This clause is an all cash earn-out in which the buyer will pay to the seller additional contingent consideration based on the achievement of financial milestones measured by net income, revenue, or EBITDA. This clause contains practical guidance, drafting notes, and an alternate clause. Click here to see recent examples of publicly filed acquisition agreements containing earn-outs in Market Standards. What is an "Earn-out"? An earn-out is a deferred portion of the purchase price, or contingent payment, payable to the seller in connection with an acquisition that is based on the performance of the target business for some specified period of time after the closing of the transaction. Often, an earn-out will be described as a "bridge the gap" mechanism that allows a buyer that is concerned about overpaying for a target and a seller that believes its target business is being undervalued to reach agreement on the purchase price. When an Earn-Out Should be Used While earn-outs can be a ...