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Earnouts i M&A T E t in Transactions ti

KeyStructuresandRecentDevelopments
June22,2011 PaulCrimmins
13127017068
pcrimmins@mayerbrown.com

BenGray
13127018644
bgray@mayerbrown.com

JessieWaller
13127018761
jwaller@mayerbrown.com

MayerBrownisagloballegalservicesorganizationcomprisinglegalpracticesthatareseparateentities("MayerBrownPractices").TheMayerBrownPracticesare:MayerBrownLLP,alimitedliabilitypartnershipestablishedintheUnitedStates; MayerBrownInternationalLLP,alimitedliabilitypartnershipincorporatedinEnglandandWales;andJSM,aHongKongpartnership,anditsassociatedentitiesinAsia.TheMayerBrownPracticesareknownasMayerBrownJSMinAsia. InBrazilMayerBrownisinassociationwithTauil&ChequerAdvogados,aBrazilianpartnership.

What is an Earnout?

B i D fi i i BasicDefinition:Anearnoutisariskallocationmechanismusedinan
M&Atransactionwherebyaportionofthepurchasepriceisdeferredandis calculatedbasedontheperformanceoftheacquiredbusinessovera specifiedtimeperiodfollowingtheclosing. ifi d ti i d f ll i th l i

Reasons for Use of Earnouts


ValuationGap:Earnoutscanbridgethebusinessvaluationgapbetweenan
optimisticsellerandaskepticalbuyer. Allowsassettoproveitsworth.

Financing:Useofanearnoutinstructuringanacquisitionprovidesbuyerwith
anadditionaloptiontofinancetheacquisition(i.e.,buyermaybeabletopayfor theacquisitionwithfutureprofitsofthetargetbusiness). Thisattributeisparticularlyimportantineconomicclimateswherethirdparty financingcanbedifficulttoobtainonfavorableterms.

IncentiveBasedCompensation:Earnoutscanalsobeusedasaformof
incentivebasedcompensationtosellerswhoarecontinuingasemployeesofthe p g p y acquiredcompany.

Startups:Earnoutsareoftenusedforcompanieswithlittleoperatinghistorybut
significantgrowthpotential(whicharenoteasilyvalued). significant growth potential (which are not easily valued)

Key Structural Considerations


Principalconsiderationswhennegotiatinganddraftingan earnout: earnout:
(1)thedefinitionandscopeofthetargetbusiness; (2)theselectionoftheperformancemetric; ( ) p ; (3)theselectionofappropriateaccountingmeasurementstandards; (4)thedeterminationofthepayoutstructureandestablishmentofthe earnoutperiod; t i d (5)postclosingoperation(i.e.,theallocationofcontrolbetweenbuyerand sellerandthelevelofsupport,ifany,thatbuyerwillcommittoassistthe targetbusinessinachievingitsearnoutobjectives);and t tb i i hi i it t bj ti ) d (6)disputesandresolution.

Key Structural Considerations (contd)


1)DefiningtheTargetBusiness
Th Thescopeofthetargetbusinessshouldbeclearlydefinedsinceitisthe f th t tb i h ld b l l d fi d i it i th performanceofthisbusinessthatwilldeterminewhetherearnout requirementsaresatisfied. Relatively easy when acquired business will be operated as an Relativelyeasywhenacquiredbusinesswillbeoperatedasan independentsubsidiaryordivision,butmoredifficultwhenthetargetis tobeintegratedintobuyersexistingbusiness.Insuchsituations,the performanceofthebusinessmaybemoredifficulttotrackandspecial accountingallocationsmayberequired. Segregatedfinancialstomeasureperformanceoftheacquired businessshouldbeestablished. Particularmatterstobeaddressedinclude:(i)thedefinedlineof business,(ii)whetherexpansionofthebusinessbeyondthedefinedline willcounttowardtheearnoutand(iii)salestocommoncustomers.
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Key Structural Considerations (contd)


2)PerformanceMetric
FinancialMetrics:Themostcommonfinancialmetricsare(i)revenue,(ii)net income,(iii)EBITDAand(iv)earningspershare.Sellersoftenpreferrevenue andbuyersoftenprefernetincome. Sellerspreferrevenuebecauseitislesseasilymanipulatedbybuyer(and easiertoachieve).Usingrevenueasthemetricmayincentivizesellers managementtograntunprofitabledealstocustomers. Buyersprefernetincomebecauseitprovidesamorecompletepictureof performanceandincentivizessellersmanagementtocontrolcosts. PartiesoftencompromiseonEBITDA(whichfactorsinoperationalcosts butexcludescertainnonoperationalcosts). Non Financial Targets: In certain cases non financial metrics are more NonFinancialTargets:Incertaincases,nonfinancialmetricsaremore appropriatebecausethereisnohistoricalinformationtouseasabasisfor financialprojections.Inthesecases,productdevelopmentmilestones, numberofcustomers,numberofproductssoldorlaunchofanewproduct maybeusedasthemetric.Ingeneral,nonfinancialmetricscanleadtofewer disputesregardingcalculationsofbenchmarks.

Key Structural Considerations (contd)


3)AccountingPrinciples
Itisimportanttoestablishappropriateaccountingprinciplesformeasuring theperformancemetric. ReferencetoGAAPinandofitselfisusuallynotsufficient. Parties should at a minimum stipulate that GAAP will be applied Partiesshould,ataminimum,stipulatethatGAAPwillbeapplied consistentwitheitherbuyersorsellershistoricpractices. Partiesshouldalsoconsiderstipulatingaspecificsetofaccounting principlesasasupplement(orexception)tothegeneralGAAPprovision. principles as a supplement (or exception) to the general GAAP provision Somespecificaccountingmatterstobeconsideredare(i)useofcashor accrualrevenuebasis,(ii)revenueandexpenseallocation,(iii)timingof revenuerecognition,(iv)treatmentofacquisitionexpenses,(v)treatmentof revenue recognition (iv) treatment of acquisition expenses (v) treatment of othernonrecurringitems,(vi)treatmentofintercompanytransactionsand (vii)treatmentofuncollectedreceivables.

Key Structural Considerations (contd)


4)PayoutStructureandEarnoutPeriod
Structure Alternatives: StructureAlternatives: Installmentsvs.lumpsum Percentageofearnoutpaymentuponpartialsatisfactionofbenchmarks vs.allornothingapproach Earnoutconditionedonparticipationbysellerinacquiredbusiness Caponearnoutpayments Cap on earnout payments Offsetofindemnificationclaims Adjustmentswithrespecttopaymentsmade(ormissed)inprevious installmentsbasedonsubsequentperformance(e.g.,carryback/carry forwardofEBITDAfromonemeasurementperiodtoother measurementperiods)
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Key Structural Considerations (contd)


Earnoutperiod: Anearnoutperiodthatistooshortrisksperformancedistortionby shorttermfactorsorthatsellerswillsacrificethelongterminterestsof thebusiness.Sellersmayseekashorterperiodinordertoreceivefull paymentsoonerandmitigaterisk. Alongerearnoutperiodwillallowtimetoensurethattheacquired businessprovestobeaworthylongterminvestment. Partiesshouldconsiderincludingaccelerationrights,whichresultinan immediatepaymentandterminationoftheearnoutarrangement. Sellermayhaveaccelerationrightuponcertaineventsthat negativelyimpactsellersabilitytosatisfyearnouttargets(e.g., buyerssubsequentsaleofacquiredbusiness,bankruptcyor changeofcontrol).

Key Structural Considerations (contd)


5)PostClosingOperationofAcquiredBusiness
Twoimportantquestionsthatmustbeaddressedare(i)howwillpost acquisitioncontrolbeallocatedbetweenbuyerandsellerand(ii)whatlevelof support(ifany)willbuyerbeobligatedtoprovidetheacquiredbusiness? (i)AllocationofControloverOperations Sellerwillsometimesretainalevelofcontrolovertheoperationsofthe acquiredbusiness(e.g.,approvalrightsovermajordecisions). At minimum seller will want restrictive covenants that set limitations on Atminimum,sellerwillwantrestrictivecovenantsthatsetlimitationson howtheacquiredbusinessmaybeoperatedtopreventbuyerfrom makingsignificantchangesthatreducetheearnoutamount,suchas(a) discontinuingproducts,(b)reducingsalesforceor(c)shiftingsalesand costs. Buyermayberequiredtooperatethebusinessconsistentlywith howitwasoperatedpriortoclosing.
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Key Structural Considerations (contd)


Thepartiesshouldaddressthetreatmentofbuyersexistingcompeting businessesandafteracquiredbusinesses. (ii) L l f S (ii)LevelofSupport Affirmativerequirementsforbuyerinsupportingthetargetbusiness(e.g., marketing,salesforceincreases,adequatecapitalization). Requirementthatbuyeruseaspecifiedlevelofeffortstomaximizethe earnout. Buyer sobjectivewillbetoobtaintherighttooperatetheacquired Buyers objective will be to obtain the right to operate the acquired businessinitssolediscretionandnotbeobligatedtoachievetheearnout. Buyershouldincludelanguageintheacquisitionagreementthat(i) givesbuyerabsolutediscretionoveroperationand(ii)negatesany gives buyer absolute discretion over operation and (ii) negates any obligation(expressorimplied)towardsupportingtheacquired businessorachievingtheearnout.

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Key Structural Considerations (contd)


6)DisputesandResolution
Financialstatementsandearnoutcalculationsaretypicallyprepared bybuyeranditsaccountants. Seller is afforded opportunity to review and challenge the financial Sellerisaffordedopportunitytoreviewandchallengethefinancial statementsandearnoutcalculation. Arbitrationproceduresshouldbeestablishedinadvancetoresolve futuredisagreementsconcerningtheearnoutcalculationinafairand expeditiousmanner. Oftenanindependentaccountantservesasthearbitrator. p

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Earnouts Case Law

TheEarnout:ADisputePostponed?
Duetothecomplexitiesofstructuringanearnout,earnoutsoftenleadto futuredisagreementsandlitigation. As Vice Chancellor Laster stated in the recent Airborne Health decision AsViceChancellorLasterstatedintherecentAirborneHealthdecision,... anearnoutoftenconvertstodaysdisagreementoverpriceintotomorrows litigationoveroutcome. Notably courts have been willing to use the implied covenant of good faith to Notably,courtshavebeenwillingtousetheimpliedcovenantofgoodfaithto imposeobligationsorrestrictionsonbuyerwithrespecttoitspostclosing operationoftheacquiredbusinessintheabsenceofexpresscontractual terms.

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Implied Covenant of Good Faith


OToolv.GenmarHoldings,Inc.,387F.3d1188(10thCir.2004) g, , ( )
The10thCircuit,applyingDelawarelaw,upheldajuryverdictinfavorof sellersofaboatmanufacturingbusiness.Theopinionwassignificantinthatit wasnotbasedonabreachofexpressprovisionsinthepurchaseagreement, was not based on a breach of express provisions in the purchase agreement, butontheimplieddutyofgoodfaithandfairdealing. Theimpliedcovenantofgoodfaithandfairdealinginheresineverycontract. Theimpliedcovenantprotectsthespiritofanagreementwhen,without The implied covenant protects the spirit of an agreement when, without violatingtheexpresstermsoftheagreement,onesideusesoppressiveor underhandedtacticstodenytheothersidethefruitsofthepartiesbargain. Theimpliedcovenant,however,cannotcontravenethepartiesexpress agreementandcannotbeusedtoforgeanewagreementbeyondthescopeof t d tb dt f tb d th f thewrittencontract.

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Implied Covenant of Good Faith (contd)


OToolv.GenmarHoldings,Inc.,387F.3d1188(10thCir.2004) (contd)
Specifically,thecourtheldthatthebuyerbreachedtheimpliedcovenantof goodfaithby(i)immediatelychangingknownproductnames,(ii)requiring theacquiredbusinesstoprioritizesalesofproductsnotsubjecttothe earnout,(iii)discontinuingcertainproductsandshuttingdownmanufacturing earnout, (iii) discontinuing certain products and shutting down manufacturing facilities,(iv)forcingtheacquiredbusinesstobearthedesignandproduction costsofanotherlineofbuyersbusinessand(v)failingtogivethesellersthe necessaryoperationalcontrolovertheacquiredbusiness.Thecourt reasonedthatdespitethelackofexpressprovisionsrestrictingthebuyers d h d i h l k f ii i i h b actions,theobviousspiritofthecontractwastogivethesellersafair opportunitytooperatethe[acquiredbusiness]insuchafashionasto maximizetheearnout,andupheldthejurysfindingthatsuchan , p j y g opportunityhadnotbeengiven. Asignificantfactorinthisdecisionwasthefactthatthecourtstrongly gg y y gy suggestedthebuyerhadanulteriormotiveandthatthebuyersstrategywas nottogrowthebusinessbuttoeliminateacompetitorandgainaproduction facilityforitsotherbrands.
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Implied Covenant of Good Faith (contd)


AirborneHealth,Inc.v.SquidSoap,LP,984A.2d126(Del.Ch. 2009)
TheDelawareChanceryCourtrecentlyreachedadifferentresultinAirborne. BuyerpurchasedsellersSquidSoapbusinessfor$1millionplusupto$26.5 o ea out pay e ts millioninearnoutpayments. Importantly,theacquisitionagreementhadaprovisionrequiringbuyerto returnthesoldassetsifcertainbusinesstargets,suchasadvertisingspending andsales,werenotachieved. , Shortlyaftertheacquisition,buyersufferedfromcripplinglitigationand negativepublicitywithregardtoanunrelatedproduct,andtheearnout targetswerenotachieved. g Sellerallegedthatbuyerbreachedtheimpliedcovenantofgoodfaithandfair dealingbynotspendingonmarketingoftheSquidSoapproduct.
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Implied Covenant of Good Faith (contd)


AirborneHealth,Inc.v.SquidSoap,LP,984A.2d126(Del.Ch. 2009)(contd)
Theagreementcontainednorequirementforbuyertospendfundson marketingsotherewasnoexpressbreachofcontract.Inaddition,the agreementcontemplatedthattheassetswouldbereturnedifbuyerfailedto achievecertaintargets. achieve certain targets. Thecourtagreedthatbuyercouldnotarbitrarilyorinbadfaithrefuseto expendresourcesandtherebydepriveselleroftheearnout.However,the courtfoundseller sclaimtobelackingbecause [seller]doesnotcontendthat court found sellers claim to be lacking because [seller] does not contend that [buyer]failedtoexpendfundstomakethebusinessasuccessarbitrarily,in badfaith,orfornoreason.Tothecontrary,thecourtrecognizedthatbuyer hadsufferedacorporatecrisisandwasundoubtedlyrestrainedbythelegal andfinancialburdensofthesettlementandsystemicmarketdamage.The d fi i lb d f h l d i k d Th courtnotedthatsellerspositionwasalsoundercutbytheeasewithwhichit couldhavecontractedforanexpenditureofresources. B Buyersmotionforsummaryjudgmentwasgranted. i f j d d

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Implied Covenant of Good Faith (contd)


Fireman v News America Marketing In Store Inc 2009 U S Firemanv.NewsAmericaMarketingInStore,Inc.,2009U.S. Dist.LEXIS91236(D.Mass.2009).
InFireman,sellerssoldtheirmarketingbusinesstodefendantfor$2.8million incashplusthepossibilityofadditionalearnoutpaymentsoverfiveyears. Whentheacquiredbusinessdidnotmeetthemaximumearnouttargets, sellersallegedbuyerbreachedtheimpliedcovenantbyrebrandingthe product,removingandmarginalizingkeytalentfromthebusinessand product removing and marginalizing key talent from the business and refusingtouseitssalesforcetopromotetheproductattradeshows. ApplyingNewYorklaw,thecourtheldthatthemeritof[sellers]claim dependsonwhether[buyer]intentionallyorrecklesslycaused[theacquired depends on whether [buyer] intentionally or recklessly caused [the acquired business]tolosemoney.Thecourtfoundthatbuyersactionswere legitimatebusinessdecisions,andthatplaintiffsallegationsamountedto nothingmorethandisputesconcerningstrategybetweensophisticated businesspeople.Therefore,thecourtheldthattherewasnodisputeof materialfactastowhetherdefendantbuyerbreachedtheimpliedcovenant ofgoodfaith,andgrantedbuyersmotionforsummaryjudgment. Takeaway:Ifsellerwantsbuyertotakecertainactionswhenoperatingthe business,itshouldnegotiateforsuchprovisionsinthecontract.

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Implied Obligation to use Reasonable Efforts


SonoranScanners,Inc.v.PerkinElmer,Inc.,585F.3d535(1stCir. 2009) )
The1stCircuit,applyingMassachusettslaw,didnotfindabreachoftheimplied covenantofgoodfaith.Nevertheless,itreversedthelowercourtsgrantof summaryjudgmenttobuyerbyholdingthatbuyerhadanimpliedobligationto yj g y y g y p g usereasonableeffortstodevelopandpromotesellerstechnology. Thecourtreliedonaseriesofcasesdealingwithexclusivelicenses. Th f ll i f Thefollowingfactorswereimportantinfindingthatanobligationofreasonable i i fi di h bli i f bl effortsapplied:(i)theearnoutwassubstantialinrelationtotheupfrontpayment ($3.5millionupfrontand$3.5millioninpotentialearnouts);(ii)thatmostofthe upfrontpaymentwenttocreditors;(iii)thatthepurchaseagreement p p y ;( ) p g contemplatedacampaigntomarketsellerstechnologyand(iv)that[t]herewas nolanguageintheagreementnegatinganobligation...tousereasonableefforts orconferringabsolutediscretionon[buyer]astotheoperationofthebusiness. Remandedtodistrictcourttodetermineifbuyerbreachedthisobligation.
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Implied Obligation to use Reasonable Efforts


SonoranScannersseemstobeanoutlier. Littleothercaselawimpliesareasonableeffortsobligationin thecontextofearnouts.
Delawarecourtshavesuggestedthereisnoimpliedobligationtouse reasonableefforts.Airborne:SquidSoapspositionisalsoundercutbythe easewithwhichSquidSoapcouldhaveinsistedonspecificcontractual commitmentsfromAirborneregardingtheexpenditureofresources,orsome commitments from Airborne regarding the expenditure of resources or some formofeffortsobligationforAirborne. Itremainstobeseen,however,ifothercourtswillfollowtheleadofthe1st Circuit. Circuit


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Buyers Points: Disclaimers


Inlightofthecaselaw,buyersshouldfocusonincluding disclaimerprovisionsinanyearnoutscontract.
Buyershouldaddcontractuallanguagethatnegatesanyimpliedcovenantofgoodfaith andanyimpliedobligationofreasonableefforts. Disclaim obligations to operate the postacquisition business in any specified Disclaimobligationstooperatethepostacquisitionbusinessinanyspecified manner. Impliedobligationofgoodfaithcanonlybedisclaimedifdonespecifically. Includespecificcontractuallanguageacknowledgingthat,withtheexception ofanyspecificallynegotiatedrestrictivecovenantsintheagreement,buyer hasnoexpressorimpliedobligationsinregardstotheearnout. Includeprovisionswaivingasellersrighttosueunderanimpliedcovenantor impliedobligation. Buyershouldalsoincludenorelianceprovisionsandintegrationclauses.

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Buyers Points
Buyer should also add contractual provisions reserving the right to take certain Buyershouldalsoaddcontractualprovisionsreservingtherighttotakecertain actions. Buyershouldincludeanacknowledgmentfromsellerintheacquisition agreementthatbuyerhasabsolutediscretiontooperatethebusiness. agreement that buyer has absolute discretion to operate the business

Yarboroughv.DeVilbissAirPowerInc.,321F.3d728(8thCir. 2003)
Earnoutpaymentwasbasedonlyonsalestocertainspecifiedcustomers. Buyerdiscontinueddoingbusinesswithonespecifiedcustomerand transferredthatportionofitsbusinesstoanother,nonspecifiedcustomer. Agreementstatedthatbuyerhastheright,initssolediscretion,to determinethetermsandconditionsofanyandallrelevantsales,including thedecisiontomakeornotmakeanysuchsales. 8thCircuitfoundbuyerhadexpresslyandunambiguouslycontractedfor absolutepoweroveritsabilitytomakesalesinordertoforeclosesellers claimofbreachoftheimpliedcovenantofgoodfaith.Thecourtaffirmedthe grantofsummaryjudgmentforbuyer.

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Sellers Points
AffirmativeCovenants:Sellershouldnegotiateforaffirmative
covenantsrequiringbuyertoactingoodfaith,usereasonableeffortsandtake everyactionnecessarytomaximizetheearnoutpayment.

RestrictiveCovenants:Sellershouldalsonegotiateforcovenants g
explicitlyrestrictingcertainactions,including,forexample:transferringfixed coststotheacquiredbusiness,firingorrelocatingkeypersonnelandunder capitalizingthebusinessortheR&Dneededforgrowth.

Control:Sellermayalsowanttocontractforacertainlevelofcontrolover
theoperationsoftheacquiredbusinessduringthelengthoftheearnout period(e.g.,approvalrightsovercertainmajordecisions,abilitytoelecta certainnumberofdirectors).

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Sellers Points: The Problem of Damages


SelfExecutingRemedies:
Inearnoutscases,damagescanoftenbehardtoprove. LaPointv.AmerisourcebergenCorp.,2007Del.Ch.LEXIS131(Del.Ch.2007), illustratesthisproblemforsellers. TheDelawareChanceryCourtheldthatbuyerbreachedacovenant requiringittoexclusivelyandactivelypromotetheacquiredbusinesss products,butitdidnotfindthatsellersatisfieditsburdeninproving damages.Thus,thecourtawardedonlynominaldamagesonthatcount. Toavoidthistypeofoutcome,thepartiesshouldspecifyremediesfor h f h h l f f breachesoftheagreement(e.g.,liquidateddamages). Itisdifficulttoprovethatspecificbenchmarkswouldhavebeenachievedbut forbreachesbybuyer. f b h b b Breachofcontractualprovisionallowingsellertoretaincontrolofthe acquiredbusinesssoperationscreatesevenmoreuncertaintyastodamages.

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Sellers Points: The Problem of Damages


PossibleSelfExecutingRemedies:
Li id t d d Liquidateddamages. Breachofanyexpresscovenantresultsindamagesofmaximumorpartial earnoutpayment. Canresultinwindfallfortheseller.SeeAvesair,Inc.v.InPhonic,Inc., 2007NCBC32(N.C.Super.Ct.2007).Inthatcase,theacquisition agreementprovidedthatregardlessofwhethertheearnoutthreshold wasmet,themaximumearnoutwouldbedueifbuyer(i)failedtouse t th i t ld b d if b (i) f il d t commerciallyreasonableeffortstosellacquiredbusinessproducts,(ii) terminatedcertainemployeesor(iii)failedtoprovideoutsideaudited financialinformationattheendoftheearnoutperiod.Thecourt concludedthatbecauseoutsideauditedfinancialinformationwasnot provided,sellerwasentitledtomaximumearnoutpayment.

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Sellers Points: The Problem of Damages


PossibleSelfExecutingRemedies(contd): oss b e Se ecu g e ed es (co d)
Breachofany(i)expressobligationofbuyertouseacertainlevelofeffortsto maximizetheearnoutor(ii)impliedcovenantorobligationresultsindamages ofmaximumorpartialearnoutpayment. of maximum or partial earnout payment. Specificremedies:Breachofcovenanttomakeexpenditureorotherrequired actionresultsinanadjustmenttothefinancialmetricusedfortheearnout calculation. calculation.

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Additional Consideration: Accounting Treatment (FAS 141(R))


Historically,earnoutconsiderationwasrecognizedinbuyersfinancial statementsifandwhentheconditionstopaymentoftheearnoutwere satisfied. UnderFAS141(R),effectivein2009,earnoutsarenowrequiredtobe recordedatfairvalueatthedateofclosing.Therecordedfairvalueisthen subjecttoperiodicadjustmentsbasedonthelikelihoodofpaymentoractual earnoutpaymentsthathaveoccurred. Anysuchadjustmentmustberecordedasgainorlossonbuyersincome statement. Resultofthisruleistoacceleratetherecordingofliabilitiesrelatedtothe earnoutandcouldalsocausefutureearningsvolatility. Thismaymaketheuseofearnoutslessattractivetobuyersorcausebuyersto negotiateforashorterearnoutperiod. FAS 141(R) does not apply to earnout payments characterized as FAS141(R)doesnotapplytoearnoutpaymentscharacterizedas compensationratherthanpurchaseprice.
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Additional Consideration: Earnouts as a Security?


Istherighttoanearnoutasecurity?Anearnoutcanbea securityundercertaincircumstances.TheSEChasissued multiplenoactionlettersonthesubjectandhascreateda multiplefactortest: multiple factor test:
Istheearnoutrightanintegralpartoftheconsiderationtobereceivedinthe transaction? Istheearnoutrightrepresentedbyanyformofcertificateorinstrument? Dotheholdersoftheearnouthaveanyrightincommonwithshareholders suchasvotinganddividendrights? Doestheearnoutrepresentanequityorownershipinterestinthesurviving entity? Is the earnout assignable or transferable except by operation of law? Istheearnoutassignableortransferable,exceptbyoperationoflaw?

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