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Business Combination

12 Months Ended

Dec. 31, 2018

10. BUSINESS COMBINATION

On November 1, 2018, we entered into the Transaction Agreement with OSW Holdings and the other parties thereto. We amended the Transaction Agreement on January 7, 2019. Pursuant to the Transaction Agreement, among other things, OSW Holdings will, directly or indirectly, acquire our company and OneSpaWorld. OneSpaWorld is a pre-eminent global operator of health and wellness centers onboard cruise ships and a leading operator of health and wellness centers at destination resorts worldwide. Its highly-trained and experienced staff offer guests a comprehensive suite of premium health, fitness, beauty and wellness services and products. OSW Holdings is expected to be listed on The Nasdaq Stock Market under the symbol “OSW.” This transaction will be funded through a combination of cash, stock and debt financing. Completion of the proposed transaction, which is expected in the first quarter of 2019, is subject to customary and other closing conditions, including approval from our stockholders.

Transaction Agreement

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each share of the Company’s Class A common stock will be converted into the right to receive one fully paid and non-assessable common share, par value U.S. $0.0001 per share, of OSW Holdings (each, an “OSW Holdings Share”);

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each of the warrants included in the units issued in the Company’s initial public offering will be restated and become exercisable for one OSW Holdings Share, on the same terms and conditions as those applicable to the existing warrant (each, an “OSW Holdings Public Warrant”);

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the 8.25 million shares of the Company’s Class B common stock held by Haymaker Sponsor, LLC (the “Sponsor” will be converted into 6,650,000 OSW Holdings Shares (3,650,000, subject to certain adjustments, of which will be transferred and forfeited to OSW Holdings) and the right to receive 1,600,000 OSW Holdings Shares upon the occurrence of certain events;

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each of the Placement Warrants will be restated and become exercisable for one OSW Holdings Share, on the same terms and conditions as those applicable to the Placement Warrants (the “OSW Holdings Private Warrants”); and

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the sponsor will forfeit 3,650,000 OSW Holdings Shares and 4,707,734 OSW Holdings Private Warrants.

Certain of the Company’s stockholders (who hold Class A shares and are not subject to the insider agreement not to redeem any shares) may exercise their right to redeem all or a portion of their shares of Class A common stock pursuant to the Company’s certificate of incorporation.

Subject to the terms and conditions of the Transaction Agreement (including certain adjustments pursuant to and in accordance with the terms of the Transaction Agreement and the ancillary agreements), the selling equity holders of OSW (the “Sellers”) will receive: (i) 14,821,863 OSW Holdings Shares (valued at $148,218,630 based on a $10.00 share price), (ii) 1,602,440 OSW Holdings Private Warrants, (iii) $637,096,370 in cash, and (iv) the right to receive up to an additional 5,000,000 OSW Holdings Shares upon the occurrence of certain events. The cash consideration payable to the Sellers at the closing of the business combination will be increased (and the OSW Holdings Share consideration payable to the seller will be correspondingly decreased) if the sum of the interest on the amounts in the trust account, as of immediately prior to the closing of the business combination (without giving effect to any redemptions), plus $400,000, is greater than the aggregate amount of redemptions of the Company’s Class A common stock in excess of $50,000,000.

Subject to the terms and conditions of the Transaction Agreement, no more than five business days following (i) the first day the OSW Holdings Shares’ five-day volume weighted average price is greater than or equal to $20.00, (ii) a change of control of OSW Holdings where the OSW Holdings Shares are sold for at least $20.00 per share, or (iii) the 10-year anniversary of the closing of the business combination, OSW Holdings will issue 5,000,000 OSW Holdings Shares to Steiner Leisure Limited and 1,600,000 OSW Holdings Shares to our sponsor (both subject to adjustment as set forth in the Transaction Agreement) (such shares, the “Deferred Shares”). To the extent that the transaction expenses are less than $35,000,000, a portion of the Deferred Shares will instead be issued at the closing of the business combination to Steiner Leisure Limited and the Sponsor.

Financing

Along with the funds held in the trust account, OSW Holdings has secured commitments for a $122,500,000 private placement of OSW Holdings Shares and OSW Holdings Private Warrants from investors. The proposed transaction also includes committed debt financing. Based on commitment letters the Company obtained from certain lenders on behalf of OSW Holdings, a subsidiary of OSW Holdings will enter into (i) (x) a first lien term loan facility of up to $245,000,000 (including $50,000,000 which may be utilized to partially fund the business combination in the event of redemption) that matures in seven years and (y) a first lien revolving loan facility of up to $22,500,000 that matures in five years, and (ii) a second lien term loan facility of up to $25,000,000 that matures in eight years. Loans outstanding under the first lien term loan facility and the first lien revolving loan facility will accrue interest at a rate per annum equal to LIBOR plus a margin ranging from 4.25% to 3.75% depending on the achievement of certain leverage ratios and undrawn amounts under the first lien revolving loan facility accrue a commitment fee at a rate per annum of 0.50% on the average daily undrawn portion of the commitments thereunder, with one step down to 0.325% upon achievement of a certain leverage ratio. Loans outstanding under the second lien term loan facility will accrue interest at a rate per annum equal to LIBOR plus 7.50%. Principal payments on the first lien term loan facility equal to 0.25% of the original principal amount will be due quarterly, and the second lien term loan facility is not subject to amortization

Certain Related Agreements

Concurrent with the execution of the Transaction Agreement, OSW Holdings, the Company and the seller representative entered into a Director Designation Agreement (the “DDA”), pursuant to which, among other things, the seller representative will have the right to appoint one member of the board of directors of OSW Holdings and one member of the compensation committee of OSW Holdings for so long as the seller representative and certain of its affiliates, in the aggregate, beneficially own 5.00% or more of the issued and outstanding OSW Holdings Shares. Immediately following the closing of the business combination, Marc Magliacano will serve as a Class B director of the board of directors of OSW Holdings and as a member of the compensation committee of OSW Holdings pursuant to the seller representative’s rights under the DDA.

In addition and concurrent with the execution of the Transaction Agreement, the Sponsor, the Company, OSW Holdings and the seller representative entered into a Sponsor Support Agreement, pursuant to which the Sponsor will surrender certain of its equity interests in OSW Holdings (as contemplated by the Transaction Agreement and described above) and agree to certain covenants and agreements related to the transactions contemplated by the Transaction Agreement, particularly with respect to taking supportive actions to consummate the business combination. At the same time, the seller representative, the Company, and the Sponsor also entered into a Waiver Agreement, pursuant to which each holder of Class B common stock irrevocably waived its rights under Section 4.3(b)(ii) of the Company’s certificate of incorporation to receive additional Class A common stock upon conversion of the Class B common stock held by such person in connection with the business combination as a result of the new issuance of OSW Holdings Shares or any other anti-dilution (or similar) protections in respect of the Class B common stock.