- 30 -
and Southampton was therefore necessary for most partnership
decisions. As its representative, Southampton appointed
Pohlschroeder. Kannex appointed de Beer, and MLCS appointed
Taylor.
The Partnership Agreement provided that, in general, income,
gain, expense, and loss, as reported by the partnership for
Federal income tax purposes, would be allocated among the
partners in proportion to their respective capital accounts. As
subsequent events would demonstrate, this general sharing
provision did not fully reflect the partners' original
understanding of the manner in which they would share the
economic costs of partnership transactions.
Upon the occurrence of specified "Revaluation Events", the
partnership would revalue its assets on its books, and any
unrealized income, gain, expense, or loss inherent in its assets
would be allocated among the partners as if realized in a sale of
the assets at their fair market value. These Revaluation Events
included: (i) a change in a partner's proportionate interest in
partnership capital; (ii) a sale or exchange by the partnership
of any Colgate debt instrument; (iii) an adjustment to the Yield
Component (as defined below) with respect to Colgate debt; (iv) a
contribution or distribution of partnership assets;
(v) liquidation of the partnership; (vi) the last business day of
each fiscal year; and (vii) after November 30, 1989, the properly
executed request of any partner.
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