ITEM 1.01 Entry into a Material Definitive Agreement.
Asset Purchase Agreement
On December 21, 2021, ALJ Regional Holdings, Inc., a Delaware corporation (the “Company” or “ALJ”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) with TTEC Government Solutions, LLC, a Colorado limited liability company (“Purchaser” or “TTEC”), TTEC Holdings, Inc., a Delaware corporation, and Faneuil, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Faneuil”). Purchaser has agreed, subject to the terms and conditions set forth in the Asset Purchase Agreement, to acquire the assets of Faneuil’s tolling and transportation vertical and health benefit exchange vertical (the “Asset Sale”) for a purchase price to be paid at closing of $140.0 million, less an indemnification escrow amount of approximately $15.0 million. Faneuil is also eligible to receive additional earn-out payments based upon the performance of certain customer agreements in an aggregate amount of up to $25.0 million.
In addition, Faneuil agreed to grant TTEC a call right to purchase, in one or a series of separate transactions, the assets of any of its utilities, non-health benefit exchange healthcare, commercial and other verticals (the “Other Verticals”). Such call right will be exercisable for a three-year period commencing on the closing date (the “Option Period”). Faneuil also granted TTEC a call right to purchase its wholly owned subsidiary Realtime Digital Innovations, Inc., d/b/a Vistio (“Vistio”). The Vistio call right is exercisable commencing during the calendar year 2024 and continuing for the remainder of the Option Period. The exercise prices for the Other Verticals and Vistio call rights will be determined based on the sales of the applicable Other Vertical or Vistio at the time of exercise. The consummation of a call right transaction, if any, is subject to customary Company and Faneuil corporate approvals, including board and stockholder consent.
In addition to the above rights, Faneuil agreed that it will not entertain any third party acquisition proposals for any of the Other Verticals or Vistio in the first year of the Option Period, and granted TTEC a right of first offer in the event a third party acquisition proposal is received for any of the Other Verticals or Vistio during the remainder of the Option Period.
The completion of the Asset Sale is subject to certain customary closing conditions, including, among others, (a) the receipt of certain requisite consents, including requisite consents to effect the transfer of customer contracts representing not less than ninety-five percent (95%) of trailing twelve (12)-month revenue, (b) the expiration of the waiting period applicable to the Asset Sale under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (c) the accuracy of the parties’ respective representations and warranties in the Asset Purchase Agreement, subject to specified materiality qualifications, (d) compliance by the parties with their respective covenants in the Asset Purchase Agreement in all material respects, and (e) the absence of a Material Adverse Effect (as defined in the Asset Purchase Agreement). Consummation of the Asset Sale is not subject to a financing condition. The Asset Purchase Agreement also contains representations, warranties, covenants and indemnities that are customary for transactions of this type. ALJ, TTEC and Faneuil may terminate the Asset Purchase Agreement under certain specified circumstances, including, among others, if the Asset Sale is not consummated by April 30, 2022.
The foregoing description of the Asset Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Asset Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and incorporated herein by reference.
The Asset Purchase Agreement and the above description have been included to provide investors and security holders with information regarding the terms of the Asset Purchase Agreement. They are not intended to provide any other factual information about ALJ, TTEC, Faneuil or their respective subsidiaries or affiliates or stockholders. The representations, warranties and covenants set forth in the Asset Purchase Agreement have been made only for the purposes of the Asset Purchase Agreement and solely for the benefit of the parties thereto and may be subject to limitations agreed upon by such parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between such parties instead of establishing these matters as facts. In addition, such representations and warranties were made only as of the dates specified in the Asset Purchase Agreement and information regarding the subject matter thereof may change after the date of the Asset Purchase Agreement. Accordingly, investors should read the representations and warranties in the Asset Purchase Agreement not in isolation but only in conjunction with the other information about ALJ, Faneuil or TTEC that the respective companies include in reports, statements and other filings they make with the SEC.