the issuance of a review by the Company's independent registered
public accounts for the quarter ended on November 30 of each year.
(ii) Incremental EBITDA.
For purposes of this Agreement, "Incremental EBITDA"
shall mean the amount by which the EBITDA of the Practice for any Earnout Period
exceeds the Baseline EBITDA (as defined below).
(iii) Baseline EBITDA.
(A) Within 60 days following the Closing Date, the parties, acting together in
good faith, shall establish the "Baseline EBITDA" for the Practice for the 12
months ended on November 29, 2008.
The Baseline EBITDA shall be consistent with
the sample EBITDA calculation set forth on Exhibit 2.8(a)(ii), and shall include
(I) a gross margin equal to 62% of gross revenues, (II) total sales field costs
equal to 33% of gross revenues (which sales field costs shall include variable
costs equal to 25% of gross revenues and fixed costs equal to 8% of gross
revenues (such amount, the "Fixed Sales Costs")), and (III) actual selling,
general, and administrative expenses of Seller for the 12 months ended on
November 30, 2008; provided, however, that in no case shall the EBITDA of the
Seller for the 12 months ended on November 30, 2008, which is used as a
component of the Baseline EBITDA and is calculated in a manner consistent with
the sample EBITDA calculation set forth on Exhibit 2.8(a)(ii), be less than
$206,000.
(B) If the parties cannot agree to a Baseline EBITDA within the 60 day period,
the determination of the Baseline EBITDA shall be submitted to the Special
Accountants for determination, whose determination shall be binding and
conclusive on the parties.
The parties shall equally divide and pay the Special
Accountants' fees, costs and expenses.
(b) Computation of EBITDA.
(i) Manner of Computation.
In general, for purposes of this Agreement, the
"EBITDA" of the Practice for any Earnout Period shall mean the earnings of the
Practice from operations before interest, taxes, depreciation and amortization,
including any revenues from FC Derivative Works (as defined in the License
Agreement) that the parties agree, after negotiating in good faith on a
case-by-case basis for each such FC Derivative Work, to allocate to the EBITDA
of the Practice (for the avoidance of doubt, revenues from the programs entitled
"Leadership: Great Leaders, Great Teams, Great Results," "Leadership: Great
Leaders, Great Teams, Great Results for the Public Sector," "Leadership
Foundations," and "Executive Leadership Summit" are not included in the EBITDA
of the Practice), calculated as if the Practice were being operated as a
separate and independent division of the Company.
Except as provided in this
Section 2.8(b), the EBITDA of the Practice shall be determined in accordance
with GAAP and using assumptions consistent with the sample EBITDA calculation as
set forth on Exhibit 2.8(a)(ii).
For the purposes of determining the EBITDA of
the Practice and the Annual Earnout Payment:
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(A)
EBITDA shall be computed without regard to "extraordinary items"
of gain or loss as that term shall be defined in GAAP;
(B)
EBITDA