Closing Escrow The Closing shall take place by means of a so called “New York style” escrow (the “Closing Escrow”), and, at or prior to the Closing, the Parties shall enter into a closing escrow agreement with the Escrow Agent with respect to the Closing Escrow in form and substance reasonably acceptable to Seller, Purchaser and the Escrow Agent (the “Closing Escrow Agreement”) pursuant to which (i) the Purchase Price to be paid by Purchaser pursuant to Section 3.3 shall be deposited with Escrow Agent, (ii) all of the documents required to be delivered by Seller and Purchaser at Closing pursuant to this Agreement shall be deposited with Escrow Agent, and (iii) at Closing, the Purchase Price (as adjusted pursuant to Section 3.1) and the ▇▇▇▇▇▇▇ Money shall be disbursed to Seller and the documents deposited into the Closing Escrow shall be delivered to Seller and Purchaser (as the case may be) pursuant to the Closing Escrow Agreement.
Indemnity Escrow As a remedy for the indemnity set forth in Article VII, at the Closing, Parent shall deposit with the Escrow Agent 7.5% of the Transaction Shares (the “Escrowed Indemnity Shares”), comprised of Escrowed Earnout Shares (including First Target Shares, Second Target Shares and Third Target Shares) and Transaction Shares that are not Escrowed Earnout Shares to be held in a separate escrow account and released therefrom (if applicable) from time to time to Parent in satisfaction of such indemnity, all in accordance with Article VII hereof and the terms and conditions of the Escrow Agreement. On the fifth Business Day following the date (the “Indemnity Escrow Termination Date”) that is fifteen (15) months from the Closing Date, the Escrow Agent shall release the Escrowed Indemnity Shares, less any of such shares applied in satisfaction of a claim for indemnification and any of such shares related to a claim for indemnification that is then unresolved. Upon such release, Escrowed Indemnity Shares that constitute Transaction Shares shall be delivered to the Company Stockholders in accordance with Section 2.6(c) of the Company Disclosure Statement and the Escrow Agreement; and the Escrowed Indemnity Shares that constitute Escrowed Earnout Shares shall be retained in escrow in accordance with Section 2.8 hereof and the Escrow Agreement. Any Escrowed Indemnity Shares held with respect to any unresolved claim for indemnification and not applied as indemnification with respect to such claim upon its resolution shall be delivered in accordance with the preceding sentence.
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.
Escrow Amount At the Closing, Seller and Buyer shall enter into an escrow agreement in the form attached hereto as Exhibit A (the “Escrow Agreement”), pursuant to which Seller shall deposit Three Hundred Forty-Seven Thousand Two Hundred Ninety-Nine Dollars ($347,299) (the “Escrow Amount”) with the Escrow Agent, which shall be held by the Escrow Agent in a segregated account as security for Seller’s indemnification obligations under Section 15 hereof. All interest accruing on the Escrow Amount shall be for the benefit of Seller. In the event Buyer makes a written claim or demand for indemnification under Section 15 hereof (an “Indemnification Claim”), and Seller does not dispute such Indemnification Claim, or is determined to be liable for and in respect of such Indemnification Claim by a court of competent jurisdiction, then the Escrow Agent promptly thereafter shall pay such Indemnification Claim in full to Buyer, all as more particularly provided in the Escrow Agreement. On the date which is six (6) months after the Closing Date (as defined in Section 1.06 hereof), fifty percent (50%) of the Escrow Amount then remaining in escrow under the Escrow Agreement and not then subject to an outstanding Indemnification Claim shall be paid by the Escrow Agent to Seller. The Escrow Agreement shall expire upon the termination of the Survival Period (as defined in Section 15.01 hereof), and immediately thereafter the Escrow Agent shall pay the portion, if any, of the then remaining Escrow Amount not in dispute to Seller; provided, however, that if prior to the expiration of the Survival Period, Buyer shall have made an Indemnification Claim or commenced litigation or any other proceeding on account of any such claim, the term of the Escrow Agreement shall be extended, and the Escrow Agent shall continue to hold in escrow the portion of the then Escrow Amount in dispute, in each case until the final resolution of such Indemnification Claim or litigation or proceeding relating thereto, all as more particularly provided in the Escrow Agreement.
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.
