Green Acquisition Obligations
A share purchase/ asset purchase agreement clause requiring the purchaser to maintain/ improve the target company's green credentials post acquisition, linked to payment from escrow if successful.
What this clause does
Sellers can ensure that the purchaser maintains and continues the progress the seller has invested in towards achieving net zero and climate targets. The purchaser is incentivised by earning back a payment held in an escrow account and by gaining a company that maintains a robust net zero transition plan.
Clauses
1.1 Payment of the Repayable Consideration by the Seller from the Escrow Account via a notification to the Escrow Account Manager is conditional on the following conditions (the Repayable Consideration Conditions) being satisfied (as determined by the Seller in its sole discretion in the absence of manifest error) or waived by the Seller on the Repayable Consideration Condition Date:
a) that, for the period commencing on the date of this Agreement and ending on the Repayable Consideration Condition Date, the Company has maintained its Climate Credentials (as evidenced by the Climate Report); and
b) that, for the period commencing on the date of this Agreement and ending on the Repayable Consideration Condition Date, the Company has made reasonable efforts to achieve the Climate Targets (as evidenced by the Climate Report).
1.2 Within [x] days of the Repayable Consideration Condition Date, the Seller shall notify the Buyer that:
a) the Repayable Consideration Conditions have been satisfied or waived; or
b) the Repayable Consideration Conditions have not been satisfied or waived, providing written evidence of its calculations and outlining its reasons as to why the Repayable Consideration Conditions have not been satisfied,
such date of notification being the Determination Date.
1.3 In the event the Seller fails to notify the Buyer by the Determination Date pursuant to paragraph 1.2 above the Seller shall be deemed to have notified the Buyer that the Repayable Consideration Conditions have been waived.
1.4 If the Repayable Consideration Conditions are satisfied or waived by the Seller pursuant to paragraphs 1.2 and 1.3 above, then the Seller shall pay to the Buyer the Repayable Consideration from the Escrow Account on the Repayable Consideration Payment Date within [10 Business Days] of the Determination Date.
Definitions
Buyer means [x].
Carbon Footprint Standards means internationally recognised standards to measure, manage and demonstrate carbon credentials covering:
a) organisations (including but not limited to the BEIS Voluntary Reporting Guidelines and the GHG Protocol Corporate Accounting and Reporting Standard);
b) projects, product and services (including but not limited to PAS 2050:2011, ISO 14001 and the GHG Protocol Product Life Cycle Accounting and Reporting Standard); and
c) events (including but not limited to PAS2060/ ISO 20121).
Company means [x].
Climate Credentials means the following aspects of the Company:
a) the existing carbon footprint of the Company, including particular projects, products or services, measure in accordance with a Carbon Footprint Standard;
b) the sustainability committee of the Board chaired by a non-executive director with experience of improving sustainability and mitigating carbon footprint; and
c) the purchase by the Company of electricity for its office [and factory] on a green tariff that uses 100% renewable energy [; and] [.]
Climate Report means a report provided by a licensed professional to be agreed by the Seller and commissioned by the Buyer [3] months prior to the Repayable Consideration Condition Date, to determine whether the Buyer has satisfied the Repayable Consideration Conditions.
Climate Targets means:
a) the Company [has demonstrated credible progress towards] achieving the Net Zero Target;
b) the Company achieving pre-agreed reductions on its Carbon Footprint measured in accordance with one of Carbon Footprint Standards;
c) [the establishment by the Company of a sustainability committee as a committee of the Board chaired by a non-executive director with experience of improving sustainability and mitigating carbon footprint;] [If not already a Climate Credential]
d) [the purchase by the Company of electricity for its office [and factory] on a green tariff that uses 100% renewable energy;] [If not already a Climate Credential]
e) [the use by the Group of web hosts and cloud service providers which run their servers on 100% renewable energy or have their own Net Zero Target;
f) [the replacement of the Company’s fleet of vehicles with electric vehicle equivalents or implementation other electrification projects];
g) [the Company reviewing and updating supplier terms of engagement to procure goods and services from companies that have Net Zero Targets or other relevant climate targets] [the Company sourcing all consumables used by the Company from sustainable and ethical sources];
h) [the Company implementing zero waste and circular economy practices and principles in existing operations and design of new products and services] [; and] [.]
Determination Date has the meaning given in paragraph 1.2.
Escrow Account means [x].
Escrow Account Manager means [x].
Greenhouse Gases (GHGs) means the natural and anthropogenic gases which trap thermal radiation in the earth’s atmosphere and as specified in Annex A to the Kyoto Protocol to the United Nations Framework Convention on Climate Change (“UNFCCC”) or otherwise specified by the UNFCCC, and which currently include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3).
Greenhouse Gas Emissions means the emission of Greenhouse Gases over a specified area and period of time [as calculated in accordance with the GHG Protocol Corporate Accounting and Reporting Standard, or such other equivalent and generally recognised greenhouse gas emission calculation methodology].
Net Zero Target means that the balance between greenhouse gas emissions from all operations and greenhouse gas removals, accounted for by credits from either insetting or offsetting projects, is zero.
Repayable Consideration means [x%] of [purchase price].
Repayable Consideration Conditions has the meaning given in paragraph 1.1.
Repayable Consideration Condition Date means [x] or such later date as may be agreed between the Seller and the Buyer.
Seller means [x].
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