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Earnout Agreement for the Netherlands

Earnout Agreement Template for Netherlands

A Dutch law-governed Earnout Agreement is a legally binding document that structures additional purchase price payments based on the future performance of the acquired business. This agreement, compliant with Dutch civil and corporate law, defines the specific performance metrics, calculation methodologies, and payment conditions that determine post-closing compensation to the sellers. It includes detailed provisions for monitoring business performance, information rights, dispute resolution mechanisms, and protections for both buyers and sellers, all within the framework of Dutch legal requirements and accounting standards.

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What is a Earnout Agreement?

An Earnout Agreement is used in merger and acquisition transactions where part of the purchase price is contingent on the future performance of the acquired business. This document, governed by Dutch law, bridges the valuation gap between buyers and sellers by linking additional payments to specific performance targets. The agreement is particularly valuable in transactions involving businesses with significant growth potential, uncertain valuations, or where the sellers' continued involvement is crucial. The Earnout Agreement details the mechanics of calculating and paying the earnout, including performance metrics, measurement periods, payment terms, and verification procedures. It includes provisions compliant with Dutch corporate and tax laws, addressing areas such as business operation requirements, information rights, and dispute resolution mechanisms.

What sections should be included in a Earnout Agreement?

1. Parties: Identification of the buyer, seller(s), and any guarantors

2. Background: Context of the transaction, including reference to the main purchase agreement

3. Definitions: Defined terms used throughout the agreement, including financial metrics and calculation periods

4. Earnout Structure: Core earnout mechanics, including performance metrics and measurement periods

5. Calculation of Earnout Payments: Detailed methodology for calculating earnout payments, including formulas and adjustments

6. Payment Terms: Timing, method, and conditions for earnout payments

7. Information Rights: Seller's rights to information and financial statements relevant to earnout calculations

8. Verification and Dispute Resolution: Procedures for verifying calculations and resolving disputes

9. Conduct of Business: Obligations regarding how the business should be operated during the earnout period

10. Acceleration Events: Circumstances triggering immediate payment or adjustment of earnout (e.g., sale of business)

11. Representations and Warranties: Standard representations regarding authority and capacity

12. Confidentiality: Provisions regarding confidential information

13. Governing Law and Jurisdiction: Choice of Dutch law and jurisdiction provisions

14. General Provisions: Standard boilerplate clauses including notices, amendments, and assignment

What sections are optional to include in a Earnout Agreement?

1. Employment Conditions: Required when earnout is linked to continued employment of sellers

2. Intellectual Property Protection: Needed when IP is critical to achieving earnout targets

3. Non-Competition and Non-Solicitation: Include when additional protection of business value is required

4. Tax Provisions: Specific tax arrangements and allocations between parties

5. Multiple Seller Provisions: Required when there are multiple sellers with different earnout arrangements

6. Security Arrangements: Include when security is provided for earnout payments

7. Change of Control Provisions: Needed when specific provisions apply in case of change of control

8. Regulatory Compliance: Required for regulated industries or when specific regulatory requirements apply

What schedules should be included in a Earnout Agreement?

1. Schedule 1 - Earnout Calculations: Detailed formulas and examples of earnout calculations

2. Schedule 2 - Performance Metrics Definitions: Detailed definitions of all financial and operational metrics used

3. Schedule 3 - Accounting Principles: Specific accounting principles and policies to be applied

4. Schedule 4 - Form of Earnout Statement: Template for periodic earnout calculations and reporting

5. Schedule 5 - Excluded Events and Adjustments: List of events that require adjustments to calculations

6. Schedule 6 - Information Rights: Detailed procedures for information sharing and verification

7. Schedule 7 - Dispute Resolution Procedure: Detailed steps for resolving calculation disputes

8. Schedule 8 - Pro Forma Calculations: Example calculations showing how the earnout would work in different scenarios

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Netherlands

Publisher

Ƶ

Document Type

Payment Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions






















































Clauses



































Relevant Industries

Technology

Professional Services

Healthcare

Manufacturing

E-commerce

Software Development

Consulting

Media and Entertainment

Pharmaceuticals

Financial Services

Real Estate

Consumer Goods

Relevant Teams

Legal

Finance

Mergers & Acquisitions

Corporate Development

Tax

Accounting

Business Development

Executive Leadership

Treasury

Commercial

Relevant Roles

Chief Executive Officer

Chief Financial Officer

M&A Director

Corporate Lawyer

Financial Controller

Business Development Director

Integration Manager

Tax Director

Commercial Director

General Counsel

Finance Manager

Corporate Development Manager

Managing Director

Transaction Services Manager

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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