Common use of Participation Thresholds Clause in Contracts

Participation Thresholds. On the date of each grant of Class C Units to a Management Unitholder who is, or as a result of such grant becomes, a holder of Class C Units pursuant to a grant made under an incentive unit grant agreement or similar agreement, the Board shall establish an initial Participation Threshold amount with respect to each Class C Unit granted on such date. The Participation Threshold with respect to a Class C Unit shall be equal to or greater than the Fair Market Value of a Class B Unit on the date of grant of such Class C Unit. The Board may designate a series number for each subset of Class C Units consisting of Class C Units having the same Participation Threshold, which Participation Threshold differs from the Participation Thresholds of all Class C Units not included in such subset. Each Class C Unit's Participation Threshold shall be adjusted after the grant of such Class C Unit in the following manner: (i) in the event of any Distribution made pursuant to Section 4.1 or Section 4.2, the Participation Threshold of each Class C Unit outstanding at the time of such Distribution shall be reduced (but not below zero) by the amount that each Class B Unit receives in such Distribution less the amount that such Class C Unit is entitled to receive in such Distribution, if any (with such reduction occurring immediately after the determination of the portion of such Distribution, if any, that such Class C Unit is entitled to receive). For this purpose, Distributions shall include Tax Distributions made pursuant to Section 4.2 only (A) to the extent such Tax Distributions are made as a result of the recognition of the built-in gain in any asset that existed at the time the relevant Class C Unit was issued or (B) to the extent that the relevant Class C Unit is not also entitled to a Tax Distribution with respect to the item or tier of taxable income giving rise to the Tax Distribution. For this purpose, the Tax Distribution that arises from the recognition of the built-in gain in an asset may be bifurcated between the Tax Distribution that relates to the built-in gain that existed at the time the relevant Class C Unit was issued and the Tax Distribution that relates to any additional gain in the asset that accrued since the time the relevant Class C Unit was issued. In order to preserve the economic results intended by this Agreement, the Board may determine whether any Tax Distribution (or portion of any Tax Distribution) not described in clauses (A) or (B) of this Section 3.5(c)(i) should reduce the Participation Threshold of a Class C Unit. For purposes of applying the adjustments of this Section 3.5(c)(i), any Distribution made under Section 4.1(a)(v) shall be treated as a separate Distribution occurring prior to any Distributions under Section 4.2, and the adjustments to a Participation Threshold made pursuant to this Section 3.5(c)(i) relating to the Distribution under Section 4.1(a)(v) shall be made before the allocation of any Distributions under Section 4.2 is determined. The Board may also apply Section 4.2 by breaking a single Distribution into two or more Distributions treated as separate Distributions occurring in order (and if such an approach is taken, the adjustments to Participation Threshold pursuant to this Section 3.5(c)(i) shall be made after each separate Distribution and before the next Distribution); (ii) in the event of any Capital Contribution made with respect to outstanding Class B Units, the Participation Threshold of each Class C Unit outstanding at the time of such Capital Contribution shall be increased by the amount contributed with respect to each Class B Unit; (iii) if the Company at any time subdivides (by any Unit split or otherwise) the Residual Units into a greater number of Units, the Participation Threshold of each Class C Unit outstanding immediately prior to such subdivision shall be proportionately reduced, and if the Company at any time combines (by reverse Unit split or otherwise) the Residual Units into a smaller number of Units, the Participation Threshold of each Class C Unit outstanding immediately prior to such combination shall be proportionately increased; and (iv) no adjustment to any Participation Threshold shall be made in connection with (A) any redemption or repurchase by the Company or any Unitholder of any Units or Equity Securities or (B) any Capital Contribution by any Unitholder in exchange for newly issued Units or Equity Securities. The Participation Thresholds of each Unitholder's Class C Units shall be set forth in the Unit Ledger, and the Company shall update the Unit Ledger from time to time as necessary to reflect any adjustments to the Participation Thresholds of outstanding Class C Units required pursuant to this Section 3.5. In the event of any dispute as to the Participation Threshold of any Incentive Unit, the good faith determination of the Board shall control.