Common use of Earnout Clause in Contracts

Earnout. (a) Except as set forth in Section 2.5(i), then at the time specified in Section 2.5(b), Section 2.5(d), Section 2.5 (f) , and Section 2.5(h) below, as applicable, the Purchaser shall pay, as part of the Purchase Price due hereunder, to the Members in the proportions set forth on Schedule 2.2(a), an earnout payment or earnout payments, if earned, pursuant to the formula below (each or together hereinafter referred to as the “Earnout Payment”). It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action.

Earnout. Upon satisfaction of all of the following items (i) – (vi) Lessor shall pay Lessee an earnout payment equal to the total cost of construction of the Improvements (“Total Cost”): (i) completion of the Improvements in accordance with all Applicable Laws, the approved plans and specifications, and the Approved Budget, (ii) issuance by the City of Stockton of an unconditional certificate of occupancy, together with evidence that the Lessee is in occupancy of the Improvements and is conducting its business therein, (iii) issuance by the Title Company of a date down title policy subject only to Permitted Exceptions insuring the Lessor’s interest in the Property lien free and insuring the value of the Improvements, and including such endorsements as Lessor reasonably requests, (iv) issuance of an ALTA survey including all Table A Items 1, 2, 3, 4, 6, 7(a), (b)(i) (c), 8, 9, 10, 11(a), 12-16 and certified to Lessor and Lender, (v) issuance of a zoning letter from the City of Stockton confirming that the Improvements located on the Property are in compliance with all applicable zoning laws and constitute a conforming use, and (vi) a modification of this Lease to (a) Except extend Lessee’s right to early termination until, at least, ten (10) years from the effective date of the modification, (b) increase the Base Rent to an amount equal to the product obtained by multiplying the (i) Total Cost times the Combined Interest Rate plus (ii) the Base Rent payable under this Lease as set forth of the effective date of the modification of this Lease with five percent (5%) increases to the Base Rent every five (5) years commencing on the first day of the initial Base Term and (c) extend Lessee’s right of early termination until, at least, ten (10) years following the date of the modification, which shall be a period coterminous with the Building Lease. As an example, if construction of the Improvements was completed in Section 2.5(i)December 2007 the expiration date of the Building Lease would continue as April 30, then at the time specified 2026, but, for purposes of early termination, Lessee’s tenth (10th) Lease Year shall commence in Section 2.5(b)December, Section 2.5(d), Section 2.5 (f) 2016, and Section 2.5(hend in December, 2017 with the first five percent (5%) belowincreases to the Base Rent commencing on May 1, as applicable2011 i.e. five (5) years following the commencement date of the initial Base Term. For purposes hereof Total Cost shall mean the actual hard cost of construction of the Improvements and the cost to prepare the plans and specifications, all fees and costs of regulating agencies and utility companies; all professional fees and costs; and all other costs that are customary in the development of this type of building, but in no event including the cost of the Property, the Purchaser shall pay, cost of the racking systems and distribution systems which are to be installed as part of the Purchase Price due hereunderImprovements, to commissions, developer fees or amounts in excess of the Members in the proportions set forth on Schedule 2.2(a)Approved Budget, an earnout payment or earnout payments, if earned, as such Approved Budget may be modified pursuant to the formula below (each or together hereinafter referred to as the “Earnout Payment”). It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDA. Furthermore, if Purchaser causes the Company to incur one or more expenses (not related to Purchaser’s overhead) that are not consistent with the past practices of the Company consistently applied, including but not limited to, opening a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total of the Extraordinary Expenses and thereafter each time the Purchaser causes the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action.Subsection 4.1

Earnout. As an Earnout, the Sellers shall receive 27.7778% of the Company's earnings determined in accordance with this Section 2.6, up to a maximum aggregate amount of Three Million Dollars (a$3,000,000.00) Except for the period beginning September 1, 2002 and ending December 31, 2005 (the "Maximum Earnout Amount"). The Earnout shall be allocated among the Shareholders as set forth follows: Xxxxx: 31.564%; Xxxxxx Xxxxx: 34.218%; and Xxxx X. Xxxxx: 34.218%. The Company's earnings ("Earnings") for purposes of the Earnout shall be calculated in accordance with GAAP, applied consistently with the principles used in the preparation of the Company's audited financial statements for the year ended December 31, 2001 delivered to Buyer under Section 3.4, subject to the following: (i) There shall be no provision for income taxes; (ii) interest expense from acquisition indebtedness related to this transaction that exceeds average indebtedness of the Company as a percentage of total assets during 2001 shall be excluded; (iii) goodwill amortization and goodwill writedowns relating to this transaction shall be excluded; (iv) if after the Closing Date the Company obtains, with the assistance of the Buyer, a lower interest rate than the rate that would be available under the senior credit facility described in Section 2.5(i)7.3 in accordance with its terms as in effect on the Closing Date, then at the time specified in Section 2.5(b), Section 2.5(d), Section 2.5 (f) , and Section 2.5(h) below, as applicable, the Purchaser shall pay, as part of the Purchase Price due hereunder, to the Members in the proportions set forth on Schedule 2.2(a), an earnout payment or earnout payments, if earned, pursuant to the formula below (each or together hereinafter referred to as the “Earnout Payment”). It is the intention of the parties that in calculating each Earnout Payment, the Company be evaluated as it existed prior to the purchase herein contemplated, and therefore, all expenses attributed in any way to Purchaser’s overhead shall be excluded from the calculation of EBITDAearnings for purpose of calculating the Earnout will be done as if the interest expense included the higher rate that would then be in effect under such facility. FurthermoreIn addition, Earnings shall be determined as nearly as possible as if Purchaser causes the Company were operating as an independent entity consistent with past business strategies and practices, unless Xxxxx consents to incur one any proposed change in strategies or more practices. Accordingly, any cost savings that the Company obtains solely as a result of its affiliation with the Buyer shall not be included in the determination of Earnings. Similarly, any additional costs or expenses (not related to Purchaser’s overhead) imposed upon the Company by the Buyer that are not agreed to by Xxxxx shall not be included in the determination of Earnings unless such costs or expenses would have been reasonable and necessary had the Company remained an independent entity operating in a manner consistent with past practices. Without limiting the past practices generality of the Company consistently appliedforegoing, including but not limited tocharge-offs, opening dealer reserves and general reserves shall be established in a new office, developing a new line of business, or developing a new product line (each an “Extraordinary Expense” and collectively “Extraordinary Expenses ”), then provided that Fxxxxxx and Diamond remain employed by the Company (a) Purchaser shall, prior to incurring the expense, discuss such action manner consistent with the Fxxxxxx and Diamond and (b) once the aggregate total of all Extraordinary Expenses exceeds (i) $75,000 GAAP as applied in the aggregate during the First Calculation Period, (ii) $150,000 in the aggregate during the Second Calculation Period, (iii) $150,000 in the aggregate during the Third Calculation Period, or (iv) $75,000 in the aggregate during the Fourth Calculation Period, promptly notify Fxxxxxx and Diamond in writing that such thresholds have been exceeded. Fxxxxxx and Diamond, acting jointly, shall have ten (10) days from the date of each such notice to object in writing to some or all of such Extraordinary Expenses. The Extraordinary Expenses to which Fxxxxxx and Diamond timely and properly object shall be referred to herein as the “Objectionable Expenses” and all other Extraordinary Expenses shall be referred to as “Accepted Expenses.” Any Accepted Expenses shall be subtracted from the total preparation of the Extraordinary Expenses and thereafter each time Company's audited financial statements for the Purchaser causes year ended December 31, 2001 delivered to Buyer under Section 3.4. This Earnout will be payable by Buyer based on completed audited financial statements, for the Company to incur one or more additional Extraordinary Expenses that, when added to the Objectionable Expenses for such period, cause any of the thresholds set forth above to be exceeded, the Purchaser shall again promptly notify Fxxxxxx and Diamond of such event and Fxxxxxx and Diamond shall have the opportunity to object to those expenses in the same manner set forth above. If the Objectionable Expenses, in the aggregate, incurred in any measurement period exceed the thresholds set forth above for such period, then all expenses and revenues associated with those Objectionable Expenses shall be excluded from the calculation of EBITDA for all calculation periods impacted by such expenses. Notwithstanding anything to the contrary, Purchaser shall be entitled to approve and implement any action which gives rise to an Extraordinary Expense, and cause the Company to incur such expense, and Fxxxxxx and Diamond shall cooperate and use their commercially reasonable efforts to implement such actions in good faith regardless of whether they object to the action.covered as follows: