Earn-Out Consideration. (a) The Shareholder shall be entitled to earn additional cash consideration (collectively, the "EARN-OUT") in an amount, up to $300,000 in the aggregate (the "MAXIMUM EARN-OUT"), equal to 33% of the positive Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") beginning on the Closing Date (as defined below) and continuing for the twelve (12) calendar quarters immediately following the Closing (the "EARN-OUT PERIODS" and each individually, an "EARN-OUT PERIOD"), with the first Earn-Out Period to include the first full calendar quarter following the Closing Date plus the period between the Closing Date and the first day of such first calendar quarter, all in accordance with the terms and conditions of this Section. (b) Within thirty (30) calendar days after the end of each calendar quarter (i.e., the three (3) months ended March 31, June 30, September 30 and December 31 of each relevant calendar year) or portion thereof that is included within the Earn-Out Periods, Bridgeline shall prepare an income statement reflecting solely the business and operations associated exclusively with the operations of Company following the completion of the Acquisition independent of the remaining business and operations of Bridgeline (the "IAPPS BUSINESS") calculated in accordance with generally accepted accounting principles consistently applied ("GAAP") for such Earn-Out Period, and a related calculation of EBITDA of the Iapps Business for such Earn-Out Period, such calculation of EBITDA to be completed in accordance with GAAP and to reflect as closely as reasonably possible the EBITDA that would have been achieved by the Company during such Earn-Out Period if the Acquisition had not occurred (each such income statement and EBITDA calculation are collectively referred to herein as the "INCOME STATEMENT"). The maximum allocation of corporate overhead ("G&A ALLOCATION") that will be charged by Bridgeline to the Iapps Business (operating as a division of Bridgeline) on a monthly basis shall not exceed $12,000.00 per month. This G&A Allocation assumes that the Iapps business unit or division will provide all research and development and sales and marketing activity and related expenses within its own internal expense budgets, operating as a division of Bridgeline. Other than the aforesaid G&A Allocation, for purposes of computing the EBITDA of the Iapps Business, the following rules shall apply: (i) there shall be no (A) allocations of any other Bridgeline costs, expenses or other financial items charged to the Iapps Business Unit except to the extent directly incurred by the Iapps Business or (B) compensation charge to the Iapps Business Unit for issuance of stock options (regardless of whether required by GAAP) and (ii) without the prior written consent of the Shareholder (which shall not be unreasonably withheld, conditioned or delayed) there shall be no (A) incurrence by Bridgeline of reimbursable expenditures on behalf of the Iapps Business Unit, (B) charge-offs against the Iapps Business Unit (other than charge-offs required by GAAP), or (C) other accounting adjustments with respect to the Iapps Business by Bridgeline that adversely affect the Earn-Out (except as required to be made in accordance with GAAP). Promptly following Bridgeline's determination of such EBITDA for an Earn-Out Period, Bridgeline shall deliver the Income Statement to the Shareholder, which shall include a statement of the total amount owed collectively to the Shareholder, if any, based on the calculation set forth above (each Income Statement and each such accompanying statement of the Earn-Out Amount, if any, are collectively referred to herein as the "EARN-OUT NOTICE"). (c) The Shareholder shall have fifteen (15) business days from the date of his receipt of an Earn-Out Notice to either (i) accept the calculations and conclusions made in the Earn-Out Notice or (ii) give notice to Bridgeline in writing that the Shareholder intends to dispute the amounts included in the Earn-Out Notice, and such notice shall set forth in reasonable detail the disputed amount and the basis for such dispute. Any such dispute by the Shareholder must be reasonable and made in good faith. If the Shareholder accepts the Earn-Out computation, Bridgeline shall pay the Earn-Out amount no later than five (5) days following acceptance of such computation. (d) If, within the 15-business day period provided for in Section 1.3(c), the Shareholder either affirmatively notifies Bridgeline that he accepts the calculations and conclusions made in the Earn-Out Notice or does not otherwise give notice to Bridgeline in writing that he intends to dispute the amounts included in the Earn-Out Notice, then within five (5) business days following the expiration of such ten-business day period provided for in Section 1.3(c) or, if earlier, the date of Bridgeline's receipt of such affirmative notice of the Shareholder's acceptance of the calculations and conclusions made in the Earn-Out Notice, Bridgeline shall pay the relevant Earn-Out Amount, if any, to the Shareholder. (i) If the Shareholder notifies Bridgeline that he intends to dispute the amounts included in the Earn-Out Notice in accordance with Section 1.3(c)(ii) above, then Bridgeline and the Shareholder shall negotiate in good faith to resolve the dispute. If Bridgeline and the Shareholder are unable to reach a resolution within ten (10) business days after receipt by Bridgeline of the Shareholder's written notice of dispute, then Bridgeline and the Shareholder shall submit the matter to a mutually acceptable independent public accounting firm (the "INDEPENDENT ACCOUNTING FIRM"), which shall, within thirty (30) calendar days after such submission, determine the Earn-Out Amount, if any. The determination of the Earn-Out Amount by the Independent Accounting Firm shall be final, non-appealable and binding on the parties. (ii) In the event that the Independent Accounting Firm determines that the Earn-Out Amount stated by Bridgeline under Section 1.3(b) is accurate and correct in all material respects, then (A) the Shareholder shall pay all costs and expenses charged by the Independent Accounting Firm (the "EARN-OUT IAF FEE") and (B) if an Earn-Out Amount is due under such Earn-Out Notice, within five (5) business days of the parties' receipt of such report by the Independent Accounting Firm, Bridgeline shall pay such Earn-Out Amount to the Shareholder (which payment may be in an amount net of the Earn-Out IAF Fee otherwise due from the Shareholder to the Independent Accounting Firm, if Bridgeline chooses in its sole discretion to pay directly to the Independent Accounting Firm the Earn-Out IAF Fee due from the Shareholder). (iii) In the event that the Independent Accounting Firm determines that Bridgeline's calculations and conclusions made in the Earn-Out Notice are inaccurate or misstated such that the Earn-Out Notice includes no Earn-Out Amount or otherwise references an Earn-Out Amount lower than the accurate Earn-Out Amount, then (A) Bridgeline shall pay the Earn-Out IAF Fee and (B) within five (5) business days of the parties' receipt of such report by the Independent Accounting Firm, Bridgeline shall pay to the Shareholder the Earn-Out Amount determined by the Independent Accounting Firm. (f) Notwithstanding any of the foregoing contained in this Section 1.3, in no event shall any Earn-Out Amount for any individual Earn-Out Period exceed the aggregate amount of $25,000.00. (g) The Earn-Out is computed on a quarter-by-quarter basis and is not cumulative. In the event that the Shareholder has not earned the aggregate Maximum Earn-Out during the collective initial twelve (12) Earn-Out Periods, the provisions of this Section 1.3 and shall automatically extend and continue for an additional twelve (12) months.
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 Shareholder Earn Out shall be entitled 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 Earn Out, if and to earn additional cash consideration the extent earned, shall be determined as of the annual anniversary date of the Start Date for the years 2012 (collectivelythe "2012 Earn Out"), 2013 (the "2013 Earn Out") and 2014 (the "2014 Earn Out" and, together with the 2012 Earn Out and the 2013 Earn Out, the "EARN-OUTEarn Out Period") and paid, if and to the extent earned, in an amount, up to $300,000 in the aggregate (the "MAXIMUM EARN-OUT"), equal to 33% of the positive Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") beginning on the Closing Date (as defined below) and continuing for the twelve (12) calendar quarters immediately following the Closing (the "EARN-OUT PERIODS" and each individually, an "EARN-OUT PERIOD"), with the first Earn-Out Period to include the first full calendar quarter following the Closing Date plus the period between the Closing Date and the first day of such first calendar quarter, all three annual installments in accordance with the following terms and conditions conditions:
(a) For the 2012 Earn Out, in the event that the consolidated EBITDA of this Sectionthe NTS Rockford laboratory facility which will operate the Business and 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 amount shared pro rata between the parties as set forth below.*
(b) Within thirty (30) calendar days after For the end of each calendar quarter (i.e.2013 Earn Out, in the three (3) months ended March 31, June 30, September 30 and December 31 of each relevant calendar year) or portion thereof event that is included within the Earn-Out Periods, Bridgeline shall prepare an income statement reflecting solely the business and operations associated exclusively with the operations of Company following the completion consolidated EBITDA of the Acquisition independent Rockford Facility exceeds $5,400,000 during the twelve calendar months immediately preceding the second anniversary date of the remaining business and operations of Bridgeline Start Date (the "IAPPS BUSINESS2013 EBITDA Target") calculated in accordance with generally accepted accounting principles consistently applied ("GAAP") for such Earn-Out Period), and a related calculation of Sellers will be entitled to receive the amount by which the consolidated EBITDA of the Iapps Business Rockford Facility for such Earnthe 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 Periodexceeds the 2014 EBITDA Target up to a maximum aggregate amount of Three Million Seventy-Five Thousand Dollars ($3,075,000) for the years 2012, such calculation 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 EBITDA to be completed in accordance with GAAP and to reflect as closely as reasonably possible 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 would have been achieved by the Company during such Earn-Total Earn Out Period if the Acquisition had not occurred (each such income statement and EBITDA calculation are collectively referred payable to herein as the "INCOME STATEMENT"). The maximum allocation of corporate overhead ("G&A ALLOCATION") that will be charged by Bridgeline to the Iapps Business (operating as a division of Bridgeline) on a monthly basis Sellers shall not exceed $12,000.00 per month7,075,000 million. This G&A Allocation assumes that Each of the Iapps business unit or division will provide all research and development and sales and marketing activity and related expenses foregoing Earn Out amounts, if earned, shall be paid by Buyer to Sellers within its own internal expense budgets, operating as a division sixty (60) days following each of Bridgeline. Other than the aforesaid G&A Allocation, for purposes first three anniversaries of computing the Start Date based upon Buyer's good faith calculation of the EBITDA of for the Iapps Businessapplicable period, the following rules shall apply: (i) there shall be no (A) allocations of any other Bridgeline costs, expenses or other using Buyer's unaudited financial items charged to the Iapps Business Unit except to the extent directly incurred by the Iapps Business or (B) compensation charge to the Iapps Business Unit for issuance of stock options (regardless of whether required by GAAP) and (ii) without the prior written consent of the Shareholder (which shall not be unreasonably withheld, conditioned or delayed) there shall be no (A) incurrence by Bridgeline of reimbursable expenditures on behalf of the Iapps Business Unit, (B) charge-offs against the Iapps Business Unit (other than charge-offs required by GAAP), or (C) other accounting adjustments with respect to the Iapps Business by Bridgeline that adversely affect the Earn-Out (except as required to be made statements maintained in accordance with GAAPBuyer's normal internal accounting methods consistently applied. In each case, however, the applicable Earn Out payment shall be subject to a subsequent adjustment increasing or decreasing such Earn Out payment based upon Buyer's Audited Financials covering the twelve-month period in which the Earn Out was earned (or otherwise would have been earned). Promptly following Bridgeline's determination of such EBITDA for an Earn-Out Period, Bridgeline shall deliver the Income Statement to the Shareholder, which shall include a statement of the total amount owed collectively to the Shareholder, if any, based on the calculation set forth above be calculated within sixty (each Income Statement and each such accompanying statement of the Earn-Out Amount, if any, are collectively referred to herein as the "EARN-OUT NOTICE").
(c) The Shareholder shall have fifteen (15) business days from the date of his receipt of an Earn-Out Notice to either (i) accept the calculations and conclusions made in the Earn-Out Notice or (ii) give notice to Bridgeline in writing that the Shareholder intends to dispute the amounts included in the Earn-Out Notice, and such notice shall set forth in reasonable detail the disputed amount and the basis for such dispute. Any such dispute by the Shareholder must be reasonable and made in good faith. If the Shareholder accepts the Earn-Out computation, Bridgeline shall pay the Earn-Out amount no later than five (560) days following acceptance such Audited Financials being completed and signed by the independent 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) to an Earn Out payment previously made (or which should have been made as a result of such computation.
(d) If, within the 15-business day period provided for in Section 1.3(cadjustment), the Shareholder either affirmatively notifies Bridgeline that he accepts the calculations and conclusions made in the Earn-Out Notice or does not otherwise give notice to Bridgeline in writing that he intends to dispute the amounts included in the Earn-Out Notice, then within five (5) business days following the expiration of such ten-business day period provided for in Section 1.3(c) or, if earlier, the date of Bridgeline's receipt of such affirmative notice of the Shareholder's acceptance of the calculations and conclusions made in the Earn-Out Notice, Bridgeline Buyer shall pay to Sellers the relevant Earn-Out Amountfull amount of any such upwards adjustment, if any, to the Shareholder.
(i) If the Shareholder notifies Bridgeline that he intends to dispute the amounts included in the Earn-Out Notice in accordance with Section 1.3(c)(ii) above, then Bridgeline and the Shareholder shall negotiate in good faith to resolve the dispute. If Bridgeline and the Shareholder are unable to reach a resolution within ten (10) business days after receipt by Bridgeline of the Shareholder's written notice of dispute, then Bridgeline and the Shareholder shall submit the matter to a mutually acceptable independent public accounting firm (the "INDEPENDENT ACCOUNTING FIRM"), which shallwithout interest, within thirty (30) calendar days after such submission, determine the Earn-Out Amount, if any. The determination of the Earn-Out Amount by the Independent Accounting Firm shall be final, non-appealable and binding on the parties.
(ii) In the event that the Independent Accounting Firm determines that the Earn-Out Amount stated by Bridgeline under Section 1.3(b) is accurate and correct in all material respects, then (A) the Shareholder shall pay all costs and expenses charged by the Independent Accounting Firm (the "EARN-OUT IAF FEE") and (B) if an Earn-Out Amount is due under such Earn-Out Notice, within five (5) business days of the parties' receipt completion of such report by the Independent Accounting Firmcalculations, Bridgeline and Sellers shall pay Buyer the full amount of any such Earn-Out Amount to the Shareholder downwards adjustment, without interest, within thirty (which payment may be in an amount net of the Earn-Out IAF Fee otherwise due from the Shareholder to the Independent Accounting Firm, if Bridgeline chooses in its sole discretion to pay directly to the Independent Accounting Firm the Earn-Out IAF Fee due from the Shareholder).
(iii30) In the event that the Independent Accounting Firm determines that Bridgeline's calculations and conclusions made in the Earn-Out Notice are inaccurate or misstated such that the Earn-Out Notice includes no Earn-Out Amount or otherwise references an Earn-Out Amount lower than the accurate Earn-Out Amount, then (A) Bridgeline shall pay the Earn-Out IAF Fee and (B) within five (5) business days of the parties' receipt completion of such report by the Independent Accounting Firm, Bridgeline shall pay to the Shareholder the Earn-Out Amount determined by the Independent Accounting Firmcalculations.
(f) Notwithstanding any of the foregoing contained in this Section 1.3, in no event shall any Earn-Out Amount for any individual Earn-Out Period exceed the aggregate amount of $25,000.00.
(g) The Earn-Out is computed on a quarter-by-quarter basis and is not cumulative. In the event that the Shareholder has not earned the aggregate Maximum Earn-Out during the collective initial twelve (12) Earn-Out Periods, the provisions of this Section 1.3 and shall automatically extend and continue for an additional twelve (12) months.
Appears in 1 contract
Sources: Asset Purchase Agreement (National Technical Systems Inc /Ca/)
Earn-Out Consideration. (a) The Shareholder LDD Holders shall be entitled to earn additional cash consideration (collectively, the "EARNEarn-OUTout") in an amount, aggregate amount of up to Three Hundred Forty-two Thousand Three Hundred Ninety-nine and 06/100 Dollars ($300,000 in the aggregate 342,399.06) (the "MAXIMUM EARNMaximum Earn-OUT"), equal to 33% of the positive Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDAout") beginning on the Closing Date (as defined below) and continuing for the twelve (12) calendar quarters immediately following the Closing (the "EARN-OUT PERIODS" and each individually, an "EARN-OUT PERIOD"), with the first Earn-Out Period to include the first full calendar quarter following the Closing Date plus the period between the Closing Date and the first day of such first calendar quarter, all in accordance with the terms and conditions of this SectionSection 1.5 and subject to the prior repayment of the Remainder Debt to Heffernan and Matteo pursuant to Section 1.6(a) below and the Princip▇▇ ▇▇▇▇▇▇olders' indemnification obligations contained in Article VIII below.
(b) Within thirty (30) calendar days after the end of each calendar quarter (i.e., the three (3) months ended March 31, June 30, September 30 and December 31 of each relevant calendar year) or portion thereof that is included within the thirty-six (36) month period beginning on the first calendar day following the Closing Date (the "Earn-Out out Periods" and each individually, Bridgeline an "Earn-out Period"), the Acquirer shall prepare an income statement reflecting solely the business and operations associated exclusively with the operations of Company Corporation following the completion of the Acquisition Merger independent of the remaining business and operations of Bridgeline the Acquirer (the "IAPPS BUSINESSLDD Business") calculated in accordance with generally accepted accounting principles consistently applied ("GAAP") for such Earn-Out out Period, and a related calculation of EBITDA the Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") of the Iapps LDD Business for such Earn-Out out Period, such calculation of EBITDA to be completed in accordance with GAAP and to reflect as closely as reasonably possible the EBITDA that would have been achieved by the Company Corporation during such Earn-Out out Period if the Acquisition Merger had not occurred (each such income statement and EBITDA calculation are collectively referred to herein as the "INCOME STATEMENTIncome Statement"). The maximum allocation of corporate overhead ("G&A ALLOCATION") that will be charged by Bridgeline to the Iapps Business (operating as a division of Bridgeline) on a monthly basis shall not exceed $12,000.00 per month. This G&A Allocation assumes that the Iapps business unit or division will provide all research and development and sales and marketing activity and related expenses within its own internal expense budgets, operating as a division of Bridgeline. Other than the aforesaid G&A Allocation, for purposes of computing the EBITDA of the Iapps Business, the following rules shall apply: (i) there shall be no (A) allocations of any other Bridgeline costs, expenses or other financial items charged to the Iapps Business Unit except to the extent directly incurred by the Iapps Business or (B) compensation charge to the Iapps Business Unit for issuance of stock options (regardless of whether required by GAAP) and (ii) without the prior written consent of the Shareholder (which shall not be unreasonably withheld, conditioned or delayed) there shall be no (A) incurrence by Bridgeline of reimbursable expenditures on behalf of the Iapps Business Unit, (B) charge-offs against the Iapps Business Unit (other than charge-offs required by GAAP), or (C) other accounting adjustments with respect to the Iapps Business by Bridgeline that adversely affect the Earn-Out (except as required to be made in accordance with GAAP). Promptly following Bridgelinethe Acquirer's determination of such EBITDA for an Earn-Out out Period, Bridgeline the Acquirer shall deliver to Heffernan, as the representative duly authorized by, and acting on be▇▇▇▇ ▇▇, the LDD Holders (or his successor(s) as duly elected by a majority in interest of the LDD Holders) (referred to in this capacity as the "LDD Representative"), the Income Statement to the ShareholderStatement, which shall include a statement of the total amount owed collectively to the ShareholderLDD Holders, if any, based on the calculation calculations set forth above on Schedule 1.5(b) hereto (the "Earn-out Amount") (each Income Statement and each such accompanying statement of the Earn-Out out Amount, if any, are collectively referred to herein as the "EARNEarn-OUT NOTICEout Notice").
(c) The Shareholder LDD Representative shall have fifteen ten (1510) business days from the date of his receipt of an Earn-Out out Notice to either (i) accept the calculations and conclusions made in the Earn-Out out Notice or (ii) give notice to Bridgeline the Acquirer in writing that the Shareholder LDD Representative intends to dispute the amounts included in the Earn-Out out Notice, and such notice shall set forth in reasonable detail the disputed amount and the basis for such dispute. Any such dispute by the Shareholder LDD Representative must be reasonable and made in good faith. If the Shareholder accepts the Earn-Out computation, Bridgeline shall pay the Earn-Out amount no later than five (5) days following acceptance of such computation.
(d) If, within the 1510-business day period provided for in Section 1.3(c1.5(c), the Shareholder LDD Representative either affirmatively notifies Bridgeline the Acquirer that he accepts the calculations and conclusions made in the Earn-Out out Notice or does not otherwise give notice to Bridgeline the Acquirer in writing that he intends to dispute the amounts included in the Earn-Out out Notice, then within five ten (510) business days following the expiration of such ten-business day period provided for in Section 1.3(c1.5(c) or, if earlier, the date of Bridgelinethe Acquirer's receipt of such affirmative notice of the ShareholderLDD Representative's acceptance of the calculations and conclusions made in the Earn-Out out Notice, Bridgeline the Acquirer shall pay the relevant Earn-Out out Amount, if any, to the ShareholderLDD Holders.
(i) If the Shareholder LDD Representative notifies Bridgeline the Acquirer that he intends to dispute the amounts included in the Earn-Out out Notice in accordance with Section 1.3(c)(ii1.5(c)(ii) above, then Bridgeline the Acquirer and the Shareholder LDD Representative shall negotiate in good faith to resolve the dispute. If Bridgeline the Acquirer and the Shareholder LDD Representative are unable to reach a resolution within ten (10) business days after receipt by Bridgeline the Acquirer of the ShareholderLDD Representative's written notice of dispute, then Bridgeline the Acquirer and the Shareholder LDD Representative shall submit the matter to a mutually acceptable independent public accounting firm of international reputation (the "INDEPENDENT ACCOUNTING FIRMIndependent Accounting Firm"), which shall, within thirty (30) calendar days after such submission, determine the Earn-Out out Amount, if any. The determination of the Earn-Out out Amount by the Independent Accounting Firm shall be final, non-appealable and binding on the partiesparties hereto and, under the Non-Principal Shareholder's Letters, each other LDD Holder.
(ii) In the event that the Independent Accounting Firm determines that the Earn-Out out Amount stated by Bridgeline the Acquirer under Section 1.3(b1.5(b) is accurate and correct in all material respects, then (A) the Shareholder LDD Holders shall pay all costs and expenses charged by the Independent Accounting Firm (the "EARNEarn-OUT IAF FEEout I.A.F. Fee") and (B) if an Earn-Out out Amount is due under such Earn-Out out Notice, within five ten (510) business days of the parties' receipt of such report by the Independent Accounting Firm, Bridgeline the Acquirer shall pay such Earn-Out out Amount to the Shareholder LDD Holders (which payment may be in an amount net of the Earn-Out IAF out I.A.F. Fee otherwise due from the Shareholder LDD Holders to the Independent Accounting Firm, if Bridgeline the Acquirer chooses in its sole discretion to pay directly to the Independent Accounting Firm the Earn-Out IAF out I.A.F. Fee due from the ShareholderLDD Holders).
(iii) In the event that the Independent Accounting Firm determines that Bridgelinethe Acquirer's calculations and conclusions made in the Earn-Out out Notice are inaccurate or misstated such that the Earn-Out out Notice includes no Earn-Out out Amount or otherwise references an Earn-Out out Amount lower than the accurate Earn-Out out Amount, then (A) Bridgeline the Acquirer shall pay the Earn-Out IAF out I.A.F. Fee and (B) within five ten (510) business days of the parties' receipt of such report by the Independent Accounting Firm, Bridgeline the Acquirer shall pay to the Shareholder LDD Holders the Earn-Out out Amount determined by the Independent Accounting Firm.
(f) Notwithstanding any of the foregoing contained in this Section 1.31.5, and subject to Section 1.6(a), in no event shall any Earn-Out out Amount for any individual one Earn-Out out Period exceed the aggregate amount of Thirty-seven Thousand Five Hundred Dollars ($25,000.0037,500.00). All Earn-out Amounts that may be paid to the LDD Holders hereunder shall be divided and allocated among the LDD Holders on the basis of their respective percentage ownership of the Shares immediately prior to the Effective Time, as set forth in Schedule 1.3(a) (with respect to each LDD Holder, the "Earn-out Portion").
(g) The Earn-Out is computed on a quarter-by-quarter basis and is not cumulative. In the event that the Shareholder has LDD Holders are not earned paid the aggregate Maximum Earn-Out out during the collective initial twelve (12) Earn-Out out Periods, the provisions of this Section 1.3 and shall automatically LDD Representative may elect to extend and continue the period during which the Earn-out may be paid for an additional twelve (12) monthsmonths by providing to the Acquirer a written notice of such election at least ninety (90) days prior to the third anniversary of the Closing Date.
Appears in 1 contract
Earn-Out Consideration. (a) The Shareholder Shareholders shall be entitled to earn additional cash consideration (collectively, the "EARN-OUT") in an amount, up to $300,000 750,000 in the aggregate (the "MAXIMUM EARN-OUT"), equal to 33100% of the positive Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") of the New Tilt Business (as defined below) beginning on the Closing Date (as defined below) and continuing for the twelve (12) calendar quarters immediately following the Closing (the "EARN-OUT PERIODS" and each individually, an "EARN-OUT PERIOD"), with the first Earn-Out Period to include the first full calendar quarter following the Closing Date plus the period between the Closing Date and the first day of such first calendar quarterending June 30, 2006, all in accordance with the terms and conditions of this Section.
(b) Within thirty (30) calendar days after the end of each calendar quarter (i.e., the three (3) months ended March 31, June 30, September 30 and December 31 of each relevant calendar year) or portion thereof that is included within the Earn-Out Periods, Bridgeline shall prepare an income statement reflecting solely the business and operations associated exclusively with the operations of (x) the Company and (y) the division of Bridgeline headquartered in Woburn, Massachusetts and known as "Bridgeline New England" following the completion of the Acquisition independent of the remaining business and operations of Bridgeline (the "IAPPS NEW TILT BUSINESS") calculated in accordance with generally accepted accounting principles consistently applied ("GAAP") for such Earn-Out Period, except as provided below, and a related calculation of EBITDA of the Iapps New Tilt Business for such Earn-Out Period, such calculation of EBITDA to be completed in accordance with GAAP and to reflect as closely as reasonably possible the EBITDA that would have been achieved by the Company New Tilt Business during such Earn-Out Period if the Acquisition had not occurred (each such income statement and EBITDA calculation are collectively referred to herein as the "INCOME STATEMENT"). The maximum allocation of corporate overhead allocation ("G&A AND CORPORATION MARKETING ALLOCATION") that will be charged by Bridgeline to the Iapps New Tilt Business (operating as a division of Bridgeline) on a monthly basis shall not exceed $12,000.00 per monthbe determined reasonably using a headcount and revenue comparison metric between the New Tilt Business and Bridgeline as a whole. This The maximum G&A and Corporate Marketing Allocation assumes that will be charged by Bridgeline to the Iapps business unit or division will provide all research and development and sales and marketing activity and related expenses within its own internal expense budgets, New Tilt Business (operating as a division the New England office of Bridgeline) for a specified Earn-Out Period sh▇▇▇ ▇▇▇ ▇▇▇▇ed fifteen percent (15%) of the total revenues generated by the New Tilt Business in such Earn-Out Period. Other than the aforesaid G&A and Corporate Marketing Allocation, for purposes of computing the EBITDA of the Iapps New Tilt Business, the following rules shall apply: (i) there shall be no (A) allocations of any other Bridgeline costs, expenses expenses, losses due to impairment of assets or otherwise or other financial items charged to the Iapps New Tilt Business Unit except to the extent directly incurred by the Iapps Business or New Tilt Business, (B) compensation charge to the Iapps New Tilt Business Unit for issuance of stock options (regardless of whether required by GAAP), (C) allocation to the New Tilt Business of any expenses incurred by New Tilt in connection with any move by the Company from its current offices; (D) allocation to the New Tilt Business of any expenses incurred in connection with the Merger, including but not limited to legal and accounting fees incurred in connection with the Merger; (E) allocations to the New Tilt Business of any impairment losses relating to the Merger, including but not limited to any losses or charges relating to impairment of goodwill of the Company established by Bridgeline in connection with the Merger under FASB 142 or losses relating to impairment of the value established by Bridgeline for the Company's intangible assets in the Merger; (F) allocation to the New Tilt Business of any expenses or losses attributable to any impairment charges, expenses or losses that are incurred and recorded after the Merger that are associated with any assets on the balance sheet of Bridgeline New England as of the Merger or any assets recorded after the Merger but connected with activities prior to the Merger; or (G) allocation to the New Tilt Business of the compensation of employees whose expenses are in the ordinary course expenses of the New Tilt Business Unit for any billable hours spent by such employees on projects for the benefit of one or more other Bridgeline business units (which determination shall be based on an equitable allocation of such employee's total billable time for the New Tilt Business Unit, on the one hand, and for other Bridgeline business units, on the other hand) and (ii) without the prior written consent of each of the Shareholder (which shall not be unreasonably withheld, conditioned or delayed) Shareholders there shall be be, for purposes of determining the Earn-Out and regardless of GAAP, no (A) incurrence by Bridgeline of reimbursable expenditures on behalf of the Iapps New Tilt Business Unit, (B) charge-offs against the Iapps New Tilt Business Unit (other than charge-offs that directly relate to the New Tilt Business and are required by GAAP), or (C) other accounting adjustments with respect to the Iapps New Tilt Business by Bridgeline that adversely affect the Earn-Out (except as adjustments that relate directly to the New Tilt Business and are required to be made in accordance with GAAP). Promptly following Bridgeline's determination of such EBITDA for an Earn-Out Period, Bridgeline shall deliver the Income Statement to Michelle Chambers, as the Shareholderrepresentative duly authorized by, and acti▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇, the Shareholders (or her successor(s) as duly elected by a majority in interest of the former Shareholders) (referred to in this capacity as the "NEW TILT REPRESENTATIVE"), which shall include a statement of the total amount owed collectively to the ShareholderShareholders, if any, based on the calculation set forth above (each Income Statement and each such accompanying statement of the Earn-Out Amount, if any, are collectively referred to herein as the "EARN-OUT NOTICE").
(c) The Shareholder New Tilt Representative shall have fifteen fourteen (1514) business days from the date of his her receipt of an Earn-Out Notice to either (i) accept the calculations and conclusions made in the Earn-Out Notice or (ii) give notice to Bridgeline in writing that the Shareholder New Tilt Representative intends to dispute the amounts included in the Earn-Out Notice, and such notice shall set forth in reasonable detail the disputed amount and the basis for such dispute. Any such dispute by the Shareholder New Tilt Representative must be reasonable and made in good faith. If the Shareholder accepts the Earn-Out computation, Bridgeline shall pay the Earn-Out amount no later than five (5) days following acceptance of such computation.
(d) If, within the 15-business 14 day period provided for in Section 1.3(c), the Shareholder New Tilt Representative either affirmatively notifies Bridgeline that he she accepts the calculations and conclusions made in the Earn-Out Notice or does not otherwise give notice to Bridgeline in writing that he she intends to dispute the amounts included in the Earn-Out Notice, then within five (5) business days following the expiration of such ten-business fourteen day period provided for in Section 1.3(c) or, if earlier, the date of Bridgeline's receipt of such affirmative notice of the ShareholderNew Tilt Representative's acceptance of the calculations and conclusions made in the Earn-Out Notice, Bridgeline shall pay the relevant Earn-Out Amount, if any, to the ShareholderShareholders their respective portions of the Earnout Amount. All Earnout Amounts that may be paid to the Shareholders hereunder shall be divided and allocated among the Shareholders on the basis of the same relevant shares of the Merger Consideration as are set forth in Exhibit 1.1 and shall be paid in immediately available funds or by Bridgeline company check.
(i) If the Shareholder New Tilt Representative notifies Bridgeline that he she intends to dispute the amounts included in the Earn-Out Notice in accordance with Section 1.3(c)(ii) above, then Bridgeline and the Shareholder New Tilt Representative shall negotiate in good faith to resolve the dispute. If Bridgeline and the Shareholder New Tilt Representative are unable to reach a resolution within ten (10) business days after receipt by Bridgeline of the ShareholderNew Tilt Representative's written notice of dispute, then Bridgeline and the Shareholder New Tilt Representative shall submit the matter to a mutually acceptable independent public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) (the "INDEPENDENT ACCOUNTING FIRM"), which shall, within thirty (30) calendar days after such submission, determine the Earn-Out Amount, if any, based on the principles specified in this Section 1.3 (including the intent to reflect the New Tilt Business as a stand-alone business). The determination of the Earn-Out Amount by the Independent Accounting Firm shall be final, non-appealable and binding on the parties.
(ii) In the event that the Independent Accounting Firm determines that the Earn-Out Amount stated by Bridgeline under Section 1.3(b) is accurate and correct in all material respects, then (A) the Shareholder Shareholders shall pay all costs and expenses charged by the Independent Accounting Firm (the "EARN-OUT IAF FEE") and (B) if an Earn-Out Amount is due under such Earn-Out Notice, within five (5) business days of the parties' receipt of such report by the Independent Accounting Firm, Bridgeline shall pay such Earn-Out Amount to the Shareholder Shareholders (which payment may be in an amount net of the Earn-Out IAF Fee otherwise due from the Shareholder Shareholders to the Independent Accounting Firm, if Bridgeline chooses in its sole discretion to pay directly to the Independent Accounting Firm the Earn-Out IAF Fee due from the ShareholderShareholders).
(iii) In the event that the Independent Accounting Firm determines that Bridgeline's calculations and conclusions made in the Earn-Out Notice are inaccurate or misstated such that the Earn-Out Notice includes no Earn-Out Amount or otherwise references an Earn-Out Amount lower than the accurate Earn-Out Amount, then (A) Bridgeline shall pay the Earn-Out IAF Fee and (B) within five (5) business days of the parties' receipt of such report by the Independent Accounting Firm, Bridgeline shall pay to the Shareholder Shareholders the Earn-Out Amount determined by the Independent Accounting Firm.
(f) Notwithstanding any of the foregoing contained in this Section 1.3, in no event shall any Earn-Out Amount for any individual Earn-Out Period exceed the aggregate amount of $25,000.0062,500.00.
(g) The Earn-Out is computed on a quarter-by-quarter basis and is not cumulative. In the event that the Shareholder has Shareholders have not earned the aggregate Maximum Earn-Out during the collective initial twelve (12) Earn-Out Periods, but have earned at least fifty percent (50%) of such Maximum Earn-Out, the provisions of this Section 1.3 and shall automatically extend and continue for an additional twelve four (124) monthscalendar quarters.
(h) In the event of (x) a sale of the New Tilt Business by any means, (y) the consolidation of the New Tilt Business with or into any other existing or future business unit or affiliate of Bridgeline or (z) any other recapitalization, reorganization or other event, in each case the consequences of which are that the operations of the New Tilt Business are no longer able to be clearly separated from those of other businesses or business units, then the provisions of this Section 1.3 shall be modified to provide that the Shareholders shall receive the Maximum Earn-Out ratably over the remaining Earn-Out Periods.
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Earn-Out Consideration. (a) The Shareholder Company Participating Equity Holders shall be entitled to earn additional cash consideration as follows:
(collectivelya) 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) $3,000,000 (the “Initial Performance Payment”) and (ii) $2.00 for each $1.00 of Company Revenue for the three month period ended December 31, 2008 that is greater than the Revenue Target (the “Additional Threshold Payment” and, together with the Initial Performance Payment, the "EARN-OUT") in an amount, up to $300,000 in the aggregate (the "MAXIMUM EARN-OUT"), equal to 33% of the positive Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") beginning on the Closing Date (as defined below) and continuing for the twelve (12) calendar quarters immediately following the Closing (the "EARN-OUT PERIODS" and each individually, an "EARN-OUT PERIOD"), with the first “Earn-Out Period to include out Consideration”). In no event shall (i) the first full calendar quarter following Additional Threshold Payment exceed an aggregate of $5,000,000 or (ii) the Closing Date plus the period between the Closing Date and the first day Earn-out Consideration exceed an aggregate of such first calendar quarter, all in accordance with the terms and conditions of this Section$8,000,000.
(b) Within thirty (30) calendar days after the end of each calendar quarter (i.e., the three (3) months ended March 31, June 30, September 30 and December 31 of each relevant calendar year) or portion thereof that is included within the Earn-Out Periods, Bridgeline shall prepare an income statement reflecting solely the business and operations associated exclusively with the operations of The Company following the completion of the Acquisition independent of the remaining business and operations of Bridgeline (the "IAPPS BUSINESS") calculated in accordance with generally accepted accounting principles consistently applied ("GAAP") for such Earn-Out Period, and a related calculation of EBITDA of the Iapps Business for such Earn-Out Period, such calculation of EBITDA to be completed in accordance with GAAP and to reflect as closely as reasonably possible the EBITDA that would have been achieved by the Company during such Earn-Out Period if the Acquisition had not occurred (each such income statement and EBITDA calculation are collectively referred to herein as the "INCOME STATEMENT"). The maximum allocation of corporate overhead ("G&A ALLOCATION") that will be charged by Bridgeline to the Iapps Business (operating as a division of Bridgeline) on a monthly basis shall not exceed $12,000.00 per month. This G&A Allocation assumes that the Iapps business unit or division will provide all research and development and sales and marketing activity and related expenses within its own internal expense budgets, operating as a division of Bridgeline. Other than the aforesaid G&A Allocation, for purposes of computing the EBITDA of the Iapps Business, the following rules shall apply: (i) there shall be no (A) allocations of any other Bridgeline costs, expenses or other financial items charged to the Iapps Business Unit except to the extent directly incurred by the Iapps Business or (B) compensation charge to the Iapps Business Unit for issuance of stock options (regardless of whether required by GAAP) and (ii) without the prior written consent of the Shareholder (which Participating Equity Holders shall not be unreasonably withheldentitled to receive, conditioned or delayed) there and shall be no (A) incurrence by Bridgeline of reimbursable expenditures on behalf of the Iapps Business Unitnot receive, (B) charge-offs against the Iapps Business Unit (other than charge-offs required by GAAP), or (C) other accounting adjustments with respect to the Iapps Business by Bridgeline that adversely affect the any Earn-Out (except as required to be made in accordance with GAAP). Promptly following Bridgeline's determination of such EBITDA out Consideration if the Company Gross Margins for an Earn-Out Periodthe three month period ending December 31, Bridgeline shall deliver 2008 are less than the Income Statement to the Shareholder, which shall include a statement of the total amount owed collectively to the Shareholder, if any, based on the calculation set forth above (each Income Statement and each such accompanying statement of the Earn-Out Amount, if any, are collectively referred to herein as the "EARN-OUT NOTICE")Gross Margins Target.
(c) The Shareholder As soon as practicable after completion of 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 have fifteen prepare (15or cause to be prepared) business days from and deliver to the date of his receipt of an Earn-Out Notice to either Representative (i) accept a calculation of the calculations Company Revenue for the three month period ending December 31, 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 conclusions made in Company Gross Margins, and (iv) a statement of the amount, if any, of the Earn-Out Notice or out Consideration to be delivered to the Company Participating Equity Holders. Unless the Representative shall, in accordance with the provisions of subsection (iid) give notice to Bridgeline in writing that below, challenge the Shareholder intends to dispute Buyer’s determination of the amounts included in 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 out Consideration within 30 days after the 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 books, records and accounting work papers of the Company to conduct its review of such Company Gross Revenue and Company Gross Margins. Such access shall be at such times and in such a manner as shall not unreasonably interfere with the Buyer’s operation of the Company’s business.
(d) 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 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, and such notice 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 disputed amount and the basis for such dispute. Any In the event of such dispute by a dispute, the Shareholder must be reasonable Buyer and made the Representative shall use their Reasonable Best Efforts to reach agreement on the disputed items or amounts in good faithorder to determine the Earn-out Consideration. If the Shareholder accepts Buyer and the Representative are unable to resolve the dispute within 30 calendar days after delivery of the Earn-Out computationout Dispute Notice, Bridgeline then any remaining items in dispute shall pay be submitted to an independent nationally recognized accounting firm selected in writing by the 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 dispute 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, on the one hand, and the Buyer, on the other hand; provided that if the Neutral Accountant determines that the Buyer, on the one hand, or the Representative, on the other hand, adopted a position or positions with respect to the Earn-Out amount no later than five (5) days following acceptance out Consideration that is frivolous or clearly without merit, the Neutral Accountant may, in its discretion, assign a greater portion of any such computationfees and expenses to such party.
(df) If, within Within 14 days of the 15resolution of any dispute or the Representative’s failure to deliver an Earn-business day period provided for in Section 1.3(c)out Dispute Notice on a timely basis, the Shareholder either affirmatively notifies Bridgeline that he accepts the calculations and conclusions made in Buyer shall (i) pay 1.3% of the Earn-Out Notice or does not otherwise give notice out Consideration, if any, to Bridgeline The Jordan, ▇▇▇▇▇▇▇▇ Group, Inc. in writing that he intends to dispute accordance with payment instructions provided by the amounts included in Representative, (ii) pay 86.2% of the Earn-Out Notice, then within five (5) business days following the expiration of such ten-business day period provided for in Section 1.3(c) or, if earlier, the date of Bridgeline's receipt of such affirmative notice of the Shareholder's acceptance of the calculations and conclusions made in the Earn-Out Notice, Bridgeline shall pay the relevant Earn-Out Amountout Consideration, if any, to the Shareholder.
Paying Agent and (iiii) If deposit with the Shareholder notifies Bridgeline that he intends to dispute the amounts included in the Earn-Out Notice in accordance with Section 1.3(c)(ii) above, then Bridgeline and the Shareholder shall negotiate in good faith to resolve the dispute. If Bridgeline and the Shareholder are unable to reach a resolution within ten (10) business days after receipt by Bridgeline of the Shareholder's written notice of dispute, then Bridgeline and the Shareholder shall submit the matter to a mutually acceptable independent public accounting firm (the "INDEPENDENT ACCOUNTING FIRM"), which shall, within thirty (30) calendar days after such submission, determine the Earn-Out Amount, if any. The determination Escrow Agent 12.5% of the Earn-Out Amount by the Independent Accounting Firm shall be finalout Consideration, non-appealable and binding on the parties.
(ii) In the event that the Independent Accounting Firm determines that the Earn-Out Amount stated by Bridgeline under Section 1.3(b) is accurate and correct if any, in all material respects, then (A) the Shareholder shall pay all costs and expenses charged by the Independent Accounting Firm (the "EARN-OUT IAF FEE") and (B) if an Earn-Out Amount is due under such Earn-Out Notice, within five (5) business days of the parties' receipt of such report by the Independent Accounting Firm, Bridgeline shall pay such Earn-Out Amount escrow pursuant to the Shareholder (which payment may be in an amount net of the Earn-Out IAF Fee otherwise due from the Shareholder to the Independent Accounting Firm, if Bridgeline chooses in its sole discretion to pay directly to the Independent Accounting Firm the Earn-Out IAF Fee due from the Shareholder).
(iii) In the event that the Independent Accounting Firm determines that Bridgeline's calculations and conclusions made in the Earn-Out Notice are inaccurate or misstated such that the Earn-Out Notice includes no Earn-Out Amount or otherwise references an Earn-Out Amount lower than the accurate Earn-Out Amount, then (A) Bridgeline shall pay the Earn-Out IAF Fee and (B) within five (5) business days of the parties' receipt of such report by the Independent Accounting Firm, Bridgeline Escrow Agreement. The Paying Agent shall pay to each Company Participating Equity Holder an amount equal to the Shareholder 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 Amount determined by the Independent Accounting Firm.
(f) Notwithstanding any of the foregoing contained in this Section 1.3, in no event shall any Earn-Out Amount for any individual Earn-Out Period exceed the aggregate amount of $25,000.00out Consideration.
(g) The 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 is computed on out Consideration. The Company Participating Equity Holders will have no right to claim any lost earn-out or other damages as a quarter-by-quarter basis and is result of such decisions so long as the actions were not cumulative. In taken by the event that Buyer in bad faith for the Shareholder has not earned the aggregate Maximum Earn-Out during the collective initial twelve (12) Earn-Out Periods, the principal purpose of frustrating provisions of this Section 1.3 1.6.
(h) Notwithstanding any other provision in this Section 1.6, if at the time any Earn-out Consideration would otherwise be payable to the 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 ($0), then the Buyer may offset that portion of the Earn-out Consideration otherwise payable by the Buyer by the amount by which that portion of the Total Pending Claims attributable to the Unsatisfied Claim that would reduce the Escrow Fund to an amount of less than zero ($0) (or, if the actual amount of the Unsatisfied Claim has been determined under Article VII, the actual Damages with respect to such claim as so determined). One hundred percent (100%) of any remaining balance of the Earn-out Consideration remaining after such offset shall automatically extend and continue be paid to the Paying Agent for an additional twelve (12) monthspayment 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 previously offset Earn-out Consideration 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).
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