Earn-Out Payment If, during the period beginning January 1, 2022 and ending on December 31, 2022 (the “Earn-Out Period”), the Group Companies achieve certain Adjusted EBITDA targets as set forth in this Section 2.6.1 (the “Earn-Out Milestone”), then Buyer shall pay, or cause to be paid, to Seller and to the individuals set forth on Schedule 1.2(a) and Schedule 1.2(b) an aggregate amount not to exceed $50,000,000 subject to the proviso in Section 2.6.1(c) (the “Earn-Out Payment”), which shall be payable in accordance with Section 2.6.2. The Earn-Out Payment shall be calculated as follows:
(a) If the Adjusted EBITDA of the Group Companies during the Earn-Out Period is less than the Earn-Out Threshold, the Earn-Out Payment shall be zero dollars ($0); and
(b) If during the Earn-Out Period, the Group Companies achieve an Adjusted EBITDA (i) equal to or greater than the Earn-Out Target, the Earn-Out Payment shall be $50,000,000 (subject to the proviso in Section 2.6.1(c)); or (ii) less than the Earn-Out Target, but greater than the Earn-Out Threshold, the Earn-Out Payment shall be an amount equal to the product of: (A) $50,000,000 (subject to the proviso in Section 2.6.1(c)) multiplied by (B) a fraction (1) the numerator of which shall be the amount by which the Adjusted EBITDA achieved exceeds the Earn-Out Threshold and (2) the denominator of which shall be an amount equal to the Earn-Out Target minus the Earn-Out Threshold.
(c) Notwithstanding anything to the contrary, in no event shall the Earn-Out Payment exceed $50,000,000; provided, that the amount of the Earn-Out Payment will be increased by the lesser of (i) the amount of the final calculation of Accrued Income Taxes solely with respect to clause (g) of the definition of Accrued Income Taxes and (ii) the product of (y) the amount of the Earn-Out Compensatory Payment (if any) and (z) 26%. For the avoidance of doubt, an illustrative example of the calculation of Adjusted EBITDA is set forth on Exhibit B-1.
Earn-Out Payments (i) Pursuant to the Purchase Agreement, the WME Member or the Company, as applicable, are the obligors in respect of a portion of the Earn-Out Payment. Subject to Section 7.03(g)(ii), the Earn-Out Payments may be funded in any of the following manners (or any combination thereof) as determined by unanimous Board approval (provided that if unanimous Board approval is not obtained, the WME Member or the Company, as applicable, shall nevertheless be permitted to comply with their respective obligations to the Earn-Out Recipients under the Purchase Agreement): (A) for so long as the January Capital Member is a Member, a special cash distribution by the Company to the January Capital Member in consideration of that portion of the Earn-Out Payment due to the January Capital Member, (B) a cash distribution to all Common Members on a pro rata basis to enable the Common Members (other than the Class B Members) to make Earn-Out Payments to the Earn-Out Recipients (provided that all such Common Members shall be required to make such Earn-Out Payment following receipt of such distribution), (C) a special cash distribution by the Company to the WME Member to fund Earn-Out Payments by the WME Member to the Earn-Out Recipients (provided that the WME Member shall be required to make such Earn-Out Payment following receipt of such distribution), and (D) funding by the WME Member (and to the extent agreed to by the Sponsor Members, the Sponsor Members) for Earn-Out Payments to the Earn-Out Recipients.
(ii) The Earn-Out Payments shall be subject to the following rules: (A) Earn-Out Payments to the January Capital Member will, to the extent permitted under the terms of any indebtedness and Senior Equity of the Company and its Subsidiaries and Annex A, and to the extent the WME Directors reasonably determine (after meaningful consultation with the full Board) that doing so would not have an adverse impact on the Company or its Subsidiaries, for so long as the January Capital Member is a Member, be distributed by the Company to the January Capital Member (subject, in each case, to clause (B) below) (provided that, for purposes of clarification, the January Capital Member shall not lose or waive its right to receive unpaid Earn-Out Payments solely because it ceases to be a Member; provided further that, if the Company is prohibited under the terms of any indebtedness or Senior Equity of the Company or its Subsidiaries or Annex A, or the Board otherwise determines that doing so would have an adverse impact on the Company or its Subsidiaries, and accordingly does not distribute Earn-Out Payments to the January Capital Member in accordance with this clause (A), then the January Capital Member shall have the right, but not the obligation, to elect in writing to defer the payment of such Earn-Out Payment for a period of up to 24 months (the “Outside Earn-Out Payment Date”); provided further that the deferred Earn-Out Payment will be made to the January Capital Member on the earliest to occur of (A) the date on which the deferred Earn-Out Payment may be made by the Company in accordance with, and subject to the terms and conditions of, this clause (A), (2) the date specified in writing by the January Capital Member (provided the January Capital Member provides written notice to the WME Member at least 60 days prior to the date on which the January Capital Member would like to receive the deferred Earn-Out Payment if such date is prior to the Outside Earn-Out Payment Date) and (3) the Outside Earn-Out Payment Date, (B) the Class B Members shall be grossed up so that they do not bear the effect of any Dilutive Adjustment (as defined below) or the Economic Cost of any Earn-Out Payments that are funded by distributions by the Company, (C) the Class B Members shall not bear any dilution arising from (x) the issuance of any Units that are issued in connection with the Earn-Out Payments or (y) any adjustment to the exercise price (a “Dilutive Adjustment”) of any securities or other interests convertible into Equity Securities of the Company resulting from any gross-up or true-up payment made in connection with, or that constitutes, any Earn-Out Payment, and (D) if any portion of the Earn-Out Payments are paid pursuant to clause (D) of Section 7.03(g)(i) by the WME Member and, if applicable, any Sponsor Members, the WME Member and such Sponsor Members (if any), will be issued Class A Common Units in respect of the amounts so paid thereby pursuant to such clause (D) at a price to be unanimously determined by the Board, which shall in no event be greater than Fair Market Value; provided, that if the Board does not unanimously agree on the price per Class A Common Unit, such Class A Common Units will be issued at Fair Market Value, as unanimously determined by the Board; provided, further, that if the Board does not unanimously agree on Fair Market Value, such value shall be determined by an investment banking firm of national reputation selected by the WME Member and reasonably acceptable to the SL Member, the KKR Member and the Company, whose expenses shall be borne by the Company.
(iii) Solely for purposes of this Section 7.03(g), “Economic Cost”, means, with respect to a Class B Member, such Member’s direct or indirect Percentage Interest of any Company cash or other Company asset that is distributed in a non-pro rata distribution to fund all or any portion of any Earn-Out Payment; provided, that, “Economic Cost” shall not include any diminution in value, lost profits or similar cost not relating to the immediate economic effect of the applicable non-pro-rata distribution.
Earnout Payment (i) As promptly as practicable after the end of the Earnout Period, but in no event later than 60 days following December 31, 2005, Parent shall provide the Stockholders’ Agent with a report, setting forth the Net Revenues for the 12-month period ended December 31, 2005 (the “Earnout Report”). If an Earnout Dispute Notice is not delivered pursuant to Section 2.4(c)(iii) below, then in no event later than 105 days following December 31, 2005, Parent shall pay or cause to be paid the Earnout Payment Amount in accordance with the terms of this Agreement, subject to the right of offset provisions of Sections 2.4(a), (b) and (d).
(ii) Parent shall keep full, clear and accurate books and records with respect to the Business. The books and records shall be maintained in such a manner that Net Revenue shall be readily verifiable. All books and records with respect to the Business shall be available for inspection by the Stockholders’ Agent or any attorney or accountant engaged by the Stockholders’ Agent to act on behalf of the Holders, in all cases upon reasonable prior notice and during normal business hours. The information contained in the books and records of Parent with respect to the Business shall remain confidential. Notwithstanding the foregoing, upon written request of the Stockholders’ Agent, Parent shall provide the Stockholders’ Agent with a report reflecting the estimate of the Net Revenue to date (which estimate is subject to change in the preparation of the Earnout Report) as promptly as practicable thereafter; provided that the Stockholders’ Agent may only make such a request once every six months commencing on July 1, 2005. If the Stockholders’ Agent does not deliver to Parent an Earnout Dispute Notice (as defined below) as set forth in Section 2.4(c)(iii) below, then the Earnout Report for the Earnout Period shall be deemed final and binding and neither the Stockholders’ Agent nor the Holders shall have any further right to contest the report, the computation of Net Revenue or payment of the Earnout Payment Amount.
(iii) In the event that the Stockholders’ Agent shall dispute the information set forth by Parent in the Earnout Report or, if based on the Stockholders’ Agent’s review of the books and records of the Business in accordance with subsection (c)(ii) above, omitted from the Earnout Report, as the case may be, then, within 60 calendar days following the date of the delivery by Parent of such report, the Stockholders’ Agent shall provide written notice to Parent (the “Earnout Dispute Notice”) specifying the amount disputed and the basis for the dispute, together with supporting documentation reflecting the analysis of and justification for any recomputation made. Parent and the Stockholders’ Agent shall make good faith efforts to resolve the dispute through negotiations for a period of 30 calendar days following the receipt of the written notice defining and describing the nature of the dispute. In the event that the parties are unable to finally resolve the dispute within such 30 calendar-day period, the parties to the dispute may elect by mutual agreement to extend the period of negotiation and may elect by mutual agreement to engage a mediator to assist in such negotiation. To the extent that any matter remains unresolved following negotiations (as determined by notice by any party to the other parties), the Stockholders’ Agent and Parent shall jointly select an independent accountant of recognized national standing to resolve any remaining disagreements, which independent accountant shall not have provided services to the Stockholders’ Agent, the Company or Parent or its affiliates during the five-year period preceding the date of its selection (the “Independent Accountant”). The Stockholders’ Agent and Parent shall use their respective commercially reasonable efforts to cause such Independent Accountant to make its determination within 60 calendar days of accepting its selection. Within 10 business days after the date of determination of such Independent Accountant, Parent shall pay or cause to be paid to the Holders the Earnout Payment Amount, if any, in the manner set forth herein, subject to the right of offset provisions of Sections 2.4(a), (b) and (d). The decision of the Independent Accountant shall be a final, binding, and conclusive resolution of the parties’ dispute, shall be non-appealable, and shall not be subject to further review. Irrespective of the Independent Accountant’s decision, the costs and expenses of the Independent Accountant shall be split equally between the parties. In the event that the Stockholders’ Agent does not pay the full amount of one-half of the Independent Accountant’s costs and expenses, Parent shall be entitled to deduct the difference between one-half of the costs and expenses of the Independent Accountant and the amount actually paid by the Stockholders’ Agent to the Independent Accountant from the Earnout Payment Amount. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split equally between the parties) incurred in connection with the dispute. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split equally between the parties) incurred in connection with the dispute.
(iv) The Holders will be deemed to, as part of their approval and adoption of the Merger Agreement and the transactions contemplated therein and herein, and the Stockholders’ Agent hereby, generally, irrevocably, unconditionally and completely agree that (1) the Company and Parent (as the controlling stockholder of the Company as of the Effective Time of the Merger) and each of their respective Affiliates shall be entitled to operate the Business after the Effective Time as they determine in their sole and absolute discretion, and shall have no obligation to operate the Business in any manner that would maximize, maintain or protect the value of the Common Stock CVRs and the Preferred Stock CVRs, and as a result of such operation of the Business, there may be a diminution in or elimination of the value of the CVRs, (2) the Common Stock CVRs and the Preferred Stock CVRs represent contractual obligations of Parent, and none of Parent, the Company or any of their respective Affiliates owes any fiduciary duty of any type (including, without limitation, any duty of loyalty or care) to any Holder of Common Stock CVRs and/or Preferred Stock CVRs, and (3) each of the Holders and the Stockholders’ Agent shall be prohibited from asserting any dispute, right, claim, action, cause of action, controversy or remedy of any kind and nature against any of the Company, Parent or any of their Affiliates resulting from the operation of the Business after the Effective Time or resulting from any allegation of breach of fiduciary duty of any nature, other than claims for fraud or intentional misconduct (and other than the right of the Stockholders’ Agent to dispute the Closing Balance Sheet Payment under Section 2.4(b)(iii) and/or the Earnout Report under Section 2.4(c)(iii) above). Upon either (A) the occurrence of an allegation by the Stockholders’ Agent of any claim which may arise for fraud or intentional misconduct under this subsection (iv) or (B) the receipt by the Stockholders’ Agent of written notice made in accordance with Section 1.3 by any Holder to the Stockholders’ Agent of the occurrence of any claim which such Holder has a good faith belief has arisen for fraud or intentional misconduct under this subsection (iv) (in each case, a “Claim”), the Stockholders’ Agent shall provide notice of such Claim to Parent, stating, to the best of his or her understanding, the circumstances giving rise to the Claim, specifying the amount of the Claim and making a request for any payment then believed due (the “Notice”). Upon receipt of any such Notice by Parent, within the next 45 days thereafter, the parties shall use their reasonable best efforts to cooperate and arrive at a mutually acceptable resolution of such dispute. If a mutually acceptable resolution cannot be reached between the parties within such 45-day period, the Stockholders’ Agent may submit the dispute for resolution by a panel of three arbitrators selected from the panels of arbitrators of the American Arbitration Association in Santa ▇▇▇▇▇ County, California; provided, however, that (i) one arbitrator shall be selected by the Stockholders’ Agent, the second arbitrator shall be selected by Parent and the third arbitrator shall be selected by the two previously selected arbitrators and (ii) in all respects, such panel shall be governed by the American Arbitration Association’s then existing Commercial Arbitration Rules. If it is finally determined that all or a portion of such Claim amount is owed to the Holders, Parent shall, within 10 days of such determination, pay the Holders such amount owed, together with interest from the date that the Stockholders’ Agent initially requested such payment until the date of actual payment, at an annual rate equal to the prime interest rate then generally in effect on the date of payment as set forth in The Wall Street Journal. The arbitration panel’s decision shall be final and binding upon the parties, and may be entered and enforced in any court of competent jurisdiction by any party. The parties shall be responsible for their respective fees and costs (including any attorneys’ or accountants’ fees) incurred in connection with the arbitration. EACH HOLDER AND THE STOCKHOLDERS’ AGENT ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE FOR FRAUD OR INTENTIONAL MISCONDUCT UNDER THE PRECEDING SENTENCE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO FRAUD OR INTENTIONAL MISCONDUCT UNDER THE PRECEDING SENTENCE. EACH HOLDER AND THE STOCKHOLDERS’ AGENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, AND (C) IT MAKES SUCH WAIVER VOLUNTARILY.
(v) Notwithstanding anything to the contrary set forth in this Section 2.4(c), in the event of a Change of Control (as defined below) of Parent before December 31, 2005, the Aggregate Earnout Payment Amount payable pursuant to this Section 2.4(c) shall be at least $14,000,000 regardless of the actual Net Revenue recognized during the Earnout Period, subject, however, to the offset provisions of Section 2.4(a), (b) and (d). In event of a Change of Control of Parent as set forth herein, Parent shall make proper provisions so that the continuing or surviving corporation or entity shall assume the obligation to pay the Aggregate Earnout Payment Amount as set forth herein. For purposes of this Section 2.4(c)(v), a “Change of Control” shall mean (1) the consummation of any transaction, including without limitation, any merger or consolidation, pursuant to which any of the voting stock of Parent is converted into or exchanged for cash, securities or other property, other than any transaction where the voting stock of Parent outstanding immediately prior to such transaction is converted into or exchanged for voting stock of the surviving or transferee entity constituting more than 50% of such voting stock of such surviving or transferee entity (immediately after giving effect to such issuance) and other than an acquisition of Parent in which the management of Parent participates in ten percent or more of the fully-diluted equity of the acquiror; or (2) a sale of all or substantially all of Parent’s assets.
Earn-Out 4.1 Subject to clause 4.2, at the end of the Earn Out Period the Buyer shall pay to the LLP Sellers the Earn Out Amount in accordance with clause 4.3.
4.2 The Earn Out Amount shall be payable by the Buyer to the LLP Sellers if, during the Earn Out Period, the Aggregate JCA Revenue equals or is greater than the Target Earn Out Revenue.
4.3 The Earn Out Amount shall be paid by the Buyer by the later of (i) 90 days of the end of the Earn Out Period and (ii) ten Business Days after the date on which the Aggregate JCA Revenue has become final and binding in accordance with the procedure in this clause 4, subject to the terms and conditions of this clause 4, by electronic transfer for same day value (‘Earn Out Payment’) to each of the LLP Sellers in the proportions set out in column (4) of his or her Consideration Schedule. For the avoidance of doubt, the Buyers may make the Earn Out Payment to the Sellers Solicitors’ Bank Account whose written confirmation of receipt shall be sufficient discharge to the Buyer, and the Buyer shall have no duty in connection with the manner in which the Earn Out Amount is allocated among the Sellers or applied in any particular way.
4.4 If at the date upon which the Earn Out Payment would otherwise be payable by the Buyer pursuant to this clause 4 any amount, which has been agreed or determined by a court of competent jurisdiction from which there is no right of appeal to be payable to the Buyer by an LLP Seller pursuant to this Agreement or the Tax Deed or the Specific Covenant for Tax, remains unpaid, then the Buyer shall be entitled to withhold from the Earn Out Payment due to the defaulting LLP Seller an amount up to such unpaid amount. Any amount so withheld shall be applied in settlement (in whole or in part) of the amount due to the Buyer, and shall be deemed to be deducted from the amount of the Earn Out Payment due to the relevant LLP Seller.
4.5 If at the date upon which an Earn Out Payment would otherwise be payable by the Buyer pursuant to this clause 4 there are Unresolved Claims pursuant to this Agreement or the Tax Deed or the Specific Covenant for Tax, including any Claim, the Buyer shall be entitled to withhold from the Earn Out Payment due to the defaulting LLP Seller an amount (a ‘Retained Amount’) equal to the lesser of (i) the amount of the Earn Out Payment otherwise due to that LLP Seller and (ii) the amount of such Unresolved Claim; provided that following final agreement or determination of such Unresolved Claim (whether by a binding settlement or a judgement or arbitration award to which there is no further appeal) then to the extent that the amount of the Earn Out Payment withheld by the Buyer exceeds the amount agreed or determined to be due to the Buyer in respect of the Unresolved Claim, the Buyer shall promptly pay such excess to the relevant LLP Seller (by payment to the Sellers’ Solicitors). In the event that the Buyer agrees with the Sellers that it will not pursue any claim in respect of which any Retained Amount has been withheld, the Buyer shall pay to the relevant LLP Seller (by payment to the Sellers’ Solicitors) the full amount of the Retained Amount in respect of such claim promptly following such agreement. Any Retained Amount shall be deemed to be deducted from the amount of the Earn Out Payment due to the relevant LLP Seller.
4.6 If before an Earn Out Payment is due to be paid the Buyer and an LLP Seller shall not have reached agreement as to the amount which may be retained pursuant to clause 4.5 in respect of any Claim, then the question of the amount which may be retained (including the amount of the Buyer’s costs and expenses which are likely to be determined to be payable by the LLP Seller) may be referred by either the Buyer or the LLP Sellers to an independent counsel of appropriate experience and standing to be appointed by the Buyer and the LLP Sellers or (in default of agreement within five Business Days of any proposal for the appointment of such counsel) by the chairman for the time being of the Council of the Bar on the application of either the Buyer or the LLP Sellers; and the decision of such counsel (who shall be deemed to be acting as an expert and not as an arbitrator) shall be final and binding on the parties and the cost of such reference shall be paid by the Buyer and the LLP Sellers in equal shares or in such other proportions as such counsel shall determine. An amount determined by counsel pursuant to this clause 4.6 shall be a “Unresolved Claim”. In relation to a determination to be made under this clause 4.6:
(a) the Buyer and the Warrantors shall procure that the counsel appointed is provided with all information reasonably required by him for the purpose of making his determination; and
(b) such counsel shall allow each of the Buyer and the Warrantors an opportunity to make written representations to him but so that all such representations must be made within 14 days of his appointment .
4.7 During the Earn Out Period, if the ability of the LLP Sellers to achieve the Target Earn Out Revenue, whether individually or collectively is restricted by any member of the Buyer Group agreeing or having previously agreed a placement fee of less than 30 per cent of the first year salary, bonus, benefits, and signing on bonus with a client, which the LLP Seller is subsequently obliged to observe, the difference between the actual fee the LLP Seller would ordinarily charge the client prior to the placement fee adjustment shall be added to the Target Earn Out Revenue. For the avoidance of doubt, the provisions of this clause 4.7 shall not apply in relation to placement fees below 30 per cent of the first year salary, bonus, benefits, and signing on bonus which have been agreed (i) by the Buyer Group prior to the date of this Agreement or (ii) by the Buyer Group together with the LLP Sellers, at the request of a client and/or potential client, following the date of this Agreement.
4.8 If a LLP Seller dies at any time during the Earn Out Period the LLP Seller and her estate shall continue to be entitled to be paid her proportion of the Earn Out Amount, as set out in column (4) of his or her Consideration Schedule.
4.9 The Buyer shall within 45 Business Days after the end of the Earn Out Period prepare and deliver to the LLP Sellers’ Representative a statement of the Aggregate JCA Revenue (which shall include a breakdown by LLP Seller and JCA Employee) and based on that a calculation of the Earn Out Amount (the ‘Earn Out Statement’). The LLP Sellers’ Representative shall by the fifth Business Day after receipt of the Earn Out Statement, send the Buyer an acknowledgement of receipt. If the LLP Sellers’ Representative fails to issue an acknowledgement of receipt by such time then the Sellers shall, for the purposes of this clause 4.9 be deemed to have issued an acknowledgement of receipt on the fifth Business Day after it receives the Earn Out Statement.
4.10 If within 15 Business Days following receipt of the acknowledgment of an Earn Out Statement by the LLP Sellers’ Representative, the LLP Sellers’ Representative has not given the Buyer written notice of her objection to the Earn Out Statement (which notice shall state in detail the basis of the Sellers’ objection) then the Earn Out Statement shall be binding and conclusive on the parties.
4.11 If the LLP Sellers’ Representative gives the Buyer written notice of the Sellers’ objection to an Earn Out Statement within 15 Business Days following acknowledgement of receipt of an Earn Out Statement by the LLP Sellers’ Representative and if the LLP Sellers’ Representative and the Buyer fail to resolve the issues outstanding with respect to the determination of the Earn Out Statement within 15 Business Days after the Buyer’s receipt of the LLP Sellers’ Representative’s notice of objection either the LLP Sellers’ Representative or the Buyer may at any time after that date refer the matter or matters in dispute to such independent firm of chartered accountants as they shall agree or, in default of agreement within 10 days of any proposal for the appointment of such accountants, as shall be appointed by the President for the time being of the Institute of Chartered Accountants in England and Wales on the application of either the LLP Sellers’ Representative or the Buyer.
4.12 The independent firm of chartered accountants referred to in clause 4.11 shall determine the matter or matters in dispute acting as experts not as arbitrators and their decision shall be final and binding and accordingly the Accountant Determined Earn Out Amount shall be the amount of the Earn Out Payment. Such independent firm of chartered accountants shall be instructed to deliver their determination as soon as practicable to the LLP Sellers’ Representative and the Buyer.
4.13 The LLP Sellers’ Representative and the Buyer agree that they shall instruct any accountants appointed under clause 4.11 to determine only the particular aspect of the preparation of the Earn Out Statement in dispute and, accordingly, such accountants shall not determine or adjust any other matter or have regard to any fact not directly relating to the matter in dispute.
4.14 The fees of the accountant appointed pursuant to this clause 4 shall be paid by the Buyer and the Sellers in equal shares or as the accountant may determine.
4.15 If either the Sellers or the Buyer fails to pay such fees of the accountants appointed under clause 4.11 in accordance with the provisions of clause 4.14, the other party may in its absolute discretion pay such fees on the non-paying party’s behalf and the non-paying party shall reimburse the other on demand all costs and expenses incurred by the other in so doing.
4.16 Subject to clause 4.17, the Sellers acknowledge, understand and agree that:-
(a) after Completion the Buyer shall exercise operational control over the business and assets of the Group; and
(b) that the future operation of the business of the Group, and the marketing and sale of their products is to be exercised by the Buyer in accordance with its own business judgment and in its sole and absolute discretion.
4.17 During the Earn Out Period, the Buyer shall not:
(a) terminate the employment of any LLP Seller or JCA Employee other than in following circumstances:
(i) the LLP Seller or JCA Employee voluntarily resigning;
(ii) the LLP Seller’s or JCA Employee’s gross misconduct, as defined in the Buyer’s UK Company Employee Handbook, as at the date of this Agreement and as disclosed to the LLP Sellers;
(iii) the LLP Seller or JCA Employee committing or continuing to commit a serious breach of her obligations in his or her Service Agreement that is not reasonably capable of being rectified within a reasonable period;
(iv) the LLP Seller or JCA Employee being deemed to be repeatedly failing to perform their duties and obligations under his or her Service Agreement, which has not been remedied within a reasonable period;
(v) the LLP Seller or JCA Employee is or has become of unsound mind or a patient under the Mental Health ▇▇▇ ▇▇▇▇;
(vi) the LLP Seller or JCA Employee is convicted of a criminal offence (excluding an offence under road traffic legislation in the United Kingdom and elsewhere for which a penalty of imprisonment cannot be imposed); or
(vii) the LLP Seller or JCA Employee has become addicted to or is habitually under the influence of alcohol or any drug (not being a drug prescribed to him or her by a medical practitioner for the treatment of a condition other than drug addiction) the possession of which is controlled by law; or
(b) unreasonably (in the reasonable discretion of the Buyer), take, divert or re-direct any business opportunities away from the LLP Sellers or the JCA Employees.
4.18 The LLP Sellers acknowledge, understand and agree that no Member of the Buyer Group has a duty to the LLP Sellers to use any level of efforts to do any action or thing which would or might increase the Aggregate JCA Revenue for any part of the Earn Out Period. However, no Member of the Buyer Group will knowingly interfere with or do anything the primary purpose of which is to impair or adversely diminish the Aggregate JCA Revenue for any part of the Earn Out Period.
4.19 The Aggregate JCA Revenue shall be, unless otherwise agreed in writing by the LLP Sellers’ Representative, calculated on the basis of the Remuneration Model.
4.20 Notwithstanding that as at the date of the Agreement neither party envisages such a requirement, if the Buyer or the Group is required to account for Tax or National Insurance contributions in relation to any Earn Out Payments made to the Sellers, the Buyer or Group Entity (as relevant) may make deduction of such Tax or National Insurance contributions from those Earn Out Payments and shall not be required to increase any Earn Out Payments or otherwise compensate the Sellers for those deductions.
Earnout Payments (a) The Seller shall be entitled to, and shall, earn each of the Year-One Earnout Consideration and the Year-Two Earnout Consideration as and to the extent provided in this Section 2.5.
(b) Within sixty (60) days after the expiry of each Earnout Period, the Buyer shall provide the Seller with written notice (the “Earnout Notice”) of the Buyer’s reasonably detailed computation of the EBITDA during such Earnout Period (the “Earnout EBITDA”), the Earnout Consideration calculated therefrom. If the Buyer shall fail to timely provide an Earnout Notice, then the Earnout EBITDA shall be finally and conclusively deemed to equal 100% of the Earnout Target for such Earnout Period.
(c) Upon the receipt by the Seller of an Earnout Notice, the Seller shall have a period of thirty (30) days to review the Earnout Notice and may have the same verified by independent accountants and other Representatives selected by him. The Seller and his Representatives shall be entitled to perform all reasonable procedures (including review of all records of the Buyer and the Company supporting such calculations and other materials as they may reasonably request) and to take any other reasonable steps that the Seller and his Representatives deem appropriate to confirm that the amount of the Earnout EBITDA for the applicable Earnout Period set forth in the Earnout Notice has been prepared in accordance with the terms of this Agreement. If the Seller shall have any objections to the calculation of the Earnout EBITDA set forth in the Earnout Notice, the Seller shall deliver to the Buyer, within thirty (30) days from his receipt of the Earnout Notice (the “Earnout Objection Period”), a written statement (the “Earnout Objection Notice”) setting forth the component or components of the Earnout Notice that are in dispute, the basis of such dispute and, if known, the amount proposed as an adjustment. The failure of the Seller to deliver an Earnout Objection Notice within the thirty (30) day period hereinabove provided shall constitute the acceptance by the Seller of the Earnout EBITDA and the amount of Earnout Consideration set forth in the Earnout Notice whereupon such amounts shall be final, binding and conclusive for all purposes hereunder. Notwithstanding anything to the contrary contained in this Section 2.5, in the event any information reasonably requested by the Seller under this Section 2.5(c) has not been provided to the Seller promptly following the Seller’s request thereof and within such thirty (30) day period, then the Earnout EBITDA and the amount of Earnout Consideration, each as set forth in the Earnout Notice shall not be deemed final, binding or conclusive hereunder, and the Seller may unilaterally (without the Buyer’s consent) extend the period for which the Seller may submit the Earnout Objection Notice five (5) days for each day beyond the thirty (30) day period that such item remains outstanding by delivering a written notice to the Buyer of such extension.
(d) If the Seller delivers an Earnout Objection Notice, the Seller and the Buyer shall in good faith attempt to resolve any such dispute and, if the parties so resolve all such disputes, then the computation of the Earnout EBITDA and the amount of Earnout Consideration set forth in the Earnout Notice for the applicable Earnout Period as resolved by the parties, shall be conclusive and binding on the parties upon written acknowledgement of such resolution. If the Seller and the Buyer fail to resolve all of the items in dispute within thirty (30) days after the Seller’s delivery of the Earnout Objection Notice to the Buyer (or such longer period as they may mutually agree in writing), then either party may elect to submit any remaining disputed items to an independent third-party arbitrator mutually acceptable to the Buyer and the Seller who shall be qualified by experience and training to arbitrate commercial disputes (the “Earnout Expert”) who shall be retained to review promptly the Earnout EBITDA and the amount of Earnout Consideration set forth in the Earnout Notice and the disputed items or amounts; provided, however, that if the Buyer and the Seller are unable to mutually agree on an individual to act as the Earnout Expert within five (5) Business Days after the Buyer or the Seller elect to submit the dispute to arbitration, then each of the Buyer and the Seller shall each designate an independent third-party arbitrator and such designees shall promptly (and in any event within ten (10) days) select an individual to act as the Earnout Expert.
(e) If any disputed items are referred to the Earnout Expert, the parties shall cooperate in good faith with the determination process and the Earnout Expert’s requests for information, including providing the Earnout Expert with information as promptly as practicable after its request therefor. Each party shall be entitled to receive copies of all materials provided by the other to the Earnout Expert in connection with the determination process. In making its determination on the disputed items, the Earnout Expert shall make such determinations (i) only in accordance with the standards set forth in this Agreement, (ii) only with respect to the disputed items submitted to the Earnout Expert and no other items, (iii) on a disputed item by disputed item basis (i.e., not in the aggregate), and (iv) where the result of the Earnout Expert’s determination for such disputed item is neither greater then nor less than the amounts presented by the parties to the Earnout Expert with respect to the item in dispute. In connection with his review the Earnout Expert shall have the right to engage an independent accounting firm; provided such independent accounting firm does not have, and has not had, a material relationship with the Seller, the Buyer or any of their respective Affiliates in the past five (5) years. The determination of the Earnout Expert shall be final, conclusive and binding on the parties, absent manifest error. The parties shall instruct the Earnout Expert to provide its determination in writing to the parties within thirty (30) days of the date it is engaged on such project. Neither party shall have any ex parte conversations or meetings with the Earnout Expert without the prior written consent of the other party.
(f) The amount of Earnout EBITDA for the applicable Earnout Period and the amount of Earnout Consideration calculated therefrom either as accepted or deemed to have been accepted by the Seller or as adjusted and resolved in the manner herein provided, shall fix the amount of the Earnout EBITDA for the applicable Earnout Period and the amount of Earnout Consideration calculated therefrom. Subject to the reimbursement provided in the next sentence, each party shall bear its own expenses and the fees and expenses of its own Representatives, including its independent accountants, in connection with the preparation, review, dispute (if any) and final determination of the amount of Earnout EBITDA for the applicable Earnout Period and the Earnout Consideration calculated therefrom. The fees and expenses of the Earnout Expert shall be borne by the party (either the Buyer or the Seller) whose determination of the amount of Earnout EBITDA (as set forth in the Earnout Notice or Earnout Objection Notice, as applicable) was farthest from the final determination by the Earnout Expert, and such party shall reimburse the other party for all out-of-pocket fees and expenses (including attorneys’ and accountants’ fees) incurred in connection therewith; provided, that, if the determination by the Earnout Expert is equidistant between the determinations of the parties, or is no more than five percent (5%) more or less than such equidistant amount, the fees of the Earnout Expert shall be borne equally by the Buyer and the Seller and each of the Buyer and the Seller shall bear the cost of their own respective fees and expenses.
(g) If the Earnout EBITDA set forth in the Earnout Notice for the First Earnout Period is equal to or greater than one hundred percent (100%) of the Year-One EBITDA Target then the Seller shall be entitled to receive one hundred percent (100%) of the Year-One Earnout Consideration.
(h) If the Earnout EBITDA as set forth in the Earnout Notice for the First Earnout Period is equal to or greater than seventy percent (70%) and less than one hundred percent (100%) of the Year-One EBITDA Target, then the Seller shall be entitled to receive a portion of the Year-One Earnout Consideration equal to the product of (A) the Year-One Earnout Consideration multiplied by (B) a fraction, the numerator of which is the Earnout EBITDA for the First Earnout Period, and the denominator of which is the Year-One EBITDA Target. If the Earnout EBITDA for the First Earnout Period is less than seventy percent (70%) of the Year-One EBITDA Target, then the Seller shall not be entitled to any portion of the Year-One Earnout Consideration.
(i) If the Earnout EBITDA set forth in the Earnout Notice for the Second Earnout Period is equal to or greater than one hundred percent (100%) of the Year-Two EBITDA Target then the Seller shall be entitled to receive an amount equal to the Year-Two Earnout Consideration.
(j) If the Earnout EBITDA as set forth in the Earnout Notice for the Second Earnout Period is equal to or greater than seventy percent (70%) and less than one hundred percent (100%) of the Year-Two EBITDA Target, then the Seller shall be entitled to receive a portion of the Year-Two Earnout Amount equal to the product of (A) the Year-Two Earnout Amount multiplied by (B) a fraction, the numerator of which is the Earnout EBITDA for the Second Earnout Period, and the denominator of which is the Year-Two EBITDA Target. If the Earnout EBITDA for the Second Earnout Period is less than seventy percent (70%) of the Year-Two EBITDA Target, then the Seller shall not be entitled to any portion of the Year-Two Earnout Consideration.
(k) Except as set forth in Section 2.5(l), the Earnout Consideration shall be paid by wire transfer of immediately available funds; provided, however, to the extent there shall not be an Equity Conditions Failure, at the Buyer’s discretion, up to sixty percent (60%) of the Earnout Consideration for any Earnout Period may be satisfied with shares of the Buyer Common Stock valued at a price per share equal to the Earnout Share Price.
(l) If no Earnout Objection Notice is received, within three (3) Business Days of the expiration of the Earnout Objection Period, the Buyer shall either (i) pay to the Seller in immediately available funds the applicable percentage of the Earnout Consideration, or (ii) to the extent there shall not be an Equity Conditions Failure, (x) pay in immediately available funds and (y) issue such number of shares of Buyer Common Stock, which together shall equal in value the applicable percentage of the Earnout Consideration to the Seller; provided, that at least forty percent (40%) of such Earnout Consideration shall be paid in immediately available funds. If an Earnout Objection Notice is received, within five (5) Business Days of the Earnout EBITDA determination becoming final, conclusive and binding upon the parties in accordance with the terms set forth above, the Buyer shall (i) pay to the Seller in immediately available funds the applicable percentage of the Earnout Consideration or (ii) to the extent the Equity Conditions are then satisfied, (x) pay in immediately available funds and (y) issue such number of shares of Buyer Common Stock, which together shall equal in value the applicable percentage of the Earnout Consideration to the Seller; provided, that at least forty percent (40%) of such Earnout Consideration shall be paid in immediately available funds.
(m) Notwithstanding anything contained in this Section 2.5 to the contrary, if (i) the Seller timely delivers an Earnout Objection Notice to the Buyer and (ii) the Buyer’s computation of EBITDA for such Earnout Period is in an amount sufficient for a portion of the Earnout Consideration to be paid (or if applicable, issued) for such Earnout Period, then, within three (3) Business Days of the receipt of the Earnout Objection, the Buyer shall (i) pay to the Seller in immediately available funds the applicable percentage of the Earnout Consideration or (ii) to the extent there shall be no Equity Conditions Failure, (x) pay in immediately available funds and (y) issue such number of shares of Buyer Common Stock, which together shall equal in value the applicable percentage of the Earnout Consideration to the Seller (any such amount so paid or issued, an “Interim Earnout Payment Amount”). Upon final determination of the appropriate amount of the Earnout Consideration for such Earnout Period in accordance with this Section 2.5, the Buyer shall promptly pay and/or issue to Seller the amount of such Earnout Consideration less the Interim Earn-out Payment Amount previously paid and/or issued; provided, that at least forty percent (40%) of the aggregate amount of such Earnout Consideration shall be paid in immediately available funds.
(n) Any payments under this Section 2.5 shall constitute an adjustment to the Purchase Price.
(o) From and after the Closing Date until the expiration of the Second Earnout Period, the Buyer shall, and the Buyer shall cause the Company to, own and operate the Company as a separate business and maintain separate financial statements for the Company, to include all business that is originated or generated by the Company, including, without limitation, all revenue generated by employees compensated by the Company (including those individuals set forth on Schedule 2.3(a)) with or by the use of the Buyer’s products or platforms including SRAX, SRAX MD, SRAX DI, GroupAD, Social Spotlight Media, Facebook ads and advertisements on other social media platforms, as well as any future products, platforms or other sales channels or methodologies developed by the Buyer, which shall be counted toward the determination of the Company’s EBITDA; provided, however, that (i) the related employee compensation costs, (ii) the actual cost of utilizing any such product, platform, sales channel or other methodology which is directly attributable to the revenue generated by such employees which are compensated by the Company (but not the cost of any development or creation of such products, platform, sales channels or other methodologies) and (iii) any project or campaign specific development costs or creative services costs requested by the Seller, in each case shall be counted toward the determination of the Company’s EBITDA and shall not be an EBITDA Adjustment. The Buyer shall act in good faith in the exercise of its power, authority and control of the Company and shall cause the Company to operate the Business in a manner generally consistent with the Company’s operation of the Business in the fiscal year prior to the Closing and in a manner intended to maximize EBITDA during each Earnout Period. In furtherance of the foregoing covenants in this Section 2.5(o), from the Closing Date until the expiration of the Second Earnout Period, the Buyer shall not, and the Buyer shall cause the Company not to, without the prior written consent of the Seller: (i) increase the compensation of any employees, consultants, contractors or other persons providing services to the Business or the Company, which such increase, in the aggregate, would be material to the Company or the Business; (ii) engage in any transaction or incur any expense or obligation to an Affiliate unless such expense or obligation is on terms and conditions which are no more favorable to such Affiliate than the Buyer or the Company would obtain in an arms’ length arrangement negotiated with a third party; (iii) increase any reserve or take any charge against earnings except to the extent required by applicable Law or GAAP and, in which case, any such increase or reserve shall be disregarded for purposes of calculating the Company’s EBITDA; (iv) incur any expense inconsistent with the type, amount or timing of expenses incurred by the Company in the conduct of the Business during the fiscal year prior to the Closing, unless the Buyer or the Company reasonably determines such expense is reasonably necessary to generate or protect revenues during s
