Contingent Consideration. (A) As promptly as practicable after the end of each calendar quarter or fraction thereof commencing on the first day of the Earnout Period (e.g., March 31, 2006, June 30, 2006, September 30, 2006, December 31, 2006 and January 31, 2007), Buyer shall provide the Sellers’ Representative with a report, setting forth the Net Revenue for such quarter or fraction thereof of the Earnout Period. As promptly as practicable after the end of the Earnout Period, Buyer shall provide the Sellers’ Representative with a report, setting forth the Net Revenue for the Earnout Period substantially in the form attached hereto as Exhibit D (the “Earnout Report”). If an Earnout Dispute Notice is not delivered pursuant to subsection (C) below, then in no event later than twenty (20) Business Days following the expiration of the Earnout Dispute Period, ArthroCare shall pay or cause to be paid the Contingent Consideration in cash by wire transfer of immediately available funds to such account as Sellers shall designate by written notice to Buyer. (B) Buyer shall keep full, clear and accurate books and records with respect to the Acquired Business. The books and records shall be maintained in such a manner that Net Revenue shall be readily verifiable. All books and records with respect to the Acquired Business shall be available for inspection by the Sellers’ Representative or any attorney or accountant engaged by the Sellers’ Representative to act on behalf of the Sellers, in all cases upon reasonable prior notice and during normal business hours. The information contained in the books and records of Buyer with respect to the Acquired Business shall remain confidential except to the extent required to be disclosed by applicable law or in connection with a dispute regarding the Transactions. If the Sellers’ Representative does not deliver to Buyer an Earnout Dispute Notice (as defined below) in accordance with subsections (A)-(C), then the Earnout Report for the Earnout Period shall be deemed final and binding and neither the Sellers’ Representative nor the Sellers shall have any further right to contest the report, the computation of Net Revenue or payment of the Contingent Consideration. (C) In the event that the Sellers’ Representative shall dispute the information set forth by Buyer in the Earnout Report, then, within sixty (60) calendar days following the date of the delivery by Buyer of such report, the Sellers’ Representative shall provide written notice to Buyer (the “Earnout Dispute Notice”) specifying the amount disputed and the basis for the dispute, together with supporting documentation reflecting the analysis of and justification for any recomputation made to the extent such information is available. Buyer and the Sellers’ Representative shall make good faith efforts to resolve the dispute through negotiations for a period of thirty (30) calendar days following the receipt of the Earnout Dispute Notice. In the event that the parties are unable to finally resolve the dispute within such thirty (30) calendar-day period, the parties to the dispute may elect by mutual agreement to extend the period of negotiation and may elect by mutual agreement to engage a mediator to assist in such negotiation. To the extent that any matter remains unresolved following negotiations (as determined by notice by any party to the other party), the Sellers’ Representative and Buyer shall jointly select an independent accountant of recognized national standing to resolve any remaining disagreements (the “Independent Accountant”). The Sellers’ Representative and Buyer shall use their respective commercially reasonable efforts to cause such Independent Accountant to make its determination within sixty (60) calendar days of accepting its selection. Within ten (10) Business Days after the date of determination of such Independent Accountant, Buyer shall pay or cause to be paid to the Sellers the Contingent Consideration in the manner set forth herein, subject to the right of offset provisions of Article 10 below. The decision of the Independent Accountant shall be a final, binding, and conclusive resolution of the parties’ dispute, shall be non-appealable, and shall not be subject to further review absent patent error. The costs and expenses of the Independent Accountant shall be split between Buyer and the Sellers in proportion to the difference between the amount set forth in the decision of the Independent Accountant and the amount reflected in the Earnout Report (with respect to Buyer’s portion) and the amount reflected in the Earnout Dispute Notice (with respect to the Sellers’ portion). In the event that the Sellers do not pay their amount of the Independent Accountant’s costs and expenses, Buyer shall be entitled to deduct the difference between the Sellers’ portion of the costs and expenses of the Independent Accountant and the amount actually paid by the Sellers to the Independent Accountant from the Contingent Consideration. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split between the parties in accordance with this subsection (C) incurred in connection with the dispute. (D) Each Seller hereby, generally, irrevocably, unconditionally and completely agrees that, except as provided by this subsection (D), Buyer and each of its Affiliates shall be entitled to operate the Acquired Business as they determine in their sole and absolute discretion, and shall have no obligation to operate the Acquired Business in any manner that would maximize, maintain or protect the Contingent Consideration; provided, however, that Buyer hereby covenants and agrees that from the Closing through the last day of the Earnout Period that: (a) in the event Buyer [*] directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period; (b) Buyer will continue to make the [*] payments payable to each of [*] in accordance with the letter of understanding with [*], dated [*], and the [*] agreements with [*] summarized on Schedule 3.11, respectively, unless, Buyer and [*] with respect to [*] letter of understanding, Buyer and [*] with respect to [*] agreement or Buyer and [*] with respect to [*] agreement, as the case may be, mutually agree otherwise in writing; (c) Buyer will cause the books and records of the Acquired Business to be maintained in such a manner as will allow for the segregation, identification and accounting for revenues of the Acquired Business by Buyer; (d) Buyer will sell the Acquired Business Products [*]; (e) Buyer will not terminate the employment of ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or the consultancy of ▇▇▇▇ ▇▇▇▇▇▇▇, other than as a result of death, disability or for cause (as defined in their employment or consulting agreement with Buyer, as the case may be), or materially reduce their cash compensation or responsibilities and duties in the operation of the Business from what is set forth in their employment or consulting agreement, as the case may be, with Buyer from the earlier of the end date set forth in their employment or consulting agreement (as applicable) and the last day of the Earnout Period; (f) Buyer will not require ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇ to commit any material time or energy to an enterprise other than the Acquired Business; (g) Buyer will continue to sell the Acquired Business Products for Epistaxis and sinus surgery indications; (h) Buyer will conduct the Acquired Business only through Buyer and its Affiliates; (i) Buyer will make available sufficient working capital to the Acquired Business to support the sale of the Acquired Business Products; (j) Buyer will not terminate (other than as a result of death, disability or for cause) or materially reduce the cash compensation of [*] as of the Closing Date if such termination or reduction directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period; and (k) in the event there is a Class II Recall or Class III Recall (each as defined by the FDA) of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In the event Buyer fails to comply with any of subsection (b), (c), (d), (e), (f), (g), (h) or (i) above and such failure to comply directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In addition, in the event a Buyer Change of Control is consummated during the Earnout Period, the Contingent Consideration payable pursuant to this Section 2.05(a)(ii) shall in any case be $15.0 million, regardless of the actual Net Revenue recognized during the Earnout Period. Any offset that may be made pursuant to Article 10 of this Agreement shall be deducted from the $15.0 million payable pursuant to the foregoing sentence.
Appears in 1 contract
Contingent Consideration. As additional consideration for the Shares, Purchaser shall pay to Seller an amount equal to 50 percent of Seller's earnings before income taxes, interest, depreciation and amortization (A"EBITDA") As promptly as practicable after for the end 12-month period ending April 30, 2003 (the "Contingent Purchase Price") determined in conformity with GAAP. Purchaser shall provide Seller with written notice (the "EBITDA Notice") of each calendar quarter Purchaser's determination of EBITDA in reasonable detail on or fraction thereof commencing on the first day of the Earnout Period (e.g., March 31, 2006, before June 30, 20062003, September 30, 2006, December 31, 2006 and January 31, 2007), Buyer shall provide the Sellers’ Representative together with copies of a report, setting forth the Net Revenue for such quarter or fraction thereof of the Earnout Period. As promptly as practicable after the end of the Earnout Period, Buyer shall provide the Sellers’ Representative with a report, setting forth the Net Revenue for the Earnout Period substantially in the form attached hereto as Exhibit D (the “Earnout Report”). If an Earnout Dispute Notice is not delivered pursuant to subsection (C) below, then in no event later than twenty (20) Business Days following the expiration of the Earnout Dispute Period, ArthroCare shall pay or cause to be paid the Contingent Consideration in cash by wire transfer of immediately available funds to such account as Sellers shall designate by written notice to Buyer.
(B) Buyer shall keep full, clear and accurate books and records similar computation with respect to Purchaser's EBITDA for the Acquired Business12-month period ending April 30, 2002. The books and records shall be maintained in such a manner that Net Revenue shall be readily verifiable. All books and records with respect Following Purchaser's delivery to the Acquired Business shall be available for inspection by the Sellers’ Representative or any attorney or accountant engaged by the Sellers’ Representative to act on behalf Seller of the SellersEBITDA Notice, in all cases upon Purchaser shall provide Seller's independent accountants and/or Seller's other agents and representatives with reasonable prior notice access to Purchaser's books, records and during normal business hoursemployees for the purpose of substantiating Purchaser's determination of EBITDA for the 12-month period ending April 30, 2003. The information contained in the books and records of Buyer with respect to the Acquired Business Seller shall remain confidential except to the extent required to be disclosed by applicable law or in connection with a dispute regarding the Transactions. If the Sellers’ Representative does not deliver to Buyer an Earnout Dispute Notice Purchaser, within 60 days following Seller's receipt of the EBITDA Notice, written notice of (as defined belowi) in accordance Seller's concurrence with subsections (A)-(C), then the Earnout Report Purchaser's determination of EBITDA for the Earnout Period shall be deemed final and binding and neither the Sellers’ Representative nor the Sellers shall have any further right to contest the report12-month period ending April 30, the computation 2003 ("Notice of Net Revenue Concurrence") or payment (ii) Seller's disagreement with such determination, accompanied by a detailed explanation of the Contingent Consideration.
(C) such disagreement. In the event that the Sellers’ Representative shall dispute the information set forth by Buyer in the Earnout Report, then, within sixty (60) calendar days following the date of the delivery by Buyer of such reporta disagreement, the Sellers’ Representative parties shall provide written notice to Buyer (the “Earnout Dispute Notice”) specifying the amount disputed and the basis for the dispute, together with supporting documentation reflecting the analysis of and justification for any recomputation made to the extent such information is available. Buyer and the Sellers’ Representative shall make good faith efforts to resolve the dispute through negotiations endeavor for a period of thirty (30) calendar at least 30 days following the receipt to negotiate a settlement of the Earnout Dispute Noticetheir differences. In the event that If the parties are unable to finally resolve the dispute within reach agreement during such thirty (30) calendar-day period, the parties shall engage Ernst & Young LLP (the "Independent Firm") to perform a determination of Purchaser's EBITDA for the dispute may elect by mutual agreement to extend 12-month period ending April 30, 2003 (the period of negotiation and may elect by mutual agreement to engage a mediator to assist in such negotiation. To the extent that any matter remains unresolved following negotiations (as determined by notice by any party to the other party"Final Determination"), which determination shall be final and binding on each of the Sellers’ Representative and Buyer shall jointly select an independent accountant of recognized national standing to resolve any remaining disagreements (the “Independent Accountant”)parties. The Sellers’ Representative and Buyer Independent Firm shall use their respective commercially reasonable efforts to cause such Independent Accountant to make its determination within sixty (60) calendar days of accepting its selectionbased solely on presentations by Purchaser and Seller, and not by independent review. Within ten (10) Business Days after the date of determination of such Independent Accountant, Buyer shall pay or cause to be paid to the Sellers the Contingent Consideration in the manner set forth herein, subject to the right of offset provisions of Article 10 below. The decision of In resolving any disputed item the Independent Accountant shall be Firm may not assign a final, binding, and conclusive resolution of value to any item greater than the parties’ dispute, shall be non-appealable, and shall not be subject to further review absent patent errorgreatest value for such item claimed by either party or less than the smallest value for such item claimed by either party. The costs Any fees and expenses of the Independent Accountant Firm shall be split between Buyer and borne by: (i) Seller in the Sellers in proportion that the aggregate dollar amount of such disputed items so submitted that are unsuccessfully disputed by Seller bears to the difference between the aggregate dollar amount set forth of all disputed items and (ii) Purchaser in the decision proportion that the aggregate dollar amount of such disputed items so submitted that are successfully disputed by Seller bears to the aggregate dollar amount of all disputed items. Purchaser shall pay to Seller the Contingent Purchase Price within 10 business days following (i) Purchaser's receipt of the Independent Accountant and Notice of Concurrence; (ii) completion of the amount reflected in the Earnout Report (parties' negotiated settlement with respect to Buyer’s portionPurchaser's EBITDA for the 12-month period ending April 30, 2003; or (iii) and the amount reflected in the Earnout Dispute Notice (with respect to the Sellers’ portion). In the event that the Sellers do not pay their amount parties' receipt of the Independent Accountant’s costs and expenses, Buyer shall be entitled to deduct the difference between the Sellers’ portion of the costs and expenses of the Independent Accountant and the amount actually paid by the Sellers to the Independent Accountant from the Contingent Consideration. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split between the parties in accordance with this subsection (C) incurred in connection with the dispute.
(D) Each Seller hereby, generally, irrevocably, unconditionally and completely agrees that, except as provided by this subsection (D), Buyer and each of its Affiliates shall be entitled to operate the Acquired Business as they determine in their sole and absolute discretion, and shall have no obligation to operate the Acquired Business in any manner that would maximize, maintain or protect the Contingent Consideration; provided, however, that Buyer hereby covenants and agrees that from the Closing through the last day of the Earnout Period that:
(a) in the event Buyer [*] directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period;
(b) Buyer will continue to make the [*] payments payable to each of [*] in accordance with the letter of understanding with [*], dated [*], and the [*] agreements with [*] summarized on Schedule 3.11, respectively, unless, Buyer and [*] with respect to [*] letter of understanding, Buyer and [*] with respect to [*] agreement or Buyer and [*] with respect to [*] agreementFinal Determination, as the case may be, mutually agree otherwise in writing;
(c) Buyer will cause the books and records of the Acquired Business to be maintained in such a manner as will allow for the segregation, identification and accounting for revenues of the Acquired Business by Buyer;
(d) Buyer will sell the Acquired Business Products [*];
(e) Buyer will not terminate the employment of ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or the consultancy of ▇▇▇▇ ▇▇▇▇▇▇▇, other than as a result of death, disability or for cause (as defined in their employment or consulting agreement with Buyer, as the case may be), or materially reduce their cash compensation or responsibilities and duties in the operation of the Business from what is set forth in their employment or consulting agreement, as the case may be, with Buyer from the earlier of the end date set forth in their employment or consulting agreement (as applicable) and the last day of the Earnout Period;
(f) Buyer will not require ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇ to commit any material time or energy to an enterprise other than the Acquired Business;
(g) Buyer will continue to sell the Acquired Business Products for Epistaxis and sinus surgery indications;
(h) Buyer will conduct the Acquired Business only through Buyer and its Affiliates;
(i) Buyer will make available sufficient working capital to the Acquired Business to support the sale of the Acquired Business Products;
(j) Buyer will not terminate (other than as a result of death, disability or for cause) or materially reduce the cash compensation of [*] as of the Closing Date if such termination or reduction directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period; and
(k) in the event there is a Class II Recall or Class III Recall (each as defined by the FDA) of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In the event Buyer fails to comply with any of subsection (b), (c), (d), (e), (f), (g), (h) or (i) above and such failure to comply directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In addition, in the event a Buyer Change of Control is consummated during the Earnout Period, the Contingent Consideration payable pursuant to this Section 2.05(a)(ii) shall in any case be $15.0 million, regardless of the actual Net Revenue recognized during the Earnout Period. Any offset that may be made pursuant to Article 10 of this Agreement shall be deducted from the $15.0 million payable pursuant to the foregoing sentence.
Appears in 1 contract
Contingent Consideration. (A) As promptly as practicable after An earnout may be earned by Seller as, and to the end of each calendar quarter or fraction thereof commencing on the first day of extent provided for, in this Section 2.07, and, if earned, shall be paid by Buyer to Seller following the Earnout Period as provided for in this Section 2.07 (e.g.such earnout, March 31, 2006, June 30, 2006, September 30, 2006, December 31, 2006 and January 31, 2007), Buyer shall provide the Sellers’ Representative with a report, setting forth the Net “Revenue for such quarter or fraction thereof of the Earnout Period. As promptly as practicable Earnout”):
(a) Within forty-five (45) days after the end expiry of the Earnout Period, Buyer shall will use reasonable efforts to provide the Sellers’ Representative Seller with a report, setting forth the Net Revenue for preliminary draft of the Earnout Period substantially in Notice (defined below) with the form attached hereto understanding that such preliminary notice is for Seller’s information and subject to change as Exhibit D Buyer finalizes its end-of-fiscal-year accounting. Not later than ninety (90) days after the expiry of each Earnout Period, Buyer will provide Seller with written notice (the “Earnout ReportNotice”) setting forth: (i) Buyer's computation of Revenue for the applicable Earnout Period; (ii) Buyer's computation of the Gross Profit Margin for the applicable Earnout Period; and (iii) whether any applicable Earnout Consideration was earned during the applicable Earnout Period (collectively, the “Earnout Calculations”). If .
(b) Upon the receipt by Seller of an Earnout Dispute Notice is not delivered pursuant to subsection (C) belowNotice, then in no event later than Seller shall have a period of twenty (20) Business Days following days to review the expiration Earnout Notice and may have the same verified by independent accountants and other Representatives selected by Seller. Seller and its Representatives shall be entitled to perform reasonable procedures (including review of the accounting records of the Buyer and supporting such calculations and other materials as they may reasonably request) and to take any other reasonable steps that Seller and its Representatives deem appropriate to confirm that the amount of the Earnout Dispute Calculations for the applicable Earnout Period set forth in the Earnout Notice has been prepared in accordance with the terms of this Agreement. For the avoidance of doubt, reasonable procedures and reasonable requests include full access to the relevant books and records of ▇▇▇▇▇, the personnel of, and work papers prepared by, ▇▇▇▇▇ and/or ▇▇▇▇▇'s Accountants to the extent that they relate to the Earnout Calculations and to such historical financial information (to the extent in Buyer's possession) relating to the Earnout Calculations. Buyer will provide materials requested by Seller within three (3) Business Days of Seller’s request. If Seller shall have any objections to the calculation of the Earnout Calculations set forth in the Earnout Notice, Seller shall deliver to Buyer, within twenty (20) days from its receipt of the Earnout Notice (the “Earnout Objection Period”), a written statement (the “Earnout Objection Notice”) setting forth the component or components of the Earnout Notice that are in dispute, the basis of such dispute and, if known, the amount proposed as an adjustment. The failure of Seller to deliver an Earnout Objection Notice within the twenty (20) day period hereinabove provided shall constitute the acceptance by Seller of the calculations and determinations made by Buyer as set forth in the Earnout Notice, whereupon such amounts shall be final, binding and conclusive for all purposes hereunder. Notwithstanding any dispute or objection, undisputed amounts of the Earnout Consideration shall be paid in accordance with Section 2.07(i).
(c) If Seller delivers an Earnout Objection Notice, Seller and Buyer shall in good faith attempt to resolve any such dispute and, if the parties so resolve all such disputes, then the computation of the Earnout Calculations set forth in the Earnout Notice for the applicable Earnout Period as resolved by the parties, shall be conclusive and binding on the parties upon written acknowledgement of such resolution. If Seller and Buyer fail to resolve all of the items in dispute within fifteen (15) days after Seller's delivery of the Earnout Objection Notice to Buyer (or such longer period as they may mutually agree in writing), then either party may elect to submit any remaining disputed items to an independent third-party arbitrator mutually acceptable to Buyer and Seller who shall be qualified by experience and training to arbitrate commercial disputes (the “Earnout Expert”) who shall be retained to review promptly the Earnout Calculations set forth in the Earnout Notice and the disputed items or amounts; provided, however, that if the Buyer and Seller are unable to mutually agree on an individual to act as the Earnout Expert within five (5) Business Days after Buyer or Seller elects to submit the dispute to arbitration, then each of Buyer and Seller shall each designate an independent third-party arbitrator and such designees shall promptly (and in any event within ten (10) days) select an individual to act as the Earnout Expert.
(d) If any disputed items are referred to the Earnout Expert, the parties shall cooperate in good faith with the determination process and the Earnout Expert’s requests for information, including providing the Earnout Expert with information as promptly as practicable after its request therefor. Each party shall be entitled to receive copies of all materials provided by the other to the Earnout Expert in connection with the determination process. In making its determination on the disputed items, the Earnout Expert shall make such determinations (i) only in accordance with the standards set forth in this Agreement, (ii) only with respect to the disputed items submitted to the Earnout Expert and no other items, (iii) on a disputed item by disputed item basis (i.e., not in the aggregate), and (iv) where the result of the Earnout Expert’s determination for such disputed item is neither greater than nor less than the amounts presented by the parties to the Earnout Expert with respect to the item in dispute. In connection with the Earnout Expert’s review, the Earnout Expert shall have the right to engage an independent accounting firm. The determination of the Earnout Expert shall be final, conclusive and binding on the parties, absent manifest error. The parties shall instruct the Earnout Expert to provide its determination in writing to the parties within thirty (30) days of the date it is engaged on such project. Neither party shall have any ex parte conversations or meetings with the Earnout Expert without the prior written consent of the other party.
(e) The Earnout Calculations for the applicable Earnout Period, ArthroCare and the earning of the applicable Earnout Consideration therefrom, either as accepted or deemed to have been accepted by Seller or as adjusted and resolved in the manner herein provided, shall fix the Earnout Calculations for the applicable Earnout Period and the earning of the Earnout Consideration determined therefrom. Each party shall bear its own expenses and the fees and expenses of its own Representatives, including its independent accountants, in connection with the preparation, review, dispute (if any) and final determination of the Earnout Calculations for the applicable Earnout Period, and the earning of any Earnout Consideration calculated therefrom.
(f) If the Revenue for the First Earnout Period is: (A) equal to or greater than one hundred percent (100%) of the Initial Revenue Target, and the Gross Profit Margin is above the Gross Profit Margin Threshold, then Seller shall be entitled to receive one hundred percent (100%) of the Initial Earnout Consideration; or (B) less than the Initial Revenue Target, but the Gross Profit Margin is above the Gross Profit Margin Threshold, then the Initial Earnout Consideration shall be an amount equal to the Revenue Percentage of the Initial Earnout Consideration.
(g) If the Revenue for the Second Earnout Period is: (A) (i) equal to or greater than one hundred percent (100%) of the Year-Two Revenue Target, and the Gross Profit Margin above the Gross Profit Margin Threshold, then Seller shall be entitled to receive one hundred percent (100%) of the Year-Two Earnout Consideration; or (B) less than the Year-Two Revenue Target, but the Gross Profit Margin is above the Gross Profit Margin Threshold, then the Year-Two Earnout Consideration shall be an amount equal to the Revenue Percentage of Year-Two Earnout Consideration.
(h) For the avoidance of doubt, Seller will not be entitled to Earnout Consideration for an applicable Earnout Period if the Revenue during an Earnout Period does not exceed the Gross Profit Margin Threshold. Further, Revenue realized during the First Earnout Period shall not, under any circumstance, be applied toward the Earnout Consideration for the Second Earnout Period.
(i) Following the Earnout Period, within five (5) Business Days after the date that is the earlier of (i) the acceptance of the Earnout Notice and the date on which written agreement in respect of any amount of the Revenue Earnout is reached or a determination is made in accordance with Section 2.07(c) or with Section 2.07(d), Buyer shall pay or cause to Seller all undisputed portions of the Earnout Consideration, if any, as follows: (a) the portion of the Earnout Consideration paid in cash shall be paid the Contingent Consideration in cash by wire transfer of immediately available funds to such account as Sellers shall designate the accounts identified by written notice Seller at least three (3) days prior to the expiration of the applicable Earn-Out Period; and (b) the portion of the Earnout Consideration to be paid in Earnout Shares will be issued to Seller by Buyer.
(Bj) Buyer shall keep full, clear and accurate books and records with respect to the Acquired Business. The books and records shall be maintained in such a manner that Net Revenue shall be readily verifiable. All books and records with respect to the Acquired Business shall be available for inspection by the Sellers’ Representative or any attorney or accountant engaged by the Sellers’ Representative to act on behalf of the Sellers, in all cases upon reasonable prior notice and during normal business hours. The information contained in the books and records of Buyer with respect to the Acquired Business shall remain confidential except to the extent required to be disclosed by applicable law or in connection with a dispute regarding the Transactions. If the Sellers’ Representative does not deliver to Buyer an Earnout Dispute Notice (as defined below) in accordance with subsections (A)-(C), then the Earnout Report for the Earnout Period shall be deemed final and binding and neither the Sellers’ Representative nor the Sellers shall have any further right to contest the report, the computation of Net Revenue or payment of the Contingent Consideration.
(C) In the event that the Sellers’ Representative shall dispute the information set forth by Buyer in the Earnout Report, then, within sixty (60) calendar days following the date of the delivery by Buyer of such report, the Sellers’ Representative shall provide written notice to Buyer (the “Earnout Dispute Notice”) specifying the amount disputed and the basis for the dispute, together with supporting documentation reflecting the analysis of and justification for any recomputation made to the extent such information is available. Buyer and the Sellers’ Representative shall make good faith efforts to resolve the dispute through negotiations for a period of thirty (30) calendar days following the receipt of the Earnout Dispute Notice. In the event that the parties are unable to finally resolve the dispute within such thirty (30) calendar-day period, the parties to the dispute may elect by mutual agreement to extend the period of negotiation and may elect by mutual agreement to engage a mediator to assist in such negotiation. To the extent that any matter remains unresolved following negotiations (as determined by notice by any party to the other party), the Sellers’ Representative and Buyer shall jointly select an independent accountant of recognized national standing to resolve any remaining disagreements (the “Independent Accountant”). The Sellers’ Representative and Buyer shall use their respective commercially reasonable efforts to cause such Independent Accountant to make its determination within sixty (60) calendar days of accepting its selection. Within ten (10) Business Days after the date of determination of such Independent Accountant, Buyer shall pay or cause to be paid to the Sellers the Contingent Consideration in the manner set forth herein, subject to the right of offset provisions of Article 10 below. The decision of the Independent Accountant shall be a final, binding, and conclusive resolution of the parties’ dispute, shall be non-appealable, and shall not be subject to further review absent patent error. The costs and expenses of the Independent Accountant shall be split between Buyer and the Sellers in proportion to the difference between the amount set forth in the decision of the Independent Accountant and the amount reflected in the Earnout Report (with respect to Buyer’s portion) and the amount reflected in the Earnout Dispute Notice (with respect to the Sellers’ portion). In the event that the Sellers do not pay their amount of the Independent Accountant’s costs and expenses, Buyer shall be entitled to deduct the difference between the Sellers’ portion of the costs and expenses of the Independent Accountant and the amount actually paid by the Sellers to the Independent Accountant from the Contingent Consideration. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split between the parties in accordance with this subsection (C) incurred in connection with the dispute.
(D) Each Seller hereby, generally, irrevocably, unconditionally and completely agrees that, except as provided by this subsection (D), Buyer and each of its Affiliates shall be entitled to operate the Acquired Business as they determine in their sole and absolute discretion, and shall have no obligation to operate the Acquired Business in any manner that would maximize, maintain or protect the Contingent Consideration; provided, however, that Buyer hereby covenants acknowledges and agrees that Buyer may make from time to time such business decisions as it deems appropriate, in its sole discretion and in good faith, in the Closing through the last day conduct of the Earnout Period that:
(a) in the event Buyer [*] directly results in a back order business of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period;
(b) Buyer will continue to make the [*] payments payable to each of [*] in accordance with the letter of understanding with [*], dated [*], and the [*] agreements with [*] summarized on Schedule 3.11, respectively, unless, Buyer and [*] with respect its Subsidiaries, including actions that may have an impact on Buyer's Revenue and/or the Earn-Out Consideration. Seller will have no right(s) to [*] letter of understanding, Buyer and [*] with respect to [*] agreement claim any lost Earn-Out Consideration or Buyer and [*] with respect to [*] agreement, as the case may be, mutually agree otherwise in writing;
(c) Buyer will cause the books and records of the Acquired Business to be maintained in such a manner as will allow for the segregation, identification and accounting for revenues of the Acquired Business by Buyer;
(d) Buyer will sell the Acquired Business Products [*];
(e) Buyer will not terminate the employment of ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or the consultancy of ▇▇▇▇ ▇▇▇▇▇▇▇, other than damages as a result of death, disability or for cause (as defined in their employment or consulting agreement with Buyer, such decisions so long as the case may be), or materially reduce their cash compensation or responsibilities and duties actions were not taken by Buyer in the operation of the Business from what is set forth in their employment or consulting agreement, as the case may be, with Buyer from the earlier of the end date set forth in their employment or consulting agreement (as applicable) and the last day of the Earnout Period;
(f) Buyer will not require ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇ to commit any material time or energy to an enterprise other than the Acquired Business;
(g) Buyer will continue to sell the Acquired Business Products for Epistaxis and sinus surgery indications;
(h) Buyer will conduct the Acquired Business only through Buyer and its Affiliates;
(i) Buyer will make available sufficient working capital to the Acquired Business to support the sale of the Acquired Business Products;
(j) Buyer will not terminate (other than as a result of death, disability or for cause) or materially reduce the cash compensation of [*] as of the Closing Date if such termination or reduction directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue bad faith for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes principal purpose of calculating the Contingent Consideration payable for the Earnout Period; and
(k) in the event there is a Class II Recall or Class III Recall (each as defined by the FDA) frustrating provisions of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In the event Buyer fails to comply with any of subsection (b), (c), (d), (e), (f), (g), (h) or (i) above and such failure to comply directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In addition, in the event a Buyer Change of Control is consummated during the Earnout Period, the Contingent Consideration payable pursuant to this Section 2.05(a)(ii) shall in any case be $15.0 million, regardless of the actual Net Revenue recognized during the Earnout Period. Any offset that may be made pursuant to Article 10 of this Agreement shall be deducted from the $15.0 million payable pursuant to the foregoing sentence2.07.
Appears in 1 contract
Sources: Asset Purchase Agreement (Super League Gaming, Inc.)
Contingent Consideration. (Aa) As promptly additional consideration, the Buyer will pay, or cause to be paid, to the Sellers as practicable after set forth in Section 1.3(a) an additional amount of consideration equal to the end Contingent Consideration, if any, in accordance with the terms of each calendar quarter or fraction thereof commencing on this Section 1.7. The Contingent Consideration, if any, paid to Sellers pursuant to this Section 1.7 will be treated as an adjustment to the first day Purchase Price.
(b) The Buyer will deliver to the Sellers a statement setting forth the Buyer’s calculation, in reasonable detail, of the Earnout Period (e.g., March 31, 2006, June 30, 2006, September 30, 2006, Contingent Consideration and Incremental EBITDA for the fiscal year ended December 31, 2006 and January 31, 2007), Buyer shall provide the Sellers’ Representative with a report, setting forth the Net Revenue for such quarter or fraction thereof of the Earnout Period. As promptly as practicable after the end of the Earnout Period, Buyer shall provide the Sellers’ Representative with a report, setting forth the Net Revenue for the Earnout Period substantially in the form attached hereto as Exhibit D 2021 (the “Earnout ReportContingent Consideration Statement”) as soon as reasonably practicable, but in any event no later than April 15, 2022 (the “Statement Delivery Date”). The Buyer will provide to the Sellers reasonable supporting documentation for the calculation of the amounts set forth in the Contingent Consideration Statement. The Sellers may review the work papers used in the preparation of the Buyer’s calculation of the amounts set forth in the Contingent Consideration Statement, and the Buyer will make available to the Sellers all such work papers and other documents related thereto as may be reasonably requested by the Sellers. If the Sellers disagree with the Contingent Consideration Statement, then the Sellers will give written notice (an “Objection Notice”) to the Buyer within thirty (30) days after the delivery of the Contingent Consideration Statement by the Buyer to the Sellers (the “Objection Period”), specifying in reasonable detail the disputed items or amounts in the Contingent Consideration Statement (the “Disputed Items”), and the Sellers will be deemed to have agreed with all other items and amounts contained in the Contingent Consideration Statement. If the Sellers do not deliver an Objection Notice within the Objection Period, then the Sellers will be deemed to have agreed entirely with the determination of the Contingent Consideration as set forth by the Buyer in the Contingent Consideration Statement. If an Earnout Dispute Objection Notice is not delivered pursuant in accordance with the terms of this Section 1.7(b), the Buyer and the Sellers will, during the thirty (30) days following delivery of such Objection Notice, use commercially reasonable, good faith efforts to subsection reach agreement on the Disputed Items. If after such thirty (C30)-day period, the Buyer and the Sellers are unable to reach agreement on the Disputed Items, they will promptly cause the Valuation Firm to review this Agreement, the Contingent Consideration Statement and the Disputed Items for the purpose of calculating the Contingent Consideration, and the terms of Section 1.6(a) belowshall apply mutatis mutandis to the Valuation Firm’s determination of the Contingent Consideration and the payment of the Valuation firm’s fees and expenses related thereto.
(c) Subject to the terms and conditions of this Agreement, then in no event later than twenty within five (205) Business Days following the expiration resolution of the Earnout Dispute PeriodDisputed Items, ArthroCare shall pay the Buyer will pay, or cause to be paid paid, to the Sellers (as additional consideration for the Units) an amount equal to the Contingent Consideration in cash by (as finally determined pursuant to Section 1.7(b)), via wire transfer of immediately available funds to such account as Sellers shall designate by written notice to Buyer.
(B) Buyer shall keep full, clear and accurate books and records with respect to the Acquired Business. The books and records shall be maintained in such a manner that Net Revenue shall be readily verifiable. All books and records with respect to the Acquired Business shall be available for inspection one or more accounts designated by the Sellers’ Representative , or any attorney or accountant engaged by such other method as may be agreed by the Sellers’ Representative Buyer and the Equityholders; provided, that in no event shall the Buyer be obligated to act on behalf of pay the SellersSellers more than Maximum Contingent Consideration; provided, in all cases upon reasonable prior notice and during normal business hours. The information contained in further, that if the books and records of Buyer with respect to the Acquired Business shall remain confidential except to the extent required to be disclosed by applicable law Incremental EBITDA is zero or in connection with a dispute regarding the Transactions. If the Sellers’ Representative does not deliver to Buyer an Earnout Dispute Notice (as defined below) in accordance with subsections (A)-(C)negative, then the Earnout Report for the Earnout Period Buyer shall not be deemed final obligated to pay, and binding and neither the Sellers’ Representative nor none of the Sellers shall have be entitled to receive, any further right to contest the report, the computation of Net Revenue or payment of the Contingent Consideration.
(Cd) In None of the event Buyer nor any of its Affiliates (including the Acquired Companies) will (x) take any action that is made for the primary purpose of minimizing the Contingent Consideration to be paid by the Buyer, or (y) from the Closing Date through December 31, 2021, prevent the Acquired Companies from operating in accordance with the operating expense budget for the fiscal year ended December 31, 2021 (as delivered to the Buyer prior to the date of this Agreement) in the ordinary course of business. The Sellers each acknowledge and agree that: (i) the Sellers’ Representative shall dispute sole and exclusive right under this Section 1.7 will be to receive, subject to the information other terms of this Agreement, the Contingent Consideration, if any, if the conditions set forth by in this Section 1.7 with respect thereto are satisfied; (ii) the Buyer will have the right to operate its business and that of its Affiliates (including the Acquired Companies) as it chooses, in its sole discretion, and neither the Earnout Report, then, within sixty Buyer nor any of its Affiliates (60including the Acquired Companies) calendar days following is under any obligation to provide any specific level of investment or financial assistance to its business or to undertake any specific actions (or to refrain from taking any specific actions) with respect to the date operation of its business; (iii) neither the Buyer nor any of its Affiliates is representing or warranting that any specific level of 2021 EBITDA will be achieved after the Closing nor will any of the delivery Sellers have any claims against the Buyer or any of its Affiliates (including the Acquired Companies) arising from the failure to meet for any reason any level of 2021 EBITDA; and (iv) all payments made under this Section 1.7 to, or as directed by, the Sellers are being paid solely in consideration for the Units pursuant to the transactions contemplated by this Agreement, and, except as otherwise required by a determination within the meaning of Section 1313 of the Code, neither the Sellers nor the Buyer will take a Tax position inconsistent with the foregoing (other than, for avoidance of such reportdoubt, the treatment of any portion thereof as imputed interest).
(e) With respect to any Contingent Consideration that is required to be paid by the Buyer to, or as directed by, the Sellers’ Representative shall provide written notice , the Buyer will have the right to Buyer set-off against such Contingent Consideration (the “Earnout Dispute Notice”or any portion thereof) specifying the any amount disputed otherwise due and the basis for the dispute, together with supporting documentation reflecting the analysis of and justification for any recomputation made payable to the extent such information is available. Buyer and or its Affiliates, on the one hand, by the Sellers’ Representative shall make good faith efforts , on the other hand, pursuant to resolve this Agreement or, with respect to any individual Seller, any ancillary document to which such Seller is a party.
(f) Notwithstanding anything to the dispute through negotiations for a period of thirty (30) calendar days following contrary contained herein, the receipt obligations of the Earnout Dispute Notice. In Buyer to make any payment of the event that the parties Contingent Consideration hereunder, including, without limitation pursuant to this Section 1.7, are unable to finally resolve the dispute within such thirty (30) calendar-day period, the parties subordinate and junior to the dispute may elect by mutual agreement to extend the period prior payment and performance of negotiation and may elect by mutual agreement to engage a mediator to assist in such negotiation. To the extent any of Buyer’s obligations under any of its current or future credit facilities; provided, that any matter remains unresolved following negotiations (as determined by notice by any party to the other party), the Sellers’ Representative and Buyer shall jointly select an independent accountant of recognized national standing to resolve any remaining disagreements (the “Independent Accountant”). The Sellers’ Representative and Buyer shall will use their respective commercially reasonable efforts to cause such Independent Accountant any of its future credit facilities to make its determination within sixty (60) calendar days expressly permit the payment of accepting its selection. Within ten (10) Business Days after the date of determination of such Independent Accountant, Buyer shall pay or cause to be paid to the Sellers the Contingent Consideration in the manner set forth herein, subject (if any) when and to the right of offset provisions of Article 10 below. The decision of the Independent Accountant shall be a final, binding, extent due and conclusive resolution of the parties’ dispute, shall be non-appealable, and shall not be subject to further review absent patent error. The costs and expenses of the Independent Accountant shall be split between Buyer and the Sellers in proportion to the difference between the amount set forth in the decision of the Independent Accountant and the amount reflected in the Earnout Report (with respect to Buyer’s portion) and the amount reflected in the Earnout Dispute Notice (with respect to the Sellers’ portion). In the event that the Sellers do not pay their amount of the Independent Accountant’s costs and expenses, Buyer shall be entitled to deduct the difference between the Sellers’ portion of the costs and expenses of the Independent Accountant and the amount actually paid by the Sellers to the Independent Accountant from the Contingent Consideration. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split between the parties in accordance with this subsection (C) incurred in connection with the dispute.
(D) Each Seller hereby, generally, irrevocably, unconditionally and completely agrees that, except as provided by this subsection (D), Buyer and each of its Affiliates shall be entitled to operate the Acquired Business as they determine in their sole and absolute discretion, and shall have no obligation to operate the Acquired Business in any manner that would maximize, maintain or protect the Contingent Consideration; provided, however, that Buyer hereby covenants and agrees that from the Closing through the last day of the Earnout Period that:
(a) in the event Buyer [*] directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period;
(b) Buyer will continue to make the [*] payments payable to each of [*] in accordance with the letter of understanding with [*], dated [*], and the [*] agreements with [*] summarized on Schedule 3.11, respectively, unless, Buyer and [*] with respect to [*] letter of understanding, Buyer and [*] with respect to [*] agreement or Buyer and [*] with respect to [*] agreement, as the case may be, mutually agree otherwise in writing;
(c) Buyer will cause the books and records of the Acquired Business to be maintained in such a manner as will allow for the segregation, identification and accounting for revenues of the Acquired Business by Buyer;
(d) Buyer will sell the Acquired Business Products [*];
(e) Buyer will not terminate the employment of ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or the consultancy of ▇▇▇▇ ▇▇▇▇▇▇▇, other than as a result of death, disability or for cause (as defined in their employment or consulting agreement with Buyer, as the case may be), or materially reduce their cash compensation or responsibilities and duties in the operation of the Business from what is set forth in their employment or consulting agreement, as the case may be, with Buyer from the earlier of the end date set forth in their employment or consulting agreement (as applicable) and the last day of the Earnout Period;
(f) Buyer will not require ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇ to commit any material time or energy to an enterprise other than the Acquired Business;
(g) Buyer will continue to sell the Acquired Business Products for Epistaxis and sinus surgery indications;
(h) Buyer will conduct the Acquired Business only through Buyer and its Affiliates;
(i) Buyer will make available sufficient working capital to the Acquired Business to support the sale of the Acquired Business Products;
(j) Buyer will not terminate (other than as a result of death, disability or for cause) or materially reduce the cash compensation of [*] as of the Closing Date if such termination or reduction directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period; and
(k) in the event there is a Class II Recall or Class III Recall (each as defined by the FDA) of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In the event Buyer fails to comply with any of subsection (b), (c), (d), (e), (f), (g), (h) or (i) above and such failure to comply directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In addition, in the event a Buyer Change of Control is consummated during the Earnout Period, the Contingent Consideration payable pursuant to this Section 2.05(a)(ii) 1.7, subject to any limitations required by a lender thereunder and, for the avoidance of doubt, the Buyer shall not be limited in its ability to obtain financing, or to agree to any case be $15.0 millionterms the Buyer determines in its sole discretion are necessary or advisable to obtain the financing, regardless after the Closing by this Section 1.7. So long as the Buyer or any Affiliate thereof is prohibited, in whole or in part, from making payments of the actual Net Revenue recognized during Contingent Consideration under this Agreement pursuant to the Earnout Periodterms of such credit facilities or the rules of any public exchange, no payment shall be made by the Buyer or any of its Affiliates (and no Seller shall receive or accept any such payment) with respect to the Contingent Consideration unless and until the Buyer is permitted under such credit facilities or such public exchange to make such payment. Any offset that may payment received by or on behalf of any Seller in violation of the foregoing shall be made held in trust by such recipient for the benefit of the lenders under such credit facility or facilities and any administrative agents for such lenders (the “Financing Parties”) or the Buyer, as applicable, and shall promptly be paid over to the Financing Parties or the Buyer, as applicable, by wire transfer of immediately available funds. Prior to the indefeasible payment in full in cash of all of the Buyer’s obligations under its credit facilities and termination of any commitments to extend credit under the Buyer’s credit facilities, no Seller shall take any action, without the prior written consent of the Financing Parties, to collect, enforce payment, or exercise any remedies with respect the Contingent Consideration (whether pursuant to Article 10 the terms of this Agreement shall be deducted from or otherwise) either at law or in equity, by judicial proceedings or otherwise. The provisions of this Section 1.7(f) are intended solely for the $15.0 million payable pursuant benefit of the Financing Parties to define the relative rights of the Sellers, on the one hand, and the Financing Parties, on the other hand. Notwithstanding anything to the foregoing sentence.contrary set forth herein, including Section 11.2 (No Third-Party Beneficiaries) and Section 11.9 (
Appears in 1 contract
Sources: Securities Purchase Agreement (Hydrofarm Holdings Group, Inc.)
Contingent Consideration. (Aa) As promptly soon as practicable after the end practicable, but in any event no later than 90 days following each of each calendar quarter or fraction thereof commencing on the first day of the Earnout Period (e.g., March 31, 2006, June 30, 2006, September 30, 2006, December 31, 2006 2002, 2003, and January 312004, 2007)the Buyer (i) shall prepare in accordance with GAAP, Buyer shall provide applied on a basis consistent with the Sellers’ Representative with Financial Statements, a report, setting forth statement derived from the Net Revenue for such quarter or fraction thereof audited financial statements of the Earnout Period. As promptly as practicable after Buyer (the end "EARN-OUT STATEMENT") of the Earnout Period, Buyer shall provide the Sellers’ Representative with a report, setting forth the Net Revenue for the Earnout Period substantially in the form attached hereto as Exhibit D (the “Earnout Report”). If an Earnout Dispute Notice is not delivered pursuant to subsection (C) below, then in no event later than twenty (20) Business Days following the expiration of the Earnout Dispute Period, ArthroCare shall pay or cause to be paid the Contingent Consideration in cash by wire transfer of immediately available funds to such account as Sellers shall designate by written notice to Buyer.
(B) Buyer shall keep full, clear and accurate books and records with respect to the Acquired Business. The books and records shall be maintained in such a manner that Net Revenue shall be readily verifiable. All books and records with respect to the Acquired Business shall be available for inspection by the Sellers’ Representative or any attorney or accountant engaged by the Sellers’ Representative to act on behalf of the Sellers, in all cases upon reasonable prior notice and during normal business hours. The information contained in the books and records of Buyer with respect to the Acquired Business shall remain confidential except to the extent required to be disclosed by applicable law or in connection with a dispute regarding the Transactions. If the Sellers’ Representative does not deliver to Buyer an Earnout Dispute Notice EBITDA (as defined below) in accordance with subsections for each such full fiscal year (A)-(Csuch one-year periods each being an "EARN-OUT PERIOD"), then the Earnout Report for the Earnout Period and (ii) shall be deemed final and binding and neither deliver each Earn-Out Statement to the Sellers’ Representative nor ' Representative. The Buyer shall, and shall cause the Sellers shall have any further right Buyer's accountant, to contest the report, the computation of Net Revenue or payment of the Contingent Consideration.
(C) In the event that provide access to the Sellers’ ' Representative shall dispute the information set forth by Buyer in the Earnout Report, then, within sixty (60) calendar days following the date of the delivery by Buyer of such report, the Sellers’ Representative shall provide written notice to Buyer (the “Earnout Dispute Notice”) specifying the amount disputed and the basis for the dispute, together with supporting documentation reflecting the analysis of and justification for any recomputation made to the extent such information is available. Buyer and the Sellers’ ' accountant any and all work papers used in the preparation of the Earn-Out Statements. The Sellers' Representative shall make good faith efforts to resolve the dispute through negotiations for a period of thirty have forty-five (3045) calendar days following the after receipt of any Earn-Out Statement (except for the Earnout Dispute Notice. In the event that the parties are unable Final Earn-Out Statement) ("PRELIMINARY DISPUTE PERIOD") to finally resolve the dispute within any or all amounts or elements of such thirty Earn-Out Statement (30) calendar-day period, the parties to the dispute may elect by mutual agreement to extend the period of negotiation and may elect by mutual agreement to engage a mediator to assist in such negotiation. To the extent that any matter remains unresolved following negotiations (as determined by notice by any party to the other party), the Sellers’ Representative and Buyer shall jointly select an independent accountant of recognized national standing to resolve any remaining disagreements (the “Independent Accountant”"PRELIMINARY DISPUTE"). The Sellers’ ' Representative and Buyer shall use their respective commercially reasonable efforts to cause such Independent Accountant to make its determination within sixty (60) calendar days of accepting its selection. Within ten (10) Business Days after the date of determination of such Independent Accountant, Buyer shall pay or cause to be paid provide to the Sellers the Contingent Consideration in the manner set forth hereinBuyer, subject prior to the right of offset provisions of Article 10 below. The decision end of the Independent Accountant Preliminary Dispute Period, written notice of the Preliminary Dispute (a "PRELIMINARY DISPUTE NOTICE"), setting forth in reasonable detail the amounts and elements with which it disagrees. If the Sellers' Representative does not deliver a Preliminary Dispute Notice to the Buyer prior to the end of each Preliminary Dispute Period, the Earn-Out Statement for such Earn-Out Period shall be a final, binding, final and conclusive resolution of the parties’ dispute, shall be non-appealable, and shall not be subject to further review absent patent error. The costs and expenses of the Independent Accountant shall be split between Buyer and binding upon the Sellers in proportion the form in which it was delivered to the difference between Sellers' Representative and no amounts in such Earn-Out Statement may be disputed by the amount Sellers in the Final Dispute Notice. The Sellers' Representative shall have forty-five (45) days after receipt of the Earn-Out Statement prepared for the fiscal year ended December 31, 2004 (the "FINAL EARN-OUT STATEMENT") (such period, the "FINAL DISPUTE PERIOD") to dispute any or all amounts or elements of the Final Earn-Out Statement and the items set forth in the decision of the Independent Accountant and the amount reflected in the Earnout Report (a Preliminary Dispute Notice with respect to any Preliminary Dispute Periods (a "DISPUTE"), but no Dispute can be based on the proper application of accounting policies and practices that are in accordance with GAAP and are applied on a basis consistent with the Financial Statements. If the Sellers' Representative determines to pursue a Dispute, the Sellers' Representative shall provide to the Buyer’s portion) , prior to the end of the Final Dispute Period, written notice of the Dispute (a "DISPUTE NOTICE"), setting forth in reasonable detail the amounts and elements with which it disagrees, and any Dispute by the amount reflected Sellers' Representative shall be limited to the matters included by the Sellers' Representative in the Earnout Dispute Notice (with respect and any Preliminary Dispute Notice previously delivered to the Buyer. If the Sellers' Representative does not deliver a Dispute Notice to Buyer prior to the end of the Final Dispute Period, the Final Earn-Out Statement shall be final and binding upon the Sellers in the form in which it was delivered to the Sellers’ portion). In the event that the Sellers do not pay their amount of the Independent Accountant’s costs and expenses, Buyer shall be entitled to deduct the difference between the Sellers’ portion of the costs and expenses of the Independent Accountant and the amount actually paid by the Sellers to the Independent Accountant from the Contingent Consideration. Notwithstanding the foregoing, in any case, the parties shall be responsible for the payment of their respective costs and expenses, including any attorneys’ and accountants’ fees (other than any accountants’ fees payable to the Independent Accountant, which shall be split between the parties in accordance with this subsection (C) incurred in connection with the dispute' Representative.
(D) Each Seller hereby, generally, irrevocably, unconditionally and completely agrees that, except as provided by this subsection (D), Buyer and each of its Affiliates shall be entitled to operate the Acquired Business as they determine in their sole and absolute discretion, and shall have no obligation to operate the Acquired Business in any manner that would maximize, maintain or protect the Contingent Consideration; provided, however, that Buyer hereby covenants and agrees that from the Closing through the last day of the Earnout Period that:
(a) in the event Buyer [*] directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period;
(b) If the Sellers' Representative shall have delivered to the Buyer will continue a Dispute Notice prior to make the [*] payments payable to each of [*] in accordance with the letter of understanding with [*], dated [*], and the [*] agreements with [*] summarized on Schedule 3.11, respectively, unless, Buyer and [*] with respect to [*] letter of understanding, Buyer and [*] with respect to [*] agreement or Buyer and [*] with respect to [*] agreement, as the case may be, mutually agree otherwise in writing;
(c) Buyer will cause the books and records end of the Acquired Business to be maintained in such a manner as will allow for the segregation, identification and accounting for revenues of the Acquired Business by Buyer;
(d) Buyer will sell the Acquired Business Products [*];
(e) Buyer will not terminate the employment of ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or the consultancy of ▇▇▇▇ ▇▇▇▇▇▇▇, other than as a result of death, disability or for cause (as defined in their employment or consulting agreement with Buyer, as the case may be), or materially reduce their cash compensation or responsibilities and duties in the operation of the Business from what is set forth in their employment or consulting agreement, as the case may be, with Buyer from the earlier of the end date set forth in their employment or consulting agreement (as applicable) and the last day of the Earnout Period;
(f) Buyer will not require ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇ to commit any material time or energy to an enterprise other than the Acquired Business;
(g) Buyer will continue to sell the Acquired Business Products for Epistaxis and sinus surgery indications;
(h) Buyer will conduct the Acquired Business only through Buyer and its Affiliates;
(i) Buyer will make available sufficient working capital to the Acquired Business to support the sale of the Acquired Business Products;
(j) Buyer will not terminate (other than as a result of death, disability or for cause) or materially reduce the cash compensation of [*] as of the Closing Date if such termination or reduction directly results in a back order of the Acquired Business Products or a material reduction in quality of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period; and
(k) in the event there is a Class II Recall or Class III Recall (each as defined by the FDA) of the Acquired Business Products, which directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In the event Buyer fails to comply with any of subsection (b), (c), (d), (e), (f), (g), (h) or (i) above and such failure to comply directly results in reduced Net Revenue for the Acquired Business, the amount by which the Net Revenue is reduced shall be added to Net Revenue for purposes of calculating the Contingent Consideration payable for the Earnout Period. In addition, in the event a Buyer Change of Control is consummated during the Earnout Dispute Period, the Contingent Consideration payable pursuant Sellers' Representative and the Buyer shall attempt to this Section 2.05(a)(ii) shall resolve the Dispute and agree in any case be $15.0 million, regardless writing upon the final content of the actual Net Revenue recognized during Final Earn-Out Statement within fifteen (15) days following delivery by the Earnout Period. Any offset that may be made pursuant to Article 10 Sellers' Representative of this Agreement shall be deducted from the $15.0 million payable pursuant to the foregoing sentence.the
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