Second Tier Profits Clause Samples
The "Second Tier Profits" clause defines how additional profits, earned after a certain threshold or initial distribution, are to be allocated among parties. Typically, this clause comes into play in joint ventures or investment agreements where profits are distributed in stages: the first tier covers initial returns or preferred payments, and the second tier addresses the division of remaining profits. By clearly outlining the method for sharing these subsequent profits, the clause ensures transparency and fairness, preventing disputes over profit allocation once initial obligations have been met.
Second Tier Profits. Thereafter, to the Members in such proportions and in such amounts, as would result, as closely as possible, in the Capital Account balance of each Member at the end of such Fiscal Year (or part thereof) equaling, as nearly as possible, such Member’s share of the then Company Capital determined by calculating the amount each Member would receive if an amount equal to the Company Capital were distributed to the Members in accordance with the provisions of Sections 7.1 or 7.2, as applicable. If there are insufficient Net Profits to be allocated in a Fiscal Year (or part thereof) in order to cause the Capital Account balance of each Member to equal such Member’s share of the then Company Capital under Section 5.2.2, then items of gross income and gross deduction for such Fiscal Year (or part thereof) shall be allocated to the Members in order to cause the Capital Account balance of each Member at the end of such Fiscal Year (or part thereof) to equal such Member’s share of the then Company Capital determined by calculating the amount each Member would receive if an amount equal to the Company Capital were distributed to the Members in accordance with the provisions of Sections 7.1 or 7.2, as applicable.
Second Tier Profits. Second, any remaining Net Profits shall be allocated to the Class C Members, in proportion to the amount by which the accrued Preferred Allocation of each such Class C Member exceeds the difference between (i) the Net Profits previously allocated to such Class C Member pursuant to this Section 4.02(b) for all fiscal periods since the inception of the Company, and (ii) the Net Losses previously allocated to such Class C Member pursuant to Section 4.01(a) for all fiscal periods since the inception of the Company (that are attributable to this Section 4.02(b)), until the Net Profits currently allocated pursuant to this Section 4.02(b) are equal to the aggregate amount of such excess for all Class C Members;
Second Tier Profits. Thereafter, to the Members in such proportions and in such amounts, as would result, as closely as possible, in the respective Capital Account balance of each such Member equaling, as nearly as possible, each such Member’s share of the then Company Capital determined by calculating the amount each Member would receive if the Company sold all of its assets for their book value and the net proceeds were distributed to the Members in accordance with the provisions of Section 5.01.
Second Tier Profits. Second, to the Partners in proportion to, and to the extent of, the amount by which the aggregate cumulative Net Losses for the current and all prior fiscal years of the Partnership allocated to each such Partner throughout the term hereof pursuant to Section 4.01(b) exceeds the aggregate cumulative Net Profits for the current and all prior fiscal years of the Partnership allocated to each such Partner throughout the term hereof pursuant to this Section 4.02(b); and