EXHIBIT 10.56
EARNOUT AGREEMENT
THIS EARNOUT AGREEMENT (the " Agreement"), is made and entered into this
31st day of July, 1997 by and among XXXXXXXX INDUSTRIES, INC. (the " Buyer") and
C. XXXXXXXXX XXXXX, XXX XXXXXX XXXXX, XXXXXX XXXXXXX XXXXX and XXXX XXXXXXXXX
XXXXX ("hereinafter collectively referred to as the "AD Shareholders"). C.
Xxxxxxxxx Xxxxx is hereinafter individually referred to as "AD". Capitalized
terms used but not defined herein have the meanings set forth in the Purchase
Agreement which is defined hereinbelow.
WITNESSETH:
WHEREAS, the parties hereto have entered into with others that certain
Stock Purchase Agreement dated as of the date hereof (the "Purchase Agreement");
WHEREAS, it is a condition to the AD Shareholders' execution of the
Purchase Agreement that the Buyer contemporaneously execute this Agreement; and
WHEREAS, this Agreement sets forth the terms and conditions upon which the
Buyer will, under certain circumstances, pay to the AD Shareholders earnout
considerations specified in Section 2.2(c) of the Purchase Agreement as part of
the Purchase Price to be paid the AD Shareholders for' their Shares.
NOW, THEREFORE, for and in consideration of the AD Shareholders selling
their shares to Buyer and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer agrees to pay the portion of
the Purchase Price specified in Section 2.2(c) of the Purchase Agreement to AD
Shareholders as follows:
1. Definitions. As used herein, the following terms have the following
meanings:
a. "Additional Earnout Consideration" means an amount equal to fifteen
percent (15%) of EBT or Annualized EBT, as the cases may be, for the fourth
Twelve - Month Period and ten percent (10%) of EBT for the fifth
Twelve-Month Period, except as otherwise provided in Section 4 herinbelow.
b. "Annualized EBT" means the EBT for any elapsed portion of a
Twelve - Month Period (such elapsed portion determined as the period
commencing on the date on which such Twelve - Month period begins and
ending on the effective date of the Fundamental Corporate Event) multiplied
by a fraction, the numerator of which is the total number of days in such
Twelve- Month period and the denominator of which is the number of days in
such elapsed portion of the Twelve - Month Period.
c. "Company" means Wink Xxxxx Equipment Co., Inc.
d. "Earnout Consideration" means an amount equal to fifty percent
(50%) of all EBT in excess of (i) One Million One Hundred Thousand Dollars
($1,100,000) for the first Twelve- Month period or (ii) One Million Two
Hundred Thousand Dollars ($1,200,000) for each successive Twelve - Month
Period described in Section 2 herinbelow, but such amount shall not exceed
in the aggregate One Million Five Hundred Thousand Dollars ($1,500,000).
e. "EBT" means with respect to the Company for any period the sum of
(i) Net Income and (ii) federal, state and local income taxes, in each of
the Company, for such period, computed and calculated in accordance with
GAAP.
f. "Fundamental Corporate Event" means (i) any purchase by a Person
not affiliated with the Buyer of more than fifty percent (50%) of the
equity securities of the Company (whether by merger, recapitization,
consolidation, reorganization or otherwise), (ii) the sale of all or
substantially all of the Company's assets to a Person not affiliated with
the Buyer or (iii) the sale by Buyer to a party not affiliated with the
Buyer of fifty percent (50%) or more of the shares of the Company held by
it as of the date hereof .
g. "GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time, consistently applied by the
Company.
h. "Interest Rate" means 12.0% per annum calculated on the basis of
actual days elapsed in a 365-day year.
i. "Net Income" means as to the Company, for any period, the net
income (or loss) of the Company for such period, determined in accordance
with GAAP. In determining Net Income, interest charges shall be limited to
those fairly and appropriately allocable to the Company in the discretion
of Buyer which discretion shall be exercised in good faith.
j. "Payment Date" means any date upon which a portion of Earnout
Consideration or Additional Earnout Consideration is payable as set forth
in Sections 2, 3 and 4 herinbelow or, if any such day is not a business
day, the next succeeding business day.
k. "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trust, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
l. "Sharing Percentages" means those percentages set forth on Exhibit
"A" attached hereto and incorporated herein by reference.
m. "Twelve - Month Period" means the period commencing August 1, 1997
and ending June 30, 1998 or any one or more of the four (4) consecutive
Twelve (12) month periods the
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first of which commences on July 1, 1998, and in the case of Section 4c,
"Twelve - Month Period" also means the twelve (12) - month period ending on
July 31, 1997, as the case may be.
2. Payments of Earnout Consideration. The Earnout Consideration shall
become due and payable as set forth in this Section 2 only in the event that the
Company produces EBT in excess of One Million One Hundred Thousand Dollars
($1,100,000) for the first Twelve - Month Period or One Million Two Hundred
Thousand Dollars ($1,200,000) in any one or more of the successive Twelve -
Month periods, and the Earnout Consideration shall be payable for each Twelve -
Month Period. In the event that the Earnout Consideration becomes due and
payable for any such Twelve - Month Period as described in the immediately
preceding sentence, then the Buyer shall pay the Earnout Consideration as a
portion of the Purchase Price in cash, bank cashier's check or by wire transfer
to the AD Shareholders in accordance with respective Sharing Percentages within
ten (10) days after the Company's determination of EBT for such Twelve - Month
period but in no event later than sixty (60) days after expiration of the
applicable Twelve - Month Period.
3. Payment of Additional Earnout Considerations. The Additional Earnout
Consideration shall become due and payable as set forth in this Section 3 only
in the event that Earnout Considerations of an aggregate of One Million Five
Hundred Dollars ($1,500,000) was due and payable under Section 2 for any or all
of the first three consecutive Twelve - Month periods. In the event that
Additional Earnout Consideration becomes due and payable as described in the
immediately preceding sentence, then the Buyer Shall pay to AD Additional
Earnout Consideration as a portion of the Purchase Price for each of the fourth
and fifth Twelve - Month Periods in cash, bank cashier's check or by wire
transfer no later than sixty (60) days after expiration of the fourth and fifth
Twelve - Month periods, respectively.
4. Payment Upon Fundamental Corporate Event. In the event that a
Fundamental Corporate Event occurs prior to the expiration of the fifth Twelve -
Month period, then the Earnout Consideration in the amount set forth in the next
sentence shall become due and payable, as a portion of the Purchase Price, by
the Buyer in cash, bank cashier's check or by wire transfer to the AD
Shareholders contemporaneously with the occurrence of such Fundamental Corporate
Event as provided in this Section 4. The amount of Earnout Consideration payable
to the AD Shareholders in accordance with their respective Sharing Percentages
shall be equal to One Million Five Hundred Thousand Dollars ($1,500,000) less
any amount of Earnout Consideration paid to the AD Shareholders prior to the
occurrence of the Fundamental Corporate Event. In the case of Additional Earnout
Consideration in the event that a Fundamental Corporate Event occurs, AD shall
have the right to elect to (i) have the terms of Section 3 and continue to apply
or (ii) waive payment of Additional Earnout Consideration under Section 3 and
receive Earnout Consideration as a portion of the Purchase Price
contemporaneously with the occurrence of such Fundamental Corporate Event in
accordance with the terms of this Section 4 as set forth herinbelow:
a. In the event the Fundamental Corporate Event occurs during the
fifth Twelve - Month period, and Additional Earnout Consideration is
otherwise due and payable per the terms of the first sentence of Section 3
hereinabove, Additional Earnout Consideration for such fifth Twelve - Month
Period shall be equal to ten percent (10%) of, at AD's election, (i) the
Annualized EBT for
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the elapsed portion of such fifth Twelve-Month Period or (ii) if the
elapsed portion of such fifth Twelve-Month Period is less than two (2) full
months, the EBT for the fourth Twelve-Month Period;
b. In the event the Fundamental Corporate Event occurs in the fourth
Twelve-Month Period, and Additional Earnout Consideration is otherwise due
and payable per the terms of the first sentence of Section 3 hereinabove,
the amount of the Additional Earnout Consideration due and payable shall be
(i) fifteen percent (15%) of the EBT for the third Twelve-Month Period and
(ii) ten percent (10%) of, at AD's election, (x) the Annualized EBT for the
elapsed portion of such fourth Twelve-Month Period or (y) if the elapsed
portion of such fourth Twelve-Month Period is less than two full months,
the EBT for the third Twelve-Month Period; or
c. In the event the Fundamental Corporate Event occurs in the first,
second or third Twelve-Month Period, the amount of Additional Earnout
Consideration due and payable shall be (i) fifteen percent (15%) of the EBT
for the Twelve-Month Period immediately preceding the Twelve-Month Period
in which the Fundamental Corporate Event occurs and (ii) ten percent (10%)
of, at AD's election, (x) the Annualized EBT of the elapsed portion of the
Twelve-Month Period in which the Fundamental Corporate Event occurs or (y)
if the elapsed portion of such Twelve-Month Period is less than two (2)
full months, the EBT for the Twelve-Month Period described in (i) in this
subsection c.
5. Interest. To the extent that the Buyer does not make a payment of any
portion of the Earnout Consideration or Additional Earnout Consideration on the
Payment Date, such unpaid amount shall bear interest at the Interest Rate from
and after the Payment Date to the date on which such unpaid amount (or a portion
thereof) is paid. AD Shareholders may pursue any and all available remedies, at
law, equity or both, in the event of a default by the Company of any of its
obligation under the terms of this Agreement, and the Buyer shall pay all costs
of collection, including, but not limited to, reasonable attorney's fees and
costs, incurred by the AD Shareholders to collect any amounts due by or through
an attorney at law.
6. Financial Statements. The Company shall no later than sixty (60) days
following the end of each Twelve-Month Period provide to each of the AD
Shareholders financial statements of the Company (including a balance sheet and
related statements of income, changes in stockholders' equity and cash flow) for
such Twelve-Month Period together with the Company's calculation of EBT, Earnout
Consideration and/or Additional Earnout Consideration due and payable under this
Agreement. In the event of a Fundamental Corporate Event, the Company shall
timely provide such financial statements to each of the AD Shareholders for the
relevant Twelve-Month Periods.
7. Entire Agreement and Modification. This Agreement represents the entire
agreement between the parties relevant to the Earnout Consideration and
Additional Earnout Consideration and the other matters relating thereto set
forth in this Agreement. This Agreement may not be amended except by a written
agreement executed by the parties to be charged with the amendment.
8. Assignment and Successors. No party may assign any of its rights under
this Agreement without the prior written consent of the other parties hereto.
This Agreement shall be
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binding upon and shall inure to the benefit of the parties hereto, their heirs,
personal representatives, successors and assigns.
9. Governing Law. This Agreement shall be construed under and shall be
governed by the law of North Carolina, and any dispute or matter involving this
Agreement or the terms hereof shall be exclusively adjudicated in a court of
competent jurisdiction in the State of North Carolina.
10. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree shall remain in
full force and effect to the extent not held invalid or unenforceable.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth hereinabove.
XXXXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
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Title: Pres
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/s/ C. Xxxxxxxxx Xxxxx
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C. XXXXXXXXX XXXXX
/s/ Xxx Xxxxxx Xxxxx Atty in Fact
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XXX XXXXXX XXXXX
/s/ Xxxxxx Xxxxxxx Xxxxx Atty in Fact
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XXXXXX XXXXXXX XXXXX
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/s/ Xxxx Xxxxxxxxx Xxxxx Atty in Fact
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XXXX XXXXXXXXX XXXXX
EXHIBIT "A"
Sharing Percentages
AD Sharing
Shareholders Percentage
------------ ----------
C. Xxxxxxxxx Xxxxx 68.916%
Xxx Xxxxxx Xxxxx 10.362%
Xxxxxx Xxxxxxx Xxxxx 10.361%
Xxxx Xxxxxxxxx Xxxxx 10.361%
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100.00%
