Distribution Shortfall Clause Samples
The Distribution Shortfall clause defines the procedures and consequences when the expected distributions, such as profits or payments, fall below a specified threshold. Typically, this clause outlines how any shortfall is calculated, who bears responsibility for the deficit, and the steps to be taken to address the gap, such as adjusting future distributions or requiring additional contributions. Its core function is to ensure fairness and transparency in financial arrangements by providing a clear mechanism for handling situations where distributions do not meet agreed-upon levels.
Distribution Shortfall. Except to the extent that any Distribution Shortfall (defined below) is attributable to the Company’s and its Subsidiaries’ compliance with an Applicable Overriding Law, in the event that the Company fails, for any quarter, to make a distribution to the Members of Distributable Cash in an amount not less than thirty percent (30%) of the net income of the Company and its Subsidiaries for such quarter (the “Threshold Amount”) within the ten- (10-) day period following the Distribution Date (a “Distribution Shortfall”), then Cinergy shall pay to New Investor, on an After-Tax Basis, an amount equal to (a) (i) the Threshold Amount less (ii) the amount of Distributable Cash actually distributed by the Company to the Members for such quarter, multiplied by (b) New Investor’s respective Company Percentage Interest. To the extent Cinergy does not withhold Tax on a payment to New Investor pursuant to this Section 13.1 and Tax is imposed on New Investor in respect of such payment, Cinergy shall indemnify New Investor for any Tax so imposed. Such payment shall be made within five (5) Business Days of the end of the ten- (10-) day period by wire transfer of immediately available funds to the account or accounts that New Investor shall designate to Cinergy at least five (5) Business Days prior to such closing. For the avoidance of doubt, any payment required to be made by Cinergy pursuant to this Section 13.1 shall not affect New Investor’s right to (or the amount of) future distributions made by the Company. Notwithstanding anything to the contrary in this Agreement, Cinergy shall not have the right to assign its obligations under this Section 13.1, whether in connection with a Transfer of Units made pursuant to Section 11.2 or otherwise, unless (i) such assignment is to a Wholly-Owned Affiliate of Cinergy, and (ii) New Investor is satisfied in its reasonable discretion that such Wholly-Owned Affiliate of Cinergy (or, if applicable, other provider of credit support in connection with such assignment) has sufficient financial wherewithal and creditworthiness to make the support payments pursuant to Section 13.1.
Distribution Shortfall. Except to the extent that any Distribution Shortfall (defined below) is attributable to the Company’s and its Subsidiaries’ compliance with an Applicable Overriding Law, in the event that the Company fails, for any fiscal quarter, to make a distribution to the Members of Distributable Cash in an amount not less than fifty-five percent (55%) of the net cash provided by operating activities of the Company and its Subsidiaries for such fiscal quarter (the “Threshold Amount”) within the ten- (10-) day period following the Distribution Date (a “Distribution Shortfall”), then Progress Energy or any of its Affiliates shall pay to New Investor an amount equal to (a) (i) the Threshold Amount less (ii) the amount of Distributable Cash actually distributed by the Company to the Members for such fiscal quarter, multiplied by (b) the New Investor Group’s Company Percentage Interest, which shall be prorated during such fiscal quarter based on the number of days such Member held an applicable Company Percentage Interest during such fiscal quarter; provided, however, that in no event shall the amount of any support payment pursuant to this Section 13.1 exceed the sum of (a) DEF Retained Earnings as of the end of such fiscal quarter, (b) 100% of consolidated net income of the Company and its subsidiaries exclusive of DEF for such fiscal quarter and (c) any retained earnings of the Company and its subsidiaries exclusive of DEF; provided, further, that, for the avoidance of doubt, no Distribution Shortfall shall be considered to exist in respect of any such excess. Notwithstanding anything to the contrary in this Agreement, Progress Energy shall not have the right to assign its obligations under this Section 13.1 in connection with a Transfer of Units unless (i) such assignment is to a Wholly-Owned Affiliate of Progress Energy, and (ii) New Investor is satisfied in its reasonable discretion that such Wholly-Owned Affiliate of Progress Energy (or, if applicable, other provider of credit support in connection with such assignment) has sufficient financial wherewithal and creditworthiness to make the support payments pursuant to Section 13.1.