Reformation Inc 10-Q for FY2026 Q2
Reformation Inc. (REF)
10-Q
2026-09-11
For: 2026-06-27
View Original
Added on
September 11, 2026
About this 10-Q
Reformation Inc filed this 10-Q on September 11, 2026, covering the quarter ended June 27, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 27, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $155.23M
- up 24.1% from $125.07M a year earlier
- Net income
- $12.41M
- up 79.4% from net income of $6.92M a year earlier
- Diluted EPS
- $0.23
- up 76.9% from $0.13 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________________
FORM 10-Q
__________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended June 27, 2026
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: 001-43424
__________________________
(Exact Name of Registrant as Specified in its Charter)
__________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(213 ) 282-2025
__________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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. Yes ☐ No x
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). Yes x No o
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 | o | Accelerated filer | o | |||||||||||
| x | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of September 8, 2026 the registrant had 59,079,320 shares of common stock, $0.0001 par value per share, outstanding.
Table of Contents
| Page | |||||||||||
Condensed Consolidated Balance Sheets (unaudited) June 27, 2026 and December 27, 2025 | |||||||||||
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) 13 and 26 weeks ended June 27, 2026 and June 28, 2025 | |||||||||||
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) 13 and 26 weeks ended June 27, 2026 and June 28, 2025 | |||||||||||
Condensed Consolidated Statements of Cash Flows (unaudited) 26 weeks ended June 27, 2026 and June 28, 2025 | |||||||||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current views with respect to, among other things, future events and our future business, financial condition, results of operations, prospects and our strategy for growth.
Some of the forward-looking statements can be identified by the use of terms such as “believes”, “expects”, “may”, “will”, “should”, “could”, “seeks”, “intends”, “plans”, “estimates”, “anticipates” or other comparable terms. However, not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not related to present facts or current conditions or that are not historical facts. Although the forward-looking statements contained in this Quarterly Report on Form 10-Q reflect management’s current beliefs and expectations based upon information currently available to management and upon assumptions which management believes to be reasonable, actual results may differ materially from those stated in or implied by these forward-looking statements.
A number of factors could cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements, including those listed in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. Forward-looking statements are not guarantees of performance and speak only as of the date hereof. They necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause our actual results, performance and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements.
Forward-looking statements are subject to known and unknown risks and uncertainties, many of which are beyond our control. Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Quarterly Report on Form 10-Q as a result of various factors, including, among others:
•our ability to attract new customers and retain returning customers;
•our ability to maintain and enhance the value and reputation of our brand;
•the effect of tariffs imposed by the U.S. government or a global trade war;
•our ability to anticipate and respond to changing consumer preferences;
•our ability to accurately forecast customer demand;
•our ability to effectively manage our growth;
•our ability to grow our e-commerce and retail channels and execute our expansion into new markets;
•the risks associated with leasing property;
•our ability to achieve the sustainability targets and goals that we have announced;
•our expectations regarding sustainability initiatives;
•our ability to attract and retain qualified personnel;
•our reliance on suppliers to provide materials and to produce our products;
•our dependence on key suppliers;
•our ability to protect our intellectual property rights and any costs associated therewith; and
•other risks and uncertainties discussed under Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and subsequent filings with the Securities and Exchange Commission.
Accordingly, you should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by the cautionary statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q.
The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and trends that we believe may affect our business strategy, financial condition, results of operations, short-term and long-term business operations and objectives and financial needs. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect
new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Reformation Inc. Condensed Consolidated Balance Sheets (Unaudited) | ||||||||||||||
(in thousands, except share and per share data) | June 27, 2026 | December 27, 2025 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| IEEPA tariff receivable | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Right-of-use assets | |||||||||||
| Intangible assets, net | |||||||||||
| Trade name | |||||||||||
| Goodwill | |||||||||||
| Other noncurrent assets | |||||||||||
Total assets | |||||||||||
Liabilities and Stockholders' Equity | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Recapitalization dividend payable | |||||||||||
| Current lease liabilities | |||||||||||
| Current portion of long-term debt | |||||||||||
| Deferred revenue | |||||||||||
Total current liabilities | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Noncurrent lease liabilities | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Deferred revenue, net of current portion | |||||||||||
| Other noncurrent liabilities | |||||||||||
Total liabilities | |||||||||||
| Commitments and contingencies (Note 14) | |||||||||||
| Stockholders' equity | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive (loss) income | ( | ||||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Reformation Inc. Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) 13 and 26 Weeks Ended June 27, 2026 and June 28, 2025 | ||
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
| (in thousands except share and per share data) | June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||||||||
| Net revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Marketing expenses | |||||||||||||||||||||||
| Selling, general and administrative expense | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Income from operations | |||||||||||||||||||||||
| Other (expense) income | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
Total other (expense) income | ( | ( | ( | ( | |||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
Foreign currency translation (loss) gain, net of tax | ( | ( | |||||||||||||||||||||
Total comprehensive income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||
| Earnings per share | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares used in per share calculation | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Reformation Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) 13 and 26 Weeks Ended June 27, 2026 and June 28, 2025 | ||
| (in thousands, except share data) | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Stockholders' Equity | ||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balances at March 28, 2026 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Issuance of common stock from exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | — | — | — | |||||||||||||||||||||||||||||||
| Recapitalization dividend | - | — | ( | ( | ( | ||||||||||||||||||||||||||||||
| Net income | - | — | — | — | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balances at June 27, 2026 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| (in thousands, except share data) | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Stockholders' Equity | ||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balances at March 29, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | |||||||||||||||||||||||||||||||
| Net income | - | - | - | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | |||||||||||||||||||||||||||||||
| Balances at June 28, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| (in thousands, except share data) | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Stockholders' Equity | ||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balances at December 27, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Issuance of common stock from exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | — | — | — | |||||||||||||||||||||||||||||||
| Recapitalization dividend | - | — | ( | ( | — | ( | |||||||||||||||||||||||||||||
| Net income | - | — | — | — | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balances at June 27, 2026 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| (in thousands, except share data) | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Stockholders' Equity | ||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balances at December 28, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | |||||||||||||||||||||||||||||||
| Net income | - | - | - | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | |||||||||||||||||||||||||||||||
| Balances at June 28, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Reformation Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) 26 Weeks Ended June 27, 2026 and June 28, 2025 | ||
26 Weeks Ended | |||||||||||
| (in thousands) | June 27, 2026 | June 28, 2025 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||||||||
Depreciation of property and equipment | |||||||||||
Change in operating lease right-of-use assets | |||||||||||
Amortization of definite-lived intangible assets | |||||||||||
Amortization of debt issuance costs | |||||||||||
Deferred income taxes | ( | ||||||||||
Stock-based compensation expense | |||||||||||
Other | |||||||||||
Increase (decrease) in cash due to changes in operating assets and liabilities | |||||||||||
Accounts receivable | ( | ( | |||||||||
IEEPA tariff receivable | ( | ||||||||||
Inventories | ( | ( | |||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Other noncurrent assets | ( | ( | |||||||||
Accounts payable | ( | ( | |||||||||
Accrued expenses and other current liabilities | |||||||||||
Operating lease liabilities | ( | ( | |||||||||
Deferred revenue | |||||||||||
Other noncurrent liabilities | |||||||||||
Net cash provided by (used in) operating activities | ( | ||||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Proceeds from term loan, net of lender fees | |||||||||||
| Repayments on term loan | ( | ( | |||||||||
| Payment of debt issuance costs | ( | ||||||||||
| Payment of offering costs | ( | ||||||||||
| Payment of dividends declared | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
Net change in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents | |||||||||||
| Beginning of the period | |||||||||||
| End of the period | $ | $ | |||||||||
| Supplemental cash flow information | |||||||||||
| Cash paid during the year for | |||||||||||
Income taxes, net of refunds | $ | $ | |||||||||
Interest | |||||||||||
| Noncash financing and investing activities | |||||||||||
| Recapitalization dividend accrued but not paid | |||||||||||
Purchase of property and equipment included in accounts payable and accrued expenses and other current liabilities | |||||||||||
Operating lease right-of-use assets obtained in exchange for operating lease liabilities | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Reformation Inc.
Notes to the Condensed Consolidated Financial Statements (unaudited)
1. Organization and Nature of Business
Reformation Inc. (formerly known as REF Topco, Inc.) is a Delaware corporation headquartered in Los Angeles, California. On April 11, 2025, REF Topco, Inc. changed its legal entity name to Reformation Inc. Reformation Inc. and its subsidiaries (collectively, the “Company”) sell apparel and accessories direct to customers through its website and company-owned retail stores located in the United States and internationally, as well as through wholesale and other channels. The Company’s mission is to bring sustainable fashion to everyone by minimizing its environmental impact through the sourcing of sustainable fabrics and vintage garments and incorporating sustainable practices throughout its supply chain and broader operations.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the year ended December 27, 2025, included in the Company’s final prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended, in connection with the Company’s initial public offering (“IPO”), on July 30, 2026 (the “IPO Prospectus”).
Fiscal Year End
Use of Estimates
Accounts Receivable, Net
Accounts receivable primarily consist of wholesale receivables from apparel retailers with a smaller portion attributed to credit card receivables related to sales transactions from the Company’s ecommerce platform and retail stores. Accounts receivable are carried at invoiced amounts less allowances for expected credit losses and are generally settled within 30 to 60 days. The allowance for expected credit losses is based on forecasts of future economic conditions, as well as information about past events and current conditions under the accounts
9
IEEPA Tariff Receivable
Revenue Recognition
Revenue is recognized as the net amount estimated to be received after deducting estimated or known amounts for sales returns and chargebacks. Sales returns and chargebacks are estimated using the expected value method based primarily on historical rates. Estimates are reviewed regularly until product returns are realized and the result of any such adjustments are known. As of June 27, 2026 and December 27, 2025, the amount of reserves for sales returns included in the accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets were $17.4 million and $12.7 million, respectively.
The Company accounts for gift card transactions by recording a contract liability at the time gift cards are issued to the customer in exchange for consideration from the customer which is presented as deferred revenue in the condensed consolidated balance sheets. Contract liabilities for customer gift cards remain on the Company’s books until the gift card is redeemed by the customer, at which time the Company records the redemption of the gift card for merchandise as net revenues. Gift cards do not have an expiration date. The Company determines the probability of gift cards being redeemed based on historical redemption patterns and recognizes net revenues on unredeemed gift cards where the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions (gift card breakage).
Deferred Offering Costs
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The new guidance requires, on an annual basis, disclosure of specific categories in
10
the rate reconciliation and disclosure of income taxes paid disaggregated by jurisdiction. The Company will adopt the new standard during the year ended December 26, 2026. Adoption of the new standard is expected to result in expanded tax disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). The new guidance requires additional disclosure related to the disaggregation of income statement expense categories. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The adoption of ASU 2024-03 is expected to result in additional disclosures and the Company is currently evaluating the effect this standard will have on the condensed consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update provides amendments to clarify and modernize the accounting for costs incurred to develop or acquire internal-use software. Under this guidance, capitalization for internal-use software costs begins when management has authorized and committed to funding the project and it is probable the project will be completed, and the software will be used to perform the intended function. ASU 2025-06 is effective for annual and interim periods beginning after December 15, 2027, with early adoption permitted on a retrospective, modified, or prospective basis. The Company is currently evaluating the potential impact of this guidance and the timing of adoption.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. This update provides amendments to for a broad range of Topics arising from technical corrections, unintended application of the FASB codification, clarifications, and other minor improvements. The resulting amendments are collectively referred to as “Codification improvements”. The guidance is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. An entity may elect to early adopt the amendments on an issue-by-issue basis. The Company is currently evaluating the potential impact of this guidance and the timing of adoption, especially issue 10 which clarifies the treasury stock retirement guidance in paragraph 505-30-30-8 to explicitly permit the excess of repurchase price over par or stated value to be accounted for entirely as a deduction from additional paid-in capital (“APIC”) as long as APIC does not become negative.
In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818), which establishes recognition, measurement, presentation and disclosure requirements for environmental credits and environmental credit obligations. The guidance requires costs incurred to obtain environmental credits that are used for voluntary environmental initiatives to be recognized as expense when incurred. The guidance also requires enhanced annual disclosures related to environmental credits and environmental credit obligations. The amendments are effective for public business entities for annual reporting periods beginning after December 15, 2027, including interim periods within those annual reporting periods, with early adoption permitted. The Company currently purchases carbon offsets in connection with its voluntary environmental initiatives and expenses the related costs as incurred. Accordingly, the Company does not expect the adoption of ASU 2026-02 to have a material impact on its consolidated financial statements; however, adoption will result in additional disclosures related to the Company’s environmental credit activities. The Company is currently evaluating the timing of adoption.
3. Inventories
Inventories consist of the following:
| As of | |||||||||||
| (in thousands) | June 27, 2026 | December 27, 2025 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| $ | $ | ||||||||||
11
As of June 27, 2026 and December 27, 2025, the Company had inventory reserves in the amount of $14.8 million and $14.5 million, respectively.
4. Property and Equipment, Net
Property and equipment consist of the following:
| (in thousands) | As of | ||||||||||
| June 27, 2026 | December 27, 2025 | ||||||||||
| Leasehold improvements | $ | $ | |||||||||
| Computer equipment and software | |||||||||||
| Furniture, fixtures and office equipment | |||||||||||
| Machinery and equipment | |||||||||||
| Construction in progress | |||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| $ | $ | ||||||||||
For the 13 weeks ended June 27, 2026 and June 28, 2025, depreciation and amortization expense amounted to $4.0 million and $2.8 million, respectively. For the 26 weeks ended June 27, 2026 and June 28, 2025, depreciation and amortization expense amounted to $8.0 million and $5.5 million, respectively. Depreciation and amortization expense of property and equipment are primarily recognized within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income (loss).
5. Goodwill, Trade Name and Intangible Assets, Net
Goodwill, trade name and intangible assets consist of the following:
| As of June 27, 2026 | |||||||||||||||||||||||
| (in thousands) | Useful Life (Years) | Gross | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| Trade name | Indefinite | $ | $ | - | $ | ||||||||||||||||||
| Goodwill | Indefinite | - | |||||||||||||||||||||
| E-commerce and retail customer relationships | |||||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
| As of December 27, 2025 | |||||||||||||||||||||||
| (in thousands) | Useful Life (Years) | Gross | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| Trade name | Indefinite | $ | $ | - | $ | ||||||||||||||||||
| Goodwill | Indefinite | - | |||||||||||||||||||||
| E-commerce and retail customer relationships | |||||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
12
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
| (in thousands) | As of | ||||||||||
| June 27, 2026 | December 27, 2025 | ||||||||||
| Salaries, wages and employee benefits | $ | $ | |||||||||
| Sales returns and allowances | |||||||||||
| Professional fees | |||||||||||
| Inventory purchases | |||||||||||
| Freight out | |||||||||||
| General and administrative | |||||||||||
| Sales tax payable | |||||||||||
| Marketing | |||||||||||
| Interest | |||||||||||
| Other accruals | |||||||||||
| $ | $ | ||||||||||
7. Long-Term Debt
On May 2, 2024, LYMI Inc., a wholly owned subsidiary of Reformation Inc., entered into a credit agreement with JPMorgan Chase Bank, N.A., Citibank, N.A., Morgan Stanley Senior Funding, Inc. and Royal Bank of Canada (the “Credit Agreement”), to secure a five-year term loan of $165.0 million (“Term Loan”) and a revolving line of credit (“Revolver”) with a maximum borrowing capacity of $30.0 million (together, the “Credit Facility”).
On June 17, 2026, the Company entered into an amendment to its Credit Agreement (the "Amendment"). The Amendment, among other things, (i) provided for an additional $52.0 million of term loan borrowing (ii) provided for an incremental $40.0 million delayed draw term loan facility, of which, $40.0 million was funded on June 17, 2026 (iii) extended the maturity date of the term loan facilities and the revolving credit facility to June 17, 2031, and (iv) revised the scheduled principal amortization of the term loan facilities to reduce required principal payments over the remaining term of the debt. Upon completion of the Amendment, the Company had $246.7 million of term loan borrowings outstanding on June 17, 2026. Borrowings under the Amended Term Loans bear interest at a variable rate based on (Secured Overnight Financing Rate (“SOFR”) plus an applicable margin.
The Company evaluated the Amendment in accordance with ASC 470, Debt, and concluded that the amendments to the term loan facilities should be accounted for as a debt modification as the terms were not substantially different. The Company incurred a total of $3.3 million in financing and third-party fees. Lender fees allocated to the term loans amounted to $2.8 million and were capitalized and will be amortized as an adjustment to interest expense over the remaining term of the debt using the effective interest method and the SOFR rate as of June 17, 2026. Third-party fees of $0.3 million incurred in connection with the modification of the term loan facilities were recognized in earnings as incurred. Fees allocated to the revolving borrowings of $0.2 million were capitalized and will be amortized ratably over the term of the revolving credit facility.
As of June 27, 2026 and December 27, 2025, the Company had $246.7 million and $158.8 million outstanding under its Term Loan, respectively, and no borrowings under its Revolver.
The Credit Facility includes a $10.0 million sub-limit on letters of credit. Outstanding letters of credit reduce the amount available to borrow on the Revolver. As of both June 27, 2026 and December 27, 2025, the available credit under the Revolver was $26.4 30.0 3.6 0.50 %.
13
The following summarizes the Company’s outstanding long-term debt:
| (in thousands) | As of | ||||||||||
| June 27, 2026 | December 27, 2025 | ||||||||||
| Term loans, gross | $ | $ | |||||||||
| Less: Unamortized debt, issuance costs | ( | ( | |||||||||
| Total long-term debt | |||||||||||
| Less: Current portion of long-term debt | ( | ( | |||||||||
| Long-term debt, net of current portion | $ | $ | |||||||||
The Term Loan may be prepaid in whole or in part prior to the maturity date and is subject to certain lender fees if converted, assigned, or paid on a day other than the end of the interest period.
The Term Loan requires quarterly principal payments with a balloon payment upon maturity. Scheduled principal payments for future fiscal years are as follows:
| (in thousands) | ||||||||
| Fiscal year | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| 2031 | ||||||||
| Total Term Loan - principal payments | $ | |||||||
Interest on the Term Loan is payable quarterly and accrues, at the Company’s option, at either SOFR plus 3.75 % or the Alternate Base Rate plus 2.75 %. The Alternate Base Rate is defined as the greatest of (i) the prime rate, (ii) the New York Federal Reserve Bank rate plus 0.50 %, and (iii) one-month Term SOFR plus 1.00 %, subject to a floor of 1.00 %.
Borrowings under the Credit Facility are collateralized by substantially all assets of the Company. The Credit Agreement contains various customary representations and warranties, affirmative and negative and covenants, including, among others, covenants limiting the ability of the Company and its subsidiaries to dispose of assets, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to customary exceptions. The Credit Facility requires the Company to maintain a minimum fixed charge coverage ratio of 1.15 to 1.00 as of the last day of each fiscal quarter of the Company through March 31, 2025 and 1.25 to 1.00 for each fiscal quarter thereafter. The Credit Facility also requires that the Company maintain a maximum leverage ratio of 3.50 times Consolidated Adjusted Earnings Before Income Taxes, Depreciation and Amortization (“Adjusted EBITDA”) (as defined in the financing agreement) as of the last day of any fiscal quarter of the Company. As of June 27, 2026, the Company was in compliance with all financial covenants contained in the Credit Facility.
8. Net Revenues
A summary of disaggregated net revenues is as follows:
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
| (in thousands) | June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||||||||
| Direct-to-consumer (DTC) | $ | $ | $ | $ | |||||||||||||||||||
| Wholesale and other | |||||||||||||||||||||||
| Net revenues | $ | $ | $ | $ | |||||||||||||||||||
14
Direct-to-consumer represents net revenues from e-commerce through the Company’s online sale platform and net revenues from retail through direct product sales made from stores located in the U.S., United Kingdom, Canada, and France. Wholesale and other net revenues consist of sales made to third-party retailers such as department stores and online retailers, sales to distributors, and other miscellaneous revenues such as sample sales.
9. Income Taxes
The Company accounts for income taxes in interim periods using an income statement approach in accordance with ASC 740-270. Under this approach, the interim income tax provision is determined by estimating the annual effective tax rate expected to be applicable for the full fiscal year and applying that rate to year to date ordinary income (or loss).
10. Stock-Based Compensation
In 2019, the Company established the 2019 Stock Option Plan (the “2019 Plan”) to allow the Company to issue nonqualified stock options (“NQSO”) to eligible participants.
The 2019 Plan is administered by the Compensation Committee of the Company’s Board of Directors, which determines the terms of the options granted, including exercise price, number of options granted, and vesting period of such options. Under the 2019 Plan, the exercise price of options may not be less than the fair market value of the Company’s common stock at the date of grant. Options have a term of no more than ten years from the date of grant and are generally cancelled 90 days after termination of employment or other service.
As of June 27, 2026, there were 6,724,960 shares reserved for issuance under the 2019 Plan, of which options to purchase 5,838,178 shares were outstanding and 886,782 shares remained available for issuance.
Stock Options
Prior to March 27, 2026, the Company granted 50 % of its options with a service condition (“time-based option”) and 50 % of the options with both market and an implied performance condition (“performance-based option”) (collectively, the “Options”). The time-based options generally vest over a four-year period with 25 % of the shares vesting one year after the service date and the remaining 75 % of shares vesting in equal installments monthly for the following 36 months. The performance-based options were originally set to vest when the Company’s controlling stockholder achieves a multiple of invested capital (“MOIC”) ranging from 175 % to 250 % of invested capital, based on cash proceeds received by the investor. At the grant date, the performance-based awards had a service condition, the MOIC condition, and an implied performance condition because the MOIC condition was not deemed to be achievable without the occurrence of a Change in Control or an IPO. Prior to March 27, 2026, no compensation cost was recognized for the performance-based options as the implied performance condition was not considered probable.
On March 27, 2026, the Company’s Board of Directors removed the non-service conditions on all outstanding performance-based options, thereby converting such options to time-based vesting awards. Following the modification, the former performance-based options are subject to the same time-based vesting conditions and other key terms as the time-based options originally granted to the same participant under the same option agreement.
The modification was determined to be an improbable-to-probable modification and, accordingly, was accounted for as new equity awards for accounting purposes, with compensation cost measured based on the fair value of the modified awards as of the modification date. The aggregate fair value of modified awards was $25.3 million at the date of modification, determined using the Black-Scholes option-pricing model with the following weighted-average assumptions: expected term of 0.9 years, expected volatility of 45 %, risk-free interest rate of 3.76 %, and expected dividend yield of 0 %. Compensation cost for the modified awards is measured at the modification-date fair value and recognized over the requisite service period of the modified awards. For awards that were already
15
vested as of the modification date, the related compensation cost was recognized immediately. During the 13 weeks ended March 28, 2026, the Company recognized compensation expense of $23.8 million in connection with this modification since the majority of these options were vested at the modification date.
Option activity under the 2019 Plan for time-based option grants is as follows:
| Time-Based Options | |||||||||||||||||||||||
| Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
| Outstanding at December 27, 2025 | $ | $ | |||||||||||||||||||||
| Options exercised | ( | ||||||||||||||||||||||
| Options forfeited or expired | ( | ||||||||||||||||||||||
Options modified (a) | |||||||||||||||||||||||
| Outstanding at June 27, 2026 | $ | $ | |||||||||||||||||||||
| Exercisable at June 27, 2026 | $ | $ | |||||||||||||||||||||
| Vested at June 27, 2026 | $ | $ | |||||||||||||||||||||
For the 13 weeks ended June 27, 2026 and June 28, 2025, stock-based compensation expense was $1.8 million and $0.3 million, respectively. For the 26 weeks ended June 27, 2026 and June 28, 2025, stock-based compensation expense was $25.9 million and $0.6 million, respectively. Stock-based compensation expense was recognized almost entirely in selling, general and administrative expense except for an immaterial amount recorded in cost of goods sold.
As of June 27, 2026, total unrecognized compensation cost for all time-based options was 1.5 million and was recognized in full in July 2026 as a result of an acceleration of the vesting of all outstanding time-based options. The accelerated vesting was triggered by the Company’s controlling stockholder beneficially owning less than 50 % of the Company’s issued and outstanding shares upon completion of the IPO.
Restricted Stock Units
During the 13 weeks and 26 weeks ended June 27, 2026, the Company’s Board of Directors granted restricted stock unit awards (“RSUs”) to key employees outside of the 2019 Plan.
The awards contain both a service condition and a performance-based condition. Under the service condition, the awards vest over a period of 3 or 4 years. The performance condition accelerates vesting at a Change in Control or an IPO and the awards would be forfeited if no Change in Control or IPO event occurs within 7 years of the grant date. No expense has been recognized for the RSUs for the 13 weeks ended June 27, 2026 and June 28, 2025 and for the 26 weeks ended June 27, 2026 and June 28, 2025, respectively, as the performance condition is not deemed probable.
16
The following table summarizes the activities for unvested RSUs:
| Restricted Stock Units | |||||||||||
| Number of Shares | Weighted- Average Grant Date | ||||||||||
| Unvested at December 27, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Forfeited | ( | $ | |||||||||
| Unvested at June 27, 2026 | $ | ||||||||||
11. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share for the periods indicated:
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | ||||||||||||||||||||
| Net income (in thousands) | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average shares outstanding—basic | |||||||||||||||||||||||
| Dilutive effect of stock options | |||||||||||||||||||||||
| Weighted average shares outstanding—diluted | |||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
Time-based shares excluded from the computation of diluted earnings per share | |||||||||||||||||||||||
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common stockholders by the sum of the weighted average number of common shares and dilutive potential common shares outstanding during the period.
The effect of the potential common shares from the exercise of the Company’s time-based stock options is included in diluted earnings per share under the treasury stock method as their effect is dilutive. The contingently issuable common shares from performance-based stock options and RSUs are excluded from diluted earnings per share as of June 28, 2025, because the Company determined that the performance and market conditions had not yet been satisfied. The contingently issuable common shares from performance-based RSUs are excluded from diluted earnings per share as of June 27, 2026, because the Company determined that the performance and market conditions had not yet been satisfied.
The following shares have been excluded from the computation of diluted earnings per share as their inclusion would have an anti-dilutive effect on earnings per share, or in the case of contingently issuable performance shares, conditions have not been satisfied:
•For the 13 weeks ended June 27, 2026 and June 28, 2025, the weighted-average outstanding time-based stock options to purchase 27,706 and 37,848 common shares, respectively. For the 26 weeks ended June 27, 2026 and June 28, 2025, the weighted-average outstanding time-based stock options to purchase 45,328 and 35,276 common shares, respectively.
17
•As of June 27, 2026 and June 28, 2025, the effect of nil and 3,051,782 of contingently issuable performance-based shares, respectively.
•As of June 27, 2026 and June 28, 2025, the effect of 371,438 and 67,783 of contingently issuable performance-based RSUs, respectively.
In March 2026, the Company converted all of its outstanding performance-based options into time-based options.
12. Stockholders’ Equity
The Company’s Board of Directors has authorized one class of shares, common stock. On July 13, 2026, the Company effected a 142.7 -for-1 forward split of its common stock and a proportionate increase in the number of authorized shares. Accordingly, all share and per share information throughout the consolidated financial statements have been retroactively adjusted to reflect the stock split. As of June 27, 2026, the Company was authorized to issue 107,025,000 shares of common stock and had 49,793,037 500,000,000 .
Dividend Recapitalization Transaction
On June 17, 2026, the Company declared a dividend in the amount of $1.63 per share (as adjusted for the 142.7 -for-1 forward stock split) to holders of its common stock using proceeds from the Amendment to the Credit Agreement as discussed in Note 7. The Board of Directors determined the dividend to be an extraordinary dividend under the 2019 Plan and certain RSU agreements, and consequently approved an adjustment to options outstanding under the 2019 Plan and RSUs outstanding under the RSU Agreements, pursuant to which (i) certain options and RSUs received an amount in cash equal to $1.63 for each such option and RSU, as applicable, (ii) the strike price of certain options was reduced by $1.63 for each such option and (iii) certain RSUs received an accrued dividend right equal to $1.63 for each such RSU, which are payable at the same time, and subject to the same terms, as the underlying RSU. The aggregate amount of the dividend and cash payments in respect of certain options and RSUs was $89.7 million, of which $60.6 million was paid during the thirteen weeks ended June 27, 2026 and $29.1 million was paid shortly thereafter. Accordingly, $29.1 million is recorded as a recapitalization dividend payable on the Company’s condensed consolidated balance sheet at June 27, 2026.
During the 13 weeks ended June 27, 2026, the Company recognized stock-based compensation expense of $1.5 million in connection with the dividend declaration on June 17, 2026.
13. Leases
The Company has certain manufacturing facilities, warehouse, office, and retail space that are accounted for as operating leases. The Company’s lease terms may include options to extend or terminate the lease and are, therefore, included in the operating lease right-of-use assets and operating lease liabilities when such options are reasonably certain to be exercised. Rent expense is recorded on a straight-line basis over the term of the lease (“operating lease cost”) and is included in cost of goods sold and selling, general, and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss).
The following table presents the Company’s total lease cost:
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
| (in thousands) | June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||||||||
| Operating lease expense | $ | $ | $ | $ | |||||||||||||||||||
| Short term lease expense | |||||||||||||||||||||||
| Variable lease expense | |||||||||||||||||||||||
| Total lease expense | $ | $ | $ | $ | |||||||||||||||||||
18
Other information related to leases are as follows:
| As of | |||||||||||
| June 27, 2026 | December 27, 2025 | ||||||||||
| Weighted average remaining lease term (in years) | |||||||||||
| Operating leases | |||||||||||
| Weighted average discount rate | |||||||||||
| Operating leases | % | % | |||||||||
Future minimum lease payments for operating leases are as follows:
| (in thousands) | Operating Lease Liability | |||||||
| Fiscal year | ||||||||
| Remainder of 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total undiscounted lease payments | ||||||||
| Less: Imputed interest | ( | |||||||
| Present value of future minimum lease payments | $ | |||||||
14. Commitments and Contingencies
Legal Matters
15. Employee Benefit Plan
In 2019, the Company established The LYMI Inc. 401(k) Profit Sharing Plan and Trust (the “Plan”) of LYMI Inc. Employees who have worked for the Company for 13 consecutive weeks and meet certain eligibility restrictions may participate in the Plan and may defer up to 92 % of their salaries up to the maximum amount allowed by law of their eligible compensation to the Plan. The Company’s matching contribution is based on a percentage formula set forth in the Plan agreement. For the 13 weeks ended June 27, 2026 and June 28, 2025, Company contributions to the Plan were $0.7 million and $0.6 million, respectively. For the 26 weeks ended June 27, 2026 and June 28, 2025, Company contributions to the Plan were $1.2 million and $1.0 million, respectively. Contributions to the employee benefit plan are primarily recognized within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income (loss).
16. Segment Information
The Company’s operations are conducted as one operating segment and one reportable segment via revenue derived from the sale of individual products sold to customers through various channels. Segment information has
19
been determined based on how the Company’s chief operating decision maker (“CODM”) manages its business, makes operating decisions, and evaluates operating performance. The Company’s CODM is its Chief Executive Officer. The Company’s assets are managed centrally and are reported internally in the same manner as the condensed consolidated financial statements, and thus, no additional information is disclosed herein. While the CODM evaluates operating performance based on both consolidated net income and Adjusted EBITDA, the primary measure of profit and loss evaluated by the CODM for its single reportable segment is consolidated net income.
The CODM is also regularly provided disaggregated expense information, as shown below:
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
| (in thousands) | June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Cost of goods sold(a) | |||||||||||||||||||||||
| Selling expenses(a) | |||||||||||||||||||||||
| Marketing expenses(a) | |||||||||||||||||||||||
| Employee compensation(b) | |||||||||||||||||||||||
| Occupancy expenses | |||||||||||||||||||||||
| Other segment expenses(c) | |||||||||||||||||||||||
| Depreciation of property and equipment | |||||||||||||||||||||||
| Amortization of definite-lived intangible assets | |||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Plus: | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Other segment items | |||||||||||||||||||||||
| Segment net income | $ | $ | $ | $ | |||||||||||||||||||
(a)Amounts are exclusive of depreciation and amortization expense as well as certain employee compensation and occupancy expenses.
(b)Amount is exclusive of stock-based compensation expense.
(c)Other segment expenses primarily include technology costs, professional fees, and other general and administrative expenses.
17. Geographic Information
The Company operated in the United States and internationally for the 13 and 26 weeks ended June 27, 2026 and June 28, 2025. Net revenues from retail stores are attributed to the geographic area in which the store is located, while net revenues from e-commerce and wholesale are attributed based on the customer's shipping destination.
The following table lists net revenues by geographic area:
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
| (in thousands) | June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| Rest of the world | |||||||||||||||||||||||
| Total net revenues | $ | $ | $ | $ | |||||||||||||||||||
20
The following table lists long-lived assets by foreign geographic area:
| As of | |||||||||||
| (in thousands) | June 27, 2026 | December 27, 2025 | |||||||||
| United States | $ | $ | |||||||||
| Rest of the world | |||||||||||
| Total property and equipment, net | $ | $ | |||||||||
The following table lists right-of-use assets by foreign geographic area:
| As of | |||||||||||
| (in thousands) | June 27, 2026 | December 27, 2025 | |||||||||
| United States | $ | $ | |||||||||
| Rest of the world | |||||||||||
| Total right-of-use assets | $ | $ | |||||||||
18. Subsequent Events
Initial Public Offering
On July 31, 2026, the Company completed its IPO, pursuant to which the Company issued and sold 9,478,821 shares of common stock, and the selling stockholders sold an aggregate of 4,583,679 shares of common stock at a price per share of $15.00 . The Company received aggregate proceeds of approximately $132.2 million from the IPO, after deducting the underwriting discount of $10.0 million. On September 1, 2026, an additional 229,546 shares of common stock were sold by the selling stockholders pursuant to the underwriters’ partial exercise of their option to purchase additional shares. The Company did not receive any proceeds from the sale of these shares. Upon the completion of the IPO, the Company’s authorized capital stock consists of 500,000,000 shares of common stock, $0.0001 par value per share and 10,000,000 shares of preferred stock, $0.0001 par value per share.
Following the IPO, the Company used $110.0 million of the net proceeds for the partial repayment of term loans under the Credit Agreement and $8.5 million to repurchase shares of common stock and outstanding stock options from certain existing stockholders and employees. The remaining proceeds will be used to pay for expenses associated with the IPO and for general corporate purposes.
2026 Omnibus Incentive Plan
Effective July 29, 2026, the Company adopted the 2026 Omnibus Incentive Plan (the “2026 Plan”), pursuant to which the Company and its affiliates’ employees, consultants and directors will be eligible to receive incentive awards. The 2026 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards and performance awards, in each case intended to align the interests of participants with those of the Company’s stockholders. In connection with the 2026 Plan, 5,316,858 shares of the Company’s common stock were reserved for issuance.
On July 29, 2026, the Board of Directors granted stock options to purchase approximately 0.8 million shares under the 2026 Plan. One-third of such options vest on the first anniversary of the grant date, with the remaining two-thirds vesting in eight equal quarterly installments thereafter, subject to continued service through the applicable vesting dates. The Board of Directors also granted approximately 2.7 million RSUs to certain employees, officers and directors under the 2026 Plan, with vesting terms ranging up to three years .
In addition, the Board of Directors granted 300,000 performance-based RSUs to Hali Borenstein, the Company’s Chief Executive Officer (the “Borenstein Performance Award”). The Borenstein Performance Award is eligible to vest based on the achievement of specified stock price targets during the five-year period following the grant date. The award is divided into six tranches, each of which is subject to a separate, progressively higher stock price target. Achievement of the applicable stock price targets will be assessed quarterly, and a target will be deemed
21
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our annual audited consolidated financial statements and the related notes thereto for the fiscal year ended December 27, 2025 contained in our final prospectus (the “IPO Prospectus”) filed with the Securities and Exchange Commission (the “SEC”) on July 30, 2026 pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”). This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, such as those relating to our plans, objectives, expectations, intentions and beliefs, which involve risks and uncertainties. Our actual results may differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full fiscal year or any other period.
All references to the “Company,” “Reformation,” “we,” “our” and “us,” unless the context otherwise requires, are to Reformation Inc., a Delaware corporation, and its consolidated subsidiaries and all references to the “Issuer” are only to Reformation Inc.
Overview
Reformation is a premium sustainable womenswear brand built to challenge the conventional fashion model and reimagine how brands interact and engage with customers. Our goal is to have a positive impact on people and the planet while delivering both impressive financial and environmental results.
We believe we are the largest sustainable womenswear brand on the planet and we operate within the highly fragmented fashion industry. With approximately 1,204,000 Active Customers (as defined below) in the United States as of June 27, 2026, and an estimated 94 million women aged 18-60 in the United States, our implied penetration is approximately 1%, highlighting the large opportunity ahead. We believe we are well positioned to capture significant growth over the long term. Our path forward is clear: we intend to grow by increasing our distribution through both our direct-to-consumer (“DTC”) and wholesale channels, expanding our product assortment within existing and new product categories, growing in international markets, and driving operational excellence.
Initial Public Offering
On July 31, 2026, we completed our initial public offering (“IPO”) pursuant to which we issued and sold 9,478,821 shares of common stock, and the selling stockholders sold an aggregate of 4,583,679 shares of common stock at a price per share of $15.00 . On September 1, 2026, an additional 229,546 shares of common stock were sold by the selling stockholders pursuant to the underwriters’ partial exercise of their option to purchase additional shares. We received aggregate proceeds of approximately $132.2 million from the IPO, after deducting the underwriting discount of $10.0 million.
Key Factors Affecting Our Performance
We measure our business using both financial and operating metrics. We believe that our performance and future success depend on a variety of factors that present significant opportunities for our business but also present risks and challenges that could adversely impact our growth and profitability, including those discussed below and in “Risk Factors.”
Overall Economic Trends
The overall economic environment and related changes in consumer behavior have a significant impact on our business. In general, positive conditions in the broader economy promote consumer spending across our channels, while economic weakness may have a negative effect. Macroeconomic factors that can affect consumer spending patterns, and thereby our results of operations, include employment rates, business conditions, changes in the housing market, the availability of credit, interest rates and inflation.
23
All the products and materials that we import are subject to import taxes and duties, including tariffs. Since the beginning of 2025, the U.S. government has imposed incremental tariffs, including International Emergency Economic Powers Act (“IEEPA”) tariffs, at varying rates on certain imports. There has been significant volatility in U.S. tariff and customs policy, and trade negotiations between the United States and other countries are ongoing. If tariffs on countries from which we source products increase further, it may increase our cost of sales, and similar to all other potential cost increases, we may pass a portion of these costs through to customers. For additional information on related risks, please see “Risk Factors.”
We have undertaken, and continue to evaluate, a series of actions and initiatives intended to mitigate the impact of tariffs, including diversifying our supply chain, engaging in cost-sharing discussions with our vendors, optimizing our product import logistics, and selectively adjusting product pricing. These mitigation efforts may take significant investment and time to implement. Ultimately, these efforts may not yield the intended results or be as effective as tariff policy changes, and could have adverse impacts on our business, financial condition and results of operations.
Ability to Increase Brand Awareness
As a lifestyle brand operating primarily in e-commerce and physical retail environments, we seek to establish and expand a strong brand presence in a competitive market. We deploy a deliberate and disciplined approach to brand building and marketing investment that leverages a combination of direct marketing, digital media, new store openings, wholesale expansion and strategic partnerships to reach new audiences and brand positioning across regions.
We believe that continued investment in brand awareness can support customer acquisition and retention, which contributes to revenue growth. We invest in innovative marketing strategies and use data analytics to evaluate the effectiveness of these initiatives. Our goal is to establish our brand as a leader in the fashion industry, recognized for quality, style, sustainability, and commitment to making our customers look and feel good.
Customer Acquisition
Our growth will depend in part on our ability to cost-effectively attract new customers. To continue to grow profitably, we intend to acquire new customers, retain those customers, drive repeat purchases and ultimately increase Active Customers and DTC Net Revenue per Customer at a reasonable cost. As of June 27, 2026, our total Active Customer base was approximately 1.2 million compared to 1.0 million as of the second quarter of 2025, reflecting continued customer acquisition and retention.
We invest in brand building and marketing across a range of channels to acquire new customers. It is important that the cost of these efforts remain aligned with the net revenue and contribution margin we expect to generate from the customers acquired through such initiatives. We take an integrated approach to acquiring new customers, evaluating performance across channels to inform our marketing investments and optimize return.
Customer Retention and Repeat Purchase Rate
Our continued success depends in part on our ability to retain and drive repeat purchases from our returning customers. In addition to investments in brand and marketing, we invest in our products, merchandising, and overall customer experience to promote long-term customer retention and repeat purchases. We track the retention, spend, and repeat purchase behavior of new customers over time from their initial purchase. These metrics provide insights into the effectiveness of our retention strategies and help us to identify areas for improvement.
Sourcing and Supply Chain Management
Effective sourcing and supply chain management are central to our ability to deliver high-quality products to our customers in a timely manner. Our cost of goods is primarily comprised of the procurement of finished goods and raw materials, labor-related expenses, and associated import costs.
We have established strong relationships with a diversified network of suppliers, both domestically and internationally. We are committed to the highest levels of ethical sourcing and sustainable business practices throughout our supply chain and require adherence to our Preferred Partners Guide, which sets standards for environmental practices and labor conditions. By incorporating sustainable materials and processes into our product offerings, we aim to meet the growing consumer demand for sustainable fashion.
24
We closely monitor key performance indicators related to our sourcing and supply chain management, including lead times, on-time rates, quality, and initial markups. These metrics provide valuable insights into the efficiency of our operations and help us identify areas for improvement. Production speed is important to our ability to respond to changing consumer demand. We utilize robust reporting and maintain close collaboration with our vendor partners to monitor development and production timelines, enabling disciplined execution.
Inventory Management
Effective inventory management is essential to our operations and plays a crucial role in our ability to meet customer demand while optimizing costs. As an apparel and accessories company operating primarily in our DTC channel, we recognize that maintaining the right balance of inventory is vital to our success. We utilize thorough inventory management systems and rigorous analytics to monitor inventory levels, sales trends, and customer preferences. This allows us to optimize our inventory mix, ensuring that we have the right products available at the right time. By analyzing historical sales data and market trends, we can make informed decisions about reordering and selling out of various styles. Accurate demand forecasting is central to minimizing excess inventory and stockouts. This proactive approach enables us to align our inventory levels with anticipated customer demand, reducing the risk of overstocking or understocking.
Seasonality
Our business does not exhibit the same seasonal patterns as traditional retailers, which typically generate a significant portion of net revenue in the holiday quarter. Historically, we have experienced increased sales during the early spring and summer months, resulting in higher net revenue in the second fiscal quarter compared to the first fiscal quarter. The third fiscal quarter typically sees a moderate increase in net revenue relative to the second fiscal quarter, given the timing of one of our twice-yearly promotional events beginning in August. We expect this seasonality to continue in future years, subject to the timing and structure of our promotional sales strategy, including our twice-yearly promotional sales event and our annual Black Friday Cyber Monday promotion. Our operating income has reflected these historical quarterly trends as a significant portion of our expenses are relatively fixed in the short term.
Fiscal Calendar
We operate on a 52/53-week fiscal year convention whereby our fiscal year ends on the last Saturday in December of each year, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. Fiscal 2026 will end on December 26, 2026 and will be a 52-week year. Fiscal 2025 was a 52-week year and ended on December 27, 2025.
Key Operating Metrics
In addition to the measures presented in our condensed consolidated financial statements, we use the following key operating metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions. The following table summarizes our key operating metrics for the periods presented:
| 13 Weeks Ended | |||||||||||
| ($ in thousands except DTC Net Revenue per Customer) | June 27, 2026 | June 28, 2025 | |||||||||
Active Customers(1) (as of the end of period) | 1,204,000 | 980,000 | |||||||||
DTC Net Revenue per Customer(2) | $ | 417 | $ | 423 | |||||||
Store Count(3) (as of the end of period) | 70 | 53 | |||||||||
Gross margin(4) | 66.7 | % | 64.4 | % | |||||||
_____________________________________________________
(1)We define an Active Customer as a unique customer who has placed at least one order through our e-commerce platform or retail or outlet stores within the last rolling 12 months (excluding retail concession customers, employee orders, gift-card only orders, and face mask only orders, as purchased during the COVID-19 pandemic).
(2)We calculate DTC Net Revenue per Customer by dividing our DTC net revenue by the number of customers counted within the period in which an item in their purchase has shipped. As of June 27, 2026 and June 28, 2025, the number of customers was 1,202,000 and 978,000, respectively.
(3)We define Store Count as the total number of retail or outlet stores open at the end of a given period, excluding temporary store locations designated as pop-ups (which are typically open for one year or less) and our concession locations (“shop-in-shop”).
(4)We define gross margin as gross profit as a percentage of net revenue.
25
Active Customers
The number of Active Customers is a key operating metric that we use to assess the reach of our direct channel, including both our e-commerce platform and physical stores, as well as the resonance of our brand and product offering. We define an Active Customer as a unique customer who has placed at least one order through our e-commerce platform or retail or outlet stores within the last rolling 12 months (excluding retail concession customers, employee orders, gift-card only orders, and face mask only orders, as purchased during the COVID-19 pandemic). While we devote effort to identify customers who may have created duplicate profiles and consolidate profiles, this number may still contain duplicate profiles and may include accounts utilized by multiple individuals in a single household.
The number of Active Customers has increased steadily over time as we attract new customers and retain returning customers. As of June 27, 2026, our total Active Customer base was approximately 1.2 million compared to 1.0 million as of the second quarter of 2025, an increase of 23%, as we continued to acquire and retain customers efficiently and expanded our store footprint from 53 stores to 70 stores over the same time period. This growth is a function of rising brand awareness driven by new store openings, international expansion, product category extension, continued marketing efforts, and the retention of returning customers.
DTC Net Revenue per Customer
DTC Net Revenue per Customer is a key operating metric that reflects our ability to grow the average value of our customers on a trailing 12-month basis, which is key to understanding broader revenue growth trends. This metric is calculated by dividing our DTC net revenue by the number of customers counted within the period in which an item in their purchase has shipped. As of the second quarter of 2026 and the second quarter of 2025, the number of customers was 1,202,000 and 978,000, respectively. We use DTC Net Revenue per Customer to evaluate trends in customer spending behavior, including the extent to which customers engage with our brand across our assortment and shop across our omnichannel platform, and to assess the effectiveness of our sales strategies, marketing efforts, and customer engagement initiatives.
We continuously monitor our DTC Net Revenue per Customer and analyze trends over time to identify opportunities for improvement. DTC Net Revenue per Customer for the second quarter of 2026 was $417, compared to $423 in the second quarter of 2025, a decrease of 1.4%. The expansion of our customer base through new customer acquisition will have a dilutive impact on our total DTC Net Revenue per Customer in the year in which they are acquired. New customers typically have a lower initial spend compared to our returning customers. As customer cohorts mature, we generally observe increases in customer spend and purchase frequency over time. As we continue to refine our strategies to enhance DTC Net Revenue per Customer, we are focused on the following initiatives:
•Scaling our channel distribution both domestically and internationally to offer customers an omni-experience and increased access to interact and shop with our brand;
•Expanding our product offerings across occasions and categories, through growth of existing categories, launching new categories and offering exclusive collections and collaborations that resonate with our target audience; and
•Increasing customer retention and order frequency through loyalty initiatives, personalized shopping experiences and other tailored marketing strategies.
By focusing on increasing DTC Net Revenue per Customer, we aim to improve our overall financial performance and create long-term value for our shareholders. We believe that a strong emphasis on customer engagement, product quality and breadth, and personalized experiences will position us for sustainable growth in the competitive apparel and accessories market.
Store Count
Store Count is a key growth lever that reflects the scale of our owned, physical retail presence and our ability to reach consumers across markets. We define Store Count as the total number of retail or outlet stores open at the end of a given period, excluding temporary store locations designated as pop-ups (which are typically open for one year or less) and our concession locations (“shop-in-shop”). As of the second quarter of 2026, we had 67 full-price stores and three outlets. We regularly review the productivity of our stores and from time to time may decide to close a store due to, among other factors, underperformance, shift in consumer traffic trends, performance of retail hub in which a store is a part of or
26
changes in local customer and other retail demographics. Our results of operations have been, and will continue to be, affected by the timing and number of stores that we operate. The following chart represents our Store Count.
| 26 Weeks Ended | |||||||||||
| June 27, 2026 | June 28, 2025 | ||||||||||
Beginning of Period | 64 | 50 | |||||||||
New Store Openings | 6 | 4 | |||||||||
| Store Closures | - | 1 | |||||||||
| End of Period | 70 | 53 | |||||||||
Our store locations remain a key part of our growth strategy, and we view them as a valuable tool in helping us build our brand awareness as well as enabling our omnichannel capabilities. Our stores serve as valuable marketing vehicles for introducing new customers to our brand and driving repeat purchases and, in turn, positively impact Active Customers and DTC Net Revenue per Customer.
Gross Margin
We define gross margin as gross profit as a percentage of net revenue. Gross profit is equal to our net revenue less cost of goods sold. Cost of goods sold consists of all material, labor, and overhead costs incurred to manufacture or purchase merchandise sold to customers. Cost of goods sold also includes import duties, other taxes, inbound freight costs, storage costs during the manufacturing process, inventory valuation adjustments, shrinkage, and other miscellaneous costs.
Gross margin is impacted by the average price and volume of the products that we sell through our two channels and the impact of our twice-yearly promotional sales events and Black Friday Cyber Monday event.
Certain of our competitors and other retailers define cost of goods sold differently than we do. As a result, the reporting of our gross profit and gross margin may not be comparable to other companies.
Other Items
The following table provides a summary of our other items from continuing operations and the related favorable (unfavorable) impact on our gross margin ratio and selling, general, and administrative (“SG&A”) ratio:
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
| ($ in thousands) | June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||||||||
| Gross margin | |||||||||||||||||||||||
Tariffs(1) | $ | - | $ | (5,599) | $ | - | $ | (5,712) | |||||||||||||||
Tariff refund(2) | - | - | 10,154 | - | |||||||||||||||||||
| Total Other Items | $ | - | $ | (5,599) | $ | 10,154 | $ | (5,712) | |||||||||||||||
Impact on gross margin ratio | - | % | (4.5) | % | 3.8 | % | (2.7) | % | |||||||||||||||
| Selling, general, and administrative expenses | |||||||||||||||||||||||
Los Angeles Distribution Center costs(3) | $ | (406) | $ | (1,943) | $ | (862) | $ | (3,801) | |||||||||||||||
IPO-related executive bonuses and CFO transition expenses(4) | (150) | (753) | (600) | (953) | |||||||||||||||||||
Department store customer bankruptcy(5) | (15) | (139) | 90 | (581) | |||||||||||||||||||
| Total Other Items | $ | (571) | $ | (2,835) | $ | (1,372) | $ | (5,335) | |||||||||||||||
Impact on SG&A ratio | (0.4) | % | (2.3) | % | (0.5) | % | (2.5) | % | |||||||||||||||
(1)Represents costs related to IEEPA tariffs imposed on imported goods. This does not reflect potential future tariffs that may be implemented as a result of various policy proposals currently under consideration by the President.
(2)Represents refunds submitted for IEEPA tariffs imposed on finished goods.
(3)Represents incremental costs incurred in connection with the transition of our company-operated distribution center to a larger leased facility, both located in Vernon, California, including the temporary overlapping rent and labor costs resulting from operating both facilities during the transition period.
(4)Represents incremental, one-time costs associated with IPO-related bonuses and Chief Financial Officer transition expenses.
(5)Reflects the expense arising from the bankruptcy of a significant department store customer, which is outside the Company’s normal credit loss experience and reflects a customer-specific event.
27
Components of Results of Operations
Net Revenue
We generate revenue through selling our wide array of apparel and accessories, including clothing, shoes, and bags. The Company recognizes net revenue for the sale of a product at the point in time when its performance obligation has been satisfied and control of the product has transferred to the customer. A customer is deemed to have control once they are able to direct the use and receive substantially all of the benefits of the product, which occurs generally upon shipment of the goods for wholesale or e-commerce customers and upon purchase by retail customers.
Net revenue transactions are generally comprised of a single performance obligation for each individual product sold to customers through direct-to-consumer, and wholesale channels. Net revenue is measured based on a transaction price, which is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods to the customer.
DTC represents net revenue primarily from the Company’s website and direct product sales made from retail stores located in the US, United Kingdom, Canada, and France. The Company manages and considers Online sales and Retail store sales as one collective DTC channel. Although sales data is captured separately at the transaction level, the Company reviews DTC channel performance on a combined basis for purposes of allocating resources and assessing customer behavior and business strategy. Wholesale and Other net revenue consists of sales made to third-party retailers such as department stores, online retailers and other wholesale partners, and other miscellaneous revenues such as sample sales and sales to distributors.
Net revenue in our DTC channel is driven by growth in the number of Active Customers and DTC Net Revenue per Customer. Net revenue in our Wholesale and Other channel is driven by the number of wholesale partners we sell to, the number of stores we are present in with each partner, and the average revenue per store.
Our focus on customer engagement drives our business and shapes how we evaluate net revenue performance. We measure our success through increases in Active Customer count and the depth of their spend, as measured by DTC Net Revenue per Customer. Because we manage a diverse array of products with thousands of SKUs at a broad range of price points, we believe analyzing volume and price does not provide a meaningful reflection of how we actively manage growth.
Shipping and Handling Fees and Costs
Shipping and handling fees charged to customers are included in net revenues. Revenue is recognized and cost is accrued when control is transferred to the customer. Freight costs associated with shipping merchandise to and from customers are recorded within selling, general and administrative expenses.
Cost of Goods Sold
Cost of goods sold includes all material, labor, import-related costs, and overhead costs incurred to manufacture or purchase the inventory. Cost of goods sold also includes other taxes, inbound freight costs, warehouse storage costs, inventory valuation adjustments, shrinkage, and other miscellaneous costs.
We expect our cost of goods sold to fluctuate as a percentage of net revenue primarily due to product mix from customer preferences, fluctuations in landed costs, and resulting demand and management of our inventory and merchandise mix. As we continue to grow, we expect our cost of goods sold to increase with revenue due to an increased number of orders and higher input costs, including the impact of tariffs. However, we maintain a geographically diverse supply chain that enables us to quickly adjust to optimize our cost of goods.
Gross Profit and Gross Margin
Gross profit represents net revenue less cost of goods sold. Gross margin is gross profit expressed as a percentage of net revenue. Over the past five years we have maintained an average gross margin above 60%. However, gross margin may fluctuate in the future based on a number of factors, including the average price and volume at which we sell our products through our two channels, level of discounting, and cost at which we can obtain, transport and manufacture our inventory, including the impact of tariffs.
28
Marketing Expenses
Marketing expenses consist of brand and performance marketing, including digital content, editorial content, public relations, customer insights, as well as other marketing and advertising costs. We expect our marketing expenses to increase in absolute dollars over time and to fluctuate as a percentage of net revenue depending on the timing of major marketing campaigns and the anticipated growth of our business.
Selling, General and Administrative Expenses
Selling, general, and administrative (“SG&A”) expenses primarily consist of employee-related costs including salaries, benefits, bonuses, and stock-based compensation for our corporate and store employees, costs associated with shipping merchandise to our stores and customers, information technology, credit card processing fees, lease and other operating costs for stores and corporate facilities, legal, a portion of depreciation of property and equipment, amortization of intangible assets, and other administrative costs associated with operating the business. We expect our SG&A to increase in absolute dollars over time and to fluctuate as a percentage of net revenue due to the anticipated growth of our business and additional costs associated with being a public company. Additionally, in the event of a change of control, we will recognize accelerated stock-based compensation expenses related to our RSUs. For further information, see the section titled “—Critical Accounting Policies and Estimates.”
Interest Expense
Interest expense primarily consists of interest expense associated with our Credit Agreement.
Interest Income
Interest income consists primarily of interest generated from our cash and cash equivalents balances, and is recognized as earned. We expect our interest income to fluctuate based on our future bank balances and fluctuating interest rates.
Other Income, Net
Other income, net, consists primarily of realized and unrealized gains and losses from foreign currency transactions and other income and expenses that are not part of our core operations. We expect our other income, net, to fluctuate primarily based on changes in the prevailing exchange rates between the U.S. dollar and the currencies of our international markets.
Income Tax Provision
Income tax provision consists of income taxes related to foreign and domestic federal and state jurisdictions in which we conduct business, adjusted for allowable credits, deductions, and valuation allowance against deferred tax assets.
29
Results of Operations
Comparison of the Thirteen Weeks Ended June 27, 2026 and June 28, 2025
The following tables set forth our consolidated statements of operations data for the periods presented and as a percentage of net revenue.
| 13 Weeks Ended | Change | ||||||||||||||||||||||||||||||||||
(in thousands except percentages) | June 27, 2026 | June 27, 2026 | June 28, 2025 | June 28, 2025 | $ | % | |||||||||||||||||||||||||||||
| Net revenue | $ | 155,233 | 100.0 | % | $ | 125,073 | 100.0 | % | $ | 30,160 | 24.1 | % | |||||||||||||||||||||||
| Cost of goods sold | 51,761 | 33.3 | 44,507 | 35.6 | 7,254 | 16.3 | |||||||||||||||||||||||||||||
Gross profit | 103,472 | 66.7 | 80,566 | 64.4 | 22,906 | 28.4 | |||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||
Marketing expenses | 14,490 | 9.3 | 11,250 | 9.0 | 3,240 | 28.8 | |||||||||||||||||||||||||||||
Selling, general, and administrative expenses | 69,958 | 45.1 | 56,728 | 45.4 | 13,230 | 23.3 | |||||||||||||||||||||||||||||
Total operating expenses | 84,448 | 54.4 | 67,978 | 54.4 | 16,470 | 24.2 | |||||||||||||||||||||||||||||
| Income from operations | 19,024 | 12.3 | 12,588 | 10.1 | 6,436 | 51.1 | |||||||||||||||||||||||||||||
| Other (expense) income | |||||||||||||||||||||||||||||||||||
Interest expense | (3,543) | (2.3) | (4,035) | (3.2) | 492 | (12.2) | |||||||||||||||||||||||||||||
Interest income | 185 | 0.1 | 414 | 0.3 | (229) | (55.3) | |||||||||||||||||||||||||||||
Other income, net | 1,439 | 0.9 | 308 | 0.2 | 1,131 | 367.2 | |||||||||||||||||||||||||||||
| Total other (expense) income | (1,919) | (1.2) | (3,313) | (2.6) | 1,394 | (42.1) | |||||||||||||||||||||||||||||
| Income (loss) before income taxes | 17,105 | 11.0 | 9,275 | 7.4 | 7,830 | 84.4 | |||||||||||||||||||||||||||||
Income tax provision | 4,697 | 3.0 | 2,360 | 1.9 | 2,337 | 99.0 | |||||||||||||||||||||||||||||
Net income | $ | 12,408 | 8.0 | % | $ | 6,915 | 5.5 | % | $ | 5,493 | 79.4 | % | |||||||||||||||||||||||
Net Revenue
| 13 Weeks Ended | Change | ||||||||||||||||||||||
($ in thousands) | June 27, 2026 | June 28, 2025 | $ | % | |||||||||||||||||||
| Direct-to-consumer (DTC) | $ | 135,324 | $ | 111,682 | $ | 23,642 | 21.2 | % | |||||||||||||||
| Wholesale and Other | 19,909 | 13,391 | 6,518 | 48.7 | |||||||||||||||||||
Net revenue | $ | 155,233 | $ | 125,073 | $ | 30,160 | 24.1 | % | |||||||||||||||
Net revenue increased $30.2 million, or 24.1%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. This increase was driven by an increase in DTC net revenue of $23.6 million, or 21.2%, and an increase in Wholesale and Other net revenue of $6.5 million, or 48.7%.
DTC net revenue grew 21.2% for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. The increase was driven by an increase in Active Customers during the quarter of 22.9%, partially offset by a reduction of DTC Net Revenue per Customer of 1.4%. The growth in Active Customers was driven by an increase in customer retention and an increase in new customers. DTC Net Revenue per Customer declined primarily as a result of the increase in newly acquired customers that typically enter the brand at initially lower spend levels.
Wholesale and Other net revenue grew 48.7% for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025, driven by increased demand from our existing wholesale partners.
Cost of Goods Sold, Gross Profit, and Gross Margin
($ in thousands) | 13 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Cost of goods sold | $ | 51,761 | $ | 44,507 | $ | 7,254 | 16.3 | % | |||||||||||||||
| Gross profit | $ | 103,472 | $ | 80,566 | $ | 22,906 | 28.4 | % | |||||||||||||||
Gross margin | 66.7 | % | 64.4 | % | 2.3 | % | |||||||||||||||||
30
Cost of goods sold increased by $7.3 million, or 16.3%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. The increase in dollar terms was primarily due to increased sales volume offset by reduced product costs as a result of a lower tariff environment.
Gross profit increased by $22.9 million, or 28.4%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. The increase was driven by an increase in revenue and lower product acquisition costs.
Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, increased from 64.4% for the thirteen weeks ended June 28, 2025, to 66.7% for the thirteen weeks ended June 27, 2026. The increase was primarily driven by lower average tariff rates and higher average unit retail, partially offset by accelerated growth in the wholesale channel.
Operating Expenses
($ in thousands) | 13 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Marketing expenses | $ | 14,490 | $ | 11,250 | $ | 3,240 | 28.8 | % | |||||||||||||||
| Selling, general, and administrative expenses | 69,958 | 56,728 | 13,230 | 23.3 | |||||||||||||||||||
Total operating expenses | $ | 84,448 | $ | 67,978 | $ | 16,470 | 24.2 | % | |||||||||||||||
| As a percentage of net revenue | 54.4 | % | 54.4 | % | |||||||||||||||||||
Total operating expenses increased by $16.5 million, or 24.2%, during the second quarter of 2026 when compared to the second quarter of 2025. The increase in total operating expenses was primarily driven by increases in selling, general and administrative expenses.
Marketing expenses
Marketing expenses increased $3.2 million, or 28.8%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. As a percentage of net revenue, marketing expenses increased from 9.0% of net revenue for the thirteen weeks ended June 28, 2025 to 9.3% of net revenue for the thirteen weeks ended June 27, 2026, due to timing of spend in partnership campaigns and events.
Selling, general, and administrative expenses
SG&A expenses increased $13.2 million, or 23.3%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. The increase was driven primarily by increased selling and shipping expenses of $6.1 million due to higher sales volume. Additionally, compensation and related benefits increased by $2.4 million due to increased corporate payroll and new store additions.
As a percentage of net revenue, SG&A expenses were approximately 45.1% and 45.4% for the thirteen weeks ended June 27, 2026 and June 28, 2025, respectively. The 30 basis points of SG&A improvement was the result of leverage on payroll expense and the lapping of costs associated with the relocation of our LA distribution center. The other items identified earlier in this section were approximately 0.4% and 2.3% for the thirteen weeks ended June 27, 2026 and June 28, 2025, respectively.
Interest Expense
($ in thousands) | 13 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Interest expense | $ | (3,543) | $ | (4,035) | $ | 492 | (12.2) | % | |||||||||||||||
Interest expense decreased by $0.5 million, or 12.2%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. The decrease in interest expense was primarily due to lower average borrowings outstanding under the Existing Credit Facilities.
31
Interest Income
($ in thousands) | 13 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Interest income | $ | 185 | $ | 414 | $ | (229) | (55.3) | % | |||||||||||||||
Interest income decreased $0.2 million, or 55.3%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. The decrease was driven by lower interest income due to lower average cash and cash equivalents balance during the quarter.
Other (Expense) Income, Net
($ in thousands) | 13 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Other (expense) Income, net | $ | 1,439 | $ | 308 | $ | 1,131 | 367.2 | % | |||||||||||||||
Total other (expense) income, net, increased by $1.1 million, or 367.2%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. The increase was driven by insurance proceeds and increased foreign exchange transaction gains during the quarter.
Income Tax Provision
($ in thousands) | 13 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Income tax provision | $ | 4,697 | $ | 2,360 | $ | 2,337 | 99.0 | % | |||||||||||||||
| Effective tax rate | 27.5 | % | 25.4 | % | 2.1 | % | |||||||||||||||||
Income tax expense increased by $2.3 million, or 99.0%, for the thirteen weeks ended June 27, 2026, compared to the thirteen weeks ended June 28, 2025. Our effective tax rate increased from 25.4% for the thirteen weeks ended June 28, 2025, to 27.5% for the thirteen weeks ended June 27, 2026. The increase in income tax expense was primarily driven by the increase in pre-tax income. The increase in the effective tax rate was primarily due to a discrete tax expense related to the increase in reserves for uncertain tax positions associated with an ongoing tax examination.
32
Results of Operations
Comparison of the 26 Weeks Ended June 27, 2026 and June 28, 2025
The following tables set forth our consolidated statements of operations data for the periods presented and as a percentage of net revenue.
| 26 Weeks Ended | Change | ||||||||||||||||||||||||||||||||||
(in thousands except percentages) | June 27, 2026 | June 27, 2026 | June 28, 2025 | June 28, 2025 | $ | % | |||||||||||||||||||||||||||||
| Net revenue | $ | 267,533 | 100.0 | % | $ | 211,164 | 100.0 | % | $ | 56,369 | 26.7 | % | |||||||||||||||||||||||
| Cost of goods sold | 85,064 | 31.8 | 78,720 | 37.3 | 6,344 | 8.1 | |||||||||||||||||||||||||||||
Gross profit | 182,469 | 68.2 | 132,444 | 62.7 | 50,025 | 37.8 | |||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||
Marketing expenses | 23,942 | 8.9 | 19,792 | 9.4 | 4,150 | 21.0 | |||||||||||||||||||||||||||||
Selling, general, and administrative expenses | 152,342 | 56.9 | 103,971 | 49.2 | 48,371 | 46.5 | |||||||||||||||||||||||||||||
Total operating expenses | 176,284 | 65.9 | 123,763 | 58.6 | 52,521 | 42.4 | |||||||||||||||||||||||||||||
| Income (loss) from operations | 6,185 | 2.3 | 8,681 | 4.1 | (2,496) | (28.8) | |||||||||||||||||||||||||||||
| Other (expense) income | |||||||||||||||||||||||||||||||||||
Interest expense | (6,814) | (2.5) | (8,187) | (3.9) | 1,373 | (16.8) | |||||||||||||||||||||||||||||
Interest income | 498 | 0.2 | 1,069 | 0.5 | (571) | (53.4) | |||||||||||||||||||||||||||||
Other income, net | 1,183 | 0.4 | 235 | 0.1 | 948 | 403.4 | |||||||||||||||||||||||||||||
| Total other (expense) income | (5,133) | (1.9) | (6,883) | (3.3) | 1,750 | (25.4) | |||||||||||||||||||||||||||||
Income (loss) before income taxes | 1,052 | 0.4 | 1,798 | 0.9 | (746) | (41.5) | |||||||||||||||||||||||||||||
Income tax provision | 792 | 0.3 | 434 | 0.2 | 358 | 82.5 | |||||||||||||||||||||||||||||
Net income (loss) | $ | 260 | 0.1 | % | $ | 1,364 | 0.6 | % | $ | (1,104) | (80.9) | % | |||||||||||||||||||||||
Net Revenue
($ in thousands) | 26 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Direct-to-consumer (DTC) | $ | 233,749 | $ | 186,378 | $ | 47,371 | 25.4 | % | |||||||||||||||
| Wholesale and Other | 33,784 | 24,786 | 8,998 | 36.3 | |||||||||||||||||||
Net revenue | $ | 267,533 | $ | 211,164 | $ | 56,369 | 26.7 | % | |||||||||||||||
Net revenue increased $56.4 million, or 26.7%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. This increase was driven by an increase in DTC net revenue of $47.4 million, or 25.4%, and an increase in Wholesale and Other net revenue of $9.0 million, or 36.3%.
DTC net revenue grew 25.4% for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. The increase was driven by an increase in Active Customers during the quarter of 22.9%, partially offset by a reduction of DTC Net Revenue per Customer of 1.4%. The growth in Active Customers was driven by an increase in customer retention and an increase in new customers. DTC Net Revenue per Customer declined primarily as a result of the increase in newly acquired customers that typically enter the brand at initially lower spend levels, and the timing of customer shipments.
Wholesale and Other net revenue grew 36.3% for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025, driven by increased demand from our existing wholesale partners.
Cost of Goods Sold, Gross Profit, and Gross Margin
($ in thousands) | 26 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Cost of goods sold | $ | 85,064 | $ | 78,720 | $ | 6,344 | 8.1 | % | |||||||||||||||
| Gross profit | $ | 182,469 | $ | 132,444 | $ | 50,025 | 37.8 | % | |||||||||||||||
Gross margin | 68.2 | % | 62.7 | % | 5.5 | % | |||||||||||||||||
Cost of goods sold increased by $6.4 million, or 8.1%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. The increase in dollar terms was driven by an increase in revenue, partially offset by a $12.3
33
million reduction to cost of goods sold related to our refund of tariffs paid under IEEPA on imported goods for which we were importer of record. Of this $12.3 million, $10.2 million related to sales recorded in fiscal 2025.
Gross profit increased by $50.0 million, or 37.8%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. The increase was driven by an increase in revenue and lower product acquisition costs.
Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, increased from 62.7% for the 26 weeks ended June 28, 2025, to 68.2% for the 26 weeks ended June 27, 2026. The 550 basis points increase was primarily due to the recognition of a receivable for a refund of IEEPA tariffs on imported goods, of which 381 basis points related to sales recorded in 2025. The remaining basis points increase was primarily driven by lower average tariff rates and strong full-price selling.
Operating Expenses
($ in thousands) | 26 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Marketing expenses | $ | 23,942 | $ | 19,792 | $ | 4,150 | 21.0 | % | |||||||||||||||
| Selling, general, and administrative expenses | 152,342 | 103,971 | 48,371 | 46.5 | |||||||||||||||||||
Total operating expenses | $ | 176,284 | $ | 123,763 | $ | 52,521 | 42.4 | % | |||||||||||||||
| As a percentage of net revenue | 65.9 | % | 58.6 | % | 7.3 | % | |||||||||||||||||
Total operating expenses increased by $52.5 million, or 42.4%, during the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. The increase in total operating expenses as a percentage of net revenue was driven by increases in selling, general and administrative expenses.
Marketing expenses
Marketing expenses increased $4.2 million, or 21.0%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. As a percentage of net revenue, marketing expenses decreased from 9.4% of net revenue for the 26 weeks ended June 28, 2025 to 8.9% of net revenue for the 26 weeks ended June 27, 2026, driven by increased efficiencies in marketing spend.
Selling, general, and administrative expenses
SG&A expenses increased $48.4 million, or 46.5%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. The increase was primarily due to the impact of a stock-based compensation modification during the 26 weeks ended June 27, 2026, which resulted in compensation expense of $23.8 million. The remaining increase was driven by increased selling and shipping expenses of $12.4 million due to higher sales volume. Additionally, compensation and related benefits increased by $4.9 million due to increased corporate payroll and new store additions.
As a percentage of net revenue, SG&A expenses were approximately 56.9% for the 26 weeks ended June 27, 2026, compared to 49.2% for the 26 weeks ended June 28, 2025, primarily due to the impact of stock-based compensation modification during the 26 weeks ended June 27, 2026. As a percentage of net revenue, the other items identified earlier in this section were approximately 0.5% and 2.5% for the 26 weeks ended June 27, 2026 and June 28, 2025, respectively.
Interest Expense
($ in thousands) | 26 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Interest expense | $ | (6,814) | $ | (8,187) | $ | 1,373 | (16.8) | % | |||||||||||||||
Interest expense decreased by $1.4 million, or 16.8%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. The decrease in interest expense was primarily due to lower average borrowings outstanding under the Existing Credit Facilities.
34
Interest Income
($ in thousands) | 26 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Interest income | $ | 498 | $ | 1,069 | $ | (571) | (53.4) | % | |||||||||||||||
Interest income decreased $0.6 million, or 53.4%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. The decrease was driven by lower interest income due to lower average cash and cash equivalents balance during the 26 weeks ended June 27, 2026.
Other (Expense) Income, Net
($ in thousands) | 26 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Other (expense) Income, net | $ | 1,183 | $ | 235 | $ | 948 | 403.4 | % | |||||||||||||||
Total other (expense) income, net, increased by $0.9 million, or 403.4%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. The increase was driven by insurance proceeds and increased foreign exchange transaction gains during the 26 weeks ended June 27, 2026.
Income Tax Provision
($ in thousands) | 26 Weeks Ended | Change | |||||||||||||||||||||
| June 27, 2026 | June 28, 2025 | $ | % | ||||||||||||||||||||
| Income tax provision | $ | 792 | $ | 434 | $ | 358 | 82.5 | % | |||||||||||||||
| Effective tax rate | 75.3 | % | 24.1 | % | 51.2 | % | |||||||||||||||||
Income tax expense increased by $0.4 million, or 82.5%, for the 26 weeks ended June 27, 2026, compared to the 26 weeks ended June 28, 2025. Our effective tax rate increased from 24.1% for the 26 weeks ended June 28, 2025, to 75.3% for the 26 weeks ended June 27, 2026. The increase in income tax expense was primarily due to a discrete tax expense related to the increase in reserves for uncertain tax positions associated with an ongoing tax examination. The effective tax rate increased compared with the prior-year period primarily because the prior year included a discrete tax benefit resulting from the remeasurement of the Company’s deferred tax assets and liabilities for changes in the state statutory rate.
Non-GAAP Financial Measures
In addition to our condensed consolidated financial statements, which are prepared in accordance with GAAP, we present certain non-GAAP measures in this Quarterly Report on Form 10-Q as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our operating performance.
The following table summarizes our key financial metrics and non-GAAP financial measures for the periods presented:
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
| ($ in thousands) | June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||||||||
| Net revenue | $ | 155,233 | $ | 125,073 | $ | 267,533 | $ | 211,164 | |||||||||||||||
| Net income | $ | 12,408 | $ | 6,915 | $ | 260 | $ | 1,364 | |||||||||||||||
Adjusted EBITDA(1) | $ | 25,423 | $ | 16,516 | $ | 41,279 | $ | 16,194 | |||||||||||||||
Adjusted EBITDA margin(2) | 16.4 | % | 13.2 | % | 15.4 | % | 7.7 | % | |||||||||||||||
________________________________________________________
(1)We define Adjusted EBITDA as net income before interest, taxes, and depreciation and amortization as further adjusted for stock compensation expense, transaction costs, and other costs not indicative of our ongoing core operations.
(2)We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of net revenue.
35
Adjusted EBITDA and Adjusted EBITDA margin
We define Adjusted EBITDA as net income before interest, taxes, and depreciation and amortization as further adjusted for stock compensation expense, transaction costs, and other costs not indicative of our ongoing core operations. We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of net revenue. Adjusted EBITDA and Adjusted EBITDA margin are not measurements of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate Adjusted EBITDA and Adjusted EBITDA margin in the same manner. We present Adjusted EBITDA and Adjusted EBITDA margin because we consider these metrics to be important supplemental measures of our performance and believe that both measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.
Management uses Adjusted EBITDA and Adjusted EBITDA margin:
•as measurements of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, since they remove the impact of items not directly resulting from our core operations;
•for planning purposes, including the preparation of our internal annual operating budget and financial projections; and
•to evaluate the performance and effectiveness of our operational strategies.
By providing these non-GAAP financial measures, together with a reconciliation to the most directly comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and should not be considered in isolation, or as alternatives to, or substitutes for net income or other financial statement data presented in our condensed consolidated financial statements as indicators of financial performance. Some of the limitations are:
•Adjusted EBITDA does not reflect all our cash expenditures, or future requirements for capital expenditures, or contractual commitments;
•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
•Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
Due to these limitations, Adjusted EBITDA and Adjusted EBITDA margin should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of interest, income tax provision (benefit), depreciation and amortization, stock-based compensation expense, transaction costs, and other costs. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal results of operations and results of operations of other companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record following our IPO. Each of the normal recurring adjustments and other adjustments
36
described in this paragraph and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.
The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to the most directly comparable GAAP measure, net income, for the periods presented:
13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
($ in thousands) | June 27,2026 | June 28,2025 | June 27,2026 | June 28,2025 | |||||||||||||||||||
Net income | $ | 12,408 | $ | 6,915 | $ | 260 | $ | 1,364 | |||||||||||||||
| Interest and other expense (income) | 1,919 | 3,313 | 5,133 | 6,883 | |||||||||||||||||||
| Provision for income taxes | 4,697 | 2,360 | 792 | 434 | |||||||||||||||||||
| Depreciation and amortization | 4,245 | 3,015 | 8,407 | 5,876 | |||||||||||||||||||
Stock-based compensation expense(1) | 1,795 | 259 | 25,866 | 568 | |||||||||||||||||||
Transaction costs(2) | - | 393 | 375 | 768 | |||||||||||||||||||
Legal costs(3) | 349 | 149 | 420 | 162 | |||||||||||||||||||
Other one-time costs(4) | 10 | 112 | 26 | 139 | |||||||||||||||||||
Adjusted EBITDA | $ | 25,423 | $ | 16,516 | $ | 41,279 | $ | 16,194 | |||||||||||||||
| Net revenue | $ | 155,233 | $ | 125,073 | $ | 267,533 | $ | 211,164 | |||||||||||||||
| Net income margin | 8.0 | % | 5.5 | % | 0.1 | % | 0.6 | % | |||||||||||||||
Adjusted EBITDA margin | 16.4 | % | 13.2 | % | 15.4 | % | 7.7 | % | |||||||||||||||
_______________________________________________________
(1)Represents non-cash expenses primarily related to equity-based compensation programs, which may vary significantly from period to period depending on various factors including the timing, number, and the valuation of awards granted, vesting of awards including the satisfaction of performance conditions, modifications or settlements of awards, and the impact of repurchases of awards from employees.
(2)Represents costs incurred in connection with pursuing various strategic alternatives, including legal and accounting costs directly attributable to preparing for an IPO, and other strategic sell side and investment alternatives.
(3)Represents one-time legal costs and settlements.
(4)Represents one-time costs directly attributable to activities that are not indicative of our ongoing core operations, including, but not limited to, system implementation and duplicative expenses associated with store relocation.
Liquidity and Capital Resources
As of June 27, 2026, we had cash and cash equivalents of $76.6 million. Our operations have been funded through cash flows from our operating activities, including the sale of our products.
Our primary liquidity requirements are to fund our operations and other general corporate purposes and to service our debt. Our ability to generate cash from our operations depends on our future operating performance, which is dependent, to some extent, on general economic, financial, competitive, market, legislative, regulatory and other factors, many of which are beyond our control, as well as other factors including those discussed in this section and the section entitled “Risk Factors.” We believe our existing cash and cash equivalents, funds available under our revolving credit facility, and cash flows from operating activities will be sufficient to fund our operations for at least the next 12 months. The following tables show our cash and cash equivalents, accounts receivable and working capital as of the dates indicated:
(in thousands) | As of | ||||||||||
June 27,2026 | December 27, 2025 | ||||||||||
| Cash and cash equivalents | $ | 76,627 | $ | 65,473 | |||||||
| Accounts receivable, net | $ | 18,584 | $ | 18,407 | |||||||
| Net working capital | $ | 77,073 | $ | 54,769 | |||||||
Our future capital requirements will depend on many factors, including, but not limited to, revenue growth rate, growth in the number of stores, expansion of our geographies and product offerings, ability to execute new marketing initiatives, and the timing of investments in technology and personnel to support the overall growth in our business. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. There can be no assurances that we will be able to raise additional capital. In the event additional financing is required from outside sources, we may not be able to negotiate terms acceptable to us or at all. If we are unable to raise additional capital when required or on favorable terms, or if we cannot
37
expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, financial condition, and cash flows would be adversely affected.
Credit Facility
On May 2, 2024, LYMI Inc., a wholly owned subsidiary of Reformation Inc., entered into a financing agreement with JPMorgan Chase Bank, N.A., Citibank, N.A., Morgan Stanley Senior Funding, Inc. and Royal Bank of Canada (the “Credit Agreement”), to secure a five-year term loan of $165.0 million (“Term Loan”) and a revolving line of credit (“Revolver”) with a maximum borrowing capacity of $30.0 million (together, the “Credit Facility”). Proceeds from the Term Loan were used to fund the Company’s share repurchase on May 2, 2024.
On June 17, 2026, the Company entered into an amendment to its Credit Agreement (the "Amendment"). The Amendment, among other things, (i) provided for an additional $52.0 million of term loan borrowing (ii) provided for an incremental $40.0 million delayed draw term loan facility, of which, $40.0 million was funded on June 17, 2026 (iii) extended the maturity date of the term loan facilities and the revolving credit facility to June 17, 2031, and (iv) revised the scheduled principal amortization of the term loan facilities to reduce required principal payments over the remaining term of the debt. Upon completion of the Amendment, the Company had $246.7 million of term loan borrowings outstanding on June 17, 2026. Borrowings under the Amended Term Loans bear interest at a variable rate based on SOFR plus an applicable margin.
The Credit Facility also contains customary representations and warranties, affirmative and negative covenants and restrictive covenants for facilities of this type. The restrictive covenants limit the borrower and its subsidiaries’ ability to, among other things, incur indebtedness, create liens, make restricted payments, make cash payments on junior financing, make investments, merge, amalgamate or consolidate, dispose of assets, enter into transactions with affiliates and enter into sale and lease back transactions, in each case subject to customary materiality thresholds and other exceptions. The Credit Facility also provides for customary events of default. The obligations under the Credit Facility are guaranteed by REF Holdings, Inc. and certain of the borrower’s material, wholly owned domestic subsidiaries and secured by a first- priority lien on substantially all assets of REF Holdings, Inc., the borrower and certain of the borrower’s material, wholly owned subsidiaries, in each case, subject to certain customary exceptions and exclusions.
As of June 27, 2026 and December 27, 2025, the Company had $246.7 million and $158.8 million outstanding under its Term Loan, respectively, and no borrowings under its Revolver. In July 2026, the Company received aggregate proceeds of $132.2 million from the IPO, after deducting the underwriting discount of $10.0 million. The Company made a $110.0 million repayment on the Term Loan in August 2026 using proceeds from the Company’s IPO.
The borrower is subject to financial maintenance covenants which are measured on a quarterly basis. The borrower was in compliance with all financial covenants contained in its debt agreements as of June 27, 2026. See Note 7 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
(in thousands) | 26 Weeks Ended | ||||||||||
| June 27, 2026 | June 28, 2025 | ||||||||||
| Net cash provided by (used in) operating activities | $ | 26 | $ | (14,210) | |||||||
| Net cash used in investing activities | (13,216) | (21,060) | |||||||||
| Net cash provided by (used in) financing activities | 24,823 | (2,023) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (479) | 777 | |||||||||
| Net change in cash and cash equivalents | $ | 11,154 | $ | (36,516) | |||||||
Cash Flows Provided By (Used In) Operating Activities
Net cash provided by operating activities was $26,000 for the 26 weeks ended June 27, 2026, which resulted from net income of $0.3 million, adjusted for non-cash charges of $44.4 million and net cash outflow of $44.6 million. Non-cash charges primarily consisted of depreciation and amortization expenses of $8.4 million, changes in operating lease right-of-use assets of $10.5 million, and stock-based compensation expense of $24.4 million. The changes in operating assets and
38
liabilities were primarily driven by increases in accrued expenses and deferred revenue totaling $5.0 million, offset by an increase in tariff receivables which was primarily attributable to the recognition of a $15.0 million receivable for IEEPA tariffs refunds on imported goods for which we were importer of record, prepaid expenses, and inventory to support the growth of our business.
Net cash used in operating activities was $14.2 million for the 26 weeks ended June 28, 2025, which resulted from net income of $1.4 million, adjusted for non-cash charges of $15.4 million and net cash outflow of $31.0 million. Non-cash charges primarily consisted of depreciation and amortization expenses of $5.9 million and changes in operating lease right-of-use assets of $8.8 million. The changes in operating assets and liabilities were primarily driven by increases in accrued expenses and deferred revenue totaling $5.8 million, offset by the timing of collections of accounts receivable and vendor payments, and an increase in prepaid expenses, and inventory to support the growth of our business.
Cash Flows Used In Investing Activities
Our primary investing activities have consisted of purchases of property and equipment to support our distribution center relocation, store footprint expansion and our overall business growth. Purchases of property and equipment may vary from period-to-period due to timing of the expansion of our operations.
For the 26 weeks ended June 27, 2026 and June 28, 2025, net cash used in investing activities was $13.2 million and $21.1 million, respectively, which was primarily related to our investment in our relocated distribution center and the build-out of new stores.
Cash Flows (Provided by) Used In Financing Activities
Our financing activities primarily consist of repurchases of our common stock, proceeds from the exercise of stock options, dividend declarations, tax withholdings on share-based payment awards and borrowings and repayments related to the existing term loan and line of credit, when applicable.
For the 26 weeks ended June 27, 2026, net cash provided by financing activities was $24.8 million, which was primarily related to the principal payments of our term loan, debt issuance cost, and the payment of dividends declared, offset by $92.0 million in borrowings from the Credit Agreement.
For the 26 weeks ended June 28, 2025, net cash used in financing activities was $2.0 million, which was primarily related to the principal payments of our term loan.
Contractual Obligations and Commitments
Our operating lease commitments relate primarily to our store, warehouse, distribution and office locations. The Company’s lease terms may include options to extend or terminate the lease and are, therefore, included in the operating lease right-of-use assets and operating lease liabilities when such options are reasonably certain to be exercised. These leases expire on various dates through 2040. For additional discussion on our operating lease obligations, see Note 13 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
The Term Loan Facility requires quarterly principal and interest payments, with any remaining unpaid principal and any accrued and unpaid interest due on the maturity date of June 17, 2031. The Term Loan Facility may be prepaid in whole or in part prior to the maturity date and is subject to certain lender fees if converted, assigned, or paid on a day other than the end of the interest period. As of the second quarter of 2026, the outstanding principal balance under the Term Loan Facility was $246.7 million and the carrying value was $241.5 million, net of unamortized debt issuance costs of $5.2 million.
Purchase obligations primarily include agreements for a licensed platform with minimum usage commitments. Purchase obligations do not include agreements that are cancelable without penalty.
Off-Balance Sheet Arrangements
We enter into standby letters of credit to secure certain leases in lieu of a cash security deposit. We had issued letters of credit of $3.6 million as of the second quarter of 2026, under our Credit Facility. We did not have any other off-balance sheet arrangements as of the second quarter of 2026.
39
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
There have been no material changes to our critical accounting policies and estimates disclosed in the IPO Prospectus. For additional information about our critical accounting policies and estimates, see the disclosure included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the IPO Prospectus as well as Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
Emerging Growth Company Status
We are currently an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
40
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. These risks include the following:
Foreign Exchange Risk
Our net revenue is primarily denominated in U.S. dollars, with some denominated in foreign currencies, and a portion of our operating expenses are incurred outside the United States, denominated in foreign currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates, particularly changes in the Canadian Dollar, Euro and British Pound, or weak economic conditions in foreign markets. We are exposed to changes in foreign currency rates as a result of our foreign operations and international suppliers from whom we purchase primarily in US dollars. Revenue and income generated by our operations in Canada, France and the United Kingdom will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. As of June 27, 2026, foreign currency transaction gains and losses have not been material to our consolidated financial statements, and we have not engaged in any foreign currency hedging transactions.
Interest Rate Risk
Our cash and cash equivalents as of June 27, 2026, consisted of $76.6 million in cash and cash equivalents. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate exposure. We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents.
Our exposure to interest rate risk is related to the Credit Facility. The Credit Facility bears interest based on floating reference rates. A 100 basis point increase in market interest rates would have a negative effect on net profit in the amount of $1.8 million for the quarter ended June 27, 2026. A 100 basis point decrease in market interest rates would have an approximately equal and opposite effect. The revolving credit facility is currently not utilized and therefore has no impact on interest costs at present.
Inflation Risk
Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our results of operations. We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as 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). Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at a reasonable assurance level because of the material weaknesses (as described below) in internal control over financial reporting that have not been remediated as of June 27, 2026.
Notwithstanding these identified material weaknesses, based on additional procedures and post-closing review, management concluded that the condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the financial position, results of operations, and cash flows of the Company for the periods presented, in conformity with accounting principles generally accepted in the United States.
41
Material Weaknesses in Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Prior to our IPO, we have not historically prepared public company financial statements.
In connection with the audit of our 2025, 2024 and 2023 consolidated financial statements, we identified the following material weaknesses in our internal control over financial reporting:
•we did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we did not maintain evidence of the consistent execution of control activities across all significant business processes, including the preparation and review of account reconciliations and journal entries;
•we did not design and maintain an effective risk assessment and monitoring process. Specifically, we lacked a formal process related to identifying and analyzing risks of material misstatement in financial reporting and the monitoring of internal controls; and
•we did not design and maintain effective IT general controls for certain information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain (i) program change management controls to ensure that program and data changes are identified, tested, authorized and implemented appropriately, (ii) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel, (iii) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored, and (iv) program development controls to ensure that new software development is tested, authorized and implemented appropriately.
Remediation Plan for Material Weaknesses
In order to address the material weaknesses, our management is taking the following remediation efforts:
•hiring and retaining additional accounting, finance and IT personnel with appropriate public company reporting and internal controls expertise;
•formalizing and documenting our internal control framework, including risk assessment and monitoring activities;
•designing and implementing enhanced review and approval controls over journal entries, account reconciliations, and financial reporting processes;
•strengthening segregation of duties through both procedural changes and system-based controls; and
•improving IT general controls, including controls over user access provisioning and termination, privileged access monitoring, change management, computer operations, and implementation of new technology.
Our management believes that the remediation efforts described above will enable us to address the material weaknesses that were identified in a timely manner and maintain a properly designed and effective system of internal controls over financial reporting and provide appropriate segregation of duties. Our remediation efforts are in progress as of June 27, 2026. We will not be able to demonstrate that the material weaknesses have been fully remediated, or that our controls are operating effectively, until we complete our remediation efforts.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended June 27, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitation on the Effectiveness of Internal Control
Our management, including our Chief Executive Officer and our Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the
42
objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
43
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of conducting our business, from time to time we may become involved in various legal actions and other claims. We may also become involved in other judicial, regulatory, and arbitration proceedings concerning matters arising in connection with the conduct of our businesses. Some of these matters may involve claims of substantial amounts. We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Item 1A. Risk Factors.
You should carefully consider the following risk factors, in addition to the other information contained in this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this Quarterly Report on Form 10-Q occurs, our business, operating results and financial condition could be materially harmed. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Quarterly Report on Form 10-Q or other risks that we currently deem immaterial or that may be unknown to us.
Risk Factor Summary
Our business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following:
•We rely on consumer discretionary spending, which may be adversely affected by economic uncertainty or downturns and other macroeconomic conditions, trends, or factors.
•If we fail to attract new customers, maintain or grow our returning customers, or maintain or increase sales to customers, our business, financial condition, results of operations, and growth prospects could be harmed.
•Our success depends on the strength of our brand and on our ability to maintain a strong community of engaged customers; if we are unable to maintain and enhance the value and reputation of our brand, or if we experience negative publicity, our business or reputation will be harmed, which could have a materially adverse effect on our financial condition and results of operations.
•If we are unable to anticipate and respond to changing consumer preferences and shifts in industry trends in a timely and cost-effective manner, our business, financial condition, and results of operations could be harmed.
•We utilize a range of marketing, advertising, and other initiatives to increase returning customers’ spend and to acquire new customers; if the costs of advertising or marketing increase, or if our initiatives fail to achieve their desired impact, we may be unable to grow the business profitably.
•Failure to accurately forecast customer demand could lead to excess inventories or inventory shortages, which could result in decreased operating margins, reduced cash flows, and harm to our business.
•Existing and potential tariffs imposed by the United States or other governments, new trade restrictions, or a global trade war could increase the cost of our products, which could have an adverse effect on our business, financial condition, and results of operations.
•If we fail to effectively manage our growth, our business, financial condition, and results of operations could be harmed.
•If we are unsuccessful in growing our e-commerce and retail channels and executing our expansion into new markets, our business, financial condition, results of operations, and growth prospects may suffer.
•We are subject to various federal and state employment and labor laws and regulations and increases in labor costs, including wages, could adversely affect our business, financial condition, and results of operations.
44
•As a company that operates retail stores, we are subject to commercial real estate risks.
•We are subject to risks related to our sustainability activities and disclosures, including our commitment to certain sustainability criteria, which we call the Sustainability Framework, and our reputation and brand could be harmed by evolving disclosure requirements and expectations.
•Climate change and the evolving and varied expectations by governments, organizations, customers, and investors on sustainability issues, including those related to climate change and socially responsible activities, may adversely affect our reputation, business, financial condition, and results of operations.
•Our focus on using sustainable high-quality materials and reducing environmental impacts in our manufacturing processes and supply chain practices may increase our cost of revenue and hinder our net revenue growth.
•If we are unable to attract and retain qualified personnel, we may not be able to grow effectively or successfully operate our business.
•Our reliance on suppliers to provide materials for and to produce our products could cause problems in our supply chain, and failure of our suppliers to consistently provide high-quality materials and products could adversely affect our brand and reputation and cause our business, financial condition, and results of operations to suffer.
•We have operations and do business in China, which exposes us to risks inherent in doing business there.
•Shipping and delivery are critical parts of our business and any changes in, or disruptions to, our shipping and delivery arrangements could adversely affect our business, financial condition, and results of operations.
•The operations of our suppliers, most of which are located outside of the United States, are subject to additional risks that are beyond our control and that could harm our business, financial condition, and results of operations.
•Any material disruption of our information technology (“IT”) systems or unexpected network interruption could disrupt our business and reduce our sales.
•Our failure or inability to obtain, maintain, protect and enforce our intellectual property rights could diminish the value of our brand and weaken our competitive position.
•If sensitive information about our customers is actually or alleged to have been disclosed, or if we or our third-party providers are subject to real or perceived cyberattacks or similar incidents, our customers may curtail use of our website, we may be exposed to liability and our reputation could suffer.
•We are subject to federal, state, or foreign laws and regulations as well as our contractual obligations and industry requirements relating to privacy, data protection, and customer protection; the expansion of current or the enactment of new laws and regulations relating to privacy, data protection, and customer protection, or failure to comply with those laws or obligations, whether or not inadvertent, could materially adversely affect our business, financial condition, and results of operations.
•Government regulation of the internet and e-commerce continues to evolve and unfavorable changes or failure by us to comply with these regulations, whether or not inadvertent, could substantially harm our business, financial condition, and results of operations.
•We have identified material weaknesses in our internal control over financial reporting. If we fail to remediate these material weaknesses or otherwise maintain effective internal controls, we may not be able to accurately report our financial results of operations which may adversely affect investor confidence.
•Certain of our significant stockholders have significant influence over us, including significant influence over decisions that require the approval of stockholders, which may be inconsistent with the interests of our other stockholders.
45
Risks Related to Our Business, Brand, Products, and Industry
We rely on consumer discretionary spending, which may be adversely affected by economic uncertainty or downturns and other macroeconomic conditions, trends, or factors.
Our products may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions and other factors such as consumer confidence in future economic conditions, actual or perceived risk of an economic recession, trade wars, increased tariffs and global trade instability, the availability and cost of consumer credit, government shutdowns, levels of unemployment and inflation, and tax rates. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable, and discretionary spending may be subject to reductions as a result of significant increases in unemployment, financial market instability and uncertainties about the future. Unfavorable economic conditions, including an economic downturn or economic uncertainty in our current core markets, specifically in the United States, the United Kingdom, Canada and France, may lead consumers to delay or reduce purchases of our products. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our business, financial condition and results of operations.
If we fail to attract new customers, maintain or grow our returning customers, or maintain or increase sales to customers, our business, financial condition, results of operations, and growth prospects could be harmed.
Our success depends on our ability to acquire and retain customers in a cost-effective manner. In order to attract new customers and continue to expand our customer base, we must appeal to and attract customers who identify with our products and our brand. If the number of people who are willing to purchase our products does not continue to increase, if we fail to deliver a high-quality shopping or customer experience, if we make products that our customers do not buy in sufficient quantities or if our current or potential future customers are not convinced that our products are superior to alternatives, then our ability to retain returning customers, acquire new customers, and continue to grow our business may be harmed.
We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers. For example, we maintain close ongoing relationships with key opinion leaders, including influencers, creators, editors, and celebrities, who support our brand and marketing efforts. Such campaigns are often the result of long-term investments in these relationships, involving significant time and resources from our brand and marketing teams as well as monetary consideration, and may not result in new customers or increased sales of our products. Further, as our brand becomes more widely known, we may not attract new customers or increase our net revenue at the same rates as we have in the past. As of 2025, we have approximately 854,000 Active Customers in the United States. Globally, 78% of our repeat orders in 2025 contained more than one product category. If we are unable to acquire new customers who purchase products across categories in numbers sufficient to grow our business, our net revenue may decrease and our business, financial condition, and results of operations may be materially and adversely affected.
In addition, our future success depends in part on our ability to increase sales to our returning customers over time, as a significant portion of our direct channel net revenue is generated from sales to returning customers, particularly more loyal returning customers who are highly engaged and make frequent and/or large purchases of the products we offer. Nearly 70% of our DTC net revenue in 2025 was generated from returning customers and 54% of our customers acquired before 2025 have shopped with us more than once. If existing and/or loyalty customers no longer find our products appealing or are not satisfied with our customer experience, or if we are unable to update our products in a timely manner to meet current trends and customer demands, our returning customers may not make purchases, or if they do, they may make fewer or smaller purchases in the future.
If we are unable to continue to attract new customers or our returning customers decrease their spending on the products we offer or fail to make repeat purchases of our products, our business, financial condition, results of operations and growth prospects will be harmed.
Our success depends on the strength of our brand and on our ability to maintain a strong community of engaged customers; if we are unable to maintain and enhance the value and reputation of our brand, or if we experience negative publicity, our business or reputation will be harmed, which could have a materially adverse effect on our financial condition and results of operations.
The “Reformation” brand is integral to our business strategy and our ability to attract, engage, and retain customers. In 2025, we brought in approximately 75% of DTC new customers through unpaid marketing channels, an ability which we
46
believe is largely powered by the strength and uniqueness of our brand and brand voice in the marketplace. As a result, our success depends on our ability to maintain and enhance the image, value, and recognition of our brand. Maintaining, promoting, and positioning our brand will depend largely on the success of our creative, design, and marketing efforts, including advertising, social media, celebrity campaigns, and collaborations with other brands or influencers, as well as our ability to maintain a positive consumer perception of our corporate integrity, culture, mission, values, and environmental sustainability efforts.
Our brand, business and reputation could be adversely affected by any number of factors or events, including if our public image is tarnished by negative publicity due to our actions or those of persons associated with us (including employees, celebrities, influencers, brand partners or others who speak publicly or post on social media about our brand or our products, whether authorized or not), if we receive customer complaints or negative publicity related to our website, products, product delivery times, customer love or marketing efforts, if we fail to deliver innovative and high-quality products, if we face or mishandle a product recall or if we are subject to claims of “greenwashing” (e.g., misleading or deceptive claims related to our Sustainability Framework, goals or practices). For example, the organization known as People for the Ethical Treatment of Animals chose to label Reformation as “Greenwasher of the Year” in 2023 based on the use of animal-derived materials in some of our products. This type of response can adversely affect our public image, brand and reputation. Further, our brand and reputation have in the past, and in the future could be, negatively impacted by adverse publicity, whether or not valid, regarding allegations that we or persons associated with us have violated applicable laws or regulations, including but not limited to, those related to product labeling and safety, ethical sourcing, marketing, employment, discrimination, harassment, whistle- blowing, customer privacy, corporate citizenship, improper business practices or cybersecurity. Negative publicity regarding, or non-compliance with legal requirements or norms by, our direct and indirect suppliers could similarly adversely affect our reputation and sales and could force us to identify and engage alternative suppliers. Any harm to our brand and reputation could adversely affect our ability to attract and engage customers and could have a material adverse effect on our business, financial condition and results of operations.
Our brand may also be harmed through the licensing of trademarks and other intellectual property rights to third parties, including for example as part of our co-branded collaborations with our brand partners. Despite the terms of our licensing agreements with these third parties that govern the use of our intellectual property, which require licensees to abide by certain standards with respect to such use, our efforts to police licensees’ use of our intellectual property may not be sufficient to ensure their compliance with such agreements. The failure of our licensees to comply with the terms of their licenses could harm our reputation or the value of our brand or lead to a loss of our trademarks and other intellectual property rights, which could have a material adverse effect on our business, financial condition, and results of operations. Any failure to effectively maintain and enhance our brands or reputation, or any excessive expenses incurred in these unsuccessful efforts, could have a material adverse effect on our business, financial condition and results of operations. Third parties who receive licenses to use our intellectual property rights may also experience negative claims or publicity involving their own brands, which by association could damage our reputation and brand, regardless of whether such claims are accurate.
In addition, the importance of our brand may increase to the extent we experience increased competition, which has required, and could continue to require, additional expenditures on our brand marketing activities. Maintaining and enhancing our brand image also has required, and may continue to require, us to make additional investments in areas such as merchandising, marketing, retail stores and online operations. These investments may be substantial and may not ultimately be successful.
If we are unable to anticipate and respond to changing consumer preferences and shifts in industry trends in a timely and cost-effective manner, our business, financial condition, and results of operations could be harmed.
Our target market of apparel, footwear, and accessories for women is subject to new and rapidly changing trends and constantly evolving consumer preferences and demands that cannot be predicted with certainty. We take inspiration from both vintage styles as well as current cultural moments to design products which we believe our customers are seeking at that moment. Accordingly, our success is dependent on our ability to anticipate, gauge and react to the latest trends and consumer demands, to translate such trends and demands into appropriate, desirable product offerings in a timely manner and to allocate these product offerings appropriately across all of our selling channels, including e-commerce, retail and wholesale channels. Our Merchandising, Design, Planning and Allocation and Operations teams are primarily responsible for performing this highly subjective and logistically complex work, including making initial product decisions, and they rely on feedback around trends from a variety of sources. This process may not accurately predict evolving trends, and our new products may not resonate with consumers as their preferences could shift rapidly to different styles. Our future success depends in part on our ability to anticipate and respond to these changes, and we may not be able to generate sufficient consumer interest in our products to remain competitive.
47
In particular, our unique designs, quality control, innovation and sourcing and use of sustainable materials and/or processes in the design and manufacturing of our products is essential to our commercial success. Research and development play a key role in environmentally sustainable innovation. We rely upon specialists in the fields of sustainability and material innovation to inform our research and development strategy and efforts. While we strive to produce products that are sustainable, consumer demand for our products could decline if we fail to introduce or maintain environmentally sustainable innovations in our products or if customers’ interest in sustainable materials and innovation substantially subsides. In addition, our experience in anticipating consumer preferences in one category, such as apparel, may not help us predict or anticipate consumer preferences in other new categories.
Further, lead times for many of our products, particularly denim, sweaters and outerwear, may make it more difficult for us to respond rapidly to new or changing product trends or consumer preferences. In addition, our lead times may be longer due to the extent we rely on ocean shipping to reduce carbon emissions, which may take longer generally (or as a result of geopolitical dynamics) compared with air or other transport. We continue to balance our inventory levels based on shifts in demand, but we may not be able to respond quickly enough to adjust our inventory position accordingly, which may have an adverse impact on our operating results. If we are unable to anticipate consumer preferences or industry changes or introduce new products in a timely manner, or our new product launches are not accepted by consumers, we could experience lower sales, excess inventories or lower profit margins, any of which could have an adverse effect on our business, financial condition and results of operations.
We utilize a range of marketing, advertising, and other initiatives to increase returning customers’ spend and to acquire new customers; if the costs of advertising or marketing increase, or if our initiatives fail to achieve their desired impact, we may be unable to grow the business profitably.
We deploy what we believe is a highly differentiated brand voice, unique content and performance marketing efforts, to drive customers from awareness to consideration to conversion. Promoting awareness of our brand and products is important to our ability to grow our business, drive ongoing customer engagement and retention and attract new customers. Our marketing strategy includes brand marketing campaigns, including campaigns, public relations, events and product gifting, as well as performance marketing, including paid search, paid social, affiliate marketing, retargeting, display, email, direct mail, generative AI optimization and search engine optimization, among other tools. In addition, our marketing strategy is global in scale. To monitor the efficacy of our expansion, we utilize a suite of paid and organic analytics tools to verify our brand reach and audience engagement across diverse markets. These tools allow us to measure the visibility of our content and the conversion efficiency of our campaigns in real- time; however, any inaccuracies in this data or limitations imposed by third-party platform transparency could lead to inefficient capital allocation and a failure to reach our target demographics effectively.
We establish and maintain relationships with celebrity, influencer and brand partners in order to develop and promote our products as well as strengthen our brand. In a competitive environment, the monetary and non-monetary costs associated with establishing and nurturing these relationships may increase, and there can be no assurance that our investments and efforts will ultimately result in new customers or increased sales to returning customers. If we are unable to maintain current partnerships or establish new partnerships in the future, this could adversely affect our brand visibility and strength and result in a negative impact to our financial results. We also seek to engage with our customers and audiences and build awareness of our brand through sponsoring unique events and experiences. If our marketing efforts, events and broader messaging are not appropriately tailored to and accepted by our target customers, we may fail to attract new customers and/or retain returning customers, and our brand and reputation may be harmed. Our future growth and profitability and the success of our brand will depend in part upon the effectiveness and efficiency of our marketing efforts.
We use third-party social media platforms, including Instagram, Facebook, Pinterest, TikTok, X (formerly known as Twitter) and YouTube, to raise awareness of our brand and engage with our community. As of June 27, 2026, we had approximately four million followers across social media platforms, which may include the same followers on multiple platforms. As existing social media platforms evolve and new platforms develop, we must continue to maintain a presence on these platforms and establish a presence on emerging platforms. If we are unable to cost-effectively use social media platforms as marketing tools, or unable to continue to use certain platforms at all, our ability to acquire new customers and our financial condition may suffer. For example, lawmakers in the United States, Europe and Canada have recently escalated efforts to restrict access to TikTok. On April 24, 2024, former-President Biden signed into law certain measures requiring TikTok’s parent company to sell TikTok by January 19, 2025 or face a total ban in the United States. Though TikTok’s parent company did not sell TikTok by the deadline, President Trump signed multiple extensions to give his administration more time to broker a deal to bring the social media platform under American ownership and, in September 2025, signed an executive order approving a proposed deal that resolves national security concerns and complies with the Protecting Americans from Foreign Adversary Controlled Applications Act by removing TikTok in the United States from
48
China’s control. On January 22, 2026, TikTok USDS Joint Venture LLC, a majority owned U.S. joint venture, was established in compliance with the executive order signed by President Trump to enable continued accessibility for users in the United States. Individual states, governmental bodies and institutions have also voiced concerns that TikTok poses a national security threat and have pursued similar prohibitions. In addition, social media platforms we use may change their policies or algorithms, including in response to shifting consumer sentiment around topics such as sustainability, leading to shifts in the level of recommended content, which may impact our ability to fully optimize such platforms and acquire customers, resulting in an adverse effect on our business, financial condition and results of operations.
In addition, we currently receive a significant number of visits to our website via search engine results, primarily from Google. Search engines frequently change the algorithms that determine the ranking and display of results of a user’s search, which could reduce the number of visits to our website, in turn reducing new customer acquisition and adversely affecting our results of operations. The impact of agentic search is changing the landscape of search and discovery. Further, the recent introduction of AI and large language models within search and other marketing channels may change consumer search behavior and our ability to cost effectively acquire and retain customers. For example, in March 2025, Google introduced an experimental AI mode within its search platform and other platforms have or may in the future launch similar functionality. If we are unable to adapt to this and similar changes, our net revenue growth and profitability may be adversely affected. If we are unable to cost-effectively drive traffic to our website, our ability to acquire new customers and our financial condition would suffer.
Email and SMS marketing is also central to our marketing efforts. As of June 27, 2026, we had approximately three million subscribers to our email list. If we are unable to successfully deliver emails to our customers or if customers do not engage with our emails, whether out of choice, because those emails are marked as low priority or spam, or for other reasons, our business could be adversely affected. Our marketing initiatives have become increasingly expensive and may continue to increase in cost, and generating a meaningful return on those initiatives may be difficult or unpredictable. Even if we successfully increase net revenue as a result of our marketing efforts, it may not offset the additional marketing expenses we incur.
If our marketing efforts are not successful in promoting awareness of our products, driving customer engagement or attracting new customers, if we are not able to cost-effectively manage our marketing expenses or if we lose access to certain tools or platforms, our business, financial condition and results of operations could be adversely affected.
Failure to accurately forecast customer demand could lead to excess inventories or inventory shortages, which could result in decreased operating margins, reduced cash flows, and harm to our business.
To meet anticipated demand for our products, we must forecast inventory needs and place orders with our suppliers based on our estimates of future demand for particular products. Although we seek to replenish product based on real time sales data and other considerations, our ability to accurately forecast demand for our products could be affected by many factors, including an increase or decrease in customer demand for our products or for products of our competitors, changing consumer preferences, changing product trends, our failure to accurately forecast consumer acceptance of new products, product introductions by competitors, unanticipated changes in general market conditions, declines in overall consumer spending and weakening of economic conditions or consumer confidence in future economic conditions. For example, we source products, directly and indirectly, from China. The imposition of significant tariffs on imports from China or other countries that we source from, if reinstated at heightened levels or if reinstated at all, may result in our inability to cost-effectively source products. If we fail to accurately forecast customer demand, whether from China or other countries, we may experience excess inventory levels or a shortage of products available for sale in our stores or for delivery directly to our customers or to our wholesale partners.
Inventory levels in excess of demand may result in inventory write-offs, inventory write-downs, donations by us of our unsold products and/or the sale of excess inventory at discounted prices, any of which could cause our gross margin to suffer, impair the strength and exclusivity of our brand and have an adverse effect on our business, financial condition, results of operations and cash flows. For example, we have in the past sold certain of our products at discounted prices through various channels including our website, retail stores, outlets, sample sales and off-price wholesalers. We have also donated excess products to third parties in the past. Further, holding inventory in advance of any such sales or donations also risks the appeal of such inventory to be sold at all or may require that we sell such inventory at prices that are unfavorable to us.
Conversely, while we aim to manage our inventory to sell through and create a degree of scarcity, if we underestimate customer demand for our products and fail to place sufficient orders with our suppliers in advance, then our suppliers may not be able to deliver products to meet our requirements and we may experience inventory shortages. Inventory shortages
49
in our stores or our company-operated or third-party distribution centers have in the past, and could in the future, result in delayed shipments to customers, lost sales, a negative customer experience, lower brand loyalty or damage to our reputation and customer relationships, any of which could have an adverse effect on our business, financial condition and results of operations.
Our industry is highly competitive and if we do not compete effectively, our operating results could be adversely affected.
The women’s apparel, footwear and accessories retail industry is highly competitive. We compete with a diverse set of businesses, including department stores, specialty retailers, independent brands, vintage stores, resale/second hand retailers, online marketplaces and other types of online and retail businesses that market products similar to the products we offer. We believe our ability to compete depends on many factors within and beyond our control, including:
•attracting new customers and engaging and cultivating our relationships with returning customers;
•attracting and retaining personnel;
•further developing our data analytics and technology capabilities;
•maintaining favorable brand recognition and effectively marketing our products to customers;
•the amount, diversity and quality of products that we or our competitors offer;
•optimizing and/or personalizing our website and in-store shopping experience;
•maintaining and curating an appealing portfolio of products;
•the price at which we are able to offer our products;
•maintaining and growing our market share, including access to capital to invest in the business and/or growth;
•price fluctuations or demand disruptions of our third-party suppliers and wholesale partners;
•the speed and cost at which we can deliver products to our customers and the ease with which they can use our services to return products;
•anticipating and quickly responding to changing fashion trends and consumer shopping preferences; and
•our ability to expand attractive physical distribution points, whether through strategic wholesale placements or prime retail locations.
We expect competition to increase as other established and emerging companies enter the markets in which we compete, as customer requirements evolve and as new products and technologies are introduced.
Many of our current competitors have, and potential competitors may have, longer operating histories, larger fulfillment infrastructures, greater technical capabilities, faster shipping times, lower-cost shipping or pricing, more attractive customer service policies (e.g., with respect to shipping windows, return windows, return fees), larger customer bases, more sophisticated data analytics capabilities, and greater financial, marketing, institutional and other resources than we do. These factors may allow our competitors to derive greater revenue and profits from their existing customer bases, acquire customers at lower costs or respond more quickly than we can to new or emerging technologies and changes in fashion trends and customer shopping behaviors. These competitors may engage in more extensive research and development efforts, enter into or expand their presence in physical retail, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build larger customer bases or generate revenue from their existing customer bases more effectively than we do. If we fail to execute on any of the above better than our competitors, our business, financial condition and results of operations may be adversely affected.
Competition, along with other factors such as consolidation within the fashion industry and changes in customer spending patterns, could also result in significant pricing pressure. These factors may cause us to reduce prices to our customers, which could cause our gross margins to decline if we are unable to appropriately manage inventory levels or otherwise offset price reductions with comparable reductions in our operating costs. If our prices decline and we fail to
50
sufficiently reduce our product costs or operating expenses, our profitability may decline, which could have a material adverse effect on our business, financial condition and results of operations.
If we fail to effectively manage our growth, our business, financial condition, and results of operations could be harmed.
We have expanded our operations rapidly since our inception in 2009. In particular, in the past three fiscal years, our net revenue has increased from $360 million in 2023 to $507 million in 2025, and from $125.1 million in the second quarter of 2025 to $155.2 million in the second quarter of 2026, and our total company headcount has grown from approximately 974 employees in 2023 to approximately 1,353 as of the second quarter of 2026. If our operations continue to grow at a rapid pace, we may experience difficulties in obtaining sufficient supplier capacity and raw materials to produce our products, as well as delays in production and shipments, as our products are subject to risks associated with overseas sourcing and manufacturing. We could be required to continue to expand our creative, design, merchandising, planning, operations and supply chain functions, invest in opening and operating a greater number of retail stores in our existing markets and/or in new markets or invest in wholesale partners’ operations in lieu of or in addition to retail stores operated by us, upgrade our information systems and other processes and technology and obtain more space for our expanding workforce. This expansion could increase the strain on our resources, expose us to legal and compliance risk across new markets and cause us to experience operating difficulties, including difficulties in hiring, training and managing an increasing number of employees, especially to the extent our growth exposes us to a greater number of markets’ employment, health and safety and other regulatory and compliance requirements. Any of these or other difficulties in effectively managing our growth and the increased complexity of our business could result in the erosion of our brand image, which could have a material adverse effect on our financial condition and results of operations.
Further, if we are unable to maintain our core values and culture as we grow, our business could be harmed. We believe that a critical component of our success to date has been our corporate culture and values. We have invested substantial time and resources in building our culture, which is rooted in five core values: Make an Impact, Be Brave, People Focused, Make It Better and Own It. However, as we continue to grow, including expanding our geographic presence and developing the infrastructure associated with being a public company, we will face a number of challenges that may affect our ability to sustain our culture and shared values, including:
•a need to identify, attract, reward and retain people in key leadership positions in our organization who share and further our culture, values and mission;
•the increasing size and geographic diversity of our workforce, which may limit our ability to promote a uniform and consistent culture and set of shared values across all of our offices and employees globally;
•the wider array of alternative working arrangements we now permit or may in the future permit, including part-time or flexible roles, fully remote roles, or “hybrid” roles (where a mix of in-person and remote work is permitted); and
•competitive pressures that may divert us from our mission, vision and values, and may cause us to take actions that are contrary to, or that our workforce views as contrary to, our culture or values.
Any failure to preserve our corporate culture (or localize it authentically) or any failure to live up to our values as a company, particularly those related to sustainability, could negatively affect our brand and reputation, harm our business and limit our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.
Our past growth rates are not indicative of expected results in the future and we may be unable to successfully execute on our growth strategy.
Although our net revenue has grown profitably over time, this should not be considered as indicative of our future performance. We may not be successful in navigating through macroeconomic challenges and may not be successful in executing our growth strategy. Even if we effectively manage external challenges and achieve our strategic plan, we may not be able to sustain profitability. In future periods, our net revenue may decline or grow more slowly than we expect. We believe that the sustainability of our recent net revenue growth, profitability and potential future growth, including retail, category and geographic expansion, will depend upon many factors, including our ability to:
•increase brand awareness and drive efficient customer acquisition;
51
•retain returning customers and continue growth within our existing customer base;
•provide a premium shopping experience for our customers;
•respond to shifting customer behaviors and traffic patterns in person and online;
•operate new retail stores on a profitable basis and effectively extend our existing store leases at the same or better terms;
•offer an assortment of products that is attractive to customers and accurately forecast demand for our products;
•offer an attractive, effective, reliable, user-friendly online experience and develop new features to enhance the customer experience both in-store and on our website;
•increase the frequency with which new and repeat customers purchase products on our website and in our stores through merchandising, data analytics and technology;
•add new suppliers and deepen our relationships with our existing suppliers;
•attract and retain personnel;
•enhance and scale the systems our customers use to interact with our website and invest in our infrastructure platform;
•enhance and scale the technology and infrastructure we use to fulfill orders and process returns at our company-operated and third-party distribution centers;
•target additional categories and price points to continue widening our appeal beyond Millennial and Generation Z customers;
•expand further internationally and adapt to different local cultures, laws, regulations, standards and policies;
•comply with regulatory requirements, taxes, trade laws, trade sanctions and economic embargoes, tariffs, export quotas, custom duties or other trade restrictions or any unexpected changes thereto; and
•compete with local incumbents that understand the local market and may operate more effectively.
We cannot assure that we will be able to achieve any of the foregoing or that we will achieve or sustain the expected benefits of our growth strategy. Our customer base may not continue to grow or may decline in the future due to increased competition, the maturation of our business or other factors. Failure to continue our net revenue growth rates could have a material adverse effect on our business, financial condition and results of operations. You should not rely on our historical rate of net revenue growth as an indication of our future performance or the rate of growth we may experience in any new channel, category or geography.
We may be adversely affected by the financial health of our wholesale partners.
We have a small number of wholesale partners who account for a significant portion of our Wholesale and Other net revenues. We are party to agreements with such wholesale partners, and one of our growth initiatives is to leverage these partnerships to increase brand awareness and reach new customers. This strategy has required, and will continue to require, investment in cross-functional operations and management focus, along with investment in logistics, channel management, supporting technologies and headcount. If our wholesale partners discontinue or decelerate our partnership or otherwise do not satisfy their obligations to us, if we are unable to meet our wholesale partners’ expectations and demands or if we decide to enter into additional partnerships and are unable to identify suitable wholesale partners or reach agreements with them, we may fail to meet our business objectives with respect to our wholesale strategy. In addition, a decline in the performance or financial condition of our wholesale partners, including bankruptcy or liquidation, could result in a material loss of revenues to us and cause us to limit or discontinue business with that partner, require us to assume more credit risk relating to our receivables from that partner or limit our ability to collect amounts related to previous purchases by that partner. For example, in 2025 we incurred a $1.7 million expense arising from the Chapter 11 bankruptcy filing of Saks Global. These risks are further heightened by the fact that our net accounts receivable are highly concentrated, with a single customer accounting for 23% of our consolidated accounts receivable as of 2025. In addition, we and our wholesale partners could face risks from a decline in the overall level of consumer retail spending, and a weak retail environment
52
could impact customer traffic in the stores of our wholesale partners and also adversely affect our net revenue. Further, store closings by our wholesale partners decrease the number of stores carrying our products, while the remaining stores may purchase a smaller amount of our products and may reduce the retail floor space designated for our brand. In the future, retailers may further consolidate, undergo restructurings or reorganizations, realign their affiliations or reposition their stores’ target markets. Any of these types of actions could decrease the number of stores that carry our products or increase the ownership concentration within the retail industry. These changes could decrease our opportunities in the market, increase our reliance on a diminishing number of large wholesale partners and decrease our negotiating strength with our wholesale partners. These factors could have a material adverse effect on our business, financial condition and results of operations.
If we are unsuccessful in growing our e-commerce and retail channels and executing our expansion into new markets, our business, financial condition, results of operations, and growth prospects may suffer.
Although we distribute our products to wholesale partners, sales to our customers primarily occur via e-commerce and retail channels that are owned and operated by us. Growing our e-commerce platform and the number of physical stores owned by us is essential to our growth strategy. This strategy has required, and will continue to require, significant investment in cross-functional operations and management focus, along with investment in supporting technologies and retail store spaces. If we are unable to provide a convenient and consistent experience for our customers, our ability to compete and our results of operations could be adversely affected.
In addition, our future growth depends, to a considerable extent, on our efforts to expand our existing markets and also on our success in entering new markets throughout the world that we deem attractive. While our headquarters are in the United States, we sell our products globally. As of the second quarter of 2026, approximately 20% of our net sales were to customers outside of the United States. We have limited experience with regulatory environments and market practices outside of the United States, and cannot guarantee that we will be able to successfully enter or operate in any such markets. For example, in connection with our expansion efforts in our existing international markets, the United Kingdom, Canada and France, we have encountered, and expect we will continue to encounter, increased costs of operations resulting from higher custom duties, tariffs, taxes, payroll and benefits and other expenses and from new and different business requirements generally. We may also face risks related to foreign currency fluctuations, which could result in increased operating expenses and reduced net revenue. In connection with our expansion efforts into new international markets, we have encountered, and expect to continue to encounter, a number of obstacles including cultural and linguistic differences, differences in regulatory environments and market practices, difficulties in keeping abreast of market, business and technical developments and foreign customers’ tastes and preferences, differences in foreign labor laws and practices, as well as differences in employee expectations and working culture. We may also encounter difficulty expanding into new markets throughout the world because of limited brand recognition leading to delayed acceptance of our products by customers in these new markets. In particular, we have no assurance that our brand and performance marketing playbook will prove successful outside of the geographic regions in which they have been used in the United States, United Kingdom, Canada and France. The expansion into new markets may also present competitive, merchandising, forecasting and distribution and logistics challenges, including the timing component of speed to market and longer transit times, that are different from or more complex than those we currently face. Failure to develop new markets globally or disappointing growth outside of such markets may harm our business, financial condition or results of operations.
We are subject to various federal and state employment and labor laws and regulations and increases in labor costs, including wages, could adversely affect our business, financial condition, and results of operations.
Labor is a significant portion of our cost structure and is subject to many external factors, including unemployment levels, inflation, prevailing wage rates, minimum wage requirements, overtime pay, fair labor standards, potential union protection, potential collective bargaining arrangements, health and other insurance costs, payroll taxes and changes in employment and labor legislation or other workplace regulations. We are subject to, and must comply with, an increasingly complex array of employment, labor, wage and hour, pay transparency, health and safety, harassment, discrimination, leave and benefits, and other workforce-related laws and regulations across multiple jurisdictions. Our failure, or perceived failure, to comply with such requirements could result in audits, investigations, disputes, penalties, or litigation, and could harm our reputation and financial results. These laws and regulations change frequently, exist at multiple levels with respect to a single physical location (e.g., federal, state and local), and may be difficult to interpret and apply. For example, recent amendments to California’s equal pay and transparency laws may increase our compliance obligations. Additional changes to these or similar laws could further affect our compensation practices and increase the cost of compliance.
In addition, from time to time, legislative proposals are made to increase the federal minimum wage in the United States, as well as the minimum wage in California and a number of other states and municipalities in which we operate, and
53
to reform entitlement programs, such as health insurance and paid leave programs. As minimum wage rates increase or related laws and regulations change, we have and may need to continue to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly or salaried employees. Any increase in the cost of our labor could have a significant impact on our operating costs and may require that we take steps to mitigate such increases, which may have an adverse effect on our business, financial condition and results of operations. There is also a risk of potential claims related to discrimination and harassment, health and safety, wage and hour laws, personal injury and other claims. In addition, if we fail to pay such higher wages, we could suffer increased employee turnover. Increases in labor costs could force us to increase prices, which could adversely impact our sales. If competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline and could have a material adverse effect on our business, financial condition and results of operations. In particular, the job market in Southern California, where our principal offices and our company-operated distribution center, as well as [nearly half] of our employees (including retail employees) as of the second quarter of 2026, are located, is very competitive. Further, since Reformation is a high performance culture, we have been a recruiting target for brands that wish to attract our talent.
In addition, although none of our domestic employees are currently covered by a collective bargaining agreement, if a material portion of our workforce were to become members of labor organizations or parties to collective bargaining agreements, we could be vulnerable to a strike, work stoppage or other labor action, which could have an adverse effect on our business. Our business operations and financial performance could be adversely affected by changes in our relationship with our workforce or changes to U.S. or foreign labor and employment laws and regulations.
Further, the laws and regulations that govern the status and classification of independent contractors and other similar non-employee services providers are subject to change and divergent interpretations by various authorities, which can create uncertainty and unpredictability for us and could significantly affect our business and our relationship with our employees and other individuals providing valuable services to us, such as photographers, influencers, models and various consultants. For example, in California, Assembly Bill 5 codified and extended an employment classification test set forth by the California Supreme Court that established a new standard for determining employee or independent contractor status. This bill, and other similar initiatives throughout the United States, could lead to additional challenges to the classification of photographers, influencers, models and various consultants and a potential increase in claims, lawsuits, arbitration proceedings, administrative actions, government investigations and other legal and regulatory proceedings at the federal, state and municipal levels challenging the classification of any photographers, influencers, models or various consultants as independent contractors. Such regulatory scrutiny or actions over such classification practices also may create different or conflicting obligations from one jurisdiction to another. Although we are currently not involved in any material legal actions of this nature and, to our knowledge, there have been no material claims of misclassification made against us, the likelihood of misclassification claims in states like California has increased in light of laws such as Assembly Bill 5, and the results of any such litigation or arbitration are inherently unpredictable and legal proceedings related to such claims, individually or in the aggregate, could have a material impact on our business, financial condition and results of operations. Regardless of the outcome, litigation and arbitration of misclassification and wage and hour claims could result in defense and settlement costs and diversion of management resources, among other factors, which could have a material adverse effect on our business, financial condition and results of operations.
Our quarterly operating results may fluctuate, which could cause our stock price to decline.
Our quarterly operating results may fluctuate for a variety of reasons, many of which are beyond our control. These reasons include those described in these risk factors, as well as the following:
•fluctuations in net revenue generated from our products;
•fluctuations in the levels or quality of inventory;
•fluctuations in capacity as we expand our operations;
•our success in engaging returning customers and attracting new customers;
•the amount and timing of our operating expenses;
•fluctuations in the rate of U.S. tariffs imposed on goods imported from China and other countries;
•the timing and success of new products we introduce;
•the impact of competitive developments and our response to those developments;
54
•our ability to manage our existing business and future growth;
•disruptions or defects in our site, such as privacy or data security breaches or changes in the ability to or ease of checkout; and
•economic and market conditions, particularly those affecting our industry.
In addition, historically, we have experienced a pattern of increased sales into the early spring and summer months, which has resulted in increased revenue during the second quarter of each fiscal year relative to the first quarter. The third fiscal quarter typically sees a moderate increase in net revenue relative to the second fiscal quarter, given the timing of one of our twice-yearly promotional events beginning in August. We expect this seasonality to continue in future years and believe it will be subject to maintaining our promotional sales strategy and the precise timing of our twice-yearly promotional sales event and our annual Black Friday Cyber Monday promotion. This seasonality, along with other factors that are beyond our control, including weather conditions and the effects of climate change, could adversely affect our business and cause our operating results to fluctuate.
As a result of these quarterly fluctuations, we believe that comparisons of our operational results between different quarters within a single fiscal year or across different fiscal years are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of our future performance. In the event that any quarterly fluctuations in our net revenue and results of operations result in our failure to meet our forecasts or the forecasts of the research analysts that may cover us in the future, the market price of our ordinary shares could fluctuate or decline.
As a company that operates retail stores, we are subject to commercial real estate risks.
As of June 27, 2026, we operated 67 full-price retail store locations and three outlet stores across four countries. We lease our stores under operating leases. We are focused on the expansion of our retail operations and expect to continue to evaluate and grow the total number of stores we operate over the next several years, domestically and internationally.
When we open new retail stores, our ability to effectively obtain real estate to open new retail stores, both domestically and internationally, depends on many factors, including, among others, our ability to:
•identify suitable store locations that meet our criteria for traffic, size, layout and square footage, co-tenancies, lease economics, demographics and other factors, the availability of which is outside of our control and may require expensive and long-term lease obligations;
•gain brand recognition and acceptance, particularly in geographies or regions that are new to us;
•negotiate acceptable lease terms;
•hire, train and retain employees who possess the required customer service and other skills and who share our commitment to sustainability;
•invest sufficient capital in store build-out and opening;
•immerse new employees into our corporate culture and shared values;
•source sufficient inventory levels; and
•successfully integrate new stores into our existing operations and IT systems.
We may be unsuccessful in identifying new markets where our products and brand image will be accepted. We also must be able to effectively renew our existing real estate leases. In addition, if an existing or new store is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. We may also be committed to perform our obligations under the applicable leases even if current locations of our stores become unattractive as demographic or competitive landscape patterns change. Failure to secure adequate new locations or successfully modify leases for existing locations, including due to the impact of supply and demand economics and market cyclicality, or failure to effectively manage the profitability of our existing retail stores or efficiently manage any retail store closure process, could have an adverse effect on our business, financial condition and results of operations.
55
We may be unable to accurately forecast net revenue and appropriately plan our expenses in the future.
We base our current and future expense levels on our operating forecasts and estimates of future net revenue and gross margins. Net revenue and operating results are difficult to forecast because they generally depend on the volume, timing, value and type of the orders we receive and return rates, chargebacks and bad debts, all of which are uncertain. In addition, we cannot be sure the same growth rates, trends and other key performance metrics are meaningful predictors of future growth. Our business is affected by general economic and business conditions in the United States, Canada, the United Kingdom and France and, as we grow, in additional international markets. For example, the rapid changes and uncertainty in global trade practices, including tariff rates, make it difficult to predict sales, inventory levels and gross margin. Our mix of product offerings may also be variable from quarter-to-quarter. This variability makes it difficult to predict sales and could result in significant fluctuations in our net revenue, margins and profitability from period-to-period. A significant portion of our expenses are fixed, and as a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in net revenue.
Furthermore, we may be unable to adjust our investments in a timely manner to support increasing demand and higher net revenue or compensate for any incremental unexpected shortfall in net revenue. Any failure to accurately predict net revenue or expenses could cause our operating results to be lower than expected, which could materially adversely affect our business, financial condition and results of operations.
Product returns could harm our business.
We generally allow customers to return products under a return policy that we believe is relatively standard for the industry. For example, unless otherwise stated, within the United States, we generally accept product returns for products purchased through our DTC channel in new condition and with original tags for full refund or exchange if returned within 30 days. A return shipping fee generally applies to all online orders, with one fee per order. Our revenue is reported net of returns, discounts and any taxes collected from customers and remitted to government authorities. We estimate an allowance for expected product returns based on historical return trends. Revenue is presented net of the sales return allowance and the expected inventory right of recovery is presented as a reduction of cost of revenue. The introduction of new products, changes in consumer confidence or shopping habits or other competitive and general economic conditions could cause actual returns to exceed our estimates. As actual return costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur. In addition, from time to time, our products may be damaged in transit, which may increase return rates or impede our ability to resell such products with respect to damaged returned goods. From time to time, customers have abused our return policy by, for example, not appropriately returning product or returning product that has been worn repeatedly or has been stained within the 30-day return window and cannot be resold. Competitive pressures could cause us to alter our return policies or our shipping policies, which could result in an increase in product returns, an increase in damaged, unsaleable inventory and/or an increase in costs if we are no longer able to charge a return shipping fee. Alternatively, if we implement higher return fees or increase other standards or qualifications for product returns in order to improve our product return economics, for example by reducing the return window, it could result in reduced demand for our product or result in lower customer satisfaction and higher customer churn. If the rate of product returns increases significantly or if product return economics become less efficient, our business, financial condition and results of operations could be harmed.
We are subject to risks related to our sustainability activities and disclosures, including our commitment to certain sustainability criteria, which we call the Sustainability Framework, and our reputation and brand could be harmed by evolving disclosure requirements and expectations.
In 2015, we began purchasing third party carbon offsets with the intention to make up for our environmental footprint, and introduced RefScale to track the environmental footprint of our products. In 2016, we made our sustainability progress public with our inaugural Sustainability Report, which we have published at least bi-annually. We introduced the first iteration of our Sustainability Framework in 2019, which establishes the core tenets of our work. In December 2020, we announced our commitment to reducing our carbon footprint and becoming Climate Positive by the end of 2025, which we subsequently achieved. While there is no standardized or broadly agreed upon definition of Climate Positive, we define it as meeting our greenhouse gas reduction targets and supporting the removal of more operational greenhouse gas emissions than we produce. This includes investing in solutions that reduce greenhouse gas emissions, driving climate action throughout our supply chain, including through our Factory Forward program that assists our suppliers with measuring, reporting, and assessing opportunities for reducing environmental costs, and making our roadmap public so others can do it too. In 2023, we announced our commitment to be circular by 2030, meaning we will aim to create products with as close to zero virgin materials (which we define as any raw material that was cultivated or created for our product and has not
56
been used before) as possible, reduce waste and strive to ensure that every product is recyclable, and published a roadmap that defines how we plan to achieve that goal.
While our sustainability strategy and practices and the level of transparency with which we are approaching them are foundational to our business, they expose us to certain risks and uncertainties, including:
•we may fail or be unable to fully achieve one or more of the 2030 commitments, or other aspirations, targets, goals, commitments, due to a range of factors within or beyond our control (including, for example, technical limitations on recycled fibers that impede product quality and durability, the cost of recycling sustainable fibers, the lack of enforcement of industry-wide regulation by state and federal governments and/or the inability of the fashion industry to make sufficient progress on technological innovation), or that we may modify our stated goals in light of new information, adjusted projections or a change in business strategy, any of which could negatively impact our brand, reputation and business;
•achieving our 2030 commitments and other sustainability commitments has required, and may in the future require, us to expend significant monetary and non-monetary resources, which could divert the attention of our senior management and key personnel, impact our profitability, harm us competitively or otherwise limit our ability to make investments in the growth of our business;
•actual or anticipated customer sentiment regarding sustainability matters may change, which may negatively impact our brand, reputation and business;
•our disclosures related to sustainability may result in heightened scrutiny from stakeholders, investors, governmental authorities or other third parties of our sustainability performance, activities and decisions;
•our brand, reputation and business could be negatively impacted by an actual or perceived failure to disclose sustainability metrics and related goals, a failure to appropriately manage selection of goals, an actual or perceived failure to make appropriate disclosures, the fact that we have sustainability programs and goals at all, the perception that our sustainability goals and practices are not aligned with the policies, standards or expectations of certain stakeholders, including third-party rating services;
•we use the terms ‘sustainable,’ ‘climate positive,’ ‘circular,’ and ‘deadstock,’ among other terms related to sustainability activities, our definitions of which may not align with the definitions, requirements or expectations of regulators, lawmakers, industry groups, customers and other stakeholders, and which definitions may evolve or change, including across geographies;
•certain metrics we utilize receive limited or no assurance from and/or verification by third parties, may involve a less rigorous review process than assurance sought in connection with more traditional audits and may not identify errors or protect us from potential liability under the securities laws and if we were to seek more extensive assurance or attestation with respect to such sustainability metrics, we may be unable to obtain such assurance or attestation or may face increased costs related to obtaining and/or maintaining such assurance or attestation;
•the third-party data, benchmarks, indices and assumptions used in our RefScale carbon footprint and water calculations are determined to be wrong or become unavailable to us for whatever reason, which would require us to find a new source of quality third-party data or develop our own, either of which could require significant resources or a temporary suspension of sharing our RefScale calculations and if our stakeholders react unfavorably to any such situation, or we fail to adequately manage any transition, it could negatively impact our brand, reputation and business;
•the sustainability standards, norms or metrics, which are constantly evolving, change in a manner that impacts us negatively or requires us to change the content or manner of our disclosures and our stakeholders or third parties view such change(s) negatively, we are unable to adequately explain such changes or we are required to expend significant resources to update our disclosures, any of which could negatively impact our brand, reputation and business;
•our brand, reputation and business could be negatively impacted if we are perceived, alleged or found to be in violation of, or non-compliant with, existing, newly adopted or constantly evolving sustainability-related laws and disclosure requirements that are applicable to us and that may conflict with other regulatory requirements and result in regulatory uncertainty; and
57
•our brand, reputation and business could be negatively impacted if any of our disclosures, including our RefScale calculations, marketing, labeling, reporting to third-party sustainability standards or reporting against our 2030 commitments or other goals are inaccurate, perceived to be inaccurate or alleged to be inaccurate.
Climate change and the evolving and varied expectations by governments, organizations, customers and investors on sustainability issues, including those related to climate change and socially responsible activities, may adversely affect our reputation, business, financial condition, and results of operations.
Climate change occurring around the world may impact our business in numerous ways. Such changes could lead to an increase in prices of raw materials, commodities and/or packaging, as well as reduced availability of key manufacturing components. Increased frequency and severity of natural disasters and extreme weather, such as storms, severe temperatures, wildfires, hurricanes and floods, as well as changes in weather patterns, could cause increased disruption to the production and distribution of our products and have an adverse impact on consumer demand and spending. For example, in January 2025, the Los Angeles area wildfires resulted in the temporary closure of all of our local stores for several days and, ultimately, in the extended closure of our Pacific Palisades store, resulting in lost revenue and profits.
The focus of investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders and stakeholders on sustainability practices of companies has been changing. Some of these parties have placed increased importance on the implications of the social impact of their investments. If our sustainability practices do not meet investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones we choose to focus on or may emphasize none at all), or if our sustainability practices, including our periodic reporting, change or otherwise do not live up to our own values or sustainability-related goals, then our brand, reputation and employee retention may be negatively impacted. On the other hand, various governmental authorities and regulators at the state and federal level may scrutinize or otherwise take action against our sustainability initiatives, policies and practices, including those relating to human capital management. We could also incur additional costs and require additional resources to monitor, assess and comply with applicable regulations and other developments and to achieve our sustainability goals. In addition, as we continue to grow or enter new markets, our business may be subject to additional and potentially conflicting laws and regulations. Also, our failure, or perceived failure, to manage reputational threats and meet expectations with respect to socially responsible activities and sustainability commitments could negatively impact our brand, employee retention, the willingness of our customers and suppliers to do business with us and have a material adverse impact on our business, financial condition and results of operations.
Our business may also become a target for litigation, activism and media attention based on any sustainability claims that we may make. Other companies have faced increased scrutiny over their sustainability claims from consumers and legislative and regulatory bodies in recent years. For example, in 2024, Canada and the EU implemented new “greenwashing” rules regulating environmental claims in marketing materials. Similarly, there may be updates to the Federal Trade Commission (“FTC”) Green Guides, in which green marketing guidance is incorporated into various consumer protection and false advertising laws. This has led to a notable increase in litigation and regulatory action relating to these types of claims. Similarly, there is potential litigation risk related to our commitment to sustainable sourcing. In the event that human rights and labor abuses or unsustainable practices are uncovered in our supply chain, we are susceptible to consumer protection false advertising litigation and other actions, which may have a material adverse effect on our brand, business, or reputation. The outcome of such litigation, particularly class action and regulatory actions, can be difficult to assess or quantify, and the cost to defend such lawsuits may be significant.
Our focus on using sustainable high-quality materials and reducing environmental impacts in our manufacturing processes and supply chain practices may increase our cost of revenue and hinder our net revenue growth.
We are dedicated to prioritizing sustainable materials that meet our quality standards, and supply chain and manufacturing processes that collectively limit our carbon footprint. In May 2023, we announced a commitment to be circular by 2030, and published a roadmap of how we plan to achieve that goal. As our business evolves, it may be increasingly challenging to cost-effectively secure enough sustainably sourced high-quality materials to support our growth and achieve our sustainability goals while also achieving and maintaining profitability. In addition, our ability to expand into new product categories depends in part on our ability to identify new sustainable materials that are suitable for our products. Our inability to source materials that meet our sustainability requirements and high-quality standards in sufficient volumes could result in slower growth, increased costs and/or lower net profits. Additionally, as our business evolves, we may not be able to identify suppliers with business practices that reflect our commitment to sustainability, which may adversely impact our ability to expand our supply chain to meet the expected growth of our business. Most of our total carbon footprint comes from our supply chain, so maintaining our climate positive goal depends on how we influence our supplier relationships. While we have implemented several measures, including our Factory Forward programs, there is no
58
assurance that these measures will be successful. If any of these factors prevent us from achieving our sustainability goals, including one or more of the 2030 commitments, or increase the carbon footprint of any of our products, it could have an adverse effect on our brand, reputation, business, financial condition, and results of operations.
Certain of our key operating metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies in such metrics or the underlying data may cause a loss of investor confidence in such metrics, and the market price of our common stock may decline.
We track certain key operating metrics using internal and/or external data analytics tools, which have certain limitations, including, but not limited to, imperfect data collection (e.g., lack of emails and/or other identifiers for certain customers who purchase via our retail channels and do not supply such information). In addition, we rely on data received from third parties, including third-party platforms, to track certain performance indicators, and we may be limited in our ability to verify such data. In addition, our methodologies for tracking metrics may change over time, which could result in changes to the metrics we report. If we undercount or overcount performance due to the internal data analytics tools we use or issues with the data received from third parties, if our internal data analytics tools contain algorithmic or other technical errors or if changes in access to third-party data or external reporting standards require modifications to how we calculate certain operating metrics, the data we report may not be accurate or comparable with prior periods. In addition, limitations, changes or errors with respect to how we measure data may affect our understanding of certain details of our business, which could affect our longer-term strategies. If our performance metrics are not, or are not perceived to be, accurate representations of our business, if we discover material inaccuracies in our metrics or the data on which such metrics are based or if we can no longer calculate any of our key performance metrics with a sufficient degree of accuracy, investors could lose confidence in the accuracy and completeness of such metrics, which could cause the price of our common stock to decline.
Our indebtedness could adversely affect our financial condition and operating flexibility.
As of June 27, 2026, we had $246.7 million of term loans and $3.6 million of letters of credit outstanding under the Credit Agreement for a total indebtedness of $250.3 million. As of June 27, 2026, cash on hand was $76.6 million and we had $26.4 million of capacity available under our revolving facility. We generally experience significant fluctuations in our working capital over our operating cycle due to our limited number of sale periods every year and the seasonality of our business, wherein we typically experience lower net revenue in our first quarter compared to our second and third quarter. Our debt could have important consequences, including:
•limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing;
•requiring a portion of our cash flow to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flow available for working capital, capital expenditures, acquisitions and other general corporate purposes;
•requiring the net cash proceeds of certain equity offerings to be used to prepay our debt as opposed to being applied for other purposes;
•exposing us to the risk of rising interest rates with respect to the borrowings under any variable rate indebtedness; and
•limiting our flexibility in planning for and reacting to changes in the industry in which we compete.
The Credit Agreement contains a number of restrictive covenants that impose operating and financial restrictions on us. For example, the Credit Agreement limits our ability to, among other things, incur additional indebtedness, make certain restricted payments and investments or redeem or repurchase capital stock, transfer or sell assets, enter into transactions with affiliates, create or incur certain liens, make certain loans, investments or acquisitions, issue certain redeemable stock and preferred stock, create or incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, merge, consolidate or transfer all or substantially all of our assets, pay or redeem subordinated debt or equity and amend our organizational documents. All of these limitations are subject to significant exceptions and qualifications. Nevertheless, the covenants to which we are subject could limit our ability to finance our future operations and capital needs and our ability to pursue business opportunities and activities that may be in our interest.
If we are unable to comply with these restrictions and covenants at times and to the extent they are applicable, including as a result of events beyond our control, we may risk an event of default under the Credit Agreement, which
59
could accelerate the payment of any amounts then due and limit our ability to incur future borrowings. In addition, if we are unable to pay amounts due under the Credit Agreement or to fund other liquidity needs, such as future capital expenditures or contingent liabilities as a result of adverse business developments, increased pricing pressures or otherwise, we may be required to refinance all or part of our then-existing indebtedness, sell assets, reduce or delay capital expenditures or seek to raise additional capital. Any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Inflation could adversely impact our business, financial condition, and results of operations.
Inflation in the United States and other jurisdictions in which we operate began to rise significantly in late 2021, although it has slightly improved in 2024 and 2025. The rise of, and uncertainty regarding, inflation is primarily believed to be the result of the economic impacts from the global COVID-19 pandemic, including related global supply chain disruptions, government stimulus packages, strong economic recovery and associated widespread demand for goods, as well as geopolitical conflicts (such as in Ukraine and the Middle East), and recently imposed, new or increased tariffs, among other factors. For instance, global supply chain disruptions have resulted in shortages in materials, which has led to inflationary cost increases for materials and energy, and could in the future cause further cost increases as well as scarcity of certain products. We have experienced, and may in the future experience, inflationary pressures in certain areas of our business, including with respect to employee wages, the cost of materials, transportation and energy, as well as performance and brand marketing expenses, store rents and build-out costs and other various professional and technology expenses. We cannot predict any future trends in the rate of inflation or associated increases in our operating costs or potential weakening of consumer spending power and how that may impact our business. To the extent we are unable to recover higher operating costs and a potential weakening of consumer spending power resulting from inflation, or otherwise mitigate the impact of such costs on our business, our revenues and gross profit margins could decrease and our business, financial condition, and results of operations could be adversely affected.
We are a holding company and depend upon our subsidiaries for our cash flows.
We are a holding company. All of our operations are conducted, and almost all of our assets are owned, by our subsidiaries. Consequently, our cash flows and our ability to meet our obligations depend upon the cash flows of our subsidiaries and the payment of funds by our subsidiaries to us in the form of dividends, distributions or otherwise. The ability of our subsidiaries to make any payments to us depends on their earnings, the terms of their indebtedness, including the terms of any credit facilities and legal restrictions. Any failure to receive dividends or distributions from our subsidiaries when needed could have a material adverse effect on our business, financial condition, and results of operations.
If we are unable to attract and retain qualified personnel, we may not be able to grow effectively or successfully operate our business.
Our success, including our ability to anticipate and effectively respond to changing trends, depends in part on our ability to attract and retain qualified personnel on our executive team, particularly our Chief Executive Officer, and in our merchandising, engineering, marketing, design and other teams. Competition for qualified personnel is strong, and we cannot be sure that we will be able to attract and retain a sufficient number of qualified personnel in the future or that the compensation costs of doing so will not adversely affect our operating results. If we are unable to retain, attract and motivate talented employees and members of senior management and our board of directors with the appropriate skills at cost-effective compensation levels or if changes to our business adversely affect morale or retention, we may not achieve our objectives and our business, financial condition, and results of operations could be adversely affected. In addition, the loss of one or more of our key personnel or the inability to promptly identify a suitable successor to a key role could have an adverse effect on our business. In particular, our Chief Executive Officer, Hali Borenstein, has unique and valuable experiences, being part of our team since 2014. If she were to depart or otherwise reduce her focus on our company, our business may be disrupted. We do not currently maintain key-person life insurance policies on any member of our senior management team or other key employees. We also may be unable to retain existing management, technical, sales and customer support personnel that are critical to our success, which could harm our customer and employee relationships, result in loss of key information, expertise or know-how or cause us to incur unanticipated recruitment, training and other costs, which could in turn harm our business, financial condition, and results of operations.
60
Risks Related to Our Supply Chain
Our reliance on suppliers to provide materials for and to produce our products could cause problems in our supply chain, and failure of our suppliers to consistently provide high-quality materials and products could adversely affect our brand and reputation and cause our business, financial condition, and results of operations to suffer.
We rely primarily on suppliers to provide materials for and to produce our products. Many of our products are manufactured by third parties and may be available, in the short term, from a limited number of sources, some of whom may be impacted by external factors. In 2025, our top five suppliers produced approximately 54% of our units. Our agreements with some suppliers may not adequately meet our volume and other production requirements, and we compete with other companies for raw materials and production.
We have experienced, and may in the future experience, a significant disruption in the supply of finished goods and raw materials from current sources and we may be unable to locate alternative suppliers of comparable quality at an acceptable price in time, or at all. In addition, if we experience significant increased demand or if we need to replace an existing supplier, we may be unable to locate additional supplies of raw materials or additional manufacturing capacity on terms that are acceptable to us, or at all, or we may be unable to locate any supplier with sufficient capacity to meet our requirements or to fill our orders in a timely manner. These issues and risks are increased as a result of our commitments to sustainability, including our use of specific materials and manufacturing processes and the sustainability requirements or expectations we impose on our suppliers, which generally limit the number of suppliers who could potentially satisfy our requirements. Identifying a suitable supplier is an involved process that requires us to become satisfied with its quality control, responsiveness and service, financial stability, environmental impact, labor practices, price, geographical location and ethical standards. Even if we are able to expand existing or find new manufacturing or materials sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers in our methods, products and quality control standards. Delays related to supplier changes could also arise due to an increase in shipping times if new suppliers are located farther away from our markets or from other participants in our supply chain or if an alternative shipping and transportation route is required, any of which could increase our overall environmental impact and which could also negatively impact our reputation and the carbon footprint scoring of our products. Additionally, geopolitical tensions have increased global shipping rates. Any delays, interruption or increased costs in the supply of materials or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and result in lower net revenue and income from operations both in the short and long term.
Further, our success depends on the quantity and quality of the finished products provided by our suppliers, which depends on the quantity and quality of the raw materials they receive from other supply chain partners. We may be unable to provide customers with the high-quality sustainable products they seek if our suppliers do not consistently produce high-quality products for us to sell. If returning customers are dissatisfied with their product experience due to defects in the materials or manufacturing of our products or other quality related concerns, then they may stop buying our products and may stop referring others to us, and we could experience an increase in the rate of product returns. If we are unable to retain returning customers and attract new customers due to quality issues that we fail to identify and remedy, our growth prospects would be harmed and our business could be adversely affected. If product quality issues are widespread or result in product recalls, our brand and reputation could be harmed, we could incur substantial costs and our financial condition, and results of operations could be adversely affected. While we carry product liability insurance, our insurance may not be adequate to cover all liabilities that we may incur in connection with product liability claims.
We have operations and do business in China, which exposes us to risks inherent in doing business there.
We use multiple third-party suppliers based primarily in China. With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future. Furthermore, pursuant to Chinese labor laws, employers in China are subject to various requirements when signing labor contracts, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. Our results of operations will be materially and adversely affected if the labor costs of our third-party suppliers increase significantly. In addition, we and our suppliers may not be able to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China.
Operating and doing business in China exposes us to political, legal and economic risks. In particular, the political, legal and economic climate in China, both nationally and regionally, and China’s relationship with the United States, is fluid and unpredictable. Our ability to operate and do business in China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to, among other things, taxation, import regulations and export controls, tariffs, social media, environmental regulations, land use rights, intellectual property, currency controls, network security,
61
employee benefits, hygiene supervision and other matters. For example, the Chinese Ministry of Commerce may investigate companies operating and doing business in China and may designate a company as an “Unreliable Entity” if it finds improper behavior or violations of market trading practices. Such designation may result in monetary fines, import and export restrictions, investment restrictions and reputational damage. In addition, there is risk of this designation being used as retaliation against companies that maintain intensive human rights diligence practices or are perceived to be boycotting products manufactured or sourced from certain regions, such as the Xinjiang region. If any of these events occur, our business, financial condition, and results of operations could be materially and adversely affected. Chinese trade regulations are also in a state of flux and we may become subject to other forms of taxation, tariffs and duties in China. Furthermore, the third parties we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition, and results of operations could be materially and adversely affected. Due to the uncertainty regarding the timing, content, and extent of any changes in policy and regulatory restrictions, we cannot assure you that we will successfully mitigate any negative impact, including any ability to continue to procure items or services from entities linked to China or other designated countries. Depending upon their duration and implementation, such executive or regulatory actions could result in a material adverse effect on our business, financial condition, and results of operations.
Failure of our suppliers to comply with our sustainability partner guide, contractual obligations, local laws and other standards could harm our business.
We work with suppliers, most of which are located outside of the United States, to manufacture our products. We require all of our suppliers, including cut, make and trim manufacturing partners to adhere to our sustainability partner guide and other social, environmental, health and safety standards. We also require these suppliers to comply with applicable standards for product safety. Notwithstanding their contractual obligations to comply with our policies and applicable laws and standards, and the annual independent third-party audits conducted of our direct cut, sew and finish partners, from time to time, suppliers may not comply with such standards or applicable local law or may fail to enforce such standards or applicable local law on their suppliers. Significant or continuing non-compliance with such standards and laws by one or more suppliers could harm our reputation or result in a product recall, contract termination and, as a result, could have an adverse effect on our business, financial condition, and results of operations. Similarly, agreements that we enter into with these suppliers generally do not require blanket exclusivity with us. As a result, some suppliers may be permitted to work with parties who could be deemed competitive, which could harm our business.
In addition, failure of one or more suppliers to comply with applicable laws and regulations and contractual obligations could lead to litigation against us or require us to initiate litigation to enforce our contracts, resulting in increased legal expenses and costs. Similarly, the failure of any such suppliers to provide safe and humane factory conditions and oversight at their facilities could damage our reputation with customers or result in legal claims against us or cause our merchandise to be detained or seized upon entry. For instance, the U.S. Uyghur Forced Labor Prevention Act of 2021 establishes a rebuttable presumption that goods made in whole or in part in China’s Xinjiang Uyghur Autonomous Region involve the use of forced labor and are prohibited from entry into the United States, and the U.S. government has identified cotton, rayon and apparel products as high priority sectors for enforcement. Similarly, the European Union recently adopted the EU Forced Labor Regulation, which will take effect in December 2027. In addition to reputational harm, supply chains with a potential nexus to forced labor create risk of detention or seizure of goods under these regulations. Any such non-compliance by our suppliers, product recalls or negative publicity regarding production methods, alleged practices or workplace or related conditions of any of our suppliers could adversely affect our brand image, result in lost sales, require us to divert resources to address and remediate these issues, expose us to legal claims and force us to locate alternative suppliers or delay production, any of which could have an adverse effect on our business, financial condition, and results of operations. Any of these issues with our contractors could have a greater negative impact on us, due to the importance of sustainability practices to our brand and business.
Our reliance on overseas suppliers, including those located in jurisdictions presenting an increased risk of bribery and corruption, exposes us to legal, reputational and supply chain risk through the potential for violations of federal and international anti-corruption law and sanctions and export controls.
Most of our products are derived from third-party supply and manufacturing partners in foreign countries and territories, including countries and territories perceived to carry an increased risk of corrupt business practices. We also have subsidiaries and/or employees and other agents working in several foreign countries and territories, including, but not limited to, the United Kingdom, Canada, and France. Our operations are subject to anti-bribery and anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the UK Bribery Act 2010 (the “Bribery Act”)
62
and other anti-corruption and anti-money laundering laws in countries in which we conduct activities. The FCPA, the Bribery Act and other anti-corruption laws generally prohibit companies and their employees, agents, representatives, distributors, wholesale partners, other business partners, and third-party intermediaries from corruptly promising, authorizing, offering, providing, soliciting, or receiving, directly or indirectly, improper payments or anything of value to or from recipients in the public or private sector for the purpose of obtaining or retaining business, directing business to any person, or securing any advantage. Under the Bribery Act, a company may also be liable for failing to prevent a person associated with the company from committing a bribery offense. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. In many foreign countries, including countries in which we may conduct business, it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other applicable anti-corruption laws and regulations. We face significant risks if we or any of our directors, officers, employees, agents, or other partners or representatives fail to comply with these laws, and governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties, which could adversely affect our reputation, business, financial condition, and results of operations.
While we have implemented policies and procedures relating to anti-bribery and anti-corruption compliance, our employees, agents, representatives, distributors, wholesale partners, other business partners, third-party intermediaries, and companies to which we outsource certain of our business operations may take actions in violation of our policies and applicable law, for which we may be ultimately held responsible and which could lead to an adverse effect on our reputation, business, financial condition, and results of operations.
Our business must be conducted in compliance with applicable economic and trade sanctions laws and regulations, such as those administered and enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the United Nations Security Council, the United Kingdom, and the European Union; as well as export control and import control laws and regulations, such as the U.S. Export Administration Regulations administered by the U.S. Department of Commerce, the International Traffic in Arms Regulations administered by the U.S. Department of State, and U.S. Customs and Border Protection regulations. Economic sanctions and export control laws and regulations may prohibit or restrict transactions, including the shipment of certain products and services, to embargoed, sanctioned or restricted countries, governments, and persons, as well as shipments for certain end uses (e.g., military end uses). Furthermore, our global operations expose us to the risk of violating, or being accused of violating, economic and trade sanctions laws and regulations and export controls laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees may be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, disgorgement of profits, injunctions and debarment from government contracts, fines that may be imposed on us and responsible employees or managers and, in extreme cases, the incarceration of responsible employees or managers, and other remedial measures. Investigations of alleged violations can be expensive and disruptive. Despite our compliance efforts and activities we cannot assure compliance by our employees or representatives for which we may be held responsible, and any such violation could materially adversely affect our reputation, business, financial condition, and results of operations.
Violations of the FCPA, the Bribery Act, or other applicable anti-corruption laws or anti-money laundering laws, or sanctions and export controls, or even an allegation of such a violation, could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, profit disgorgement, severe criminal or civil sanctions, securities litigation and other consequences, which could have an adverse effect on our business, financial condition, and results of operations. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
Price volatility in the cost of raw materials, or other costs for our suppliers, could increase our cost of goods and cause our business, financial condition, and results of operations to suffer.
Our suppliers’ costs are affected by, among other things, weather, port closures, strikes and labor shortages, geopolitical events, fluctuations in consumer demand, interest rates, inflation, commodity prices, currency valuation and energy prices, and other factors that are generally unpredictable and beyond our control. In addition, the imposition of new tariffs or increases in existing tariffs on goods imported from countries where our suppliers obtain raw materials could result in increased costs for the products we sell. We have in the past been affected, and may in the future be affected, by volatility in the prices of principal raw materials required to make our products. Further, if carbon pricing measures are implemented, then the price of raw materials and commodities could increase. Increases in the cost of raw materials have had, and could continue to have, a material adverse effect on our cost of revenue, financial condition, results of operations and cash flows. As a result, this may have an impact on pricing of our products, which could adversely impact demand for our products by our customers.
63
Shipping and delivery are critical parts of our business and any changes in, or disruptions to, our shipping and delivery arrangements could adversely affect our business, financial condition, and results of operations.
We rely on several air freight, ocean and “less than truckload” carriers to deliver the products we sell. If we are not able to negotiate acceptable pricing and other terms with these providers, or if these providers experience performance problems or other difficulties in processing our orders or delivering our products to customers, or delivering our products to us, it could negatively impact our business, financial condition, results of operations and our customers’ experience. Changes to the terms of our shipping arrangements or the imposition of surcharges or surge pricing may adversely impact our margins and profitability. For example, volatility in the global oil markets, including as a result of Russia’s invasion of Ukraine, ongoing conflict in the Middle East and other wars or armed conflicts, and changes in global supply generally, have from time to time resulted in higher fuel prices, which shipping partners have from time to time passed on to their customers by way of increased fuel surcharges. In addition, our ability to receive inbound inventory efficiently and ship products to customers may be negatively affected by factors beyond our and these providers’ control, including pandemics, weather, fire, flood, power loss, earthquakes, acts of war or terrorism or other events specifically impacting other shipping partners, such as labor disputes, financial difficulties, system failures and other disruptions to the operations of the shipping companies on which we rely. We have in the past experienced, and may in the future experience, shipping delays for reasons outside of our control. We are also subject to risks of damage or loss during delivery by our shipping providers. If the products ordered by our customers are not delivered in a timely fashion, including to international customers, or are damaged or lost during the delivery process, our customers could become dissatisfied and cease buying products from us, which would adversely affect our business, financial condition, and results of operations.
The operations of our suppliers, most of which are located outside of the United States, are subject to additional risks that are beyond our control and that could harm our business, financial condition, and results of operations.
Currently, most of our suppliers are located outside of the United States, with approximately 51% of our units made in Asia, 14% in Mexico, 10% in Europe and 5% in South America in 2025. As a result of our global supply chain, we are subject to risks associated with doing business abroad, including, but not limited to:
•political unrest, terrorism, geopolitical events, war and other violent conflicts, labor disputes and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured;
•the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, taxes and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds, particularly new or increased tariffs imposed by the United States on imports from countries where our products are manufactured, including, for example, China, Mexico and Brazil;
•greater challenges and increased costs with enforcing and periodically auditing or reviewing our suppliers’ compliance with our sustainability partner guide, including their labor and sustainability practices, given that their facilities are located outside of the United States;
•reduced protection for intellectual property rights, including trademark protection, in some countries, particularly China;
•disruptions in operations due to global, regional or local public health crises, including pandemics, or other emergencies or natural disasters;
•disruptions or delays in shipments; and
•changes in local economic conditions in countries where our suppliers or customers are located.
These and other factors beyond our control could interrupt our suppliers’ production, influence the ability of our suppliers to export our products cost-effectively or at all and inhibit our suppliers’ ability to procure certain materials, any of which could harm our business, financial condition, and results of operations.
Our business is subject to the risk of supplier concentration.
We depend significantly on a limited number of third-party suppliers for the sourcing of the vast majority of our products. For example, in 2025, our top ten suppliers accounted for approximately 76% of units. As a result of this concentration in our supply chain, our business and operations would be negatively affected if our suppliers in China or any of our other key suppliers were to experience a significant disruption affecting the price, quality, availability or timely
64
delivery of products. For example, in 2025, we reallocated our manufacturing to mitigate tariff impacts, successfully reducing our single-country exposure to China by 19%, though we remained dependent on Chinese manufacturing for approximately 32% of units. The partial or complete loss of these key suppliers, or a significant adverse change in our relationship with any of these suppliers, could result in lost sales, added costs and distribution delays that could harm our business, reputation and customer relationships. In addition, as a result of our commitments to sustainability, including our use of specific materials and manufacturing processes and the sustainability requirements we impose on our suppliers, there are generally fewer suppliers who could potentially satisfy our requirements without substantial lead time or without requiring us to incur much higher costs, so we may be unable to replace a key supplier without substantial time and expense.
If we do not successfully optimize, operate and manage our global network of Company-operated and third-party owned and operated logistics and distribution centers, our business, financial condition, and results of operations could be harmed.
Our success depends on our global logistics and distribution network. Currently, we rely predominantly on our company-operated warehouse and distribution facility in Vernon, California (the “Vernon Facility”) and on a third-party distribution center in Europe to store our finished products and distribute our products to customers and wholesale partners. Our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies and growth, particularly in international markets, depends on the proper operation of these distribution centers, the development or expansion of additional distribution capabilities and the timely performance of services by third parties (including those involved in shipping product to and from our own company-operated distribution center). If we continue to add new third-party logistics providers, require them to expand their fulfillment, distribution and warehouse capabilities, including adding additional locations in new countries, adding product categories with different fulfillment requirements or changing the mix of products that we sell, our global logistics and distribution network will become increasingly complex and operating it will become more challenging for us and our logistics partners.
The expansion and growth of our logistics and distribution center network may put pressure on our managerial, financial, operational and other resources. In addition, we may be required to expand our capacity sooner than we anticipate. If we are unable to secure new or expand existing third-party distribution centers to meet our future needs, our order fulfillment and shipping times may be delayed and our business, financial condition, and results of operations could be adversely affected. Our company-operated distribution facility and the third-party owned and operated logistics and distribution center we rely on could be interrupted by issues beyond our control, including IT problems, technical disruptions, disasters such as earthquakes or fires or outbreaks of disease or government actions taken to mitigate their spread. For example, during the COVID-19 pandemic, we as well as logistics providers that we rely on, faced staffing shortages, which impacted our business, impacted their business, and resulted in delayed shipping and delivery times. Any significant failure in our company-operated distribution center or our third-party logistics partner in Europe could result in an adverse effect on our business, financial condition, and results of operations. We maintain business interruption insurance, which covers our retail stores and the Vernon Facility, but it may not adequately protect us from all adverse effects caused by significant disruptions in our logistics and distribution processes and does not cover disruptions at our third-party distribution center in Europe.
In 2025, we moved over 90% of our product through the Vernon Facility and consider having a Los Angeles-based company-operated distribution center as critical to our operations. In October 2025, we opened a new 185,000 square foot automated warehouse and distribution center in close proximity to our prior facility in Vernon, California. In connection with the relocation of our distribution center, we vacated our prior facility in Vernon, California. We have sublet the prior facility to a third-party subtenant through the end of our lease term in August 2026. The transition has, and will continue to, put near-term pressure on our managerial, financial, operational and other resources. If we do not have sufficient fulfillment capacity or experience a problem fulfilling orders in a timely manner as a result of the transition, our customers may experience delays in receiving their purchases, which could harm our brand, reputation and our relationship with our customers and cause our business, financial conditions and results of operations to suffer. Further, if we grow faster than we anticipate, we may exceed our new distribution center capacity sooner than we anticipate, we may experience problems fulfilling orders in a timely manner or our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers, and we would need to increase our capital expenditures more than anticipated. Many of the expenses and investments with respect to our distribution center are fixed, and any expansion of our distribution center will require additional investment of capital. We may need to incur higher capital expenditures in the future for our distribution center operations. We may incur such expenses or make such investments in advance of expected sales, and such expected sales may not occur.
65
Risks Related to Intellectual Property, Information Technology, Data Security and Privacy
Any material disruption of our IT systems or unexpected network interruption could disrupt our business and reduce our sales.
We are increasingly dependent on IT networks and systems to market and sell our products, to manage a variety of business processes and activities and to comply with regulatory, legal and tax requirements. We also rely on a number of third parties to help us effectively manage these systems. For example, we depend on IT systems and such third-party service providers to operate our website, process transactions online and in our stores, respond to customer inquiries, manage inventory, purchase, sell and ship goods on a timely basis and maintain cost-efficient operations. We also depend on our IT infrastructure for digital marketing activities and for electronic communications among our personnel, customers and suppliers around the world. Our website may be susceptible to a variety of interruptions or outages, including those caused by damage, disruptions, slowdowns or shutdowns due to failures during the process of upgrading or replacing software, databases or components, fire, flood, power outages, hardware failures, terrorist attacks, acts of war, break-ins, earthquakes and other catastrophic events.
Due to the importance of our website and internet-related operations, we are vulnerable to website downtime and other technical failures, which may be outside of our control. Further, any slowdown or material disruption of our systems, or the systems of our third-party service providers, or our website could disrupt our ability to track, record and analyze the products that we sell and could negatively impact our operations, shipment of goods and our ability to process financial information and transactions, receive and process customer orders or engage in normal business activities. Our third-party technology providers may also change their policies, terms or offerings from time to time, may fail to introduce new features and offerings that meet our needs as we expand or may cease to provide services to us on favorable terms, or at all, which could require us to adjust how we use our IT systems, including our website, or switch to alternative third-party service providers which could be costly, cause interruptions and could ultimately adversely affect our business, financial condition, results of operations and growth prospects. Furthermore, we could experience delays in reporting our financial results.
We use proprietary software in our technology infrastructure, including the custom-built applications that power our Retail XTM physical store experiences, such as our touchscreen discovery, digital dressing rooms, and proprietary checkout systems. In addition, all of our retail stores are entirely internet dependent.
Our proprietary software may contain undetected errors or vulnerabilities, some of which may be significant and may only be discovered after the software has been implemented in our production environment. In addition, we seek to continually update and improve our software and we may not always be successful in executing these upgrades and improvements and the operation of our systems may be subject to slowdown or failure. For example, in the past we have experienced minor slowdowns and/or impaired functionality while updating our website. Moreover, new technologies or infrastructures may not be fully integrated with existing systems on a timely basis, or at all. Any errors or vulnerabilities discovered in our software after implementation or release could result in damage to our reputation, loss of customers, exploitation by bad actors resulting in data breaches or unauthorized modification of our software, disruption to our digital channels, loss of revenue or liability for damages, any of which could adversely affect our business, financial condition, results of operations and growth prospects. Further, since many of our stores leverage our proprietary Retail XTM technology, any outages, slowdowns or interruptions in the operation of this technology could disrupt store operations or negatively impact our ability to process financial information and transactions, any of which may similarly result in an adverse effect on our reputation, business, financial condition, results of operations and growth prospects.
Additionally, if we expand our use of third-party services, including cloud-based services, our technology infrastructure may be subject to increased risk of slowdown or interruption as a result of integration with, or subsequent dependence on, such services and/or failures by such third parties, which are out of our control. Our net revenue depends, in part, on the number of visitors who shop on our website and the volume of orders we can handle. Unavailability of our website or reduced order fulfillment performance would reduce the volume of goods sold and could also adversely affect consumer perception of our brand. In addition, continued growth in our transaction volume, as well as surges in online traffic and orders associated with promotional activities, place additional demands on our technology platform and could cause or exacerbate slowdowns or interruptions. If there is a substantial increase in the volume of traffic on our website or the number of orders placed by customers, we will be required to further expand, scale and upgrade our technology, transaction processing systems and network infrastructure. There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of our website or expand, scale and upgrade our technology, systems and infrastructure to accommodate such increases on a timely basis. In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our website and underlying technology
66
infrastructure, which is particularly challenging given the rapid rate at which new technologies, consumer preferences and expectations and industry standards and practices are evolving in the e-commerce industry. These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability to fulfill customer orders, potential disruption of our internal control structure, capital expenditures, additional administration and operating expenses, acquisition and retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time, the introduction of errors or vulnerabilities and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems. Our or our third-party vendors’ inability to continue to update, improve and scale our website and the underlying technology infrastructure (including upgrades to or replacement of legacy systems with successor systems or building new policies, procedures, training programs and monitoring tools) could harm our reputation and our ability to acquire, retain and serve our customers, which could adversely affect our business, financial condition, and results of operations.
Further, we endeavor to continually upgrade existing technologies and business applications, and we may be required to implement new technologies or business applications in the future. The implementation of upgrades and changes requires significant investments. Our results of operations may be affected by the timing, effectiveness and costs associated with the successful implementation of any upgrades or changes to our systems and infrastructure.
Our failure or inability to obtain, maintain, protect and enforce our intellectual property rights could diminish the value of our brand and weaken our competitive position.
Our business depends to a significant degree on our ability to obtain, maintain, protect and enforce our intellectual property rights, including those in our brand. We rely on a combination of trademark, trade dress, trade secret, copyright, patent and unfair competition laws, as well as confidentiality agreements and other contractual arrangements, to establish and protect our intellectual property rights. While it is our policy to take actions designed to protect and defend our rights to our intellectual property, we cannot be certain that the protective measures we have taken or plan to take will be sufficient or successful to deter misappropriation or other violation of, or otherwise protect, our intellectual property rights. In fact, notwithstanding these efforts, we regularly face the imitation of our brand, the manufacture and distribution of “knock-off” and counterfeit products, and misappropriation of our brand and product names. We may not be able to detect these unauthorized uses of, or take appropriate steps to enforce, our intellectual property rights. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could result in an adverse effect on our business, financial condition, and results of operations.
We rely on our trademarks and trade names to distinguish our products from the products and services of our competitors, and have registered or applied to register our key trademarks in jurisdictions that are material to our business. While we have applied for and obtained certain U.S. and foreign intellectual property registrations, we cannot guarantee that any of our pending applications will be approved by the applicable governmental authorities. For instance, some of our trademark applications may not be approved by the applicable governmental authorities because they are determined to lack sufficient distinctiveness and, even if approved, may be challenged by third parties for this same reason. Moreover, even if these applications are approved, third parties from time to time have, and may in the future, seek to oppose or otherwise challenge these registrations or other of our intellectual property rights.
In addition, third parties from time to time have infringed, and may again in the future infringe, on our intellectual property rights. As a result, we from time to time have expended, and may again in the future expend, significant time and resources to defend or enforce our rights, including, by way of example, against third parties infringing our trademarks and selling products that violate our copyrights. AI technologies may also impact our ability to protect our own data and intellectual property against infringing use. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management. Further, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights, and if such defenses, counterclaims or countersuits are successful, we could lose valuable intellectual property rights. Our inability to protect our intellectual property rights could delay further sales or the implementation of our offerings and capabilities or injure our reputation.
In addition, effective trademark, copyright, trade secret and other intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our intellectual property rights to the same extent as in the United States, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries. We may also encounter jurisdictions in which one or more third parties have pre-existing trademark registrations that may prevent us from registering our own marks in those jurisdictions, which could adversely affect our ability to effectively operate our business or market certain products. If we
67
fail to protect and maintain our intellectual property rights, the value of our brand could be diminished and our competitive position may suffer.
If sensitive information about our customers is actually or alleged to have been disclosed, or if we or our third-party providers are subject to real or perceived cyberattacks or similar incidents, our customers may curtail use of our website, we may be exposed to liability and our reputation could suffer.
Operating our business and platform involves the collection, storage and transmission of a variety of sensitive information, such as names, phone numbers, mailing and billing addresses and email addresses and other similar personal information, which we may share with our third-party service providers. We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT systems and sensitive information. In an effort to protect sensitive information, we rely on a variety of security measures, but advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography, advances in AI that circumvent security controls, evade detection and remove forensic evidence, or other developments may result in our or our third-party service providers’ failure or inability to detect cyberattacks or failure or inability to adequately protect sensitive information. There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our IT systems and sensitive information and remediating any identified gaps.
We are also vulnerable to hacking, malware, supply chain attacks, computer viruses, unauthorized access and various other attacks by computer hackers (such as phishing or social engineering attacks, ransomware attacks, credential stuffing attacks, denial-of-service attacks, exploitation of software vulnerabilities, misconfigurations, “bugs” or other vulnerabilities in commercial software that is integrated into our or our service providers’ IT systems, products or services and other real or perceived cyberattacks) as well as cybersecurity incidents caused by telecommunication failures, user or technological errors or intentional or accidental actions or inactions by users with authorized access to our systems. Additionally, certain functional areas of our workforce operate in a “hybrid” or fully remote work environment, which has heightened the risk of these potential vulnerabilities. Any of these issues could lead to interruptions or shutdowns of our platform, loss or corruption of data or unauthorized access to, or disclosure of, sensitive information. Cyberattacks could also result in the theft of our intellectual property or sensitive information of our business partners and suppliers, damage to our IT systems or disruption of our ability to make financial reports and other public disclosures required of public companies. We have been subject to attempted cyber, phishing or social engineering attacks in the past and may continue to be subject to such attacks and other cybersecurity incidents in the future. While to date no incidents have had a material impact on our operations or financial results, we cannot guarantee that material incidents will not occur in the future. We and our third-party service providers may not have the resources or technical sophistication to anticipate or prevent all such cyberattacks or mitigate such incidents. Moreover, techniques used to obtain unauthorized access to systems change frequently and may not be known until launched against us or our third-party service providers. Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our employees, our third-party service providers or their personnel.
Any adverse impact to the availability, integrity or confidentiality of our IT systems or sensitive information can result in legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs. If we or our third-party service providers experience, or are believed to have experienced, security breaches that result in website performance or availability problems or the loss or corruption of, or unauthorized access to or disclosure of, sensitive information, customers may become unwilling to provide us the information necessary to make purchases on our website. Returning customers may also decrease or stop their purchases altogether. We may need to notify governmental authorities and affected individuals with respect to such incidents. For example, laws in the European Union and United Kingdom and all 50 U.S. states may require businesses to provide notice to individuals whose personal information has been disclosed as a result of a data security breach. Complying with such numerous and complex regulations in the event of a data security breach would be expensive and difficult, and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability. We cannot guarantee that any costs and liabilities incurred in relation to an attack or incident involving our IT systems or sensitive information will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all.
Furthermore, we may be required to disclose personal information pursuant to demands from individuals, privacy advocates, regulators, government agencies and law enforcement agencies in various jurisdictions with conflicting privacy and data protection laws and regulations. Any disclosure or refusal to disclose personal information may result in a breach of privacy and data protection policies, contractual terms, notices, laws, rules, court orders and regulations and could result
68
in proceedings or actions against us in the same or other jurisdictions, damage to our reputation and brand and inability to provide our products to customers in certain jurisdictions. Additionally, changes in the laws and regulations that govern our collection, use and disclosure of customer data could impose additional requirements with respect to the retention and security of customer data and could limit our marketing activities. Any or all of the foregoing could materially adversely affect our business, operating results, and financial condition.
Third parties may initiate legal proceedings alleging that we are infringing, misappropriating, diluting or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on our business, financial condition, and results of operations.
Our commercial success depends in part on our ability to operate without infringing, misappropriating, diluting or otherwise violating the intellectual property rights of third parties. As we face increasing competition, gain greater public recognition and expand the number of products we offer, the possibility of intellectual property infringement and other similar claims against us grows. Any claim or litigation alleging that we have infringed, misappropriated, diluted or otherwise violated intellectual property rights of third parties, with or without merit, and whether or not settled out of court or determined in our favor, could be time consuming, costly to address and resolve and could divert the time and attention of our management and technical workforce. Such claims may be made by third parties seeking to obtain a competitive advantage, including non-practicing entities or individuals with no relevant product sales and, therefore, our patents, copyrights, trademarks and other intellectual property rights may provide little or no deterrence to these rights holders in bringing intellectual property rights claims against us. Additionally, some third parties, including those with substantially greater human and financial resources than we have, are able to sustain the costs and workload of complex intellectual property litigation to a greater degree and for longer periods of time than we could. As part of such litigations, third parties may seek, and we may become subject to, preliminary or provisional rulings in the course of any such litigation, including injunctions requiring us to change our products or even cease the commercialization of our products entirely. Moreover, the outcome of any litigation is inherently uncertain, and there can be no assurances that favorable final outcomes will be obtained in all cases. If any litigation to which we are a party is resolved adversely, we may be subject to unfavorable judgments that may not be reversed upon appeal, including being required to pay substantial monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property rights and being subject to a permanent injunction.
We may decide to settle such lawsuits and disputes, and those settlements may be on terms that are unfavorable to us. The terms of such a settlement may require us to cease some or all of our operations or pay substantial amounts to the other party. Even if we have an agreement requiring a party to indemnify us against any damages and costs, the indemnifying party may be unable or unwilling to uphold its contractual obligations. Further, our liability insurance may not cover potential claims of this type adequately or at all. In addition, we may have to seek a license or other rights to continue practices found to be in violation of a third-party’s rights. If we are required, or choose to enter into licensing or other similar arrangements, these arrangements may not be available on reasonable terms, or at all, and as a result, may significantly increase our operating costs and expenses. Such arrangements may also only be available on a non-exclusive basis, such that third parties, including our competitors, could have access to use the same intellectual property to compete with us. We may also have to rebrand or redesign our products so they do not infringe, misappropriate or otherwise violate third-party intellectual property rights, which may not be possible or may require substantial monetary expenditures and time, during which our products may not be available for commercialization or use. If we cannot rebrand or redesign our products in a non-infringing manner or obtain a license for any allegedly infringing aspect of our business, we would be forced to limit our products and may be unable to compete effectively.
In addition, in any intellectual property proceeding against us or that we assert against a third party, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our expenses and reduce the resources available for development activities or any future sales, marketing or distribution activities. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Any of the foregoing, and any unfavorable resolution of such disputes and litigation, could have an adverse effect on our business, financial condition, results of operations and prospects.
We are subject to federal, state or foreign laws and regulations as well as our contractual obligations and industry requirements relating to privacy, data protection and customer protection; the expansion of current or the enactment of new laws and regulations relating to privacy, data protection and customer protection, or failure to comply with those
69
laws or obligations, whether or not inadvertent, could materially adversely affect our business, financial condition, and results of operations.
We collect and maintain significant amounts of data, including personal information related to our customers and employees, and we face risks inherent in handling large volumes of data, transferring such data to third parties, processing such data for tracking and marketing purposes (or providing such data to third parties for tracking and marketing purposes) and protecting the security of such data. Our or our third-party service providers’ actual or perceived failure to comply with any federal, state or foreign laws and regulations or applicable industry standards that govern or apply to our collection, use, retention, sharing and security of data, or any failure or perceived failure by us or any of our third-party service providers to protect such data that they may maintain on our behalf, could result in enforcement investigations and actions that require us to change our business practices in a manner that may negatively impact our revenue, result in indemnity obligations to our customers, distract our management, increase our costs of doing business, as well as expose ourselves to litigation (such as class actions), fines, civil and/or criminal penalties and adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business (including our brand) in a manner that harms our financial position, results in a loss of customers and suppliers or an inability to process credit card payments and may result in the imposition of monetary penalties.
Various local, state, federal and international laws, directives and regulations apply to our collection, use, retention, protection, disclosure, transfer and processing of personal information, such as privacy and data protection laws and regulations. Such laws and regulations are increasing in number and complexity and are being adopted and amended with greater frequency, which could result in greater compliance risk and cost. Despite our efforts to comply with applicable laws and regulations relating to privacy and data protection that apply to us, including the European Union’s General Data Protection Regulation (the “EU GDPR”) and the United Kingdom General Data Protection Regulation and Data Protection Act 2018, which operates alongside the United Kingdom’s Data Use and Access Act 2025, a separate law introducing reforms to the UK’s data protection and cybersecurity framework (collectively, the “UK GDPR”) (the EU GDPR and UK GDPR together referred to as the “GDPR”) and various laws and regulations in Canada, the United States and other countries in which we operate, the interpretation and application of such laws and regulations are subject to uncertainty and continue to evolve in ways that could be inconsistent with our interpretation and practice. In such cases, we may be ordered to change our data practices, including to stop any allegedly non-compliant activity, be subject to fines or penalties, lawsuits and/or adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business (including our brand) in a manner that harms our financial position, or results in a loss of customers and suppliers. Complying with these dynamic laws has caused and could continue to cause us to incur substantial costs and expend significant resources, which could have an adverse effect on our business, financial condition, and results of operations.
In the United States, both federal and various state governments have adopted, or are considering, laws, guidelines or rules for the collection, distribution, use and storage of information collected from or about consumers or their devices. For example, California enacted the California Consumer Privacy Act (the “CCPA”), which went into effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as statutory damages and a private right of action for data breaches that is expected to increase data breach litigation. Further, in November 2020, California voters passed the California Privacy Rights Act (the “CPRA”). The CPRA took effect on January 1, 2023 and creates obligations with respect to certain data relating to consumers as of January 1, 2022, significantly expands the CCPA, including by introducing additional obligations such as data minimization and storage limitations and granting additional rights to consumers, such as correction of personal information and additional opt-out rights, and creates a new entity, the California Privacy Protection Agency, to implement and enforce the law. Personal information we handle may be subject to the CCPA and CPRA, which may increase our compliance costs and potential liability. Similar laws have been passed or are being considered in a majority of states, reflecting a trend toward more stringent privacy legislation in the United States. In addition to fines and penalties that may be imposed for failure to comply with state law, some states also provide for private rights of action to customers for misuse of or unauthorized access to personal information. The enactment of these laws could have potentially conflicting requirements and be subject to potentially conflicting interpretations that would make compliance challenging and expose us to additional liability.
Certain requirements from our third-party technology and platform providers may also cause us to modify our offerings due to privacy concerns or negatively affect our net revenue due to reduced availability of information about consumers. For example, starting in Apple iOS 14.5, apps in the Apple App Store are required to request user permission to track users across apps and websites owned by third parties for advertising and measurement purposes. Google introduced a similar feature in early 2022. Changes like this may reduce the quality of the data and related metrics that can be
70
collected or used by us and/or our partners, and could significantly inhibit the effectiveness of our targeted advertising and related activities.
In addition, Apple recently introduced updates to Apple Mail, including automated inbox categorization, sender-level grouping and AI-generated email previews. These features may reduce the visibility and engagement rates of our email communications, thereby adversely affecting our ability to reach customers effectively through the email channel.
In addition to risks posed by evolving data privacy laws and regulations, we could be subject to claims alleging violations of long-established federal and state privacy and consumer protection laws, including those related to telephone and email communications with consumers. As an example, the Telephone Consumer Protection Act (the “TCPA”) is a federal law that imposes significant restrictions on the ability to make telephone calls or send text messages to mobile telephone numbers without the appropriate consent of the person being contacted, and the applicable consent and revocation requirements have become increasingly complex and subject to evolving regulatory interpretation. The TCPA provides for substantial statutory damages for violations, which has generated extensive class action litigation. In addition, class action plaintiffs in the United States are employing novel legal theories to allege that federal and state eavesdropping/wiretapping laws and state constitutions prohibit the use of analytics technologies widely employed by website operators to understand how their users interact with their services. Despite our compliance efforts, our use of text messaging communications or similar analytics technologies could expose us to costly litigation, government enforcement actions, damages and penalties, whether or not they have merit, which could adversely affect our business, financial condition, and results of operations.
Outside of the United States, certain foreign jurisdictions, including the European Economic Area (the “EEA”) and the United Kingdom, have laws and regulations which are more restrictive in certain respects than those in the United States. We are subject to the GDPR, which imposes comprehensive data privacy compliance obligations in relation to our collection and use of data relating to an identifiable living individual or “personal information” including a principle of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit, as well as regulating cross-border transfers of personal information out of the EEA and the UK.
Since we are under the supervision of relevant data protection authorities in both the EEA and the UK, we may be fined under both the EU GDPR and UK GDPR for the same breach. Failure to comply with EU GDPR and UK GDPR may result in significant penalties for non-compliance of up to the greater of €20 million/ £17.5 million or 4% of an enterprise’s global annual revenue. In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease or change our processing of data, enforcement notices and/or assessment notices (for a compulsory audit). Since the GDPR confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations, we may also face civil claims, including representative actions and other types of litigations that are similar to class action in the U.S. (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources and reputational harm.
Following the United Kingdom’s departure from the European Union, commonly known as “Brexit,” the data protection obligations under the EU GDPR continue to apply in the United Kingdom in a largely unchanged form through the “UK GDPR.” The UK GDPR operates alongside the United Kingdom Data Protection Act 2018, which incorporates certain derogations from the UK GDPR into United Kingdom law. Under the UK GDPR, companies outside the United Kingdom that process personal information related to offering goods or services to, or monitoring the behavior of, individuals in the United Kingdom are subject to the UK GDPR. The requirements of the UK GDPR are currently very similar to those of the EU GDPR. The government of the United Kingdom adopted reforms to its data privacy and cybersecurity legal framework in its Data Use and Access Act 2025, which became law on June 19, 2025 (phasing in between June 2025 and June 2026). In 2026, the United Kingdom’s Information Commissioner’s Office launched a consultation on draft guidance concerning automated decision-making, including profiling, reflecting changes to the UK GDPR introduced by the Data Use and Access Act 2025. These developments, and any resulting guidance or enforcement activity, may further affect how we use automated decision-making tools and could increase our compliance obligations and regulatory risk. Compliance with the UK GDPR and any divergences from the EU GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of personal information, such as sensitive information, may increase our privacy compliance obligations and risk of regulatory action for non compliance. Brexit also affects the transfer of personal information between the United Kingdom and the EEA, and vice versa. The GDPR may increase our responsibility and liability concerning the personal information we process when such processing is subject to the GDPR, and we may need to implement additional mechanisms to ensure compliance with the GDPR, including additional mechanisms required by individual countries.
71
We may also be subject to European Union regulations regarding cross-border transfers of personal information outside the EEA. Transfers of personal information between the United Kingdom and the EEA are currently unrestricted and do not require additional safeguards, as the EEA has formally recognized the United Kingdom’s data protection regime as “adequate,” and the United Kingdom has reciprocally approved the adequacy of the European Union’s data protection standards. Consequently, personal information transfers between the EEA and the United Kingdom remain unrestricted and do not necessitate any additional safeguards. However, the European Union’s adequacy decision concerning the United Kingdom is subject to regular review and may be revoked if the United Kingdom’s data protection laws deviate from their current standards. While the risk is considered low, failure by the European Commission to renew the United Kingdom’s adequacy decision could require us to implement alternative data transfer mechanisms, increasing compliance costs and legal complexity. This may disrupt United Kingdom-EEA data flows and affect our cross-border operations.
Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal information from the EEA to the United States. In July 2020, the European Union-United States Privacy Shield was declared an invalid personal information transfer mechanism between the European Union and the U.S. and in June 2021, the European Commission published a new set of standard contractual clauses (“New SCCs”), which apply to the transfer of personal information outside of the European Union to a country not approved by the European Union as providing an adequate level of protection for the processing of personal information. The New SCCs must be used for all relevant transfers of personal information outside the EEA since December 27, 2022. Since then, on July 11, 2023, the European Commission determined that the European Union-United States Data Privacy Framework, a new mechanism for transferring personal information from the EEA to the United States, ensures a level of protection for personal information transferred from the EEA to the U.S., comparable to that within the European Union. Similarly, the United Kingdom has approved an extension to this framework, which came into force on October 12, 2023. However, this decision may face legal challenges and such challenges may focus on the adequacy of U.S. redress mechanisms and surveillance safeguards, particularly under the standards set by the Court of Justice of the European Union in relation to the European Union-U.S. Privacy Shield. Additionally, on March 21, 2022, the United Kingdom implemented its own international data transfer agreement (“IDTA”) and an addendum to the New Standard Contractual Clauses (“UK Addendum”). For all contracts involving the transfer of data originating from the United Kingdom entered into after September 21, 2022, organizations are required to use either the IDTA or the New SCCs together with the UK Addendum. Existing contracts that rely on standard contractual clauses for transferring United Kingdom-originated data were required to be updated to comply with the IDTA or the New SCCs along with the UK Addendum by March 21, 2024. We may make use of the New SCCs and the UK Addendum, as relevant, to transfer personal information outside the EEA and the United Kingdom with respect to both intragroup and third party transfers. We expect the existing legal complexity and uncertainty regarding international personal information transfers to continue, which could increase compliance burdens, disrupt data-dependent operations or expose us to regulatory risk. The GDPR, as well as other laws and/or regulations concerning privacy and data protection, increase our compliance obligations, affect our collection, processing, retention and transfer of personal information and reporting obligations (including in respect of personal information security breaches), and provide for increased penalties for non-compliance.
As the regulatory guidance and enforcement landscape in relation to data transfers continues to develop, we may be required to expend significant resources to update our contractual arrangements and to comply with such obligations. Further, our third-party service providers may also be affected by these changes. In addition to other impacts, we may experience additional costs to comply with these changes and we and our customers face the potential for regulators in the EEA or the United Kingdom to apply different standards to the transfer of personal information to the United States and other non-EEA countries and to block or require ad hoc verification of measures taken with respect to certain data flows to the United States and other non-EEA countries. We also may be required to engage in new contract negotiations with third parties that aid in processing data on our behalf, to the extent that any of our service providers or consultants have been relying on invalidated or insufficient contractual protections for compliance with evolving interpretations of and guidance for cross-border data transfers pursuant to the GDPR. In such cases, we may not be able to find alternative service providers, which could limit our ability to process personal information from the EEA or the United Kingdom and increase our costs. We may also be required to renegotiate contracts with third-party vendors or sub-processors, particularly where evolving regulatory standards render existing safeguards insufficient or unenforceable under applicable data transfer laws.
These recent developments may require us to review and amend the legal mechanisms by which we make and/or receive personal information transfers to/in the United States. As supervisory authorities issue further guidance on personal information export mechanisms, including circumstances where the standard contractual clauses cannot be used and/or start taking enforcement action, we could suffer additional costs, complaints and regulatory investigations or fines and if we are otherwise unable to transfer personal information between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations and could adversely affect our business, financial condition, and results of operations.
72
We depend on a number of third parties in relation to the operation of our business, a number of which process personal information on our behalf. There can be no assurances that the privacy and security-related measures and safeguards we have put in place in relation to these third parties will be effective to protect us and/ or the relevant personal information from the risks associated with the third-party processing, storage and transmission of such data. Any violation of data or security laws, or of our relevant measures and safeguards, by our third party processors could have a material adverse effect on our business, result in applicable fines and penalties, damage our reputation, and/ or result in civil claims.
Further, in the EEA and UK, regulators continue to focus on compliance with requirements in the online behavioral advertising ecosystem, including cookies and e-marketing, and current national laws that implement the Privacy and Electronic Communications Directive (“ePrivacy Directive”). Although the European Union recently withdrew its plans to enhance the ePrivacy Directive, the existing rules still impose strict obligations regarding user consent for electronic communications, including cookies, direct marketing and other online tracking technologies. Failure to comply with these requirements could result in regulatory enforcement actions, significant fines and reputational harm. In the European Union and United Kingdom, informed consent is required for the placement of certain cookies or similar tracking technologies on an individual’s device and for direct electronic marketing. Consent is tightly defined and includes a prohibition on pre-checked consents and a requirement to obtain separate consents for each type of cookie or similar technology. Under the applicable laws, authorities in EEA and UK states have the power to impose substantial financial penalties for non-compliance. Additionally, enforcement trends indicate an increasing scrutiny of consent mechanisms, particularly regarding the validity of user consents and the transparency of data collection practices. Any changes in the interpretation or enforcement of the ePrivacy Directive could impact our European operations and require additional compliance efforts, potentially increasing costs and limiting our ability to collect and process customer data for business purposes.
Although we are not a designated “gatekeeper” or online platform under the Digital Markets Act (“DMA”) or Digital Services Act (“DSA”), and these regimes do not apply to our core consumer retail model, the DMA imposes strict rules on designated gatekeepers, potentially affecting how we engage with major online platforms for advertising and sales. The DSA enhances content moderation, transparency, and accountability requirements for online services, which could impose additional compliance burdens on businesses that host third-party content. The UK’s Online Safety Act, which applies to user-to-user and search services, is not currently applicable to our business based on the functionality of our platform.
Additionally, a growing number of jurisdictions—including within the European Union and beyond—are considering or enacting data localization laws requiring certain types of personal information to be stored and processed within specific geographic regions. Such laws, if applied to our operations, could increase infrastructure costs, limit our ability to leverage global cloud and analytics solutions, and introduce complexities in managing cross-border data flows. Compliance with evolving data sovereignty requirements may necessitate operational adjustments and additional investment in localized data processing capabilities, potentially impacting efficiency and scalability. Because the interpretation and application of privacy and data protection laws such as the CCPA and GDPR, and the related regulations and standards, are uncertain, it is possible that these laws, regulations and standards may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological features of our solutions. As such, we could inadvertently fail to comply or be alleged to have failed to comply with such laws, regulations and standards and consequently be subject to significant statutory damages and negative publicity, including as associated with class action litigation and/or costs associated with modifying our solutions and business strategies.
Furthermore, compliance with legal and contractual obligations may require us to make public statements about our privacy and data security practices, including the statements we make in our online privacy policy. Although we endeavor to comply with these statements, should they prove to be untrue or be perceived as untrue, even as a result of circumstances beyond our reasonable control, we may face litigation, claims, investigations, inquiries or other proceedings by the U.S. Federal Trade Commission, state attorneys general and other federal, state and foreign regulators and private litigants alleging violations of privacy or consumer protection laws.
In November 2025, the European Commission proposed a Digital Omnibus package, which would make targeted amendments to several existing European Union digital laws, including the AI Act (as defined below), the EU GDPR, the NIS 2 Directive, the European Union’s Data Act (the “Data Act”), and other related frameworks, with the stated aim of simplifying and streamlining aspects of the European Union digital regulatory landscape. The European Parliament adopted its negotiating position on the AI limb of the Digital Omnibus package on March 26, 2026, which includes proposed amendments affecting the timing and scope of certain AI-related obligations. The proposed amendments remain subject to ongoing trilogue negotiations between the European Parliament, the Council of the European Union and the European Commission, and the timing and final form therefore remain uncertain. Any such changes may require us to reassess certain compliance positions and adjust technical or legal practices accordingly. Although the Digital Omnibus package proposal is intended to reduce administrative burden, any amendments to these frameworks may require us to
73
reassess certain compliance positions and adjust technical or legal practices accordingly, which could affect our operations in the European Union. In any case, we are conscious of the extensive and evolving regulatory frameworks in the jurisdictions in which we operate, especially in Europe. Notably, the Data Act, which became applicable from September 12, 2025, introduces obligations concerning the access, sharing, and use of data generated by connected devices and related data ecosystems. Although our core business is not the primary focus of the Data Act, certain provisions may affect how we manage data in certain business functions, including through our use of third-party platforms or cloud providers. While the direct impact is currently expected to be limited, compliance with the Data Act may increase administrative and contractual complexity in how we manage, process, and share data across our operations, and we continue to monitor the scope and impact of these developments. Additionally, the General Product Safety Regulation, effective from December 13, 2024, imposes stricter safety and transparency obligations on online retailers, including ensuring that product information is clear and traceable.
Furthermore, applicable product liability laws implementing Directive (EU) 2024/2853 may expose us to liability for defective or misleading marketed clothing and accessories. Any actual or perceived non-compliance with these rapidly changing laws, regulations or standards or our contractual obligations relating to privacy, data protection and consumer protection by us or the third-party companies we work with could result in litigation and proceedings against us by governmental entities, consumers or others, fines and civil or criminal penalties for us or company officials, obligations to cease or recall, offerings or to substantially modify our business in a manner that makes it less effective in certain jurisdictions, negative publicity and harm to our brand and reputation and reduced overall demand for our products, any of which could have an adverse effect on our business, financial condition, and results of operations.
We are subject to risks related to online payment methods.
We currently accept payments using a variety of methods, including credit cards and debit cards. As we offer new payment options to customers, we may be subject to additional regulations, compliance requirements, fraud and other risks. For certain payment methods, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. While we use a third party to process payments, we are also subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard (“PCI DSS”) and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we or our service providers fail to comply with PCI DSS or to meet other payment card or other industry standards, we may be subject to financial penalties or the allocation by the card brands of the costs of fraudulent charges to us, or restrictions and expulsion from card acceptance programs, which could materially and adversely affect our business and reputation.
We utilize AI, which could expose us to liability or adversely affect our business.
The adoption of generative AI technologies in our operations introduces distinct risks, notably in data management and data privacy. No assurance can be provided that our use of such AI technologies will enhance our products or operations or produce the intended results. These AI systems, capable of synthesizing customer interactions and generating personalized recommendations, could inadvertently use sensitive data to train future models. If this were to occur within a public model, this raises the possibility of reputational damage and legal challenges, especially if false or inaccurate information is disseminated. Any integration of AI technologies in our or any of our third-party service providers’ operations, products or services is expected to pose new or unknown cybersecurity risks and challenges. Even if we successfully integrate AI technologies into our workflows, subsequent developments in underlying AI models could result in output that is incorrect, insufficient, or outdated. Additionally, the need for AI systems to access extensive datasets heightens the risk of data breaches, potentially leading to unauthorized disclosure of sensitive customer and company information. Such breaches could result in identity theft, financial fraud, and non-compliance with privacy and data protection laws and regulations, thereby exposing us to regulatory penalties and legal liabilities. Further, AI algorithms may be flawed, insufficient, of poor quality, reflect unwanted forms of bias or contain other errors or inadequacies, any of which may not be easily detectable. We increasingly rely on AI and machine learning to inform our product assortment, quantify future demand and customize inventory allocation. If these algorithms are flawed, or if the underlying data is inaccurate, it could lead to suboptimal buying decisions, severe inventory shortages, or excess inventory and subsequent markdowns, which would negatively impact our gross margins and financial performance. AI has also been known to produce false or “hallucinatory” inferences or outputs, may present ethical issues and may subject us to new or heightened legal, regulatory, ethical, or other challenges. In addition, inappropriate or controversial data practices by developers and end-users or other factors adversely affecting public opinion of AI could impair the acceptance of AI solutions, including those incorporated in our products and services.
74
If the AI tools that we use are deficient, inaccurate, or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and financial results. If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacy or other rights or contracts to which we are a party.
In addition, regulation of AI is rapidly evolving worldwide as legislators and regulators are increasingly focused on these powerful emerging technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property, privacy and data protection, consumer protection, competition and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations. AI is the subject of ongoing review by various United States governmental and regulatory agencies, and various U.S. states and other foreign jurisdictions are applying, or are considering applying, their platform moderation, cybersecurity and data protection laws and regulations to AI or are considering general legal frameworks for AI. The European Union has adopted a regulatory framework governing certain artificial intelligence systems (the “AI Act”), which entered into force on August 1, 2024 and is expected to become applicable on a phased basis. The AI Act imposes a range of obligations depending on the nature and risk profile of the relevant AI system. The regulatory framework continues to evolve, including through proposed amendments under the Digital Omnibus package adopted by the European Parliament on March 26, 2026, which remain subject to ongoing trilogue negotiations. The timing and final form of these developments remain uncertain, and may affect how we develop, deploy and use AI technologies. Non-compliance with the AI Act may be subject to regulatory fines of up to 7% of annual worldwide turnover or €35 million. We are actively assessing the scope of application, impact, and risk of these developments in the European Union and the United Kingdom on our business and will continue to assess this moving forward. We may not be able to anticipate how to respond to these rapidly evolving frameworks and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions. Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to the use of AI. In essence, while generative AI offers significant opportunities for innovation and efficiency in our operations, it also demands stringent management to ensure the protection of data integrity, customer and employee safety, regulatory compliance, and the maintenance of our reputation.
Use of social media, influencers, emails, and SMS marketing in ways that do not comply with applicable laws and regulations may lead to the loss or infringement of intellectual property, result in unintended disclosure, harm our reputation, or subject us to fines or other penalties.
We use social media, emails and SMS marketing as part of our omnichannel approach to marketing. As laws and regulations evolve to govern the use of these channels, the failure by us, our employees or third parties acting at our direction to comply with applicable laws and regulations in the use of these channels could adversely affect our reputation or subject us to fines or other penalties. In addition, our employees, third parties acting at our direction, or other third parties (including influencers) may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential or sensitive personal information of our business, employees, customers, third-party vendors, or others. Information concerning us or our customers, whether accurate or not, may be posted on social media platforms at any time and may have an adverse impact on our brand, reputation, or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect on our reputation, business, financial condition, results of operations, and prospects.
In addition, an increase in the use of social media for product promotion and marketing may increase the risk that such content could contain problematic product or marketing claims in violation of applicable regulations. For example, in some cases, the FTC has sought enforcement action where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser. Private parties have in the past and may in the future bring claims on a similar basis. We do not prescribe what our influencers post and if we were held responsible for the content of their posts or their actions, we could be fined or forced to alter our practices, which could have an adverse impact on our business, financial condition, and results of operations.
Some of our software and systems contain open source software, which may pose particular risks to our proprietary applications.
We use open source software in the applications we have developed to operate our business and will use open source software in the future. We may face claims from third parties claiming ownership of what we believe to be open source software or claiming non-compliance with the applicable open source license terms. Some open source licenses require
75
users to distribute or make available on open source license terms all or part of our proprietary software, which in some circumstances could include valuable proprietary source code. While we employ practices designed to monitor our compliance with the licenses of open source software and try to ensure that we do not use any open source software in a manner that would require us to disclose our proprietary source code, we cannot guarantee that we will be successful. We cannot guarantee that license terms applicable to all open source software are reviewed prior to use in our products or applications, or that developers have not incorporated (and will not in the future incorporate) open source software into our products or applications without our knowledge.
Claims from third parties regarding our use of open source software could result in litigation and could require us to purchase costly licenses, publicly release the affected portions of our source code, or cease offering the implicated solutions unless and until we can re-engineer them. In addition, the use of third-party open source software typically carries greater technical and legal risks than the use of third-party commercial software because open source licensors generally do not provide support, warranties, or controls on the functionality or origin of the software. To the extent that our applications depend upon the successful operation of open source software, any undetected errors or defects could prevent the deployment or impair the functionality of our systems and injure our reputation. Use of open source software may also present additional security risks because the source code for open source software is publicly available, which may make it easier for hackers and other third parties to compromise our website and systems that rely on open source software. Any of these risks could be difficult to eliminate or manage and, if not addressed, could have an adverse effect on our business, financial condition, and results of operations.
Risks Related to Other Legal, Regulatory and Taxation Matters
Government regulation of the internet and e-commerce continues to evolve and unfavorable changes or failure by us to comply with these regulations, whether or not inadvertent, could substantially harm our business, financial condition, and results of operations.
We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet and e-commerce. Existing and future regulations and laws could impede the growth of the internet, e-commerce, or mobile commerce, which could in turn adversely affect our growth. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, customer protection, and internet neutrality. It is still not clear how some existing laws governing issues such as property ownership, sales and other taxes, and customer privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce. It is possible that general business regulations and laws, or those specifically governing the internet or e-commerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices comply fully with all such laws and regulations as they may evolve. Any failure by us, or third parties acting at our direction, to abide by applicable laws and regulations in the use of these platforms could subject us to proceedings or actions against us by governmental entities, customers, suppliers or others, regulatory investigations, class action lawsuits, liability, fines, or other penalties and adversely affect our business, financial condition, and results of operations. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, decrease the use of our website by customers and suppliers, and may result in the imposition of monetary liabilities. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of our own non-compliance with any such laws or regulations. In addition, it is possible that governments of one or more countries or territories may seek to censor content available on our site or may even attempt to completely block access to our site. As a result, adverse developments with respect to these laws and regulations could substantially harm our business, financial condition, and results of operations. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries or territories, our ability to retain or increase our customer base may be adversely affected and we may not be able to maintain or grow our net revenue and expand our business as anticipated.
Existing and potential tariffs imposed by the United States or other governments, new trade restrictions or a global trade war could increase the cost of our products, which could have an adverse effect on our business, financial condition, and results of operations.
The United States and the countries in which our products are produced or sold, including China, have imposed, and may in the future impose, additional quotas, duties, tariffs or other restrictions or regulations or may adversely adjust prevailing quota, duty or tariff levels. The results of any audits or related disputes regarding these restrictions or regulations (including, for example, regarding the proper import classification for a given product) could have an adverse effect on our financial statements for the period or periods for which the applicable final determinations are made. Countries impose,
76
modify, and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions. Adverse changes in, or withdrawal from, trade agreements or political relationships between the United States and countries where we sell or source our products, could negatively impact our results of operations or cash flows.
For example, in recent years, the U.S. government has imposed increased tariffs on imports from certain foreign countries, such as China, under Section 301 of the Trade Act of 1974. Any imposition of additional tariffs by the United States could result in the adoption of tariffs by other countries, leading to a global trade war. Any such future tariffs by the United States or other countries could have a significant impact on our business. Trade restrictions, including tariffs, quotas, economic sanctions, embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations.
For instance, in August 2025, the United States indefinitely suspended the “de minimis exemption” under Section 321 of the Tariff Act of 1930. The de minimis exemption had enabled importers to enter low value shipments into the United States without paying duties or going through the formal entry process. Despite certain flexibilities for postal shipments, such as the ability to pay a flat fee per parcel that applied until February 2026, or the application of a 10% tariff under Section 122 of the Trade Act of 1974 until July 24, 2026, the indefinite suspension of the de minimis exemption could have an adverse effect on our business, which is centered on direct-to-consumer sales.
General geopolitical instability and the responses to it, such as the possibility of sanctions, trade restrictions, and changes in tariffs, including tariffs imposed by the United States and China, and the possibility of additional tariffs or other trade restrictions between the United States and other countries where we currently or might in the future manufacture or sell our products, could adversely impact our business. The United States has promoted and implemented plans to raise tariffs and pursue other trade policies intended to restrict imports. In 2025, the United States imposed tariffs on virtually all countries at rates ranging from 10% to 50% under the IEEPA. However, in February 2026, the U.S. Supreme Court held the IEEPA tariffs unlawful. In response, the President quickly imposed a 150-day 10% tariff covering most products from virtually all countries under Section 122, and has indicated that the tariff rate will increase to 15%. The President also signaled his intention to impose additional tariffs under other authorities and the Office of the U.S. Trade Representative has launched two new investigations under Section 301 on imports from a total of 60 countries. These investigations could lead to the imposition of additional tariffs on imports from a substantial number of countries, including China. Given the time-limited nature of the Section 122 tariffs, the prospect of new or increased tariffs, the adoption of policies that require or encourage the use of U.S.-origin goods, and the potential retaliation by other governments against such tariffs and policies, there is significant uncertainty in the U.S. market. In addition, the United States also recently announced an intent to impose 50% tariffs on certain products of Canada, effective August 19, 2026, under authorities provided in Section 338 of the Tariff Act of 1930. Such changes could adversely impact our business and could increase the costs of new store build-out, increase the costs of sourcing our products, or could require us to source more of our products from other countries.
While we may attempt to renegotiate prices with suppliers or diversify our supply chain in response to tariffs or shift production between manufacturers in different countries, such efforts may not yield immediate results, may be ineffective, or may be impossible to implement in the near term. For example, we shifted approximately 20% of production capacity from China to Vietnam, the U.S. and Mexico, which means that the U.S. government’s tariffs on certain imports from China under Section 301 affected only approximately 32% of finished goods as of 2025. In 2025, we increased our production capacity in Vietnam by 16%. Goods that are of Vietnamese origin may incur U.S. Customs and Border Protection scrutiny (and, possibly, higher tariffs) due to concerns about “transshipment,” given the prevalence of this practice in the region. Further, we may be required to shift production capacity back to China (or other countries whose imports are subject to higher duties, such as antidumping and countervailing duties) due to lack of manufacturing expertise or capacity in relatively lower-tariff countries. We might also consider increasing prices to the end customer; however, this could reduce the competitiveness of our products and adversely affect our net revenue.
We are also dependent on international trade agreements and regulations. Adverse changes in, or withdrawals from, trade agreements or political relationships between the United States and countries where we sell or source our products, could negatively impact our results of operations or cash flows.
If we fail to anticipate and manage any of these dynamics successfully, our gross margin and profitability could be adversely affected.
77
We face exposure to foreign currency exchange rate fluctuations.
Certain of our foreign revenue and costs are denominated in currencies other than the U.S. dollar and are subject to currency risk. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar have affected and may in the future continue to affect our net revenue and results of operations. As a result of such foreign currency exchange rate fluctuations, it has been, and may continue to be, more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be lowered. We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place and may introduce additional risks if we are unable to structure effective hedges with such instruments.
Failure by us or our suppliers to comply with trade and other regulations including importation, exportation, product safety, labeling, labor or other laws or to provide safe conditions for our or their workers, may lead to investigations or actions by government regulators, damage our reputation and brand and harm our business.
The labeling, distribution, importation, marketing, and sale of our products is subject to regulation by various federal, state, local, and international regulatory authorities in the countries in which our products are currently distributed or sold, including the FTC and the Federal Consumer Product Safety Commission. Product safety, labeling, and licensing regulations, including consumer disclosure and warning regarding chemical exposure, may require us to remove selected products from our inventory. Such recalls or removal of products can result in, among other things, lost sales, diverted resources, potential harm to our reputation, and increased customer service costs and legal expenses, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, our actual or alleged failure to comply with such regulations may in the future subject us to investigations, enforcement actions, and the imposition of significant penalties and claims, which could harm our results of operations or our ability to conduct business. Any legal proceedings, audits, or inspections by governmental agencies related to these matters could result in significant settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could have an adverse impact on our business, financial condition, and results of operations. In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in significant compliance costs or discontinuation of product sales and could impair the marketing of our products, resulting in significant loss of revenue. Further, we contract with numerous domestic and international supply chain partners. Failure of our suppliers, vendors, and other partners to comply with applicable laws and regulations and contractual requirements could lead to litigation against us, resulting in increased legal expenses and costs.
Uncertainties in the interpretation and application of existing, new, and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate.
The tax regimes to which we are subject or under which we operate are unsettled and may be subject to significant change. The issuance of additional guidance related to existing tax laws, changes to existing tax laws or the interpretation thereof, or the introduction of new tax laws (including with respect to sales taxes, VAT, and similar taxes) proposed or implemented by the current or a future U.S. presidential administration, Congress or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially affect our tax obligations and effective tax rate. To the extent that such changes have a negative impact on us, or on our suppliers or our customers, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.
The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions and maintaining our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency. Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under
78
international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.
Additionally, tax authorities at the foreign, federal, state, and local levels continue to review and revise the treatment of companies engaged in e-commerce. New or revised foreign, federal, state, or local tax laws, regulations or court decisions may subject us or our customers to additional sales, income, and other taxes. Following the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc., states may require out-of-state sellers to collect and remit sales taxes even if those sellers lack any physical presence within the states imposing the sales taxes. Under Wayfair, a person requires only a “substantial nexus” with the taxing state before the state may subject the person to sales tax collection obligations therein. Since the Supreme Court’s Wayfair decision, many states have considered or adopted laws that attempt to impose sales tax collection obligations on out-of-state sellers. In addition, the imposition by state governments of sales tax collection obligations on out-of-state retailers in jurisdictions where we do not currently collect sales taxes, whether for prior years or prospectively, could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could have a material adverse impact on our business, financial condition, and results of operations.
We may be subject to claims and litigation that could result in unexpected expenses and could ultimately be resolved against us.
From time to time, we may be involved in litigation and other proceedings, including matters related to employment-related claims, product liability claims, commercial disputes, and copyright infringement, challenging trademarks and other intellectual property claims, as well as trade, regulatory, and other claims related to our business or our sustainability practices, statements, and goals. For example, from time to time, current or former employees will file lawsuits alleging unfair labor practices or violations of federal or state labor or antidiscrimination laws. We intend to vigorously defend against these lawsuits. Any of these proceedings could result in significant settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies or the carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business, financial condition, and results of operations. In addition, any proceeding could negatively impact our reputation among our customers and our brand image.
Risks Related to Ownership of Our Common Stock
The public trading price of our common stock may be volatile, and the value of our common stock may decline.
We cannot predict the prices at which our common stock will trade. The trading price of our common stock is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. Factors that could cause fluctuations in the trading price of our common stock include the following:
•changes to our business operations and strategy;
•actual or anticipated fluctuations in our financial condition, and results of operations;
•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
•failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors;
•announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, results of operations, or capital commitments;
•changes in stock market valuations and operating performance of other apparel and footwear companies generally, or those in our industry in particular;
•the sustainability targets we may provide to the public, any changes in these targets, or our failure to meet them;
•price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
•changes in our board of directors or management;
79
•sales of large blocks of our common stock, including sales by our directors, executive officers, and principal stockholders or by their affiliates;
•lawsuits threatened or filed against us;
•anticipated or actual changes in laws, regulations, or government policies applicable to our business;
•changes in our capital structure, such as future issuances of debt or equity securities;
•short sales, hedging, and other derivative transactions involving our capital stock;
•general economic conditions in the United States and globally; and
•other events or factors, including those resulting from geopolitical conflicts, pandemics, incidents of terrorism, or responses to these events.
In addition, the stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of certain companies’ securities, securities class action litigation has been instituted against these companies. This litigation, if instituted against us, could adversely affect our business, financial condition, and results of operations. If a market for our common stock does not develop or is not maintained, the liquidity and price of our common stock could be adversely affected.
We have identified material weaknesses in our internal control over financial reporting. If we fail to remediate these material weaknesses or otherwise maintain effective internal controls, we may not be able to accurately report our financial results of operations which may adversely affect investor confidence.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. As a private company, we have not historically prepared public company financial statements.
In connection with the audit of our 2025, 2024 and 2023 consolidated financial statements, we identified the following material weaknesses in our internal control over financial reporting:
•we did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we did not maintain evidence of the consistent execution of control activities across all significant business processes, including the preparation and review of account reconciliations and journal entries;
•we did not design and maintain an effective risk assessment and monitoring process. Specifically, we lacked a formal process related to identifying and analyzing risks of material misstatement in financial reporting and the monitoring of internal controls; and
•we did not design and maintain effective IT general controls for certain information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain (i) program change management controls to ensure that program and data changes are identified, tested, authorized and implemented appropriately, (ii) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel, (iii) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored, and (iv) program development controls to ensure that new software development is tested, authorized and implemented appropriately.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. These material weaknesses resulted in immaterial revisions in the Company’s previously issued 2024 and 2023 consolidated financial statements. Each of the material weaknesses described above could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. We have concluded that these material weaknesses occurred because, prior to our initial public offering in July 2026, we were a private company and did not have
80
the necessary systems, business processes, and related internal control to satisfy the accounting and financial reporting requirements of a public company. We plan to undertake the following steps to address these material weaknesses:
•hiring and retaining additional accounting, finance and IT personnel with appropriate public company reporting and internal controls expertise;
•formalizing and documenting our internal control framework, including risk assessment and monitoring activities;
•designing and implementing enhanced review and approval controls over journal entries, account reconciliations, and financial reporting processes;
•strengthening segregation of duties through both procedural changes and system-based controls; and
•improving IT general controls, including controls over user access provisioning and termination, privileged access monitoring, change management, computer operations, and implementation of new technology.
We may incur significant costs in connection with remediating these material weaknesses. Neither we nor our independent registered public accounting firm have tested the effectiveness of our internal control over financial reporting and we cannot assure you that we will be able to successfully remediate the material weaknesses described above. Even if we successfully remediate such material weaknesses, we cannot assure you that we will not suffer from these or other material weaknesses in the future.
We recently identified immaterial errors in our previously issued consolidated financial statements, resulting in the revision of our financial statements for 2024 and 2023. If we discover additional errors in the future, it could adversely affect investor confidence and our stock price.
During the preparation of our consolidated financial statements for 2025, we identified and corrected certain accounting errors in our previously issued financial statements for 2024 and 2023 related to the classification of bad debt expense, accounts receivable, prepaid assets, and current lease liabilities. While these revisions were immaterial to our previously filed financial statements, the discovery of further errors in the future could require us to restate or revise our financial statements again. Any such future restatements or revisions could result in a loss of investor confidence in the accuracy of our financial reporting, which could have a material adverse effect on our stock price and our business.
Certain of our significant stockholders have significant influence over us, including significant influence over decisions that require the approval of stockholders, which may be inconsistent with the interests of our other stockholders.
Permira is a significant stockholder of the Company. Following our initial public offering, Permira beneficially owned approximately 49.2% of our outstanding shares of common stock. As a result, while we are not considered to be a “controlled company” under the NYSE corporate governance rules, Permira and its affiliates have the ability to exercise significant influence over decisions requiring stockholder approval, including amendments to our certificate of incorporation and approval of significant corporate transactions, such as a merger or other sale of the Company or our assets. Further, so long as Permira continues to own at least 5% of the aggregate number of shares of common stock then issued and outstanding, it has the ability to nominate at least one individual to our board of directors pursuant to a stockholders’ agreement that we have entered into with Permira and certain other stockholders (the “Stockholders’ Agreement”).
Following our initial public offering, the Aflalo Family Trust, established U/T/A dated November 8, 2018, as amended (the “AFT Stockholder”), beneficially owned approximately 19.8% of the outstanding shares of common stock. Pursuant to the Stockholders’ Agreement, for so long as the AFT Stockholder owns at least 5% of the aggregate number of shares of common stock then issued and outstanding, the AFT Stockholder is entitled to nominate Yael Aflalo as a director. Four of our eight directors are affiliated with Permira and one of our directors are affiliated with the AFT Stockholder. These directors have fiduciary duties to us and, in addition, have duties to Permira and the AFT Stockholder, respectively. As a result, these directors may face real or apparent conflicts of interest with respect to matters affecting both us and Permira or the AFT Stockholder, whose interests may be adverse to ours in some circumstances.
Further, as a result, Permira and the AFT Stockholder acting together, are able to determine the outcome of all matters requiring stockholder approval and will be able to cause or prevent a change of control of the Company or a change in the composition of our board of directors. Permira and the AFT Stockholder’s interests may be different from or conflict with the interests of our other stockholders and, as a result, this concentration of ownership may have the effect of delaying, preventing or deterring a change in control of us and may negatively affect the market price of our stock.
81
Permira and its affiliates are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete indirectly with us. Permira or its affiliates may also pursue acquisition opportunities that are complementary to our business and, as a result, those acquisition opportunities may not be available to us.
Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline.
The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, including sales by our significant stockholders, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
We do not intend to pay dividends for the foreseeable future.
Although we have declared cash dividends in the past, including a cash dividend of an aggregate amount of approximately $90 million on the outstanding shares of our common stock in June 2026 prior to our IPO, we do not intend to pay any cash dividends in the foreseeable future. In addition, the terms of the Credit Agreement currently limit our ability to pay certain dividends and future agreements governing our indebtedness may also limit our ability to pay certain dividends. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors. Accordingly, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. See “Dividend Policy.”
Additional stock issuances could result in significant dilution to our stockholders.
We may issue our capital stock or securities convertible into our capital stock from time to time in connection with a financing, acquisition, investments or otherwise. Additional issuances of our stock will result in dilution to existing holders of our stock. Also, to the extent outstanding stock options to purchase our stock are exercised, there will be further dilution. The amount of dilution could be substantial depending upon the size of the issuance or exercise. Any such issuances could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our common stock and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business, our market and our competitors. We do not have any control over these analysts. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest more difficult, limit attempts by our stockholders to replace or remove our current management and depress the market price of our common stock.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-takeover effect and may delay, defer, or prevent a merger, acquisition, tender offer, takeover attempt, or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders. These provisions include:
•from and after the date on which Permira holds less than 20% of the aggregate number of shares of common stock then issued and outstanding (the “Voting Threshold Date”), our board of directors will be classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause; provided, however, that such classification will not take effect if, prior to the time it would otherwise become effective, our board of directors, by the affirmative vote of a majority of the directors then in office, elects not to effect such classification, subject to the terms as set forth in our amended and restated certificate of incorporation;
82
•from and after the date on which Permira and the AFT Stockholder (as defined herein) no longer collectively own (directly and indirectly) at least fifty percent (50%) of the voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, our stockholders will only be able to take action at a meeting of stockholders and not by written consent;
•special meetings of our stockholders may not be called by our stockholders;
•advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before a meeting of stockholders;
•subject to the Stockholders’ Agreement, certain amendments to our amended and restated certificate of incorporation and any amendments to our amended and restated bylaws will require the approval of at least a majority of our board of directors or approval of holders of at least 66 2/3% of the then outstanding voting power of our capital stock;
•subject to the Stockholders’ Agreement, vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders, subject to the Stockholders’ Agreement;
•no provision of our amended and restated certificate of incorporation or amended and restated bylaws provides for cumulative voting, which limits the ability of minority stockholders to elect director candidates; and
•we have authorized blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock.
In addition, we have opted out of Section 203 of the DGCL (“Section 203”), but our amended and restated certificate of incorporation will provide that the restrictions contained in Section 203 will apply to us immediately following the time at which all of the following conditions exist (if ever): (i) Section 203 by its terms would, but for the provisions of our amended and restated certificate of incorporation, apply to us and (ii) Permira and its affiliates and associates beneficially own less than 5% of the shares of common stock held by them upon completion of our initial public offering. Moreover, our amended and restated certificate of incorporation will provide that, unless and until these conditions all exist, we will be governed by provisions substantially similar to Section 203. These provisions and Section 203 each prevent some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations with us without the approval of the holders of substantially all of our outstanding common stock; provided, however, that unless and until we are governed by Section 203, Permira and its affiliates and associates will not be prohibited from engaging in such business combinations with us. See “Description of Capital Stock—Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws and Certain Provisions of Delaware Law—Section 203 of the DGCL.” These anti-takeover provisions could make it more difficult for a third-party to acquire us, even if the third-party’s offer may be considered beneficial by many of our stockholders. These provisions also may have the effect of preventing changes in our board of directors and may make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. See “Description of Capital Stock.”
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters and the U.S. federal district courts will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our amended and restated certificate of incorporation provides that, unless we otherwise consent in writing, (A) (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of Reformation to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”), our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended or restated) or as to which the DGCL confers exclusive jurisdiction on the Court of Chancery of the State of Delaware, or (4) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court (as appropriate) located within the State of Delaware; provided, however, that the foregoing provision would not apply to (i) any action brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any other claim for which the federal courts have exclusive jurisdiction, or (ii) any action asserting a claim arising under the Securities Act; and (B) the federal
83
district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a claim arising under the Securities Act. However, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions or the rules and regulations thereunder and, accordingly, we cannot be certain that a court would enforce such provision. Our amended and restated certificate of incorporation includes the provision outlined in (B) to prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. While the Delaware courts have determined that such choice of forum provisions are facially valid and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such an instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions. If a court were to find either exclusive forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with litigating Securities Act claims in state court, or both state and federal court, which could harm our business, financial condition, and results of operations. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation, except our stockholders will not be deemed to have waived (and cannot waive) compliance with the federal securities laws (including the Securities Act and the Exchange Act) and the rules and regulations thereunder.
We are an “emerging growth company,” and the reduced reporting and disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an “emerging growth company” and, for as long as we continue to be an emerging growth company, we currently intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our registration statements, periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will cease to be an emerging growth company upon the earliest of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) December 27, 2031; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; and (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
We cannot predict whether investors will find our common stock less attractive if we choose to rely on these exemptions while we are an emerging growth company. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
General Risk Factors
The requirements of being a public company may increase our costs, strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act, the listing standards of the NYSE and other applicable securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources. Furthermore, several members
84
of our management team do not have prior experience in running a public company. For example, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, financial condition, and results of operations. Although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. We also expect that being a public company that is subject to these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly members who can serve on our audit and compensation and leadership management committees and qualified executive officers.
As a result of the disclosure obligations required of a public company, our business and financial condition is more visible than it was as a private company, which may result in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, and results of operations would be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, would divert the resources of our management and harm our business, financial condition, and results of operations.
We are obligated to develop and maintain proper and effective internal control over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment requires disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company.” Our compliance with Section 404 has required, and will continue, to require that we incur substantial expenses and expend significant management efforts. We have and will likely need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, we may encounter problems or delays in completing the remediation of any deficiencies identified by us or our independent registered public accounting firm in connection with the issuance of their attestation report. Our testing, or the subsequent testing (if required) by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be additional material weaknesses. Any new material weaknesses could result in a material misstatement of our annual or quarterly financial statements or disclosures that may not be prevented or detected.
During the evaluation and testing process of our internal control, if we identify one or more additional material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting
85
could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and the accompanying notes thereto. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expenses. Significant estimates and judgments include revenue recognition, return reserves, inventory reserves, stock-based compensation and the fair value of our common stock. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.
Extreme weather conditions, natural disasters, public health crises, political crises and instability and other catastrophic events, including those caused or exacerbated by climate change, could negatively impact our results of operations and financial condition.
Extreme weather conditions and volatile changes in weather conditions in the areas in which our offices, retail stores, suppliers, customers, distribution centers, vendors and/or wholesale partners are located could adversely affect our results of operations and financial condition. Moreover, natural disasters such as earthquakes, landslides, hurricanes, tsunamis, floods, monsoons or wildfires, public health crises, such as pandemics and epidemics (including, for example, the COVID-19 pandemic), political crises, such as terrorist attacks, war and other political and geopolitical instability or other catastrophic events, whether occurring in the United States or abroad, and their related consequences and effects, including energy shortages, could disrupt our operations or the operations of our suppliers and other partners or result in economic instability that could negatively impact customer spending, any or all of which would negatively impact our results of operations and financial condition. For example, our principal offices are located in Vernon, California, an area which has a history of earthquakes and wildfires, and are thus vulnerable to damage or disruption. In particular, these types of events could impact our global supply chain, including the ability of suppliers to provide raw materials, labor and finished goods where and when needed, the ability of third parties to ship products, and our ability to ship products to customers from or to the impacted region(s). For example, in January 2025, the Los Angeles wildfires resulted in the temporary closure of all of our Los-Angeles area stores for several days and, ultimately, in the extended closure of our Pacific Palisades store, which remains closed, resulting in lost revenue and profits.
We may require additional capital to support business growth, and this capital might be unavailable or might be available only by diluting existing stockholders.
We intend to continue making investments to support our business growth and may require additional funds to support this growth. Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent, if any, of international expansion efforts and other growth initiatives, the expansion of our marketing activities and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may need to engage in equity or debt financings to secure additional funds. Recently, there has been volatility in and disruptions to the global economy, including the equity and debt financial markets. Any such volatility in and disruptions to the equity or debt markets, or further deterioration of such markets, including as a result of political unrest or war, may make any necessary equity or debt financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. In addition, we may not be able to obtain additional financing on terms favorable to us, if at
86
all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, and our business and prospects could fail or be adversely affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Equity Securities
From March 29, 2026 through June 27, 2026, we granted to our directors, officers, employees, consultants, and other service providers an aggregate of 10,274 shares of our common stock issuable upon the vesting and settlement of restricted stock unit awards.
From March 29, 2026 through June 27, 2026, we issued and sold to our directors, officers, employees, consultants, and other service providers an aggregate of 3,093 shares of common stock in connection with the exercise of options granted under our equity incentive plans at a weighted average exercise price of $8.04 per share.
None of the foregoing transactions involved any underwriters, underwriting discounts, or commissions, or any public offering. We believe the offers, sales, and issuances of the above securities were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), (or Regulation D or Regulation S promulgated thereunder) by virtue of Section 4(a)(2) of the Securities Act because the issuance of securities to the recipients did not involve a public offering, or in reliance on Rule 701 because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation as provided under such rule. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.
Use of Proceeds
On July 31, 2026, we completed our initial public offering of 14,062,500 shares of our common stock at a price to the public of $15.00 per share, which included the sale by the selling stockholders of 4,583,679 shares of our common stock. The shares of common stock sold in our initial public offering were registered under the Securities Act pursuant to our registration statement on Form S-1, as amended (File No. 333-297039), which was declared effective by the U.S. Securities and Exchange Commission on July 29, 2026. On September 1, 2026, an additional 229,546 shares of common stock were sold by the selling stockholders pursuant to the underwriters’ partial exercise of their option to purchase additional shares. Our shares of common stock were sold at an initial public offering price of $15.00 per share, which generated aggregate gross proceeds of $142.2 million for our account and $72.2 million for the accounts of the selling stockholders. J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC acted as representatives of the underwriters for the IPO.
We received net proceeds from our initial public offering of approximately $125.7 million after deducting underwriting discounts and commissions of $10.0 million and offering costs of approximately $6.5 million. No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities, or (iii) any of our affiliates.
Following the initial public offering, we used $110.0 million of the net proceeds for the partial repayment of term loans under the Credit Agreement and $8.5 million to repurchase shares of common stock and outstanding stock options from certain existing stockholders and employees. The remaining proceeds will be used to pay for expenses associated with the IPO and for general corporate purposes.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
87
Item 5. Other Information.
Securities Trading Plans of Directors and Executive Officers
During the quarter ended June 27, 2026, no director or officer, as defined in Rule 16a-1(f) under the Exchange Act, adopted terminated
88
Item 6. Exhibits.
Exhibit Number | Description | |||||||
3.1 | Amended and Restated Certificate of Incorporation of Reformation Inc. (incorporated by reference to Exhibit 3.1 filed with the Registrant’s Form 8-K filed with the SEC on August 3, 2026). | |||||||
3.2 | Amended and Restated Bylaws of Reformation Inc. (incorporated by reference to Exhibit 3.2 filed with the Registrant’s Form 8-K filed with the SEC on August 3, 2026). | |||||||
4.1 | Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.1* | ||||||||
10.2* | ||||||||
10.3 | Form of Securities Repurchase Agreement (incorporated by reference to Exhibit 10.3 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.4 | Form of Reformation Inc. Director Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.7 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.5* | ||||||||
10.6 | Reformation Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.9 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.7 | Form of Performance Stock Unit Award Agreement for CEO Stock Price Award granted under the Reformation Inc. 2026 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.10 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.8 | Form of One-Time IPO Restricted Stock Unit Award Agreement granted under the Reformation Inc. 2026 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.11 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.9 | Form of One-Time Fully Vested Restricted Stock Unit Award Agreement granted under the Reformation Inc. 2026 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.12 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.10 | Form of Restricted Stock Unit Award Agreement granted under the Reformation Inc. 2026 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.11 | Form of Stock Option Award Agreement granted under the Reformation Inc. 2026 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.14 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.12 | Form of Director Restricted Stock Unit Award Agreement granted under the Reformation Inc. 2026 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.15 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.13 | Change in Control and Severance Policy (incorporated by reference to Exhibit 10.16 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.14 | Participation Agreement to Change in Control and Severance Policy (Hali Borenstein) (incorporated by reference to Exhibit 10.17 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
89
| 10.15 | Form of Participation Agreement to Change in Control and Severance Policy (Named Executive Officers other than CEO) (incorporated by reference to Exhibit 10.18 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.16 | Outside Director Compensation Policy (incorporated by reference to Exhibit 10.19 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.17 | Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.20 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.18 | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.21 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.19 | Employment Letter Agreement between LYMI Inc. and Hali Borenstein (incorporated by reference to Exhibit 10.22 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.20 | Employment Letter Agreement between LYMI Inc. and Joshua Moore (incorporated by reference to Exhibit 10.23 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.21 | Employment Letter Agreement between LYMI Inc. and Ivan Tchakarov (incorporated by reference to Exhibit 10.24 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.22 | Reformation Inc. Stock Ownership Guidelines (incorporated by reference to Exhibit 10.25 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
10.23 | Amendment No. 1 to Credit and Guaranty Agreement, dated as of June 17, 2026, among LYMI Inc., Ref Holdings, Inc. and the subsidiaries of LYMI Inc. from time to time party thereto, the lenders party thereto and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.27 filed with the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-297039), filed with the SEC on July 20, 2026). | |||||||
31.1* | ||||||||
31.2* | ||||||||
32.1** | ||||||||
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 With Embedded Linkbase Documents. | |||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
___________
*Filed herewith.
**Furnished herewith.
90
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.
| REFORMATION INC. | ||||||||
Date: September 11, 2026 | By: | /s/ Hali Borenstein | ||||||
| Hali Borenstein | ||||||||
President and Chief Executive Officer (Principal Executive Officer) | ||||||||
Date: September 11, 2026 | By: | /s/ Joshua Moore | ||||||
| Joshua Moore | ||||||||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||||||||
91
REFORMATION INC.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (as may be further amended, modified and supplemented from time to time, this “Agreement”), dated as of July 28, 2026 is by and among Reformation Inc., a Delaware corporation (the “Company”), and each of the other parties party hereto. Each of the Persons listed on the signature pages hereto (other than the Company) and any other Person who may become a party hereto pursuant to Section 12(c) are referred to individually as a “Stockholder” and collectively as the “Stockholders.”
WHEREAS, certain parties hereto are party to that certain Stockholders’ Agreement dated as of August 26, 2019, as amended and restated on April 11, 2025 (as so amended, the “Original Stockholders’ Agreement”);
WHEREAS, the Company intends to effect the Initial Public Offering (as defined below), which offering constitutes an IPO under the terms of the Original Stockholders’ Agreement; and
WHEREAS, the parties hereto believe it is in the best interests of the Company and the Stockholders to enter into this Agreement to set forth herein their agreements on certain rights and obligations that survive the termination of the Original Stockholders’ Agreement in connection with the Initial Public Offering in accordance with Section 33 of the Original Stockholders’ Agreement.
NOW, THEREFORE, for and in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
Section 1.Definitions. As used in this Agreement, the following terms shall have the following meanings:
“Additional Piggyback Rights” has the meaning set forth in Section 3(a) hereof.
“Additional Piggyback Securities” has the meaning set forth in Section 3(b) hereof.
“Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “Controlling” and “Controlled”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise), and “Affiliated” has a meaning correlative to the foregoing.
“AFT Stockholder” means (i) the Aflalo Family Trust, established U/T/A dated November 8, 2018, as amended, and (ii) any designated transferees, assignees or successors of the AFT Stockholder pursuant to Section 12(c) hereof that, in each such case, hold Registrable Securities or securities exercisable or exchangeable for, or convertible into, Registrable Securities.
“Agreement” has the meaning set forth in the preamble hereto.
“Automatic Shelf Registration Statement” has the meaning set forth in Section 7 hereof.
“business day” means a day on which banks are open for business in the states of New York and California (which shall not include Saturdays, Sundays and public holidays in any of these localities).
“Claims” has the meaning set forth in Section 9(a) hereof.
“Common Stock” means the Company’s common stock, par value $0.0001 per share, and shall also include any common stock of the Company hereafter authorized and any capital stock of the Company of any other class hereafter authorized which does not have a preference as to dividends or distribution of assets in liquidation over any other class of capital stock of the Company.
“Company” has the meaning set forth in the preamble hereto.
“Demand Notice” has the meaning set forth in Section 3(a) hereof and, for the avoidance of doubt, includes any Take-Down Notice.
“Demand Registration” has the meaning set forth in Section 3(a) hereof.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor statute thereto and the rules and regulations of the SEC promulgated thereunder.
“FINRA” means the Financial Industry Regulatory Authority, Inc.
“Form 8-A Effective Time” means the date and time on which the registration statement on Form 8-A filed by the Company under the Exchange Act with the SEC to register the Common Stock becomes effective.
“Initial Public Offering” means the consummation of the initial Public Offering pursuant to which shares of Common Stock are being listed on the New York Stock Exchange.
“Management Stockholders” means the parties identified on the signature pages hereto or who execute an Addendum Agreement substantially in the form of Exhibit A hereto as “Management Stockholders.”
“Notice” has the meaning set forth in Section 3(a).
“Original Stockholders’ Agreement” has the meaning set forth in the preamble hereto.
“Partner Distribution” has the meaning set forth in Section 7(a) hereof.
“Permira Stockholder” means (i) Refo SCSp, a société en commandite spéciale organized under Luxembourg law and (ii) any designated transferees, assignees or successors of the Permira Stockholder pursuant to Section 12(c) hereof that, in each such case, hold Registrable Securities or securities exercisable or exchangeable for, or convertible into, Registrable Securities.
“Permitted Transferees” has the meaning given to such term in the Stockholders Agreement.
“Person” means a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, cooperative or association or other legal entity or organization of whatever nature, and shall include any successor (by merger or otherwise) of such entity, or a government or any agency or political subdivision thereof.
“Piggyback Notice” has the meaning set forth in Section 5(a)(i) hereof.
“Piggyback Registration” has the meaning set forth in Section 5(a)(i) hereof.
“Postponement Period” has the meaning set forth in Section 3(d)(i) hereof.
“Prospectus” means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as
2
amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.
“Public Offering” means the sale of Common Stock to the public pursuant to an effective Registration Statement (other than a registration statement on Form S-4 or Form S-8 or any similar or successor form) filed under the Securities Act or any comparable law or regulatory scheme of any foreign jurisdiction.
“Qualified Holder” means each of (i) the Permira Stockholder and (ii) the AFT Stockholder, and “Qualified Holders” means collectively the Permira Stockholder and the AFT Stockholder.
“Qualified Independent Underwriter” means a “qualified independent underwriter” within the meaning of FINRA Rule 5121.
“Registrable Securities” means any shares of Common Stock currently held or hereafter acquired, directly or indirectly, by the Stockholders or any other securities issued or issuable with respect to any such shares of Common Stock by way of share split, share dividend, recapitalization, merger, exchange, combination or similar event or otherwise. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities (i) when they are sold pursuant to an effective Registration Statement under the Securities Act, (ii) when they shall have ceased to be outstanding, (iii) when they have been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities, (iv) when they have been sold pursuant to Rule 144, (v) following the first anniversary of the completion of the Initial Public Offering, when the holder of such securities together with its Affiliates beneficially owns less than five percent (5%) of the issued and outstanding shares of Common Stock and all shares of Common Stock held by such holder and its Affiliates can be sold pursuant to Rule 144 in any and all three month periods without any volume or other restrictions or (vi) following the first anniversary of the completion of the Initial Public Offering, when the holder of such securities together with its Affiliates beneficially owns less than three percent (3%) of the issued and outstanding shares of Common Stock and all shares of Common Stock held by such holder and its Affiliates can be sold pursuant to Rule 144 with or without any volume or other restrictions; provided that, notwithstanding the foregoing, any shares of Common Stock currently held or hereafter acquired, directly or indirectly, by a Management Stockholder will only cease to be Registrable Securities following the third anniversary of the consummation of the Initial Public Offering. No Registrable Securities may be registered under more than one Registration Statement at any one time.
“Registration Statement” means (i) any registration statement of the Company under the Securities Act which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement (ii) the registration statement of the Company under the Securities Act filed in connection with the Initial Public Offering, including the prospectus related thereto, and any amendments and supplements to such registration statement, including post-effective amendments and all exhibits thereto.
“Required Shelf” has the meaning set forth in Section 4(a) hereof.
“Rule 144” means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
“Rule 144A” means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
“SEC” means the U.S. Securities and Exchange Commission or any successor agency having jurisdiction under the Securities Act.
“Section 3(b) Sale Amount” has the meaning set forth in Section 3(b) hereof.
3
“Section 5(b) Sale Amount” has the meaning set forth in Section 5(b) hereof.
“Securities Act” means the U.S. Securities Act of 1933, as amended from time to time, or any successor statute act, and the rules and regulations promulgated thereunder.
“Shares” has the meaning given to such term in the Stockholders Agreement.
“shelf Registration Statement” has the meaning set forth in Section 3(a) hereof.
“Shelf Take-Down” has the meaning set forth in Section 3(d)(i) hereof.
“Shelf Underwritten Offering” has the meaning set forth in Section 3(c)(i) hereof.
“Stockholders” has the meaning set forth in the preamble hereto.
“Stockholders Agreement” has the meaning set forth in the recitals hereto.
“Subsidiary” with respect to any entity (the “parent”) means any corporation, limited liability company, company, firm, association, or trust of which such parent, at the time in respect of which such term is used, (i) owns directly or indirectly more than fifty percent (50%) of the equity, membership interest, or beneficial interest, on a consolidated basis, or (ii) owns directly or controls with power to vote, directly or indirectly through one or more Subsidiaries, shares of the equity, membership interest, or beneficial interest having the power to elect more than fifty percent (50%) of the directors, trustees, managers, or other officials having powers analogous to that of directors of a corporation. Unless otherwise specifically indicated, when used herein the term Subsidiary shall refer to a direct or indirect Subsidiary of the Company.
“Take-Down Notice” has the meaning set forth in Section 3(c)(i) hereof.
“Underwriting Agreement” means the underwriting agreement to be entered into among the Company and the investment banks party thereto with respect to the underwritten Initial Public Offering.
“underwritten registration” or “underwritten offering” means a registration in which securities of the Company are sold to an underwriter for reoffering to the public, including any underwritten block trade, bought deal or block sale to a financial institution conducted as an underwritten Public Offering.
“Valid Business Reason” has the meaning set forth in Section 3(d)(i) hereof.
“WKSI” has the meaning set forth in Section 7 hereof.
Section 2.Holders of Registrable Securities. A Person is deemed, and shall only be deemed, to be a holder of Registrable Securities if such Person owns Registrable Securities or has a right to acquire Registrable Securities and such Person is a Stockholder.
Section 3.Demand Registrations.
(a)Requests for Registration. Subject to the following paragraphs of this Section 3(a), following the Initial Public Offering, (a) the Permira Stockholder who beneficially owns a majority of the then outstanding Registrable Securities beneficially owned by all of the Permira Stockholders or (b) the AFT Stockholder who beneficially owns a majority of the then outstanding Registrable Securities beneficially owned by all of the AFT Stockholders, shall subject to Section 3(f), have the right, by delivering or causing to be delivered a written notice to the Company, to require the Company to register, pursuant to the terms of this Agreement, under and in accordance with the provisions of the Securities Act, the number of Registrable Securities held by such Qualified Holder requested to be so registered pursuant to the terms of this Agreement (any such written notice, a “Demand
4
Notice” and any such registration, a “Demand Registration”); provided, however, that a Demand Notice may only be made for an underwritten offering if the sale of the Registrable Securities requested to be registered by such Qualified Holder is reasonably expected to result in aggregate gross cash proceeds in excess of $50,000,000 (without regard to any underwriting discount or commission); provided, further, that, the Company shall not be obligated to file a Registration Statement relating to any registration request under this Section 3(a), if the Demand Notice is delivered within a period of one hundred eighty (180) days after the effective date of the Registration Statement for the Initial Public Offering (provided, however, that prior to the expiration of such 180 day period, the Company may, upon the request of a Qualified Holder and to the extent permitted by applicable law, be obligated to prepare and confidentially submit a Registration Statement related to any Demand Notice made by a Qualified Holder). A Qualified Holder may request pursuant to a Demand Notice that the Company register Registrable Securities on an appropriate form, including a registration statement filed pursuant to Rule 415 of the Securities Act, or any comparable successor form (each, a “shelf Registration Statement”), and, if the Company is a WKSI, an Automatic Shelf Registration Statement. Following receipt of a Demand Notice for a Demand Registration in accordance with this Section 3(a), the Company shall, subject to Section 3(d), use its reasonable best efforts to file a Registration Statement as promptly as practicable, but in any event no later than thirty (30) days after the date of the related Demand Notice and shall use its reasonable best efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof, but in no event later than ninety (90) days after the date of the related Demand Notice.
No Demand Registration shall be deemed to have occurred for purposes of this Section 3 if (i) the Registration Statement relating thereto does not become effective, (ii) such Registration Statement is not maintained effective for the period required pursuant to this Section 3, or (iii) the offering of the Registrable Securities pursuant to such Registration Statement is subject to a stop order, injunction, or similar order or requirement of the SEC during such period, in which case, the requesting holder of Registrable Securities shall be entitled to an additional Demand Registration in lieu thereof.
Within three (3) business days after receipt by the Company of a Demand Notice in accordance with this Section 3(a), the Company shall give written notice (the “Notice”) of such Demand Notice to the other Qualified Holders and, solely to the extent the Demand Notice is delivered by the Permira Stockholder prior to the third anniversary of the consummation of the Initial Public Offering, the Management Stockholders, and the Company shall, subject to the provisions of Section 3(b) hereof, include in such registration all Registrable Securities with respect to which the Company received written requests for inclusion therein within five (5) business days after such Notice is given by the Company to such holders.
The Company may, subject to Section 3(b) hereof, elect to include in any Registration Statement and offering pursuant to a Demand Registration, (i) authorized but unissued shares of Common Stock or shares of Common Stock held by the Company as treasury shares and (ii) any other shares of Common Stock which are requested to be included in such registration pursuant to the exercise of piggyback registration rights granted by the Company after the date hereof and which are not inconsistent with the rights granted in, or otherwise conflict with the terms of, this Agreement and which have been approved by each of the Qualified Holders that hold shares of Common Stock (“Additional Piggyback Rights”).
All requests made pursuant to this Section 3 will specify the number of Registrable Securities to be registered and the intended methods of disposition thereof.
The Company shall be required to maintain the effectiveness of the Registration Statement with respect to any Demand Registration for a period of at least one hundred eighty (180) days after the effective date thereof (or, in the case of a shelf Registration Statement, until the date as of which all Registrable Securities registered by such shelf Registration Statement have been sold in a transaction in which they cease to be Registrable Securities or have otherwise ceased to be Registrable Securities) or
5
such shorter period during which all Registrable Securities included in such Registration Statement have actually been sold; provided, however, that (i) such period shall be extended for a period of time equal to the period the holder of Registrable Securities refrains from selling any securities included in such Registration Statement at the request of the Company or an underwriter of the Company pursuant to the provisions of this Agreement and (ii) the Company shall use its reasonable best efforts to file any replacement or additional shelf Registration Statement and use its reasonable best efforts to cause such replacement or additional shelf Registration Statement to become effective prior to the expiration of the initial shelf Registration Statement.
(b)Priority on Demand Registration. If any of the Registrable Securities registered pursuant to a Demand Registration are to be sold in an underwritten offering, and the managing underwriter or underwriters advise the holders of such Registrable Securities in writing that, in their view, the total amount of securities proposed to be sold in such offering (including, without limitation, securities proposed to be included by any Persons exercising Additional Piggyback Rights (“Additional Piggyback Securities”)) exceeds the largest amount (the “Section 3(b) Sale Amount”) that can be sold in an orderly manner in such underwritten offering within a price range acceptable to the party that initiated such Demand Registration, then there shall be included in such underwritten offering an amount of securities not exceeding the Section 3(b) Sale Amount, and such amount of securities shall be allocated as follows in the event of a Demand Registration:
(i)first, all Registrable Securities requested to be registered by the Qualified Holders and the Management Stockholders, if applicable, allocated, if necessary for the offering not to exceed the Section 3(b) Sale Amount, pro rata among such Qualified Holders and Management Stockholders on the basis of the number of Registrable Securities then owned by each such holder requesting inclusion in relation to the aggregate number of Registrable Securities owned by all such holders requesting inclusion;
(ii)second, any securities for which inclusion in such Demand Registration was requested by the Company on its own behalf; and
(iii)third, pro rata among all Persons requesting that Additional Piggyback Securities be included in such underwritten offering, on the basis of the number of Additional Piggyback Securities then owned by each such Person requesting inclusion in relation to the aggregate number of Additional Piggyback Securities owned by all such Persons requesting inclusion.
For purposes of any underwriter’s cutback, all Registrable Securities held by any Stockholder shall also include any Registrable Securities held by (i) the partners, retired partners, stockholders or Affiliates of such holder, (ii) the estates and family members of any such holder or such holder’s partners, retired partners, stockholders or Affiliates, (iii) any trusts for the benefit of any of the foregoing Persons and (iv) at the election of such holder or such holder’s partners, retired partners, stockholders, trusts, family members or Affiliates, any charitable organization, in each case to whom or which Common Stock shall have been distributed, transferred or contributed prior to the execution of the underwriting agreement in connection with such underwritten offering; provided that such distribution, transfer or contribution occurred not more than ninety (90) days prior to such execution, and such holder and other Persons shall be deemed to be a single selling holder of Registrable Securities, and any pro rata reduction with respect to such selling holder shall be based upon the aggregate amount of Registrable Securities owned by all Persons included with such selling holder pursuant to clauses (i) through (iv) of this paragraph. No Registrable Securities excluded from the underwriting by reason of the underwriter’s cutback shall be included in such underwritten offering.
(c)Shelf-Take Downs.
6
(i)At any time that a shelf Registration Statement covering Registrable Securities is effective, if a Qualified Holder delivers a Demand Notice to the Company (a Demand Notice pursuant to this Section 3(c), a “Take-Down Notice”) stating that it intends to effect an underwritten offering of all or part of its Registrable Securities included by it on the shelf Registration Statement (a “Shelf Underwritten Offering”), then, subject to Section 3(d), the Company shall amend or supplement the shelf Registration Statement as may be necessary in order to enable such Registrable Securities to be distributed pursuant to the Shelf Underwritten Offering (taking into account the inclusion of Registrable Securities by any other holders pursuant to this Section 3(c)) and otherwise use its reasonable best efforts to facilitate such Shelf Underwritten Offering as expeditiously as reasonably possible and in any event within three (3) days after the receipt of the Take-Down Notice. In connection with any Shelf Underwritten Offering:
(A)the Company shall also simultaneously deliver the Take-Down Notice to all other holders of Registrable Securities whose names are included, or would be permitted under SEC rules to be added by post-effective amendment or prospectus supplement, as selling security holders on such shelf Registration Statement and permit each such holder to include its Registrable Securities included on the shelf Registration Statement in the Shelf Underwritten Offering if such holder notifies the proposing holders and the Company within two (2) business days after delivery of the Take-Down Notice to such holder; and
(B)in the event that the managing underwriter or underwriters advise the Company and the proposing holders in writing that, in their view, the total amount of securities which would otherwise be included in such take-down offering exceeds the largest amount that can be sold in an orderly manner in such take-down offering within a price range acceptable (I) to the Qualified Holder(s) that delivered the Take-Down Notice in the case of an underwritten block trade (or similar transaction) or (II) in all other instances to the holders of a majority of the Registrable Securities proposed to be offered for sale in such Shelf Underwritten Offering, the managing underwriter or underwriters shall limit the amount of securities which would otherwise be included in such take-down offering in the same manner as described in Section 3(b) with respect to a limitation of the amount of securities to be included in a Demand Registration.
(ii)Notwithstanding the time periods set forth in Section 3(c)(i) to the contrary, if any of the Qualified Holders wish to engage in an underwritten block trade (or similar transaction) off of a shelf Registration Statement (through a take-down from a shelf Registration Statement covering Registrable Securities), then such Qualified Holder(s) only needs to provide the Take-Down Notice for such offering to the Company (and the Company must simultaneously deliver the Take-Down Notice to the other holders of Registrable Securities) of the block trade Shelf Underwritten Offering at least 48 hours prior to the expected time of the pricing of such offering and such other holders who are able to participate must elect whether or not to participate within the time period specified in such Take-Down Notice (which time period shall be at least 24 hours prior to the expected time of the pricing of such offering), and the Company shall as expeditiously as possible use its reasonable best efforts to facilitate such Shelf Underwritten Offering (which may close as early as one (1) business day after the date it commences).
(iii)The offer price for a Shelf Underwritten Offering shall be determined jointly by the party delivering the Take-Down Notice, and by the Permira Stockholder and the AFT Stockholder, as applicable, to the extent either is, or both are, participating in a Shelf Underwritten Offering initiated by the other.
(d)Postponement of Registration.
(i)If the board of directors of the Company, in its good faith reasonable judgment, determines that any registration of Registrable Securities or offering of Registrable Securities off of a shelf Registration Statement (a “Shelf Take-Down”), including any Demand Registration, a Required Shelf, any other shelf registration or automatic shelf registration or any Shelf Underwritten Offering, should not be made or continued because it would materially
7
interfere with any material financing, acquisition, corporate reorganization, merger, share exchange or other transaction or event involving the Company or any of its Subsidiaries or because the Company does not yet have appropriate financial statements of acquired or to be acquired entities available for filing or because the Company has material, confidential information that may be required to be disclosed in a registration statement and which the board of directors of the Company deems reasonably inappropriate to disclose at such time (in each case, a “Valid Business Reason”), then (x) the Company may postpone filing a Registration Statement relating to a Demand Registration, a Required Shelf or any other shelf registration or automatic shelf registration and suspend the offering and sale of Registrable Securities off of any shelf Registration Statement, until five (5) business days after such Valid Business Reason no longer exists, but in no event, without the consent of the Permira Stockholder and the AFT Stockholder for more than forty-five (45) days after the date the board of directors of the Company determines a Valid Business Reason exists and (y) in case a Registration Statement has been filed relating to a Demand Registration, if the Valid Business Reason has not resulted from actions taken by the Company, the Company may, to the extent determined in the good faith reasonable judgment of the board of directors of the Company to be reasonably necessary to avoid interference with any of the transactions described above, cause such Registration Statement to be withdrawn and its effectiveness terminated (other than a shelf Registration Statement, which shall not be subject to withdrawal or termination pursuant to this Section 3(d)) or postpone amending or supplementing such Registration Statement until five (5) business days after such Valid Business Reason no longer exists, but in no event, without the consent of the Permira Stockholder and the AFT Stockholder for more than forty-five (45) days after the date the board of directors of the Company determines a Valid Business Reason exists (such period of suspension, postponement or withdrawal under clause (x) or (y) of this Section 3(d)(i), the “Postponement Period”). The Company shall give written notice to the holders of Registrable Securities that were (or would have had the right) to be included in such Demand Registration, Required Shelf or other shelf registration or automatic shelf registration or have the right to initiate a Shelf Take-Down of its determination to postpone or withdraw a Registration Statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof and the holders of Registrable Securities shall keep any information obtained in connection with such notice confidential in accordance with; provided, however, that the Company shall not be permitted to postpone or withdraw a Registration Statement more than twice in any twelve (12) month period or for an aggregate of more than ninety (90) days in any twelve (12) month period, in each case without the consent of the Permira Stockholder and the AFT Stockholder.
(ii)If the Company shall give any notice of suspension, postponement or withdrawal of any Registration Statement or Shelf Take-Down pursuant to the foregoing paragraph (i), the Company shall not, during the Postponement Period, register any Common Stock, other than pursuant to a Registration Statement on Form S-4 or Form S-8 (or any similar or successor form). Each holder of Registrable Securities agrees that, upon receipt of any written notice from the Company that the Company has determined to suspend, withdraw, terminate or postpone amending or supplementing any Registration Statement or Shelf Take-Down pursuant to the foregoing paragraph (i), such holder will for a corresponding period discontinue its disposition of Registrable Securities pursuant to such Registration Statement; provided, however, that the time periods under Section 3, Section 4 or Section 5 with respect to the length of time that the effectiveness of a Registration Statement must be maintained shall automatically be extended by the amount of time the holder is required to discontinue disposition of such securities. If the Company shall have withdrawn or prematurely terminated a Registration Statement filed pursuant to Section 3(a) or Section 4(a) (whether pursuant to the foregoing paragraph (i) or as a result of any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court or for any other reason permitted hereunder), the Company shall not be considered to have effected an effective registration for the purposes of this Agreement until the Company shall have filed a new Registration Statement covering the Registrable Securities covered by the withdrawn or terminated Registration Statement and such Registration Statement shall have been declared effective and shall not have been withdrawn. If the Company shall give any notice of suspension, withdrawal or postponement of a Registration Statement or Shelf Take-Down, the Company shall, not later than five (5) business days after the Valid Business Reason
8
that caused such suspension, withdrawal or postponement no longer exists (but in no event later than sixty (60) days after the date of the postponement or withdrawal), use its reasonable best efforts to effect the registration under the Securities Act of the Registrable Securities covered by the withdrawn or postponed Registration Statement in accordance with this Section 3 or Section 4, as applicable (unless the Qualified Holder(s) initiating such Demand Registration or Shelf Underwritten Offering shall have withdrawn such request, in which case the Company shall not be considered to have effected an effective registration for the purposes of this Agreement), and such registration shall not be withdrawn or postponed pursuant to the foregoing paragraph (i).
(e)Cancellation of a Demand Registration. Holders of a majority of the Registrable Securities which are to be registered in a particular offering pursuant to this Section 3 shall have the right to notify the Company that they have determined that the Registration Statement or a Shelf Underwritten Offering be abandoned or withdrawn, in which event the Company shall abandon or withdraw such Registration Statement or Shelf Underwritten Offering, as applicable, and concurrently advise in writing all holders of Registrable Securities thereof; provided, however, that, in connection with any underwritten Demand Registration or Shelf Underwritten Offering initiated (i) solely by the Permira Stockholder, only the Permira Stockholder shall have the right to notify the Company that they have determined that the corresponding Registration Statement or Shelf Underwritten Offering be abandoned or withdrawn or (ii) solely by the AFT Stockholder, only the AFT Stockholder shall have the right to notify the Company that they have determined that the corresponding Registration Statement or Shelf Underwritten Offering be abandoned or withdrawn.
(f)Number of Demand Notices. In connection with the provisions of this Section 3, each of the Permira Stockholder and the AFT Stockholder shall have an unlimited number of Demand Notices which they are permitted to deliver (or cause to be delivered) to the Company hereunder; provided, however, that the Permira Stockholder and the AFT Stockholder shall lose such right to provide (or cause to be provided) a Demand Notice at such time as they (and their Permitted Transferees) cease to hold Registrable Securities. For the purposes of this Section 3(f), a Take-Down Notice with respect to a Shelf Underwritten Offering will be considered a Demand Notice.
(g)Registration Statement Form. If any registration requested pursuant to this Section 3 which is proposed by the Company to be effected by the filing of a Registration Statement on Form S-3 (or any successor or similar short-form registration statement) shall be in connection with an underwritten Public Offering, and if the managing underwriter shall advise the Company in writing that, in its opinion, the use of another form of Registration Statement is of material importance to the success of such proposed offering or is required by applicable law, then such registration shall be effected on such other form.
Section 4.Automatic Shelf Registrations.
(a)Filing. Following the date that is twelve (12) full calendar months after the consummation of the Initial Public Offering, if the Company has not filed a shelf Registration Statement pursuant to Section 3(a), then the Company shall use reasonable best efforts to (i) file a shelf Registration Statement for a public offering of all Registrable Securities pursuant to Rule 415 promulgated under the Securities Act (the “Required Shelf”) no later than the first (1st) day on which such filing can be made with the SEC following such date and (ii) cause the Required Shelf to become effective as soon as possible thereafter. To the extent that the Company is a WKSI at the time of filing the Required Shelf, the Company shall designate the Required Shelf as an Automatic Shelf Registration Statement. The Company shall use reasonable best efforts to remain a WKSI during the period which such Automatic Shelf Registration Statement is required to remain effective in accordance with this Agreement. The Company shall (i) promptly (but in any event no later than ten (10) days prior to the date the Required Shelf is declared effective) give written notice of the proposed registration to all other holders of Registrable Securities and (ii) use its reasonable best efforts to permit or facilitate the sale and distribution of all Registrable Securities under the Required Shelf as may be specified by a holder pursuant to, and in accordance with, its rights set forth in Section 3 or Section 5 hereof.
(b)Continued Effectiveness. The Company shall use its reasonable best efforts to keep the Required Shelf continuously effective under the Securities Act in order to permit the Prospectus
9
or any free writing prospectus forming a part thereof to be usable by the holders of Registrable Securities until the date as of which all Registrable Securities registered by the Required Shelf have been sold or have otherwise ceased to be Registrable Securities. Subject to the Company’s rights under Section 3(d), the Company shall not be deemed to have used its reasonable best efforts to keep the shelf Registration Statement effective during such period if the Company voluntarily takes any action, or omits to take any commercially reasonable action, that would result in the holders of Registrable Securities not being able to offer and sell any Registrable Securities pursuant to the Required Shelf pursuant to, and in accordance with, its rights set forth in Section 3 or Section 5 hereof during such period, unless such action or omission is (x) a suspension or postponement permitted pursuant to Section 3(d) or (y) required by applicable law, rule or regulation. The Company shall use its reasonable best efforts to file any replacement or additional shelf Registration Statement and use its reasonable best efforts to cause such replacement or additional shelf Registration Statement to become effective prior to the expiration of the initial shelf Registration Statement.
Section 5.Piggyback Registration.
(a)Right to Piggyback.
(i)Except with respect to a Demand Registration, the procedures for which are addressed in Section 3, or the filing of a Required Shelf, the procedures for which are addressed in Section 4, if the Company proposes to file a registration statement under the Securities Act with respect to an offering of Common Stock whether or not for sale of its own account (other than a registration statement (A) on Form S-4, Form S-8 or any successor forms thereto, (B) filed solely in connection with an exchange offer or any employee benefit or dividend reinvestment plan or (C) in connection with an underwritten offering of debt securities that are convertible into Common Stock), then, subject to Section 5(a)(ii), the Company shall give prompt written notice of such proposed filing at least ten (10) business days before the anticipated filing date (the “Piggyback Notice”) to each Qualified Holder. The Piggyback Notice shall offer such holders the opportunity to include (or cause to be included) in such registration statement the number of Registrable Securities as each such holder may request (a “Piggyback Registration”). Subject to Section 5(b) hereof, the Company shall include in each such Piggyback Registration all Registrable Securities from all holders with respect to which the Company has received written requests for inclusion therein within five (5) business days after Piggyback Notice has been given to the applicable holder. Each eligible holder of Registrable Securities shall be permitted to withdraw all or part of the Registrable Securities from a Piggyback Registration by giving written notice to the Company of its request to withdraw; provided, however, that such request must be made prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such Piggyback Registration and otherwise may only be made in accordance with procedures reasonably determined by the underwriters in connection with any underwriting arrangements. The Company shall be required to maintain the effectiveness of the Registration Statement for a Piggyback Registration until the earlier to occur of (x) one hundred eighty (180) days after the effective date thereof and (y) consummation of the distribution by the holders of the Registrable Securities included in such Registration Statement. The foregoing piggyback rights with respect to each Qualified Holder shall expire on the first date on which such holder and its Affiliates no longer own any Registrable Securities.
(ii)Notwithstanding anything to the contrary in this Agreement, in connection with a Public Offering (other than pursuant to a Demand Registration) following the Initial Public Offering, in each case in which the Permira Stockholder or the AFT Stockholder are selling (or causing to be sold) shares of Common Stock beneficially owned by them on a secondary basis, the Company shall be required to deliver a Piggyback Notice and in such event all other holders of Registrable Securities shall have the right to participate in such offering on a pro rata basis with the Permira Stockholder and the AFT Stockholder (subject to Section 5(b)) (it being understood that in connection with any Public Offering in which the Permira Stockholder and the AFT Stockholder are not selling (or causing to be sold) shares of Common Stock beneficially owned by them on a secondary basis, no such Piggyback Notice need be sent and such holders of Registrable Securities shall have no such right to participate in such offering).
10
(b)Priority on Piggyback Registrations. The Company shall use reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit holders of Registrable Securities who have submitted a written request for inclusion therein in accordance with Section 5(a)(i) to include in such offering all Registrable Securities as each such holder so requested on the same terms and conditions as other shares of Common Stock, if any, included in the offering. Notwithstanding the foregoing, if the managing underwriter or underwriters of such underwritten offering have informed the Company in writing that, in their view, the total amount of securities that such holders of Registrable Securities, the Company and any other Persons having rights to participate in such registration intend to include in such offering exceeds the largest amount (the “Section 5(b) Sale Amount”) that can be sold in an orderly manner in such underwritten offering, then there shall be included in such registration an amount of securities not exceeding the Section 5(b) Sale Amount, and such amount of securities shall be allocated as follows:
(i)first, any securities for which inclusion in such Registration Statement was requested by the Company on its own behalf;
(ii)second, all Registrable Securities requested to be registered by the Qualified Holders, if applicable, allocated, if necessary for the offering not to exceed the Section 5(b) Sale Amount, pro rata among such Qualified Holders on the basis of the number of Registrable Securities then owned by each such holder requesting inclusion in relation to the aggregate number of Registrable Securities owned by all such holders requesting inclusion; and
(iii)third, pro rata among all Persons (other than the Company and the Qualified Holders) requesting that securities be included in such registration, on the basis of the number of securities then owned by each such Person (other than the Company, the Qualified Holders, to the extent applicable) requesting registration in relation to the aggregate number of securities owned by all such Persons (other than the Company and the Qualified Holders, to the extent applicable) requesting registration.
Section 6.Restrictions on Public Sale by Holders of Registrable Securities.
(a)Each Stockholder agrees in connection with the Initial Public Offering and holder of Registrable Securities agrees in connection with any underwritten offering made pursuant to a Registration Statement filed pursuant to Section 3, Section 4 or Section 5 hereof (whether or not such holder elected to include Registrable Securities in such Registration Statement or Shelf Underwritten Offering), if requested (pursuant to a written notice) by the managing underwriter or underwriters in an underwritten offering, not to effect any public sale or distribution of any of the Company’s equity securities (or securities convertible into or exchangeable or exercisable for equity) (except as part of such underwritten offering), including a sale pursuant to Rule 144 or any swap or other economic arrangement that transfers to another any of the economic consequences of owning any of the Company’s equity securities (or securities convertible into or exchangeable or exercisable for equity), or to give any Demand Notice or Take-Down Notice during the period commencing on the earlier of (x) the date of the distribution of a preliminary Prospectus in connection with an underwritten offering (which shall be no earlier than fourteen (14) days prior to the expected “pricing” of such offering) or (y) the “pricing” of such offering and continuing for not more than one hundred eighty (180) days (with respect to the Initial Public Offering) or ninety (90) days (with respect to any other offering) after the date of the Prospectus (or Prospectus supplement if the offering is made pursuant to a shelf Registration Statement), pursuant to which such public offering shall be made, or such lesser period as is required by the managing underwriter. In the case of (i) any block trade (or similar transaction) off a shelf Registration Statement, the Qualified Holder delivering such Take-Down Notice, (ii) any other Demand Registration or Piggyback Registration, the holders of a majority of the Registrable Securities proposed to be sold in an underwritten offering and (iii) the Initial Public Offering, the Company shall be responsible for negotiating all “lock-up” agreements with the underwriters applicable to holders of Registrable Securities and, in addition to the foregoing provisions of this Section 6, the Stockholders and holders of Registrable Securities agree to execute the form so negotiated.
(b)If any registration pursuant to Section 3 hereof shall be in connection with any underwritten offering or a Take-Down Notice is delivered with respect to any Shelf Underwritten
11
Offering, the Company will not effect any public sale or distribution of any equity (or securities convertible into or exchangeable or exercisable for equity) (other than pursuant to a registration statement (i) on Form S-4, Form S-8 or any successor forms thereto or (ii) filed solely in connection with an exchange offer or any employee benefit or dividend reinvestment plan) for its own account during the period commencing on the earlier of (x) the date of the distribution of a preliminary Prospectus in connection with an underwritten offering (which shall be no earlier than fourteen (14) days prior to the expected “pricing” of such offering) or (y) the “pricing” of such offering and continuing for not more than ninety (90) days after the date of the final Prospectus (or Prospectus supplement if the offering is made pursuant to a “shelf” registration), pursuant to which such public offering shall be made, or such lesser period as is required by the managing underwriter.
Section 7.Registration Procedures. If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 3, Section 4 or Section 5 hereof, the Company shall effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall reasonably cooperate in good faith in the sale of the securities and shall, as expeditiously as possible:
(a)prepare and file with the SEC a Registration Statement or Registration Statements on such form as shall be available for the sale of the Registrable Securities by the holders thereof or by the Company in accordance with the intended method or methods of distribution thereof (including, without limitation, a distribution to, and resale by, the members or partners of a holder of Registrable Securities, a “Partner Distribution”), and use its reasonable best efforts to cause such Registration Statement to become effective and to remain effective as provided herein; provided, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including documents that would be incorporated or deemed to be incorporated therein by reference), or comparable statements under securities or state “blue sky” laws of any jurisdiction, or any free writing prospectus related thereto, the Company shall furnish or otherwise make available to each holder of Registrable Securities whose Registrable Securities are included in such Registration Statement or Prospectus, to (i) one (1) counsel for the Permira Stockholder and one (1) counsel for the AFT Stockholder, respectively (to be selected by the Permira Stockholder and the AFT Stockholder, respectively, as applicable), if such Registration Statement is pursuant to a Demand Registration or Shelf Take-Down initiated by the Permira Stockholder and AFT Stockholder or if the Permira Stockholder and/or the AFT Stockholder beneficially own Registrable Securities included in such Registration Statement and (ii) one (1) counsel for the holders of Registrable Securities covered by such Registration Statement, Shelf Take-Down or Prospectus (to be selected by the holders of a majority of the Registrable Securities included in such Registration Statement or Shelf Take-Down) and one (1) counsel for the managing underwriters, if any, reasonably complete drafts of all such documents proposed to be filed, which documents will be subject to the reasonable review and comment of such holders and counsel, and such other documents reasonably requested by such holders or counsel, including any correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC with respect to such Registration Statement (including documents that would be incorporated or deemed to be incorporated therein by reference), and, if requested by such holders or counsel, provide such holders (which holder, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company) and/or counsel reasonable opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein, including the insertion in any such Registration Statement or Prospectus of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included therein, and such other opportunities to conduct a reasonable investigation within the meaning of the Securities Act, including reasonable access during reasonable business hours to the Company’s books and records, officers, accountants and other advisors. The Company shall not file any such Registration Statement or Prospectus or any amendments or supplements thereto (including such documents that, upon filing, would be incorporated or deemed to be incorporated by reference therein), or any such comparable statements under securities or state “blue sky” laws of any jurisdiction, or any such free writing prospectus related thereto, with respect to a Demand Registration or Shelf Take-Down, to which such holders or counsel, on behalf of such holders of a majority of the Registrable Securities covered by such Registration Statement or Prospectus or such managing underwriters, as the case may be, shall reasonably object, in writing, on a
12
timely basis, unless, in the opinion of the Company, such filing is necessary to comply with applicable law;
(b)prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective during the period provided herein and comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; and cause the related Prospectus to be supplemented by any Prospectus supplement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of the securities covered by such Registration Statement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act;
(c)notwithstanding anything contained herein to the contrary, at the request of any holder of Registrable Securities seeking to effect or considering a Partner Distribution, (i) file any Prospectus supplement or post-effective amendments, or include in the initial Registration Statement any disclosure or language, or include in any Prospectus supplement or post-effective amendment any disclosure or language, and otherwise take any action, deemed necessary or advisable by such holder to effect such Partner Distribution and (ii) cooperate with and assist such holder and the transfer agent to facilitate such Partner Distribution in the manner reasonably requested by such holder (including other than pursuant to a Registration Statement).
(d)notify each selling holder of Registrable Securities, its counsel and the managing underwriters, if any, promptly and in writing, (i) when a Registration Statement, any pre-effective amendment thereto, a Prospectus, any Prospectus supplement, any post-effective amendment to a Registration Statement or any free writing prospectus has been filed with the SEC and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if at any time the Company has reason to believe that the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated by Section 7(p) below cease to be true, complete and correct, or could reasonably be expected with the passage of time to cease to be true, complete and correct, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, and (vi) if the Company becomes aware of the existence of any fact or the occurrence of any event that makes any statement made in such Registration Statement, related Prospectus, any document incorporated or deemed to be incorporated therein by reference, any free writing prospectus or the information conveyed to any purchaser at the time of sale to such purchaser untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus, documents, free writing prospectus or information so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, any free writing prospectus or the information conveyed to any purchaser at the time of sale to such purchaser, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (which notice shall notify the selling holders only of the existence of such a fact or occurrence of such an event and shall provide no additional information regarding such fact or event to the extent such information would constitute material non-public information);
(e)use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction at the earliest date reasonably practicable;
(f)if requested by the managing underwriters, if any, or the holders of a majority of the then outstanding Registrable Securities being sold in connection with an underwritten offering,
13
promptly include in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, or such holders may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received such request; provided, however, that the Company shall not be required to take any actions under this Section 7(f) that are not, in the opinion of counsel for the Company, in compliance with applicable law;
(g)furnish or make available to each selling holder of Registrable Securities, its counsel and each managing underwriter, if any, without charge, at least one (1) conformed copy of the Registration Statement, the Prospectus and Prospectus supplements, if applicable, and each post-effective amendment thereto, including financial statements (but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits, unless requested in writing by such holder, counsel or underwriter), and any free writing prospectus utilized in connection therewith;
(h)deliver to each selling holder of Registrable Securities, its counsel, and the underwriters, if any, without charge, as many copies of each Prospectus (including each form of or preliminary Prospectus) and each amendment or supplement thereto, and each free writing prospectus utilized in connection therewith, as such Persons may reasonably request from time to time in connection with the distribution of the Registrable Securities; and the Company, subject to the last paragraph of this Section 7, hereby consents to the use of such Prospectus and each such amendment or supplement thereto, and each such free writing prospectus, by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any such amendment or supplement thereto;
(i)prior to any Public Offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “blue sky” laws of such jurisdictions within the United States as any seller or underwriter reasonably requests in writing and to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and to take any other action that may be necessary or advisable to enable such holders of Registrable Securities to consummate the disposition of such Registrable Securities in such jurisdiction; provided, however, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) subject itself to taxation in any such jurisdiction or (iii) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject;
(j)cooperate with the selling holders of Registrable Securities and holders of Registrable Securities seeking effect a Partner Distribution, the managing underwriters and the transfer agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any legends) representing Registrable Securities to be sold or transferred after receiving written representations from each holder of such Registrable Securities that the Registrable Securities represented by the certificates so delivered by such holder will be transferred in accordance with the Registration Statement or otherwise pursuant to a Partner Distribution, including by delivering to the transfer agent a letter of indemnity in lieu of a medallion guarantee, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, or holders may request at least two (2) business days prior to any sale or transfer of Registrable Securities in a firm commitment underwritten offering, but in any other such sale or transfer, within five (5) business days prior to having to issue the securities, and instruct any transfer agent and registrar of Registrable Securities to release any stop transfer orders in respect thereof (and, in the case of Registrable Securities registered on a shelf Registration Statement, at the request of any holder, prepare and deliver certificates representing such Registrable Securities not bearing any restrictive legends and to deliver or cause to be delivered an opinion or instructions to the transfer agent in order to allow such Registrable Securities to be sold from time to time);
(k)use its reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities within the United States, except as may be required solely as a consequence of the nature of
14
such selling holder’s business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals, as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities;
(l)upon the Company becoming aware of the existence of any fact or occurrence of any event contemplated by Section 7(d)(vi) above, promptly prepare and file with the SEC a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter promptly delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(m)prior to the effective date of the Registration Statement relating to the Registrable Securities, provide a CUSIP number for the Registrable Securities;
(n)provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such Registration Statement from and after a date not later than the effective date of such Registration Statement and, in the case of any secondary equity offering, provide and enter into any reasonable agreements with a custodian for the Registrable Securities;
(o)use its reasonable best efforts to cause all Registrable Securities covered by such Registration Statement to be listed on the principal national securities exchange on which similar securities of the Company are then listed prior to the effectiveness of such Registration Statement (or, if such registration is the Initial Public Offering, use its reasonable best efforts to cause such Registrable Securities to be listed on the New York Stock Exchange);
(p)enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other actions reasonably requested by the holders of a majority of the Registrable Securities being sold in connection therewith (including those reasonably requested by the managing underwriters, if any) to expedite or facilitate the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to the holders of such Registrable Securities and the underwriters or other financial institution facilitating such offering, if any, with respect to the business of the Company and its Subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters or other such financial institution in underwritten offerings, and, if true, confirm the same if and when requested, (ii) use its reasonable best efforts to obtain an opinion and “negative assurance” letter from the Company’s counsel (and, if applicable, local counsel) and a “cold comfort” letter and updates thereof from the independent public accountants who have certified the Company’s financial statements (and/or any other financial statements) included or incorporated by reference in the Registration Statement, in each case, in customary form reasonably satisfactory to the underwriters or other financial institution facilitating such offering, if any, and to the holders of a majority of the Registrable Securities being sold pursuant to such Registration Statement, (iii) use its reasonable best efforts to furnish to each holder of such Registrable Securities upon its request and to each underwriter or other financial institution facilitating such offering, if any, a copy of such opinion, “negative assurance” letter and comfort letter addressed to such underwriter or other financial institution facilitating such offering, (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures substantially to the effect set forth in Section 9 hereof with respect to all parties to be indemnified pursuant to Section 9 except as otherwise agreed by both the Permira Stockholder and the AFT Stockholder (provided that the Permira Stockholder and the AFT Stockholder shall not agree to any modification of such indemnification provisions and procedures that disproportionately and adversely affects any other Stockholder without such other Stockholder’s prior written consent) and (v) deliver such documents and certificates as may be reasonably requested by the holders of a majority of the Registrable Securities being sold pursuant to such Registration Statement, their counsel and the managing underwriters, if any, to evidence the continued validity of the
15
representations and warranties made pursuant to Section 7(p)(i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required thereunder;
(q)make available for inspection by a representative of the selling holders of Registrable Securities, any underwriter or other financial institution participating in any such disposition of Registrable Securities, if any, and any attorneys or accountants retained by such selling holders or underwriter, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its Subsidiaries, and cause the officers, directors and employees of the Company and its Subsidiaries to supply all information in each case reasonably requested by any such representative, underwriter or other financial institution facilitating such offering, attorney or accountant in connection with such Registration Statement; provided, however, that any information that is not generally publicly available at the time of delivery of such information shall be kept confidential by such Persons unless (i) disclosure of such information is required by court or administrative order, (ii) disclosure of such information, in the opinion of counsel to such Person, is required by law or applicable legal process, or (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person. In the case of a proposed disclosure pursuant to clause (i) or (ii) of this Section 7(q), such Person shall be required to give the Company written notice of the proposed disclosure prior to such disclosure and, if requested by the Company, assist the Company in seeking to prevent or limit the proposed disclosure. Without limiting the foregoing, no such information shall be used by such Person as the basis for any market transactions in securities of the Company or its Subsidiaries in violation of law;
(r)cause its officers to use their reasonable best efforts to support the marketing of the Registrable Securities covered by the Registration Statement (including, without limitation, participation in “road shows”) taking into account the Company’s business needs;
(s)comply (and continue to comply) with all applicable rules and regulations of the SEC (including, without limitation, maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) in accordance with the Exchange Act);
(t)cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;
(u)take no direct or indirect action prohibited by Regulation M under the Exchange Act; provided, however, that to the extent that any prohibition is applicable to the Company, the Company will use its reasonable best efforts to make any such prohibition inapplicable;
(v)take all reasonable action to ensure that any free writing prospectus utilized in connection with any registration covered by Section 3, Section 4 or Section 5 complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related Prospectus, Prospectus supplement and related documents, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(w)take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities; and
(x)upon request, take all reasonable action to cooperate with any holder of Registrable Securities transfer of such securities to a brokerage account utilized for purposes of holding restricted securities under a segregated DTC number.
16
The Company shall use its reasonable best efforts to qualify for registration on Form S-3 for secondary sales. To the extent the Company is a well-known seasoned issuer (as defined in Rule 405 under the Securities Act) (a “WKSI”), promptly following the date on which the Company becomes eligible to file an automatic shelf registration statement (as defined in Rule 405 under the Securities Act) (an “Automatic Shelf Registration Statement”) on Form S-3, the Company shall notify the holders of Registrable Securities in writing at least ten (10) business days prior to the filing of the Automatic Shelf Registration Statement, of such eligibility and its intention to file and maintain the Automatic Shelf Registration Statement which covers the Registrable Securities held by the such holders, unless such holders inform the Company in writing prior to the filing of such Automatic Shelf Registration Statement not to include such holders of Registrable Securities in such Automatic Shelf Registration Statement, and the Company shall subsequently file such Automatic Shelf Registration Statement. The Company shall use its commercially reasonable best efforts to remain a WKSI (and not become an ineligible issuer (as defined in Rule 405 under the Securities Act)) during the period during which such Automatic Shelf Registration Statement is required to remain effective pursuant to this Agreement. If the Company does not pay the filing fee covering the Registrable Securities at the time the Automatic Shelf Registration Statement is filed, the Company agrees to pay such fee at such time or times as the Registrable Securities are to be sold. If the Automatic Shelf Registration Statement has been outstanding for at least three (3) years, prior to the end of the third (3rd) year the Company shall file a new Automatic Shelf Registration Statement covering the Registrable Securities. If at any time when the Company is required to re-evaluate its WKSI status the Company determines that it is not a WKSI, the Company shall use its commercially reasonable best efforts to refile the shelf Registration Statement on Form S-3 and, if such form is not available, Form S-1 and keep such registration statement effective during the period during which such registration statement is required to be kept effective.
The Company may require each holder of Registrable Securities as to which any registration is being effected to furnish to the Company in writing such information required under applicable law in connection with such registration regarding such seller only and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing and the Company may exclude from such registration the Registrable Securities of any holder who unreasonably fails to furnish such required information within a reasonable time after receiving such request.
To the extent that any of the Qualified Holders is deemed to be an underwriter of Registrable Securities pursuant to any SEC comments or policies, the Company agrees that (i) the indemnification and contribution provisions contained in Section 9 hereof shall be applicable to the benefit of such Qualified Holder, in its role as deemed underwriter in addition to its capacity as Stockholder, and any of the Qualified Holders, as applicable, may require the Company to enter into a further agreement to such effect, including providing representations, warranties and indemnities similar to those contained in a customary underwriting agreement and (ii) any of the Qualified Holders, as applicable, shall be entitled to conduct the due diligence which they would normally conduct in connection with an offering of securities registered under the Securities Act, including, without limitation, receipt of customary opinions and comfort letters.
Each holder of Registrable Securities agrees if such holder has Registrable Securities covered by such Registration Statement that, upon receipt of any written notice from the Company of the existence of any fact or occurrence of any event of the kind described in Section 7(d)(ii), Section 7(d)(iii), Section 7(d)(iv), Section 7(d)(v) or Section 7(d)(vi) hereof, such holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 7(l) hereof, or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed
17
(which shall be at the earliest opportunity that is reasonably practicable), and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus; provided, however, that the time periods under Section 3, Section 4 or Section 5 with respect to the length of time that the effectiveness of a Registration Statement must be maintained shall automatically be extended by the amount of time the holder is required to discontinue disposition of such securities.
Section 8.Registration Expenses. All reasonable fees and expenses incident to the performance of or compliance with this Agreement by the Company including, without limitation, (i) all registration, listing and filing fees (including, without limitation, fees and expenses (A) paid to the SEC, a stock exchange or FINRA and (B) of compliance with securities or “blue sky” laws, including, without limitation, any fees and disbursements of counsel for the underwriters in connection with “blue sky” qualifications of the Registrable Securities pursuant to Section 7(i)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of the Registrable Securities included in any Registration Statement), (iii) messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) expenses of the Company incurred in connection with any road show, (vi) fees and disbursements of all independent certified public accountants referred to in Section 7(p)(ii) hereof and any other Persons, including special experts retained by the Company, (vii) fees and expenses payable to a Qualified Independent Underwriter, and (viii) fees and disbursements of (A) one (1) counsel for the Permira Stockholder, together with any necessary local counsel as may be required by the Permira Stockholder and one (1) counsel for the AFT Stockholder, together with any necessary local counsel as may be required by the AFT Stockholder, respectively, if such Registration Statement is pursuant to a Demand Registration initiated by the Permira Stockholder and the AFT Stockholder or if the Permira Stockholder and/or the AFT Stockholder beneficially own Registrable Securities included in such Registration Statement or (B) one (1) counsel for the holders of Registrable Securities whose shares are included in a Registration Statement, which counsel shall be selected as provided by Section 7(a), shall be borne by the Company whether or not any Registration Statement is filed or becomes effective. In addition, the Company shall pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange on which similar securities issued by the Company are then listed and rating agency fees and the fees and expenses of any Person, including special experts, retained by the Company.
The Company shall not be required to pay (i) fees and disbursements of any counsel retained by any holder of Registrable Securities or by any underwriter (except as set forth in clauses (i)(B) and (viii) of the first paragraph of this Section 8), (ii) any underwriter’s fees (including discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals) relating to the distribution of the Registrable Securities (other than with respect to Registrable Securities sold by the Company, and except as set forth in clause (vii) of the first paragraph of this Section 8), or (iii) any other expenses of the holders of Registrable Securities not required to be paid by the Company pursuant to the first paragraph of this Section 8.
Section 9.Indemnification.
(a)The Company will, and hereby agrees to, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus, its directors, officers, fiduciaries, employees, stockholders, members or general and limited partners (and the directors, officers, fiduciaries, employees, stockholders, members or general and limited partners thereof), each other Person who participates as a seller (and its directors, officers, fiduciaries, employees, stockholders, members or general and limited partners), underwriter or Qualified Independent Underwriter, if any, in the offering or sale of such securities, each officer, director, employee, stockholder, fiduciary, managing director, agent,
18
Affiliate, consultant, representative, successor, assign or partner of such underwriter or Qualified Independent Underwriter, and each other Person, if any, who controls such holder, seller, underwriter or Qualified Independent Underwriter within the meaning of the Securities Act, from and against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) and expenses (including reasonable and documented fees of counsel and any amounts paid in any settlement effected with the Company’s consent, which consent shall not be unreasonably withheld or delayed) to which each such indemnified party may become subject under the Securities Act or otherwise in respect thereof (collectively, “Claims”), insofar as such Claims arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, together with the documents incorporated by reference therein, or any free writing prospectus utilized in connection therewith, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iii) any untrue statement or alleged untrue statement of a material fact in the information conveyed by the Company to any purchaser at the time of the sale to such purchaser, or the omission or alleged omission to state therein a material fact required to be stated therein, or (iv) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration, and the Company will reimburse any such indemnified party for any documented legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim as such expenses are incurred; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such registration statement or amendment thereof or supplement thereto or in any such prospectus or any preliminary, final or summary prospectus or free writing prospectus in reliance upon and in strict conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use therein. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such holder.
(b)Each holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus (and, if the Company requires as a condition to including any Registrable Securities in any Registration Statement filed in accordance with Section 3, Section 4 or Section 5, any underwriter and Qualified Independent Underwriter, if any) shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 9(a)) to the extent permitted by law the Company, its officers and directors, each Person controlling the Company within the meaning of the Securities Act and all other prospective sellers and their directors, officers, stockholders, fiduciaries, managing directors, agents, Affiliates, consultants, representatives, successors, assigns or general and limited partners and respective controlling Persons with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, such Registration Statement, any preliminary, final or summary Prospectus contained therein, or any amendment or supplement thereto, or any free writing prospectus utilized in connection therewith, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to the Company or its representatives by or on behalf of such holder, underwriter or Qualified Independent Underwriter, if any, specifically for use therein, and each such holder, underwriter or Qualified Independent Underwriter, if any, shall reimburse such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such holder (which consent shall not be unreasonably withheld or delayed), and the maximum aggregate amount which any such holder shall be required to pay pursuant to this Section 9 (including pursuant to indemnity, contribution or otherwise) shall in no case be greater than the amount of the net proceeds received by such holder upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such Claim; provided, further, that such holder shall not be liable in any such
19
case to the extent that prior to the filing of any such Registration Statement or Prospectus or amendment thereof or supplement thereto, or any free writing prospectus utilized in connection therewith, such holder has furnished in writing to the Company information expressly for use in such Registration Statement or Prospectus or any amendment thereof or supplement thereto or free writing prospectus which corrected or made not misleading information previously furnished to the Company. The Company and each holder of Registrable Securities hereby acknowledge and agree that, unless otherwise expressly agreed to in writing by such holder to the contrary, for all purposes of this Agreement, the only information furnished or to be furnished to the Company for use in any such Registration Statement, preliminary, final or summary Prospectus or amendment or supplement thereto, or any free writing prospectus, are statements specifically relating to (i) the beneficial ownership of shares of Common Stock by such holder and its Affiliates as disclosed in the section of such document entitled “Selling Stockholders” or “Principal and Selling Stockholders” or other documents thereof and (ii) the name and address of such holder. If any additional information about such holder or the plan of distribution (other than for an underwritten offering) is required by law to be disclosed in any such document, then such holder shall not unreasonably withhold its agreement referred to in the immediately preceding sentence. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such holder.
(c)Indemnification similar to that specified in the Section 9(a) and Section 9(b) (with appropriate modifications) shall be given by the Company and each holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus with respect to any required registration or other qualification of securities under any applicable securities and state “blue sky” laws.
(d)Any Person entitled to indemnification under this Agreement shall notify promptly the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 9, but the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 9, except to the extent the indemnifying party is materially and actually prejudiced thereby and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Section 9. In case any action or proceeding is brought against an indemnified party and such indemnified party shall have notified the indemnifying party of the commencement thereof (as required above), the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such Claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party that it so chooses, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within thirty (30) days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so; (ii) if such indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal or equitable defenses available to such indemnified party which are not available to the indemnifying party or which may conflict with those available to another indemnified party with respect to such Claim; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one (1) firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have made a conclusion described in clause (ii) or (iii) of this Section 9(d)) and the indemnifying party shall be liable for any expenses therefor. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from
20
all liability arising out of such action or claim and (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.
(e)If for any reason the foregoing indemnity is unavailable, unenforceable or is insufficient to hold harmless an indemnified party under Sections 9(a), 9(b) or 9(c), then each applicable indemnifying party shall contribute to the amount paid or payable to such indemnified party as a result of any Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, with respect to such Claim. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if any contribution pursuant to this Section 9(e) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 9(e). The amount paid or payable in respect of any Claim shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 12(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 9(e) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 9(e) to contribute any amount greater than the amount of the net proceeds received by such indemnifying party from the sale of Registrable Securities pursuant to the registration statement giving rise to such Claim, less the amount of any indemnification payment made by such indemnifying party pursuant to Sections 9(b) and 9(c). In addition, no holder of Registrable Securities or any Affiliate thereof shall be required to pay any amount under this Section 9(e) unless such Person would have been required to pay an amount pursuant to Section 9(b) if it had been applicable in accordance with its terms.
(f)The indemnity and contribution agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party.
(g)The indemnification and contribution required by this Section 9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred; provided, however, that the recipient thereof hereby undertakes to repay such payments if and to the extent it shall be determined by a court of competent jurisdiction that such recipient is not entitled to such payment hereunder.
(h)Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control (to the extent such provisions do not disproportionately and adversely affect any Stockholder).
Section 10.Rule 144 and Rule 144A.
(a)After the Initial Public Offering, the Company shall (i) file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner (including, but not limited to, the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1)(i) of Rule 144) or, if the Company is not required to file such reports, it will, upon the request of any holder of Registrable Securities, make publicly available other information so long as necessary to permit sales by such holder of Registrable Securities under Rule 144 or Rule 144A, (ii) take such further action as any
21
holder of Registrable Securities may reasonably request, and (iii) furnish to each holder of Registrable Securities upon written request, (x) a copy of the most recent annual or quarterly report of the Company and (y) such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of Rule 144 or Rule 144A, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 or Rule 144A. Upon the request of any holder of Registrable Securities, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements.
(b)The provisions of Section 10(a) are not intended to modify or otherwise affect any restrictions on transfers of securities contained in the Stockholders Agreement.
Section 11.Underwritten Registrations.
(a)In connection with any Demand Registration or Shelf Underwritten Offering other than with respect to any underwritten block trades (or similar transaction), the holders of a majority of the Registrable Securities shall have the right, and in the case of any Shelf Underwritten Offering with respect to underwritten block trades (or similar transaction), the Qualified Holder(s) that delivers the Take-Down Notice initiating such Shelf Underwritten Offering shall have the right, to designate the lead managing underwriters in connection with any underwritten offering pursuant to such registration and each other managing underwriter for any such underwritten offering; provided that in each case other than an underwritten block trade (or similar transaction), each such underwriter is reasonably satisfactory to the Company, which approval shall not be unreasonably withheld or delayed.
(b)If the Company initiates a registration on its own behalf, and if the Permira Stockholder owns Registrable Securities that are included in such registration, the Permira Stockholder shall have the right to designate the lead managing underwriters, and each other managing underwriter, in connection with any underwritten offering pursuant to such registration; provided that, in each case, each such underwriter is reasonably satisfactory to the Company, which approval shall not be unreasonably withheld or delayed. In all other cases where the Company initiated a registration on its own behalf, the Company shall have the right to designate the lead managing underwriters, and each other managing underwriter, in connection with any underwritten offering pursuant to such registration; provided that, in each case, each such underwriter is reasonably satisfactory to the Permira Stockholder, which approval shall not be unreasonably withheld or delayed.
(c)No Person may participate in any underwritten registration hereunder unless such Person (i) agrees to sell the Registrable Securities it desires to have covered by the underwritten registration on the basis provided in any underwriting arrangements in customary form and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, custody agreements and other documents required under the terms of such underwriting arrangements, provided that such Person shall not be required to make any representations or warranties other than those related to title and ownership of such Person’s shares and as to the accuracy and completeness of statements made in a Registration Statement, Prospectus, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company or the managing underwriter by such Person for use therein.
Section 12.Miscellaneous.
(a)Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may be given, with the written consent of the Company, the Permira Stockholder and the AFT Stockholder; provided, however, that (x) any amendment, modification, supplement, waiver or consent to departures from the provisions of this Agreement that would subject a Stockholder to adverse differential treatment relative to the other Stockholders shall require the written consent of the differentially treated Stockholder and (y) any amendment, modification, supplement, waiver or consent to departures from the provisions of this Agreement that would be adverse to a right specifically granted to a specific Stockholder herein (but not to other Stockholders) shall require the agreement of that Stockholder; provided that, in the event the Permira Stockholder and the AFT
22
Stockholder no longer hold any Registrable Securities, this Agreement may be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may be given, with the written consent of the Company and the Stockholders holding a majority of Registrable Securities held by the holders. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least a majority of the Registrable Securities being sold by such holders pursuant to such Registration Statement.
(b)Notices. All notices required to be given hereunder shall be in writing and shall be deemed to be duly given if personally delivered, telecopied or emailed and confirmed, or mailed by certified mail, return receipt requested, or overnight delivery service with proof of receipt maintained, at the following address (or any other address that any such party may designate by written notice to the other parties):
If to the Company, to the address of its principal executive offices. If to any Stockholder, at such Stockholder’s address as set forth on the records of the Company. Any such notice shall, if delivered personally, be deemed received upon delivery; shall, if delivered by telecopy or electronic mail, be deemed received on the first business day following confirmation; shall, if delivered by overnight delivery service, be deemed received the first business day after being sent; and shall, if delivered by mail, be deemed received upon the earlier of actual receipt thereof or five (5) business days after the date of deposit in the United States mail.
(c)Successors and Assigns; Stockholder Status. The rights and obligations contained in this Agreement shall be assignable to any transferee of Registrable Securities. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including the Company and subsequent holders of Registrable Securities acquired, directly or indirectly, from the Stockholders; provided, however, that such successor or assign shall not be entitled to such rights unless the successor or assign shall have executed and delivered to the Company an Addendum Agreement substantially in the form of Exhibit A hereto (which shall also be executed by the Company) promptly following the acquisition of such Registrable Securities, in which event such successor or assign shall be deemed a Stockholder for purposes of this Agreement. Except as provided in Section 9 with respect to an indemnified party, nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim under, in or in respect of this Agreement or any provision herein contained.
(d)Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any counterpart or other signature hereupon delivered by facsimile or electronic mail with attachment shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.
(e)Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(f)Governing Law. The provisions of this Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice of law rules that may direct the application of the laws of another jurisdiction.
(g)Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find
23
and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(h)Entire Agreement. This Agreement and the Stockholders Agreement are intended by the parties as a final expression of their agreement, and are intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein, with respect to the registration rights granted by the Company with respect to Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
(i)Securities Held by the Company or Its Subsidiaries. Whenever the consent or approval of holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Subsidiaries shall not be counted in determining whether such consent or approval was given by the holders of such required percentage.
(j)Specific Performance. The parties hereto recognize and agree that money damages may be insufficient to compensate the holders of any Registrable Securities for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific performance of the terms hereof will be available in the event of any such breach.
(k)Limitation on Other Registration Rights. From and after the date of this Agreement, the Company shall not: (i) enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder registration rights that are more favorable in any respect than the rights granted under this Agreement or (ii) without the prior written consent of the Qualified Holders, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights except as would otherwise be permitted under clause (i) of this Section 12(k).
(l)No Inconsistent Agreements. The Company shall not hereafter enter into any agreement with respect to its securities that is inconsistent in any material respects with the rights granted to the Stockholders in this Agreement.
(m)Term. This Agreement shall terminate with respect to a Stockholder on the date on which such Stockholder ceases to own Registrable Securities; provided that such Stockholder’s rights and obligations pursuant to Section 9, as well as the Company’s obligations to pay expenses pursuant to Section 8, shall survive with respect to any registration statement in which any Registrable Securities of such Stockholders were included and, for the avoidance of doubt, any underwriter lock-up that a Stockholder has executed prior to the termination of this Agreement with respect to such Stockholder in accordance with this Section 12(m), and any lock-up period in effect with respect to such Stockholder pursuant to Section 6 at the time of such termination, shall remain in effect in accordance with its terms.
(n)Consent to Jurisdiction. The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in New York, and appropriate appellate courts therefrom, over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each party hereby irrevocably agrees that all claims in respect of such dispute or proceeding may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. This consent to jurisdiction is being given solely for purposes of this
24
Agreement and is not intended to, and shall not, confer consent to jurisdiction with respect to any other dispute in which a party to this Agreement may become involved.
(o)Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action, or proceeding of the nature specified in Section 12(n) above by the mailing of a copy thereof in the manner specified by the provisions of Section 12(b).
(p)EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Section 13.Effectiveness
. This Agreement shall become effective as of immediately prior to the Form 8-A Effective Time. Until such time as this Agreement becomes effective, the Original Stockholders’ Agreement shall remain in full force and effect. This Agreement shall automatically terminate if (i) the Underwriting Agreement is terminated for any reason prior to the completion of the Initial Public Offering or (ii) the Initial Public Offering contemplated by the Underwriting Agreement is not consummated on or before the tenth (10th) business day following the date of this Agreement, provided that Section 14 shall survive any such termination.
Section 14.Original Stockholders’ Agreement. The parties hereto hereby agree that in the event this Agreement becomes effective but is subsequently terminated pursuant to Section 13, the parties shall either reinstate the Original Stockholders’ Agreement or execute a registration rights agreement with terms that are substantially equivalent (to the extent practicable) to, mutatis mutandis, the relevant terms of the Original Stockholders’ Agreement.
[Signature Pages Follow]
25
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties execute this Agreement as of the date first written above.
REFORMATION INC.
By: /s/ Christina Halliday
Name: Christina Halliday
Title: General Counsel
Name: Christina Halliday
Title: General Counsel
[Signature Page to Registration Rights Agreement]
PERMIRA STOCKHOLDER
Refo SCSp
By:/s/ Eddy Perrier
Signed by Eddy Perrier, Manager
for and on behalf of
P6 GP S.à r.l. acting for its own account and as general partner of Refo SCSp
[Signature Page to Registration Rights Agreement]
AFT STOCKHOLDER
Aflalo Family Trust, established U/T/A dated November 8, 2018, as amended
By: /s/ Yael Aflalo
Name: Yael Aflalo
Title: Trustee
Name: Yael Aflalo
Title: Trustee
[Signature Page to Registration Rights Agreement]
MANAGEMENT STOCKHOLDER
By: /s/ Hali Borenstein
Name: Hali Borenstein
Name: Hali Borenstein
[Signature Page to Registration Rights Agreement]
MANAGEMENT STOCKHOLDER
By: /s/ Joshua Moore
Name: Joshua Moore
Name: Joshua Moore
[Signature Page to Registration Rights Agreement]
MANAGEMENT STOCKHOLDER
By: /s/ Ivan Tchakarov
Name: Ivan Tchakarov
Name: Ivan Tchakarov
[Signature Page to Registration Rights Agreement]
EXHIBIT A
ADDENDUM AGREEMENT
This Addendum Agreement is made this day of , 20 by and between (the “New Stockholder”) and Reformation Inc. (the “Company”), pursuant to a Registration Rights Agreement, dated as of [●], 202[●] (as amended, supplemented or modified from time to time, the “Agreement”), between and among the Company and the Stockholders party thereto. Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the Agreement.
WITNESSETH:
WHEREAS, the Company has agreed to provide registration rights with respect to the Registrable Securities as set forth in the Agreement;
WHEREAS, the New Stockholder has acquired Registrable Securities directly or indirectly from a Stockholder or from the Company; and
WHEREAS, the Company and the Stockholders have required in the Agreement that all persons desiring registration rights must enter into an Addendum Agreement binding the New Stockholder to the Agreement.
NOW, THEREFORE, in consideration of the mutual promises of the parties, the New Stockholder acknowledges that it has received and read the Agreement and that the New Stockholder shall be bound by, and shall have the benefit of, all of the terms and conditions set out in the Agreement and shall be deemed to be a [Qualified Holder][Management Stockholder][Stockholder] thereunder.
New Stockholder
Address:
Exhibit A-1
AGREED TO on behalf of the Company pursuant to Section 13(c) of the Agreement.
REFORMATION INC.
By:
Printed Name and Title
Exhibit A-2
SECOND AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
OF REFORMATION INC.
OF REFORMATION INC.
Dated as of July 28, 2026
TABLE OF CONTENTS
Page
SECTION 1 EFFECTIVENESS; DEFINITIONS 2
Section 1.1 Effective Time 2
Section 1.2 Definitions 2
Section 1.3 Interpretation 7
SECTION 2 GENERAL PROVISIONS 8
Section 2.1 Organizational Documents 8
Section 2.2 Applicable Law 8
SECTION 3 GOVERNANCE 8
Section 3.1 Board Representation 8
Section 3.2 Committees of the Board 11
Section 3.3 Quorum and Acts of the Board 11
Section 3.4 Indemnification 12
Section 3.5 Directors’ and Officers’ Insurance 13
SECTION 4 RIGHTS AND OBLIGATIONS OF STOCKHOLDERS 14
Section 4.1 Actions Requiring Approval of the Permira Stockholder 14
Section 4.2 Lock-Up 15
Section 4.3 Confidential Information 15
SECTION 5 GENERAL PROVISIONS 17
Section 5.1 Further Assurances 17
Section 5.2 Authority; Effect 17
Section 5.3 Amendment and Waiver 17
Section 5.4 Successors and Assigns 18
Section 5.5 Notices 18
Section 5.6 Third Parties 20
Section 5.7 Governing Law 20
Section 5.8 Submission to Jurisdiction 20
Section 5.9 WAIVER OF JURY TRIAL 20
Section 5.10 Fiduciary Duties; Exculpation Clause 21
Section 5.11 Several Obligations 21
Section 5.12 Entire Agreement 21
Section 5.13 Titles and Headings 21
Section 5.14 Severability 21
Section 5.15 Counterparts 21
Section 5.16 Aggregation of Securities 21
Section 5.17 Remedies 22
Section 5.18 Termination 22
Section 5.19 Independent Nature of Stockholders’ Obligations and Rights 22
Exhibit A Option Holders
Annex A Form of Joinder Agreement
REFORMATION INC.
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT
This SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT is dated as of July 28, 2026, by and among (i) Reformation Inc., a Delaware corporation (the “Company”), (ii) Refo SCSp, a société en commandite spéciale organized under Luxembourg law (together with its Permitted Transferees, the “Permira Stockholder”), (iii) the Aflalo Family Trust, established U/T/A dated November 8, 2018, as amended (together with its Permitted Transferees, the “AFT Stockholder”), (iv) the parties set forth on Exhibit A that have received shares of the Company’s Common Stock (as defined below) upon the exercise or other settlement of Options (as defined below) (each an “Option Holder” and together, the “Option Holders”) and (v) each other party, if any, that from time to time becomes party hereto by executing a Joinder Agreement and its Permitted Transferees (as defined herein) (collectively, the “Other Stockholders” and each, an “Other Stockholder”).
The parties listed in (i) through (v) above, collectively, the “Parties” and each, a “Party.” The parties listed in (ii) through (v) above, collectively, the “Stockholders” and each, a “Stockholder.”
RECITALS
WHEREAS, the Company and certain of the Stockholders are party to the Stockholders Agreement, dated as of August 26, 2019, as amended and restated on April 11, 2025 (as so amended, the “Original Agreement”);
WHEREAS, the Company intends to effect the Initial Public Offering (as defined below), which offering constitutes an IPO under the terms of the Original Agreement rendering certain provisions of the Original Agreement no longer applicable; and
WHEREAS, the Parties hereto believe that it is in the best interests of the Company and the Stockholders to enter into this Agreement to (i) set forth herein their agreements on certain matters relating to the governance of the Company and the rights and obligations of the Stockholders following the Initial Public Offering and (ii) in accordance with and pursuant to Section 22 of the Original Agreement, amend and restate the Original Agreement as set forth herein, including to eliminate those provisions of the Original Agreement that are terminating as a result of the Initial Public Offering.
NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree to amend and restate the Original Agreement in its entirety as follows:
1
SECTION 1
EFFECTIVENESS; DEFINITIONS
EFFECTIVENESS; DEFINITIONS
Section 1.1 Effective Time. This Agreement will become effective as of immediately prior to the Form 8-A Effective Time (the “Effective Time”) and will supersede and result in the termination of the Original Agreement as of the Effective Time.
Section 1.2 Definitions. The following terms have the following meanings when used herein:
“Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “Controlling” and “Controlled”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise), and “Affiliated” shall have a meaning correlative to the foregoing.
“AFT Stockholder” has the meaning set forth in the preamble hereto.
“AFT Stockholder Director Nominee” has the meaning set forth in Section 3.1(b)(i)(2).
“Aggregate AFT Stockholder Ownership” means the total number of Shares owned, in the aggregate and without duplication, by the AFT Stockholder as of the date of such calculation.
“Aggregate Permira Ownership” means the total number of Shares owned, in the aggregate and without duplication, by the Permira Stockholder as of the date of such calculation.
“Agreement” means this Amended and Restated Stockholders Agreement, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.
“Audit Committee” has the meaning set forth in Section 3.2(a).
“Authorized Recipients” has the meaning set forth in Section 4.3(a).
“Board” means the board of directors of the Company as the same shall be constituted from time to time.
“Bylaws” means the Amended and Restated Bylaws of the Company, as in effect on the date of completion of the Initial Public Offering and as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“Certificate of Incorporation” means the Amended and Restated Certificate of Incorporation of the Company, as in effect immediately prior to the Initial Public Offering and as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and the terms of this Agreement.
2
“Change of Control Transaction” means a transaction or series of related transactions (whether by merger, consolidation, recapitalization, liquidation or sale or transfer of Common Stock or assets (including equity securities of Subsidiaries) or otherwise) as a result of which any Person or group, other than the Permira Stockholder and any of its affiliates and controlled entities, within the meaning of Section 13(d)(3) of the Exchange Act obtains ownership, directly or indirectly, of (i) Shares that represent more than fifty percent (50%) of the total voting power of the voting securities of the Company or any applicable successor entity, including the right to appoint, or cause the appointment of, more than fifty percent (50%) members of the board of directors (or similar governing body), or (ii) all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
“Chief Executive Officer” means the chief executive officer of the Company.
“Common Stock” means the Company’s common stock, par value $0.0001 per share, and shall also include any common stock of the Company hereafter authorized and any capital stock of the Company of any other class hereafter authorized which does not have a preference as to dividends or distribution of assets in liquidation over any other class of capital stock of the Company.
“Company” has the meaning set forth in the preamble hereto.
“Compensation Committee” has the meaning set forth in Section 3.2(a).
“Confidential Information” has the meaning set forth in Section 4.3(a).
“Controlled Entity” means any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise controlled by the Company.
“Convertible Securities” means any evidence of indebtedness, shares of stock (other than Common Stock) or other securities which are directly or indirectly convertible into or exchangeable or exercisable for shares of Common Stock.
“Covered Indemnitee” has the meaning set forth in Section 3.4.
“Effective Time” has the meaning set forth in Section 1.1.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time, or any successor act, and the rules and regulations promulgated thereunder.
“Form 8-A Effective Time” means the date and time on which the registration statement on Form 8-A filed by the Company under the Exchange Act with the SEC to register the Common Stock becomes effective.
“Fund Indemnitor” has the meaning set forth in Section 3.4.
“Governance Documents” means, with respect to any Person, the articles and/or memorandum of association, certificate of incorporation, certificate of organization, bylaws,
3
partnership agreement, limited liability company agreement, operating agreement, certificate of formation, certificate of limited partnership and/or other organizational or governing documents of such Person.
“Governmental Authority” means any (i) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) U.S. and other federal, state, local, municipal, foreign, supranational or other government; or (iii) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal).
“Indemnification Agreements” means the indemnification agreements between the Company and each Company director, in each case as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“Indemnification Sources” has the meaning set forth in Section 3.4(c).
“Indemnitee” has the meaning set forth in Section 3.4(a).
“Indemnitee-Related Entities” means any exempted company, corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Company or any Controlled Entity or the insurer under and pursuant to an insurance policy of the Company or any Controlled Entity) from which an Indemnitee may be entitled to indemnification or advancement of expenses with respect to which, in whole or in part, the Company or any Controlled Entity may also have an indemnification or advancement obligation to the Indemnitee.
“Independent Director” means a director who qualifies, as of the date of such director’s election or appointment to the Board (or any committee thereof) and as of any other date on which the determination is being made, (i) as an “independent director” under the applicable rules and regulations of the Stock Exchange, as determined by the Board or (ii) as an “Independent Director” under Rule 10A-3 under the Exchange Act and any corresponding requirement of the Stock Exchange rules and regulations for audit committee members, as well as any other requirement of the U.S. securities laws that is then applicable to the Company, as determined by the Board.
“Information” means the books and records of the Company and information relating to the Company and its properties, operations, financial condition and affairs.
“Initial Public Offering” means the initial Public Offering pursuant to the registration statement on Form S-1 (SEC File No. 333-297039) filed with the SEC on June 25, 2026.
“Joinder Agreement” means a joinder agreement substantially in the form of Annex A attached hereto or such other form as may be agreed by the Company.
4
“Jointly Indemnifiable Claim” shall be broadly construed and shall include, without limitation, any Losses for which the Indemnitee shall be entitled to indemnification or advancement of expenses from both (i) the Company and/or any Controlled Entity pursuant to the Indemnification Sources, on the one hand, and (ii) any Indemnitee-Related Entity pursuant to any other agreement between any Indemnitee-Related Entity and the Indemnitee pursuant to which the Indemnitee is indemnified, the Laws of the jurisdiction of incorporation or organization of any Indemnitee-Related Entity and/or the Governance Documents of any Indemnitee-Related Entity, on the other hand.
“Law” means any applicable constitutional provision, statute, act, code, law, regulation, rule, ordinance, order, decree, ruling, proclamation, resolution, judgment, decision, declaration, or interpretative or advisory opinion or letter of a Governmental Authority.
“Losses” has the meaning set forth in Section 3.4(a).
“Necessary Action” means (i) with respect to the Company or any Stockholder and a specified result, all actions (to the extent such actions are not prohibited by applicable Law and are within such party to this Agreement’s control, and in the case of any action that requires a vote or other action on the part of the Board subject to the satisfaction by the Company’s directors of their fiduciary duties in connection with such vote or action) necessary to cause such result, including (a) calling meetings of stockholders, (b) assisting in preparing or furnishing forms of ballots, proxies, consents or similar instruments, if applicable, in each case, with respect to shares of Common Stock, and facilitating the collection or processing of such ballots, proxies, consents, or instruments, (c) executing agreements and instruments, (d) making, or causing to be made, with any government, governmental department or agency, or political subdivision thereof, all filings, registrations, or similar actions that are required to achieve such result and (e) nominating or appointing, or taking steps to cause the nomination or appointment of, certain Persons (including to fill vacancies) and providing the highest level of support for the election or appointment of such Persons to the Board or any committee thereof, including in connection with the annual or special meeting of stockholders of the Company, and (ii) with respect to a Stockholder and a specified result, (a) attending, in person or by proxy, all meetings of the stockholders of the Company and (b) voting or providing a written consent or proxy, if applicable in each case, with respect to shares of Common Stock held by such Stockholder, in each case, in favor of such result.
“Nominating Committee” has the meaning set forth in Section 3.2(a).
“Option Holders” has the meaning set forth in the preamble hereto.
“Options” means any options to purchase Shares granted to eligible individuals under the Company’s 2019 Stock Option Plan on the terms set forth therein and in the individual award agreements issued pursuant thereto.
“Original Agreement” has the meaning set forth in the recitals hereto.
“Other Stockholders” has the meaning set forth in the preamble hereto.
5
“Parties” has the meaning set forth in the preamble hereto.
“Permira Director Nominee” has the meaning set forth in Section 3.1(b)(i)(1).
“Permira Stockholder” has the meaning set forth in the preamble hereto.
“Permitted Transferee” means, with respect to a Stockholder, any Person to whom such Stockholder Transfers its Shares in accordance with the terms of this Agreement.
“Person” means a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, cooperative or association or other legal entity or organization of whatever nature, and shall include any successor (by merger or otherwise) of such entity, or a government or any agency or political subdivision thereof.
“Principal Stockholder” means the Permira Stockholder or the AFT Stockholder, and “Principal Stockholders” means collectively the Permira Stockholder and the AFT Stockholder.
“Principal Stockholder Director Nominee” has the meaning set forth in Section 3.1(b)(i)(2).
“Public Offering” means the completion of an underwritten offering of Common Stock pursuant to a registration statement which has become effective under the Securities Act, in which some or all of the Common Stock shall be listed and traded on a national exchange.
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date hereof, by and among the Company and certain of the Stockholders party thereto, as it may be amended restated, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“Representatives” means, with respect to any Person, each Affiliate of such Person and each adviser to such Person or Affiliate and each of their respective directors, managers, officers, principals, employees, professional advisers, attorneys, financial advisors, consultants, accountants, members, stockholders, general and limited partners (actual and potential), controlling persons, investment committee, agents and other representatives.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the U.S. Securities Act of 1933, as amended from time to time, or any successor act, and the rules and regulations promulgated thereunder.
“Shares” means (i) any and all shares of Common Stock and all other equity securities of the Company, securities of the Company convertible into, or exchangeable or exercisable for, such shares, and Convertible Securities or other rights to acquire such shares and (ii) any equity securities issued or issuable directly or indirectly with respect to the shares referred to in clause (i) above by way of equity distribution or equity split or in connection with a combination of equity, recapitalization, merger, consolidation, reorganization or other transaction.
6
“Stock Exchange” means the New York Stock Exchange or other national securities exchange or interdealer quotation system on which the Common Stock is at any time listed or quoted.
“Stockholder” has the meaning set forth in the preamble hereto.
“Subsidiary” means, with respect to any Person, any corporation or other entity of which a majority of the capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar function at the time directly or indirectly owned by such Person.
“Transfer” or “Transferred” means a transfer, sale, assignment, donation, contribution, pledge, encumbrance, hypothecation or other disposition by a Person (the “Transferring Person”) of a legal, economic or beneficial interest in another Person, whether directly or indirectly, voluntarily or involuntarily, including pursuant to the creation of a derivative security, the grant of an option or other right, by operation of Law or by any disposition of an interest in any direct or indirect investor in such Transferring Person.
“Transferee” means a Person to whom a Transfer is made.
Section 1.3 Interpretation.
(a)Unless the context clearly requires otherwise, the words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(b)The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.
(c)References herein to a specific Section or Annex shall refer, respectively, to Sections or Annexes of this Agreement, unless the express context otherwise requires.
(d)Whenever the word “include,” “includes” or “including” is used in this Agreement, it shall be deemed to be followed by the words “without limitation,” unless clearly indicated otherwise.
(e)The headings and titles in this Agreement are included for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of this Agreement.
(f)In the event of any inconsistency between the provisions of this Agreement and the provisions of the Governance Documents of the Company, this Agreement will prevail.
(g)The Parties have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party because of the authorship of any provision of this Agreement. Furthermore, any rule of law or any legal decision that would require interpretation of any
7
claimed ambiguities in this Agreement against the drafting Party has no application to the Parties and is expressly waived by each Party.
SECTION 2
GENERAL PROVISIONS
GENERAL PROVISIONS
Section 2.1 Organizational Documents. Each Stockholder agrees with the Company to take, and the Company agrees to take, any and all actions within its power to cause the organizational documents of the Company to reflect or incorporate the terms of this Agreement to the extent consistent with applicable Law and the Stock Exchange rules and regulations, so as to effectuate and preserve the intent of the Parties as set out herein and the Company shall not take any action that would cause the organizational documents of the Company to be inconsistent with the terms of this Agreement.
Section 2.2 Applicable Law. The Parties acknowledge that in certain instances a provision of this Agreement may not be enforceable or that its enforceability may be limited by applicable Law. Nevertheless, the Parties agree that they intend to be bound by the terms of this Agreement and, if any provision is held to be unenforceable, the Parties agree to use their reasonable efforts to implement an alternative enforceable mechanism that would effect, as closely as possible, the intent of the Parties as reflected in, or provided by, the unenforceable provision.
SECTION 3
GOVERNANCE
GOVERNANCE
Section 3.1 Board Representation.
(a)Size. On and after the Effective Time, the Board shall consist of eight (8) directors; provided, that the Board shall further increase the number of Independent Directors to the extent necessary to comply with applicable law and the Stock Exchange rules and regulations, or as otherwise agreed by the Board, subject to the rights of the Permira Stockholder under Section 4.1(e).
(b)Composition.
(i)The Company agrees with each Stockholder, severally and not jointly, that it shall take all Necessary Action to include in the slate of nominees recommended by the Company for election as directors at each applicable annual or special meeting of stockholders at which directors are to be elected a number of individuals as follows:
(1)For so long as the Aggregate Permira Ownership continues to be, and unless waived by the Permira Stockholder in its sole discretion, (A) at least thirty percent (30%) of the aggregate number of shares of Common Stock then issued and outstanding, the Permira Stockholder shall be entitled to nominate up to four (4) directors; (B) less than thirty percent (30%) but at least twenty percent (20%) of the aggregate number of shares of Common Stock then issued and outstanding, the Permira Stockholder shall be entitled to nominate up to three (3) directors; (C) less than twenty percent (20%) but at least ten percent (10%) of the aggregate number of shares of Common Stock then issued and outstanding, the Permira Stockholder shall be entitled to nominate up to two (2) directors; and (D) less than ten percent (10%) but greater than or
8
equal to five percent (5%) of the aggregate number of shares of Common Stock then issued and outstanding, the Permira Stockholder shall be entitled to nominate one (1) director; provided that the total number of directors nominated as Permira Director Nominees at any such annual meeting or special meeting shall not result in the Permira Stockholder having more than the specified number of Permira Director Nominees, if elected, or then serving as directors than the specified number of directors in each of clause (A), (B), (C) or (D) above, as applicable. Each director so nominated or serving as a director may be referred to as a “Permira Director Nominee.”
(2)For so long as the Aggregate AFT Stockholder Ownership continues to be, and unless waived by the AFT Stockholder in its sole discretion, at least five percent (5%) of the aggregate number of shares of Common Stock then issued and outstanding, the AFT Stockholder shall be entitled to nominate Yael Aflalo (the “AFT Stockholder Director Nominee”) as a director. The AFT Stockholder Director Nominee, together with the Permira Director Nominees, are referred to as the “Principal Stockholder Director Nominees.”
(ii)At and following the date upon which the Aggregate Permira Ownership is less than twenty percent (20%) of the aggregate number of shares of Common Stock then issued and outstanding, the directors will be divided into three (3) classes of directors, with each class serving for staggered three (3)-year terms. Subject to the Certificate of Incorporation and the Bylaws, in the event that the Permira Stockholder has the right to nominate one or more directors for membership on the Board pursuant to Section 3.1(b)(i)(1), such Permira Director Nominee(s) may be nominated as a Class I, a Class II or a Class III director, as determined by the Permira Stockholder following consultation with the Company and following such consultation, the Company and the Permira Stockholder shall take all Necessary Action to effect such determination.
(iii)Notwithstanding anything to the contrary contained in this Section 3.1(b), no party shall have the right to nominate any director, and the Company shall not be required to take any action to cause any such person to be nominated, if and to the extent such nominee would result, assuming all such nominees are elected as members of the Board, in a number of directors nominated by such party to exceed the number of directors that such party is then entitled to nominate for membership on the Board pursuant to this Section 3.1(b). Further, it is understood that the failure of the Stockholders to elect any Permira Director Nominee or AFT Stockholder Director Nominee shall not affect the right of the Permira Stockholder or the AFT Stockholder, as applicable, to designate the Permira Director Nominees or the AFT Stockholder Director Nominee, as the case may be, for election pursuant to this Section 3.1(b) in connection with any future election of directors.
(c)Removal; Vacancies.
(i)The Permira Stockholder or the AFT Stockholder, as applicable, may request to remove their respective nominee(s) from the Board by sending written notice to the Company’s Secretary stating the name of the respective nominee to be removed from the Board and, upon such receipt of such notice by the Company’s Secretary, the Company and the Stockholders shall take all Necessary Action to effect such removal.
(ii)The Permira Stockholder or the AFT Stockholder, as applicable, shall have the exclusive right to designate a director to fill any vacancy created by reason of death, removal, or resignation of their respective nominee(s) to the Board (and the Company shall take all Necessary Action to elect or appoint the person designated by the
9
applicable party to fill any such vacancy). Notwithstanding anything to the contrary contained in this Section 3.1(c), no party shall have the right to designate a replacement director to fill any vacancy, and the Company shall not be required to take any action to cause any such vacancy to be filled, if and to the extent that the appointment of a designee by a party to the Board would result in a number of directors nominated or designated by such party and then serving on the Board exceeding the number of directors that such party is then entitled to nominate for membership on the Board pursuant to this Agreement.
(iii)If the number of directors that the Permira Stockholder or the AFT Stockholder, as applicable, are entitled to nominate is reduced or eliminated pursuant to the terms of Section 3.1(b)(i)(1) or Section 3.1(b)(i)(2), respectively, then the Permira Stockholder or the AFT Stockholder, as applicable, shall, upon written request from the Company, take all Necessary Action to cause the number of directors for which the Permira Stockholder or AFT Stockholder, as applicable, cease to have the right to designate to serve as directors to tender such director’s resignation from the Board and any board or other similar governing body of any Subsidiary of the Company, including all committees thereof, to the Nominating Committee; provided that, such resignation will be effective at the Company’s next annual meeting of stockholders and any such resignation shall be subject to delay at the request of the Board.
(iv)If the Principal Stockholders are not entitled to fill such vacant director position(s), such vacant director position(s) shall be filled by the Board, after considering the recommendation of the Nominating Committee.
(d)Chairperson. Except as otherwise provided in the Certificate of Incorporation, the chairperson of the Board shall be elected by the Board, who shall have the powers and perform such duties as provided in the Bylaws and as the Board may from time to time prescribe. The initial chairperson shall be Joyn Coyle.
Section 3.2 Committees of the Board.
(a)In accordance with the Certificate of Incorporation and Bylaws, (a) the Board shall establish and maintain committees of the Board for (x) Audit (the “Audit Committee”), (y) Compensation (the “Compensation Committee”) and (z) Nominating and Corporate Governance (the “Nominating Committee”), and (b) the Board may from time to time by resolution establish and maintain other committees of the Board. The Company shall take all Necessary Action to cause the composition of the committees to comply with the requirements of this Section 3.2.
(b)Subject to applicable Law and the Stock Exchange rules and regulations, and subject to requisite independence requirements applicable to such committee, for so long as the Aggregate Permira Ownership continues to be at least five percent (5%) of the aggregate number of shares of Common Stock then issued and outstanding, and unless waived by the Permira Stockholder in its sole discretion, the Permira Stockholder has the right to designate:
(i)one Permira Director Nominee to serve on the Audit Committee, the Compensation Committee and the Nominating Committee; and
(ii)one Permira Director Nominee to serve on any other committee that the Board may from time to time by resolution establish and maintain; provided, that a special committee may exclude a Permira Director Nominee if (1) no such director is eligible to serve on such special committee due to the Stock Exchange rules and
10
regulations or (2) the primary purpose of such special committee is to review, assess and/or approve a transaction in which the Permira Stockholder has a material or direct interest and (A) having such Permira Director Nominee appointed on such committee would constitute a conflict of interest, or (B) the Board otherwise determines that including such director(s) on such committee would be inconsistent with the directors’ fiduciary duties, in each case as determined by a majority of the Independent Directors in their reasonable good faith discretion.
Section 3.3 Quorum and Acts of the Board.
(a)At all duly called meetings of the Board or any of its committees, the attendance of a majority of the total number of the members of the Board or any such committee, which must include at least one Permira Director Nominee, shall each be required to constitute a quorum for the transaction of business at the applicable Board or committee meeting. If a quorum shall not be present at any meeting of the Board or any of its committees, the members of the Board or such committee present or represented thereat may adjourn the meeting from time to time.
(b)Each member shall be entitled to one (1) vote at any meeting of the Board or any of its committees. Action of the Board or any of its committees shall require, at a duly called meeting with an established quorum, the approval of a majority of the members of Board in attendance.
Section 3.4 Indemnification.
(a)To the fullest extent permitted by applicable Law, the Company shall, and shall cause its Subsidiaries to, indemnify, pay, protect and hold harmless each Stockholder and its Representatives (collectively, the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses and disbursements of any kind or nature whatsoever (including all reasonable costs and expenses of attorneys and the defense, appeal and settlement of any and all suits, actions or proceedings instituted or threatened against any Indemnitee) and all costs of investigation in connection therewith (collectively, “Losses”) which may be imposed on, incurred by, or asserted against the Indemnitee in connection with, or in any way relating to or arising out of, or alleged to relate to or arise out of (i) any action or inaction on the part of the Indemnitee when acting as a representative of the Company or any of its Subsidiaries in any capacity, including as a member of a Board or committee thereof or as a member of any other board of directors or other governing body or committee thereof of the Company or any of its Subsidiaries, (ii) any actual or alleged fiduciary or similar duties owed to the Company or any of its Subsidiaries arising from an Indemnitees’ control or ability to influence the Company or any of its Subsidiaries or (iii) any Public Offering, including the Initial Public Offering (in each case, other than any such Losses by a Stockholder as a result of a breach of this Agreement without prejudice to any other remedy a Stockholder may have as a result of such breach, Losses which are finally determined by a competent court (after all appeals have been heard or waived) to have resulted from such Indemnitee’s fraud, gross negligence or willful misconduct or Losses resulting from a decrease in such Indemnitees’ investment in the Company). The rights of any 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 Indemnitee is or becomes a party or is or otherwise becomes a beneficiary or under law or regulation. In any action, suit or proceeding against any Indemnitee relating to or arising out of, or alleged to relate or to arise out of, any such action or non-action, or any Public Offering, the Indemnitee shall have the right jointly to employ, at the expense of the Company, counsel of the Indemnitee’s choice, which counsel shall be reasonably satisfactory to the Company, in such action, suit or proceeding. If joint counsel is
11
so retained, an Indemnitee may nonetheless employ separate counsel, but at such Indemnitee’s own expense (it being understood that such expense shall not be considered an indemnifiable Loss). Upon the request of the Indemnitee, the Company shall, and shall cause its Subsidiaries to, advance the costs, expenses and disbursements for which the Indemnitee would be entitled to indemnification under the terms of this Section 3.4 (subject to the Indemnitee providing an undertaking to repay such advances if it is ultimately determined that such Indemnitee is not entitled to indemnification). If an Indemnitee is determined by a court, tribunal or other relevant body to have committed fraud or to have acted with gross negligence or to have been guilty of willful misconduct, the Indemnitee shall reimburse all the expenses paid by the Company on its behalf under this clause (a).
(b)The indemnification rights contained in this Section 3.4 will be cumulative and in addition to any and all other rights, remedies and recourse to which an Indemnitee, its heirs, successors, assignees and administrators are entitled. The indemnification provided in this Section 3.4 will inure to the benefit of the heirs, successors, assignees and administrators of each of the Indemnitees.
(c)The Company hereby acknowledges and agrees that it shall, and to the extent applicable shall cause each of its Subsidiaries to, be fully and primarily responsible for the payment to the Indemnitee in respect of Losses in connection with any Jointly Indemnifiable Claim, pursuant to and in accordance with (as applicable) the terms of (i) applicable Law, (ii) the Governance Documents of the Company or any of its Subsidiaries, (iii) this Agreement, (iv) the Registration Rights Agreement, (v) any Indemnification Agreement, (vi) any other agreement between the Company or any of its Subsidiaries on the one hand and the Indemnitee on the other hand pursuant to which the Indemnitee is indemnified, and/or (vii) the Laws of the jurisdiction of incorporation or organization of the Company or any of its Subsidiaries (clauses (i) through (vii) collectively, the “Indemnification Sources”), irrespective of any right of advancement or recovery the Indemnitee may have from any Indemnitee-Related Entities. Under no circumstance shall the Company or any of its Subsidiaries be entitled to any right of subrogation or contribution by the Indemnitee-Related Entities and no right of advancement or recovery the Indemnitee may have from the Indemnitee-Related Entities shall reduce or otherwise alter the rights of the Indemnitee or the obligations of the Company or any Subsidiary under the Indemnification Sources. In the event that any of the Indemnitee-Related Entities shall make any payment to the Indemnitee in respect of indemnification or advancement of expenses with respect to any Jointly Indemnifiable Claim, (x) the Company shall, and to the extent applicable, shall cause its Subsidiaries to, reimburse the Indemnitee-Related Entity making such payment to the extent of such payment promptly upon written demand from such Indemnitee-Related Entity, (y) to the extent not previously and fully reimbursed by the Company and its Subsidiaries pursuant to clause (x) above, the Indemnitee-Related Entity making such payment shall be subrogated to the extent of the outstanding balance of such payment to all of the rights of recovery of the Indemnitee against the Company or its Subsidiaries, as applicable, and (z) the Indemnitee shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the Indemnitee-Related Entities effectively to bring suit to enforce such rights.
(d)The indemnity provided by this Section 3.4 shall in no event cover damages or indemnifiable expenses to the extent they are actually paid or reimbursed by or under any applicable insurance policy or arrangement carried by or on behalf of or in favor of an Indemnitee.
(e)Except as set forth in the last two sentences of Section 3.4(a), under no circumstances will any Indemnitee be liable for or have any obligation to satisfy any indemnification claim made hereunder.
12
Section 3.5 Directors’ and Officers’ Insurance. The Company will purchase and maintain at its expense insurance in an amount determined in good faith by the Board to be appropriate, on behalf of any person who prior to or after the Effective Time is or was a director or officer of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including any direct or indirect Subsidiary of the Company, against any expense, liability or loss asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person’s status as such, subject to customary exclusions. The Company hereby acknowledges that any director, officer or other indemnified person covered by any such indemnity insurance policy (any such Person, a “Covered Indemnitee”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by the Permira Stockholder and certain of its Affiliates (the “Fund Indemnitor”). The Company hereby agrees that (i) the Company shall be the indemnitor of first resort (i.e., its obligations to a Covered Indemnitee shall be primary and any obligation of the Fund Indemnitor to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Covered Indemnitee shall be secondary) and (ii) the Company irrevocably waives, relinquishes and releases the Fund Indemnitor from any and all claims against the Fund Indemnitor for contribution, subrogation or any other recovery of any kind in respect thereof, except in the case of conduct by a Covered Indemnitee where such Covered Indemnitee is not otherwise entitled to indemnification from the Company under Section 3.4 or any other indemnification agreement with the Company. The Company further agrees that no advancement or payment by the Fund Indemnitor on behalf of a Covered Indemnitee with respect to any claim for which such Covered Indemnitee has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitor shall have a right of contribution and/or shall be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Covered Indemnitee against the Company. The provisions of this Section 3.4 will survive any termination of this Agreement. The Fund Indemnitor or insurer thereof not a party to this Agreement is an express third party beneficiary of this Section 3.4, and is entitled to enforce this Section 3.4 according to its terms to the same extent as if such Fund Indemnitor or insurer thereof were a party hereto.
SECTION 4
RIGHTS AND OBLIGATIONS OF STOCKHOLDERS
RIGHTS AND OBLIGATIONS OF STOCKHOLDERS
Section 4.1 Actions Requiring Approval of the Permira Stockholder. Except as otherwise required by Law and in addition to any approval by the Stockholders of the Company or the Board’s approval (or the approval of the required governing body of any Subsidiary of the Company), so long as the Aggregate Permira Ownership continues to be at least five percent (5%) of the aggregate number of shares of Common Stock then issued and outstanding, the Company agrees with the Permira Stockholder that the following actions by the Company or any of its Subsidiaries shall require the prior written consent of the Permira Stockholder:
(a)Entering into or effecting a Change of Control Transaction.
(b)Directly or indirectly, entering into or effecting any transaction or series of related transactions involving, or entering into any agreement providing for, (i) the purchase, lease, license, exchange or other acquisition by the Company or its Subsidiaries of any assets
13
and/or equity securities for consideration having a fair market value (as reasonably determined by the Board) in excess of $25,000,000 and/or (ii) 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 $25,000,000; in each case, other than transactions solely between or among the Company and one or more of its direct or indirect wholly-owned Subsidiaries.
(c)Incurring (or extending the maturity of) any indebtedness for borrowed money, 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 entering into (or extending the maturity of) any agreement under which the Company or any Subsidiary may incur indebtedness for borrowed money in the future, in each case in an aggregate principal amount in excess of $100,000,000 in any transaction or series of related transactions and 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 Permira Stockholder or that was entered into on or prior to the date hereof.
(d)Terminating the employment of the Chief Executive Officer of the Company or hiring a new Chief Executive Officer of the Company.
(e)Increasing or decreasing the size of the Board.
(f)Incurring or committing to incur gross capital expenditures in excess of $25,000,000.
(g)Amending or modifying the Certificate of Incorporation or Bylaw.
Section 4.2 Lock-Up. The AFT Stockholder and each of the Option Holders party hereto from time to time hereby agree (i) not to Transfer any Common Stock of the Company owned or hereafter acquired for a period of one hundred eighty (180) days after the date of the final prospectus relating to the Public Offering and (ii) to execute and deliver a “lock-up agreement” or such other agreements as may be reasonably requested by the Company or its underwriter which are consistent with the foregoing or which are necessary to give further effect thereto (a “Lock-Up Agreement”). The Company may impose stop-transfer instructions with respect to the shares of Common Stock subject to the foregoing restriction until the end of the applicable period.
Section 4.3 Confidential Information.
(a)Each Stockholder agrees to hold in strict confidence all Information furnished to it, the terms of this Agreement and any other matters relating to the transaction contemplated by the Agreement or the discussions among the Parties in relation thereto (collectively, “Confidential Information”) and to procure that its Affiliates hold in strict confidence the Confidential Information. Subject to applicable Law, a Stockholder may disclose any Confidential Information to (i) any of its Representatives and (ii) any Affiliate of such Stockholder (other than portfolio companies); provided that such Stockholder shall be responsible for the compliance of such Representatives and Affiliates with this Section 4.3 or such Representatives and Affiliates shall have entered into a confidentiality undertaking for the benefit of the Company to hold any such information in strict confidence in accordance with this Section 4.3 (clauses (i) and (ii) collectively, “Authorized Recipients”). Confidential Information
14
shall not include any information that (a) is or becomes generally available to the public other than as a result of an unauthorized disclosure by such Stockholder or its Authorized Recipient, (b) is or becomes available to a Stockholder or any of its Authorized Recipients on a non-confidential basis from a third party source (other than any other Stockholder or its Representatives or any Person described in clause (i) above), which source (after reasonable inquiry) is not bound by a duty of confidentiality to any other Party hereto or their respective Representatives or (c) is independently developed by any Stockholder without the benefit of any other Confidential Information. If any Stockholder or any of its Authorized Recipients is required by Law or any legal or judicial process to disclose any Confidential Information, such Stockholder shall as promptly as reasonably practicable notify the Company of such requirement so that the Company may, in consultation with the applicable Stockholders to the extent practicable under the circumstances, at its own expense, oppose such requirement or seek a protective order and request confidential treatment thereof. If such Stockholder or such Authorized Recipient is nonetheless required to disclose any such Confidential Information, such Stockholder or Authorized Recipient may disclose only such portion of such Confidential Information that is legally required to be disclosed without liability hereunder. Notwithstanding the foregoing, a Stockholder and its Authorized Recipients may disclose Confidential Information, and need not provide notice to the Company or any other Party hereto, in connection with a proceeding (including audits or examinations by any regulatory authority or self-regulatory organization) in the ordinary course of such Stockholder’s or its Authorized Recipients’ business (including in response to oral questions, interrogatories or requests for information or documents) involving such Stockholder or such Authorized Recipients that does not specifically target the Company or another Party hereto, so long as the Stockholder or its Authorized Recipients has exercised reasonable efforts to indicate to such regulatory authority or self-regulatory organization that the information should be accorded confidential treatment.
(b)Notwithstanding anything contained in this Agreement to the contrary, a Stockholder may disclose Confidential Information in connection with any proposed Transfer of Shares by such Stockholder; provided that such Transfer is permitted by this Agreement, and the relevant Transferee shall enter into a confidentiality agreement with the Company to hold any such information in strict confidence and to not use such information for any purpose other than such Transfer and specifying the Company and each of the Stockholders shall be entitled to enforce such confidentiality agreement. In addition, each of the Stockholders may make customary disclosures of Confidential Information regarding their investment in the Company to current, prospective, direct or indirect limited partners of such Stockholder or its affiliated private equity funds who are subject to customary confidentiality obligations to such Stockholder or its affiliated private equity fund.
(c)The Parties hereby acknowledge that the Principal Stockholder Director Nominees will be entitled to share with such Principal Stockholder (and its Affiliates (other than portfolio companies) and their respective Representatives) any Information received by such Principal Stockholder Director Nominee in his or her capacity as such except to the extent that such information has been designated by the Company as attorney-client, work product or similar privilege with respect to which the Company has determined in good faith, based on advice of counsel, that the disclosure of such information to the Principal Stockholders would be reasonably likely to jeopardize attorney-client privilege or other similar privilege protected under applicable Law (otherwise benefiting the Company or any of its Subsidiaries) without the prior consent of the Company, or such disclosure would be inconsistent with such Person’s fiduciary duties to the Company and its Stockholders or with applicable Law. Each Principal Stockholder shall be responsible for any breach of the terms of this Section 4.3 by it or its employees or other Representatives. With respect to each Principal Stockholder, the consent to share non-public information concerning the Company with individuals employed by, and other Representatives of, such Principal Stockholder pursuant to this Section 4.3 shall terminate upon the date that such Principal Stockholder no longer has the right to nominate any Principal Stockholder Director
15
Nominees to the Board hereunder, and the confidentiality obligation of such Principal Stockholder pursuant to this Section 4.3 shall terminate upon the second anniversary of such date (and survive any termination of this Agreement prior to such date). Each Principal Stockholder shall, and shall cause such Affiliates and their respective Representatives to, treat any such Information received from its Principal Stockholder Director Nominee(s) as Confidential Information in accordance with this Section 4.3.
SECTION 5
GENERAL PROVISIONS
GENERAL PROVISIONS
Section 5.1 Further Assurances. The Parties will sign such further documents or instruments, cause such further meetings to be held, vote in favor of and adopt such resolutions, furnish non-confidential information and copies of non-confidential documents, and do and perform and cause to be done such further acts and things as may be necessary in order to give full effect to this Agreement and the transactions contemplated by this Agreement.
Section 5.2 Authority; Effect. Each Party hereto represents and warrants to and agrees with each other Party hereto that (a) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on behalf of such Party and do not violate any agreement or other instrument applicable to such Party or by which such Party’s assets are bound and (b) this Agreement constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except to the extent that the enforcement of the rights and remedies created hereby is subject to (i) bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors generally and (ii) general principles of equity. This Agreement does not, and shall not be construed to, give rise to the creation of a partnership among any of the Parties hereto, or to constitute any of such Parties as members of a joint venture or other association.
Section 5.3 Amendment and Waiver.
(a)Except as otherwise provided herein, this Agreement may be amended, supplemented or otherwise modified, or any provision hereof may be waived, by a written instrument executed by the Company and the Permira Stockholder; provided that, in the event the Principal Stockholders no longer hold any Shares, this Agreement may be amended, supplemented or otherwise modified, or any provision hereof may be waived with the written consent of the Company and the Stockholders holding a majority of the voting power of the outstanding Shares; and provided, further, that any amendment, modification, supplement or waiver that by its express terms has a disproportionate and adverse effect on the rights, obligation, powers or interests of the AFT Stockholder hereunder relative to the rights hereunder of all other Stockholders (including the Permira Stockholder (or any of its Affiliates or any other Person to which the Permira Stockholder or one of its Affiliates Transfers its Common Stock)), shall require the AFT Stockholder’s prior written consent. Notwithstanding the foregoing, the Company may, subject to the terms of this Agreement, from time to time add additional holders of Common Stock as parties to this Agreement with the consent of the Permira Stockholder and without consent or additional signatures of the other Stockholders (and amend and/or restate the Agreement, including any exhibits or annexes hereto, solely to reflect such additional holders and the terms applicable to them), and upon the Company’s receipt of such additional holder’s executed signature pages hereto or a Joinder Agreement, such additional holders shall be deemed to be a party hereto and such additional signature pages shall be a part of this Agreement.
16
(b)No waiver by any Party of any of the provisions hereof will be effective unless explicitly set forth in writing and executed by the Party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, will be deemed to constitute a waiver by the Party taking such action of compliance with any covenants or agreements contained herein. The waiver by any Party hereto of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach. Any failure by any Party at any time to enforce any of the provisions of this Agreement shall not be construed as a waiver of such provision or another provision hereof.
Section 5.4 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto, and their respective successors and permitted assigns. Except as otherwise expressly provided herein, no Stockholder party hereto may assign any of its respective rights or delegate any of its respective obligations under this Agreement without the prior written consent of the Company and the Permira Stockholder, and any attempted assignment or delegation in violation of the foregoing will be null and void; provided, however, that the Permira Stockholder and the AFT Stockholder shall, at any time and without the consent of any other Party hereto, have the right to assign all or part of its rights and obligations under this Agreement to one or more of its Affiliates, so long as such Affiliate remains an Affiliate of the Permira Stockholder or the AFT Stockholder, as applicable, and such Affiliate agrees in writing to be bound by the provisions of this Agreement and executes and delivers to the Company a Joinder Agreement.
Section 5.5 Notices. All notices, requests and other communications to any Party hereunder shall be in writing (including email or similar writing) and shall be given to the Company and the Permira Stockholder at the addresses set forth below and to any Other Stockholder at the address indicated below its name on the signature pages hereto, or such other address or email as such Party may hereinafter specify for the purpose to the Party giving such notice. Each such notice, request or other communication shall be effective (a) if given by email, upon obtaining electronic delivery confirmation (other than automatically generated confirmations), (b) if given by overnight courier or express mail service, when delivery is confirmed, or (c) if given by any other means, when delivered at the address specified in this Section 5.5. In each case, notice shall be sent to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):
if to the Company:
Reformation Inc.
5801 S. 2nd Street
Vernon, CA 90058
Attention: Hali Borenstein
Email: [***]
5801 S. 2nd Street
Vernon, CA 90058
Attention: Hali Borenstein
Email: [***]
With a copy to (which shall not constitute notice):
[***]
17
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
One Manhattan West, 395 9th Avenue
New York, NY 10001
Attention: Allison R. Schneirov
Laura Kaufmann
Email: [***]
[***]
One Manhattan West, 395 9th Avenue
New York, NY 10001
Attention: Allison R. Schneirov
Laura Kaufmann
Email: [***]
[***]
if to the Permira Stockholder:
Refo SCSp
488, route de Longwy
L-1940 Luxembourg
Attention: [***]
Email: [***]
488, route de Longwy
L-1940 Luxembourg
Attention: [***]
Email: [***]
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
One Manhattan West, 395 9th Avenue
New York, NY 10001
Attention: Allison R. Schneirov
Laura Kaufmann
Email: [***]
[***]
One Manhattan West, 395 9th Avenue
New York, NY 10001
Attention: Allison R. Schneirov
Laura Kaufmann
Email: [***]
[***]
if to the AFT Stockholder:
Aflalo Family Trust, established U/T/A dated November 8, 2018, as amended
[***]
Attention: Yael Aflalo
Attention: Yael Aflalo
[***]
Email: [***]
Email: [***]
[***]
18
with a copy to (which shall not constitute notice):
Sheppard, Mullin, Richter & Hampton LLP
321 North Clark Street, 31st Floor
Chicago, IL 60654
Attention: Saul Rostamian
Alexander Schwartz
Email: [***]
[***]
321 North Clark Street, 31st Floor
Chicago, IL 60654
Attention: Saul Rostamian
Alexander Schwartz
Email: [***]
[***]
Section 5.6 Third Parties. Except as otherwise expressly provided herein, this Agreement does not create any rights, claims or benefits inuring to any Person that is not a Party hereto nor does it create or establish any third party beneficiary hereto.
Section 5.7 Governing Law. This Agreement, including the validity hereof and the rights and obligations of the Parties hereunder, all amendments and supplements hereto and the transactions contemplated hereby, and all actions or proceedings arising out of or relating to this Agreement, of any nature whatsoever, shall be construed in accordance with and governed by the domestic substantive laws of the State of Delaware without giving effect to any choice of law or conflicts of law provision or rule that might otherwise cause the application of the domestic substantive laws of any other jurisdiction.
Section 5.8 Submission to Jurisdiction. Each of the Parties hereto (i) consents to submit itself to the exclusive personal jurisdiction and venue of the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (unless the Delaware Court of Chancery shall decline to accept jurisdiction over a particular matter, in which case, in any Delaware state or federal court within the State of Delaware) with respect to any suit (whether at law, in equity, in contract, in tort or otherwise) relating to or arising out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that it will not, directly or indirectly, attempt to defeat or deny such personal jurisdiction or venue by motion or otherwise, (iii) agrees that it will not, and it will cause its Affiliates not to, bring or support any such suit in any court other than such courts of the State of Delaware, as described above, (iv) irrevocably agrees that any such suit (whether at law, in equity, in contract, in tort or otherwise) shall be heard and determined exclusively in such courts of the State of Delaware, as described above, (v) agrees to service of process in any such action in any manner prescribed by the Laws of the State of Delaware and (vi) agrees that service of process upon such Party in any action or proceeding shall be effective if notice is given in accordance with Section 5.5 herein.
Section 5.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH STOCKHOLDER WAIVES, AND COVENANTS THAT SUCH PARTY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED
19
WITH THE DEALINGS OF ANY STOCKHOLDER OR THE COMPANY IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. The Company or any Stockholder may file an original counterpart or a copy of this Section 5.9 with any court as written evidence of the consent of the Stockholders to the waiver of their rights to trial by jury.
Section 5.10 Fiduciary Duties; Exculpation Clause. To the maximum extent permitted by Law, none of the Stockholders shall have a fiduciary or similar duty to the other Stockholders or their respective Affiliates or funds managed, advised or Controlled by any such Person, to the Company or any of its Subsidiaries or to any shareholder, creditor, employee or other stakeholder of the Company or its Subsidiaries, and each Stockholder hereby waives any claim relating to a breach of fiduciary or similar duty any Stockholder has or may have in connection with any action or inaction by such Stockholder. The foregoing shall not be deemed to limit the obligations of the Stockholders under this Agreement.
Section 5.11 Several Obligations. Except as expressly provided otherwise in the Agreement, the obligations of each of the Parties under this Agreement shall be several and not joint.
Section 5.12 Entire Agreement. This Agreement and the annex hereto, together with the Registration Rights Agreement, represent the entire understanding and agreement of the Parties and supersede all prior agreements, understandings and arrangements (whether written or oral) among the Parties with respect to the subject matter hereof and thereof. Notwithstanding the foregoing, no rights or obligations of any Party that accrued prior to the effectiveness of this Agreement shall be deemed to be affected as a result of the effectiveness of this Agreement. Each Party acknowledges that it has not made or relied on any representation or warranty other than those specifically set forth herein.
Section 5.13 Titles and Headings. The headings contained in this Agreement are for reference purposes only and will not affect the meaning or interpretation of this Agreement.
Section 5.14 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdictions, it being intended that all rights and obligations of the Parties hereunder shall be enforceable to the fullest extent permitted by law.
Section 5.15 Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and which together shall constitute one and the same agreement. A facsimile or electronic signature will be considered due execution and will be binding upon the signatory thereof with the same force and effect as if the signature were an original.
Section 5.16 Aggregation of Securities. All securities owned or acquired by a Stockholder and its Affiliates shall be aggregated together for purposes of determining the rights or obligations of a Stockholder, or application of any restrictions to a Stockholder, or reference to its securities
20
under this Agreement, in each instance in which such right, obligation or restriction is determined by any ownership threshold.
Section 5.17 Remedies. Each Party hereto shall be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The Parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each Party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.
Section 5.18 Termination.
(a)This Agreement shall terminate on the date that (i) neither Principal Stockholder is entitled to nominate at least one director pursuant to the terms of Section 3.1(b)(i)(1) or Section 3.1(b)(i)(2), respectively, and (ii) there are no longer any Principal Stockholder Director Nominees on the Board.
(b)Subject to Section 5.18(c), the rights and obligations of an Option Holder under this Agreement shall terminate upon the expiration of any Lock-Up Agreement.
(c)No expiration or termination of this Agreement or any part hereof will relieve any Person of liability for a breach at or prior to such expiration or termination.
(d)The effectiveness of this Agreement is expressly conditioned upon the occurrence of the Effective Time and if the Initial Public Offering of the Company is terminated, withdrawn or otherwise abandoned prior to the Effective Time then this Agreement may be terminated by the Permira Stockholder and the Original Agreement shall remain in full force and effect.
Section 5.19 Independent Nature of Stockholders’ Obligations and Rights. Each Stockholder and the Company agrees that the arrangements contemplated by this Agreement are not intended to constitute the formation of a “group” (as defined in Section 13(d)(3) of the Exchange Act). Each Stockholder agrees that, for purposes of determining beneficial ownership of such Stockholder, it shall disclaim any beneficial ownership by virtue of this Agreement of the Shares owned by the other Stockholders (other than, in the case of the Permira Stockholder, as amongst the Stockholders within such defined group as further set forth in Section 5.16), and the Company agrees to recognize such disclaimer in its Exchange Act and Securities Act reports. The obligations of each Stockholder under this Agreement are several and not joint with the obligations of any other Stockholder, and no Stockholder shall be responsible in any way for the performance of the obligations of any other Stockholder under this Agreement. Nothing contained herein, and no action taken by any Stockholder pursuant hereto, shall be deemed to constitute the Stockholders as, and the Company acknowledges that the Stockholders do not so constitute, a partnership, an association, a joint venture, or any other kind of group or entity, or create a presumption that the Stockholders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement and the Company acknowledges that the Stockholders are not acting in concert or as a group, and the
21
Company shall not assert any such claim, in each case, with respect to such obligations or the transactions contemplated by this Agreement. The decision of each Stockholder to enter into this Agreement has been made by such Stockholder independently of any other Stockholder. Each Stockholder acknowledges that no other Stockholder has acted as agent for such Stockholder in connection with such Stockholder making its investment in the Company and that no other Stockholder will be acting as agent of such Stockholder in connection with monitoring such Stockholder’s investment in the Shares or enforcing its rights under this Agreement. The Company and each Stockholder confirms that each Stockholder has had the opportunity to independently participate with the Company and its Subsidiaries in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Stockholder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Stockholder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement to effectuate the rights and obligations contemplated hereby was solely in the control of the Company, not the action or decision of any Stockholder, and was done solely for the convenience of the Company and its Subsidiaries and not because the Company was required to do so by any Stockholder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Stockholder, solely, and not between the Company and the Stockholders collectively and not between and among the Stockholders.
[Signature pages follow]
22
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.
REFORMATION INC.
By: /s/ Hali Borenstein
Name: Hali Borenstein
Title: Chief Executive Officer
Name: Hali Borenstein
Title: Chief Executive Officer
[Signature Page to Amended and Restated Stockholders Agreement]
PERMIRA STOCKHOLDER
Refo SCSp
By:/s/ Eddy Perrier
Signed by Eddy Perrier, Manager
for and on behalf of
P6 GP S.à r.l. acting for its own account and as general partner of Refo SCSp
[Signature Page to Amended and Restated Stockholders Agreement]
AFT STOCKHOLDER
Aflalo Family Trust, established U/T/A dated November 8, 2018, as amended
By:/s/ Yael Aflalo
Name: Yael Aflalo
Title: Trustee
Name: Yael Aflalo
Title: Trustee
[Signature Page to Amended and Restated Stockholders Agreement]
EXHIBIT A
Option Holders
[***]
ANNEX A
JOINDER AGREEMENT
The undersigned is executing and delivering this Joinder Agreement pursuant to that certain Stockholders Agreement of Reformation Inc. (the “Company”), dated as of [●], 202[●] (as amended, restated, supplemented, or otherwise modified in accordance with the terms thereof, the “Stockholders Agreement”) by and among the Company, the Permira Stockholder, the AFT Stockholder and the other parties thereto. 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 transferee of Shares, to become a party to, and to be bound by and comply with the applicable provisions of, the Stockholders Agreement in the same manner as if the undersigned were an original signatory to the Stockholders Agreement.
The undersigned hereby represents and warrants that, pursuant to this Joinder Agreement and the Stockholders Agreement, it is a Permitted Transferee of [a Permira Stockholder][an AFT Stockholder][an Option Holder][an Other Stockholder] and will be the lawful record owner of ___________ shares of Common Stock of the Company as of the date hereof. The undersigned hereby covenants and agrees that it will take all such actions as required of a Permitted Transferee as set forth in the Stockholders Agreement, including but not limited to conveying its record and beneficial ownership of any Shares and all rights, title, and obligations thereunder back to the initial transferor Stockholder or to another Permitted Transferee of the original transferor Stockholder, as the case may be, immediately prior to such time that the undersigned no longer meets the qualifications of a Permitted Transferee as set forth in the Stockholders Agreement.
The undersigned acknowledges and agrees that Section 5.7, Section 5.8, Section 5.9 and Section 5.17 of the Stockholders Agreement are incorporated herein by reference, mutatis mutandis.
[Remainder of page intentionally left blank]
Accordingly, the undersigned has executed and delivered this Joinder Agreement as of the __ day of __, 20[●].
__________________________________________
Signature
__________________________________________
Print Name
Address: __________________________________
__________________________________
__________________________________
Telephone:
Email:
Exhibit 10.5
REFORMATION INC.
2026 OMNIBUS INCENTIVE PLAN
2026 OMNIBUS INCENTIVE PLAN
Section 1.Purpose of Plan.
The name of the Plan is the Reformation Inc. 2026 Omnibus Incentive Plan. The purposes of the Plan are to provide an additional incentive to selected officers, employees, non-employee directors, independent contractors, and consultants of the Company or its Affiliates whose contributions are essential to the growth and success of the business of the Company and its Affiliates, in order to strengthen the commitment of such persons to the Company and its Affiliates, motivate such persons to faithfully and diligently perform their responsibilities, and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability of the Company and its Affiliates. To accomplish such purposes, the Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock Bonuses, Other Stock-Based Awards, Cash Awards or any combination of the foregoing.
Section 2.Definitions.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a)“Administrator” means the Board, or, if and to the extent the Board does not administer the Plan, the Committee, which shall administer the Plan in accordance with Section 3 hereof.
(b)“Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified.
(c)“Award” means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Stock Bonus, Other Stock-Based Award or Cash Award granted under the Plan.
(d)“Award Agreement” means any written or electronic agreement, contract or other instrument or document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan. Each Participant who is granted an Award shall enter into an Award Agreement with the Company containing such terms and conditions as the Administrator shall determine in its sole discretion.
(e)“Base Price” has the meaning set forth in Section 8(b) hereof.
(f)“Beneficial Owner” (or any variant thereof) has the meaning defined in Rule 13d-3 under the Exchange Act.
(g)“Board” means the Board of Directors of the Company.
(h)“Cash Award” means an Award granted pursuant to Section 12 hereof.
(i)“Cause” means (a) if the Participant is a party to an employment agreement or offer letter with the Company or one of its Subsidiaries in which “Cause” is defined, the occurrence of any circumstances defined as “Cause” in such employment agreement or offer letter, or (b) if the Participant is not a party to an employment agreement or offer letter with any member of the Group in which “Cause” is defined, (i) an act of fraud or material dishonesty made by the Participant in connection with the Participant’s responsibilities as an employee or service provider, (ii) the Participant’s conviction of, or plea of nolo contendere to, a felony or any crime involving fraud or embezzlement, (iii) the Participant’s gross misconduct, (iv) the Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of the Participant’s relationship with the Company, (v) the Participant’s willful breach of any obligations under any written agreement or covenant with the Company, (vi) the Participant’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested the Participant’s cooperation, or (vii) the Participant’s continued failure to perform the Participant’s employment or service duties after the Participant has received a written demand of performance from the Company which specifically sets forth the factual basis for the Company’s belief that the Participant has not substantially performed his or her duties and has failed to cure such non-performance to the Company’s satisfaction within 30 days after receiving such notice.
(j)“Certificate of Incorporation” means the certificate of incorporation of the Company, as may be amended, modified or supplemented from time to time.
(k)“Change in Capitalization” means any (i) merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase or other reorganization or corporate transaction or event; (ii) special or extraordinary dividend or other extraordinary distribution (whether in the form of cash, Common Stock, or other property), stock split, reverse stock split, subdivision or consolidation; (iii) combination or exchange of shares; or (iv) other change in corporate structure, which, in any such case, the Administrator determines, in its sole discretion, affects the Common Stock such that an adjustment pursuant to Section 5 hereof is appropriate.
(l)“Change in Control” means an event set forth in any one of the following paragraphs shall have occurred:
(1)any Person (or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Exchange Act), excluding the Principal Stockholder, is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (I) of paragraph (3) below;
2
(2)the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’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 Effective Date or whose appointment, election or nomination for election was previously so approved or recommended;
(3)there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary with any other corporation or other entity, other than (I) a merger or consolidation (A) which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary, more than fifty percent (50%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation and (B) immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the Company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger or consolidation is then a subsidiary, the ultimate parent thereof, or (II) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities; or
(4)the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than (A) a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company following the completion of such transaction in substantially the same proportions as their ownership of the Company immediately prior to such sale or (B) a sale or disposition of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or, if such entity is a subsidiary, the ultimate parent thereof.
Notwithstanding the foregoing, (i) a Change in Control shall not be deemed to have occurred as a result of any transaction or series of integrated transactions following which the Principal Stockholder possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the Company (or any successor thereto), whether through the
3
ownership of voting securities, as trustee or executor, by contract or otherwise, including, without limitation, the ownership, directly or indirectly, of securities having the power to elect a majority of the Board or the board of directors or similar body governing the affairs of any successor to the Company and (ii) for each Award that constitutes deferred compensation under Section 409A of the Code, and to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, a Change in Control shall be deemed to have occurred under the Plan with respect to such Award only if a change in the ownership or effective control of the Company or a change in ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A of the Code.
(m)“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(n)“Committee” means any committee or subcommittee the Board may appoint to administer the Plan. Subject to the discretion of the Board, the Committee shall be composed entirely of individuals who meet the qualifications of (i) a “non-employee director” within the meaning of Rule 16b-3 and (ii) any other qualifications required by the applicable stock exchange on which the Common Stock is traded. If at any time or to any extent the Board shall not administer the Plan, then the functions of the Administrator specified in the Plan shall be exercised by the Committee
(o)“Common Stock” means the common stock, par value $0.0001 per share, of the Company.
(p)“Company” means Reformation, Inc., a Delaware corporation (or any successor company, except as the term “Company” is used in the definition of “Change in Control” above).
(q)“Disability” means (a) if the Participant is a party to an employment agreement or offer letter with the Company or one of its Subsidiaries in which “Disability” is defined, the occurrence of any circumstances defined as “Disability” in such employment agreement or offer letter, or (b) if the Participant is not a party to an employment agreement or offer letter with any member of the Group in which “Disability” is defined, “Disability” means that the Participant, as determined by the Administrator in its sole discretion, is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company or an Affiliate thereof.
(r)“Effective Date” has the meaning set forth in Section 20 hereof.
(s)“Eligible Recipient” means an officer, employee, non-employee director, independent contractor or consultant of the Company or any Affiliate of the Company who has been selected as an eligible participant by the Administrator; provided, however, that to the
4
extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, an Eligible Recipient of an Option or a Stock Appreciation Right means an employee, non-employee director, independent contractor or consultant of the Company or any Affiliate of the Company with respect to whom the Company is an “eligible issuer of service recipient stock” within the meaning of Section 409A of the Code.
(t)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
(u)“Exercise Price” means, with respect to any Option, the per share price at which a holder of such Option may purchase the Shares issuable upon the exercise of such Option.
(v)“Fair Market Value” of Common Stock or another security as of a particular date shall mean the fair market value as determined by the Administrator in its sole discretion; provided, however, that except as otherwise determined by the Administrator, (i) if the Common Stock or other security is admitted to trading on a national securities exchange, the fair market value on any date shall be the closing sale price reported on the last preceding trading day on which there was a sale of such share of Common Stock or other security on such exchange, or (ii) if the Common Stock or other security is then traded in an over-the-counter market, the fair market value on any date shall be the average of the closing bid and asked prices for such share of Common Stock or other security in such over-the-counter market for the last preceding date on which there was a sale of such share of Common Stock or other security in such market, or (iii) for purposes of any Awards granted on the Registration Date, the Fair Market Value will be the initial price to the public as set forth in the final prospectus included within the registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission for the initial public offering of the Common Stock;.
(w)“Free Standing Right” has the meaning set forth in Section 8(a) hereof.
(x)“Group” means the Company and the Company’s direct and indirect wholly-owned subsidiaries.
(y)“Group Company” shall mean any member of the Group.
(z)“ISO” means an Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code.
(aa)“Nonqualified Stock Option” means an Option that is not designated as an ISO.
(ab)“Option” means an option to purchase Shares granted pursuant to Section 7 hereof. The term “Option” as used in the Plan includes the terms “Nonqualified Stock Option” and “ISO.”
(ac)“Other Stock-Based Award” means an Award granted pursuant to Section 10 hereof.
5
(ad) “Participant” means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority provided for in Section 3 hereof, to receive grants of Awards, and, upon such Eligible Recipient’s death, such Eligible Recipient’s successors, heirs, executors and administrators, as the case may be.
(ae)“Performance Goals” means performance goals based on criteria selected by the Administrator in its sole discretion The Administrator shall have the authority to make equitable adjustments to the Performance Goals as may be determined by the Administrator, in its sole discretion.
(af)“Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
(ag)“Plan” means this Reformation, Inc. 2026 Omnibus Incentive Plan, as may be amended and/or restated from time to time.
(ah)“Principal Stockholder” means Permira Advisers LLC, together with any of its Affiliates.
(ai)“Registration Date” means the effective date of the first registration statement that is filed by the Company and declared effective pursuant to Section 12(b) of the Exchange Act, with respect to any class of the Company’s securities.
(aj)“Related Right” has the meaning set forth in Section 8(a) hereof.
(ak)“Restricted Stock” means Shares granted pursuant to Section 9 hereof subject to certain restrictions that lapse at the end of a specified period or periods.
(al)“Restricted Stock Unit” means the right, granted pursuant to Section 9 hereof, to receive an amount in cash or Shares (or any combination thereof) equal to the Fair Market Value of a Share subject to certain restrictions that lapse at the end of a specified period or periods.
(am)“Rule 16b-3” has the meaning set forth in Section 3(a) hereof.
(an)“Shares” means shares of Common Stock reserved for issuance under the Plan, as adjusted pursuant to the Plan, and any successor (pursuant to a merger, consolidation or other reorganization) security.
(ao)“Stock Appreciation Right” means the right to receive, upon exercise of the right, the applicable amounts as described in Section 8 hereof.
(ap) “Stock Bonus” means a bonus payable in fully vested Shares granted pursuant to Section 11 hereof.
(aq)“Subsidiary” means, with respect to any Person, as of any date of determination, any other Person as to which such first Person owns or otherwise controls, directly or indirectly,
6
more than 50% of the voting shares or other similar interests or a sole general partner interest or managing member or similar interest of such other Person.
(ar)“Transfer” has the meaning set forth in Section 18 hereof.
Section 3.Administration.
(a)The Plan shall be administered by the Administrator and shall be administered in accordance with the requirements of Rule 16b-3 under the Exchange Act (“Rule 16b-3”), to the extent applicable.
(b)Pursuant to the terms of the Plan, the Administrator, subject, in the case of the Committee, to any restrictions on the authority delegated to it by the Board, shall have the power and authority, without limitation:
(1)to select those Eligible Recipients who shall be Participants;
(2)to determine whether and to what extent Awards are to be granted hereunder to Participants;
(3)to determine the number of Shares to be covered by each Award granted hereunder;
(4)to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder (including, but not limited to, (i) the restrictions applicable to Awards and the conditions under which restrictions applicable to such Awards shall lapse, (ii) the Performance Goals and periods applicable to Awards, (iii) the Exercise Price of each Option and the Base Price of each Stock Appreciation Right, (iv) the vesting schedule applicable to each Award, (v) the number of Shares or amount of cash or other property subject to each Award and (vi) subject to the requirements of Section 409A of the Code (to the extent applicable), any amendments to the terms and conditions of outstanding Awards, including, but not limited to, extending the exercise period of such Awards and accelerating or waiving the vesting schedule or other conditions of such Awards);
(5)to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Awards;
(6)to determine the Fair Market Value in accordance with the terms of the Plan;
(7)to determine the duration and purpose of leaves of absence which may be granted to a Participant without constituting termination of the Participant’s employment or service for purposes of Awards granted under the Plan;
(8)to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable;
7
(9)to prescribe, amend and rescind rules and regulations relating to sub-plans or addendums established for the purpose of satisfying applicable foreign laws or qualifying for favorable tax treatment under applicable foreign laws, which rules and regulations may be set forth in an appendix or appendices to the Plan or the applicable Award Agreement; and
(10)to construe and interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto), and to otherwise supervise the administration of the Plan and to exercise all powers and authorities either specifically granted under the Plan or necessary and advisable in the administration of the Plan.
(c)Notwithstanding the foregoing, but subject to Section 5 hereof, the Company may not, without first obtaining the approval of the Company’s stockholders, (i) amend the terms of outstanding Options or Stock Appreciation Rights to reduce the Exercise Price or Base Price, as applicable, of such Options or Stock Appreciation Rights, (ii) cancel outstanding Options or Stock Appreciation Rights in exchange for Options or Stock Appreciation Rights with an Exercise Price or Base Price, as applicable, that is less than the Exercise Price or Base Price of the original Options or Stock Appreciation Rights or (iii) cancel outstanding Options or Stock Appreciation Rights with an Exercise Price or Base Price, as applicable, that is above the current per share stock price, in exchange for cash, property or other securities.
(d)All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all Persons, including the Company and the Participants. The provisions and administration of each Award need not be the same with respect to each Participant. No member of the Board or the Committee, nor any officer or employee of the Company or any Subsidiary thereof acting on behalf of the Board or the Committee, shall be personally liable for any action, omission, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company and of any Subsidiary thereof acting on their behalf shall, consistent with the Certificate of Incorporation and to the maximum extent permitted by applicable law (as it now exists or may hereafter be amended), be fully indemnified and protected by the Company in respect of any such action, omission, determination or interpretation.
(e)The Administrator may, in its sole discretion, delegate its authority, in whole or in part, under this Section 3 (including, but not limited to, its authority to grant Awards under the Plan, other than its authority to grant Awards under the Plan to any Participant who is subject to reporting under Section 16 of the Exchange Act) to one or more officers of the Company, subject to the requirements of applicable law or any stock exchange on which the Shares are traded.
Section 4.Shares Reserved for Issuance; Certain Limitations
(a)Subject to adjustment as provided in Section 5 hereof, the maximum number of shares of Common Stock reserved for issuance under the Plan shall be the sum of (i) 5,316,858 Shares and (ii) an annual increase on the first day of each fiscal year during the term of the Plan, beginning in calendar year 2026, and ending in calendar year 2035, equal to the lesser of (x) 5% of the aggregate number of shares of Common Stock issued and outstanding on the final day of
8
the immediately preceding fiscal year and (y) such number of shares of Common Stock as may be determined by the Administrator. All the Shares reserved for issuance under the Plan pursuant to this Section 4(a) as of the Effective Date (subject to adjustment as provided in Section 5 hereof) may be granted as ISOs.
(b)Shares issued under the Plan may, in whole or in part, be authorized but unissued Shares or Shares that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise. If any Shares subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of Shares to the Participant, the Shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan unless such forfeiture, cancellation, exchange, surrender, termination or expiration occurs following the tenth (10th) anniversary of the Effective Date and such Shares were originally reserved for issuance under the Plan pursuant to Section 4(a)(ii). Shares that are exchanged by a Participant or withheld by the Company as full or partial payment in connection with the exercise of any Option or Stock Appreciation Right under the Plan or the payment of any purchase price with respect to any other Award under the Plan, as well as any Shares exchanged by a Participant or withheld by the Company or any Subsidiary to satisfy the tax withholding obligations related to any Award under the Plan, shall again be available for subsequent Awards under the Plan, provided, however, that no Shares shall again be available for subsequent Awards under the Plan if (x) such Shares were originally reserved for issuance under the Plan pursuant to Section 4(a)(ii) and exchanged by a Participant or withheld by the Company following the tenth (10th ) anniversary of the Effective Date or (y) such Shares were reacquired by the Company in the open market following the tenth (10th ) anniversary of the Effective Date. In addition, (i) to the extent an Award is denominated in Shares, but paid or settled in cash, the number of Shares with respect to which such payment or settlement is made shall again be available for grants of Awards pursuant to the Plan and (ii) Shares underlying Awards that can only be settled in cash shall not be counted against the aggregate number of Shares available for Awards under the Plan.
Section 5.Equitable Adjustments.
(a)In the event of any Change in Capitalization (including a Change in Control), an equitable substitution or proportionate adjustment shall be made, in each case, in the manner determined by the Administrator, in its sole discretion, in (i) the aggregate number of Shares reserved for issuance under the Plan pursuant to Section 4(a) hereof, (ii) the kind and number of securities subject to, and the Exercise Price or Base Price of, any outstanding Options and Stock Appreciation Rights granted under the Plan, (iii) the kind, number and purchase price of Shares, or the amount of cash or amount or type of other property, subject to outstanding Restricted Stock, Restricted Stock Units, Stock Bonuses and Other Stock-Based Awards granted under the Plan or (iv) the Performance Goals and performance periods applicable to any Awards granted under the Plan; provided, however, that any fractional shares resulting from the adjustment shall be eliminated. Such other equitable substitutions or adjustments shall be made in the manner determined by the Administrator, in its sole discretion.
9
(b)Without limiting the generality of the foregoing, in connection with a Change in Capitalization (including a Change in Control), the Administrator may provide, in its sole discretion, but subject in all events to the requirements of Section 409A of the Code, for the cancellation of any outstanding Award in exchange for payment in cash or other property having an aggregate Fair Market Value equal to the Fair Market Value of the Shares, cash or other property covered by such Award, reduced by the aggregate Exercise Price or Base Price thereof, if any; provided, however, that if the Exercise Price or Base Price of any outstanding Award is equal to or greater than the Fair Market Value of the Shares, cash or other property covered by such Award, the Administrator may cancel such Award without the payment of any consideration to the Participant.
(c)The determinations made by the Administrator pursuant to this Section 5 shall be final, binding and conclusive.
Section 6.Eligibility.
The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from those individuals that qualify as Eligible Recipients.
Section 7.Options.
(a)General. Each Participant who is granted an Option shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, which Award Agreement shall set forth, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option, and whether the Option is intended to be an ISO or a Nonqualified Stock Option (and in the event the Award Agreement has no such designation, the Option shall be by default a Nonqualified Stock Option). More than one Option may be granted to the same Participant and be outstanding concurrently hereunder. Options granted under the Plan shall be subject to the terms and conditions set forth in this Section 7 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable and set forth in the applicable Award Agreement.
(b)Exercise Price. The Exercise Price of Shares purchasable under an Option shall be determined by the Administrator in its sole discretion at the time of grant, but, except as provided in the applicable Award Agreement, and subject to Section 7(f) hereof, in no event shall the exercise price of an Option be less than one hundred percent (100%) of the Fair Market Value of the related Shares on the date of grant.
(c)Option Term. The maximum term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten (10) years after the date such Option is granted. Each Option’s term is subject to earlier expiration pursuant to the applicable provisions in the Plan and the Award Agreement.
(d)Exercisability. Each Option shall be exercisable at such time or times and subject to such terms and conditions, including the attainment of Performance Goals, as shall be
10
determined by the Administrator in the applicable Award Agreement. The Administrator may also provide that any Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine in its sole discretion. Notwithstanding anything to the contrary contained herein, an Option may not be exercised for a fraction of a share.
(e)Method of Exercise. Options may be exercised in whole or in part by giving written notice of exercise to the Company specifying the number of whole Shares to be purchased, accompanied by payment in full of the aggregate Exercise Price of the Shares so purchased in cash or its equivalent, as determined by the Administrator. As determined by the Administrator, in its sole discretion, with respect to any Option or category of Options, payment in whole or in part may also be made (i) by means of consideration received under any cashless exercise procedure approved by the Administrator (including the withholding of Shares otherwise issuable upon exercise), (ii) in the form of unrestricted Shares already owned by the Participant which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (iii) any other form of consideration approved by the Administrator and permitted by applicable law or (iv) any combination of the foregoing.
(f)ISOs. The terms and conditions of ISOs granted hereunder shall be subject to the provisions of Section 422 of the Code and the terms, conditions, limitations and administrative procedures established by the Administrator from time to time in accordance with the Plan. At the discretion of the Administrator, ISOs may be granted only to an employee of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or “subsidiary corporation” (as such term is defined in Section 424(f) of the Code). Notwithstanding anything herein to the contrary, no ISOs may be granted after the tenth (10th ) anniversary of the earlier of (x) the date the Plan was adopted and (y) the Effective Date, and no more than 5,316,858 Shares may be granted as ISOs (subject to adjustment as provided in Section 5 hereof).
(i)ISO Grants to 10% Stockholders. Notwithstanding anything to the contrary in the Plan, if an ISO is granted to a Participant who owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or “subsidiary corporation” (as such term is defined in Section 424(f) of the Code), the term of the ISO shall not exceed five (5) years from the time of grant of such ISO and the Exercise Price shall be at least one hundred and ten percent (110%) of the Fair Market Value of the Shares on the date of grant.
(ii)$100,000 Per Year Limitation For ISOs. To the extent the aggregate Fair Market Value (determined on the date of grant) of the Shares for which ISOs are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, such excess ISOs shall be treated as Nonqualified Stock Options.
(iii)Disqualifying Dispositions. Each Participant awarded an ISO under the Plan shall notify the Company in writing immediately after the date the Participant makes a “disqualifying disposition” of any Share acquired pursuant to the exercise of such ISO.
11
A “disqualifying disposition” is any disposition (including any sale) of such Shares before the later of (i) two years after the date of grant of the ISO and (ii) one year after the date the Participant acquired the Shares by exercising the ISO. The Company may, if determined by the Administrator and in accordance with procedures established by it, retain possession of any Shares acquired pursuant to the exercise of an ISO as agent for the applicable Participant until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Shares.
(iv) No Liability. Neither the Company nor the Administrator will be liable to a Participant, or to any other party, if an ISO fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code.
(g)Rights as Stockholder. Except as provided in the applicable Award Agreement, a Participant shall have no rights to dividends, dividend equivalents or distributions or any other rights of a stockholder with respect to the Shares subject to an Option until the Participant has given written notice of the exercise thereof, has paid in full for such Shares and has satisfied the requirements of Section 17 hereof.
(h)Termination of Employment or Service. In the event of the termination of employment or service with the Company and all Affiliates thereof of a Participant who has been granted one or more Options, such Options shall be exercisable at such time or times and subject to such terms and conditions as set forth in the Award Agreement.
(i)Other Change in Employment or Service Status. An Option shall be affected, both with regard to vesting schedule and termination, by leaves of absence, including unpaid and un-protected leaves of absence, changes from full-time to part-time employment, partial Disability or other changes in the employment status or service status of a Participant, in the discretion of the Administrator.
Section 8.Stock Appreciation Rights.
(a)General. Stock Appreciation Rights may be granted either alone (“Free Standing Rights”) or in conjunction with all or part of any Option granted under the Plan (“Related Rights”). Related Rights may be granted either at or after the time of the grant of such Option. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, grants of Stock Appreciation Rights shall be made, the number of Shares to be awarded, the Base Price, and all other conditions of Stock Appreciation Rights. Notwithstanding the foregoing, no Related Right may be granted for more Shares than are subject to the Option to which it relates. Stock Appreciation Rights granted under the Plan shall be subject to the following terms and conditions set forth in this Section 8 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable, as set forth in the applicable Award Agreement.
(b)Base Price. Except as provided in the applicable Award Agreement, each Stock Appreciation Right shall be granted with a base price that is not less than one hundred percent
12
(100%) of the Fair Market Value of the related Shares on the date of grant (such amount, the “Base Price”).
(c)Rights as Stockholder. Except as provided in the applicable Award Agreement, a Participant shall have no rights to dividends, dividend equivalents or distributions or any other rights of a stockholder with respect to the Shares, if any, subject to a Stock Appreciation Right until the Participant has given written notice of the exercise thereof and has satisfied the requirements of Section 17 hereof.
(d)Exercisability.
(1)Stock Appreciation Rights that are Free Standing Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator in the applicable Award Agreement.
(2)Stock Appreciation Rights that are Related Rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in accordance with the provisions of Section 7 hereof and this Section 8.
(e)Consideration Upon Exercise.
(1)Upon the exercise of a Free Standing Right, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to (i) the excess of the Fair Market Value of a share of Common Stock as of the date of exercise over the Base Price per share specified in the Free Standing Right, multiplied by (ii) the number of Shares in respect of which the Free Standing Right is being exercised.
(2)A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to (i) the excess of the Fair Market Value of a share of Common Stock as of the date of exercise over the Exercise Price specified in the related Option, multiplied by (ii) the number of Shares in respect of which the Related Right is being exercised. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.
(3)Notwithstanding the foregoing, the Administrator may determine to settle the exercise of a Stock Appreciation Right in cash (or in any combination of Shares and cash).
(f)Termination of Employment or Service.
(1)In the event of the termination of employment or service with the Company and all Affiliates thereof of a Participant who has been granted one or more Free Standing Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as set forth in the Award Agreement.
13
(2)In the event of the termination of employment or service with the Company and all Affiliates thereof of a Participant who has been granted one or more Related Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as set forth in the related Options.
(g)Term.
(1)The term of each Free Standing Right shall be fixed by the Administrator, but no Free Standing Right shall be exercisable more than ten (10) years after the date such right is granted.
(2)The term of each Related Right shall be the term of the Option to which it relates, but no Related Right shall be exercisable more than ten (10) years after the date such right is granted.
(h)Other Change in Employment or Service Status. Stock Appreciation Rights shall be affected, both with regard to vesting schedule and termination, by leaves of absence, including unpaid and un-protected leaves of absence, changes from full-time to part-time employment, partial Disability or other changes in the employment status or service status of a Participant, in the discretion of the Administrator.
Section 9.Restricted Stock and Restricted Stock Units.
(a)General. Restricted Stock and Restricted Stock Units may be issued under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, Restricted Stock or Restricted Stock Units shall be made; the number of Shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Stock or Restricted Stock Units; the period of time prior to which Restricted Stock or Restricted Stock Units become vested and free of restrictions on Transfer (the “Restricted Period”); the Performance Goals (if any); and all other conditions of the Restricted Stock and Restricted Stock Units. If the restrictions, Performance Goals and/or conditions established by the Administrator are not attained, a Participant shall forfeit the Participant’s Restricted Stock or Restricted Stock Units, in accordance with the terms of the grant.
(b)Rights as Stockholder. Except as provided in the applicable Award Agreement, the Participant shall generally have the rights of a stockholder of the Company with respect to shares of Restricted Stock during the Restricted Period, including the right to vote such shares and to receive any dividends declared with respect to such shares. Any dividends declared during the Restricted Period with respect to shares of Restricted Stock shall, to the extent set forth in an Award Agreement, be payable either currently, at the time (and to the extent) that the underlying shares of Restricted Stock vest, or in the form of additional shares of Restricted Stock that are subject to the same vesting and other terms and conditions as the underlying shares of Restricted Stock. Except as provided in the applicable Award Agreement, the Participant shall generally not have the rights of a stockholder with respect to shares of Common Stock subject to Restricted Stock Units during the Restricted Period; provided, however, that, subject to Section 409A of the Code, an amount equal to any dividends declared during the Restricted Period with respect to the
14
number of Shares covered by Restricted Stock Units may, to the extent set forth in an Award Agreement, be provided to the Participant either currently, at the time (and to the extent) that the Shares in respect of the related Restricted Stock Units are delivered to the Participant, or in the form of additional Restricted Stock Units that are subject to the same vesting and other terms and conditions as the related Restricted Stock Units.
(c)Termination of Employment or Service. The rights of Participants granted Restricted Stock or Restricted Stock Units upon termination of employment or service with the Company and all Affiliates thereof for any reason during the Restricted Period shall be set forth in the Award Agreement.
(d)Form of Settlement. The Administrator reserves the right in its sole discretion to provide (either at or after the grant thereof) that any Restricted Stock Unit represents the right to receive the amount of cash per unit that is determined by the Administrator in connection with the Award.
Section 10.Other Stock-Based Awards.
Other forms of Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including but not limited to dividend equivalents, may be granted either alone or in addition to other Awards (other than, in the case of dividend equivalents, in connection with Options or Stock Appreciation Rights) under the Plan. Subject to the provisions of the Plan, the Administrator shall have sole and complete authority to determine the individuals to whom and the time or times at which such Other Stock-Based Awards shall be granted, the number of Shares to be granted pursuant to such Other Stock-Based Awards, or the manner in which such Other Stock-Based Awards shall be settled (e.g., in Shares, cash or other property), or the conditions to the vesting and/or payment or settlement of such Other Stock-Based Awards (which may include, but not be limited to, achievement of performance criteria) and all other terms and conditions of such Other Stock-Based Awards.
Section 11.Stock Bonuses.
In the event that the Administrator grants a Stock Bonus, the Shares constituting such Stock Bonus shall, as determined by the Administrator, be evidenced in uncertificated form or by a book entry record or a certificate issued in the name of the Participant to whom such grant was made and delivered to such Participant as soon as practicable after the date on which such Stock Bonus is payable.
Section 12.Cash Awards.
The Administrator may grant Awards that are payable solely in cash, as deemed by the Administrator to be consistent with the purposes of the Plan, and such Cash Awards shall be subject to the terms, conditions, restrictions and limitations determined by the Administrator, in its sole discretion, from time to time. Cash Awards may be granted with value and payment contingent upon the achievement of Performance Goals.
15
Section 13.Change in Control Provisions.
Except as provided in the applicable Award Agreement, in the event that a Change in Control occurs and an outstanding Award is not assumed or substituted in connection therewith, then: (i) any unvested or unexercisable portion of any Award carrying a right to exercise shall become fully vested and exercisable and (ii) the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to an Award granted under the Plan shall lapse and such Awards shall be deemed fully vested, and any performance conditions imposed with respect to such Awards shall be deemed to be achieved at the greater of target and actual performance levels as of the date of the Change of Control. In the event that a Change of Control occurs and an Award is assumed or substituted in connection therewith, such Award shall remain outstanding and shall continue to vest following such Change of Control in accordance with its terms, subject to adjustment in accordance with Section 5 hereof. For purposes of this Section 13, an outstanding Award shall be considered to be assumed or substituted for if, following the Change in Control, the Award remains subject to the same terms and conditions that were applicable to the Award immediately prior to the Change in Control except that, if the Award related to Shares, the Award may instead confer the right to receive common equity of the acquiring entity (or cash or such other security or entity as may be determined by the Administrator, in its sole discretion, pursuant to Section 5 hereof).
Section 14.Voting Proxy
The Company reserves the right to require the Participant, to the fullest extent permitted by applicable law, to appoint such Person as shall be determined by the Administrator in its sole discretion as the Participant’s proxy with respect to all applicable unvested Awards of which the Participant may be the record holder of from time to time to (A) attend all meetings of the holders of the shares of Common Stock, with full power to vote and act for the Participant with respect to such Awards in the same manner and extent that the Participant might were the Participant personally present at such meetings, and (B) execute and deliver, on behalf of the Participant, any written consent in lieu of a meeting of the holders of the shares of Common Stock in the same manner and extent that the Participant might but for the proxy granted pursuant to this sentence.
Section 15.Amendment and Termination.
The Administrator may amend, alter or terminate the Plan, but no amendment, alteration, or termination shall be made that would impair the rights of a Participant under any outstanding Award without such Participant’s consent. Unless the Board determines otherwise, the Board shall obtain approval of the Company’s stockholders for any amendment to the Plan that would require such approval in order to satisfy any rules of the stock exchange on which the Common Stock is traded or other applicable law. The Administrator may amend the terms of any outstanding Award, prospectively or retroactively, but, subject to Section 5 hereof and the immediately preceding sentence, no such amendment shall impair the rights of any Participant without the Participant’s consent; provided that the Administrator may amend the terms of any such Award to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Award to any applicable law, government regulation or stock
16
exchange listing requirement relating to such Award (including, but not limited to, Section 409A of the Code), and by accepting an Award under this Plan, the Participant thereby agrees to any amendment made pursuant to this Section 15 to such Award (as determined by the Administrator) without further consideration or action.
Section 16.Unfunded Status of Plan.
The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
Section 17.Withholding Taxes.
Each Participant shall, no later than the date as of which the value of an Award first becomes includible in the gross income of such Participant for purposes of applicable taxes, pay to the Company, or make arrangements satisfactory to the Company regarding payment of, an amount in respect of such taxes up to the maximum statutory rates in the Participant’s applicable jurisdiction with respect to the Award, as determined by the Company. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant. Whenever cash is to be paid pursuant to an Award, the Company shall have the right to deduct therefrom an amount sufficient to satisfy any applicable withholding tax requirements related thereto as determined by the Company. Whenever Shares or property other than cash are to be delivered pursuant to an Award, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy any related taxes to be withheld and applied to the tax obligations as determined by the Company; provided, that, with the approval of the Administrator, a Participant may satisfy the foregoing requirement by either (i) electing to have the Company withhold from such delivery Shares or other property, as applicable, or (ii) by delivering already owned unrestricted shares of Common Stock, in each case, having a value not exceeding the applicable taxes to be withheld and applied to the tax obligations as determined by the Company. Such withheld Shares or other property or already owned and unrestricted shares of Common Stock shall be valued at their Fair Market Value on the date on which the amount of tax to be withheld is determined and any fractional share amounts resulting therefrom shall be settled in cash. Such an election may be made with respect to all or any portion of the Shares to be delivered pursuant to an award. The Company may also use any other method of obtaining the necessary payment or proceeds, as permitted by law, to satisfy its withholding obligation with respect to any Award as determined by the Company.
Section 18.Transfer of Awards.
Until such time as the Awards are fully vested and/or exercisable in accordance with the Plan or an Award Agreement, no purported sale, assignment, mortgage, hypothecation, transfer, charge, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any Award or any agreement or commitment to do
17
any of the foregoing (each, a “Transfer”) by any holder thereof in violation of the provisions of the Plan or an Award Agreement will be valid, except with the prior written consent of the Administrator, which consent may be granted or withheld in the sole discretion of the Administrator. Any purported Transfer of an Award or any economic benefit or interest therein in violation of the Plan or an Award Agreement shall be null and void ab initio, and shall not create any obligation or liability of the Company, and any Person purportedly acquiring any Award or any economic benefit or interest therein transferred in violation of the Plan or an Award Agreement shall not be entitled to be recognized as a holder of any Shares or other property underlying such Award. Unless otherwise determined by the Administrator in accordance with the provisions of the immediately preceding sentence, an Option or Stock Appreciation Right may be exercised, during the lifetime of the Participant, only by the Participant or, during any period during which the Participant is under a legal disability, by the Participant’s guardian or legal representative.
Section 19.Continued Employment or Service.
Neither the adoption of the Plan nor the grant of an Award hereunder shall confer upon any Eligible Recipient any right to continued employment or service with the Company or any Affiliate thereof, as the case may be, nor shall it interfere in any way with the right of the Company or any Affiliate thereof to terminate the employment or service of any of its Eligible Recipients at any time.
Section 20.Effective Date.
The Plan was adopted on July 13, 2026, subject to approval by the Company’s stockholders, and became effective on July 29, 2026 following such approval (the “Effective Date”).
Section 21.Term of Plan.
The Plan shall automatically terminate on the date no Shares remain available for issuance under the Plan, but Awards theretofore granted may extend beyond that date.
Section 22.Securities Matters and Regulations.
(a)Notwithstanding anything herein to the contrary, the obligation of the Company to sell or deliver Common Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, the receipt of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator and the listing requirements of any securities exchange on which the Shares are traded. The Administrator may require, as a condition of the issuance and delivery of certificates evidencing shares of Common Stock pursuant to the terms hereof, that the recipient of such shares make such agreements and representations, and that such certificates bear such legends, as the Administrator, in its sole discretion, deems necessary or advisable.
18
(b)Each Award is subject to the requirement that, if at any time the Administrator determines that the listing, registration or qualification of Common Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Common Stock, no such Award shall be granted or payment made or Common Stock issued, in whole or in part, unless such listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Administrator.
(c)In the event that the disposition of Common Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act and is not otherwise exempt from such registration, such Common Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Administrator may require a Participant receiving Common Stock pursuant to the Plan, as a condition precedent to receipt of such Common Stock, to represent to the Company in writing that the Common Stock acquired by such Participant is acquired for investment only and not with a view to distribution.
Section 23.Notification of Election Under Section 83(b) of the Code.
If any Participant shall, in connection with the acquisition of Shares under the Plan, make the election permitted under Section 83(b) of the Code, such Participant shall notify the Company of such election, and shall deliver a copy of such election to the Company, in each case, within ten (10) days after filing notice of the election with the Internal Revenue Service.
Section 24.No Fractional Shares.
No fractional Shares shall be issued or delivered pursuant to the Plan. The Administrator shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
Section 25.Beneficiary.
A Participant may file with the Company a written designation of a beneficiary on such form as may be prescribed by the Company and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Participant, the executor or administrator of the Participant’s estate shall be deemed to be the Participant’s beneficiary.
Section 26.Paperless Administration.
In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.
19
Section 27.Severability.
If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.
Section 28.Clawback.
Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to or in connection with any such law, government regulation or stock exchange listing requirement).
Section 29.Section 409A of the Code.
The Plan as well as payments and benefits under the Plan are intended to be exempt from, or to the extent subject thereto, to comply with Section 409A of the Code, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted in accordance therewith. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Participant shall not be considered to have terminated employment or service with the Company for purposes of the Plan and no payment shall be due to the Participant under the Plan or any Award until the Participant would be considered to have incurred a “separation from service” from the Company and its Affiliates within the meaning of Section 409A of the Code. Any payments described in the Plan that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent that any Awards (or any other amounts payable under any plan, program or arrangement of the Company or any of its Affiliates) are payable upon a separation from service and such payment would result in the imposition of any individual tax and penalty interest charges imposed under Section 409A of the Code, the settlement and payment of such awards (or other amounts) shall instead be made on the first business day after the date that is six (6) months following such separation from service (or upon the Participant’s death, if earlier). Each amount to be paid or benefit to be provided under this Plan shall be construed as a separate identified payment for purposes of Section 409A of the Code. The Administrator shall have the sole authority to make any accelerated distributions permissible under Treas. Reg. Section 1.409A-3(j)(4) to Participants with respect to any deferred amounts, provided that such distributions meets the requirements of Treas. Reg. Section 1.409A-3(j)(4). The Company makes no representation that any or all of the payments or benefits described in this Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. The Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A of the Code.
Section 30.Governing Law.
20
The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law of such state.
Section 31.Titles and Headings.
The titles and headings of the sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
Section 32.Successors.
The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
Section 33.Relationship to Other Benefits.
No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare, or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
21
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Hali Borenstein, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Reformation Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Intentionally omitted];
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 11, 2026
| By: | /s/ Hali Borenstein | |||||||
| Name: Hali Borenstein | ||||||||
| Title: Chief Executive Officer | ||||||||
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joshua Moore, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Reformation Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Intentionally omitted];
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 11, 2026
| By: | /s/ Joshua Moore | |||||||
| Name: Joshua Moore | ||||||||
| Title: Chief Financial Officer | ||||||||
Exhibit 32.1
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Reformation Inc., does hereby certify, to such officer's knowledge that the Quarterly Report on Form 10-Q of Reformation Inc. for the fiscal quarter ended June 27, 2026 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Reformation Inc.
Date: September 11, 2026
| By: | /s/ Hali Borenstein | |||||||
| Name: Hali Borenstein | ||||||||
| Title: Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Date: September 11, 2026
| By: | /s/ Joshua Moore | |||||||
| Name: Joshua Moore | ||||||||
| Title: Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
This certification accompanies the Quarterly Report, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of Reformation Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.