Earnout Agreement review
Post-closing contingent-consideration earnout (Delaware *Lazard / Aveta* line).
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What it checks
Earnout period and milestones defined
Earnout must define period and specific, measurable milestones.
Critical · MNA-063
Definition of 'Revenue' / 'EBITDA' for earnout
Earnouts based on revenue / EBITDA must define those metrics precisely.
Critical · MNA-064
Conduct-of-business covenant during earnout period
Buyer should covenant to operate the business in a way consistent with achieving earnout milestones.
Critical · MNA-065
Implied covenant — express acknowledgment or waiver
The implied covenant fills only gaps the earnout leaves open; the agreement should state the intended conduct standard expressly (Lazard Tech. Partners v. Qinetiq (Del. 2015)).
Warning · MNA-066
Disclaimer of obligation to maximize earnout
Delaware generally enforces express disclaimers of any duty to maximize the earnout; the implied covenant fills only gaps the contract leaves open (Lazard Tech. Partners v. Qinetiq (Del. 2015)).
Warning · MNA-067
Earnout calculation and payment mechanics
Earnout must specify calculation, statement-delivery, dispute, and payment timing.
Critical · MNA-068
Right of set-off against earnout
Earnout often includes a right of set-off against indemnification obligations.
Warning · MNA-069
Acceleration on change of control
Earnout should address acceleration if buyer undergoes a subsequent change of control.
Warning · MNA-070
Tax treatment of earnout (imputed interest)
Earnouts can trigger imputed-interest treatment under IRC § 483 / § 1274.
Warning · MNA-071
Every run also applies 115 general checks that belong to any agreement: structure, parties and signatures, defined terms, cross-references, dates, amounts, and one-sided terms.
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