Balance Sheet Test Clause Samples
The Balance Sheet Test clause establishes a requirement to assess a company's financial health by comparing its assets and liabilities at a specific point in time. In practice, this clause is often used to determine whether a company is solvent, meaning its total assets exceed its total liabilities, before certain actions—such as dividend payments or debt incurrence—are permitted. The core function of this clause is to prevent a company from undertaking financial obligations or distributions that could jeopardize its solvency, thereby protecting creditors and stakeholders from undue risk.
Balance Sheet Test. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3.
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Balance Sheet Test. The Sellers and Purchaser agree that the Purchase Price will be adjusted as of the Effective Time such that (i) if at the Effective Time the Closing Date Net Working Capital is more than the Target, the Purchase Price will be increased by 73.1% of the amount of such excess and (ii) if at the Effective Time the Closing Date Net Working Capital is less than the Target, the Purchase Price will be reduced by 73.1% of the amount of such shortfall. Attached hereto as Exhibit C is an example of a Closing Date Balance Sheet, including a calculation of the Closing Date Net Working Capital as of June 30, 2014, based on the Company’s balance sheet as of such date, which is included solely to illustrate the Parties’ intentions regarding the provisions of this Section 2.3.
Balance Sheet Test. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. Notwithstanding anything set forth above, VPI acknowledges (i) that the COMPANY has established a reserve in the amount of $385,000 on its balance sheet relating to contingent liabilities and (ii) that this reserve shall be deemed to have not been established (i.e., shall be ignored and not counted) when conducting the above-referenced balance sheet tests, including positive net working capital, positive net worth and fully funded customer deposits.
Balance Sheet Test. (a) If on the Closing Date the Agency’s current assets exceed total liabilities, the Purchase Price will be increased by fifty percent (50%) of such excess. If on the Closing Date the Agency’s total liabilities exceed current assets, the Purchase Price will be reduced by fifty percent (50%) of such excess. The calculations described above are referred to herein as the “Balance Sheet Test”. For purposes of this Agreement, “current assets” and “total liabilities” of the Agency shall consist of the types of items described in Schedule 1.3(a). In computing the adjustment described above, the Closing Date Balance Sheet (as defined below) shall be prepared in accordance with generally accepted accounting principles, except that the following items will be included in total liabilities (whether or not required to be so treated by generally accepted accounting principles): vacation accruals, self-insured health or medical claims which have been incurred but not funded, accrued rebates, paid-in-advance subscription liabilities, pre-paid advertising, all state and local taxes (including interest and penalties) imposed on the Agency for periods ending on or before the Closing Date (treating the Closing Date as the end of a taxable period of the Agency whether or not it is so treated by applicable tax law). Current assets shall not be reduced, and total liabilities shall not be increased, by the amount paid to Seller pursuant to the Redemption Agreement or any expenses incurred in connection therewith. The accounting methods currently employed by the Agency consistent with prior periods shall be used to determine the value of inventory, prepaid expenses and similar items. The amounts to be included on the Closing Date Balance Sheet with respect to (i) the assets and liabilities of the Retirement Benefit Plan of Newspaper Drivers & Handlers, Local #372, (ii) the assets and liabilities of the Retirement Benefit Plan of GCIU Detroit Newspaper Union 13N, and (iii) post-retirement benefit obligations under FAS 106 with respect to all current and former employees of the Agency (and their beneficiaries), will be a liability of $121.6 million, notwithstanding what amounts would otherwise be required to be included under generally accepted accounting principles. Current assets will include (x) the amount to be included on the Closing Date Balance Sheet for cumulative capital expenditures relating to the Sterling Heights Press and Facility Expansion as of the Closing Date, notw...
Balance Sheet Test. If on the Closing Date the Newspapers’ current assets which are included in the Assets exceed the total liabilities set forth on the Closing Date Balance Sheets (as defined below), the Base Purchase Price will be increased by such excess. If on the Closing Date the Newspapers’ total liabilities set forth on the Closing Date Balance Sheet exceed the Newspapers’ current assets which are included in the Assets, the Base Purchase Price will be reduced by such excess. The calculations described above are referred to herein as the “Balance Sheet Tests”. In computing the adjustment described above, the Closing Date Balance Sheets shall be prepared in accordance with Sellers’ historical accounting practices which reflect accrual basis accounting and are in accordance with generally accepted accounting principles other than as set forth on Schedule 1.6(c). The accounts receivable shall be included net of an agreed upon reserve. All intercompany and affiliate receivables or liabilities will be treated as shareholders’ equity and will be excluded from the balance sheet adjustment and will not be assumed by Buyer. All prepaid advertising shall be accrued as liabilities in the amount of such prepayments.
Balance Sheet Test. The Balance Sheet Test determines whether or not the fair value and present fair salable value of Delta Apparel's assets exceeds its stated liabilities and identified contingent liabilities after giving effect to the Transaction. This test requires an analysis of the fair market value of Delta Apparel as a going-concern. As part of this analysis, Houlihan Lokey considered, ▇▇▇▇▇ ▇t▇▇▇ ▇hings,
Balance Sheet Test. The Balance Sheet Test determines whether or not the fair value and present fair salable value of Duck Head's assets exceeds its stated liabilities and identified contingent liabilities after giving effect to the Transaction. This test requires an analysis of the fair market value of Duck Head as a going-concern. As part of this analysis, Houlihan Lokey considered, a▇▇▇▇ ▇▇▇e▇ ▇▇▇ngs,