[{"data":1,"prerenderedAt":526},["ShallowReactive",2],{"document-earnout-clauses-agreement-D329":3},{"document":4,"label":23,"preview":11,"thumb":24,"description":5,"descriptionCustom":6,"apiDescription":5,"pages":8,"extension":10,"parents":25,"breadcrumb":29,"related":37,"customDescModule":178,"customdescription":6,"mdFm":179,"mdProseHtml":525},{"description":5,"descriptionCustom":6,"label":7,"pages":8,"size":9,"extension":10,"preview":11,"thumb":12,"svgFrame":13,"seoMetadata":14,"parents":15,"keywords":22},"EARNOUT CLAUSES This Earnout Clauses (the \"Agreement\") is effective [DATE], BETWEEN: [YOUR COMPANY NAME] (the \"Vendor\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] AND: [COMPANY NAME] (the \"Purchaser\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] 1. INTERPRETATION 1.1 \"Earnout Amount\" has the meaning ascribed to it in Section 2.2 hereof; 1.2 \"Earnout Period\" means the [NUMBER] year period commencing [DATE]; 1.3 \"Earnout Year\" means the [NUMBER] month period commencing on the first day of the Earnout Period and each [NUMBER] month period thereafter during the Earnout Period. 2. PURCHASE AND SALE OF SHARES 2.1 Purchaser agrees to purchase the Shares and Vendor agrees to sell and transfer the Shares to Purchaser as provided in this Agreement. 2.2 Purchase Price As consideration for the Shares, Purchaser shall pay to Vendor (the \"Purchase Price\"): (i) [AMOUNT] plus (ii) an amount (the \"Earnout Amount\") in respect of each Earnout Year equal to the amount by which [%] of the Company's Revenues during such Earnout Year exceeds any Mutual Fund Fee Shortfall for such Earnout Year provided however that the Earnout Amount for each Earnout Year shall not be less than [AMOUNT]. 2.3 Payment of Purchase Price (a) on Closing, Purchaser shall pay [AMOUNT] to Vendor; no later than [NUMBER] days after the end of the first Earnout Year, Purchaser shall pay to Vendor the Earnout Amount estimated by the Company to be payable with respect to such first Earnout Year; and (c) commencing with the second Earnout Year, Purchaser shall pay to Vendor Earnout Amounts for the balance of the Earnout Period calculated quarterly based on quarterly results of the Company and paid in arrears not more than [NUMBER] days after the end of each quarter, subject to the yearly adjustments provided in Section 2.4. 2.4 Yearly Adjustments Within [NUMBER] days following the end of each Earnout Year, the Company shall deliver to Vendor a statement, certified by the Company's auditors as to its accuracy, setting forth, in such detail as Vendor may reasonably require, a computation of the Earnout Amount for such Earnout Year based on audited financial statements of the Company and appropriate adjustments shall be made for any overpayment or underpayment of the aggregate Earnout Amounts previously paid in respect of such Earnout Year at the time of the next quarterly payment under Section 2.3 (c) and in respect of the last Earnout Year, within [NUMBER] after delivery of the last annual certificate of the Company's auditor delivered pursuant to this Section 2.4. The Company shall permit the Vendor to have reasonable access to its books and records for the purpose of permitting the Vendor's independent verification of such statements, and the Parties shall act in good faith to resolve any discrepancy. 2.5 Closing Net Book Value Vendor agrees that at the Closing Time, the Net Book Value of the Company shall be [AMOUNT]. Immediately prior to the Closing Date: (i) Vendor shall cause the Company to repay all indebtedness then owing (other than any notes issued in payment of the dividend or dividends referred to in Section 2",null,"Earnout Clauses Agreement","3",46,"doc","https://templates.business-in-a-box.com/imgs/1000px/earnout-clauses-agreement-D329.png","https://templates.business-in-a-box.com/imgs/250px/329.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#329.xml",{"title":7,"description":6},[16,19],{"label":17,"url":18},"Finance & Accounting","/templates/finance-accounting/",{"label":20,"url":21},"Buy & Sell Shares","/templates/buy-sell-shares/","earnout clauses agreement","Earnout Clauses Agreement Template","https://templates.business-in-a-box.com/imgs/400px/329.png",[26,16,19],{"label":27,"url":28},"Templates","/templates/",[30,31,34],{"label":27,"url":28},{"label":32,"url":33},"Legal Agreements","/templates/business-legal-agreements/",{"label":35,"url":36},"Equity & Mergers","/templates/equity-and-mergers/",[38,42,46,50,54,58,62,66,70,74,78,82,86,103,117,131,145,159],{"label":39,"url":40,"thumb":41,"extension":10},"Non-Profit Partnership Agreement","/template/non-profit-partnership-agreement-D14023","https://templates.business-in-a-box.com/imgs/250px/14023.png",{"label":43,"url":44,"thumb":45,"extension":10},"Acquisition Agreement","/template/acquisition-agreement-D847","https://templates.business-in-a-box.com/imgs/250px/847.png",{"label":47,"url":48,"thumb":49,"extension":10},"Amalgamation Agreement","/template/amalgamation-agreement-D855","https://templates.business-in-a-box.com/imgs/250px/855.png",{"label":51,"url":52,"thumb":53,"extension":10},"Arbitration Agreement","/template/arbitration-agreement-D856","https://templates.business-in-a-box.com/imgs/250px/856.png",{"label":55,"url":56,"thumb":57,"extension":10},"Attorney Agreement","/template/attorney-agreement-D862","https://templates.business-in-a-box.com/imgs/250px/862.png",{"label":59,"url":60,"thumb":61,"extension":10},"Bonus Agreement","/template/bonus-agreement-D13815","https://templates.business-in-a-box.com/imgs/250px/13815.png",{"label":63,"url":64,"thumb":65,"extension":10},"Caregiver Agreement","/template/caregiver-agreement-D13510","https://templates.business-in-a-box.com/imgs/250px/13510.png",{"label":67,"url":68,"thumb":69,"extension":10},"Charter Agreement","/template/charter-agreement-D13440","https://templates.business-in-a-box.com/imgs/250px/13440.png",{"label":71,"url":72,"thumb":73,"extension":10},"Coaching Agreement","/template/coaching-agreement-D13221","https://templates.business-in-a-box.com/imgs/250px/13221.png",{"label":75,"url":76,"thumb":77,"extension":10},"Collaboration Agreement","/template/collaboration-agreement-D13222","https://templates.business-in-a-box.com/imgs/250px/13222.png",{"label":79,"url":80,"thumb":81,"extension":10},"Compliance Agreement","/template/compliance-agreement-D13823","https://templates.business-in-a-box.com/imgs/250px/13823.png",{"label":83,"url":84,"thumb":85,"extension":10},"Confidentiality Agreement","/template/confidentiality-agreement-D950","https://templates.business-in-a-box.com/imgs/250px/950.png",{"description":87,"descriptionCustom":6,"label":88,"pages":89,"size":90,"extension":10,"preview":91,"thumb":92,"svgFrame":93,"seoMetadata":94,"parents":95,"keywords":101,"url":102},"TABLE OF CONTENTS Pages 1. INTERPRETATION 5 1.1 Definitions 5 1.2 Generally Accepted Accounting Principles 7 1.3 Headings and References 7 1.4 Extended Meanings 7 1.5 Schedules 7 1.6 Currency 7 1.7 Tender 7 1.8 Performance on Holidays 7 1.9 Calculation of Time 7 1.10 Ordinary Course 7 1.11 \"Material\" and \"Materially\" Defined 7 2. PURCHASE AND SALE 7 2.1 Purchase and Sale and Purchase Price 7 2.1.1 Term and Conditions 7 2.1.2 The Purchase Price shall be paid and satisfied as follows: 7 2.2 Adjustments 7 2.2.1. Net Worth Determination 7 2.2.2. Final Determination of Purchase Price 7 2.2.3. Disputes 7 2.3 Closing 7 2.4 Allocation of Purchase Price 7 2.5 General Adjustments 7 2.6 Accounts Receivable 7 2.7 Liabilities Not Assumed 7 2.8 Transfer Taxes 7 2.9 Non-Assignable Contracts 7 2.10 Increase in Rent on Assignment 7 3. REPRESENTATIONS AND WARRANTIES 7 3.1. Representations and Warranties of the Vendor 7 3.1.1 Corporate Matters 7 3.1.2 Title to Purchased Assets 7 3.1.3 No Options 7 3.1.4 The Financial Statements 7 3.1.5 Undisclosed Liabilities 7 3.1.6 Absence of Changes 7 3.1.7 Absence of Unusual Transactions 7 3.1.8 Tax Matters 7 3.1.9 Books and Records 7 3.1.10 Leases, Material Contracts, etc. 7 3.1.11 Accounts Receivable 7 3.1.12 Consents, Approvals, Etc. 7 3.1.13 Absence of Guarantees 7 3.1.14 Restrictions on Business 7 3.1.15 Absence of Conflicting Agreements 7 3.1.16 Compliance with Applicable [YOUR COUNTRY LAW] 7 3.1.17 Employees 7 3.1.18 Collective Agreements 7 3.1.19 Benefit Plans 7 3.1.20 Litigation 7 3.1.21 Insurance 7 3.1.22 Leases 7 3.1.23 Premises 7 3.1.24 No Expropriation 7 3.1.25 Leased Equipment 7 3.1.26 Licenses 7 3.1.27 Intellectual Property Rights 7 3.1.28 Assets 7 3.1.29 Inventories 7 3.1.30 Forward Commitments 7 3.1.31 Copies of Documents 7 3.1.32 Residency 7 3.1.33 Environmental Matters 7 3.1.34 Occupational Health and Safety 7 3.1.35 Workers' Compensation 7 3.1.36 Disclosure 7 3.1.37 Obligations to Customers 7 3.1.38 Retail Outlets 7 3.2. Representations and Warranties of the Purchaser 7 3.2.1 Incorporation 7 3.2.2 Corporate Power and Due Authorization 7 3.2.3 Enforceability of Obligations 7 3.2.4 Absence of Conflicting Agreements 7 3.2.5 Consents and Approvals 7 3.3. Interpretation 7 3.4. Commission 7 3.5. Qualification of Representations and Warranties 7 3.6. Non-Waiver 7 3.7. Survival of Representations and Warranties of the Vendor 7 3.8. Survival of Representations and Warranties of Purchaser 7 3.9. Knowledge of the Vendor 7 4. OTHER COVENANTS OF THE [COMPANY NAME] 7 4.1. Conduct of Business Prior to Closing 7 4.2. Conduct Business in Ordinary Course 7 4.3. Contracts 7 4.4. Continue Insurance 7 4.5. Comply with [YOUR COUNTRY LAW] 7 4.6. Taxes 7 4.7. Employees 7 4.8. Material Changes 7 4.9. Liens 7 4.10. Action by Vendor 7 4.11. Capital Expenditures 7 4.12. [SPECIFY] Claim 7 4.13. Conduct of Business Prior to Closing 7 4.14. Lease Consents and Estoppel Certificates 7 4.15. Consents and Waivers 7 4.16. Access for Investigation 7 4.17. Delivery of Books and Records 7 4.18. Accounts Receivable 7 4.19. Discharge of Obligations 7 4.20. Cooperation 7 4.21. Employees 7 4.21.1. Offer of Employment 7 4.21.2. Employment Process 7 4.21.3. Indemnification for Severance Claims of Non-Hired Employees 7 4.21.4. Claims Re: Employment Prior to Closing 7 4.21.5. Benefit Plans 7 4.21.6. Termination after Time of Closing 7 4.22. Pension Plan for Employees 7 4.23. Actions to Satisfy Closing Conditions 7 4.24. Disclosure 7 4.25. Injunctions 7 4.26. Action by the Vendor 7 4.27. Competition Act 7 4.28. Bulk Sales Legislation and Provincial Legislation 7 4.29. Consignment Goods and Contractual Rights 7 4.30. [DATE] Financial Statements 7 4.31. Purchaser Radius Clauses 7 5. INDEMNIFICATION 7 5.1 Definitions 7 5.2 Indemnification by the Vendor 7 5.3 Indemnification by the Purchaser 7 5.4 Notice of and the Defense of Third Party Claims 7 5.5 Assistance for Third Party Claims 7 5.6 Settlement of Third Party Claims 7 5.7 Direct Claims 7 5.8 Failure to Give Timely Notice 7 5.9 Payment and Interest 7 5.10 Limitation 7 5.11 Rights in Addition 7 5.12 Survival 7 5.13 Subsequent Recovery 7 5.14 Subrogation 7 5.15 Letter of Credit 7 5.16 Notices to Escrow Agent 7 6. CONDITIONS PRECEDENT 7 6.1 Purchaser's Conditions 7 6.2 Accuracy of Representations and Performance of Covenants 7 6.3 Consents to Assignments 7 6.4 No Material Adverse Change 7 6.5 Litigation 7 6.6 Receipt of Closing Documentation 7 6.7 Non-Competition Agreement 7 6.8 Opinion of Counsel for Vendor 7 6.9 Approval of Board of Directors 7 6.10 Management Agreement 7 6.11 Space and Facilities Agreement 7 6.12 Trade Mark License Agreement 7 6.13 Trade Mark Assignment 7 6.14 Cancellation of Certain Agreements 7 6.15 Environmental Audit 7 6.16 Escrow Agreement 7 6.17 Minimum Number of Leases 7 6.18 Vendor's Conditions 7 6.18.1. Accuracy of Representations and Performance of Covenants 7 6.18.2. Litigation 7 6.18.3. Opinion of Counsel for Purchaser 7 6.18.4. Competition Act 7 6.18.5. Minimum Number of Leases 7 6.18.6. Approval of [SPECIFY] Board of Directors 7 6.18.7. Escrow Agreement 7 6.18.8. Management Agreement 7 6.19 Waiver 7 6.20 Failure to Satisfy Conditions 7 6.21 Destruction or Expropriation 7 7. POST CLOSING OPERATIONS 7 7.1 Failure to Obtain Consent to Assignment of Lease 7 7.1.1. If with respect of any Lease described in Schedule [SPECIFY], the Vendor is unable to obtain any necessary consent, substantially in form or forms approved or deemed approved pursuant to subsection 4.1.10, to the assignment thereof to the Purchaser as herein contemplated at the Time of Closing (a \"Non-Assignable Lease\"), then the Non-Assignable Lease shall not be assigned and the Purchaser shall, in accordance with the terms of a management agreement to be entered into by the parties at Closing, manage the Business as it is carried on at the location covered by the Non-Assignable Lease for the account of the Vendor provided that such agreement does not result in a violation of any Applicable [YOUR COUNTRY LAW] or result in the early termination of the Non-Assignable Lease. 7 7.2 Delivery of Space and Facilities Agreement 7 7.3 Release of Vendor from Lease Covenants 7 7.4 No Hiring of Employees 7 7.5 Access for Taxes 7 7.6 Volume Rebates 7 7.7 Remediation of Certain Outstanding Phase I Violations 7 8. GENERAL 7 8.1 Further Assurances 7 8.2 Time of the Essence 7 8.3 Expenses 7 8.4 Benefit of the Agreement 7 8.5 Entire Agreement 7 8.6 Amendments and Waiver 7 8.7 Assignment 7 8.8 Notices 7 8.9 Confidentiality 7 8.10 Governing [YOUR COUNTRY LAW] 7 8.11 Attornment 7 8.12 Counterparts 7 ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (the \"Agreement\") is effective [DATE], BETWEEN: [YOUR COMPANY NAME] (the \"Purchaser\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] AND: [COMPANY NAME] (the \"Vendor\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] WHEREAS the Vendor, through its [COMPANY NAME], is in the [SPECIFY] business; AND WHEREAS the Vendor desires to sell and the Purchaser desires to purchase as a going concern the undertaking and substantially all of the assets relating to the business of the Vendor's [COMPANY NAME], upon and subject to the terms and conditions hereinafter set forth; NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and the covenants and agreements herein contained the parties hereto agree as follows: INTERPRETATION Definitions In this Agreement, unless something in the subject matter or context is inconsistent therewith:","Asset Purchase Agreement For a Retail Business","71",671,"https://templates.business-in-a-box.com/imgs/1000px/asset-purchase-agreement_for-a-retail-business-D931.png","https://templates.business-in-a-box.com/imgs/250px/931.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#931.xml",{"title":6,"description":6},[96,98],{"label":32,"url":97},"business-legal-agreements",{"label":99,"url":100},"Purchase & Sale Agreements","purchase-sale-agreement","asset purchase agreement for a retail business","/template/asset-purchase-agreement-for-a-retail-business-D931",{"description":104,"descriptionCustom":6,"label":105,"pages":106,"size":107,"extension":10,"preview":108,"thumb":109,"svgFrame":110,"seoMetadata":111,"parents":112,"keywords":115,"url":116},"Asset Purchase Agreement Prepared By: Your Name Job Title Phone 555.555.5555 Email info@yourbusiness.com www.yourbusiness.com TABLE OF CONTENTS Pages 1 - INTERPRETATION 6 1.1 Definitions 6 Extended Meanings 9 1.3 Interpretation Not Affected by Headings 9 1.4 Applicable Law 9 1.5 Funds 9 1.6 Financial Documents 9 1.7 Invalidity 10 1.8 Business Day 10 1.9 Preamble 10 2 - PURCHASED ASSETS 10 2.1 Purchased Assets 10 2.2 Excluded Assets 11 2.3 Leases and Retention of Ownership Agreements 12 2.4 Removal of Purchased Assets 12 2.5 Forward Commitments 12 2.6 Assets Used in the Business 12 3 - PURCHASE AND SALE 12 3.1 Purchase Price 12 3.2 Default 13 3.3 Balance of Price 13 3.4 Allocation of the Purchase Price 13 3.5 No Assumption of Liabilities 13 3.6 Payment of Taxes 14 3.7 Adjustments 14 3.8 Net Worth Adjustment 14 3.9 Disagreement Regarding Adjustment of Purchase Price 14 3.10 Escrow of Purchase Price 14 4 - CLOSING AND CONDITIONS PRECEDENT TO THE SALE 15 4.1 Closing Date 15 4.2 Conditions Precedent to Closing in Favor of the Purchaser 15 4.2.1 Corporate Authorization 15 4.2.2 Statements 15 4.2.3 Truth of Representations and Warranties 15 4.2.4 Compliance with Terms and Conditions 15 4.2.5 Governmental Approvals 16 4.2.6 Approval of Purchaser's Counsel 16 4.2.7 Prohibited Actions 16 4.2.8 Delivery of Documents and Title Deeds 16 4.2.9 Legal Opinion of Seller's Counsel 16 4.2.10 Non-Competition Agreements 16 4.2.11 Residence 16 4.2.12 Bulk Sale Affidavit 17 4.2.13 Tax Election Form 17 4.2.14 Powers of Attorney 17 4.2.15 Consents 17 4.2.16 Due Diligence 17 4.2.17 No Substantial Damage or Adverse Change 17 4.2.18 No Adverse Legislation 17 4.2.19 Delivery of Documents 17 4.3 Conditions Precedent to Closing in Favor of the Seller 18 4.3.1 Letter of Credit 18 4.3.2 Truth of Representations and Warranties 18 4.3.3 Compliance with Terms and Conditions 18 4.3.4 Legal Opinion of Purchaser's Counsel 18 4.4 Risk of Loss 18 4.5 Notification 19 5 - REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PURCHASER 19 5.1 Representations and Warranties of Seller 19 5.1.1 Due Incorporation and Qualification to Carry on Business 19 5.1.2 Binding Nature 19 5.1.3 Title of Assets 19 5.1.4 Options, Commitments 20 5.1.5 No Violation 20 5.1.6 Books and Records 20 5.1.7 Business Conducted in Ordinary Course 20 5.1.8 Leases 21 5.1.9 Uses 21 5.1.10 Work Orders 21 5.1.11 Litigation 22 5.1.12 Proprietary Rights 22 5.1.13 Infringement of Proprietary Rights 22 5.1.14 Compliance with Laws 22 5.1.15 Employment Agreements 23 5.1.16 Labour Unions 23 5.1.17 Labour Practices 23 5.1.18 Pension Plans 23 5.1.19 Restrictive Documents 24 5.1.20 Outstanding Long Term Indebtedness 24 5.1.21 Outstanding Guarantees 24 5.1.22 Insurance 24 5.1.23 Taxes 24 5.1.24 Withholdings 25 5.1.25 Condition of Purchased Assets 25 5.1.26 Clients and Supplies 25 5.1.27 Vacation Pay 25 5.1.28 Residence 25 5.1.29 Knowledge 25 5.1.30 Liabilities 26 5.1.31 Inventories 26 5.1.32 Financial Statements 26 5.1.33 Absence of Certain Developments 26 5.1.34 No Material Adverse Change 27 5.1.35 Other Agreements 27 5.1.36 Environmental Matters 28 5.1.37 Reliance 29 5.1.38 Evidence 29 5.1.39 Standard of Conduct 29 5.2 Representations and Warranties of the Purchaser 29 5.2.1 Due Incorporation 29 5.2.2 Binding Nature 29 5.2.3 No Violation 29 5.3 Survival 30 5.4 Indemnification of the Purchaser 30 5.5 Warranty Work 30 6 - EMPLOYEES 31 6.1 List of Non-Unionized Employees 31 6.2 Employment to Non-Unionized Employees 31 6.3 Claims by Non-Unionized Employees 31 6.4 Pension Plan for Employees 31 6.5 Assumption of Collective Agreement 32 6.6 List of Unionized Employees 32 6.7 Offers to Unionized Employees 32 6.8 Short Term and Long Term Disability 33 6.9 Benefit Plans 33 7 - MUTUAL COOPERATION 33 7.1 Conduct of Business Prior to Closing 33 (a) Conduct Business in Ordinary Course 33 (b) Continue Insurance 33 (c) Perform Obligations 33 7.2 Access for Investigation Prior to Closing 33 7.3 Actions to Satisfy Closing Conditions 34 7.4 Transfer of Purchased Assets 34 7.5 Assistance in Judicial Claims 35 7.6 Collection of Receivables 35 7.7 Accounts Receivable 35 7.8 Differentiation of Products 36 8 - MISCELLANEOUS 36 8.1 Successors and Assigns 36 8.2 Brokers 36 8.3 Legal Fees 36 8.4 Public Announcement 36 8.5 Entire Agreement 36 8.6 Notices 37 8.7 Time of Essence 37 8.8 Counterparts 37 9 - GUARANTEE 37 9.1 Intervention of the Guarantor 37 9.2 Indulgence 38 9.3 Disability of Purchaser 38 ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (the \"Agreement\") is effective [DATE], BETWEEN: [YOUR COMPANY NAME] (the \"Purchaser\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] AND: [FIRST PART] (the \"Company\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] AND: [SECOND PART] (the \"Seller\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] WHEREAS the Seller carries on the business of [NUMBER] WHEREAS the Seller has agreed to sell and the Purchaser has agreed to purchase certain assets relating to the Business upon the terms and conditions set forth in this Agreement. NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS HEREIN CONTAINED AND OTHER GOOD AND VALUABLE CONSIDERATION, THE [COMPANY NAME] HERETO AGREE AS FOLLOWS: INTERPRETATION Definitions Unless the subject matter or context otherwise requires: \"Affiliate\" has the meaning ascribed to the term \"affiliated corporations\" in the [COUNTRY Business Corporations Act]. \"Associate\" has the meaning ascribed to the term \"associate\" in the [COUNTRY Business Corporations Act]. \"Balance of Price\" has the meaning ascribed thereto in Section 3.1.2. \"Books and Records\" means any books and records (originals or copies thereof) of Seller relating exclusively to the Business including, without limitation, books and records relating to the purchase materials and supplies, the manufacture, assembly and processing of products, sales of products, dealings with customers and franchises, invoices, customer lists, mailing lists, suppliers lists, trademarks and trade names, financial records, personnel records (to the extent permitted by law) and taxes (excluding Seller's income tax and other tax records unrelated to the Business).","Asset Purchase Agreement","37",259,"https://templates.business-in-a-box.com/imgs/1000px/asset-purchase-agreement-D928.png","https://templates.business-in-a-box.com/imgs/250px/928.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#928.xml",{"title":6,"description":6},[113,114],{"label":32,"url":97},{"label":99,"url":100},"asset purchase agreement","/template/asset-purchase-agreement-D928",{"description":118,"descriptionCustom":6,"label":119,"pages":8,"size":120,"extension":10,"preview":121,"thumb":122,"svgFrame":123,"seoMetadata":124,"parents":126,"keywords":129,"url":130},"[DATE] [CONTACT NAME] [ADDRESS] [ADDRESS 2] [CITY, STATE/PROVINCE] [ZIP/POSTAL CODE] SUBJECT: LETTER OF INTENT-ACQUISITION OF BUSINESS Dear [CONTACT NAME]: This letter (\"Letter of Intent\") sets forth the basic preliminary terms between the Buyer or his nominee and yourselves regarding the purchase of the [SPECIFY] business (the \"Business\") carried on by yourselves. Except as specifically set forth herein, this Letter of Intent shall not constitute an agreement between the parties and no agreement shall be deemed to exist until execution of a definitive purchase agreement. It is proposed that Buyer will acquire certain assets of the Business which Buyer believes to be necessary to the future of the Business, including the warehouse in [CITY/STATE] in which [COMPANY NAME] the Company has invested [AMOUNT] in cash and which has been financed by a mortgage loan of approximately [AMOUNT] granted by the [SPECIFY COMPANY] [CITY/STATE]. Buyer understands that the said warehouse has no other charges or liabilities affecting it other than the said mortgage loan. Buyer may either purchase the warehouse outright or enter into a lease-purchase or instalment transfer of ownership which is satisfactory to both parties. The gross purchase price for the said warehouse will be [AMOUNT]. Buyer may purchase or lease barrels and other equipment currently owned by the Company which are necessary to operate the Business, on a cash or instalment basis agreeable to both parties. The specific assets to be purchased and the amounts to be paid by Buyer in connection with this transaction remain to be negotiated by the parties. This Letter of Intent also evidences the intentions of the parties with respect to the following agreements: Buyer will enter into a [NUMBER]-year employment agreement with [COMPANY NAME], providing for the Company will be responsible for the purchase of [SPECIFY] for Buyer. The agreement will contain the customary terms and conditions found in employment agreements in similar transactions and will provide for the usual non-competition and non-solicitation covenants to be entered into by the Company in favour of Buyer. It is expressly understood that if the contemplated transaction is consummated, the aggregate amount of commission paid or payable to yourselves (net of reasonable expenses acceptable to Buyer) in respect of all purchases of [SPECIFY] made through you from the date of this Letter of Intent to the date of closing, with the exception of commissions earned on the [NUMBER] truckloads of [SPECIFY] to be delivered to Buyer during the week of [DATE] to [DATE], will be applied against remuneration payable to the Company in the first year of his employment agreement. If the contemplated transaction is not consummated, all such commissions paid or payable will be treated as commissions. Buyer will enter into a [NUMBER]-year employment agreement with [EMPLOYEE NAME], providing for the payment of a gross base salary of [ANNUAL SALARY] per year, to be paid weekly, subject to annual review. [EMPLOYEE NAME] will be President of the Business and the employment agreement will provide for health benefits, automobile, expenses and bonus arrangements","Letter of Intent_Acquisition of Business",513,"https://templates.business-in-a-box.com/imgs/1000px/letter-of-intent_acquisition-of-business-D5197.png","https://templates.business-in-a-box.com/imgs/250px/5197.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#5197.xml",{"title":125,"description":6},"letter of intent_acquisition of business",[127,128],{"label":32,"url":97},{"label":32,"url":97},"letter intent_acquisition business","/template/letter-of-intent_acquisition-of-business-D5197",{"description":132,"descriptionCustom":6,"label":133,"pages":8,"size":120,"extension":10,"preview":134,"thumb":135,"svgFrame":136,"seoMetadata":137,"parents":139,"keywords":138,"url":144},"NON-DISCLOSURE AGREEMENT (NDA) This Non-Disclosure Agreement (the \"Agreement\") is made and effective [DATE], BETWEEN: [YOUR COMPANY NAME] (the \"Disclosing Party\"), a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] AND: [RECEIVING PARTY NAME] (the \"Receiving Party\"), an individual with his main address located at OR a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] WHEREAS, Receiving Party has been or will be engaged in the performance of work on [DESCRIBE]; and in connection therewith will be given access to certain confidential and proprietary information; and WHEREAS, Receiving Party and Disclosing Party wish to evidence by this Agreement the manner in which said confidential and proprietary material will be treated. NOW, THEREFORE, it is agreed as follows: NON-DISCLOSURE OF CONFIDENTIAL INFORMATION Both Parties understand and agree that each Party may have access to the confidential information of the other party. For the purposes of this Agreement, \"Confidential Information\" means proprietary and confidential information about the Disclosing Party's (or it's suppliers') business or activities. Such information includes all business, financial, technical, and other information marked or designated by such Party as \"confidential\" or \"proprietary.\" Confidential Information also includes information which, by the nature of the circumstances surrounding the disclosure, ought in good faith to be treated as confidential. For the purposes of this Agreement, Confidential Information does not include: Information that is currently in the public domain or that enters the public domain after the signing of this Agreement. Information a Party lawfully receives from a third Party without restriction on disclosure and without breach of a non-disclosure obligation. Information that the Receiving Party knew prior to receiving any Confidential Information from the Disclosing Party. Information that the Receiving Party independently develops without reliance on any Confidential Information from the Disclosing Party. Each Party agrees that it will not disclose to any third Party or use any Confidential Information disclosed to it by the other Party except when expressly permitted in writing by the other Party. Each Party also agrees that it will take all reasonable measures to maintain the confidentiality of all Confidential Information of the other Party in its possession or control. TERM The term of this Agreement is [number] of [years/months] from the date of execution by both Parties. TITLE The Receiving Party agrees that all Confidential Information furnished by the Disclosing Party shall remain the sole property of the Disclosing Party. DISCLAIMER","Non Disclosure Agreement Nda","https://templates.business-in-a-box.com/imgs/1000px/non-disclosure-agreement-nda-D12692.png","https://templates.business-in-a-box.com/imgs/250px/12692.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#12692.xml",{"title":138,"description":6},"non disclosure agreement nda",[140,141],{"label":32,"url":97},{"label":142,"url":143},"Confidentiality Agreements","confidentiality-agreement","/template/non-disclosure-agreement-nda-D12692",{"description":146,"descriptionCustom":6,"label":147,"pages":148,"size":149,"extension":10,"preview":150,"thumb":151,"svgFrame":152,"seoMetadata":153,"parents":154,"keywords":157,"url":158},"NON-COMPETE AGREEMENT This Non-Compete Agreement (the \"Agreement\") is made and effective [DATE], BETWEEN: FIRST PARTY NAME] (the \"First Party\"), a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] AND: [COMPANY NAME] (the \"Second Party\"), a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] FOR GOOD CONSIDERATION, the receipt of which is hereby acknowledged, the undersigned First party agrees not to compete with Second party, or its successors or assigns.","General Non-Compete Agreement","1",30,"https://templates.business-in-a-box.com/imgs/1000px/general-non-compete-agreement-D882.png","https://templates.business-in-a-box.com/imgs/250px/882.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#882.xml",{"title":6,"description":6},[155,156],{"label":32,"url":97},{"label":32,"url":97},"general non compete agreement","/template/general-non-compete-agreement-D882",{"description":160,"descriptionCustom":6,"label":161,"pages":162,"size":163,"extension":10,"preview":164,"thumb":165,"svgFrame":166,"seoMetadata":167,"parents":168,"keywords":176,"url":177},"EMPLOYMENT AGREEMENT FOR AN EXECUTIVE This Employment Agreement for an Executive (the \"Agreement\") is made and effective this [Date], BETWEEN: [EXECUTIVE NAME] (the \"Executive\"), an individual with his main address at: AND: [COMPANY NAME] (the \"Company\"), an entity organized and existing under the laws of the [STATE/PROVINCE], with its head office located at: Recitals In consideration of the covenants and agreements herein contained and the moneys to be paid hereunder, the Company hereby employs the Executive and the Executive hereby agrees to perform services as an Executive of the Company, upon the following terms and conditions: TERM The Company hereby employs Executive to serve as [position] and to serve in such additional or different position or positions as the Company may determine in its sole discretion. The term of employment shall be for a period of [NUMBER] years (\"Employment Period\") to commence on [DATE], unless earlier terminated as set forth herein. The effective date of this Agreement shall be the date first set forth above, and it shall continue in effect until the earlier of: The effective date of any subsequent employment agreement between the Company and the Executive; The effective date of any termination of employment as provided elsewhere herein; or [NUMBER] year(s) from the effective date hereof, provided, that this Employment Agreement shall automatically renew for successive periods of [NUMBER] years each unless either party gives written notice to other that it does not wish to automatically renew this Agreement, which written notice must be received by the other party no less than [NUMBER] days and no more than [NUMBER] days prior to the expiration of the applicable term. Duties and Responsibilities Executive will be reporting to [IDENTIFY]. Within the limitations established by the By-laws of the Company, the Executive shall have each and all of the duties and responsibilities of that position and such other or different duties on behalf of the Company, as may be assigned from time to time by [identify what person or body may assign additional responsibilities]. Location The initial principal location at which Executive shall perform services for the Company shall be [location]. Acceptance of Employment Executive accepts employment with the Company upon the terms set forth above and agrees to devote all Executive's time, energy and ability to the interests of the Company, and to perform Executive's duties in an efficient, trustworthy and business-like manner. Devotion of Time to Employment The Executive shall devote the Executive's best efforts and substantially all of the Executive's working time to performing the duties on behalf of the Company. The Executive shall provide services during the normal business hours of the Company as determined by the Company. Reasonable amounts of time may be allotted to personal or outside business, charitable and professional activities and shall not constitute a violation of this Agreement provided such activities do not materially interfere with the services required to be rendered hereunder. QUALIFICATIONS The Executive shall, as a condition of this Agreement, satisfy all of the qualification that are reasonably and in good faith established by the Board of Directors. Compensation Base Salary Executive shall be paid a base salary (\"Base Salary\") at the annual rate of [salary], payable in bi-weekly installments consistent with Company's payroll practices. The annual Base Salary shall be reviewed on or before [DATE] of each year, unless Executive's employment hereunder shall have been terminated earlier pursuant to this Agreement, starting on [agreed upon date] by the Board of Directors of the Company to determine if such Base Salary should be increased for the following year in recognition of services to the Company. In consideration of the services under this Agreement, Executive shall be paid the aggregate of basic compensation, bonus and benefits as hereinafter set forth. Payment Payment of all compensation to Executive hereunder shall be made in accordance with the relevant Company policies in effect from time to time, including normal payroll practices. Bonus From time to time, the Company may pay to Executive a bonus out of net revenues of the Company. Payment of any bonus compensation shall be at the sole discretion of the Board of Directors or the Executive committee of the Board of Directors and the Executive shall have no entitlement to such amount absent a decision by the Company as aforesaid to make such bonus compensation. Executive shall also be entitled to a bonus determined as follows: [DESCRIBE] Benefits The Company shall provide Executive with such benefits as are provided to other senior management Of the Company. Benefits shall include at a minimum (i) paid vacation of [NUMBER] days per year, at such times as approved by the Board of Directors, (ii) health insurance coverage under the same terms as offered to other Executives of the Company, (iii) retirement and profit sharing programs as offered to other Executives of the Company, (iv) paid holidays as per the Company's policies, and (v) such other benefits and perquisites as are approved by the Board of Directors. The Company has the right to modify conditions of participation, terminate any benefit, or change insurance plans and other providers of such benefits in its sole discretion. The Executive shall be reimbursed for out of pocket expenses that are pre-approved by the Company, subject to the Company's policies and procedures therefore, and only for such items that are a necessary and integral part of the Executive's job functions. NonDeductible Compensation In the event a deduction shall be disallowed by the Internal Revenue Service or a court of competent jurisdiction for federal income tax purposes for all or any part of the payment made to Executive by the Company or any other shareholder or Executive of the Company, shall be required by the Internal Revenue Service to pay a deficiency on account of such disallowance, then Executive shall repay to the Company or such other individual required to make such payment, an amount equal to the tax imposed on the disallowed portion of such payment, plus any and all interest and penalties paid with respect thereto. The Company or other party required to make payment shall not be required to defend any proposed disallowance or other action by the Internal Revenue Service or any other state, federal, or local taxing authorities. Withholding All sums payable to Executive under this Agreement will be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law. Other Employment Benefits Business Expenses Upon submission of itemized expense statements in the manner specified by the Company, Executive shall be entitled to reimbursement for reasonable travel and other reasonable business expenses duly incurred by Executive in the performance of his duties under this Agreement. Benefit Plans Executive shall be entitled to participate in the Company's medical and dental plans, life and disability insurance plans and retirement plans pursuant to their terms and conditions. Executive shall be entitled to participate in any other benefit plan offered by the Company to its Executives during the term of this Agreement (other than stock option or stock incentive plans, which are governed by Section 3(d) below). Nothing in this Agreement shall preclude the Company or any affiliate of the Company from terminating or amending any Executive benefit plan or program from time to time. Vacation Executive shall be entitled to [agreed upon number of time] weeks of vacation each year of full employment, exclusive of legal holidays, as long as the scheduling of Executive's vacation does not interfere with the Company's normal business operations.","Employment Agreement Executive","12",97,"https://templates.business-in-a-box.com/imgs/1000px/employment-agreement_executive-D543.png","https://templates.business-in-a-box.com/imgs/250px/543.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#543.xml",{"title":6,"description":6},[169,172,175],{"label":170,"url":171},"Human Resources","human-resources",{"label":173,"url":174},"Hire an Employee","hire-employee",{"label":32,"url":97},"employment agreement executive","/template/employment-agreement-executive-D543",false,{"seo":180,"reviewer":192,"quick_facts":196,"at_a_glance":199,"personas":203,"variants":228,"glossary":253,"clauses":290,"how_to_fill":341,"common_mistakes":382,"faqs":407,"industries":435,"comparisons":452,"diy_vs_lawyer":467,"jurisdictions":480,"related_template_ids_curated":501,"schema":512,"classification":513},{"meta_title":181,"meta_description":182,"primary_keyword":183,"secondary_keywords":184},"Earnout Clauses Agreement Template | BIB","Free earnout clauses agreement template for M&A transactions. Covers performance metrics, payment triggers, dispute resolution, and seller protections.","earnout clauses agreement template",[185,186,187,188,189,190,191],"earnout agreement template","earnout clause template word","earnout agreement free download","merger acquisition earnout template","earnout provision template","earnout payment agreement","business acquisition earnout clause",{"name":193,"credential":194,"reviewed_date":195},"Bruno Goulet","CEO, Business in a Box","2026-05-02",{"difficulty":197,"legal_review_recommended":198,"signature_required":198},"advanced",true,{"what_it_is":200,"when_you_need_it":201,"whats_inside":202},"An Earnout Clauses Agreement is a legally binding document used in mergers and acquisitions that ties a portion of the purchase price to the target company's post-closing financial or operational performance. This free Word download gives buyers and sellers a structured, attorney-ready starting point they can edit online and export as PDF — covering performance metrics, measurement periods, payment schedules, seller protections, and dispute resolution in a single document.\n","Use it when a buyer and seller cannot agree on a single upfront valuation — typically because the target business has uncertain future revenue, recent rapid growth, or unproven products. It is also commonly used to retain key seller management post-closing by aligning their compensation with results.\n","Performance metric definitions, measurement periods, earnout payment schedule, buyer operational covenants protecting the seller's ability to hit targets, accounting methodology, dispute resolution procedures, and acceleration or forfeiture triggers.\n",[204,208,212,216,220,224],{"title":205,"use_case":206,"icon_asset_id":207},"Business sellers and founders","Protecting the right to receive deferred purchase price tied to post-closing performance","persona-startup-founder",{"title":209,"use_case":210,"icon_asset_id":211},"Private equity acquirers","Bridging a valuation gap on a target with uncertain near-term revenue growth","persona-investor",{"title":213,"use_case":214,"icon_asset_id":215},"M&A attorneys","Drafting enforceable earnout provisions with clear metrics and dispute mechanisms","persona-lawyer",{"title":217,"use_case":218,"icon_asset_id":219},"Corporate development officers","Structuring earn-based consideration for strategic acquisitions of early-stage companies","persona-ceo",{"title":221,"use_case":222,"icon_asset_id":223},"CFOs and finance directors","Establishing accounting methodology and reporting obligations for post-closing earnout calculations","persona-cfo",{"title":225,"use_case":226,"icon_asset_id":227},"Business brokers","Facilitating deals where buyer and seller valuations are more than 15% apart","persona-business-broker",[229,233,236,239,243,246,250],{"situation":230,"recommended_template":231,"slug":232},"Acquiring a SaaS or subscription business with unpredictable churn","Earnout Clauses Agreement (Revenue-Based)","earnout-clauses-agreement-D329",{"situation":234,"recommended_template":235,"slug":232},"Seller remaining as CEO post-closing with full operational control","Earnout Clauses Agreement with Employment Addendum",{"situation":237,"recommended_template":238,"slug":232},"Acquisition of a pharma or biotech asset pending regulatory approval","Milestone-Based Earnout Agreement",{"situation":240,"recommended_template":241,"slug":242},"Full business acquisition including all earnout and purchase price terms","Business Purchase Agreement","asset-purchase-agreement-for-a-retail-business-D931",{"situation":244,"recommended_template":105,"slug":245},"Buyer acquiring only specific assets, not the full entity","asset-purchase-agreement-D928",{"situation":247,"recommended_template":248,"slug":249},"Seller retaining equity stake post-closing alongside earnout","Stock Purchase Agreement with Earnout","stock-purchase-agreement-D349",{"situation":251,"recommended_template":252,"slug":232},"Short-form earnout covering a single fiscal year metric","Earnout Side Letter",[254,257,260,263,266,269,272,275,278,281,284,287],{"term":255,"definition":256},"Earnout","A contractual mechanism where a portion of the acquisition price is paid to the seller after closing, contingent on the target meeting defined performance thresholds.",{"term":258,"definition":259},"Earnout Period","The defined post-closing window — typically 12 to 36 months — during which performance is measured and earnout payments are calculated.",{"term":261,"definition":262},"Performance Metric","The specific, measurable target — such as EBITDA, revenue, gross profit, or a non-financial milestone — that triggers an earnout payment when achieved.",{"term":264,"definition":265},"EBITDA","Earnings Before Interest, Taxes, Depreciation, and Amortization — a common earnout metric because it approximates operating cash generation and is harder to manipulate than net income.",{"term":267,"definition":268},"Acceleration Clause","A provision that makes the full remaining earnout immediately payable to the seller if the buyer triggers a specified event, such as a change of control or material breach.",{"term":270,"definition":271},"Clawback","A provision allowing the buyer to recover previously paid earnout amounts if the performance figures are later restated or found to be inaccurate.",{"term":273,"definition":274},"Anti-Dilution Covenant","A seller protection requiring the buyer to operate the acquired business in a manner that does not artificially suppress the earnout metrics — for example, by shifting revenue to affiliated entities.",{"term":276,"definition":277},"Closing Date","The date on which the acquisition transaction is completed and legal ownership transfers to the buyer — the typical start date for the earnout measurement period.",{"term":279,"definition":280},"Escrow","A third-party holding arrangement sometimes used in earnouts to ring-fence buyer funds against future earnout payment obligations.",{"term":282,"definition":283},"Purchase Price Adjustment","A separate mechanism — distinct from an earnout — that adjusts the acquisition price based on working capital, net debt, or similar closing-date balance sheet items.",{"term":285,"definition":286},"Good Faith Operation Covenant","A contractual obligation requiring the buyer to operate the acquired business in a commercially reasonable manner to give the seller a fair opportunity to achieve the earnout.",{"term":288,"definition":289},"Dispute Resolution Expert","An independent accountant or financial expert appointed to resolve disagreements over earnout calculations when the parties cannot agree within a defined negotiation window.",[291,296,301,306,311,316,321,326,331,336],{"name":292,"plain_english":293,"sample_language":294,"common_mistake":295},"Parties and Recitals","Identifies the buyer, seller, and acquired entity by full legal name and ties the earnout agreement to the underlying acquisition document.","This Earnout Agreement ('Agreement') is entered into as of [CLOSING DATE] by and between [BUYER LEGAL NAME] ('Buyer') and [SELLER LEGAL NAME] ('Seller') in connection with the acquisition of [TARGET COMPANY NAME] pursuant to the [PURCHASE AGREEMENT] dated [DATE].","Failing to cross-reference the parent acquisition agreement. Without an explicit tie-in, courts may treat the earnout as a standalone obligation disconnected from the deal's other conditions and representations.",{"name":297,"plain_english":298,"sample_language":299,"common_mistake":300},"Performance Metric Definition","Specifies exactly which financial or operational figure will be measured — revenue, EBITDA, gross profit, units sold, or a non-financial milestone — and how it is calculated.","'Earnout Revenue' means the consolidated net revenue of the Business for the applicable Earnout Year, calculated in accordance with GAAP, excluding (i) intercompany transactions with Buyer's affiliates, (ii) revenue from acquisitions made by Buyer post-Closing, and (iii) any revenue attributable to discontinued product lines.","Using a broad term like 'revenue' without defining inclusions and exclusions. Post-closing disputes almost always center on what the buyer counted or excluded — specificity eliminates the ambiguity that drives litigation.",{"name":302,"plain_english":303,"sample_language":304,"common_mistake":305},"Earnout Period and Measurement Schedule","States the start and end dates of each measurement period, how many periods exist, and when calculations and payments are due after each period closes.","The Earnout Period shall consist of [TWO] annual measurement periods: (i) Year 1: [DATE] through [DATE]; and (ii) Year 2: [DATE] through [DATE]. Buyer shall deliver an Earnout Statement within [45] days following the end of each Earnout Year.","Setting an earnout period longer than 36 months. Multi-year earnouts dramatically increase the likelihood of management conflict, accounting disputes, and litigation — most practitioners recommend 12 to 24 months.",{"name":307,"plain_english":308,"sample_language":309,"common_mistake":310},"Earnout Payment Schedule and Thresholds","Sets the dollar amounts or formulas payable at each performance tier — floor, target, and stretch — and the maximum earnout cap.","Buyer shall pay Seller an Earnout Amount for each Earnout Year calculated as follows: (i) if Earnout Revenue is below $[FLOOR], $0; (ii) if Earnout Revenue is between $[FLOOR] and $[TARGET], $[X] per $[Y] of revenue; (iii) if Earnout Revenue equals or exceeds $[TARGET], $[MAXIMUM EARNOUT AMOUNT].","No payment floor and no cap. Without a floor, the seller bears all downside risk; without a cap, the buyer faces uncapped liability. Both extremes make the deal economically unpredictable and are harder to get approved by boards or lenders.",{"name":312,"plain_english":313,"sample_language":314,"common_mistake":315},"Accounting Methodology","Specifies the accounting standards, treatment elections, and consistency requirements that govern how the performance metrics are calculated each period.","All calculations under this Agreement shall be made in accordance with GAAP applied on a basis consistent with the Company's historical accounting practices in effect for the 12-month period prior to Closing. Buyer shall not change any accounting policy, method, or election that would have the effect of reducing the Earnout Amount without Seller's prior written consent.","Allowing the buyer to adopt new accounting standards or change revenue recognition methods mid-earnout without seller consent. A shift from cash-basis to accrual — or vice versa — can move the earnout metric by 10–20% without any real change in business performance.",{"name":317,"plain_english":318,"sample_language":319,"common_mistake":320},"Buyer Operational Covenants (Anti-Dilution Protections)","Obligates the buyer to operate the acquired business in a manner that gives the seller a reasonable opportunity to earn the earnout — prohibiting actions that would artificially suppress the metrics.","During the Earnout Period, Buyer shall: (i) operate the Business as a separate accounting unit; (ii) not allocate corporate overhead to the Business in excess of [X]% of revenue; (iii) not divert customers, contracts, or revenue-generating opportunities from the Business to Buyer's affiliates; and (iv) maintain the Business's key employees listed in Schedule A.","Omitting operational covenants entirely. Without them, a buyer can legitimately restructure the business, shift customers to affiliates, load overhead, or change the product mix in ways that legally destroy the earnout — leaving the seller with no remedy.",{"name":322,"plain_english":323,"sample_language":324,"common_mistake":325},"Earnout Statement and Audit Rights","Requires the buyer to deliver a detailed earnout calculation within a defined period after each measurement year and gives the seller the right to audit the underlying books.","Buyer shall deliver to Seller an Earnout Statement within [45] days after the end of each Earnout Year, setting out the calculation of the Earnout Amount in reasonable detail. Seller shall have [30] days to review and may, at its expense, audit the relevant books and records of the Business. If Seller does not object within such period, the statement becomes final and binding.","No audit right for the seller. A buyer-prepared earnout statement with no audit mechanism is effectively unverifiable — sellers who waive audit rights routinely receive lower earnout payments than the actual results would support.",{"name":327,"plain_english":328,"sample_language":329,"common_mistake":330},"Dispute Resolution","Defines the process for resolving disagreements over earnout calculations — typically a negotiation period followed by referral to an independent accountant whose determination is binding.","If Seller objects to the Earnout Statement, the parties shall negotiate in good faith for [20] Business Days. If unresolved, either party may refer the dispute to [ACCOUNTING FIRM / JAMS], whose determination shall be final, binding, and non-appealable. Costs shall be borne by the party whose position deviates furthest from the expert's determination.","Specifying court litigation as the only dispute mechanism. Earnout disputes involve complex accounting questions — litigation is expensive, slow, and decided by judges without accounting expertise. Independent accountant determination resolves 80–90% of earnout disputes faster and at a fraction of the cost.",{"name":332,"plain_english":333,"sample_language":334,"common_mistake":335},"Acceleration and Forfeiture Triggers","Specifies events that cause the full remaining earnout to become immediately due (acceleration) or permanently forfeited — such as a second sale of the business, material breach, or seller's voluntary departure.","The entire unpaid Earnout Amount shall immediately accelerate and become due if Buyer (i) sells or transfers more than 50% of the equity or assets of the Business to a third party, (ii) materially breaches this Agreement and fails to cure within [30] days of written notice, or (iii) causes a Change of Control of Buyer. Seller forfeits any unpaid Earnout Amount if Seller voluntarily terminates employment with the Business within [12] months of Closing without Good Reason.","Failing to define 'Change of Control' and 'Good Reason' precisely. Ambiguous triggers generate the most earnout litigation — courts have split on whether a private equity recapitalization, minority sale, or IPO constitutes a change of control triggering acceleration.",{"name":337,"plain_english":338,"sample_language":339,"common_mistake":340},"Governing Law and Entire Agreement","Specifies the jurisdiction whose law governs the agreement, confirms that this document and the parent acquisition agreement constitute the complete understanding of the parties on earnout matters.","This Agreement shall be governed by and construed in accordance with the laws of [STATE / PROVINCE / COUNTRY], without regard to conflict-of-law principles. This Agreement, together with the [PURCHASE AGREEMENT], constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior representations, negotiations, and understandings.","Choosing a governing jurisdiction that differs from the parent acquisition agreement. Conflicting governing law clauses require courts to resolve which document controls — a preventable ambiguity that adds cost and uncertainty to any dispute.",[342,347,352,357,362,367,372,377],{"step":343,"title":344,"description":345,"tip":346},1,"Identify the parties and link to the parent acquisition agreement","Enter the full registered legal names of the buyer, seller, and target entity. Include the date and name of the underlying purchase agreement so the earnout is unambiguously tied to the deal.","Confirm that the entity names exactly match the signatory names in the parent acquisition agreement — a mismatch creates an enforcement gap.",{"step":348,"title":349,"description":350,"tip":351},2,"Define the performance metric with precise inclusions and exclusions","Choose one primary metric — revenue, EBITDA, gross profit, or a non-financial milestone — and write a definition that explicitly lists what is included and what is excluded from the calculation.","If in doubt, model the metric against three historical years of financials to test whether the definition produces the result both parties expect.",{"step":353,"title":354,"description":355,"tip":356},3,"Set the earnout period and measurement calendar","Define the start date (typically the closing date), the number of annual or quarterly measurement periods, and the deadline by which the buyer must deliver each earnout statement.","Keep the earnout period to 24 months or less — every additional year multiplies the probability of management conflict and metric manipulation.",{"step":358,"title":359,"description":360,"tip":361},4,"Build the payment threshold table","Enter the floor below which no payment is owed, the target level at which the agreed consideration is paid, and the maximum cap. For EBITDA-based earnouts, include a percentage formula between floor and target rather than a binary on/off payment.","A linear sliding scale between floor and target aligns incentives better than a cliff-edge threshold where missing by $1 means losing the entire earnout.",{"step":363,"title":364,"description":365,"tip":366},5,"Draft the buyer's operational covenants","List the specific actions the buyer is prohibited from taking during the earnout period — affiliate revenue diversion, excess overhead allocation, key employee terminations, and material product changes. Attach a list of protected key employees as Schedule A.","Negotiate covenants during the LOI stage, not at closing — buyers are more willing to accept seller protections before the deal is fully signed.",{"step":368,"title":369,"description":370,"tip":371},6,"Confirm the accounting methodology and change restrictions","State that calculations follow GAAP (or IFRS for UK/EU deals) applied consistently with the company's pre-closing historical practices. Add a clause requiring seller consent for any accounting policy change that would reduce the earnout metric by more than a defined threshold.","Attach the company's most recent audited financial statements as the accounting baseline to eliminate ambiguity about what 'consistent historical practice' means.",{"step":373,"title":374,"description":375,"tip":376},7,"Include audit rights and a dispute resolution mechanism","Grant the seller the right to audit earnout calculations within 30 days of receiving each statement. Define a 20-business-day negotiation period followed by referral to a named independent accounting firm whose determination is binding and non-appealable.","Name a specific accounting firm or arbitration body — leaving the choice open creates another dispute before the underlying one is even resolved.",{"step":378,"title":379,"description":380,"tip":381},8,"Execute before or simultaneously with closing","Both parties must sign the earnout agreement on or before the closing date of the acquisition. Post-closing execution raises fresh-consideration issues and may void seller protections in common-law jurisdictions.","Use a counterparts and electronic signature clause to allow simultaneous signing across multiple time zones at closing.",[383,387,391,395,399,403],{"mistake":384,"why_it_matters":385,"fix":386},"Defining the metric too broadly","A metric defined as 'revenue' without exclusions allows the buyer to count intercompany transfers, one-time gains, or post-closing acquisitions — inflating or suppressing the number depending on their interest.","Define every inclusion and exclusion explicitly, and test the definition against at least two years of historical financials before signing.",{"mistake":388,"why_it_matters":389,"fix":390},"Omitting operational covenants for the seller","Without covenants preventing the buyer from diverting customers, loading overhead, or eliminating key personnel, the buyer can legally reduce the earnout metric to zero through ordinary post-closing management decisions.","Include a named list of prohibited actions and attach a Schedule of protected key employees whose departure triggers either earnout acceleration or forfeiture depending on the cause.",{"mistake":392,"why_it_matters":393,"fix":394},"No audit right for the seller","Buyer-prepared earnout statements are unverifiable without audit access — sellers routinely receive payments significantly below what a full audit would support.","Grant the seller a 30-day right to audit all books and records relevant to the earnout calculation after receiving each annual statement, at the seller's cost unless the audit reveals an underpayment exceeding a defined threshold.",{"mistake":396,"why_it_matters":397,"fix":398},"Earnout period exceeding 36 months","Long earnout periods increase the probability of post-closing relationship breakdown, management changes, market shifts, and accounting disputes — all of which tend to reduce the earnout paid rather than increase it.","Limit the earnout to 12 to 24 months. If a longer period is unavoidable, include quarterly milestones and interim payment mechanisms to reduce the lump-sum risk at the end.",{"mistake":400,"why_it_matters":401,"fix":402},"No acceleration clause for a second sale of the business","If the buyer sells the acquired business mid-earnout to a third party who has no earnout obligations, the seller may lose the entire remaining deferred consideration with no remedy.","Include an explicit acceleration clause triggering full payment of the unpaid earnout upon any sale, transfer, or change of control of the acquired business or the buyer itself.",{"mistake":404,"why_it_matters":405,"fix":406},"Choosing litigation as the sole dispute resolution mechanism","Earnout disputes require accounting expertise — judges rarely have it, litigation takes 18 to 36 months, and legal fees routinely exceed the disputed amount for earnouts under $5 million.","Specify binding independent accountant determination as the primary mechanism, with litigation reserved only for non-accounting questions such as breach of operational covenants.",[408,411,414,417,420,423,426,429,432],{"question":409,"answer":410},"What is an earnout clause in an acquisition agreement?","An earnout clause is a contractual provision in a merger or acquisition agreement that ties a portion of the purchase price to the target company's post-closing performance. Rather than paying the full price upfront, the buyer pays an additional amount — the earnout — if the business meets specified revenue, EBITDA, or milestone targets during the earnout period, typically one to three years after closing. It is commonly used to bridge a valuation gap when buyer and seller cannot agree on a single upfront price.\n",{"question":412,"answer":413},"When should a buyer or seller use an earnout agreement?","Earnouts are most appropriate when there is significant uncertainty about the target's future performance — for example, a startup with a short revenue history, a company with a product awaiting regulatory approval, or a business whose results depend heavily on the continued involvement of the seller post-closing. Sellers accept earnouts to secure a higher total potential price; buyers use them to limit upfront risk. They are less suitable when the seller exits completely and has no influence over post-closing operations.\n",{"question":415,"answer":416},"What performance metrics are most commonly used in earnout agreements?","Revenue and EBITDA are the two most common earnout metrics in M&A transactions. Revenue is simpler to measure but easier for a buyer to manipulate through intercompany transactions or customer diversion. EBITDA is more aligned with value creation but susceptible to accounting policy changes and overhead allocation. Gross profit is a middle ground used in product businesses. Non-financial milestones — regulatory approvals, contract signings, or customer retention rates — are common in pharma, SaaS, and professional services acquisitions.\n",{"question":418,"answer":419},"How long should an earnout period last?","Most M&A practitioners recommend earnout periods of 12 to 24 months. Periods exceeding 36 months significantly increase the probability of management conflict, post-closing relationship breakdown, and accounting disputes. The longer the earnout period, the more the seller's payment depends on the buyer's management decisions rather than the seller's original performance — which is the opposite of what earnouts are designed to achieve.\n",{"question":421,"answer":422},"What protections should a seller insist on in an earnout agreement?","Sellers should insist on at minimum four protections: operational covenants prohibiting the buyer from diverting customers, loading overhead, or eliminating key employees; audit rights over each earnout calculation; an acceleration clause triggered by a second sale of the business; and a binding independent accountant dispute resolution mechanism. Without these, the buyer can legally manage the acquired business in ways that reduce the earnout to zero while fully complying with the contract.\n",{"question":424,"answer":425},"Are earnout payments taxable?","In most jurisdictions, earnout payments are taxable, but the character of the tax depends on how they are structured. Payments treated as additional purchase price are typically subject to capital gains tax. Payments tied to the seller's continued employment are generally treated as ordinary income. In the US, the IRS scrutinizes earnouts closely when the seller remains an employee, often seeking to reclassify capital gain earnout payments as compensation income. Consult a tax advisor before finalizing the earnout structure.\n",{"question":427,"answer":428},"Can an earnout clause be enforced if the buyer intentionally prevents the seller from hitting the targets?","In most jurisdictions, courts imply a duty of good faith on the buyer not to deliberately prevent the seller from earning the earnout. In the US, the Delaware Court of Chancery has consistently held that buyers breach their implied covenant of good faith when they take actions specifically designed to suppress earnout metrics. However, relying on implied duties is far weaker protection than explicit contractual covenants — sellers should always negotiate specific operational prohibitions rather than depending on implied good-faith obligations alone.\n",{"question":430,"answer":431},"What is the difference between an earnout and a purchase price adjustment?","A purchase price adjustment — typically based on closing-date working capital, net debt, or cash balances — corrects the agreed price for conditions that existed at closing but were not fully known until the books were closed. An earnout is forward-looking, contingent on post-closing performance that has not yet occurred. Both may appear in the same acquisition agreement, but they serve fundamentally different functions and are calculated on entirely different timelines.\n",{"question":433,"answer":434},"Do I need a lawyer to draft an earnout agreement?","For most M&A transactions, yes. Earnout agreements involve complex accounting definitions, post-closing behavioral obligations, and multi-year payment mechanisms that interact with employment agreements, tax structures, and the parent acquisition agreement. A well-completed template is a strong starting point that reduces drafting time and legal cost, but attorney review is strongly recommended — particularly for deals above $500K or involving non-financial milestones, multi-year periods, or cross-border considerations.\n",[436,440,444,448],{"industry":437,"icon_asset_id":438,"specifics":439},"Technology / SaaS","industry-saas","ARR or MRR-based earnout metrics with specific churn exclusions, product milestone triggers, and retention covenants for engineering and sales leadership.",{"industry":441,"icon_asset_id":442,"specifics":443},"Healthcare and Pharmaceuticals","industry-healthtech","Non-financial milestone earnouts tied to FDA approval stages, clinical trial completion, or reimbursement code assignments — with extended periods up to 36 months.",{"industry":445,"icon_asset_id":446,"specifics":447},"Professional Services","industry-professional-services","Client retention rates and revenue-per-engagement metrics with anti-solicitation covenants protecting the earnout against client diversion by the buyer.",{"industry":449,"icon_asset_id":450,"specifics":451},"Manufacturing","industry-manufacturing","Gross profit earnouts adjusted for raw material cost pass-throughs, with specific exclusions for buyer-mandated capital expenditures that reduce EBITDA.",[453,456,459,463],{"vs":241,"vs_template_id":454,"summary":455},"business-purchase-agreement-D13625","A Business Purchase Agreement governs the full acquisition transaction — representations, warranties, indemnities, closing conditions, and purchase price. An Earnout Clauses Agreement is a companion document or addendum that handles only the contingent payment mechanism. Most M&A deals use both: the purchase agreement sets the fixed consideration and deal structure, while the earnout agreement defines how deferred performance-based consideration is measured, paid, and disputed.",{"vs":105,"vs_template_id":457,"summary":458},"asset-purchase-agreement-D329","An Asset Purchase Agreement transfers specific business assets — equipment, contracts, IP, and customer lists — rather than the equity of the company. Earnout provisions can be embedded in either an asset or equity purchase, but asset deals require careful drafting to define which entity's post-closing operations generate the earnout metrics, since the seller entity retains its legal existence after the assets transfer.",{"vs":460,"vs_template_id":461,"summary":462},"Stock Purchase Agreement","D{STOCK_PURCHASE_AGREEMENT_ID}","A Stock Purchase Agreement transfers equity ownership of the target company. Because the target's legal entity continues unchanged, stock deals typically simplify earnout accounting — the acquired company's own books serve as the measurement base. Earnout clauses in stock deals focus primarily on preventing buyer manipulation of the target's post-closing financials through intercompany transactions or overhead loading.",{"vs":464,"vs_template_id":465,"summary":466},"Letter of Intent (LOI)","letter-of-intent-D12755","A Letter of Intent outlines the proposed deal structure — including whether an earnout will be used — but is typically non-binding on financial terms. The earnout mechanism described in an LOI is a framework only; the binding definition of metrics, covenants, audit rights, and dispute procedures appears in the final Earnout Clauses Agreement executed at closing. The LOI is the negotiation document; the earnout agreement is the enforceable one.",{"use_template":468,"template_plus_review":472,"custom_drafted":476},{"best_for":469,"cost":470,"time":471},"Simple single-metric earnouts on deals under $500K with a defined 12-month period and seller remaining as an employee","Free","2–4 hours to complete the template",{"best_for":473,"cost":474,"time":475},"Deals between $500K and $5M, multi-year periods, or EBITDA-based metrics requiring accounting policy alignment","$800–$2,500 for attorney review and redline","3–7 business days",{"best_for":477,"cost":478,"time":479},"Transactions above $5M, cross-border acquisitions, pharma milestone earnouts, or earnouts tied to complex financial instruments","$5,000–$25,000+","2–6 weeks",[481,486,491,496],{"code":482,"name":483,"flag_asset_id":484,"note":485},"us","United States","flag-us","Delaware courts — which govern most US M&A transactions — apply a strong implied covenant of good faith to buyer conduct during earnout periods, but sellers cannot rely on this alone. The IRS closely scrutinizes earnout payments to selling shareholders who remain as employees, frequently seeking to reclassify capital-gain earnout receipts as ordinary compensation income under IRC §83. State-specific non-compete and trade secret laws also interact with earnout protections for seller key employees.",{"code":487,"name":488,"flag_asset_id":489,"note":490},"ca","Canada","flag-ca","Canadian courts in Ontario and British Columbia have enforced earnout clauses where the metric definitions and buyer obligations are clearly drafted, but have voided provisions found to be ambiguous in favor of the buyer as the document's drafter. Quebec's Civil Code applies different interpretive rules than common-law provinces and requires extra care in metric and covenant language. Earnout payments to selling shareholders who remain as employees may be recharacterized as employment income under the Income Tax Act, triggering CPP obligations and higher marginal rates.",{"code":492,"name":493,"flag_asset_id":494,"note":495},"uk","United Kingdom","flag-uk","English courts do not imply a general duty of good faith in commercial contracts — meaning a buyer who reduces the earnout metric through entirely lawful management decisions faces no implied liability unless specific covenants are breached. Sellers in UK transactions must negotiate explicit behavioral obligations. HMRC may apply Employment-Related Securities rules if earnout payments are linked to the seller's continued service, treating payments as employment income subject to PAYE and NICs rather than capital gains.",{"code":497,"name":498,"flag_asset_id":499,"note":500},"eu","European Union","flag-eu","EU member states vary significantly in their treatment of contingent purchase price obligations. German law (BGB §242) implies a general duty of good faith, offering sellers stronger implied protection than UK law. French courts have similarly implied seller protections in earnout disputes. IFRS revenue recognition standards govern metric calculations for EU-listed entities and may produce different earnout results than US GAAP — requiring explicit accounting standard elections in cross-border deals. VAT treatment of earnout payments also varies by member state.",[242,245,502,503,504,505,506,507,508,509,510,511],"letter-of-intent_acquisition-of-business-D5197","non-disclosure-agreement-nda-D12692","general-non-compete-agreement-D882","employment-agreement-executive-D543","independent-contractor-agreement-D160","term-sheet-D473","checklist-customer-due-diligence-D13916","shareholders-agreement-D1016","business-report-D12762","merger-agreement-D12659",{"emit_how_to":198,"emit_defined_term":198},{"primary_folder":97,"secondary_folder":514,"document_type":515,"industry":516,"business_stage":517,"tags":518,"confidence":524},"equity-and-mergers","agreement","general","exit",[519,520,521,522,523],"m-and-a","earnout","mergers-and-acquisitions","purchase-price","acquisition",0.95,"\u003Ch2>What is an Earnout Clauses Agreement?\u003C/h2>\n\u003Cp>An \u003Cstrong>Earnout Clauses Agreement\u003C/strong> is a legally binding document used in mergers and acquisitions that makes a portion of the purchase price contingent on the acquired business's post-closing financial or operational performance. Rather than settling the full valuation dispute upfront, the buyer and seller agree that if the target meets defined performance thresholds — typically revenue, EBITDA, or gross profit targets — during a specified period after closing, the seller receives additional consideration. The document defines those metrics precisely, establishes the buyer's obligations to operate the business fairly during the measurement period, and creates a binding process for calculating, auditing, and resolving disputes over each payment.\u003C/p>\n\u003Cp>Earnouts are typically used when the buyer and seller are more than 10–15% apart on valuation — a gap that commonly arises when the target has a short operating history, recent rapid growth, or a product pending regulatory approval. By deferring a portion of the price, both parties share the risk and reward of post-closing performance rather than forcing one side to accept the other's valuation assumption at a fixed point in time.\u003C/p>\n\u003Ch2>Why You Need This Document\u003C/h2>\n\u003Cp>Without a written earnout agreement, the deferred consideration in an acquisition is unenforceable. A buyer who verbally agrees to pay more if the business performs well faces no legal obligation to do so unless the terms — metric definitions, payment thresholds, measurement dates, and audit rights — are documented and signed. Sellers who skip a formal earnout agreement routinely receive nothing on the contingent portion of their deal, because the buyer's post-closing management decisions — shifting customers to affiliates, loading overhead, or changing accounting methods — can legally reduce the measured metric to zero with no remedy available.\u003C/p>\n\u003Cp>Even a well-intentioned buyer needs this document to protect itself: a properly drafted earnout with a payment cap and clear forfeiture triggers prevents an unanticipated obligation from materializing years after closing. For both sides, the cost of not having a precise, signed earnout agreement is absorbing the full economic risk of the other party's valuation assumptions — which is exactly what the earnout structure is designed to avoid. This template gives buyers and sellers a structured, attorney-ready foundation that covers every material term, reducing drafting time and the risk of the ambiguity that drives earnout litigation.\u003C/p>\n",1778696346966]