This form is an Asset Purchase Agreement. The buyer agrees to purchase from the seller certain assets which are listed in the agreement. The form also provides a listing of certain assets which will be excluded from the sale. The form must be signed in the presence of a notary public.
Asset Purchase Agreement With Earn Out Provision
Category:
State:
Multi-State
Control #:
US-00418
Format:
Word;
Rich Text
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Often, when buyers and sellers want to complete a deal but can't agree on the price, they employ a strategy called an earn-out. An earn-out is a contingent payment that the seller only receives from the buyer when specific performance targets are met.
An earnout is a contractual provision stating that the seller of a business is to obtain additional compensation in the future if the business achieves certain financial goals, which are usually stated as a percentage of gross sales or earnings.
Provisions of an APA may include payment of purchase price, monthly installments, liens and encumbrances on the assets, condition precedent for the closing, etc. An APA differs from a stock purchase agreement (SPA) under which company shares, title to assets, and title to liabilities are also sold.
Earn-out Payments.The buyer will pay the seller an earn-out equal to the seller's EBIT less some agreed-upon EBIT threshold times 1.5, if the subtraction results in a positive number.The maximum earn-out that the seller will pay per year during 5 year period is $2.0M per year.More items...?
The earn-out amount generally represents 20 to 30 percent of the total deal consideration, but deals go as high as 40 to 60 percent. Earn-out periods are typically in the one- to three-year range.
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More detail later in presentation. Key Provisions in Stock Purchase Agreements.The parties might even. Free Asset Purchase Agreement Earnout Clause Library.