Exhibit (a)(1)(iii)
RENT THE RUNWAY, INC.
TERMS OF ELECTION
BY PARTICIPATING, YOU AGREE TO ALL TERMS OF THE OPTION EXCHANGE AS SET FORTH IN THE OFFER TO EXCHANGE CERTAIN ELIGIBLE OUTSTANDING OPTIONS FOR A NUMBER OF REPLACEMENT RESTRICTED STOCK UNITS, DATED JUNE 9, 2023 (AS IT
MAY BE AMENDED AND SUPPLEMENTED FROM TIME TO TIME, THE “OFFER TO EXCHANGE”).
Rent the Runway, Inc. (“Rent the Runway”, “our”, “we”) is offering eligible service providers the opportunity to exchange outstanding eligible stock options for a number of new restricted stock units (“replacement RSUs”) to be granted under the
Rent the Runway Amended and Restated 2021 Incentive Award Plan (the “2021 Plan”). We refer to the offer made pursuant to the Offer to Exchange as the “Option Exchange.”
If you would like to participate in this Option Exchange, please indicate your election by making the applicable selections on the option exchange program website at www.myoptionexchange.com by 11:59 P.M. U.S. Eastern Time on July 10, 2023
(unless the Option Exchange is extended).
You may withdraw this election by submitting a new properly completed election via the option exchange program website on or prior to 11:59 P.M. U.S. Eastern Time on July 10, 2023 (the “Expiration Time”), unless we extend the Option Exchange, in
which case the term “Expiration Time” will refer to the last time and date on which this Option Exchange expires.
By electing to exchange your eligible options, you understand and agree to all of the following:
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I hereby agree to (i) accept the grant by Rent the Runway, Inc. of my eligible options indicated on my election, to the extent not previously accepted and (ii) exchange my eligible options indicated on my election for replacement RSUs as
determined in accordance with the Offer to Exchange on the terms of the Option Exchange as set forth in the Offer to Exchange of which I hereby acknowledge receipt. Each eligible option indicated on my election will be cancelled, on a
grant-by-grant basis, on the first business day following the Expiration Time. Any replacement RSUs will be granted to me on July 11, 2023, in accordance with the terms of the Option Exchange or, if the Option Exchange is extended, on the
first business day following the Expiration Time of the extended Option Exchange.
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I hereby agree to execute a restricted stock unit award agreement evidencing the grant of the replacement RSUs and further acknowledge that the replacement RSUs have a different vesting schedule than the eligible options cancelled in the
exchange. Instead, unless otherwise determined by Rent the Runway, the replacement RSUs granted pursuant to the Option Exchange will vest in eight equal quarterly installments over two years on November 1, 2023, February 1, 2024, May 1,
2024, August 1, 2024, November 1, 2024, February 1, 2025, May 1, 2025, and August 1, 2025 (which vesting dates may change if the Expiration Time is extended), subject to my continued employment or service through the applicable vesting
dates.
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The Option Exchange is currently set to expire at 11:59 P.M. U.S. Eastern Time on July 10, 2023, unless Rent the Runway, in its discretion, extends the period of time during which the Option Exchange will remain open.
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If I am no longer employed by or engaged as an active employee, individual consultant or non-employee director of Rent the Runway or its subsidiaries, whether my termination is voluntary, involuntary or for any other reason, as of the
completion of the Option Exchange, I will not be able to participate in the Option Exchange or receive any replacement RSUs. Even if I had elected to participate in this Option Exchange, my tender will automatically be deemed withdrawn and
I will not participate in this Option Exchange, and I will retain my outstanding options in accordance with their current terms and conditions. Instead, I will keep my current eligible options and they can be exercised or will expire in
accordance with their terms. Unless otherwise expressly provided in the 2021 Plan, the form of restricted stock unit award agreement or determined by Rent the Runway, my right to vest in the replacement RSUs, if any, will terminate as of
the date of your termination of employment or service. Notwithstanding the foregoing, the Administrator (as defined in the 2021 Plan) shall have exclusive discretion to determine when my termination of employment or service has occurred for
purposes of the replacement RSUs (including when you are no longer considered to be actively providing services while on a leave of absence).
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Until 11:59 P.M. U.S. Eastern Time on July 10, 2023, or if the Option Exchange is extended, the extended Expiration Time, I will have the right to withdraw or change the election that I have made with respect to all of my eligible
options. HOWEVER, AFTER THAT TIME I WILL HAVE NO ABILITY TO CHANGE MY ELECTION. The last properly submitted election received by Rent the Runway prior to the
Expiration Time of the Option Exchange shall be binding. Until the Option Exchange period closes at 11:59 P.M. U.S. Eastern Time on July 10, 2023, or if the Option Exchange is extended, the extended Expiration Time, I may withdraw my
tendered eligible options at any time.
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The tender of my eligible options will constitute my acceptance of all of the terms and conditions of the Option Exchange. Acceptance by Rent the Runway of my eligible options pursuant to the Option Exchange will constitute a binding
agreement between Rent the Runway and me upon the terms and subject to the conditions of the Option Exchange.
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I am the registered holder of the eligible options tendered hereby, and my name and other information appearing on the election are true and correct.
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I am not required to tender some or all of my eligible options pursuant to the Option Exchange.
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RENT THE RUNWAY AND/OR ANY INDEPENDENT FIRMS HIRED WITH RESPECT TO THE OPTION EXCHANGE CANNOT GIVE ME LEGAL, TAX OR INVESTMENT ADVICE WITH RESPECT TO THE OPTION EXCHANGE AND I HAVE BEEN ADVISED TO CONSULT WITH MY PERSONAL LEGAL COUNSEL, ACCOUNTANT, FINANCIAL, AND
TAX ADVISORS AS TO THE CONSEQUENCES OF PARTICIPATING OR NOT PARTICIPATING IN THE OPTION EXCHANGE.
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Under certain circumstances set forth in the Offer to Exchange, Rent the Runway may terminate or amend the Option Exchange and postpone its acceptance of the eligible options I have elected to exchange. If the eligible options I tendered
are not accepted for exchange, such options will continue to be governed by their existing terms and conditions.
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I understand that the exchange ratio to be used in the Option Exchange cannot be known at this time and that after the close of trading, U.S. Eastern Time, on the last business day prior to the Expiration Time of the Option Exchange,
Rent the Runway will distribute by e-mail to me the exact exchange ratio to be used in the Option Exchange with respect to my eligible options and I will have until the Expiration Time to make any changes to any election that I have
previously made to tender an option for exchange.
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I understand that: (i) the value of any Class A common stock of Rent the Runway obtained upon vesting of the replacement RSUs granted pursuant to the Offer to Exchange is an extraordinary item which is outside the scope of my employment
or consulting contract, if any; (ii) the replacement RSUs and the shares acquired upon vesting and settlement thereof are not part of normal or expected compensation for any purpose, including but not limited to purposes of calculating any
severance, resignation, dismissal, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (iii) neither the rights nor any provision of the Option Exchange, the Offer to
Exchange, the 2021 Plan, the form of restricted stock unit award agreement or the policies adopted pursuant to the 2021 Plan confer upon you any right with respect to service or employment or continuation of current service or employment
and shall not be interpreted to form a service or employment contract or relationship with Rent the Runway; (iv) the future value of Rent the Runway’s Class A common stock is unknown and cannot be predicted with certainty; and (v) if you
acquire shares of Rent the Runway’s Class A common stock upon vesting or settlement of the replacement RSUs, the value of the shares acquired may increase or decrease in value.
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I understand that no claim or entitlement to compensation or damages shall arise from forfeiture of the right to participate in the Option Exchange resulting from termination of my employment or service with Rent the Runway or any of its
subsidiaries (for any reason whatsoever and whether or not in breach of local labor laws), and I irrevocably release Rent the Runway and its subsidiaries from any such claim that may arise; if, notwithstanding the foregoing, any such claim
is found by a court of competent jurisdiction to have arisen, I shall be deemed irrevocably to have waived my entitlement to pursue such claim.
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Regardless of any action that Rent the Runway or its subsidiaries takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits, payment on account or other tax-related withholding related to the Option
Exchange and the replacement RSUs (“Tax-Related Items”), I understand that the ultimate liability for all Tax-Related Items is and remains my sole responsibility and may exceed the amount actually withheld by Rent the Runway or its
subsidiaries, if any. I further acknowledge that Rent the Runway and/or its subsidiaries (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option Exchange and
the replacement RSUs including, but not limited to, the exchange of eligible options, grant or vesting of the replacement RSUs, the issuance of Class A common stock of Rent the Runway upon vesting and settlement of the replacement RSUs or
the subsequent sale of shares acquired pursuant to such issuance; and (ii) do not commit to and are under no obligation to structure the terms of the Option Exchange or new replacement RSUs to reduce or eliminate my liability for
Tax-Related Items or achieve any particular tax result. Further, if I have become subject to tax in more than one jurisdiction between the date of the grant of the new replacement RSUs and the date of any relevant taxable or tax withholding
event, as applicable, I acknowledge that Rent the Runway and/or any of its subsidiaries may be required to withhold or account for Tax-Related Items in more than one jurisdiction. In that regard, I authorize Rent the Runway and/or any of
its subsidiaries to withhold all Tax-Related Items legally payable by me pursuant to the terms of the restricted stock unit award agreement evidencing my replacement RSUs and the 2021 Plan.
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I understand and agree that Rent the Runway may collect, store, use, transfer, and process certain personal information about me for the purposes of implementing, administering and managing my participation in
the Option Exchange and applicable plan, including my name, home address, telephone number, date of birth, Social Security or other identification number, salary, nationality, job title, any shares of or directorships held in Rent the
Runway or any of its subsidiaries, details of all options or any other entitlement to Rent the Runway shares awarded, canceled, exercised, vested, unvested or outstanding in my favor (collectively, “Personal Data”). I understand that and
authorize Rent the Runway to transfer Personal Data to third parties assisting in the implementation, administration and management of the Option Exchange and applicable plan, including to my elected broker or other third party with whom I
elect to deposit any shares issued upon vesting of the new replacement RSUs, but that my Personal Data will not be “sold” or “shared”, as those terms are defined under the California Consumer Privacy Act. I understand that Rent the Runway
will retain Personal Data collected in relation to the Option Exchange for as long as necessary to implement, administer and manage my participation in the Option Exchange and the applicable plan, resolve disputes or as otherwise required
to comply with applicable law. I understand that I may contact my local human resources representative for additional information on how my Personal Data is processed during my employment with Rent the Runway.
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In the event that I have not accepted the grant of the eligible option(s) I elect to tender in the Option Exchange, I hereby agree to be bound by the terms and conditions of the applicable equity incentive plan pursuant to which the
eligible option(s) were granted , the applicable option agreement evidencing my eligible option(s), including any grant notice attached thereto or provided therewith, each as provided at www.shareworks.com. I also agree to accept as
binding, conclusive and final, all decisions or interpretations of the plan administrator of the applicable equity incentive plan) upon any questions arising under such equity incentive plan or relating to such eligible option(s).
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I understand that none of the officers or employees of Rent the Runway, the Board of Directors of Rent the Runway or the Compensation Committee of the Board of Directors of Rent the Runway is making any recommendation
as to whether I should exchange or refrain from exchanging my eligible options, and that I must make my own decision whether to tender my eligible options, taking into account my own personal circumstances and preferences. I understand that the new
replacement RSUs may decline in value. I further understand that past and current market prices of Rent the Runway Class A common stock may provide little or no basis for predicting what the market price of Rent the Runway Class A common stock will
be in the event I elect to exchange my options in accordance with the terms of this Option Exchange or at any other time in the future.
These Terms of Election do not constitute the Option Exchange. The full terms of the Option Exchange are described in (1) the Offer to Exchange; (2) these Terms of Election; (3) the 2021 Plan and (4) the applicable
form of restricted stock unit award agreement under the 2021 Plan (based on my status as an employee or non-employee director).
ELECTION INSTRUCTIONS
FORMING PART OF THE ELECTION TERMS AND CONDITIONS
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To participate in the Option Exchange, you must complete and deliver an election.
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Participation in this Option Exchange is voluntary. If you are an eligible service provider, at the start of the Option Exchange you will have received an announcement email from Jennifer Y. Hyman, Chief Executive Officer, dated June 9, 2023,
announcing this Option Exchange. If you do not want to participate, then no action is necessary. If you choose to participate in the Option Exchange, you must do the following before 11:59 p.m., U.S. Eastern Time, on the date of Expiration Time,
which is expected to be July 10, 2023 (unless the Option Exchange is extended).
Elections via the Option Exchange Website
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To submit an election via the Option Exchange website, click on the link to the Option Exchange website in the announcement email you received from Jennifer Y. Hyman, Chief Executive Officer, dated June 9, 2023, announcing the Option
Exchange, or go to the Option Exchange website at http://www.myoptionexchange.com/Identity/Account/Register. Log in to the Option Exchange website using the login instructions provided to you in the announcement email (or if you
previously logged into the Option Exchange website, your updated login credentials).
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After logging in to the Option Exchange website, review the information and proceed through to the “Election Form” page. You will be provided with personalized information regarding each eligible option grant you hold, including:
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the grant date of the eligible option grant;
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the per share exercise price of the eligible option grant;
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the number of vested shares of our Class A common stock or Class B common stock, as applicable, subject to the eligible option grant as of July 10, 2023 (assuming vesting in accordance with the applicable vesting schedule, and no
exercise or early termination occurs, through such date); and
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the hypothetical range of number of shares of our Class A common stock subject to the replacement RSU grant that would be granted in exchange for the eligible option grant.
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On the “Election Form” page, make your selection next to each of your eligible option grants to indicate which eligible option grants you choose to exchange in the Option Exchange by selecting “Exchange” or choose not to exchange in
the Option Exchange by selecting “Do Not Exchange.”
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Proceed through the Option Exchange website by following the instructions provided. Review your election and confirm that you are satisfied with your election. After reviewing, acknowledging and agreeing to the terms and conditions
stated on the Confirm Elections page and in the Option Exchange documents, submit your election. If you do not acknowledge and agree to the terms and conditions, you will not be permitted to submit your election.
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Upon submitting your election, a confirmation statement will be generated by the Option Exchange website. Please print and keep a copy of the confirmation statement for your records. A copy of the confirmation statement will also be
sent to your email. At this point, you will have completed the election process via the Option Exchange website.
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We must receive your properly completed and submitted election by the Expiration Time of the Option Exchange, currently expected to be 11:59 p.m., U.S. Eastern Time, on July 10, 2023. If you are unable to submit your election via the Option
Exchange website as a result of technical failures of the Option Exchange website such as the Option Exchange website being unavailable or the Option Exchange website not enabling you to submit your election, please email legal@renttherunway.com.
If you elect to exchange any portion of an individual eligible option grant in the Option Exchange, you must elect to exchange the entire individual eligible option grant. If you hold more than one individual eligible option grant, however, you
may choose to exchange one or more of such individual eligible option grants, on a grant-by-grant basis, without having to exchange all of your individual eligible option grants. No partial exchanges of an eligible option grant will be permitted.
If you are eligible to participate in the Option Exchange, the Option Exchange website will list all of your eligible options.
We may extend this Option Exchange. If we extend the offering period, we will issue a press release, email or other communication disclosing the extension no later than 9:00 a.m., U.S. Eastern Time, on July 11, 2023 (the U.S. business day
following the previously scheduled or announced Expiration Time). We reserve the right to reject any option tendered for exchange that we determine is not in the appropriate form or that we determine is unlawful to accept. Subject to the terms and
conditions of this Option Exchange, we will accept all properly tendered eligible option grants promptly after the Expiration Time of this Option Exchange.
You may change your mind after you have submitted an election and withdraw from the Option Exchange at any time on or before the Expiration Time, as described below. You may change your mind as many times as you wish, but you will be bound by
the properly submitted election we receive last on or before the Expiration Time. You also may change your mind about which of your eligible option grants you wish to have exchanged. If you wish to include more or fewer eligible option grants in
your election, you must complete and submit a new election on or before the Expiration Time by following the procedures described below. This new election must be properly submitted after any prior elections you have submitted and must list all
eligible option grants you wish to exchange. Any prior election will be disregarded. If you wish to withdraw some or all of the eligible option grants you elected for exchange, you may do so at any time on or before the Expiration Time by following
the procedures described below.
Your delivery of all documents regarding the Option Exchange, including elections, is at your risk. If you submit your election via the Option Exchange website, a confirmation statement will be generated by the Option
Exchange website at the time that you complete and submit your election. You should print and keep a copy of the confirmation statement for your records. A copy of the confirmation statement will also be sent to your email. The printed confirmation
statement will provide evidence that you submitted your election. If you do not receive a confirmation, it is your responsibility to confirm that we have received your election. If you do not receive a confirmation, we recommend that you confirm
that we have received your election by emailing renttherunway@infiniteequity.com. Only responses that are properly completed and actually received by us by the deadline through the Option Exchange website at www.myoptionexchange.com will be
accepted. Responses submitted by any other means, including hand delivery, interoffice, email, U.S. mail (or other post) and Federal Express (or similar delivery service), are not permitted.
We reserve the right to reject any option tendered for exchange that we determine is not in the appropriate form or that we determine it is unlawful to accept. Subject to the terms and conditions of this Option Exchange, we will accept all
properly tendered eligible option grants promptly after the Expiration Time of this Option Exchange.
Our receipt of your election is not by itself an acceptance of your options for exchange. For purposes of this Option Exchange, we will be deemed to have accepted options for exchange that are validly elected to be exchanged and are not properly
withdrawn as of the time when we give oral or written notice to the option holders generally of our acceptance of options for exchange. We may issue this notice of acceptance by press release, email or other form of communication. Options accepted
for exchange will be cancelled on the first business day following the Expiration Time, which we presently expect will be July 11, 2023.
Rent the Runway will not accept any alternative, conditional or contingent tenders. Any confirmation of receipt provided to you merely will be a notification that we have received your election form and does not mean that your eligible options
have been cancelled. Your eligible options that are accepted for exchange will be cancelled on the first business day following the Expiration Time of the Option Exchange, which cancellation is scheduled to be July 11, 2023 (unless the Option
Exchange is extended).
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To change or withdraw prior elections of your eligible options, you must complete and deliver a new election.
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You may change an election you previously made with respect to some or all of your eligible options, including an election to withdraw all of your eligible options from this Option Exchange, only in accordance with the provisions of Section 5 of
the Offer to Exchange. You may change your mind after you have submitted an election and withdraw some or all of your elected eligible options from the Option Exchange at any time before the Expiration Time of the Option Exchange, currently
expected to be 11:59 p.m., U.S. Eastern Time, on July 10, 2023. If we extend the Expiration Time, you may change or withdraw your election of tendered options at any time until the extended Option Exchange expires. In addition, under U.S.
securities laws, if we have not accepted your options by 11:59 p.m., U.S. Eastern Time, on August 7, 2023 (which is the 40th U.S. business day following the
commencement of the Option Exchange), you may withdraw your options at any time thereafter up to such time as Rent the Runway does accept your properly tendered options.
To change an election you previously made with respect to some or all of your eligible option grants, including an election to withdraw all of your eligible option grants from this Option Exchange, you must deliver a valid new election
indicating only the eligible option grants you wish to exchange in the Option Exchange or a valid new election indicating that you reject the Option Exchange with respect to all of your eligible options, by completing the election process described
below on or before the Expiration Time, currently expected to be 11:59 p.m., U.S. Eastern Time, on July 10, 2023.
Election Changes and Withdrawals via the Option Exchange Website
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Log in to the Option Exchange website at www.myoptionexchange.com.
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After logging in to the Option Exchange website, review the information and proceed through to the “Election Form” page, where you will find personalized information regarding each eligible option grant you hold, including:
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the grant date of the eligible option grant;
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the per share exercise price of the eligible option grant;
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the number of vested shares of our Class A common stock or Class B common stock, as applicable, subject to the eligible option grant as of July 10, 2023 (assuming vesting in accordance with the applicable vesting schedule, and no
exercise or early termination occurs, through such date); and
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the hypothetical range of number of shares of our Class A common stock subject to the replacement RSU grant that would be granted in exchange for the eligible option grant.
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On the “Election Form” page, change your selection next to each of your eligible option grants to indicate which eligible option grants you choose to exchange in the Option Exchange by selecting “Exchange” or choose not to exchange in
the Option Exchange by selecting “Do Not Exchange.”
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Proceed through the Option Exchange website by following the instructions provided. Review your election and confirm that you are satisfied with your election. After reviewing, acknowledging and agreeing to the terms and conditions
stated on the Confirm Elections page and in the Option Exchange documents, submit your election. If you do not acknowledge and agree to the terms and conditions, you will not be permitted to submit your election.
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Upon submitting your election, a confirmation statement will be generated by the Option Exchange website. Please print and keep a copy of the confirmation statement for your records. A copy of the confirmation statement will also be
sent to your email. At this point, you will have completed the process for changing your previous election or withdrawing from participation in the Option Exchange via the Option Exchange website.
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You may change your mind as many times as you wish, but you will be bound by the properly submitted election we receive last on or before the Expiration Time of the Option Exchange, currently expected to be 11:59 p.m., U.S. Eastern Time, on July
10, 2023. Any options with respect to which you do not revise your election will be bound to your prior election. If you are unable to submit your election via the Option Exchange website as a result of technical failures of the Option Exchange
website such as the Option Exchange website being unavailable or the Option Exchange website not enabling you to submit your election, please email to legal@renttherunway.com.
If you change your election to withdraw some or all of your eligible option grants, you may elect later to exchange the withdrawn eligible option grants again at any time on or before the Expiration Time of the Option Exchange. All eligible
option grants that you withdraw will be deemed not properly tendered for purposes of the Option Exchange, unless you subsequently properly elect to exchange such eligible option grants on or before the Expiration Time of the Option Exchange. To
reelect to exchange some or all of your eligible option grants, you must submit a new election by completing a new election on the “Election Form” page of the Option Exchange website on or before the Expiration Time of the Option Exchange by
following the procedures described in Section 3 of the Offer to Exchange. This new election must be properly submitted after your previously submitted election and must list all eligible option grants you wish to exchange. Upon our receipt of your
properly submitted election, any prior election will be disregarded in its entirety and will be considered replaced in full by the new election. Each time you make an election on the Rent the Runway Option Exchange
website, please be sure to make an election with respect to each of your eligible option grants.
If you intend to tender an eligible option grant through the Option Exchange, you must tender all of your shares of Rent the Runway’s Class A common stock or Class B common stock, as applicable, subject to that eligible option grant.
You may pick and choose which of your outstanding eligible option grants you wish to exchange if you hold more than one eligible option grant and you may choose to exchange in the Option Exchange one or more of your eligible option grants
without having to exchange all of your eligible option grants. However, if you decide to participate in this Option Exchange to exchange an eligible option grant, you must elect to exchange that entire eligible option grant (that is, all eligible
options subject to that eligible option grant).
However, if you have an eligible option grant that is subject to a domestic relations order (or comparable legal document as the result of the end of a marriage) and a person who is not an eligible service provider beneficially owns a portion of
that eligible option grant, then in order to participate in the Option Exchange with respect to such eligible option grant, you may accept this Option Exchange with respect to the entire remaining outstanding portion of the eligible option grant,
including the portion beneficially owned by the other person, as long as you are the legal owner of the eligible option grant. We will not accept partial tenders of option grants, so you may not accept this Option Exchange with respect to a portion
of an eligible option grant that is beneficially owned by you while rejecting it with respect to the portion beneficially owned by someone else. As you are the legal owner of the eligible option grant, we will respect an election properly made by
you, but will not be responsible to you or the beneficial owner of the eligible option grant for any errors made by you with respect to such eligible option grant.
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Signatures on elections.
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Logging in to the Option Exchange website and completing and submitting your election via the Option Exchange website is the equivalent of signing your name on a paper election form and has the same legal effect as your written signature.
If the election form is signed by a trustee, executor, administrator, guardian, attorney in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, that person should so indicate when signing, and proper
evidence satisfactory to Rent the Runway of the authority of that person to act in that capacity must be submitted with the election form.
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Other information on elections.
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When submitting the election via the Option Exchange website, please confirm that your name, email address, and other information are correct.
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Requests for assistance or additional copies.
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Any questions and any requests for additional copies of the election form or other Option Exchange documents may be directed to legal@renttherunway.com. Copies will be furnished promptly at Rent the Runway’s expense.
Neither we nor any other person is obligated to give you notice of any defects or irregularities in any election, nor will anyone incur any liability for failure to give any notice. We will determine, in our discretion, all questions about the
validity, form, eligibility (including time of receipt) and acceptance of any eligible options. Our determination of these matters will be given the maximum deference permitted by law. However, you have all rights accorded to you under applicable
law to challenge such determination in a court of competent jurisdiction. Only a court of competent jurisdiction can make a determination that will be final and binding upon the parties. We reserve the right to reject any election of any option
tendered for exchange that we determine is not in an appropriate form or that we determine is unlawful to accept. We will accept all properly tendered eligible options that are not validly withdrawn, subject to the terms of this Option Exchange.
We also reserve the right to waive any of the conditions of the Option Exchange or any defect or irregularity in any tender of any particular options or for any particular option holder, provided that if we grant any such waiver, it will be
granted with respect to all option holders and tendered options in a uniform and nondiscriminatory manner. No tender of options will be deemed to have been properly made until all defects or irregularities have been cured by the tendering holder of
the eligible options or waived by us.
Important: Elections must be received via the Option Exchange website at www.myoptionexchange.com on or before 11:59 p.m., U.S. Eastern Time, on July 10, 2023 (unless the Option Exchange is extended).
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Additional documents to read.
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You should be sure to read the Offer to Exchange, all documents referenced therein, this Election Terms and Conditions and its associated instructions, and the announcement email you received from Jennifer Y. Hyman, Chief Executive Officer,
dated June 9, 2023, announcing the Option Exchange, before deciding to participate in the Option Exchange.
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Important tax information.
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Please refer to Section 13 of the Offer to Exchange for a discussion of the material U.S. federal income tax consequences. We also recommend that you consult with your personal advisers before deciding whether or not to participate in this
Option Exchange.
Exhibit (a)(1)(ix)
FREQUENTLY ASKED QUESTIONS AND ANSWERS
The following are answers to some of the questions that you may have about the Option Exchange. We urge you to read them carefully, as well as the remainder of this Offer to Exchange. Where applicable, we have included
section references to the remainder of this Offer to Exchange where you can find a more complete description of the topics in this question and answer summary. We suggest that you consult with your personal financial, legal and tax advisors before
deciding whether to participate in the Option Exchange. Please review this summary term sheet and questions and answers, and the remainder of this Offer to Exchange and the Terms of Election to ensure that you are making an informed decision
regarding your participation in the Option Exchange. This summary is not intended to reflect any specific terms that relate to options held by our former Chief Financial Officer, that were agreed to pursuant to the terms of her Transition Agreement.
The questions have been separated into three sections:
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Administrative/Timing.
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Other Important Questions.
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Exchange Design
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What is the Option Exchange?
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The Option Exchange is being offered by Rent the Runway to allow eligible active service providers of Rent the Runway to exchange their outstanding options that remain outstanding and unexercised prior to the
completion of the Option Exchange for new restricted stock units, each representing the right to receive one share of our Class A common stock, which we refer to as replacement RSUs.
The number of eligible options to be surrendered in exchange for each replacement RSU will be determined by the exchange ratio described below under question 3. The replacement RSUs will be granted under the 2021 Plan
on the replacement RSUs grant date, which will be the date on which we cancel the eligible options accepted for exchange, which we expect will be the first business day following the expiration date of the Option Exchange. The replacement RSUs will
have the terms and be subject to the conditions as provided for in the 2021 Plan and RSU Agreement entered into between you and RTR.
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2.
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Why are we offering the Option Exchange?
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An objective of our equity incentive programs has been, and continues to be, to provide us with a competitive advantage, particularly in our efforts to hire and retain top talent, and we believe that the Option
Exchange is an important component in our efforts to achieve that goal. We are implementing the Option Exchange using an exchange ratio designed to result in potential grants of replacement RSUs with an aggregate fair value that will be between 90%
to 100% of the aggregate fair value of the eligible options that are surrendered in the Option Exchange.
A significant majority of our service providers’ options have exercise prices that exceed, in some cases significantly, the trading prices of our Class A common stock over the past year. We believe these underwater
options are no longer effective as incentives to motivate and retain our service providers. In the face of a competitive market for exceptional service providers, the need for adequate and appropriate incentives and retention tools remains strong.
The Option Exchange will also allow our eligible non-employee directors to be fairly compensated for their service on our Board of Directors.
As of June 2, 2023, we had an aggregate of 11,092,146 shares of Class A common stock and Class B common stock available for issuance subject to outstanding options and restricted stock units under our equity incentive
plans or available for issuance under the 2021 Plan, which we collectively refer to as our “overhang.” As of June 2, 2023, eligible options outstanding under our existing equity incentive plans were exercisable for approximately 3,888,155 shares of
Class A common stock and approximately 3,057,017 shares of Class B common stock.
Eligible options remain outstanding and contribute to overhang until such time as they expire or are otherwise cancelled. Although eligible options are not likely to be exercised as long as our share price is lower
than the applicable exercise price, they will remain on our financial statements with the potential to dilute shareholders’ interests for up to the full term of the options, while delivering relatively little retentive or incentive value, unless they
are surrendered or cancelled. For illustrative purposes, if all of these eligible stock options are exchanged and replaced by replacement RSUs at an exchange ratio of 2.9 to 1, which is the midpoint of the range of our expected exchange ratio, there
would be a net reduction in the overhang of our equity awards by approximately 4,550,285 shares subject to outstanding options. We believe that the replacement RSUs will drive service provider retention as they have inherent value and are more
motivational than current underwater options. The Option Exchange gives eligible service providers an opportunity to exchange certain options that are significantly “underwater” as of the commencement date for replacement RSUs that may provide value
to eligible service providers, even if our stock price does not increase. Further, surrendered eligible options will be cancelled and returned to the pool of shares reserved for future grant under the 2021 Plan.
The Option Exchange is voluntary and will allow eligible service providers to choose whether to keep their existing options at existing exercise prices and vesting
schedules or to exchange those options for replacement RSUs. We intend the Option Exchange to enable eligible service providers to restore equity value so they are further motivated to deliver the important strategic and operational initiatives of
our Company.
Subject to the limitations set forth in Section 6 of this Offer to Exchange (“Conditions of the Option Exchange”) and Section 14 of this Offer to Exchange (“Extension of the Option Exchange; Termination; Amendment”),
respectively, we reserve the right before the Expiration Time, to terminate or amend the Option Exchange and to postpone our acceptance and cancellation of any options elected for exchange, if at any time on or after the date of commencement of the
Option Exchange and prior to the Expiration Time certain events have occurred, including any increase or decrease of greater than 33% of the market price of our Class A common stock that occurs during the tender offer as measured from $2.45, which
was the closing price of our Class A common stock on Nasdaq on June 8, 2023.
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3.
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How do RSUs differ from stock options?
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The table below outlines some key differences between stock options and RSUs:
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Stock Options
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RSUs
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What they are
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The right to purchase a fixed number of shares of Rent the Runway Class A common stock or Class B common stock, as applicable, at a fixed exercise price for a fixed period of time.
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The right to receive shares of Rent the Runway Class A common stock in the future at no exercise or purchase price.
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How they work
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Once a stock option grant vests, you can exercise the vested portion at any time until the expiration date of that option. Exercising means you buy the stock at the exercise price set on the date of grant.
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Once an RSU vests, a share of Rent the Runway Class A common stock is issued to you and at no cost to you, other than any applicable withholding taxes associated with the RSU. The value you receive for an RSU upon issuance of the Class A
common stock will be based on the then-current Rent the Runway stock price. Once our stock is issued to you following the vesting of the RSU, you can either keep it as an investment or sell it.
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If the price of our Class A common stock or Class B common stock is greater than the exercise price when you exercise and sell the shares, you receive the gain (after payment of applicable taxes).
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However, when our stock price is less than the exercise price, the stock option has no intrinsic value and is considered to be underwater.
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4.
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Will my replacement RSUs have an exercise or purchase price? What will their terms and conditions be?
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Your replacement RSUs will not have an exercise or purchase price. Each replacement RSU will represent your right to receive one share of our Class A common stock upon vesting for each replacement RSU that vests in the
future. See Section 1 of this Offer to Exchange (“Eligibility; Number of Options; Expiration Time”) below for additional information. You do not have to make a cash payment to RTR to receive a grant of replacement RSUs in exchange for your exchanged
eligible options or pay RTR to receive the shares of Class A common stock that become issuable to you if your replacement RSUs vest though you may have taxes due on the vesting or settlement of the RSUs. Generally, replacement RSUs that do not vest
will be forfeited to RTR, as determined in accordance with the 2021 Plan and applicable RSU Agreement.
See Section 7 of this Offer to Exchange (“Price Range of Class A Common Stock Underlying the Options”) for information concerning our historical Class A common stock prices.
Replacement RSUs will have the terms and be subject to the conditions as provided for in the 2021 Plan and the RSU Agreement. In addition, the number of shares subject to the replacement RSUs and the replacement RSUs’
vesting dates will be different from the terms that are applicable to eligible options.
You are encouraged to consult the 2021 Plan and RSU Agreement for complete information about the terms of the replacement RSUs, which are available through the option exchange website.
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5.
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How does the Option Exchange work?
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We are offering eligible service providers the opportunity to exchange eligible options that remain outstanding and unexercised prior to the completion of the Option Exchange for a number of replacement RSUs, based on
the exchange ratio described below. The outstanding options that you hold give you the right to purchase a fixed number of Rent the Runway Class A common stock or Class B common stock, as applicable, once you exercise those options by paying the
applicable exercise price of those options (and satisfying any applicable tax withholding obligations). Thus, when we use the term “options” in this Option Exchange, we refer to the actual options you hold to purchase our Class A common stock or
Class B common stock, as applicable, and not the shares of Class A common stock or Class B common stock underlying those options.
Participating in the Option Exchange requires an eligible service provider to make a voluntary election to tender eligible options on or before 11:59 P.M. U.S. Eastern Time on Monday, July 10, 2023, unless the Option
Exchange is extended, after which time such election will be irrevocable.
Unless prevented by law or applicable regulations, eligible options accepted for exchange will be cancelled, and replacement RSUs will be granted under our 2021 Plan.
Examples
To illustrate how the exchange ratio works, assume that:
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(a)
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You are an active service provider.
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(b)
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You have an eligible option to purchase 1,000 shares.
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(c)
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The exchange ratio is determined to be 2.9 to 1.
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(d)
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The replacement RSUs grant date is July 11, 2023.
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If you elect to participate in the Option Exchange, you would receive 344 replacement RSUs for the eligible option to purchase 1,000 shares (i.e., 1,000 ÷ 2.9) (with any fractional RSUs rounded down to the nearest whole share).
Replacement RSUs will vest in eight equal quarterly installments over two years on November 1, 2023, February 1, 2024, May 1, 2024, August 1, 2024, November 1, 2024, February 1, 2025, May 1, 2025, and August 1, 2025
(which vesting dates may change if the Expiration Time is extended), subject to your continued employment or service through the applicable vesting dates, regardless of whether any of the surrendered eligible options are vested as of July 10, 2023.
This means that each replacement RSU will generally be completely unvested on July 11, 2023 (the replacement RSUs grant date in this example), regardless of whether the surrendered option was wholly or partially vested on such date.
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6.
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What does the exchange ratio mean and what will it be?
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The exchange ratio in the Option Exchange represents the number of Class A common stock or Class B common stock, as applicable, underlying an eligible option that a service provider must surrender in order to receive
one Class A common stock underlying a replacement RSU. The exchange ratio for the Option Exchange cannot be calculated as of the date of the Option Exchange because the ratio will be based in part on the 20-Day VWAP. The same exchange ratio will be
applied to all eligible options and will represent an amount that would result, as of the determination time, in the issuance of a number of replacement RSUs that would have an aggregate fair value equal to a specific amount between 90% to 100% of
the aggregate fair value of all eligible options, and not on a grant-by-grant basis (assuming all eligible options are exchanged and calculated using a Black-Scholes valuation model), which we refer to as a “value-for-value” exchange. As such, on an
individual grant basis, the number of replacement RSUs that you receive may not have a fair value equal to 90% to 100% of the fair value of the eligible options that you exchanged.
The exchange ratio will be determined using the Black-Scholes valuation model and will be based on, among other things, the price of our Class A common stock, the volatility of the stock price of our peers and us, and
the strike price and remaining term of the eligible stock options in order to balance the compensatory goals of the Option Exchange and the interests of our shareholders, including reducing our total number of common stock underlying outstanding
options, avoiding further dilution to our shareholders and minimizing the share compensation expense of the grants of replacement RSUs. For the purposes of determining the fair value of eligible options, the fair market value of a share of our Class
A common stock will be determined based on the trailing 20-Day volume weighted average price, or “20-Day VWAP”. The 20-Day VWAP means the simple arithmetic average of the Daily VWAPs (as defined below) over the 20 consecutive trading days up to and
including July 7, 2023. The “Daily VWAP” means, for any trading day, the per share volume-weighted average price of our Class A common stock on Nasdaq, as displayed under the heading “Bloomberg VWAP” on Bloomberg page “RENT <equity> AQR” (or
its equivalent successor if such page is not available), in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session of Nasdaq on such trading day (or if such volume-weighted average
price is unavailable, the market value of one share of our Class A common stock on such trading day determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained for this purpose by us).
The Daily VWAP will be determined without regard to pre-market hours or after-hours trading or any other trading outside of the regular trading session trading hours.
Because the methodology used to calculate the final exchange ratio will include the Black-Scholes value of the eligible options and the replacement RSUs, the exact exchange ratio will not be known until shortly after
the close of trading, U.S. Eastern Time, on July 7, 2023. After the close of trading, U.S. Eastern Time, on July 7, 2023, we will distribute by email to all holders the exact exchange ratio to be used in the Option Exchange with respect to all
eligible options.
For illustrative purposes only, below is a table setting forth the number of replacement RSUs you could receive in exchange for an eligible option to purchase 1,000 shares, at various exchange ratios within the
currently expected range. However, because the exchange ratio will be based in part on the future value of our Class A common stock, which is inherently difficult to predict, the final exchange ratio selected by the Compensation Committee could fall
outside of this range. For example, if the 20-Day VWAP is between $1.00 - $2.00, the exchange ratio could potentially fall within a range as high as 2.5-4.1 to 1.0 and, conversely, if the 20-Day VWAP is between $4.00 - $5.00, the exchange ratio could
potentially fall within a range as low as 1.7-2.1 to 1.0.
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Hypothetical Exchange Ratios for Eligible
Options
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Number of
Eligible
Options
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Exchange
Ratio
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Number of
Replacement
RSUs
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1,000
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2.0 : 1.0
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500
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1,000
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2.3 : 1.0
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434
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1,000
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2.6 : 1.0
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384
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1,000
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2.9 : 1.0
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344
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1,000
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3.2 : 1.0
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312
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1,000
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3.5 : 1.0
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285
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1,000
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3.8 : 1.0
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263
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7.
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Which options are eligible for the Option Exchange?
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Options eligible for exchange are those held by active service providers that remain outstanding and unexercised prior to the completion of the Option Exchange.
Additionally, options that expire pursuant to their terms prior to the completion of the Option Exchange will be forfeited and will not eligible to be exchanged for replacement RSUs.
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8.
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Who is eligible to participate in the Option Exchange?
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You are eligible to participate in the Option Exchange only if (i) you are an active U.S.-based employee, individual consultant or non-employee director (each, a “service provider”) of Rent the Runway as of the date
this Option Exchange commences and remain an active service provider through the completion of the Option Exchange and (ii) you hold at least one eligible option as of the commencement of the Option Exchange.
If you are no longer employed by or engaged as a service provider to Rent the Runway, whether your termination is voluntary, involuntary, or for any other reason as of the completion of the Option Exchange, you will
not be able to participate in the Option Exchange.
ACCORDINGLY, IF YOU ARE NOT AN ELIGIBLE SERVICE PROVIDER OF RENT THE RUNWAY AT THE EXPIRATION TIME, EVEN IF YOU HAD ELECTED TO PARTICIPATE IN THE OPTION EXCHANGE AND HAD TENDERED SOME OR ALL OF YOUR OPTIONS FOR
EXCHANGE, YOUR TENDER WILL AUTOMATICALLY BE DEEMED WITHDRAWN AND YOU WILL NOT PARTICIPATE IN THE OPTION EXCHANGE, AND YOU WILL RETAIN YOUR OUTSTANDING OPTION(S) IN ACCORDANCE WITH THEIR CURRENT TERMS AND CONDITIONS. IN THE CASE OF A TERMINATION OF
YOUR EMPLOYMENT OR SERVICE, YOU MAY BE ENTITLED TO EXERCISE YOUR OUTSTANDING OPTION(S) DURING A LIMITED PERIOD OF TIME FOLLOWING THE TERMINATION OF EMPLOYMENT OR SERVICE IN ACCORDANCE WITH THEIR TERMS TO THE EXTENT THAT THEY ARE VESTED AS OF SUCH
TERMINATION OF EMPLOYMENT OR SERVICE. See Section 1 of this Offer to Exchange (“Eligibility; Number of Options; Expiration Time”) and Section 5 of this Offer to Exchange (“Acceptance of Options for Exchange; Grant of Replacement RSUs”) below for
additional information.
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9.
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Why isn’t the exchange ratio set at one-for-one?
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The exchange ratio will be calculated to result in an aggregate fair value, for accounting purposes, of the replacement RSUs that will be between 90% to 100% of the aggregate fair value of the eligible options they
replace, and not on a grant-by-grant basis (assuming all eligible options are exchanged and calculated using a Black-Scholes valuation model), calculated as of July 7, 2023, in order to balance the compensatory goals of the option exchange and the
interests of our shareholders, including reducing our total number of common stock underlying outstanding options, avoiding further dilution to our shareholders and minimizing the share-based compensation expense of the grants of replacement RSUs.
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10.
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If I participate, what will happen to my exchanged options?
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Eligible options that you elect to exchange will be cancelled on the first business day following the expiration date of the Option Exchange, which is currently scheduled for 11:59 P.M. U.S. Eastern Time on Monday,
July 10, 2023, unless the Option Exchange is extended.
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11.
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Can I select which of my eligible options to exchange? If I elect to exchange some of my eligible options, do I have to elect to exchange all of my eligible options?
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If you hold more than one eligible separate option grant, you may choose to elect to exchange your eligible options on a grant-by-grant basis (determined based on options having the same grant date and exercise price),
without having to exchange all of your eligible separate option grants. If you elect to exchange any portion of an eligible separate option grant in the Option Exchange, you must elect to exchange that entire eligible separate option grant. No
partial exchanges of separate option grants will be permitted.
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12.
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What happens to eligible options that I choose not to exchange or that you do not accept for exchange?
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Eligible options that you choose not to exchange or that we do not accept for exchange will remain outstanding and will retain their existing terms, exercise prices and vesting schedules.
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13.
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What happens if I have an eligible option grant that is subject to a domestic relations order or comparable legal document as the result of the end of a marriage?
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If you have an eligible separate option grant that is subject to a domestic relations order (or comparable legal document as the result of the end of a marriage) and a person who is not an eligible service provider
beneficially owns a portion of that eligible separate option grant, then in order to participate in the Option Exchange with respect to such eligible separate option grant, you may accept this Option Exchange with respect to the entire remaining
outstanding portion of the eligible separate option grant, including the portion beneficially owned by the other person, as long as you are the legal owner of the eligible separate option grant. We are not accepting partial tenders of an eligible
separate option grant, so you may not accept this Option Exchange with respect to a portion of an eligible separate option grant that is beneficially owned by you while rejecting it with respect to the portion beneficially owned by someone else. As
you are the legal owner of the eligible separate option grant, we will respect an election properly made by you, but will not be responsible to you or the beneficial owner of the eligible separate option grant for any errors made by you with respect
to such eligible separate option grant.
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14.
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What are the conditions to the Option Exchange?
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The Option Exchange is subject to the conditions described in Section 6 of this Offer to Exchange (“Conditions of the Option Exchange”). The Option Exchange is not conditioned upon a minimum aggregate number of options
being elected for exchange. See Section 6 of this Offer to Exchange (“Conditions of the Option Exchange”) below for additional information.
Administrative/Timing
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15.
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How do I participate in the Option Exchange?
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If you choose to participate in the Option Exchange, you must take the following action on or before 11:59 P.M., U.S. Eastern Time, on Monday, July 10, 2023:
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1.
|
Use your user log-in ID and password (which you will set up using instructions that will be emailed to you) to access the option exchange website at www.myoptionexchange.com; and
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2.
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Properly complete and submit your election via the option exchange website by (a) navigating to the Election Form page, (b) indicating which eligible options you wish to exchange by selecting “Exchange” or “Do Not Exchange” in the
Election column and “Next” at the bottom of the page, and (c) after reading all of the offering documents, checking the appropriate boxes, typing your electronic signature, and selecting “Submit.” By selecting the “Submit” button you are
acknowledging and agreeing to the Terms of Election.
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Rent the Runway must receive your properly completed submission on or before 11:59 P.M. U.S. Eastern Time on Monday, July 10, 2023, unless extended by us.
You can change your election any time on or after the commencement of the Option Exchange and prior to the Expiration Time; however, the last election that you make, if any, on or prior to 11:59 P.M. U.S. Eastern Time
on Monday, July 10, 2023 will be final and irrevocable.
If you elect to exchange an eligible separate option grant, you must elect to exchange that entire eligible option grant. If you hold more than one eligible separate option grant, however, you may choose to exchange
separate eligible option grants, on a grant-by-grant basis, without having to exchange all of your eligible option grants. No partial exchanges of separate option grants will be permitted. If you are eligible to participate in the Option Exchange,
the option exchange website will list all of your eligible separate option grants.
Confirmation statements for submissions through the option exchange website will be emailed directly to you, and you may also obtain a confirmation from the option exchange website after submitting your election or
withdrawal. You should print and save a copy of the confirmation for your records.
Elections submitted by any other means, including email, facsimile, hand delivery, interoffice, United States mail (or other post) and Federal Express (or similar delivery service), are not permitted, and will not be
accepted.
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16.
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How do I find out the details about my existing options?
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Information on your eligible options will be provided to you with the Option Exchange on the option exchange website located at www.myoptionexchange.com.
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17.
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What will happen if I do not submit my election by the deadline?
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If you do not submit your election by the deadline, then you will not participate in the Option Exchange, and all options currently held by you will remain intact at their original exercise price and subject to their
original terms and conditions. (See “Risk Factors” below for additional information).
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18.
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How will we determine whether an eligible option has been properly tendered?
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We will determine, in our sole discretion, all questions as to the validity, form, eligibility (including time of receipt) and acceptance of any eligible option grants. We reserve the right to reject any election or any eligible option elected to
be exchanged that we determine are not in appropriate form or that we determine are unlawful to accept or not timely made. Neither we nor any other person is obligated to give notice of any defects or irregularities in any election, nor will anyone
incur any liability for failure to give any notice. No surrender of eligible options will be deemed to have been properly made until all defects or irregularities have been cured by the tendering holder of the eligible options or waived by us.
Subject to any order or decision by a court or arbitrator of competent jurisdiction, our determination of these matters will be final and binding on all parties. Subject to Rule 13e-4 under the Exchange Act we also reserve the right to waive any of
the conditions of the Option Exchange or any defect or irregularity in any surrender with respect to any particular eligible options or any particular eligible service provider.
See also Section 3 of this Offer to Exchange (“Procedures for Electing to Exchange Options”) below for additional information.
IF YOU FAIL TO PROPERLY SUBMIT YOUR ELECTION BY THE DEADLINE, YOU WILL NOT BE PERMITTED TO PARTICIPATE IN THE OPTION EXCHANGE.
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19.
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During what period of time can I withdraw or change my previous elections?
|
You can withdraw or change your previously submitted election to exchange or not exchange eligible options at any time on or before 11:59 P.M. U.S. Eastern Time on Monday, July 10, 2023, unless extended by us. If the
Option Exchange is extended beyond July 10, 2023, you can withdraw or change your election at any time until the extended expiration of the Option Exchange. To change your previously submitted election, you must submit a new election in the same
manner described in Question 13 before the election deadline. To withdraw your previously submitted election, submit a new election before the election deadline, and select “No” in the election column for the particular option(s) you wish to
withdraw. It is your responsibility to confirm that we have received your correct election before the deadline. In all cases, the last election submitted and received prior to the deadline will be final and irrevocable. See Section 4 of this Offer to
Exchange (“Withdrawal Rights”) below for additional information.
AFTER THE DEADLINE TO WITHDRAW OR CHANGE YOUR ELECTION HAS OCCURRED, YOU WILL NOT BE PERMITTED TO WITHDRAW OR CHANGE YOUR ELECTION.
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20.
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Can I exchange the remaining portion of an eligible separate option grant that I have already partially exercised?
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Yes, any unexercised portion of an eligible separate option grant can be exchanged. If you have previously exercised a portion of an eligible separate option grant, only the portion of that separate option grant that
has not yet been exercised will be eligible to be exchanged. Any portion of a separate option grant that has been exercised is not eligible to participate in the Option Exchange. The replacement RSUs will only replace the portion of eligible separate
option grant that is cancelled upon the expiration of the Option Exchange.
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21.
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Can I exchange both vested and unvested eligible options?
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Yes. You can exchange eligible options regardless of whether they are vested or unvested. However, you will not be able to choose to only exchange the vested or unvested portion of a particular option grant. If you
choose to exchange a particular option grant, you must exchange all of the unexercised portion of such grant.
As a reminder, each replacement RSU will generally be completely unvested on the replacement RSUs grant date, regardless of whether the surrendered eligible option was wholly or partially vested.
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22.
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Will I be required to give up all of my rights under the exchanged options?
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Yes. Once RTR has accepted your exchanged options, your exchanged options will be cancelled and you will no longer have any rights under those exchanged options. RTR will cancel all exchanged options on the first business day following the
Expiration Time. We expect to grant the replacement RSUs on the first business day following the Expiration Time. See Section 8 of this Offer to Exchange (“Source and Amount of Consideration; Terms of Replacement RSUs”) below for additional
information. Once your exchanged options have been cancelled, you do not need to take additional action in order to receive your replacement RSUs.
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23.
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When will the replacement RSUs vest?
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Replacement RSUs will generally be unvested on the replacement RSUs grant date and will vest in eight equal quarterly installments over two years on November 1, 2023, February 1, 2024, May 1, 2024, August 1, 2024,
November 1, 2024, February 1, 2025, May 1, 2025, and August 1, 2025 (which vesting dates may change if the Expiration Time is extended), subject to your continued employment or service through the applicable vesting dates.
Like all of our outstanding options and restricted stock units, the vesting of the replacement RSUs is dependent upon continued employment with Rent the Runway (if you are an employee) or continued service with Rent
the Runway (if you are an individual consultant or non-employee director) through the applicable vesting date. Replacement RSUs are subject to the terms and conditions as provided for in the 2021 Plan and the RSU Agreement and may be forfeited if not
vested at the time of a termination of service. See Section 8 of this Offer to Exchange (“Source and Amount of Consideration; Terms of Replacement RSUs”) below for additional information.
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24.
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What if my employment or service with Rent the Runway is terminated after the replacement RSUs are granted?
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If your employment or service is terminated for any reason after the replacement RSUs has been granted, replacement RSUs will generally be forfeited if not vested at the time of a termination of employment or service. See Section 8 of this Offer
to Exchange (“Source and Amount of Consideration; Terms of Replacement RSUs”) below for additional information.
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25.
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What happens if Rent the Runway is subject to a change in control BEFORE the replacement RSUs are granted?
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Although we are not currently contemplating a merger or similar transaction that could result in a change in control of our Company, we reserve the right, in the event of a merger or similar transaction, to take any
actions that we deem necessary or appropriate to complete a transaction that our Board of Directors believes is in the best interest of our Company and our shareholders. This could include terminating the Option Exchange and/or your right to receive
replacement RSUs under the Option Exchange.
Any change in control transaction, or announcement of such transaction, could have a substantial effect on our share price.
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26.
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Are there other circumstances where I would not be granted replacement RSUs?
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Yes. Even if we accept your tendered options, we will not grant replacement RSUs to you if we are prohibited by applicable law or regulations from doing so, or until all necessary government approvals have been
obtained. We will use reasonable efforts to avoid a prohibition, but if prohibited by applicable law or regulation on the date of Expiration Time, you will not be granted replacement RSUs, if at all, until all necessary government approvals have been
obtained. In addition, we will not grant replacement RSUs to you if you are not an eligible service provider on the replacement RSUs grant date. See Section 12 of this Offer to Exchange (“Agreements; Legal
Matters; Regulatory Approvals”) below for additional information.
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27.
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Will my decision to participate in the Option Exchange have an impact on my ability to receive options or other equity awards in the future?
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No. Your election to participate or abstain from participating in the Option Exchange will have no effect on our making future grants of options, other equity awards, or any other rights to you or anyone else.
Other Important Questions
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28.
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What are the U.S. Federal tax consequences of my participation in the Option Exchange?
|
If you accept the Option Exchange and reside and work in the United States, under current U.S. law, you generally will not recognize income for federal income tax purposes either at the time your exchanged options are
cancelled or when the replacement RSUs are granted. You generally will recognize income for income tax and other tax purposes when the replacement RSUs vest and the shares underlying the replacement RSUs are issued to you. If you are subject to the
tax laws of a country other than the United States, even if you are a resident of the United States, you should be aware that there may be other tax consequences that may apply to you. Tax consequences may vary depending on each individual’s
circumstances. Included as part of this Option Exchange are disclosures regarding the expected material federal tax consequences of the Option Exchange in the United States. You should review these disclosures carefully before deciding whether or not
to participate in the Option Exchange.
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29.
|
How should I decide whether or not to participate?
|
The decision to participate must be each individual’s personal decision and will depend largely on each individual’s assumptions about the future of our business, our share price, the overall economic environment, and
the performance of publicly traded stocks generally. Please review all of the materials provided to you in connection with the Option Exchange, including this Offer to Exchange, Summary Term Sheet and Questions and Answers. These materials can all be
found on the Option Exchange website and in, or filed as exhibits to, a document filed by RTR with the SEC called a “Schedule TO,” which is available on the SEC website at http://www.sec.gov.
In addition to reviewing the materials provided, please note the following:
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1.
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The number of shares issuable under your replacement RSUs will be determined based on an exchange ratio that will not be known until July 7, 2023, the last business day prior to the Expiration Time. You will likely receive fewer shares
subject to your replacement RSUs than underlying your eligible options that you surrender for exchange.
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2.
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Options generally provide value upon exercise only if our common stock price increases after its grant date. RSUs provide value upon vesting even if our Class A common stock price does not increase after its grant date. However, because
the exchange ratio for the Option Exchange is value-based upon the aggregate fair value of all eligible options, and not on a grant-by-grant basis (assuming all eligible options are exchanged), and will likely be less than one-for-one
replacement RSUs to options, it is possible that, at some point in the future, eligible options you choose to exchange could be economically more valuable than the replacement RSUs received by you pursuant to the Option Exchange.
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3.
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Replacement RSUs granted in the Option Exchange are subject to new vesting schedules, even if the eligible options you exchange were fully vested.
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4.
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You should carefully consider the tax consequences of the replacement RSUs. In general, the replacement RSUs will be taxed when they vest and shares are issued to you. If you are a resident of or subject to
the tax laws in more than one country, you should be aware that there may be additional or different tax consequences that may apply to you. You are strongly encouraged to consult with your personal legal counsel, accountant, financial
and/or tax advisor(s) for advice on these matters.
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Please also note that no one from RTR is, or will be, authorized to provide you with advice or recommendations or to provide you additional information not included in this Offer to Exchange or the documents referenced in this Offer to
Exchange. You must make your own personal decision as to whether or not to participate in the Option Exchange. You are strongly encouraged to consult with your personal legal counsel, accountant, financial, and/or tax advisor(s) for
further advice.
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Please also review the “Risk Factors” that appear following this Summary Term Sheet and Questions and Answers.
We understand that this will be a challenging decision for all eligible individuals. THE OPTION EXCHANGE CARRIES CONSIDERABLE RISK, AND THERE ARE NO GUARANTEES OF OUR FUTURE SHARE PERFORMANCE OR THE PRICE OF OUR CLASS
A COMMON STOCK AT THE EXPIRATION TIME. See Section 17 of this Offer to Exchange (“Miscellaneous”) below for additional information.
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30.
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What do we think of the Option Exchange? Who can I contact to help me decide whether or not I should exchange my eligible options?
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Although our Board of Directors and stockholders have approved the Option Exchange, neither RTR nor our executive officers or members of our Board of Directors make any recommendation as to whether you should elect to
exchange or refrain from exchanging your eligible options. No one from RTR is, or will be, authorized to provide you with advice or recommendations or to provide you additional information not included in this Offer to Exchange or the documents
referenced in this Offer to Exchange. You must make your own personal decision as to whether or not to participate in the Option Exchange. Please contact your personal financial, legal and tax advisors to assist you in determining if you should
exchange your eligible options and for further advice.
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31.
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To whom should I ask questions regarding the Option Exchange?
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If you have questions regarding the Option Exchange or have requests for assistance (including requests for additional copies of this Offer to Exchange document or other documents relating to the Option Exchange),
please email legal@renttherunway.com.
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