Common use of Earnout Payment Calculation Clause in Contracts

Earnout Payment Calculation. (a) Within 30 days after the end of each Quarterly Earnout Period, Buyer shall prepare a written Earnout Statement, as defined in Section 2.5(a)(i) below, in the following manner: (i) Buyer shall cause to be delivered to Seller a certificate executed by Buyer's Chief Financial Officer or President reflecting the Revenue during the Quarterly Earnout Period (the "Earnout Statement") and such further detail and information as reasonably requested by Seller to evaluate the Revenue reported in the Earnout Statement, (ii) Buyer shall give Seller and the Seller's accountants access to the working papers and information related to the Earnout Statement at such times as may reasonably be requested by the Seller including, but not limited to, any description of the methodology, procedures, audits and analysis undertaken in connection with the Earnout Statement, for purposes of preparing, reviewing and resolving any disputes concerning the Earnout Statement. Buyer shall keep and maintain accurate and complete books and records with respect to the basis for each Earnout Statement for a period of one year after the creation thereof, which records shall include such information as shall be reasonably necessary to verify the Revenue for the Quarterly Earnout Period.. Within 30 days following the delivery to Seller of the Earnout Statement, Seller shall notify Buyer of any dispute of any item contained in the Earnout Statement, which notice shall set forth in reasonable detail the basis for such dispute. If Seller fails to notify Buyer of any such dispute within such 30 day period, the Earnout Statement shall be deemed to be accepted by Seller. (b) In the event that Seller shall so notify Buyer of any dispute, Buyer and Seller shall cooperate in good faith to resolve such dispute as promptly as possible. If Buyer and Seller are unable to resolve any such dispute within 15 days of Seller's delivery of such notice (the "Earnout Resolution Period"), then all amounts remaining in dispute shall be submitted to binding arbitration to be conducted by an arbitrator selected by Seller and Buyer within 10 days after the expiration of the Earnout Resolution Period. If Seller and Buyer are unable to agree on a single arbitrator, then Buyer and Seller shall each have the right to request the American Arbitration Association to appoint the arbitrator, who shall not have had a material relationship with Seller, Buyer or any of their respective affiliates within the past two years. All fees and expenses relating to the arbitration shall be borne by the party the arbitrator determines not to have been the successful party in the arbitration. The prevailing party in the arbitration shall, in addition to any compensation or amount awarded, be awarded such party's own attorneys' fees and expenses in connection with the arbitration. In addition, if the arbitrator determines that the amount of Revenue reported in the applicable Earnout Statement under dispute was underreported by Buyer by an amount in excess of 5% of the actual amount of Revenue during such Quarterly Earnout Period, then Seller shall be entitled to recover the fees and expenses of Seller's accountants retained in connection with the review of such Earnout Statement(s). The arbitrator shall determine only those issues still in dispute and shall be limited to those adjustments, if any, that need be made for the Earnout Statement to comply with this Agreement. The arbitrator's determination shall be set forth in a written statement delivered to Seller and Buyer within 30 days (or such later date as shall be mutually agreed upon by the Buyer and Seller) after the initial meeting between the arbitrator and representatives of the Buyer and Seller and such arbitrator's determination shall be final, binding and conclusive (c) The parties acknowledge that the Seller's right to receive the Earnout represents a significant portion of the Purchase Price and is a significant factor in its willingness to sell the Assets. The parties agree that it is their joint intention that the Business be conducted following the Closing in a commercially reasonable manner and without the intention of jeopardizing the ability of Seller to receive the Earnout. Buyer covenants and agrees that during each Quarterly Earnout Period Buyer will conduct the Business, including the allocation of financial, management, sales, marketing and engineering resources, in a manner consistent with the manner in which Buyer otherwise conducts the business of its Storage Infrastructure Division, and shall in no event take into consideration the Earnout in its decisions as to the operation of the Business. (d) On the 45th day following end of each Quarterly Earnout Period, Buyer shall pay to Seller any amount due under Section 2.4(c) that is not disputed. With respect to any disputed amount, Buyer shall pay Seller immediately upon and in accordance with the final, binding and conclusive determination by the arbitrator as contemplated by Section 2.5(b). (e) In the event of a Subsequent Sale or Liquidation (each as defined below) which occurs on or before November 30, 2004, Buyer shall pay to Seller, in lieu of all future Earnout payments, $25,000,000 minus the aggregate amount, if any, paid or payable pursuant to Section 2.4 and Section 2.5(d), discounted to net present value using the Prime Rate. In the event of a Subsequent Sale or Liquidation which occurs after November 30, 2004, Buyer shall pay to Seller, in lieu of all future Earnout payments, (i) the Subsequent Sale Compensation or Liquidation Compensation (each as defined below); provided, however, that in the event Projected Revenue on the date of a Subsequent Sale or Liquidation is less than $25,000,000, the Subsequent Sale Compensation or Liquidation Compensation payable by Buyer to Seller shall be zero. All payments pursuant to this Section 2.5(e) shall be made within 20 days of the Subsequent Sale or Liquidation.