Earnout. (a) If and to the extent earned in accordance with this Section 2.06 and Annex B to this Agreement, Sellers shall be entitled to an earnout payment (the “Earnout Payment”) from Buyer. The Earnout Payment for all purposes under this Agreement shall be calculated in accordance with Annex B. (b) As promptly as practicable, but in no event later than ninety (90) days after the end of the Earnout Period, Buyer shall prepare and deliver to the Sellers’ Representative a statement (the “Earnout Statement”) setting forth Buyer’s good faith calculation of EBITDA and the Earnout Payment, if any. After receipt of the Earnout Statement, the Sellers’ Representative shall have thirty (30) days (the “Earnout Review Period”) to review the Earnout Statement. During the Earnout Review Period, the Sellers’ Representative and Sellers’ Accountants shall have reasonable access to the books and records of the Company, the personnel of, and work papers prepared by Buyer and/or Buyer’s Accountants, to the extent that they relate to the Earnout Statement, as the Sellers’ Representative may reasonably request for the purpose of reviewing the Earnout Statement and to prepare an Earnout Objection Notice (defined below), provided, that such access shall be in a manner that does not interfere with the business operations of Buyer or the Company. (c) On or prior to the last day of the Earnout Review Period, the Sellers’ Representative may object to the Earnout Statement by delivering to Buyer a written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount and the basis for the Sellers’ Representative’s disagreement therewith (the “Earnout Objection Notice”). For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Earnout Statement and all components thereof (including Buyer’s calculation of the Earnout Payment) will be deemed final and binding on the Parties for all purposes under this Agreement and not subject to further dispute or challenge. If the Sellers’ Representative delivers the Earnout Objection Notice before the expiration of the Earnout Review Period, then the Parties shall resolve the matters in dispute in a manner consistent, mutatis mutandis, with the review and dispute procedures set forth in Section 2.04(c). (d) Except as set forth in Section 2.06(e) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Company’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such actions on the Earnout Payment, if any. For avoidance of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty in respect of this Section 2.06, (ii) is making any representations or warranties to Sellers with respect to the operations of the Company or the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating Business. (e) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will: (i) operate the Company’s business as a separate business unit; (ii) maintain separate financial statements for such business unit; (iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable); (iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable); (v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and (vi) credit all revenue generated from the sale of the Company Products to such business unit. (f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant to the provisions of this Section 2.06 and that the right to receive the Earnout Payment, if any, pursuant to this Agreement: (i) does not represent an equity or other ownership interest in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy). (g) Within two (2) Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06, Buyer shall pay (i) to each Seller such Seller’s Pro Rata Share of the Earnout Payment by wire transfer of immediately available funds to such Seller’s Purchase Price Bank Account. (h) The Parties shall treat the payment of the Earnout Payment Amount made under this Section 2.06, if any, as an adjustment to the Purchase Price by the parties for Tax purposes, unless (a) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any such payment causes such payment not to be treated as an adjustment to the Purchase Price for Tax purposes or (b) otherwise required by applicable Law.
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Samples: Membership Interest Purchase Agreement (Computer Programs & Systems Inc)
Earnout. (a) If and to the extent earned in accordance with this Section 2.06 and Annex B to this Agreement, Sellers shall be entitled to an earnout payment Within sixty (the “Earnout Payment”) from Buyer. The Earnout Payment for all purposes under this Agreement shall be calculated in accordance with Annex B.
(b) As promptly as practicable, but in no event later than ninety (9060) days after the end of each of the First Earnout Period, the Second Earnout Period and the Third Earnout Period, Buyer shall prepare and deliver to the Sellers’ Securityholder Representative a written statement (the each an “Earnout Statement”) ), which, for the avoidance of doubt, will include each of the components set forth on the Base Plan Schedule, setting forth Buyer’s good faith its calculation of the Adjusted EBITDA and for such period in accordance with the Base Plan Schedule, compared against the Earnout Paymentcalculation for the applicable Earnout Period set forth on Schedule 2.5 attached hereto (the “Base Plan Schedule”). For purposes of clarity, if any. After receipt of nothing in the Earnout Statement, Base Plan Schedule shall alter the Sellers’ Representative shall have Adjusted EBITDA targets set forth in Schedule 2.5(c).
(b) Within thirty (30) days (the “Earnout Review Period”) to review the following delivery by Buyer of an Earnout Statement, the Securityholder Representative shall deliver written notice to Buyer of any good faith disagreement that the Securityholder Representative has with respect to the contents thereof which notice explains, in reasonable detail, the basis for its disagreement. During such period, Buyer shall provide the Earnout Review Period, the Sellers’ Securityholder Representative and Sellers’ Accountants shall have his Representatives reasonable access to the relevant books and records and employees of the Company, the personnel of, and work papers prepared by Buyer and/or Buyer’s Accountants, to the extent that they relate to the Earnout Statement, as the Sellers’ Representative may reasonably request Group Companies for the purpose of reviewing facilitating the Securityholder Representative’s review of the applicable Earnout Statement. In the event that the Securityholder Representative does not notify Buyer in writing of a disagreement with respect to the Earnout Statement within such thirty (30)-day period, such Earnout Statement shall be deemed final, conclusive and binding on the parties. If the Securityholder Representative delivers a notice of disagreement within such thirty (30)-day period, then Buyer and the Securityholder Representative shall negotiate in good faith to prepare an Earnout Objection Notice resolve any such disagreement. If Buyer and the Securityholder Representative, notwithstanding such good faith effort, fail to resolve such disagreement within thirty (defined below30) days after the Securityholder Representative notifies Buyer of its disagreement, then the dispute shall be submitted for final and binding resolution to the Accounting Expert for resolution in accordance with the procedures set forth in Sections 2.3(c) and (d), provided, that such access which shall be in a manner that does not interfere with the business operations of Buyer or the Companyapply hereto mutatis mutandis.
(c) On or prior If the Adjusted EBITDA, as finally determined pursuant to Section 2.5(b), for the last day of First Earnout Period, Second Earnout Period and/or Third Earnout Period exceeds the applicable thresholds set forth on Schedule 2.5(c), the Earnout Review Period, the Sellers’ Representative may object Payment with respect to the Earnout Statement by delivering to Buyer a written notice setting such period shall be as set forth the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount and the basis for the Sellers’ Representative’s disagreement therewith (the “Earnout Objection Notice”on Schedule 2.5(c). For the avoidance of doubt, all other matters each Securityholder hereby acknowledges and agrees that (i) Adjusted EBITDA shall be measured solely with respect toto each Earnout Period and in no event shall any Adjusted EBITDA with respect to any Earnout Period be “carried forward” to a future Earnout Period, or be “carried back” to a prior Earnout Period and all other components of(ii) if the Earnout payment for the First Earnout Period or the Second Earnout Period as finally determined pursuant to this Section 2.5 is Zero Dollars ($0), the Securityholders shall have no rights to receive any Earnout Statement not identified payment in the respect of such Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Earnout Statement and all components thereof Period (including Buyer’s calculation by way of any future “catch up” payment), notwithstanding the fact that the Adjusted EBITDA for subsequent Earnout PaymentPeriod(s) will be deemed final and binding on the Parties results in Earnout payments being made for all purposes under this Agreement and not subject to further dispute or challenge. If the Sellers’ Representative delivers the such subsequent Earnout Objection Notice before the expiration of the Earnout Review Period, then the Parties shall resolve the matters in dispute in a manner consistent, mutatis mutandis, with the review and dispute procedures set forth in Section 2.04(cPeriod(s).
(d) Except as set forth in Section 2.06(e) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Company’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such actions on the Earnout Payment, if any. For avoidance of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty in respect of All amounts payable pursuant to this Section 2.062.5 shall be paid within five (5) Business Days from the date on which the Adjusted EBITDA for the pertinent period is finally determined, by wire transfer of immediately available funds: (iia) is making any representations or warranties to Sellers with respect to the operations of Members, to the Company or the CompanySecurityholder Representative for further distribution to each Member in accordance with each Member’s businesses after the Closing or Additional Pro Rata Share and (b) with respect to any estimates or projections relating the Optionholders, to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge be paid by the Company to the applicable Optionholders (less applicable withholding and any Taxes required to be paid by the Group Companies with another Person (respect thereto) on or before the next regularly scheduled payroll date following such other Person, a “Consolidating Business”)payment in accordance with each Securityholder’s Additional Pro Rata Share. Sellers will Buyer shall have no rights or interests inright to withhold and set off any amounts owed by the Member to Buyer under the terms of this Agreement against amounts payable pursuant to this Section, or relating to, any Acquired Business or any Consolidating Businessexcept as contemplated by Section 2.4(b) and Article 8.
(e) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the During each Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer willPeriod:
(i) Buyer shall operate the Company’s Business in good faith consistent with the manner in which Buyer operates its other acquired business as a separate business unitunits, applicable Law and its third-party obligations;
(ii) Buyer shall operate the Group Companies as a separate profit center, business unit or division which will maintain separate financial statements books and records sufficient for such the calculation of the Earnout, provided that Buyer may, at its discretion, move or integrate certain corporate functions of the Business (including with respect to corporate, finance, human resources and legal functions), and allocate the applicable expenses of any Group Company to Buyer or Buyer Parent instead. For purposes of determining the appropriate sharing of revenue for transactions between the Buyer and the Group Companies, (A) the Group Companies will be allocated sixty five percent (65%) of revenue generated and recognized by Buyer, Buyer Parent or their respective Affiliates (other than the Group Companies) or their respective business unit;divisions (other than the Business) as a result of cross-marketing or referrals from the Group Companies and/or the Business and (B) Buyer will be allocated sixty five (65%) of revenue generated and recognized by any Group Company or the Business as a result of cross-marketing or referrals from Buyer, Buyer Parent or their respective Affiliates (other than the Group Companies) or their respective business divisions (other than the Business); and
(iii) maintain the Company’s sales and marketing expenditures at a level consistent Buyer shall not, or permit its Affiliates to, take any action, or knowingly omit to take any action, with the average monthly expenditures for primary intent of impeding achievement of or reducing the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business amount of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unitEarnout.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant If, prior to the provisions end of this Section 2.06 and that the right to receive the Earnout PaymentPeriod, if any, Buyer effects a Company Sale at a price that is equal to or greater than the price actually paid pursuant to this Agreement: Agreement (ias adjusted for partial sales), then the maximum amount of the Earnout payments contemplated in Section 2.5(c) does for the period in which the Company Sale occurs and any future periods (but not represent an equity any past periods) (the “Outstanding Earnout Payment”) shall be accelerated and become due and payable without further action required on the part of any party hereto. In the event of such acceleration, Buyer shall make (or other ownership interest in Buyer cause the applicable acquirer or any of Buyer’s Affiliates; (iisurviving company to make) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy).
(g) Within Outstanding Earnout Payment within two (2) Business Days after following the final determination consummation of the amount a Company Sale. For purposes of the Earnout Paymentthis Agreement, if any“Company Sale” means any transaction or series of transactions pursuant to which any Person, in accordance with this Section 2.06other than Buyer or an Affiliate of Buyer, Buyer shall pay acquires, directly or indirectly: (i) to each Seller such Seller’s Pro Rata Share 50% or more of the Earnout Payment by wire transfer of immediately available funds to such Seller’s Purchase Price Bank Account.
(h) The Parties shall treat the payment outstanding equity, voting securities or beneficial ownership of the Earnout Payment Amount made under this Section 2.06Group Companies (whether by merger, if anyconsolidation, as an adjustment to reorganization, combination, amalgamation, sale, transfer or otherwise) or (ii) a majority of the Purchase Price assets of the Group Companies, determined on a consolidated basis. For purposes of clarity, Company Sale shall not include indirect acquisitions of the Group Companies’ equity and/or assets effectuated by the parties for Tax purposes, unless acquisition of the equity and/or assets of Buyer or its Affiliates (aother than the Group Companies or a holding company substantially all of the assets of which are the equity interests of the Group Companies) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any such payment causes such payment not to be treated as an adjustment to minority investments in the Purchase Price for Tax purposes or (b) otherwise required by applicable LawGroup Companies.
Appears in 1 contract
Earnout. (a) If Subject to and to the extent earned in accordance with the terms and conditions set forth in this Section 2.06 3.2, Buyer shall pay Seller a contingent earnout payment, if any (the "Earnout Amount"), based on the revenue generated directly by the Business (the "Earnout Revenue") during the period commencing August 1, 2013 and Annex B ending on April 30, 2014 (the "Earnout Period"). If the Earnout Revenue for the Earnout Period is equal to this Agreementor greater than $3,750,000, Sellers the Earnout Amount shall be entitled to an earnout payment ($1,000,000; if the “Earnout Payment”) from BuyerRevenue for the Earnout Period is less than $3,750,000, the Earnout Amount shall equal two-thirds of the amount, if any, by which the Earnout Revenue for the Earnout Period exceeds $2,250,000; provided, however, that the Earnout Amount shall in no event exceed $1,000,000. The Earnout Payment for all purposes under this Agreement shall be calculated in accordance with Annex B.ASSET PURCHASE AGREEMENT
(b) As promptly as practicable, but in no event No later than ninety (90) 15 calendar days after the end of each calendar month during the Earnout Period, Buyer shall prepare and deliver to the Sellers’ Representative Seller a statement (the “Earnout Statement”) written schedule setting forth Buyer’s good faith in reasonable detail its calculation of EBITDA and the Earnout Payment, if any. After receipt of the Earnout Statement, the Sellers’ Representative shall have thirty (30) days (the “Earnout Review Period”) Revenue generated in such month and cumulative to review date for the Earnout Statement. During the Earnout Review Period, together with reasonably detailed information supporting the Sellers’ Representative calculation, including reasonable detail regarding booking, shipping and Sellers’ Accountants shall have reasonable access backlog for such month and period to the books and records of the Company, the personnel of, and work papers prepared by Buyer and/or Buyer’s Accountants, to the extent that they relate to the Earnout Statement, as the Sellers’ Representative may reasonably request for the purpose of reviewing the Earnout Statement and to prepare an Earnout Objection Notice (defined below), provided, that such access shall be in a manner that does not interfere with the business operations of Buyer or the Companydate.
(c) On or prior No later than May 31, 2014, Buyer shall deliver to the last day Seller a written schedule setting forth in reasonable detail its calculation of the Earnout Review PeriodAmount, together with reasonably detailed information supporting the Sellers’ Representative may object to calculation (the "Earnout Calculation"). If, within 20 calendar days after Seller's receipt of the Earnout Statement by delivering to Calculation, Buyer a shall not have received written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement from Seller stating, in reasonable detail, indicating each disputed item or amount and the basis for the Sellers’ Representative’s disagreement therewith (the “Earnout Objection Notice”). For avoidance of doubt, all other matters disputes by Seller with respect to, and all other components of, the Earnout Statement not identified in Calculation, then the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Earnout Statement and all components thereof (including Buyer’s calculation of the Earnout Payment) will Amount shall be deemed final and binding on the Parties for all purposes under this Agreement and not subject to further dispute or challengeparties. If the Sellers’ Representative delivers Seller, within such 20-day period, gives written notice to Buyer of any such disputes to the Earnout Objection Notice before Calculation, Buyer and Seller shall attempt to reconcile their differences. If Buyer and Seller are unable to reach a resolution within 15 calendar days after receipt by Buyer of Seller's written notice of dispute, Buyer and Seller shall submit the expiration items remaining in dispute for resolution to the Independent Accounting Firm, which shall, within 30 calendar days of such submission, determine and report to Seller and Buyer upon such remaining disputed items, and such report shall be final, binding and conclusive on Seller and Buyer. The fees and disbursements of the Earnout Review Period, then Independent Accounting Firm shall be allocated in the Parties shall resolve same proportion that the matters in dispute in a manner consistent, mutatis mutandis, with aggregate amount of such remaining disputed items so submitted to the review and dispute procedures set forth in Section 2.04(c)Independent Accounting Firm that are unsuccessfully disputed by each such party (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed items so submitted.
(d) Except Buyer shall pay Seller the Earnout Amount, if any, within 10 calendar days of a final determination of such Earnout Amount in accordance with this Section 3.2 by wire transfer in immediately available funds to an account designated by Seller. Any portion of the Earnout Amount that is not paid when due shall bear interest at the rate of 7% per annum until paid and Buyer shall pay any Losses reasonably incurred by Seller in connection with collecting such amount.
(e) Seller acknowledges and agrees that (i) its sole and exclusive right under this Section 3.2 shall be to receive, subject to the other terms of this Agreement, the Earnout Amount payable pursuant to this Section 3.2 and any interest and collection costs payable under Section 3.2(d); (ii) except as set forth in Section 2.06(e) below3.2(f), nothing contained in this Agreement shall restrict in Buyer is not under any way management obligation to provide any specific level of Buyer from operating investment or financial assistance to the Company and Business or the Company’s businesses and operations in Assets or to undertake any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such specific actions on the Earnout Payment, if any. For avoidance of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty in respect of this Section 2.06, (ii) is making any representations or warranties to Sellers with respect to the operations operation of the Company Business or the Company’s businesses after Assets; and (iii) Buyer is not representing or warranting that any specific level of revenue will be achieved from the Closing or with respect to any estimates or projections relating to EBITDA for Business during the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating Business.
(e) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will:
(i) operate the Company’s business as a separate business unit;
(ii) maintain separate financial statements for such business unit;
(iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unit.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant to the provisions of this Section 2.06 and that the right to receive During the Earnout PaymentPeriod, if any, pursuant Buyer shall use commercially reasonable efforts to this Agreement: (i) does not represent an equity or timely comply with shipping schedules and other ownership interest in Buyer or revenue recognition requirements consistent with Buyer's practices and shall refrain from taking any action the principal purpose of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) which is not represented by any form to reduce the amount of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy)Earnout Amount.
(g) Within two (2) Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06, Buyer shall pay (i) to each Seller such Seller’s Pro Rata Share of the Earnout Payment by wire transfer of immediately available funds to such Seller’s Purchase Price Bank Account.
(h) The Parties shall treat the payment of the Earnout Payment Amount All payments made under this Section 2.063.2 and all other payments made under this Agreement to Seller are being paid solely in exchange for the purchase of the Assets, if any, as an adjustment to and the Purchase Price by Parties shall not take a Tax return position inconsistent with the parties for Tax purposes, unless (a) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any such payment causes such payment not to be treated as an adjustment to the Purchase Price for Tax purposes or (b) otherwise required by applicable Law.foregoing. ASSET PURCHASE AGREEMENT
Appears in 1 contract
Earnout. (a) If During the time period starting on the Closing Date and ending on thirty-six (36) month anniversary thereof, the Sellers, in their capacities as employees of the Purchaser and WBS LLC, shall use commercially reasonable efforts to cause the extent earned Purchaser and WBS LLC to collect in accordance with this Section 2.06 and Annex full each of the accounts receivables of WBS LLC set forth on Schedule B to this Agreementhereto (each, a “Relevant Account Receivable”). As part of the U.S. Transaction Consideration, the Sellers shall be entitled to an earnout payment receive cash payments from the Purchaser (the “Earnout PaymentU.S. Transaction Consideration”) from Buyerequal to the amount, if any, by which: (i) the amount of cash recovered by the Purchaser and WBS LLC with respect to each Relevant Account Receivable during such time period (each, a “Recovered Amount”); exceeds (ii) the GTTA Estimated Collectible Amount for such Relevant Account Receivable set forth set forth next to its name on Schedule B; provided, however, that in no event shall the aggregate Earnout U.S. Transaction Consideration amount exceed five hundred thousand dollars ($500,000). The Earnout Payment for all purposes under this Agreement Purchaser and WBS LLC shall be calculated in accordance entitled to retain, without compensation to the Sellers, any Recovered Amount with Annex B.respect to any Relevant Account Receivable that is less than the GTTA Estimated Collectible Amount for such Relevant Account Receivable.
(b) As The Purchaser and WBS LLC shall fund their reasonable outside counsel fees associated with collection of Relevant Accounts Receivable pursuant to Section 1.11(a), which shall, except with respect to the WV Fiber matter (as described on Schedule B), be solely at the expense of the Purchaser and WBS LLC and shall not reduce the Earnout U.S. Transaction Consideration.
(c) The Earnout U.S. Transaction Consideration, if any, with respect to each Relevant Account Receivable shall be allocated fifty percent (50%) to Charter and fifty percent (50%) to Hollander and shall be paid by the Purchaser to the Sellers, by check or wire transfer of immediately available funds, promptly as practicableafter such receipt by the Purchaser or WBS LLC of the applicable Recovered Amount.
(d) In taking actions in connection with collection of Relevant Accounts Receivable: (i) the Sellers shall act in a commercially reasonably manner in accordance with the direction and oversight of their superiors within the Purchaser and WBS LLC; (ii) without limiting the generality of the foregoing, but in no event later than ninety (90) days after will any Seller take any action that is reasonably likely to harm to the end relationship of the Earnout PeriodPurchaser and WBS LLC with the applicable account debtor; and (iii) the Purchaser and WBS LLC shall act in a commercially reasonable manner.”
(h) The last sentence of Section 5.6(a) of the Purchase Agreement is hereby amended to delete therefrom the following phrase: “but, Buyer as provided in the definition of NWC in Article IX, the Companies Employees Severance Obligations shall prepare and deliver not be included in the NWC”.
(i) Section 5.12 of the Purchase Agreement is hereby amended to delete therefrom the following phrase: “but, as provided in the definition of NWC in Article IX, up to fifty-five thousand dollars ($55,000) of the Audit Expenses shall not be included in the NWC”.
(j) Section 7.2(a) of the Purchase Agreement is hereby amended to delete therefrom the following phrase: “except to the Sellers’ Representative extent accrued as a statement (Current Liability included in the “Earnout Statement”) setting forth Buyer’s good faith calculation of EBITDA the Final NWC”
(k) Section 7.6(a)(i) and the Earnout Payment, if any. After receipt (ii) of the Earnout StatementPurchase Agreement are hereby amended to provide in their entirety as follows:
(i) by the Sellers under Section 7.2(a) (Indemnification by the Sellers Concerning the Companies) shall be satisfied: (A) first, the Sellers’ Representative shall have thirty (30) days (the “Earnout Review Period”) to review the Earnout Statement. During the Earnout Review Period, the Sellers’ Representative and Sellers’ Accountants shall have reasonable access to the books and records by cancellation of the Company, the personnel of, and work papers prepared by Buyer and/or Buyer’s AccountantsStock U.S. Transaction Consideration; (B) second, to the extent that they relate the Stock U.S. Transaction Consideration is insufficient to satisfy such Seller Indemnification Payment Amount in full, by cancellation of the Notes U.S. Transaction Consideration; (C) third, to the Earnout Statementextent that the Stock U.S. Transaction Consideration and the Notes U.S. Transaction Consideration are insufficient to satisfy such Seller Indemnification Payment Amount in full, as the Sellers’ Representative may reasonably request for the purpose of reviewing the Earnout Statement and to prepare an Earnout Objection Notice (defined below), provided, that such access shall be in a manner that does not interfere with the business operations of Buyer or the Company.
(c) On or prior to the last day by cancellation of the Earnout Review PeriodU.S. Transaction Consideration; and (D) fourth, the Sellers’ Representative may object to the Earnout Statement by delivering to Buyer a written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount and the basis for the Sellers’ Representative’s disagreement therewith (the “Earnout Objection Notice”). For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Earnout Statement and all components thereof (including Buyer’s calculation of the Earnout Payment) will be deemed final and binding on the Parties for all purposes under this Agreement and not subject to further dispute or challenge. If the Sellers’ Representative delivers the Earnout Objection Notice before the expiration of the Earnout Review Period, then the Parties shall resolve the matters in dispute in a manner consistent, mutatis mutandis, with the review and dispute procedures set forth in Section 2.04(c).
(d) Except as set forth in Section 2.06(e) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Company’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such actions on the Earnout Payment, if any. For avoidance of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty in respect of this Section 2.06, (ii) is making any representations or warranties to Sellers with respect to the operations of the Company or the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating Business.
(e) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will:
(i) operate the Company’s business as a separate business unit;
(ii) maintain separate financial statements for such business unit;
(iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unit.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant to the provisions of this Section 2.06 and that the right to receive Stock U.S. Transaction Consideration, the Notes U.S. Transaction Consideration and the Earnout PaymentU.S. Transaction Consideration are insufficient to satisfy such Seller Indemnification Payment Amount in full, if any, pursuant to this Agreement: (i) does not represent an equity or other ownership interest in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy).
(g) Within two (2) Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06, Buyer shall pay (i) to each Seller such Seller’s Pro Rata Share of the Earnout Payment by wire transfer of immediately available funds of the unsatisfied part of the Seller Indemnification Payment Amount by the Sellers, jointly and severally, to the respective accounts of the Purchaser and Purchaser Europe (allocated between the Purchaser and Purchaser Europe in proportion to the Transaction Consideration for the Purchased Equity Interests that each is purchasing hereunder), in each case not later than five (5) Business Days after determination of the Seller Indemnification Payment Amount pursuant to this Article VII; and
(ii) by a Seller under Section 7.2(b) (Indemnification by each Seller Concerning Such Seller), shall be satisfied: (A) first, by cancellation of such Seller’s Stock U.S. Transaction Consideration; (B) second, to the extent that such Seller’s Stock U.S. Transaction Consideration is insufficient to satisfy such Seller Indemnification Payment Amount in full, by cancellation of such Seller’s Notes U.S. Transaction Consideration; (C) third, to the extent that such Seller’s Stock U.S. Transaction Consideration and Notes U.S. Transaction Consideration are insufficient to satisfy such Seller Indemnification Payment Amount in full, by cancellation of such Seller’s Earnout U.S. Transaction Consideration; and (D) fourth, to the extent that such Seller’s Stock U.S. Transaction Consideration, Notes U.S. Transaction Consideration and Earnout U.S. Transaction Consideration are insufficient to satisfy such Seller Indemnification Payment Amount in full, by wire transfer of immediately available funds of the unsatisfied part of the Seller Indemnification Payment Amount by such Seller to the respective accounts of the Purchaser and Purchaser Europe (allocated between the Purchaser and Purchaser Europe in proportion to the Transaction Consideration for the Purchased Equity Interests that each is purchasing hereunder), in each case not later than five (5) Business Days after determination of the Seller Indemnification Payment Amount pursuant to this Article VII.”
(l) The first sentence of Section 7.6(c) of the Purchase Price Bank AccountAgreement is hereby amended to delete the phrase “to Section 1.6(c) or” therefrom.
(hm) Sections 1.3(b)(iii) and Section 10.1(ii) of the Purchase Agreement are each hereby amended to change the reference therein to “twenty-five thousand dollars ($25,000)” to instead refer to “thirty-one thousand five hundred dollars ($31,500)”.
(n) The Parties shall treat the payment of the Earnout Payment Amount made under this Section 2.06, if any, as an adjustment table entitled “U.S. Transaction Consideration” in Schedule A to the Purchase Price by Agreement is hereby amended to change the parties for Tax purposes, unless column therein entitled “Notes U.S. Transaction Consideration” to provide in its entirety as follows: (ao) The Purchase Agreement is hereby revised to add thereto a final “determination” new Schedule B consisting of Schedule B to this Amendment.
(as that term is defined for purposes of Code Section 1313 or corresponding state Lawsp) with respect to any such payment causes such payment not to be treated as an adjustment Exhibits A-1 and A-2 to the Purchase Price for Tax purposes or (b) otherwise required by applicable LawAgreement are hereby amended to consist of Exhibit A-1 and A-2, respectively, to this Amendment.
Appears in 1 contract
Samples: Purchase Agreement (Global Telecom & Technology, Inc.)
Earnout. (a) If No later than seventy-five (75) days following the end of the period beginning on January 1, 2026 and to the extent earned in accordance with this Section 2.06 and Annex B to this Agreementending on December 31, Sellers shall be entitled to an earnout payment 2026 (the “Earnout PaymentMeasurement Period”) from Buyer. The Earnout Payment for all purposes under this Agreement ), Acquiror shall be calculated in accordance with Annex B.
(b) As promptly as practicable, but in no event later than ninety (90) days after the end of the Earnout Period, Buyer shall prepare and deliver to the Sellers’ API Representative a written statement (such statement, the “Earnout Statement”) setting forth Buyer’s its good faith calculation of EBITDA (i) the Included FRR and the components thereof and (ii) the applicable Earnout PaymentAmount resulting therefrom, if anyany (the “Proposed Earnout Amount”), in each case, as calculated in accordance with this Agreement, and together with reasonable supporting documentation for the calculation thereof. After Acquiror shall not be permitted to amend the Earnout Statement following its delivery to the API Representative. For illustrative purposes only, attached hereto as Schedule 2.7(a) is a sample calculation of Included FRR and the resulting Earnout Amount, using the assumptions set forth therein.
(b) If the API Representative disagrees with any part of Acquiror’s calculations in the Earnout Statement (an “Earnout Dispute”), the API Representative shall, within forty-five (45) days after its receipt of the Earnout Statement (the “Earnout Dispute Period”), notify Acquiror in writing of such disagreement (an “Earnout Dispute Notice”). The Earnout Dispute Notice shall specify with reasonable detail which aspects of the calculation of the Earnout Statement, including the Sellers’ amount of Included FRR and the resulting Earnout Amount, are being disputed and describe the basis for and amount of such dispute, and the API Representative’s alternative calculation, in reasonable detail, of such amounts, and any other information applicable to such Earnout Dispute. The API Representative shall have thirty not be permitted to amend the Earnout Dispute Notice following its delivery to the Acquiror.
(30c) days Following the delivery of the Earnout Statement until the determination of the Final Earnout Amount, the Acquiror Parties shall, and shall cause the Company Group Entities and any other Persons comprising the Acquired Management Business (the “Earnout Review PeriodAcquired Management Business Entities”) ), and their respective other Affiliates and representatives to, reasonably cooperate with the API Representative and its representatives solely to assist with their review of the Earnout Statement. During Statement and the calculations therein, including of the Proposed Earnout Review PeriodAmount, including by (i) permitting the Sellers’ API Representative and Sellers’ Accountants shall its representatives to have reasonable access to the books books, records and records other documents (including work papers, schedules, financial statements, memoranda, etc.) of the CompanyAcquiror Parties, the personnel ofAcquired Management Business Entities and their respective Affiliates and representatives, and reasonably cooperating with the API Representative in seeking to obtain work papers prepared by Buyer and/or Buyer’s Accountantsfrom the Acquiror Parties, the Acquired Management Business Entities and their respective other Affiliates and representatives, in each case, to the extent that they relate pertaining to or used in connection with the preparation of such documents and providing the API Representative and its representatives with copies thereof (as reasonably requested by the API Representative) and (ii) providing the API Representative and its representatives reasonable access to the Earnout Statementemployees and accountants of the Acquiror Parties, the Acquired Management Business Entities and their respective Affiliates as reasonably requested by the Sellers’ Representative may reasonably request for API Representative; provided, that, in each case, such access shall (A) be conducted during normal business hours and under the purpose supervision of reviewing personnel of Acquiror or its Affiliates (other than the Earnout Statement and to prepare an Earnout Objection Notice (defined belowCompany Group Entities), provided(B) be conducted in a manner not to unreasonably interfere with the businesses or operations of Acquiror or its Affiliates (including the Acquired Management Business Entities), that (C) comply with all applicable Laws, including those regarding the exchange of competitively sensitive information and (D) be subject to API Representative’s and its representatives’ execution of customary access letters which contain, among other things, a non-reliance provision. Notwithstanding anything herein to the contrary, no such access shall be permitted to the extent that it would require the Acquiror or any of the Acquired Management Business Entities to disclose information that is subject to attorney-client privilege or for which disclosure is prohibited by the terms of any Contract or applicable Law; provided, that the Acquiror Parties shall, and shall cause their respective Affiliates (including the Acquired Management Business Entities) to, use their respective commercially reasonable efforts to permit such access and disclosure in a manner that does not interfere with violate any such Contract, Law or attorney-client or other privilege. If the business operations API Representative does not deliver an Earnout Dispute Notice to Acquiror prior to the end of Buyer or the Company.
Earnout Dispute Period, then such Earnout Statement shall be conclusive, final and binding on the API Entities and Acquiror (cand all other Parties) On or in the form in which it was delivered to the API Representative and such Proposed Earnout Amount shall be deemed to be the “Final Earnout Amount”. The API Representative may, at any time prior to the last day of such Earnout Dispute Period, notify Acquiror that such party agrees with the Earnout Review PeriodStatement, and upon such notification from the API Representative, the Sellers’ Representative may object Proposed Earnout Amount shall be deemed to the Earnout Statement by delivering to Buyer a written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount and the basis for the Sellers’ Representative’s disagreement therewith (be the “Final Earnout Objection NoticeAmount”). For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Earnout Statement and all components thereof (including Buyer’s calculation of the Earnout Payment) will be deemed final and binding on the Parties for all purposes under this Agreement and not subject to further dispute or challenge. If the Sellers’ Representative delivers the Earnout Objection Notice before the expiration of the Earnout Review Period, then the Parties shall resolve the matters in dispute in a manner consistent, mutatis mutandis, with the review and dispute procedures set forth in Section 2.04(c).
(d) Except as set forth If an Earnout Dispute Notice is timely delivered by the API Representative to Acquiror, the API Representative, on the one hand, and Acquiror, on the other hand, shall negotiate in Section 2.06(egood faith to resolve such Earnout Dispute and any such resolution agreed upon in writing shall be conclusive and binding on the API Entities and Acquiror (and all other Parties). In the event that the API Representative and Acquiror are unable to resolve such Earnout Dispute within thirty (30) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Companydays after Acquiror’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact receipt of such actions on timely delivered Earnout Dispute Notice, either the API Representative or Acquiror, as applicable, may submit such Earnout Payment, if anyDispute to the Accounting Expert. For the avoidance of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty items and amounts not objected to by the API Representative in respect of this Section 2.06, (ii) is making any representations or warranties to Sellers with respect the Earnout Dispute Notice shall be deemed resolved and shall not be submitted to the operations of the Company or the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating BusinessAccounting Expert.
(e) Buyer Acquiror and the API Representative shall not take any action with use commercially reasonable efforts to cause, and shall instruct, the knowing and primary purpose and intent of artificially preventing or decreasing Accounting Expert to resolve all Earnout Disputes as soon as practicable, but in any material respect event shall direct the earning Accounting Expert to render a determination within thirty (30) days after its retention. The Accounting Expert, acting as an expert and not as an arbitrator, shall consider only those items and amounts in Acquiror’s or API Representative’s respective calculations of the Earnout PaymentStatement, if any. Buyer covenants as applicable, including the amount of Included FRR and agrees that, during the Earnout Period Amount resulting therefrom, that are identified as being items and subject amounts to Annex Bwhich Acquiror or the API Representative, Buyer will:
(i) operate as applicable, have been unable to agree in writing. In resolving any disputed item, the Company’s business as Accounting Expert may not assign a separate business unit;
(ii) maintain separate financial statements value to any item greater than the greatest value for such business unit;
item claimed by either Acquiror or the API Representative or less than the smallest value for such item claimed by either Acquiror or the API Representative. The Accounting Expert’s determination shall be based solely on written materials submitted by the API Representative and Acquiror and their respective representatives, as applicable (iii) maintain a copy of which shall be delivered to Acquiror or the Company’s sales and marketing expenditures at a level consistent API Representative, as applicable, substantially concurrently with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except delivery to the extent reasonably necessary to conduct Accounting Expert) (i.e., not on independent review), and on the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unit.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant to the provisions terms of this Section 2.06 2.7. The determination of the Accounting Expert shall be conclusive and that binding upon the right Parties and shall not be subject to receive the appeal or further review (other than with respect to errors in arithmetic calculations). For purposes of this Agreement, a “Final Earnout Payment, if any, Amount” shall mean a Proposed Earnout Amount as finally determined pursuant to this Agreement: (i) does not represent an equity Section 2.7 or other ownership interest as otherwise agreed in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented writing by any form of certificate or instrument; (iv) does not bear any interest; Acquiror and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy)API Representative.
(g) Within two (2) Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06, Buyer shall pay (i) to each Seller such Seller’s Pro Rata Share of the Earnout Payment by wire transfer of immediately available funds to such Seller’s Purchase Price Bank Account.
(h) The Parties shall treat the payment of the Earnout Payment Amount made under this Section 2.06, if any, as an adjustment to the Purchase Price by the parties for Tax purposes, unless (a) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any such payment causes such payment not to be treated as an adjustment to the Purchase Price for Tax purposes or (b) otherwise required by applicable Law.
Appears in 1 contract
Samples: Transaction Agreement (TPG Inc.)
Earnout. The Earnout Amount shall be calculated, determined and paid in the following manner:
(a) If and to the extent earned in accordance with this Section 2.06 and Annex B to this Agreement, Sellers shall be entitled to an earnout payment (the “Earnout Payment”) from Buyer. The Earnout Payment for all purposes under this Agreement shall be calculated in accordance with Annex B.
(b) As promptly as practicable, but in no event later than ninety (90) Within 90 days after the end of the Earnout Period, Buyer shall prepare in good faith and deliver to Seller a written statement showing in reasonable detail the Sellers’ Representative a statement calculation of EBITDA for the Earnout Period and the Earnout Amount payable, if any (the “Earnout Statement”).
(b) setting forth Buyer’s good faith calculation In the event of any objection by Seller with respect to the determination of the EBITDA and or the Earnout PaymentAmount payable for the Earnout Period, if any. After Seller shall, within 60 days after its receipt of the Earnout Statement, give written notice to Buyer of such objection showing in reasonable detail the Sellers’ Representative shall have thirty calculation thereof (30) days (the an “Earnout Review PeriodDispute Notice”). Buyer and Seller shall thereafter attempt to amicably resolve any disputed items set forth in the Earnout Dispute Notice. If Seller does not timely deliver an Earnout Dispute Notice, then the calculation of the EBITDA and the Earnout Amount payable for the Earnout Period as set forth in the Earnout Statement shall be deemed to have been accepted and shall be final and binding on all parties hereto.
(c) If, for any reason, Buyer and Seller cannot resolve any disputed items indicated in the Earnout Dispute Notice within 30 days of the date of delivery of the Earnout Dispute Notice, then such unresolved items (“Earnout Disputes”) shall be resolved by the Accountant in the manner provided in Section 2.3(c) above, mutatis mutandis, except as modified herein. The Accountant shall issue a written report which shall include a revised Earnout Statement as adjusted (i) pursuant to review the Earnout Statement. During the Earnout Review Period, the Sellers’ Representative any resolutions to objections agreed upon by Buyer and Sellers’ Accountants shall have reasonable access Seller and (ii) pursuant to the books and records Accountant’s resolution of the Company, unresolved objections. The Accountant shall review only those matters specified in the personnel of, unresolved objections and work papers prepared by Buyer and/or Buyer’s Accountants, to the extent that they relate shall make no changes to the Earnout Statement, except as are required to resolve the Sellers’ Representative may reasonably request for unresolved objections. The award of the purpose of reviewing Accountant shall set out the final Earnout Statement and to prepare an Earnout Objection Notice (defined below)Statement, provided, that such access shall be final and binding on all parties hereto, and may be enforced in a manner any court of competent jurisdiction. The parties agree that does not interfere the procedure set forth in this Section 2.8 for resolving disputes with the business operations of Buyer or the Company.
(c) On or prior to the last day of the Earnout Review Period, the Sellers’ Representative may object respect to the Earnout Statement by delivering to Buyer a written notice setting forth shall be the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount sole and the basis exclusive method for the Sellers’ Representative’s disagreement therewith (the “Earnout Objection Notice”). For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Earnout Statement and all components thereof (including Buyer’s calculation of the Earnout Payment) will be deemed final and binding on the Parties for all purposes under this Agreement and not subject to further dispute or challenge. If the Sellers’ Representative delivers the Earnout Objection Notice before the expiration of the Earnout Review Period, then the Parties shall resolve the matters in dispute in a manner consistent, mutatis mutandis, with the review and dispute procedures set forth in Section 2.04(c)resolving any such disputes.
(d) Except In connection with the preparation of the Earnout Statement, and until the final resolution of the Earnout Statement, Buyer shall, and shall cause the Company and its Subsidiaries to, (A) provide Seller and its authorized Representatives with reasonable access to the relevant books and records, Buyer’s and its accountants’ work papers, schedules and other supporting data, facilities and employees as may reasonably be requested by Seller; and (B) otherwise reasonably cooperate with Seller and its authorized Representatives, including by providing on a timely basis information reasonably necessary or useful in the determination of the calculations and amounts set forth in Section 2.06(e) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Company’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such actions on the Earnout Payment, if any. For avoidance of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty in respect of this Section 2.06, (ii) is making any representations or warranties to Sellers with respect to the operations of the Company or the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating BusinessStatement.
(e) On the fifth Business Day after Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of Seller agree to the Earnout Payment, if any. Statement or Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will:
(i) operate the Company’s business as a separate business unit;
(ii) maintain separate financial statements for such business unit;
(iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated Seller receive from the sale of the Company Products to such business unit.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable Accountant its written report pursuant to the provisions of this Section 2.06 and that the right to receive the Earnout Payment2.8(c), if any, pursuant to this Agreement: (i) does not represent an equity or other ownership interest in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy).
(g) Within two (2) Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06as applicable, Buyer shall pay (i) to each Seller such Seller’s Pro Rata Share of an amount in cash equal to the Earnout Payment Amount payable for the Earnout Period. Such cash payment shall be made by wire transfer transfers of immediately available funds to such Seller’s Purchase Price Bank Account.
(h) The Parties shall treat the payment of the Earnout Payment Amount made under this Section 2.06, if any, as an adjustment accounts specified in accordance with written instructions provided by Seller to Buyer at least two Business Days prior to the Purchase Price by the parties for Tax purposes, unless (a) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any date such payment causes is due or on such payment not to be treated other date as an adjustment to the Purchase Price for Tax purposes or (b) otherwise required by applicable LawBuyer and Seller shall agree.
Appears in 1 contract
Samples: Membership Interest Purchase Agreement (Bank Jos a Clothiers Inc /De/)
Earnout. (a) If and Subject to the extent earned in accordance with terms and conditions of this Section 2.06 and Annex B to this AgreementSECTION 3.5, Sellers the Purchase Price shall be entitled increased by an amount equal to an ten times the Incremental 2007 Adjusted EBITDA but in no event shall the aggregate Purchase Price (including any earnout payment (the “Earnout Payment”payment) from Buyer. The Earnout Payment for all purposes under this Agreement shall be calculated in accordance with Annex B.exceed $24,500,000.
(b) As promptly as practicable, but in no event No later than ninety (90) days after the end of the Earnout PeriodApril 30, 2008 Buyer shall prepare and deliver or cause to be prepared a consolidated statement of income of the Sellers’ Representative Company for the year ended December 31, 2007 together with a statement calculation of Incremental 2007 Adjusted EBITDA for such year (the “Earnout Statement”"EARNOUT EBITDA CALCULATION").
(c) setting forth Buyer’s good faith calculation Sellers will have a period of EBITDA and the Earnout Payment, if any. After receipt of the Earnout Statement, the Sellers’ Representative shall have thirty (30) days (following the “Earnout Review Period”) to review the Earnout Statement. During the Earnout Review Period, the Sellers’ Representative and Sellers’ Accountants shall have reasonable access to the books and records of the Company, the personnel of, and work papers prepared by Buyer and/or Buyer’s Accountants, to the extent that they relate to the Earnout Statement, as the Sellers’ Representative may reasonably request for the purpose of reviewing the Earnout Statement and to prepare an Earnout Objection Notice (defined below), provided, that such access shall be in a manner that does not interfere with the business operations of Buyer or the Company.
(c) On or prior to the last day delivery of the Earnout Review Period, the Sellers’ Representative may object EBITDA Calculation to notify Buyer of any disagreements with the Earnout Statement EBITDA Calculation. Any such notice shall be accompanied by delivering to Buyer a written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement in supporting documentation containing reasonable detail, indicating each disputed item or amount and the basis for the Sellers’ Representative’s disagreement therewith (the “Earnout Objection Notice”). For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will Failure to notify Buyer within such 30-day period shall be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration deemed acceptance of the Earnout Review PeriodEBITDA Calculation. In the event Sellers timely notify Buyer of any disagreement, the Earnout Statement and all components thereof (including Buyer’s calculation parties agree that each of them will attempt in good faith to resolve such disagreement. If within 30 days after delivery to Buyer of the Earnout Payment) will notification by Sellers of a disagreement the parties are unable to resolve such disagreement, either Sellers, on the one hand, or Buyer, on the other hand, shall have the right to submit the determination to the Independent Auditor, whose decision shall be deemed final and binding on the Parties for all purposes under this Agreement and not subject to further dispute or challengeparties. If the Sellers’ Representative delivers the Earnout Objection Notice before the expiration The cost of the Earnout Review Period, then Independent Auditor shall be paid by the Parties shall resolve the matters in dispute in a manner consistent, mutatis mutandis, with the review and dispute procedures set forth in Section 2.04(c).
(d) Except as set forth in Section 2.06(e) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Company’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such actions on the Earnout Payment, if any. For avoidance of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty in respect of this Section 2.06, (ii) is making any representations or warranties to Sellers with respect to the operations party whose estimate of the Company or disputed amount differs most greatly from the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment determination of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating BusinessIndependent Auditor.
(e) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will:
(i) operate Up to and including the first $2,000,000 (the "Other Escrow") of any cash payment to be made as a result of the Company’s business as a separate business unit;
(ii) maintain separate financial statements for such business unit;
(iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business 's achievement of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
Incremental 2007 Adjusted EBITDA shall be paid by Buyer within five (iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unit.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant to the provisions of this Section 2.06 and that the right to receive the Earnout Payment, if any, pursuant to this Agreement: (i) does not represent an equity or other ownership interest in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy).
(g) Within two (25) Business Days after of the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06, Buyer shall pay (i) to each Seller such Seller’s Pro Rata Share of the Earnout Payment Incremental 2007 Adjusted EBITDA by wire transfer of immediately available funds to the Escrow Agent to be held and disbursed in accordance with the terms and conditions of the Escrow Agreement.
(ii) Any portion of a cash payment to be made as a result of the Company's achievement of the Incremental 2007 Adjusted EBITDA in excess of $2,000,000 shall be paid by Buyer within five (5) Business Days of the final determination of Incremental 2007 Adjusted EBITDA by wire transfer of immediately available funds to the account designated by Sellers at least three (3) Business Days prior to the date such Seller’s Purchase Price Bank Accountpayment is made.
(iii) In the event that such cash payment to be made by Buyer to the Escrow Agent is less than $2,000,000, then any shortfall of such $2,000,000 shall be contributed within five (5) Business Days of the final determination of Incremental 2007 Adjusted EBITDA by wire transfer of immediately available funds to the Escrow Agent from (x) the Escrow Amount, if, and only if, all claims under Section 9.2 hereof have been fully satisfied by Sellers pursuant to a settlement agreement with Buyer or a judgment rendered by a court of competent jurisdiction (having exhausted all appeals) and/or (y) the Sellers (jointly and severally) so that the total Other Escrow amount held by the Escrow Agent equals an aggregate of $2,000,000.
(e) No later than April 30, 2009 Buyer shall prepare or cause to be prepared a consolidated statement of income of the Company for the year ended December 31, 2008 together with a calculation of the 2008 contract staffing gross profit for such year (the "2008 CONTRACT STAFFING GROSS PROFIT CALCULATION").
(f) Sellers will have a period of thirty (30) days following the delivery of the 2008 Contract Staffing Gross Profit Calculation to notify Buyer of any disagreements with the 2008 Contract Staffing Gross Profit Calculation. Any such notice shall be accompanied by supporting documentation containing reasonable detail. Failure to notify Buyer within such 30-day period shall be deemed acceptance of the 2008 Contract Staffing Gross Profit Calculation. In the event Sellers timely notify Buyer of any disagreement, the parties agree that each of them will attempt in good faith to resolve such disagreement. If within 30 days after delivery to Buyer of the notification by Sellers of a disagreement the parties are unable to resolve such disagreement, either Sellers, on the one hand, or Buyer, on the other hand, shall have the right to submit the determination to the Independent Auditor, whose decision shall be binding on the parties. The cost of the Independent Auditor shall be paid by the party whose estimate of the disputed amount differs most greatly from the determination of the Independent Auditor.
(g) If the 2008 Contract Staffing Gross Profit Calculation yields a gross profit of $4,900,000 or more, then Buyer and Sellers shall, within five (5) Business Days of the final determination of 2008 Contract Staffing Gross Profit Calculation, deliver a joint written instruction letter to the Escrow Agent instructing the Escrow Agent to disburse the Other Escrow Amount ($2,000,000) to the Sellers by wire transfer of immediately available funds to an account designated by Sellers in such instruction letter.
(h) The Parties If, on the other hand, the 2008 Contract Staffing Gross Profit Calculation is less than $4,900,000, then Buyer shall treat include $100,000 of actual revenue from permanent placement and conversion revenue in excess of $300,000 (if any) to the payment 2008 Contract Staffing Gross Profit Calculation to determine if the $4,900,000 benchmark is met. If after adding in this additional revenue the $4,900,000 benchmark is not met, then Buyer and Sellers shall, within five (5) Business Days of the Earnout Payment Amount made under this Section 2.06final determination of 2008 Contract Staffing Gross Profit Calculation, if any, as an adjustment deliver a joint written instruction letter to the Purchase Price Escrow Agent instructing the Escrow Agent to disburse the Other Escrow Amount ($2,000,000) to Buyer by the parties for Tax purposes, unless (a) a final “determination” (as that term is defined for purposes wire transfer of Code Section 1313 or corresponding state Laws) with respect immediately available funds to an account designated by Buyer in such instruction letter. If after adding in any such payment causes such payment not to be treated as an adjustment additional revenue the $4,900,000 benchmark is met, then Buyer and Sellers shall, within five (5) Business Days of the final determination of 2008 Contract Staffing Gross Profit Calculation, deliver a joint written instruction letter to the Purchase Price for Tax purposes or Escrow Agent instructing the Escrow Agent to disburse the Other Escrow Amount (b$2,000,000) otherwise required to the Sellers by applicable Lawwire transfer of immediately available funds to an account designated by Sellers in such instruction letter.
Appears in 1 contract
Samples: Stock Purchase Agreement (Cross Country Healthcare Inc)
Earnout. (a) If and As additional purchase price consideration, after Closing, Purchaser shall pay or cause to be paid an amount, if any (an "Earnout Payment"), equal to the extent earned amount payable upon the Business achieving the applicable Milestone Measurement in the Earnout Period, subject to the terms and conditions of and in accordance with the procedures set forth in this Section 2.06 2.7 and Annex B to this Agreement, Sellers shall be entitled to an earnout payment (on Section 2.7 of the “Earnout Payment”) from Buyer. The Earnout Payment for all purposes under this Agreement shall be calculated in accordance with Annex B.Disclosure Schedules.
(b) As promptly as practicable, but in no event Not later than ninety (90) 90 days after following the end of the Earnout Period, Buyer Purchaser shall prepare and deliver to the Sellers’ Representative Seller a statement setting forth, in reasonable detail and accompanied by applicable supporting information, Purchaser's good faith determination of the Milestone Measurement in respect of the Earnout Period (the “"Earnout Measurement") and any resulting Earnout Payment due, prepared in accordance with Section 2.7 of the Disclosure Schedules (the "Earnout Statement”").
(c) setting forth Buyer’s good faith calculation of EBITDA and the Earnout Payment, if any. After If Seller does not deliver a written objection to Purchaser within 60 days following receipt of the Earnout Statement, the Sellers’ Representative shall have thirty (30) days (the “Earnout Review Period”) to review then the Earnout Statement. During the Earnout Review Period, the Sellers’ Representative Measurement (and Sellers’ Accountants shall have reasonable access to the books and records of the Company, the personnel of, and work papers prepared by Buyer and/or Buyer’s Accountants, to the extent that they relate to the Earnout Statement, as the Sellers’ Representative may reasonably request for the purpose of reviewing the Earnout Statement and to prepare an Earnout Objection Notice (defined below), provided, that such access shall be in a manner that does not interfere with the business operations of Buyer or the Company.
(c) On or prior to the last day of the Earnout Review Period, the Sellers’ Representative may object to the Earnout Statement by delivering to Buyer a written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount and the basis for the Sellers’ Representative’s disagreement therewith (the “Earnout Objection Notice”). For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Earnout Statement and all components thereof (including Buyer’s calculation of the resulting Earnout Payment) will be deemed final final, conclusive and binding on the Parties for all purposes under this Agreement and not subject to further dispute or challengeParties. If To the Sellers’ Representative delivers extent that the Earnout Objection Notice before the expiration Seller disputes any portion of the Earnout Review PeriodStatement, then Section 2.4(d) and Section 2.4(e) shall apply mutatis mutandis to this Section 2.7 and the Parties Earnout Statement (and the calculations of the Earnout Measurement and resulting Earnout Payment), shall resolve the matters in be finally determined and any dispute in a manner consistent, mutatis mutandis, with the review and dispute procedures regarding any matter set forth in Section 2.04(c).
(d) Except as set forth in Section 2.06(e) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Company’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such actions on the Earnout Payment, if anyStatement shall be resolved in accordance therewith. For avoidance After the final resolution of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty dispute in respect of this Section 2.06, the Earnout Statement (ii) is making any representations or warranties to Sellers with respect to and the operations calculations of the Company or the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout PeriodMeasurement and Earnout Payment), or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights paid promptly (and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating Business.
(e) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will:
(i) operate the Company’s business as a separate business unit;
(ii) maintain separate financial statements for such business unit;
(iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unit.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant to the provisions of this Section 2.06 and that the right to receive the Earnout Payment, if any, pursuant to this Agreement: (i) does not represent an equity or other ownership interest in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy).
(g) Within two (2) event within five Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06, Buyer shall pay (ithereof) to each Seller such Seller’s Pro Rata Share of the Earnout Payment by Purchaser by wire transfer of immediately available funds to such Seller’s Purchase Price Bank Accountan account designated in writing by Seller to Purchaser.
(hd) The Parties shall treat From Closing until the payment end of the Earnout Period, (i) Purchaser and its applicable Affiliates, including the Transferred Entities following the Closing, shall not take or fail to take any action with the purpose (and not merely the effect) of preventing the achievement of the full Earnout Payment Amount made under hereunder. For the avoidance of doubt, notwithstanding anything to the contrary contained herein, (A) Purchaser and its Affiliates shall otherwise be entitled to run and operate the Business and conduct its operations in their sole discretion, (B) Purchaser and its Affiliates shall not have any duty or obligation, expressed or implied, to own, use, or otherwise operate the assets of the Business in order to maximize or expedite the payments described in this Section 2.062.7, if any(C) Purchaser and its Affiliates shall owe no duty, as an adjustment a fiduciary or otherwise, to Seller or its Affiliates in connection with its operation of the Purchase Price Business following the Closing, and (D) there is no assurance that Seller will receive any payment described in this Section 2.7; and (ii) in the event of any direct or indirect sale of more than 50% of the equity interests or substantially all of the assets of Purchaser or the Business (whether by the parties for Tax purposesmerger, unless (asale of stock, sale of assets or otherwise) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any unaffiliated third party (each, a "Sale Trigger"), Purchaser shall use its commercially reasonable efforts to cause such payment causes such payment not third party to be treated as an adjustment to the Purchase Price for Tax purposes or (b) otherwise required by applicable Law.expressly assume any then remaining obligations set forth in this Section 2.7; provided,
Appears in 1 contract
Earnout. (a) If and to the extent earned in accordance with this Section 2.06 and Annex B to this Agreement, Sellers The Seller shall be entitled to receive three (3) annual earnout payments (each, an earnout payment (the “Earnout Payment”) from Buyer. The Earnout Payment for all purposes under this Agreement shall be calculated ), each in an amount of [ ]Dollars ($[ ]), in accordance with Annex B.the schedule below:
(i) Earnout #1 – $[ ]of additional consideration if the net revenue of the Business (the “Net Revenue,” as defined in Exhibit II) is greater than $[ ]for the fiscal year ending [ ].
(ii) Earnout #2 – $[ ]of additional consideration if the Net Revenue is greater than $[ ] for the fiscal year ending [ ].
(iii) Earnout #3 – $[ ]of additional consideration if the Net Revenue is greater than $[ ]for the fiscal year ending [ ]. Each fiscal year listed above shall constitute an “Earnout Period.” Each Earnout Payment shall be paid in accordance with Section 1.6(b).
(b) As promptly as practicable, but in no event later than ninety Within sixty (9060) days after following the end of the each Earnout Period, the Buyer shall prepare and deliver to the Sellers’ Representative Seller a statement of the Net Revenue of the Business for such Earnout Period (the “Earnout Statement”) setting forth Buyer’s good faith calculation of EBITDA and the Earnout Payment, if any). After receipt of the Earnout Statement, the Sellers’ Representative The Seller shall have thirty (30) days after receipt of the Earnout Statement (the “Earnout Review Period”) to review the calculation of Net Revenue for such Earnout StatementPeriod. During the Earnout Review Period, the Sellers’ Representative and Sellers’ Accountants Seller shall have reasonable access the right to inspect the Buyer’s books and records of during normal business hours at the CompanyBuyer's offices, the personnel of, upon reasonable prior notice and work papers prepared by Buyer and/or Buyer’s Accountants, solely for purposes reasonably related to the extent that they relate to the Earnout Statement, as the Sellers’ Representative may reasonably request for the purpose determinations of reviewing the Earnout Statement and to prepare an Earnout Objection Notice (defined below), provided, that such access shall be in a manner that does not interfere with the business operations of Buyer or the Company.
(c) On or prior to the last day of the Earnout Review Period, the Sellers’ Representative may object to the Earnout Statement by delivering to Buyer a written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount Net revenue and the basis for the Sellers’ Representative’s disagreement therewith (the “resulting Earnout Objection Notice”)Payment. For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject Prior to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Seller may object to the Net Profit calculation set forth on the Earnout Statement by delivering a written notice of objection (an “Objection Notice”) to the Buyer, which shall specify the disputed items and all components thereof (including Buyer’s calculation of shall describe in reasonable detail the Earnout Payment) will be deemed final and binding on basis for such objection, as well as the Parties for all purposes under this Agreement and not subject to further dispute or challengeamount in dispute. If the Sellers’ Representative delivers the Earnout Seller fails to deliver an Objection Notice before to the Buyer prior to the expiration of the Earnout Review Period, then the Parties Net Revenue calculation set forth in the Earnout Statement shall be final and binding on the parties hereto. If the Seller timely delivers an Objection Notice, the parties shall negotiate in good faith to resolve the matters in disputed items and agree upon the resulting amount of the Net Revenue and the Earnout Payment for the applicable Earnout Period. If the parties are unable to reach agreement within thirty (30) days, then the parties shall forthwith refer the dispute in to a manner consistent, mutatis mutandisnationally recognized accounting firm mutually agreeable to the Seller and the Buyer for resolution, with the review understanding that such firm shall resolve all disputed items within twenty (20) days after such disputed items are referred to it. If the Buyer and dispute procedures set forth the Seller are unable to agree on the choice of an accounting firm, they shall select a nationally recognized accounting firm by lot (after excluding their respective regular outside accounting firms). Each of the Seller, on the one hand, and the Buyer, on the other hand, shall bear one-half of the costs of such accounting firm. The decision of the accounting firm shall be deemed final and conclusive and shall be binding upon the Seller and the Buyer.
(c) [The Earnout Payment shall be comprised of a combination of shares of [HLCO common stock] (“Earnout Shares”) and cash in Section 2.04(c)immediately available funds, each in an amount equal to fifty percent (50%) of the earned Earnout Payment]. The Earnout Shares related to each Earnout Payment shall be restricted stock, shall not carry any registration rights and shall be subject to a lockup as outlined in Exhibit III. The Earnout Shares will be issued at the market price at the time of issuance based on the five-day volume weighted average price of the HLCO common stock prior to the last day of the applicable measurement year.
(d) Except as set forth in Section 2.06(e) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating To the Company and extent the Company’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such actions on the Earnout Payment, if any. For avoidance of doubt, neither Buyer nor any of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty in respect of this Section 2.06, (ii) Seller is making any representations or warranties entitled to Sellers with respect to the operations of the Company or the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any a portion of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating Business.
(e) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will:
(i) operate the Company’s business as a separate business unit;
(ii) maintain separate financial statements for such business unit;
(iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unit.
(f) Sellers acknowledge and agree that there may be no an Earnout Payment payable pursuant to the provisions of this Section 2.06 and that the right to receive the Earnout Payment, if any, pursuant to this Agreement: (i) does not represent an equity or other ownership interest in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy).
(g) Within two (2) Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.061.6, Buyer the applicable Earnout Payment(s) shall pay be paid on the date that is forty-five (i45) to each days from the date on which it is determined that the Seller such Seller’s Pro Rata Share of the Earnout Payment by wire transfer of immediately available funds is entitled to such Seller’s Purchase Price Bank AccountEarnout Payment.
(h) The Parties shall treat the payment of the Earnout Payment Amount made under this Section 2.06, if any, as an adjustment to the Purchase Price by the parties for Tax purposes, unless (a) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any such payment causes such payment not to be treated as an adjustment to the Purchase Price for Tax purposes or (b) otherwise required by applicable Law.
Appears in 1 contract
Samples: Credit Agreement (Healing Co Inc.)
Earnout. (a) If Buyer will pay Seller as additional consideration an amount (the “Earnout”) in cash not to exceed $12,000,000 based on the shipment of Products by Buyer during the period commencing on October 1, 2007 and to ending on September 30, 2008 (such period, the extent earned “Earnout Period”) in accordance with this Section 2.06 and Annex B to this Agreement, Sellers shall be entitled to an earnout payment 2.7. The actual amount of cash payable as the Earnout (the “Earnout Payment”) from Buyerwill be determined on the basis of the Earnout Amount (as defined herein) for each fiscal quarter during the Earnout Period as set forth on and pursuant to Schedule 2.7 hereto (each such fiscal quarter, an “Earnout Quarter”). In no event will Buyer be obligated to pay any amounts in the aggregate in excess of $12,000,000 under this Section 2.7 (including, for such purpose, Schedule 2.7) as the Earnout Payment, irrespective of the amount of Earnout Amount in a particular Earnout Quarter or the entire Earnout Period. The Earnout Payment for all purposes under this Agreement shall will be calculated payable in accordance with Annex B.subsection (b) hereof. For the purposes hereof, “Earnout Amount” means the aggregate dollar amount of all Products shipped by Buyer during the Earnout Period, which will be determined by multiplying (i) the number of each such Product shipped by Buyer by (ii) the trailing quarterly weighted average sales price (“ASP”) of each such Product shipped by Buyer to its distributors or customers as determined using the applicable invoice(s); provided, however, that solely for the purposes of the first Earnout Quarter, any Products shipped by Seller to Buyer at the written request of Buyer, which Products are not subsequently shipped by Buyer to any distributor or customer during such Earnout Quarter, will be deemed to constitute a “shipment by Buyer” for the purposes hereof and thus will be included in the calculation of the Earnout Amount for such Earnout Quarter; provided further, that for the purpose of determining ASP for each Product shipped by Buyer during the first Earnout Quarter (including those products deemed shipped by Buyer pursuant to the immediately preceding proviso), such ASP will be determined based on the applicable purchase order(s) for any such Product as submitted by Buyer’s distributors and customers. In the event that the Closing Date occurs after October 1, 2007, the Parties will agree to a mutually acceptable adjustment of the Earnout Amount and Earnout Payment for the first Earnout Quarter.
(b) As promptly soon as practicable, practicable but in no event later than ninety 45 days following the end of an Earnout Quarter, Buyer will pay Seller the portion of the Earnout Payment attributable to such period (90an “Earnout Quarter Payment”), by wire transfer to an account designated in writing by Seller. Buyer will have the right to withhold and set off against any portion of such Earnout Quarter Payment the amount of any Damages to which any Buyer Indemnified Party may be entitled under this Agreement.
(c) No later than 90 days after the expiration of the Earnout Period, Buyer will deliver to Seller a computation of the Earnout Amount, identifying the Earnout Payment previously made by Buyer based on such computation, during the Earnout Period (the “Earnout Statement”). Unless within 60 days after receipt of such computation, Seller tenders written notice to Buyer setting forth any and all items of disagreement relating to such computation, the computation will be conclusive and binding on Seller. If Seller delivers a dispute notice within such 60-day period, Buyer and Seller will use reasonable efforts to resolve their differences for a period of 10 days. If Buyer and Seller are unable to resolve their differences within such period, Buyer and Seller will jointly retain a mutually agreed third Person (the “Earnout Referee”) to resolve such disagreement. Buyer and Seller will request that the Earnout Referee render a determination as to the computation of the aggregate Earnout Amount, and the Earnout Payment based thereon, within 45 days after its retention, and Buyer and Seller will cooperate fully with the Earnout Referee so as to facilitate a final determination as quickly and as accurately as possible. In making such resolution, the Earnout Referee will consider only those issues, items or amounts in the Earnout Statement as to which Seller has disagreed in writing in the aforementioned dispute notice. The Earnout Referee’s final determination (the “Final Earnout Report”) will be in writing and will be binding on Buyer and Seller, and the fees and expenses of the Earnout Referee will be allocated between the Parties in the same proportion that the aggregate amount of disputed items so submitted to the Earnout Referee that is unsuccessfully disputed by such Party (as finally determined by the Earnout Referee) bears to the total amount of such remaining disputed items so submitted. In the event that any amount is payable as the Earnout Payment under this subsection (c), Buyer will pay such amount by wire transfer of immediately available funds to an account designated by the Seller as soon as reasonably practicable but in no event later than 10 days following the receipt of the Final Earnout Report. In the event that the Earnout Payment is adjusted downward in the Final Earnout Report, Seller will pay such amount by wire transfer of immediately available funds to an account designated by Buyer as soon as practicable but in no event later than 10 days following the receipt of the Final Earnout Report.
(d) Buyer agrees, with respect to the Earnout, except as otherwise agreed by the Seller, such agreement not to be unreasonably withheld or delayed, that:
(i) it will use commercially reasonable efforts to cause the Business to be integrated with its existing businesses and operations promptly and in a manner that does not have a material negative impact on the Earnout Payment;
(ii) during the Earnout Period it will use commercially reasonable efforts to promote and maximize the sale of Products; and
(iii) during the Earnout Period it will not cease or materially reduce production of the Products. Notwithstanding the foregoing, Seller acknowledges that (A) upon the closing of the Contemplated Transactions, Buyer has the right to operate the Business and Buyer’s other businesses in any way that Buyer deems appropriate in Buyer’s sole and absolute discretion, consistent with clauses (d)(i) through (d)(iii) above, (B) subject to clauses (d)(i) through (d)(iii) above, Buyer has no obligation to operate the Business in order to achieve any Earnout Payment or to maximize the amount of the Earnout Payment during the Earnout Period or any particular Earnout Quarter, (C) the Earnout Payment is speculative and is subject to numerous factors outside the control of Buyer and Seller, (D) there is no assurance that Seller will receive any Earnout Payment and Buyer has not promised nor projected any Earnout Payment, (E) Buyer owes no fiduciary duty or, subject to clauses (d)(i) through (d)(iii) above, express or implied duty to the Seller, including an implied duty of good faith and fair dealing, and (F) the Parties solely intend the express provisions of this Agreement to govern their contractual relationship. Seller hereby waives any fiduciary duty or, subject to clauses (d)(i) through (d)(iii) above, express or implied duty of Buyer to the Seller, including an implied duty of good faith and fair dealing.
(e) Buyer agrees that, if requested by Seller, it will meet with Seller at a mutually agreeable time once each quarter at the Buyer’s principal executive offices during regular business hours, at Seller’s sole expense, to discuss the level of sales of Products. Buyer agrees that it will consider in good faith the suggestions of Seller concerning increasing the sales of Products. If requested by Seller within 60 days from the end of the Earnout Period, Buyer shall prepare will cooperate with and deliver allow Seller and any representative of Seller, during normal business hours and subject to the Sellers’ Representative a statement (the “Earnout Statement”) setting forth Buyercustomary confidentiality restrictions, upon reasonable notice and at Seller’s good faith calculation of EBITDA and the Earnout Payment, if any. After receipt of the Earnout Statement, the Sellers’ Representative shall have thirty (30) days (the “Earnout Review Period”) to review the Earnout Statement. During the Earnout Review Period, the Sellers’ Representative and Sellers’ Accountants shall have reasonable access to the books and records of the Company, the personnel of, and work papers prepared by Buyer and/or Buyer’s Accountantsexpense, to the extent that they relate to the Earnout Statement, as the Sellers’ Representative may reasonably request for the purpose of reviewing the Earnout Statement and to prepare conduct an Earnout Objection Notice (defined below), provided, that such access shall be in a manner that does not interfere with the business operations of Buyer or the Company.
(c) On or prior to the last day of the Earnout Review Period, the Sellers’ Representative may object to the Earnout Statement by delivering to Buyer a written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount and the basis for the Sellers’ Representative’s disagreement therewith (the “Earnout Objection Notice”). For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, the Earnout Statement and all components thereof (including Buyer’s calculation of the Earnout Payment) will be deemed final and binding on the Parties for all purposes under this Agreement and not subject to further dispute or challenge. If the Sellers’ Representative delivers the Earnout Objection Notice before the expiration of the Earnout Review Period, then the Parties shall resolve the matters in dispute in a manner consistent, mutatis mutandis, with the review and dispute procedures set forth in Section 2.04(c).
(d) Except as set forth in Section 2.06(e) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Company’s businesses and operations in any respect and making all customer and other business decisions in the manner that Buyer’s management or board of directors deems appropriate in their sole discretion and without taking into consideration the impact of such actions on the Earnout Payment, if any. For avoidance of doubt, neither Buyer nor any audit of Buyer’s Affiliates (i) owes Sellers any fiduciary or other duty in respect of this Section 2.06, (ii) is making any representations or warranties to Sellers records with respect to the operations of the Company or the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (B) to sell the Company or sell or assign all or any of the membership interests of the Company to another Person or to merge the Company with another Person (such other Person, a “Consolidating Business”). Sellers will have no rights or interests in, or relating to, any Acquired Business or any Consolidating Business.
(e) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will:
(i) operate the Company’s business as a separate business unit;
(ii) maintain separate financial statements for such business unit;
(iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unit.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant to the provisions of this Section 2.06 and that the right to receive the Earnout Payment, if any, pursuant to this Agreement: (i) does not represent an equity or other ownership interest in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy).
(g) Within two (2) Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06, Buyer shall pay (i) to each Seller such Seller’s Pro Rata Share of the Earnout Payment by wire transfer of immediately available funds to such Seller’s Purchase Price Bank Account.
(h) The Parties shall treat the payment of the Earnout Payment Amount made under this Section 2.06, if any, as an adjustment to the Purchase Price by the parties for Tax purposes, unless (a) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any such payment causes such payment not to be treated as an adjustment to the Purchase Price for Tax purposes or (b) otherwise required by applicable Law.
Appears in 1 contract
Samples: Asset Purchase Agreement (Vitesse Semiconductor Corp)
Earnout. (a) If and The Purchase Price includes up to the extent earned in accordance with this Section 2.06 and Annex B to this Agreementthree (3) annual earnout payments (each, Sellers shall be entitled to an earnout payment (the “Earnout Payment”) from Buyer. The Earnout Payment for all purposes under this Agreement shall be calculated ), each in an amount of One Million Dollars ($1,000,000), in accordance with Annex B.the schedule and conditions set forth below:
(i) Earnout #1 – $1,000,000 of additional consideration if the Net Revenue of the Business (the “Net Revenue,” as defined in Exhibit II) is greater than $5,900,000 for the period starting March 1, 2023 and ending December 31, 2023.
(ii) Earnout #2 – $1,000,000 of additional consideration if the Net Revenue is greater than $11,000,000 for the calendar year ending December 31, 2024
(iii) Earnout #3 – $1,000,000 of additional consideration if the Net Revenue is greater than $15,000,000 for the calendar year ending December 31, 2025.
(b) As promptly Each calendar year, or partial calendar year, as practicableapplicable, but listed above shall constitute an “Earnout Period.” Each Earnout Payment shall be paid in no event later than ninety accordance with Section 1.5(c).
(90c) Within sixty (60) days after following the end of the each Earnout Period, Buyer shall prepare and deliver to Seller an audit of the Sellers’ Representative a statement financial statements of the Business for such Earnout Period (the “Earnout Statement”) setting forth Buyer’s good faith calculation of EBITDA and the Earnout Payment, if any). After receipt of the Earnout Statement, the Sellers’ Representative Seller shall have thirty (30) days after receipt of the Earnout Statement (the “Earnout Review Period”) to review the calculation of Net Revenue for such Earnout StatementPeriod. During the Earnout Review Period, the Sellers’ Representative and Sellers’ Accountants Seller shall have reasonable access the right to the inspect Buyer’s books and records of the Company, the personnel of, and work papers prepared by Buyer and/or during normal business hours at Buyer’s Accountantsoffices, upon reasonable prior notice and solely for purposes reasonably related to the extent that they relate to the Earnout Statement, as the Sellers’ Representative may reasonably request for the purpose determinations of reviewing the Earnout Statement and to prepare an Earnout Objection Notice (defined below), provided, that such access shall be in a manner that does not interfere with the business operations of Buyer or the Company.
(c) On or prior to the last day of the Earnout Review Period, the Sellers’ Representative may object to the Earnout Statement by delivering to Buyer a written notice setting forth the Sellers’ Representative’s objections to the Earnout Statement in reasonable detail, indicating each disputed item or amount Net Revenue and the basis for the Sellers’ Representative’s disagreement therewith (the “resulting Earnout Objection Notice”)Payment. For avoidance of doubt, all other matters with respect to, and all other components of, the Earnout Statement not identified in the Earnout Objection Notice as an item or amount in dispute will be binding and conclusive on the Parties for all purposes under this Agreement and not subject Prior to further dispute or challenge absent manifest error. If the Sellers’ Representative fails to deliver the Earnout Objection Notice before the expiration of the Earnout Review Period, Seller may object to the Net Revenue calculation set forth on the Earnout Statement by delivering a written notice of objection (an “Objection Notice”) to Buyer, which shall specify the disputed items and all components thereof (including Buyer’s calculation of shall describe in reasonable detail the Earnout Payment) will be deemed final and binding on basis for such objection, as well as the Parties for all purposes under this Agreement and not subject to further dispute or challengeamount in dispute. If the Sellers’ Representative delivers the Earnout Seller fails to deliver an Objection Notice before to Buyer prior to the expiration of the Earnout Review Period, then the Parties Net Revenue calculation set forth in the Earnout Statement shall be final and binding on the parties hereto. If Seller timely delivers an Objection Notice, the parties shall negotiate in good faith to resolve the matters in disputed items and agree upon the resulting amount of the Net Revenue and the Earnout Payment for the applicable Earnout Period. If the parties are unable to reach agreement within thirty (30) days, then the parties shall forthwith refer the dispute in to a manner consistent, mutatis mutandisnationally recognized accounting firm mutually agreeable to Seller and Buyer for resolution, with the understanding that such firm shall resolve all disputed items within twenty (20) days after such disputed items are referred to it. If Xxxxx and Seller are unable to agree on the choice of an accounting firm, they shall select a nationally recognized accounting firm by lot (after excluding their respective regular outside accounting firms). The fees and costs of such accounting firm shall be borne by Seller and Buyer in proportion to the amounts by which their respective calculations of Net Revenue differ from the decision of the accounting firm, provided, however, that in the event the Net Revenue calculation set forth on the applicable Earnout Statement represents less than 90% of the Net Revenue determined by such accounting firm, Buyer shall bear the entire amount of the fees and costs of the accounting firm and shall promptly reimburse Seller for its reasonable expenses incurred in connection with its review of the Earnout Statement and the activities relating to the dispute procedures and resolution thereof as set forth in Section 2.04(c)this section. The decision of the accounting firm shall be deemed final and conclusive and shall be binding upon Seller and Buyer.
(d) Except as set forth in Section 2.06(eThe Earnout Payments shall be comprised of (i) below, nothing contained in this Agreement shall restrict in any way management of Buyer from operating the Company and the Company’s businesses and operations in any respect and making all customer and other business decisions cash in the manner that Buyer’s management or board amount of directors deems appropriate in their sole discretion and without taking into consideration fifty percent (50%) of the impact of such actions on the applicable Earnout Payment, if anyand (ii) shares of HLCO common stock in that number of shares equal in value to fifty percent (50%) of the applicable Earnout Payment (“Earnout Shares” and collectively with the Buyer Shares, the “Shares”). The Earnout Shares related to each Earnout Payment shall be restricted stock, shall not carry any registration rights, and may be distributed in accordance with the provisions of Section 1.4(d) above. The Earnout Shares will be issued at the market price at the time of issuance based on the five-day volume weighted average price of HLCO common stock prior to the last day of the applicable measurement year. Notwithstanding the foregoing, in the event HLCO is taken private or undergoes a Change of Control, any subsequent Earnout Payment due shall be paid 100% in cash. For avoidance the purpose of doubtthis subsection, neither Buyer nor “Change of Control” shall mean the occurrence of any of Buyer’s Affiliates the following events: (i) owes Sellers an acquisition of HLCO by one or more third parties by means of any fiduciary transaction or other duty in respect series of this Section 2.06related transactions (including, (ii) is making without limitation, any representations reorganization, merger or warranties to Sellers with respect to consolidation but excluding any merger effected exclusively for the operations purpose of changing the domicile of the Company or the Company’s businesses after the Closing or with respect to any estimates or projections relating to EBITDA for the Earnout Period, or (iii) has any obligation in respect of this Section 2.06 other than an obligation to comply with the covenants and agreements expressly set forth in this Section 2.06 and in Annex B, it being the Parties’ intention that all other representations, warranties, covenants, obligations, and agreements, express or implied, in respect of this Section 2.06 and Annex B, and the earning or payment of the Earnout Payment, if any, are expressly waived and disclaimed by Sellers. Nothing in this Agreement will be interpreted as a restriction or limitation on Buyer’s or any of Buyer’s Affiliates’ rights and abilities (A) to acquire by purchase, exchange, or otherwise any other Person, whether or not engaged in a business similar or related to any of the businesses of the Company (an “Acquired Business”), or (Bii) to sell the Company or sell or assign a sale of all or any substantially all of the membership interests assets of the Company to another Person or to merge the Company with another Person HLCO (such other Personcollectively, a “Consolidating BusinessMerger”). Sellers will have no rights or interests in, or relating toso long as in either case the HLCO stockholders of record immediately prior to such Merger will, any Acquired Business or any Consolidating Business.
immediately after such Xxxxxx, hold less than fifty percent (e50%) Buyer shall not take any action with the knowing and primary purpose and intent of artificially preventing or decreasing in any material respect the earning of the Earnout Payment, if any. Buyer covenants and agrees that, during the Earnout Period and subject to Annex B, Buyer will:
(i) operate the Company’s business as a separate business unit;
(ii) maintain separate financial statements for such business unit;
(iii) maintain the Company’s sales and marketing expenditures at a level consistent with the average monthly expenditures for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business voting power of the Company in the Ordinary Course surviving or except as is otherwise commercially reasonable);
(iv) refrain from a material increase in any expenses attributed to the business unit above the Company’s pre-Closing expenses for the twelve (12) months immediately preceding the Closing Date (except to the extent reasonably necessary to conduct the business of the Company in the Ordinary Course or except as is otherwise commercially reasonable);
(v) refrain from intentionally diverting any revenues away from such business unit to any of Buyer’s other business units or any of its Affiliates; and
(vi) credit all revenue generated from the sale of the Company Products to such business unitacquiring entity.
(f) Sellers acknowledge and agree that there may be no Earnout Payment payable pursuant to the provisions of this Section 2.06 and that the right to receive the Earnout Payment, if any, pursuant to this Agreement: (i) does not represent an equity or other ownership interest in Buyer or any of Buyer’s Affiliates; (ii) does not carry voting, dividend, or liquidation rights; (iii) is not represented by any form of certificate or instrument; (iv) does not bear any interest; and (v) is not assignable or transferable (other than by testamentary disposition or the laws of intestacy).
(g) Within two (2) Business Days after the final determination of the amount of the Earnout Payment, if any, in accordance with this Section 2.06, Buyer shall pay (i) to each Seller such Seller’s Pro Rata Share of the Earnout Payment by wire transfer of immediately available funds to such Seller’s Purchase Price Bank Account.
(h) The Parties shall treat the payment of the Earnout Payment Amount made under this Section 2.06, if any, as an adjustment to the Purchase Price by the parties for Tax purposes, unless (a) a final “determination” (as that term is defined for purposes of Code Section 1313 or corresponding state Laws) with respect to any such payment causes such payment not to be treated as an adjustment to the Purchase Price for Tax purposes or (b) otherwise required by applicable Law.
Appears in 1 contract
