Locked Box Clause Samples
A Locked Box clause is a mechanism used in mergers and acquisitions to fix the purchase price of a business as of a specific date, known as the "locked box date." After this date, the seller is typically restricted from extracting value from the company, such as through dividends or other payments, until the transaction closes. The clause ensures that any economic benefits or risks arising after the locked box date accrue to the buyer, not the seller. Its core function is to provide price certainty and prevent value leakage between the agreed date and completion of the deal.
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Locked Box. 4.1 Each Seller severally and in respect of itself only, warrants and undertakes to the Purchaser that in the period commencing on the day immediately following the Signing Date up to and including the Completion Date, save to the extent that the same would constitute Permitted Leakage:
(a) no dividend or other distribution of profits or assets (including any distribution as defined in Part IV of the Taxes Act and extended by section 418 of the Taxes Act) has been or will be declared, made by the Company or would be treated as having been paid or made by the Company to or for the benefit of a Seller or any person connected with either Seller (a “Seller’s Affiliate”);
(b) no payments have been or will be made by or on behalf of the Company to or for the benefit of a Seller or a Seller’s Affiliate;
(c) no share or loan capital of the Company has been or will be redeemed, repurchased or repaid or result in a payment to or an agreement or obligation to make a payment to a Seller or a Seller’s Affiliate;
(d) no amounts owed to the Company by a Seller or Seller’s Affiliate have been or will be waived;
(e) no assets, rights or other benefits have been or will be transferred by the Company to a Seller or a Seller’s Affiliate;
(f) no indebtedness or other liabilities have been or will be assumed or incurred, guaranteed or indemnified by the Company for the benefit of a Seller or a Seller’s Affiliate;
(g) no Encumbrance has been created over any of the assets of the Company in favour of or for the benefit of a Seller or a Seller’s Affiliate;
(h) no management, service, monitoring or other shareholder or directors’ fees or bonuses or payments of a similar nature have been or will be paid by or on behalf of the Company to or for the benefit of a Seller or a Seller’s Affiliate;
(i) no costs or expenses of a Seller or Seller’s Affiliate relating to the sale of the Shares (to any person), or to the other transactions contemplated by this agreement (including any professional advisers’ fees and any transaction or sale bonuses or other payments payable as a result of the completion of the sale of the Shares (to any person)), have been or will be paid or incurred, by or on behalf of the Company to or on behalf of a Seller or a Seller’s Affiliate;
(j) the Company has not has amended, nor will it amend the terms of its borrowing or indebtedness in the nature of borrowing owed by it to a Seller or a Seller’s Affiliate to the benefit of a Seller or a Seller’s Affiliate;
(k) the...
Locked Box. Borrower has obtained and shall continue to maintain during the term of this Agreement the post office box at the U.S. Post Office bearing the following address: P▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇, or such other address as Bank may notify Borrower from time to time (the “Locked Box”). Borrower shall notify all of its customers and account debtors to forward all remittances of every kind due Borrower (“Remittances”) to the Locked Box (such notices to be in such form and substance as Bank may require from time to time). Immediately upon receipt thereof, Borrower shall deposit all other proceeds of Receivables or other Loan Collateral into the Locked Box (or into the Special Account, as defined below). Bank shall have sole access to the Locked Box at all times, and Borrower shall take all action necessary to grant Bank such sole access. At no time shall Borrower remove any item from the Locked Box without Bank’s prior written consent, and Borrower shall not notify any customer or account debtor to pay any Remittance to any other place or address without Bank’s prior written consent. If Borrower should neglect or refuse to notify any customer or account debtor to pay any Remittance to the Locked Box, Bank shall be entitled to make such notification. Borrower hereby grants to Bank an irrevocable power of attorney, coupled with an interest, to take in Borrower’s name all action necessary (a) to grant Bank sole access to the Locked Box, (b) to contact account debtors to pay any Remittance to the Locked Box in the event that any such account debtor is not paying any such Remittance to the Locked Box, (c) to contact account debtors for any reason upon the occurrence of an Event of Default, and (d) to endorse each Remittance delivered to the Locked Box for deposit to the Special Account.
Locked Box. In the event that Completion occurs in accordance with clause 3.13.2, the Vendor covenants to the Purchaser that between the Completion Accounts Date and the Completion Date (inclusive) (save to the extent it *** Confidential Treatment Requested constitutes Permitted Leakage or save to the extent the relevant matter will be or has been taken into account in the Completion Accounts):
3.14.1 no dividend or other distribution of profits or assets (or any payments in lieu of any dividend or other distribution of profits or assets) will be declared, paid or made by any Group Company or would be treated as having been paid or made by a Group Company other than to another Group Company, whether in cash or in kind;
3.14.2 no payments will be made by or on behalf of a Group Company to or for the benefit of a Related Party;
3.14.3 no share capital of a Group Company will be redeemed, repurchased, reduced, waived or repaid or result in a payment or an agreement or obligation to make a payment to a member of any Related Party;
3.14.4 no amounts owed to a Group Company by a Related Party will be reduced, waived or forgiven;
3.14.5 no management, advisory, monitoring or other shareholder or director’s fees, charges or employee or director bonuses (including transaction bonuses) or payments of a similar nature will be paid by or on behalf of a Group Company to or for the benefit of a Related Party;
3.14.6 no changes will be made to the terms of any borrowing between a Related Party and a Group Company;
3.14.7 no indebtedness of any kind (including all accrued Interest thereon) due or owing to (or for the benefit of) any Related Party by (or on behalf of) any Group Company will be created, incurred, increased, repaid, reduced or waived save for balances arising from the ordinary course of business under agreements entered into on or before the date of this Agreement;
3.14.8 no liability, obligation or indemnity will be assumed, indemnified or incurred by any Group Company for the benefit of any Related Party;
3.14.9 there will be no change in the terms of any indebtedness of any Group Company;
3.14.10 no sale, transfer, surrender or other disposal (whether in whole or in part) or waiver of any assets, rights or other benefits or value of a Group Company will be made to any Related Party;
3.14.11 no professional fees, expenses or other costs in connection with the transaction contemplated by the Transaction Documents will be paid by or on behalf of a Group Company or for t...
Locked Box. 3.4.1 Subject to the provisions of this Section 3.4:
3.4.1.1 Sellers undertake jointly and severally to pay to Buyer an amount equal to any Leakage received by, or originating in favor of, Sellers or any of their Affiliates (other than the Companies) from and including the Locked Box Date to Closing. In each case, if such amount is determined prior to Closing, it shall be deducted from the Purchase Price as paid to the Escrow Account.
3.4.2 Buyer may serve on Sellers a Leakage Notice at any time up to seven (7) months after Closing. Within twenty (20) Business Days after the date of receipt of any Leakage Notice, the respective Seller (or Sellers as appropriate) may either: (i) accept in writing the amount of Leakage specified in the Leakage Notice in whole or in part (such accepted amount, the “Agreed Leakage Amount”); or (ii) deliver a Leakage Dispute Notice (including in respect of the not accepted amount from the previous subparagraph (i)). Sellers shall pay to Buyer an amount equal to any Leakage: (A) by deduction from the Purchase Price payable at Closing if the Agreed Leakage Amount is determined before Closing; or (B) within 10 Business Days of the Leakage Amount being otherwise determined (whether as an Agreed Leakage Amount or otherwise), in accordance with this Section 3.4. If the respective Seller (or Sellers as appropriate) does not deliver a Leakage Dispute Notice within the relevant period referred to in this Section 3.4.2, then the Leakage specified in the Leakage Notice shall be deemed to be an Agreed Leakage Amount.
3.4.3 If the respective Seller (or Sellers as appropriate) delivers a Leakage Dispute Notice within the relevant period referred to in Section 3.4.2, then:
3.4.3.1 Buyer shall make immediately available, and Buyer shall procure that the respective Company makes immediately available, to the respective Seller such information, records or documents in its possession and control which Buyer in its sole discretion deems reasonably requested by the respective Seller for the purpose of reviewing the items identified in the Leakage Notice;
3.4.3.2 the respective Seller and Buyer shall seek to negotiate in good faith for a period of twenty (20) Business Days as of delivery of the Leakage Dispute Notice to agree the Leakage Amount;
3.4.3.3 if the Leakage Dispute Notice is delivered before Closing, an amount equal to the Leakage which is disputed in the Leakage Dispute Notice (the “Leakage Escrow Amount”) shall be held in the Escrow Acc...
Locked Box. 5.1 Each Minority Seller in respect of itself and its Connected Persons:
(a) severally warrants only to the Buyer that, during the period from (but excluding) the Locked Box Date up to and including the date of this Agreement, neither it nor any of its Connected Persons has received or benefitted (directly or indirectly) from any Leakage, other than Permitted Leakage; and
(b) severally undertakes only to the Buyer that, during the period from (but excluding) the date of this Agreement up to and including the Completion Date, neither it nor any of its Connected Persons shall receive or benefit (directly or indirectly) from any Leakage, other than Permitted Leakage.
5.2 In the event of any breach of warranty or undertaking in clause 5.1 (but always subject to clause 5.3):
(a) each Minority Seller shall pay to the Buyer on demand (on a pound for pound basis) an amount equal to the cash or cash equivalent value of the benefit received (directly or indirectly), or deemed to have been received pursuant to clause 5.6, by such Minority Seller or its Connected Persons as a result of such Leakage, less any Minority Pre-Completion Leakage Amount in respect of such Leakage that is deducted from such Minority Seller’s Relevant Portion in accordance with clause 3.4; save that,
(b) where limb (g) of Leakage applies, or limbs (l) and (m) to the extent they apply solely in respect of limb (g), each Minority Seller shall pay to the Buyer on demand (on a pound for pound basis) an amount equal to such proportion of the aggregate amount of any such Leakage (less any Minority Pre-Completion Leakage Amount in respect of such Leakage that is deducted in accordance with clause 3.1) as is equal to the proportion which the amount of Consideration payable to such Minority Seller at Completion bears to the total consideration payable by the Buyer for the sale of the Shares and Majority Shares at Completion and completion of the Majority SPA.
5.3 No Minority Seller shall be liable for any Leakage Claim unless written notice of the Leakage Claim, specifying in reasonable detail (as far as they are known to the Buyer) the specific matter in respect of which the Leakage Claim is made and, as far as is reasonably practicable, the Buyer’s calculation of the amount claimed, is served on the relevant Minority Seller on or before the date which is six months following the Completion Date, provided that a failure to provide such detail shall not of itself invalidate a written notice of such Lea...
Locked Box. 7.1 The Seller undertakes that from and including 25 September 2009 and until Completion, other than Permitted Leakage:
(A) no member of the Group has declared, authorised, paid or made (whether actual or deemed) to any member of the Retained Group any dividend, distribution or other return of capital (whether by reduction of capital or purchase of shares) or will do any of those things;
(B) no member of the Group has transferred or surrendered any asset to, or assumed, indemnified or incurred any liability (including, without limitation, any indebtedness, expenses or costs) for the benefit of, any member of the Retained Group or will do any of those things;
(C) no member of the Group has waived or released in favour of member of the Retained Group, nor has any member of the Retained Group failed to pay when due, any sum or obligation due by any such member of the Retained Group to any member of the Group or will do any of those things;
(D) no payment, management charge or fee of any nature has been or will be levied by, or for the benefit of, any member of the Retained Group against any member of the Group and there has been no payment of any nature including, without limitation, any payment of any management, service or similar fee or compensation or loan by a member of the Group to, or for the benefit of, any member of the Retained Group;
(E) no member of the Group has entered into, and will not enter into, any agreement or arrangement with any member of the Retained Group and has not amended and will not amend an agreement with any member of the Retained Group in such a way as to increase the cost to that member of the Group;
(F) no member of the Group has incurred or paid, nor will they incur or pay any amount to any person whether as fees, bonus or otherwise in connection with any sale and purchase of the Shares;
(G) none of the matters referred to in clauses (A) to (F) has taken place where the person directly benefiting is not a member of the Retained Group but as a consequence of a direct or indirect agreement or arrangement between such person and any member of the Retained Group obtains a benefit;
(H) no group company has made or entered into any agreement or arrangement to give effect to any of the matters referred to in sub-clauses (A) to (G) above, (together, the “No Leakage Undertakings”).
7.2 For the purposes of sub-clause 7.1, the “Retained Group” includes any nominee, agent or director of any member of the Retained Group and any person “c...
Locked Box. Since April 1, 2018 until the Closing Date (included), there has been no Leakage other than a Permitted Leakage.
Locked Box. The Sellers, severally and not jointly, represent, warrant and undertake, to Parent that:
(i) there has been no Leakage at any time from the Locked-Box Date up to and including the Agreement Date, other than Permitted Leakage or as set forth on Schedule 6.9(a)(i) of the Seller Disclosure Letter; and
(ii) there shall be no Leakage at any time from the Agreement Date up to and including the Closing, other than Permitted Leakage or as set forth on Schedule 6.9(a)(ii) of the Seller Disclosure Letter. following:
Locked Box. 5.1 For the purposes of this Agreement, “Leakage” means the following:
Locked Box. 4.1 Each Seller (in respect of itself only and not in respect of any other Seller) severally covenants to pay to the Purchaser (or any member of the Group as the Purchaser directs) an amount in cash equal to any Leakage received by it or him (or any Connected Person of such Seller) within 15 Business Days of receipt of a valid written notice from the Purchaser in accordance with clause 4.2.
4.2 Except in the case of fraud, no Seller shall be liable under clause 4.1 unless written notice of such Leakage has been notified to that Seller (specifying the precise nature of the Leakage and the amount due from him) on or before the date which is six (6) months after the Completion Date setting out reasonable details of the Leakage (including the matter or thing giving rise to the relevant Leakage, together with the amount repayable by the relevant Seller(s)).
4.3 The maximum aggregate liability of each Seller under this clause 4 (Locked Box) shall not in any circumstances exceed the amount of Leakage actually received by that Seller or Connected Person of such Seller and the Purchaser shall have no other remedy for any Leakage other than as set out in this clause 4 (Locked Box).