Common use of Earn-Outs Clause in Contracts

Earn-Outs. (a) The parties hereto acknowledge and agree that (i) the Company may, in the future, owe Earn-Outs to the applicable third parties identified on Schedule EO (each, an “Earn-Out Seller”) pursuant to written agreements with the Earn-Out Sellers which agreements are identified on Schedule 3.13(a)(vii) (each, an “Earn-Out Agreement”) and (ii) except as otherwise expressly set forth in Section 6.16(d), the Earn-Outs, if and when due, shall be satisfied in full from the Earn-Out Escrow Account. (b) As promptly as reasonably practical, but in any event at least fifteen (15) Business Days before the date (the “Earn-Out Due Date”) that the Company is required to provide its calculation of the Earn-Out payment (each such payment, an “Earn-Out Payment”) to the applicable Earn-Out Seller, the Purchaser shall provide to or make available to the Seller Representative all of the books, records and other documents (including work papers) within the possession of the Parent or its Subsidiaries necessary for Seller Representative or his agents to calculate the Earn-Out Payment. Except to the extent that disclosure is required by the applicable Earn-Out Agreement, all such books, records and other documents (including work papers) shall be treated as Confidential Information pursuant to Section 6.8. At least five (5) Business Days before the Earn-Out Due Date, the Seller Representative shall provide to the Purchaser its calculation of the applicable Earn-Out Payment (the “Earn-Out Calculation”) accompanied by information sufficient to support the calculation of such Earn-Out Payment, which shall not show an Earn-Out Payment that is greater than the maximum amount that can be owed at that time to the applicable Earn-Out Seller pursuant to the applicable Earn-Out Agreement. No later than the Earn-Out Due Date, the Seller Representative shall provide to the applicable Earn-Out Seller its calculation of the applicable Earn-Out Payment accompanied by information required to be provided pursuant to the applicable Earn-Out Agreement. The Seller Representative and the applicable Earn-Out Seller shall then proceed to determine the amount of such Earn-Out Payment pursuant to the procedures set forth the applicable Earn-Out Agreement. (c) Subject to Section 6.16(d) and Section 6.16(e), upon the Earn-Out Seller and the Seller Representative agreeing in writing in a form reasonably acceptable to the Purchaser that the Earn-Out Calculation accurately reflects the Earn-Out Payment required under the applicable Earn-Out Agreement (such agreed upon amount, the “Agreed Earn-Out Payment Amount”) or, in the absence of such agreement, upon the determination of the amount of such Earn-Out Payment pursuant to the procedures set forth in the applicable Earn-Out Agreement (the “Determined Earn-Out Payment Amount”), then the Seller Representative and the Purchaser shall execute written instructions to the Escrow Agent to release (i) the Agreed Earn-Out Payment Amount or the Determined Earn-Out Payment Amount to the applicable Earn-Out Seller and (ii) the amount by which the Earn-Out payment amount set forth on Schedule EO with respect to such Earn-Out Payment exceeds the Agreed Earn-Out Payment Amount (or, as the case may be, the Determined Earn-Out Payment Amount) to Sellers and Option Holders pursuant to their Purchase Price Pro Rata Percentages, together with interest allocable to such amount. (d) Notwithstanding anything to the contrary in Section 6.16(c), if the Company has the right, in the sole discretion of the Purchaser, to offset any indemnity or other claims against the applicable Earn-Out Seller on the date that the applicable Earn-Out Payment is to be made (the amount of any offset, the “Offset Amount”), upon the written request of the Purchaser to the Seller Representative, the joint written instructions of the Purchaser and the Seller Representative shall provide that the Escrow Agent release (i) the Agreed Earn-Out Payment Amount (or, as the case may be, the Determined Earn-Out Payment Amount) less the Offset Amount to the applicable Earn-Out Seller, (ii) the Offset Amount to the Purchaser and (iii) the amount by which the Earn-Out payment amount set forth on Schedule EO with respect to such Earn-Out Payment exceeds the Agreed Earn-Out Payment Amount (or, as the case may be, the Determined Earn-Out Payment) to Sellers and Option Holders pursuant to their Purchase Price Pro Rata Percentages, together with interest allocable to such amount. If Purchaser requests that Seller Representative execute joint written instructions which include the payment of an Offset Amount to the Purchaser, then Purchaser hereby agrees to indemnify and hold harmless Seller Representative, Sellers and the directors of the Company as of the date hereof against and from and in respect of any and all Losses which are incurred by virtue of or result from any claim by the applicable Earn-Out Seller that the Offset Amount should have been paid to the applicable Earn-Out Seller. (e) Notwithstanding anything to the contrary in Section 6.16(c) and Section 6.16(d), in connection with any Earn-Out Payment related to the Earn-Out Agreement identified as Item 1 on Schedule 3.13(a) (the “LRA Agreement”), unless all such amounts that would otherwise be paid to the applicable Earn-Out Seller are paid to Purchaser as Offset Amounts, an amount up to the first $1 million that would otherwise be paid to such Earn-Out Seller shall be paid into an escrow account pursuant to LRA Agreement and the documents executed in connection therewith. In such circumstances, Purchaser and Seller Representative agree to execute joint written instructions that include the payment of this $1 million into escrow. (f) If the Earn-Out Seller and the Seller Representative do not agree in writing in a form reasonably acceptable to the Purchaser that the Earn-Out Calculation accurately reflects the Earn-Out Payment required under the applicable Earn-Out Agreement, then all such disputed amounts shall remain in the Earn-Out Escrow Fund until they do so agree or until such disputed amounts are directed to be disbursed pursuant to the procedures in the applicable Earn-Out Agreement. (g) Notwithstanding anything to the contrary in this Section 6.16, Purchaser and Parent acknowledge that the Seller Representative shall have the right to negotiate a cash settlement of any Earn-Out following the date hereof (whether prior or subsequent to the Closing), provided that Purchaser approve all documents that any Purchaser Party must enter into in connection therewith (such approval not to unreasonably be withheld) and no cash settlement amount in connection with any individual Earn-Out shall exceed the amount of the applicable Earn-Out listed on Schedule EO. In the event of any such settlement, the Seller Representative and Purchaser shall execute and deliver to Escrow Agent a joint written instruction to pay, in immediately available funds, (i) the cash settlement amount with respect to such Earn-Out to the applicable Earn-Out Seller and (ii) to Sellers and Option Holders pursuant to their Purchase Price Pro Rata Percentages, the amount by which the Earn-Out listed on Schedule EO exceeds the settlement amount for such Earn-Out, together with interests applicable to such amount.

Earn-Outs. Should Purchaser, or any of its Affiliates, receive Earn-Out Revenues (as defined below), Purchaser shall make the following additional payments (collectively, “Earn-Outs”) to Seller, as follows: (a) The parties hereto acknowledge and agree that (i) the Company may, in the future, owe EarnDuring each consecutive 12-Outs to the applicable third parties identified on Schedule EO (each, an “Earn-Out Seller”) pursuant to written agreements with month period within the Earn-Out Sellers which agreements are identified on Schedule 3.13(a)(vii) Period (each, an “Earn-Out Agreement”) and (ii) except as otherwise expressly set forth in Section 6.16(ddefined below), Purchaser shall pay to Seller an amount equal to (i) 5% of the Earnfirst U.S.$15,000,000.00 in Revenues received during such 12-Outs, if month period by Purchaser and when due, shall be satisfied in full from the Earn-Out Escrow Account. (b) As promptly as reasonably practical, but in any event at least fifteen (15) Business Days before the date its Affiliates (the “Earn-Out Due DateRevenues”), (ii) that 4% of the Company next U.S.$15,000,000.00 in such Earn-Out Revenues received during such 12-month period, (iii) 3% of the next U.S.$15,000,000.00 in such Earn-Out Revenues received during such 12-month period, and (iv) 2% of all such Earn-Out Revenues above U.S.$45,000,000.00 received during such 12-month period. Notwithstanding the foregoing, during the first consecutive 12-month period within the Earn-Out Period in which an Earn-Out of greater than U.S.$500,000.00 is required to provide its calculation earned, the first U.S.$10,000,000.00 of Revenues for such 12-month period shall be exempt from the Earn-Out payment (each such paymentobligations set forth in the first sentence of this Section 2.2(a), an “provided that U.S.$500,000.00 will be applied towards the Aggregate Earn-Out Payment”(as defined below) total as if such amount had been paid to the applicable Seller as an Earn-Out Seller, Out. (b) Earn-Outs shall be paid by Purchaser to Seller by wire transfer in immediately available funds on a quarterly basis within 30 days after the Purchaser shall provide to or make available to the Seller Representative all end of the books, records and other documents (including work papers) within the possession of the Parent or its Subsidiaries necessary for Seller Representative or his agents to calculate each calendar quarter during the Earn-Out PaymentPeriod and shall be reconciled on an annual basis. Except Purchaser shall maintain book and records relating to the extent that disclosure is required by the applicable Earn-Out Agreement, all such books, records Revenues and Earn-Outs separately from its other documents books and records. (including work papersc) shall be treated as Confidential Information pursuant to Section 6.8. At least five (5) Business Days before During the Earn-Out Due DatePeriod and for six months thereafter, Seller may designate a certified public accountant (the “CPA”), who shall be reasonably acceptable to Purchaser, and who shall not perform the subject services on a contingency fee basis, to examine the books and records of Seller Representative shall provide to solely as they may contain information for the Purchaser its calculation of Earn-Outs payable to Seller hereunder. Such examination (i) shall be at Seller’s sole cost and expense, (ii) must be conducted during Purchaser’s normal business hours and only upon no less than 15 days’ prior written notice and (iii) may not be conducted more than once in any 12-month period during the applicable Earn-Out Period and the six months thereafter. The CPA shall hold all books and records and resulting reports (each, a “CPA Report”) in the strictest confidence except as necessary to report to Seller on and/or to testify regarding the accuracy of Purchaser’s books and records. The CPA Report shall be limited to a statement of whether a discrepancy has been discovered and, if so, the amount. If the CPA Report substantiates underpayment or overpayment of Earn-Outs, the applicable party shall promptly pay such amount to the other. In the event of an underpayment in excess of ten percent of the total amount paid during the audited period (provided that the amount such underpayment is more than U.S.$5,000.00), Purchaser shall reimburse Seller for the reasonable third-party costs of the audit incurred by it. (d) Payment of the Earn-Outs will continue until the earlier to occur of: (i) the fifth anniversary of the Closing Date, or (ii) the date on which the sum of (A) the value of the Shares on the earlier of (the date thereof, the “Liquidity Date”), (1) the date that shares of Common Stock become freely tradable on the public markets with the deemed value of the Shares to be the initial price at which DDHC sells shares of the Common Stock to the public on such date, or (2) the date of an offer by DDHC to repurchase at fair value (no minority interest discounts) as determined by an independent valuation performed by a qualified professional designated by Purchaser and reasonably acceptable to Seller (the “Equity Value”), and (B) the amount of the aggregate payments of Earn-Outs made to Seller through such date (the “Aggregate Earn-Out”), exceeds U.S.$22,000,000.00 (such payment period being the “Earn-Out CalculationPeriod”) accompanied by information sufficient ). For clarity, Seller shall not be obligated to support accept Purchaser’s offer to purchase the Shares at fair value, but such offer shall nonetheless be included as a part of the calculation of such the Equity Value. Notwithstanding the foregoing, in the event that, on the fifth anniversary of the Closing Date, the sum of the Equity Value and the Aggregate Earn-Out Paymentdoes not exceed U.S.$12,000,000.00, which shall not show an Earn-Out Payment that is greater than the maximum amount that can be owed at that time to the applicable Earn-Out Seller pursuant to the applicable Earn-Out Agreement. No later than then the Earn-Out Due Date, Period will continue until such time that the Seller Representative shall provide to sum of the applicable Equity Value and the Aggregate Earn-Out Seller its calculation of the applicable Earn-Out Payment accompanied by information required is equal to be provided pursuant to the applicable Earn-Out Agreement. The Seller Representative and the applicable Earn-Out Seller shall or greater then proceed to determine the amount of such Earn-Out Payment pursuant to the procedures set forth the applicable Earn-Out AgreementU.S.$12,000,000.00. (c) Subject to Section 6.16(d) and Section 6.16(e), upon the Earn-Out Seller and the Seller Representative agreeing in writing in a form reasonably acceptable to the Purchaser that the Earn-Out Calculation accurately reflects the Earn-Out Payment required under the applicable Earn-Out Agreement (such agreed upon amount, the “Agreed Earn-Out Payment Amount”) or, in the absence of such agreement, upon the determination of the amount of such Earn-Out Payment pursuant to the procedures set forth in the applicable Earn-Out Agreement (the “Determined Earn-Out Payment Amount”), then the Seller Representative and the Purchaser shall execute written instructions to the Escrow Agent to release (i) the Agreed Earn-Out Payment Amount or the Determined Earn-Out Payment Amount to the applicable Earn-Out Seller and (ii) the amount by which the Earn-Out payment amount set forth on Schedule EO with respect to such Earn-Out Payment exceeds the Agreed Earn-Out Payment Amount (or, as the case may be, the Determined Earn-Out Payment Amount) to Sellers and Option Holders pursuant to their Purchase Price Pro Rata Percentages, together with interest allocable to such amount. (d) Notwithstanding anything to the contrary in Section 6.16(c), if the Company has the right, in the sole discretion of the Purchaser, to offset any indemnity or other claims against the applicable Earn-Out Seller on the date that the applicable Earn-Out Payment is to be made (the amount of any offset, the “Offset Amount”), upon the written request of the Purchaser to the Seller Representative, the joint written instructions of the Purchaser and the Seller Representative shall provide that the Escrow Agent release (i) the Agreed Earn-Out Payment Amount (or, as the case may be, the Determined Earn-Out Payment Amount) less the Offset Amount to the applicable Earn-Out Seller, (ii) the Offset Amount to the Purchaser and (iii) the amount by which the Earn-Out payment amount set forth on Schedule EO with respect to such Earn-Out Payment exceeds the Agreed Earn-Out Payment Amount (or, as the case may be, the Determined Earn-Out Payment) to Sellers and Option Holders pursuant to their Purchase Price Pro Rata Percentages, together with interest allocable to such amount. If Purchaser requests that Seller Representative execute joint written instructions which include the payment of an Offset Amount to the Purchaser, then Purchaser hereby agrees to indemnify and hold harmless Seller Representative, Sellers and the directors of the Company as of the date hereof against and from and in respect of any and all Losses which are incurred by virtue of or result from any claim by the applicable Earn-Out Seller that the Offset Amount should have been paid to the applicable Earn-Out Seller. (e) Notwithstanding anything to the contrary in Section 6.16(c) and Section 6.16(d), in connection with any Earn-Out Payment related to the Earn-Out Agreement identified as Item 1 on Schedule 3.13(a) (the “LRA Agreement”), unless all such amounts that would otherwise be paid to the applicable Earn-Out Seller are paid to Purchaser as Offset Amounts, an amount up to the first $1 million that would otherwise be paid to such Earn-Out Seller shall be paid into an escrow account pursuant to LRA Agreement and the documents executed in connection therewith. In such circumstances, Purchaser and Seller Representative agree to execute joint written instructions that include the payment of this $1 million into escrow. (f) If the Earn-Out Seller and the Seller Representative do not agree in writing in a form reasonably acceptable to the Purchaser that the Earn-Out Calculation accurately reflects the Earn-Out Payment required under the applicable Earn-Out Agreement, then all such disputed amounts shall remain in the Earn-Out Escrow Fund until they do so agree or until such disputed amounts are directed to be disbursed pursuant to the procedures in the applicable Earn-Out Agreement. (g) Notwithstanding anything to the contrary in this Section 6.16, Purchaser and Parent acknowledge that the Seller Representative shall have the right to negotiate a cash settlement of any Earn-Out following the date hereof (whether prior or subsequent to the Closing), provided that Purchaser approve all documents that any Purchaser Party must enter into in connection therewith (such approval not to unreasonably be withheld) and no cash settlement amount in connection with any individual Earn-Out shall exceed the amount of the applicable Earn-Out listed on Schedule EO. In the event of any such settlement, the Seller Representative and Purchaser shall execute and deliver to Escrow Agent a joint written instruction to pay, in immediately available funds, (i) the cash settlement amount with respect to such Earn-Out to the applicable Earn-Out Seller and (ii) to Sellers and Option Holders pursuant to their Purchase Price Pro Rata Percentages, the amount by which the Earn-Out listed on Schedule EO exceeds the settlement amount for such Earn-Out, together with interests applicable to such amount.