EXHIBIT 3.2
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
NEXTLINK COMMUNICATIONS, L.L.C.
(A WASHINGTON LIMITED LIABILITY COMPANY)
DATED AND EFFECTIVE
AS OF
MARCH 29, 1996
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TABLE OF CONTENTS
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ARTICLE 1 -- FORMATION 1
1.1 Certificate of Formation...................... 1
1.2 Name.......................................... 1
1.3 Purpose....................................... 1
1.4 Term.......................................... 1
1.5 Principal Place of Business................... 1
1.6 Registered Office and Registered Agent........ 1
ARTICLE 2 -- DEFINITIONS................................ 2
ARTICLE 3 -- MEMBERS, CONTRIBUTIONS AND INTERESTS....... 5
3.1 Members Names, Addresses and Percentages...... 5
3.2 Contributions................................. 5
3.3 Additional Members; Equity Option Plan........ 6
3.4 Capital Accounts.............................. 7
3.5 No Withdrawal or Transfer of Member's Interest 7
ARTICLE 4 -- MEETINGS OF MEMBERS........................ 7
4.1 Meetings...................................... 7
4.2 Place of Meetings............................. 8
4.3 Notice of Meetings............................ 8
4.4 Record Date................................... 8
4.5 Quorum........................................ 8
4.6 Proxies....................................... 8
4.7 Waiver of Notice.............................. 9
4.8 Action Without Meeting........................ 9
4.9 Meetings by Telephone......................... 9
ARTICLE 5 -- MANAGEMENT................................. 9
5.1 Management.................................... 9
5.2 Manager Agent of Company...................... 9
5.3 Managers' Other Activities.................... 9
5.4 Agents; Administrative Functions.............. 9
5.5 Meetings of Managers.......................... 10
ARTICLE 6 -- ACCOUNTING AND RECORDS..................... 10
6.1 Books of Account.............................. 10
6.2 Fiscal Year................................... 11
6.3 Accounting Reports............................ 11
6.4 Tax Returns................................... 11
6.5 Tax Matters Member............................ 11
ARTICLE 7 -- ALLOCATIONS................................ 11
7.1 Allocation of Net Profit and Loss - In General 11
7.2 Special Allocations........................... 12
7.3 Corrective Allocations........................ 13
7.4 Other Allocation Rules........................ 13
7.5 Determination of Net Profit or Loss........... 14
7.6 Mandatory Tax Allocations Under Code
Section 704(c)................................ 14
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ARTICLE 8 -- DISTRIBUTIONS TO MEMBERS................... 15
8.1 Nonliquidating Distributions.................. 15
8.2 Special Distribution to SRC to Cover 1995 Taxes 16
8.3 Distributions in Liquidation.................. 17
8.4 Distributions in Kind......................... 17
ARTICLE 9 -- DISSOLUTION AND LIQUIDATION................ 17
9.1 Events of Dissolution......................... 17
9.2 Liquidation Upon Dissolution and Winding Up... 18
9.3 No Obligation to Restore Negative Capital Account
Balance on Liquidation........................
ARTICLE 10 -- DISSOCIATION OF A MEMBER.................. 18
10.1 Events....................................... 18
10.2 Purchase Price............................... 19
10.3 Failure to Exercise Purchase Option.......... 19
ARTICLE 11 -- LIMITATION OF MEMBER'S LIABILITY;
INDEMNIFICATION........................... 19
11.1 Limitation of Liability...................... 19
11.2 Indemnification.............................. 20
ARTICLE 12 -- MISCELLANEOUS............................. 20
12.1 Notices...................................... 20
12.2 Governing Law................................ 21
12.3 Amendments................................... 21
12.4 Construction................................. 21
12.5 Headings..................................... 21
12.6 Waivers...................................... 21
12.7 Remedies..................................... 21
12.8 Severability................................. 21
12.9 Heirs, Successors and Assigns................ 22
12.10 Creditors.................................... 22
12.11 Jurisdiction and Venue....................... 22
12.12 Dispute Resolution........................... 22
12.13 Counterparts................................. 24
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
NEXTLINK COMMUNICATIONS, L.L.C.
(A WASHINGTON LIMITED LIABILITY COMPANY)
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of
March 29, 1996, is made among the persons whose signatures appear on the
signature page hereof.
ARTICLE 1 -- FORMATION
1.1 CERTIFICATE OF FORMATION. A Certificate of Formation was filed on
January 6, 1995, and was effective immediately upon filing, the date on which
the term of the Company began. The Company's Limited Liability Company
Agreement was previously amended and restated in a First Amended and Restated
Limited Liability Company Agreement dated as of September 1, 1995.
1.2 NAME. The name of the limited liability company is "NEXTLINK
Communications, L.L.C." The company was formerly known as "Nextlink
Investments, L.L.C." and as "FiberLink Investments, L.L.C."
1.3 PURPOSE. The purpose and business of the Company is to engage in any
lawful business permitted under the Act and to exercise all other powers
necessary or reasonably connected or incidental to such purpose and business
that may be legally exercised by the Company.
1.4 TERM. The term shall continue until December 31, 2025, unless the
Company is earlier dissolved in accordance with Article 9.
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1.5 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Company shall be 155 108th Avenue NE, Bellevue, Washington 98004. The Managers
may relocate the Company's principal place of business or establish additional
Company offices from time to time.
1.6 REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial
registered agent and the address of its initial registered office are as
follows:
Name Address
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DWTR&J Corp. 2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101-1688
The registered office and registered agent may be changed by the Managers from
time to time by filing an amendment to the Certificate of Formation.
ARTICLE 2 -- DEFINITIONS
The following terms used in this Agreement shall have the following
meanings (unless otherwise expressly provided herein):
"ACT" means the Washington Limited Liability Company Act (RCW Ch. 25.15).
"AGREEMENT" means this amended and restated limited liability company
agreement, as originally executed and as amended from time to time.
"CAPITAL ACCOUNT" has the meaning defined in Section 3.4.
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"CAPITAL CONTRIBUTION" means, with respect to each Member, the amount
contributed by such Member to the capital of the Company pursuant to Sections
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3.2 and 3.3.
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"CLASS A MEMBER" has the meaning given in Article 3.
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"CLASS B MEMBER" has the meaning given in Article 3.
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"CODE" means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent superseding federal revenue laws.
"COMPANY" means the limited liability company governed by this Agreement.
"DEFICIT CAPITAL ACCOUNT" means, with respect to any Member, the deficit
balance, if any, in such Member's Capital Account as of the end of the taxable
year, after giving effect to the following adjustments:
(i) credit to such Capital Account any amount that such Member is
obligated to restore to the Company under Regulation Section 1.704-
1(b)(2)(ii)(c), as well as any addition thereto pursuant to the next to last
sentences of Regulation Sections 1.704-2(g)(1) and (i)(5); and
(ii) debit to such Capital Account the items described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
This definition is intended to comply with the provisions of Regulation Sections
1.704-1(b)(2)(ii)(d) and 1.704-2, and shall be interpreted consistently with
those provisions.
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"DISTRIBUTABLE CASH" means, with respect to any fiscal period, all cash
receipts received by the Company from operations in the ordinary course of
business including, without limitation, income from invested Reserves and cash
receipts of the Company from any borrowing by the Company, but after deducting
Operating Cash Expenses, debt service, commitment fees, loan broker fees, and
other payments made in connection with any loan to the Company or other loans
secured by a lien on the Company's assets, capital expenditures of the Company
and amounts set aside for the creation of or addition to Reserves, all as
determined in the discretion of the Managers. Distributable Cash does not
include Capital Contributions made in accordance with Article 3. The Managers
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shall use their discretion to determine the nature and extent of Distributable
Cash.
"EAGLE RIVER" means Eagle River Investments, L.L.C., a Washington limited
liability company, formerly known as Eagle River Transition, L.L.C.
"EQUITY OPTION PLAN" means the Company's Amended and Restated Equity Option
Plan, dated as of February 27, 1996, as amended from time to time.
"MAJORITY INTEREST" means the vote, approval, consent or other action of
Members holding more than fifty percent (50%) of the Profits Interests and the
Capital Interests of the Company held by such Members. For these purposes, a
Member's Profit Interest is determined by reference to the Member's interest in
the Company's net profits under Section 7.1.1(d), and a Member's Capital
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Interest is based on the Member's Capital Account balance determined as of the
date on which the event triggering such other action of the Members occurs.
"MAJORITY PERCENTAGE INTEREST" means the vote, approval, consent or other
action of the Members entitled to act holding more than fifty percent (50%) of
the outstanding units held by such Members as of the date on which the event
triggering the vote or other action of Members occurs.
"MANAGERS" means Eagle River and NEXTLINK, Inc.
"MEMBER" means each person who executes a counterpart of this Agreement as
a Class A Member or a Class B Member, and each person who may hereafter be
admitted to the Company as an additional or substituted Class A Member or Class
B Member.
"NET CAPITAL CONTRIBUTION" means, with respect to a Class A Member, the
average daily amount of the following calculation: (i) the amount of each
Capital Contribution made by such Member, (ii) less the amount of all
distributions made to such Member pursuant to Section 8.1(c).
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"NEXTLINK, INC." means NEXTLINK, Inc., a Washington corporation.
"OPERATING CASH EXPENSES" means, with respect to any fiscal period, the
amount of cash disbursed in the ordinary course of operations of the Company
during such period, including without limitation, all cash expenses such as
expenses relating to marketing, sales, regulatory matters, technical matters,
engineering matters, rights of way, telecommunication expenses, utility charges,
administrative costs, advertising expenses, legal and accounting fees, insurance
premiums, taxes, and repair and maintenance expenses, all as determined in the
discretion of the Managers. Operating Cash Expenses shall not include
expenditures paid out of Reserves.
"PERCENTAGE INTEREST" means, with respect to any Member at any time, the
percentage determined based on the ratio that the number of Units held by such
Member bears to the total number of outstanding Units held by all Members.
"PREFERRED RETURN" shall mean, as of any date, an amount equal to an annual
return at a rate equal to the SFNB Prime Rate, as in effect on the first day of
each calendar quarter, plus 2% per annum, on the Net Capital Contribution of
each Class A Member, accruing from the date of each Capital Contribution.
"REGULATION" includes proposed, temporary and final Treasury regulations
promulgated under the Code and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.
"RESERVES" means, with respect to any fiscal period, funds set aside or
amounts allocated during such period to reserves that may be maintained by the
Company for working capital and to pay taxes, insurance, debt services or other
costs or expenses of the Company, all as determined in the discretion of the
Managers.
"SFNB PRIME RATE" means on any day Seattle-First National Bank's publicly
announced prime rate of interest, or if Seattle-First National Bank shall not be
publicly announcing such rate, a comparable base lending rate publicly announced
by a commercial bank, selected by the Managers.
"SRC" means BWP, Inc., an Oregon corporation formerly known as Sound
Response Corporation, and its permitted successors and assigns.
"UNITS" means the Class A or Class B Units issued to the Members pursuant
to this Agreement. The Units held by the Members shall be set forth on attached
Schedule 1, as amended from time to time.
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ARTICLE 3 -- MEMBERS, CONTRIBUTIONS AND INTERESTS
3.1 MEMBERS NAMES, ADDRESSES AND PERCENTAGES. The names and
addresses of the Members, and their Units and Percentage Interests are as set
forth on attached Schedule 1, as amended from time to time. Class A Members are
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holders of Class A Units. Class B Members are holders of Class B Units.
Members shall be either Class A Members or Class B Members and their respective
rights, preferences and limitations as Members shall in all respects be the
same, except as specifically provided in this Article 3 or elsewhere in this
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Agreement. Class B Members shall not have any right to vote on any matter,
except as provided in Section 9.1(c) and Section 12.3.
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3.2 CONTRIBUTIONS. The Members shall make, or previously have made,
the Capital Contributions in cash or by contribution of assets as stated in the
records of the Company prior to the date of this Agreement and in any Schedule 2
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attached to this Agreement as amended from time to time. No interest shall be
paid on Capital Contributions and no Member shall have the right to withdraw
his, her or its Capital Contribution.
Additional Capital Contributions shall be required of Class A Members
only upon a written call for additional capital by the Managers setting forth
the aggregate amount of additional capital, the number of additional Class A
Units to be issued in connection with the call for additional capital, and the
subscription price for each Class A Unit. If the Managers issue a call for
additional Capital Contributions, the Class A Members shall make such additional
Capital Contributions on a pro rata basis in proportion to their respective
ownership of the total Class A Units, such that 100% of the additional Capital
Contribution is funded by the Class A Members, within ten business days after
receipt of notice of the required additional Capital Contribution. Class B
Members shall have no right or obligation to make additional Capital
Contributions.
In the event that any Class A Member fails to make a required
additional Capital Contribution within the time required, the non-defaulting
Class A Members may, at their option and as determined by the Managers:
(a) recharacterize the additional Capital Contribution made by each
of the non-defaulting Class A Members as a loan to the Company, bearing interest
at a rate equal to the lesser of the maximum rate permitted by law or the SFNB
Prime Rate in effect as of the first day of each calendar month, plus three
percent per annum, with such interest rate being adjusted as of the first day of
each calendar month and with interest payable monthly and principal payable
within thirty (30) days after written demand; or
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(b) contribute to the Company, pro rata in accordance with the number
of Class A Units held by each non-defaulting Class A Member or in such other
manner as the non-defaulting Class A Members may agree, an amount equal to the
defaulting Member's required additional Capital Contribution in exchange for
additional Class A Units at the subscription price set forth in the Managers'
call for additional capital; or
(c) advance, pro rata in accordance with the number of Class A Units
held by each non-defaulting Class A Member or in such other manner as the non-
defaulting Class A Members may agree, an amount equal to such required
additional Capital Contribution on behalf of the defaulting Member (a "Default
Loan"). Default Loans shall bear interest at the lesser of the maximum rate
permitted by law or the SFNB Prime Rate in effect as of the first day of each
calendar month, plus 3% per annum, and such interest rate shall be adjusted as
of the first day of each calendar month. Default Loans shall be repayable
within thirty (30) days after written demand and if not sooner repaid or demand
made, shall be repaid from any cash distributions otherwise distributable by the
Company to the defaulting Member (and charged against the Defaulting Member's
Capital Account) or offset against any amount to be paid to the defaulting
Member by the Company.
Following the contribution of additional capital and the issuance of
additional Class A Units pursuant to the call of the Managers under this Section
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3.2, the Percentage Interests of the Members shall be adjusted so that the
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Percentage Interest of each Member is in the ratio of a fraction, the numerator
of which is the aggregate number of Units held by each Member and the
denominator of which is the aggregate number of Units held by all Members, and
Schedule 1 shall be amended accordingly.
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3.3 ADDITIONAL MEMBERS; EQUITY OPTION PLAN. The Company may, as
determined by the Managers time to time, admit additional persons as Members, or
grant options to persons to become Members, pursuant to the Equity Option Plan
or otherwise. The Equity Option Plan, and additional agreements executed
pursuant to the terms of the Equity Option Plan, shall govern the terms of any
options to become a Member. Persons admitted as Members pursuant to the Equity
Option Plan shall be admitted as Class B Members.
3.4 CAPITAL ACCOUNTS. A capital account ("Capital Account") shall be
determined and maintained for each Member in accordance with the principles of
Regulation Section 1.704-1(b) at all times throughout the full term of the
Company. In the event of a permitted sale or assignment of all or any part of a
Member's interest in the Company, the Capital Account of the transferor shall
become the Capital Account of the transferee to the extent it relates to the
transferred Company interest.
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The book value of all Company properties may be adjusted to equal
their respective gross fair market values, as determined by the Managers, as of
the following times: (1) in connection with the acquisition of an interest in
the Company by a new or existing Member, (2) in connection with the liquidation
of the Company as defined in Regulation Section 1.704-(1)(b)(2)(ii)(g), or (3)
in connection with a distribution to a retiring or a continuing Member as
consideration for all or a portion of his, her or its interest in the Company.
In the event of a revaluation of any Company assets hereunder, the Capital
Accounts of the Members shall be adjusted, including continuing adjustments for
depreciation, to the extent provided in Regulation Section 1.704-
(1)(b)(2)(iv)(f).
3.5 NO WITHDRAWAL OR TRANSFER OF MEMBER'S INTEREST. No Member shall
voluntarily withdraw from the Company without the consent of the Managers. A
withdrawal in violation of this Section 3.5 shall constitute a breach of this
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Agreement for which the Company and other Members shall have the remedies
provided under applicable law.
No Member shall voluntarily assign, encumber, sell or otherwise
transfer all or any portion of the Member's interest in the Company or options
to acquire any interest in the Company (except as set forth in the Equity Option
Plan governing such option), or enter into any agreement as a result of which
any person shall become interested with the Member in the Company, without the
consent of a Majority Percentage Interest of the non-transferring Members. The
Members acknowledge and agree that this is a reasonable restraint on the
alienation of their interests in the Company in view of the paramount objective
of the Members that the Company be treated as a partnership for federal income
tax purposes.
ARTICLE 4 -- MEETINGS OF MEMBERS
4.1 MEETINGS. Meetings of Members are not required, but may be
called by Class A Members holding at least twenty percent (20%) of the
Percentage Interests held by Members; provided, however, that Class A Members
holding at least fifteen percent (15%) of the Percentage Interests held by
Members may call a meeting of Members once per year. No business shall be
transacted at any meeting of Members except as is specified in the notice
calling such meeting.
4.2 PLACE OF MEETINGS. The Members may designate any place, either
within or outside the State of Washington, as the place of meeting for any
meeting of the Members. If no designation is made, the place of meeting shall
be the principal office of the Company specified in Section 1.5.
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4.3 NOTICE OF MEETINGS. Written notice stating the place, day and
time of the meeting and the purpose for which the meeting is called shall be
delivered not less than ten (10) nor more than fifty (50) days before the date
of the meeting, either personally or by mail, by or at the direction of the
Members calling the meeting, to each Member entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered three (3) calendar days
after being deposited in the United States Mail, addressed to the Member at his,
her or its address as it appears on the records of the Company, postage prepaid.
4.4 RECORD DATE. For the purpose of determining Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or
Members entitled to any distribution, the date on which notice of the meeting is
first delivered or mailed, or the date on which a resolution declaring such
distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section 4.4, such
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determination shall apply to any adjournment thereof.
4.5 QUORUM. Members holding a Majority Percentage Interest,
represented in person or by proxy, shall constitute a quorum at any meeting of
Members. In the absence of a quorum at any such meeting, a majority of the
Percentage Interests so represented may adjourn the meeting from time to time
for a period not to exceed sixty (60) days without further notice. However, if
the adjournment is for more than sixty (60) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, notice of the adjourned
meeting shall be given to each Member. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed.
4.6 PROXIES. At all meetings of Members, a Member may vote in person
or by proxy executed in writing by the Member or by the Member's attorney-in-
fact or agent appointed in writing. Such proxy or appointment shall be filed
with the Company before or at the time of the meeting. No proxy or appointment
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy or appointment.
4.7 WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the Member entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice. Attendance at a meeting shall
constitute waiver of notice of the meeting unless the Member at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting.
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4.8 ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the Members at a meeting may be taken without a meeting if a consent in
writing, describing the action taken, is signed by a Majority Percentage
Interest of the Class A Members, unless a different vote is required to approve
such action under this Agreement. Such action shall be included in the minutes
of the Company's meetings.
4.9 MEETINGS BY TELEPHONE. Meetings of the Members may be held by
conference telephone or by any other means of communication by which all
participants can hear each other simultaneously during the meeting, and such
participation shall constitute presence in person at the meeting.
ARTICLE 5 -- MANAGEMENT
5.1 MANAGEMENT. The Company shall be managed exclusively by the
Managers. The Managers shall have the right to make all management, financial,
and accounting decisions concerning the Company, including the right and
authority, notwithstanding any provision of this Agreement to the contrary, to
cause the Company to be merged with or into another entity or to cause the
Company to be converted into a corporation.
5.2 MANAGER AGENT OF COMPANY. The Managers are agents of the Company
for purposes of its business, and the act of either Manager for the purpose of
carrying on the business of the Company, including the execution in the Company
name of any instrument for such purpose, shall bind the Company.
5.3 MANAGERS' OTHER ACTIVITIES. Each Manager is at all times
specifically permitted to engage in any other business ventures and activities
including such activities as may be deemed to be in competition with the Company
and shall have no obligation to account to the Company or its Members for any
such business ventures or activities.
5.4 AGENTS; ADMINISTRATIVE FUNCTIONS. The Managers may also delegate
to one Manager the right to implement the decisions of the Managers and
administration of the day-to-day operational matters of the Company. The
Managers may also authorize, in writing, one or more agents or officers (each,
an "Administrator") to implement the management decisions of the Managers and to
handle the day-to-day operational matters of the Company. Such authority may be
general or limited to specific instances. The Managers shall determine the
duties, compensation, term of service and other matters relating to any
Administrator. The Managers may remove an Administrator at any time. The
Administrator's expenses incurred on behalf of the Company shall be paid by, or
reimbursed by, the Company.
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5.5 MEETINGS OF MANAGERS. Meetings of Managers are not required.
Either Manager may call a meeting of the Managers. The Manager calling the
meeting may designate any place, either within or outside the State of
Washington, as the place of meeting of the Managers. The affirmative vote of
Managers present at the meeting holding a Majority Percentage Interest of the
Units held by the Managers shall be the act of the Managers. A Manager may be
represented in meetings or votes of the Managers by any representative
designated by such Manager. Any action required or permitted to be taken by the
Managers may be taken without a meeting if a consent in writing, describing the
action taken, is signed by Managers holding a Majority Percentage Interest of
the Units held by the Managers. Meetings of the Managers may be held by
conference telephone or by any other means of communication by which all
participants can hear each other simultaneously during the meeting, and such
participation shall constitute presence at the meeting.
ARTICLE 6 -- ACCOUNTING AND RECORDS
6.1 BOOKS OF ACCOUNT. The Managers shall maintain records and
accounts of all of the Company's operations and expenditures. At a minimum the
Managers shall keep at the Company's principal place of business the following
records:
(a) A current list and past list, setting forth the full name and last
known mailing address of each Member and Manager;
(b) A copy of the Certificate of Formation and all amendments thereto;
(c) Copies of this Agreement and all amendments hereto and copies of
all limited liability company agreements no longer in effect;
(d) Copies of the Company's federal, state, and local tax returns and
reports, if any, for the three (3) most recent years;
(e) Minutes of meetings of the Members, if any, and any written
consents obtained from Members for actions taken by Members without a meeting;
and
(f) Copies of the Company's financial statements for the three (3)
most recent years.
6.2 FISCAL YEAR. The fiscal year of the Company shall be the calendar
year.
6.3 ACCOUNTING REPORTS. Within one hundred twenty (120) days after
the close of each fiscal year, the Managers
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shall cause each Member to receive an unaudited financial report of the
activities of the Company for the preceding fiscal year, including the balance
sheet of the Company as of the end of such year and a statement of income or
loss for such year.
6.4 TAX RETURNS. The Managers shall cause to be prepared and timely
filed all required federal and state income tax returns. Within ninety (90)
days after the end of each fiscal year, each Member shall be furnished a
statement suitable for use in the preparation of the Member's income tax return.
6.5 TAX MATTERS MEMBER. For purposes of the Code and any comparable
provisions of state law, the "Tax Matters Partner" shall be Eagle River.
ARTICLE 7 -- ALLOCATIONS OF PROFITS, LOSSES AND OTHER ITEMS
7.1 ALLOCATION OF NET PROFIT AND LOSS - IN GENERAL.
7.1.1 ALLOCATION OF NET PROFIT. After giving effect to the special
allocations set forth in Sections 7.2 and 7.3, the net profit for any fiscal
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year of the Company shall be allocated among the Members as follows:
(a) first, to the Members in proportion to the aggregate allocations
of net loss to each Member pursuant to Section 7.1.2(c), until each Member has
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received aggregate allocations of net profit under this Paragraph (a) in an
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amount that is equal to (but does not exceed) the aggregate allocations of net
loss to such Member under Section 7.1.2(c);
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(b) second, to the Members in proportion to the aggregate allocations
of net loss to each Member pursuant to Section 7.1.2(b), until each Member has
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received aggregate allocations of net profit under this Paragraph (b) in an
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amount that is equal to (but does not exceed) the aggregate allocations of net
loss to such Member under Section 7.1.2(b);
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(c) third, one hundred percent (100%) to the Class A Members (pro
rata, in accordance with their respective accrued and unallocated Preferred
Return) until the net profit allocated pursuant to this Section 7.1.1(c) for the
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current and all prior fiscal years is equal to the cumulative Preferred Return
for such Class A Members from the inception of the Company to the day on which
such allocation is made; and
(d) fourth, to the Members in proportion to their respective
Percentage Interests.
7.1.2 ALLOCATION OF NET LOSS. After giving effect to the special
allocations set forth in Sections 7.2 and 7.3, the
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net loss for any fiscal year of the Company shall be allocated among the Members
as follows:
(a) first, to the Members, in proportion to the aggregate allocations
of net profits to each Member pursuant to Section 7.1.1(d), until each Member
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has received aggregate allocations of net loss under this Paragraph (a) in an
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amount that is equal to (but does not exceed) the aggregate allocations of net
profit to such Member under Section 7.1.1(d);
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(b) second, to the Members, pro rata in proportion to their
respective Percentage Interests; provided, however, that no net loss shall be
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allocated to any Member if and to the extent such allocation of net loss would
cause such Member to have an Adjusted Capital Account Deficit at the end of the
Company's fiscal year and any such excess net loss shall be allocated pursuant
to Paragraph (c) below; and
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(c) the balance of the net loss, if any, shall be allocated among
those Members who do not have Deficit Capital Accounts in proportion to their
respective Percentage Interests; provided, however, that no allocation under
this Section 7.1.2(c) shall cause any Member to have a Deficit Capital Account.
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7.2 SPECIAL ALLOCATIONS. The following special allocations shall be
made for any fiscal year of the Company in the following order:
7.2.1 MINIMUM GAIN CHARGEBACK. If there is a decrease in the
Company's "partnership minimum gain," as defined in and determined under
Regulation Sections 1.704-2(b)(2) and 1.704-2(d), the minimum gain chargeback
provisions of Regulation Section 1.704-2(f), which are hereby incorporated into
this Agreement by this reference, shall be applied.
7.2.2 MEMBER MINIMUM GAIN CHARGEBACK. If there is a decrease in any
Member's share of "partner nonrecourse debt minimum gain," as defined in and
determined under Regulation Section 1.704-2(i), the partner nonrecourse debt
minimum gain chargeback provisions of Regulation Section 1.704-2(i)(4), which
are hereby incorporated into this Agreement by this reference, shall be applied.
7.2.3 QUALIFIED INCOME OFFSET. In the event that any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
income and gain shall be specially allocated to such Member in accordance with
Regulation Section 1.704-(1)(b)(2)(ii)(d).
12
7.2.4 NONRECOURSE DEDUCTIONS. "Nonrecourse deductions," as defined
in and determined under Regulation Sections 1.704-2(b)(1) and (c), shall be
allocated among the Members in accordance with their respective Percentage
Interests.
7.2.5 MEMBER NONRECOURSE DEDUCTIONS. "Partner nonrecourse
deductions," as defined in and determined under Regulation Sections 1.704-
2(i)(1) and (2), shall be specially allocated among the Members in accordance
with Regulation Section 1.704-2(i).
7.3 CORRECTIVE ALLOCATIONS. The allocations set forth in Section
-------
7.2 are intended to comply with certain regulatory requirements under Code
- ---
Section 704(b). The Members intend that, to the extent possible, all
allocations made pursuant to such Sections will, over the term of the Company,
be offset either with other allocations pursuant to Section 7.2 or with special
-----------
allocations of other items of Company income, gain, loss, or deduction pursuant
to this Section 7.3. Accordingly, the Managers are hereby authorized and
-----------
directed to make offsetting allocations of Company income, gain, loss or
deduction under this Section 7.3 in whatever manner the Managers determine is
-----------
appropriate so that, after such offsetting special allocations are made (and
taking into account the reasonably anticipated future allocations of income and
gain pursuant to Sections 7.2.1 and 7.2.2), the Capital Accounts of the Members
-------------- -----
are, to the extent possible, equal to the Capital Accounts each would have if
the provisions of Section 7.2 were not contained in this Agreement and all
-----------
income, gain, loss and deduction of the Company were instead allocated pursuant
to Section 7.1.
-----------
7.4 OTHER ALLOCATION RULES.
7.4.1 GENERAL. Except as otherwise provided in this Agreement, all
items of Company income, gain, loss, deduction, credit, and any other
allocations not otherwise provided for shall be divided among the Members in
accordance with their Percentage Interests, or as otherwise may be required
under the Code and the regulations thereunder.
7.4.2 ALLOCATION OF RECAPTURE ITEMS. In making any allocation among
the Members of income or gain from the sale or other disposition of a Company
asset, the ordinary income portion, if any, of such income and gain resulting
from the recapture of cost recovery or other deductions shall be allocated among
those Members who were previously allocated (or whose predecessors-in-interest
were previously allocated) the cost recovery deductions or other deductions
resulting in the recapture items, in proportion to the amount of such cost
recovery deductions or other deductions previously allocated to them.
13
7.4.3 ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. Solely for
purposes of determining a Member's proportionate share of the "excess
nonrecourse liabilities" of the Company within the meaning of Regulation Section
1.752-3(a)(3), the Members' interests in the Company's profits shall be in
accordance with their respective Percentage Interests.
7.4.4 ALLOCATIONS IN CONNECTION WITH VARYING INTERESTS. If, during a
Company fiscal year, there is (i) a permitted transfer of all or a part of a
Member's interest, or (ii) the admission or withdrawal of a Member, net profit,
net loss, each item thereof, and all other tax items of the Company for such
fiscal year shall be divided and allocated among the Members by taking into
account their varying interests during such fiscal year in accordance with Code
Section 706(d) and using any conventions permitted by law and selected by the
Managers.
7.5 DETERMINATION OF NET PROFIT OR LOSS.
7.5.1 COMPUTATION OF NET PROFIT OR LOSS. The net profit or net loss
of the Company, for each fiscal year or other period, shall be an amount equal
to the Company's taxable income or loss for such period, determined in
accordance with Code Section 703(a) (and, for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1), including income and gain exempt from federal income tax,
shall be included in taxable income or loss).
7.5.2 ADJUSTMENTS TO NET PROFIT OR LOSS. For purposes of computing
taxable income or loss on the disposition of an item of Company property or for
purposes of determining the cost recovery, depreciation, or amortization
deduction with respect to any property, the Company shall use such property's
book value determined in accordance with Regulation Section 1.704-1(b).
7.5.3 ITEMS SPECIALLY ALLOCATED. Notwithstanding any other provision
of this Section 7.5, any items that are specially allocated pursuant to Section
----------- -------
7.2 or Section 7.3 shall not be taken into account in computing the Company's
- --- -----------
net profit or net loss.
7.6 MANDATORY TAX ALLOCATIONS UNDER CODE SECTION 704(C). In
accordance with Code Section 704(c) and Regulation Section 1.704-3, income,
gain, loss and deduction with respect to any property contributed to the capital
of the Company shall, solely for tax purposes, be allocated among the Members so
as to take account of any variation between the adjusted basis of such property
to the Company for federal income tax purposes and its initial book value
computed in accordance with Section 7.5.2. Prior to the contribution of any
-------------
property to the Company that has a fair market value that differs from its
adjusted tax basis in the hands of the contributing Member on the date of
contribution,
14
the contributing Member and the Managers shall agree upon the allocation method
to be applied with respect to that property under Regulation Section 1.704-3,
which allocation method shall be set forth on attached Schedule 3, if any, as
----------
amended from time to time. The same procedure shall apply to any revaluation of
Company property as permitted under Regulation Section 1.704-2(b)(iv)(f);
provided, however, that all decisions with respect to such revaluation shall be
- -------- -------
made by the Managers.
Allocations pursuant to this Section 7.6 are solely for purposes of
-----------
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of net profit,
net loss, or other items as computed for book purposes, or, subject to Section
-------
8.1(a), distributions pursuant to any provision of this Agreement.
- ------
ARTICLE 8 -- DISTRIBUTIONS TO MEMBERS
8.1 NONLIQUIDATING DISTRIBUTIONS. Subject to Section 8.2,
-----------
distributions of Distributable Cash and distributions in kind, other than
distributions in liquidation pursuant to Section 8.3, shall be distributed at
-----------
times and under circumstances determined by the Managers in the following order
of priority:
(a) first, the Company shall make a distribution to the Members in an
amount equal to at least (a) the Company's net taxable income during the fiscal
year multiplied by (b) the maximum federal income tax rate of any Member in
effect for the fiscal year, less (c) the amount of any distributions made by the
Company during the fiscal year (other than distributions made during the fiscal
year that are required to be made under the provisions of this Section 8.1(a)
--------------
with respect to a prior fiscal year). Such distribution shall be made to each
Member in proportion to the net taxable income reported on such Member's Form K-
1 from the Company for such fiscal year. For purposes of this Section 8.1(a),
--------------
the Company's net taxable income shall be the net excess of items of recognized
income and gain over the items of recognized loss and deduction reported on the
Company's federal income tax return for the taxable year with respect to which
the distribution is being made. Notwithstanding the foregoing, in the event (1)
there is an allocation by the Company of income or gain to SRC, or losses or
deductions only to the other Members (or Members other than the Company in the
event the assets previously contributed to the Company by SRC are contributed by
the Company to another limited liability company or partnership), with respect
to property contributed by SRC for a particular fiscal year in accordance with
Section 7.6 of this Agreement and (2) the amount of cash distributed to SRC for
- -----------
that fiscal year pursuant to the first two sentences of this Section 8.1(a),
--------------
when added to the amount of any prior distributions made to SRC during that year
(other than distributions made during the fiscal year that are required to be
15
made under provisions of this Section 8.1(a) with respect to a prior fiscal
--------------
year), is less than the product of (a) the maximum federal income tax rate for
individuals for that year times (b) the net amount of gain allocated by the
Company to SRC for that fiscal year for federal income tax purposes, then the
Company shall distribute to SRC an additional amount of cash equal to such
"shortfall." Such distribution shall be made to SRC no later than five business
days before the due date of the federal tax return filed by SRC reflecting such
gain. The Company's obligation to make such distribution is subject to the
restrictions governing distributions under the Act.
(b) second, to the Class A Members (pro rata in accordance with their
respective accrued and unpaid Preferred Return), until such Members have
received aggregate distributions under this Section 8.1(b) in an amount that is
--------------
equal to (but does not exceed) such Members' accrued Preferred Return through
the date of the distribution;
(c) third, to the Class A Members (pro rata in accordance with their
respective Net Capital Contributions) to the extent of such Class A Members'
Capital Contributions to the Company until such Class A Members have received
aggregate distributions under this Section 8.1(c) in an amount that is equal to
--------------
(but does not exceed) such Class A Members' aggregate Capital Contributions to
the Company through the date of the distribution; and
(d) fourth, to the Members pro rata in proportion to their respective
Percentage Interests.
8.2 SPECIAL DISTRIBUTION TO SRC TO COVER 1995 TAXES. On or before
April 15, 1996, the Company shall make a special distribution to SRC in the
positive amount (if any) determined under the following formula:
[(A - B) X C] - D = Amount of Distribution
For purposes of applying this formula, each of the following variables shall
have the meaning set forth opposite such variable:
A = SRC's net taxable income attributable to its operations from January
1, 1995 through August 31, 1995, determined in a manner consistent
with the historical preparation of SRC's Form 1120S, Income Tax Return
for an S Corporation. The calculation of SRC's net taxable income for
this purpose shall not include any consideration received by SRC under
the Member Contribution and Asset Purchase Agreement between the
Company and SRC.
16
B = SRC's allocable share of net loss of the Company for calendar year
1995.
C = 48.6% (the combined highest marginal federal and Oregon state income
tax rates imposed on individuals during 1995).
D = The aggregate amount of distributions made by SRC to its shareholders
during the period commencing on January 1, 1995 and ending on August
31, 1995.
8.3 DISTRIBUTIONS IN LIQUIDATION. Notwithstanding Sections 8.1 and 8.2,
--------------------
distributions in liquidation of the Company shall be made to each Member in the
manner set forth in Article 9.
---------
8.4 DISTRIBUTIONS IN KIND. Non-cash assets, if any, shall be distributed
at times and in a manner determined in the discretion of the Managers that
reflects how cash proceeds from the sale of such assets for fair market value
would have been distributed (after any unrealized income, gain or loss
attributable to such non-cash assets has been allocated among the Members in
accordance with Article 7).
---------
ARTICLE 9 -- DISSOLUTION AND LIQUIDATION
9.1 EVENTS OF DISSOLUTION. Except as otherwise provided in this
Agreement, the Company shall dissolve upon the earlier of:
(a) expiration of the term specified in Section 1.4;
-----------
(b) the written agreement of a Majority Percentage Interest of the
Class A Members; or
(c) the occurrence of any of the following events, unless the business
of the Company is continued with the consent of a Majority Interest of the
remaining Members within ninety (90) days following such event:
(i) a Member is the subject of a voluntary or involuntary insolvency
or bankruptcy proceeding as specified in RCW 25.15.130(1)(d) or (c); or
(ii) in the case of a Member who is an individual, the death of the
Member or the entry of an order by a court of competent jurisdiction
adjudicating the Member incompetent to manage his or her person or estate; or
(iii) in the case of a Member that is a general partnership, limited
partnership or limited liability company, the dissolution and commencement of
winding up of such entity; or
17
(iv) in the case of a Member that is a corporation, the filing of
articles of dissolution or the equivalent for the corporation or the
administrative dissolution of the corporation and the lapse of any period
authorized for application for reinstatement; or
(v) in the case of a Member that is a trust, the termination of such
trust; or
(vi) any event which causes the Company to have fewer than two (2)
Members.
9.2 LIQUIDATION UPON DISSOLUTION AND WINDING UP. Upon the dissolution of
the Company, the Managers shall wind up the affairs of the Company. A full
account of the assets and liabilities of the Company shall be taken. The assets
shall be promptly liquidated and the proceeds thereof applied as required by the
Act. Upon discharging all debts and liabilities of the Company, all remaining
assets shall be distributed to the Members or their representatives by the end
of the taxable year in which the liquidation occurs (or, if later, within ninety
(90) days after the date of such liquidation) in proportion to the positive
balances of their respective Capital Accounts, as determined after taking into
account all Capital Account adjustments for the taxable year during which the
liquidation occurs (other than those made pursuant to this Section 9.2). The
-----------
Managers may, in the process of winding up the Company, distribute property in
kind, in which case the Members' Capital Account balances shall be adjusted in
accordance with Regulation Section 1.704-1(b)(2)(iv)(e).
9.3 NO OBLIGATION TO RESTORE NEGATIVE CAPITAL ACCOUNT BALANCE ON
LIQUIDATION. No Member shall have any obligation to make any Capital
Contribution to the Company to eliminate the negative balance, if any, of such
Member's Capital Account upon a liquidation within the meaning of Regulation
Section 1.704-1(b)(2)(ii)(g) and such negative balance shall not be considered a
debt owed by such Member to the Company or to any other person for any purpose
whatsoever.
ARTICLE 10 -- DISSOCIATION OF A MEMBER
10.1 EVENTS. Upon the occurrence of an event of Member dissociation
specified in Section 9.1(c) with respect to any Member other than Eagle River or
--------------
NEXTLINK, Inc., the non-dissociated Class A Members shall each have the option,
exercisable by written notice to the person who succeeds to the interest of such
dissociated Member, to purchase such Member's entire interest in the Company.
If more than one Class A Member exercises the option to purchase the dissociated
Member's interest, their exercise of the purchase option shall be deemed an
election to purchase a portion of the interest that is the
18
ratio of the purchasing Member's Percentage Interest to the Percentage Interests
of all purchasing Members. Upon the occurrence of an event of Member
dissociation specified in Section 9.1(c) with respect to Eagle River or
--------------
NEXTLINK, Inc., the other Class A Members shall not have any option to purchase
the interest of Eagle River or NEXTLINK, Inc. in the Company. The terms of the
Company's right to repurchase any option to acquire Class B Units in the Company
shall be governed by the Equity Option Plan rather than the provisions of this
Article 10.
- ----------
10.2 PURCHASE PRICE. The purchase price for a selling Member's
interest in the Company for purposes of Section 10.1 shall be the amount of the
------------
liquidating distribution the Selling Member would receive pursuant to Section
-------
9.2 if the Company's assets (other than purchased good will) were sold for their
- ---
book values as determined at the close of the immediately preceding fiscal year
of the Company, the Company's liabilities repaid, and the balance distributed to
the Members in liquidation of their interests in the Company.
10.3 FAILURE TO EXERCISE PURCHASE OPTION. If the Class A Members do
not exercise the purchase option under Section 10.1 and the business of the
------------
Company is continued as provided in Section 9.1(c), then each of the persons who
--------------
succeed to the dissociated Member's interest shall be an assignee of such
dissociated Member, but shall not be a Member unless admitted as a Member in
accordance with Section 3.3. The rights of such Member's successors shall be
-----------
subject to offset for any damages suffered by the Company or the other Members
as a result of such wrongful dissociation.
ARTICLE 11 -- LIMITATION OF MEMBER'S LIABILITY;
INDEMNIFICATION OF MEMBERS
11.1 LIMITATION OF LIABILITY. No Member or Manager, or their respective
officers, directors, agents, employees, members or managers, shall have
liability to the Company or its Members for monetary damages for conduct as a
Member or Manager, except for acts or omissions that involve a breach of this
Agreement, intentional misconduct, a knowing violation of law, conduct violating
RCW 25.15.235, or for any transaction from which such person has personally
received a benefit in money, property or services to which such person was not
legally entitled. If the Act is hereafter amended to authorize Company action
further limiting the personal liability of such persons, then the liability of
such persons shall be eliminated or limited to the full extent permitted by the
Act, as so amended. No repeal or modification of the Act or this Section 11.1
------------
shall adversely affect any right or protection of any such person existing at
the time of such repeal or modification for or with respect to an act or
omission of such person occurring prior to such repeal or modification.
19
11.2 INDEMNIFICATION. The Company shall indemnify each Member and
Manager, and their respective officers, directors, agents, employees, members or
managers, from and against any judgments, settlements, penalties, fines or
expenses incurred in a proceeding to which such person is a party because he,
she or it is, or was, a Member, a Manager, or officer, director, agent,
employee, member or manager thereof; provided, that such persons shall not be
indemnified from or on account of acts or omissions of such persons finally
adjudicated to be a breach of this Agreement, intentional misconduct or a
knowing violation of law by such persons, conduct of such persons adjudged to be
in violation of RCW 25.15.235, or any transaction with respect to which it was
finally adjudged that such person received a benefit in money, property or
services to which such person was not legally entitled. The right to
indemnification conferred in this Section 11.2 shall be a contract right and
------------
shall include the right to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
that the payment of such expenses in advance of the final disposition of a
proceeding shall be made only upon delivery to the Company of an undertaking, by
or on behalf of such indemnified person, to repay all amounts so advanced if it
shall ultimately be determined that such person is not entitled to be
indemnified under this Section 11.2 or otherwise.
------------
The right to indemnification and payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in this Section 11.2
------------
shall not be exclusive of any other right any person entitled to indemnification
under this Agreement may have or hereafter acquire under any statute, this
Agreement, vote of Members or otherwise.
No repeal or modification of the Act or this Section 11.2 shall adversely
------------
affect any right to indemnification existing at the time of such repeal or
modification for or with respect to indemnification related to an act or
omission of such person occurring prior to such repeal or modification.
ARTICLE 12 -- MISCELLANEOUS
12.1 NOTICES. Any notice or other communication required or permitted
under this Agreement shall be deemed to have been duly given if delivered
personally to the party to whom directed or, if mailed, by registered or
certified mail, postage and charges prepaid, addressed (a) if to a Member or
Manager, to such person's address specified on attached Schedule 1, and (b) if
----------
to the Company, to the Company's address specified in Section 1.5. Any such
-----------
notice shall be deemed to be given when personally delivered, on the date of
delivery if delivered by overnight courier service, on the date such notice is
sent by telecopier to a telecopy number designated on the Schedule if such
notice is
20
also sent by overnight courier service, or, if mailed, two (2) business days
after the date of mailing. A Member, Manager or the Company may change its
address for purposes of notices hereunder by giving notice specifying such
changed address in the manner specified in this Section 12.1.
------------
12.2 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Washington.
12.3 AMENDMENTS. This Agreement may be amended by the affirmative vote of
a Majority Percentage Interest of the Class A Members; provided, however, that
-------- -------
Section 3.2, Article 7 and Article 8 of this Agreement shall not be modified in
- ----------- --------- ---------
any way that has an adverse effect on a Member unless such Member consents to
the proposed modification.
12.4 CONSTRUCTION. Whenever the singular number is used in this Agreement
and when required by the context, the same shall include the plural and vice
versa, and the masculine gender shall include the feminine and neuter genders
and vice versa.
12.5 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not affect the interpretation of this Agreement.
12.6 WAIVERS. The failure of any person to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
12.7 REMEDIES. The rights and remedies of the parties hereunder shall not
be mutually exclusive, and the exercise of any one right or remedy shall not
preclude or waive the right to exercise any other remedies. Said rights and
remedies are in addition to any other rights the parties may have by law or
otherwise.
12.8 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid, illegal or unenforceable
to any extent, the remainder of this Agreement and the application thereof shall
not be affected and shall be enforceable to the fullest extent permitted by law.
12.9 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants, terms,
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors and
assigns.
21
12.10 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Company.
12.11 JURISDICTION AND VENUE. In the event that any suit is brought
arising out of or in connection with this Agreement, the parties consent to the
jurisdiction of, and agree that sole venue will lie in, the state and federal
courts located in King County, Washington.
12.12 DISPUTE RESOLUTION.
12.12.1 DISPUTE RESOLUTION. The parties to this Agreement desire to
resolve disputes arising out of this Agreement without litigation. Accordingly,
except for action seeking a temporary restraining order injunction related to
the purposes of this Agreement, or suit to compel compliance with this dispute
resolution process, the parties agree to use the dispute resolution procedures
set forth in Section 12.12 as their sole remedy with respect to any controversy
-------------
or claim arising out of or relating to this Agreement or its breach.
At the written request of any party, the parties to the dispute will
appoint knowledgeable, responsible representatives to meet and negotiate in good
faith to resolve any dispute arising under this Agreement. The parties intend
that these negotiations be conducted by non-lawyer, business representatives.
The location, format, frequency, duration and conclusion of these discussions
shall be left to the discretion of the representatives. Discussion and
correspondence among the representatives for purposes of these negotiations
shall be treated as confidential information developed for purposes of
settlement, exempt from discovery and production, which shall not be admissible
in the arbitration described below. Documents identified in or provided with
such communications, which are not prepared for purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in evidence in
the arbitration or lawsuit.
12.12.2 MEDIATION. If the negotiations set forth in Section 12.12.1
---------------
do not resolve the dispute within sixty (60) days of the initial written
request, the parties agree to work in good faith to settle the dispute by
mediation under the commercial mediation rules of the American Arbitration
Association. The parties will attempt to agree on a mediator. If they are
unable to do so, the mediation will be referred to the Seattle office of the
American Arbitration Association for mediation which will appoint a qualified
mediator to serve. The mediation shall take place in Seattle. Unless the
parties agree otherwise, the first mediation session shall take place no later
than ninety (90) days after the initial written request to negotiate. The
mediation shall continue until the dispute is resolved or until such time
22
as the mediator makes a good faith determination that the likelihood of
resolution is sufficiently remote that continuation of the mediation is not
warranted.
12.12.3 ARBITRATION. If a determination is made pursuant to Section
-------
12.12.2 that continuation of the mediation process is not warranted, the dispute
- -------
shall be submitted to binding arbitration by a panel of three arbitrators
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. Any party may demand such arbitration in accordance with the
procedures set out in those rules. Each party shall have the right to take the
deposition of one individual, and any expert witness designated by the other
party. Each party shall also have the right to request production of relevant
documents, the scope and enforcement of which shall be governed by the
arbitrator. Additional discovery may be only by order of the arbitrator, and
only upon a showing of substantial need. The arbitrator shall be authorized to
issue subpoenas for the purpose of requiring attendance of witnesses at
depositions. The arbitration hearing shall be commenced within sixty (60) days
of the determination that mediation is not going to be successful. The
arbitration shall be held in Seattle, Washington or such other location as
mutually agreed upon by the parties. The arbitrator shall control the
scheduling so as to process the matter expeditiously. The parties may submit
written briefs. The arbitrator shall rule on the dispute by issuing a written
opinion within thirty (30) days after the close of hearings. The times
specified in this section may be extended upon mutual agreement of the parties
or by the arbitrator upon a showing of good cause. The award rendered by
arbitration shall be final, binding and nonappealable judgment and the award may
be entered in any court of competent jurisdiction in the United States.
Punitive damages shall not be awarded by the arbitrator.
12.12.4 CONFIDENTIALITY. The parties agree that all communications
and negotiations between the parties during the dispute resolution process, any
settlements agreed upon during the dispute resolution process and any
information regarding the other party obtained during the dispute resolution
process (that are not already public knowledge) are confidential and may be
disclosed only to employees and agents of the parties who shall have a "need to
know" the information and who shall have been made aware of the confidentiality
obligations set forth in this Section, unless the party is required by law to
disclose such information.
12.12.5 FEES AND EXPENSES. The parties shall equally split the fees
of the mediator and the arbitrator. Any party found by the arbitrator to have
breached this Agreement shall pay all other costs and expenses, including
reasonable attorneys' fees and expenses, of the other party incurred in
connection with the dispute resolution process. If the arbitrator does not find
23
that any party has breached this Agreement, then each party shall bear its own
costs and expenses, including attorneys' fees and expenses.
12.13 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same instrument.
[Signature Page Follows]
24
Executed as of the date first above written by the undersigned.
EAGLE RIVER INVESTMENTS, L.L.C.
By
----------------------------------
Manager
NEXTLINK, INC.
By
----------------------------------
Title
--------------------------
BWP, INC.
By
----------------------------------
Title
--------------------------
------------------------------------
SCOT JARVIS
25
PENNS LIGHT COMMUNICATIONS, INC.
By
----------------------------------
Title
--------------------------
PROBE VENTURES, INC.
By
----------------------------------
Title
--------------------------
CITY SIGNAL, INC.
By
----------------------------------
Title
--------------------------
U.S. NETWORK CORPORATION
By
----------------------------------
Title
--------------------------
26
Schedule 1
to
Amended and Restated Limited Liability Company Agreement
of
NEXTLINK Communications, L.L.C.
NAMES AND ADDRESSES OF PERCENTAGE
MEMBERS UNITS INTERESTS
EAGLE RIVER 53,938,354 87.705%
INVESTMENTS, L.L.C.
2320 Carillon Point
Kirkland, WA 98033
NEXTLINK, INC. 820,388 1.334%
155 108TH Ave. N.E.
Bellevue, WA 98004
BWP, INC. 4,411,941 7.174%
700 S.W. Washington
Portland, OR 97205
SCOT JARVIS 500,000 0.813%
2320 Carillon Point
Kirkland, WA 98033
PENNS LIGHT COMMUNICATIONS, INC. 262,525 0.427%
925 Berkshire Blvd.
Wyomissing, PA 91610
PROBE VENTURES CORP. 26,239 0.043%
Three Wing Drive
Cedar Knolls, NJ 07927-1000
CITY SIGNAL, INC. 888,371 1.445%
2855 Oak Industrial Drive N.E.
Grand Rapids, MI 49506
U.S. NETWORK CORPORATION 651,993 1.060%
10 South Riverside Plaza
Chicago, IL 60606-3709
TOTALS 61,499,811 100%
27