Appears in 2 contracts

Samples: Membership Interest Purchase Agreement (Brookside Technology Holdings, Corp.), Membership Interest Purchase Agreement (Brookside Technology Holdings, Corp.)

Earnout. (a) ~~Except~~ Within 15 days after EBITDA (hereinafter defined) is determined, Sub and Westower shall deliver to the CORD Stockholders the portion of the Merger Consideration deliverable pursuant to Section 2.1(c) (the "Earnout"). The Earnout shall be, for each share of CORD Stock, a number of shares of Westower Stock equal to the product of .00025902 multiplied by EBITDA for the period from September 1, 1998 through August 31, 1999 (the "Earnout Period"), subject to the limitation that in no event shall the Earnout for each share of CORD Stock exceed 388.47 shares of Westower Stock; provided, however, that in the event -------- ------- that the authorized number of shares of Westower Stock is not increased as contemplated by Section 7.9 hereof, Westower may at its option replace up to 194.23 shares of Westower Stock with cash at the rate of $23.00 per share of Westower Stock. The term "EBITDA" shall mean the net income of CORD (for the portion of the Earnout Period prior to the Merger) and Sub (for the portion of the Earnout Period after the Merger), determined in accordance with generally accepted accounting principles, as utilized by CORD for its fiscal year ended June 30, 1998, consistently applied, plus, to the extent deducted in determining net income, interest, income taxes, depreciation and amortization. In addition, for purposes of this Agreement, (i) EBITDA of the Sub shall be computed without giving effect to the Merger and any accounting adjustments caused thereby and any expenses as a result of the Merger will be excluded (including audit expenses to the extent increased above normal audit expenses); (ii) EBITDA shall not be reduced by bonuses paid to Sub employees as set forth in Section ~~2.5(i), then at the time specified~~ 7.2 hereof; (iii) EBITDA shall not be reduced for severance payments made by CORD or Sub to Xxxx pursuant to Xxxx'x post-Closing severance agreement as set forth in ~~Section 2.5(b), Section 2.5(d), Section 2.5~~ Disclosure Schedule 4.14; (fiv) , EBITDA shall not be reduced by Westower for overhead costs attributable to Westower incurred by Sub; (v) all transactions between CORD and ~~Section 2.5(h) below, as applicable, the Purchaser~~ Sub and Westower and its subsidiaries and affiliates shall ~~pay, as part~~ be adjusted to an arm's-length price for sales or leases of ~~the Purchase Price due hereunder,~~ property or provision of services to the ~~Members~~ extent that the price paid is less than the price that would otherwise be charged by or to CORD in ~~the proportions set forth on Schedule 2.2(a),~~ a transaction with an ~~earnout payment or earnout payments, if earned, pursuant to the formula below~~ independent third party; and (each or together hereinafter referred to as the “Earnout Payment”). It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, vi) extraordinary and ~~therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses~~ nonrecurring gains (including tax refunds) and extraordinary and nonrecurring losses not related to ~~Purchaser’s overhead)~~ operations shall be excluded; provided that ~~are not consistent with the past practices~~ gains and losses from projects of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues nature associated with ~~those Objectionable Expenses~~ CORD's core business shall not be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the actionconsidered nonrecurring. (i) Without regard to the actual Closing Date, in the event that EBITDA during the period beginning with July 1, 2007 and ending on December 31, 2007 (the “First Calculation Period ”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “First Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the First Target; (ii) In the event that EBITDA during the period beginning with January 1, 2008 and ending on December 31, 2008 (the “Second Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Third Target; and (iv) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target. (b) The Purchaser shall provide the Members with a written statement of its calculation (the “First Calculation Statement ”) of the Earnout Payment pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived for the First Calculation Period and the Earnout Payment due in connection therewith, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any event. (c) Following the delivery of the First Calculation Statement, the Purchaser will allow the Members and its representatives, upon reasonable advance notice, reasonable access during regular business hours to all work papers, books and records and all additional information used in preparing the First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after receipt of the First Calculation Statement of such disagreement, stating the facts of the disagreement and the calculation of the Earnout Payment pursuant to Section 2.5(a)(i) by the Members, and including therewith a copy of any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement shall be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Purchaser and the Members notwithstanding such good faith effort, are unable to reach an agreement within thirty (30) days after receipt by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion of the Earnout Payment due, if any, pursuant to Section 2.5(a)(i). In making its calculation, the Arbitration Firm shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within thirty (30) days after the date on which the Arbitration Firm begins its review and shall be final, conclusive and binding on the parties. The fees, costs and expenses of the Arbitration Firm shall be borne by the party whose calculation of the Earnout Payment pursuant to Section 2.5(a)(i) is furthest from the Arbitration Firm’s calculation. (d) The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”) of the Earnout Payment pursuant to

Appears in 1 contract

Samples: Merger Agreement (Westower Corp)

Earnout. From and after the Effective Time until December 31, 2014 (~~a) Except as set forth in Section 2.5(i~~the “Earnout Period”), ~~then at~~ GlobalSCAPE shall, or shall cause the ~~time specified in Section 2.5(b)~~Surviving Corporation to, ~~Section 2.5(d), Section 2.5~~ pay up to $8,000,000 (f) , and Section 2.5(h) below, as applicable, the Purchaser shall pay, as part of the Purchase Price due hereunder, to the Members in the proportions set forth on Schedule 2.2(a), an earnout payment or earnout payments, if earned, pursuant to the formula below (each or together hereinafter referred to as the “Earnout Payment”~~). It is~~ ) to the ~~intention~~ Stockholders’ Representative, on behalf of the ~~parties that~~ Stockholders, in ~~calculating each Earnout Payment~~the amounts set forth below: (a) For 2012, the Stockholders and holders of Company ~~be evaluated as it existed~~ Stock Options and Warrants immediately prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overheadcancellation thereof contemplated by Section 2.06(k) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to ~~approve~~ (i) an aggregate of $1,500,000 (the “2012 Revenue Payment”) if the aggregate of the Net Revenues earned by GlobalSCAPE (or any successor thereto) and ~~implement~~ the Surviving Corporation (or any ~~action which gives rise~~ successor thereto) (including, without limitation, from sales by licensees and distributors of each of the foregoing) from end sales of the Products for calendar year 2012 is equal to ~~an Extraordinary Expense~~or greater than $3,000,000 and (ii) the net of $2,000,000 upon Acceptance of the Professional Edition (the “Professional Edition Payment”), ~~and cause~~ minus the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the actionHoldback Amount. (b) The first time during the Earnout Period that the aggregate of the Net Revenues earned by GlobalSCAPE and the Surviving Corporation (including, without limitation, from sales by licensees and distributors of each of the foregoing), from end sales of the Products (i) ~~Without regard~~ equals or exceeds $1,000,000 for two consecutive fiscal quarters of Parent, the Stockholders and holders of Company Stock Options and Warrants immediately prior to the ~~actual Closing Date, in the event that EBITDA during the period beginning with July 1, 2007 and ending on December 31, 2007~~ cancellation thereof contemplated by Section 2.06(j) will be entitled to receive an aggregate of $1,500,000 (the “~~First Calculation Period~~ Quarterly Earnout Payment”) ~~is greater than One Million Two Hundred Fifty Thousand~~ and ~~No/100 Dollars~~ (ii) equals or exceeds an aggregate of $~~1,250,000.00)~~ 10,000,000 for a period of 12 consecutive calendar months, the Stockholders and holders of Company Stock Options and Warrants will be entitled to receive an aggregate of $3,000,000 (the “~~First Target~~ LTM Earnout Payment”). (c) Parent, ~~the Earnout Payment shall be equal~~ in its sole discretion, may propose that up to fifty percent (50%) of the ~~EBITDA~~ Earnout Payment, if any, shall be payable in Parent Common Stock with the balance being paid in cash; provided, however, that Parent will not issue Parent Common Stock in satisfaction of the Company in excess of the First Target; (ii) In the event that EBITDA during the period beginning with January 1, 2008 and ending on December 31, 2008 (the “Second Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment if the Stockholders’ Representative objects. If any part of the Earnout Payment is paid in Parent Common Stock, the number of shares of Parent Common Stock paid to the Stockholders under this Section 2.07(c) shall be equal to the portion of the Earnout Payment then due divided by the Market Price. All shares of Parent Common Stock so issued shall be “restricted securities” as such term is defined in Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and shall be issued only to “accredited investors” (as such term is defined in Regulation D promulgated under the Securities Act). Parent and the recipient of any shares of Parent Common Stock shall execute such documents and instruments as Parent may reasonably require in connection therewith. (d) During the Earnout Period, Parent shall provide the Stockholder Representative with a quarterly report, within forty-five (45) days after the end of each calendar quarter, setting forth a reasonably detailed calculation of Net Revenues earned by the Surviving Corporation by month within such calendar quarter and within such calendar year. No later than 45 days following the end of each fiscal quarter of Parent during the Earnout Period, Parent shall (i) calculate Net Revenues, the amount of the 2012 Revenue Payment, the Quarterly Earnout Payment and the LTM Earnout Payment, if any, and prepare reasonably detailed statements of the calculation thereof (the “Calculation”), and (ii) deliver the Calculation to the Stockholders’ Representative on behalf of the Stockholders. The Stockholders shall have a thirty (30) day period to review the Calculation and during such period Parent, if requested, shall share its relevant supporting documentation with the Stockholders’ Representative or its professional adviser. (e) If the Stockholders’ Representative disputes the Calculation or any portion thereof, the Stockholders’ Representative shall deliver a notice to Parent no later than thirty (30) days after delivery of the Calculation (the “Earnout Dispute Notice”). The Stockholder Representative shall set forth in detail in the Earnout Dispute Notice the basis for their disagreement with the Calculation. If the Stockholder Representative fails to deliver the Earnout Dispute Notice within the allotted time period, the Stockholder Representative, on behalf of the Stockholders, shall be deemed to have agreed to the Calculation which shall be final, conclusive and binding upon the parties. The Stockholders’ Representative will also deliver an Earnout Dispute Notice in the event of a dispute related to whether Acceptance was improperly withheld in connection with the delivery of the Professional Edition. (f) If the Stockholder Representative disputes the Calculation within the allotted time period or disputes whether Acceptance was improperly withheld, the parties in good faith shall attempt to jointly resolve any dispute during the thirty day period following the delivery of the Earnout Dispute Notice. If Parent and the Stockholder Representative can resolve their dispute, they shall memorialize their agreement in writing and such mutually agreed upon figure(s) shall be final, conclusive and binding upon all of the parties. (g) (i) If Parent and the Stockholders’ Representative cannot resolve a dispute involving the Calculation to their mutual satisfaction, Parent and the Stockholder Representative shall engage the Independent Accountants to determine the disputed Calculation. The costs and expenses of the Independent Accountants incurred by the parties pursuant to this Section 2.07(g)(i) shall be borne fifty percent (50%) ~~of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009~~ by Parent and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of by the ~~EBITDA of~~ Stockholders’ Representative. To the ~~Company~~ extent that the Independent Accountants desire the parties to this Agreement to meet in excess of the Third Target; and (iv) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”)person, the ~~Earnout Payment~~ parties shall ~~be equal to fifty percent (50%)~~ choose a mutually acceptable location for such meeting. Each of Parent and the ~~EBITDA of the Company in excess of the Fourth Target. (b) The Purchaser~~ Stockholder Representative shall provide ~~the Members with a written statement of its calculation (the “First Calculation Statement ”) of the Earnout Payment pursuant~~ or cause their accounting professional advisers, to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived for the First Calculation Period and the Earnout Payment due in connection therewith, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c)provide, as the case may be, ~~provided, further, that a Member shall have~~ the ~~option to receive its portion~~ Independent Accountants such of ~~an Earnout Payment in Shares~~ their respective work papers or other relevant supporting documentation as may be requested by ~~providing written notice to~~ the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c)Independent Accountants. The ~~conversion price per Share~~ Independent Accountants shall be ~~seventy~~requested to complete their engagement within forty-five ~~percent~~ (~~75%~~45) days of being retained by Parent and the Stockholder Representative. The determination of the VWAP, but not less than the Floor Price in any event. (c) Following the delivery of the First Calculation Statement, the Purchaser will allow the Members and its representatives, upon reasonable advance notice, reasonable access during regular business hours to all work papers, books and records and all additional information used in preparing the First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after receipt of the First Calculation Statement of such disagreement, stating the facts of the disagreement and the calculation of the Earnout Payment pursuant to Section 2.5(a)(i) by the Members, and including therewith a copy of any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement shall be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Purchaser and the Members notwithstanding such good faith effort, are unable to reach an agreement within thirty (30) days after receipt by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion of the Earnout Payment due, if any, pursuant to Section 2.5(a)(i). In making its calculation, the Arbitration Firm shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within thirty (30) days after the date on which the Arbitration Firm begins its review and Independent Accountants shall be final, conclusive and binding on upon the parties. (ii) If Parent and the Stockholders’ Representative cannot resolve a dispute involving Acceptance to their mutual satisfaction, Parent and the Stockholder Representative shall engage an Independent Software Testing Firm to determine if Acceptance was improperly withheld pursuant to the Acceptance Criteria set forth in the Specifications. The ~~fees,~~ costs and expenses of the ~~Arbitration~~ Independent Software Testing Firm incurred by the parties pursuant to this Section 2.07(g)(ii) shall be borne by the party ~~whose calculation~~ determined by the Independent Software Testing Firm to win such dispute involving Acceptance. To the extent that the Independent Software Testing Firm desires the parties to this Agreement to meet in person, the parties shall choose a mutually acceptable location for such meeting. Each of Parent and the Stockholder Representative shall act in good faith to provide the Independent Software Testing Firm access to the fully documented source code for the Professional Edition. The Independent Software Testing Firm shall be requested to complete their engagement within thirty (30) days of being retained by Parent and the Stockholder Representative. The determination of the Independent Software Testing Firm shall be final, conclusive and binding upon the parties as to whether Acceptance was wrongfully withheld. (h) In the event of a Change of Control of Parent, Parent shall require that any successor to Parent expressly assume the obligations of Parent under this Section 2.07, and that the successor agrees to pay the Earnout Payment in the same form of consideration paid to Parent or the Stockholders of Parent in the Change of Control transaction or in cash. (i) Parent agrees (A) to operate the business of the Surviving Corporation in good faith, and in a commercially reasonable manner including making commercially reasonable sales, marketing, product development, and customer support efforts and expenditures with respect to the Products and (B) that it will not, and will cause its Affiliates to not, intentionally take or fail to take any action with the principal purpose of causing the goals set forth in this Section 2.07 to not be satisfied. To the extent consistent with the foregoing sentence, Parent shall have sole discretion in operating the Business and the Surviving Corporation following the Closing and shall have the exclusive right to establish the terms, prices and discounts, payment terms and all other terms and conditions related to the operation of the Business and to restructure, combine or otherwise reorganize the Surviving Corporation and the Business, regardless of how its decisions affect the satisfaction of the goals set forth in this Section 2.07. Without limiting the generality of the foregoing, Parent shall not be restricted in making any commercially reasonable decision regarding its product portfolio and allocation of resources among different components of the same as a result of the obligations contained herein. (j) The rights to the Earnout Payment are personal to each Stockholder, shall not be represented by any separate certificate or instrument, and shall not be transferable for any reason other than by operation of law, will or the laws of descent and distribution. Any attempted transfer of such right by any holder thereof (other than as permitted by the immediately preceding sentence) shall be null and void. (k) The payment of any portion of the Earnout Payment ~~pursuant to Section 2.5(a)(i~~will be made within five (5) ~~is furthest from~~ business days of the ~~Arbitration Firm’s calculation. (d) The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”)~~ final determination that such portion of the Earnout Payment ~~pursuant to~~has been earned. (l) Parent will be entitled to retain the Holdback Amount portion of the Professional Edition Payment as partial security for the performance of the indemnification obligations of the Stockholders and holders of the Company Stock Options and Warrants set forth in this Agreement. The Holdback Amount will be deducted from the Professional Edition Payment payable to the Stockholders and holders of the Company Stock Options and Warrants pro rata, in proportion to their ownership of Common Stock Outstanding. Promptly following the date that is fifteen (15) months following the Effective Date, any remaining portion of the Holdback Amount will be paid to the Stockholders’ Representative on behalf of the Stockholders and the holders of the Company Stock Options and Warrants, less any portion of the Holdback Amount that remains subject to a pending indemnification Claim. Promptly following final resolution of, and full payment or credit in connection with, any such pending indemnification Claim, any Holdback Amount then remaining shall be paid to the Stockholders’ Representative in the manner set forth above.

Appears in 1 contract

Samples: Merger Agreement (Globalscape Inc)

Earnout. In further consideration for the sale of the Purchased Assets, for the period commencing on or before April 1, 2007, as determined by Buyer, and continuing for a twelve (a12) ~~Except as set forth in Section 2.5(i~~month period thereafter (the “Earnout Period”), ~~then at the time specified~~ Buyer shall pay to Seller monthly earnout payments in ~~Section 2.5(b), Section 2.5(d), Section 2.5~~ arrears (~~f) , and Section 2.5(h) below, as applicable~~collectively, the ~~Purchaser shall pay, as part of the Purchase Price due hereunder,~~ “Earnout Payments”) in an amount equal to the ~~Members~~ sum of: (i) ten percent (10%) of all gross revenues determined in accordance with GAAP generated from services performed during the ~~proportions~~ applicable month (net of any pass through costs such as freight and supplies) (“Net Revenues”) under the Existing Customer Contracts or any amendments or extensions thereto or renewals or novations thereof; plus (ii) five percent (5%) of all Net Revenues under new contracts (for business not historically performed by Seller) with the Existing Customers (and/or with existing purchasing groups or same business owners) or their Affiliates, subsidiaries, successors or assigns (the “Existing Customer Group”); plus (iii) five percent (5%) of all Net Revenues under new contracts with the not more than three customers designated by Seller set forth on ~~Schedule 2.2(a~~Annex 2.06(c)(iii) and reasonably acceptable to Buyer and which are otherwise not members of the Existing Customer Group. (The contracts referred to in subparts (i), ~~an earnout payment or earnout payments~~(ii), ~~if earned, pursuant to the formula below~~ and (~~each or together hereinafter~~ iii) above are collectively referred to as the “Earnout ~~Payment~~Contracts”). ~~It is~~ Notwithstanding the ~~intention~~ foregoing, Net Revenues generated under new contracts with Existing Customers covering the same business generated as of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead Closing under Existing Customer Contracts shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action. (i) Without regard to the actual Closing Date, in the event that EBITDA during the period beginning with July 1, 2007 and ending on December 31, 2007 (the “First Calculation Period ”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “First Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the First Target; (ii) In the event that EBITDA during the period beginning with January 1, 2008 and ending on December 31, 2008 (the “Second Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Third Target; and (iv) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target. (b) The Purchaser shall provide the Members with a written statement of its calculation (the “First Calculation Statement ”) of the Earnout Payment considered Net Revenues generated under Existing Customer Contracts pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived for the First Calculation Period and the Earnout Payment due in connection therewith, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”2.06(c)(i), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any event. (c) Following the delivery of the First Calculation Statement, the Purchaser will allow the Members and its representatives, upon reasonable advance notice, reasonable access during regular business hours to all work papers, books and records and all additional information used in preparing the First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after receipt of the First Calculation Statement of such disagreement, stating the facts of the disagreement and the calculation of the Earnout Payment pursuant to Section 2.5(a)(i) by the Members, and including therewith a copy of any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement shall be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Purchaser and the Members notwithstanding such good faith effort, are unable to reach an agreement within thirty (30) days after receipt by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion of the Earnout Payment due, if any, pursuant to Section 2.5(a)(i). In making its calculation, the Arbitration Firm shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within thirty (30) days after the date on which the Arbitration Firm begins its review and shall be final, conclusive and binding on the parties. The fees, costs and expenses of the Arbitration Firm shall be borne by the party whose calculation of the Earnout Payment pursuant to Section 2.5(a)(i) is furthest from the Arbitration Firm’s calculation. (d) The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”) of the Earnout Payment pursuant to

Appears in 1 contract

Samples: Asset Purchase Agreement (Innotrac Corp)

Earnout. (a) ~~Except as~~ On the terms and subject to the conditions set forth in this Section ~~2.5(i~~2.4, and subject to the set off right described in Section 2.4(c), ~~then~~ Buyer shall pay to each Seller and/or cause its transfer agent to issue to each Seller, his, her or its Pro Rata Fraction of each of the following amounts (collectively, if any, the “Earnout Consideration”): (i) An aggregate amount equal to $2,900,000 if the Acquired Companies achieve $9,000,000 or more of Net Sales during the twelve months ending December 31, 2023 (such period, the “Initial Earnout Period”); provided, that no amount will be payable to the Sellers under this Section 2.4(a)(i) unless during the Initial Earnout Period the Acquired Companies achieve Gross Margin for the Net Sales of at least 30% (“Triggering Event I”); (ii) An aggregate amount equal to $1,400,000 if the Acquired Companies achieve $10,000,000 or more of Net Sales during the Initial Earnout Period; provided, that no amount will be payable to the Sellers under this Section 2.4(a)(ii) unless during the Initial Earnout Period the Acquired Companies achieve Gross Margin for the Net Sales of at least 30% (“Triggering Event II”); (iii) An aggregate amount equal to $1,850,000 if the Acquired Companies achieve $10,000,000 or more of Net Sales during the twelve months ending December 31, 2024 (such period, the “Second Earnout Period”); provided, that no amount will be payable to the Sellers under this Section 2.4(a)(iii) unless during the Second Earnout Period the Acquired Companies achieve Gross Margin for the Net Sales of at least 30% (“Triggering Event III”); (iv) An aggregate amount equal to $850,000 if the Acquired Companies achieve $11,000,000 or more of Net Sales during the Second Earnout Period; provided, that no amount will be payable to the Sellers under this Section 2.4(a)(iv) unless during the Second Earnout Period the Acquired Companies achieve Gross Margin for the Net Sales of at least 30% (“Triggering Event IV”); and (v) An aggregate amount equal to $500,000 if the Acquired Companies achieve $12,000,000 or more of Net Sales during the twelve months ending December 31, 2025 (such period, the “Third Earnout Period” and, together with the Initial Earnout Period and the Second Earnout Period, the “Earnout Periods”); provided, that no amount will be payable to the Sellers under this Section 2.4(a)(v) unless during the Third Earnout Period the Acquired Companies achieve Gross Margin for the Net Sales of at least 30% (“Triggering Event V” and, together with Triggering Event I, Triggering Event II, Triggering Event III and Triggering Event IV, the “Triggering Events”). (b) For the avoidance of doubt, the Sellers shall be entitled to receive Earnout Consideration upon the occurrence of each Triggering Event; provided, that each portion of Earnout Consideration shall be payable only once, with the maximum aggregate amount of Earnout Consideration payable pursuant to this Section 2.4 to equal $7,500,000; provided, further, that (i) Triggering Event I and Triggering Event II and (ii) Triggering Event III and Triggering Event IV may, for the avoidance of doubt, be achieved at the same time ~~specified~~ or over the same overlapping period. (c) The right of the Sellers to receive any Earnout Consideration: (i) does not give any Seller dividend rights, voting rights, liquidation rights, preemptive rights or other equity rights with respect to Buyer or any of its Affiliates; (ii) shall not be evidenced by a certificate or other instrument; (iii) shall not be readily marketable and shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, either directly or indirectly, by any Seller; (iv) shall not accrue or pay interest on any portion thereof; and (v) does not represent any right other than the right to receive the consideration (if any) set forth in this Section ~~2.5(b)~~2.4, subject to the terms and conditions of this Agreement. Any portion of the Earnout Consideration payable or issuable pursuant to this Section ~~2.5(d)~~2.4 does not constitute compensation for services, ~~Section 2.5 (f) , and Section 2.5(h) below, as applicable, the Purchaser shall pay, as~~ but rather constitutes part of the ~~Purchase Price due hereunder, to~~ consideration for the ~~Members~~ Subject Securities in connection with the proportions set forth on Schedule 2.2(a), an earnout payment or earnout payments, if earned, pursuant to the formula below (each or together hereinafter referred to as the “Earnout Payment”). It is the intention consummation of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expensesTransactions. Notwithstanding anything to the ~~contrary~~contrary herein, ~~Purchaser~~ Buyer shall be entitled to ~~approve~~ set off and ~~implement any action which gives rise~~ reduce, on a dollar-for-dollar basis, the Earnout Consideration otherwise payable pursuant to ~~an Extraordinary Expense, and cause~~ this Section 2.4 by the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the actionFree Cash Flow Credit. (d) Buyer shall cause the Acquired Companies with respect to which a Closing has occurred to, within sixty (60) calendar days following the end of each Earnout Period, prepare a statement of the Net Sales achieved during the applicable Earnout Period (each, an “Earnout Statement”) and shall deliver each such Earnout Statement to the Sellers. The Acquired Companies, as applicable, shall prepare the Earnout Statement in accordance with the applicable definitions in this Agreement and the Accounting Principles. If the Sellers believe, in good faith, that the Net Sales achieved during the applicable Earnout Period were higher than set forth on the relevant Earnout Statement, the Sellers shall promptly notify Buyer in writing of their belief that such Net Sales were higher. Following receipt of such notice, Buyer and the Sellers shall, for a period of thirty (30) calendar days, seek to reach agreement, in good faith, as to the amount of Net Sales achieved during the applicable Earnout Period. If such dispute cannot be resolved by Xxxxx and the Sellers within such thirty (30) calendar day period, then Buyer and the Sellers shall submit such dispute to the Independent Accountant, which firm will be directed by Xxxxx and the Sellers to render, within twenty (20) Business Days, its opinion only as to such dispute, strictly in accordance with the provisions of this Section 2.4(d). The Independent Accountant will be directed to send to Buyer and the Sellers its determination of the dispute, which determination will, in the absence of manifest error, be final and binding on Buyer and the Sellers. Such determination will be on the basis of the standards and guidelines set forth in this Agreement and in accordance with the Accounting Principles. Each of Buyer, on the one hand, and the Sellers, on the other hand, will bear their own expenses and fees and the fees and expenses of their respective representatives and experts, including their respective independent accountants, in connection with the resolution of such dispute. The fees and expenses of the Independent Accountant shall be borne by Xxxxx, on the one hand, and the Sellers, on the other hand, based on the inverse of the percentage that the Independent Accountant’s resolution of the dispute bears to the total amount of such dispute as originally submitted to the Independent Accountant. (e) Any portion of the Earnout Consideration payable pursuant to this Section 2.4, if any, shall be payable, at Buyer’s sole discretion, in the form of cash, shares of Buyer Common Stock (with such number of shares of Buyer Common Stock to equal the quotient obtained by dividing the (i) ~~Without regard~~ aggregate amount of Earnout Consideration to be paid in the ~~actual~~ form of shares of Buyer Common Stock by (ii) the VWAP of a share of Buyer Common Stock during the twenty (20) consecutive Trading Days ending on the last Trading Day of the applicable Earnout Period) or a combination thereof; provided, that no less than 25.0% of the Earnout Consideration paid for each Triggering Event, if any, shall be paid in cash. (f) Xxxxx acknowledges that the possibility of the Sellers receiving the Earnout Consideration comprises a material inducement for the Acquired Companies and the Sellers to enter into this Agreement. From the date of the applicable Closing, until the end of the Third Earnout Period, Buyer shall operate each Acquired Company in good faith. Buyer and, after the applicable Closing, each Acquired Company shall not (i) adversely interfere with the customer relationships between the Acquired Companies, as applicable, and their respective customers as of the U.S. Closing Date, (ii) materially reduce the working capital of the Acquired Companies, as applicable, below historical averages or (iii) take, or fail to take, any action for the primary purpose or with the primary intent of augmenting, avoiding or reducing the Earnout Consideration. Notwithstanding anything to the contrary contained in this Agreement, other than as specifically set forth in this Section 2.4(f), Buyer shall have sole discretion, after consultation with the ~~event that EBITDA~~ Sellers, over the operations of the Acquired Companies following the applicable Closing and nothing in this Agreement shall be construed as requiring Buyer or any its Affiliates (including, after the applicable Closing, each Acquired Company) to take, or abstain from taking, any actions or decisions in connection with the operation of the business of each Acquired Company following the applicable Closing. (g) Notwithstanding anything in this Agreement to the contrary, any portion of Earnout Consideration payable to a Seller during the ~~period beginning with July 1~~Third Earnout Period pursuant to Section 2.3(a)(v) shall be paid to such Seller only if such Seller continues to provide services (whether as an employee, ~~2007~~ director or individual independent contractor) to Buyer or one of its Subsidiaries (including, for the avoidance of doubt, following the U.S. Closing, ODA, and ~~ending on December 31~~following the Australia Closing, ~~2007 (~~ODA Australia) through the ~~“First Calculation~~ date of the occurrence of Triggering Event V. For the avoidance of doubt, only the portion of Earnout Consideration payable to a Seller during the Third Earnout Period ”pursuant to Section 2.3(a)(v) is ~~greater than One Million Two Hundred Fifty Thousand~~ subject to possible forfeiture under this Section 2.3(g). Any right to the payment of such portion of the Earnout Consideration that is forfeited pursuant to the preceding sentence shall be reallocated to the other Seller so long as such other Seller continues to provide services (whether as an employee, director or individual independent contractor) to Buyer or one of its Subsidiaries (including, for the avoidance of doubt, following the U.S. Closing, ODA, and ~~No/100 Dollars ($1,250,000.00~~following the Australia Closing, ODA Australia) (at such time; provided, that, if the ~~“First Target ”~~rights of both Sellers to the payment of the portion of the Earnout Consideration have been forfeited pursuant to this Section 2.3(g), Section 2.3(a)(v) shall immediately be terminated and be of no further force and effect; and provided further, that during the Earnout ~~Payment~~ Period, Buyer shall ~~be equal~~ not, and shall cause its Subsidiaries (including, following the applicable Closing, each Acquired Company) not to, terminate the services of either Seller solely for the purposes of avoiding Buyer’s obligations to ~~fifty percent (50%)~~ make payment of any portion of the ~~EBITDA of the Company in excess of the First Target;~~Earnout Consideration hereunder. (iih) In the event ~~that EBITDA during~~ that, (i) following the ~~period beginning with January 1~~U.S. Closing, ~~2008~~ ODA, and ~~ending on December 31~~(ii) following the Australia Closing, ~~2008~~ ODA Australia, and, in each case, prior to the end of the Third Earnout Period, (i) such Acquired Company effects a sale of all or substantially all of the assets of such Acquired Company to a third party, (ii) Buyer effects a sale of such Acquired Company to a third party or (iii) Buyer or such Acquired Company makes a general assignment for the benefit of creditors, or any proceeding shall be instituted by Buyer or adjudicated against Buyer or such Acquired Company declaring Buyer or such Acquired Company as bankrupt or insolvent, or seeking liquidation, winding up or reorganization, arrangement, adjustment, protection, relief or composition of its debts under any applicable Law relating to bankruptcy, insolvency or reorganization (each of clauses (i), (ii) and (iii), a “~~Second Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target~~ Acceleration Event”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Third Target; and (iv) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target. (b) The Purchaser shall provide the Members with a written statement of its calculation (the “First Calculation Statement ”) of the Earnout Payment pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived for the First Calculation Period and the Earnout Payment due in connection therewith, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any event. (c) Following the delivery of the First Calculation Statement, the Purchaser will allow the Members and its representatives, upon reasonable advance notice, reasonable access during regular business hours to all work papers, books and records and all additional information used in preparing the First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after ~~receipt~~ such Acceleration Event, Buyer shall pay to the Sellers in full the remaining Earnout Consideration to which the Sellers would have been entitled to if all applicable Triggering Events relating to any Earnout Periods that would expire between the time of the ~~First Calculation Statement of such disagreement, stating~~ Acceleration Event through the ~~facts~~ end of the ~~disagreement and~~ Third Earnout Period had occurred; provided, that, for the ~~calculation~~ avoidance of ~~the~~ doubt, no Seller will be entitled to Earnout ~~Payment pursuant~~ Consideration with respect to ~~Section 2.5(a)(i) by the Members, and including therewith a copy of~~ any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement shall be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Purchaser and the Members notwithstanding such good faith effort, are unable to reach an agreement within thirty (30) days after receipt by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion of the Earnout Payment due, if any, pursuant to Section 2.5(a)(i). In making its calculation, the Arbitration Firm shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within thirty (30) days after the date on Triggering Event for which the ~~Arbitration Firm begins its review~~ applicable Earnout Period expired prior to such Acceleration Event and shall be final, conclusive and binding on the parties. The fees, costs and expenses of the Arbitration Firm shall be borne by the party whose calculation of the Earnout Payment pursuant to Section 2.5(a)(i) is furthest from the Arbitration Firm’s calculationsuch Triggering Event did not occur. (di) ~~The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”)~~ Each of the Parties acknowledges and agrees that any Earnout ~~Payment~~ Consideration shall be payable by Buyer to the Sellers based on their Pro Rata Fractions, as indicated on the U.S. Allocation Schedule. Buyer shall be entitled to conclusively rely upon the Allocation Schedules delivered by the Sellers, including with respect to whether any individual Seller received the appropriate portion of any such payment, and in no event will Buyer, the Acquired Companies or any of their respective Affiliates have any liability to any Person on account of payments or distributions made in accordance with the Allocation Schedules delivered by the Sellers. (j) Any payment to be made pursuant toto Sections 2.3(a)(i) through (iv) shall be treated by all Parties for Tax purposes as an adjustment to the U.S. Closing Cash Consideration to the maximum extent permitted by applicable Law.

Appears in 1 contract

Samples: Securities Purchase Agreement (Tempo Automation Holdings, Inc.)

Earnout. (ai) ~~Except as set forth in Section 2.5(i)~~From time to time, ~~then at~~ after the ~~time specified in Section 2.5(b), Section 2.5(d), Section 2.5 (f) , and Section 2.5(h) below, as applicable~~Closing, the ~~Purchaser~~ Stockholders and the Optionees shall ~~pay~~earn up to an additional $4,000,000 plus the FBI Claim Proceeds (collectively, ~~as part~~ the “Earnout Amount”) upon the occurrence of the ~~Purchase Price due hereunder, to the Members in the proportions set forth on Schedule 2.2(a)~~following events (each, an ~~earnout payment or earnout payments~~“Earnout Event”): A. the Stockholders and the Optionees shall earn an additional $2,000,000 if the sum of (1) the Company’s and the Subsidiary’s consolidated revenues (as determined in accordance with GAAP applied consistently with the Company’s past practices) for the period commencing on January 1, ~~if earned~~2003 through June 30, 2003, plus (2) the Company’s (excluding the Subsidiary) revenues (as determined in accordance with GAAP applied consistently with the Company’s past practices) for the period commencing on July 1, 2003 through the Closing Date, plus (3) the Company’s (excluding the Subsidiary) and the Buyer’s revenues (as determined in accordance with GAAP applied consistently with the Company’s past practices) generated by, pursuant to or under the ~~formula below~~ Material Contracts for the period commencing on the date immediately following the Closing Date through December 31, 2003, plus (~~each~~ 4) the Company’s (excluding the Subsidiary) and the Buyer’s revenues (as determined in accordance with GAAP applied consistently with the Company’s past practices) generated from opportunities identified in the Sales Pipeline for the period commencing on the date immediately following the Closing Date through December 31, 2003, plus (5) a mutually agreed to portion of revenues generated from opportunities mutually agreed to by the Buyer and the Stockholders’ Representative from and after the Closing Date through December 31, 2003 (as determined in accordance with GAAP applied consistently with the Company’s past practices), plus (6) revenues generated from the sale or ~~together hereinafter referred to as the “Earnout Payment”). It is the intention~~ licensing of the ~~parties that~~ Company’s software products from and after the Closing Date through December 31, 2003 (as determined in accordance with GAAP applied consistently with the Company’s past practices), exceeds $56,700,000; provided, however, for purposes of calculating ~~each Earnout Payment~~such sum, in no event shall any revenue be accounted for with respect to more than one of clauses (1), (2), (3), (4), (5) and (6) of this Section 2(e)(i)(A); B. the Stockholders and the Optionees shall earn an additional $500,000 if the Company ~~be evaluated as it existed prior to~~ or the ~~purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from~~ Buyer is awarded the ~~calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one~~ Mine Warfare (60106) Recompete Contract (or ~~more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices~~ another contract or associated contracts addressing substantially similar requirements of the ~~Company consistently applied~~customer) as of December 31, ~~including but not limited to, opening~~ 2003 (or such later date if the award is delayed without a ~~new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then~~ significant interruption to contracted services provided ~~that Fxxxxxx and Diamond remain employed~~ by the Company under the existing contract or any renewal or substitute thereof, but no later than June 30, 2004), and the Estimated Annual Revenues for such contract and other related or associated contracts is greater than or equal to $4,000,000; C. the Stockholders and the Optionees shall earn an additional $500,000 if the Company or the Buyer is awarded the Department of Navy CIP Support Contract (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some another contract or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total associated contracts addressing substantially similar requirements of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any customer) as of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action. (i) Without regard to the actual Closing Date, in the event that EBITDA during the period beginning with July 1, 2007 and ending on December 31, ~~2007~~ 2003 (or such later date if the ~~“First Calculation Period ”)~~ award is ~~greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “First Target ”), the Earnout Payment shall be equal~~ delayed without a significant interruption to ~~fifty percent (50%) of the EBITDA of~~ contracted services provided by the Company ~~in excess of~~ under the ~~First Target; (ii) In the event that EBITDA during the period beginning with January 1~~existing contract or any renewal or substitute thereof, ~~2008 and ending on December 31, 2008 (the “Second Calculation Period”) is greater~~ but no later than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Third Target; and (iv) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, ~~2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”~~2004), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target. (b) The Purchaser shall provide the Members with a written statement of its calculation (the “First Calculation Statement ”) of the Earnout Payment pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived for the First Calculation Period and the ~~Earnout Payment due in connection therewith~~Estimated Annual Revenues for such contract (including related or associated contracts, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any event. (c) Following the delivery of the First Calculation Statement, the Purchaser will allow the Members and its representatives, upon reasonable advance notice, reasonable access during regular business hours to all work papers, books and records and all additional information used in preparing the First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after receipt of the First Calculation Statement of such disagreement, stating the facts of the disagreement and the calculation of the Earnout Payment pursuant to Section 2.5(a)(i) by the Members, and including therewith a copy of any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement shall be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Purchaser and the Members notwithstanding such good faith effort, are unable to reach an agreement within thirty (30) days after receipt by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion of the Earnout Payment due, if any, pursuant to Section 2.5(a)(i). In making its calculation, the Arbitration Firm shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within thirty (30) days after the date on which the Arbitration Firm begins its review and shall be final, conclusive and binding on the parties. The fees, costs and expenses of the Arbitration Firm shall be borne by the party whose calculation of the Earnout Payment pursuant to Section 2.5(a)(i) is furthest from the Arbitration Firm’s calculation. (d) The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”) of the Earnout Payment pursuant toe.

Appears in 1 contract

Samples: Stock Purchase Agreement (American Management Systems Inc)

Earnout. As an Earnout, the Sellers shall receive 27.7778% of the Company's earnings determined in accordance with this Section 2.6, up to a maximum aggregate amount of Three Million Dollars ($3,000,000.00) for the period beginning September 1, 2002 and ending December 31, 2005 (the "Maximum Earnout Amount"). The Earnout shall be allocated among the Shareholders as follows: Xxxxx: 31.564%; Xxxxxx Xxxxx: 34.218%; and Xxxx X. Xxxxx: 34.218%. The Company's earnings ("Earnings") for purposes of the Earnout shall be calculated in accordance with GAAP, applied consistently with the principles used in the preparation of the Company's audited financial statements for the year ended December 31, 2001 delivered to Buyer under Section 3.4, subject to the following: (i) There shall be no provision for income taxes; (ii) interest expense from acquisition indebtedness related to this transaction that exceeds average indebtedness of the Company as a percentage of total assets during 2001 shall be excluded; (iii) goodwill amortization and goodwill writedowns relating to this transaction shall be excluded; (iv) if after the Closing Date the Company obtains, with the assistance of the Buyer, a lower interest rate than the rate that would be available under the senior credit facility described in Section 7.3 in accordance with its terms as in effect on the Closing Date, the calculation of earnings for purpose of calculating the Earnout will be done as if the interest expense included the higher rate that would then be in effect under such facility. In addition, Earnings shall be determined as nearly as possible as if the Company were operating as an independent entity consistent with past business strategies and practices, unless Xxxxx consents to any proposed change in strategies or practices. Accordingly, any cost savings that the Company obtains solely as a result of its affiliation with the Buyer shall not be included in the determination of Earnings. Similarly, any additional costs or expenses imposed upon the Company by the Buyer that are not agreed to by Xxxxx shall not be included in the determination of Earnings unless such costs or expenses would have been reasonable and necessary had the Company remained an independent entity operating in a manner consistent with past practices. Without limiting the generality of the foregoing, charge-offs, dealer reserves and general reserves shall be established in a manner consistent with GAAP as applied in the preparation of the Company's audited financial statements for the year ended December 31, 2001 delivered to Buyer under Section 3.4. This Earnout will be payable by Buyer based on completed audited financial statements, for the period covered as follows: (a) ~~Except as set forth in Section 2.5(i)~~Payment due March 31, ~~then at~~ 2003 for the time specified in Section 2.5(b), Section 2.5(d), Section 2.5 (f) , and Section 2.5(h) below, as applicable, the Purchaser shall pay, as part of the Purchase Price due hereunder, to the Members in the proportions set forth on Schedule 2.2(a), an earnout payment or earnout payments, if earned, pursuant to the formula below (each or together hereinafter referred to as the “Earnout Payment”). It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded period from the ~~calculation of EBITDA. Furthermore~~Closing Date through December 31, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and 2002; (b) ~~once~~ Payment due March 31, 2004 for the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action. (i) Without regard to the actual Closing Date, in the event that EBITDA during the period beginning with July 1, 2007 and year ending on December 31, 2007 (the “First Calculation Period ”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “First Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the First Target2003; (iic) In Payment due March 31, 2005 for the ~~event that EBITDA during the period beginning with January 1, 2008 and~~ year ending on December 31, 2008 (the “Second Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Third Target2004; and (ivd) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target. (b) The Purchaser shall provide the Members with a written statement of its calculation (the “First Calculation Statement ”) of the Earnout Payment pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) due March 31, ~~2008. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived~~ 2006 for the ~~First Calculation Period and the Earnout Payment due in connection therewith~~year ending December 31, ~~all of the information, work papers and supporting information necessary to demonstrate same~~2005. ~~The Earnout Payment shall~~ Buyer will be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required continue to be ~~delivered into escrow pending the resolution of~~ obligated to pay any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any event. (c) Following the delivery of the First Calculation Statement, the Purchaser will allow the Members and its representatives, upon reasonable advance notice, reasonable access during regular business hours to all work papers, books and records and all additional information used in preparing the First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after receipt of the First Calculation Statement of such disagreement, stating the facts of the disagreement and the calculation of the Earnout Payment pursuant to Section 2.5(a)(i) by the Members, and including therewith a copy of any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement shall be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Purchaser and the Members notwithstanding such good faith effort, are unable to reach an agreement within thirty (30) days after receipt by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed remaining portion of the Earnout ~~Payment due~~in accordance with the terms of this Section 2.6 notwithstanding the death of Xxxxx during the Earnout measurement period; provided that if it is available at a cost of not more than Thirty Thousand Dollars ($30,000) per year, ~~if any~~Buyer will at its cost purchase a term life insurance policy on Xxxxx, ~~pursuant to Section 2.5(a)(i). In making its calculation~~and the proceeds of such policy, ~~the Arbitration Firm shall consider only the items or amounts in dispute (and~~ up to the ~~extent required~~Maximum Earnout Amount, will be paid to the Shareholders upon Xxxxx'x death, less any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within thirty (30) days after the date on which the Arbitration Firm begins its review and shall be finalEarnout payments already made, ~~conclusive and binding on the parties. The fees, costs and expenses~~ in lieu of ~~the Arbitration Firm shall be borne by the party whose calculation of the Earnout Payment pursuant to~~ any further payments under this Section ~~2.5(a)(i) is furthest from the Arbitration Firm’s calculation~~2.6. ~~(d) The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”) of the Earnout Payment pursuant to~~

Appears in 1 contract

Samples: Stock Purchase Agreement (C & F Financial Corp)

Earnout. (a1) ~~Except~~ Within 15 days after EBITDA (hereinafter defined) is determined, Sub and Westower shall deliver to each of Xxxx Xxxxxxxx, Xxxx Xxxxxxxx and Xxxx Xxxx (collectively, the "Cord Stockholders") the portion of the Merger Consideration deliverable pursuant to Section 2.1(c) of the Merger Agreement (the "Earnout"). The Earnout shall be, for each share of Cord Stock, a number of shares of Westower Stock equal to the product of .00025902 multiplied by EBITDA for the period from September 1, 1998 through August 31, 1999 (the "Earnout Period"), subject to the limitation that in no event shall the Earnout for each share of Cord Stock exceed 388.47 shares of Westower Stock; provided, however, that in the event that the authorized number of -------- ------- shares of Westower Stock is not increased as contemplated by Section 7.9 of the Merger Agreement, Westower may at its option replace up to 194.23 shares of Westower Stock with cash at the rate of $23.00 per share of Westower Stock. The term "EBITDA" shall mean the net income of Cord (for the portion of the Earnout Period prior to the Merger) and Sub (for the portion of the Earnout Period after the Merger), determined in accordance with generally accepted accounting principles, as utilized by Cord for its fiscal year ended June 30, 1998, consistently applied, plus, to the extent deducted in determining net income, interest, income taxes, depreciation and amortization. In addition, for purposes of the Merger Agreement, (i) EBITDA of the Sub shall be computed without giving effect to the Merger and any accounting adjustments caused thereby and any expenses as a result of the Merger will be excluded (including audit expenses to the extent increased above normal audit expenses); (ii) EBITDA shall not be reduced by bonuses paid to Sub employees as set forth in Section ~~2.5(i), then at the time specified in Section 2.5(b), Section 2.5(d), Section 2.5 (f) , and Section 2.5(h) below, as applicable, the Purchaser shall pay, as part~~ 7.2 of the ~~Purchase Price due hereunder,~~ Merger Agreement; (iii) EBITDA shall not be reduced for severance payments made by Cord or Sub to Xxxx pursuant to Xxxx'x post-Closing severance agreement as set forth in Disclosure Schedule 4.14 of the Merger Agreement; (iv) EBITDA shall not be reduced by Westower for overhead costs attributable to Westower incurred by Sub; (v) all transactions between Cord and Sub and Westower and its subsidiaries and affiliates shall be adjusted to an arm's-length price for sales or leases of property or provision of services to the ~~Members~~ extent that the price paid is less than the price that would otherwise be charged by or to Cord in ~~the proportions set forth on Schedule 2.2(a),~~ a transaction with an ~~earnout payment or earnout payments, if earned, pursuant to the formula below~~ independent third party; and (each or together hereinafter referred to as the “Earnout Payment”). It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, vi) extraordinary and ~~therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses~~ nonrecurring gains (including tax refunds) and extraordinary and nonrecurring losses not related to ~~Purchaser’s overhead)~~ operations shall be excluded; provided that ~~are not consistent with the past practices~~ gains and losses from projects of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues nature associated with ~~those Objectionable Expenses~~ Cord's core business shall not be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the actionconsidered nonrecurring. (i) Without regard to the actual Closing Date, in the event that EBITDA during the period beginning with July 1, 2007 and ending on December 31, 2007 (the “First Calculation Period ”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “First Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the First Target; (ii) In the event that EBITDA during the period beginning with January 1, 2008 and ending on December 31, 2008 (the “Second Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Third Target; and (iv) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target. (b) The Purchaser shall provide the Members with a written statement of its calculation (the “First Calculation Statement ”) of the Earnout Payment pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived for the First Calculation Period and the Earnout Payment due in connection therewith, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any event. (c) Following the delivery of the First Calculation Statement, the Purchaser will allow the Members and its representatives, upon reasonable advance notice, reasonable access during regular business hours to all work papers, books and records and all additional information used in preparing the First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after receipt of the First Calculation Statement of such disagreement, stating the facts of the disagreement and the calculation of the Earnout Payment pursuant to Section 2.5(a)(i) by the Members, and including therewith a copy of any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement shall be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Purchaser and the Members notwithstanding such good faith effort, are unable to reach an agreement within thirty (30) days after receipt by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion of the Earnout Payment due, if any, pursuant to Section 2.5(a)(i). In making its calculation, the Arbitration Firm shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within thirty (30) days after the date on which the Arbitration Firm begins its review and shall be final, conclusive and binding on the parties. The fees, costs and expenses of the Arbitration Firm shall be borne by the party whose calculation of the Earnout Payment pursuant to Section 2.5(a)(i) is furthest from the Arbitration Firm’s calculation. (d) The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”) of the Earnout Payment pursuant to

Appears in 1 contract

Samples: Merger Agreement (Westower Corp)

Earnout. (a) Except as set forth in Section 2.5(i), then at the time specified in Section 2.5(b), Section 2.5(d), Section 2.5 (f) , and Section 2.5(h) below, as applicable, the Purchaser shall pay, as part of the Purchase Price due hereunder, to the Members in the proportions set forth on Schedule 2.2(a), an earnout payment or earnout payments, if earned, pursuant to the formula below (each or together hereinafter referred to as the “Earnout Payment”). It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser ~~shall, prior~~ shall pay to ~~incurring the expense, discuss such action with the Fxxxxxx and Diamond and~~ Seller an additional amount (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “~~Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from~~ Earnout”), based on the ~~total of~~ EBITDA, if any, generated by the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action. (i) Without regard to the actual Closing Date, in the event that EBITDA Business during the period ~~beginning with July~~ commencing on January 1, ~~2007~~ 2006 and ending on December 31, ~~2007~~ 2006 (the “~~First Calculation Period~~ Earnout Period”) ~~is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars~~ as follows: (~~$1,250,000.00~~i) (If the ~~“First Target ”),~~ Business generates EBITDA during the Earnout ~~Payment shall be~~ Period of less than or equal to ~~fifty percent (50%) of the EBITDA of the Company in excess of the First Target~~$7,500,000 but more than $0, then Purchaser shall pay to Seller $800,000; (ii) In If the ~~event that~~ Business generates EBITDA during the ~~period beginning with January 1, 2008 and ending on December 31, 2008 (the “Second Calculation Period”) is greater~~ Earnout Period of less than ~~Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment shall be~~ or equal to ~~fifty percent (50%) of the EBITDA of the Company in excess of the Second Target~~$8,000,000 but more than $7,500,000, then Purchaser shall pay to Seller $1,200,000; (iii) In If the ~~event that~~ Business generates EBITDA during the ~~period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater~~ Earnout Period of less than ~~Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be~~ or equal to ~~fifty percent (50%) of the EBITDA of the Company in excess of the Third Target~~$8,400,000 but more than $8,000,000, then Purchaser shall pay to Seller $1,600,000; ~~and~~or (iv) In If the ~~event that~~ Business generates EBITDA during the ~~period beginning with January 1~~Earnout Period of more than $8,400,000, ~~2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars (~~then Purchaser shall pay to Seller $~~1,250,000.00) (the “Fourth Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target~~2,000,000. (b) ~~The~~ Within 90 days following the end of the Earnout Period, Purchaser shall ~~provide~~ deliver to Seller a notice specifying the ~~Members with a written statement of its calculation~~ EBITDA for such period (the “~~First Calculation Statement~~ Earnout Notice”) showing in reasonable detail the computation thereof, all to be accompanied by a certification by Purchaser’s chief financial officer that such computation was based on Purchaser’s books and records and performed in a manner consistent with the preparation of the Earnout Payment pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008. The First Calculation Statement shall include, in addition Annual Financial Statements to the ~~Purchaser’s calculation of EBITDA derived for the First Calculation Period and the Earnout Payment due~~ extent they were prepared in connection therewith, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any eventaccordance with GAAP. (c) ~~Following~~ During the ~~delivery~~ preparation of the ~~First Calculation Statement~~Earnout Notice and the period of any review contemplated by this Section 4.2, ~~the~~ Purchaser ~~will allow the Members and its representatives~~shall (i) provide Seller, upon reasonable ~~advance~~ notice, ~~reasonable~~ full access during ~~regular~~ normal business hours to ~~all work papers, books and records and all additional information used in preparing~~ the ~~First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers,~~ books, ~~records~~ records, facilities and ~~information. In~~ employees of Purchaser involved with or related to the ~~event that~~ Business to review the ~~Members disagree~~ preparation of the Earnout Notice and (ii) cooperate with Seller, including the ~~First Calculation Statement, it shall notify~~ provision on a timely basis of all information reasonably requested by Seller and necessary or useful in reviewing the preparation of the Earnout Notice. (~~the “First Dispute Notice”~~d) ~~the Purchaser in writing within thirty (30) days after~~ After receipt of the ~~First Calculation Statement of such disagreement~~Earnout Notice, ~~stating~~ Seller shall have 30 days to review the ~~facts of~~ Earnout Notice, together with all the ~~disagreement and~~ work papers used in preparation thereof. Unless Seller delivers a written notice to Purchaser on or before the ~~calculation~~ 30th day after Seller’s receipt of the Earnout ~~Payment pursuant to Section 2.5(a)(i) by~~ Notice specifying, in reasonable detail, all disputed items and the ~~Members~~basis therefore, ~~and including therewith a copy of any financial information used in making~~ the ~~calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement~~ Seller shall be deemed to have accepted and agreed to the Earnout Notice. If Seller notifies Purchaser of an objection to the Earnout Notice, Seller and Purchaser shall, within 30 days following such notice, attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive for Purchaser and ~~binding on~~ Seller. If, at the ~~parties. In the event a First Dispute Notice is timely given~~end of such 30-day period, ~~the Members and the Purchaser~~ any amounts shall ~~meet and attempt in good faith to resolve the items or amounts~~ remain in dispute, then all amounts remaining in dispute with respect to the calculation of EBITDA shall be submitted to a firm of reputable independent accountants (the “Neutral Auditor”) selected by Purchaser and Seller within ten (10) days after the expiration of the 30-day period. If ~~the~~ Purchaser and ~~the Members notwithstanding such good faith effort,~~ Seller are unable to ~~reach an agreement~~ agree on the Neutral Auditor, then Purchaser and Seller shall each have the right to request the American Arbitration Association to appoint the Neutral Auditor, who shall not have had a material business relationship with Seller, Purchaser or any of their respective Affiliates within ~~thirty~~ the past two (302) ~~days after receipt~~ years. Purchaser and Seller agree to execute, if requested by the ~~Purchaser of~~ Neutral Auditor, a reasonable engagement letter. All fees and expenses relating to the ~~First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion of the Earnout Payment due~~work, if any, ~~pursuant~~ to ~~Section 2.5(a)(i)~~be performed by the Neutral Auditor shall be borne 50% by Purchaser and 50% by Seller. ~~In making its calculation, the Arbitration Firm~~ The Neutral Auditor shall ~~consider~~ act as an arbitrator to determine only ~~the items or amounts~~ those issues that remain in dispute (between Purchaser and Seller, and each of them shall submit to the ~~extent required, any other items or amounts necessary to derive~~ Neutral Auditor a statement of its position within five (5) business days the ~~disputed items or amounts)~~selection of the Neutral Auditor. ~~Such~~ The Neutral Auditor’s determination shall be made within ~~thirty (30)~~ 30 days ~~after the date on which the Arbitration Firm begins~~ of its ~~review~~ selection, shall be set forth in a written statement delivered to Seller and Purchaser, and shall be final, binding and conclusive on Purchaser and Seller. Judgment upon the decision of the Neutral Auditor may be entered by Purchaser or Seller in any court of competent jurisdiction. (e) Other than a determination by the Neutral Auditor as provided under Section 4.2(d) hereof, when the amount payable to Seller, if any, under this Section 4.2 has been determined in accordance with the terms and procedures set forth in this Section 4.2, Purchaser shall prepare, and Purchaser and Seller shall execute, a written statement setting forth the amount of such payment which shall be final, binding and conclusive on ~~the parties~~Purchaser and Seller. The ~~fees~~amounts, ~~costs and expenses~~ if any, payable to Seller pursuant to this Section 4.2 shall be paid by Purchaser within five (5) business days following the final determination of the ~~Arbitration Firm shall be borne by~~ amount payable in accordance with this Section 4.2. (f) Purchaser covenants and agrees for the ~~party whose calculation~~ benefit of the Seller that during the period from the date of the Closing until the end of the Earnout ~~Payment pursuant~~ Period, it will: (i) cause separate books of account and financial statements of the Business to be maintained consistent with the preparation of the Annual Financial Statements to the extent they were prepared in accordance with GAAP, for purposes of determining whether the Business has achieved the EBITDA targets set forth in Section ~~2.5(a)(i~~4.2(a); (ii) ~~is furthest from~~ if requested by the ~~Arbitration Firm’s calculation. (d) The Purchaser shall~~ Seller, provide the ~~Members~~ Seller with ~~a written statement~~ copies of ~~its calculation (the “Second Calculation Statement ”)~~ annual financial statements of the Business covering the Earnout ~~Payment pursuant to~~Period prepared in accordance with (i) above promptly after such financial statements become available; and (iii) operate or cause to be operated the Business in substantially the same manner as operated by Seller as of immediately prior to the Closing.

Appears in 1 contract

Samples: Asset Purchase Agreement (Gametech International Inc)

Earnout. Upon satisfaction of all of the following items (i) – (vi) Lessor shall pay Lessee an earnout payment equal to the total cost of construction of the Improvements (“Total Cost”): (i) completion of the Improvements in accordance with all Applicable Laws, the approved plans and specifications, and the Approved Budget, (ii) issuance by the City of Stockton of an unconditional certificate of occupancy, together with evidence that the Lessee is in occupancy of the Improvements and is conducting its business therein, (iii) issuance by the Title Company of a date down title policy subject only to Permitted Exceptions insuring the Lessor’s interest in the Property lien free and insuring the value of the Improvements, and including such endorsements as Lessor reasonably requests, (iv) issuance of an ALTA survey including all Table A Items 1, 2, 3, 4, 6, 7(a), (b)(i) (c), 8, 9, 10, 11(a), 12-16 and certified to Lessor and Lender, (v) issuance of a zoning letter from the City of Stockton confirming that the Improvements located on the Property are in compliance with all applicable zoning laws and constitute a conforming use, and (vi) a modification of this Lease to (a) ~~Except~~ extend Lessee’s right to early termination until, at least, ten (10) years from the effective date of the modification, (b) increase the Base Rent to an amount equal to the product obtained by multiplying the (i) Total Cost times the Combined Interest Rate plus (ii) the Base Rent payable under this Lease as ~~set forth~~ of the effective date of the modification of this Lease with five percent (5%) increases to the Base Rent every five (5) years commencing on the first day of the initial Base Term and (c) extend Lessee’s right of early termination until, at least, ten (10) years following the date of the modification, which shall be a period coterminous with the Building Lease. As an example, if construction of the Improvements was completed in ~~Section 2.5(i)~~December 2007 the expiration date of the Building Lease would continue as April 30, ~~then at the time specified~~ 2026, but, for purposes of early termination, Lessee’s tenth (10th) Lease Year shall commence in ~~Section 2.5(b)~~December, ~~Section 2.5(d), Section 2.5 (f)~~ 2016, and ~~Section 2.5(h~~end in December, 2017 with the first five percent (5%) ~~below~~increases to the Base Rent commencing on May 1, ~~as applicable~~2011 i.e. five (5) years following the commencement date of the initial Base Term. For purposes hereof Total Cost shall mean the actual hard cost of construction of the Improvements and the cost to prepare the plans and specifications, all fees and costs of regulating agencies and utility companies; all professional fees and costs; and all other costs that are customary in the development of this type of building, but in no event including the cost of the Property, the ~~Purchaser shall pay,~~ cost of the racking systems and distribution systems which are to be installed as part of the ~~Purchase Price due hereunder~~Improvements, ~~to the Members in the proportions set forth on Schedule 2.2(a)~~commissions, ~~an earnout payment~~ developer fees or earnout payments, if earned, pursuant to the formula below (each or together hereinafter referred to as the “Earnout Payment”). It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action. (i) Without regard to the actual Closing Date, in the event that EBITDA during the period beginning with July 1, 2007 and ending on December 31, 2007 (the “First Calculation Period ”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “First Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company amounts in excess of the ~~First Target; (ii) In the event that EBITDA during the period beginning with January 1~~Approved Budget, 2008 and ending on December 31, 2008 (the “Second Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment shall as such Approved Budget may be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Third Target; and (iv) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target. (b) The Purchaser shall provide the Members with a written statement of its calculation (the “First Calculation Statement ”) of the Earnout Payment modified pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived for the First Calculation Period and the Earnout Payment due in connection therewith, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any event. (c) Following the delivery of the First Calculation Statement, the Purchaser will allow the Members and its representatives, upon reasonable advance notice, reasonable access during regular business hours to all work papers, books and records and all additional information used in preparing the First Calculation Statement and will make the Purchaser’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after receipt of the First Calculation Statement of such disagreement, stating the facts of the disagreement and the calculation of the Earnout Payment pursuant to Section 2.5(a)(i) by the Members, and including therewith a copy of any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement shall be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Purchaser and the Members notwithstanding such good faith effort, are unable to reach an agreement within thirty (30) days after receipt by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion of the Earnout Payment due, if any, pursuant to Section 2.5(a)(i). In making its calculation, the Arbitration Firm shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within thirty (30) days after the date on which the Arbitration Firm begins its review and shall be final, conclusive and binding on the parties. The fees, costs and expenses of the Arbitration Firm shall be borne by the party whose calculation of the Earnout Payment pursuant to Section 2.5(a)(i) is furthest from the Arbitration Firm’s calculation. (d) The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”) of the Earnout Payment pursuant toSubsection 4.1

Appears in 1 contract

Samples: Subground Lease Agreement (Cost Plus Inc/Ca/)

Earnout. (a) ~~Except as set forth in Section 2.5(i), then at the time specified in Section 2.5(b), Section 2.5(d), Section 2.5 (f) , and Section 2.5(h) below, as applicable, the Purchaser shall pay, as~~ As part of the ~~Purchase Price due hereunder~~Merger Consideration issued by Phase Forward in the Merger, in addition to the ~~Members in~~ Base Consideration, Phase Forward shall make the ~~proportions set forth on Schedule 2.2(a), an earnout payment or earnout payments, if earned, pursuant~~ following payment(s) (the “Earnout”) (but only to the ~~formula below (~~extent such payments become due and payable in accordance with the terms below, computed in each ~~or together hereinafter referred to as the “Earnout Payment”~~case in accordance with Exhibit 4.8(a)~~. It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior~~ ) to the ~~purchase herein contemplated,~~ Securityholder Representative within 120 days following the applicable calendar year end for further distribution to the Lincoln Securityholders in accordance with Sections 4.2 and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then 4.3; provided that ~~Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once~~ the aggregate ~~total of all Extraordinary Expenses exceeds (i)~~ Earnout payments that may become payable by Phase Forward under this Section 4.8 shall not exceed $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action.6.0 million: (i) ~~Without regard~~ an amount equal to the ~~actual Closing Date~~product of (x) * multiplied by (y) 2005 Earnout Revenue, in the event that EBITDA during the period beginning with July 1, 2007 and ending on December 31, 2007 (the “First Calculation Period ”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars (up to a maximum payment of $~~1,250,000.00) (the “First Target ”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the First Target;~~2.0 million; and (ii) In the event that EBITDA during the period beginning with January 1, 2008 and ending on December 31, 2008 (the “Second Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Second Target ”), the Earnout Payment shall be an amount equal to ~~fifty percent~~ the product of (~~50%~~x) * multiplied by (y) 2006 Earnout Revenue, up to a maximum payment of the EBITDA of the Company in excess of the Second Target; (iii) In the event that EBITDA during the period beginning with January 1, 2009 and ending on December 31, 2009 (the “Third Calculation Period”) is greater than Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the “Third Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Third Target; and (iv) In the event that EBITDA during the period beginning with January 1, 2010 and ending on June 30, 2010 (the “Fourth Calculation Period”) is greater than One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Fourth Target”), the Earnout Payment shall be equal to fifty percent (50%) of the EBITDA of the Company in excess of the Fourth Target4.0 million. (b) The ~~Purchaser shall provide~~ parties acknowledge and agree that the ~~Members with a written statement of its calculation (the “First Calculation Statement ”)~~ contingent right to Earnout consideration payable under this Section 4.8 is an integral part of the ~~Earnout Payment pursuant to Section 2.5(a)(i) on the earlier of (i) the date the Purchaser completes its audit for 2007 or (ii) March 31, 2008~~Merger Consideration. The First Calculation Statement shall include, in addition to the Purchaser’s calculation of EBITDA derived for the First Calculation Period and the Earnout Payment due in connection therewith, all of the information, work papers and supporting information necessary to demonstrate same. The Earnout Payment shall be payable (i) in cash no later than April 30, 2008 (A) after receipt by the Purchaser of notice from the Members that they have accepted the First Calculation Statement (a “First Acceptance Notice”), or (B) after expiration of the period during which a First Dispute Notice may be delivered if neither a First Dispute Notice nor a First Acceptance Notice are delivered, or (ii) into escrow pursuant to the Escrow Agreement attached as Exhibit B hereto (the “Escrow Agreement ”) pending the resolution of any disagreement pursuant to Section 2.5(c), as the case may be, provided, further, that a Member shall have the option to receive its portion of an Earnout Payment in Shares by providing written notice to the Purchaser at the earlier of (a) the time that the First Acceptance Notice is delivered, (b) April 20,2008, or (c) at the time that an Earnout Payment is required to be delivered into escrow pending the resolution of any disagreement pursuant to Section 2.5(c). The conversion price per Share shall be seventy-five percent (75%) of the VWAP, but not less than the Floor Price in any event** Confidential Treatment Requested. (c) ~~Following~~ Notwithstanding any other provision herein, the ~~delivery~~ contingent right to the Earnout payable under this Section 4.8 is not assignable or transferable, except by operation of law; provided, however, that nothing in this Section 4.8(c) shall prohibit or be deemed to prohibit any assignment or transfer of any interest in the contingent right to receive any portion of any Earnout payable hereunder by any Lincoln Securityholder to any other Lincoln Securityholder (provided written notice thereof is provided to Phase Forward). (d) During the Earnout Period, the business and operations of Lincoln shall be conducted in accordance with the provisions set forth in Exhibit 4.8(d). (e) On or before each of April 30, 2006 and April 30, 2007, Phase Forward, at its expense, shall prepare and deliver to the Securityholder Representative a report setting forth the determination of the ~~First Calculation Statement~~Earnout payment due with respect to the prior calendar year (an “Earnout Report”), together with the ~~Purchaser will allow~~ Earnout payment shown to be due thereon. Each Earnout Report shall be computed in accordance with Exhibit 4.8(a). The Earnout Report delivered to the ~~Members~~ Securityholder Representative shall be conclusive and ~~its representatives~~binding upon the parties unless the Securityholder Representative, within 30 days from the date of receipt of the Earnout Report, delivers a written objection to Phase Forward specifying in reasonable detail the basis for the objection, and a computation of the Earnout payment asserted by the Securityholder Representative (an “Earnout Objection”). The Securityholder Representative, and agents and representatives of the Securityholder Representative, shall upon ~~reasonable~~ two (2) business days’ advance notice, have a reasonable opportunity to review the working papers relating to the preparation of any Earnout Report and shall have reasonable access ~~during regular business hours~~ to ~~all work papers, books and records and all additional information used~~ employees or accountants of Phase Forward or the Surviving Corporation who prepared or assisted in ~~preparing~~ the ~~First Calculation Statement and will make the Purchaser~~preparation of any Earnout Report. Upon Phase Forward’s officers, employees, representatives and accountants reasonably available to discuss such papers, books, records and information. In the event that the Members disagree with the First Calculation Statement, it shall notify (the “First Dispute Notice”) the Purchaser in writing within thirty (30) days after receipt of ~~the First Calculation Statement of such disagreement~~any Earnout Objection, ~~stating the facts of the disagreement~~ Phase Forward and the calculation of the Earnout Payment pursuant to Section 2.5(a)(i) by the Members, and including therewith a copy of any financial information used in making the calculation other than that information previously provided by the Purchaser. If a First Dispute Notice is not given within such thirty (30) day period, then the First Calculation Statement Securityholder Representative shall ~~be deemed to be final, conclusive and binding on the parties. In the event a First Dispute Notice is timely given, the Members and the Purchaser shall meet and attempt~~ negotiate in good faith to resolve the ~~items or amounts in dispute. If~~ Earnout Objection, but if the ~~Purchaser and the Members notwithstanding~~ Earnout Objection cannot be resolved by such ~~good faith effort, are unable to reach an agreement~~ negotiation within ~~thirty (30)~~ 15 days after Phase Forward’s receipt ~~by the Purchaser of the First Dispute Notice, then the Purchaser and the Members jointly shall engage the Arbitration Firm to review the disputed items or amounts and compute the disputed portion~~ of the Earnout ~~Payment due~~Objection, ~~if any, pursuant to Section 2.5(a)(i). In making its calculation~~Phase Forward and the Securityholder Representative shall cause the Earnout Report, the ~~Arbitration Firm~~ Earnout Objection, and all work papers related thereto (collectively, the “Earnout Determination Materials”), to be submitted to the Accounting Expert. Phase Forward shall ~~consider only~~ immediately pay to the ~~items or amounts~~ Securityholder Representative any amount which is no longer in dispute following such 15 day period. (f) The Accounting Expert shall review the Earnout Determination Materials and shall determine the Earnout payment to be made with respect to the ~~extent required~~calendar year which is the subject of such Earnout Report, ~~any other items or amounts necessary to derive~~ which may not be outside the ~~disputed items or amounts)~~range of value defined by the Earnout payment reflected on the Earnout Report and the Earnout payment asserted in the Earnout Objection. ~~Such~~ The Accounting Expert shall notify the parties in writing of its determination within 30 days following the receipt of the Earnout Determination Materials, which determination shall be ~~made within thirty (30) days after the date on which the Arbitration Firm begins its review~~ final and conclusive. No such determinations shall result in adjustments to any items not in dispute and no adjustments shall be ~~final~~greater than claimed in any dispute by the Securityholder Representative. In acting hereunder, ~~conclusive~~ the Accounting Expert shall act as experts and ~~binding on~~ not as arbiters. Phase Forward shall be entitled to offset one-half of the ~~parties. The fees, costs~~ fees and expenses of the ~~Arbitration Firm shall be borne by~~ Accounting Expert from the ~~party whose calculation~~ Earnout payment which is the subject of the Earnout ~~Payment pursuant to Section 2.5(a)(i) is furthest~~ Report, or from the ~~Arbitration Firm’s calculation~~Escrow Amount. ** Confidential Treatment Requested. ~~(d) The Purchaser shall provide the Members with a written statement of its calculation (the “Second Calculation Statement ”) of the Earnout Payment pursuant to~~

Appears in 1 contract

Samples: Merger Agreement (Phase Forward Inc)

Common use of Earnout Clause in Contracts