Subsequent Events	6 Months Ended
Jul. 31, 2025
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events Recapitalization Transactions On August 20, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with CHS US Investments LLC (“Lender”) in connection with the Recapitalization Transactions. Concurrently with the entry into the Exchange Agreement, on August 20, 2025, the Company also entered into (i) an investor rights agreement (the “Investor Rights Agreement”), by and among the Company, the Investor Group and certain entities affiliated with Jennifer Hyman, (ii) an amendment to the employment agreement with Ms. Hyman, Chief Executive Officer (the “Amended Employment Agreement”), (iii) an amendment to the Rent the Runway, Inc. Transaction Bonus Plan (the “Amended Transaction Bonus Plan”), (iv) a rights offering backstop agreement (the “Rights Offering Backstop Agreement”), by and among the Company and the Investor Group, (v) a debt and equity purchase agreement (the “Debt and Equity Purchase Agreement”), by and among the Company, CHS (US) Management LLC (“Agent”) and the Investor Group, and (vi) a conversion notice and proxy (the “Conversion Notice and Proxy”) with each of the holders of the Company’s Class B common stock, each as further described below. In addition, upon the closing of the Exchange Transactions (as defined below) (the “Closing”), the Company shall enter into an amended and restated credit agreement (the “New Credit Agreement”), by and among the Company, as borrower, Agent, as the administrative agent, and the Investor Group to evidence the new term loans that will result, upon the Closing, from the transactions described below. The Company’s Board of Directors (the “Board”), acting on the unanimous recommendation of the finance committee of the Board (the “Finance Committee”), with the Finance Committee being comprised of independent and disinterested directors formed for the purpose of considering potential financing and strategic transactions, such as the Recapitalization Transactions, unanimously (with Ms. Hyman abstaining) (i) determined that the terms of the Exchange Agreement, the other principal transaction documents and the Recapitalization Transactions, including the Exchange Transactions (as defined below), are fair to, and in the best interests of, the Company and its stockholders, (ii) determined that it is in the best interests of the Company and its stockholders and declared it advisable that the Company enter into the Exchange Agreement and the other principal transaction documents, (iii) approved the execution and delivery of the Exchange Agreement and the other principal transaction documents by the Company, the Company’s performance of the covenants and agreements contained therein and the consummation of the Recapitalization Transactions upon the terms and subject to the conditions contained therein, (iv) resolved to recommend that the Company’s stockholders vote to approve the issuance of the Exchange Stock (as defined below) and the issuance of shares of the Company’s Class A common stock pursuant to the Rights Offering Backstop Agreement, the MIP (as defined below) and the Thirteenth Amended and Restated Certificate of Incorporation (the “Amended and Restated Charter”), to be effective immediately prior to the Closing, in each case, pursuant to the terms of the Exchange Agreement, and (v) directed that the matters in clause (iv) be submitted for approval by the Company’s stockholders. Exchange Agreement Pursuant to the Exchange Agreement, at the Closing, Lender would (i) exchange $100 million of existing outstanding indebtedness owing to Lender under the 2025 Amended Facility on a dollar-for-dollar cashless basis for new term loans under the New Credit Agreement (“Exchange Consideration Term Loans”) and (ii) contribute all outstanding indebtedness owing to Lender under the 2025 Amended Facility in excess thereof to the Company in exchange for newly issued shares of the Class A common stock, equal to 86% of the number of shares of the Company’s total common stock outstanding as of the Closing (after giving effect to the Conversions (as defined below), but before giving effect to the Rights Offering (as defined below) and the MIP Pool (as defined below) (the “Exchange Stock”) (collectively, the “Exchange Transactions”). The converted debt will be exchanged at an effective conversion price of $9.23 per share assuming the Closing occurs on December 31, 2025, or an 80.9% premium to the 30-day volume weighted average price as of August 20, 2025 of $5.10 per share. In connection with the Exchange Agreement, all of the holders of the Class B common stock (the “Proxy Stockholders”) executed and delivered a Conversion Notice and Proxy (collectively, the “Conversion Notices”), pursuant to which each such Proxy Stockholder (i) opted to convert his, her or its respective shares of Class B common stock into shares of Class A common stock pursuant to the Company’s certificate of incorporation, effective immediately prior to (A) the effectiveness of the Thirteenth Amended and Restated Certificate of Incorporation (the “Amended and Restated Charter”), or (B) if stockholder approval of the Amended and Restated Charter is not obtained, the Closing (the “Conversions”), and (ii) granted to certain officers of the Company, at the request of the Board, a proxy to vote (or cause to be voted) all shares of common stock held by such Proxy Stockholders at the meeting of stockholders to be held to obtain the approval of all actions presented to the Company’s stockholders by the Board that are necessary and desirable in connection with the Recapitalization Transactions, including the issuance of the Exchange Stock, to the extent required by Nasdaq rules, the issuance of shares pursuant to the Rights Offering Backstop Agreement, and the Amended and Restated Charter (the proxy described in this clause (ii), the “Proxy”). The Closing is not subject to a financing condition, but is subject to certain conditions, including (i) approval of the Company’s stockholders (the “Company Stockholder Approval”) of the issuance of the Exchange Stock pursuant to the Exchange Agreement and the amendment and restatement of the Company’s Amended and Restated 2021 Incentive Award Plan (as further described below), (ii) absence of any order or injunction prohibiting the consummation of the Recapitalization Transactions, (iii) consummation of the Rights Offering, (iv) substantially simultaneous consummation of the sale transactions contemplated by the Debt and Equity Purchase Agreement, (v) entry by the Company and the Investor Group into the New Credit Agreement and effectiveness thereof, (vi) adoption of amended and restated bylaws, (vii) subject in certain cases to customary materiality qualifiers, the accuracy of the representations and warranties contained in the Exchange Agreement and compliance with the covenants contained in the Exchange Agreement and (viii) no Company Material Adverse Effect having occurred since the date of the Exchange Agreement that is continuing. The Exchange Agreement contains customary representations, warranties and covenants, including, among others, covenants by the Company to conduct the Company’s businesses in the ordinary course between the execution of the Exchange Agreement and the Closing, not to engage in certain kinds of transactions during such period (including payment of dividends outside of the ordinary course or as otherwise permitted under the Exchange Agreement), to convene and hold a meeting of the Company’s stockholders to consider and vote upon the Company Stockholder Approval, to seek approval from the Company’s stockholders of the Amended and Restated Charter, to conduct the Rights Offering, and, subject to certain customary exceptions, for the Board to recommend that the Company’s stockholders approve the issuance of the Exchange Stock pursuant to the Exchange Agreement, to the extent required by Nasdaq rules, the issuance of shares pursuant to the Rights Offering Backstop Agreement, and the Amended and Restated Charter. The Exchange Agreement also contains customary representations, warranties and covenants of Lender. The Exchange Agreement contains a customary “no-shop” provision that restricts the Company’s ability to, among other things, solicit Takeover Proposals (as defined in the Exchange Agreement) from third parties and to provide non-public information to, and engage in discussions or negotiations with, third parties regarding Takeover Proposals. The “no-shop” provision allows the Company, under certain circumstances and in compliance with certain obligations set forth in the Exchange Agreement, to provide non-public information to any person and its representatives that has made a bona fide Takeover Proposal that either constitutes, or would reasonably be expected to lead to, a Takeover Proposal. The Exchange Agreement contains certain termination rights for both the Company and Lender. The Company shall pay to Lender a fee of $6,000,000 if: (i) Lender terminates the Exchange Agreement as a result of an Adverse Recommendation Change (as defined in the Exchange Agreement) by the Board; (ii) the Company terminates the Exchange Agreement to enter into a definitive agreement for a Superior Proposal (as defined in the Exchange Agreement); or (iii) a Takeover Proposal has been made and thereafter the Exchange Agreement is terminated as a result of the Exchange Transactions not having been consummated on or before 11:59 p.m., Eastern time, on February 20, 2026 (as such date may be extended pursuant to any written agreement to so extend that is executed by the Company and Lender), the Company Stockholder Approval not having been obtained, the Company’s breach of the Company’s representations, warranties or covenants in a manner that would cause the related conditions to Closing to not be met or a Proxy Stockholder having rescinded, revoked, withdrawn, repudiated or challenged the validity or effectiveness of their respective Conversion Notices or Proxy (a “Proxy Revocation”), and within 12 months of such termination the Company or any of the Company’s subsidiaries consummate a specified Takeover Proposal or enter into a definitive agreement providing for a specified Takeover Proposal. The Company shall pay to Lender a fee of $2,000,000 if Lender terminates the Exchange Agreement as a result of a Proxy Revocation (which shall be creditable against the $6,000,000 termination fee). The Exchange Agreement also provides that either party may specifically enforce the other party’s obligations under the Exchange Agreement. Pursuant to the Exchange Agreement, the Company and Lender shall take all actions as may be necessary to cause, upon the Closing, the Board to consist of seven members, including Ms. Hyman, a director selected by Ms. Hyman and approved by the Investor Group, a director designated by Nexus, a director designated by Story3 and three directors designated by the Board and subject to the approval of the Investor Majority (as defined in the Investor Rights Agreement). New Credit Agreement Terms The New Credit Agreement, when entered into in accordance with the terms of the Exchange Agreement, will amend and restate the 2025 Amended Facility and provide for $120 million in aggregate principal amount of term loans comprised of (x) $100 million of Exchange Consideration Term Loans and (y) $20 million of new money term loans to be provided by the Investor Group at the Closing (the “New Money Term Loans”). All such term loans would mature on the fourth anniversary of the Closing and bear interest, at the Company’s option, at either (i) a bank reference rate, plus 4.00% or (ii) term SOFR plus 5.00%, in each case per annum. The New Credit Agreement would also modify the 2025 Amended Facility in certain other respects, including by temporarily reducing the minimum liquidity maintenance covenant from $30 million to $15 million, which reduced minimum liquidity maintenance covenant applies during the period from the Closing until February 20, 2027 and thereafter reverts to $30 million. Debt and Equity Purchase Agreement Pursuant to the Debt and Equity Purchase Agreement, subject to the terms and conditions thereof, each of Nexus and Story3 has agreed to enter into the New Credit Agreement, to provide its share of the New Money Term Loans, and to purchase (i) $15 million of the Exchange Consideration Term Loans and (ii) 15% of the Exchange Stock from Lender for an aggregate purchase price of $15 million immediately following the Closing. Consummation of the sale transactions under the Debt and Equity Purchase Agreement is conditioned only on the substantially simultaneous closing of the Exchange Transactions. The Debt and Equity Purchase Agreement is not expected to have an impact on the Company’s consolidated financial statements. Investor Rights Agreement Pursuant to the Investor Rights Agreement, which takes effect upon the closing of the Exchange Transactions, the Company will be required to prepare and file with the SEC, within 20 days following the Closing, a shelf registration statement registering the resale of Class A common stock held by Ms. Hyman and the Investor Group, and will grant certain demand, piggyback and shelf registration rights to Ms. Hyman and the Investor Group. The Investor Rights Agreement also provides for certain Board designation rights of the Investor Group and Ms. Hyman following the Closing. Pursuant to the Investor Rights Agreement, for so long as they meet certain minimum ownership thresholds, each of Nexus and Story3 will be entitled to designate one director to the Board, and the Board will designate three directors to the Board, subject to the approval of the Investor Majority and after considering in good faith Ms. Hyman’s views in connection therewith. In addition, the Investor Rights Agreement provides that, so long as Ms. Hyman serves as Chief Executive Officer, she will be designated as a member of the Board, and, for so long as she continues to own a specified minimum number of Class A common stock, Ms. Hyman will be entitled to appoint one additional director to the Board, subject to the reasonable approval of the Investor Majority. Subject to certain minimum ownership thresholds, each of Ms. Hyman, Nexus and Story3 would also be entitled to appoint a non-voting Board observer, and the Lender would be entitled to appoint two non-voting Board observers; provided, that (i) each of Story3 and Nexus shall have the right to designate one Board observer in total pursuant to the Investor Rights Agreement and the New Credit Agreement and (ii) the Lender shall have the right to designate two Board observers in total pursuant to the Investor Rights Agreement and the New Credit Agreement. Rights Offering Backstop Agreement Pursuant to the Exchange Agreement, the Company has agreed to prepare and file with the SEC a registration statement on Form S-1 in connection with a $12,500,000 rights offering by the Company (the “Rights Offering”). Under the Rights Offering Backstop Agreement, the Investor Group agreed to purchase from the Company, at a price of $4.08 per share, all unsubscribed shares of the Class A common stock to be issued in connection with the Rights Offering, on the terms and subject to the conditions set forth in the Rights Offering Backstop Agreement. The completion of the Rights Offering, as well as the Investor Group’s obligations to complete the purchase of shares pursuant to the Rights Offering Backstop Agreement, are subject to certain customary conditions, including among others, that a registration statement with respect to the Rights Offering has been declared and remains effective and, to the extent required by Nasdaq rules, stockholder approval of the purchase of shares pursuant to the Rights Offering Backstop Agreement. Fourteenth Amendment Concurrently with entry into the Exchange Agreement, the Company entered into a Fourteenth Amendment to the 2025 Amended Facility. The Fourteenth Amendment provides that, until the earliest of (a) February 20, 2026 (which may be extended if agreed to by the parties), (b) termination of the Exchange Agreement (or 30 days after the termination of the Exchange Agreement under certain conditions), and (c) the Closing (“Relief Termination Date”), (i) interest that would otherwise be payable in cash will be capitalized and (ii) the liquidity financial covenant level will be reduced to $15 million. In addition, the Fourteenth Amendment increases the number of Board observers permitted to be designated by the Agent from one to two and defers the operation of certain other financial covenants until the end of the fiscal year ending January 31, 2026. Relief under the Fourteenth Amendment generally continues until the earliest of the Outside Date (as defined in the Exchange Agreement), termination of the Exchange Agreement (with an additional 30-day relief period in certain circumstances) and the occurrence of the Closing. Management Incentive Plan The Exchange Agreement requires that the Company take all actions necessary to increase the maximum number of shares of Class A common stock authorized for issuance under the Amended and Restated 2021 Incentive Award Plan, subject to stockholder and Board approval, by a number of shares of Class A common stock (such shares, the “MIP Pool”), equal to approximately 18.3% of the shares of Class A common stock outstanding immediately prior to the Closing, determined on a fully diluted basis. Amendment to Ms. Hyman’s Employment Agreement In connection with the entry into the Exchange Agreement and with effectiveness contingent on the Closing, on August 20, 2025, the Company and Ms. Hyman entered into the Amended Employment Agreement. The Amended Employment Agreement provides, among other things, for an initial term that expires on January 31, 2030, subject to automatic one-year extensions unless one party provides the other with notice not more than 90 days prior to the expiration of the term. The Amended Employment Agreement further provides that, within 30 days following the Closing, the Company will grant Ms. Hyman an award from the MIP Pool in respect of 5% of the shares of Class A common stock outstanding immediately following the Closing in accordance with the Exchange Agreement, assuming target-level performance, or 7.5% assuming maximum performance. In addition, the Amended Employment Agreement reduces the cash severance that Ms. Hyman is eligible to receive. Under the terms of the Amended Employment Agreement, Ms. Hyman will be eligible for a cash severance payment in an amount equal to (i) her applicable “severance multiplier,” multiplied by (ii) her then-current annual base salary and annual target bonus. Her “severance multiplier” will be equal to 1.5 in the event that during either the 12-month period following the Closing or the 24-month period following a “change in control,” her employment is terminated by the Company without “cause” or, in certain specified circumstances, she resigns for “good reason” (each, as defined in the Amended Employment Agreement). Her severance multiplier will be 1.0 in the event that her employment is terminated by the Company without cause or she resigns for good reason other than under the circumstances described in the immediately preceding sentence. Transaction Bonus Plan Amendment In connection with the entry into the Exchange Agreement, on August 20, 2025, the Compensation Committee of the Board approved the Amended Transaction Bonus Plan. The Amended Transaction Bonus Plan provides that each participant will no longer be eligible for the participant’s free cash flow bonus and the participant’s base transaction bonus (the “Base Transaction Bonus”) will not be paid in full upon the Closing. Instead, the Base Transaction Bonus will be paid 25% at Closing (the “Closing Installment”), 6.25% on the 18-month, 24-month, 30-month and 36-month anniversaries of the Closing (each, a “Semi-Annual Installment”), with the final 50% becoming payable on the earlier of January 31, 2030, and the date of a change in control (which does not include the Recapitalization Transactions), in the case of the final 50%, based on the satisfaction of financial or stock price-based performance measures (as applicable), provided that the participant remains employed through the date each Base Transaction Bonus installment is paid. The Closing Installment and each Semi-Annual Installment are subject to repayment to the Company, net of taxes paid with respect thereto, if the participant terminates their employment prior to the applicable vesting date other than due to a “good leaver termination” (as defined in the Amended Transaction Bonus Plan). The Closing Installment will vest 25% on each of the first four anniversaries of the Closing, the first Semi-Annual Installment will vest 33% on each of the second, third and fourth anniversary of the Closing, the second and third Semi-Annual Installments will each vest 50% on each of the third and fourth anniversary of the Closing, and the fourth Semi-Annual Installment will fully vest on the fourth anniversary of the Closing. The Company is currently evaluating the impact of the Recapitalization Transactions on the Company’s prospective consolidated financial statements. Pre-litigation Dispute Settlement In September 2025, the Company agreed to settle a pre-litigation dispute that existed as of July 31, 2025. The settlement agreement is in the process of being finalized. The full amount of the settlement is expected to be paid directly by the Company’s insurance carriers, subject to an immaterial standard deductible. In accordance with ASC 855, Subsequent Events, the anticipated settlement amount and related insurance proceeds have been recognized in the Company’s financial statements for the quarter ended July 31, 2025. The overall impact of the settlement is not material to the Company’s financial statements.

Concurrently with the entry into the Exchange Agreement, on August 20, 2025, the Company also entered into (i) an investor rights agreement (the “Investor Rights Agreement”), by and among the Company, the Investor Group and certain entities affiliated with Jennifer Hyman, (ii) an amendment to the employment agreement with Ms. Hyman, Chief Executive Officer (the “Amended Employment Agreement”), (iii) an amendment to the Rent the Runway, Inc. Transaction Bonus Plan (the “Amended Transaction Bonus Plan”), (iv) a rights offering backstop agreement (the “Rights Offering Backstop Agreement”), by and among the Company and the Investor Group, (v) a debt and equity purchase agreement (the “Debt and Equity Purchase Agreement”), by and among the Company, CHS (US) Management LLC (“Agent”) and the Investor Group, and (vi) a conversion notice and proxy (the “Conversion Notice and Proxy”) with each of the holders of the Company’s Class B common stock, each as further described below. In addition, upon the closing of the Exchange Transactions (as defined below) (the “Closing”), the Company shall enter into an amended and restated credit agreement (the “New Credit Agreement”), by and among the Company, as borrower, Agent, as the administrative agent, and the Investor Group to evidence the new term loans that will result, upon the Closing, from the transactions described below.

The Company’s Board of Directors (the “Board”), acting on the unanimous recommendation of the finance committee of the Board (the “Finance Committee”), with the Finance Committee being comprised of independent and disinterested directors formed for the purpose of considering potential financing and strategic transactions, such as the Recapitalization Transactions, unanimously (with Ms. Hyman abstaining) (i) determined that the terms of the Exchange Agreement, the other principal transaction documents and the Recapitalization Transactions, including the Exchange Transactions (as defined below), are fair to, and in the best interests of, the Company and its stockholders, (ii) determined that it is in the best interests of the Company and its stockholders and declared it advisable that the Company enter into the Exchange Agreement and the other principal transaction documents, (iii) approved the execution and delivery of the Exchange Agreement and the other principal transaction documents by the Company, the Company’s performance of the covenants and agreements contained therein and the consummation of the Recapitalization Transactions upon the terms and subject to the conditions contained therein, (iv) resolved to recommend that the Company’s stockholders vote to approve the issuance of the Exchange Stock (as defined below) and the issuance of shares of the Company’s Class A common stock pursuant to the Rights Offering Backstop Agreement, the MIP (as defined below) and the Thirteenth Amended and Restated Certificate of Incorporation (the “Amended and Restated Charter”), to be effective immediately prior to the Closing, in each case, pursuant to the terms of the Exchange Agreement, and (v) directed that the matters in clause (iv) be submitted for approval by the Company’s stockholders.

Pursuant to the Exchange Agreement, at the Closing, Lender would (i) exchange $100 million of existing outstanding indebtedness owing to Lender under the 2025 Amended Facility on a dollar-for-dollar cashless basis for new term loans under the New Credit Agreement (“Exchange Consideration Term Loans”) and (ii) contribute all outstanding indebtedness owing to Lender under the 2025 Amended Facility in excess thereof to the Company in exchange for newly issued shares of the Class A common stock, equal to 86% of the number of shares of the Company’s total common stock outstanding as of the Closing (after giving effect to the Conversions (as defined below), but before giving effect to the Rights Offering (as defined below) and the MIP Pool (as defined below) (the “Exchange Stock”) (collectively, the “Exchange Transactions”). The converted debt will be exchanged at an effective conversion price of $9.23 per share assuming the Closing occurs on December 31, 2025, or an 80.9% premium to the 30-day volume weighted average price as of August 20, 2025 of $5.10 per share.

In connection with the Exchange Agreement, all of the holders of the Class B common stock (the “Proxy Stockholders”) executed and delivered a Conversion Notice and Proxy (collectively, the “Conversion Notices”), pursuant to which each such Proxy Stockholder (i) opted to convert his, her or its respective shares of Class B common stock into shares of Class A common stock pursuant to the Company’s certificate of incorporation, effective immediately prior to (A) the effectiveness of the Thirteenth Amended and Restated Certificate of Incorporation (the “Amended and Restated Charter”), or (B) if stockholder approval of the Amended and Restated Charter is not obtained, the Closing (the “Conversions”), and (ii) granted to certain officers of the Company, at the request of the Board, a proxy to vote (or cause to be voted) all shares of common stock held by such Proxy Stockholders at the meeting of stockholders to be held to obtain the approval of all actions presented to the Company’s stockholders by the Board that are necessary and desirable in connection with the Recapitalization Transactions, including the issuance of the Exchange Stock, to the extent required by Nasdaq rules, the issuance of shares pursuant to the Rights Offering Backstop Agreement, and the Amended and Restated Charter (the proxy described in this clause (ii), the “Proxy”).

The Closing is not subject to a financing condition, but is subject to certain conditions, including (i) approval of the Company’s stockholders (the “Company Stockholder Approval”) of the issuance of the Exchange Stock pursuant to the Exchange Agreement and the amendment and restatement of the Company’s Amended and Restated 2021 Incentive Award Plan (as further described below), (ii) absence of any order or injunction prohibiting the consummation of the Recapitalization Transactions, (iii) consummation of the Rights Offering, (iv) substantially simultaneous consummation of the sale transactions contemplated by the Debt and Equity Purchase Agreement, (v) entry by the Company and the Investor Group into the New Credit Agreement and effectiveness thereof, (vi) adoption of amended and restated bylaws, (vii) subject in certain cases to customary materiality qualifiers, the accuracy of the representations and warranties contained in the Exchange Agreement and compliance with the covenants contained in the Exchange Agreement and (viii) no Company Material Adverse Effect having occurred since the date of the Exchange Agreement that is continuing.

The Exchange Agreement contains customary representations, warranties and covenants, including, among others, covenants by the Company to conduct the Company’s businesses in the ordinary course between the execution of the Exchange Agreement and the Closing, not to engage in certain kinds of transactions during such period (including payment of dividends outside of the ordinary course or as otherwise permitted under the Exchange Agreement), to convene and hold a meeting of the Company’s stockholders to consider and vote upon the Company Stockholder Approval, to seek approval from the Company’s stockholders of the Amended and Restated Charter, to conduct the Rights Offering, and, subject to certain customary exceptions, for the Board to recommend that the Company’s stockholders approve the issuance of the Exchange Stock pursuant to the Exchange Agreement, to the extent required by Nasdaq rules, the issuance of shares pursuant to the Rights Offering Backstop Agreement, and the Amended and Restated Charter. The Exchange Agreement also contains customary representations, warranties and covenants of Lender.

The Exchange Agreement contains a customary “no-shop” provision that restricts the Company’s ability to, among other things, solicit Takeover Proposals (as defined in the Exchange Agreement) from third parties and to provide non-public information to, and engage in discussions or negotiations with, third parties regarding Takeover Proposals. The “no-shop” provision allows the Company, under certain circumstances and in compliance with certain obligations set forth in the Exchange Agreement, to provide non-public information to any person and its representatives that has made a bona fide Takeover Proposal that either constitutes, or would reasonably be expected to lead to, a Takeover Proposal.

The Exchange Agreement contains certain termination rights for both the Company and Lender. The Company shall pay to Lender a fee of $6,000,000 if: (i) Lender terminates the Exchange Agreement as a result of an Adverse Recommendation Change (as defined in the Exchange Agreement) by the Board; (ii) the Company terminates the Exchange Agreement to enter into a definitive agreement for a Superior Proposal (as defined in the Exchange Agreement); or (iii) a Takeover Proposal has been made and thereafter the Exchange Agreement is terminated as a result of the Exchange Transactions not having been consummated on or before 11:59 p.m., Eastern time, on February 20, 2026 (as such date may be extended pursuant to any written agreement to so extend that is executed by the Company and Lender), the Company Stockholder Approval not having been obtained, the Company’s breach of the Company’s representations, warranties or covenants in a manner that would cause the related conditions to Closing to not be met or a Proxy Stockholder having rescinded, revoked, withdrawn, repudiated or challenged the validity or effectiveness of their respective Conversion Notices or Proxy (a “Proxy Revocation”), and within 12 months of such termination the Company or any of the Company’s subsidiaries consummate a specified Takeover Proposal or enter into a definitive agreement providing for a specified Takeover Proposal. The Company shall pay to Lender a fee of $2,000,000 if Lender terminates the Exchange Agreement as a result of a Proxy Revocation (which shall be creditable against the $6,000,000 termination fee). The Exchange Agreement also provides that either party may specifically enforce the other party’s obligations under the Exchange Agreement.

Pursuant to the Exchange Agreement, the Company and Lender shall take all actions as may be necessary to cause, upon the Closing, the Board to consist of seven members, including Ms. Hyman, a director selected by Ms. Hyman and approved by the Investor Group, a director designated by Nexus, a director designated by Story3 and three directors designated by the Board and subject to the approval of the Investor Majority (as defined in the Investor Rights Agreement).

The New Credit Agreement, when entered into in accordance with the terms of the Exchange Agreement, will amend and restate the 2025 Amended Facility and provide for $120 million in aggregate principal amount of term loans comprised of (x) $100 million of Exchange Consideration Term Loans and (y) $20 million of new money term loans to be provided by the Investor Group at the Closing (the “New Money Term Loans”). All such term loans would mature on the fourth anniversary of the Closing and bear interest, at the Company’s option, at either (i) a bank reference rate, plus 4.00% or (ii) term SOFR plus 5.00%, in each case per annum. The New Credit Agreement would also modify the 2025 Amended Facility in certain other respects, including by temporarily reducing the minimum liquidity maintenance covenant from $30 million to $15 million, which reduced minimum liquidity maintenance covenant applies during the period from the Closing until February 20, 2027 and thereafter reverts to $30 million.

Pursuant to the Debt and Equity Purchase Agreement, subject to the terms and conditions thereof, each of Nexus and Story3 has agreed to enter into the New Credit Agreement, to provide its share of the New Money Term Loans, and to purchase (i) $15 million of the Exchange Consideration Term Loans and (ii) 15% of the Exchange Stock from Lender for an aggregate purchase price of $15 million immediately following the Closing. Consummation of the sale transactions under the Debt and Equity Purchase Agreement is conditioned only on the substantially simultaneous closing of the Exchange Transactions.

Pursuant to the Investor Rights Agreement, which takes effect upon the closing of the Exchange Transactions, the Company will be required to prepare and file with the SEC, within 20 days following the Closing, a shelf registration statement registering the resale of Class A common stock held by Ms. Hyman and the Investor Group, and will grant certain demand, piggyback and shelf registration rights to Ms. Hyman and the Investor Group. The Investor Rights Agreement also provides for certain Board designation rights of the Investor Group and Ms. Hyman following the Closing. Pursuant to the Investor Rights Agreement, for so long as they meet certain minimum ownership thresholds, each of Nexus and Story3 will be entitled to designate one director to the Board, and the Board will designate three directors to the Board, subject to the approval of the Investor Majority and after considering in good faith Ms. Hyman’s views in connection therewith. In addition, the Investor Rights Agreement provides that, so long as Ms. Hyman serves as Chief Executive Officer, she will be designated as a member of the Board, and, for so long as she continues to own a specified minimum number of Class A common stock, Ms. Hyman will be entitled to appoint one additional director to the Board, subject to the reasonable approval of the Investor Majority. Subject to certain minimum ownership thresholds, each of Ms. Hyman, Nexus and Story3 would also be entitled to appoint a non-voting Board observer, and the Lender would be entitled to appoint two non-voting Board observers; provided, that (i) each of Story3 and Nexus shall have the right to designate one Board observer in total pursuant to the Investor Rights Agreement and the New Credit Agreement and (ii) the Lender shall have the right to designate two Board observers in total pursuant to the Investor Rights Agreement and the New Credit Agreement.

Pursuant to the Exchange Agreement, the Company has agreed to prepare and file with the SEC a registration statement on Form S-1 in connection with a $12,500,000 rights offering by the Company (the “Rights Offering”). Under the Rights Offering Backstop Agreement, the Investor Group agreed to purchase from the Company, at a price of $4.08 per share, all unsubscribed shares of the Class A common stock to be issued in connection with the Rights Offering, on the terms and subject to the conditions set forth in the Rights Offering Backstop Agreement. The completion of the Rights Offering, as well as the Investor Group’s obligations to complete the purchase of shares pursuant to the Rights Offering Backstop Agreement, are subject to certain customary conditions, including among others, that a registration statement with respect to the Rights Offering has been declared and remains effective and, to the extent required by Nasdaq rules, stockholder approval of the purchase of shares pursuant to the Rights Offering Backstop Agreement.

Concurrently with entry into the Exchange Agreement, the Company entered into a Fourteenth Amendment to the 2025 Amended Facility. The Fourteenth Amendment provides that, until the earliest of (a) February 20, 2026 (which may be extended if agreed to by the parties), (b) termination of the Exchange Agreement (or 30 days after the termination of the Exchange Agreement under certain conditions), and (c) the Closing (“Relief Termination Date”), (i) interest that would otherwise be payable in cash will be capitalized and (ii) the liquidity financial covenant level will be reduced to $15 million. In addition, the Fourteenth Amendment increases the number of Board observers permitted to be designated by the Agent from one to two and defers the operation of certain other financial covenants until the end of the fiscal year ending January 31, 2026. Relief under the Fourteenth Amendment generally continues until the earliest of the Outside Date (as defined in the Exchange Agreement), termination of the Exchange Agreement (with an additional 30-day relief period in certain circumstances) and the occurrence of the Closing.

The Exchange Agreement requires that the Company take all actions necessary to increase the maximum number of shares of Class A common stock authorized for issuance under the Amended and Restated 2021 Incentive Award Plan, subject to stockholder and Board approval, by a number of shares of Class A common stock (such shares, the “MIP Pool”), equal to approximately 18.3% of the shares of Class A common stock outstanding immediately prior to the Closing, determined on a fully diluted basis.

In connection with the entry into the Exchange Agreement and with effectiveness contingent on the Closing, on August 20, 2025, the Company and Ms. Hyman entered into the Amended Employment Agreement. The Amended Employment Agreement provides, among other things, for an initial term that expires on January 31, 2030, subject to automatic one-year extensions unless one party provides the other with notice not more than 90 days prior to the expiration of the term.

In addition, the Amended Employment Agreement reduces the cash severance that Ms. Hyman is eligible to receive. Under the terms of the Amended Employment Agreement, Ms. Hyman will be eligible for a cash severance payment in an amount equal to (i) her applicable “severance multiplier,” multiplied by (ii) her then-current annual base salary and annual target bonus. Her “severance multiplier” will be equal to 1.5 in the event that during either the 12-month period following the Closing or the 24-month period following a “change in control,” her employment is terminated by the Company without “cause” or, in certain specified circumstances, she resigns for “good reason” (each, as defined in the Amended Employment Agreement). Her severance multiplier will be 1.0 in the event that her employment is terminated by the Company without cause or she resigns for good reason other than under the circumstances described in the immediately preceding sentence.

In connection with the entry into the Exchange Agreement, on August 20, 2025, the Compensation Committee of the Board approved the Amended Transaction Bonus Plan. The Amended Transaction Bonus Plan provides that each participant will no longer be eligible for the participant’s free cash flow bonus and the participant’s base transaction bonus (the “Base Transaction Bonus”) will not be paid in full upon the Closing. Instead, the Base Transaction Bonus will be paid 25% at Closing (the “Closing Installment”), 6.25% on the 18-month, 24-month, 30-month and 36-month anniversaries of the Closing (each, a “Semi-Annual Installment”), with the final 50% becoming payable on the earlier of January 31, 2030, and the date of a change in control (which does not include the Recapitalization Transactions), in the case of the final 50%, based on the satisfaction of financial or stock price-based performance measures (as applicable), provided that the participant remains employed through the date each Base Transaction Bonus installment is paid. The Closing Installment and each Semi-Annual Installment are subject to repayment to the Company, net of taxes paid with respect thereto, if the participant terminates their employment prior to the applicable vesting date other than due to a “good leaver termination” (as defined in the Amended Transaction Bonus Plan). The Closing Installment will vest 25% on each of the first four anniversaries of the Closing, the first Semi-Annual Installment will vest 33% on each of the second, third and fourth anniversary of the Closing, the second and third Semi-Annual Installments will each vest 50% on each of the third and fourth anniversary of the Closing, and the fourth Semi-Annual Installment will fully vest on the fourth anniversary of the Closing.

In September 2025, the Company agreed to settle a pre-litigation dispute that existed as of July 31, 2025. The settlement agreement is in the process of being finalized. The full amount of the settlement is expected to be paid directly by the Company’s insurance carriers, subject to an immaterial standard deductible. In accordance with ASC 855, Subsequent Events, the anticipated settlement amount and related insurance proceeds have been recognized in the Company’s financial statements for the quarter ended July 31, 2025. The overall impact of the settlement is not material to the Company’s financial statements.