Earn Out Units Clause Samples
The 'Earn Out Units' clause defines the mechanism by which additional ownership interests or equity units are granted to a party based on the achievement of specific performance targets after a transaction closes. Typically, this clause outlines the criteria for earning these units, such as meeting revenue milestones or profitability goals within a set timeframe, and details the calculation and timing of such issuances. Its core practical function is to align incentives between the parties, rewarding continued strong performance and bridging valuation gaps by tying part of the consideration to future results.
Earn Out Units. In addition to the consideration set forth above in Section 1.3, in the event that EBITDA (as defined below) exceeds $4,088,900 (the “Threshold Amount”) for any 12-month trailing period (on a calendar month basis) occurring prior to the third anniversary of the IPO Closing Date, then the Grantors shall receive 83,333 Units (the “Earn-Out Units”). In the event EBITDA has not exceeded the Threshold Amount during any such period, but EBITDA has exceeded $4,005,567 (the “Base Amount”) during the final 12-month trailing period (on a calendar month basis) occurring prior to the third anniversary of the IPO Closing Date, then the Grantors shall receive an amount of Earn-Out Units equal to the product of (a) 83,333 multiplied by (b) the fraction obtained by dividing the difference between the Base Amount and the actual amount of such EBITDA by the difference between the Base Amount and the Threshold Amount. For purposes of this Section 1.4, “EBITDA” shall mean the net income before interest, taxes, depreciation and amortization, determined in accordance with generally accepted accounting principles applied on a consistent basis, earned attributable solely to the Property. Such Earn-Out Units shall be delivered by Optionee on a business day to be determined by Optionee no later than 30 calendar days after the end of such applicable period. Notwithstanding anything herein to the contrary, in the event at the time of any such required delivery of Units pursuant to this Section 1.4, legal counsel to the Optionee determines that the issuance of any such Units would not be exempt from registration under the Act and applicable state securities laws, then Optionee shall pay to any such Grantor the cash value of any such Units in lieu of delivery of the Units.
Earn Out Units. The Parties intend that, for U.S. federal and applicable state and local income tax purposes, (a) the Earn Out Units, if any, received by the Continuing Members in connection with the Business Combination Agreement not be treated as being received in connection with the performance of services, (b) the Earn Out Units, if any, received by the Continuing Members in connection with the Business Combination Agreement reflect an adjustment by the Members to the agreed-upon sharing of unrealized appreciation in the Company’s assets, (c) no such Member be treated as having taxable income or gain as a result of such receipt of any such Earn Out Units or as a result of holding any such Earn Out Units at the time of any Triggering Event (other than as a result of corrective allocations made pursuant to Section 5.2(i)), and (d) for the avoidance of doubt, for purposes of the allocations described in this Article V and the determination and maintenance of Capital Accounts and distributions described in Article VI, each Earn Out Unit is a Class B Unit. The Company shall prepare and file all tax returns consistent with such intended treatment unless otherwise required by a “determination” within the meaning of Section 1313 of the Code.
Earn Out Units. The parties to this Agreement intend that, for U.S. federal income tax purposes, unless otherwise required by the Code or Treasury Regulations, (a) the Unvested Earn Out Units received by any of the Pre-Transaction Members shall not be treated as being received in connection with the performance of services, (b) the receipt of Common Units on conversion of any Unvested Earn Out Units upon a Vesting Event shall be treated in accordance with principles similar to those set forth in Treasury Regulation Section 1.721-2(a), and (c) the Pre-Transaction Members shall not be treated as having taxable income or gain as a result of the receipt of such Unvested Earn Out Units or the receipt of any Common Units as a result of any Vesting Event (other than as a result of corrective allocations made pursuant to the second sentence of Section 5.04(d)). The Company shall prepare and file all applicable tax returns consistent therewith unless otherwise required by a “determination” within the meaning of Section 1313 of the Code or a change in applicable Law. Notwithstanding the foregoing, each of the Pre-Transaction Members may, within 30 days of the Closing Date, as defined in the Transaction Agreement, file with the IRS on a protective basis a completed election under Section 83(b) of the Code and the Treasury Regulations with respect to the Unvested Earn Out Units.
Earn Out Units. The parties to this Agreement intend that, for U.S. federal income tax purposes, unless otherwise required by the Code or Treasury Regulations, (a) unless a contrary treatment is set forth in the applicable Supplemental Agreement, the Unvested Earn-out Units received by any Partner shall not be treated as being received in connection with the performance of services, (b) the receipt of Class A Units on conversion of any Unvested Earn-out Units upon a Vesting Event shall be treated in accordance with principles similar to those set forth in Treasury Regulation Section 1.721-2(a), and (c) the Partners shall not be treated as having taxable income or gain as a result of the receipt of such Unvested Earn-out Units or the receipt of any Class A Units in connection with any Vesting Event (other than as a result of corrective allocations made pursuant to the last sentence of Section 5.6 . The Partnership shall prepare and file all applicable tax returns consistent therewith unless otherwise required by a “determination” within the meaning of Section 1313 of the Code or a change in applicable Law.
Earn Out Units. (a) As part of the Recapitalization, the Class A Sellers will receive the Unvested Earn Out Units, which will have the terms and conditions set forth in the Company Second A&R Operating Agreement, which shall be consistent with the terms listed in this Section 3.01 and shall vest as follows:
(i) upon the occurrence of Triggering Event I, 2,500,000 of the Unvested Earn Out Units shall vest to each Class A Seller in accordance with such Class A Seller’s Earn Out Pro Rata Share to the extent provided in the Company Second A&R Operating Agreement (the “Triggering Event I Earn Out Units”);
(ii) (x) upon the occurrence of Triggering Event II-A, 5,000,000 of the Unvested Earn Out Units shall vest to each Class A Seller in accordance with such Class A Seller’s Earn Out Pro Rata Share to the extent provided in the Company Second A&R Operating Agreement (the “Triggering Event II-A Earn Out Units”) or (y) upon the occurrence of Triggering Event II-B, 7,500,000 of the Unvested Earn Out Units shall vest to each Class A Seller in accordance with such Class A Seller’s Earn Out Pro Rata Share to the extent provided in the Company Second A&R Operating Agreement (the “Triggering Event II-B Earn Out Units”); and
(iii) upon the occurrence of Triggering Event III, 2,500,000 of the Unvested Earn Out Units shall vest to each Class A Seller in accordance with such Class A Seller’s Earn Out Pro Rata Share to the extent provided in the Company Second A&R Operating Agreement (the “Triggering Event III Earn Out Units” and, together with the Triggering Event I Earn Out Units, the Triggering Event II-A Earn Out Units and the Triggering Event II-B Earn Out Units, the “Earn Out Units”).
(b) For the avoidance of doubt, (i) the Earn Out Units shall be, in each case, adjusted as appropriate to reflect any stock splits, reverse stock splits, stock dividends (including any dividend or distribution of securities convertible into Company Common Units), extraordinary cash dividend (which adjustment shall be subject to the reasonable mutual agreement of the Purchaser and the Company), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change or transaction with respect to Company Common Units occurring on or after the Closing, (ii) the Triggering Events may be achieved at the same time or over the same overlapping Trading Days, and (iii) Triggering Event II-A and Triggering Event II-B may not both be achieved.
(c) If Triggering Event I or a Change of...