Article IV: Capital Accounts, Allocations of Profits and Losses
4.1 Capital Accounts
4.2 Allocations of Profits and Losses. Subject to the remaining provisions of this Article IV, . . .
4.3 Allocations Without Economic Effect.
4.4 Regulatory Allocations. The provisions of the Treasury Regulations under Code Section 704(b) relating to qualified income offset, minimum gain chargeback, minimum gain chargeback with respect to partner nonrecourse debt, allocations of nonrecourse deductions, allocations with respect to partner nonrecourse debt, and forfeiture allocations with respect to substantially nonvested partnership interests are hereby incorporated by reference and shall be applied to the allocation of income, gain, loss, or deduction in the manner provided in the Treasury Regulations. Notwithstanding anything to the contrary in this Agreement, the Company shall make no allocation of loss or deduction to cause or increase a Member’s Adjusted Capital Account2 deficit, and such loss or deduction shall be allocated to other Member’s in accordance with their positive Adjusted Capital Account balances.
The Managers may, in its discretion, adjust the subsequent allocations of income, gain, losses, or deduction to prevent distortion of the economic arrangement of the Members, as otherwise described in this Agreement, due to allocations resulting from the foregoing.
4.5 Income Tax Allocations.
1 Although capitalized terms will be defined in the agreement’s “Definitions” section, for convenience some are re-printed here. “Profits Interest” means an interest in the Company intended to qualify as a “profits interest” within the meaning of IRS Revenue Procedure 93-27.
2 “Adjusted Capital Account” means the balance in the Capital Account maintained for each Member, further (i) increased by any amounts which such Member is obligated to restore pursuant to any provision of this Agreement or is treated as being obligated to restore pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.