EARNOUT AGREEMENT
This
Earnout Agreement (“Agreement”) is entered into this 10th day of June, 2008, by
and between xxxxxxxx.xxx, Inc., a Delaware corporation (“Parent”), and The
Registry Management Company, LLC, a Florida limited liability company
(“Buyer”).
RECITALS
A. Parent
has this date sold to Buyer substantially all of the assets of its wholly-owned
subsidiary, Tralliance Corporation, a New York corporation (“Tralliance”), which
assets also constitute substantially all of the assets of the Parent on a
consolidated basis with its subsidiaries, pursuant to a Purchase Agreement
dated
as of June 10, 2008, by and among Tralliance, the Parent and Buyer (the
“Purchase Agreement”). Defined terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Purchase
Agreement.
B. The
Purchase Agreement provides that a portion of the purchase price will be
calculated and paid as an earnout based upon the Net Revenues (as hereinafter
defined) generated by the Buyer over the Term (hereinafter
defined).
C. Parent
and Buyer have agreed that determination and payment of the earnout contemplated
by the Purchase Agreement shall be made in accordance with the terms of this
Agreement.
Now,
therefore, in consideration of the premises and of the respective covenants
and
provisions herein contained, Parent and Buyer agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Business
shall
have the meaning of such term as set forth in the Purchase
Agreement.
1.2 Cumulative
Minimum Payment Amount
shall
mean the sum of Two Million One Hundred Seventy Five Thousand Dollars
($2,175,000), plus an amount equal to the number of effective days in the final
Earnout Period divided by 365 multiplied by Four Hundred Fifty Thousand Dollars
($450,000).
1.3 Earnout
Amount
means
with respect to any particular time period, an amount equal to ten percent
(10.0%) of the Net Revenues of the Buyer for such period.
1.4 Earnout
Period
shall
mean the one year period commencing on the Closing Date and all succeeding
one
year periods thereafter (or portion thereof with respect to the last such year)
during the Term.
1.5 Fiscal
Quarter
shall
mean the calendar quarters ending on March 31, June 30, September 30 and
December 31.
1.6 Net
Revenue
shall
have the meaning set forth in Section 3.1 below with respect to the Company
and
any subsidiary thereof.
1.7 Term
shall
mean the period commencing on the date hereof and continuing until the close
of
business on May 5, 2015.
ARTICLE
II
EARNOUT
PAYMENT
2.1 Minimum
Earnout Payments. The
minimum Earnout Amount that shall be paid to the Parent with respect to the
initial Earnout Period shall be Three Hundred Thousand Dollars ($300,000).
Thereafter, the minimum Earnout Amount that shall be paid to the Parent shall
increase by $25,000 in each subsequent Earnout Period until the end of the
Term,
with the minimum Earnout Amount for the last Earnout Period prorated based
upon
the effective number of days in that period. The minimum aggregate Earnout
Payments that shall be paid to the Parent over the Term shall be equal to the
Cumulative Minimum Payment Amount. Within ten (10) Business Days following
the
end of each Fiscal Quarter during the Term, Buyer shall pay to the Parent an
amount equal to twenty-five percent (25%) of the minimum Earnout Amount due
for
that Earnout Period, except that the quarterly payments due during the final
Earnout Period shall be equal to thirty three and one-third percent (33
1/3rd%)
of the
minimum Earnout Amount due for such final Earnout Period.
2.2 Yearly
Earnout Payments.
As
further provided in Section 3.2(a) below, within twenty (20) Business Days
following the end of each Earnout Period (or May 5, 2015 with respect to the
last such Earnout Period) during the Term, Buyer shall pay to Parent an amount
equal to the excess, if any, of the Net Revenue of the Buyer for such period
multiplied by ten percent (10.0%) (the “Yearly Earnout Payment”) over the sum of
all Minimum Earnout payments made and attributable to such Earnout
Period.
2.3 Interest.
Unless
such payment is not timely made, Parent
shall not be entitled to any interest on any payments under this Agreement.
Any
minimum Earnout Amount or Yearly Earnout Payment that is not made on a timely
basis shall bear interest at the rate of one percent (1%) per month from the
date due until paid in full.
2.4 Right
to Operate the Business. The
Parent acknowledges that following the Closing of the Purchase Agreement Buyer
will have the right to operate the Business of the Buyer in a manner that Buyer
deems appropriate in Buyer’s sole discretion, but subject to the provisions of
Section 2.5 hereof. Notwithstanding the foregoing, at all times during the
Term,
the Buyer shall diligently proceed with commercially reasonable efforts to
develop and market the Business.
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2.5 Segregation
of Business within the Buyer.
The
Parties acknowledge and agree that the earn-out calculations under this
Agreement assume that the Buyer acts as a single purpose entity and continues
to
operate the Business of the Tralliance solely within the Buyer. During the
Term,
the Buyer covenants that it will only own and operate the Business (together
will such other business as is related or incidental thereto) through the Buyer
or a subsidiary thereof, or will implement appropriate procedures to accurately
track Net Revenues as contemplated by this Agreement, which procedures will
be
subject to the approval of Parent which consent will not be unreasonably
withheld.
ARTICLE
III
COMPUTATION
OF NET REVENUE; PAYMENT
3.1 Manner
of Computation.
For
purposes of this Agreement, “Net Revenue” for any period shall mean the total
cash received by the Buyer and its subsidiaries related to registrations of
“.travel” domain names, net of third-party registry operator fees, if
applicable, and exclusive of any cash received from a Bulk Purchase Program.
“Bulk Purchase Program” means any agreement or program of Buyer or its
subsidiaries pursuant to which a single purchaser or affiliated group of
purchasers registers or renews more than twenty five thousand (25,000) “.travel”
domain names.
3.2 Time
of Determination and Payment
(a) Within
twenty (20) Business Days after the end of each Earnout Period during the Term,
the Buyer shall provide the Parent a complete and accurate statement of its
Net
Revenues for such Earnout Period (the “Earnout Statements”). Each Earnout
Statement shall be certified as accurate by an officer of the Buyer and shall
be
accompanied by payment of the amounts shown as due on such Earnout Statement.
All payments made hereunder shall be in United States currency drawn on a United
States bank, unless otherwise specifically agreed upon by the parties.
(b) The
Buyer
shall retain records relating to all of its Net Revenue and its Earnout
Statements for at least one (1) year after the expiration or termination of
this
Agreement. Parent, directly or through its representative, shall be entitled
to
inspect the Buyer's books and records relating to said Net Revenue and Earnout
Statements for purposes of verifying the accuracy of the Earnout Statements
delivered to it pursuant to 3.2(a) of this Agreement.
(c) Such
inspection and access will be available to Parent upon not less than five (5)
days written notice to the Buyer, not more than once each calendar year of
the
Term, during normal business hours, and once a year for one (1) year after
the
expiration or termination of this Agreement. Should such inspection reveal
with
reasonable certainty a discrepancy in reporting and payment of amounts due
to
the Parent’s detriment, then the Buyer shall promptly pay to the Parent the
amount of such discrepancy. In addition, if the discrepancy in reporting and
payment is the greater of (i) five percent (5%) and (ii) twenty thousand dollar
($20,000) over the course of any consecutive four quarters, Buyer shall also
pay
to Parent the reasonable and necessary costs of such inspection plus interest
on
the amount due from the date that it should have been paid until the date of
actual payment at the rate of twelve percent (12%) per annum.
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ARTICLE
IV
MISCELLANEOUS
4.1 Benefit
of Parties and Assignment.
All of
the terms and provisions of this Agreement shall be binding upon and inure
to
the benefit of the parties and their respective permitted successors and
assigns. This Agreement shall not be assignable by either party without the
prior written consent of the other party.
4.2 Entire
Agreement.
This
Agreement contains the entire understanding of the parties with respect to
the
subject matter hereof and supersedes all prior agreements and understandings
between the parties with respect thereto.
4.3 Counterparts.
This
Agreement may be executed simultaneously in two or more counterparts, each
of
which shall be deemed an original, but all of which together shall constitute
one and the same instruments.
4.4 Notices.
Any
notice required or permitted to be given hereunder shall be given in accordance
with Section 11.1 of the Purchase Agreement.
4.5 Waiver
of Compliance
The
party for whose benefit a warranty, representation, covenant or condition is
intended may, in writing, waive any inaccuracies in the warranties,
representations, covenants or conditions contained in this Agreement or waive
compliance with any of the foregoing and so waive performance of any of the
obligations of the other party hereto and any defaults hereunder, provided,
however, that such waiver shall not affect or impair the waiving party’s rights
in respect to any other warranty, representation, covenant, condition or default
hereunder.
4.6 Index
and Captions
The
captions of the Articles and Sections of this Agreement are solely for
convenient reference and shall not be deemed to affect the meaning or
interpretation of any Article or Section hereof.
4.7 Governing
Law; Venue.
This
Agreement will be governed by and construed under the laws of the State of
Florida without regard to conflicts of laws principles that would require the
application of any other law. Each of the parties irrevocably and
unconditionally (a) agrees that any suit, action or legal proceeding arising
out
of or relating to this Agreement may be brought in the courts of record of
the
State of Florida in Broward County or the court of the United States, Southern
District of Florida; (b) consents to the jurisdiction of each such court in
any
suit, action or proceeding; (c) waives any objection which it may have to the
laying of the venue of any such suit, action or proceeding in any of such
courts; and (d) agrees that service of any court paper may be effected on such
party by mail, as provided in this Agreement, or in such other manner as may
be
provided under applicable laws or court rules in said state.
[Signatures
appear on the next page]
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IN
WITNESS WHEREOF, the parties have hereunto caused this Agreement to be executed
in multiple original counterparts as of the date set forth above.
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xxxxxxxx.xxx,
inc.
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By:
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/s/
Xxxxxx X. Xxxxxxxx
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Print Name:
Xxxxxx
X. Xxxxxxxx
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BUYER:
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The
Registry Management Company, LLC
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By:
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/s/
Xxxxxxx X. Xxxx
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Print
Name: Xxxxxxx
X. Xxxx
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