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the general partner. The IHCL Restated Agreement further provided
that after approximately 5 years, the net losses were to be
allocated to the partners on a pro rata basis. Pursuant to the
IHCL Restated Agreement, IHCL’s net income was allocated to the
partners in the same ratio as net losses until such time as the
allocated amount of income equaled the amount of IHCL’s cumulative
net losses; thereafter, IHCL’s income would be allocated to the
partners pro rata.
Moreover, as part of Dondi’s entry into IHCL, the limited
partnership agreements of Landmark and Gateway were amended to
allocate 90.91 percent of Landmark’s and Gateway’s net losses to
IHCL.
IHCL maintained capital accounts for each of its partners.
The partnership agreements of IHCL, Landmark, and Gateway all
required that upon liquidation distributions to partners would be
made in accordance with the partners’ positive capital account
balances.
By January 1986, Dondi had contributed $10.8 million of the
required $19.8 million to IHCL and agreed to pay the balance due
($9 million) in subsequent quarterly installments. Dondi
encountered financial difficulties and failed to make the
installment payment due January 6, 1987. (By that time, the
Federal Deposit Insurance Corporation (FDIC) had become the
receiver for Vernon.) As a result, in April 1987, THEI gave Dondi
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