Earnout Agreement Template for Germany

This document is essential in merger and acquisition transactions where part of the purchase price is contingent on future performance. An Earnout Agreement under German law is typically used when parties cannot agree on a fixed purchase price due to differing valuations or when incentivizing sellers to ensure business continuity post-acquisition. The agreement must comply with German corporate, commercial, and tax laws, particularly regarding purchase price adjustments and contingent payments. It includes detailed provisions for calculating earnout payments, defining financial metrics, establishing information rights, and protecting both parties' interests. The document is especially relevant in transactions involving high-growth companies, businesses with uncertain future performance, or where seller continuation is crucial.

1. Parties: Identification of the contracting parties including legal form and registration details

2. Background: Context of the transaction, reference to the main purchase agreement, and purpose of the earnout arrangement

3. Definitions: Detailed definitions of terms, particularly financial metrics, calculation periods, and earnout-specific terminology

4. Earnout Structure: Framework of the earnout arrangement, including total potential value and duration

5. Calculation Method: Detailed methodology for calculating earnout payments, including relevant financial metrics and adjustments

6. Payment Terms: Timing, method, and conditions for earnout payments, including any minimum or maximum thresholds

7. Information Rights: Buyer's obligations to provide financial information and seller's audit or verification rights

8. Conduct of Business: Restrictions and requirements regarding the operation of the business during the earnout period

9. Protection Mechanisms: Provisions protecting the earnout calculation from manipulation or extraordinary events

10. Security Provisions: Any security arrangements for earnout payments, such as bank guarantees or escrow arrangements

11. Tax Provisions: Treatment of tax implications for earnout payments and responsibilities of the parties

12. Dispute Resolution: Procedures for resolving disputes about earnout calculations or payments

13. Final Provisions: Standard closing provisions including governing law, jurisdiction, and form requirements