8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): July 24, 2020

THE CONTAINER STORE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-36161	26-0565401
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

500 Freeport Parkway
Coppell, TX 75019
(Address of principal executive offices) (Zip Code)

(972) 538-6000
(Registrant’s telephone number, including area code)

N/A
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

◻Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

◻Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

◻Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

◻Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	TCS	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Item 2.02. Results of Operations and Financial Condition.

On July 28, 2020, The Container Store Group, Inc. announced its financial results for the quarter ended June 27, 2020. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Current Report on Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly provided by specific reference in such a filing.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On July 24, 2020, Jodi L. Taylor notified the Company of her resignation as Chief Financial Officer of the Company, effective as of August 31, 2020 (the “CFO Transition Date”). As previously disclosed and in accordance with her Second Amended and Restated Employment Agreement with the Company, Ms. Taylor will continue to serve as the Company’s Chief Administrative Officer and Secretary following the CFO Transition Date.

On July 27, 2020, the Company’s Board of Directors appointed Jeffrey A. Miller to serve as the Company’s Chief Financial Officer, effective as of the CFO Transition Date, at which point he will succeed Ms. Taylor as principal financial officer of the Company. Mr. Miller will continue to serve as the Company’s principal accounting officer following the CFO Transition Date.

Mr. Miller, 48, has served as the Company’s Vice President and Chief Accounting Officer since August 2013. Prior to joining the Company, Mr. Miller served in variety of roles with increasing responsibility at FedEx Office from 2003 to 2013, progressing to Vice President and Controller from 2008 until his departure. Mr. Miller began his career as a public accountant with Arthur Andersen and Ernst & Young.

In connection with Mr. Miller’s appointment as Chief Financial Officer, Mr. Miller has entered into an employment agreement (the “Agreement”) with the Company. The Agreement provides that Mr. Miller will serve as Chief Financial Officer for a term commencing on August 31, 2020 and ending on August 31, 2023, unless earlier terminated as provided in the Agreement. The Agreement provides for an annual base salary of $375,000, subject to review annually for possible increase. The Company and Mr. Miller agreed to a 33% reduction of his base salary to $251,250 until such time as determined by the Board. The Agreement also provides for an annual cash performance-based bonus with a target of 40% of annual base salary and a maximum of 75% of annual base salary.

The Agreement provides certain severance benefits upon termination by the Company without “Cause” or by Mr. Miller for “Good Reason,” as such terms are defined in the Agreement. The Company and Mr. Miller agreed that the salary reduction will not constitute “Good Reason” for purposes of the Agreement.

Except as described below, upon a termination of employment by the Company without Cause or by Mr. Miller for Good Reason (each, a “Qualifying Termination”), he would be eligible to receive (a) one and one-half times his annual base salary (calculated without applying the salary reduction currently in effect), (b) pro-rata vesting of any of his then-unvested equity awards that are, at the time of termination (i) subject solely to time-based vesting and (ii) scheduled to vest on the next scheduled time-vesting date, with such pro-ration being calculated based on the number of days worked since grant or the most recent time-vesting date, as applicable, and (c) continuation of medical and welfare benefits for him and his eligible dependents for eighteen months following the termination date, paid for by the Company, and a payment to make him whole on an after-tax basis for our payment of these costs. In addition, any of Mr. Miller’s equity awards that are unvested at the time of termination and subject to performance-based vesting would remain outstanding and eligible to vest and become exercisable based on the actual level of achievement of the applicable performance targets, but only with respect to the number of shares eligible to vest on the first time-vesting date that follows Mr. Miller’s termination, and pro-rated based on the number of days worked during the period from grant or the prior time-vesting date.

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If the Qualifying Termination occurs within one year following a change in control of the Company or prior to February 28, 2022, in lieu of the cash severance and medical benefits and related payments described in the preceding paragraph, (a) Mr. Miller would be eligible to receive two times his annual base salary (calculated without applying the salary reduction currently in effect), and (b) he and his eligible dependents would be entitled to continuation of medical and welfare benefits for two years following the termination date, paid for by the Company, and to a payment to make him whole on an after-tax basis for our payment of these costs. If such Qualifying Termination occurs within one year following a change in control, then, in lieu of the equity award treatment described in the preceding paragraph, (a) Mr. Miller’s unvested equity awards that are, at the time of termination, subject solely to time-based vesting would become fully vested and exercisable, and (b) his equity awards that are unvested at the time of termination and subject to performance-based vesting conditions will vest in the amount that would have vested had the applicable performance period been completed and maximum performance levels achieved.

All of the payments and benefits described above to which Mr. Miller would be entitled in connection with a Qualifying Termination are subject to his execution of a release of claims in favor of the Company.

Upon Mr. Miller’s death or termination due to disability, his designee or estate would be entitled to receive a prorated amount of the bonus he would have earned for the year of termination had he remained employed throughout the year, based on actual performance (calculated without applying the salary reduction currently in effect). His unvested equity awards will vest in the same proportion as described in the case of a Qualifying Termination occurring other than during the one-year period after a change in control or prior to February 28, 2022.

Also under the Agreement, Mr. Miller agreed that, during his employment with the Company and during the two-year period following the date of his termination from employment for any reason, he would not directly or indirectly work for or engage or invest in any of our competitors or solicit, directly or through any third party, any of our employees or consultants. The foregoing description of the Agreement is qualified in its entirety by reference to the Agreement, which is filed as Exhibit 10.1 to this Current Report and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1*	Press Release issued on July 28, 2020
10.1	Employment Agreement with Jeffrey A. Miller, dated July 27, 2020

* Exhibit 99.1 shall be deemed to be furnished, and not filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE CONTAINER STORE GROUP, INC.
Date: July 28, 2020	By:	/s/ Jodi L. Taylor
		Jodi L. Taylor
		Chief Financial Officer and Chief Administrative Officer

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EX-10.1

‌Exhibit 10.1

Employment Agreement

This Employment Agreement (the “Agreement”) is entered into on and effective as of August 31, 2020 (the “Effective Date”), by and between Jeffrey A. Miller (the “Executive”) and The Container Store Group, Inc., a Delaware corporation (“Parent”), and any of its subsidiaries and affiliates as may employ the Executive from time to time (collectively, and together with any successor thereto, the “Company”).

RECITALS

WHEREAS, the Company desires to assure itself of the continued services of the Executive by promoting and engaging the Executive to perform services on the terms and subject to the conditions set out in this Agreement; and

WHEREAS, the Executive desires to provide services to the Company on the terms and subject to the conditions set out in this Agreement;

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto, intending to be legally bound hereby, agree as follows:

ARTICLE I.
DefinED TERMS

1.1Previously Defined Terms. As used herein, each term defined in the first paragraph and recitals of this Agreement shall have the meaning set forth above.

1.2Definitions. As used herein, the following terms shall have the following respective meanings:

(a)“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. As used in the preceding sentence, “control” has the meaning given such term under Rule 405 of the Securities Act of 1933, as amended.

(b)“Annual Base Salary” has the meaning set forth in Section 3.1.

(c)“Annual Bonus” has the meaning set forth in Section 3.2.

(d)“Board” means the Board of Directors of Parent.

(e)The Company shall have “Cause” to terminate the Executive’s employment hereunder upon the occurrence of any one or more of the following events: (i) a material breach by the Executive of any material provision of this Agreement which is not corrected by the Executive within thirty (30) days after receipt of written notice from the Company specifying such breach, to the extent such breach is capable of cure; (ii) the Executive’s conviction of, or entry by the Executive of a guilty or nolo contendere plea to, the commission of a felony or a crime involving moral turpitude, other than vicarious liability or

US-DOCS\116914551.9

traffic violations; (iii) the Executive’s intentional breach of Company policies constituting theft or embezzlement from the Company or any of its customers or suppliers; or (iv) the Executive’s gross neglect or intentional misconduct in connection with the performance of any material portion of the Executive’s duties (which, in the case of the Executive’s gross neglect, is not corrected by the Executive within thirty (30) days after receipt of written notice from the Company specifying such neglect, to the extent that such neglect is capable of cure).

(f) “Change in Control” has the meaning set forth in the Company’s Amended and Restated 2013 Incentive Award Plan, provided that such event also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).

(g)“Change in Control Period” means the period beginning on the date of a Change in Control and ending on the first (1^st) anniversary of such Change in Control.

(h)“CIC Continuation Period” has the meaning set forth in Section 5.3.

(i)“Compensation Committee” means the Compensation Committee of the Board.

(j)“Competitive Business” has the meaning set forth in Section 6.1.

(k)“Continuation Period” has the meaning set forth in Section 5.2.

(l)“Date of Termination” means: (i) if the Executive’s employment is terminated by the Executive’s death, the date of death; (ii) if the Executive’s employment is terminated pursuant to Sections 4.1(b)–(f), either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4.2, whichever is earlier; or (iii) if the Executive’s employment is terminated due to the expiration of the Term under Section 2.2, the date of expiration of the Term.

(m)“Disability” means the Executive’s incapacity to perform the essential duties of the Executive’s position for any six (6) months (whether or not consecutive) during any twelve (12) month period due to the Executive’s physical or mental illness, as determined by a physician mutually acceptable to, and agreed to in good faith by, a majority of the Board and the Executive.

(n)“Equity Award” has the meaning set forth in Section 4.3.

(o)“Fiscal Year” means the fiscal year of the Company, as in effect from time to time.

(p)The Executive shall have “Good Reason” to resign from the Executive’s employment hereunder upon the occurrence of any one or more of the following events without the Executive’s prior written consent: (i) an adverse change in the Executive’s title or reporting line or the Executive’s material duties, authorities or responsibilities; (ii) the assignment to the Executive of duties materially inconsistent with the Executive’s position; (iii) a material breach by the Company of any material provision of this Agreement; (iv) a reduction of the Executive’s Annual Base Salary or benefits hereunder (other than any such reduction by no more than 10%

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of the Executive’s Annual Base Salary which is part of, and generally consistent with, a general reduction affecting other similarly situated executives of the Company) or Annual Bonus opportunity (it being understood that the Performance Targets shall be determined annually by the Board); (v) failure of the Company to pay any portion of the Annual Base Salary or Annual Bonus otherwise payable to the Executive or to provide the benefits set forth in Section 3.4 (other than as provided in clause (iv) above); or (vi) the Company’s requiring the Executive to be headquartered at any office or location more than fifty (50) miles from Coppell, Texas, except for required travel on the Company’s business to an extent substantially consistent with the Executive’s present business travel obligations; provided, that, the Base Pay Reduction will not constitute “Good Reason” under this Agreement. Notwithstanding the foregoing, the Executive may not resign from his employment for Good Reason unless: (A) the Executive provides the Company with at least sixty (60) days prior written Notice of Termination of his intent to resign for Good Reason and (B) the Company has not corrected the circumstances constituting Good Reason prior to the Date of Termination specified in the Notice of Termination; provided, that such Notice of Termination may not be given later than ninety (90) days after the initial occurrence of the event constituting Good Reason.

(q)“Health Gross-Up Payment” means an additional amount equal to the federal, state and local income and payroll taxes that the Executive incurs on each monthly Health Payment.

(r)“Health Payment” means the monthly premium amount paid by the Executive pursuant to Section 5.2.

(s)“Notice of Termination” has the meaning set forth in Section 4.2.

(t)“Performance-Based Awards” has the meaning set forth in Section 5.1.

(u)“Performance Measurement Date” has the meaning set forth in Section 5.1.

(v)“Performance Target” has the meaning set forth in Section 3.2.

(w)“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

(x)“Proprietary Information” has the meaning set forth in Section 7.1.

(y)“Pro-Ration Fraction” has the meaning set forth in Section 5.1.

(z)“Qualifying Termination” has the meaning set forth in Section 5.2.

(aa)“Restricted Period” has the meaning set forth in Section 6.1.

(bb)“Section 409A” means Section 409A of the United States Internal Revenue Code of 1986, as amended, and the Department of Treasury regulations and other interpretive guidance issued with respect thereto.

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(cc)“Term” has the meaning set forth in Section 2.2.

(dd)“Time-Based Awards” has the meaning set forth in Section 5.1.

ARTICLE II.
Employment

2.1Employment of Executive. The Company hereby agrees to continue to employ the Executive, and the Executive agrees to remain in the employ of the Company, on the terms and subject to the conditions herein provided.

2.2Term. The term of employment under this Agreement (the “Term”) shall be for the period beginning on the Effective Date and ending on August 31, 2023, unless earlier terminated as provided in Section 4.1.

2.3Position and Duties. During the Term, the Executive shall serve as the Company’s Chief Financial Officer, with such customary responsibilities, duties and authority as may from time to time be assigned to the Executive by the Board or the Chief Executive Officer. Such duties, responsibilities and authority may include services for one or more subsidiaries or Affiliates of the Company. The Executive shall report to the Chief Executive Officer. The Executive shall devote substantially all of the Executive’s working time and efforts to the business and affairs of the Company. The Executive agrees to observe and comply with the Company’s rules and policies, as the same may be adopted and amended from time to time.

ARTICLE III.
Compensation and Related Matters

3.1Annual Base Salary. During the Term, the Executive shall receive a base salary at a rate of $375,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review annually for possible increase, but not decrease (other than any decrease that would not constitute Good Reason), in the Board’s discretion (the “Annual Base Salary”); provided, that, as of the Effective Date, the Annual Base Salary shall be reduced by 33% to $251,250 (the “Base Pay Reduction”), until such time as the Base Pay Reduction is removed in the Board’s sole discretion. The Base Pay Reduction shall not be applied for purposes of determining the amount of any severance compensation provided under this Agreement.

3.2Annual Bonus. With respect to each Fiscal Year that ends during the Term, the Executive shall be eligible to receive an annual cash bonus (the “Annual Bonus”) based upon Company annual EBITDA and/or other financial and non-financial performance targets (the “Performance Targets”), established by the Board; provided that if any such Performance Target is based on Company annual EBITDA, EBITDA shall be determined in the same manner, and with the same adjustments, as Consolidated EBITDA (as defined in the Credit Agreement, entered into as of April 6, 2012, among the Company, the Guarantors (as defined therein) party thereto, the Lenders (as defined therein), JPMorgan Chase Bank, N.A., and the other parties thereto, as amended from time to time (the “Credit Agreement”)), is determined for purposes of the Credit Agreement. The target Annual Bonus shall be 40% of the Annual Base Salary and the maximum Annual Bonus shall be 75% of the Annual Base Salary. The amount of the Annual

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Bonus shall be based upon the Company’s attainment of the Performance Targets, as determined by the Board (or any authorized committee of the Board). If the percentile level of achievement of a Performance Target is between two levels, the amount earned shall be determined on the basis of a straight-line interpolation between such levels. Each such Annual Bonus shall be payable within thirty (30) days following the completion of the audited financials for the Fiscal Year to which such Annual Bonus relates, but in any event within the period required by Section 409A such that it qualifies as a “short-term deferral” pursuant to Section 1.409A-1(b)(4) of the Department of Treasury Regulations. Notwithstanding the foregoing, except as set forth in Article V, no bonus shall be payable with respect to any Fiscal Year unless the Executive remains continuously employed with the Company during the period beginning on the Effective Date and ending on the last day of such Fiscal Year.

3.3Annual Equity-Based Compensation. From and after the Effective Date, the amount and form of the Executive’s annual equity awards and the applicable performance targets thereunder shall be determined in or prior to the applicable Fiscal Years. If the percentile level of achievement of a performance target is between two levels, the amount earned shall be determined on the basis of a straight-line interpolation between such levels.

3.4Benefits. During the Term, the Executive shall be entitled to the following benefits: (a) participation in the Company’s employee health and welfare benefit plans and programs and arrangements which are applicable to the Company’s senior executives as may be adopted by the Company from time to time, subject to the terms and conditions of the applicable employee benefit plan, program or arrangement, and (b) indemnification and/or directors and officers liability insurance coverage insuring the Executive against insurable events which occur while the Executive is a director or executive officer of the Company, on terms and conditions that are comparable to those then provided to other current or former directors or executive officers of the Company.

3.5Vacation and Holidays. During the Term, the Executive shall be entitled to paid vacation and holidays in accordance with the Company’s policies applicable to senior executives of the Company, provided that the Executive shall be entitled to paid vacation of no less than four (4) weeks for each full Fiscal Year during the Term. Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive.

3.6Expenses. During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s expense reimbursement policy.

3.7Lifetime Executive Discount. During the Term and following the Date of Termination, the Executive shall be entitled to a sales discount on the Company’s products that is the same as the sales discount afforded to executives of the Company (as may be modified from time to time).

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ARTICLE IV.
Termination

4.1Circumstances. During the Term, the Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

(a)Death. The Executive’s employment hereunder shall terminate upon the Executive’s death.

(b)Disability. If the Executive has incurred a Disability, the Company may terminate the Executive’s employment due thereto.

(c)Termination for Cause. The Company may terminate the Executive’s employment for Cause.

(d)Termination without Cause. The Company may terminate the Executive’s employment without Cause.

(e)Resignation for Good Reason. The Executive may resign from the Executive’s employment for Good Reason.

(f)Resignation without Good Reason. The Executive may resign from the Executive’s employment without Good Reason.

4.2Notice of Termination. Any termination of the Executive’s employment by the Company or by the Executive pursuant to Section 4.1 (other than termination due to death pursuant to Section 4.1(a)) shall be communicated by a written notice to the other party hereto. Such written notice (a “Notice of Termination”) shall: (a) indicate the specific termination provision in this Agreement relied upon; and (b) specify a Date of Termination which, (i) if submitted by the Executive, shall be at least sixty (60) days, but no more than six (6) months, following the date of such notice and (ii) if submitted by the Company in connection with a termination of employment by the Company without Cause, shall be at least thirty (30) days following the date of such notice. Notwithstanding the foregoing, the Company may, in its sole discretion, change the Executive’s proposed Date of Termination to any date following the Company’s receipt of the Executive’s Notice of Termination and prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company in connection with a termination of employment by the Company for Cause may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter chosen by the Company in its sole discretion; provided that, notwithstanding the foregoing, any Notice of Termination submitted by the Company in connection with a termination of the Executive’s employment for Cause within the meaning of Section 1.2(e)(i) (due to the Executive’s material breach of any material provision of this Agreement) or Section 1.2(e)(iv) (due to the Executive’s gross neglect in connection with the performance of any material portion of the Executive’s duties) shall indicate a Date of Termination that is at least thirty (30) days following the date of such notice, provided that such breach is capable of cure. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause, Good Reason or Disability shall not waive any right of

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the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Company’s or the Executive’s rights hereunder; provided that a Notice of Termination submitted by the Executive of the Executive’s intent to resign for Good Reason may not be given later than 90 days after the initial occurrence of the event constituting Good Reason.

4.3Company Obligations upon Termination. Upon termination of the Executive’s employment, the Executive (or, in the event of the Executive’s death, such person as the Executive shall designate prior to the Executive’s death in a written notice to the Company or, if no such person is designated, the Executive’s estate) shall be entitled to receive: (a) any amount of the Annual Base Salary through the Date of Termination not theretofore paid; (b) any reimbursement of expenses incurred through the Date of Termination owing to the Executive under Section 3.6; (c) any accrued but unused vacation pay owed to the Executive pursuant to Section 3.5; and (d) any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3.4, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements (including, if applicable, any death benefits). Except as otherwise set forth in Sections 5.1, 5.2 and 5.3 below, the payments and benefits described in this Section 4.3 shall be the only payments and benefits payable in the event of the Executive’s termination of employment for any reason (other than, for the avoidance of doubt, any payments or benefits to which the Executive is entitled by virtue of the Executive being a stockholder of the Company) and any equity-based awards (each, an “Equity Award”) the Executive holds on the Date of Termination shall be treated as provided in the applicable plan or award agreement. The amounts in subsections (a)-(c) above shall be paid within sixty (60) days after the Date of Termination or, if earlier, on or before the time required by law, but in any event within the period required by Section 409A such that it qualifies as a “short-term deferral” pursuant to Section 1.409A-1(b)(4) of the Department of Treasury Regulations.

ARTICLE V.
Severance Payments

5.1Termination due to Death or Disability. If the Executive’s employment is terminated pursuant to Section 4.1(a) due to the Executive’s death or Section 4.1(b) due to the Executive’s Disability, then, notwithstanding the last sentence of Section 3.2, in addition to the amounts set forth in Section 4.3, (a) all Equity Awards that are held by the Executive on the Date of Termination and on such date are unvested and subject to only time-based vesting conditions (“Time-Based Awards”) shall vest and, if applicable, become exercisable with respect to a number of Company shares equal to the number of Company shares that are scheduled to vest on the next scheduled time-vesting date multiplied by a fraction (the “Pro-Ration Fraction”), the numerator of which is the number of days from the last time-vesting date and through the Date of Termination and the denominator of which is the total number of days from the last time-vesting date through and including the next scheduled time-vesting date, and all remaining Time-Based Awards (for the avoidance of doubt, not including any Equity Awards that were already vested prior to the Date of Termination) shall be forfeited on the Date of Termination, (b) all Equity Awards that are held by the Executive on the Date of Termination and on such date are unvested and subject to performance-vesting conditions, which, for the avoidance of doubt, shall include any Equity Awards with respect to which the level of achievement of applicable performance

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targets has not yet been determined by the Board or applicable subcommittee thereof, whether or not the applicable period over which such targets are measured ends after, or ended before, the Date of Termination (“Performance-Based Awards”) shall remain outstanding and eligible to vest and, if applicable, become exercisable, on the date as of which such level of achievement is determined (the “Performance Measurement Date”) in a number of Company shares based on the actual level of achievement of the performance targets as determined on the Performance Measurement Date, multiplied by the Pro-Ration Fraction, and all remaining Performance-Based Awards (for the avoidance of doubt, not including any Equity Awards that were already vested prior to the Date of Termination) shall be forfeited on the Performance Measurement Date and (c) the Company shall pay to the Executive (or, in the case of the Executive’s death, to such person as the Executive shall designate prior to the Executive’s death in a written notice to the Company or, if no such person is designated, the Executive’s estate) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Company’s actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs but in any event within the period required by Section 409A such that it qualifies as a “short-term deferral” pursuant to Section 1.409A-1(b)(4) of the Department of Treasury Regulations (but in no event earlier than January 1, or later than December 31, of the calendar year immediately following the calendar year in which the Date of Termination occurs).

5.2Termination without Cause; Resignation for Good Reason. If the Executive’s employment is terminated by the Company without Cause pursuant to Section 4.1(d), or the Executive resigns from his employment for Good Reason pursuant to Section 4.1(e) (each such event a “Qualifying Termination”), and such Qualifying Termination does not occur during a Change in Control Period or prior to the 18-month anniversary of the Effective Date, then, in addition to the amounts set forth in Section 4.3, (i) the Company shall pay the Executive an amount equal to 1.5 times the Annual Base Salary as in effect immediately prior to the Date of Termination (but prior to any reduction that constitutes Good Reason and without giving effect to the Base Pay Reduction) payable in equal installments in accordance with the Company’s payroll practices (disregarding, however, any past or future changes in the Company’s payroll practices that would result in an impermissible change in the timing of payments under this provision for purposes of Section 409A), during the 18 month period beginning on the first payroll date that follows the thirtieth (30^th) day following the Date of Termination, (ii) all Time-Based Awards held by the Executive on the Date of Termination shall vest and, if applicable, become exercisable with respect to a number of Company shares equal to the number of Company shares that are scheduled to vest on the next scheduled time-vesting date multiplied by the Pro-Ration Fraction, and all remaining Time-Based Awards (for the avoidance of doubt, not including any Equity Awards that were already vested prior to the Date of Termination) shall be forfeited on the Date of Termination, (iii) all Performance-Based Awards held by the Executive on the Date of Termination shall remain outstanding and eligible to vest and, if applicable, become exercisable, on the Performance Measurement Date in a number of Company shares based on the actual level of achievement of the performance targets as determined on the Performance Measurement Date, multiplied by the Pro-Ration Fraction, and all remaining

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Performance-Based Awards (for the avoidance of doubt, not including any Equity Awards that were already vested prior to the Date of Termination) shall be forfeited on the Performance Measurement Date and (iv) during the 18-month period beginning on the Date of Termination (such period, the “Continuation Period”), the Executive and his eligible dependents, if applicable, shall be entitled to continued participation in the Company’s medical, health, disability and similar welfare benefit plans in which the Executive and the Executive’s eligible dependents, if applicable, were participating on the Date of Termination at the Company’s sole expense; provided that if such continued participation is not permitted under such plans, the Company shall provide to the Executive and the Executive’s eligible dependents, if applicable, substantially similar benefits during the Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-Up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Company’s group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-1(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations.

5.3Qualifying Termination During a Change in Control Period; Qualifying Termination Prior to the 18-month Anniversary of the Effective Date. If the Executive experiences a Qualifying Termination during a Change in Control Period or prior to the 18-month anniversary of the Effective Date, then, in addition to the amounts set forth in Section 4.3, (i) the Company shall pay the Executive an amount equal to two (2) times the Annual Base Salary as in effect immediately prior to the Date of Termination (but prior to any reduction that constitutes Good Reason) payable in equal installments in accordance with the Company’s payroll practices (disregarding, however, any past or future changes in the Company’s payroll practices that would result in an impermissible change in the timing of payments under this provision for purposes of Section 409A), during the two (2)-year period beginning on the first payroll date that follows the thirtieth (30^th) day following the Date of Termination, (ii) all Time-Based Awards that are held by the Executive on the Date of Termination shall, as of the Date of Termination, become fully vested and exercisable, (iii) all Performance-Based Awards held by the Executive on the Date of Termination shall, as of the Date of Termination, vest in the amount that would have vested had the applicable performance period been completed and maximum performance levels achieved; provided, that if Qualifying Termination occurs prior to the 18-month anniversary of the Effective Date, any Time-Based Awards and Performance-Based Awards granted to the Executive following the Effective Date shall not be eligible for the vesting described in this Section 5.3(ii) and (iii), but any such Time-Based Awards and Performance-Based-Awards, shall vest as set forth in Section 5.2(ii) and (iii), respectively, and (iv) during the two (2) year period beginning on the Date of Termination (such period, the “CIC Continuation

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Period”), the Executive and the Executive’s eligible dependents, if applicable, shall be entitled to continued participation in the Company’s medical, health, disability and similar welfare benefit plans in which the Executive and the Executive’s eligible dependents, if applicable, were participating on the Date of Termination at the Company’s sole expense; provided, that if such continued participation is not permitted under such plans, the Company shall provide to the Executive and his eligible dependents, if applicable, substantially similar benefits during the CIC Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-Up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Company’s group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-1(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations. If the Executive dies after the Executive becomes entitled to any payments pursuant to Section 4.3, Section 5.2 or this Section 5.3, any remaining unpaid amounts shall be paid, at the time and in the manner such payments otherwise would have been paid to the Executive, to such person as the Executive shall designate in a written notice to the Company (or, if no such person is designated, to his estate).

5.4Section 409A. Notwithstanding any provision to the contrary in this Agreement, no cash payments or other benefits described in Sections 5.2 or 5.3 will be paid or made available to the Executive unless the Executive’s termination of employment constitutes a “separation from service” within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations, and unless, on or prior to the thirtieth (30th) day following the Date of Termination, (a) the Executive shall have executed a waiver and release of claims in the form attached as Exhibit A hereto, and (b) such release shall not have been revoked by the Executive prior to such thirtieth (30th) day. Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed at the time of the Executive’s separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion of the Executive’s termination benefits shall not be provided to the Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executive’s “separation from service” with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A of the Code) or (ii) the date of the Executive’s death. Upon the expiration of the applicable deferral period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to Section 5.2 or 5.3 shall be paid in a lump sum to the Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided herein. For the avoidance of doubt, no payments

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or benefits shall be payable under Section 5.2 or 5.3 in the event of the Executive’s termination of employment due to expiration of the Term under Section 2.2.

5.5Survival. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto that shall have accrued prior to such expiration or termination or that by their express terms survive the expiration or termination of the Term.

ARTICLE VI.
Non-Competition; Non-Solicitation

6.1Non-Competition Obligation. The Executive shall not, at any time during the period commencing on the Effective Date and ending on the second (2nd) anniversary of the Date of Termination (the “Restricted Period”), directly or indirectly, enter the employ of, or render any services to, any Person engaged in any business in North America or anywhere in the world in which the Company conducts business as of the Date of Termination (a) which derives more than fifteen percent (15%) of its consolidated revenues from the marketing or distribution of products sold by the Company, (b) which participates in the manufacturing or design of modular or component shelving or drawer systems or other material products of Elfa International AB and its subsidiaries, or (c) which, as of the Date of Termination, the Board (including any committee thereof) or senior management of the Company has taken active steps to engage in or acquire (any such business, a “Competitive Business”); and the Executive shall not become interested in any such Competitive Business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity; provided, that nothing contained in this Section 6.1 shall be deemed to prohibit the Executive from working for another retail organization, provided, further, that the Executive is not engaged in any aspect of the business of such retail organization (including, but not limited to, starting any division or other segment of such retail organization in a Competitive Business), whether in a supervisory, consultative or other capacity, relating to a Competitive Business. For the avoidance of doubt, the Executive’s position as a senior executive officer of a retail organization, of which a Competitive Business is an immaterial aspect of its general retail business, shall not be prohibited by, or constitute a violation of, the terms of this Section 6.1; provided that the Executive does not participate in any day-to-day operations or in any strategic or other decisions relating to the conduct of such retail organization as it relates to a Competitive Business and, to the extent necessary, has delegated such responsibilities to other management personnel of such retail organization. It is expressly agreed that nothing contained in this Section 6.1 shall be deemed to prohibit the Executive from acquiring, solely as an investment, up to five percent (5%) of the outstanding shares of capital stock of any public corporation or working for a retail organization, provided that the Executive is not, directly or indirectly, engaged in a business relating to a Competitive Business.

6.2Non-Solicitation Obligation. The Executive shall not, at any time during the Restricted Period, for the Executive’s benefit or for the benefit of any other Person, solicit the employment or services of, or hire (or cause any Person to so solicit or hire), any person who upon the termination of the Executive’s employment hereunder, or within twelve (12) months prior thereto, was (a) employed by the Company or (b) a consultant to the Company. The restrictions in this Section 6.2 shall not apply to (i) general solicitations that are not specifically directed to employees of or consultants to the Company, (ii) at the request of a former employee,

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serving as an employment reference for such former employee or (iii) solicitations or hirings of former employees of the Company whose employment was terminated by the Company without “Cause” or who terminated their employment for “Good Reason” (as such terms are defined in the applicable employment agreement or, in the absence of such an agreement, as determined by a majority of the Board in its good faith discretion).

6.3Definition. As used in this Article VI, the term “Company” shall include the Company (as defined in the preamble hereof) and any of its direct or indirect subsidiaries.

6.4Amendment. The provisions contained in Sections 6.1 and 6.2 may be altered and/or waived only with the prior written consent of a majority of the Board or the Compensation Committee.

ARTICLE VII.
Nondisclosure of Proprietary Information

7.1Nondisclosure. Except as required in the faithful performance of the Executive’s duties hereunder or pursuant to Section 7.3, the Executive shall, during the Term and after the Date of Termination, maintain in confidence and shall not directly or indirectly, use, disseminate, disclose or publish, or use for the Executive’s benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Company’s operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment (“Proprietary Information”), or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. The Executive’s obligation to maintain and not use, disseminate, disclose or publish, or use for the Executive’s benefit or the benefit of any Person any Proprietary Information after the Date of Termination shall continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and in the public domain (other than by means of the Executive’s direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee of the Company).

7.2Return of Proprietary Information. Upon termination of the Executive’s employment with the Company for any reason, the Executive shall promptly deliver to the Company all Proprietary Information in the Executive’s possession, including without limitation all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Company’s customers, business plans, marketing strategies, products or processes. Notwithstanding anything to the contrary in this Section 7.2 or in Section 7.1, the Executive shall be entitled to retain and disclose to the Executive’s counsel, financial or other professional advisors and to the Executive’s immediate family (provided that such advisors and family members agree to the restrictions in Section 7.1 with respect to such information): (a) information showing the Executive’s equity awards or other compensation or relating to expense reimbursements, (b) copies of employee

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benefit and compensation plans, programs, agreements and other arrangements of the Company in which the Executive was a participant or covered and (c) compensation information that the Executive reasonably believes the Executive requires for the Executive’s personal tax preparation.

7.3Response to Legal Process; Contents of Book. Notwithstanding Section 7.1, (a) the Executive may respond to a lawful and valid subpoena or other legal process relating to the Company or its business or operations; provided that the Executive shall: (i) give the Company the earliest possible notice thereof; (ii) as far in advance of the return date as possible, at the Company’s sole cost and expense, make available to the Company and its counsel the documents and other information sought; and (iii) at the Company’s sole cost and expense, assist such counsel in resisting or otherwise responding to such process and (b) the Executive’s reporting of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or federal law or regulation shall not violate or constitute a breach of this Agreement.

7.4Non-Disparagement.

(a)The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, members or Affiliates, either orally or in writing, at any time; provided that the Executive may confer in confidence with his legal representatives and make truthful statements as required by law.

(b)The Company agrees to instruct the members of the Board and the executive officers of the Company not to disparage the Executive, either orally or in writing, at any time; provided that the Company may confer in confidence with its legal representatives and make truthful statements as required by law.

7.5Company Definition. As used in this Article VII, the term “Company” shall include the Company (as defined in the preamble hereof), its parent, related entities, and any of its direct or indirect subsidiaries.

7.6Exceptions. The Executive acknowledges that the Company has provided the Executive with the following notice of immunity rights in compliance with the requirements of the Defend Trade Secrets Act of 2016: (i) the Executive shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of Proprietary Information that is made in confidence to a U.S. federal, state or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law; (ii) the Executive shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of Proprietary Information that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (iii) if the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Proprietary Information to the Executive’s attorney and use the Proprietary Information in the court proceeding, if the Executive files any document containing the Proprietary Information under seal, and does not disclose the Proprietary

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Information, except pursuant to court order. However, under no circumstance will the Executive be authorized to disclose any information covered by attorney-client privilege or attorney work product of the Company without prior written consent of the Company’s General Counsel or other officer designated by the Company.

ARTICLE VIII.
REMEDIES

8.1Acknowledgement; Blue Pencil. The Executive acknowledges and agrees that the benefits and payments provided under this Agreement represent adequate consideration for the Executive’s agreement to be bound by the restrictive covenants set forth in Articles VI and VII, and that the Executive’s agreement to be bound by such restrictive covenants is a material inducement to the Company’s entering into this Agreement. In the event, however, that any restrictive covenant set forth in Articles VI or VII shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it is the intention of the Executive and Company that it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.

8.2Injunctive Relief. The Executive acknowledges and agrees that a breach of the covenants contained in Articles VI or VII will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Articles VI or VII, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief without any requirement to post a bond. The Company acknowledges and agrees that a breach of the covenants contained in Section 7.4(b) will cause irreparable damage to the Executive, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Company agrees that in the event of a breach of any of the covenants contained in Section 7.4(b), in addition to any other remedy which may be available at law or in equity, the Executive will be entitled to specific performance and injunctive relief without any requirement to post a bond.

ARTICLE IX.
MISCELLANEOUS

9.1Assignment. The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise. The Executive may not assign his rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

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9.2Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without reference to the principles of conflicts of law of New York or any other jurisdiction, and where applicable, the laws of the United States.

9.3Notices. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows:

(a)If to the Company:

The Container Store Group, Inc.

500 Freeport Parkway

Coppell, TX 75019

ATTN:  General Counsel

with a copy to:

Latham & Watkins LLP

885 Third Avenue

Suite 1000

New York, NY 10022

ATTN:  Howard Sobel; Bradd Williamson

(b)If to the Executive, to the address set forth in the Company’s records or at any other address as any party shall have specified by notice in writing to the other party.

9.4Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.

9.5Entire Agreement. As of the Effective Date, the terms of this Agreement and the other agreements and instruments contemplated hereby or referred to herein are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of (and supersede) any prior or contemporaneous agreement (including without limitation any term sheet or similar agreement entered into between the Company and the Executive). The parties further intend that this Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

9.6Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company and approved by a majority of the Board, which expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and

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approved by a majority of the Board, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or conform. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

9.7No Inconsistent Action. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

9.8Construction. This Agreement shall be deemed drafted equally by both the parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary: (a) the plural includes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

9.9Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before an arbitrator in New York, New York in accordance with the Employment Arbitration Rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction. Notwithstanding the foregoing, (a) the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Articles VI or VII of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without requiring the Company to post a bond, and (b) the Executive shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 7.4(b) of this Agreement and the Company hereby consents that such restraining order or injunction may be granted without requiring the Executive to post a bond. Only individuals who are: (i) lawyers engaged full-time in the practice of law and (ii) on the AAA register of arbitrators shall be selected as an arbitrator. Within twenty (20) days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law. It is mutually agreed that the written decision of the arbitrator shall be valid, binding, final and non-appealable, provided, that the parties hereto agree that the arbitrator shall not be empowered to award punitive damages against any party to such

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arbitration. The arbitrator shall require the non-prevailing party to pay the arbitrator’s full fees and expenses or, if in the arbitrator’s opinion there is no prevailing party, the arbitrator’s fees and expenses shall be borne equally by the parties thereto. In the event action is brought to enforce the provisions of this Agreement pursuant to this Section 9.9, the non-prevailing parties shall be required to pay the reasonable attorney’s fees and expenses of the prevailing parties, except that if in the opinion of the court or arbitrator deciding such action there is no prevailing party, each party shall pay its own attorney’s fees and expenses.

9.10Enforcement. In the event any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect: (a) such provision shall be fully severable; (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a portion of this Agreement; and (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by such invalid, illegal or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such invalid, illegal or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in substance to such invalid, illegal or unenforceable provision as may be possible and be valid, legal and enforceable.

9.11Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

9.12Employee Acknowledgment. The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his own judgment.

9.13Section 409A.

(a)To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that a majority of the Board determines that any amounts payable pursuant to this Agreement may be subject to Section 409A, the Company may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to: (i) exempt such payments from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to such payments or (ii) comply with the requirements of Section 409A and thereby avoid the application of penalty taxes under Section 409A; provided that no such amendments, policies, procedures or actions shall reduce the economic value to the Executive of this Agreement from the value of this Agreement (without taking into account the effect of Section 409A) prior to the adoption or taking of such amendments, policies, procedures or actions. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or any of its Affiliates, employees or agents.

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(b)To the extent that any installment payments under this Agreement are deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), each such payment that the Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.

(c)To the extent that any reimbursements or corresponding in-kind benefits provided to the Executive under this Agreement (including, without limitation, the Health Payment and the Health Gross-Up Payment) are deemed to constitute “deferred compensation” within the meaning of Section 409A to the Executive, such amounts shall be paid or reimbursed reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred, and in any event in accordance with Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations. The amount of any such payments or expense reimbursements in one calendar year shall not affect the expenses or in-kind benefits eligible for payment or reimbursement in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and the Executive’s right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.

9.14Cooperation. During the Term hereof and thereafter, the Executive shall cooperate with the Company in any disputes with third parties, internal investigations or administrative, regulatory or judicial proceedings as reasonably requested by the Company and at the Company’s sole cost and expense (including, without limitation, the Executive being available to the Company upon reasonable notice for interviews and factual investigations, at times and on schedules that are reasonably consistent with the Executive’s other permitted activities and commitments).

9.15Indemnification. To the maximum extent allowed under applicable law and the Company’s By-Laws and other corporate organizational documents, in the event that the Executive is a party to any threatened, pending or completed action, suit or proceeding (other than any action, suit or proceeding arising under or related to this Agreement or any other compensation agreement), whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent 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, the Company shall indemnify the Executive and hold his harmless against all expenses (including reasonable and documented attorneys’ fees and costs incurred by the Executive), judgments, fines and amounts paid in settlement (subject to the Company’s consent, with such consent not to be unreasonably withheld) actually and reasonably incurred by his, as and when incurred, in connection with such action, suit or proceeding; provided that the Executive acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Executive did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, or that, with respect to any criminal

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action or proceeding, the Executive had reasonable cause to believe that his conduct was unlawful. The provisions of this Section 9.15 shall not be deemed exclusive of any other rights of indemnification to which the Executive may be entitled or which may be granted to his, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance. These provisions shall continue in effect after Executive has ceased to be an officer or director of the Company.

9.16No Mitigation. The Executive shall have no obligation to mitigate any payments due hereunder.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

THE CONTAINER STORE GROUP, INC.

By:  /s/ Melissa Reiff         ​ ​       ​ ​                       ​ ​  

Name:  Melissa Reiff​ ​​ ​​ ​​ ​

Title: Chief Executive Officer​ ​​ ​

[Employment Agreement with Jeffrey A. Miller]

EXECUTIVE

By:  /s/ Jeffrey A. Miller­­               ­                                      

Jeffrey A. Miller

[Employment Agreement with Jeffrey A. Miller]

EXHIBIT A

Form of Release Agreement

Jeffrey A. Miller (the “Executive”) agrees for the Executive, the Executive’s spouse and child or children (if any), the Executive’s heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, hereby forever to release, discharge, and covenant not to sue The Container Store Group, Inc., a Delaware corporation (the “Company”), the Company’s past, present, or future parent, affiliated, related, and/or subsidiary entities, and all of their past and present directors, shareholders, officers, general or limited partners, employees, agents, and attorneys, and agents and representatives of such entities, and employee benefit plans in which the Executive is or has been a participant by virtue of his employment with the Company, from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys’ fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected, which the Executive has or may have had against such entities based on any events or circumstances arising or occurring on or prior to the date this release (the “Release”) is executed, arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever, (a) Executive’s employment with the Company or the termination thereof or (b) Executive’s status as a holder of any securities of the Company based on any events or circumstances arising or occurring on or prior to the date this Release is executed, and any and all claims based on, relating to, or arising under federal, state, or local laws, including without limitation claims of discrimination, harassment, retaliation, wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, liability in tort, or for violation of public policy, claims of any kind that may be brought in any court or administrative agency, any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act, the Securities Act of 1933, the Securities Exchange Act of 1934 (the “Exchange Act”), the Texas Commission on Human Rights Act, the Texas Anti-Retaliation Act, the Texas Labor Code, the Sarbanes-Oxley Act, and similar state or local statutes, ordinances, and regulations; provided, however, notwithstanding anything to the contrary set forth herein, that this general release shall not extend to (i) benefit claims under employee pension benefit plans in which the Executive is a participant by virtue of his employment with the Company or to benefit claims under employee welfare benefit plans (e.g., claims for medical care, death, or onset of disability), (ii) accrued and vested benefits under applicable employee benefit plans, or the Executive’s right to continue or convert coverage under certain employee benefit plans, in accordance with the terms of those plans and applicable law; (iii) any obligation under this Release, or under that Employment Agreement entered into on and effective as of August 31, 2020, by and between the Company and the Executive, assumed by any party thereto; and (iv) reporting possible violations of federal law or regulation to, otherwise communicating with or participating in any investigation or proceeding that may be conducted by, or providing documents and other information, without notice to the Company, to, any federal, state or local governmental authority, including in accordance with the provisions of and rules promulgated under Section 21F of the Exchange Act

or Section 806 of the Sarbanes-Oxley Act, as each may have been amended from time to time, or any other whistleblower protection provisions of state or federal law or regulation. Pursuant to 18 USC Section 1833(b), the Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (y) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

The Executive understands that this Release includes a release of claims arising under the Age Discrimination in Employment Act (ADEA). The Executive understands and warrants that he has been given a period of twenty-one (21) days to review and consider this Release and such period shall not be affected or extended by any changes, whether material or immaterial, that might be made to this Release. The Executive is hereby advised to consult with an attorney prior to executing the Release. By his signature below, the Executive warrants that he has had the opportunity to do so and to be fully and fairly advised by that legal counsel as to the terms of this Release. The Executive further warrants that he understands that he may use as much or all of his twenty-one (21)-day period as he wishes before signing, and warrants that he has done so.

The Executive further warrants that he understands that he has seven (7) days after signing this Release to revoke the Release by notice in writing to _____________________________________________________________________________. This Release shall be binding, effective, and enforceable upon both parties upon the expiration of this seven (7)-day revocation period without _____________ having received such revocation, but not before such time.

* * * * *

The Executive acknowledges and agrees that this Release is a legally binding document and the Executive’s signature will commit the Executive to its terms.  Executive acknowledges and agrees that the Executive has carefully read and fully understands all of the provisions of this Release and that the Executive voluntarily enters into this Release by signing below.  Upon execution, the Executive agrees to deliver a signed copy of this Release to ​ ​​ ​​ ​.

/s/ Jeffrey A. Miller                                                                                                                                                    

Jeffrey A. Miller

Date:     7/27/2020              

EX-99.1

Exhibit 99.1

The Container Store Group, Inc. Announces First Quarter Fiscal 2020 Financial Results

Announces CFO Transition Plan

Coppell, TX — July 28, 2020 — The Container Store Group, Inc. (NYSE: TCS) (the “Company”), today announced financial results for the first quarter of fiscal 2020 ended June 27, 2020.

● Consolidated net sales were $151.7 million, down 27.6%. Net sales in The Container Store retail business (“TCS”) were $139.4 million, down 28.5% due to the impact of COVID-19 on store operations. Elfa International AB (“Elfa”) third-party net sales were $12.3 million, down 14.6% due to COVID-19.

● Online sales increased by 192.3% in the first quarter of fiscal 2020, which nearly tripled compared to the first quarter of fiscal 2019.

● Consolidated net loss and net loss per share (“EPS”) were $16.7 million and ($0.34) compared to a net loss of $4.1 million and ($0.08) in the first quarter of fiscal 2019. Adjusted net loss per share (“Adjusted EPS”) was ($0.32) compared to ($0.08) in the first quarter of fiscal 2019 (see Reconciliation of GAAP to Non-GAAP Financial Measures table).

● Net cash provided by operating activities was $25.6 million in the first quarter of fiscal 2020, compared to net cash used in operating activities of $8.3 million in the first quarter of fiscal 2019. Free cash flow generation during the first quarter of fiscal 2020 was strong, despite the significant impact of COVID-19, with free cash flow of $21.7 million generated in the first quarter of fiscal 2020, compared to $17.0 million utilized in the first quarter of fiscal 2019, as a result of the many actions undertaken by the Company to preserve liquidity (see Reconciliation of GAAP to Non-GAAP Financial Measures table).

Melissa Reiff, Chairwoman and Chief Executive Officer commented, “Our first quarter results were significantly impacted by the COVID-19 pandemic. We moved swiftly to protect the health and safety of our employees and customers by temporarily closing stores and shifting select locations to operate with curbside pickup. I am very proud of the dedication and commitment our teams exhibited during this time, and particularly pleased with the resiliency of our operating model as we were able to maintain over 72% of our consolidated net sales from the prior year period with our strong online channel growth that nearly tripled over the prior year in the first quarter. Deleverage on the sales decline, combined with a higher mix of online sales with certain temporary incremental costs to fulfill these sales, were meaningful profitability headwinds. However, we moved quickly to reduce expenses and preserve capital to help mitigate the bottom line and free cash flow impact, enabling us to deliver positive adjusted EBITDA for the quarter.”

Ms. Reiff continued, “As of today all of our stores are now reopened and operating at close to normalized schedules, with limited capacity.Retail sales trends have improved and we preserved approximately 90% of prior year sales for the fiscal month of July when looking at our sales orders taken. While we expect sales and margin performance to improve as fiscal 2020 progresses, we remain disciplined and agile as we manage the business in this still uncertain environment.”

First Quarter Fiscal 2020 Results

For the first quarter (thirteen weeks) ended June 27, 2020:

● Consolidated net sales were $151.7 million, down 27.6% compared to the first quarter of fiscal 2019, due primarily to the impact of COVID-19 on store operations. TCS net sales were $139.4 million, down

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approximately 28.5% with Custom Closets declining 22.7% and other product categories declining 33.5%. Although the impact of COVID-19 and the related temporary closure of our stores negatively affected our net sales for the first quarter of fiscal 2020, our online sales increased 192.3%, compared to the first quarter of fiscal 2019. Elfa third-party net sales were $12.3 million, down approximately $2.1 million or 14.6%, compared to the first quarter of fiscal 2019, however, excluding the impact of foreign currency translation, Elfa third-party sales were down 12.5%. As a result of the extended closures of the Company’s stores due to the COVID-19 pandemic and the Company’s policy of excluding extended store closures from its comparable sales calculation, the Company does not believe that comparable store sales is a meaningful metric to present for the first quarter of fiscal 2020.

● Consolidated gross margin was 51.6%, a decrease of 560 basis points, compared to the first quarter of fiscal 2019. TCS gross margin decreased 760 basis points to 49.8%, primarily due to increased shipping costs as a result of a higher mix of online sales and increased promotional activity in the first quarter of fiscal 2020. Elfa gross margin increased 640 basis points primarily due to favorable customer and product sales mix and, to a lesser extent, lower direct material costs.

● Consolidated selling, general and administrative expenses (“SG&A”) decreased by 20.9% to $86.3 million in the first quarter of fiscal 2020 from $109.0 million in the first quarter of fiscal 2019. SG&A as a percentage of net sales increased 490 basis points primarily due to the deleverage of occupancy and other fixed costs associated with lower sales, partially offset by reductions in payroll, transportation and marketing costs during the quarter.

● Other expenses increased to $0.8 million in the first quarter of fiscal 2020 due to severance costs associated with the reduction in workforce as a result of the COVID-19 pandemic and the related temporary store closures.

● Consolidated net interest expense decreased 13.3% to $4.9 million in the first quarter of fiscal 2020 from $5.7 million in the first quarter of fiscal 2019. The decrease is primarily due to lower interest rates, combined with a lower principal balance on the Senior Secured Term Loan Facility, partially offset by increased borrowings on the asset-based revolving credit agreement.

● The effective tax rate was 29.3% in the first quarter of fiscal 2020, as compared to 30.5% in the first quarter of fiscal 2019. The decrease in the effective tax rate is primarily due to stock-based compensation and the jurisdictional mix of income.

● Net loss was $16.7 million, or ($0.34) per share, in the first quarter of fiscal 2020 compared to net loss of $4.1 million, or ($0.08) per share in the first quarter of fiscal 2019. Adjusted net loss was $15.5 million, or ($0.32) per share, in the first quarter of fiscal 2020 compared to adjusted net loss of $4.1 million, or ($0.08) per share in the first quarter of fiscal 2019 (see Reconciliation of GAAP to Non-GAAP Financial Measures table).

● Adjusted EBITDA (see Reconciliation of GAAP to Non-GAAP Financial Measures table) was $4.5 million in the first quarter of fiscal 2020 compared to $10.6 million in the first quarter of fiscal 2019. The decrease in Adjusted EBITDA was driven by the higher net loss in the first quarter of fiscal 2020, partially offset by a decrease in cash lease expense due to renegotiated terms with landlords during COVID-19 that resulted in deferral of $11.9 million of certain cash lease payments and the modification of certain lease terms for a substantial portion of our leased properties.

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Balance sheet and liquidity highlights:

(In thousands)	June 27, 2020		June 29, 2019
Cash	$	63,508	$	11,404
Total debt, net of deferred financing costs	$	308,694	$	289,438
Liquidity (1)	$	106,890	$	82,709
Free cash flow (2)	$	21,701	$	(17,024)

(1) Cash plus availability on revolving credit facilities.

(2) See Reconciliation of GAAP to Non-GAAP Financial Measures table.

CFO Transition Plan

The Company announced today that Jeff Miller, Vice President and Chief Accounting Officer, will succeed Jodi Taylor as Chief Financial Officer effective August 31, 2020. Ms. Taylor will continue to serve as Chief Administrative Officer and Secretary, which we expect will ensure a seamless transition for Mr. Miller. 

Mr. Miller has been with The Container Store since August 2013 and has served as its Chief Accounting Officer since that time. Prior to joining The Container Store, Mr. Miller was previously at FedEx Office for over 10 years and served in a variety of roles with increasing responsibility, progressing to Vice President and Controller from 2008 until his departure. Mr. Miller began his career as a public accountant with Arthur Andersen and Ernst & Young. He brings over 25 years of accounting and financial reporting experience to the Chief Financial Officer role. 

Ms. Reiff said, “I want to thank Jodi for her tenure as The Container Store’s Chief Financial Officer. During the past 13 years, Jodi has led the company’s financial teams through many milestones including our initial public offering as well as, most recently, our development and execution of our initiatives to revitalize sales and profitability. She has also developed a strong team and has positioned the company well for this upcoming transition. I am pleased to have her partnership as she continues to serve as our Chief Administrative Officer, and I have the utmost confidence in Jeff’s ability to continue to lead our financial functions. I have worked closely with Jeff over the years and I am excited to announce his appointment as Chief Financial Officer.”

Conference Call Information

A conference call to discuss first quarter fiscal 2020 financial results is scheduled for today, July 28, 2020, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-3982 (international callers please dial (201) 493-6780) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at investor.containerstore.com.

A taped replay of the conference call will be available within two hours of the conclusion of the call and can be accessed both online and by dialing (844) 512-2921 (international callers please dial (412) 317-6671). The pin number to access the telephone replay is 13706739. The replay will be available until August 28, 2020.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding our future opportunities; our goals, strategies, priorities and initiatives; our anticipated financial performance; our plans in response to the outbreak of COVID-19 and our expected CFO transition.

These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: the

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outbreak of COVID-19 and the associated impact on our business, results of operations and financial condition; our ability to continue to lease space on favorable terms; costs and risks relating to new store openings; quarterly and seasonal fluctuations in our operating results; cost increases that are beyond our control; our inability to protect our brand; our failure or inability to protect our intellectual property rights; overall decline in the health of the economy, consumer spending, and the housing market; our inability to source and market new products to meet consumer preferences; failure to successfully anticipate consumer preferences and demand; competition from other stores and internet-based competition; vendors may sell similar or identical products to our competitors; our and our vendors’ vulnerability to natural disasters and other unexpected events; disruptions at our Elfa manufacturing facilities; deterioration or change in vendor relationships or events that adversely affect our vendors or their ability to obtain financing for their operations, including COVID-19; product recalls and/or product liability, as well as changes in product safety and other consumer protection laws; risks relating to operating two distribution centers; our dependence on foreign imports for our merchandise; our reliance upon independent third party transportation providers; our inability to effectively manage our online sales; effects of a security breach or cyber-attack of our website or information technology systems, including relating to our use of third-party web service providers; damage to, or interruptions in, our information systems as a result of external factors, working from home arrangements, staffing shortages and difficulties in updating our existing software or developing or implementing new software; our indebtedness may restrict our current and future operations, and we may not be able to refinance our debt on favorable terms, or at all; fluctuations in currency exchange rates; our inability to maintain sufficient levels of cash flow to meet growth expectations; our fixed lease obligations; disruptions in the global financial markets leading to difficulty in borrowing sufficient amounts of capital to finance the carrying costs of inventory to pay for capital expenditures and operating costs; changes to global markets and inability to predict future interest expenses; our reliance on key executive management; employee furloughs and uncertainty about their ability to return to work; our inability to find, train and retain key personnel; labor relations difficulties; increases in health care costs and labor costs; violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws; impairment charges and effects of changes in estimates or projections used to assess the fair value of our assets; effects of tax reform and other tax fluctuations; and significant fluctuations in the price of our common stock; substantial future sales of our common stock, or the perception that such sales may occur, which could depress the price of our common stock; risks related to being a public company; our performance meeting guidance provided to the public; anti-takeover provisions in our governing documents, which could delay or prevent a change in control; and our failure to establish and maintain effective internal controls.

These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, (the “SEC”) on June 17, 2020, and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

About The Container Store

The Container Store Group, Inc. (NYSE: TCS) is the nation’s leading retailer of storage and organization products and solutions – a concept they originated in 1978. Today, with locations nationwide, the retailer offers more than 11,000 products designed to help customers accomplish projects, maximize their space and make the most of their home. The Container Store also offers a full suite of custom closets designed to accommodate all sizes, styles and budgets.

Visit www.containerstore.com for more information about store locations, the product collection and services offered. Visit www.containerstore.com/blogfor inspiration, tips and real solutions to everyday organization challenges, and www.whatwestandfor.com to learn more about the company’s unique culture.

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The Container Store Group, Inc.

Consolidated statements of operations

	Thirteen Weeks Ended
(In thousands, except share and per share amounts)	June 27, 2020		June 29, 2019
		(unaudited)		(unaudited)
Net sales	$	151,686	$	209,520
Cost of sales (excluding depreciation and amortization)		73,447		89,713
Gross profit		78,239		119,807
Selling, general, and administrative expenses (excluding depreciation and amortization)		86,265		109,029
Stock-based compensation		832		811
Pre-opening costs		9		477
Depreciation and amortization		8,949		9,706
Other expenses (income)		809		(27)
Gain on disposal of assets		(7)		(4)
Loss from operations		(18,618)		(185)
Interest expense, net		4,950		5,709
Loss before taxes		(23,568)		(5,894)
Benefit for income taxes		(6,898)		(1,795)
Net loss	$	(16,670)	$	(4,099)
Net loss per common share — basic and diluted	$	(0.34)	$	(0.08)
Weighted-average common shares — basic and diluted		48,389,205		48,231,148

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The Container Store Group, Inc.

Consolidated balance sheets

	June 27,		March 28,		June 29,
(In thousands)	2020		2020		2019
Assets	(unaudited)				(unaudited)
Current assets:
Cash	$	63,508	$	67,755	$	11,404
Accounts receivable, net		25,369		24,721		27,821
Inventory		109,182		124,207		120,512
Prepaid expenses		8,632		8,852		11,129
Income taxes receivable		3,391		4,724		1,124
Other current assets		14,235		11,907		11,867
Total current assets		224,317		242,166		183,857
Noncurrent assets:
Property and equipment, net		141,504		147,540		152,448
Noncurrent operating lease assets		311,911		347,170		353,490
Goodwill		202,815		202,815		202,815
Trade names		225,100		222,769		225,182
Deferred financing costs, net		153		170		223
Noncurrent deferred tax assets, net		2,411		2,311		1,898
Other assets		2,250		1,873		1,607
Total noncurrent assets		886,144		924,648		937,663
Total assets	$	1,110,461	$	1,166,814	$	1,121,520

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The Container Store Group, Inc.

Consolidated balance sheets (continued)

	June 27,		March 28,		June 29,
(In thousands, except share and per share amounts)	2020		2020		2019
Liabilities and shareholders’ equity	(unaudited)				(unaudited)
Current liabilities:
Accounts payable	$	51,656	$	53,647	$	55,387
Accrued liabilities		75,962		66,046		68,507
Revolving lines of credit		5,533		9,050		9,951
Current portion of long-term debt		6,952		6,952		6,931
Current operating lease liabilities		53,165		62,476		58,664
Income taxes payable		198		—		2,011
Total current liabilities		193,466		198,171		201,451
Noncurrent liabilities:
Long-term debt		296,209		317,485		272,556
Noncurrent operating lease liabilities		301,399		317,284		327,221
Noncurrent deferred tax liabilities, net		45,053		50,178		50,182
Other long-term liabilities		11,304		11,988		8,903
Total noncurrent liabilities		653,965		696,935		658,862
Total liabilities		847,431		895,106		860,313
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized; 48,491,369 shares issued at June 27, 2020; 48,316,559 shares issued at March 28, 2020; 48,283,197 shares issued at June 29, 2019		485		483		483
Additional paid-in capital		867,332		866,667		864,386
Accumulated other comprehensive loss		(28,970)		(36,295)		(25,929)
Retained deficit		(575,817)		(559,147)		(577,733)
Total shareholders’ equity		263,030		271,708		261,207
Total liabilities and shareholders’ equity	$	1,110,461	$	1,166,814	$	1,121,520

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The Container Store Group, Inc.

Consolidated statements of cash flows

	Thirteen Weeks Ended
	June 27,		June 29,
(In thousands) (unaudited)	2020		2019
Operating activities
Net loss	$	(16,670)	$	(4,099)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		8,949		9,706
Stock-based compensation		832		811
Gain on disposal of assets		(7)		(4)
Deferred tax benefit		(7,178)		(1,891)
Non-cash interest		465		465
Other		104		—
Changes in operating assets and liabilities:
Accounts receivable		204		(2,200)
Inventory		16,085		(11,923)
Prepaid expenses and other assets		(1,841)		(670)
Accounts payable and accrued liabilities		11,651		2,275
Net change in lease assets and liabilities		9,851		(152)
Income taxes		1,560		(1,009)
Other noncurrent liabilities		1,609		370
Net cash provided by (used in) operating activities		25,614		(8,321)
Investing activities
Additions to property and equipment		(3,913)		(8,703)
Proceeds from sale of property and equipment		6		4
Net cash used in investing activities		(3,907)		(8,699)
Financing activities
Borrowings on revolving lines of credit		11,340		17,961
Payments on revolving lines of credit		(15,288)		(13,599)
Borrowings on long-term debt		—		19,000
Payments on long-term debt		(21,739)		(1,741)
Payment of taxes with shares withheld upon restricted stock vesting		(406)		(347)
Net cash (used in) provided by financing activities		(26,093)		21,274
Effect of exchange rate changes on cash		139		(214)
Net (decrease) increase in cash		(4,247)		4,040
Cash at beginning of fiscal period		67,755		7,364
Cash at end of fiscal period	$	63,508	$	11,404

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Note Regarding Non-GAAP Information

This press release includes financial measures that are not calculated in accordance with GAAP, including adjusted net loss, adjusted net loss per common share - diluted, Adjusted EBITDA, and free cash flow. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in a table accompanying this release. These non-GAAP measures should not be considered as alternatives to net income or net loss as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP and they should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. These non-GAAP measures are key metrics used by management, the Company’s board of directors, and Leonard Green and Partners, L.P., its controlling stockholder, to assess its financial performance.

The Company presents adjusted net loss, adjusted net loss per common share - diluted, and Adjusted EBITDA because it believes they assist investors in comparing the Company’s performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance and because the Company believes it is useful for investors to see the measures that management uses to evaluate the Company. These non-GAAP measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. In evaluating these non-GAAP measures, you should be aware that in the future the Company will incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation of these non-GAAP measures should not be construed to imply that its future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using non-GAAP measures supplementally. These non-GAAP measures are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

The Company defines adjusted net loss as net loss before restructuring charges, charges related to the impact of COVID-19 on business operations, severance charges associated with COVID-19, charges related to an Elfa manufacturing facility closure, charges related to the closure of Elfa France operations, impairment charges related to intangible assets, loss on extinguishment of debt, certain (gains) losses on disposal of assets, certain management transition costs incurred and benefits realized, charges incurred as part of the implementation of our optimization plan, and the tax impact of these adjustments and other unusual or infrequent tax items. We define adjusted net loss per common share - diluted as adjusted net loss divided by the diluted weighted average common shares outstanding. We use adjusted net loss and adjusted net loss per common share - diluted to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. We present adjusted net loss and adjusted net loss per common share - diluted because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance and because we believe it is useful for investors to see the measures that management uses to evaluate the Company.

The Company defines EBITDA as net loss before interest, taxes, depreciation, and amortization. Adjusted EBITDA is calculated in accordance with its credit facilities and is one of the components for performance evaluation under its executive compensation programs. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash and other items that the Company does not consider in its evaluation of ongoing operating performance from period to period as discussed further below. The Company uses Adjusted EBITDA in connection with covenant compliance and executive performance evaluations, and to supplement GAAP measures of performance to evaluate the effectiveness of its business strategies, to make budgeting decisions and to compare its performance against that of other peer companies using similar measures. The Company believes it is useful for investors to see the measures that management uses to evaluate the Company, its executives and its covenant compliance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry.

The Company presents free cash flow, which the Company defines as net cash provided by (used in) operating activities in a period minus payments for property and equipment made in that period, because it believes it is a useful indicator of the Company’s overall liquidity, as the amount of free cash flow generated in any period is representative of cash that is available for debt repayment, investment, and other discretionary and non-discretionary cash uses. Accordingly, we

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believe that free cash flow provides useful information to investors in understanding and evaluating our liquidity in the same manner as management. Our definition of free cash flow is limited in that it does not solely represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Consolidated Statements of Cash Flows. Although other companies report their free cash flow, numerous methods may exist for calculating a company’s free cash flow. As a result, the method used by our management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.

Additionally, this press release refers to the decline in Elfa third-party net sales after the conversion of Elfa’s net sales from Swedish krona to U.S. dollars using the prior year’s conversion rate, which is a financial measure not calculated in accordance with GAAP. The Company believes the disclosure of Elfa third-party net sales decline without the effects of currency exchange rate fluctuations helps investors understand the Company’s underlying performance.

The Container Store Group, Inc. Supplemental Information - Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except share and per share amounts)
(unaudited)

The table below reconciles the non-GAAP financial measures of adjusted net loss and adjusted net loss per common share - diluted with the most directly comparable GAAP financial measures of GAAP net loss and GAAP net loss per common share - diluted.

	Thirteen
	Weeks Ended
	June 27, 2020		June 29, 2019
Numerator:
Net loss	$	(16,670)	$	(4,099)
COVID-19 costs (a)		1,223		—
Severance (b)		809		—
Taxes (c)		(885)		—
Adjusted net loss	$	(15,523)	$	(4,099)
Denominator:
Weighted-average common shares outstanding — basic and diluted		48,389,205		48,231,148
Net loss per common share — basic and diluted	$	(0.34)	$	(0.08)
Adjusted net loss per common share — basic and diluted	$	(0.32)	$	(0.08)

(a) Includes incremental costs attributable to the COVID-19 pandemic, substantially all of which consist of hazard pay for distribution center employees and sanitization costs.

(b) Includes costs associated with the reduction in workforce as a result of the COVID-19 pandemic and the related temporary store closures.

(c) Tax impact of adjustments to net loss which are considered to be unusual or infrequent tax items, all of which we do not consider in our evaluation of ongoing performance.

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The table below reconciles the non-GAAP financial measure Adjusted EBITDA with the most directly comparable GAAP financial measure of GAAP net loss.

	Thirteen Weeks Ended
	June 27, 2020		June 29, 2019
Net loss	$	(16,670)	$	(4,099)
Depreciation and amortization		8,949		9,706
Interest expense, net		4,950		5,709
Income tax benefit		(6,898)		(1,795)
EBITDA	$	(9,669)	$	9,521
Pre-opening costs (a)		9		477
Non-cash lease expense (b)		11,138		(64)
Stock-based compensation (c)		832		811
Foreign exchange losses (gains) (d)		121		(75)
COVID-19 costs (e)		1,223		—
Severance and other costs (f)		809		(27)
Adjusted EBITDA	$	4,463	$	10,643

(a) Non-capital expenditures associated with opening new stores and relocating stores, including marketing expenses, travel and relocation costs, and training costs. We adjust for these costs to facilitate comparisons of our performance from period to period.

(b) Reflects the extent to which our annual GAAP operating lease expense has been above or below our cash operating lease payments. The amount varies depending on the average age of our lease portfolio (weighted for size), as our GAAP operating lease expense on younger leases typically exceeds our cash operating lease payments, while our GAAP operating lease expense on older leases is typically less than our cash operating lease payments. Non-cash lease expense increased due to renegotiated terms with landlords during the first quarter of fiscal 2020 due to COVID-19 that resulted in deferral of $11.9 million of certain cash lease payments and the modification of certain lease terms for a substantial portion of our leased properties.

(c) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on volume and vesting timing of awards. We adjust for these charges to facilitate comparisons from period to period.

(d) Realized foreign exchange transactional gains/losses our management does not consider in our evaluation of our ongoing operations.

(e) Includes incremental costs attributable to the COVID-19 pandemic, substantially all of which consist of hazard pay for distribution center employees and sanitization costs.

(f) Severance and other costs include amounts our management does not consider in our evaluation of our ongoing operations. For the first quarter of fiscal 2020, Severance and other costs consist of amounts associated with the reduction in workforce as a result of the COVID-19 pandemic and the related temporary store closures, and for the first quarter of fiscal 2019, consist of severance and other charges unrelated to COVID-19.

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The table below reconciles the non-GAAP financial measure of free cash flow with the most directly comparable GAAP financial measure of net cash provided by (used in) operating activities.

	Thirteen Weeks Ended
	June 27,		June 29,
	2020		2019
Net cash provided by (used in) operating activities	$	25,614	$	(8,321)
Less: Additions to property and equipment		(3,913)		(8,703)
Free cash flow	$	21,701	$	(17,024)

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