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Covenants
Promises made by the buyer or seller in the acquisition agreement to perform or refrain from specific actions before or after closing.
Implications
Legally binding agreements or clauses in a contract, often found in loan agreements or bonds, that impose certain obligations or restrictions on the borrower or issuer, designed to protect the interests of the lender or investor.
Example
Example: A company agrees to financial covenants in its loan agreement that require it to maintain a minimum level of working capital and limit additional borrowing, ensuring it remains financially stable.
Related Terms
Different from conditions, which must be met for a contract to be executed, covenants are ongoing obligations that must be adhered to throughout the duration of a contract.
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