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On July 31, 2017 Buyco acquired Sellco in a cash transaction for 100% of Sellco's common stock. In addition to the cash payment, Buyco agreed to pay Sellco's shareholders 40% of the difference between Sellco's realized EBITDA and forecast EBITDA for each of the next two fiscal years ending July 31, 2018 and July 31, 2019. The earnout payment for 2019 is subject to an additional requirement that realized total EBITDA for the two years exceed the forecast total EBITDA for the two years (the "clawback").

This report calculates the fair value of the earnout as of the transaction date July 31, 2017.

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