundred and twenty (120) calendar days after the due date (including extensions) of IRS Form 1120 (or any successor form) of the Corporate Taxpayer for each relevant Taxable Year, the Corporate Taxpayer shall deliver to each TRA Party and to the TRA Party Representative a schedule (the “Basis Schedule”) that shows, in
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reasonable detail necessary to perform the calculations required by this Agreement, (i) the Blocker Transferred Basis of the Reference Assets in respect of such TRA Party, if any, (ii) the Basis Adjustment with respect to the Reference Assets in respect of such TRA Party as a result of the Exchanges effected in such Taxable Year or any prior Taxable Year by such TRA Party, if any, calculated in the aggregate, (iii) the Non-Stepped Up Tax Basis of the Reference Assets in respect of such TRA Party as of each applicable Exchange Date, if any, (iv) the period (or periods) over which the Reference Assets in respect of such TRA Party are amortizable and/or depreciable and (vii) the period (or periods) over which the Blocker Transferred Basis, and each Basis Adjustment in respect of such TRA Party is amortizable and/or depreciable. All costs and expenses incurred in connection with the provision and preparation of the Basis Schedules and Tax Benefit Schedules for each TRA Party in compliance with this Agreement shall be borne by OpCo.
Section 2.2. Tax Benefit Schedule.
(a) Tax Benefit Schedule. Within one hundred and twenty (120) calendar days after the due date (including extensions) of IRS Form 1120 (or any successor form) of the Corporate Taxpayer for any Taxable Year in which there is a Realized Tax Benefit or a Realized Tax Detriment Attributable to a TRA Party, the Corporate Taxpayer shall provide to such TRA Party and to the TRA Party Representative a schedule showing, in reasonable detail, the calculation of the Realized Tax Benefit and Tax Benefit Payment or the Realized Tax Detriment, as applicable, in respect of such TRA Party for such Taxable Year (a “Tax Benefit Schedule”). Each Tax Benefit Schedule will become final as provided in Section 2.3(a) and may be amended as provided in Section 2.3(b) (subject to the procedures set forth in Section 2.3(b)).
(b) Applicable Principles.
(i) General. Subject to Section 3.3, the Realized Tax Benefit (or the Realized Tax Detriment) for each Taxable Year is intended to measure the decrease (or increase) in the actual liability for Taxes of the Corporate Taxpayer for such Taxable Year attributable to the Tax Attributes, determined using a “with and without” methodology. Carryovers or carrybacks of any Tax item attributable to any of the Tax Attributes shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of U.S. state and local income and franchise Tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type. If a carryover or carryback of any Tax item includes a portion that is attributable to any Tax Attribute and another portion that is not, such portions shall be considered to be used in accordance with the “with and without” methodology. The parties agree that (A) all Tax Benefit Payments (other than Imputed Interest thereon) attributable to Blocker Transferred Basis or Pre-Merger NOLs will be treated as non-qualifying property or money for purposes of Sections 351 or 356 of the Code received in the Mergers, (B) as a result, any additional Basis Adjustments will be incorporated into the calculation for the year in which the applicable Tax Benefits Payments are paid and into future year calculations, as appropriate, and (C) the Actual Tax Liability will take into account the deduction of the portion of the Tax Benefit Payment that must be accounted for as Imputed Interest.
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(ii) Applicable Principles of Section 734(b) Exchanges. Notwithstanding any provisions to the contrary in this Agreement, the foregoing treatment set out in Section 2.3(b)(i) shall not be required to apply to payments hereunder to an Exchanging Holder in respect of a Section 734(b) Exchange by such Exchanging Holder. For the avoidance of doubt, payments made under this Agreement relating to a Section 734(b) Exchange shall not be treated as resulting in a Basis Adjustment to the extent such payments are treated as Imputed Interest. The parties intend that (A) an Exchanging Holder that has made a Section 734(b) Exchange shall, with respect to the Basis Adjustment resulting from such Section 734(b) Exchange or any payments hereunder in respect of such Section 734(b) Exchange, be entitled to Tax Benefit Payments attributable to such Basis Adjustments only to the extent such Basis Adjustments are allocable to the Corporate Taxpayer following such Section 734(b) Exchange (without taking into account any concurrent or subsequent Exchanges) and (B) if, as a result of a subsequent Exchange, an increased portion of the Basis Adjustments resulting from such Section 734(b) Exchange or any payments hereunder in respect of such Section 734(b) Exchange becomes allocable to the Corporate Taxpayer, then the Unit Holder that makes such subsequent Exchange shall be entitled to a Tax Benefit Payment calculated in respect of such increased portion.
(iii) Applicable Principles for Blocker Transferred Basis. For the avoidance of doubt, the Realized Tax Benefit (or the Realized Tax Detriment) attributable to the Blocker Transferred Basis is intended to represent the decrease (or increase) in the actual liability for Taxes of the Corporate Taxpayer for such Taxable Year attributable to the Tax deductions resulting from the tax basis of the Reference Assets measured at the time of the IPO based on the Blocker Shareholders’ proportionate ownership of the total equity interests of the Blockers and such Blockers’ relative pro rata share in accordance with Units held immediately prior to the Mergers.
Section 2.3. Procedures, Amendments.
(a) Procedure. Every time the Corporate Taxpayer delivers to a TRA Party and to the TRA Party Representative an applicable Schedule under this Agreement, including any Amended Schedule, the Corporate Taxpayer shall also (x) deliver to such TRA Party and to the TRA Party Representative supporting schedules and work papers, as determined by the Corporate Taxpayer or as reasonably requested by such TRA Party or the TRA Party Representative, providing reasonable detail regarding data and calculations that were relevant for purposes of preparing such Schedule and (y) allow such TRA Party or the TRA Party Representative reasonable access at no cost to the appropriate representatives at the Corporate Taxpayer, as determined by the Corporate Taxpayer or as reasonably requested by such TRA Party or TRA Party Representative, in connection with a review of such Schedule. Without limiting the generality of the preceding sentence, the Corporate Taxpayer shall ensure that any Tax Benefit Schedule that is delivered to a TRA Party and to the TRA Party Representative, along with any supporting schedules and work papers, provides a reasonably detailed presentation of the calculation of the Actual Tax Liability and the Hypothetical Tax Liability and identifies any material assumptions or operating procedures or principles that were used for purposes of such calculations. An applicable Schedule or amendment thereto shall become final and binding on all parties thirty (30) calendar days from the date on which all relevant TRA Parties are treated as having received the applicable Schedule or amendment thereto under
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Section 7.1 unless the TRA Party Representative (i) within thirty (30) calendar days from such date provides the Corporate Taxpayer with written notice of a material objection to such Schedule (“Objection Notice”) made in good faith or (ii) provides a written waiver of such right of any Objection Notice within the period described in clause (i) above, in which case such Schedule or amendment thereto becomes binding on the date the waiver is received by the Corporate Taxpayer. If the Corporate Taxpayer and the TRA Party Representative, for any reason, are unable to successfully resolve the issues raised in the Objection Notice within thirty (30) calendar days after receipt by the Corporate Taxpayer of an Objection Notice, the Corporate Taxpayer and the TRA Party Representative shall employ the reconciliation procedures as described in Section 7.9 of this Agreement (the “Reconciliation Procedures”).
(b) Amended Schedule. The applicable Schedule for any Taxable Year may be amended from time to time by the Corporate Taxpayer (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to a TRA Party, (iii) to comply with an Expert’s determination under the Reconciliation Procedures, (iv) to reflect a change in the Realized Tax Benefit, or the Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other Tax item to such Taxable Year, (v) to reflect a change in the Realized Tax Benefit or the Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year or (vi) to adjust an applicable TRA Party’s Basis Schedule to take into account payments made pursuant to this Agreement (any such Schedule, an “Amended Schedule”). The Corporate Taxpayer shall provide an Amended Schedule to each TRA Party and to the TRA Party Representative within ninety (90) calendar days of the occurrence of an event referenced in clauses (i) through (vi) of the preceding sentence.
ARTICLE III
TAX BENEFIT PAYMENTS
Section 3.1. Payments.
(a) Payments. Within five (5) calendar days after a Tax Benefit Schedule delivered to a TRA Party becomes final in accordance with Section 2.3(a) and Section 7.9, if applicable, the Corporate Taxpayer shall pay such TRA Party for such Taxable Year the Tax Benefit Payment determined pursuant to Section 3.1(b) that is Attributable to the relevant TRA Party. Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to the bank account previously designated by such TRA Party to the Corporate Taxpayer or as otherwise agreed by the Corporate Taxpayer and such TRA Party. For the avoidance of doubt, (x) no Tax Benefit Payment shall be made in respect of estimated Tax payments, including, without limitation, U.S. federal estimated income Tax payments and (y) the payments provided for pursuant to the above sentence shall be computed separately for each TRA Party. Notwithstanding anything to the contrary in this Agreement, with respect to each Exchange by or with respect to any TRA Party, if such TRA Party notifies the Corporate Taxpayer in writing of a stated maximum selling price (within the meaning of Treasury Regulations Section 15A.453-1(c)(2)), then the amount of the consideration received in connection with such Exchange and the aggregate Tax Benefit Payments to such TRA Party in respect of such Exchange (other than
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amounts accounted for as interest under the Code) shall not exceed such stated maximum selling price.
(b) A “Tax Benefit Payment” in respect of a TRA Party for a Taxable Year means an amount, not less than zero, equal to the Net Tax Benefit that is Attributable to such TRA Party and the Interest Amount with respect thereto. For the avoidance of doubt, for Tax purposes, a portion of the Interest Amount shall be treated as interest pursuant to Section 483 of the Code and a portion of the Interest Amount shall be treated as additional consideration in the applicable transaction, unless otherwise required by law. Subject to Section 3.3, the “Net Tax Benefit” for a Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year, over the total amount of payments previously made under the first sentence of Section 3.1(a) (excluding payments attributable to Interest Amounts); provided, for the avoidance of doubt, that no such recipient shall be required to return any portion of any previously made Tax Benefit Payment. The “Interest Amount” shall equal the interest on the Net Tax Benefit calculated at the Agreed Rate from the due date (without extensions) for filing IRS Form 1120 (or any successor form) of the Corporate Taxpayer with respect to Taxes for such Taxable Year until the payment date under Section 3.1(a).
Section 3.2. No Duplicative Payments. It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. The provisions of this Agreement shall be construed in the appropriate manner to ensure such intentions are realized.
Section 3.3. Pro Rata Payments. Notwithstanding anything in Section 3.1 to the contrary, to the extent that the aggregate Realized Tax Benefit of the Corporate Taxpayer with respect to the Tax Attributes is limited in a particular Taxable Year because the Corporate Taxpayer does not have sufficient taxable income, the Net Tax Benefit for that Taxable Year shall be allocated among all parties then-eligible to receive Tax Benefit Payments under this Agreement in proportion to the amounts of Net Tax Benefit for that Taxable Year, respectively, that would have been Attributable to each TRA Party if the Corporate Taxpayer had sufficient taxable income so that there were no such limitation; provided, that, for the avoidance of doubt, for purposes of allocating among the TRA Parties the aggregate Net Tax Benefit with respect to any Taxable Year, the operation of this Section 3.3 with respect to any prior Taxable Years shall be taken into account so as to eliminate as quickly as possible, proportionately, the difference with respect to each TRA Party between (i) the aggregate Net Tax Benefit that would be Attributable to such TRA Party under Section 3.1(b) with respect to each such Taxable Year (on a cumulative basis) if the Corporate Taxpayer had sufficient taxable income so that there were no limitation under this clause (a) and (ii) the actual aggregate Net Tax Benefit deemed Attributable to such TRA Party under Section 3.1(b) with respect to each such Taxable Year (on a cumulative basis) by operation of this clause (a). Consistent with the foregoing, the Tax Benefit Schedule for a given Taxable Year shall reflect the operation of this Section 3.3 in respect of previous Taxable Years, with Pre-Merger NOLs, Blocker Transferred Basis, Basis Adjustments and Imputed Interest described in such Tax Benefit Schedule that are attributable to a TRA Party being adjusted to reflect payments received in respect of such Pre-Merger NOLs, Blocker Transferred Basis, Basis Adjustments and Imputed Interest (the intention of the parties being to avoid duplicative payments and maintain records sufficient to allow the Corporate Taxpayer to allocate
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Tax Benefit Payments consistent with the terms of this Section 3.3). For the avoidance of doubt, the determination of whether Tax Benefit Payments are held-back pursuant to Section 3.6, shall not be relevant in the determination of whether a Net Tax Benefit is eligible to be allocated to the relevant TRA Party for purposes of this Section 3.3.
Section 3.4. Payment Ordering. If for any reason the Corporate Taxpayer does not fully satisfy its payment obligations to make all Tax Benefit Payments due under this Agreement in respect of a particular Taxable Year, then the Corporate Taxpayer and the TRA Parties agree that (i) Tax Benefit Payments for such Taxable Year shall be allocated to all parties eligible to receive Tax Benefit Payments under this Agreement in such Taxable Year in proportion to the amounts of Tax Benefit Payments, respectively, that would have been made to each TRA Party if the Corporate Taxpayer had sufficient cash available to make such Tax Benefit Payments and (ii) no Tax Benefit Payments shall be made in respect of any Taxable Year until all Tax Benefit Payments to all TRA Parties in respect of all prior Taxable Years have been made in full; provided, however, that any payments that were previously held by the Corporate Taxpayer on behalf of a TRA Party and have now become due and payable pursuant to Section 3.5 or Section 3.6 shall be made prior to any other Tax Benefit Payments.
ARTICLE IV
TERMINATION
Section 4.1. Early Termination of Agreement; Breach of Agreement.
(a) The Corporate Taxpayer may terminate this Agreement with respect to all amounts payable to the TRA Parties and with respect to all of the Units held by the TRA Parties at any time by paying to each TRA Party the Early Termination Payment in respect of such TRA Party; provided, however, that this Agreement shall only terminate upon the receipt of the Early Termination Payment by all TRA Parties, and provided, further, that the Corporate Taxpayer may withdraw any notice to execute its termination rights under this Section 4.1(a) prior to the time at which any Early Termination Payment has been paid. Upon payment of the Early Termination Payment in respect of each TRA Party by the Corporate Taxpayer the Corporate Taxpayer shall have no further payment obligations under this Agreement, other than for any (a) Tax Benefit Payments due and payable and that remain unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the Early Termination Payment). If an Exchange occurs after the Corporate Taxpayer makes all of the required Early Termination Payments, the Corporate Taxpayer shall have no obligations under this Agreement with respect to such Exchange.
(b) In the event that the Corporate Taxpayer (1) breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise or (2)(A) shall commence any case, proceeding or other action (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
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reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate a bankruptcy or insolvency, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts or (ii) seeking an appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or it shall make a general assignment for the benefit of creditors or (B) there shall be commenced against the Corporate Taxpayer any case, proceeding or other action of the nature referred to in clause (A) above that remains undismissed or undischarged for a period of sixty (60) calendar days, unless otherwise waived or directed in writing by the TRA Party Representative, all obligations hereunder shall be automatically accelerated and shall be immediately due and payable, and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but not be limited to, (x) the Early Termination Payments calculated as if an Early Termination Notice had been delivered on the date of a breach, (y) any Tax Benefit Payment due and payable and that remains unpaid as of the date of a breach, and (z) any Tax Benefit Payment in respect of any TRA Party due for the Taxable Year ending with or including the date of a breach; provided, that procedures similar to the procedures of Section 4.2 shall apply with respect to the determination of the amount payable by the Corporate Taxpayer pursuant to this sentence. Notwithstanding the foregoing, in the event that the Corporate Taxpayer breaches this Agreement, to the fullest extent permitted by applicable law, each TRA Party shall be entitled to elect to receive the amounts set forth in clauses (x), (y) and (z) above or to seek specific performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this Agreement within three (3) months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three (3) months of the date such payment is due. Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of a material obligation of this Agreement if the Corporate Taxpayer fails to make any Tax Benefit Payment when due to the extent that the Corporate Taxpayer has insufficient funds to make such payment; provided, that the interest provisions of Section 5.2 shall apply to such late payment (unless the Corporate Taxpayer does not have sufficient funds to make such payment as a result of limitations imposed by any Senior Obligations, in which case Section 5.2 shall apply, but the Default Rate shall be replaced by the Agreed Rate).
(c) In the event of a Change of Control, unless otherwise waived in writing by the TRA Party Representative, all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such Change of Control and utilizing the Valuation Assumptions by substituting in each case the terms “the closing date of a Change of Control” in each place where the phrase “Early Termination Date” appears. Such obligations shall include (1) the Early Termination Payments calculated as if the Early Termination Date is the date of such Change of Control, (2) any Tax Benefit Payment due and payable and that remains unpaid as of the date of such Change of Control, and (3) any Tax Benefit Payment in respect of any TRA Party due for any Taxable Year ending prior to, with or including the date of such Change of Control (except to the extent any amounts described in clause (2) or (3) are included in the Early Termination Payment). For the avoidance of doubt, Sections 4.2 and 4.3 shall apply to a Change of Control, mutatis mutandis.
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Section 4.2. Early Termination Notice. If the Corporate Taxpayer chooses to exercise its right of early termination under Section 4.1(a) above, the Corporate Taxpayer shall deliver to each TRA Party and to the TRA Party Representative notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying the Corporate Taxpayer’s intention to exercise such right under either clause (i) or (ii) thereof and showing in reasonable detail the calculation of the Early Termination Payment(s) due for each relevant TRA Party. Each Early Termination Schedule shall become final and binding on all parties thirty (30) calendar days from the first date on which the TRA Party Representative is treated as having received such Schedule or amendment thereto under Section 7.1 unless the TRA Party Representative (i) within thirty (30) calendar days after such date provides the Corporate Taxpayer with notice of a material objection to such Schedule made in good faith (“Material Objection Notice”) or (ii) provides a written waiver of such right of a Material Objection Notice within the period described in clause (i) above, in which case such Schedule becomes binding on the date the waiver is received by the Corporate Taxpayer. If the Corporate Taxpayer and the TRA Party Representative, for any reason, are unable to successfully resolve the issues raised in such notice within thirty (30) calendar days after receipt by the Corporate Taxpayer of the Material Objection Notice, the Corporate Taxpayer and the TRA Party Representative shall employ the Reconciliation Procedures in which case such Schedule becomes binding ten (10) calendar days after the conclusion of the Reconciliation Procedures.
Section 4.3. Payment upon Early Termination.
(a) Within three (3) calendar days after an Early Termination Effective Date, the Corporate Taxpayer shall pay to each relevant TRA Party an amount equal to the Early Termination Payment in respect of such TRA Party. Such payment shall be made by wire transfer of immediately available funds to a bank account or accounts designated by such TRA Party or as otherwise agreed by the Corporate Taxpayer and such TRA Party or, in the absence of such designation or agreement, by check mailed to the last mailing address provided by such TRA Party to the Corporate Taxpayer.
(b) “Early Termination Payment” in respect of a TRA Party shall equal the present value, discounted at the Early Termination Rate as of the applicable Early Termination Effective Date, of all Tax Benefit Payments in respect of such TRA Party that would be required to be paid by the Corporate Taxpayer beginning from the Early Termination Date and assuming that the Valuation Assumptions in respect of such TRA Party are applied.
ARTICLE V
SUBORDINATION AND LATE PAYMENTS
Section 5.1. Subordination. Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment required to be made by the Corporate Taxpayer to the TRA Parties under this Agreement shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporate Taxpayer and its Subsidiaries (“Senior Obligations”) and shall rank pari passu in right of payment with all current or future unsecured obligations of the Corporate Taxpayer that are not Senior Obligations. To the extent that any
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payment under this Agreement is not permitted to be made at the time payment is due as a result of this Section 5.1 and the terms of agreements governing Senior Obligations, such payment obligation nevertheless shall accrue for the benefit of TRA Parties and the Corporate Taxpayer shall make such payments at the first opportunity that such payments are permitted to be made in accordance with the terms of the Senior Obligations. Notwithstanding any other provision of this Agreement to the contrary, to the extent that the Corporate Taxpayer or any of its Affiliates enters into future Tax receivable or other similar agreements (“Future TRAs”), the Corporate Taxpayer shall ensure that the terms of any such Future TRA shall provide that the Tax Attributes subject to this Agreement are considered senior in priority to any Tax attributes subject to any such Future TRA for purposes of calculating the amount and timing of payments under any such Future TRA. The Corporate Taxpayer shall use commercially reasonable efforts not to enter into any agreement if a principal purpose of such agreement is to restrict in any material respect the amounts payable hereunder.
Section 5.2. Late Payments by the Corporate Taxpayer. Subject to the proviso in the last sentence of Section 4.1(b), the amount of all or any portion of any Tax Benefit Payment or Early Termination Payment not made to the TRA Parties when due under the terms of this Agreement, whether as a result of Section 5.1 or otherwise, shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such Tax Benefit Payment or Early Termination Payment was first due and payable to the date of actual payment.
ARTICLE VI
NO DISPUTES; CONSISTENCY; COOPERATION
Section 6.1. Participation in the Corporate Taxpayer’s and OpCo’s Tax Matters. Except as otherwise provided herein, and except as provided in the OpCo Agreement, the Corporate Taxpayer shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporate Taxpayer and OpCo, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, the Corporate Taxpayer shall notify the TRA Party Representative of, and keep the TRA Party Representative reasonably informed with respect to, the portion of any audit of the Corporate Taxpayer and OpCo by a Taxing Authority the outcome of which is reasonably expected to materially affect the rights and obligations of a TRA Party under this Agreement, and shall provide to the TRA Party Representative reasonable opportunity to provide information and other input to the Corporate Taxpayer, OpCo and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporate Taxpayer and OpCo shall not be required to take any action that is inconsistent with any provision of the OpCo Agreement; provided, further, that the Corporate Taxpayer shall not settle or fail to contest any issue pertaining to Taxes or Tax matters where such settlement or failure to contest would reasonably be expected to materially adversely affect the TRA Parties’ rights and obligations under this Agreement without the written consent of the TRA Party Representative, such consent not to be unreasonably withheld, conditioned, or delayed.
Section 6.2. Consistency. The Corporate Taxpayer and the TRA Parties agree to report and cause to be reported for all purposes, including U.S. federal, state and local Tax purposes and financial reporting purposes, all Tax-related items (including, without limitation, the Basis
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Adjustments and each Tax Benefit Payment) in a manner consistent with that contemplated by this Agreement or specified by the Corporate Taxpayer in any Schedule required to be provided by or on behalf of the Corporate Taxpayer under this Agreement unless otherwise required by law. Any dispute concerning such advice shall be subject to the terms of Section 7.9.
Section 6.3. Cooperation. Each of the TRA Parties shall (a) furnish to the Corporate Taxpayer in a timely manner such information, documents and other materials as the Corporate Taxpayer may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the Corporate Taxpayer and its representatives to provide explanations of documents and materials and such other information as the Corporate Taxpayer or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the Corporate Taxpayer shall reimburse each such TRA Party for any reasonable and documented out-of-pocket costs and expenses incurred pursuant to this Section 6.3. Upon the request of any TRA Party, the Corporate Taxpayer shall cooperate in taking any action reasonably requested by such TRA Party in connection with its tax or financial reporting and/or the consummation of any assignment or transfer of any of its rights and/or obligations under this Agreement, including without limitation, providing any information or executing any documentation. The Corporate Taxpayer shall not, without the prior written consent of the TRA Party Representative, take any action that has the primary purpose of circumventing the achievement or attainment of any Tax Benefit Payment or Early Termination Payment under this Agreement.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile or email with confirmation of transmission by the transmitting equipment or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
If to the Corporate Taxpayer, to:
European Wax Center, Inc.
5830 Granite Parkway, 3rd Floor
Plano, Texas 75024
Attention: Gavin O’Conner, Chief Legal Officer
Email: gavin.oconnor@myewc.com
If to the TRA Parties, to the respective addresses, fax numbers and email addresses set forth in the records of OpCo.
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Any party may change its address, fax number or email by giving the other party written notice of its new address, fax number or email in the manner set forth above.
Section 7.2. Counterparts. This Agreement may be executed in one or more counterparts (including counterparts transmitted electronically in portable document format (pdf)), all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. Electronic signatures shall be a valid method of executing this Agreement.
Section 7.3. Entire Agreement; No Third Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 7.4. Governing Law. The laws of the State of Delaware shall govern (a) all proceedings, claims or matters related to or arising from this Agreement (including any tort or non-contractual claims) and (b) any questions concerning the construction, interpretation, validity and enforceability of this Agreement, and the performance of the obligations imposed by this Agreement, in each case without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 7.5. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.
Section 7.6. Successors; Assignment; Amendments; Waivers.
(a) Each TRA Party may assign all or any portion of its rights under this Agreement to any Person as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, substantially in form of Exhibit A hereto, agreeing to become a TRA Party for all purposes of this Agreement, except as otherwise provided in such joinder.
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(b) No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Corporate Taxpayer and by the TRA Parties who would be entitled to receive at least two-thirds of the total amount of the Early Termination Payments payable to all TRA Parties hereunder if the Corporate Taxpayer had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any TRA Party pursuant to this Agreement since the date of such most recent Exchange); provided, that no such amendment shall be effective if such amendment will have a disproportionate effect on the payments one or more TRA Parties receive under this Agreement unless such amendment is consented in writing by such TRA Parties disproportionately affected who would be entitled to receive at least two-thirds of the total amount of the Early Termination Payments payable to all TRA Parties disproportionately affected hereunder if the Corporate Taxpayer had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any TRA Party pursuant to this Agreement since the date of such most recent Exchange). No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.
(c) All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Corporate Taxpayer shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporate Taxpayer, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporate Taxpayer would be required to perform if no such succession had taken place.
Section 7.7. Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
Section 7.8. Resolution of Disputes.
(a) Any and all disputes which are not governed by Section 7.9 and cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in the state of Delaware in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the Dispute fail to agree on the selection of an arbitrator within thirty (30) calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer admitted to the practice of law in the State of Delaware and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.
(b) Notwithstanding the provisions of paragraph (a), the Corporate Taxpayer may bring an action or special proceeding in any court of competent jurisdiction for the purpose
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of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each TRA Party (i) expressly consents to the application of paragraph (c) of this Section 7.8 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Corporate Taxpayer as agent of such TRA Party for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise the TRA Party of any such service of process, shall be deemed in every respect effective service of process upon the TRA Party in any such action or proceeding.
(c) (i) EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN THE STATE OF DELAWARE FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.8, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and (ii) The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in the preceding paragraph of this Section 7.8 and such parties agree not to plead or claim the same.
Section 7.9. Reconciliation. In the event that the Corporate Taxpayer and the TRA Party Representative are unable to resolve a disagreement with respect to the matters governed by Sections 2.3, 4.2 and 6.2 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner or principal in a nationally recognized accounting or law firm, and unless the Corporate Taxpayer and the TRA Party Representative agree otherwise, the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with the Corporate Taxpayer or the TRA Party Representative or other actual or potential conflict of interest. If the Corporate Taxpayer and the TRA Party Representative are unable to agree on an Expert within fifteen (15) calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, then the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise. The Expert shall resolve any matter relating to the TRA Party’s Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on the date prescribed by this Agreement and such Tax
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Return may be filed as prepared by the Corporate Taxpayer, subject to adjustment or amendment upon resolution. The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by the Corporate Taxpayer except as provided in the next sentence. The Corporate Taxpayer and the TRA Party Representative shall bear their own costs and expenses of such proceeding, unless (i) the Expert adopts the TRA Party Representative’s position, in which case the Corporate Taxpayer shall reimburse the TRA Party Representative for any reasonable out-of-pocket costs and expenses in such proceeding, or (ii) the Expert adopts the Corporate Taxpayer’s position, in which case the TRA Party Representative shall reimburse the Corporate Taxpayer for any reasonable out-of-pocket costs and expenses in such proceeding. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.9 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on the Corporate Taxpayer and each of the TRA Parties and may be entered and enforced in any court having jurisdiction.
Section 7.10. Withholding. The Corporate Taxpayer shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporate Taxpayer is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporate Taxpayer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such withholding was made. To the extent that any payment pursuant to this Agreement is not reduced by such deductions or withholdings, such recipient shall indemnify the applicable withholding agent for any amounts imposed by any Taxing Authority together with any costs and expenses related thereto. Each TRA Party shall promptly provide the Corporate Taxpayer, OpCo or other applicable withholding agent with any applicable Tax forms and certifications (including IRS Form W-9 or the applicable version of IRS Form W-8) reasonably requested, in connection with determining whether any such deductions and withholdings are required under the Code or any provision of U.S. state, local or foreign Tax law.
Section 7.11. Admission of the Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets.
(a) If the Corporate Taxpayer is or becomes a member of an affiliated or consolidated group of corporations that files a consolidated income Tax Return pursuant to Sections 1501 et seq. of the Code or any corresponding provisions of state or local law, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated taxable income of the group as a whole (including, for the avoidance of doubt, by treating any direct or indirect transfer of one or more Reference Assets or Common Units to a corporation with which the Corporate Taxpayer files a consolidated Tax Return pursuant to Section 1501 of the Code as an Exchange which gives rise to a Basis Adjustment).
(b) If the Corporate Taxpayer (or any member of a group described in Section 7.11(a)) transfers one or more Reference Assets to a Person treated as a corporation for U.S.
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federal income tax purposes (with which, in the case of PubCo, PubCo does not file a consolidated Tax Return pursuant to Section 1501 of the Code), such transferor, for purposes of calculating the amount of any Tax Benefits Payment due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such transfer. The consideration deemed to be received by the Corporate Taxpayer, shall be equal to the fair market value of the transferred asset plus the amount of debt to which such asset is subject, in the case of a transfer of an encumbered asset. For purposes of this Section 7.1(b), a transfer of a partnership interest shall be treated as a transfer of the transferring partner’s applicable share of each of the assets and liabilities of that partnership. Notwithstanding anything to the contrary set forth herein, if the Corporate Taxpayer or any member of a group described in Section 7.1(a) transfers its assets pursuant to a transaction that qualifies as a “reorganization” (within the meaning of Section 368(a) of the Code) in which such entity does not survive or pursuant to any other transaction to which Section 381(a) of the Code applies (other than any such reorganization or any such other transaction, in each case, pursuant to which such entity transfers assets to a corporation with which the Corporate Taxpayer or any member of the group described in Section 7.1(a) (other than any such member being transferred in such reorganization or other transaction) does not file a consolidated Tax Return pursuant to Section 1501 of the Code), the transfer will not cause such entity to be treated as having transferred any assets to a corporation (or a Person classified as a corporation for U.S. federal income tax purposes) pursuant to this Section 7.1(b).
Section 7.12. Confidentiality.
(a) Subject to the last sentence of Section 6.3, each TRA Party and each of their assignees acknowledge and agree that the information of the Corporate Taxpayer is confidential and, except in the course of performing any duties as necessary for the Corporate Taxpayer and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Corporate Taxpayer and its Affiliates and successors, concerning OpCo and its Affiliates and successors or the members, learned by the TRA Party heretofore or hereafter. This Section 7.12 shall not apply to (i) any information that has been made publicly available by the Corporate Taxpayer or any of its Affiliates, becomes public knowledge (except as a result of an act of the TRA Party in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for the TRA Party to prepare and file its Tax Returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such returns. Notwithstanding anything to the contrary herein, each TRA Party and each of its assignees (and each employee, representative or other agent of the TRA Party or its assignees, as applicable) may disclose to any and all Persons, without limitation of any kind, the Tax treatment and Tax structure of the Corporate Taxpayer, OpCo and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other Tax analyses) that are provided to the TRA Party relating to such Tax treatment and Tax structure.
(b) If a TRA Party or an assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, the Corporate Taxpayer shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other
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security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporate Taxpayer or any of its Subsidiaries or the TRA Parties and the accounts and funds managed by the Corporate Taxpayer and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.
Section 7.13. Change in Law. Notwithstanding anything herein to the contrary, if, in connection with an actual or proposed change in law, a TRA Party reasonably believes that the existence of this Agreement could cause income (other than income arising from receipt of a payment under this Agreement) recognized by the TRA Party upon any Exchange by such TRA Party to be treated as ordinary income rather than capital gain (or otherwise taxed at ordinary income rates) for U.S. federal income Tax purposes or would have other material adverse Tax consequences to such TRA Party, then at the election of such TRA Party and to the extent specified by such TRA Party, this Agreement (i) shall cease to have further effect with respect to such TRA Party, (ii) shall not apply to an Exchange by such TRA Party occurring after a date specified by such TRA Party, or (iii) shall otherwise be amended in a manner determined by such TRA Party and PubCo as it relates to such TRA Party, provided, that such amendment shall not result in an increase in payments under this Agreement at any time as compared to the amounts and times of payments that would have been due in the absence of such amendment.
Section 7.14. TRA Party Representative. By executing this Agreement, each of the TRA Parties shall be deemed to have irrevocably constituted the TRA Party Representative as his, her or its agent and attorney in fact with full power of substitution to act from and after the date hereof and to do any and all things and execute any and all documents on behalf of such TRA Parties which may be necessary, convenient or appropriate to facilitate any matters under this Agreement, including but not limited to: (i) execution of the documents and certificates required pursuant to this Agreement; (ii) except to the extent specifically provided in this Agreement receipt and forwarding of notices and communications pursuant to this Agreement; (iii) administration of the provisions of this Agreement; (iv) any and all consents, waivers, amendments or modifications deemed by the TRA Party Representative, in its sole and absolute discretion, to be necessary or appropriate under this Agreement and the execution or delivery of any documents that may be necessary or appropriate in connection therewith; (v) amending this Agreement or any of the instruments to be delivered to the Corporate Taxpayer pursuant to this Agreement; (vi) taking actions the TRA Party Representative is expressly authorized to take pursuant to the other provisions of this Agreement; (vii) negotiating and compromising, on behalf of such TRA Parties, any dispute that may arise under, and exercising or refraining from exercising any remedies available under, this Agreement or any other agreement contemplated hereby and executing, on behalf of such TRA Parties, any settlement agreement, release or other document with respect to such dispute or remedy; and (viii) engaging attorneys, accountants, agents or consultants on behalf of such TRA Parties in connection with this Agreement or any other agreement contemplated hereby and paying any fees related thereto. The TRA Party Representative may resign upon thirty (30) days’ written notice to the Corporate Taxpayer. All reasonable, documented out-of-pocket costs and expenses incurred by the TRA Party Representative in its capacity as such shall be promptly reimbursed by the Corporate Taxpayer upon invoice and reasonable support therefor by the TRA Party Representative. To the fullest extent permitted by law, none of the TRA Party Representative, any of its Affiliates, or any of the TRA Party Representative’s or Affiliate’s directors, officers, employees or other agents (each
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a “Covered Person”) shall be liable, responsible or accountable in damages or otherwise to any TRA Party, OpCo or the Corporate Taxpayer for damages arising from any action taken or omitted to be taken by the TRA Party Representative or any other Person with respect to OpCo or the Corporate Taxpayer, except in the case of any action or omission which constitutes, with respect to such Person, willful misconduct or fraud. Each of the Covered Persons may consult with legal counsel, accountants, and other experts selected by it, and any act or omission suffered or taken by it on behalf of OpCo or the Corporate Taxpayer or in furtherance of the interests of OpCo or the Corporate Taxpayer in good faith in reliance upon and in accordance with the advice of such counsel, accountants, or other experts shall create a rebuttable presumption of the good faith and due care of such Covered Person with respect to such act or omission; provided, that such counsel, accountants, or other experts were selected with reasonable care. Each of the Covered Persons may rely in good faith upon, and shall have no liability to OpCo, the Corporate Taxpayer or the TRA Parties for acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties.
Section 7.15. Partnership Agreement. This Agreement shall be treated as part of the partnership agreement of OpCo as described in Section 761(c) of the Code, and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.
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IN WITNESS WHEREOF, PubCo and each TRA Party have duly executed this Agreement as of the date first written above.
PubCo:
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
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Exhibit 10.6
TRA Parties:
GENERAL ATLANTIC PARTNERS AIV (EW), L.P.
By: General Atlantic GenPar (EW), L.P.,
its general partner
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GA AIV-1 B INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
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Exhibit 10.6
EWC MANAGEMENT HOLDCO, LLC
By: General Atlantic (SPV) GP, LLC,
its manager
By: General Atlantic, L.P.,
its sole member
By: /s/ J. Frank Brown
Name: J. Frank Brown
Title: Managing Director
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
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Exhibit 10.6
/s/ Sanjeev Khanna
Name: Sanjeev Khanna
/s/ Govind Agrawal
Name: Govind Agrawal
EWC HOLDINGS, INC.
By: /s/ David Coba
Name: David Coba
Title: President
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Exhibit 10.6
Exhibit A
Form of Joinder
This JOINDER (this “Joinder”) to the Tax Receivable Agreement (as defined below), is by and among European Wax Center, Inc., a Delaware corporation (including any successor corporation, “PubCo”), ______________________ (“Transferor”) and ______________________ (“Permitted Transferee”).
WHEREAS, on ______________________, Permitted Transferee shall acquire ______________________ percent of the Transferor’s right to receive payments that may become due and payable under the Tax Receivable Agreement (as defined below) (the “Acquired Interests”) from Transferor (the “Acquisition”); and
WHEREAS, Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.6(a) of the Tax Receivable Agreement, dated as of [ ], 2021, between PubCo and the TRA Parties (as defined therein) (the “Tax Receivable Agreement”).
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1.1 Definitions. To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the respective meanings set forth in the Tax Receivable Agreement.
Section 1.2 Acquisition. For good and valuable consideration, the sufficiency of which is hereby acknowledged by the Transferor and the Permitted Transferee, the Transferor hereby transfers and assigns absolutely to the Permitted Transferee all of the Acquired Interests.
Section 1.3 Joinder. Permitted Transferee hereby acknowledges and agrees (i) that it has received and read the Tax Receivable Agreement, (ii) that the Permitted Transferee is acquiring the Acquired Interests in accordance with and subject to the terms and conditions of the Tax Receivable Agreement and (iii) to become a “TRA Party” (as defined in the Tax Receivable Agreement) for all purposes of the Tax Receivable Agreement.
Section 1.4 Notice. Any notice, request, consent, claim, demand, approval, waiver or other communication hereunder to Permitted Transferee shall be delivered or sent to Permitted Transferee at the address set forth on the signature page hereto in accordance with Section 7.1 of the Tax Receivable Agreement.
Section 1.5 Governing Law. This Joinder shall be governed by and construed in accordance with the law of the State of Delaware, without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State.
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Exhibit 10.6
IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted Transferee as of the date first above written.
EUROPEAN WAX CENTER, INC.
By:
Name:
Title:
[TRANSFEROR]
By:
Name:
Title:
[PERMITTED TRANSFEREE]
By:
Name:
Title:
Address for notices:
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Exhibit 10.7
FIFTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
EWC VENTURES, LLC
(a Delaware limited liability company)
This FIFTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of August 4, 2021 (this “Agreement”), OF EWC VENTURES, LLC (the “Company”) by and among the Company and the Persons recorded as Members on the Register of Members of the Company, amends and restates the Fourth Amended and Restated Limited Liability Company Agreement of the Company, dated as of June 15, 2020 and effective as of May 7, 2020 (the “Prior Agreement”). Certain defined terms as used herein shall have the meanings set forth in Article 11.
BACKGROUND
WHEREAS, on December 12, 2012, (i) the Company was formed by filing a Certificate of Formation (the “Certificate of Formation”) with the Secretary of State of the State of Delaware in accordance with the provisions of the Delaware Limited Liability Company Act, as heretofore or hereafter amended (the “Act”), and (ii) the original members of the Company entered into a written agreement pursuant to the Act governing the affairs of the Company and the conduct of its business (the “Initial Agreement”);
WHEREAS, on March 22, 2013, the Company and all then-current members amended and restated the Initial Agreement by entering into that certain Amended and Restated Limited Liability Company Agreement (as amended June 26, 2013, September 18, 2013, June 25, 2014 and October 20, 2014, the “First A&R Agreement”);
WHEREAS, on September 25, 2018, the Company amended and restated the First A&R Agreement by entering into that certain Second Amended and Restated Limited Liability Company Agreement (the “Second A&R Agreement”);
WHEREAS, on May 7, 2020 the Board of Managers of the Company amended and restated the Second A&R Agreement by approving that certain Third Amended and Restated Limited Liability Company Agreement (the “Third A&R Agreement”);
WHEREAS, on June 15, 2020, the Board of Managers of the Company amended and restated the Third A&R Agreement by approving the Prior Agreement, effective as of May 7, 2020;
WHEREAS, pursuant to the terms of the Reorganization Agreement, dated as of the date hereof (the “Reorganization Agreement”), by and among the Company, European Wax Center, Inc. (“Pubco”) and the other Persons identified therein, the parties thereto have agreed to
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consummate the reorganization of the Company and to take the other actions contemplated in the Reorganization Agreement;
WHEREAS, in accordance with Section 13.1 of the Prior Agreement, the requisite Members desire to amend and restate the Prior Agreement in its entirety as set forth in this Agreement and, by their execution and delivery of this Agreement and the Management Holdco Equity Agreements, as applicable, such requisite Members have evidenced their authorization and approval of the terms of this Agreement; and
WHEREAS, as of the date hereof, the Board (as defined in the Prior Agreement) has adopted and approved the terms of this Agreement and has authorized the Company to enter into and perform its obligations under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises of the parties hereinafter set forth and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members agree as follows:
FORMATION, PURPOSE AND DEFINITIONS
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UNITS; CAPITAL CONTRIBUTIONS;
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ALLOCATION OF PROFITS AND LOSSES
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DISTRIBUTIONS
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MANAGEMENT; GOVERNANCE
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TRANSFER OF UNITS
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CERTAIN OTHER AGREEMENTS
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DISSOLUTION AND LIQUIDATION
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ACCOUNTING, FISCAL AND TAX MATTERS
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MISCELLANEOUS
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“THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE PROVISIONS OF THE LIMITED LIABILITY COMPANY AGREEMENT OF THE COMPANY, AS AMENDED FROM TIME TO TIME (A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SECURITIES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL OF THE PROVISIONS OF THE AFORESAID LIMITED LIABILITY COMPANY AGREEMENT.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT AND LAWS AND EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE AFORESAID LIMITED LIABILITY COMPANY AGREEMENT.
THIS CERTIFICATE EVIDENCES LIMITED LIABILITY COMPANY INTERESTS IN EWC VENTURES, LLC, A DELAWARE LIMITED LIABILITY COMPANY, AND SHALL BE A SECURITY FOR PURPOSES OF ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE IN EFFECT IN THE STATE OF DELAWARE AND THE UNIFORM COMMERCIAL CODE OF ANY OTHER RELEVANT JURISDICTION.”
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Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attn: Matthew W. Abbott
Fax: 212-492-0403
Email: mabbott@paulweiss.com
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attn: Matthew W. Abbott
Fax: 212-492-0403
Email: mabbott@paulweiss.com
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DEFINITIONS
“Act” has the meaning set forth in the background recitals.
“Affiliate” means with respect to any Person, (i) another Person directly or indirectly controlling, controlled by, or under common control with such Person or (ii) an officer, director, manager, member, partner, or member of the immediate family of such Person. Notwithstanding the foregoing, no GA Member shall be considered an Affiliate of any portfolio company in which the direct or indirect equityholders of such GA Member or any of their affiliated investment funds have made a debt or equity investment (or vice versa).
“Affiliated Transferee” (i) in the case of any Member that is an individual, any transferee of Units of such Member that is (a) a Family Member of such Member, (b) a trust, family-partnership or estate-planning vehicle for the benefit of such Member and/or any of such Member’s Family Members, (c) a charitable institution controlled by such Member and/or such Member’s Family Members, (d) an individual mandated under a qualified domestic relations order, (e) a legal or personal representative of such Member and/or such Member’s Family Member in the event of the death or disability thereof, or (f) otherwise an Affiliate of such Member or (ii) in the case of any Member that is a corporation, partnership, limited liability company or other entity, any transferee of Units of such Member that is (w) a Family Member of the individual that controls a majority of the voting or economic interest in such Member, (x) a trust, family-partnership or estate-planning vehicle for the benefit of such individual and/or any of its Family Members, (y) otherwise an Affiliate of such Member or (z) in the case of a GA Member, any investment fund managed, sponsored, controlled or advised by, or managed accounts of, General Atlantic LLC and any successor thereto or any of its Affiliates.
“Agreement” has the meaning set forth in the preamble.
“Annual Financial Statements” has the meaning set forth in Section 9.5(a).
“Assumed Income Tax Rate” means the highest effective combined marginal U.S. federal, state and local income tax rate applicable to an individual or corporation (whichever is higher) that is resident in New York City for such taxable year (taking into account the net investment income tax under Section 1411 of the Code, to the extent applicable), taking into account the character (long-term capital gain, qualified dividend income, tax exempt income, etc.) of the taxable income in question and the deductibility of state and local income taxes as applicable at the time for U.S. federal income tax purposes (and any limitations thereon, including pursuant
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to Section 68 of the Code); provided, that, for administrative convenience, it shall be assumed that no portion of any state and local taxes shall be deductible for so long as the limitation set forth in Section 164(b)(6)(B) of the Code remains applicable.
“Business Day” means any day other than Saturday, Sunday or a day on which commercial banks in New York, New York are authorized or required by law to close. If any period expires on a day which is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding Business Day.
“Call Member” has the meaning set forth in Section 6.5(a).
“Call Notice” has the meaning set forth in Section 6.5(a).
“Call Paired Interests” has the meaning set forth in Section 6.5(a).
“Call Price” has the meaning set forth in Section 6.5(b).
“Capital Account” has the meaning set forth in Section 3.1.
“Capital Contribution” means the amounts (in cash, property or services) actually contributed to the capital of the Company by any Member.
“Certificate of Formation” has the meaning set forth in the background recitals.
“Class A Common Stock” means Class A Common Stock, $0.00001 par value per share, of Pubco.
“Class A Units” means Class A Units (as such term was defined in the Prior Agreement), all of which have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.
“Class B Common Stock” means Class B Common Stock, $0.00001 par value per share, of Pubco.
“Class B Units” means Class B Units (as such term was defined in the Prior Agreement), all of which have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.
“Class C Units” means Class C Units (as such term was defined in the Prior Agreement), all of which have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.
“Class D Units” means Class D Units (as such term was defined in the Prior Agreement), all of which have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.
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“Code” means the Internal Revenue Code of 1986, as amended.
“Common Unit” means a non-voting common limited liability interest in the Company.
“Company” has the meaning set forth in the preamble.
“Company Group” has the meaning set forth in Section 1.6.
“Controlled Entities” has the meaning set forth in Section 5.7(c).
“Corporation Law” means the General Corporation Law of the State of Delaware, as amended from time to time.
“Depreciation” means, for each fiscal year or other period, an amount equal to the depreciation, amortization, depletion or other cost recovery deduction allowable with respect to an asset for such year or other period for federal income tax purposes, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, depletion or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member.
“Designated Person” has the meaning set forth in Section 5.4.
“Economic Pubco Security” has the meaning set forth in Section 7.1(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Agreement” means the Exchange Agreement, dated as of the date hereof, by and among Pubco, the Company and the holders of Common Units and shares of Class B Common Stock from time to time party thereto.
“Exempt Income” means any income and gain of the Company that is exempt from federal income tax.
“Expenses” has the meaning set forth in Section 5.7(c).
“Family Member” means any immediate family member of an individual, including parents, grandparents, lineal descendants, siblings or spouse of such individual, and lineal descendants of siblings of such individual or of such individual’s spouse.
“Final Distribution” has the meaning set forth in Section 8.2(a)(iii) hereof.
“First A&R Agreement” has the meaning set forth in the background recitals.
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“GA Member” means any of (i) GAPCO AIV Interholdco (EW), L.P., (ii) General Atlantic Partners AIV (EW), L.P. or (iii) any Affiliated Transferee to whom any of them Transfers any of the Common Units.
“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, and statements and pronouncements of the Financial Accounting Standards Board, that are applicable to the circumstances as of the date of determination, consistently applied.
“Gross Asset Value” means with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:
“Holdco Common Units” means common limited liability company interests in Management Holdco.
“Hypothetical Liquidation Value” has the meaning set forth in Section 2.1(a).
“Incentive Plan” means the Equity Incentive Plan of Management Holdco, as amended, restated, supplemented or otherwise modified from time to time, pursuant to which Class B Units of Management Holdco may be issued.
“Income Tax Liability” means, an amount equal to the excess of (A) the product of (i) the net taxable income allocable (or in the case of estimated payments, estimated net taxable income allocable) to the Member with the greatest proportionate allocation of taxable income
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attributable to its ownership of the Company, for such taxable year through the end of such period, and (ii) the Assumed Income Tax Rate, over (B) distributions previously made to such Member pursuant to Section 4.1 or Section 8.2 with respect to the taxable year. In computing taxable income or loss for purposes of Section 4.1(d), items of income, gain, loss and deduction shall be determined (i) without regard to any adjustments pursuant to Section 734 or 743 of the Code (in whole or in part), (ii) taking into account any allocations under Section 704(c) of the Code and the Treasury Regulations thereunder and (iii) taxable income and loss allocated to a Member with respect to any period prior to the IPO (whether with respect to income or loss of the Company, or income or loss of a Subsidiary of the Company) shall be disregarded and not taken into account, and no Tax Distribution shall be payable to the Members with respect thereto other than the distributions made pursuant to Section 4.1(e).
“Indebtedness” means, with respect to any Person all liabilities, obligations and indebtedness of such Person (a) for borrowed money (other than trade debt and other current liabilities or obligations incurred in the ordinary course of business); (b) evidenced by a note, bond, debenture or similar instrument; (c) created or arising under any capital lease, conditional sale, earn out or other arrangement for the deferral of purchase price of any property; (d) under letters of credit, banker’s acceptances or similar credit transactions, in each case, to the extent drawn; (e) for any other Person’s obligation or indebtedness of the same type as any of the foregoing, whether as obligor, guarantor or otherwise; and (f) for interest on any of the foregoing; provided, that with respect to the Company Group, Indebtedness shall not include any of the foregoing owed (i) by the Company to a wholly owned Subsidiary or (ii) by a wholly owned Subsidiary to the Company or another wholly owned Subsidiary.
“Indemnification Sources” has the meaning set forth in Section 5.7(c).
“Indemnified Parties” has the meaning set forth in Section 5.7(a).
“Indemnitee-Related Entities” has the meaning set forth in Section 5.7(c)(i).
“Initial Agreement” has the meaning set forth in the background recitals.
“Involuntary Transfer” means any Transfer of Units by a Member resulting from (i) any seizure under levy of attachment or execution, (ii) any bankruptcy (whether voluntary or involuntary), (iii) any Transfer to a state or to a public officer or agency pursuant to any statute pertaining to escheat or abandoned property, (iv) any divorce or separation agreement or a final decree of a court in a divorce action or (v) death or permanent disability.
“IPO” means the initial underwritten public offering of Pubco.
“Jointly Indemnifiable Claims” has the meaning set forth in 5.7(c)(ii).
“Lock-Up Agreements” means the Lock-Up Agreements between certain Members and Pubco.
“Management Holdco” means EWC Management Holdco, LLC, a Delaware limited liability company.
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“Management Holdco Action” has the meaning set forth in Section 7.3(a).
“Management Holdco Equity Agreement” means an agreement by and between Management Holdco and those Persons who prior to the IPO held Management Holdco Class B Units.
“Management Holdco Interests” has the meaning set forth in Section 7.3(a).
“Management Holdco LLC Agreement” means the limited liability company agreement of Management Holdco, as it may be amended, restated or otherwise modified from time to time.
“Management Holdco Partners” has the meaning set forth in Section 7.3(a).
“Managing Member” means (i) Pubco so long as Pubco has not withdrawn as the Managing Member pursuant to Section 5.3 and (ii) any successor thereof appointed as Managing Member in accordance with Section 5.3.
“Members” means each of the Persons that signs this Agreement intending to be a Member or who is a transferee consented to in accordance with Section 6.1 hereof, in each case until he, she or it ceases to be a Member in accordance with this Agreement and the Act. The Persons or entities listed on Exhibit A of this Agreement are the current Members of the Company.
“Nondeductible Expenditure” means an expenditure described in Section 705(a)(2)(B) of the Code or treated as such an expenditure under Regulations Section 1.704‑1(b)(2)(iv)(i).
“Non-Pubco Member” means any Member that is not a Pubco Member.
“Opportunity” has the meaning set forth in Section 10.7.
“Owned Shares” means, with respect to the GA Members, the total number of shares of Class A Common Stock beneficially owned (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) by the GA Members (including, for the purposes of this definition, any Person that owns either Units or Pubco Common Stock and that otherwise qualifies under the definition of “GA Member”), in the aggregate and without duplication, as of the date of such calculation (determined on an “as-converted” basis taking into account any and all securities then convertible into, or exercisable or exchangeable for, shares of Class A Common Stock (including Common Units and shares of Class B Common Stock exchangeable pursuant to the Exchange Agreement)).
“Ownership Minimum” means, with respect to the GA Members, if the number of its Owned Shares exceeds 5,639,871.75, as adjusted for any stock split, stock dividend, reverse stock split, combination, recapitalization, reclassification or similar event.
“Paired Interest” has the meaning set forth in the Exchange Agreement.
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“Partnership Audit Provisions” means Title XI, Section 1101, of the Bipartisan Budget Act of 2015, P.L. 114-74 (together with any subsequent amendments thereto, Treasury Regulations promulgated thereunder, and published administrative interpretations thereof, and any comparable provisions of state or local tax law).
“Partnership Representative” has the meaning set forth in the Partnership Audit Provisions.
“Percentage Interest” means, with respect to any Member, a fractional amount, expressed as a percentage: (i) the numerator of which is the aggregate number of Common Units owned of record thereby (excluding any Unvested Common Units) and (ii) the denominator of which is the aggregate number of Common Units issued and outstanding (excluding any Unvested Common Units). The sum of the outstanding Percentage Interests of all Members shall at all times equal 100%.
“Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, governmental body or other entity.
“Pricing” means such date and time as the Board or the pricing committee thereof prices the IPO.
“Prior Agreement” has the meaning set forth in the preamble.
“Profits and Losses” means, for each fiscal year or other period, an amount equal to the Company’s taxable income or loss for such year or period, determined under the accrual method of accounting and in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:
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“Properties” has the meaning set forth in Section 1.4.
“Pubco” has the meaning set forth in the background recitals.
“Pubco Common Stock” means all classes and series of common stock of Pubco, including the Class A Common Stock and Class B Common Stock.
“Pubco Equity Plan” means the European Wax Center, Inc. 2021 Omnibus Incentive Plan.
“Pubco Member” means (i) Pubco and (ii) any subsidiary of Pubco (other than the Company and its Subsidiaries) that is a Member.
“Purchase Agreements” means those Purchase Agreements, dated as of the date hereof, in each case by and among Pubco and the respective sellers party thereto.
“Quarterly Financial Statements” has the meaning set forth in Section 9.5(b).
“Register of Members” means the Register of Members kept by the Company setting forth, among other things, the name of each Member and the number of Common Units owned by such Member set forth opposite such Member’s name.
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date hereof, by and among Pubco, the General Atlantic Holders (as defined therein), EWC Holdings, Inc. and the other parties thereto.
“Regulations” means the final and temporary regulations promulgated under the Code.
“Reorganization Agreement” has the meaning set forth in the background recitals.
“Reorganization Documents” means this Agreement, the Reorganization Agreement, the Tax Receivable Agreement, the Exchange Agreement, the Stockholders’ Agreement, the Registration Rights Agreement, the Management Holdco Equity Agreements, the Lock-Up Agreements, the Subscription Agreement, the Purchase Agreements and the other agreements entered into pursuant to the Reorganization Agreement.
“Second A&R Agreement” has the meaning set forth in the background recitals.
“Stockholders’ Agreement” means the Stockholders’ Agreement, dated as of the date hereof, by and among Pubco and the GA Members.
“Subscription Agreement” means the Subscription Agreement for Class B Common Stock of Pubco, dated as of the date hereof, by and between Pubco and the subscribers listed therein.
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“Subsidiaries” means all Persons in which the Company owns, directly or indirectly, more than fifty percent (50%) of the capital stock or other ownership interest.
“Tax Allocation Percentages” means, with respect to any Member, a fractional amount, expressed as a percentage: (i) the numerator of which is the aggregate number of Common Units owned of record thereby and (ii) the denominator of which is the aggregate number of Common Units issued and outstanding. The sum of the outstanding Tax Allocation Percentages of all Members shall at all times equal 100%.
“Tax Distribution” has the meaning set forth in Section 4.1(d).
“Tax Receivable Agreement” means the Tax Receivable Agreement, dated as of the date hereof, by and among Pubco and the parties thereto.
“Third A&R Agreement” has the meaning set forth in the background recitals.
“Transaction Documents” has the meaning set forth in Section 10.11.
“Transfers” has the meaning set forth in Section 6.1(a). The terms “Transferred”, “Transferring”, “Transferor”, “Transferee” and “Transferable” have meanings correlative to the foregoing.
“UCC” has the meaning set forth in Section 10.12.
“Units” means Common Units or any other class of limited liability interests in the Company designated by the Company after the date hereof in accordance with this Agreement; provided, that any type, class or series of Units shall have the designations, preferences and/or special rights set forth or referenced in this Agreement, and the membership interests of the Company represented by such type, class or series of Units shall be determined in accordance with such designations, preferences and/or special rights.
“Unvested Common Unit” means, on any date of determination, any Common Unit held directly or indirectly by a Member or an Management Holdco Partner that is not “vested” in accordance with the Incentive Plan and/or an Management Holdco Equity Agreement.
“Vested Common Unit” means, on any date of determination, any Common Unit held directly or indirectly by a Member or an Management Holdco Partner that is “vested” in accordance with the Incentive Plan and/or an Management Holdco Equity Agreement.
[Signature Page to Immediately Follow]
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
39
IN WITNESS WHEREOF, and intending to be legally bound, the Company and each Member has signed this Agreement as of the date first written above.
EWC VENTURES, LLC
By:
Name:
Title:
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
40
IN WITNESS WHEREOF, and intending to be legally bound, the Company and each Member has signed this Agreement as of the date first written above.
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
EUROPEAN MANAGEMENT HOLDCO, LLC
By: European Wax Center, Inc.,
its manager
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
41
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GENERAL ATLANTIC PARTNERS AIV (EW), L.P.
By: General Atlantic GenPar (EW), L.P.,
its general partner
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
42
/s/ Sanjeev Khanna
Name: Sanjeev Khanna
/s/ Govind Agrawal
Name: Govind Agrawal
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
43
EWC HOLDINGS, INC.
By: /s/ David Coba
Name: David Coba
Title: President
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
44
Exhibit A
Register of Members
(as of August 4, 2021)
Member Name |
Common Units |
GAPCO AIV Interholdco (EW), L.P. |
2,794,183 |
General Atlantic Partners AIV (EW), L.P. |
13,263,980 |
Sanjeev Khanna |
1,387,164 |
Govind Agrawal |
1,387,164 |
EWC Holdings, Inc. |
13,863,502 |
EWC Management Holdco, LLC |
4,044,963 |
European Wax Center, Inc. |
21,540,982 |
Total |
58,281,938 |
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
45
Exhibit A
Register of Members
(as of August [9], 2021)
Member Name |
Common Units |
GAPCO AIV Interholdco (EW), L.P. |
2,572,210 |
General Atlantic Partners AIV (EW), L.P. |
12,216,644 |
Sanjeev Khanna |
1,348,198 |
Govind Agrawal |
1,348,198 |
EWC Holdings, Inc. |
11,829,093 |
EWC Management Holdco, LLC |
3,972,197 |
European Wax Center, Inc. |
30,456,188 |
Total |
63,742,728 |
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
46
Exhibit B
Joinder
[Attached]
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
47
JOINDER AGREEMENT
The undersigned is executing and delivering this Joinder Agreement pursuant to the Fifth Amended and Restated Limited Liability Company Agreement of EWC Ventures, LLC, a Delaware limited liability company, dated as of August 4, 2021, as amended, supplemented or otherwise modified in accordance with the terms thereof (the “LLC Agreement”). Capitalized terms used but not defined in this Joinder Agreement shall have the respective meanings ascribed to them in the LLC Agreement.
By executing and delivering this Joinder Agreement to the LLC Agreement, the undersigned hereby agrees to be admitted as [a][an] [Member][GA Member] and to become a party to, to be bound by, and to comply with the provisions of the LLC Agreement in the same manner as if the undersigned were an original signatory to such agreement as [a][an] [Member][GA Member].
Accordingly, the undersigned has executed and delivered this Joinder Agreement as of the ___ day of ____________, 20__.
Signature of Member
Print Name of Member
Address of Member
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14553674v14
48
Exhibit 10.8
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated August 4, 2021 (this “Agreement”), by and among the sellers listed on Schedule I hereto, as sellers (collectively, the “Sellers” and each, a “Seller”), and EWC Ventures, LLC, a Delaware limited liability company, as purchaser (the “Purchaser”).
WHEREAS, pursuant to the Fourth Amended and Restated Limited Liability Company Agreement (the “Prior EWC LLCA”) of the Purchaser, the Sellers are entitled to receive the Deferred Payment Amount in the aggregate with respect to their Class C Units (such terms as defined below);
WHEREAS, pursuant to the Fifth Amended and Restated Limited Liability Company Agreement of the Purchaser, the Class C Units were reclassified into the number of common units of the Purchaser (“Opco Units”) having a value equal to the amount that would have been distributed in respect thereof pursuant to Section 6.4(b) of the Prior EWC LLCA had the Purchaser been liquidated on the date thereof based on the Offering Price (as defined below) (such reclassification, the “Unit Reclassification”);
WHEREAS, pursuant to that certain Exchange and Redemption Agreement, dated as of August 4, 2021, by and among EWC Management Holdco, LLC, a Delaware limited liability company (“Management Holdco”), and certain of the Sellers, Management Holdco redeemed a portion of each Seller’s limited liability company interests in Management Holdco in exchange for Opco Units and shares of Purchaser’s Class B common stock, par value $0.00001 per share (“Class B Common Stock”);
WHEREAS, European Wax Center, Inc., a Delaware corporation (“Pubco”), is currently contemplating an underwritten initial public offering (the “Offering”) of Pubco’s Class A common stock, par value $0.00001 per share (the “Class A Common Stock”);
WHEREAS, in connection with the consummation of the Offering, each Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from each Seller, the number of Opco Units and the number of shares of Class B Common Stock, each set forth opposite such Seller’s name on Schedule I hereto; and
WHEREAS, the sale of the Opco Units pursuant to this Agreement satisfies and reflects the payment in full of the Deferred Payment Amount with respect to the Sellers’ Class C Units that were converted into Opco Units in connection with the Unit Reclassification, after which the Purchaser shall have no further obligations to the Sellers with respect to the Class C Units.
1
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
DEFINITIONS
“Class C Units” means the Class C Units of the Purchaser, all of which have reclassified into Opco Units pursuant to the Unit Reclassification.
“Closing” means the closing of the purchase of the Purchased Paired Interests.
“Commission” means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act.
“Deferred Payment Amount” means twenty million dollars ($20,000,000).
“Governmental Authority” means the government of any nation, state, city, locality or other political subdivision of any thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or other security interest of any kind or nature whatsoever.
“Offering Closing” means the initial closing of the sale of Class A Common Stock in the Offering.
“Offering Price” means the per share public offering price for the Class A Common Stock in the Offering.
“Paired Interest” or “Paired Interests” means one or more Opco Units together with an equal number of shares of Class B Common Stock.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
2
PURCHASE AND SALE OF PAIRED INTERESTS
3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller represents, warrants, and agrees severally with respect to itself only, as of the date hereof as follows:
4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser makes the following representations and warranties for the benefit of the Sellers as of the date hereof:
5
MISCELLANEOUS
EWC Ventures, LLC
c/o European Wax Center, Inc.
5830 Granite Parkway, 3rd Floor
Plano, TX 75024
Attention: Gavin O’Connor, Chief Legal Officer
With a copy to (which shall not constitute actual or constructive notice):
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
Attention: Matthew W. Abbott
John C. Kennedy
Monica K. Thurmond
Email: mabbott@paulweiss.com
jkennedy@paulweiss.com
mthurmond@paulweiss.com
Any party may by notice given in accordance with this Section 5.1 designate another address or person for receipt of notices hereunder.
6
7
[Remainder of page intentionally left blank]
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized as of the date first above written.
EWC VENTURES, LLC
By: European Wax Center, Inc.,
its managing member
By: ______________________
Name: Gavin O’Connor
Title: Secretary
9
/s/ Sanjeev Khanna
Sanjeev Khanna
/s/ Govind Agrawal
Govind Agrawal
EWC HOLDINGS, INC.
By: /s/ David Coba
Name: David Coba
Title: President
10
/s/ Jonathan Biggert
Jonathan Biggert
/s/ Rebecca Jones
Rebecca Jones
/s/ David Willis
David Willis
/s/ Sherry Baker
Sherry Baker
/s/ Marc Brody
Marc Brody
/s/ Mark Novell
Mark Novell
/s/ Mark Gramm
Mark Gramm
/s/ Robb Thomas
Robb Thomas
11
SCHEDULE I
Sellers, Opco Units, Class B Common Stock and Paired Interests
Name of Seller |
Opco Units |
Class B Common Stock |
Paired Interests |
EWC Holdings, Inc. |
1,025,770 |
1,025,770 |
1,025,770 |
Sanjeev Khanna |
38,966 |
38,966 |
38,966 |
Govind Agrawal |
38,966 |
38,966 |
38,966 |
David Willis |
25,328 |
25,328 |
25,328 |
Marc Brody |
8,280 |
8,280 |
8,280 |
Rebecca Jones |
8,280 |
8,280 |
8,280 |
Robb Thomas |
4,578 |
4,578 |
4,578 |
Mark Novell |
4,578 |
4,578 |
4,578 |
Mark Gramm |
4,578 |
4,578 |
4,578 |
Jon Biggert |
4,578 |
4,578 |
4,578 |
Sherry Baker |
12,566 |
12,566 |
12,566 |
12
EXHIBIT A
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT (this “Agreement”), dated as of August 4, 2021, by and among the sellers listed as “Sellers” on the signature pages hereto, as sellers (collectively, the “Sellers” and each, a “Seller”), EWC Ventures, LLC, a Delaware limited liability company (the “Purchaser”). Each capitalized term used herein without definition shall have the meaning assigned to it in the Purchase Agreement (as defined below).
RECITALS
WHEREAS, the Purchaser and the Sellers entered into a Purchase Agreement, dated as of August 4, 2021 (the “Purchase Agreement”), pursuant to which each Seller agreed to sell, assign, convey and transfer Opco Units to the Purchaser; and
WHEREAS, the Purchaser has agreed to purchase such Opco Units from each Seller pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein and in the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows:
13
[remainder of page intentionally left blank]
14
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the parties to this Agreement as of the date first written above.
Sellers:
[SELLER]
Name:
Number of Opco Units:
[ADDITIONAL SELLERS]
15
EWC VENTURES, LLC
By:
Name:
Title:
16
Exhibit 10.9
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated August 4, 2021 (this “Agreement”), by and among the sellers listed on Schedule I hereto, as sellers (collectively, the “Sellers” and each, a “Seller”), and European Wax Center, Inc., a Delaware corporation, as purchaser (the “Purchaser”).
WHEREAS, the Purchaser is currently contemplating an underwritten initial public offering (the “Offering”) of the Purchaser’s Class A common stock, par value $0.00001 per share (the “Class A Common Stock”); and
WHEREAS, in connection with the consummation of the Offering, each Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from each Seller, the number of common units (“Opco Units”) of EWC Ventures, LLC, a Delaware limited liability company (“EWC”), and the number of shares of the Purchaser’s Class B common stock, par value $0.00001 per share (the “Class B Common Stock”), each set forth opposite such Seller’s name on Schedule I hereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
DEFINITIONS
“Additional Closing” means each closing of the purchase of Additional Purchased Paired Interests.
“Additional Offering Closing” means any additional closing of the sale of Class A Common Stock in the Offering pursuant to the exercise of the underwriters’ option to purchase additional shares of Class A Common Stock, which closing may occur on the same date and time as the Offering Closing.
“Additional Purchased Paired Interests” means the number of Paired Interests to be sold by any Seller, with respect to each Additional Offering Closing, which will be equal to the total number of shares of Class A Common Stock that are sold by the Purchaser pursuant to the exercise of the underwriters’ option to purchase additional shares of Class A Common Stock at the corresponding Additional Offering Closing and divided pro rata among the Sellers in proportion to the Initial Purchased Paired Interests sold thereby in the Initial Closing; provided that the total number of
1
Paired Interests to be sold by the Sellers at all of the Additional Closings shall not exceed 913,998 in the aggregate).
“Closing” means each Additional Closing together with the Initial Closing.
“Commission” means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act.
“Discounted Price” means (i) the Offering Price less (ii) the Per Share Underwriting Discount.
“Governmental Authority” means the government of any nation, state, city, locality or other political subdivision of any thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“Initial Closing” means the closing of the purchase of the Initial Purchased Paired Interests.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or other security interest of any kind or nature whatsoever.
“Offering Closing” means the initial closing of the sale of Class A Common Stock in the Offering.
“Offering Price” means the per share public offering price for the Class A Common Stock in the Offering.
“Paired Interest” or “Paired Interests” means one or more Opco Units together with an equal number of shares of Class B Common Stock.
“Per Share Underwriting Discount” means the underwriting discount per share paid to the underwriters in the Offering.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
PURCHASE AND SALE OF PAIRED INTERESTS
2
3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller represents, warrants, and agrees, severally with respect to itself only, as of the date hereof as follows:
4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser makes the following representations and warranties for the benefit of the Sellers as of the date hereof:
5
MISCELLANEOUS
European Wax Center, Inc.
5830 Granite Parkway, 3rd Floor
Plano, TX 75024
Attention: Gavin O’Connor, Chief Legal Officer
E-mail: gavin.oconnor@myewc.com
With a copy to (which shall not constitute actual or constructive notice):
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
Attention: Matthew W. Abbott
John C. Kennedy
Monica K. Thurmond
Email: mabbott@paulweiss.com
jkennedy@paulweiss.com
mthurmond@paulweiss.com
Any party may by notice given in accordance with this Section 5.1 designate another address or person for receipt of notices hereunder.
6
7
[Remainder of page intentionally left blank]
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized as of the date first above written.
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor
Name: Gavin O’Connor
Title: Secretary
9
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
GENERAL ATLANTIC PARTNERS AIV (EW), L.P.
By: General Atlantic GenPar (EW), L.P.,
its general partner
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
10
EWC HOLDINGS, INC.
By: /s/ David Coba
Name: David Coba
Title: President
11
SCHEDULE I
Sellers, Opco Units, Class B Common Stock and Paired Interests
Name of Seller |
Opco Units |
Class B Common Stock |
Paired Interests |
EWC Holdings, Inc. |
1,008,639 |
1,008,639 |
1,008,639 |
GAPCO AIV Interholdco (EW), L.P. |
221,973 |
221,973 |
221,973 |
General Atlantic Partners AIV (EW), L.P. |
1,047,336 |
1,047,336 |
1,047,336 |
12
EXHIBIT A
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT (this “Agreement”), dated as of August 4, 2021, by and among the sellers listed as “Sellers” on the signature pages hereto, as sellers (collectively, the “Sellers” and each, a “Seller”), European Wax Center, Inc., a Delaware corporation (the “Purchaser”), and EWC Ventures, LLC, a Delaware limited liability company (“EWC”). Each capitalized term used herein without definition shall have the meaning assigned to it in the Purchase Agreement (as defined below).
RECITALS
WHEREAS, the Purchaser and the Sellers entered into a Purchase Agreement, dated as of August 4, 2021 (the “Purchase Agreement”), pursuant to which each Seller agreed to sell, assign, convey and transfer Opco Units to the Purchaser; and
WHEREAS, the Purchaser has agreed to purchase such Opco Units from each Seller pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein and in the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows:
13
[remainder of page intentionally left blank]
14
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the parties to this Agreement as of the date first written above.
Sellers:
[SELLER]
Name:
Number of Opco Units:
[ADDITIONAL SELLERS]
15
EUROPEAN WAX CENTER, INC.
By:
Name:
Title:
EWC VENTURES, LLC
By:
Name:
Title:
16
Exhibit 10.10
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE SECURITIES ACQUIRED HEREUNDER MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE LAWS PURSUANT TO REGISTRATION OR EXEMPTION FROM REGISTRATION REQUIREMENTS THEREUNDER.
CLASS B COMMON STOCK SUBSCRIPTION AGREEMENT
This Class B COMMON STOCK SUBSCRIPTION AGREEMENT (this “Agreement”) is entered into as of August 4, 2021, by and between European Wax Center, Inc., a Delaware corporation (the “Company”), and the subscribers listed as “Subscribers” on the signature pages hereto, as subscribers (collectively, the “Subscribers” and each, a “Subscriber”).
WHEREAS, in connection with the initial public offering of the shares of the Company’s Class A common stock, par value $0.00001 per share (the “Class A Common Stock”), and the reorganization transactions contemplated by that certain Reorganization Agreement, dated as of date hereof, by and among the Company, EWC Ventures, LLC, a Delaware limited liability company (“EWC”), EWC Management Holdco, LLC, a Delaware limited liability company (“Management Holdco”), the Subscribers and certain other parties listed therein (the “Reorganization Agreement”), pursuant to which, among other things, all of the existing equity interests in EWC, including those held by the Subscribers, have been reclassified into EWC’s common interest units (“EWC Units”), based on a hypothetical liquidation of EWC and the initial public offering price per share of the Class A Common Stock;
WHEREAS, as a condition to receiving the EWC Units in the reclassification described above, each Subscriber has entered into this Agreement to subscribe for and purchase that number of shares of the Company’s Class B common stock, par value $0.00001 per share (the “Class B Common Stock”), specified on Schedule I hereto.
The parties hereto, intending to be legally bound, hereby agree, for good and valuable consideration, the receipt of which is hereby acknowledged, as follows:
1
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
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DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
“THE TRANSFER OF SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE CLASS B Common stock SUBSCRIPTION AGREEMENT, DATED AS OF AUgust 4, 2021, BETWEEN EUROPEAN WAX CENTER, INC. AND THE SUBSCRIBER, AS IT MAY BE AMENDED, SUPPLEMENTED AND/OR RESTATED FROM TIME TO TIME, AND NO TRANSFER OF THESE SECURITIES WILL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE SECURITIES ACQUIRED HEREUNDER MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE LAWS PURSUANT TO REGISTRATION OR EXEMPTION FROM REGISTRATION REQUIREMENTS THEREUNDER.”
3
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
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DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
5
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
[Signature Pages Follow]
6
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
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DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Agreement as of the date and year first written above.
THE COMPANY: |
EUROPEAN WAX CENTER, INC.
By: /s/ Gavin O’Connor Name: Gavin O’Connor Title: Secretary
|
8
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
SUBSCRIBER:
GAPCO AIV INTERHOLDCO (EW), L.P.
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
9
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
SUBSCRIBER:
GENERAL ATLANTIC PARTNERS AIV (EW), L.P.
By: General Atlantic GenPar (EW), L.P.,
its general partner
By: General Atlantic (SPV) GP, LLC,
its general partner
By: General Atlantic, L.P.,
its sole member
By: /s/ Michael Gosk
Name: Michael Gosk
Title: Managing Director
10
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
SUBSCRIBER:
EWC MANAGEMENT HOLDCO, LLC
By: General Atlantic (SPV) GP, LLC,
its manager
By: General Atlantic, L.P.,
its sole member
By: /s Michael Gosk
Name: Michael Gosk
Title: Managing Director
11
DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
SUBSCRIBER:
/s/ Sanjeev Khanna
Sanjeev Khanna
/s/ Govind Agrawal
Govind Agrawal
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DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
SUBSCRIBER:
EWC HOLDINGS, INC.
By: /s/ David Coba
Name: David Coba
Title: President
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DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
Schedule I
Name of Subscriber |
Shares of Class B Common Stock of the Company issued to such Subscriber |
GAPCO AIV Interholdco (EW), L.P. |
2,794,183.0 |
General Atlantic Partners AIV (EW), L.P. |
13,263,980.0 |
EWC Holdings, Inc. |
13,863,502.0 |
EWC Management Holdco, LLC |
4,044,963.0 |
Govind Agrawal |
1,387,164.0 |
Sanjeev Khanna |
1,387,164.0 |
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DOCPROPERTY "Keywords" \* MERGEFORMAT Doc#: US1:14741212v6
Exhibit 10.11
EUROPEAN WAX CENTER, INC.
2021 Omnibus Incentive Plan
1
2
3
4
5
6
7
8
9
10
11
12
13
14
TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE EUROPEAN WAX CENTER, INC. 2021 OMNIBUS INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, DATED AS OF [ , 2021] BETWEEN EUROPEAN WAX CENTER, INC. AND [ ]. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF EUROPEAN WAX CENTER, INC.
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provided, however, that the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect any “equity restructuring” (within the meaning of the Financial Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)). Except as otherwise determined by the Committee, any adjustment in Incentive Stock Options under this Section 11 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 11 shall be made in a manner that does not adversely affect the exemption provided pursuant to Rule 16b-3 promulgated under the Exchange Act. Any such adjustment hereunder, upon notice, shall be conclusive and binding for all purposes. In anticipation of the occurrence of any event listed in the first sentence of this Section 11, for reasons of administrative convenience, the Committee in its sole discretion may refuse to permit the exercise of any Award or as it otherwise may determine during a period of up to 30 days prior to, and/or up to 30 days after, the anticipated occurrence of any such event.
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To the extent practicable, the provisions of this Section 12(b) shall occur in a manner and at a time that allows affected Participants the ability to participate in the Change in Control transaction with respect to the Shares subject to their Awards.
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David P. Berg, certify that:
Date: September 14, 2021 |
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By: |
/s/ DAVID P. BERG |
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David P. Berg |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jennifer C. Vanderveldt, certify that:
Date: September 14, 2021 |
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By: |
/s/ JENNIFER C. VANDERVELDT |
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Jennifer C. Vanderveldt |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of European Wax Center, Inc. (the “Company”) on Form 10-Q for the period ending June 26, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David P. Berg, as Chief Executive Officer of the Company ,certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: September 14, 2021 |
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By: |
/s/ DAVID P. BERG |
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David P. Berg |
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Chief Executive Officer |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of European Wax Center, Inc. (the “Company”) on Form 10-Q for the period ending June 26, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jennifer C. Vanderveldt, as Chief Financial Officer of the Company ,certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: September 14, 2021 |
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By: |
/s/ JENNIFER C. VANDERVELDT |
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Jennifer C. Vanderveldt |
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Chief Financial Officer |