Earnout. (a) BNC shall cause the Agency to pay to Sellers in accordance with Section 2.5 additional consideration up to a maximum aggregate amount of $8,500,000 (the "Earnout"), based on the EBITDA, if any, generated by Milne ▇▇▇▇▇ in the future as follows: (i) For each consecutive twelve (12) month segment of the sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period. (ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period; (iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period; (b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAP. (c) The amounts, if any, payable to the Sellers for each Earnout Period pursuant to this Section 2.3 shall be paid by the Agency within 30 days following the end of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Period. (d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditors.
Appears in 1 contract
Earnout. (ai) BNC Following the Closing and during the Earnout Period, and as additional consideration for the Pre-Closing Reorganization and the transactions contemplated hereby, within twenty (20) Business Days after the occurrence of a Triggering Event, NewCo shall issue or cause the Agency to pay be issued to Sellers each Pre-Closing Holder (in accordance with Section 2.5 additional consideration up its respective Pro Rata Participation Percentage) NewCo Common Shares (which shall be equitably adjusted for share splits, reverse share splits, share dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with respect to a maximum aggregate amount of $8,500,000 NewCo Common Shares occurring after the Closing) (such shares, the "Earnout"“Earnout Shares”), based on upon the EBITDA, if any, generated by Milne ▇▇▇▇▇ terms and subject to the conditions set forth in the future as follows:
(i) For each consecutive twelve (12) month segment of the sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000this Agreement; provided, however, that any such issuance of Earnout Shares will not be made to any Pre-Closing Holder for which a filing under the HSR Act is required in connection with the issuance of Earnout Shares, until the applicable waiting period under the HSR Act has expired or been terminated:
(A) that Upon the sum occurrence of Triggering Event I, a one-time issuance of a number of Earnout Shares equal to the Base product of (1) the quotient obtained by dividing (a)(i) the Aggregate Stock Consideration Shares minus (ii) the Repurchased Shares by (b) 0.90, multiplied by (2) 0.025 (the “Triggering Event I Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and Shares”);
(B) Upon the amount occurrence of Triggering Event II, a one-time issuance of a number of Earnout Shares equal to the product of (1) the quotient obtained by dividing (a)(i) the Aggregate Stock Consideration Shares minus (ii) the Repurchased Shares by (b) 0.90, multiplied by (2) 0.025 (the “Triggering Event II Earnout Premium for Shares”); and
(C) Upon the particular occurrence of Triggering Event III, a one-time issuance of a number of Earnout Period Shares equal to the product of (1) the quotient obtained by dividing (a)(i) the Aggregate Stock Consideration Shares minus (ii) the Repurchased Shares by (b) 0.90, multiplied by (2) 0.05 (the “Triggering Event III Earnout Shares”); provided, that in the event a Triggering Event occurs prior to Closing, NewCo shall issue or cause to be credited against issued the applicable Earnout Shares to each Pre-Closing Holder (in accordance with its respective Pro Rata Participation Percentage) within twenty (20) Business Days after, and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000conditioned upon, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout PeriodClosing.
(ii) For avoidance of doubt, the Pre-Closing Holders shall be entitled to receive Earnout Shares upon the occurrence of each Triggering Event; provided, however, that each Triggering Event shall only occur once, if at all, and in no event shall the Pre-Closing Holders be entitled to receive more than an aggregate number of Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA Shares equal to the product of (1) the quotient obtained by dividing (a)(i) the Aggregate Stock Consideration Shares minus (ii) the Repurchased Shares by (b) 0.90, multiplied by (2) 0.10. In the event of the failure of the occurrence of any Triggering Event during the Earnout Period, no Earnout Shares will be issued to the Pre-Closing Holders in respect of such Triggering Event pursuant to this Section 2.2(b).
(iii) If, during the Earnout Period, there is a Change of Control pursuant to which NewCo or its shareholders have the right to receive consideration with a value per NewCo Common Share (as determined in good faith by the disinterested members of the NewCo Board) of:
(A) less than $11.50, then this Section 2.2(b) shall terminate and no Earnout Shares shall be issuable hereunder;
(B) greater than or equal to $2,500,000 11.50 but more less than $2,000,00012.50, BNC then, (I) immediately prior to the consummation of such Change of Control, NewCo shall cause issue a number of NewCo Common Shares equal to the Agency Triggering Event I Earnout Shares (such number of shares to pay be reduced by the number of Earnout Shares that have become earned and payable prior thereto as a result of the prior occurrence of Triggering Event I, if any) to Sellers a Base the Pre-Closing Holders (in accordance with each Pre-Closing Holder’s respective Pro Rata Participation Percentage) and (II) thereafter, this Section 2.2(b) shall terminate and no further Earnout of $1,360,000 for that Earnout PeriodShares shall be issuable hereunder;
(iiiC) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less greater than or equal to $2,000,00012.50 but less than $14.00, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium then, (I) immediately prior to the Sellers for that Earnout Period;
(b) Within 20 days after the end consummation of each Earnout Periodsuch Change of Control, BNC NewCo shall deliver issue a number of NewCo Common Shares equal to the Sellers' Representatives a notice sum of (the "Earnout Notice") specifying (i1) the EBITDA for such Triggering Event I Earnout Period, Shares and (ii2) the Base Triggering Event II Earnout and Earnout Premium then due, if any, and Shares (iii) the remaining balance such number of the Earnout that may shares to be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAP.
(c) The amounts, if any, payable to the Sellers for each Earnout Period pursuant to this Section 2.3 shall be paid reduced by the Agency within 30 days following the end number of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice Shares that have become earned and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable prior thereto as a result of the resolution shall be paid by the Agency within ten (10) days prior occurrence of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of Triggering Event I or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the workTriggering Event II, if any) to the Pre-Closing Holders (in accordance with each Pre-Closing Holder’s respective Pro Rata Participation Percentage) and (II) thereafter, this Section 2.2(b) shall terminate and no further Earnout Shares shall be issuable hereunder; or
(D) greater than or equal to $14.00, then, (I) immediately prior to the consummation of such Change of Control, NewCo shall issue a number of NewCo Common Shares equal to the sum of (1) the Triggering Event I Earnout Shares, (2) the Triggering Event II Earnout Shares, and (3) the Triggering Event III Earnout Shares (such number of shares to be performed reduced by the Neutral Auditors number of Earnout Shares that have become earned and payable prior thereto as a result of the prior occurrence of Triggering Event I, Triggering Event II or Triggering Event III, if any) to the Pre-Closing Holders (in accordance with each Pre-Closing Holder’s respective Pro Rata Participation Percentage) and (II) thereafter, this Section 2.2(b) shall terminate and no further Earnout Shares shall be borne 50% by BNC and 50% by the Sellers. issuable hereunder.
(iv) The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be NewCo Common Share price targets set forth in a written statement delivered to Sellers the definitions of Triggering Event I, Triggering Event II and BNCTriggering Event III, and in clauses (A), (B), (C), and (D) of Section 2.2(b)(iii) shall be finalequitably adjusted for share splits, binding and conclusive on BNCreverse share splits, share dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with respect to NewCo Common Shares occurring after the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral AuditorsClosing.
Appears in 1 contract
Sources: Business Combination Agreement (Sports Entertainment Acquisition Corp.)
Earnout. (a) BNC shall cause The Earnout Recipients have the Agency right to pay to Sellers in accordance with Section 2.5 additional consideration receive up to a maximum an aggregate amount of $8,500,000 4,500,000 additional shares of Parent Class A Common Stock (the "Earnout"), based on the EBITDA, if any, generated by Milne ▇▇▇▇▇ in the future “Earnout Shares”) as follows:
(i) For each 3,500,000 Earnout Shares if the VWAP of Parent’s Common Stock is above $12.50 for any twenty (20) out of thirty (30) consecutive twelve (12) month segment of Trading Days during the sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount Period (the "Base Earnout") of $1,700,000 plus an “12.50 Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout PeriodTrigger”), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period.and
(ii) For each 1,000,000 Earnout Shares if the VWAP of Parent’s Common Stock is above $15.00 for any twenty (20) out of thirty (30) consecutive Trading Days during the Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to (together with the $2,500,000 but more than $2,000,00012.50 Earnout Trigger, BNC shall cause the Agency to pay to Sellers a Base “Earnout of $1,360,000 for that Triggers” and each an “Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;Trigger”).
(b) Within 20 days after the end of each The Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying Shares (i) shall be issued to the EBITDA for such recipients thereof free and clear of all Liens other than applicable federal and state securities restrictions and restrictions set forth in the Earnout PeriodEscrow Agreement, (ii) shall be deposited in escrow at Closing pursuant to an escrow agreement substantially in the Base form attached hereto as Exhibit J (the “Earnout and Earnout Premium then due, if anyEscrow Agreement”), and (iii) shall be released from escrow to the remaining balance extent they are earned as a result of the occurrence of the applicable Earnout that may Trigger or, to the extent not earned as a result of the occurrence of the applicable Earnout Trigger, shall thereupon be earned returned to Parent, in future periodseither case pursuant to the Earnout Escrow Agreement. The Earnout Shares, if anyearned, showing shall be distributed to the Earnout Recipients in reasonable detail accordance with the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed principles set forth in a manner consistent with GAAPthe Consideration Spreadsheet.
(c) The amountsIf, if anyat any time after the Closing and prior to or on the fifth (5th) anniversary of the Closing Date, payable there occurs any transaction resulting in a Change in Control, then the Earnout Triggers set forth in Sections 3.6(a)(i) - (ii) shall be deemed to have occurred provided, however, that, the Earnout Shares shall be released to the Sellers for each recipients thereof as of immediately prior to the Change in Control, and the recipients of such Earnout Period pursuant to this Section 2.3 Shares shall be paid by the Agency within 30 days following the end of the eligible to participate in such Change in Control transaction with respect to such Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout PeriodShares.
(d) During the preparation of each Earnout Notice Period, Parent shall use commercially reasonable efforts to remain listed as a public company on, and for the period Parent Class A Common Stock to be tradable over, Nasdaq; provided, however, that the foregoing shall not limit Parent from consummating a Change in Control or entering into a Contract that contemplates a Change in Control. Upon the consummation of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access Change in Control during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and Parent shall have no further obligations pursuant to this Section 3.6(d).
(iie) Except with respect to any amounts treated as imputed interest under Section 483 of the Sellers' Representatives and BNC shallCode, within 10 days following any issuance of shares of Earnout Shares pursuant to this Section 3.6 shall be treated as an adjustment to the merger consideration by the parties for Tax purposes, unless otherwise required by a change in applicable Tax Law. To the extent any Earnout Shares hereunder are required to be treated as contingent interest pursuant to Treasury Regulations Section 1.483-4(b), example (2), or other applicable Law, then the Earnout Shares so issued shall be represented by separate share certificates to the extent they represent contingent interest versus the principal component under such Objection, attempt to resolve the ObjectionRegulations or other applicable Law. Any resolution Earnout Share that is issued pursuant to this Section 3.6 will be treated as to any disputed items shall eligible for non-recognition treatment under Section 354 of the Code (and will not be final, binding and conclusive for BNCtreated as “other property” within the meaning of Section 356 of the Code).
(f) For the avoidance of doubt, the Agency Pre-PIPE Convertible Noteholder is not an Earnout Recipient and all Sellershas no right to earn, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution periodno rights to, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral AuditorsEarnout Shares.
Appears in 1 contract
Sources: Merger Agreement (Revelstone Capital Acquisition Corp.)
Earnout. (a) BNC shall cause Subject to the Agency to pay to Sellers in accordance with terms and conditions of this Section 2.5 2.6, as additional consideration up for the purchase of the Acquired Assets, Sellers shall be eligible to a maximum receive an additional earnout payment in an aggregate amount of not to exceed Two Million Dollars ($8,500,000 2,000,000) (the "Earnout"“Earnout Payment”), based upon the Case Volume for the period beginning on the EBITDAFirst Closing Date and ending on the date that is twelve (12) months after the First Closing Date (the “Earnout Period”), if anyas set forth below (as applicable, generated by Milne ▇▇▇▇▇ in the future as follows:“Earnout Target”):
(i) For If the Case Volume for the Earnout Period is more than 8,000 but less than 10,000, then Sellers will receive an Earnout Payment in an amount equal to Seven Hundred Fifty Thousand Dollars ($750,000); or
(ii) If the Case Volume for the Earnout Period is more than 10,000 but less than 11,000, then Sellers will receive an Earnout Payment in an amount equal to One Million Five Hundred Thousand Dollars ($1,500,000); or
(iii) If the Case Volume for the Earnout Period is more than 11,000, then Sellers will receive an Earnout Payment in an amount equal to Two Million Dollars ($2,000,000).
(b) Purchaser will provide to Parent or its designee or assigned beneficiary hereunder, a report within ten (10) Business Days after the end of each consecutive twelve (12) month segment of during the sixty (60) month period commencing on Earnout Period, excepting the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for Period, setting forth in reasonable detail the particular Earnout Period shall be credited against and reduce the remaining balance Purchaser’s good faith calculation of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of Case Volume during such month and cumulative Case Volume during the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period.
(ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAP.
(c) The amounts, if any, payable to the Sellers for each Earnout Period pursuant to this Section 2.3 shall be paid by the Agency within 30 days following Not later than thirty (30) Business Days after the end of the Earnout Period, subject Purchaser shall prepare and deliver (or cause to Section 2.3(ebe prepared and delivered) below if to Sellers a written statement (the Sellers' Representatives notify BNC “Earnout Statement”) setting forth Purchaser’s good faith calculation of their objection to the Earnout Notice for Case Volume during the Earnout Period. If Sellers objects to Purchaser’s calculation of the Case Volume set forth in the Earnout Statement, then Sellers shall notify Purchaser in writing of such objection within twenty (20) days following its receipt of the Earnout Statement. If, for any reason, Sellers fail to give Purchaser notice of any such objection within such 20-day period, then, for purposes of this Section 2.6(b), Purchaser’s calculation of the Case Volume set forth in the Earnout Statement shall be conclusive and binding upon the parties. If Sellers notify Purchaser in writing of such an objection within such 20-day period, then Purchaser and Sellers shall, for a period not to exceed thirty (30) days (unless otherwise agreed in writing by the parties) after the date upon which Purchaser receives Sellers’ objection notice (such period of time being hereinafter referred to as the “Objection Period”), work together diligently and in good faith to resolve any and all such objections. If, at or before the end of the Objection Period, Sellers and Purchaser resolve their disputes regarding the calculation of the Case Volume set forth in the Earnout Statement, then the calculation as so agreed to by Sellers and Purchaser shall be conclusive and binding upon the parties. If, at the end of the Objection Period, Sellers and Purchaser have not resolved their disputes regarding the calculation of the Case Volume, then such disputes shall, within five (5) Business Days after the expiration of the Objection Period, be submitted to arbitration pursuant to the procedure set forth in Section 10.2. The arbitrator shall only have the authority to resolve matters expressly submitted to it for resolution. The parties and their respective employees shall cooperate with the arbitrator during its engagement by promptly complying with all reasonable requests by the arbitrator for information, books, records and similar items. Sellers shall bear the fees and expenses of the arbitration for such determination unless it is determined by the arbitrator that the Earnout Target has been achieved, in which case, such fees and expenses shall be paid by Purchaser.
(d) During Sellers hereby acknowledge that the preparation contingent right of each Earnout Notice Sellers to receive any amounts pursuant to this Section 2.6 is solely a contractual right and the period is not a security for purposes of any review contemplated by this Section 2.3federal or state securities laws (and shall confer upon Sellers only the rights of a general, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representativesunsecured creditor under Applicable Law), upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representativeswill not be represented by any form of certificate or instrument, including the provision on a timely basis (iii) does not give Sellers any distribution rights, voting rights, liquidation rights, preemptive rights or other rights of all information reasonably requested holders of equity securities, (iv) is not assignable or otherwise transferable by the Sellers' Representatives Sellers except by operation of law or otherwise permitted under this Agreement (and necessary any purported assignment or useful transfer in reviewing violation hereof shall be null and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"void ab initio), the and (v) is speculative in nature and is not guaranteed until earned. Sellers shall be deemed to have accepted further acknowledge and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of agree that during the Earnout Period, and (ii) Purchaser shall have sole discretion with regard to all matters relating to the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result operations of the resolution Business; provided, however, that Purchaser shall not take any action in bad faith with the intention of reducing Case Volume or any amounts that may be paid payable pursuant to this Section 2.6.
(e) In the event of one or more Indemnifiable Claims by any Purchaser Indemnified Party against Sellers or Parent for Damages pursuant to Section 8.2, subject to the Agency within ten (10) days of the resolution. At the end of such 10-day resolution periodlimitations set forth in Section 8.4, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA Purchaser shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request reduce any amount payable pursuant to this Section 2.6 up to the American Arbitration Association to appoint the Neutral Auditors, who shall not aggregate amount of Damages that have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency been or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested may be sustained by the Neutral Auditors, a reasonable engagement letterPurchaser Indemnified Parties in connection with such Indemnifiable Claims. All fees and expenses relating The parties agree that any reduction of any amounts payable pursuant to this this Section 2.6 pursuant to the work, if any, to be performed by right of set-off in the Neutral Auditors immediately preceding sentence shall be borne 50% by BNC and 50% by treated as a decrease to the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral AuditorsPurchase Price.
Appears in 1 contract
Earnout. (a) BNC In connection with this Section 2.5, Acquisition Sub shall cause deliver to the Agency to pay to Sellers in accordance with Section 2.5 additional consideration up to a maximum aggregate amount of $8,500,000 (the "Earnout"), based on the EBITDA, if any, generated by Milne ▇▇▇▇▇ in the future as follows:
(i) For each consecutive twelve (12) month segment of the Representative no later than sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period.
(ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAP.
(c) The amounts, if any, payable to the Sellers for each Earnout Period pursuant to this Section 2.3 shall be paid by the Agency within 30 days following the end of the twelfth (12th) full calendar month following the Closing Date (such twelve (12) full month period beginning with the first day of the first month following the Closing Date and ending on the end of the twelfth (12th) full calendar month of such date, the "Earnout Period"), financial statements of Acquisition Sub setting forth the amount of aggregate Net Income of Acquisition Sub (the "Acquisition Sub Financial Statements"), along with a reasonably detailed description of the calculations of the amount of the aggregate Net Income. In the event Net Income of Acquisition Sub: (i) equals or exceeds the Bonus Amount, Acquisition Sub shall (A) pay to IVonyx $2,000,000, of which $1,000,000 shall be paid in four equal quarterly installments with the first installment due on the first day of the month following the end of the third Earnout Period, subject and (B) issue to Section 2.3(e) below if IVonyx 7,500,000 shares of Common Stock (the Sellers' Representatives notify BNC of their objection to the "Bonus Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and Payment"); (ii) cooperate with equals or exceeds the Sellers' RepresentativesTarget Amount and is less than the Bonus Amount, including the provision on a timely basis Acquisition Sub shall (A) pay to IVonyx $2,000,000, of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, which $1,000,000 shall be paid within thirty (30) days in four equal quarterly installments with the first installment due on the first day of the month following the three month period after the end of the Earnout Period, and (B) issue to IVonyx 2,500,000 shares of Common Stock (the "Target Earnout Payment"); or (iii) does not equal or exceed the Target Amount but equals or exceeds the Reduced Target Amount, Acquisition Sub shall (A) pay to IVonyx $666,667 plus an incremental 33% of the amount by which Net Income exceeds the Reduced Target Amount, to be paid in four equal quarterly installments with the first installment due on the first day of the month following the three month period after the end of the Earnout Period (the "Reduced Target Earnout Payment," with each of the Bonus Earnout Payment and the Target Earnout Payment referred to herein as an "Earnout Payment"), in each case in accordance with the terms of this Section 2.5. Unless the Representative gives written notice to Acquisition Sub on or before the twentieth (20th) calendar day after the Representative's receipt of the Acquisition Sub Financial Statements, specifying in reasonable detail all disputed items and the basis therefor, the Representative shall be deemed to have accepted the Acquisition Sub Financial Statements and Acquisition Sub shall have (i) no obligation to pay any Earnout Payment to IVonyx if Net Income is less than the Reduced Target Amount or (ii) an obligation to pay the Sellers' Representatives applicable Earnout Payment if Net Income is above the Reduced Target Amount. If the Representative so notifies Acquisition Sub of his objection to the Acquisition Sub Financial Statements, the Representative and BNC Acquisition Sub shall, within 10 twenty (20) days following such Objectionnotice, attempt to resolve the Objection. Any their differences in good faith, and any resolution by them as to any disputed items amounts shall be final, binding and conclusive for BNCconclusive. If, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At at the end of such 10-twenty (20) day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue the Representative and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives Acquisition Sub are unable to agree on resolve such disagreements, the Neutral Auditors, then BNC independent accountants of Acquisition Sub and the Sellers' Representatives Representative shall each have the right jointly select a third independent auditor of recognized national standing to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with resolve any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditors.remaining
Appears in 1 contract
Earnout. The Base Purchase Price shall be subject to periodic increases (and in no event to decrease) not to exceed an aggregate increase in the amount of Twelve Million Seven Hundred Sixty-Three Thousand Three Hundred Thirteen and No/100 Dollars ($12,763,313) as hereinafter set forth at such time or times (whether before or after the Initial Closing) and such increase(s) shall be deemed earned at such time as Seller shall have procured any tenant(s) for all or any portion of the Vacant Space and such tenant shall have accepted its space "as-is" (subject only to punch-list items to be timely completed by Seller at Seller's sole cost and expense), taken possession, opened for business and commenced full rental payments, including CAM, taxes and insurance on a pro-rata basis per their respective leases.
(a) BNC The increase to the Base Purchase Price in each such event shall cause the Agency to pay to Sellers be in accordance with Section 2.5 additional consideration up to a maximum aggregate an amount of $8,500,000 (the "EarnoutEarnout Purchase Price"), based on the EBITDA, if any, generated by Milne ▇▇▇▇▇ in the future ) determined as follows:
(i) For : the base rent payable by each consecutive such tenant during the first twelve (12) month segment months of its lease term during which such tenant is paying full base rent under its lease shall first be divided by a base rent divider of 7.2298% and then the sixty resulting quotient shall be reduced by the Aggregate Slippage of such tenants, if any. It is currently anticipated that the aggregate Earnout Purchase Price will be approximately Twelve Million Five Hundred Twenty-Six Thousand Five Hundred Eighty Nine and 00/100 Dollars (60) month period commencing $12,526,589), calculated based on an estimated aggregate base rent for the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") Vacant Space of $1,700,000 plus an Earnout premium 905,652,00, divided by the base rent divider of 7.2298% (less the "Earnout Premium") equal to 50% of the amount by which EBITDA Aggregate Slippage for such Earnout Period exceeds tenants, if any), which amount shall in no event increase above $2,500,000; provided12,763,313 in accordance -5- herewith. Purchaser shall deliver at the Initial Closing, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periodsa guaranty, in inverse order form and substance reasonably acceptable to Seller, from Inland Western Retail Real Estate Trust, Inc., a Maryland corporation, fully guarantying the timely payment and performance when and if due of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable all Purchaser's obligations with respect to the fifth Earnout Period.
(ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance payment of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAP.
(c) The amounts, if any, payable to the Sellers for each Earnout Period pursuant to this Section 2.3 Purchase Price. [ILLEGIBLE] guaranty shall be paid by a guaranty of payment and performance as opposed to a guaranty of [ILLEGIBLE] Seller shall not be required first to exhaust its remedies against Purchaser as a condition to its rights to proceed directly against the Agency within 30 days guarantor. The Seller shall have a maximum time period of 24 months following the end Initial Closing to earn all or any portion of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout PeriodPurchase Price.
(d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditors.
Appears in 1 contract
Sources: Purchase and Sale Agreement (Inland Western Retail Real Estate Trust Inc)
Earnout. (a) BNC If the First Year EBITDA exceeds $8,500,000, then the Buyer shall pay, or cause to be paid, to Seller aggregate consideration equal to the Agency product of (i) the excess of the First Year EBITDA over $8,500,000 multiplied by (ii) four (the "Excess Earnout Amount"). If the First Year EBITDA is less than $8,500,000, then the Seller shall pay, or cause to pay be paid, to Sellers in accordance with Section 2.5 additional Buyer aggregate consideration up equal to a maximum aggregate amount the product of (i) the excess of $8,500,000 over the First Year EBITDA multiplied by (ii) four (the "EarnoutShortfall Earnout Amount"). The Excess Earnout Amount and the Shortfall Earnout Amount shall hereinafter be referred to, based on as the EBITDAcontext requires, if anyas the "Earnout Amount". Notwithstanding the foregoing, generated by Milne ▇▇▇▇▇ in no event shall the future as followsExcess Earnout Amount exceed $28,000,000 or the Shortfall Earnout Amount exceed $15,000,000.
(b) On the Earnout Payment Date:
(i) For each consecutive twelve (12) month segment In the case of an Excess Earnout Amount, Buyer shall pay or cause to be paid to Seller one-half of the sixty Excess Earnout Amount in cash, and Parent, on behalf of Buyer, shall issue or cause to be issued to Seller an aggregate number of shares of Parent Common Stock equal to (601) month period commencing on the last day one-half of the month in which Excess Earnout Amount divided by (2) the greater of (A) $14.00 or (B) to the extent the Average Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period Price exceeds $2,500,00014.50, the Average Closing Price; provided, however, that in no event shall the number of shares of Parent Common Stock issued pursuant to this clause (Ai) that exceed 1,000,000 shares (the sum "Parent Common Stock Cap"). If the number of shares of Parent Common Stock to be issued pursuant to this clause (i) exceeds the Parent Common Stock Cap then the portion of the Base Excess Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period Amount that would have been payable in Parent Common Stock shall be credited against and reduce the remaining balance of the Earnout that may be earned paid in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Periodcash.
(ii) For each In the case of a Shortfall Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than Amount, Seller shall pay or cause to be paid to Buyer one-half of the Shortfall Earnout Amount in cash and transfer or cause to be transferred to Buyer, an aggregate number of shares of Parent Common Stock equal to (1) one-half of the Shortfall Earnout Amount divided by (2) the greater of (i) $2,500,000 but more than 14.00 or (ii) to the extent the Average Closing Price exceeds $2,000,00014.50, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;Average Closing Price.
(iii) For each The cash portion of any Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than Amount shall be payable by wire transfer of immediately available funds to such bank account or equal to $2,000,000accounts as per written instructions of Seller or Buyer, then neither BNC nor as the Agency shall pay any Base Earnout or Earnout Premium case may be, given to the Sellers for that Earnout Period;
(b) Within 20 other party at least five days after the end of each Earnout Period, BNC shall deliver prior to the Sellers' Representatives a notice (the "Earnout Notice") specifying Payment Date. No fractional shares of Parent Common Stock shall be issued or transferred pursuant to clause (i) the EBITDA for such Earnout Period, or (ii) above. If any party would be entitled to a fractional share of Parent Common Stock pursuant to clause (i) or (ii) above, such party shall receive an amount in cash equal to the Base Earnout and Earnout Premium then due, if any, and product of (iiiA) such fractional share multiplied by (B) the remaining balance greater of (i) $14.00 or (ii) to the Earnout that may be earned in future periodsextent the Average Closing Price exceeds $14.50, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAPAverage Closing Price.
(civ) The amounts, if any, payable to the Sellers for each Earnout Period pursuant to this Section 2.3 Buyer shall be paid by the Agency within 30 days following the end of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request withhold and set-off against any Excess Earnout Amount the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with amount of any claim for indemnification or payment of the Sellers, the Sellers' Representatives, BNC, the Agency Losses provided for in Section 9.1 or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree amounts payable by Seller to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating Buyer pursuant to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral AuditorsSection 4.
Appears in 1 contract
Earnout. (a) BNC On the Closing Date, Parent shall cause deposit all of the Agency Escrowed Earnout Shares with the Escrow Agent, to pay be held in an escrow account for the purpose of distributing such shares to Sellers the Company Stockholders upon the achievement of certain targets, as described in this Section 2.8, provided that 7.5% of such Escrowed Earnout Shares shall be part of the Escrowed Indemnity Shares and placed in a separate escrow account in satisfaction of the indemnity set forth in Article VII hereof in accordance with Section 2.5 additional consideration 2.10 hereof. The Escrowed Earnout Shares shall be allocated to the Company Stockholders in accordance with Section 2.6(c) of the Company Disclosure Statement and in accordance with the terms and conditions of this Section 2.8 and an agreement to be entered into at the Closing between Parent, the Escrow Representative, and Continental Stock Transfer & Trust Company (the “Escrow Agent”) (or another escrow agent mutually agreed to by Parent and the Company), in customary form and substance as reasonably agreed to by Parent and the Company (the “Escrow Agreement”).
(b) Subject to Section 2.8(e) hereof, if between the first and the third anniversary of the Closing Date, the Closing Price of Parent Common Stock equals or exceeds $20.00 per share (the “First Target”) for 20 trading days within any 30 trading day period, then within ten Business Days after the achievement of such target, Parent and the Escrow Representative shall instruct the Escrow Agent to release one Tranche of Escrowed Earnout Shares (which amount may be reduced by up to a maximum aggregate amount 7.5% of $8,500,000 such shares (the "Earnout"“First Target Indemnity Shares”) pursuant to Article VII hereof and the Escrow Agreement), based on which shares shall be allocated to the EBITDACompany Stockholders in accordance with Section 2.6(c) hereof and Section 2.6(c) of the Company Disclosure Statement (the “First Target Shares”).
(c) Subject to Section 2.8(e) hereof, if anybetween the second and the fourth anniversary of the Closing Date, generated the Closing Price of Parent Common Stock equals or exceeds $24.50 per share (the “Second Target”) for 20 trading days within any 30 trading day period, then within ten Business Days after the achievement of such target, Parent and the Escrow Representative shall instruct the Escrow Agent to release (i) one Tranche of Escrowed Earnout Shares (which amount may be reduced by Milne ▇▇▇▇▇ up to 7.5% of such shares (the “Second Target Indemnity Shares”) pursuant to Article VII hereof and the Escrow Agreement), which shares shall be allocated to the Company Stockholders in accordance with Section 2.6(c) hereof and Section 2.6(c) of the Company Disclosure Statement (the “Second Target Shares”) and (ii) the First Target Shares, if such shares were not released pursuant to Section 2.8(b) . If the First Target has not been achieved for such 20 trading days during the two-year period referenced in Section 2.8(b) and the Second Target has not been achieved for such 20 trading days during the two-year period referenced in this Section 2.8(c), the First Target Shares shall no longer be outstanding and shall be cancelled.
(d) Subject to Section 2.8(e) hereof, if between the third and the fifth anniversary of the Closing Date, the Closing Price of Parent Common Stock equals or exceeds $30.50 per share (the “Third Target”) for 20 trading days within any 30 trading day period, then within ten Business Days after the achievement of such target, Parent and the Escrow Representative shall instruct the Escrow Agent to release (i) one Tranche of Escrowed Earnout Shares (which amount may be reduced by up to 7.5% of such shares (the “Third Target Indemnity Shares”) pursuant to Article VII hereof and the Escrow Agreement), which shares shall be allocated to the Company Stockholders in accordance with Section 2.6(c) hereof and Section 2.6(c) of the Company Disclosure Statement (the “Third Target Shares”) and (ii) the Second Target Shares, if such shares were not released pursuant to Section 2.8(c) . If the Second Target has not been achieved for such 20 trading days during the two-year period referenced in Section 2.8(c) and the Third Target has not been achieved for such 20 trading days during the two-year period referenced in this Section 2.8(d), the Second Target Shares shall no longer be outstanding and shall be cancelled. If the Third Target has not been achieved for such 20 trading days during the two-year period referenced in this Section 2.8(d), the Third Target Shares shall no longer be outstanding and shall be cancelled.
(e) In the event of a Change of Control or Reorganization Event, any Escrowed Earnout Shares remaining in the future escrow account and not theretofore cancelled shall be released or cancelled as follows: (i) to the extent that the Change of Control or Reorganization Event Consideration exceeds the First Target, any First Target Shares shall be released, (ii) to the extent that the Change of Control or Reorganization Event Consideration exceeds the Second Target, any Second Target Shares shall be released, and (iii) to the extent that the Change of Control or Reorganization Event Consideration exceeds the Third Target, any Third Target Shares shall be released. To the extent that the Change of Control or Reorganization Event Consideration does not exceed any given Target, the Target Shares with respect to such Tranche shall no longer be outstanding and shall be cancelled, effective upon completion of such Change of Control or Reorganization Event.
(f) The target closing price triggers listed in Sections 2.8(b), (c) and (d) hereof (such dollar amounts, the “Closing Price Triggers”) and the Escrowed Earnout Shares to be distributed upon achievement of said targets shall be adjusted from time to time as follows:
(i) For each consecutive twelve (12) month segment In the event the outstanding shares of Parent Common Stock shall be subdivided or reclassified into a greater number of shares of Parent Common Stock, the sixty (60) month period commencing Closing Price Triggers in effect at the close of business on the last day upon which such subdivision or reclassification becomes effective shall be equitably and proportionately reduced, and conversely, in case outstanding shares of the month in which Parent Common Stock shall each be combined or reclassified into a smaller number of shares of Parent Common Stock, the Closing occurs (each Price Triggers in effect at the close of business on the day upon which such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period combination or reclassification becomes effective shall be credited against equitably and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00proportionately increased, such that no Earnout payments would be payable with respect reduction or increase, as the case may be, to become effective immediately prior to the fifth Earnout Periodopening of business on the day following the day upon which such subdivision or combination becomes effective.
(ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium Pursuant to the Sellers Escrow Agreement, in connection with any such subdivision or reclassification into a greater number of shares of Parent Common Stock, the Escrowed Earnout Shares distributable upon the achievement of the applicable milestones shall be equitably and proportionately increased and, conversely, in connection with any such combination or reclassification into a smaller number of shares of Parent Common Stock, the Escrowed Earnout Shares distributable upon the achievement of the applicable milestones shall be equitably and proportionately reduced. For example, for purposes of clarity, (x) in the case of a 2-for-1 stock split of Parent Common Stock, the Escrowed Earnout Shares distributable upon the achievement of the first milestone shall be increased from 9,666,667 to 19,333,334 and (y) in the case of a 1-for-2 reverse stock split of Parent Common Stock, the Escrowed Earnout Shares distributable upon the achievement of the first milestone shall be reduced from 9,666,667 to 4,833,334 (assuming for the purposes of this example that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver there are no adjustments to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance number of the Earnout that may be earned shares of Parent Common Stock in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAPeach Tranche).
(cg) The amountsWithout limiting the specificity of any of the foregoing, if any, payable it is the intent of the parties to provide for fair and equitable adjustments to the Sellers for each Closing Price Triggers and the Escrowed Earnout Period pursuant Shares to preserve the economic benefits intended to be provided to the Company Stockholders under the terms of this Section 2.3 shall be paid by Agreement in the Agency within 30 days following the end event there is any change in or conversion of the Earnout PeriodParent Common Stock and, subject to Section 2.3(e) below if accordingly, the Sellers' Representatives notify BNC Parent Board of their objection to Directors shall make appropriate equitable adjustments in connection therewith, as determined in the Earnout Notice for good faith judgment of the Earnout PeriodParent Board of Directors.
(h) Neither Parent, the Company Stockholders nor any Affiliate thereof shall take any action, directly or indirectly, with the intent or effect of influencing or manipulating the market prices of Parent Common Stock during any measurement period described in Sections 2.8(b), (c) and (d) During hereof. Furthermore, for the preparation purposes of each Earnout Notice and the determining whether a Closing Price Trigger has been achieved for 20 trading days within any 30-trading-day period of any review contemplated by this Section 2.3pursuant to Sections 2.8(b), BNC shall cause Milne ▇▇▇▇▇ to (ic) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (iid) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution periodhereof, any items remaining in dispute, including without limitation, exclusions of days during which any such persons (A) have outstanding a public announcement or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses statement relating to the workpurchase or sale of equity securities of Parent (other than ordinary-course, if anygeneric statements as to the possibility of such purchases from time to time and which do not specify either the amount of any such potential purchases nor the price or prices at which such purchases may be made), whether in the public market or otherwise, or (B) have made, in the aggregate, to be performed by the Neutral Auditors shall be borne 50best knowledge of Parent, purchases of Parent Common Stock exceeding 1% by BNC and 50% by of the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still average daily trading volume reported for the security during the four calendar weeks preceding the week in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selectionwhich such purchases were made, shall not be set forth in a written statement delivered to Sellers and BNC, and counted as days on which such Closing Price Trigger has been achieved. Such excluded days shall be final, binding and conclusive on BNC, extend the Agency, the Sellers' Representatives and each 30-trading-day measurement period by an equal number of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditorsdays.
Appears in 1 contract
Earnout. (a) BNC Following the Closing, upon the terms and subject to the conditions set forth herein, the Sellers shall cause have the Agency contingent right to pay to Sellers in accordance with Section 2.5 receive as additional consideration up to a maximum for the Share Exchange an aggregate amount of $8,500,000 additional Pubco Ordinary Shares equal to (i) the number of Earnout Shares, multiplied by (ii) a percentage equal to (A) 100% minus (B) the Maxim Fee Percentage (the "Earnout"“Delta Earnout Shares”), based on .
(b) The Sellers shall have the EBITDA, if any, generated by Milne ▇▇▇▇▇ in contingent right to receive the future as followsDelta Earnout Shares if:
(i) For each consecutive twelve (12) month segment of the sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") 2025 Revenue is equal to 50% of the amount by which EBITDA for such Earnout Period or exceeds Seven Hundred Million Dollars ($2,500,000700,000,000); provided, however, and
(ii) either (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of 2025 EBITDA is equal to or exceeds Twenty Million Dollars ($3,400,000, and 20,000,000) or (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods 2025 Net Income is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period.
(ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to or exceeds Ten Million Dollars ($2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAP10,000,000).
(c) The amounts, if any, payable Delta Earnout Shares shall be issued to the Sellers for each Earnout Period pursuant to this Section 2.3 shall be paid by the Agency within 30 ten (10) calendar days following the end date on which Pubco files the 2025 Annual Report with the SEC. The Delta Earnout Shares shall be allocated amongst the Sellers pro rata based on the number of Purchased Shares owned by each Seller as of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout PeriodClosing.
(d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to If (i) provide the Sellers' RepresentativesDelta Earnout Shares are issued pursuant to this Section 2.4, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate within one (1) year of filing the 2025 Annual Report with the Sellers' RepresentativesSEC, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout NoticePubco’s financial statements that are set forth therein are restated, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed iii) prior to the Earnout Notice. If time of such restatement Pubco has not changed its auditor that conducted the Sellers' Representatives notify BNC audit of an Objection to an Earnout Notice, (i) Pubco’s audited financial statements set forth in the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period2025 Annual Report, and (iiiv) in such restatement, either (x) 2025 Revenue (as restated, the Sellers' Representatives “Restated 2025 Revenue”) is below $700,000,000 or (y) (A) 2025 EBITDA (as restated, the “Restated 2025 EBITDA”) is below $20,000,000 and BNC shall(B) 2025 Net Income (as restated, within 10 days following such Objectionthe “Restated Net Income”) is equal to or exceeds $10,000,000, attempt then a percentage equal to resolve the Objection. Any resolution as to any disputed items greatest of the 2025 Revenue Shortfall Percentage, the 2025 EBITDA Shortfall Percentage and the 2025 Net Income Shortfall Percentage, in each case, of the number of Delta Earnout Shares shall be finalreturned by the Sellers to Pubco and cancelled; provided, binding and conclusive that in lieu of returning such Delta Earnout Shares the Sellers may, in their sole discretion, either (A) return other Pubco Ordinary Shares to Pubco and/or (B) pay an amount in cash to Pubco equal to the number of Delta Earnout Shares so required to be returned, multiplied by the VWAP of Pubco Ordinary Shares for BNCthe twenty (20) Trading Days ending immediately prior the date of such payment. For the avoidance of doubt, the Agency foregoing provisions of this Section 2.4(d) (I) shall not apply if Pubco changes it auditor after the filing of the 2025 Annual Report and all Sellersprior to such restatement, and (II) will not impose any sums payable as a result restrictions on transfer or disposition of the resolution shall be paid Delta Earnout Shares by the Agency within ten (10) days of Sellers after the resolution. At the end issuance of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions Delta Earnout Shares pursuant to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditorsthis Section 2.4.
Appears in 1 contract
Sources: Merger and Share Exchange Agreement (Kaival Brands Innovations Group, Inc.)
Earnout. (ai) BNC At the Acquisition Merger Effective Time, (A) the Company shall cause issue and deposit with the Agency Escrow Agent a number of New Company Units equal to pay to Sellers in accordance with Section 2.5 additional consideration up to a maximum aggregate amount of $8,500,000 the Maximum Seller Earnout (the "Earnout"), based on “Earnout Units”) and (B) Pubco shall issue and deposit with the EBITDA, if any, generated by Milne Escrow Agent (x) a number of shares of Pubco Class B Common Stock equal to the Maximum Seller Earnout (the “Seller Earnout Shares”) and (y) a number of shares of Pubco Class A Common Stock equal to the sum of (I) Maximum Sponsor Earnout and (II) the Maximum ▇▇▇▇▇▇▇▇▇ Earnout (collectively, the “Pubco Earnout Shares” and, together with the Seller Earnout Shares, the “Earnout Shares”), in each case, to be held in escrow in accordance with the future terms of the Escrow Agreement and this Section 3.01(c).
(ii) Upon receipt of the Earnout Shares and Earnout Units, the Escrow Agent shall place the Earnout Shares and Earnout Units into one or more escrow accounts in accordance with the Escrow Agreement, and such Earnout Shares and Earnout Units shall be earned, released and delivered as follows:
(iA) For On the occurrence of Earnout Triggering Event I, Pubco and the Company shall cause the Escrow Agent to release to each consecutive twelve Earnout Participant (121) month segment a number of New Company Units equal to (x) fifteen million (15,000,000) (the sixty “First Earnout Units”) multiplied by (60y) month its Earnout Pro Rata Portion and (2) a number of shares of Pubco Class B Common Stock equal to (x) fifteen million (15,000,000) (the “First Earnout Shares”) multiplied by (y) its Earnout Pro Rata Portion.
(B) On the occurrence of Earnout Triggering Event II, Pubco and the Company shall cause the Escrow Agent to release to each Earnout Participant (1) a number of New Company Units equal to (x) fifteen million (15,000,000) (the “Second Earnout Units”) multiplied by (y) its Earnout Pro Rata Portion and (2) a number of shares of Pubco Class B Common Stock equal to (x) fifteen million (15,000,000) (the “Second Earnout Shares”) multiplied by (y) its Earnout Pro Rata Portion.
(C) On the occurrence of Earnout Triggering Event III, Pubco and the Company shall cause the Escrow Agent to release to each Earnout Participant (1) a number of New Company Units equal to (x) ten million (10,000,000) (the “Third Earnout Units”) multiplied by (y) its Earnout Pro Rata Portion and (2) a number of shares of Pubco Class B Common Stock equal to (x) ten million (10,000,000) (the “Third Earnout Shares”) multiplied by (y) its Earnout Pro Rata Portion.
(D) Promptly following the filing of Pubco’s Form 10-K with the SEC for the fiscal year ending December 31, 2023:
(1) If the Pubco EBITDA for all of 2023 is less than $12,416,530, no New Company Units or shares of Pubco Class B Common Stock shall be released from escrow in relation to the Pubco EBITDA targets for the 2023 Earnout Measurement Periods. If the Pubco EBITDA for all of 2023 is at least $12,416,530, and:
(I) The Pubco EBITDA for one (but not both) period commencing listed on the last day of the month in which the Closing occurs Schedule 3.01(c)(ii)(D) (each such twelveperiod, a “2023 Earnout Measurement Period”) is equal to or greater than the Pubco EBITDA listed for such 2023 Earnout Measurement Period on Schedule 3.01(c)(ii)(D), Pubco and the Company shall cause the Escrow Agent to release to each Earnout Participant (I) a number of New Company Units equal to (x) seven million five hundred thousand (7,500,000) multiplied by (y) its Earnout Pro Rata Portion and (II) a number of shares of Pubco Class B Common Stock equal to (x) seven million five hundred thousand (7,500,000) multiplied by (y) its Earnout Pro Rata Portion.
(II) The Pubco EBITDA for both 2023 Earnout Measurement Periods is equal to or greater than the Pubco EBITDA listed for such 2023 Earnout Measurement Periods on Schedule 3.01(c)(ii)(D), Pubco and the Company shall cause the Escrow Agent to release to each Earnout Participant (I) a number of New Company Units equal to (x) fifteen million (15,000,000) multiplied by (y) its Earnout Pro Rata Portion and (II) a number of shares of Pubco Class B Common Stock equal to (x) fifteen million (15,000,000) multiplied by (y) its Earnout Pro Rata Portion.
(III) The Pubco EBITDA for neither 2023 Earnout Measurement Period is equal to or greater than the Pubco EBITDA listed for such 2023 Earnout Measurement Period on Schedule 3.01(c)(ii)(D), no New Company Units or shares of Pubco Class B Common Stock shall be released from escrow in relation to the Pubco EBITDA targets for the 2023 Earnout Measurement Periods.
(2) If the Pubco Revenue for all of 2023 is less than $70 million, no New Company Units or shares of Pubco Class B Common Stock shall be released from escrow in relation to the Pubco Revenue targets for the 2023 Earnout Measurement Periods. If the Pubco Revenue for all of 2023 is at least $70 million, and:
(I) The Pubco Revenue for one (but not both) 2023 Earnout Measurement Period is equal to or greater than the Pubco Revenue listed for such 2023 Earnout Measurement Period on Schedule 3.01(c)(ii)(D), Pubco and the Company shall cause the Escrow Agent to release to each Earnout Participant (I) a number of New Company Units equal to (x) two million five hundred thousand (2,500,000) multiplied by (y) its Earnout Pro Rata Portion and (II) a number of shares of Pubco Class B Common Stock equal to (x) two million five hundred thousand (2,500,000) multiplied by (y) its Earnout Pro Rata Portion.
(II) The Pubco Revenue for both 2023 Earnout Measurement Periods is equal to or greater than the Pubco Revenue listed for such 2023 Earnout Measurement Periods on Schedule 3.01(c)(ii)(D), Pubco and the Company shall cause the Escrow Agent to release to each Earnout Participant (I) a number of New Company Units equal to (x) five million (5,000,000) multiplied by (y) its Earnout Pro Rata Portion and (II) a number of shares of Pubco Class B Common Stock equal to (x) five million (5,000,000) multiplied by (y) its Earnout Pro Rata Portion.
(III) The Pubco Revenue for neither 2023 Earnout Measurement Period is equal to or greater than the Pubco Revenue listed for such 2023 Earnout Measurement Period on Schedule 3.01(c)(ii)(D), no New Company Units or shares of Pubco Class B Common Stock shall be released from escrow in relation to the Pubco Revenue targets for the 2023 Earnout Measurement Periods.
(E) Promptly following the filing of Pubco’s Form 10-month segmentQ or 10-K with the SEC for each period listed on Schedule 3.01(c)(ii)(E) (each, an "a “2024 Earnout Measurement Period"” and, together with the 2023 Earnout Measurement Periods, a “Earnout Measurement Period”):
(1) that Milne if the Pubco EBITDA for such 2024 Earnout Measurement Period is equal to or greater than the Pubco EBITDA listed for such 2024 Earnout Measurement Period on Schedule 3.01(c)(ii)(E), Pubco and the Company shall cause the Escrow Agent to release to each Earnout Participant, with respect to each such 2024 Earnout Measurement Period for which the Pubco EBITDA target was met: (I) a number of New Company Units equal to (x) two million five hundred thousand (2,500,000) multiplied by (y) its Earnout Pro Rata Portion and (II) a number of shares of Pubco Class B Common Stock equal to (x) two million five hundred thousand (2,500,000) multiplied by (y) its Earnout Pro Rata Portion.
(2) if the Pubco Revenue for such 2024 Earnout Measurement Period is equal to or greater than the Pubco Revenue listed for such Earnout Measurement Period on Schedule 3.01(c)(ii)(E), Pubco and the Company shall cause the Escrow Agent to release to each Earnout Participant, with respect to each such 2024 Earnout Measurement Period for which the Pubco Revenue target was met: (I) a number of New Company Units equal to (x) two million five hundred thousand (2,500,000) multiplied by (y) its Earnout Pro Rata Portion and (II) a number of shares of Pubco Class B Common Stock equal to (x) two million five hundred thousand (2,500,000) multiplied by (y) its Earnout Pro Rata Portion.
(iii) Notwithstanding the foregoing:
(A) Until a number of Earnout Shares equal to the Maximum Sponsor Earnout have been earned, released and delivered to Sponsor in accordance with Section 3.01(c)(ii), each time the Sponsor is entitled to be delivered a New Company Unit and share of Pubco Class B Common Stock in accordance with Section 3.01(c)(ii), Pubco and the Company shall instead cause the Escrow Agent to release to Sponsor one Pubco Earnout Share.
(B) After a number of Earnout Shares equal to the Maximum Sponsor Earnout have been earned, released and delivered to Sponsor in accordance with Section 3.01(c)(ii), each time the Sponsor is entitled to be delivered a New Company Unit and share of Pubco Class B Common Stock in accordance with Section 3.01(c)(ii), the Earnout Units and Earnout Shares shall instead be delivered to the other Earnout Participants (excluding ▇▇▇▇▇▇▇▇▇) in proportion to their Earnout Pro Rata Portions.
(C) Each time ▇▇▇▇▇▇▇▇▇ generates EBITDA is entitled to be delivered a New Company Unit and share of more than $2,500,000Pubco Class B Common Stock in accordance with Section 3.01(c)(ii), then BNC Pubco and the Company shall instead cause the Agency Escrow Agent to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal release to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period.
(ii) For each Earnout Period that Milne ▇▇▇▇▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base one Pubco Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAPShare.
(civ) The amounts, if any, payable In the event that Earnout Triggering Event II occurs prior to the Sellers for each occurrence of Earnout Period pursuant to this Section 2.3 shall be paid by the Agency within 30 days following the end of the Triggering Event I, Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall Triggering Event I will be deemed to have accepted been achieved, the First Earnout Units and agreed First Earnout Shares shall also be deemed to have vested, and Pubco and the Company shall cause the Escrow Agent to release the First Earnout Units and First Earnout Shares in accordance with Section 3.01(c)(ii). In the event that Earnout Triggering Event III occurs prior to the occurrence of Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Triggering Event I or Earnout NoticeTriggering Event II, (i) the undisputed portion of the Base Earnout Triggering Event I and Earnout PremiumTriggering Event II, as applicable, will be deemed to have been achieved, and the First Earnout Units and First Earnout Shares and Second Earnout Units and Second Earnout Shares shall also be paid within thirty deemed to have vested, and Pubco and the Company shall cause the Escrow Agent to release the First Earnout Units and First Earnout Shares and Second Earnout Units and Second Earnout Shares in accordance with Section 3.01(c)(ii).
(30v) days Promptly following the end filing of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such Pubco’s 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue K with the SEC for the 2023 fiscal year and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditors.2024 fiscal year:
Appears in 1 contract
Sources: Agreement and Plan of Merger (FAST Acquisition Corp. II)
Earnout. (a) BNC In addition to the Closing Consideration, Seller shall cause be entitled to receive the Agency to pay to Sellers amounts set forth in accordance with this Section 2.5 additional consideration up to a maximum aggregate amount of $8,500,000 (each, an “Earnout Payment” and together, the "Earnout"“Earnout Payments”), based on if any that become payable pursuant to the EBITDA, if any, generated by Milne ▇▇▇▇▇ in the future as follows:
(i) For each consecutive twelve (12) month segment of the sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount terms hereof. A sample calculation of the Earnout Premium Payments is included on Schedule 1.9.
(b) If Buyer’s Adjusted EBITDA for the particular 2025 calendar year (the “First Earnout Period Period”) is greater than Four Million Dollars ($4,000,000), Buyer shall pay Seller an amount equal to Five Hundred Thousand Dollars ($500,000).
(c) If Buyer’s Adjusted EBITDA for the 2026 calendar year (the “Second Earnout Period” and together with the First Earnout Period, the “Earnout Periods” and each, an “Earnout Period”) is greater than Five Million Dollars ($5,000,000), Buyer shall pay Seller an amount equal to One Million Dollars ($1,000,000).
(d) The applicable Earnout Payment shall be credited against and reduce the remaining balance made within ten (10) business days of the Earnout that may be earned in future Earnout Periods, in inverse order final determination of payment. For example, if the Buyer’s Adjusted EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth applicable Earnout Period.
(iie) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less No later than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
ninety (iii90) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC Buyer shall deliver to Seller Buyer’s good faith calculations of the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the Buyer’s Adjusted EBITDA for such the applicable Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne . ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAP.
(c) The amounts, if any, payable to ’s undisputed calculations of the Sellers Buyer’s Adjusted EBITDA for each the appliable Earnout Period pursuant to this Section 2.3 shall be paid by final, conclusive and binding on Seller unless Seller provides a Dispute Notice to Buyer no later than thirty (30) calendar days after Buyer’s delivery of its calculations to Seller. The Dispute Notice shall set forth in reasonable detail the Agency within 30 days following nature of any disagreement so asserted and the end estimated dollar amount of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne disputed sums. ▇▇▇▇▇ and Seller shall attempt to resolve the matters raised in a Dispute Notice in good faith. If any such matters remain unresolved by the date that is thirty (30) calendar days after the date on which the Dispute Notice was delivered to Buyer, Buyer and Seller shall jointly submit the disputed items to the Accounting Firm (appointed in accordance with Section 1.6(c) mutatis mutandis).
(f) During the Earnout Period, Buyer shall (i) provide use good faith efforts to operate the Sellers' RepresentativesBusiness in a profitable manner and (ii) not take any actions, upon reasonable notice, full access during normal business hours the intent or the primary effect of which is to avoid or reduce the maximum Earnout Payment payable hereunder.
(g) Notwithstanding anything to the bookscontrary in this Agreement, recordsthe Earnout Payments shall become immediately and automatically due and payable to Seller upon the occurrence of any of the following events: (i) any bankruptcy, work papersreorganization, facilities and employees assignment for the benefit of Milne creditors, or other proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding initiated by or against Buyer; (ii) any sale of all or substantially all of the assets of Buyer; or (iii) any person or group of persons (excluding ▇▇▇▇▇▇▇ to review the preparation Entities and any other Affiliates of Buyer) directly or indirectly acquires more than 50% of the Earnout Notice and (ii) cooperate with the Sellers' Representativesequity interests of Buyer, including the provision on a timely basis by way of all information reasonably requested by the Sellers' Representatives and necessary merger, consolidation or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifyingotherwise (but, in reasonable detaileach case, all disputed items and for the basis therefor (an "Objection"avoidance of doubt, excluding internal reorganization transactions), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditors.
Appears in 1 contract
Sources: Asset Purchase Agreement (Commercial Vehicle Group, Inc.)
Earnout. (a) BNC After the Closing, subject to the terms and conditions set forth herein, the Sellers shall cause have the Agency contingent right to pay receive in the aggregate up to Sellers in accordance an additional Three Million Two Hundred Thousand (3,200,000) Pubco Ordinary Shares (subject to equitable adjustment for share splits, share dividends, combinations, recapitalizations and the like after the Closing, including to account for any equity securities into which such shares are exchanged or converted) (the “Earnout Shares” and, together with Section 2.5 the Exchange Shares, the “Consideration Shares”) as additional consideration up to a maximum aggregate amount of $8,500,000 (the "Earnout"), based on Pubco achieving certain Net Revenue milestones for each of the EBITDAfiscal years 2023 and 2024 (each, if anya “Net Revenue Earnout Year”; such period, generated by Milne ▇▇▇▇▇ in the future “Earnout Period”). The Sellers’ right to receive the Earnout Shares shall vest and become due and issuable as follows:
(i) For each consecutive twelve In the event that the Net Revenue of Pubco as reported in the audited financial statements set forth in the annual report of Pubco for the fiscal year ended December 31, 2023 filed with the SEC is equal to or exceeds One Hundred Seventy Million Dollars (12$170,000,000) month segment (the “2023 Net Revenue Earnout Milestone”), then, subject to the terms and conditions of the sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segmentthis Agreement, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount shall be entitled to receive One Million Six Hundred Thousand (the "Base Earnout"1,600,000) of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for Shares (the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period“First Tranche”), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Periodeach Seller receiving its Pro Rata Share thereof.
(ii) For each Earnout Period In the event that Milne ▇▇▇▇▇ generates the Net Revenue of Pubco as reported in the audited financial statements set forth in the annual EBITDA less than or report of Pubco for the fiscal year ended December 31, 2024 filed with the SEC is equal to or exceeds Two Hundred Million Dollars ($2,500,000 but more than $2,000,000200,000,000) (the “2024 Net Revenue Earnout Milestone” and, BNC shall cause together with the Agency to pay to Sellers a Base 2023 Net Revenue Earnout of $1,360,000 for that Milestone, the “Net Revenue Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000Milestones”), then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium then, subject to the terms and conditions of this Agreement, the Sellers for shall be entitled to receive One Million Six Hundred Thousand (1,600,000) of the Earnout Shares (the “Second Tranche”), with each Seller receiving its Pro Rata Share thereof. In the event that the applicable Earnout Period;Milestones are not met during the applicable periods, the Sellers shall not be entitled to receive the applicable portion of the Earnout Shares.
(b) Within 20 days after the end of each Any Earnout Period, BNC Shares issued hereunder to Sellers shall deliver be subject to the Sellers' Representatives a notice (same restrictions and lock-up period(s) applicable to the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAPExchange Shares.
(c) The amountsAs soon as practicable (but in any event within twenty (20) Business Days) after the completion of the audited consolidated financial statements for Pubco and its Subsidiaries for each Net Revenue Earnout Year, if any, payable Pubco’s Chief Financial Officer (the “CFO”) will prepare and deliver to the deliver to the Post-Closing Pubco Board for approval by a Disinterested Independent Director Majority a written statement (each, an “Earnout Statement”) that sets forth the CFO’s determination in accordance with the terms of this Section 2.4 of the Net Revenue for such Net Revenue Earnout Year and whether the applicable Net Revenue Earnout Milestone has been satisfied for such Net Revenue Earnout Year. If a Disinterested Independent Director Majority determines in good faith that the Sellers are entitled to receive Earnout Consideration for each having achieved a Net Revenue Earnout Period Milestone pursuant to this Section 2.3 shall be paid by an Earnout Statement, the Agency within 30 days following the end applicable portion of the Earnout Period, subject to Section 2.3(eConsideration will be due upon such final determination and Pubco shall deliver such Earnout Shares within ten (10) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout PeriodBusiness Days thereafter.
(d) During Following the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to Closing (i) provide the Sellers' Representatives, upon reasonable notice, full access including during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice Period), Pubco and (ii) cooperate with the Sellers' Representativesits Subsidiaries, including the provision Target Companies, shall be entitled to operate their respective businesses based upon the business requirements of Pubco and its Subsidiaries, consistent with past practice. Each of Pubco and its Subsidiaries, including the Target Companies, shall be permitted, following the Closing (including during the Earnout Period), to make changes at its sole discretion to its operations, organization, personnel, accounting practices and other aspects of its business, including actions that may have an impact on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents ability of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days Sellers to review earn the Earnout NoticeShares, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed not have any right to have accepted and agreed to claim the Earnout Notice. If the Sellers' Representatives notify BNC loss of an Objection to an Earnout Notice, (i) the undisputed all or any portion of the Base any Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable Shares or other damages as a result of such decisions. Notwithstanding the resolution foregoing, Pubco shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNCnot, and shall be finalcause its Subsidiaries, binding including the Target Companies, not to, take or omit to take any action that is in bad faith and conclusive on BNChas the primary purpose of avoiding, reducing or preventing the Agency, the Sellers' Representatives and each achievement or attainment of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral AuditorsNet Revenue Earnout Milestones.
Appears in 1 contract
Sources: Business Combination Agreement (Hainan Manaslu Acquisition Corp.)
Earnout. (a) BNC In addition to the Cash Payment, Sellers will be entitled to certain additional consideration from Buyer after the Closing pursuant to the terms and conditions of this Section 1.8.
(b) With respect to the twelve-month period beginning on the Closing Date and each of the two succeeding twelve-month periods (each of such three twelve-month periods, an “Earnout Period”), the Sellers (taken together) shall cause be entitled to receive a cash payment from Buyer in an amount (such amount, an “Earnout Amount”) equal to (x) 1.25%, multiplied by (y) the Agency sum of (A) the Company’s Written Premium for such Earnout Period and (B) the Company’s Fees for such Earnout Period; provided, however, that if at any time prior to pay the end of the final Earnout Period, the Company or any material portion of its assets or business is sold (whether pursuant to a merger, stock sale, sale of all or substantially all of the Company’s assets, or otherwise, and whether in a single transaction or a series of transactions) (such a sale, a “Sale of the Company”), then the total Earnout Amount payable by Buyer to Sellers in accordance with Section 2.5 additional consideration up to a maximum aggregate amount respect of $8,500,000 (the "Earnout"), based on the EBITDA, if any, generated by Milne ▇▇▇▇▇ in the future all three Earnout Periods shall instead be calculated as follows:
(i) For each consecutive twelve (12) month segment if the Sale of the sixty Company occurs prior to the end of the first Earnout Period, then the total Earnout Amount shall be an amount equal to (60x) month 1.25%, multiplied by (y) the sum of (A) the Company’s Written Premium for the period commencing on of twelve calendar months ending as of the last day of the month preceding the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% Sale of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, Company occurs and (B) the amount Company’s Fees for such twelve calendar month period, multiplied by (z) three (3); or
(ii) if the Sale of the Earnout Premium for Company occurs after the particular Earnout Period shall be credited against and reduce the remaining balance end of the first Earnout that may be earned in future Earnout PeriodsPeriod, in inverse order of payment. For example, if EBITDA for each but prior to the end of the five second Earnout Periods is $4,000,000Period, then the sum of the Base total Earnout and Earnout Premium payable for each of the first three Earnout Periods would Amount shall be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 an amount equal to (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of x) the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be Amount paid or payable with respect to the fifth first Earnout Period.
, plus (iiy) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or an amount equal to $2,500,000 but more than $2,000,000(A) 1.25%, BNC shall cause multiplied by (B) the Agency to pay to Sellers a Base Earnout sum of $1,360,000 (I) the Company’s Written Premium for that Earnout Period;the period of twelve calendar months ending as of the last day of the month preceding the month in which the Sale of the Company occurs and (II) the Company’s Fees for such twelve calendar month period, multiplied by (C) two (2); or
(iii) For each if the Sale of the Company occurs after the end of the second Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or Period, but prior to the end of the third Earnout Period, then the total Earnout Amount shall be an amount equal to $2,000,000(x) the Earnout Amounts paid or payable with respect to each of the first and second Earnout Periods, then neither BNC nor plus (y) an amount equal to (A) 1.25%, multiplied by (B) the Agency sum of (I) the Company’s Written Premium for the period of twelve calendar months ending as of the last day of the month preceding the month in which the Sale of the Company occurs and (II) the Company’s Fees for such twelve calendar month period. Any and all amounts payable to Sellers pursuant to clause (i), (ii) or (iii) above shall pay any Base Earnout be paid at or Earnout Premium prior to the closing of the Sale of the Company. For the avoidance of doubt, if any amount is paid to Sellers for that pursuant to clause (i), (ii) or (iii) above in connection with a Sale of the Company, no additional Earnout Period;Amount shall be payable to Sellers at any time following the date of such payment.
(bc) Within 20 Buyer shall deliver to Sellers within sixty (60) days after the end of each Earnout Period, BNC shall deliver to Period a worksheet setting forth Buyer’s calculation of the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA Amount for such Earnout PeriodPeriod (such worksheet, (ii) the Base “Earnout and Statement”). The Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may Statement shall be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification accompanied by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and all records and performed in a manner consistent with GAAP.
(c) The amounts, if any, payable work papers necessary for Sellers to the Sellers for each Earnout Period pursuant to this Section 2.3 shall be paid by the Agency within 30 days following the end of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice compute and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to otherwise review the preparation of the Earnout Notice and information set forth therein. Sellers shall have thirty (ii30) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After days after receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days Statement to review the such Earnout Notice, together with all the work papers used in preparation thereofStatement delivered by Buyer. Unless the Sellers' Representatives Sellers deliver a written notice to BNC Buyer on or before prior to the 10th thirtieth (30th) day after Sellers’ receipt by the of an Earnout Statement specifying in reasonable detail Sellers' Representatives of ’ objections to the Earnout Notice specifyingStatement, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout NoticeAmount as set forth in such Earnout Statement delivered by Buyer. If the Sellers' Representatives Sellers so notify BNC Buyer of an Objection objection to an Earnout NoticeStatement and the applicable Earnout Amount as set forth in such Earnout Statement, (i) the undisputed portion of the Base Earnout Sellers and Earnout PremiumBuyer shall, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (iior such longer period as they may agree) the Sellers' Representatives and BNC shall, within 10 days following such Objectionnotice (the “Earnout Resolution Period”), attempt to resolve the Objection. Any their differences, and any resolution by them as to any disputed items amounts shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolutionconclusive. At the end conclusion of such 10-day resolution periodthe Earnout Resolution Period, (i) if any items remaining amounts remain in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA then all amounts remaining in dispute shall be submitted to a firm of nationally recognizedthe Accountants for resolution in accordance with the procedures set forth in Section 1.5(b) mutatis mutandis, independent accountants with an office and (ii) all amounts not in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to executedispute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selectionnot previously paid, shall be set forth in paid as provided herein.
(d) For purposes of this Section 1.8, (i) “Written Premium” of the Company means the amount of total private passenger and commercial assigned risk, voluntary take out and mandatory take out premium managed and administered by the Company on behalf of a written servicing carrier (the “Managed Business”), plus the total amount of private passenger and commercial auto premium managed and administered by the Company on behalf of state departments of insurance, assigned risk plans and other agencies; and (ii) “Fees” means the amount of buyout fees and proceeds from the sale of take out, territorial and other credits received by such Company servicing carriers from insurance carriers with respect to the Managed Business. For illustrative purposes, attached as Exhibit B hereto is a statement delivered to Sellers of the Company’s Written Premium and BNCFees for the year ended December 31, 2014, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each a sample calculation of the Sellers. The amount Earnout Amount that would have been payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditorsbased thereon.
Appears in 1 contract
Sources: Stock Purchase Agreement (Kingsway Financial Services Inc)
Earnout. (a) BNC In the event that the Company achieves a Pretax Income above certain thresholds after the Closing Date as provided below, the Sellers will be entitled to the payments set forth in this Section 2.1.3 (“Earn-out Payments”). The Earn-out Payments shall cause the Agency to pay to Sellers in accordance with Section 2.5 additional consideration up to a maximum aggregate amount of $8,500,000 (the "Earnout"), based on the EBITDA, if any, generated by Milne ▇▇▇▇▇ in the future be calculated as follows:
(i) For each consecutive twelve In the event that the Company achieves an Pretax Income of at least $611,000 (12the “Year 1 Target”) month segment for the fiscal year beginning on the first day after the Closing Date and ending on the first anniversary of the sixty Closing Date (60“Year 1”), the Buyer shall be required to pay $433,000 (the “Year 1 Maximum Payment”) month to the Sellers as provided below. In the event that the Company achieves an Pretax Income for Year 1 exceeding 487,000 (the “Year 1 Floor”) but less than the Year 1 Target, the Buyer shall be required to pay to the Sellers
(a) is hereinafter referred to as the “Actual Year 1 Payment.” The Actual Year 1 Payment, if any, shall be paid by the Buyer to the Sellers on a pro rata basis based upon each Seller’s ownership of the Shares immediately prior to the Closing Date, within 5 days after the determination of the Actual Year 1 Payment becomes final and binding pursuant to Section 2.1.3(b), by wire transfer of immediately available funds as directed by the Sellers to the Buyer.
(ii) In the event that the Company achieves a cumulative Pretax Income of at least $1,417,000 (the “Year 2 Cumulative Target”) for the period commencing beginning on the last first day after the Closing Date and ending on the second anniversary of the month in which Closing Date (“Years 1 and 2”), the Buyer shall be required to pay $866,000 (the “Year 2 Cumulative Maximum Payment”) to the Sellers, minus the Actual Year 1 Payment, as provided below. In the event that the Company achieves a cumulative Pretax Income for Years 1 and 2 exceeding 1,004,000 (the “Year 2 Cumulative Floor”) but less than the Year 2 Cumulative Target, the Buyer shall be required to pay to the Sellers as provided below an amount equal to the product of: (A) the Year 2 Cumulative Maximum Payment; and (B) the following fraction, expressed as a percentage, with the numerator being the cumulative Pretax Income for Years 1 and 2 minus the Year 2 Cumulative Floor and the denominator being the Year 2 Cumulative Target minus the Year 2 Cumulative Floor, minus the Actual Year 1 Payment. In the event that the Company achieves a cumulative Pretax Income for Years 1 and 2 less than or equal to the Year 2 Cumulative Floor, no payment shall be required to be made by the Buyer to the Sellers pursuant to this clause (ii) of Section 2.1.3(a). The amount of any payment required to be made by the Buyer to the Sellers pursuant to this clause (ii) of Section 2.1.3(a) is hereinafter referred to as the “Actual Year 2 Payment.” The Actual Year 2 Payment, if any, shall be paid by the Buyer to the Sellers on a pro rata basis based upon each Seller’s ownership of the Shares immediately prior to the Closing occurs Date, within 5 days after the determination of the Actual Year 2 Payment becomes final and binding pursuant to Section 2.1.3(b), by wire transfer of immediately available funds as directed by the Sellers to the Buyer.
(iii) In the event that the Company achieves a cumulative Pretax Income of at least $2,513,000 (the “Year 3 Cumulative Target”) for the period beginning on the first day after the Closing Date and ending on the third anniversary of the Closing Date (“Years 1,2 and 3”), the Buyer shall be required to pay $1,300,000 (the “Year 3 Cumulative Maximum Payment”) to the Sellers, minus the Actual Year 1 Payment and the Actual Year 2 Payment, as provided below. In the event that the Company achieves a cumulative Pretax Income for Years 1, 2 and 3 exceeding 1,598,000 (the “Year 3 Cumulative Floor”) but less than the Year 3 Cumulative Target, the Buyer shall be required to pay to the Sellers as provided below an amount equal to the product of: (A) the Year 3 Cumulative Maximum Payment; and (B) the following fraction, expressed as a percentage, with the numerator being the cumulative Pretax Income for Years 1, 2 and 3 minus the Year 3 Cumulative Floor and the denominator being the Year 3 Cumulative Target minus the Year 3 Cumulative Floor, minus the Actual Year 1 Payment
(a) is hereinafter referred to as the “Actual Year 3 Payment.” The Actual Year 3 Payment, if any, shall be paid by the Buyer to the Sellers on a pro rata basis based upon each Seller’s ownership of the Shares immediately prior to the Closing Date, within 5 days after the determination of the Actual Year 3 Payment becomes final and binding pursuant to Section 2.1.3(b), by wire transfer of immediately available funds as directed by the Sellers to the Buyer.
(b) Within 30 days after each of the first three anniversaries of the Closing Date, the Buyer shall cause to be prepared and delivered to the Sellers a calculation and all supporting documentation of the Actual Year 1 Payment, the Actual Year 2 Payment and the Actual Year 3 Payment, respectively or the calculation and all supporting documentation evidencing that no such twelvepayment is due (the “Earn-month segmentout Payment Calculations”). Within 30 days following receipt by the Sellers of the Earn-out Payment Calculations, the Sellers shall deliver written notice to the Buyer (an "Earnout Period"“Earn-out Objection Notice”), of any dispute they have regarding the Earn-out Payment Calculations. The Earn-out Objection Notice must describe in reasonable detail the items contained in the Earn-out Payment Calculations that the Sellers dispute and the basis for any such disputes. Any determination set forth on the Earn-out Payment Calculations which is not specifically objected to in the Earn-out Objection Notice shall be deemed acceptable and shall be final and binding upon the Buyer and the Sellers upon delivery of the Earn-out Objection Notice. If the Sellers do not provide the Buyer with an Earn-out Objection Notice within such 30-day period, such Earn-out Payment Calculations will be final, conclusive and binding on the Buyer and the Sellers. In the event the Sellers provide an Earn-out Objection Notice to the Buyer, the Buyer and the Sellers shall negotiate in good faith to resolve any such disputes. If the Buyer and the Sellers, notwithstanding such good faith effort, fail to resolve any of the disputes described in the Earn-out Objection Notice within 30 days after the Buyer’s receipt of the Earn-out Objection Notice, then the Buyer and the Sellers jointly shall engage the firm of Deloitte & Touche LLP (the “Arbitration Firm”) to resolve such disputes in accordance with the terms of this Agreement. As promptly as practicable thereafter, the Buyer and the Sellers shall each prepare and submit any relevant materials to the Arbitration Firm, along with copies of the Earn-out Payment Calculations and Earn-out Objection Notice. As soon as practicable thereafter, the Buyer and the Sellers shall cause the Arbitration Firm to make a final determination of the Actual Year 1 Payment, the Actual Year 2 Payment or the Actual Year 3 Payment in accordance with the terms of this Agreement. The Arbitration Firm shall make an independent determination of the Actual Year 1 Payment, the Actual Year 2 Payment or the Actual Year 3 Payment that Milne shall be final and binding on the Sellers and the Buyer. The fees, costs and expenses of the Arbitration Firm shall be paid by the party whose calculation of the Earn-out Payment in dispute was different by the greater amount from that of the Arbitration Firm.
(c) From and after the Closing Date through the third anniversary thereof, G▇▇▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period.
(ii) For each Earnout Period that Milne R▇▇▇▇▇▇ generates annual EBITDA less than or equal shall have control over the performance of the Company, subject to $2,500,000 but more than $2,000,000, BNC shall cause oversight by Buyer in accordance with the Agency to pay to Sellers a Base Earnout strategy outlined by Buyer. All aspects of $1,360,000 the operation of the Business by the Company after the Closing Date through the third anniversary thereof will be accounted for that Earnout Period;
(iii) For each Earnout Period that Milne through the Company. The continued employment of G▇▇▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne R▇▇▇▇▇'▇ books by the Company shall not be a condition precedent to the payment of the Earn-out Payments. The Buyer covenants and records and performed agrees that it shall not cause the Company to accelerate (or defer) any sales, or defer (or accelerate) any expenses, in a manner consistent with GAAP.
that would increase (cor reduce) The amountsPretax Income, if any, payable except to the Sellers extent that any such deferral or acceleration is done in good faith for each Earnout Period pursuant to this Section 2.3 shall be paid by the Agency within 30 days following the end of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice a legitimate business purpose and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate not with the Sellers' Representatives, including the provision on a timely basis intent of all information reasonably requested by the Sellers' Representatives affecting any Earn-out Payment. The Buyer acknowledges and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days agrees that it intends to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with pay off any of the SellersCompany’s indebtedness for borrowed money within twelve months after Closing and does not presently intend to leverage the Business during the first three years following the Closing, such that interest expense during the Sellers' Representativesfirst three years following the Closing should be nominal, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested except as reasonably required by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral AuditorsBusiness.
Appears in 1 contract
Sources: Stock Purchase Agreement (Preformed Line Products Co)
Earnout. (a) BNC After the Closing, subject to the terms and conditions set forth herein, the Sellers shall cause have the Agency contingent right to pay to Sellers in accordance with Section 2.5 receive additional consideration up to a maximum aggregate amount of $8,500,000 (the "Earnout"), from Purchaser based on the EBITDAperformance of Purchaser and its Subsidiaries, including the Company, for the fiscal year ended December 31, 2019 (the “2019 Earnout Year”) and the fiscal year ended December 31, 2020 (the “2020 Earnout Year” and each such fiscal year, an “Earnout Year” and such two-year fiscal period, the “Earnout Period”) if anythe requirements as set forth in this Section 1.4 are met. In the event that the Purchaser Adjusted Net Income for the 2019 Earnout Year is equal to or greater than One Hundred and Eighty Million Renminbi (RMB180,000,000) (the “2019 Earnout Target”), generated by Milne ▇▇▇▇▇ in then, subject to the future terms and conditions of this Agreement, the Sellers shall be entitled to receive from the Purchaser, as follows:
(i) For each consecutive twelve (12) month segment additional consideration for the purchase of the sixty Purchased Shares, an additional Five Million (605,000,000) month period commencing on Purchaser Ordinary Shares (subject to equitable adjustment for share splits, share dividends, combinations, recapitalizations and the last day like after the Closing, including to account for any equity securities into which such shares are exchanged or converted) (the “2019 Earnout Shares”). In the event that the Purchaser Adjusted Net Income for the 2020 Earnout Year is equal to or greater than Three Hundred and Fifteen Million Renminbi (RMB315,000,000) (the “2020 Earnout Target” and together with the 2019 Earnout Target, the “Earnout Targets”), then, subject to the terms and conditions of this Agreement, the Sellers shall be entitled to receive from the Purchaser, as additional consideration for the purchase of the month in which the Closing occurs (each such twelve-month segmentPurchased Shares, an "additional Five Million (5,000,000) Purchaser Ordinary Shares (subject to equitable adjustment for share splits, share dividends, combinations, recapitalizations and the like after the Closing, including to account for any equity securities into which such shares are exchanged or converted) (the “2020 Earnout Period") Shares”, and collectively with the 2019 Earnout Shares, the “Earnout Shares”)). In the event that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000an Earnout Target is not met for any Earnout Year, then BNC shall cause the Agency to pay the Sellers a fixed minimum shall not be entitled to receive any Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA Shares for such Earnout Period exceeds $2,500,000Year; provided, however, (A) that in the event that the sum of the Base aggregate Purchaser Adjusted Net Income for both Earnout Years combined is at least Four Hundred and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and Ninety Five Million Renminbi (BRMB495,000,000) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period.
(ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "“Aggregate Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAP.
(c) The amounts, if any, payable to the Sellers for each Earnout Period pursuant to this Section 2.3 shall be paid by the Agency within 30 days following the end of the Earnout Period, subject to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"Target”), the Sellers shall be deemed entitled to have accepted receive any Earnout Shares that they otherwise did not receive (the “Alternative Earnout”). For the avoidance of doubt, any determination of the Purchaser Adjusted Net Income that is not otherwise in Renminbi will be expressed in Renminbi by converting the applicable currency to Renminbi using the applicable exchange rate as of the last day of the applicable Earnout Year.
(b) As soon as practicable (but in any event within ten (10) Business Days) after Purchaser’s filing of the annual audited consolidated financial statements for Purchaser and agreed its Subsidiaries with the SEC on Form 20-F or 10-K (or other equivalent SEC form) for each Earnout Year, the Purchaser’s Chief Financial Officer (the “CFO”) will prepare and deliver to the Purchaser Representative and the Seller Representative (each, a “Representative Party”) a written statement (each, an “Earnout Notice. If Statement”) that sets forth the Sellers' Representatives notify BNC CFO’s determination in accordance with the terms of an Objection to an Earnout Notice, this Section 1.4 of (i) the undisputed portion Purchaser Adjusted Net Income for such Earnout Year based on such audited financial statements, (ii) for the 2020 Earnout Year only, the aggregate Purchaser Adjusted Net Income for both Earnout Years combined based on such audited financial statements and the finally determined Earnout Statement for the 2019 Earnout Year, and (iii) whether the Sellers are entitled to receive Earnout Shares for such Earnout Year as a result of achieving the applicable Earnout Target or, with respect to the 2020 Earnout Year only, the Aggregate Earnout Target. Each Representative Party will have thirty (30) days after its receipt of an Earnout Statement to review it. The Seller Representative and the Purchaser Representative, and their respective Representatives on their behalves, may make inquiries of the Base CFO and related Purchaser and Company personnel and advisors regarding questions concerning or disagreements with the Earnout Statement arising in the course of their review thereof, and the Purchaser and the Company shall provide reasonable cooperation in connection therewith. If either Representative Party has any objections to the Earnout PremiumStatement, as applicable, such Representative Party shall be paid deliver to the Company (to the attention of the CFO) and the other Representative Party a statement setting forth its objections thereto (in reasonable detail) (an “Objection Statement”). If an Objection Statement is not delivered by a Representative Party within thirty (30) days following the end date of delivery of the Earnout PeriodStatement, then such Representative Party will have waived its right to contest the Earnout Statement, and all determinations and calculations set forth therein, and whether the Sellers have earned the Earnout Shares for such Earnout Year (iior have otherwise achieved the Alternative Earnout). If an Objection Statement is delivered within such thirty (30) day period, then the Sellers' Representatives Seller Representative and BNC shall, within 10 days following such Objection, attempt the Purchaser Representative shall negotiate in good faith to resolve any such objections for a period of twenty (20) days thereafter. If the Objection. Any Seller Representative and the Purchaser Representative do not reach a final resolution as to any disputed items shall be finalwithin such twenty (20) day period, binding and conclusive for BNCthen upon the written request of either Representative Party (the date of receipt of such notice by the other Representative Party, the Agency and all Sellers“Independent Expert Notice Date”), and any sums payable as a result the Representative Parties will refer the dispute to the Independent Expert for final resolution of the resolution shall dispute in accordance with Section 1.4(c). The Parties acknowledge that any information provided pursuant to this Section 1.4 will be paid by subject to the Agency within ten confidentiality obligations of Section 6.13.
(10c) days If a dispute with respect to an Earnout Statement is submitted in accordance with this Section 1.4 to the Independent Expert for final resolution, the Parties will follow the procedures set forth in this Section 1.4(c). Each of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC Seller Representative and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree Purchaser Representative agrees to execute, if requested by the Neutral AuditorsIndependent Expert, a reasonable engagement letterletter with respect to the determination to be made by the Independent Expert. All fees and expenses relating to of the work, if any, to Independent Expert will be performed borne by the Neutral Auditors shall Purchaser. Except as provided in the preceding sentence, all other costs and expenses incurred by the Seller Representative in connection with resolving any dispute hereunder before the Independent Expert will be borne 50% by BNC and 50% by the Sellers, and all other costs and expenses incurred by the Purchaser Representative in connection with resolving any dispute hereunder before the Independent Expert will be borne by the Purchaser. The Neutral Auditors shall act as an arbitrator to Independent Expert will determine only those items issues still in dispute between BNC as of the Independent Expert Notice Date and the Sellers' RepresentativesIndependent Expert’s determination will be based solely upon and consistent with the terms and conditions of this Agreement. The Neutral Auditors' determination shall by the Independent Expert will be based solely on presentations with respect to such disputed items by the Purchaser Representative and the Seller Representative to the Independent Expert and not on the Independent Expert’s independent review; provided, that such presentations will be deemed to include any work papers, records, accounts or similar materials delivered to the Independent Expert by a Representative Party in connection with such presentations and any materials delivered to the Independent Expert in response to requests by the Independent Expert. Each of the Seller Representative and the Purchaser Representative will use their reasonable efforts to make their respective presentations as promptly as practicable following submission to the Independent Expert of the disputed items, and each such Representative Party will be entitled, as part of its presentation, to respond to the presentation of the other Representative Party and any questions and requests of the Independent Expert. In deciding any matter, the Independent Expert will be bound by the provisions of this Agreement, including this Section 1.4. It is the intent of the parties hereto that the Independent Expert Procedure and the activities of the Independent Expert in connection herewith are not (and should not be considered to be or treated as) an arbitration proceeding or similar arbitral process and that no formal arbitration rules should be followed (including rules with respect to procedures and discovery). The Seller Representative and the Purchaser Representative will request that the Independent Expert’s determination be made within 30 forty-five (45) days of their selectionafter its engagement, shall or as soon thereafter as possible, will be set forth in a written statement delivered to Sellers the Purchaser Representative and BNC, the Seller Representative and shall will be final, conclusive, non-appealable and binding for all purposes hereunder (other than for fraud or manifest error).
(d) If for any Earnout Year there is a final determination in accordance with Section 1.4(b) that the Sellers are entitled to receive Earnout Shares for such Earnout Year (or have otherwise achieved the Alternative Earnout), then such Earnout Shares will be due upon such final determination and conclusive Purchaser will deliver such shares within ten (10) Business Days thereafter (subject to this Section 1.4(e))). Notwithstanding anything to the contrary contained herein, any obligation of the Purchaser to issue Earnout Shares under this Section 1.4 will be subject to offset against the indemnification obligations of the Indemnitors under Article VII, and the number of Earnout Shares to be issued will be reduced by (up to a maximum equal to the total maximum number of Earnout Shares) (i) the number of Earnout Shares used to satisfy indemnification claims that have been made and resolved in accordance with Article VII hereof on BNCor prior to the issuance date of such Earnout Shares that have not been satisfied or sufficiently reserved using the Escrow Property in accordance with Section 1.3 and Article VII and (ii) a number of Earnout Shares necessary to satisfy indemnification claims that have been made in accordance with Article VII hereof and that remain unresolved on or prior to the issuance date of such Earnout Shares that have not been sufficiently reserved using the Escrow Property in accordance with Section 1.3 and Article VII (with such Earnout Shares under this clause (ii) determined based on the amount of the indemnification claim included in the Claim Notice provided by the Purchaser Representative under Article VII and the Purchaser Share Price as of the date of issuance of the Earnout Shares). Promptly after the final resolution of all such pending indemnification claims, the Agencyremaining Earnout Shares that have been reserved for pending indemnification claims, if any, after using the Earnout Shares to satisfy the indemnification obligations for the pending indemnification claims that have been resolved, shall be issued by Purchaser to the Sellers' Representatives , with each such Seller receiving its Pro Rata Share of such Earnout Shares.
(e) Following the Closing (including during the Earnout Period), Purchaser and each its Subsidiaries, including the Target Companies, will be entitled to operate their respective businesses based upon the business requirements of Purchaser and its Subsidiaries. Each of Purchaser and its Subsidiaries, including the Target Companies will be permitted, following the Closing (including during the Earnout Period), to make changes at its sole discretion to its operations, organization, personnel, accounting practices and other aspects of its business, including actions that may have an impact on the Purchaser Adjusted Net Income and the ability of the Sellers. The amount payable shall then be paid by Sellers to earn the Agency within 10 days following Earnout Shares, and the final determination Sellers will not have any right to claim the loss of the Neutral Auditorsall or any portion of any Earnout Shares or other damages as a result of such decisions.
Appears in 1 contract
Sources: Share Exchange Agreement (TKK SYMPHONY ACQUISITION Corp)
Earnout. (a) BNC In connection with this Section 2.7, Acquiror shall cause deliver to the Agency Seller no later than sixty (60) days following the end of each of the first four calendar quarters following the Closing Date (it being understood that if the Closing occurs in June, the first of such calendar quarters shall be the calendar quarter ending September 30, 2002), financial statements of the Upshot Business setting forth the amount of aggregate Net Revenue of the Upshot Business for each month in such calendar quarter beginning with the first full calendar month following the Closing Date and ending with the twelfth full calendar month following the Closing Date (the "Upshot Business Financial Statements"). The Upshot Business Financial Statements shall set forth the Net Revenue attributable to the Upshot Business on a client by client basis and shall specify the amount of each adjustment to Net Revenues contemplated by clauses (a)-( ) of Schedule 2.5(a). In the event Net Revenue of the Upshot Business for the first full twelve calendar month period following the Closing Date equals or exceeds the Target Amount, Acquiror shall pay to Sellers Seller an amount equal to fifty percent (50%) of the amount by which Net Revenue exceeds the Target Amount in accordance with the terms of this Section 2.5 additional consideration 2.7, up to a maximum aggregate payment of Two Million Dollars ($2,000,000.00) pursuant to this sentence. In the event Net Revenue of the Upshot Business for the first twelve calendar month period following the Closing Date exceeds the Bonus Amount, Acquiror shall pay to Seller an amount equal to thirty three percent (33%) of $8,500,000 the amount by which Net Revenue exceeds the Bonus Amount (in addition to the amount paid pursuant to the preceding sentence) in accordance with the terms of this Section 2.7. Any amounts required to be paid pursuant to either of the preceding two sentences are collectively referred to as "EarnoutEarnout Payments"). Notwithstanding the foregoing, based on in the EBITDA, if any, generated by Milne event a Change of Control of Acquiror occurs and ▇▇▇▇▇ in the future as follows:
(i) For each consecutive twelve (12) month segment of the sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more than $2,500,000, then BNC shall cause the Agency to pay the Sellers a fixed minimum Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") equal to 50% of the amount by which EBITDA for such Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Earnout and Earnout Premium for each Earnout Period shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of payment. For example, if EBITDA for each of the five Earnout Periods is $4,000,000, then the sum of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period), and the remaining balance of the Earnout that may be earned in the fifth Earnout Period would be $0.00, such that no Earnout payments would be payable with respect to the fifth Earnout Period.
(ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying (i) the EBITDA for such Earnout Period, (ii) the Base Earnout and Earnout Premium then due, if any, and (iii) the remaining balance of the Earnout that may be earned in future periods, if any, showing in reasonable detail the computation thereof, and a certification by BNC's chief financial officer that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAPresponsibilities are expanded beyond the Upshot Business, then the maximum aggregate Earnout Payments that Acquiror will be required to make under this Section 2.7 will equal Four Million Seven Hundred Fifty Thousand Dollars ($4,750,000.00). If Net Revenue for the first full twelve calendar month period following the Closing Date equals or is less than the Target Amount, Acquiror shall have no obligation to pay any Earnout Payment.
(cb) The amounts, if any, payable Unless Seller gives written notice to Acquiror on or before the Sellers for each Earnout Period twentieth (20th) calendar day after Seller's receipt of the final Upshot Business Financial Statement to be delivered pursuant to this Section 2.3 2.7(b), specifying in reasonable detail all disputed items and the basis therefor, Seller shall be paid by deemed to have accepted the Agency Upshot Business Financial Statements and Acquiror shall (i) have no obligation to pay any Earnout Payment to Seller if Net Revenue for the first full twelve calendar month period following the Closing Date is equal to or less than the Target Amount or (ii) have an obligation to pay the applicable Earnout Payment(s) if Net Revenue exceeds the Target Amount. If Seller so notifies Acquiror of its objection to the Upshot Business Financial Statements, Seller and Acquiror shall, within 30 twenty (20) days following such notice, attempt to resolve their differences in good faith, and any resolution by them as to any disputed amounts shall be final, binding and conclusive. If, at the end of the Earnout Periodsuch twenty (20) day period, subject Seller and Acquiror are unable to Section 2.3(e) below if the Sellers' Representatives notify BNC resolve such disagreements, Acquiror and Seller shall jointly select an independent auditor of their objection to the Earnout Notice for the Earnout Period.
(d) During the preparation of each Earnout Notice and the period of any review contemplated by this Section 2.3, BNC shall cause Milne recognized national standing that is not ▇▇▇▇▇▇▇▇ to resolve any remaining disagreements; provided that PricewaterhouseCoopers LLP will be the independent auditor if Acquiror and Seller cannot agree on the selection of such independent auditor (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice and (ii) cooperate with the Sellers' Representatives, including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives and necessary or useful in reviewing and validating the contents of the Earnout Notice. After receipt of an Earnout Notice, the Sellers' Representatives shall have 10 days to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "ObjectionIndependent Accountant"), . Acquiror and Seller shall use their reasonable efforts to cause the Sellers shall be deemed Independent Accountant to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid make its determination within thirty (30) calendar days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objectionaccepting its selection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid The determination by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and Independent Accountant shall be final, binding and conclusive on BNCthe parties. The fees and expenses of the Independent Accountant shall be borne by Acquiror and Seller Parties in proportion to the aggregate amount of all disputed items as to which such party's claim was unsuccessful (i.e., if there is a $1,000,000 dispute regarding the amount of the Earnout Payment and the Independent Accountant determines that Seller's claim prevails with respect to $250,000 of such disputed amount and Acquiror's claim prevails with respect to $750,000 of such disputed amount, then Seller Parties would be obligated to pay seventy five percent (75%) of the fees and expenses and Acquiror would be obligated to pay twenty five percent (25%) of the fees and expenses).
(c) Subject to Section 10.9 below, within ten (10) calendar days after (i) receipt by Seller of Upshot Business Financial Statements which reflect aggregate Net Revenue for the first twelve month period following the Closing Date equal to or in excess of the Target Amount, or (ii) in the event of a disagreement, the Agencydate of resolution of such disagreement by the Parties or the date of determination by the Independent Accountant pursuant to Section 2.7(c) (it being understood that this clause (ii) shall only apply to any disputed portion of the Earnout Payments), the Sellers' Representatives applicable Earnout Payment shall be paid by Acquiror as follows:
(i) Acquiror shall pay ninety percent (90%) of the Earnout Payment to an account designated by Seller in writing; and
(ii) Acquiror shall deposit ten percent (10%) of the Earnout Payment to the Holdback Fund, which amount shall become part of the Holdback Amount.
(d) In connection with the operation of the Upshot Business after the Closing, Acquiror agrees to maintain separate divisional books and records for the Upshot Business in accordance with GAAP, consistently applied. Acquiror and each of the Sellers. The amount payable shall then Seller Parties agree to act in good faith during the Earnout Period relative to the Upshot Business and not to take actions that would be paid by unfairly prejudicial or discriminatory to the Agency within 10 days following Upshot Business for the final determination purpose of adversely affecting Seller's interest in receiving an Earnout Payment.
(e) Upon delivery of the Neutral AuditorsUpshot Business Financial Statements, Acquiror shall afford to Seller and its accounting representatives prompt and reasonable access upon reasonable notice to all information reasonably necessary to verify calculation of the Net Revenue. Acquiror shall make its employees who are familiar with such matters, its independent outside accounting firm available to Seller and its representatives on a mutually convenient basis at reasonable times during normal business hours to provide an explanation of such materials and to provide such other information as Seller and its representatives may reasonably request in connection with its review of the Upshot Business Financial Statements.
Appears in 1 contract
Earnout. (a) BNC If Parent’s aggregate Net Sales derived from the sale or distribution of Skagen-branded products (including all corporate/private label related brands other than “Grenen”) for the Earnout Period calculated in accordance with GAAP and as reflected in the Parent’s financial statements for such Earnout Period (such twelve-month period, the “Earnout Period Net Sales”), are equal to or greater than $155,000,000 but less than $160,000,000, then Parent shall cause the Agency issue 50,000 Earnout Shares to pay to Skagen US Sellers in accordance with Section 2.5 additional consideration up 1.2(c). If Earnout Period Net Sales are equal to a maximum aggregate amount of $8,500,000 (the "Earnout"), based on the EBITDA, if any, generated by Milne ▇▇▇▇▇ in the future as follows:
(i) For each consecutive twelve (12) month segment of the sixty (60) month period commencing on the last day of the month in which the Closing occurs (each such twelve-month segment, an "Earnout Period") that Milne ▇▇▇▇▇ generates EBITDA of more or greater than $2,500,000160,000,000 but less than $165,000,000, then BNC Parent shall cause the Agency issue 75,000 Earnout Shares to pay the Skagen US Sellers a fixed minimum in accordance with Section 1.2(c). If Earnout amount (the "Base Earnout") of $1,700,000 plus an Earnout premium (the "Earnout Premium") Period Net Sales are equal to 50% of the amount by which EBITDA for such or greater than $165,000,000, then Parent shall issue 100,000 Earnout Period exceeds $2,500,000; provided, however, (A) that the sum of the Base Shares to Skagen US Sellers in accordance with Section 1.2(c). The Earnout and Earnout Premium for each Earnout Period Shares set forth above shall not exceed an aggregate of $3,400,000, and (B) the amount of the Earnout Premium for the particular Earnout Period shall be credited against and reduce the remaining balance of the Earnout that may be earned in future Earnout Periods, in inverse order of paymentadditive. For example, and not by way of limitation, if EBITDA Earnout Period Net Sales are US$170,000,000, the number of Earnout Shares shall be 100,000. The Earnout Shares shall be subject to the same restrictions as the Purchase Price Shares. For purposes hereof, the term “Net Sales” means, without duplication, for each any period, the amount of all Skagen-branded products (including all corporate/private label related brands other than “Grenen”) sold (determined on the basis of the five Earnout Periods is $4,000,000aggregate invoice price for such products, then subject to adjustment in the sum manner set forth below in this definition) by Parent and its Subsidiaries for such period, less the related amount of the Base Earnout and Earnout Premium payable for each of the first three Earnout Periods would be $2,450,000, the Base Earnout payable for the fourth Earnout Period would be $1,150,000 (with no Earnout Premium payable for the fourth Earnout Period)any product returns, and the remaining balance further reduced by any markdowns, non-invoice related pricing discounts, rebates, promotions, coupons and similar items of the Earnout that may be earned such products, calculated in the fifth Earnout Period would be $0.00, accordance with GAAP consistently applied throughout such that no Earnout payments would be payable with respect to the fifth Earnout Periodspecified period.
(ii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,500,000 but more than $2,000,000, BNC shall cause the Agency to pay to Sellers a Base Earnout of $1,360,000 for that Earnout Period;
(iii) For each Earnout Period that Milne ▇▇▇▇▇ generates annual EBITDA less than or equal to $2,000,000, then neither BNC nor the Agency shall pay any Base Earnout or Earnout Premium to the Sellers for that Earnout Period;
(b) Within 20 days after the end of each Earnout Period, BNC shall deliver to the Sellers' Representatives a notice (the "Earnout Notice") specifying Sellers acknowledge and agree that (i) upon the EBITDA for such Earnout PeriodClosing, Buyers have the right to operate the Companies and the Business (and all other components of Buyers’ business) as Parent deems appropriate in Parent’s sole discretion, (ii) Buyers have no obligation to operate the Base Companies or the Business (or any other component of Buyers’ business) in a manner designed specifically to achieve the Earnout Period Net Sales standards set forth in Section 1.4(a) above, (iii) Buyers are not obligated to operate the Companies or the Business in the manner in which Sellers operated the Companies and the Business prior to the Closing Date, (iv) none of Buyers nor their respective Affiliates are under any obligation to continue to serve any customer or distributor or to develop any new products derived from the Skagen-branded products after the Closing Date (and Buyers may offer Skagen-branded products to any customer or distributor or prospective customer or distributor for trial or promotional purposes, the value of which will not be credited to Earnout Premium then duePeriod Net Sales to the extent no proceeds are paid by such customer, if anydistributor or prospective customer or distributor), (v) the potential payment of any Earnout Shares described in this Section 1.4 is speculative and subject to numerous factors outside the control of Buyers, (vi) Buyers owe no fiduciary duty or express or implied duty to any Seller, including no implied duty of good faith and fair dealing, other than any duties to Sellers expressly set forth in this Agreement, and (iiivii) the remaining balance parties solely intend the express provisions of this Agreement to govern their contractual relationship. Notwithstanding the Earnout that may be earned in future periodsforegoing provisions of this Section 1.4(b), if any, showing in reasonable detail the computation thereofParent shall not, and a certification by BNC's chief financial officer shall cause its Subsidiaries not to, intentionally and knowingly take, or intentionally and knowingly not take, any action or series of actions for which the primary goal of Parent or the applicable Subsidiary (at the time the action is taken or not taken) is reducing, in bad faith, Earnout Period Net Sales and the number of Earnout Shares that such computation was based on Milne ▇▇▇▇▇'▇ books and records and performed in a manner consistent with GAAPwill become payable hereunder.
(c) The amounts, if any, payable Notwithstanding anything to the contrary in this Agreement, the right of Skagen US Sellers for each Earnout Period pursuant to under this Section 2.3 1.4 to receive any amount of Earnout Shares (A) is a non-transferable contract right (and is not a security (and shall confer upon Skagen US Sellers only the rights of a general unsecured creditor)); (B) will not be paid represented by the Agency within 30 days following the end any form of the Earnout Periodcertificate or instrument; (C) except as expressly contemplated in Section 1.2, subject does not give Skagen US Sellers any dividend rights, voting rights, liquidation rights, preemptive rights or other similar rights; (D) is not redeemable; and (E) shall not be transferred or assigned to Section 2.3(e) below if the Sellers' Representatives notify BNC of their objection to the Earnout Notice for the Earnout Periodany other Person.
(d) During Within two Business Days after the preparation Earnout Common Stock Issuance Date, Parent shall provide written notice to the Representative of each the Earnout Notice and the period of any review contemplated by this Section 2.3Period Net Sales, BNC which notice shall cause Milne ▇▇▇▇▇ to (i) provide the Sellers' Representatives, upon reasonable notice, full access during normal business hours to the books, records, work papers, facilities and employees be certified by an officer of Milne ▇▇▇▇▇ to review the preparation of the Earnout Notice Parent and (ii) cooperate with the Sellers' Representatives, be accompanied by reasonable supporting details (including the provision on a timely basis of all information reasonably requested by the Sellers' Representatives general ledger and necessary or useful in reviewing trial balance) and validating the contents calculations of the Earnout NoticePeriod Net Sales. After receipt of an Earnout Notice, Parent shall provide the Sellers' Representatives shall have 10 days Representative (and its representatives) with such information and access to Parent’s employees and representatives as the Representative may reasonably request in order for the Representative to review the Earnout Notice, together with all the work papers used in preparation thereof. Unless the Sellers' Representatives deliver a written notice to BNC on or before the 10th day after receipt by the Sellers' Representatives of the Earnout Notice specifying, in reasonable detail, all disputed items and the basis therefor (an "Objection"), the Sellers shall be deemed to have accepted and agreed to the Earnout Notice. If the Sellers' Representatives notify BNC of an Objection to an Earnout Notice, (i) the undisputed portion of the Base Earnout and Earnout Premium, as applicable, shall be paid within thirty (30) days following the end of the Earnout Period, and (ii) the Sellers' Representatives and BNC shall, within 10 days following such Objection, attempt to resolve the Objection. Any resolution as to any disputed items shall be final, binding and conclusive for BNC, the Agency and all Sellers, and any sums payable as a result of the resolution shall be paid by the Agency within ten (10) days of the resolution. At the end of such 10-day resolution period, any items remaining in dispute, including without limitation, exclusions of or additions to revenue and any allocations of expenses contemplated by the definition of EBITDA shall be submitted to a firm of nationally recognized, independent accountants with an office in Maricopa County, Arizona (the "Neutral Auditors") selected by BNC and the Sellers' Representatives within ten (10) days after the expiration of the 10-day resolution period. If BNC and the Sellers' Representatives are unable to agree on the Neutral Auditors, then BNC and the Sellers' Representatives shall each have the right to request the American Arbitration Association to appoint the Neutral Auditors, who shall not have had a material business relationship with any of the Sellers, the Sellers' Representatives, BNC, the Agency or any of their respective Affiliates within the past two years. BNC and each of the Sellers agree to execute, if requested by the Neutral Auditors, a reasonable engagement letter. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne 50% by BNC and 50% by the Sellers. The Neutral Auditors shall act as an arbitrator to determine only those items still in dispute between BNC and the Sellers' Representatives. The Neutral Auditors' determination shall be made within 30 days of their selection, shall be set forth in a written statement delivered to Sellers and BNC, and shall be final, binding and conclusive on BNC, the Agency, the Sellers' Representatives and each of the Sellers. The amount payable shall then be paid by the Agency within 10 days following the final determination of the Neutral Auditorscalculations.
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Sources: Purchase Agreement (Fossil Inc)