We are agreeing to provide thirty percent seller financing to help close the deal, but we want to monitor the company's health without interfering in daily operations. How do we structure information rights and default triggers linked to our historical Scorecard metrics in the promissory note?

Question

Tyler Smith · Accepted Answer

When you accept a seller note, you are taking on buyer risk. To sleep at night, you need real-time operational visibility, but you cannot legally or practically micro-manage the business post-close. The solution is to write your historical Scorecard metrics directly into the promissory note as your information rights package.

Do not settle for standard quarterly financial statements delivered forty-five days after the quarter ends. By then, the damage is already done. Instead, mandate that the buyer provides you with a copy of the weekly operational Scorecard. This provides a direct, unvarnished window into the actual health of the business, tracking leading indicators like pipeline value, customer satisfaction scores, and employee retention.

Incorporate specific default triggers into the note based on these Scorecard numbers:

- A drop in the rolling four-week average of key leading indicators below seventy percent of historical levels.
- Failure to run weekly Level 10 Meetings™ with the leadership team, which indicates a breakdown of the operating system.
- Any unauthorized change to the seat-holders occupying the visionary or integrator roles on the Accountability Chart.

By tying your promissory note covenants to these objective operational metrics, you create an early-warning system. If the buyer starts to slip, you have the legal leverage to intervene, adjust terms, or protect your principal before the business heads toward insolvency.