Consolidated net worth clause: Copy, customize, and use instantly
Introduction
A consolidated net worth clause defines the financial health requirement of a party, typically calculated by subtracting total liabilities from total assets on a consolidated basis. It ensures that the party maintains sufficient financial stability, which can be critical for fulfilling contractual obligations or meeting debt covenants.
Below are templates for consolidated net worth clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Minimum consolidated net worth clause
This variation requires a party to maintain a specified minimum consolidated net worth throughout the Agreement term.
The Party agrees to maintain a consolidated net worth of no less than [amount] during the term of this Agreement. Consolidated net worth will be determined in accordance with generally accepted accounting principles (GAAP) and verified through annual financial statements provided to the other party.
Periodic reporting of consolidated net worth clause
This variation requires regular reporting of consolidated net worth to ensure transparency.
The Party agrees to provide periodic reports detailing its consolidated net worth every [frequency, e.g., quarter], calculated in accordance with GAAP. These reports must include audited financial statements and any relevant supporting documentation requested by the other party.
Trigger for review of consolidated net worth clause
This variation allows for a review of consolidated net worth upon certain triggers.
The Party agrees that its consolidated net worth will be subject to review if a material adverse event occurs, such as a significant financial loss or acquisition. The review will determine compliance with this Agreement, and the Party must provide updated financial statements within [number] days of the event.
Consolidated net worth restoration clause
This variation requires corrective actions if consolidated net worth falls below a certain threshold.
If the Party’s consolidated net worth falls below [amount], the Party agrees to take all reasonable steps to restore it to the required level within [number] days. This includes implementing cost reductions, asset sales, or additional capital contributions as necessary.
Consolidated net worth covenant clause
This variation establishes a financial covenant requiring the maintenance of consolidated net worth.
The Party agrees to comply with a financial covenant requiring the maintenance of a consolidated net worth of no less than [amount] during the term of this Agreement. Non-compliance with this covenant will constitute a material breach, subject to remedies outlined herein.
Consolidated net worth adjustment clause
This variation allows for adjustments to the required consolidated net worth under specific circumstances.
The required consolidated net worth under this Agreement may be adjusted by mutual agreement of the parties in the event of significant financial events, including mergers, acquisitions, or asset divestitures. Any adjustment will be documented in writing and take effect upon execution.
Consolidated net worth threshold clause
This variation specifies a threshold for consolidated net worth to trigger additional obligations.
If the Party’s consolidated net worth falls below [amount], the Party agrees to notify the other party within [number] days and provide a detailed explanation along with a plan for corrective action. Failure to meet this threshold may result in additional performance guarantees or other remedies.
Consolidated net worth guarantee clause
This variation includes a guarantor to ensure compliance with consolidated net worth requirements.
The Party agrees to maintain a consolidated net worth of no less than [amount] and provides a guarantee from [Guarantor’s Name] to fulfill this obligation if the Party fails to meet the requirement. The Guarantor’s consolidated financial statements must be provided upon request.
Quarterly consolidated net worth review clause
This variation requires regular financial reviews to monitor compliance with the net worth requirement.
The Party agrees to undergo quarterly reviews of its consolidated net worth, conducted by an independent auditor or mutually agreed party. The results of these reviews will be shared with the other party within [number] days of completion to confirm compliance.
Consolidated net worth fallback clause
This variation provides a fallback measure if consolidated net worth drops below the required level.
In the event that the Party’s consolidated net worth falls below [amount], the Party agrees to provide additional collateral or guarantees as specified in this Agreement. These measures will remain in place until the consolidated net worth is restored to the required level.
Consolidated net worth termination clause
This variation allows for termination of the Agreement if the required net worth is not maintained.
If the Party fails to maintain a consolidated net worth of at least [amount] for a period exceeding [number] days, the other party reserves the right to terminate this Agreement. Written notice of termination will be provided, and all obligations will be settled in accordance with the termination provisions.
Consolidated net worth escalation clause
This variation allows for periodic increases in the required consolidated net worth.
The required consolidated net worth under this Agreement will increase by [percentage] annually to account for inflation or other financial considerations. The Party agrees to comply with the adjusted requirement and provide updated financial statements confirming compliance.
Consolidated net worth collateral clause
This variation requires collateral if the consolidated net worth dips below the agreed level.
If the Party’s consolidated net worth falls below [amount], the Party agrees to provide collateral in the form of [assets, e.g., real estate, securities] valued at no less than the shortfall amount. This collateral will remain in effect until compliance is restored.
Consolidated net worth waiver clause
This variation allows for a temporary waiver of the consolidated net worth requirement under certain conditions.
The Party may request a temporary waiver of the consolidated net worth requirement in the event of extraordinary circumstances, such as a market downturn or natural disaster. Any waiver must be approved in writing by the other party and will specify the duration and conditions of the waiver.
Consolidated net worth verification clause
This variation requires periodic verification of consolidated net worth through audits.
The Party agrees to provide audited financial statements annually to verify compliance with the consolidated net worth requirement of no less than [amount]. The audit must be conducted by an independent auditor approved by the other party, and results will be shared within [number] days of completion.
Consolidated net worth acceleration clause
This variation allows the other party to demand immediate action if net worth requirements are not met.
If the Party’s consolidated net worth falls below [amount], the other party may demand immediate repayment of outstanding obligations or enforce additional financial guarantees. The Party agrees to comply with these demands within [number] days.
Consolidated net worth restoration timeline clause
This variation sets a specific timeframe for restoring consolidated net worth.
In the event that the Party’s consolidated net worth falls below [amount], the Party agrees to restore it to the required level within [number] days. Failure to meet this timeline will constitute a material breach of the Agreement, subject to remedies outlined herein.
Material change in net worth clause
This variation requires disclosure of significant changes in consolidated net worth.
The Party agrees to disclose any material changes to its consolidated net worth that could impact its obligations under this Agreement. Such disclosures must be made within [number] days of the change and include a detailed explanation of the cause and potential impacts.
Consolidated net worth monitoring clause
This variation includes ongoing monitoring by the other party to ensure compliance.
The Party agrees to allow the other party to monitor its consolidated net worth on an ongoing basis through access to relevant financial records and statements. Monitoring will occur at intervals of [frequency, e.g., quarterly], and any discrepancies will be addressed promptly.
Consolidated net worth penalty clause
This variation imposes penalties for failing to maintain the required net worth.
If the Party fails to maintain the required consolidated net worth of [amount], a penalty of [amount or percentage] will be assessed for each [number] days of non-compliance. Penalty payments must be made to the other party within [number] days of notification.
Net worth maintenance during restructuring clause
This variation requires maintaining net worth during periods of corporate restructuring.
During any restructuring or reorganization, the Party agrees to maintain a consolidated net worth of no less than [amount]. The Party will provide updated financial statements throughout the restructuring process to confirm compliance.
Net worth adjustment based on market conditions clause
This variation adjusts the required net worth based on external market conditions.
The required consolidated net worth under this Agreement will be adjusted annually to reflect prevailing market conditions, as determined by mutual agreement. Any adjustments will be communicated in writing and take effect within [number] days of agreement.
Consolidated net worth default clause
This variation specifies default provisions if the net worth requirement is breached.
A failure to maintain the required consolidated net worth of [amount] will constitute an event of default under this Agreement. Upon default, the other party may enforce remedies, including termination of the Agreement or demand for immediate payment of all outstanding obligations.
Net worth contingency clause
This variation ties certain obligations to maintaining a specified consolidated net worth.
The Party agrees that specific obligations under this Agreement, including [list obligations], are contingent upon maintaining a consolidated net worth of no less than [amount]. Failure to meet this requirement may result in the suspension or modification of these obligations.
Consolidated net worth preservation clause
This variation requires the Party to actively preserve its consolidated net worth.
The Party agrees to use diligent efforts to preserve its consolidated net worth above [amount] throughout the term of this Agreement. This includes avoiding unnecessary liabilities, maintaining asset quality, and promptly addressing any factors that may impact net worth.
Consolidated net worth event notification clause
This variation mandates notification of significant events affecting net worth.
The Party agrees to notify the other party within [number] days of any events or transactions that materially affect its consolidated net worth. The notification must include an explanation of the event, its financial impact, and proposed corrective measures, if applicable.
Pro-rata net worth adjustment clause
This variation allows proportional adjustments to net worth requirements based on external changes.
The required consolidated net worth may be adjusted pro-rata in the event of significant market or industry changes. Both parties will review and agree on the adjustment in writing within [number] days of identifying such changes.
Consolidated net worth surplus clause
This variation addresses actions required for net worth exceeding a certain threshold.
If the Party’s consolidated net worth exceeds [amount], the Party agrees to allocate a portion of the surplus to enhancing performance under this Agreement, including investments in [list areas, e.g., technology or personnel]. Surplus utilization plans must be shared with the other party for review.
Independent review of net worth clause
This variation requires independent verification of net worth calculations.
The Party agrees to have its consolidated net worth independently reviewed by a certified public accountant or financial auditor annually. A copy of the independent review will be submitted to the other party within [number] days of completion.
Net worth-based payment adjustment clause
This variation ties payment obligations to net worth levels.
Payment obligations under this Agreement may be adjusted based on the Party’s consolidated net worth. If the net worth falls below [amount], payment terms will be renegotiated in good faith within [number] days to reflect the Party’s financial capacity.
Consolidated net worth reserve clause
This variation requires maintaining a reserve to safeguard net worth.
The Party agrees to establish and maintain a reserve account equivalent to [percentage]% of its required consolidated net worth. The reserve will act as a safeguard to ensure financial stability and compliance with this Agreement.
Net worth restoration through external funding clause
This variation provides for restoring net worth using external financing options.
If the Party’s consolidated net worth falls below [amount], the Party agrees to seek external funding, including loans or equity contributions, to restore it to the required level within [number] days. Documentation of the funding process must be shared with the other party.
Net worth compliance certificate clause
This variation requires a certificate of compliance for net worth requirements.
The Party agrees to provide a net worth compliance certificate, signed by an authorized officer, on a [frequency, e.g., quarterly] basis. The certificate will confirm compliance with the required consolidated net worth of [amount] and include supporting documentation.
Consolidated net worth threshold increase clause
This variation allows periodic increases to the net worth requirement over time.
The required consolidated net worth will increase by [amount or percentage] annually to reflect inflation or growth targets. The Party agrees to comply with the updated thresholds and submit revised financial statements confirming compliance.
Net worth audit rights clause
This variation grants the other party the right to audit net worth compliance.
The Party agrees that the other party may conduct audits to verify compliance with the consolidated net worth requirement of [amount]. Audits will be conducted at the other party’s expense and require the Party’s full cooperation, including access to relevant financial records.
Consolidated net worth stability clause
This variation requires consistent financial stability to ensure compliance.
The Party agrees to maintain consolidated net worth stability, ensuring it does not fluctuate below [amount] during any quarter of the Agreement term. If fluctuations occur, the Party must provide a detailed explanation and a plan to address the instability.
Net worth improvement plan clause
This variation mandates a formal improvement plan if net worth falls below a threshold.
If the Party’s consolidated net worth falls below [amount], the Party agrees to submit an improvement plan within [number] days outlining steps to restore financial compliance. The plan must include timelines, key actions, and resource allocation details.
Net worth deficiency notification clause
This variation requires immediate notification if the required net worth is not met.
The Party agrees to notify the other party within [number] days if its consolidated net worth falls below [amount]. The notification must include the reasons for the deficiency and any corrective measures being undertaken.
Tiered net worth compliance clause
This variation introduces multiple thresholds with different requirements.
The Party agrees to maintain a consolidated net worth of at least [amount] at all times. If the net worth falls between [amount] and [lower amount], additional reporting requirements will apply. Falling below [lower amount] constitutes a material breach of this Agreement.
Consolidated net worth reassessment clause
This variation provides for periodic reassessment of the required net worth.
The required consolidated net worth will be reassessed every [frequency, e.g., year] to ensure it reflects current financial conditions. Any adjustments must be mutually agreed upon and documented in an amendment to this Agreement.
Net worth recovery assistance clause
This variation requires the Party to seek professional assistance to restore net worth.
If the Party’s consolidated net worth falls below [amount], the Party agrees to engage a financial consultant or auditor to develop a recovery strategy. Documentation of the consultant’s recommendations and progress updates must be provided to the other party.
Net worth compliance timeline clause
This variation sets strict timelines for meeting net worth requirements after a breach.
If the Party breaches the consolidated net worth requirement of [amount], it agrees to restore compliance within [number] days. Failure to meet this timeline will result in the enforcement of remedies outlined in this Agreement.
Consolidated net worth buffer clause
This variation requires maintaining a buffer above the minimum net worth level.
The Party agrees to maintain a consolidated net worth buffer of [percentage]% above the required [amount]. This buffer ensures financial stability and provides additional security for obligations under this Agreement.
Net worth adjustment due to external factors clause
This variation allows for adjustments based on macroeconomic changes.
The consolidated net worth requirement may be adjusted if external factors, such as inflation or regulatory changes, significantly impact the Party’s financial performance. Adjustments must be approved in writing by both parties and implemented within [number] days.
Consolidated net worth insolvency prevention clause
This variation focuses on proactive measures to avoid insolvency.
The Party agrees to use all reasonable efforts to prevent its consolidated net worth from falling to insolvency levels. Efforts include reducing liabilities, securing additional funding, and providing regular updates to the other party on financial health.
Consolidated net worth interim compliance clause
This variation requires mid-term compliance checks during the Agreement period.
The Party agrees to demonstrate interim compliance with the consolidated net worth requirement of [amount] at the halfway point of the Agreement term. Compliance will be verified through submitted financial statements and supporting documentation.
Consolidated net worth equity contribution clause
This variation mandates equity contributions if net worth falls below the required level.
If the Party’s consolidated net worth falls below [amount], it agrees to secure equity contributions from shareholders or other sources to restore compliance within [number] days. Proof of equity contributions must be provided to the other party.
Net worth breach mitigation clause
This variation outlines specific actions to mitigate breaches of net worth requirements.
If the Party’s consolidated net worth falls below [amount], the Party agrees to immediately implement mitigation measures, including cost reductions, asset divestitures, or additional capital infusions. A detailed mitigation plan must be submitted to the other party within [number] days.
Consolidated net worth protection clause
This variation requires proactive measures to protect consolidated net worth.
The Party agrees to use reasonable efforts to protect its consolidated net worth from falling below [amount]. This includes monitoring financial health, maintaining operational efficiency, and avoiding excessive liabilities.
Performance-linked net worth clause
This variation ties net worth requirements to specific performance metrics.
The Party’s consolidated net worth requirement will be directly linked to the performance metrics outlined in this Agreement. If performance falls below [specified metric], the required net worth will be adjusted proportionally, subject to mutual agreement.
Consolidated net worth transfer restriction clause
This variation limits asset transfers that could impact net worth.
The Party agrees not to transfer, sell, or encumber any significant assets without prior written consent from the other party, if such actions would cause its consolidated net worth to fall below [amount]. This restriction ensures financial stability and compliance.
Annual consolidated net worth escalation clause
This variation provides for incremental increases in net worth requirements.
The required consolidated net worth will increase annually by [amount or percentage] starting on [date]. The Party agrees to meet the adjusted requirements and provide updated financial statements confirming compliance within [number] days of each adjustment.
Consolidated net worth reallocation clause
This variation allows for reallocating assets to maintain net worth.
If the Party’s consolidated net worth approaches the required minimum of [amount], the Party agrees to reallocate internal resources or liquidate non-essential assets to restore financial compliance. The reallocation plan must be submitted for review and approval by the other party.
Consolidated net worth contingency fund clause
This variation requires establishing a contingency fund to support net worth compliance.
The Party agrees to establish a contingency fund equivalent to [percentage]% of the required consolidated net worth. This fund will be used exclusively for maintaining compliance with the financial requirements of this Agreement and must be replenished as necessary.
Net worth evaluation during force majeure clause
This variation considers net worth requirements during force majeure events.
In the event of a force majeure, the Party’s consolidated net worth requirement may be temporarily suspended or adjusted. Both parties will evaluate the financial impact and agree on revised requirements within [number] days of the force majeure event’s occurrence.
Consolidated net worth benchmark clause
This variation ties net worth requirements to industry benchmarks.
The Party agrees to maintain a consolidated net worth aligned with industry benchmarks for companies of similar size and scope. Benchmark evaluations will occur annually, and adjustments to the required net worth will be made as necessary to reflect changes in the market.
Net worth compliance grace period clause
This variation allows a grace period for restoring net worth compliance.
If the Party’s consolidated net worth temporarily falls below [amount], a grace period of [number] days will be provided to restore compliance. During this period, the Party must submit a recovery plan and provide updates on progress to the other party.
Consolidated net worth financial review clause
This variation requires periodic financial reviews to ensure compliance.
The Party agrees to undergo financial reviews every [frequency, e.g., six months] to verify compliance with the consolidated net worth requirement of [amount]. Reviews will be conducted by an independent auditor, and results must be submitted within [number] days of completion.
Net worth compliance surcharge clause
This variation imposes surcharges for prolonged non-compliance.
If the Party fails to restore its consolidated net worth to [amount] within [number] days, a surcharge of [percentage]% of the shortfall amount will be applied for every [number] days of continued non-compliance. Surcharges must be paid within [number] days of assessment.
Net worth recovery timeline clause
This variation sets phased deadlines for restoring net worth to required levels.
The Party agrees to a phased recovery timeline if consolidated net worth falls below [amount]. Phase one requires partial restoration within [number] days, and full compliance must be achieved within [number] days. Progress reports will be provided at each phase.
Consolidated net worth pre-termination clause
This variation provides for early termination if net worth requirements are not met.
If the Party’s consolidated net worth remains below [amount] for a continuous period of [number] days, the other party may terminate this Agreement early. Written notice of termination must be provided, and all obligations will be settled in accordance with the termination terms.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.