Earn-Out Consideration. (a) The Sponsor, the Company and NAC hereby agree that following the Closing, in addition to the consideration to be received pursuant to the BCA, ParentCo shall be required to issue to the Sponsor additional ParentCo Common Shares as follows: (i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the second anniversary of the Closing (the “First Deadline”) the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period (the “First Earn-Out Target”) (such 625,000 ParentCo Common Shares, the “First Level Earn-Out Consideration”). (ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing (the “Second Deadline”) the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, and, together with the First Earn-Out Target, the “Earn-Out Targets”) (such 625,000 ParentCo Common Shares, the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Consideration, the “Earn-Out Consideration”). For the avoidance of doubt, each of the First Level Earn-Out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with the terms of this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares, in the aggregate. (b) If any of the Earn-Out Targets set forth in Section 5(a) shall have been achieved, within five (5) Business Days following the achievement of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor. (c) If a Change of Control of ParentCo occurs (i) prior to the First Deadline, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change of Control. (d) The Earn-Out Consideration and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.” (B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the following: (a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows: (A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business Combination; (B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; (C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and (D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares Lock-up Period”)
Appears in 1 contract
Sources: Nac Founder Support Agreement (Nebula Parent Corp.)
Earn-Out Consideration. Certain capitalized terms used in this Section 1.7 are defined in Section 1.7(d) below.
(a) The SponsorShareholder shall be entitled, subject to the terms and conditions hereof, to receive as additional cash consideration for the transfer of the Shares, additional cash payments (the “Earn-Out Consideration”) based on the Annual Revenue of the Buyer during each of the three consecutive twelve-month periods following the Closing Date (each, an “Earn-Out Period” and the entire period from the Closing Date to the end of the final Earn-Out Period, the Company and NAC hereby agree that following the Closing“Earn-Out Term”), in addition to the consideration to be received pursuant to the BCA, ParentCo shall be required to issue to the Sponsor additional ParentCo Common Shares as follows:
(i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in If the aggregate, if any time prior to or as Annual Revenue for each of the second anniversary of first two Earn-Out Periods exceeds the Closing Minimum Revenue for such Earn-Out Period, then (A) for the “First Deadline”) the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period (the “First Earn-Out Target”) (such 625,000 ParentCo Common SharesPeriod, the “First Level Shareholder shall be entitled to be paid one dollar for each dollar of Annual Revenue achieved for such Earn-Out ConsiderationPeriod in excess of the Minimum Revenue for such Earn-Out Period up to Annual Revenue of seven million five hundred thousand dollars ($7,500,000) (i.e. such payment shall not exceed the Maximum Status Quo Payment for such Earn-Out Period), and (B) for the Second Earn-Out Period, the Shareholder shall be entitled to be paid the Maximum Status Quo Payment for such Earn-Out Period, in each case together with interest on such payment at the rate of five percent (5%) for the period from the Closing Date until such payment is made (such payments described in this Section 1.7(a)(i) collectively being the “Status Quo Payments” and each individually being a “Status Quo Payment”).
(ii) Six Hundred Twenty Five Thousand In addition to the foregoing, the Shareholder shall receive the Earn-Out Payment (625,000as defined and calculated below) ParentCo Common Sharesfor each Earn-Out Period. In the event that the Percentage Growth Achieved for the Third Earn-Out Period is less than one hundred percent (100%), then the Unearned Earn-Out for the Third Earn-Out Period shall be forfeited, and Buyer shall have no further obligation to pay such amount to the Shareholder. Example calculations of the Earn-Out Payments for the three Earn-Out Periods are set forth on Schedule 1.7(a)(ii).
(b) Annual Revenue and the resulting Status Quo Payment (as applicable) and Earn-Out Payment for each Earn-Out Period shall be determined, and Status Quo Payments and Earn-Out Payments shall be paid, as follows:
(i) Within thirty (30) days following the end of each Earn-Out Period, Buyer will deliver to the Shareholder a statement in writing setting forth Buyer’s determination of the Annual Revenue for such Earn-Out Period, and a calculation of the resulting Status Quo Payment (as applicable) and Earn-Out Payment to be made by Buyer for such Earn-Out Period (each such statement, a “Buyer Earn-Out Statement”).
(ii) The Shareholder shall have a period of up to thirty (30) days following the Shareholder’s receipt of a Buyer Earn-Out Statement to review Buyer’s calculation of Annual Revenue and the resulting Status Quo Payment (as applicable) and Earn-Out Payment. In connection with the review of the Buyer Earn-Out Statement, Buyer shall provide to the Shareholder reasonable access to all relevant books and records and personnel of the Company. If, as a result of such review, the Shareholder disagrees with Buyer’s calculations, the Shareholder shall deliver to Buyer a written notice of disagreement (a “Dispute Notice”) prior to the expiration of such thirty (30) day review period setting forth the basis for such dispute. Upon Buyer’s receipt of a Dispute Notice, Buyer and the Shareholder agree to negotiate in good faith to resolve the dispute set forth in the Dispute Notice. If Buyer and the Shareholder have not resolved the dispute within thirty (30) days following Buyer’s receipt of the Dispute Notice (or such longer period of time as Buyer and the Shareholder may mutually agree), then Buyer and the Shareholder agree to finally resolve such dispute in accordance with Section 1.7(b)(iii) below.
(iii) If Buyer and the Shareholder cannot reach agreement as described in Section 1.7(b)(ii) above, then the dispute shall be promptly referred to an Accounting Arbitrator, who shall be selected in accordance with the same process described in Section 1.6(c), for binding resolution. The Accounting Arbitrator shall determine the applicable Status Quo Payment (as applicable) and Earn-Out Payment owed at such time, in accordance with the aggregateprovisions of this Agreement, if any time prior as promptly as may be reasonably practicable and shall endeavor to or complete such process within a period of no more than sixty (60) days. The determination of the Accounting Arbitrator, absent manifest error, shall be final and binding on Buyer and the Shareholder, effective as of the date the Accounting Arbitrator’s written opinion is received by Buyer and the Shareholder. Buyer and the Shareholder shall each pay their own respective costs and expenses in connection with the foregoing dispute resolution process, but Buyer and the Shareholder shall share equally the costs and expenses of the Accounting Arbitrator; provided that if there is thirty an Erroneous Party as described in Section 1.6(c) with respect to the disputed items at issue, then the Erroneous Party shall pay all fees and expenses of the Accounting Arbitrator.
(30iv) months after Closing In the event that the parties agree (based on the “Second Deadline”) calculations set forth in the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Buyer Earn-Out Target”, and, together with Statement and the Dispute Notice for the First Earn-Out Target, Period or the “Second Earn-Out Targets”Period) that Buyer has achieved the Minimum Revenue for such Earn-Out Period, then Buyer shall pay to the Shareholder the relevant Status Quo Payment within ten (10) Business Days following the Shareholder’s delivery of the relevant Dispute Notice. Prior to the date that is the later of (A) ten (10) days following the final determination of the Status Quo Payment (as applicable) and Earn-Out Payment in accordance with this Section 1.7(b) (such 625,000 ParentCo Common Shareswhether by failure of the Shareholder to deliver a Dispute Notice within the required time period, by agreement of the parties, or by receipt of an opinion of the Accounting Arbitrator), and (B) two (2) months following the end of the relevant Earn-Out Period, Buyer shall pay to the Shareholder an amount in cash equal to the Status Quo Payment (as applicable, and if not already paid pursuant to the first sentence of this Section 1.7(b)(iv)) plus the Earn-Out Payment, each as finally determined in accordance with this Section 1.7(b).
(c) The calculation of Earn-Out Consideration set forth above assumes that the Shareholder remains employed by the Company during the entire Earn-Out Term. Otherwise, the “Second Level following adjustments shall be made to the calculation of Earn-Out Consideration” and together :
(i) In the event that the Shareholder voluntarily terminates his employment with the Company or Buyer, or Shareholder is terminated for Cause (as defined in Shareholder’s employment agreement with the Company and Buyer), or in the event of the Shareholder’s death or disability, during any Earn-Out Period, then:
(A) the Shareholder shall not be entitled to any Earn-Out Payments for any subsequent Earn-Out Period; and
(B) the Earn-Out Payment for such Earn-Out Period shall be adjusted as follows:
(1) Unearned Earn-Out for any previous Earn-Out Period shall not be included in the calculation of the Maximum Payment for such Earn-Out Period; (2) the Annual Revenue for such Earn-Out Period (the “Annualized Revenue”) shall equal (a) the Annual Revenue for such Earn-Out Period through the month during which the Shareholder’s employment is terminated as described above (such number of months, the “Elapsed Months”), divided by (b) the number of Elapsed Months, multiplied by (c) twelve (12); (3) the Percentage Growth Achieved for such Earn-Out Period shall be determined by replacing Annual Revenue in the definition of Actual Revenue Growth with Annualized Revenue; and (4) the Maximum Payment for such Earn-Out Period shall equal the Maximum Payment that would otherwise have been applicable, divided by twelve (12), and multiplied by the number of Elapsed Months.
(ii) In the event that the Shareholder is terminated by the Company or Buyer after the Closing without Cause or the Shareholder terminates his employment for Good Reason (as such terms are defined in Shareholder’s employment agreement with the Company and Buyer) during any Earn-Out Period, then the Shareholder shall be entitled to receive the Maximum Payment for such Earn-Out Period and any subsequent Earn-Out Period(s), provided that no Unearned Earn-Outs relating to any previous Earn-Out Period(s) shall be included in the calculation of such Maximum Payment(s).
(iii) In the event that the Shareholder’s employment by the Company or Buyer is terminated after the Closing before the expiration of the First Level Earn-Out Period and/or the Second Earn-Out Period for any reason, then the Shareholder shall still be entitled to receive the Status Quo Payment to which he would otherwise have been entitled (at the same time at which he would have otherwise been entitled to such payment, and not, for purposes of clarification, at the time of such termination) based on the Annual Revenue for the relevant time periods.
(d) For purposes of calculating the Earn-Out Consideration, the “Earn-Out Consideration”). For the avoidance of doubt, each of the First Level Earn-Out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with subject to the terms of this Section 5(a) and 1.7(c), the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares, in the aggregate.
(b) If any of the Earn-Out Targets set forth in Section 5(a) following terms shall have been achieved, within five (5) Business Days the following the achievement of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor.
(c) If a Change of Control of ParentCo occurs (i) prior to the First Deadline, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change of Control.
(d) The Earn-Out Consideration and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the followingmeanings:
(a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business Combination;
(B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares Lock-up Period”)
Appears in 1 contract
Sources: Stock Purchase Agreement (Sm&A)
Earn-Out Consideration. (a) The Sponsor, the Company and NAC hereby agree that following the Closing, in In addition to the consideration to be received pursuant to Cash Consideration and Share Consideration, the BCA, ParentCo Seller shall be required entitled to issue to the Sponsor additional ParentCo Common Shares consideration as follows:
(ia) Six Hundred Twenty Five Thousand If the Business Unit EBITDA for any of (625,0001) ParentCo Common Sharesthe portion of fiscal year 2008 between the Closing Date and December 31, in the aggregate2008, if any time prior to or as (2) each fiscal year ending December 31 for each of the second anniversary of the Closing calendar years 2009 through 2012 and (the “First Deadline”3) the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period (the “First Final Earn-Out Target”) out Period (such 625,000 ParentCo Common Shares, the “First Level Earn-Out Consideration”).
(ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing (the “Second Deadline”) the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, and, together with the First Earn-Out Targetcollectively, the “Earn-Out Targetsout Period”) exceeds the EBITDA Hurdle for such period, then the Seller shall be entitled to receive additional consideration equal to *** of such excess (such 625,000 ParentCo Common Shares, the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Consideration, the “Earn-Out out Consideration”). For ; provided that in no event shall the avoidance aggregate amount of doubt, each of the First Level Earn-Out out Consideration and Second Level payable to Seller exceed $37,500,000. Any Earn-out Consideration payable hereunder shall be subject to the following:
(i) to the extent any Earn-Out Consideration is issuable only once payable directly to the Seller, such amount shall be reduced by an amount equal to the Earn-out Consideration calculated in accordance with the terms of this Section 5(a3.4 for the relevant period multiplied by the aggregate Earn-Out Consideration Percentage Interests of the Ineligible Members, if any, and prior to any such payment, Seller shall certify in writing to the Buyer that no portion of such payment shall be distributed to any such Ineligible Member; and
(ii) and to the maximum amount of extent any Earn-Out Consideration is 1,250,000 ParentCo Common Sharespayable directly to the Members (upon prior written direction of the Members’ Representative), the amount payable shall be made severally to the Members in accordance with their respective Earn-out Consideration Percentage Interests, provided that no Ineligible Member shall receive his or her allocable portion of the aggregateEarn-Out Consideration.
(b) If any of With respect to each period during the Earn-Out Targets set forth in Section 5(aout Period, (x) shall have been achievedfor each period other than the Final Earn-out Period, within five no later than 10 days after the filing of Parent’s annual report on Form 10-K with the SEC for such period or, if such report is not timely filed by Parent, no later than 120 days after the end of such fiscal year and (5y) Business Days with respect to the Final Earn-out Period, no later than 10 days following the achievement filing of Parent’s quarterly report on Form 10-Q with the SEC for such period, or, if such report is not timely filed by Parent, no later than 90 days after the end of such fiscal quarter, Buyer shall prepare and deliver to the Members’ Representative a statement of income of the applicable Business as of the end of such period, together with a calculation of the Business Unit EBITDA for such period then ended and a statement of the amount, if any, of Earn-Out Target, ParentCo shall issue out Consideration payable with respect to such completed period. Unless the applicable Members’ Representative disputes Buyer’s determination of the Business Unit EBITDA and Earn-Out out Consideration for the relevant period in accordance with the provisions of Section 3.4(c), Buyer’s determination for such period shall be conclusive and binding upon the Members’ Representative and Seller. Parent and Buyer shall make available to the SponsorSeller all books and records maintained by Parent and Buyer as Seller may reasonably require in order for Seller to review and confirm Buyer’s calculation of Business Unit EBITDA.
(c) If a Change In the event that the Members’ Representative disputes the calculation of Control of ParentCo occurs (i) prior to the First Deadline, then the full Business Unit EBITDA and Earn-Out out Consideration issuable pursuant for any relevant period, the Members’ Representative shall notify Buyer in writing by delivery of a notice (an “Earn-out Dispute Notice”) within 30 days after delivery of Buyer’s calculation of the Business Unit EBITDA and Earn-out Consideration for such period, which Earn-out Dispute Notice shall set forth in reasonable detail the basis for such dispute. Any such dispute shall be resolved under the procedures set forth in Section 3.3(b)(ii) of this Agreement. If the Members’ Representative does not deliver an Earn-out Dispute Notice within 30 days after delivery of Buyer’s calculations, within 10 days after expiration of such 30 day period, or, if such a notice is timely delivered, within 10 days of the resolution of any such dispute, Buyer and Parent (jointly and severally) shall pay Seller any Earn-out Consideration that is owed to Seller. Subject to Section 5(a3.4(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive Section 10.6, such Earn-Out out Consideration prior to the consummation of such Change of Control shall be delivered by Buyer and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as Parent by wire transfers of immediately prior available funds to an account or accounts designated in writing by the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change of ControlMembers’ Representative.
(d) The Earn-Out Consideration and During the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock splitout Period, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the followingParent shall:
(ai) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, maintain separate accounting of the Business Unit for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to determining the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business CombinationEarn-out Consideration;
(Bii) twenty five percent (25%) not dispose of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to all or as a material portion of the seventh (7th) anniversary Purchased Assets or operations of the completion of Business to a third party or take any steps to wind up the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day periodBusiness; and
(Diii) notwithstanding clauses not require the Business to enter into any transaction other than in the ordinary course of business and on arm’s-length terms (Bunless such transaction will not affect Business Unit EBITDA or unless equitable adjustments are made in the calculation of Business Unit EBITDA to prevent any distortion in the calculation of Earn-out Consideration).
(e) The Seller (and (C), all Founder Shares shall not have any restrictions the Members’ Representative on Transfer under this Agreement on the date, if prior to or as behalf of the seventh (7thMembers) anniversary recognize that the contributions of the completion Members to the ongoing success of the Company’s initial Business Combinationare essential and that if any Member ceases to be a full time employee of Buyer or its Affiliates during the Earn-out Period, on which the Company (or the successor Business Unit EBITDA could be negatively impacted due to the Company pursuant cost incurred to replace each such former Business Employee. In addition, Seller (and the Members’ Representative on behalf of each Member) agrees and acknowledges that the Buyer Parties may make from time to time such business decisions as they deem appropriate in the conduct of the Business Unit’s business, including actions that may have an impact on Business Unit EBITDA, Acquired Entity EBITDA and achievement of all or any portion of Earn-out Consideration. Seller (and their respective Members) shall have no right to claim any lost Earn-out Consideration or other damages as a result of such decisions so long as the actions were not taken by the Buyer Parties in bad faith for the sole purpose of frustrating provisions of this Section 3.4, except to the Company’s initial Business Combinationextent that any such decision shall constitute a violation of Section 3.4(d).
(f) undergoes Buyer may elect to set-off against all or a Change portion of Control (collectivelyany Earn-out Consideration payable to Seller any amount owed to the Buyer Parties under the indemnification obligations set forth in Article X, as and to the “Founder Shares Lock-up Period”)extent set forth therein.
Appears in 1 contract
Earn-Out Consideration. Buyer shall pay Sellers an earn out in the aggregate not to exceed Seven Million Seventy-Five Thousand Dollars (a$7,075,000), hereinafter referred to as the "Earn Out." The Earn Out shall be paid entirely in cash. The starting date for the Earn Out Period (as defined in this paragraph) shall be the last calendar day of the month in which the Closing Date occurs (the "Start Date"). The SponsorEarn Out, the Company if and NAC hereby agree that following the Closing, in addition to the consideration to be received pursuant to the BCAextent earned, ParentCo shall be required to issue to the Sponsor additional ParentCo Common Shares as follows:
(i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or determined as of the second annual anniversary date of the Closing Start Date for the years 2012 (the “First Deadline”) the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period "2012 Earn Out"), 2013 (the “First Earn-Out Target”"2013 Earn Out") (such 625,000 ParentCo Common Shares, the “First Level Earn-Out Consideration”).
(ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing and 2014 (the “Second Deadline”) the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, "2014 Earn Out" and, together with the First Earn-2012 Earn Out Targetand the 2013 Earn Out, the “Earn-"Earn Out Targets”Period") (such 625,000 ParentCo Common Sharesand paid, if and to the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Considerationextent earned, the “Earn-Out Consideration”). For the avoidance of doubt, each of the First Level Earn-Out Consideration and Second Level Earn-Out Consideration is issuable only once in three annual installments in accordance with the following terms of this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares, in the aggregate.
(b) If any of the Earn-Out Targets set forth in Section 5(a) shall have been achieved, within five (5) Business Days following the achievement of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor.
(c) If a Change of Control of ParentCo occurs (i) prior to the First Deadline, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change of Control.
(d) The Earn-Out Consideration and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the followingconditions:
(a) The Sponsor For the 2012 Earn Out, in the event that the consolidated EBITDA of the NTS Rockford laboratory facility which will operate the Business and each Insider agrees house the Purchased Assets post-closing (the "Rockford Facility") exceeds $3,024,356 during the twelve calendar months immediately preceding the first anniversary date of the Start Date (the "2012 EBITDA Target"), Sellers will be entitled to receive the amount by which the consolidated EBITDA of the Rockford Facility for the 2012 Earn Out exceeds the 2012 EBITDA Target up to a maximum aggregate amount of Three Million Seventy-Five Thousand Dollars ($3,075,000) for the years 2012, 2013 and 2014, with any excess over that it or he amount shared pro rata between the parties as set forth below.*
(b) For the 2013 Earn Out, in the event that the consolidated EBITDA of the Rockford Facility exceeds $5,400,000 during the twelve calendar months immediately preceding the second anniversary date of the Start Date (the "2013 EBITDA Target"), Sellers will be entitled to receive the amount by which the consolidated EBITDA of the Rockford Facility for the 2013 Earn Out exceeds the 2013 EBITDA Target up to a maximum aggregate amount of Three Million Seventy-Five Thousand Dollars ($3,075,000) for the years 2012, 2013 and 2014, with any excess over that amount shared pro rata between the parties as set forth below.*
(c) For the 2014 Earn Out, in the event that the consolidated EBITDA of the Rockford Facility exceeds $5,916,000 during the twelve calendar months immediately preceding the third anniversary date of the Start Date (the "2014 EBITDA Target"), Sellers will be entitled to receive the amount by which the consolidated EBITDA of the Rockford Facility for the 2014 Earn Out exceeds the 2014 EBITDA Target up to a maximum aggregate amount of Three Million Seventy-Five Thousand Dollars ($3,075,000) for the years 2012, 2013, and 2014, with any excess over that amount shared pro rata between the parties as set forth below.* *Once the aggregate Earn Out paid to Sellers equals Three Million Seventy-Five Thousand Dollars ($3,075,000), any additional amount by which the consolidated EBITDA of the Rockford Facility exceeds the EBITDA Target for any of the applicable years shall be divided 60% to Sellers and 40% to NTS, provided that the Total Earn Out payable to Sellers shall not Transfer any Founder Shares exceed $7,075,000 million. Each of the foregoing Earn Out amounts, if earned, shall be paid by Buyer to Sellers within sixty (or60) days following each of the first three anniversaries of the Start Date based upon Buyer's good faith calculation of the EBITDA for the applicable period, for all purposes of this Letter Agreementusing Buyer's unaudited financial statements maintained in accordance with Buyer's normal internal accounting methods consistently applied. In each case, shares of Common Stock issuable however, the applicable Earn Out payment shall be subject to a subsequent adjustment increasing or decreasing such Earn Out payment based upon conversion thereof Buyer's Audited Financials covering the twelve-month period in which the Earn Out was earned (or shares of capital stock for which such Founder Shares may otherwise would have been exchanged pursuant earned), to be calculated within sixty (60) days following such Audited Financials being completed and signed by the Company’s initial Business Combinationindependent auditor of the Audited Financials for each of the two fiscal years that include the applicable twelve-month period in which the Earn Out was earned. In the event such subsequent calculation results in an adjustment (upwards or downwards) except to an Earn Out payment previously made (or which should have been made as follows:
(A) one half a result of such Founder Shares adjustment), Buyer shall not have pay to Sellers the full amount of any restrictions on Transfer under this Agreement six such upwards adjustment, without interest, within thirty (630) months following completion of the Company’s initial Business Combination;
(B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary days of the completion of such calculations, and Sellers shall pay Buyer the Company’s initial Business Combinationfull amount of any such downwards adjustment, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splitswithout interest, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary days of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares Lock-up Period”)such calculations.
Appears in 1 contract
Sources: Asset Purchase Agreement (National Technical Systems Inc /Ca/)
Earn-Out Consideration. (a) The SponsorAs additional consideration for the right to receive the Membership Interests under the Call Rights, the Company and NAC hereby agree that following the ClosingPurchaser shall pay, in addition to the consideration or cause to be received paid, the following additional amounts to Sellers (collectively, the “Earn-out Consideration”); provided, that, if the Closing has not occurred as of the date the 2021 Earn-out Consideration is due to be paid to Sellers pursuant to Section 1.6(b), the BCA, ParentCo 2021 Earn-out Consideration shall be required paid to issue Sellers on the Closing Date, and provided further, that, if the Secondary Sites are not open and processing sales transactions in accordance with all Permits by December 31, 2021, Sellers shall not receive, and Purchaser shall have no obligation to pay, the Sponsor additional ParentCo Common Shares as follows2022 Earn-out Consideration:
(i) Six Hundred Twenty Five Thousand Fifty percent (625,00050%) ParentCo Common Sharesof Revenue for the calendar year ending December 31, in the aggregate, if any time prior to or as of the second anniversary of the Closing 2021 (the “First Deadline”) the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period (the “First 2021 Earn-Out Target”) (such 625,000 ParentCo Common Shares, the “First Level Earn-Out out Consideration”).; and
(ii) Six Hundred Twenty Five Thousand Fifteen percent (625,00015%) ParentCo Common Sharesof Revenue for the calendar year ending December 31, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing 2022 (the “Second Deadline2022 Earn-out Consideration”);
(iii) provided, however, that, in no event will the VWAP is greater than or equal Purchaser be required to Fourteen pay total Earn-out Consideration in excess of Fifty-Five Million Dollars ($14.0055,000,000.00) over any twenty in the aggregate (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, and, together with the First Earn-Out Target, the “Earn-Out Targetsout Cap”) and, provided, further, however, that, in no event shall (A) any of the Earn-out Consideration be paid in shares of SH Parent Stock unless the Exchange has approved the issuance and listing of the shares of SH Parent Stock contemplated by this Section 1.6 (the “Exchange Approval”) and (B) the number of shares of SH Parent Stock that may be issued pursuant to this Section 1.6 (together with any SH Parent Stock that was issued pursuant to Section 1.4(b)(i)(C)(1)(a)) exceed (1) an aggregate of 19.99% of the issued and outstanding shares of SH Parent Stock as of the applicable date of issuance of SH Parent Stock; and (2) with respect to any Seller, together with any other SH Parent Stock or other SH Parent securities directly or indirectly owned or over which control or direction is exercised by any Seller and any Person acting jointly or in concert with such 625,000 ParentCo Common SharesSeller, 4.99% of the issued and outstanding shares of SH Parent Stock as of the applicable date of issuance of SH Parent Stock (the restrictions on the issuance of SH Parent Stock contemplated by clauses (A) and (B) above, the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Consideration, the “Earn-Out ConsiderationSH Parent Stock Restrictions”). For the avoidance of doubt, each Any amount of the First Level Earn-Out out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with not paid by way of shares of SH Parent Stock as a result of the terms SH Parent Stock Restrictions shall be paid by wire transfer of immediately available funds, without any reduction or discount, to the account(s) designated by the Sellers pursuant to this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares1.6, in the aggregateas applicable.
(b) If Closing has occurred, within thirty (30) days after Purchaser’s receipt of the Revenue reported in the State Tracking System for the calendar year ending December 31, 2021 (provided, that in no event later than sixty (60) days after the end of the calendar year ending December 31, 2021) and if Closing has not occurred, on the Closing Date:
(i) the Purchaser shall provide to the Sellers a written statement reporting the Revenue for such calendar year as generated by the State Tracking System calculating the 2021 Earn-out Consideration; and
(ii) the Purchaser shall pay, or cause to be paid, the 2021 Earn- out Consideration to the Sellers as follows:
(A) (I) if the SH Parent Stock has been publicly traded on the Exchange for at least ten (10) consecutive trading days prior to and including December 31, 2021 and (II) the Exchange Approval has been obtained, then (1) sixty-five percent (65%) of the 2021 Earn-out Consideration will be paid by wire transfer of immediately available funds to the account(s) designated by the Sellers to the Purchaser in writing at least two (2) Business Days prior to such payment, and (2) thirty-five percent (35%) of the 2021 Earn-out Consideration will be paid to the Sellers by issuance of a number of shares of SH Parent Stock in accordance with the proportions designated by the Sellers to Purchaser in writing at least two (2) Business Days before the issuance date and calculated as follows (rounding down to the nearest whole share, with any shortfall paid in cash): (x) thirty-five percent (35%) of the 2021 Earn-out Consideration, divided by (y) the Share Value as of two (2) Business Days prior to the date of issuance; multiplied by (z) the Currency Exchange Rate as of two (2) Business Days prior to the date of issuance;
(B) (I) if the SH Parent Stock has been publicly traded on the Exchange for at least ten (10) consecutive trading days prior to and including December 31, 2021 and (II) the Exchange Approval has not been obtained other than as a result of the failure of the Sellers to deliver any documentation or take any action required to obtain the Exchange Approval, there will be no reduction to the Earn-out Consideration and the 2021 Earn-out Consideration will be paid in full by wire transfer of immediately available funds to the account(s) designated by the Sellers; or
(C) if (I) the SH Parent Stock has not been publicly traded on the Exchange for at least ten (10) consecutive trading days prior to and including December 31, 2021 or (II) the Exchange Approval has not been obtained as a result of the failure of the Sellers to deliver any documentation or take any action required to obtain the Exchange Approval, the 2021 Earn-out Consideration will be reduced by eight point seventy-five percent (8.75%) and, as reduced, will be paid by wire transfer of immediately available funds to the account(s) designated by the Sellers.
(c) If the Secondary Sites are opened and processing sales transactions in accordance with all Permits by December 31, 2021, within thirty (30) days after Purchaser’s receipt of the Revenue reported in the State Tracking System for the calendar year ending December 31, 2022 (provided, that in no event later than sixty (60) days after the end of the calendar year ending December 31, 2022):
(i) the Purchaser shall provide to the Sellers a written statement reporting the Revenue for such calendar year as generated by the State Tracking System and calculating the 2022 Earn-out Consideration; and
(ii) the Purchaser shall pay, or cause to be paid, the 2022 Earn- out Consideration to the Sellers as follows:
(A) (I) if the SH Parent Stock has been publicly traded on the Exchange for at least ten (10) consecutive trading days prior to and including December 31, 2022 and (II) the Exchange Approval has been obtained, all of the 2022 Earn-out Consideration will be paid to the Sellers by issuance of a number of shares of SH Parent Stock in accordance with the proportions designated by the Sellers to Purchaser in writing at least two (2) Business Days before the Closing Date, and calculated as follows (rounding down to the nearest whole share, with any shortfall paid in cash): (x) the 2022 Earn-out Consideration, divided by (y) the Share Value as of two Business Days prior to the date of issuance; multiplied by (z) the Currency Exchange Rate as of two (2) Business Days prior to the date of issuance;
(B) (I) if the SH Parent Stock has been publicly traded on the Exchange for at least ten (10) consecutive trading days prior to and including December 31, 2022 and (II) the Exchange Approval has not been obtained other than as a result of the failure of the Sellers to deliver any documentation or take any action required to obtain the Exchange Approval, there will be no reduction to the Earn-out Consideration and the 2022 Earn-out Consideration will be paid in full by wire transfer of immediately available funds to the account(s) designated by the Sellers at least two (2) Business Days prior to such payment; or
(C) if (I) the SH Parent Stock has not been publicly traded on the Exchange for at least ten (10) consecutive trading days prior to and including December 31, 2022 or (II) the Exchange Approval has not been obtained as a result of the failure of the Sellers to deliver any documentation or take any action required to obtain the Exchange Approval, the 2022 Earn-out Consideration will be reduced by twenty-five percent (25%) and, as reduced, will be paid by wire transfer of immediately available funds to the account(s) designated by the Sellers in writing at least two (2) Business Days prior to such payment.
(d) If at any time prior to the later of (i) December 31, 2022 or (ii) payment of the Earn-Out Targets set forth out Consideration due and owing to the Sellers, the Purchaser effects a sale or other transfer, directly or indirectly, in Section 5(aone transaction or a series of related transactions, of all or substantially all of the assets of any Company Group Member or a merger, consolidation, recapitalization or other transaction in which any Person other than the Purchaser or any wholly- owned Subsidiary of the Purchaser becomes the owner directly of twenty-five percent (25%) shall have been achievedor more of the combined voting power of all interests in Purchaser or any Company Group Member or becomes the owner directly or indirectly of fifty-one percent (51%) or more of the total voting rights of the Purchaser or the Company Group (each of the foregoing events, other than a Business Combination with a shell entity that does not, directly or indirectly, own any operational assets, including, for the avoidance of doubt, a special purpose acquisition corporation, an “Earn-out Acceleration Event”) then promptly after, but in any event within five (5) Business Days following the achievement of the applicable after, such Earn-Out Targetout Acceleration Event, ParentCo the Purchaser shall issue the applicable Earn-Out Consideration to the Sponsor.
(c) If a Change of Control of ParentCo occurs (i) prior to provide the First Deadline, then Sellers written notice of the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control out Acceleration Event, and (ii) in lieu of any further Earn-out Consideration payments, pay to the Sellers by wire transfer of funds to the account(s) designated by the Sellers a total amount equal to the Earn-out Cap minus the amount of any Earn-out Consideration payments previously made.
(e) Purchaser hereby covenants and agrees that from and after the First Deadline but prior to the Second DeadlineClosing until December 31, then the Second Level 2022, (i) Purchaser will not take any action (or omit taking any action) that avoids, reduces, minimizes, hinders or delays payment of any Earn-Out Consideration issuable pursuant out Consideration, (ii) Purchaser will use its commercially reasonable efforts to Section 5(amaximize Revenue, (iii) except as related to a Business Combination with a shell entity that remains unissued as does not, directly or indirectly, own any operational assets, including, for the avoidance of immediately prior doubt, a special purpose acquisition corporation, Purchaser and its Affiliates will not transfer, assign, divest or dispose of any dispensary licenses held by the Company Group Members and (iv) Purchaser will cause each of the dispensaries to the consummation of such Change of Control shall immediately vest remain licensed, open and the Sponsor shall be entitled operational without interruption; provided, however, that Purchaser’s failure to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration comply with this subsection (if not previously paidiv) shall not vest be considered a breach if Purchaser’s failure to keep the dispensaries open and will operational is as a result of certain changes, events, occurrences or developments that cause cannabis dispensaries in the State of Illinois generally to close and not be payable by ParentCo due to such Change of Controlremain open and operational.
(df) The Earn-Out Consideration and If any payment of the Earn-Out Targets out Consideration is not made promptly when due, Purchaser shall be adjusted deemed to reflect appropriately the effect be in default of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the following:
(a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer obligations under this Agreement six Section 1.6 and such amount that is due and owing shall bear interest at the default interest rate of (6i) months following completion of for the Company’s initial Business Combination;
(B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any first thirty (30) trading day period;
(C) days after the remaining twenty five date on which such payment is due, ten percent (2510%) of per annum from the date payment was due until the date payment is actually received, and (ii) following such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares Lockinterest rate shall increase by three percent (3%) for each succeeding thirty (30) calendar day period until the date payment is actually received (e.g., from the date that is thirty-up Period”one (31) calendar days after such payment was due until sixty (60) days after such payment was due, the interest rate shall be thirteen percent (13%); from the date that is sixty-one
Appears in 1 contract
Sources: Purchase Agreement
Earn-Out Consideration. (a) The Sponsor, the Company and NAC hereby agree that following the Closing, in addition to the consideration to be received pursuant to the BCA, ParentCo shall be required to issue to the Sponsor additional ParentCo Common Shares as follows:
(i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the second anniversary of the Closing (the “First Deadline”) the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period (the “First Earn-Out Target”) (such 625,000 ParentCo Common Shares, the “First Level Earn-Out Consideration”).
(ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing (the “Second Deadline”) the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, and, together with the First Earn-Out Target, the “Earn-Out Targets”) (such 625,000 ParentCo Common Shares, the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Consideration, the “Earn-Out Consideration”). For the avoidance of doubt, each of the First Level Earn-Out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with the terms of this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares, in the aggregate.
(b) If any of the Earn-Out Targets set forth in Section 5(a) shall have been achieved, within five (5) Business Days following the achievement of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor.
(c) If a Change of Control of ParentCo occurs (i) prior to the First Deadline, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change of Control.
(d) The Earn-Out Consideration and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the following:
(a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business Combination;
(B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares Lock-up Period”)
Appears in 1 contract
Sources: Nac Founder Support Agreement (Nebula Acquisition Corp)
Earn-Out Consideration. (a) The Sponsor, the Company and NAC hereby agree that following the Closing, in addition to the consideration to be received pursuant to the BCA, ParentCo shall be required to issue to the Sponsor additional ParentCo Common Shares as follows:
(i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common SharesFollowing the Closing Date, the Parent shall deliver in the aggregate, if any time prior to or as consideration for 100% of the second anniversary issued and outstanding capital stock of the Closing Company in accordance with Section 2.1(b)(iii) hereof, additional shares of Parent Common Stock (the “First DeadlineEarn-Out Shares”) as follows, calculated for Golden Eagle sales and service income (i.e., net revenues calculated in accordance with GAAP) received by the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading Company during the twenty-four month period beginning on the first day period after the Closing Date (the “First Earn-Out TargetPeriod”) with a gross margin of at least 30% (such 625,000 ParentCo Common Shares“Qualified Sales”), as follows: · A total of $16,000,000 in Earn Out Shares if aggregate Qualified Sales during the “First Level Earn-Out Consideration”)Period shall have equaled or exceed $36 million; or · A total of $10,000,000 in Earn Out Shares if Qualified Sales during the Earn-Out Period shall have equaled at least $24 million but less than $36 million; or · A total of $ 4,000,000 in Earn Out Stares if Qualified Sales during the Earn-Out Period shall have equaled at least $18 million but less than $24 million.
(ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior Parent shall calculate the Qualified Sales for the Earn-Out Period and deliver such amount to or as of the date that is Stockholders within thirty (30) months after Closing (days of the “Second Deadline”) end of the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, and, together with the First Earn-Out Target, Period (the “Earn-Out TargetsDetermination Date”). Unless a majority in interest of the Stockholders notify the Parent in writing (the “Qualified Sales Dispute Notice”) within ten (such 625,000 ParentCo Common Shares10) business days after receipt of the Qualified Sales amount that the Stockholders disagree with the Qualified Sales Amount, the “Second Level Qualified Sales amount delivered to the Stockholders shall be conclusive and binding. The Qualified Sales Dispute Notice shall include reasonable details of the disagreement and the reasons therefor. In the event Stockholders provide the Parent with any Qualified Sales Dispute Notice, the Parent shall not be required to pay or issue any Earn-Out Consideration” Shares pending resolution of such dispute. The Parent and together the Stockholders shall attempt to resolve their differences with respect to the First Level Qualified Sales within ten (10) business days after the Parent’s receipt of the Qualified Sales Dispute Notice. Any disputes regarding the Qualified Sales not resolved by the Parent and the Stockholders within such 10-day period will be resolved by a national accounting firm (the “Arbitrator Accounting Firm”). The Arbitrator Accounting Firm’s determination of the Qualified Sales amount shall be conclusive and binding upon the parties. The fees and expenses of the Arbitrator Accounting Firm in acting under this Section shall be borne by the party that the Arbitrator Accounting Firm determines to be least correct (in net dollar terms) in its determination of the Qualified Sales.
(iii) the Parent shall issue the Earn Out Shares within 30 days following either the Earn-Out ConsiderationDetermination Date or the date of resolution of any dispute regarding Qualified Sales pursuant to Section 2.1(b)(ii) above, at the VWAP on the last day of the Earn-Out Period (the “Earn-Out ConsiderationShare Price”)) that Qualified Sales equal or exceed the amounts set forth herein. Qualified Sales shall be determined on an aggregate basis achieved during the Earn-Out Period. For the avoidance absence of doubtdoubt only one payment shall be made for each level of Qualified Sales, each of the First Level Earn-Out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with the terms of this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Sharesfor example, in the aggregate.
(b) If any event the Qualified Sales are $20,000,000 within 9 months and $30,000,000 million at the end of the Earn-Out Targets set forth Period, a total payment of $10,000,000 in Section 5(a) shall have been achieved, within five (5) Business Days following the achievement of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor.
(c) If a Change of Control of ParentCo occurs (i) prior to the First Deadline, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor Shares shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change be paid in total. . Payment of Control.
(d) The Earn-Out Consideration and the Earn-Out Targets Shares shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior made to the time any such Earn-Out Consideration is delivered to Sponsor, if anyStockholders as set forth on Schedule 2.1(b).”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the following:
(a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business Combination;
(B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares Lock-up Period”)
Appears in 1 contract
Sources: Agreement and Plan of Merger (Red Cat Holdings, Inc.)
Earn-Out Consideration. (a) The Sponsor, the Company and NAC hereby agree that following the Closing, in addition to the consideration to be received pursuant to the BCA, ParentCo Participating Equity Holders shall be required entitled to issue to the Sponsor additional ParentCo Common Shares consideration as follows:
(a) If the Company Revenue for the three month period ended December 31, 2008 is equal to or greater than the Revenue Target, then the Company Participating Equity Holders shall be entitled to additional consideration equal to the sum of (i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the second anniversary of the Closing $3,000,000 (the “First DeadlineInitial Performance Payment”) and (ii) $2.00 for each $1.00 of Company Revenue for the VWAP three month period ended December 31, 2008 that is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period the Revenue Target (the “First Earn-Out Target”) (such 625,000 ParentCo Common Shares, the “First Level Earn-Out Consideration”).
(ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing (the “Second Deadline”) the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, Additional Threshold Payment” and, together with the First Earn-Out TargetInitial Performance Payment, the “Earn-Out Targets”) (such 625,000 ParentCo Common Shares, the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Consideration, the “Earn-Out out Consideration”). For In no event shall (i) the avoidance Additional Threshold Payment exceed an aggregate of doubt, each of $5,000,000 or (ii) the First Level Earn-Out out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with the terms exceed an aggregate of this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares, in the aggregate$8,000,000.
(b) If The Company Participating Equity Holders shall not be entitled to receive, and shall not receive, any of the Earn-Out Targets set forth in Section 5(a) shall have been achievedout Consideration if the Company Gross Margins for the three month period ending December 31, within five (5) Business Days following 2008 are less than the achievement of the applicable Earn-Out Gross Margins Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor.
(c) If a Change As soon as practicable after completion of Control of ParentCo occurs the Buyer’s audit for the three month period ending December 31, 2008, and in any event no later than March 31, 2009, the Buyer shall prepare (or cause to be prepared) and deliver to the Representative (i) prior to a calculation of the First DeadlineCompany Revenue for the three month period ending December 31, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and 2008, (ii) a calculation of the Company Gross Margins for the three month period ending December 31, 2008, (iii) relevant backup schedules reasonably sufficient to allow review of the Buyer’s calculation of such Company Revenue and Company Gross Margins, and (iv) a statement of the amount, if any, of the Earn-out Consideration to be delivered to the Company Participating Equity Holders. Unless the Representative shall, in accordance with the provisions of subsection (d) below, challenge the Buyer’s determination of the Company Revenue for the three month period ended December 31, 2008, the Company Gross Margins for the three month period ending December 31, 2008 and/or the Earn-out Consideration within 30 days after the First Deadline but prior delivery of the Buyer’s calculation thereof, the Buyer’s determination shall be binding upon the Company Participating Equity Holders and the Representative. The Representative shall be granted reasonable access during business hours to the Second Deadlinebooks, then records and accounting work papers of the Second Level Earn-Out Consideration issuable pursuant Company to Section 5(a) that remains unissued as of immediately prior to the consummation conduct its review of such Change of Control shall immediately vest Company Gross Revenue and the Sponsor Company Gross Margins. Such access shall be entitled to receive at such Second Level Earn-Out Consideration prior to the consummation of times and in such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) manner as shall not vest and will not be payable by ParentCo due to such Change unreasonably interfere with the Buyer’s operation of Controlthe Company’s business.
(d) The Earn-Out Consideration and In the event that the Representative disputes the calculation of the Company Revenue for the three month period ending December 31, 2008, the Company Gross Margins for the three month period ending December 31, 2008 and/or the Earn-Out Targets out Consideration, the Representative shall notify the Buyer in writing by delivery of a notice (an “Earn-out Dispute Notice”) within 30 calendar days after delivery of the Buyer’s calculation of the Company Revenue for the three month period ending December 31, 2008, the Company Gross Margins for the three month period ending December 31, 2008 and/or the Earn-out Consideration, which Earn-out Dispute Notice shall set forth in reasonable detail the basis for such dispute. In the event of such a dispute, the Buyer and the Representative shall use their Reasonable Best Efforts to reach agreement on the disputed items or amounts in order to determine the Earn-out Consideration. If the Buyer and the Representative are unable to resolve the dispute within 30 calendar days after delivery of the Earn-out Dispute Notice, then any remaining items in dispute shall be adjusted submitted to reflect appropriately an independent nationally recognized accounting firm selected in writing by the effect Representative and the Buyer or, if the Representative and the Buyer fail or refuse to select a firm within 10 calendar days after written request therefor by the Representative or the Buyer, such an independent nationally recognized accounting firm shall be selected in accordance with the rules of the Wilmington, Delaware office of the AAA (the “Neutral Accountant”). All determinations pursuant to this paragraph (d) shall be in writing and shall be delivered to the Representative and the Buyer. The determination of the Neutral Accountant as to the resolution of any stock splitdispute shall be binding and conclusive upon all Parties. A judgment on the determination made by the Neutral Accountant pursuant to this Section 1.6 may be entered in and enforced by any court having jurisdiction thereover.
(e) The fees and expenses of the Neutral Accountant in connection with the resolution of disputes pursuant to Section 1.6(d) shall be shared equally by the Company Participating Equity Holders, reverse stock spliton the one hand, stock dividend (including any dividend and the Buyer, on the other hand; provided that if the Neutral Accountant determines that the Buyer, on the one hand, or distribution of securities convertible into ParentCo Common Shares)the Representative, reorganizationon the other hand, recapitalization, reclassification, combination, exchange of shares adopted a position or other like change positions with respect to ParentCo Common Sharesthe Earn-out Consideration that is frivolous or clearly without merit, occurring the Neutral Accountant may, in its discretion, assign a greater portion of any such fees and expenses to such party.
(f) Within 14 days of the resolution of any dispute or the Representative’s failure to deliver an Earn-out Dispute Notice on or after a timely basis, the date hereof Buyer shall (i) pay 1.3% of the Earn-out Consideration, if any, to The Jordan, ▇▇▇▇▇▇▇▇ Group, Inc. in accordance with payment instructions provided by the Representative, (ii) pay 86.2% of the Earn-out Consideration, if any, to the Paying Agent and (iii) deposit with the Escrow Agent 12.5% of the Earn-out Consideration, if any, in escrow pursuant to the Escrow Agreement. The Paying Agent shall pay to each Company Participating Equity Holder an amount equal to the product of (x) the number of Company Participating Equity Equivalents owned by the Company Participating Equity Holder immediately prior to the Effective Time and (y) the Per Share Participating Earn-out Consideration.
(g) By their adoption of this Agreement, the Company Participating Equity Holders agree and acknowledge that the Buyer may make from time to time such business decisions as it deems appropriate, in its sole discretion, in the conduct of the business of the Company and its Subsidiaries following Closing, including actions that may have an impact on the Company Revenue, Company Gross Margins and/or the Earn-out Consideration. The Company Participating Equity Holders will have no right to claim any lost earn-out or other damages as a result of such decisions so long as the actions were not taken by the Buyer in bad faith for the principal purpose of frustrating provisions of this Section 1.6.
(h) Notwithstanding any other provision in this Section 1.6, if at the time any such Earn-Out out Consideration is delivered would otherwise be payable to Sponsorthe Company Participating Equity Holders the Buyer has made any claim for indemnification under and in accordance with Article VII of this Agreement based upon a claim of fraud, willful misrepresentation or a breach of any Constitutive Representation, which claim has not previously been satisfied (an “Unsatisfied Claim”), then, if the sum of (i) the amount of such Unsatisfied Claim plus (ii) the aggregate amount of Damages claimed by the Buyer with respect to any pending claims under Article VII (the aggregate amount of the claims under clauses (i) and (ii) are hereinafter referred to as the “Total Pending Claims”) would reduce the aggregate amount then in the Escrow Fund, if any.”
, to zero (B) Exhibit B $0), then the Buyer may offset that portion of the Agreement is hereby deleted in its entirety and replaced with Earn-out Consideration otherwise payable by the following: Effective as Buyer by the amount by which that portion of the consummation Total Pending Claims attributable to the Unsatisfied Claim that would reduce the Escrow Fund to an amount of the transactions contemplated by the BCA, sub-paragraph less than zero (a$0) of paragraph 7 is hereby deleted in its entirety and replaced with the following:
(a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to if the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion actual amount of the Company’s initial Business Combination;
(B) twenty five Unsatisfied Claim has been determined under Article VII, the actual Damages with respect to such claim as so determined). One hundred percent (25100%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as remaining balance of the seventh (7th) anniversary Earn-out Consideration remaining after such offset shall be paid to the Paying Agent for payment to each Company Participating Equity Holder in accordance with the provisions of Section 1.6(f). If, after the final resolution of any such Unsatisfied Claim, the amount of Damages to which the Buyer is entitled to indemnification from such offset Earn-out Consideration is less than the amount of such offset, such excess portion of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares previously offset Earn-out Consideration shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor be paid to the Paying Agent for payment to each Company pursuant to Participating Equity Holder in accordance with the Company’s initial Business Combination) undergoes a Change provisions of Control (collectively, the “Founder Shares Lock-up Period”Section 1.6(f).
Appears in 1 contract
Earn-Out Consideration. (a) The SponsorFor purposes of this Agreement, the Company and NAC hereby agree that following the Closing, in addition to the consideration to be received pursuant to the BCA, ParentCo shall be required to issue to the Sponsor additional ParentCo Common Shares as follows:
(i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the second anniversary of the Closing (the “First Deadline”) the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period (the “First Earn-Out Target”) (such 625,000 ParentCo Common Shares, the “First Level Earn-Out Consideration”).
(ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing (the “Second Deadline”) the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, and, together with the First Earn-Out Target, the “Earn-Out Targets”) (such 625,000 ParentCo Common Shares, the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Consideration, if any, shall be calculated and determined as follows:
1.7.1 In the case of the first full twelve (12) month period following the Closing Date (the “First Twelve Month Period”), provided that the Acquired Companies’ Annual EBITDA (as hereinafter defined) for such First Twelve Month Period exceeds One Million Five Hundred Thousand Dollars ($1,500,000), the Earn-Out Consideration”). For the avoidance of doubt, each of the First Level Earn-Out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with the terms of this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares, in the aggregate.
(b) If any of the Earn-Out Targets set forth in Section 5(a) shall have been achieved, within five (5) Business Days following the achievement of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration payable to the Sponsor.
(c) If a Change of Control of ParentCo occurs (i) prior to Sellers by the First Deadline, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor Buyer shall be entitled to receive such Earn-Out Consideration prior to the consummation product of such Change of Control and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change of Control.
(d) The Earn-Out Consideration and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the following:
(a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business Combination;
and (B), where (A) twenty is twenty-five percent (25%) of and (B) is the Acquired Companies’ Annual EBITDA for such Founder Shares First Twelve Month Period. Notwithstanding anything contained herein to the contrary, if the Acquired Companies Annual EBITDA for the First Twelve Month Period does not exceed One Million Five Hundred Thousand Dollars ($1,500,000), no Earn-Out Consideration shall not have any restrictions on Transfer be required to be paid by the Company to the Sellers under this Agreement if, at any time prior to or as Section 1.7.1.
1.7.2 In the case of the seventh second full twelve (7th12) anniversary of month period following the completion of the Company’s initial Business Combination, the daily volume weighted average price Closing Date (the “VWAPSecond Twelve Month Period”), the Earn-Out Consideration, if any, payable to the Sellers by the Buyer shall be the product of (A) and (B), where (A) is twenty percent (20%) and (B) is the excess, if any, of the Acquired Companies’ Annual EBITDA for such Second Twelve Month Period over the Acquired Companies’ Annual EBITDA for the First Twelve Month Period. Notwithstanding anything contained herein to the contrary, if the Acquired Companies Annual EBITDA for the Second Twelve Month Period does not exceed Eighteen Million Dollars ($18,000,000), no Earn-Out Consideration shall be required to be paid by Buyer to the Sellers under this Section 1.7.2.
1.7.3 For purposes of this Agreement, the Annual EBITDA of the Acquired Companies for any applicable twelve month period shall mean the net income of the Acquired Companies for such twelve month period prior to deducting any tax expense, interest expense, depreciation expense and amortization expense determined in accordance with GAAP, and excluding the effect of (a) any gain or loss resulting from any sale, exchange or other disposition of assets other than in the Ordinary Course of Business, (b) any gain or loss on discontinued operations, extraordinary items or cumulative effect of an accounting change, (c) any gain, loss, income or expense resulting from a change in Buyer’s or Acquired Companies’ accounting methods, principles or practices or a change in GAAP following the Closing. and (d) any write-off of an account receivable that is not older than one hundred and twenty (120) days from the date that such account receivable was first created. The net income and Annual EBITDA of the Acquired Companies’ shall be determined within one hundred and twenty (120) days (the “Annual EBITDA Determination Date”) following the end of the applicable twelve month period for which the net income and Annual EBITDA is to be determined, by an independent public accounting firm selected by the Buyer.
1.7.4 Whether or not any Earn-Out Consideration for an applicable twelve month period is required to be paid by Buyer to Sellers, Buyer shall provide Sellers with written notice (the “Earn-Out Notice”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as Acquired Companies determination of the seventh (7th) anniversary Acquired Companies Annual EBITDA and Earn-Out Consideration payable to Sellers, if any, on or before the Annual EBITDA Determination Date.
1.7.5 If Sellers dispute the amount of the completion Earn-Out Consideration as set forth in the Earn-Out Notice, Sellers shall deliver a written notice stating the disagreement (the “Earn-Out Dispute Notice”) to Buyer within sixty (60) days after receipt of the CompanyEarn-Out Notice, which notice shall also entitle Sellers to examine Buyer’s initial Business Combinationbooks of account and records which relate to the Acquired Companies’, but only such books and records which are necessary for making a determination as to the VWAP amount, if any, of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares LockEarn-up Period”)Out
Appears in 1 contract
Sources: Limited Liability Company Ownership Interest Purchase Agreement (Arcadia Resources, Inc)
Earn-Out Consideration. (a) The Sponsor, For each of the Company and NAC hereby agree that first eight three month periods following the Closingexecution of this Agreement (each a "Measurement Period") and ending on the second anniversary thereof, in addition Buyer shall pay to Seller an amount equal to (A) 75% of the consideration to be received pursuant to the BCA, ParentCo shall be required to issue to the Sponsor additional ParentCo Common Shares as follows:
total of (i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregateGross Margin, if any time prior any, minus (ii) Bad Debt, relating to or Buyer's invoiced sales transactions for such period from all Avante Customers, as identified on Schedule 1.1(b) and (B) 20% of the second anniversary total of the Closing (the “First Deadline”i) the VWAP is greater than or equal Gross Margin, if any, minus (ii) Bad Debt, relating to Twelve Buyer's invoiced sales transactions for such period from all Non-Avante Customers, as identified on Schedule 1.1(b). The maximum aggregate payout to Seller under this Section 1.5, Earn Out Consideration, shall be Five Hundred Forty Thousand Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period (the “First Earn-Out Target”) (such 625,000 ParentCo Common Shares, the “First Level Earn-Out Consideration”540,000.00).
(ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing (the “Second Deadline”) the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, and, together with the First Earn-Out Target, the “Earn-Out Targets”) (such 625,000 ParentCo Common Shares, the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Consideration, the “Earn-Out Consideration”). For the avoidance of doubt, each of the First Level Earn-Out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with the terms of this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares, in the aggregate.
(b) If any Within thirty (30) days following each of the Earn-Out Targets set forth Measurement Periods, Buyer shall determine the amount due Seller, if any, under this Section 1.5. Specifically, within thirty (30) days following the end of each Measurement Period, Buyer shall calculate the Gross Margin relating to Buyer's invoiced sales transactions from the Customers for such period. Buyer shall deduct any Bad Debt charged which relates to Buyer's invoiced sales transactions for such period from the Customers during the Measurement Period from the Gross Margin as calculated in the preceding sentence. To the extent any additional payments are owed to Seller, such payments shall be made by Buyer within thirty (30) days after the end of such Measurement Period. To the extent Buyer subsequently determines it has overpaid Seller under this Section 1.5(b), such overpayment shall be credited against payments owed by Buyer to Seller in any subsequent Measurement Period, or if no additional payments are due hereunder, such overpayment shall be refunded by Seller to Buyer as provided in the Bad Debt Adjustment Amount calculation provided in Section 5(a) shall have been achieved, within five (5) Business Days following the achievement of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor1.5(c).
(c) If a Change Within two hundred ten (210) days following the eighth Measurement Period, Buyer shall calculate as of Control the one hundred eightieth (180th) day following the end of ParentCo occurs eighth Measurement Period, the difference between (i) prior to the First Deadline, then total invoiced amount from all sales transactions from the full Earn-Out Consideration issuable pursuant to Section 5(a) Customers that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and uncollected from all Measurement Periods minus (ii) after the First Deadline but prior to total amount of Bad Debt deducted from the Second Deadline, then the Second Level Earnearn-Out Consideration issuable out payments made pursuant to this Section 5(a1.5 for all Measurement Periods (the "Bad Debt Adjustment Amount"). To the extent the Bad Debt Adjustment Amount is a negative number, Buyer shall pay Seller its share of the resulting amount as set forth in 1.5(a) that remains unissued above. To the extent the Bad Debt Adjustment Amount is a positive number, Seller shall refund to Buyer Seller's share of the resulting amount as set forth in 1.5
(a) above. The payment of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor Bad Debt Adjustment Amount due from Buyer shall be entitled to receive such Second Level Earn-Out Consideration prior to made by Buyer within two hundred ten (210) days following the consummation end of such Change the eighth Measurement Period. Any payment of Control. By way the Bad Debt Adjustment Amount due from Seller shall be made by Seller within thirty (30) days following the receipt by Seller of example, if a Change the documentation of Control the calculation of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change of ControlBad Debt Adjustment Amount as provided in Section 1.5(d).
(d) The Earn-Out Consideration and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the following:
(a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business Combination;
(B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any Within thirty (30) trading day period;
days after the end of each Measurement Period Buyer will provide to Seller documentation of the calculation of the Gross Margin and Bad Debt according to Buyer's internal accounting practices as specified by GAAP consistently applied and in accordance with this Agreement. Within two hundred ten (C210) days after the remaining twenty five percent (25%) end of such Founders Shares the eighth Measurement Period, Buyer will provide to Seller documentation of the calculation of the Bad Debt Adjustment Amount and in accordance with this Agreement. Seller or Seller's duly authorized agent, who shall not be subject to a non-disclosure agreement reasonably satisfactory in form and substance to Buyer, shall have any restrictions on Transfer under this Agreement ifthe right, at all reasonable times, during normal business hours, and upon the giving of reasonable notice, to examine, inspect and audit the records of Buyer pertaining to such calculations. Seller agrees that any time prior documentation pertaining to or as such calculations that is copied by Seller will be used solely for the purpose of evaluating such calculations, and that Seller will keep such documentation strictly confidential. In the seventh (7th) anniversary of the completion of the Company’s initial Business Combinationevent that Seller disputes any payments made pursuant to this Section 1.5, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days it shall notify Buyer within any thirty (30) trading day period; anddays following payment by Buyer, or notification by Buyer that no amount is due, with respect to a Measurement Period. If Seller does not so notify Buyer, Buyer's calculations of Gross Margin, Bad Debt and payment, if any, to Seller shall be deemed final.
(De) notwithstanding clauses (B) and (C), all Founder Shares shall not have For the purposes of calculating any restrictions on Transfer under additional payments in this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectivelySection 1.5, the “Founder Shares Lock-up Period”)following terms shall have the meanings specified.
Appears in 1 contract
Earn-Out Consideration. Following the Closing, as additional consideration for the transactions contemplated by this Agreement and the Related Agreements, Purchaser shall pay or cause to be paid to the Sellers, in cash, the amounts, if any, as determined in accordance with this Section 1.07:
(a) The SponsorWithin ninety (90) days following the completion of each of Parent’s fiscal years 2023 and 2024 (each, an “Annual Earn-Out Period”), Purchaser shall deliver to the Sellers’ Representative its good faith calculation of (i) the Company Revenue and the Company Margin for such Annual Earn-Out Period and the resulting calculation of the Earn-Out Payment, if any, for such Annual Earn-Out Period, as determined in accordance with this Section 1.07, together with reasonably detailed supporting documentation describing how the Company Revenue, the Company Margin and NAC hereby agree that Earn-Out Payment, if applicable, was calculated or otherwise determined (each, the “Earn-Out Statement”). Notwithstanding the foregoing, if the Closing occurs after December 31, 2022, then the first Annual Earn-Out Period shall be the twelve-month period commencing on (i) the Closing Date, if the Closing Date is the first day of a month, or otherwise (ii) the first day of the month following the Closing, and the subsequent Annual Earn-Out Period shall be the twelve-month period immediately following the end of such first Annual Earn-Out Period.
(b) As promptly as practicable, but in addition no event later than sixty (60) calendar days after its receipt of the Earn-Out Statement (the “Earn-Out Review Period”), the Sellers’ Representative shall notify Purchaser in writing whether it accepts or disputes the accuracy of the items contained in the Earn-Out Statement. During the Earn-Out Review Period, the Sellers’ Representative and its Representatives shall be provided with reasonable access at reasonable times during normal business hours to files, records, relevant Personnel and accountants of the Purchaser and Company Group used in preparing the calculations in the Earn-Out Statement as they may reasonably request to respond to the consideration Earn-Out Statement, provided that the Sellers’ Representative and its Representatives shall have entered into a customary confidentiality agreement and any customary access letters reasonably requested by Parent’s or the Company Group’s accounting advisors. If the Sellers’ Representative accepts the Earn-Out Statement or if the Sellers’ Representative fails within the Earn-Out Review Period to notify Purchaser of any dispute with respect thereto, the calculation of the Company Revenue, the Company Margin and Earn-Out Payment contained in the Earn-Out Statement shall be deemed final. If the Sellers’ Representative in good faith disputes the accuracy of any items contained in the Earn-Out Statement, the Sellers’ Representative shall give written notice to Purchaser during the Earn-Out Review Period (the “Earn-Out Dispute Notice”), which shall specify in reasonable detail the reasons for such disagreement and the specific proposed adjustments, including dollar amounts, if known. During the thirty (30) calendar day period following delivery of the Earn-Out Dispute Notice (the “Earn-Out Resolution Period”), the parties shall use commercially reasonable efforts to work together in good faith to resolve any such disagreements. During the Earn-Out Resolution Period, each of Purchaser and the Sellers’ Representative and their respective Representatives shall be provided with such reasonable access at reasonable times to the files, records, relevant Personnel and accountants of the other party (and the Company Group) as it may reasonably request to negotiate and resolve the items set forth in the Earn-Out Dispute Notice, provided that such party and its Representatives shall have entered into a customary confidentiality agreement and any customary access letters reasonably requested by the other party’s accounting advisors. All such discussions and communications related thereto shall (unless otherwise agreed by Purchaser and the Sellers’ Representative) be governed by Rule 408 of the Federal Rules of Evidence and any applicable similar state rule, and any resolution by them agreed to in writing as to any disputed amounts shall be final, binding and conclusive. If the parties resolve their differences over the disputed items in accordance with the foregoing procedure, the amounts agreed upon by them for the Company Revenue, the Company Margin and the Earn-Out Payment, in each case, for such Annual Earn-Out Period, shall be deemed final. If, at the conclusion of the Earn-Out Resolution Period, the Sellers’ Representative and Purchaser are unable to resolve any disputed matters, whether factual or legal, set forth in the Earn-Out Dispute Notice, all unresolved disputed matters raised by the Sellers’ Representative in the Earn-Out Dispute Notice shall be submitted to the Independent Accountant for final resolution. The Independent Accountant shall act in accordance with the standards set forth in Section 1.05(e), which shall apply mutatis mutandis, except that the Independent Accountant shall make its determination in a manner consistent with this Section 1.07 and the definition of “Company Revenue” and “Company Margin” and all other defined terms used in this Section 1.07, as applicable. The Sellers’ Representative and Purchaser shall use their respective commercially reasonable efforts to cause the Independent Accountant to make its determination as soon as possible, but in no event later than forty five (45) calendar days following the date on which the dispute is submitted. Such determination made by the Independent Accountant for such Annual Earn-Out Period shall be final, binding and conclusive upon the parties (absent fraud or manifest error) for purposes of this Section 1.07. All fees and expenses of the Independent Accountant shall be paid by the party with whose determination the Independent Accountant does not agree, based on the aggregate amounts awarded by the Independent Accountant in accordance with the Sellers’ Representative’s position on disputed amounts and the aggregate amounts awarded by the Independent Accountant in accordance with Purchaser’s position on disputed amounts. If a retainer is required by the Independent Accountant, the retainer shall be split equally between Purchaser and the Sellers’ Representative; provided, however, that the retainer shall be considered part of the fees and expenses of such Independent Accountant and if either party has paid a portion of such retainer, such party shall be entitled to be received pursuant reimbursed by the other party to the BCAextent required by this Section 1.07.
(c) The earn-out amount, ParentCo if any, payable with respect to each Annual Earn-Out Period shall be required to issue to calculated as follows (each, an “Earn-Out Payment” and, collectively, the Sponsor additional ParentCo Common Shares as follows:“Earn-Out Payments”):
(i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, for the Annual Earn-Out Period starting in the aggregate, if any time prior to or as of the second anniversary of the Closing 2023 (the “First Deadline2023 Earn-Out Period”),
(A) if the Company Revenue is less than the amount set forth on Section 1.07(c)(i)(A)(x) of the Disclosure Schedules (the “2023 Revenue Threshold”) or the VWAP Company Gross Margin is less than the amount set forth on Section 1.07(c)(i)(A)(y) of the Disclosure Schedules (the “Margin Threshold”), the Earn-Out Payment in respect of such Annual Earn-Out Period shall be $0;
(B) if the Company Gross Margin is equal to or greater than the Margin Threshold and the Company Revenue is greater than or equal to Twelve Dollars ($12.00the 2023 Revenue Threshold but less than the amount set forth on Section 1.07(c)(i)(B) over any twenty (20) trading days within any thirty (30) trading day period of the Disclosure Schedules (the “First 2023 Revenue Target”), the Earn-Out Target”) (Payment in respect of such 625,000 ParentCo Common Shares, the “First Level Annual Earn-Out Consideration”Period shall be (x) $30,000,000, plus (y) an additional amount equal to the product of (I) $20,000,000 multiplied by (II) a fraction (which shall not be greater than one (1) nor less than zero (0).), (a) the numerator of which is the amount by which the Company Revenue for such Annual Earn-Out Period exceeds the 2023 Revenue Threshold and (b) the denominator of which is $21,500,000;
(iiC) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in if the aggregate, if any time prior Company Gross Margin is equal to or as of greater than the date that is thirty (30) months after Closing (Margin Threshold and the “Second Deadline”) the VWAP Company Revenue is greater than or equal to Fourteen Dollars the 2023 Revenue Target, the Earn-Out Payment in respect of such Annual Earn-Out Period shall be $50,000,000; and
(D) the amount, if any, by which the Earn-Out Payment for the 2023 Earn-Out Period is less than $14.0050,000,000 shall be the “2023 Remainder Amount”.
(ii) over any twenty (20) trading days within any thirty (30) trading day period for the Annual Earn-Out Period starting in 2024 (the “Second 2024 Earn-Out TargetPeriod”),
(A) if the Company Revenue is less than the amount set forth on Section 1.07(c)(ii)(A)(x) of the Disclosure Schedules (the “2024 Revenue Threshold”) or the Company Gross Margin is less than the Margin Threshold, and, together with the First Earn-Out Payment in respect of such Annual Earn-Out Period shall be $0;
(B) if the Company Gross Margin is equal to or greater than the Margin Threshold and the Company Revenue is greater than or equal to the 2024 Revenue Threshold but less than the amount set forth on Section 1.07(c)(ii)(B) of the Disclosure Schedules (the “2024 Revenue Target”), the Earn-Out Payment in respect of such Annual Earn-Out Period shall be (x) $30,000,000, plus (y) an additional amount equal to the product of (I) $20,000,000 multiplied by (II) a fraction (which shall not be greater than one (1) nor less than zero (0)), (a) the numerator of which is the amount by which the Company Revenue for such Annual Earn-Out Period exceeds the 2024 Revenue Threshold and (b) the denominator of which is $20,000,000; and
(C) if the Company Gross Margin is equal to or greater than the Margin Threshold and the Company Revenue is greater than or equal to the 2024 Revenue Target, the “Earn-Out Targets”) (Payment in respect of such 625,000 ParentCo Common Shares, the “Second Level Annual Earn-Out Consideration” Period shall be (x) $50,000,000, plus (y) an amount, if any, equal to the lesser of (I) the product of (A) 0.25 multiplied by (B) the amount, if any, by which the Company Revenue exceeds the 2024 Revenue Target and together with (II) the First Level 2023 Remainder Amount, if any.
(d) Within sixty (60) calendar days after the Earn-Out Consideration, the “Payment for each Annual Earn-Out Consideration”Period is final and binding upon parties pursuant to Section 1.07(b), Purchaser shall pay, or cause to be paid, to the Sellers, by wire transfer of immediately available funds in accordance with the wire transfer instructions designated in writing by the Sellers’ Representative to Purchaser, the Earn-Out Payment payable with respect such Annual Earn-Out Period in accordance with Section 1.07(c) and Section 11.10. For the avoidance of doubt, each the maximum amount Purchaser may pay pursuant to this Section 1.07 shall be $100,000,000 in the aggregate. Notwithstanding anything to the contrary in this Agreement, but subject to the Tax Indemnification Cap, in the event that Purchaser (on behalf of Purchaser or any Purchaser Indemnified Parties) has asserted any claim for indemnification under Section 11.04 of this Agreement which is not fully resolved, Purchaser shall be entitled to withhold the First Level lesser of (i) the amount of any such claim and (ii) the aggregate amount remaining under the Tax Indemnification Cap from the payment of any and all Earn-Out Consideration Payments otherwise payable (and Second Level which thereafter become payable) pursuant to this Section 1.07 until full resolution of such indemnification claim. The provisions of Section 1.08 of Schedule 11.11 are incorporated herein by reference.
(e) Any payments made pursuant to this Section 1.07 shall be (i) treated as an adjustment to the Purchase Price for Tax purposes and (ii) composed of an interest element and a principal element, the interest element to be computed and reported consistent with Section 483 of the Code and the Treasury Regulations promulgated thereunder, in each case, except as otherwise required by applicable Law.
(f) During each Annual Earn-Out Consideration is issuable only once Period, Purchaser shall use reasonable best efforts to cause the books and records of the Company Group to be kept in accordance with a manner intended to facilitate the terms separate recording, compiling and analysis of all information relevant to the determination and calculation of Company Revenue and Company Margin pursuant to this Section 5(a) and the maximum amount of 1.07. During each Annual Earn-Out Consideration is 1,250,000 ParentCo Common SharesPeriod, in Purchaser shall deliver within forty-five (45) days of the aggregate.
(b) If any end of each fiscal quarter of Parent an estimated calculation of the Company Revenue and the Company Margin for the previous fiscal quarter of Parent during such Annual Earn-Out Period, provided that such estimates shall solely be illustrative and non-binding and shall have no bearing on the Earn-Out Targets set forth Statement, which shall control in Section 5(a) shall have been achieved, within five (5) Business Days following the achievement event of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor.
(c) If a Change of Control of ParentCo occurs (i) prior to the First Deadline, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of any discrepancy or conflict between any such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) shall not vest and will not be payable by ParentCo due to such Change of Control.
(d) The Earn-Out Consideration estimate and the Earn-Out Targets Statement. The parties hereto expressly agree and acknowledge that such quarterly estimates may not be submitted to, or referenced in any information provided to, the Independent Accountant in connection with any dispute relating to the Earn-Out Statement.
(g) Notwithstanding anything in this Agreement to the contrary, each Seller acknowledges and agrees that (i) Parent shall be adjusted have the right to reflect appropriately operate its business and the effect businesses of any stock split, reverse stock split, stock dividend its Affiliates (including any dividend or distribution the Company Group) including the Business, in the absolute and sole discretion of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change Parent and may make all decisions with respect to ParentCo Common Sharesthe Company Group and the Business at the sole discretion of Parent, occurring on provided, that Parent shall not take any action or after fail to take any action, in bad faith, the date hereof and prior primary purpose of which is to the time reduce, defer, mischaracterize, divert or eliminate Company Revenue or Company Gross Margin for any such Annual Earn-Out Consideration Period in order to avoid or reduce an Earn-Out Payment, (ii) Parent, Purchaser, the Company Group and their Affiliates have no obligation to operate the Company Group or the Business in order to achieve any Earn-Out Payment or to maximize the amount of any Company Revenue, Company Gross Margin or Earn-Out Payment, (iii) the Earn-Out Payments contemplated herein are speculative and are subject to numerous factors, including numerous factors outside the control of Parent, Purchaser, the Company Group and their Affiliates, (iv) there is delivered no assurance that Sellers will receive any Earn-Out Payment and neither Parent, Purchaser, the Company Group, the Business nor any of their Affiliates has promised or projected payment of any Earn-Out Payment to Sponsorany Seller or provided, if any.”
whether written or oral, any assurances or commitments regarding the achievability of an Earn-Out Payment or the likelihood thereof, (Bv) Exhibit B the contingent right of the Agreement Sellers to receive any Earn-Out Payment will not be represented by any certificate or other instrument, is hereby deleted not transferable and is not an investment in its entirety Parent, Purchaser, the Company Group or their Affiliates, and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the following:
(a) The Sponsor and each Insider agrees that it or he such contingent right shall not Transfer entitle any Founder Shares Seller to any rights as a shareholder or equityholder of Parent, Purchaser, the Company Group or their Affiliates and (orvi) no Person shall be liable to any Seller for any incidental, for all purposes consequential or punitive damages arising out of any breach of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business Combination;
(B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares Lock-up Period”)Section 1.07.
Appears in 1 contract
Earn-Out Consideration. (a) The Sponsor, the Company and NAC hereby agree that following the Closing, in In addition to the consideration to be received payable at Completion pursuant to Clause 3, the BCA, ParentCo Designated Seller shall be required entitled to issue to the Sponsor additional ParentCo Common Shares as follows:
receive contingent, performance-based consideration (i) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the second anniversary of the Closing (the “First Deadline”) the VWAP is greater than or equal to Twelve Dollars ($12.00) over any twenty (20) trading days within any thirty (30) trading day period (the “First Earn-Out Target”) (such 625,000 ParentCo Common Shares, the “First Level Earn-Out Consideration”).
(ii) Six Hundred Twenty Five Thousand (625,000) ParentCo Common Shares, in the aggregate, if any time prior to or as of the date that is thirty (30) months after Closing (the “Second Deadline”) the VWAP is greater than or equal to Fourteen Dollars ($14.00) over any twenty (20) trading days within any thirty (30) trading day period (the “Second Earn-Out Target”, and, together with the First Earn-Out Target, the “Earn-Out Targets”) (such 625,000 ParentCo Common Shares, the “Second Level Earn-Out Consideration” and together with the First Level Earn-Out Consideration, the “Earn-Out Consideration”) if, and only if, one or both of the valuation milestones set forth in this Section 6.1 is achieved during the twenty-four (24)-month period commencing on, and including, the Completion Date (the “Earn-Out Period”). The Earn-Out Consideration shall be calculated and paid in accordance with the following schedule:
(A) If, at any time during the Earn-Out Period, the post-Completion enterprise valuation of the Company Group equals or exceeds Six Hundred Million United States Dollars (US$600,000,000) (the “First Valuation Threshold”), the Designated Seller shall be entitled to an aggregate earn-out payment of Five Million United States Dollars (US$5,000,000), payable in the manner set forth in Clause 6.3;
(B) If, at any time during the Earn-Out Period, the post-Completion enterprise valuation of the Company Group equals or exceeds One Billion United States Dollars (US$1,000,000,000) (the “Second Valuation Threshold,” together with the First Valuation Threshold, the “Valuation Thresholds”), the Designated Seller shall be entitled to an additional, separate earn-out payment of Five Million United States Dollars (US$5,000,000), payable in the manner set forth in Clause 6.3. For the avoidance of doubt, each of (i) the payment described in this sub-clause 6.1 (B) is in addition to, and not in lieu of, the payment described in sub-clause 6.1 (A), and (ii) if the Second Valuation Threshold is first achieved before the First Level Valuation Threshold has been achieved or tested, the Designated Seller shall instead be entitled to a one-time lump-sum earn-out payment of Ten Million United States Dollars (US$10,000,000); and
(C) The maximum aggregate Earn-Out Consideration and Second Level Earn-Out Consideration is issuable only once in accordance with the terms of payable under this Section 5(a) and the maximum amount of Earn-Out Consideration is 1,250,000 ParentCo Common Shares, in the aggregate.
(b) If any of the Earn-Out Targets set forth in Section 5(a) shall have been achieved, within five (5) Business Days following the achievement of the applicable Earn-Out Target, ParentCo shall issue the applicable Earn-Out Consideration to the Sponsor.
(c) If a Change of Control of ParentCo occurs (i) prior to the First Deadline, then the full Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Earn-Out Consideration prior to the consummation of such Change of Control and (ii) after the First Deadline but prior to the Second Deadline, then the Second Level Earn-Out Consideration issuable pursuant to Section 5(a) that remains unissued as of immediately prior to the consummation of such Change of Control shall immediately vest and the Sponsor shall be entitled to receive such Second Level Earn-Out Consideration prior to the consummation of such Change of Control. By way of example, if a Change of Control of ParentCo shall occur after the First Deadline and before the Second Deadline, such Change of Control shall cause the Second Level Earn-Out Consideration to vest and be payable by Parentco and the First Level Earn-Out Consideration (if not previously paid) Clause 6.1 shall not vest and will not be payable by ParentCo due to such Change of Controlexceed Ten Million United States Dollars (US$10,000,000).
(d) The Earn-Out Consideration and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into ParentCo Common Shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to ParentCo Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Consideration is delivered to Sponsor, if any.”
(B) Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the following: Effective as of the consummation of the transactions contemplated by the BCA, sub-paragraph (a) of paragraph 7 is hereby deleted in its entirety and replaced with the following:
(a) The Sponsor and each Insider agrees that it or he shall not Transfer any Founder Shares (or, for all purposes of this Letter Agreement, shares of Common Stock issuable upon conversion thereof or shares of capital stock for which such Founder Shares may have been exchanged pursuant to the Company’s initial Business Combination) except as follows:
(A) one half of such Founder Shares shall not have any restrictions on Transfer under this Agreement six (6) months following completion of the Company’s initial Business Combination;
(B) twenty five percent (25%) of such Founder Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the daily volume weighted average price (the “VWAP”) of the shares of Common Stock is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period;
(C) the remaining twenty five percent (25%) of such Founders Shares shall not have any restrictions on Transfer under this Agreement if, at any time prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, the VWAP of the shares of Common Stock is greater than or equal to $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) over any twenty (20) trading days within any thirty (30) trading day period; and
(D) notwithstanding clauses (B) and (C), all Founder Shares shall not have any restrictions on Transfer under this Agreement on the date, if prior to or as of the seventh (7th) anniversary of the completion of the Company’s initial Business Combination, on which the Company (or the successor to the Company pursuant to the Company’s initial Business Combination) undergoes a Change of Control (collectively, the “Founder Shares Lock-up Period”)
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