Item 1.01. Entry into a Material Definitive Agreement.
CSS Industries, Inc. (the “Company”) entered into a Cooperation Agreement (the “Cooperation Agreement”), dated as of June 28, 2019, with Varana Capital LLC, Varana Capital Partners, LP, Varana Capital Focused, LP, Stone Bay Varana, LLC, Philip R. Broenniman and Ezra M. Gardner (collectively, the “Investor Group”) regarding the membership and composition of the Board of Directors of the Company (the “Board”).
Pursuant to the Cooperation Agreement, the Company agreed, among other things, to (i) increase the size of its membership from eight (8) to ten (10) members; (ii) appoint Philip Broenniman and David Silver (collectively, the “New Directors”) to the Board with a term expiring at the Company’s 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”) and until their respective successors are duly elected and qualified; and (iii) cause a slate of nine (9) nominees to be recommended by the Board and to stand for election at the 2019 Annual Meeting, which slate shall include (x) seven (7) members of the Board who are on the Board prior to the execution of this Agreement, to be selected by the members of the Board who are on the Board prior to the execution of this Agreement, and (y) the New Directors.
Under the terms of the Cooperation Agreement, the Stockholder Group agreed, among other things, not to bring any nominations, stockholder proposals, or other business before or at the 2019 Annual Meeting or at any time thereafter during the Standstill Period (as defined below). In addition, the Cooperation Agreement provides that, at the 2019 Annual Meeting, the Stockholder Group will vote all of their shares of the Company’s common stock, par value $0.10 per share (“Common Stock”), in favor of the election of directors nominated by the Board and certain other specified proposals.
The Cooperation Agreement includes certain restrictions applicable from June 28, 2019 until the date that is the earlier of (x) thirty (30) calendar days prior to the expiration of the advance notice period for the submission by the Company’s stockholders of director nominations for consideration at the 2020 Annual Meeting of Stockholders (as such advance notice period is calculated in the advance-notice provisions of the Company’s Amended and Restated Bylaws in effect on the date hereof), and (y) one hundred (100) calendar days prior to the first anniversary of the 2019 Annual Meeting (the “Standstill Period”).
During the Standstill Period, the Stockholder Group is restricted from, among other things, engaging in any solicitation of proxies or written consents to vote any shares of Common Stock at the 2019 Annual Meeting, initiating, encouraging or participating in any “vote no,” “withhold” or similar campaign relating to the Company in connection with the 2019 Annual Meeting, and seeking the removal of any director from the Board. The Company and the Stockholder Group have also agreed to certain non-disparagement provisions.
The Stockholder Group is the beneficial owner in the aggregate of 360,750 shares of the Common Stock as of June 28, 2019.
The foregoing description of the Cooperation Agreement is subject to and qualified in its entirety by reference to the full text of the Cooperation Agreement, which is filed as Exhibit 99.1 hereto.