Adjustment Amount (a) Schedule 2.16 sets forth a sample calculation of the Adjustment Amount and the Target Adjustment Amount as of the Balance Sheet Date (the “Sample Closing Statement”), including the asset, liability and other line items and accounting principles used in such calculation, and assuming that all of such asset and liability line items that constitute Mallinckrodt Assets or Mallinckrodt Liabilities under this Agreement will be transferred to Mallinckrodt as of the Distribution.
(b) Within sixty (60) days after the Distribution Date, Mallinckrodt shall cause to be prepared and delivered to Covidien a statement (the “Closing Statement”) setting forth (i) the Adjustment Amount and the calculation of the Adjustment Amount and (ii) the Target Adjustment Amount and the calculation of the Target Adjustment Amount. The Closing Statement shall be prepared in accordance with the Transaction Accounting Principles, including the use of the same line items and line item entries, set forth on and used in the preparation of the Sample Closing Statement; provided, however, that assets newly acquired and liabilities newly incurred following the date of the Sample Closing Statement which cannot be appropriately placed in line items previously used by Mallinckrodt, but that constitute Mallinckrodt Assets or Mallinckrodt Liabilities, will also be included to the extent consistent with the Transaction Accounting Principles.
(c) Within thirty (30) days following receipt by Covidien of the Closing Statement, Covidien shall deliver written notice to Mallinckrodt of any dispute Covidien has with respect to the preparation or content of the Closing Statement (the “Dispute Notice”); provided, however, that if Covidien does not deliver any Dispute Notice to Mallinckrodt within such thirty (30)-day period, the Closing Statement will be final, conclusive and binding on the Parties. Any Dispute Notice shall (i) set forth in reasonable detail the basis for any dispute included therein, the amounts involved and Covidien’s determination of the Adjustment Amount and/or the Target Adjustment Amount (as applicable) and (ii) include only disagreements based on the Adjustment Amount and/or the Target Adjustment Amount (as applicable) not being calculated properly in accordance with this Agreement or containing mathematical errors. Upon receipt by Mallinckrodt of a Dispute Notice, Mallinckrodt and Covidien shall negotiate in good faith to resolve any dispute set forth therein. If Mallinckrodt and Covidien, such good faith effort notwithstanding, fail to resolve any such dispute within fifteen (15) Business Days following receipt by Mallinckrodt of the Dispute Notice (the “Dispute Resolution Period”), then Mallinckrodt and Covidien jointly shall engage, within ten (10) Business Days following the expiration of the Dispute Resolution Period, Ernst & Young LLP or, if Ernst & Young LLP is unavailable or conflicted, another nationally recognized major accounting firm selected jointly by Covidien and Mallinckrodt (the “Independent Accounting Firm”) to resolve any such dispute. If Ernst & Young LLP is unavailable or conflicted and Covidien and Mallinckrodt are unable to agree on the Independent Accounting Firm, then each of Covidien and Mallinckrodt shall select a nationally recognized major accounting firm, and the two (2) firms will mutually select a third nationally recognized major accounting firm to serve as the Independent Accounting Firm. As promptly as practicable, and in any event not more than fifteen (15) days following the engagement of the Independent Accounting Firm, Mallinckrodt and Covidien shall each prepare and submit a presentation detailing each Party’s complete statement of proposed resolution of each issue still in dispute to the Independent Accounting Firm. Mallinckrodt and Covidien shall cause the Independent Accounting Firm to, as soon as practicable after the submission of the presentations described in the immediately preceding sentence and in any event not more than thirty (30) days following such presentations, make a final determination, binding on the Parties, of the appropriate amount of each of the line items that remain in dispute as indicated in the Dispute Notice. With respect to each disputed line item, such determination, if not in accordance with the position of either Covidien or Mallinckrodt, shall not be in excess of the higher, nor less than the lower, of the amounts set forth by Mallinckrodt in the Closing Statement or by Covidien in the Dispute Notice, as applicable. Notwithstanding the foregoing, the scope of the disputes to be resolved by the Independent Accounting Firm shall be limited to whether any determination of the Adjustment Amount and/or the Target Adjustment Amount (as applicable) was properly calculated in accordance with the Transaction Accounting Principles, and the Independent Accounting Firm is not to make any other determination, including any determination as to whether GAAP was followed, to the extent GAAP is inconsistent with the Transaction Accounting Principles. All fees and expenses relating to the work, if any, to be performed by the Independent Accounting Firm shall be borne equally by Covidien and Mallinckrodt. All determinations made by the Independent Accounting Firm, and the Closing Statement, as modified by the Independent Accounting Firm, will be final, conclusive and binding on the Parties, absent fraud or manifest error.
(d) For purposes of complying with the terms set forth in this Section 2.16, Mallinckrodt and Covidien shall cooperate with and make available to each other and their respective Representatives all information, records, data and working papers, in each case, to the extent related to the Mallinckrodt Assets, Mallinckrodt Liabilities or Mallinckrodt Business, and shall permit access to its facilities and personnel, as may be reasonably required in connection with the preparation and analysis of the Closing Statement and the resolution of any disputes thereunder.
(e) If the Adjustment Amount, as finally determined pursuant to Section 2.16(c), is greater than the Target Adjustment Amount, as finally determined pursuant to Section 2.16(c), by at least $20 million, then Mallinckrodt shall pay or cause to be paid an amount in cash equal to the difference from the first dollar (i.e., without regard to the $20 million threshold) to Covidien by wire transfer of immediately available funds to an account or accounts designated in writing by Covidien to Mallinckrodt. If the Adjustment Amount, as finally determined pursuant to Section 2.16(c), is less than the Target Adjustment Amount, as finally determined pursuant to Section 2.16(c), by at least $20 million, then Covidien shall pay or cause to be paid an amount in cash equal to the difference from the first dollar (i.e., without regard to the $20 million threshold) to Mallinckrodt by wire transfer of immediately available funds to an account or accounts designated in writing by Mallinckrodt to Covidien. Any such payment pursuant to this Section 2.16(e) is to be made within five (5) Business Days of the date on which the Adjustment Amount and the Target Adjustment Amount have been finally determined pursuant to this Section 2.16.
Earnout Payment (i) As promptly as practicable after the end of the Earnout Period, but in no event later than 60 days following December 31, 2005, Parent shall provide the Stockholders’ Agent with a report, setting forth the Net Revenues for the 12-month period ended December 31, 2005 (the “Earnout Report”). If an Earnout Dispute Notice is not delivered pursuant to Section 2.4(c)(iii) below, then in no event later than 105 days following December 31, 2005, Parent shall pay or cause to be paid the Earnout Payment Amount in accordance with the terms of this Agreement, subject to the right of offset provisions of Sections 2.4(a), (b) and (d).
(ii) Parent shall keep full, clear and accurate books and records with respect to the Business. The books and records shall be maintained in such a manner that Net Revenue shall be readily verifiable. All books and records with respect to the Business shall be available for inspection by the Stockholders’ Agent or any attorney or accountant engaged by the Stockholders’ Agent to act on behalf of the Holders, in all cases upon reasonable prior notice and during normal business hours. The information contained in the books and records of Parent with respect to the Business shall remain confidential. Notwithstanding the foregoing, upon written request of the Stockholders’ Agent, Parent shall provide the Stockholders’ Agent with a report reflecting the estimate of the Net Revenue to date (which estimate is subject to change in the preparation of the Earnout Report) as promptly as practicable thereafter; provided that the Stockholders’ Agent may only make such a request once every six months commencing on July 1, 2005. If the Stockholders’ Agent does not deliver to Parent an Earnout Dispute Notice (as defined below) as set forth in Section 2.4(c)(iii) below, then the Earnout Report for the Earnout Period shall be deemed final and binding and neither the Stockholders’ Agent nor the Holders shall have any further right to contest the report, the computation of Net Revenue or payment of the Earnout Payment Amount.
(iii) In the event that the Stockholders’ Agent shall dispute the information set forth by Parent in the Earnout Report or, if based on the Stockholders’ Agent’s review of the books and records of the Business in accordance with subsection (c)(ii) above, omitted from the Earnout Report, as the case may be, then, within 60 calendar days following the date of the delivery by Parent of such report, the Stockholders’ Agent shall provide written notice to Parent (the “Earnout Dispute Notice”) specifying the amount disputed and the basis for the dispute, together with supporting documentation reflecting the analysis of and justification for any recomputation made. Parent and the Stockholders’ Agent shall make good faith efforts to resolve the dispute through negotiations for a period of 30 calendar days following the receipt of the written notice defining and describing the nature of the dispute. In the event that the parties are unable to finally resolve the dispute within such 30 calendar-day period, the parties to the dispute may elect by mutual agreement to extend the period of negotiation and may elect by mutual agreement to engage a mediator to assist in such negotiation. To the extent that any matter remains unresolved following negotiations (as determined by notice by any party to the other parties), the Stockholders’ Agent and Parent shall jointly select an independent accountant of recognized national standing to resolve any remaining disagreements, which independent accountant shall not have provided services to the Stockholders’ Agent, the Company or Parent or its affiliates during the five-year period preceding the date of its selection (the “Independent Accountant”). The Stockholders’ Agent and Parent shall use their respective commercially reasonable efforts to cause such Independent Accountant to make its determination within 60 calendar days of accepting its selection. Within 10 business days after the date of determination of such Independent Accountant, Parent shall pay or cause to be paid to the Holders the Earnout Payment Amount, if any, in the manner set forth herein, subject to the right of offset provisions of Sections 2.4(a), (b) and (d). The decision of the Independent Accountant shall be a final, binding, and conclusive resolution of the parties’ dispute, shall be non-appealable, and shall not be subject to further review. Irrespective of the Independent Accountant’s decision, the costs and expenses of the Independent Accountant shall be split equally between the parties. In the event that the Stockholders’ Agent does not pay the full amount of one-half of the Independent Accountant’s costs and expenses, Parent shall be entitled to deduct the difference between one-half of the costs and expenses of the Independent Accountant and the amount actually paid by the Stockholders’ Agent to the Independent Accountant from the Earnout Payment Amount. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split equally between the parties) incurred in connection with the dispute. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split equally between the parties) incurred in connection with the dispute.
(iv) The Holders will be deemed to, as part of their approval and adoption of the Merger Agreement and the transactions contemplated therein and herein, and the Stockholders’ Agent hereby, generally, irrevocably, unconditionally and completely agree that (1) the Company and Parent (as the controlling stockholder of the Company as of the Effective Time of the Merger) and each of their respective Affiliates shall be entitled to operate the Business after the Effective Time as they determine in their sole and absolute discretion, and shall have no obligation to operate the Business in any manner that would maximize, maintain or protect the value of the Common Stock CVRs and the Preferred Stock CVRs, and as a result of such operation of the Business, there may be a diminution in or elimination of the value of the CVRs, (2) the Common Stock CVRs and the Preferred Stock CVRs represent contractual obligations of Parent, and none of Parent, the Company or any of their respective Affiliates owes any fiduciary duty of any type (including, without limitation, any duty of loyalty or care) to any Holder of Common Stock CVRs and/or Preferred Stock CVRs, and (3) each of the Holders and the Stockholders’ Agent shall be prohibited from asserting any dispute, right, claim, action, cause of action, controversy or remedy of any kind and nature against any of the Company, Parent or any of their Affiliates resulting from the operation of the Business after the Effective Time or resulting from any allegation of breach of fiduciary duty of any nature, other than claims for fraud or intentional misconduct (and other than the right of the Stockholders’ Agent to dispute the Closing Balance Sheet Payment under Section 2.4(b)(iii) and/or the Earnout Report under Section 2.4(c)(iii) above). Upon either (A) the occurrence of an allegation by the Stockholders’ Agent of any claim which may arise for fraud or intentional misconduct under this subsection (iv) or (B) the receipt by the Stockholders’ Agent of written notice made in accordance with Section 1.3 by any Holder to the Stockholders’ Agent of the occurrence of any claim which such Holder has a good faith belief has arisen for fraud or intentional misconduct under this subsection (iv) (in each case, a “Claim”), the Stockholders’ Agent shall provide notice of such Claim to Parent, stating, to the best of his or her understanding, the circumstances giving rise to the Claim, specifying the amount of the Claim and making a request for any payment then believed due (the “Notice”). Upon receipt of any such Notice by Parent, within the next 45 days thereafter, the parties shall use their reasonable best efforts to cooperate and arrive at a mutually acceptable resolution of such dispute. If a mutually acceptable resolution cannot be reached between the parties within such 45-day period, the Stockholders’ Agent may submit the dispute for resolution by a panel of three arbitrators selected from the panels of arbitrators of the American Arbitration Association in Santa Xxxxx County, California; provided, however, that (i) one arbitrator shall be selected by the Stockholders’ Agent, the second arbitrator shall be selected by Parent and the third arbitrator shall be selected by the two previously selected arbitrators and (ii) in all respects, such panel shall be governed by the American Arbitration Association’s then existing Commercial Arbitration Rules. If it is finally determined that all or a portion of such Claim amount is owed to the Holders, Parent shall, within 10 days of such determination, pay the Holders such amount owed, together with interest from the date that the Stockholders’ Agent initially requested such payment until the date of actual payment, at an annual rate equal to the prime interest rate then generally in effect on the date of payment as set forth in The Wall Street Journal. The arbitration panel’s decision shall be final and binding upon the parties, and may be entered and enforced in any court of competent jurisdiction by any party. The parties shall be responsible for their respective fees and costs (including any attorneys’ or accountants’ fees) incurred in connection with the arbitration. EACH HOLDER AND THE STOCKHOLDERS’ AGENT ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE FOR FRAUD OR INTENTIONAL MISCONDUCT UNDER THE PRECEDING SENTENCE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO FRAUD OR INTENTIONAL MISCONDUCT UNDER THE PRECEDING SENTENCE. EACH HOLDER AND THE STOCKHOLDERS’ AGENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, AND (C) IT MAKES SUCH WAIVER VOLUNTARILY.
(v) Notwithstanding anything to the contrary set forth in this Section 2.4(c), in the event of a Change of Control (as defined below) of Parent before December 31, 2005, the Aggregate Earnout Payment Amount payable pursuant to this Section 2.4(c) shall be at least $14,000,000 regardless of the actual Net Revenue recognized during the Earnout Period, subject, however, to the offset provisions of Section 2.4(a), (b) and (d). In event of a Change of Control of Parent as set forth herein, Parent shall make proper provisions so that the continuing or surviving corporation or entity shall assume the obligation to pay the Aggregate Earnout Payment Amount as set forth herein. For purposes of this Section 2.4(c)(v), a “Change of Control” shall mean (1) the consummation of any transaction, including without limitation, any merger or consolidation, pursuant to which any of the voting stock of Parent is converted into or exchanged for cash, securities or other property, other than any transaction where the voting stock of Parent outstanding immediately prior to such transaction is converted into or exchanged for voting stock of the surviving or transferee entity constituting more than 50% of such voting stock of such surviving or transferee entity (immediately after giving effect to such issuance) and other than an acquisition of Parent in which the management of Parent participates in ten percent or more of the fully-diluted equity of the acquiror; or (2) a sale of all or substantially all of Parent’s assets.
Minimum Cash Balance Licensee shall fund the Facility Checking Account --------------------- with an initial amount equal to $25,000.00 and thereafter Licensee shall provide the working capital required by Section I(H) of this Agreement
Closing Payment At the Closing, Buyer will pay or cause to be paid to Seller the Closing Payment Amount, by wire transfer of immediately available funds or by such other means as may be agreed upon by Seller and Buyer.
Reduction in Purchase Price Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any of the Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such stockholders.
Indemnity for Returned Payments If, after receipt of any payment of, or proceeds applied to the payment of, all or any part of the Obligations, the Agent or any Lender is for any reason compelled to surrender such payment or proceeds to any Person, because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continue and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Agent or such Lender, and the Borrower shall be liable to pay to the Agent, and hereby does indemnify the Agent and the Lenders and hold the Agent and the Lenders harmless for, the amount of such payment or proceeds surrendered. The provisions of this Section 4.9 shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent or any Lender in reliance upon such payment or application of proceeds, and any such contrary action so taken shall be without prejudice to the Agent's and the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment or application of proceeds having become final and irrevocable. The provisions of this Section 4.9 shall survive the termination of this Agreement.
Holdback Amount Escrow Agent shall hold back in escrow from Seller’s net proceeds at Closing an amount equal to Seventy-Five Thousand Dollars ($75,000.00) (the “Holdback Amount”). The sole purpose for which the Holdback Amount may be applied is as to any amounts which Seller owes to Purchaser for post-Closing claims to the extent allowed and subject to any limitations set forth in this Agreement. For clarity, the Holdback Amount is intended as a source of payment, but not as a limitation of damages that may be claimed by Purchaser. Except as to any amounts claimed to be owed by Seller to Purchaser which amounts are specifically reflected in a lawsuit commenced against Seller within twelve (12) months after the Closing for damages based upon the post-Closing claim, Escrow Agent shall disburse the balance of the Holdback Amount to Seller immediately following the expiration of the twelve (12) month period. Prior to institution of any such lawsuit, Purchaser shall provide at least ten (10) days prior written notice to Seller, specifying the exact amount and nature of any such claim asserted by Purchaser against the Holdback Amount. Any lawsuit commenced against Seller must specifically set forth the exact amount which is claimed to be owed by Seller to Purchaser, and absent such specific amount being identified, Escrow Agent is authorized to release the entire Holdback Amount to Seller immediately following the expiration of the twelve month (12) month period post-Closing. Any portion of the Holdback Amount which Escrow Agent is entitled to retain pursuant to this Section 3.10 after the passage of the twelve (12) month period, shall continue to be held in escrow pending final and unappealable dismissal or judgment in the action or actions timely commenced by Purchaser or settled pursuant to a written agreement between Seller and Purchaser. If Purchaser obtains a final and unappealable judgment in any such action, Escrow Agent is directed to make a disbursement to Purchaser from the Holdback Amount retained in escrow in the amount of the judgment plus any interest, attorney’s fees, and costs to which it is entitled thereon upon presentation to Escrow Agent and Seller of the court order or other evidence of such final and unappealable judgment. Once all such actions are either finally or unappealably dismissed or a final and unappealable judgment is entered therein or settled pursuant to a written agreement between Seller and Purchaser, and any amount of damages due to Purchaser is paid, whether from the Holdback Amount or otherwise, Escrow Agent is directed to disburse to Seller any remaining balance of the Holdback Amount. The parties shall execute any additional escrow instructions not inconsistent with the foregoing reasonably required by Escrow Agent or either party relating to the Holdback Amount. Escrow Agent’s fees and costs for holding and disbursing the Holdback Amount shall be shared equally by Seller and Purchaser.
Non-Cash Consideration In the case of the offering of securities for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors; provided, however, that such fair value as determined by the Board of Directors shall not exceed the aggregate market price of the securities being offered as of the date the Board of Directors authorizes the offering of such securities.
Post-Closing Purchase Price Adjustment 1.9.1 Within ninety (90) days following the Closing Date, Seller shall prepare, or cause to be prepared, and deliver to Purchaser a statement (the “Closing Net Working Capital Statement”) which shall set forth the Net Working Capital of the Newsprint Business and of Apache as of the Closing Time (which shall be set forth separately for each of the Newsprint Business and Apache, but as aggregated shall be referred to as the “Closing Net Working Capital”) and shall be prepared in accordance with Seller’s past accounting methods, policies, practices and procedures and in the same manner, with consistent classification and estimation methodology, as the Financial Statements were prepared, except that the Excluded Assets and the Newsprint Retained Obligations shall be excluded. The Closing Net Working Capital Statement may not be amended by Seller after it is delivered to Purchaser.
1.9.2 Purchaser shall, within thirty (30) days after the delivery of the Closing Net Working Capital Statement to it, complete its review of the Closing Net Working Capital reflected on the Closing Net Working Capital Statement. If Purchaser wishes to dispute the Closing Net Working Capital, Purchaser shall notify Seller in writing in reasonable detail of such disagreement and any reason therefore (“Purchaser’s Objection”), setting forth a specific description of the basis of Purchaser’s Objection and the adjustments to the Closing Net Working Capital that Purchaser believes should be made, on or before the last day of such thirty (30) day period, which Purchaser’s Objection may not be amended by Purchaser after it is delivered to Seller (except to withdraw any such Purchaser’s Objection). Any items on the Closing Net Working Capital Statements not disputed in Purchaser’s Objection shall be irrevocably deemed to be accepted by Purchaser. Seller shall then have thirty (30) days to review and respond to Purchaser’s Objection. If Seller and Purchaser are unable to resolve all of their disagreements with respect to the determination of the foregoing items within thirty (30) days following Seller’s receipt of Purchaser’s Objection (the “Negotiation Period”), they shall refer their remaining differences to a mutually agreeable independent accounting firm of national recognition (other than an independent accounting firm utilized by any of Seller, Apache or Purchaser or any Affiliate of any of the foregoing within the past three (3) years) acceptable to both Seller and Purchaser or if Seller and Purchaser are unable to agree as to such third party accounting firm within ten (10) days after the conclusion of the Negotiation Period, either Seller or Purchaser may request that the Chairman of the American Arbitration Association (or the nominated representative of the Chairman) appoint a third party accounting firm meeting the aforementioned requirements to resolve the dispute (the accounting firm selected being referred to as the “CPA Firm”), who shall determine, only with respect to the remaining differences so submitted, whether and to what extent, if any, the Closing Net Working Capital requires adjustment. The procedure and schedule under which any dispute shall be submitted to the CPA Firm shall be as follows:
(a) Within ten (10) days after the later of (i) the end of the Negotiation Period and (ii) the selection of the CPA Firm, Purchaser shall submit any unresolved elements of the Purchaser’s Objection to the CPA Firm in writing (with a copy to Seller), supported by any documents and/or affidavits upon which it relies. Failure to timely do so shall constitute a withdrawal by Purchaser of the Purchaser’s Objection with respect to any unresolved element to which such failure relates.
(b) Within fifteen (15) days following Purchaser’s submission of the unresolved elements of the Purchaser’s Objection as specified in sub-clause (a) above, Seller shall submit its response to the CPA Firm in writing (with a copy to Purchaser), supported by any documents and/or affidavits upon which it relies. Failure to timely do so shall constitute an acceptance by Seller with respect to any unresolved elements to which such failure relates.
(c) The CPA Firm shall deliver its written determination to Purchaser and Seller no later than the thirtieth (30th) day after the remaining differences underlying Purchaser’s Objection are referred to the CPA Firm, or such longer period of time as the CPA Firm determines is necessary.
Earn-Out Payment (a) If, as of the close of business on September 30, 2019, the sum of (i) the total revenue (determined in accordance with GAAP) of Purchaser and its Affiliates (including the Company) resulting from sales of ECUs from the Closing up to and including September 30, 2019 (the “Product Revenue”) and (ii) the total dollar value of committed customer orders received by Purchaser and its Affiliates (including the Company) for ECUs that have been scheduled for delivery to such customer and represented by valid purchase orders as of the close of business on September 30, 2019 (the “Product Orders”) equals or exceeds $86,700,000 (the “Earn Out Benchmark”), Purchaser shall pay to Seller an amount of $30,000,000; provided, however, that if the aggregate amount of the Product Revenue and the Product Orders is less than the Earn Out Benchmark, then Purchaser shall pay to Seller an amount equal to (i) $30,000,000 multiplied by (ii) the percentage of the Earn Out Benchmark represented by the aggregate amount of the Product Revenue and the Product Orders, all as more particularly set forth in this Section 2.7. Any payment due under this Section 2.7 is referred to herein as the “Earn Out Payment” and is subject to Purchaser’s right of offset set forth in Section 10.3(i).
(b) Within 60 days of the expiration of the Earn Out Period, Purchaser shall deliver to Seller, with reasonable detail, its calculation of the Earn Out Payment, if any, and the components thereof. The Earn Out Payment shall be determined and calculated in accordance with GAAP. Following receipt of the calculation of the Earn Out Payment, if any, Seller shall be afforded a period of 30 days to review the same. To assist in any such review, Purchaser shall reasonably make available to Seller, upon request and during normal business hours, worksheets and other papers prepared in connection with the preparation of the calculation of the Earn Out Payment and the components thereof. At or before the end of the 30-day review period (the “Earn Out Review Period”), Seller shall either accept the calculation of the applicable Earn Out Payment or deliver to Purchaser a written notice disputing the same (a “Earn Out Dispute Notice”) setting forth a reasonable description of Seller’s objections and the amount of the adjustment to the Earn Out Payment which Seller believes should be made. Any items not identified within the Earn Out Dispute Notice shall be considered final and binding upon the Parties. If Purchaser’s calculation of the Earn Out Payment reflects that the Earn Out Payment is due to Seller and Seller objects in the Earn Out Dispute Notice that such calculated amount is too small, then, within five Business Days following Seller’s delivery of the Earn Out Dispute Notice, Purchaser shall pay to Seller Purchaser’s calculated amount of such Earn Out Payment by wire transfer of immediately available funds in accordance with instructions given by Seller to Purchaser, and the Parties shall proceed with the provisions of Section 2.7(c) as to the amount of the additional Earn Out Payment Seller believes is due to Seller. If no Earn Out Dispute Notice is delivered within the Earn Out Review Period, then the calculation of the Earn Out Payment shall be deemed to have been accepted by Seller.
(c) In the event that an Earn Out Dispute Notice is delivered in accordance with Section 2.7(b), Purchaser and Seller shall attempt in good faith to resolve the objections set forth therein within 30 days of Purchaser’s receipt of such Earn Out Dispute Notice. If Purchaser and Seller are unable to resolve all of the objections set forth in the Earn Out Dispute Notice within such 30-day period, any remaining objections related to the calculation of the Earn Out Payment shall be finally resolved by the Arbitrating Accountant who shall resolve any remaining disagreements in accordance with the provisions set forth in Sections 2.6(b), (c) and (d) mutatis mutandis. Purchaser and Seller shall fully cooperate with the Arbitrating Accountant. The decision of the Arbitrating Accountant shall be conclusive and binding upon the Parties, except in the case of manifest error.
(d) Upon final determination of the amount of the Earn Out Payment in accordance with Section 2.7(b) or Section 2.7(d) (the “Determination Date”), Purchaser shall pay to Seller the Earn Out Payment, as applicable, as finally determined within five Business Days of the Determination Date, by wire transfer of immediately available funds in accordance with instructions given by Seller to Purchaser.
(e) Notwithstanding anything herein to the contrary, if the Product Revenue following the Closing and prior to September 30, 2019 exceeds the Earn Out Benchmark, then Purchaser shall pay to Seller $30,000,000 within ten days after the end of the calendar month in which the Product Revenue first exceeds the Earn Out Benchmark, and thereafter no additional payments will be required pursuant to this Section 2.7. Any payment due under this Section 2.7(e) is subject to Purchaser’s right of offset set forth in Section 10.3(i).
(f) From the Closing Date until September 30, 2019 (the “Earn Out Period”), Purchaser covenants and agrees to the following: (i) Purchaser shall keep records sufficient to calculate the Earn Out Payment; (ii) upon Seller’s request during normal business hours, Purchaser shall reasonably make available to Seller and its advisors the records, worksheets and other supporting workpapers prepared in connection with the calculation of the Earn Out Payment for any period covered by this Agreement; (iii) neither Purchaser nor any of its Affiliates (including the Company) shall take any action that is primarily intended to impede Seller’s ability to earn the maximum Earn Out Payment; and (iv) Purchaser and its Affiliates (including the Company) shall operate the Business during the Earn Out Period in a commercially reasonable manner; provided, however, if the Earn Out Payment is paid to Seller prior to the expiration of the Earn Out Period as set forth in Section 2.7(e), Purchaser’s obligations set forth in this Section 2.7(f) shall terminate on the date the Earn Out Payment is paid to Seller. For purposes of this Section 2.7(f), “commercially reasonable manner” means, among other things, providing the Business with a level of administrative, development, maintenance, internal or outsourced manufacturing, quality, sales and marketing support that is consistent with the support currently being provided to the Business by Seller and providing the Business with working capital funding that is appropriate for a business of the Business’ size and industry.
