Item
1.01. Entry into a Material Definitive Agreement.
Merger
Agreement
On
November 30, 2020, Collectors Universe, Inc., a Delaware corporation (the “Company”), entered into an Agreement and
Plan of Merger (the “Merger Agreement”) with Cards Parent LP, a Delaware limited partnership (“Parent”),
and Cards Acquisition Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Merger Sub”).
The
Merger Agreement provides that, upon the terms and subject to the conditions of the Merger Agreement, as promptly as practicable,
Merger Sub will commence a tender offer (the “Offer”) to purchase the issued and outstanding shares of common stock,
par value $0.001 per share, of the Company (the “Shares”) at an offer price of $75.25 per Share, in cash, without
interest and subject to any withholding taxes (the “Offer Price”). Promptly following the completion of the Offer,
upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will then be merged with and into the Company,
with the Company surviving as an indirect wholly owned subsidiary of Parent (the “Merger”). The Merger Agreement contemplates
that the Merger will be effected pursuant to Section 251(h) of the Delaware General Corporation Law (the “DGCL”),
which would not require a vote of the Company’s stockholders in order to consummate the Merger. At the effective time of
the Merger (the “Effective Time”), each Share (except as provided in the Merger Agreement), as long as the Minimum
Tender Condition (as defined below) is satisfied, will be cancelled and converted into the right to receive the Offer Price.
The
Board of Directors of the Company (the “Board”) determined that the transactions contemplated by the Merger Agreement
are in the best interests of the Company and its stockholders and approved the Merger Agreement and the transactions contemplated
by the Merger Agreement and resolved to recommend that the Company’s stockholders tender their Shares in the Offer.
With
respect to each Company Restricted Share (as defined in the Merger Agreement), at the Effective Time, (1) any vesting conditions
applicable to such Company Restricted Share will automatically accelerate in full, and (2) such Company Restricted
Share will be cancelled and the holder thereof will only be entitled to receive, without interest, an amount in cash equal to
the product obtained by multiplying (A) the number of Company Restricted Shares outstanding immediately prior to the Effective
Time by (B) the Offer Price, less applicable taxes required to be withheld with respect to such payment.
With
respect to each Company RSU (as defined in the Merger Agreement), at the Effective Time, (1) any vesting conditions applicable
to such Company RSU will automatically accelerate in full and (2) such Company RSU will automatically be cancelled and the holder
thereof will only be entitled to receive, without interest, an amount in cash equal to the product obtained by multiplying (A)
the number of Shares subject to such Company RSU award immediately prior to the Effective Time by (B) Offer Price, less applicable
taxes required to be withheld with respect to such payment.
With
respect to each Company PSU (as defined in the Merger Agreement), at the Effective Time, (1) any vesting conditions applicable
to each Company PSU, whether vested or unvested, will automatically accelerate, and (2) such Company PSU award will automatically
be cancelled and the holder thereof will only be entitled to receive, without interest, as promptly as practicable an amount in
cash equal to the product obtained by multiplying (A) the number of Shares subject to such Company PSU award immediately prior
to the Effective Time by (B) the Offer Price, less applicable taxes required to be withheld with respect to such payment. For
purposes of determining the number of Shares subject to a Company PSU in clause (A) of the immediately preceding sentence, such
number shall be (1) for any portion of a Company PSU with a one-year performance period ending as of June 30, 2019 or June 30,
2020, the number of outstanding Company PSUs applicable to such portion based on maximum performance in accordance with the terms
of the applicable award agreement and Company stock plan and (2) for any portion of a Company PSU award with a one-year
performance period ending as of June 30, 2021, June 30, 2022, or June 30, 2023, as applicable, the maximum number of Company PSUs
applicable to such portion, in all cases, without adjustment for relative total shareholder return.
Under
the terms of the Merger Agreement, Merger Sub’s obligation to accept and pay for Shares that are tendered in the Offer is
subject to the satisfaction or waiver of certain conditions, including: (1) that prior to the expiration of the Offer there have
been validly tendered and received (within the meaning of Section 251(h) of the DGCL) and not validly withdrawn a number of Shares
that, together with Shares then-owned by Parent and any of its wholly owned subsidiaries, would represent at least one Share more
than a majority of all then outstanding Shares (excluding certain specified Shares as more specifically described in the Merger
Agreement) (the “Minimum Tender Condition”); (2) the accuracy of the Company’s representations and warranties
in the Merger Agreement, subject to specific materiality qualifications and thresholds; (3) compliance by the Company with its
covenants in the Merger Agreement in all material respects; (4) the absence of legal restraints or orders prohibiting the consummation
of the transactions contemplated by the Merger Agreement; (5) the expiration or termination of the waiting period under
the United States Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended; (6) the absence of a termination of the Merger
Agreement in accordance with its terms; and (7) the non-occurrence of a Material Adverse Effect (as defined in the Merger Agreement)
that is continuing.
Under
the terms of the Merger Agreement, the Company will be subject to customary “no-shop”
restrictions on its ability, except as permitted by the Merger Agreement, to solicit, initiate, propose or induce the making or
knowingly encourage alternative acquisition proposals from third parties and to provide nonpublic information to, or participate
in, discussions or negotiations with third parties regarding alternative acquisition proposals. The “no-shop”
provision is subject to certain exceptions that permit the Board to comply with its fiduciary duties, which, under certain circumstances,
would enable the Company to provide information to, and enter into discussions or negotiations with, third parties in response
to alternative acquisition proposals.
The
Merger Agreement contains certain termination rights for both the Company and Parent. Upon termination of the Merger Agreement
under specified circumstances, the Company will be required to pay Parent a termination fee of $22,741,818. Specifically, if the
Merger Agreement is terminated by (1) Parent in response to the Board changing its recommendation with respect to the Offer or
the Company materially breaching certain of its obligations under the Merger Agreement or (2) Parent or the Company in response
to the Board authorizing the acceptance of a superior proposal as permitted under the terms of the Merger Agreement, then, in
each case, the termination fee will be payable by the Company to Parent. The termination fee will also be payable (1) if the Merger
Agreement is terminated under certain circumstances and prior to such termination (but after the date of the Merger Agreement)
a proposal, generally speaking, to acquire at least 50% of the Company’s stock or assets is publicly announced or disclosed
by a third party and (2) within one year of such termination, the Company consummates, or enters into a definitive agreement providing
for, a transaction involving the acquisition of at least 50% of its stock or assets.
Upon
termination of the Merger Agreement under specified circumstances, Parent will be required to pay the Company a termination fee
of $43,734,265. Specifically, if the Merger Agreement is terminated by the Company in response to (1) Parent failing to consummate
the Offer after all of the conditions to the Offer have been satisfied or (2) certain breaches by Parent or Merger Sub of their
representations, warranties, covenants or agreements in the Merger Agreement impacting Parent or Merger Sub’s ability to
consummate the transaction contemplated by the Merger Agreement, then, in each case, the termination fee will be payable by Parent
to the Company. D1 Capital Partners Master LP and CPV Investments VI, LLC (together, the “Limited Guarantors”) have
each provided the Company with a limited guarantee in favor of the Company (each, a “Limited Guarantee”). Each Limited
Guarantee guarantees, among other things, the payment of the Limited Guarantor’s pro rata portion of the termination fee
payable by Parent, subject to the conditions set forth in the Limited Guarantee.
The
Merger Agreement provides that the Company, on the one hand, or Parent and Merger Sub, on the other hand, may specifically enforce
the obligations of the other party under the Merger Agreement, subject to the terms of the Merger Agreement.
Pursuant
to equity commitment letters dated November 30, 2020, the Limited Guarantors have committed to provide Parent, on the terms and
subject to the conditions set forth in each Limited Guarantors respective equity commitment letter, at the Effective Time, with
an aggregate equity contribution of up to $730 million. This amount is sufficient to fund the acquisition of all of the
Shares and to make the other payments required at the closing of the Merger, including in connection with the treatment of the
Company’s stock-based equity awards described above.
The
foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement,
a copy of which will be filed by the Company by amendment to this Current Report on Form 8-K.
The
Merger Agreement contains customary representations and warranties by each of Parent, Merger Sub and the Company. These representations
and warranties were made solely for the benefit of the parties to the Merger Agreement and:
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may
not be treated as categorical statements of fact, but rather as a way of allocating risk
to one of the parties if those statements prove inaccurate;
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may
have been qualified in the Merger Agreement by disclosures that were made to the other
party in the confidential disclosure schedules to the Merger Agreement;
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may
apply contractual standards of “materiality” that are different from “materiality”
under applicable securities laws; and
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were
made only as of the date of the Merger Agreement or such other date as may be specified
in the Merger Agreement.
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The
Merger Agreement also contains customary covenants and agreements of the Company, Parent and Merger Sub, respectively, including
with respect to the operation of the business of the Company between signing and the Effective Time. These covenants and agreements
may have been qualified in the Merger Agreement by disclosures that were made to Parent and Merger in the confidential disclosure
schedules to the Merger Agreement.