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Item 1.01
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Entry Into a Material Definitive Agreement.
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Stock Purchase Agreement
On November 4, 2020,
CSW Industrials, Inc., a Delaware corporation (the “Company”), and RectorSeal, LLC, a Delaware limited liability
company and wholly owned subsidiary of the Company (“RectorSeal”), entered into a Stock Purchase Agreement (the
“Purchase Agreement”) with T.A. Industries, Inc. d/b/a TRUaire, a California corporation (“TRUaire”),
the holders of the outstanding capital stock of TRUaire (the “Sellers”), and Yongki Yi, as Seller Representative.
Pursuant to the Purchase Agreement, RectorSeal has agreed to purchase all of the issued and outstanding shares of common stock
of TRUaire in exchange for consideration consisting of $284 million in cash and 849,852 shares of the Company’s common stock,
$0.01 par value per share, representing aggregate consideration at signing of $360 million, based on the closing price of the Company’s
common stock on November 4, 2020 (the “Transaction”). The cash consideration to be paid for TRUaire is subject
to customary adjustments, including, among others, in respect of indebtedness and working capital of TRUaire. The Company is a
party to the Purchase Agreement for limited purposes, including the issuance of its shares of common stock and providing a guaranty
of RectorSeal’s obligations.
The Purchase Agreement
contains customary representations, warranties and covenants by the parties. Under the Purchase Agreement, the Sellers have agreed
to indemnify RectorSeal for losses arising out of certain tax matters, including, among others, pre-closing taxes of TRUaire. The
representations and warranties set forth in the Purchase Agreement will expire upon consummation of the Transaction.
The consummation of
the Transaction is subject to the satisfaction or waiver of certain closing conditions, which include, among others, (i) the
expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (ii) obtaining
all required consents, (iii) each party’s material compliance with its covenants, (iv) the absence of breaches of each party’s
representations and warranties (subject to certain materiality exceptions) and (v) the absence of a material adverse effect on
TRUaire’s business.
The Purchase Agreement
contains certain termination rights for both RectorSeal and the Sellers, including if the closing of the Transaction has not occurred
by December 31, 2020. The consummation of the Transaction is not subject to any financing condition.
Pursuant to the terms
and subject to the conditions of the Purchase Agreement, the shares of the Company’s common stock to be issued as consideration
in connection with the Transaction will be issued without registration under the Securities Act of 1933, as amended (the “Securities
Act”), in reliance on the private offering exemption provided by Section 4(a)(2) thereof. The Company and the Sellers
have agreed to enter into a registration rights agreement contemporaneously with the Transaction’s closing that will obligate
the Company, on the terms and subject to the conditions set forth therein, to register the shares of the Company’s common
stock to be issued to the Sellers under the Securities Act.
The Company expects
to fund the cash portion of the consideration for the Transaction using cash on hand and borrowings under its existing revolving
credit facility.
The foregoing description
of the Purchase Agreement and the transactions contemplated thereby is not complete and is subject to and qualified in its entirety
by reference to the Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K, the terms
of which are incorporated herein by reference.
The Purchase
Agreement has been included to provide investors and security holders with information regarding its terms. It is not
intended to provide any financial or other information about TRUaire, RectorSeal, the Company or their respective
subsidiaries and affiliates. In particular, the assertions embodied in the representations and warranties contained in the
Purchase Agreement are qualified by information in confidential disclosure schedules provided by each party in connection
with the signing of the Purchase Agreement. These confidential disclosure schedules contain information that modifies,
qualifies and creates exceptions to the representations and warranties set forth in the Purchase Agreement. Moreover, certain
representations and warranties in the Purchase Agreement were used for the purpose of allocating risk between the parties
rather than establishing certain matters as facts. The Company’s investors and security holders should not rely on the
representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or
condition of TRUaire, RectorSeal, the Company or any of their respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of the representations, warranties and covenants may change after the date of the Purchase
Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.