Item 1.01 Entry into a Material Definitive Agreement.
Membership Interest Purchase Agreement
On October 28, 2020, Ritchie Bros. Auctioneers
Incorporated, a Canada corporation (the “Company”), Ritchie Bros. Auctioneers (America) Inc., a Washington corporation
and subsidiary of the Company (the “Purchaser”), Rouse Services LLC, a California limited liability company
(“Rouse”), the members of Rouse, (collectively, the “Sellers”) and Scott Rouse, in his capacity
as seller representative, entered into a membership interest purchase agreement (the “Purchase Agreement”)
pursuant to which the Sellers will sell and transfer to the Purchaser, and the Purchaser will purchase and acquire from the Sellers
(the “Acquisition”), all of the issued and outstanding units of Rouse (collectively, the “Membership
Interests”).
Under the terms of the Purchase Agreement,
the purchase price for the Membership Interests is $275 million dollars, subject to certain adjustments, including for working
capital, indebtedness, certain incentive payments to Rouse employees and Rouse’s transaction expenses. The purchase price
will be paid in cash, with the exception of 20% of the consideration payable to each of three individual Sellers who will be entering
into employment agreements with the Purchaser (the “Rollover Members”), which will be paid in Company common
shares (the “Consideration Shares”), based on a 30-day volume weighted average price for the period ending three
business days before the closing date. The Consideration Shares will be subject to transfer and forfeiture restrictions that will
lapse, with certain exceptions, in varying frequencies and increments, depending on the applicable Rollover Member, with all forfeiture
restrictions to lapse by the third anniversary of the closing date for each Rollover Member if the Rollover Member is still employed
by the Purchaser or any of its affliates as of that date.
The Purchase Agreement contains customary
representations and warranties of Rouse, the Sellers, the Purchaser and the Company, as well as covenants regarding Rouse's operation
of its business prior to the closing of the Acquisition and certain protective covenants under which the Sellers have agreed not
to take certain actions competitive with, or harmful to, Rouse’s business after the closing. Additionally, the Purchase Agreement
contains provisions regarding indemnification in favor of the Purchaser and the Sellers. The Purchaser has agreed to obtain a representation
and warranty insurance policy with respect to the Acquisition, and the Purchaser will deposit into escrow a specified portion of
the total consideration otherwise payable in the Acquisition to the Sellers, to be held in escrow for indemnification claims and
any purchase price adjustments, if any, under the Purchase Agreement for a period of 12 months following the completion of the
Acquisition.
Between signing of the Purchase Agreement
and closing, the Sellers have agreed to cause Rouse and its subsidiaries to conduct business in the ordinary course consistent
with past practice and use reasonable best efforts to maintain and preserve their organization, business and franchise, including
the preservation of rights and relationships.
Completion of the Acquisition is subject
to customary closing conditions, including, among other conditions, the expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).
The Purchase Agreement contains termination
rights of the Sellers and Purchaser, including (i) by mutual agreement, (ii) upon the existence of certain governmental actions
or restraints prohibiting the consummation of the transaction, including under the HSR Act, (iii) upon a material, uncured breach
of the Purchase Agreement and (iv) upon a failure to close the Acquisition by February 25, 2020 (the “Outside Date”)
if certain conditions are met. If the Purchase Agreement is terminated by the Sellers due to (i) a nonappealable order or the institution
of a government proceeding, including under the HSR Act, or (ii) the failure of the closing to occur on or before the Outside Date
(provided that all mutual closing conditions and Purchaser closing conditions have been satisfied except for those conditions that,
by their nature are to be satisfied at closing), then the Purchaser shall pay to Rouse a termination fee of $13,750,000.
The foregoing description of the Purchase
Agreement is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which will be filed by
the Company as an exhibit to its Annual Report on Form 10-K for the year ended December 31, 2020.