Item 1.01 Entry into a Material Definitive Agreement
On January 31, 2023 (the “Closing Date”), Mondee Holdings, Inc., a Delaware corporation (the “Mondee”), and its wholly-owned subsidiary, Mondee Brazil LLC, a Delaware limited liability company (together with Mondee, “Buyer”), entered into that certain Share Purchase and Sale Agreement, dated January 31, 2023 (the “Purchase Agreement”), with OTT Holding LTDA, a Brazilian limited liability company (the “Seller”), and Orinter Tour & Travel, S.A., a Brazilian corporation (the “Target”), along with other parties thereto (the “Intervening Parties”), as described in the Purchase Agreement. Pursuant to the Purchase Agreement, the Seller sold to Buyer, and Buyer purchased from Seller, all of the issued and outstanding shares of the Target (the “Target Securities”), upon the terms and subject to the conditions of the Purchase Agreement (such purchase and sale, together with the other transactions contemplated by the Purchase Agreement, the “Acquisition”).
In exchange for the Target Securities, Buyer agreed to pay Seller total consideration of $37,728,105.00 (the “Consideration”), comprised of: (i) a cash component equal to $20,464,052.00, $18,928,104.00 of which was paid to Seller on the Closing Date and $1,535,948.00 of which was deposited into an escrow account on the Closing Date; and (ii) a stock component equal to $17,264,053.00, in the form of 1,726,405 shares of Class A common stock of Mondee, par value $0.0001 per share (the “Shares”). In accordance with the Purchase Agreement, the Shares shall be deposited into an escrow account within 60 days of the Closing Date, and the Shares shall be released from escrow as follows: (a) 903,202 of the Shares shall be released from escrow 12 months from the Closing Date and (b) 823,203 of the Shares shall be released from escrow 24 months from the Closing Date.
In addition to the Consideration, the Seller and certain key executives of Seller (the “Key Executives”) are entitled to receive an earn-out payment from Buyer up to an aggregate of $10,000,000.00 (the “Earn-out Payment”). Pursuant to the Purchase Agreement and in the event certain EBITDA (earnings before interest, taxes, depreciation and amortization) milestones are met for the fiscal years ending December 31, 2023, December 31, 2024, and December 31, 2025, Buyer will pay Seller and the Key Executives the Earn-out Payment in three installments by March 30, 2024, March 30, 2025, and March 30, 2026, respectively.
The Purchase Agreement contains representations, warranties and covenants of the parties customary for a transaction of this nature. In addition, the Buyer, on the one hand, and the Seller and the Intervening Parties, on the other hand, agreed to indemnify the other party/parties and their respective affiliates, shareholders, members, officers, directors, employees and other representatives for certain losses, including, among other things, breaches of representations, warranties and covenants, subject to certain negotiated limitations, deductibles, thresholds and survival periods set forth in the Purchase Agreement.
The foregoing description of the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K (this “Current Report”) and is incorporated herein by reference.
This summary of the principal terms of the Purchase Agreement and the copy of the Purchase Agreement filed as Exhibit 2.1 have been included to provide investors with information regarding its terms, and is not intended to provide any other factual information about Mondee, the Seller, the Target, the Intervening Parties or any of their respective subsidiaries or affiliates (collectively, the “Parties”). 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 the parties 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 and certain covenants set forth in the Purchase Agreement. Moreover, the representations, warranties and covenants in the Purchase Agreement were made as of specific dates, were made solely for the Purchase Agreement and for the purposes of allocating risk between the Parties, rather than establishing matters as facts, are solely for the benefit of such Parties, may be subject to qualifications or limitations agreed upon by such Parties and may be subject to standards of materiality applicable to such Parties that differ from those generally applicable to investors and reports and documents filed with the U.S. Securities and Exchange Commission. Accordingly, investors are not third-party beneficiaries under the Purchase Agreement and the representations, warranties and covenants in the Purchase Agreement, and any descriptions thereof, should not be relied on as characterizations of the actual state of facts or circumstances of Parties. Moreover, information concerning the subject matter of such representations, warranties and covenants may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in Mondee’s public disclosures.