article 4
distributions
4.1 nonliquidating distributions. cash flow shall be distributed to the members in amounts deemed appropriate by the management committee after establishing appropriate reserves. except as provided in section 4.2, all distributions of cash flow shall be made among the members in accordance with their respective sharing ratios.
4.2 liquidating distributions. all distributions made in connection with the sale or exchange of all or substantially all of the company assets and all distributions made in connection with the liquidation of the company shall be made to the members in accordance with their relative capital account balances at the time of distribution.
article 5
allocation of profit and loss
5.1 determination of profit and loss. profit or loss shall be determined on an annual basis and for such other periods as may be required.
5.2 loss allocation. except as provided in section 5.4, loss shall be allocated among the members in accordance with their relative sharing ratios.
5.3 profit allocation.
(a) except as provided in section 5.3(b) and section 5.4, profit shall be allocated among the members in accordance with their relative sharing ratios.
(b) any profit with respect to the sale, exchange or other disposition of all or substantially all of the company assets or with respect to the liquidation of the company shall be allocated among the members so that their capital account balances are proportionate to their sharing ratios.
(c) for purposes of section 5.3(b), the capital accounts of the members shall be determined (i) before giving effect to distributions under section 4.2; (ii) after allocating all other items of profit and loss; and (iii) after making all distributions under section 4.1.
5.4 regulatory allocations and curative provision.
(a) the 'qualified income offset' provisions of treasury regulation section 1.704-1(b)(2)(ii)(d) are incorporated herein by reference and shall apply to adjust the allocation of profit and loss otherwise provided for under sections 5.2 and 5.3 to the extent provided in that regulation.
(b) the 'minimum gain' provisions of treasury regulation section 1.704-2 are incorporated herein by reference and shall apply to adjust the allocation of profit and loss otherwise provided for under sections 5.2 and 5.3 to the extent provided in that regulation.
(c) notwithstanding the provisions of section 5.2, if during any fiscal year of the company the allocation of any loss or deduction, net of any income or gain, to a member would cause or increase a negative balance in a member's capital account as of the end of that fiscal year, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to the member and the remaining amount shall be allocated to the other member. for the purpose of the preceding sentence, a capital account shall be reduced by the adjustments, allocations and distributions described in treasury regulations (s)(s) 1.704-1(b)(2)(d)(4), (5) and (6), and increased by the amount, if any, that the member is obligated to restore to the member's capital account within the meaning of treasury regulation (s) 1.704-1(b)(2)(ii)(c) as of that time or is deemed obligated to restore under treasury regulation (s) 1.704-2(g)(1) or (s) 1.704-2(i)(5).