Buffer Term Sheet
Buffer Term Sheet
1. Introduction
This Term Sheet ("Term Sheet") delineates the terms and conditions governing the earn-out arrangement contemplated between [YOUR COMPANY NAME] ("Buyer") and [SELLER'S COMPANY NAME] ("Seller") in connection with the acquisition of [SELLER'S COMPANY NAME] by [YOUR COMPANY NAME]. The objective is to establish a clear framework for potential earn-out payments based on predefined performance metrics and milestones post-acquisition.
2. Definitions
For this Term Sheet:
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"Earn-out Period" shall mean the period commencing on the acquisition closing date and ending on January 1, 2051.
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"Performance Metrics" refer to the specific criteria and targets upon which the earn-out payments will be based, such as achieving revenue targets, maintaining customer retention rates, or launching new products.
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"Earn-out Amount" denotes the maximum additional consideration that may be payable to the Seller, contingent upon achieving the specified Performance Metrics.
3. Earn-Out Structure
The structure of the earn-out consideration will be as follows:
|
Metric |
Weighting |
Target |
Maximum Earn-Out Amount |
|---|---|---|---|
|
Revenue Growth |
50% |
$50,000,000 |
$5,000,000 |
|
Customer Retention Rate |
30% |
80% |
$3,000,000 |
|
Product Development |
20% |
5 new products |
$2,000,000 |
4. Earn-Out Payment Mechanics
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The Earn-Out Amount shall be calculated and paid annually within 30 days following the end of each fiscal year during the Earn-Out Period.
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Payment of the Earn-Out Amount shall be subject to verification of the achievement of the applicable Performance Metrics by an independent third-party auditor agreed upon by Buyer and Seller.
5. Other Terms
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The earn-out consideration is subject to adjustment based on extraordinary events or significant changes in the business environment.
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The obligations and rights of the Buyer and Seller concerning the earn-out consideration shall survive the closing of the acquisition.
6. Dispute Resolution
Any disputes arising out of or in connection with this Term Sheet shall be resolved by the laws of [GOVERNING LAW], through binding arbitration conducted in [ARBITRATION VENUE].
7. Confidentiality
The terms of this Term Sheet are confidential and may not be disclosed to any third party without the prior written consent of the Buyer and Seller.
This Term Sheet serves as a preliminary understanding and is not legally binding except for the provisions related to confidentiality and dispute resolution. The final agreement governing the earn-out arrangement shall be documented in a definitive agreement to be negotiated and executed by the parties.
