Earnout Agreement

EARNOUT AGREEMENT
-----------------


THIS AGREEMENT ("Agreement") is made this 3rd day of April 1998 among CONLEY, CANITANO & ASSOC., INC., an Ohio corporation ("CCAi"), KELLY-LEVEY & ASSOCIATES, INC., a Kentucky corporation (the "Company"), and ANTHONY KELLY, GARY LEVEY, RONNIE CRUMPLER (collectively the "Controlling Shareholders").


R E C I T A L S:
----------------


WHEREAS, CCAi, the Company and the Controlling Shareholders are parties to the Stock Purchase Agreement dated as of April 3, 1998 (the "Purchase Agreement") pursuant to which CCAi acquired all of the capital stock of the Company from the shareholders of the Company;


WHEREAS, each of the shareholders of the Company other than the Controlling Shareholders are parties to Minority Share Purchase Agreements dated as of April 3, 1998 (the "Minority Share Purchase Agreements") (the Purchase Agreement and the Minority Share Purchase Agreements collectively referred to as the "Purchase Agreement");


WHEREAS, pursuant to the terms of the Purchase Agreement, an additional sum not to exceed One Million One Million One Hundred Twenty Six Thousand Five Hundred Thirty Four Dollars ($1,126,534) (the "Kelly Earnout Consideration") is payable to Anthony F. Kelly ("Kelly") subject to Kelly complying with the Noncompetition Agreement between CCAi and Kelly, dated April 3, 1998 (the "Kelly Non-Compete");


WHEREAS, pursuant to the terms of the Purchase Agreement, an additional sum not to exceed Three Million Three Hundred Seventy Three Thousand Four Hundred Sixty Six Dollars ($3,373,466) (the "Shareholders' Earnout Consideration") (the Kelly Earnout Consideration and the Shareholders' Earnout Consideration, collectively the "Earnout Consideration") is payable to the shareholders of the Company other than Anthony F. Kelly (collectively the "Shareholders") if certain target financial goals are met; and


WHEREAS, the parties desire to define the target financial goals for the payment of the Earnout Consideration.


NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties hereto do hereby agree as follows:


1. DEFINITIONS. Wherever used in this Agreement, the following words and phrases shall have the meaning set forth below unless the context plainly requires a different meaning:


a. "AVERAGE BILLABLE DAYS" means 220 days per year.


2


- 2 -


b. "CAUSE" shall have the meaning ascribed to it in each
individual Shareholder's employment agreement with
CCAi; PROVIDED, HOWEVER, if such Shareholder's
employment agreement with CCAi does not define
"Cause", then "Cause" shall mean:


(i) misappropriating any funds or property
of CCAi, committing fraud or embezzlement or
engaging in any criminal or illegal activity
having a material adverse effect on CCAi;
(ii) except for providing services to CCAi
in exchange for compensation in accordance
with the terms of the Shareholder's
employment agreement, attempting to obtain
material personal gain, profit or enrichment
at the expense of CCAi or from any
transaction in which the Shareholder has an
interest which is known by the Shareholder
to be adverse to the interest of CCAi; (iii)
being convicted of a felony; (iv) committing
any material breach of the Shareholder's
employment agreement with CCAi; provided
such breach continues for a period of 30
days after CCAi shall have notified the
Shareholder in writing of such breach; or
(v) performing or committing any act
intended by the Shareholder to cause a
material adverse effect on CCAi, including,
without limitation, acts of sexual
harassment, provided such act continues
unremedied for a period of 30 days after
CCAi shall have notified the Shareholder in
writing of such act.


c. "CCAI" means Conley, Canitano & Assoc., Inc.


d. "CCAI AVERAGE BILLABLE RATE" means $1,300 per day.


e. "CLOSING DATE" means April 3, 1998.


f. "CONTRIBUTION MARGIN" means 45%.


g. "EARNOUT PERIOD" means collectively the Year One
Earnout Period and the Year Two Earnout Period.


3


- 3 -


h. "TARGET CONTRIBUTION MARGIN (IN DOLLARS)" means
collectively the Year One Target Contribution Margin
(in dollars) and the Year Two Target Contribution
Margin (in dollars).


i. "KELLY" means Anthony F. Kelly.


j. "KELLY EARNOUT CONSIDERATION" means $1,126,534,
payable in three equal annual payments of $375,511 on
April 3 of each year commencing on April 3, 1999 with
the third and final payment of $375,512 on April 3,
2001, as described in Section 2(a).


k. "KELLY EARNOUT PAYMENTS" shall have the meaning
ascribed to it in Section 2(a).


l. "KELLY PAYMENT DATES" shall have the meaning ascribed
to it in Section 2(a).


m. "KLA" OR THE "COMPANY" means Kelly-Levey &
Associates, Inc.


n. "KLA CONTRIBUTION MARGIN (IN DOLLARS)" means
collectively the Year One KLA Contribution Margin (in
dollars) and the Year Two KLA Contribution Margin (in
dollars).


o. "KLA EMPLOYEES" means those employees of KLA who sign
an employment agreement with CCAi as of April 3, 1998
and are full-time employees of CCAi, and all
additional employees who become employees or
representatives of CCAi as a result of a direct or
indirect referral by a KLA Employee.


p. "KLA CONTRIBUTION MARGIN (IN DOLLARS)" means the
applicable Year One or Year Two KLA Revenues less the
applicable Year One or Year Two KLA Employee Cost.


q. "KLA EMPLOYEE COST" means the total actual hourly
cost of each KLA Employee (other than Ronnie
Crumpler, Gary Levey, Brad Wolfe and John Banta)
during the applicable Earnout Period, as determined
using the Toni Moorman Formula.


r. "SHAREHOLDERS" means all of the shareholders of KLA
other than Anthony F. Kelly.


s. "SHAREHOLDER PAYMENT DATES" shall have the meaning
ascribed to it in Section 3(a).


4


- 4 -


t. "SUCCESS FEE" means the net bonuses paid by a
customer in excess of normal time and expense
generated directly or indirectly by the KLA
Employees.


u. "TARGET CONTRIBUTION MARGIN (IN DOLLARS)" means
collectively the Year One Target Contribution Margin
(in dollars) and the Year Two Target Contribution
Margin (in dollars).


v. "TARGET REVENUES" means collectively the Year One
Target Revenues and the Year Two Target Revenues.


w. "TERMINATION EVENTS" means, with respect to any
Shareholder, the occurrence of one of the following
events: (i) the Shareholder is terminated by the
Company or CCAi with Cause; or (ii) the Shareholder
voluntarily terminates his or her employment with the
Company or CCAi.


*End of Preview*
Click the 'Add to Cart' button to download the complete and formatted agreement.