True-Up Balance Sheet Clause Samples
A True-Up Balance Sheet clause establishes a process for adjusting the purchase price or financial terms of a transaction based on the actual financial position of a company at closing, as reflected in a finalized balance sheet. Typically, after the transaction closes, the parties compare the estimated balance sheet used at signing with the actual balance sheet at closing, and any differences—such as in working capital, cash, or debt—are settled through payments between buyer and seller. This clause ensures that both parties are treated fairly by aligning the final transaction price with the company's true financial state at the time of transfer, thereby preventing overpayment or underpayment due to estimation errors.
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True-Up Balance Sheet. As promptly as practicable following the end of the twelve (12) month period immediately succeeding the Closing Date (the “True-Up Date”), but in any event within thirty (30) days after the True-Up Date, Madden shall prepare and deliver to Seller (i) the True-Up Balance Sheet, which shall be prepared as of the Closing Date on a basis consistent with the preparation of the Pre-Closing Date Working Capital Schedule, as adjusted as provided in clauses (v), (w), (x), (y) and (z) of this Section 2.5(a), and (ii) a calculation of Net Working Capital as of the close of business on the Closing Date based upon the True-Up Balance Sheet, as adjusted as provided in clauses (v), (w), (x), (y) and (z) of this Section 2.5(a) (the “True-Up Net Working Capital”), which shall explain in reasonable detail such calculation of the True-Up Net Working Capital. For purposes of the True-Up Balance Sheet, (v) the value of any Bayonne Reserve Inventory that is unsold as of the True-Up Date or that is subject to an existing order to ship such Inventory following the True-Up Date at a price less than cost for such Inventory as set forth on Section 2.3 shall be recorded on the True-Up Balance Sheet at zero, (w) the value of any Bayonne Reserve Inventory that is subject to an existing order to ship such Inventory following the True-Up Date at a price greater than or equal to cost for such Inventory as set forth on Section 2.3 of the Disclosure Schedule shall be recorded on the True-Up Balance Sheet at an amount equal to cost for such sold Inventory as set forth on Section 2.3 of the Disclosure Schedule, (x) the value of any Inventory other than the Bayonne Reserve Inventory that is unsold as of the True-Up Date shall be recorded on the True-Up Balance Sheet at an amount equal to cost (as set forth on Section 2.3 of the Disclosure Schedule) or market for such Inventory, whichever is lower, (y) the value for any Inventory (including the Bayonne Reserve Inventory) that has been sold as of the True-Up Date shall be recorded on the True-Up Balance Sheet at an amount equal to cost for such sold Inventory as set forth on Section 2.3 of the Disclosure Schedule, and (z) to the extent that any amounts are reserved for on the Pre-Closing Date Working Capital Schedule (e.g., reserves for returns, discounts and allowances), and the actual amount to which such reserves relate is known or knowable by Madden at the True-Up Date (the “True-Up Reserve Amounts”), the True-Up Balance Sheet shall be adjus...