Participation Redemption Clause Samples
The Participation Redemption clause defines the terms under which holders of certain securities, such as preferred shares, can redeem their investment and receive a specified payout. Typically, this clause outlines the conditions, timing, and calculation method for redemption, which may include a fixed price or a formula based on company performance. Its core practical function is to provide investors with a clear exit mechanism and financial certainty, thereby balancing the interests of both the company and its investors.
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Participation Redemption. At any time following the Preferred Payment, the Company may redeem (the “Participation Redemption”) the Preferred Participating Return by (i) following an Initial Public Offering, providing the Preferred Members with a redemption notice indicating the Participating Fair Market Value and the proposed closing date of the Participation Redemption (which shall be no earlier than five business days from the date of the redemption notice) and, upon the closing of the Participation Redemption, distributing to the Preferred Members, pro rata in accordance with their Preferred Units, an amount equal to the Participating Fair Market Value; and (ii) prior to an Initial Public Offering, providing the Preferred Members with a redemption notice (the “Redemption Notice”) indicating the Board of Managers’ good faith determination of the Participating Fair Market Value and the proposed closing date of the Participation Redemption (which shall be no earlier than five business days from the date of the redemption notice) and, subject to the right of a Majority in Interest of the Preferred Members to contest such good faith determination as described below, upon the closing of the Participation Redemption on the date specified in the Redemption Notice, distributing to the Preferred Members, pro rata in accordance with their Preferred Units, an amount equal to the Participating Fair Market Value; provided, however, that should a Majority in Interest of the Preferred Members contest in good faith the Board of Managers’ determination of the Participation Fair Market Value by providing the Company with notice of such contest within ten days of the Redemption Notice, the final determination of the Participation Fair Market Value shall be made by an investment banking firm of national standing designated by mutual agreement of the Company and the contesting Preferred Members, which determination shall be final and binding on the Members and the Company. The fees and expenses of such investment banking firm shall be borne by the Company.
Participation Redemption. (A) Following the Preferred Payment (as such term is defined in the AIA SPV LLC Agreement), in the case of the AIA SPV, or the Junior Preferred Payment (as such term is defined in the ALICO SPV LLC Agreement), in the case of the ALICO SPV, the applicable SPV shall not make any dividend, distribution or other payment of any kind or character to the Common Members (as such term is defined in the relevant SPV LLC Agreement) of such SPV prior to such SPV exercising its right to redeem the AIA/ALICO Preferred Participating Return of such SPV in accordance with Section 8.06 (Participation Redemption) of the applicable SPV LLC Agreement; provided that, for purposes of determining the applicable Participating Fair Market Value (as such term is defined in the relevant SPV LLC Agreement), the fair market value of the applicable SPV Intercompany Loan shall not be taken into account and in lieu thereof the excess of (1) the amount of the SPV Intercompany Loan made by such SPV at Closing over (2) all amounts of principal received by such SPV in respect of its SPV Intercompany Loan prior to the redemption of the AIA/ALICO Preferred Participating Return of such SPV shall be deemed to have been received by such SPV and available for distribution pursuant to Sections 5.02(d) and (e) (Distributions) of the AIA SPV LLC Agreement (in the case of the AIA SPV) or Sections 5.02(f) and (g) (Distributions) or Sections 5.03(c) and (d) (Alternate Distributions) of the ALICO SPV LLC Agreement (in the case of the ALICO SPV), as applicable, as of the time of such redemption.
(B) All notices required to be delivered to, and all actions that may be taken by, the Preferred Members (as such term is defined in the AIA SPV LLC Agreement) or the Junior Preferred Members (as such term is defined in the ALICO SPV LLC Agreement) pursuant to Section 8.06 (Participation Redemption) of each SPV LLC Agreement shall be delivered to or taken by the Rights Holder.