Equalization Between Commitments After an Equalization Event Clause Samples
The "Equalization Between Commitments After an Equalization Event" clause ensures that all parties' financial commitments are adjusted fairly following a significant event that affects the balance of contributions or obligations among them. In practice, this clause may require recalculating each party's share or investment to reflect new circumstances, such as the admission of a new investor or a change in the fund's structure. Its core function is to maintain fairness and proportionality among participants, preventing any party from being disadvantaged or unfairly benefited due to changes in the group’s composition or capital structure.
Equalization Between Commitments After an Equalization Event. After the occurrence of an Equalization Event, each Lender agrees with the other Lenders that, if such Lender at any time shall obtain any Advantage over the other Lenders or any thereof determined in respect of the Obligations (including Swing Loans and Letters of Credit but excluding amounts under Article III hereof) then outstanding, such Lender shall purchase from the other Lenders, for cash and at par, such additional participation in the Obligations as shall be necessary to nullify the Advantage in respect of the Obligations. For purposes of determining whether or not, after the occurrence of an Equalization Event, an Advantage in respect of the Obligations shall exist, Agent shall, as of the date that the Equalization Event occurs:
(i) add the Revolving Credit Exposure and the Term Loan Exposure to determine the equalization maximum amount (the “Equalization Maximum Amount”); and
(ii) determine an equalization percentage (the “Equalization Percentage”) for each Lender by dividing the aggregate amount of its Lender Credit Exposure by the Equalization Maximum Amount. After the date of an Equalization Event, Agent shall determine whether an Advantage exists among the Lenders by using the Equalization Percentage. Such determination shall be conclusive absent manifest error.