A lockout agreement is a contract between two parties that provides exclusivity to the buyer during a specific period to conduct due diligence and finalize the transaction. A sample lockout agreement outlines the terms and conditions under which a seller agrees not to negotiate with any other potential buyers for a certain amount of time during the transaction process.
The purpose of a lockout agreement is to protect the buyer`s investment of time and resources during the due diligence process while ensuring the seller`s continued commitment to the transaction. A lockout agreement can be used in various industries, including real estate, mergers and acquisitions, and intellectual property transactions.
A sample lockout agreement typically includes the following key elements:
1. Duration: The period of exclusivity during which the seller agrees not to solicit or negotiate with any other potential buyers.
2. Termination: The circumstances under which either party can terminate the agreement, such as a breach of contract or failure to meet certain conditions.
3. Confidentiality: A clause that requires both parties to maintain confidentiality during the negotiation process and not disclose any confidential information to third parties.
4. Liability: The extent of each party`s liability in case of breach of contract or any other dispute.
5. Conditions precedent: A list of conditions that must be met before the transaction can be completed, such as obtaining necessary permits or approvals.
6. Expenses: A provision outlining which party is responsible for covering expenses related to the transaction, such as legal fees or appraisal costs.
In conclusion, a lockout agreement is an essential tool used in many transactions to protect the investment of both parties. A sample lockout agreement should be customized to fit the specific needs of the parties involved and drafted with the help of experienced legal counsel. By carefully considering all necessary clauses and provisions, both parties can more efficiently conduct due diligence and ensure a successful transaction.