DEFAULT CAPITAL CONTRIBUTIONS Clause Samples
The "Default Capital Contributions" clause defines the procedures and consequences when a party fails to provide their required capital contribution to a partnership or joint venture. Typically, this clause outlines the steps the non-defaulting parties may take, such as covering the shortfall themselves, imposing penalties, or adjusting ownership percentages to reflect the missed contribution. Its core function is to ensure the partnership remains adequately funded and to allocate the risks and consequences of non-payment, thereby maintaining fairness and operational continuity.
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DEFAULT CAPITAL CONTRIBUTIONS. If any Member fails to timely fund its pro rata share of an additional Capital Contribution to be made in accordance with Section 7.1(a)(ii) or Section 7.1(b) (any such Member, a “Non-Funding Member,” and the amount that such Non-Funding Member failed to contribute, the “Default Amount”), or if additional capital is required to be contributed to the Company due to a failure of the Manager to perform its obligations hereunder (other than a failure by the Manager to make additional Capital Contributions), then the other Member (the “Funding Member”), at its election, and as its sole and exclusive remedy, may either (i) make a Priority Loan to the Company in the principal amount of the Default Amount, (ii) contribute to the Company the Default Amount as an additional Capital Contribution (a “Substitute Contribution”), or (iii) withdraw the Capital Contribution that was made at the time the Default Amount was to be contributed to the Company. Any Priority Loans made in accordance with this Section 7.1(c) shall not be considered a Capital Contribution, shall be repaid prior to the distribution of any Available Cash in accordance with Section 9.1, and shall be subordinate to any Company indebtedness that is secured by the Project. If the Funding Member elects to contribute the Default Amount to the Company, the Funding Member’s Percentage Interest shall be adjusted to equal the percentage equivalent of the quotient determined by dividing:
(i) the positive difference, if any, between: (A) the sum of (I) one hundred percent (100%) of the aggregate Capital Contributions (excluding Substitute Contributions then or theretofore made) then or theretofore made by the Funding Member to the Company, plus (II) two hundred percent (200%) of the Substitute Contributions then or theretofore made by the Funding Member to the Company (the excess of 200% of the Funding Member’s Substitute Contributions over the Funding Member’s Substituted Contributions is referred to herein as the “Excess Amounts”); minus (B) the Substitute Contributions then or theretofore made by the Non-Funding Member; by
(ii) one hundred percent (100%) of the aggregate Capital Contributions (including, without limitation, Substitute Contributions) then or theretofore made by all of the Members to the Company.
(iii) The Percentage Interest of the Non-Funding Member shall be reduced by the percentage necessary to insure that the Percentage Interests add up to 100%. At the same time, the Back-End Percentage In...
DEFAULT CAPITAL CONTRIBUTIONS. A. If a Partner (a "Non-Funding Partner") fails to fund any Capital Contributions required of it within the time period specified and such failure continues for a period in excess of (10) days (an "Initial Uncured Default"), then the General Partner shall promptly send Notice to the other Partners of such failure and the remaining Partners ("Funding Partners ") shall be entitled to fund all or any portion of such Capital Contribution required of the Non-Funding Partner. If the Funding Partners make such Capital Contributions ("Default Capital Contributions"), the Partnership Interest of each Partner shall thereupon be recalculated as set forth below. The Funding Partner is hereby constituted and appointed as attorney-in-fact, such appointment being coupled with an interest, to execute, acknowledge and deliver all instruments and documents necessary to effect such recalculation of Percentage Interests as herein provided.
1. The recalculation of the Percentage Interests on the Percentage Interest Adjustment Date shall be done as follows: First, the total amount of Capital Contributions made by each Partner as of the Percentage Interest Adjustment Date shall be calculated. Second, the Non-Funding Partner's Percentage Interest shall be reduced, and the Funding Partner's Percentage Interest shall be increased, to reflect each Partner's percentage of the total contributions made by both Partners as of the Percentage Interest Adjustment Date.
2. The Adjusted Percentage Interests of the Partners shall be expressed in terms of a decimal rounded to the nearest fourth digit. An example illustrating the operation of this provision is attached hereto as EXHIBIT C.
a. If due to the operation of this SECTION 6.4(A) a Non-Funding Partner's Initial Percentage Interest is diluted, the other Partner shall have the right and option for a period of 60 days after such dilution occurs to purchase the Non-Funding Partner's interest in the Partnership at a price equal to the total amount of cash capital contributions which had been contributed to the Partnership by the Non-Funding Partner at that point in time, less the amount of any distributions of Net Ordinary Cash Flow or proceeds from a Major Capital Event previously made to the Non-Funding Partner.
b. In order to elect to purchase the interest in the Partnership of a Non-Funding Partner pursuant to this SECTION 6.4(A), the Funding Partner shall send written notice of election to the Non-Funding Partner prior to expiration of...