Definitions for "Earn-Out"
An arrangement in which the sellers of a business may receive additional future payments for the business based on the economic performance of the sold business (or the buyer, including the sold business) after the sale.
An element of the price paid for the business which is due for payment at some time after completion of the transaction where in addition to the payment being tied to a performance measure the continued involvement of the sellers is a central feature. Earn out structures are extremely common in "people businesses" where a great deal of the value of a business is tied up with the people working in it.
a payment to the vendor of a portion of the purchase price over a period of time based on some benchmark to be achieved by the businesses