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Item 1.01
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Entry into a Material Definitive Agreement.
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Merger Agreement
On January 20, 2020,
CSS Industries, Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with IG Design Group Americas, Inc., a Georgia corporation (“Parent”),
TOM MERGER SUB INC., a Delaware corporation and direct, wholly owned subsidiary of Parent (“Merger Sub”), and
IG Design Group Plc, a public limited company incorporated and registered in England and Wales (“TopCo Parent”).
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Merger Sub will, as promptly as practicable,
commence a tender offer (the “Offer”) to purchase all of the outstanding shares of the Company’s common
stock, par value $0.10 per share (“Company Common Stock”), at a price per share equal to $9.40 (the “Offer
Price”), net to the seller in cash, without interest and subject to any applicable tax deduction or withholding.
The obligation of Merger
Sub to purchase shares of Company Common Stock tendered in the Offer is subject to the satisfaction or waiver of certain conditions
set forth in the Merger Agreement, including (i) a minimum of 51% of the shares of Company Common Stock then outstanding being
tendered in the Offer, (ii) the accuracy of the Company’s representations and warranties contained in the Merger Agreement,
subject to certain specified materiality qualifiers, (iii) the Company’s performance in all material respects of its obligations
under the Merger Agreement, (iv) TopCo Parent’s receipt (either directly or indirectly through any of its subsidiaries) of
the proceeds of the debt and equity financing or confirmation by the financing sources that the debt and equity financing will
be available at the consummation of the Offer (the “Funding Condition”), and (v) each of the other conditions
set forth in Exhibit B to the Merger Agreement.
The Offer will expire
at midnight (New York City time) on the date that is 20 business days following the commencement of the Offer, unless extended
in accordance with the terms of the Offer and the Merger Agreement and the applicable rules and regulations of the United States
Securities and Exchange Commission (the “SEC”).
Subject to the provisions
of the Merger Agreement and in accordance with Section 251(h) of the Delaware General Corporation Law, immediately following Merger
Sub’s acceptance for payment (the “Acceptance Time”) of all shares of Company Common Stock validly tendered
pursuant to the Offer (the “Offer Closing”), Merger Sub will merge with and into the Company, with the Company
surviving the merger as the surviving corporation (the “Merger”), without a meeting of the stockholders of the
Company.
The board of directors
of the Company (the “Board”) and the special committee of the Board have each unanimously approved the Merger
Agreement, the Merger and the other transactions contemplated by the Merger Agreement.
At the effective time
of the Merger (the “Effective Time”), each share of Company Common Stock (except for shares owned, directly
or indirectly, by Parent, Merger Sub or the Company (including shares held as treasury stock or otherwise), which will be cancelled
without any consideration in exchange therefor, and by stockholders who have perfected their appraisal rights under Delaware law)
will be converted into the right to receive the Offer Price in cash, without interest and subject to any applicable tax deduction
or withholding.
The Merger Agreement
provides that, at the Effective Time, (i) each outstanding stock option to acquire shares of Company Common Stock (each, a “Company
Stock Option”), whether or not then vested or exercisable, will be cancelled in exchange for a cash payment, without
interest and less applicable tax withholding, equal to the product of (A) the excess, if any, of the Offer Price over the exercise
price per share of such Company Stock Option, multiplied by (B) the number of shares of Company Common Stock issuable upon the
exercise of such Company Stock Option as of immediately prior to the Effective Time; (ii) each outstanding restricted stock unit
that is not subject to performance-based vesting (each, a “Company RSU”) will fully vest and be cancelled in
exchange for a cash payment, without interest and less applicable tax withholding, equal to the product of (A) the Offer Price,
multiplied by (B) the number of shares of Company Common Stock subject to such Company RSU; and (iii) each outstanding restricted
stock unit that is subject to performance-based vesting (each, a “Company PSU”) will be cancelled in exchange
for a cash payment, without interest and less applicable tax withholding, equal to the product of (A) the Offer Price, multiplied
by (B) the number of shares of Company Common Stock subject to such Company PSU (as determined after giving effect to the deemed
achievement at target performance levels). Any Company Stock Option that has an exercise price per share that is greater than or
equal to the Offer Price will be cancelled at the Effective Time without payment of any consideration.
The Merger Agreement
contains representations, warranties and covenants by the parties customary for a transaction of this nature. Among other things,
during the period between the execution of the Merger Agreement and the earlier of the consummation of the Merger or termination
of the Merger Agreement, the Company has agreed to conduct its business in the ordinary course consistent with past practice and
has agreed to certain other operating covenants, as set forth more fully in the Merger Agreement.
The Company has also
agreed not to (i) solicit proposals relating to alternative competing transactions, (ii) enter into discussions or negotiations
or provide non-public information in connection with any proposal for an alternative competing transaction, (iii) approve
or enter into any alternative competing transaction or any agreement providing for any such alternative competing transaction,
or (iv) propose or agree, or authorize or permit any representative of the Company, to do any of the foregoing. Notwithstanding
the foregoing “no-shop” restrictions, under specified circumstances the Board may change its recommendation of the
transaction or cause the Company to terminate the Merger Agreement to accept a Superior Proposal (as defined in the Merger Agreement),
in either case upon a determination by the Board that the failure to take such action would be inconsistent with its fiduciary
duties and upon payment of the company termination fee described below. Under specified circumstances and subject to the provisions
set forth in the Merger Agreement, the Board may also change its recommendation of the transaction in connection with an Intervening
Event (as defined in the Merger Agreement) upon a determination by the Board that the failure to take such action would be inconsistent
with its fiduciary duties.
TopCo Parent has (i)
entered into an amended and restated debt facility agreement with HSBC UK Bank Plc, National Westminster Bank Plc, BNP Paribas,
London Branch, SunTrust Robinson Humphrey, Inc., PNC Bank, National Association, Truist Bank, HSBC Bank Plc, and HSBC Corporate
Trustee Company (UK) Limited providing for debt financing (the “Debt Commitment”), and (ii) entered into an
equity placing agreement with Canaccord Genuity Limited (“Cannacord”) and obtained a bookrunner book building
confirmation letter from Canaccord confirming that TopCo Parent has demand from its equity investors for equity financing in an
amount no less than $100 million to finance the transactions contemplated by the Merger Agreement (together, the “Equity
Commitments” and, together with the Debt Commitment, the “Financing Commitments”). The Merger Agreement
requires TopCo Parent, Parent and Merger Sub to use their commercially reasonable efforts to obtain the debt and equity financing
on the terms and conditions described in the Financing Commitments. Immediately following the execution of the Merger Agreement,
TopCo Parent will seek to obtain the resolution of its shareholders to disapply all applicable pre-emptive rights in connection
with the equity financing (the “Pre-Emptive Rights Waiver”). If any portion of the debt financing becomes unavailable
on the terms and conditions contemplated by the Debt Commitment, TopCo Parent agreed to use commercially reasonable efforts to
arrange and obtain alternative financing from the same or alternative sources in an amount sufficient to consummate the transactions
contemplated by the Merger Agreement.
The Merger Agreement
also contains certain termination provisions for the Company and Parent, including the right of the Company, in certain circumstances,
to terminate the Merger Agreement and accept a superior proposal. The Company will be required to pay Parent a cash termination
fee equal to $3,000,000 if the Merger Agreement is terminated (i) by Parent because the Board changes its recommendation to stockholders
to accept the Offer and tender their shares of Company Common Stock in the Offer, (ii) by the Company to enter into a definitive
agreement with respect to a superior proposal, or (iii) (1) (A) by either the Company or Parent because the Acceptance Time has
not occurred by 11:59 p.m. New York City time on June 4, 2020 or (B) by Parent because the Company breaches any representation
or warranty or fails to perform any covenant or agreement such that the Company’s offer conditions could not be satisfied,
(2) an alternative competing transaction was publicly announced or publicly known prior to such termination, and (3) within 12
months after such termination, the Company consummates an alternative competing transaction or enters into an agreement with respect
to an alternative competing transaction. TopCo Parent will be required to pay the Company a cash termination fee equal to (i) $4,500,000
if the Merger Agreement is terminated by the Company or Parent due to Merger Sub’s failure to effect the Offer Closing when
all of the offer conditions (other than the Funding Condition) have been satisfied, and (ii) $2,250,000 if the Merger Agreement
is terminated by the Company because, by the date that is the earlier of (x) 60 business days from the date of the Merger Agreement
and (y) 35 business days following the failure to obtain the Pre-Emptive Rights Waiver at a shareholder meeting held for such purpose,
TopCo Parent has failed to confirm in writing that it has available cash in an amount which, together with the debt financing and
any available cash of the Company and its subsidiaries as of the closing, is required to pay the Merger Amounts (as defined in
the Merger Agreement).
The foregoing description
of the Offer, the Merger, the Merger Agreement and the other transactions contemplated thereby does not purport to be a complete
description and is qualified in its entirety by the complete text of the Merger Agreement, a copy of which is filed as Exhibit
2.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The above description
of the Merger Agreement and the Merger Agreement itself have been included to provide investors and security holders with information
regarding the terms of the Merger Agreement. It is not intended to provide any other factual information about the Company, TopCo
Parent, Parent, Merger Sub or their respective subsidiaries or affiliates. The Merger Agreement contains representations and warranties
of the Company solely for the benefit of Parent, Merger Sub and TopCo Parent and for purposes of the Merger Agreement. The assertions
embodied in those representations and warranties are subject to limitations agreed upon by the contracting parties and are qualified
by documents filed with, or furnished to, the SEC by the Company prior to the date of the Merger Agreement as well as information
in a confidential disclosure letter that the Company has delivered to Parent, Merger Sub and TopCo Parent in connection with signing
the Merger Agreement as of a specific date. The disclosure letter contains information that modifies, qualifies and creates exceptions
to the representations and warranties set forth in the Merger Agreement. Therefore, investors and security holders should not treat
the representations and warranties as categorical statements of fact. Moreover, these representations and warranties may have been
made for the purposes of allocating contractual risk between the parties to the Merger Agreement and may be subject to standards
of materiality that are different from what may be material to investors. Investors are not third-party beneficiaries to the representations
and warranties contained in the Agreement and should not rely on the representations and warranties or any descriptions thereof
as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or
affiliates. The representations and warranties were made only as of the date of the Merger Agreement or such other date or dates
as may be specified in the Merger Agreement and information concerning the subject matter of representations and warranties may
change after such dates, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Accordingly, investors and security holders should read the representations and warranties in the Merger Agreement when filed not
in isolation but only in conjunction with the other information about the Company and its subsidiaries that the Company includes
in reports and statements it files with the SEC.
Rights Agreement Amendment
On January 20, 2020,
in connection with the Merger Agreement, the Company and American Stock Transfer & Trust LLC, as rights agent (the “Rights
Agent”) under the Rights Agreement, dated as of November 11, 2019, as amended from time to time, between the Company
and the Rights Agent (the “Rights Agreement”), entered into the Amendment to the Rights Agreement (“Rights
Amendment”). The Rights Amendment renders the Rights Agreement inapplicable to the Merger Agreement by providing that
a “Distribution Date,” a “Shares Acquisition Date” and a “Triggering Event” (each as defined
in the Rights Agreement) will be deemed not to have occurred, that no person or entity will become an “Acquiring Person”
(as defined in the Rights Agreement), and that no Rights (as defined in the Rights Agreement) will become exercisable, in any such
case by reason of the (i) execution and delivery of the Merger Agreement or any amendment thereto or (ii) consummation of the Offer,
the Merger or any other transaction contemplated by the Merger Agreement. The Rights Amendment further provides that all Rights
established under the Rights Agreement will automatically expire immediately prior to the Effective Time.
The foregoing description
of the Rights Amendment does not purport to be complete and is qualified in its entirety by the complete text of the Rights Amendment,
a copy of which is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated by reference herein.