Asset Purchase Agreement by Valutech Out Sourcing and Technology Solutions and Services

ASSET PURCHASE AGREEMENT BY VALUTECH OUT SOURCING, S.A. DE C.V. AND TECHNOLOGY SOLUTIONS AND SERVICES, S.A. DE C.V.

Mexico City, April 10^th, ^,2019.- Basham, Ringe y Correa, S.C. (“Basham”) through the partner Juan Carlos Serra and the associates Jorge Campuzano, Roberto Serralde, Francisco Matus, Luis Álvarez and Ricardo Evangelista, assisted and advised Valutech Out Sourcing, S.A. de C.V. (“Valutech”)

Valutech is part of a conglomerate of industry-leading companies known as “Clover Wireless” (“Clover”), the global leader in aftermarket lifecycle management services and solutions for mobile devices. Clover’s main activities consist in a comprehensive services portfolio that includes returns management, repair services, and customized trade-in and buy-back programs, among many other global supply chain solutions for mobile device carriers, manufacturers, retailers, insurance providers, and enterprise businesses. Clover was launched in 2012, and has grown exponentially, amassing over 1 billion dollars annual revenue. Clover currently owns and operates industry-leading companies such as Valutech, The Wireless Source, Full Circle Wireless and YouRenew, which makes it the largest mobile device repair center in North America, with a team of over 12,000 dedicated Repair Technicians, Engineers and support personnel.

Clover is the only repair house that is currently working directly with all four tier-one carriers, handling more than 7 million devices each year, and reclaiming over 10 million parts annually with no overseas outsourcing. Adding nearly 500,000 square feet of cutting-edge technology and running operations across the United States – Mexican border will boost the Company’s capabilities significantly. After this transaction, Clover will include over 1 million square feet amongst three North American processing centers and over 4,500 repair technicians, 240 engineers and 150 support personnel.

Basham has assisted Clover in a maneuver which consists in the expansion of Clover’s operations into the Mexican market since 2010, including a prior successful acquisition of their facility in Mexicali. In order to advance the expansion strategy, the firm advised, among other matters, in the successful execution of an Asset Purchase Agreement with Technology Solutions and Services, S.A. DE C.V. (“TSSI”), regarding TSSI’s right, title, and interest in, to, and under all of the assets, properties, and rights of every kind and nature, that relate to, or are used or held for use in connection with, the Business in Ciudad Juarez, Mexico. TSSI is a high-volume remanufacturer of in-warranty and out-of-warranty IT electronic assets including laptops, tablets and other personal electronics.

Basham has been actively involved in negotiations with third parties to implement the entire scheme. Ancillary agreements related to the operation requested special attention. Among those, we can find (i) a temporary Sub-Let Agreement for the Juárez facility, (ii) the execution of Non-Disclosure Agreements with third parties and all the employees, (iii) the Juarez Lease Assignment Agreement; (iv) an interim maquila and bailment services agreement; (v) and the Employer Substitution Agreement (the “Ancillary Agreements”).

Foreign Trade was an important matter to consider in this transaction, from the technicality of the virtual transfer of the assets, the Value Added Tax Certification before the Tax Authorities, the successful treatment of the IMMEX and PROSEC programs, among many other crucial processes.

Advice has included, but not is limited to: (i) implementation of an appropriate Due Diligence required for the transaction in a short period of time; (ii) preparing, negotiating and drafting the Asset Purchase Agreement and the Ancillary Agreements; (iii) review and attainment of regulatory items, such as environmental permits and federal, local and municipal authorizations; (iv) provision of corporate authorizations to make the operation and ordinary course of business efficient (v) coordination of an elaborated series of hold-backs, set-offs and third-party payments included in the purchase price, and (vi) the attainment of the Phase 1 Environmental Assessment in record time. 

This operation is legally significant because TSSI’s holding company, Technology Solutions and Services, Inc., filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the Central District of California. Acquiring the assets of an ongoing, fully functional corporation of a bankrupt competing participant in the industry presented itself as a significant challenge. The purchase of TSSI’s assets was deeply tied to the purchase of the holding company, since it was a condition for closing, and set the tones for the negotiation.

This transaction represents a reaffirmation of Clover’s expansion plan into Latin America. Technological refurbishment requires extensive experience in plant operation and a thorough knowledge of the implementation of leading technologies. Even though the Company already had operations in Mexico, acquiring the assets, know-how and operations of a 20-year-old main player in Mexico is a defining strategy to immerse in the Mexican refurbishment market as a stepping stone into Latin America. Furthermore, its strategic closeness to the United States allows this facility to assist with the North American market in a swift, cost-effective way.