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XFL LLC Agreement 06-12-2000
XFL,
LLC
LIMITED LIABILITY COMPANY
AGREEMENT
June 12, 2000
<PAGE>
XFL, LLC
LIMITED LIABILITY COMPANY
AGREEMENT
TABLE OF
CONTENTS
Page
ARTICLE
I CERTAIN
DEFINITIONS.......................................... 1
ARTICLE
II FORMATION, NAME, OFFICES AND
PURPOSES; MEMBERS............... 11
ARTICLE
III CAPITAL
CONTRIBUTIONS........................................ 13
ARTICLE
IV PARTICIPATION IN COMPANY
PROPERTY............................ 14
ARTICLE
V
MANAGEMENT................................................... 15
ARTICLE
VI DISTRIBUTIONS; ALLOCATIONS OF
PROFITS AND LOSSES FOR
FEDERAL INCOME TAX PURPOSES.................................. 25
ARTICLE
VII
ACCOUNTING................................................... 30
ARTICLE
VIII SALE, TRANSFER, AND
ADMISSION................................
31
ARTICLE
IX TERM AND
DISSOLUTION......................................... 35
ARTICLE
X CONVERSION OF CLASS B MEMBERSHIP
UNITS....................... 36
ARTICLE
XI REDEMPTION OF THE CLASS C
MEMBERSHIP UNIT.................... 38
ARTICLE
XII DISPUTE
RESOLUTION........................................... 38
ARTICLE
XIII CERTAIN PRE-CLOSING
MATTERS..................................
39
ARTICLE
XIV INITIAL PUBLIC
OFFERING......................................
40
ARTICLE
XV GENERAL PROVISIONS........................................... 41
<PAGE>
Exhibit
A - Initial Business Plan
Exhibit
B - Purchased Assets
Exhibit
C - Registration Rights Agreement
ii
<PAGE>
XFL, LLC
LIMITED LIABILITY COMPANY
AGREEMENT
-----------------------------------
THIS LIMITED LIABILITY COMPANY
AGREEMENT is made and entered into as
of
this 12th day of June, 2000, by and between WWFE SPORTS, INC., a Delaware
corporation
("WWFE"), and NBC-XFL HOLDING, INC., a Delaware corporation
("NBC").
WITNESSETH:
WHEREAS, WWFE and NBC have formed
XFL, LLC, a Delaware limited
liability
company (the "Company"), as a vehicle through which to establish,
develop
and operate a professional football league to be known as the "XFL",
by
filing
a Certificate of Formation (the "Certificate") with the office of the
Secretary
of State of the State of Delaware on March 20, 2000.
NOW, THEREFORE, in consideration of
the mutual covenants and
agreements
herein contained and other good and valuable consideration, the
receipt
and sufficiency of which are hereby acknowledged, and intending to be
legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
CERTAIN
DEFINITIONS
-------------------
As used in this Agreement, the
following terms have the following
definitions:
AAA Global Headquarters. "AAA Global Headquarters" has the
meaning
-----------------------
ascribed
thereto in Section 12.1 of this Agreement.
Act.
"Act" means the Delaware Limited Liability Company Law,
Delaware
---
Code
Annotated, Title 6, Chap. 18, as amended from time to time, in effect.
Additional Capital Contribution. "Additional Capital Contribution"
-------------------------------
has
the meaning ascribed thereto in Section 3.2(a) of this Agreement.
Adjusted Capital Account
Deficit. "Adjusted Capital Account
Deficit"
--------------------------------
means,
with respect to any Member, the deficit balance, if any, in such Member's
Capital
Account as of the end of the relevant Fiscal Year, after giving effect
to
the following adjustments:
(i) Credit
to such Capital Account any amounts which such Member is
deemed
to be obligated to restore pursuant to the penultimate sentences in
Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations;
and
<PAGE>
(ii) Debit to such Capital Account
the items described in 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) of
the
Regulations.
The foregoing definition of Adjusted
Capital Account Deficit is
intended
to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Regulations
and shall be interpreted consistently therewith.
Affiliate. "Affiliate" means, with respect to
a Person, a Person
---------
that,
directly or indirectly, through one or more intermediaries, controls, is
controlled
by, or is under common control with, the first mentioned Person, or
any
member of the Immediate Family of the second mentioned Person.
Agreement. "Agreement" means this Limited
Liability Company
---------
Agreement,
as it may be amended or supplemented from time to time, and is the
"Limited
Liability Company Agreement" of the Company as defined in Section 18-
101(6)
of the Act.
Board of Managers. "Board of Managers" means the group
of Managers
-----------------
that
exercises the powers, and manages the business and affairs, of the Company
pursuant
to Article 5 of this Agreement.
Book Item. "Book Item" has the meaning
ascribed thereto in Section
---------
6.2(d)(i)(A) of this Agreement.
Broadcast Agreement. "Broadcast Agreement" has the
meaning ascribed
-------------------
thereto
in Section 2.8 of this Agreement.
Business. "Business" has the meaning ascribed
thereto in Section 2.4
--------
of
this Agreement.
Business Day. "Business Day" means any day other
than a Saturday, a
------------
Sunday,
or any day on which national banking associations in the State of New
York
are closed.
Call Exercise Notice. "Call Exercise Notice" has the
meaning ascribed
--------------------
thereto
in Section 8.4(a) of this Agreement.
Call Closing. "Call Closing" has the meaning
ascribed thereto in
------------
Section
8.4(a) of this Agreement.
Capital Account. "Capital Account" means, with
respect to any Member,
---------------
the
Capital Account maintained for such Member in accordance with the following
provisions:
(i) To each
Member's Capital Account there shall be credited (A) such
Member's
Capital Contributions, (B) such Member's distributive share of Profits
and
any items in the nature of income or gain which are specially allocated
pursuant
to Section 6.2 hereof, and (C) the amount of any Company liabilities
assumed
by such Member or which are secured by any property distributed to such
Member. The principal amount of a promissory note
which is not readily traded
on
an established securities market and which is contributed to the Company by
the
maker of the note (or a Member related to the maker of the note within the
meaning
of
2
<PAGE>
Regulations
Section 1.704-1(b)(2)(ii)(c)) shall not be included in the Capital
Account
of any Member until the Company makes a taxable disposition of the note
or
until (and to the extent) principal payments are made on the note, all in
accordance
with Regulations Section 1.704-1(b)(2)(iv)(d)(2);
(ii)
To each Member's Capital Account there shall be debited (A) the
amount
of money and the Gross Asset Value of any property distributed to such
Member
pursuant to any provision of this Agreement, (B) such Member's
distributive
share of Losses and any items in the nature of expenses or losses
which
are specially allocated pursuant to Section 6.2 hereof, and (c) the amount
of
any liabilities of such Member assumed by the Company or which are secured by
any
property contributed by such Member to the Company;
(iii) In the event Shares are
Transferred in accordance with the
terms
of this Agreement, the transferee shall succeed to the Capital Account of
the
transferor to the extent it relates to the Transferred Shares; and
(iv) In determining the amount of any
liability for purposes of
subparagraphs
(i) and (ii) above there shall be taken into account
Code Section
752(c)
and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the
other provisions of this Agreement
relating
to the maintenance of Capital Accounts are intended to comply with
Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent
with such Regulations. In the event the
Board of Managers shall
determine
that it is prudent to modify the manner in which the Capital Accounts,
or
any debits or credits thereto (including, without limitation, debits or
credits
relating to liabilities which are secured by contributed or distributed
property
or which are assumed by the Company or any Member), are computed in
order
to comply with such Regulations, the Board of Managers may make such
modification. The Board of Managers also shall (i) make any adjustments that
are
necessary or appropriate to maintain equality between the Capital Accounts
of
the Members and the amount of capital reflected on the Company's balance
sheet,
as computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q),
and (ii) make any appropriate modifications in the event
unanticipated
events might otherwise cause this Agreement not to comply with
Regulations
Section 1.704-1(b).
Capital Contributions. "Capital Contributions" means, with
respect to
---------------------
any
Member, the amount of money and the initial Gross Asset Value of any
property
(other than money) contributed to the Company with respect to the
Shares
in the Company held or purchased by such Member, including additional
Capital
Contributions.
Certificate. "Certificate" means the Company's
Certificate of
-----------
Formation
filed with the Secretary of State of the State of Delaware on March
20,
2000, as amended from time to time.
Class A Membership Units. "Class A Membership Units" means
the
------------------------
limited
liability company Interests of the Company represented by the 800,000
units
designated as Class A Membership Units in Section 2.7 of this Agreement.
3
<PAGE>
Class B Membership Units. "Class B Membership Units" means
the
------------------------
convertible,
non-voting limited liability company Interests of the Company
represented
by the 400,000 units designated as Class B Membership Units in
Section
2.7 of this Agreement.
Class C Membership Unit. "Class C Membership Unit" means the
-----------------------
redeemable,
non-voting, cumulative, preferred, non-participating limited
liability
company Interest of the Company represented by the 1 unit designated
as
a Class C Membership Unit in Section 2.7 of this Agreement. Notwithstanding
any
other provision of this Agreement, the Class C Membership Unit holder shall
be
entitled solely to a Priority Return to the extent provided herein and shall
receive
no other allocation of Profit or Loss or distribution hereunder.
Code.
"Code" means the Internal Revenue Code of 1986, as amended, 26
----
U.S.C.A.,
et seq., or any succeeding federal internal revenue law as from time
to
time in effect. Any reference to any
section of the Code shall include the
provisions
of any successor revenue law as from time to time in effect.
Company. "Company" means XFL, LLC, a
Delaware limited liability
-------
company,
being the limited liability company formed pursuant to the Certificate
and
governed by this Agreement.
Company Minimum Gain. "Company Minimum Gain" has the
meaning given
--------------------
the
term "partnership minimum gain" in Sections 1.704-2(b)(2) and
1.704-2(d) of
the
Regulations.
Control. "Control" (including the terms
"controlled by" and "under
-------
common
control with") means the possession, directly or indirectly, of the power
to
direct or cause the direction of the management or policies of a Person,
whether
through the ownership of voting securities or other ownership interests,
by
contract or otherwise.
Controlled Affiliate. "Controlled Affiliate" means, with
respect to a
--------------------
Person,
a Person that, directly or indirectly, through one or more
intermediaries,
is controlled by the first mentioned Person, and, in the case of
NBC,
also means any Person that, directly or indirectly, through one or more
intermediaries,
is controlled by NBC Parent.
Conversion Date. "Conversion Date" has the meaning
ascribed thereto
---------------
in
Section 10.1(c).
Conversion Notice. "Conversion Notice" has the meaning
ascribed
-----------------
thereto
in Section 10.1(a) of this Agreement.
Defaulting Member. "Defaulting Member" has the meaning
ascribed
-----------------
thereto
in Section 3.2(c) of this Agreement.
Deficiency. "Deficiency" has the meaning
ascribed thereto in Section
----------
3.2(c)
of this Agreement.
Deficiency Contribution.
"Deficiency Contribution" has the meaning
-----------------------
ascribed
thereto in Section 3.2(c) of this Agreement.
4
<PAGE>
Depreciation. "Depreciation" means, for each
Fiscal Year, an amount
------------
equal
to the depreciation, amortization, or other cost recovery deduction
allowable
with respect to an asset for such Fiscal Year, except that if the
Gross
Asset Value of an asset differs from its adjusted basis for federal income
tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an
amount
which bears the same ratio to such beginning Gross Asset Value as the
federal
income tax depreciation, amortization, or other cost recovery deduction
for
such Fiscal Year bears to such beginning adjusted tax basis; provided,
however,
that if the adjusted basis for federal income tax purposes of an asset
at
the beginning of such Fiscal Year is zero, Depreciation shall be determined
with
reference to such beginning Gross Asset Value using any reasonable method
selected
by the Board of Managers.
Depreciation Recapture. "Depreciation Recapture" has the
meaning
----------------------
ascribed
thereto in Section 6.2(d)(i)(B)(iii) of this
Agreement.
Dispute. "Dispute" has the meaning ascribed
thereto in Section 12.1
-------
of
this Agreement.
Estimated Tax Amount. "Estimated Tax Amount" shall mean,
for each
--------------------
Fiscal
Year, an amount of cash which, in the good faith judgment of the Board of
Managers,
equals (i) the amount of taxable income allocable
from the Company in
respect
of such Fiscal Year to the Member receiving the greatest allocation of
such
income, multiplied by (ii) forty percent (40%).
Fair Market Value. "Fair Market Value" has the meaning
ascribed
-----------------
thereto
in Section 8.5 of this Agreement.
Financial Statements. "Financial Statements" has the
meaning ascribed
--------------------
thereto
in Section 7.3(a) of this Agreement.
Fiscal Year. "Fiscal Year" has the meaning
ascribed thereto in
-----------
Section
7.2 of this Agreement.
Gross Asset Value. "Gross Asset Value" means with
respect to any
-----------------
asset,
the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The
initial Gross Asset Value of any asset contributed by a Member
to
the Company shall be the gross fair market value of such asset, as determined
by
the Board of Managers;
(ii) The Gross Asset Values of all
Company assets shall be adjusted to
equal
their respective gross fair market values (taking Code Section 7701(g)
into
account) as determined by the Board of Managers as of the following times:
(A)
the acquisition of an additional Interest in the Company by any new or
existing
Member in exchange for more than a de minimis Capital
Contribution; (B)
the
distribution by the Company to a Member of more than a de minimis
amount of
Company
property as consideration for an Interest in the Company; and (C) the
liquidation
of the Company within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g),
provided that an adjustment described in clauses (A) and (B) of
this
paragraph shall be made only if the Board of Managers reasonably determines
that
such adjustment is necessary to reflect the relative economic interests of
the
Members in the Company;
5
<PAGE>
(iii)
The Gross Asset Value of any item of Company assets distributed
to
any Member shall be adjusted to equal the gross fair market value (taking
Code
Section 7701(g) into account) of such asset on the date of distribution as
determined
by the Board of Managers; and
(iv)
The Gross Asset Values of the Company assets shall be increased
(or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant
to Code Section 734(b) or Code Section 743(b), but only to the extent
that
such adjustments are taken into account in determining Capital Accounts
pursuant
to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of
the
definition of "Profits" and "Losses" or Section 6.2(b)(vii)
hereof;
provided,
however, that Gross Asset Values shall not be adjusted pursuant to
this
subparagraph (iv) to the extent that an adjustment pursuant to subparagraph
(ii)
is required in connection with a transaction that would otherwise result in
an
adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset
has been determined or adjusted
pursuant
to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter
be
adjusted by the depreciation taken into account with respect to such asset,
for
purposes of computing Profits and Losses.
GAAP.
"GAAP" shall mean U.S. generally accepted accounting
----
principles,
consistently applied.
Immediate Family. "Immediate Family" means, and is
limited to, an
----------------
individual's
current spouse, parents, grandparents, children, siblings,
grandchildren
and other lineal descendants, or a trust or estate of which the
primary
beneficiaries are such individual or such related persons.
Initial Business Plan. "Initial Business Plan" means the
budget and
---------------------
strategic
operating plan for the Company for the period commencing on May 1,
2000
and ending on April 30, 2002 in the form attached to this Agreement as
Exhibit
A.
Interest. "Interest" means the entire
ownership interest of a Member
--------
in
the Company at any time, including such Member's Percentage Interest and the
right
of such Member to any and all benefits to which a Member may be entitled
as
provided in this Agreement, together with the obligations of such Member to
comply
with all of the terms and provisions of this Agreement.
IPO.
"IPO" has the meaning ascribed thereto in Section 14.1 of this
---
Agreement.
Liquidator. "Liquidator" means that Person, or
any successor thereto,
----------
who
shall be designated to liquidate the Company pursuant to Section 9.3 hereof.
Manager. "Manager" means any Person
hereafter elected as a member of
-------
the
Board of Managers of the Company as provided in this Agreement, but does not
include
any Person who has ceased to be a member of the Board of Managers of the
Company. Each member of the Board of Managers is a
"Manager" within the meaning
of
Section 18-101(10) of the Act.
6
<PAGE>
Member. "Member" means any Person executing
this Agreement as a
------
member
or hereafter admitted to the Company as a member as provided in this
Agreement,
but does not include any Person who has ceased to be a member in the
Company,
and each Member is a "Member" within the meaning of Section
18-101(11)
of
the Act.
Member Nonrecourse Debt. "Member Nonrecourse Debt" has the
same
-----------------------
meaning
as the term "partner nonrecourse debt" in Section 1.704-2(b)(4) of
the
Regulations.
Member Nonrecourse Debt Minimum
Gain. "Member Nonrecourse Debt
------------------------------------
Minimum
Gain" means an amount, with respect to each Member Nonrecourse Debt,
equal
to the Company Minimum Gain that would result if such Member Nonrecourse
Debt
were treated as a Nonrecourse Liability, determined in accordance with
Section
1.704-2(i)(3) of the Regulations.
Member Nonrecourse Deductions. "Member Nonrecourse Deductions" has
-----------------------------
the
same meaning as the term "partner nonrecourse deductions" in Sections
1.704-
2(i)(1) and 1.704-2(i)(2) of the
Regulations.
Merchandising Agreement. "Merchandising Agreement" has the
meaning
-----------------------
ascribed
thereto in Section 2.8 of this Agreement.
Monthly Management Reports. "Monthly Management Reports" has
the
--------------------------
meaning
ascribed thereto in Section 7.3(a) of this Agreement.
NBC.
"NBC" means NBC-XFL Holding, Inc., a Delaware corporation, its
---
successors
or permitted transferees of its entire Interest, as the case may be.
NBC Parent. "NBC Parent" means National
Broadcasting Company, Inc., a
----------
Delaware
corporation.
NBC IPO Notice. "NBC IPO Notice" has the meaning
ascribed thereto in
--------------
Section
14.2 of this Agreement.
NBC IPO Put Notice. "NBC IPO Put Notice" has the
meaning ascribed
------------------
thereto
in Section 14.2 of this Agreement.
NBC IPO Put Right. "NBC IPO Put Right" has the meaning
ascribed
-----------------
thereto
in Section 14.2 of this Agreement.
NBC Put Notice. "NBC Put Notice" has the meaning
ascribed thereto in
--------------
Section
8.4(b) of this Agreement.
NBC Put Right. "NBC Put Right" has the meaning
ascribed thereto in
-------------
Section
8.4(b) of this Agreement.
NFL.
"NFL" has the meaning ascribed thereto in Section 5.13 of this
---
Agreement.
Non-Defaulting Member. "Non-Defaulting Member" has the
meaning
---------------------
ascribed
thereto in Section 3.2(c) of this Agreement.
7
<PAGE>
Nonrecourse Deductions. "Nonrecourse Deductions" has the
meaning set
----------------------
forth
in Section 1.704-2(b)(1) of the Regulations.
Nonrecourse Liability. "Nonrecourse Liability" has the
meaning set
---------------------
forth
in Section 1.704-2(b)(3) of the Regulations.
Notice Letter. "Notice Letter" has the meaning
ascribed thereto in
-------------
Section
12.2 of this Agreement.
Observer.
"Observer" has the meaning ascribed thereto in Section 5.3
--------
of
this Agreement.
Offer Period. "Offer Period" has the meaning
ascribed thereto in
------------
Section
8.3 of this Agreement.
Offered Interest. "Offered Interest" has the meaning
ascribed thereto
----------------
in
Section 8.3 of this Agreement.
Offered Members. "Offered Members" has the meaning
ascribed thereto
---------------
in
Section 8.3 of this Agreement.
Offering Member. "Offering Member" has the meaning
ascribed thereto
---------------
in
Section 8.3 of this Agreement.
Percentage Interest. "Percentage Interest" of any Member
means the
-------------------
percentage
of all outstanding Class A Membership Units and Class B Membership
Units,
taken together, held by such Member.
Performance Based Conversion
Notice. "Performance Based
Conversion
-----------------------------------
Notice"
has the meaning ascribed thereto in Section 10.1(a) of this Agreement.
Person. "Person" means any person,
corporation, partnership, limited
------
partnership,
limited liability company, joint venture, association, joint stock
company,
trust, business trust, unincorporated association or other entity.
Priority Return. "Priority Return" means a sum equal
to ten percent
---------------
(10%)
per annum, determined on the basis of a year of 365 or 366 days, as the
case
may be, for the actual number of days in the period for which the Priority
Return
is being determined, cumulative (but not compounded) to the extent not
distributed
in any given Fiscal Year pursuant to Section 6.1(d) hereof, of the
Capital
Contribution attributable to the Class C Membership Unit ($12.50),
commencing
on the first day the Class C Membership Unit is issued to the WWFE.
Profits and Losses. "Profits" and "Losses"
mean, for each Fiscal
------------------
Year,
an amount equal to the Company's taxable income or loss for such Fiscal
Year,
determined in accordance with Code Section 703(a) (for this purpose, all
items
of income, gain, loss, or deduction required to be stated separately
pursuant
to Code Section 703(a)(1) shall be included in taxable income or loss),
with
the following adjustments (without duplication):
8
<PAGE>
(i) Any income of the Company that is exempt
from federal income
tax
and not otherwise taken into account in computing Profits or Losses pursuant
to
this definition of "Profits" and "Losses" shall be added to
such taxable
income
or loss:
(ii)
Any expenditures of the Company described in Code Section
705(a)(2)(B)
or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account
in
computing Profits or Losses pursuant to this definition of "Profits"
and
"Losses",
shall be subtracted from such taxable income or loss;
(iii)
In the event the Gross Asset Value of any Company asset is
adjusted
pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset
Value, the amount of such adjustment shall be treated as an item of gain
(if
the adjustment increases the Gross Asset Value of the asset) or an item of
loss
(if the adjustment decreases the Gross Asset Value of the asset) from the
disposition
of such asset and shall be taken into account for purposes of
computing
Profits or Losses;
(iv)
Gain or loss resulting from any disposition of property with
respect
to which gain or loss is recognized for federal income tax purposes
shall
be computed by reference to the Gross Asset Value of the property disposed
of,
notwithstanding that the adjusted tax basis of such property differs from
its
Gross Asset Value;
(v)
In lieu of the depreciation, amortization, and other cost
recovery
deductions taken into account in computing such taxable income or loss,
there
shall be taken into account Depreciation for such Fiscal Year computed in
accordance
with the definition of Depreciation;
(vi)
To the extent an adjustment to the adjusted tax basis of any
Company
asset pursuant to Code Section 734(b) is required, pursuant to
Regulations
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining
Capital Accounts as a result of a distribution other than in
liquidation
of a Member's Interest in the Company, the amount of such adjustment
shall
be treated as an item of gain (if the adjustment increases the basis of
the
asset) or loss (if the adjustment decreases such basis) from the disposition
of
such asset and shall be taken into account for purposes of computing Profits
or
Losses; and
(vii)
Notwithstanding any other provision of this definition, any
items
which are specially allocated pursuant to Section 6.2 hereof shall not be
taken
into account in computing Profits or Losses.
The amounts of the items of Company
income, gain, loss or deduction
available
to be specially allocated pursuant to Sections 6.2 hereof shall be
determined
by applying rules analogous to those set forth in subparagraphs (i)
through
(vi) above.
Purchased Assets. "Purchased Assets" has the meaning
ascribed thereto
----------------
in
Section 13.2 of this Agreement.
Put Closing. "Put Closing" has the meaning
ascribed thereto in
-----------
Section
8.4(b) of this Agreement.
9
<PAGE>
Put Rejection. "Put Rejection" has the meaning
ascribed thereto in
-------------
Section
8.4(c) of this Agreement.
Redemption Notice. "Redemption Notice" has the meaning
ascribed
-----------------
thereto
in Article 11 of this Agreement.
Regulatory Allocations. "Regulatory Allocations" has the
meaning
----------------------
ascribed
thereto in Section 6.3 of this Agreement.
Regulations. "Regulations" means the Income Tax
Regulations,
-----------
including
Temporary Regulations, promulgated under the Code, as such regulations
are
amended from time to time.
Rules. "Rules" has the meaning ascribed
thereto in Section 12.1 of
-----
this
Agreement.
Scheduled Contributions. "Scheduled Contributions" has the
meaning
-----------------------
ascribed
thereto in Section 5.19 of this Agreement.
Securities Act. "Securities Act" means the
Securities Act of 1933, as
--------------
amended.
Service. "Service" means the Internal
Revenue Service.
-------
Shares. "Shares" means any Class A
Membership Units, Class B
------
Membership
Units or Class C Membership Unit from time to time issued and
outstanding.
Subsequent Business Plan. "Subsequent Business Plan" has the
meaning
------------------------
ascribed
thereto in Section 5.19 hereof.
Tax Matters Member. "Tax Matters Member" means that
Person designated
------------------
as
the Tax Matters Member pursuant to Section 5.14 hereof.
Tax Statements. "Tax Statements" has the meaning
ascribed thereto in
--------------
Section
7.3(a) of this Agreement.
Threshold Interest. "Threshold Interest" has the
meaning ascribed
------------------
thereto
in Section 5.3 of this Agreement.
Transfer. "Transfer" means the sale,
assignment, transfer,
--------
disposition,
mortgage, pledge, charge or encumbrance, or contract to do or
permit
any of the foregoing, whether voluntarily or by operation of law.
Transferee. "Transferee" has the meaning
ascribed thereto in Section
----------
8.3
of this Agreement.
Transfer Notice. "Transfer Notice" has the meaning
ascribed thereto
---------------
in
Section 8.3 of this Agreement.
10
<PAGE>
Valuation Date. "Valuation Date" has the meaning
ascribed thereto in
--------------
Section
8.5 of this Agreement.
WWFE.
"WWFE" means WWFE Sports, Inc., a Delaware corporation, its
----
successors
or permitted transferees of its entire Interest, as the case may be.
WWFE Call Option. "WWFE Call Option" has the meaning
ascribed thereto
----------------
in
Section 8.4(a) of this Agreement.
WWFE IPO Call Notice. "WWFE IPO Call Notice" has the
meaning ascribed
--------------------
thereto
in Section 14.3 of this Agreement.
WWFE IPO Call Option. "WWFE IPO Call Option" has the
meaning ascribed
--------------------
thereto
in Section 14.3 of this Agreement.
WWFE IPO Notice. "WWFE IPO Notice" has the meaning
ascribed thereto
---------------
in
Section 14.3 of this Agreement.
WWFE Parent. "WWFE Parent" means World Wrestling
Federation
-----------
Entertainment,
Inc., a Delaware corporation.
XFL Property Rights. "XFL Property Rights" has the
meaning ascribed
-------------------
thereto
in Section 6.1 of this Agreement.
ARTICLE II
FORMATION, NAME, OFFICES AND
PURPOSES; MEMBERS
----------------------------------------------
Section 2.1. Formation.
The Company was formed on March 20, 2000 by
---------
the
filing of the Certificate with the Secretary of State of the State of
Delaware.
Except as otherwise provided in this Agreement, the rights, duties,
liabilities
and obligations of the Members, and all other Persons who become
members
of the Company in the manner set forth herein, and the administration,
dissolution,
winding up and termination of the Company shall be governed by the
Act.
Section 2.2. Name.
The name of the Company is "XFL, LLC". The
----
Company
shall execute a certificate or certificates required by law to be filed
in
connection with changes in the name of the Company or the conduct of the
business
of the Company and shall cause such certificate or certificates to be
filed
in the appropriate offices.
Section 2.3. Offices.
The principal office of the Company shall be
-------
located
at 1241 East Main Street, Stamford, CT 06902.
The Company's registered
office
and the name of its initial registered agent at such address shall be as
set
forth in the Certificate. The Company
may have such substituted and
additional
offices at such other locations as the Members shall designate. The
Company's
registered office and registered agent may be changed from time to
time
by filing the address of the new registered office and/or the name and the
acceptance
of the new registered agent with the Delaware Secretary of State
pursuant
to the Act.
11
<PAGE>
Section 2.4. Purposes; Power. The purpose of the Company shall be,
---------------
and
the Company shall have the power and authority, to establish, develop and
operate
a professional football league to be known as the "XFL" (the
"Business")
and
to acquire, own, manage and sell such assets and properties as may be
necessary
or convenient in connection with the operation of the Business. In
carrying
out these purposes and exercising these powers, the Company may enter
into,
make and perform all contracts and other undertakings and engage in all
activities
and transactions as may be necessary and proper to operate the
Business. The Company shall commence operations no
later than the date hereof.
Any
change in, or expansion of, the purpose or scope of the Business shall
require
the prior written approval of NBC and WWFE.
Section 2.5. Scope of Members' Authority. Except as otherwise
---------------------------
expressly
and specifically provided in this Agreement, no Member shall have
authority
to bind or act for, or assume any obligations or responsibilities on
behalf
of, any other Member or the Company.
Neither the Company nor any Member
shall
be responsible or liable for any indebtedness or obligation of any other
Member
incurred or arising either before or after the execution of this
Agreement,
except as to such joint responsibilities, liabilities, indebtedness
or
obligations incurred after the date hereof pursuant to a written instrument.
This
Agreement shall not be deemed to create a partnership or other affiliation
between
the Members with respect to any activities whatsoever, other than
activities
within the purpose of the Company as specified in Section 2.4 above.
Section 2.6. Confidential Information. The Company and each Member
------------------------
shall
not use or disclose to others any confidential information received from
the
Company or any other Member which is not otherwise available to the public
(or
any confidential information made available to the public as a result of a
breach
of this Agreement by the breaching party) for any purpose other than for
the
benefit of the Company, as determined by the Board of Managers, or as
required
by law.
Section 2.7. Classes of Membership Interests; Number
Authorized.
--------------------------------------------------
(a) The limited liability company
Interests of the Company
(as
defined in Section 18-101(8) of the Act) shall be represented by the Class A
Membership
Units, the Class B Membership Units and the Class C Membership Unit.
No
additional class or classes of limited liability company Interests of the
Company
shall be created or issued without the prior approval of the Members.
(b) The total number of
Class A Membership Units that the
Company
shall have the authority to issue is 800,000. On the date of this
Agreement,
200,000 Class A Membership Units are issued and outstanding and held
of
record by WWFE. The total number of Class B Membership Units that the Company
shall
have the authority to issue is 400,000. On the date of this Agreement,
200,000
Class B Membership Units are issued and outstanding and held of record
by
NBC. The total number of Class C Membership Units that the Company shall have
the
authority to issue is 1. On the date of this Agreement, 1 Class C Membership
Unit
is issued and outstanding and held of record by WWFE. Except as
specifically
provided in this Agreement, no additional Class A Membership Units,
Class
B Membership Units or Class C Membership Units shall be issued by the
Company.
12
<PAGE>
Section 2.8. Ancillary Agreements. On the date of this Agreement,
--------------------
the
Company is entering into (i) a Merchandising and
Support Services Agreement
with
WWFE Parent (the "Merchandising Agreement") and (ii) a Broadcast
Agreement
with
NBC Parent (the "Broadcast Agreement").
ARTICLE III
CAPITAL
CONTRIBUTIONS
---------------------
Section 3.1. Initial Capital Contribution.
----------------------------
(a) On the date hereof,
WWFE has made an initial cash
Capital
Contribution in the amount of $2,500,012.50. The Capital Account of WWFE
shall
be increased from zero to $2,500,012.50.
(b) On the date hereof, NBC
has made an initial cash Capital
Contribution
in the amount of $2,500,000.00. The Capital Account of NBC shall be
increased
from zero to $2,500,000.00.
Section 3.2.
Additional Capital Contributions.
--------------------------------
(a) Each Member shall
contribute to the capital of the
Company
(an "Additional Capital Contribution") its proportionate share, based
on
its
Percentage Interest, of the aggregate amount of any additional cash
contributions
called for by the Board of Managers in accordance with this
Agreement,
the Initial Business Plan and any Subsequent Business Plan. Except as
specifically
provided herein, no additional Shares shall be issued upon receipt
of
any Additional Capital Contribution.
(b) On approximately a
monthly basis, the Board of Managers
shall
send a written notice to each Member calling for such Member to make its
proportionate
share of the Additional Capital Contributions then due, as
contemplated
by the Initial Business Plan or any Subsequent Business Plan, as
the
case may be. Such notice shall set forth (i) the
aggregate amount of such
Additional
Capital Contributions and (ii) each Member's proportionate share of
such
Additional Capital Contributions. Additional Capital Contributions in the
amounts
called for in such notice shall be made by the Members within five (5)
Business
Days following receipt of such notice from the Board of Managers. A
failure
by the Board of Managers to make a call for an Additional Capital
Contribution
at such time as the same is contemplated by the Initial Business
Plan,
any Subsequent Business Plan or this Agreement shall not relieve the
Members
from their obligations under this Agreement to make such Additional
Capital
Contributions when and as the same may be called for by the Board of
Managers.
No call for an Additional Capital Contribution in excess of the
amounts
called for in the Initial Business Plan or any Subsequent Business Plan,
as
the case may be, shall be made by the Board of Managers without the prior
written
approval of NBC and WWFE.
(c) Upon the failure of a
Member (a "Defaulting Member") to
make
any Additional Capital Contribution required by this Section (the portion
thereof
not contributed by such Defaulting Member being referred to herein as
the
"Deficiency"), the Board of Managers shall give written notice of
such
failure,
including the name of the Defaulting Member
13
<PAGE>
and
the amount of such Deficiency, to the other Members (each, a
"Non-Defaulting
Member").
Each Non-Defaulting Member may (in addition to, and not in lieu of,
any
other rights or remedies such Non-Defaulting Member may have under this
Agreement,
at law or in equity), in its sole and absolute discretion, within
five
(5) Business Days after receipt of such written notice, contribute all or
any
portion of such Deficiency to the capital of the Company (a "Deficiency
Contribution");
provided, however, that if the proposed aggregate Deficiency
Contributions
of two or more Non-Defaulting Members are greater than the amount
of
the Deficiency, then, unless such Non-Defaulting Members agree on the amount
of
the Deficiency Contribution to be made by each of them, such Deficiency
Contributions
shall be made in proportion to such Non-Defaulting Members'
Percentage
Interests. In the event of any such Deficiency Contribution(s), a
number
of additional Class A Membership Units or Class B Membership Units, as
the
case may be, shall be issued to the Non-Defaulting Member or Members making
such
Deficiency Contribution(s) (in proportion to the Deficiency Contribution
made
by each Non-Defaulting Member) so that the Defaulting Member's Percentage
Interest
is reduced by an amount (expressed in terms of a percentage) equal to
the
quotient determined by dividing (1) the amount of such Deficiency
Contribution(s)
by (2) the aggregate sum of all Capital Contributions (including
Deficiency
Contributions) made by all Members to the Company through the date
such
additional Class A Membership Units or Class B Membership Units are issued,
and
the aggregate Percentage Interests of the Non-Defaulting Member or Members
making
such Deficiency Contribution(s) shall be increased by a like amount (and
in
proportion to the Deficiency Contribution made by each Non-Defaulting
Member).
Section 3.3. Non Cash Capital Contributions. If the Members make any
------------------------------
Capital
Contributions in a form other than cash, the Members shall execute and
deliver
to the Company any assignments and other instruments of transfer as may
be
deemed necessary to confirm and carry out the contributions to capital of the
Company.
Section 3.4. Use of Capital Contributions. All contributions to
----------------------------
capital
of the Company shall be available to the Company to carry out the
purposes
of the Company.
Section 3.5. Other Source of Funds. Subject to Section 5.18, the
---------------------
Company
may, at the Board of Managers' discretion, from time to time borrow and
re-borrow
funds (for working capital purposes including ordinary course
intercompany
reimbursements) under terms and conditions determined by the Board
of
Managers, including without limitation, borrowing funds from Members and
Affiliates
thereof as well as institutional lenders.
No Member shall be
required
to loan money to the Company.
ARTICLE IV
PARTICIPATION IN COMPANY
PROPERTY
---------------------------------
Section 4.1. Ownership by Member of Company. No Member shall have
------------------------------
any
right of partition with respect to any property or assets of the Company.
Section 4.2. Return of Capital. Except as expressly provided herein,
-----------------
no
Member shall have the right to demand or receive a distribution of any
capital
prior to the
14
<PAGE>
dissolution
of the Company, and no Member shall have the right to demand and
receive
property other than cash in return for any contribution to the capital
of
the Company.
Section 4.3. No Interest.
No Member shall be entitled to receive any
-----------
interest
with respect to its Capital Contributions or Capital Account.
ARTICLE V
MANAGEMENT
----------
Section 5.1. Management by the Board of Managers. Except for
-----------------------------------
situations
in which the approval of the Members, or NBC and/or WWFE
specifically,
is required by this Agreement or by non-waivable
provisions of the
Act
or the approval of the Broadcast Committee is required under the Broadcast
Agreement,
(i) the powers of the Company shall be exercised by
or under the
authority
of, and the business and affairs of the Company shall be managed under
the
direction of, the Board of Managers; and (ii) the Board of Managers may make
all
decisions and take all actions for the Company not otherwise provided for in
this
Agreement or in the Broadcast Agreement.
If any action taken by the Board
of
Managers conflicts or is inconsistent in any way with any action taken by the
Broadcast
Committee (as defined in the Broadcast Agreement) pursuant to its
powers
under the Broadcast Agreement, the action taken by the Broadcast
Committee
shall be controlling.
Section 5.2. Actions by Board of Managers. In managing the business
----------------------------
and
affairs of the Company and exercising its powers granted hereunder, the
Board
of Managers may act through meetings or written consents pursuant to
Sections
5.5 and 5.7. Any Person dealing with the
Company, other than a Member,
may
rely on the authority of a Manager or any duly appointed officer of the
Company
in taking any action in the name of the Company without inquiry into the
provisions
of this Agreement or compliance herewith, regardless of whether that
action
actually is taken in accordance with the provisions of this Agreement.
Each
Member, by execution of this Agreement, agrees to, consents to, and
acknowledges
the delegation of powers and authority to the Board of Managers
granted
hereunder, and to the actions and decisions of the Board of Managers
within
the scope of their authority as provided herein.
Section 5.3. Number and Term of Office. The Board of Managers shall
-------------------------
consist
of three Managers prior to the Conversion Date and on and after the
Conversion
Date shall consist of six Managers.
Prior to the Conversion Date,
the
holders of the Class A Membership Units shall be entitled to designate all
three
Managers to the Board of Managers. Prior
to the Conversion Date, the
holders
of the Class B Membership Units shall be entitled to designate one
individual
(the "Observer") who shall not be a Manager but who may attend all
meetings
of the Board of Managers. The Observer
shall receive all materials and
communications
as and when received by the Managers but shall have no authority
to
vote on any matter presented to the Board of Managers, but shall have the
ability
to submit non-binding recommendations to the Board of Managers. On and
after
the Conversion Date and so long as each of WWFE and NBC owns at least
eighty-five
percent (85%) of the total number of Shares owned by it as of the
date
hereof (subject to appropriate adjustment in the event of any equity
distribution,
split, combination or other similar recapitalization) (the
"Threshold
Interest"), WWFE shall be entitled to designate three Managers to the
Board
of Managers and NBC shall be entitled to designate
15
<PAGE>
three
Managers to the Board of Managers; provided, however, that during any time
after
the Conversion Date that either or both of WWFE and NBC own less than the
Threshold
Interest, NBC shall be entitled to designate a number (rounded to the
nearest
whole number) of Managers to the Board of Managers that is directly
proportionate
to the ratio of NBC's Percentage Interest to WWFE's Percentage
Interest
and WWFE shall be entitled to designate a number (rounded to the
nearest
whole number) of Managers to the Board of Managers that is directly
proportionate
to the ratio of WWFE's Percentage Interest to NBC's Percentage
Interest.
In the event that any adjustment to WWFE's and NBC's representation on
the
Board of Managers is required by the immediately preceding sentence, WWFE or
NBC,
as the case may be, shall cause an appropriate number of Managers
designated
by it to resign from the Board of Managers and any vacancy resulting
from
such resignation(s) shall be filled by the other such Member. For purposes
of
this Section 5.3, the number of Shares owned by, and the respective
Percentage
Interests of, NBC and WWFE shall be deemed to include the Shares
owned
by, and the Percentage Interests of, their respective Affiliates. On and
after
the Conversion Date, there shall be no Observer. On and after the
Conversion
Date, the Chairman of the Board of Managers shall be a Manager
designated
by WWFE and the Vice Chairman of the Board of Managers shall be a
Manager
designated by NBC. On the Conversion Date, the Observer on the
Conversion
Date, together with two additional individuals designated by NBC,
shall
become the initial Managers designated by NBC. On and after the Conversion
Date,
all references herein to the Board of Managers shall be deemed to refer to
the
full six-member Board of Managers.
The following persons are the
Managers of the Company as of the date
hereof
and until their successors are duly elected:
Vincent K. McMahon
Linda E. McMahon
August J. Liguori
The following person is the Observer
as of the date hereof:
Dick Ebersol
Section 5.4. Vacancies; Removal; Resignation. Any Manager may be
-------------------------------
removed
at any time, with or without cause, but only by the holders of the
Shares
(or the Member, if applicable) who designated such Manager. In the event
that
any Manager ceases to serve as a Manager during his term of office, the
resulting
vacancy shall be filled by the holders of the Shares (or the Member,
if
applicable) entitled to appoint the Manager whose absence has created such
vacancy. Any Manager may resign his office at any
time.
Section 5.5. Meetings.
--------
(a) A majority of the total
number of Managers shall
constitute
a quorum for the transaction of business of the Board of Managers,
and
the act of a majority of the Managers present at a meeting at which a quorum
is
present shall be necessary and sufficient to be the act of the Board of
Managers.
A Manager who is present at a meeting of the Board of Managers at
which
action on any Company matter is taken shall be presumed to have assented
to
16
<PAGE>
the
action unless his dissent shall be entered in the minutes of the meeting or
unless
he shall file his written dissent to such action with the Person acting
as
secretary of the meeting before the adjournment thereof or shall deliver such
dissent
to the Company immediately after the adjournment of the meeting. Such
right
to dissent shall not apply to a Manager who voted in favor of such action.
Any
Manager who is present at a meeting of the Board of Managers shall be
entitled
to cast the vote of any Manager who is not present and who was
appointed
by the same Member as the Manager casting the vote.
(b) Meetings of the Board
of Managers may be held at such
place
or places as shall be determined from time to time by resolution of the
Board
of Managers. At all meetings of the Board of Managers, business shall be
transacted
in such order as shall from time to time be determined by resolution
of
the Board of Managers.
(c) Regular meetings of the
Board of Managers shall be held
at
such times and places as shall be designated from time to time by resolution
of
the Board of Managers, but shall not be held less frequently than quarterly.
Notice
of such meetings shall not be required.
(d) Special meetings of the
Board of Managers may be called
by
the Chairman of the Board of Managers or any two Managers on at least 24
hours'
notice to each other Manager. Such notice need not state the purpose or
purposes
of, nor the business to be transacted at, such meeting, except as may
otherwise
be required by law or provided for in this Agreement.
(e) Any matter upon which
the Board of Managers is
deadlocked
shall be resolved pursuant to the provisions of Article 12.
Section 5.6. Approval or Ratification of Acts or Contracts
by
------------------------------------------------
Members. The Board of Managers in their discretion may
submit any act or
contract
for approval or ratification at any annual or special meeting of the
Members.
Section 5.7. Action by Managers by Written Consent or
Telephone
--------------------------------------------------
Conference. Any action permitted or required by the Act,
the Certificate or
----------
this
Agreement to be taken at a meeting of the Board of Managers may be taken
without
a meeting if a consent in writing, setting forth the action to be taken,
is
signed by that number of the Managers having not less than the minimum number
of
votes that would be necessary to authorize or take such action at a meeting
at
which all Managers were present and voting.
Such consent shall have the same
force
and effect as a vote at a meeting and may be stated as such in any
document
or instrument filed with the Secretary of State of Delaware, and the
execution
of such consent shall constitute attendance or presence in person at a
meeting
of the Board of Managers. Subject to the
requirements of the Act, the
Certificate
or this Agreement for notice of meetings, unless otherwise
restricted
by the Certificate, the Managers may participate in and hold a
meeting
of the Board of Managers by means of a conference telephone or similar
communications
equipment by means of which all Persons participating in the
meeting
can hear each other, and participation in such meeting shall constitute
attendance
and presence in person at such meeting, except where a Person
participates
in the meeting for the express purpose of objecting to the
transaction
of any business on the ground that the meeting is not lawfully
called
or convened.
17
<PAGE>
Section 5.8. Conflicts of Interest. Subject to the other express
---------------------
provisions
of this Agreement, each Manager, Member and officer of the Company at
any
time and from time to time may engage in and possess interests in other
business
ventures of any and every type and description, independently or with
others,
with no obligation to offer to the Company or any other Member, Manager
or
officer the right to participate therein.
The Company may transact business
with
any Manager, Member, officer or Affiliate thereof, provided the terms of
those
transactions are no less favorable than those the Company could obtain
from
unrelated third parties.
Section 5.9. Actions by Members. Regular meetings of the Members may
------------------
be
held at such places, and at such times, as the Members may from time to time
determine. No notice of any such meeting shall be
required. Special meetings
of
the Members may be held at any time or place called by any Member. Notice by
letter,
telegram, telecopy or telephone of a special meeting of the Members
shall
be given by the Member calling the meeting not less than two (2) Business
Days
before the special meeting. The Members may participate in a meeting of the
Members
by means of conference telephone or similar communications equipment by
means
of which all persons participating in the meeting can hear each other.
The
Secretary of the Company shall keep written minutes of all meetings of the
Members. At all meetings of the Members, Members
holding a majority of the
outstanding
Class A Membership Units entitled to vote shall constitute a quorum
for
the transaction of business and shall be necessary and sufficient for taking
any
action, except that where any action requires the prior approval of NBC
and/or
WWFE, the presence of NBC and/or WWFE, as the case may be, shall be
required
to constitute a quorum for the taking of such action. Any action to be
taken
by the Members shall require the affirmative vote of the holders of a
majority
of all the outstanding Class A Membership Units present in person or by
proxy
and entitled to vote, except as otherwise specially provided in this
Agreement
(e.g., where the prior approval of NBC and/or WWFE is required). Each
holder
of outstanding Class A Membership Units shall be entitled to one vote for
each
Class A Membership Units held by that Member at each meeting of Members
(and
written actions in lieu of meetings) with respect to any and all matters
presented
to the Members for their action or consideration and on which they are
entitled
to vote. Holders of Class B Membership
Units and the Class C
Membership
Unit shall not be entitled to vote on any action presented to the
Members,
except as required by law or by the provisions of this Agreement. Any
action
required or permitted to be taken at any meeting of the Members may be
taken
without a meeting if a consent in writing, setting forth the action to be
taken,
is signed by that number of Members entitled to vote thereon having not
less
than the minimum number of votes that would be necessary to authorize or
take
such action at a meeting at which all such Members were present and voting
(including,
in cases where the prior approval of a Member is required, the
approval
of the requisite Member(s)). No Member
shall be prohibited from voting
on
a matter solely because the matter relates to such Member or an Affiliate of
such
Member. No contract, action or
transaction will be void or voidable with
respect
to the Company because it is between or affects the Company and one or
more
of its Members or their Affiliates regardless of whether any of the
conditions
set forth in Section 18-107 of the Act have been met. Any matter
upon
which the Members are deadlocked shall be resolved pursuant to the
provisions
of Article 12.
Section 5.10. Officers. Subject to the rights and authority of the
--------
Board
of Managers, the day-to-day operations of the Company shall be run by the
officers
of the Company who will be elected by the Board of Managers. The
officers
shall consist of a President, one or
18
<PAGE>
more
Vice Presidents, a Secretary and a Treasurer, and may consist of such other
officers
(including a Chief Financial Officer) and assistant officers as the
Board
of Managers may determine. Each officer or assistant officer shall serve
at
the pleasure of the Board of Managers. The compensation of all officers and
assistant
officers shall be fixed by, or pursuant to authority delegated by, the
Board
of Managers from time to time. Any two or more offices may be held by the
same
person.
(A) President. The President shall be the chief executive
----------
officer of the Company and shall have
general and active charge and
control over the business and affairs
of the Company, subject to the
oversight of the Board of Managers.
(B) Vice President. The Vice President or, if there shall
--------------
be more than one, the Vice
Presidents, in the order of their seniority
unless otherwise specified by the Board of
Managers, shall have all of
the powers and perform all of the
duties of the President during his
absence or inability to act. Each Vice President shall also have such
other powers and perform such other
duties as shall be prescribed from
time to time by the Board of Managers
or the President.
(C) Secretary. The Secretary shall keep a record of the
---------
minutes of the proceedings of meetings of
the Members and the Board of
Managers, and shall give notice of
all such meetings as required by
the Act or this Agreement. The Secretary shall have custody of the
seal of the Company and of all books,
records, and papers of the
Company, except such as shall be in
the charge of the Treasurer or of
some other Person authorized to have
custody and possession thereof by
resolution of the Board of Managers. The Secretary shall also have
such other powers and perform such
other duties as are incident to the
office of the secretary of a limited
liability company or as shall be
prescribed from time to time by, or
pursuant to authority delegated
by, the Board of Managers or the
President.
(D) Treasurer. The Treasurer shall keep full and accurate
---------
accounts of the receipts and
disbursements of the Company in books
belonging to the Company, shall
deposit all moneys and other valuable
effects of the Company in the name
and to the credit of the Company in
such depositories as may be
designated by the Board of Managers, and
shall also have such other powers and
perform such other duties as are
incident to the office of the
treasurer of a limited liability company
or as shall be prescribed from time
to time by, or pursuant to
authority delegated by, the Board of
Managers or the President.
The
following officers of the Company shall serve at the pleasure of the Board
of
Managers until their successors are elected:
President -- Basil DeVito; Vice
President,
Football Operations -- Michael Keller; Vice President, Administration
-William
Hicks; Vice President, Finance, Chief Financial Officer and Treasurer -
August
Liguori; Secretary -Linda McMahon.
19
<PAGE>
Section 5.11. Bank Accounts. Only the Treasurer or his designees in
-------------
accordance
with authorization cards on file with the Company's banks may sign
checks
on behalf of the Company.
Section 5.12. Compensation.
Except as otherwise expressly provided
------------
in
this Agreement, no Managers or Affiliate of any Managers shall be entitled to
any
compensation from the Company or to reimbursement for expenses incurred in
connection
with the business or affairs of the Company, except with the prior
approval
of the Managers. The Company shall pay
the reasonable out-of-pocket
expenses
incurred by each Manager and Observer in connection with attending the
meetings
of the Board of Managers.
Section 5.13. Activity of Members; Football
Restrictions. Except as
------------------------------------------
specifically
set forth in this Section 5.13 or pursuant to Section 8.4, no
Member
or any Affiliate thereof shall be prohibited from engaging in any other
business
or activity by virtue of its status as a Member in the Company.
Notwithstanding
the foregoing, neither NBC nor WWFE (nor any Affiliate of either
of
the foregoing) shall, directly or indirectly, own, operate or broadcast via
television
(other than highlights of any length for use in any format or media)
any
teams, games or other events of a professional football league or own or
operate
a professional football league (it being expressly agreed that the
National
Football League, Inc. ("NFL") is excluded as it relates to this
Section
5.13
and that, accordingly, nothing in this Agreement will prohibit any Member
(or
any of its Affiliates) from owning, operating or broadcasting any NFL team,
game
or other event).
Section 5.14. Tax Matters Member. The Tax Matters Member shall be
------------------
WWFE. The Tax Matters Member shall have the
responsibility of a tax matters
partner
specified under the Code. The Tax
Matters Member shall immediately
notify
all Members of any action taken by the Service relating to an audit or
review
of the Company's federal income tax filings and shall keep all Members
informed
of the status of any such proceedings.
Each Member shall have the
right
to participate in such proceedings at such Member's own expense. The Tax
Matters
Member shall not enter into any agreement with the Service which
purports
to bind any Member without first obtaining the consent of such Member.
The
Company shall reimburse the Tax Matters Member for all expenses reasonably
incurred
in connection with its duties hereunder.
Section 5.15. Reliance on Acts of the Managers. No financial
--------------------------------
institution
or other Person dealing with an officer or another agent or
attorney-in-fact
for the Board of Managers will be required to ascertain whether
the
officer or such representative of the Board of Managers is an authorized
agent
acting in accordance with this Agreement, but such financial institution
or
such other Person will be protected in relying solely upon the deed, transfer
or
assurances or on the execution of such instrument or instruments by the
officer,
a Manager or any authorized agent thereof.
Section 5.16. Rights and Obligations of Members. Except as expressly
---------------------------------
set
forth in this Agreement or mandated by the Act, no Member shall have any
liability
to the Company in excess of such Member's Capital Contributions, and
no
Member shall have any liability to any other Member for the return or
repayment
of the Capital Contributions of such other Member or for the repayment
of
any loan by such other Member to the Company.
No Member shall be required to
pay
to the Company or any other Member any deficit in such other Member's
Capital
Account (upon dissolution or otherwise).
A Member will not be
personally
liable for any debts
20
<PAGE>
or
losses of the Company beyond the Member's obligation under Article III to
make
Capital Contributions or as otherwise required by the Act.
Section 5.17. Indemnity of the Managers, Officers, Employees,
and
---------------------------------------------------
Other
Agents.
------------
(a) The Company shall indemnify, to the fullest
extent now
or
hereafter permitted by law, each Manager and Observer (including each former
Manager
and Observer) of the Company who was or is made a party to or a witness
in
or is threatened to be made a party to or a witness in any threatened,
pending
or completed action or proceeding, whether civil, criminal,
administrative
or investigative, by reason of the fact that such Person is or
was
an authorized representative of the Company, against all expenses (including
attorneys'
fees and disbursements), judgments, fines (including excise taxes and
penalties)
and amounts paid in settlement actually and reasonably incurred by
such
Person in connection with such action or proceeding.
(b) The Company shall pay all expenses (including
attorneys'
fees and disbursements) incurred by a Manager or Observer (including
a
former Manager or Observer) referred to in Section 5.17(a) hereof in defending
or
appearing as a witness in any action or proceeding described in Section
5.17(a)
hereof in advance of the final disposition of such action or proceeding
upon
receipt of an undertaking by or on behalf of such Person to repay all
amounts
advanced if it is ultimately determined that he or she is not entitled
to
be indemnified by the Company as provided in Section 5.17(d) hereof.
(c) The Company shall, unless otherwise
determined by
mutual
agreement of NBC and WWFE, indemnify to the fullest extent now or
hereafter
permitted by law, any Person who was or is made a party to or a
witness
in or is threatened to be made a party to or a witness in, or was or is
otherwise
involved in, any threatened, pending or completed action or
proceeding,
whether civil, criminal, administrative or investigative, by reason
of
the fact that such Person is or was an authorized representative of the
Company,
both as to action in such Person's official capacity and as to action
in
another capacity at the Company's request while holding such office or
position,
against all expenses (including attorneys' fees and disbursements),
judgments,
fines (including excise taxes and penalties), and amounts paid in
settlement
actually and reasonably incurred by such Person in connection with
such
action or proceeding. The Company shall, unless otherwise determined by
mutual
agreement of NBC and WWFE, pay expenses incurred by any such Person by
reason
of his or her participation in an action or proceeding referred to in
this
Section 5.17(c) in advance of the final disposition of such action or
proceeding
upon receipt of an undertaking by or on behalf of such Person to
repay
such amount if it shall ultimately be determined that he or she is not
entitled
to be indemnified by the Company as provided in Section 5.17(d) hereof.
(d) Indemnification under this Section shall not
be made by
the
Company in any case where a court determines that the alleged act or failure
to
act giving rise to the claim for indemnification (i)
is expressly prohibited
by
the Act or any successor statute as in effect at the time of such alleged
action
or failure to take action, (ii) constitutes willful misconduct, bad
faith,
gross negligence or reckless disregard of a Person's duties or (iii) is
21
<PAGE>
outside
the scope of such Person's duties performed in his or her official
capacity
or in another capacity at the Company's request.
(e) The Company may
purchase and maintain insurance on
behalf
of any Person who is or was a Manager or an Observer, or is or was an
authorized
representative of the Company, against any liability asserted against
or
incurred by such Person in any such capacity, or arising out of the status of
such
Person as such, whether or not the Company would have the power to
indemnify
such Person against such liability under the provisions of this
Section.
(f) Each Manager and
Observer shall be deemed to act in such
capacity
in reliance upon such rights of indemnification and advancement of
expenses
as are provided in this Section. The rights of indemnification and
advancement
of expenses provided by this Section shall not be deemed exclusive
of
any other rights to which any Person seeking indemnification or advancement
of
expenses may be entitled under any agreement, statute or otherwise, both as
to
action in such Person's official capacity and as to action in another
capacity
at the Company's request while holding such office or position, and
shall
continue as to a Person who has ceased to be an authorized representative
of
the Company and shall inure to the benefit of the heirs and personal
representatives
of such Person. Indemnification and advancement of expenses
under
this Article shall be provided whether or not the indemnified liability
arises
or arose from any threatened, pending or completed action by or in the
right
of the Company. Any repeal or modification of this Article shall not
adversely
affect any right or protection existing at the time of such repeal or
modification
to which any Person may be entitled under this Section.
(g) For purposes of this
Section, references to "the
Company"
shall include all constituent limited liability companies, corporations
or
other entities absorbed in a consolidation, merger or division, as well as
the
surviving or new limited liability companies, corporations or other entities
surviving
or resulting therefrom, so that (i)
any Person who is or was an
authorized
representative of a constituent, surviving or new limited liability
company,
corporation or other entity shall stand in the same position under the
provisions
of this Section with respect to the surviving or new limited
liability
company, corporation or other entity as such Person would if he or she
had
served the surviving or new limited liability company, corporation or other
entity
in the same capacity and (ii) any Person who is or was an authorized
representative
of the Company shall stand in the same position under the
provisions
of this Section with respect to the surviving or new limited
liability
company, corporation or other entity as such Person would with respect
to
the Company if its separate existence had continued.
(h) For the purposes of
this Section, the term "authorized
representative"
shall mean a Manager, Observer, officer, employee or agent of
the
Company or of any subsidiary of the Company, or a trustee, custodian,
administrator,
committeeman or fiduciary of any employee benefit plan
established
and maintained by the Company or by any subsidiary of the Company,
or
a Person serving another corporation, partnership, joint venture, trust or
other
enterprise in any of the foregoing capacities at the request of the
Company.
(i)
No Member shall have any obligation to indemnify any
other
Member, Manager, Observer, officer, employee, agent or other authorized
representative
of the Company under any circumstances.
22
<PAGE>
(j) No Member, Manager, Observer, officer,
Company employee
or
Affiliate of any of the foregoing or their respective agents and/or the legal
representatives
of any of them shall be liable to any Member, the Company or any
other
Person for mistakes of judgment or for action or inaction which such
Member,
Manager, Observer, officer, Company employee, Affiliate, agent or legal
representative
reasonably believed to be in or not opposed to the best interests
of
the Company unless such action or inaction constitutes willful misconduct,
bad
faith, gross negligence or reckless disregard of, or is outside the scope
of,
his or its duties and, with respect to any criminal action, such party
reasonably
believes his conduct was lawful. Each Member, Observer and Manager
may
(on its own behalf or on the behalf of any representative, any Affiliates of
such
Member or their respective agents and/or legal representatives of any of
them)
consult with counsel, accountants and other experts in respect of the
Company's
affairs and such Person shall be fully protected and justified in any
action
or inaction which is taken in accordance with the advice or opinion of
such
counsel, accountants or other experts. Notwithstanding any of the foregoing
to
the contrary, the provisions of this Section shall not be construed so as to
relieve
(or attempt to relieve) (i) any Person of any
liability, to the extent
(but
only to the extent) that such liability may not be waived, modified or
limited
under applicable law, but shall be construed so as to effectuate the
provisions
of this Section to the fullest extent permitted by law or (ii) any
Member
of any liability for the breach of any contract related to the Business,
including,
without limitation, this Agreement.
Section 5.18. Member Protective Provisions. Notwithstanding any
----------------------------
other
provision of this Agreement to the contrary, at any time when either of
WWFE
or NBC (together with their respective Affiliates) (a) has less than three
(3)
Managers designated by it to the Board of Managers and (b) has a Percentage
Interest
greater than fifteen percent (15%), the Company shall not take any of
the
following actions without the prior written approval of such Member:
(a) Issue any additional membership Interest, or
any right
to
acquire any membership Interest, in the Company to any Person (except in
accordance
with Section 3.2 of this Agreement);
(b) Incur or guarantee any obligation or
liability (fixed
or
contingent) for borrowed money such that the Company has, individually or in
the
aggregate, in excess of $1,000,100 of indebtedness and amounts guaranteed
outstanding
at any time;
(c) Transfer or acquire assets that, individually
or in the
aggregate,
have a book value in excess of $1,000,100;
(d) Merge or consolidate with any other Person or
engage in
any
recapitalization, reclassification, reorganization or any other
extraordinary
corporate transaction;
(e) Pledge, mortgage, grant a security interest
in or
permit
the placing of a lien or encumbrance on all or any part of the assets of
the
Company other than in the ordinary course of the Company's business;
(f) Enter into or modify the terms of any
agreement, or
engage
in any transaction or enter into any arrangement, understanding or
commitment,
with any Member or any Affiliate of any Member;
23
<PAGE>
(g) Settle any litigation or other proceeding in
which the
amount
involved exceeds $2,000,000;
(h) Confess a judgment against the Company in
connection
with
any threatened or pending legal action, execute or deliver any assignment
for
the benefit of creditors of the Company, authorize the filing of a
bankruptcy
petition, consent to the filing of an involuntary bankruptcy
petition,
consent to the appointment of a trustee, receiver or liquidator of all
or
substantially all of the Company's assets or, except as expressly permitted
pursuant
to Section 8.4(c), voluntarily liquidate the Company; and
(i) Make any decision which affects the
calculation of
Capital
Accounts, Depreciation or Gross Asset Value or make or not make any
election
for federal, state, local or non-U.S. tax matters.
Section 5.19. Subsequent Business Plan. At least forty five (45)
------------------------
days
prior to the end of each Fiscal Year beginning with the Fiscal Year ending
April
30, 2002, the President shall present to the Board of Managers for its
approval
an annual operating budget and capital budget for the Company for the
next
Fiscal Year (each, a "Subsequent Business Plan"). Each Subsequent Business
Plan
shall be in substantially the form of the Initial Business Plan and shall
contain,
among other things, a quarterly schedule of Additional Capital
Contributions
that the Company expects to need during the next Fiscal Year (any
Additional
Capital Contributions contained in the Initial Business Plan and each
Subsequent
Business Plan being hereinafter referred to as the "Scheduled
Contributions"). Notwithstanding any other provision of this
Agreement to the
contrary,
all Scheduled Contributions, and any modification of the Initial
Business
Plan or any Subsequent Business Plan so as to increase by more than 5%
(whether
by a single modification or a series of modifications with such effect)
the
total amount of any Scheduled Contributions with respect to any fiscal
quarter
of the Company, must be approved by each of WWFE and NBC; provided,
however,
that if either WWFE or NBC fails to approve any of the foregoing
matters
in the immediately preceding sentence and the Board of Managers
determines,
in the exercise of its reasonable judgment, that the Company
requires
additional funds in excess of the Members' Capital Contributions and
any
Scheduled Contributions that have been approved by WWFE and NBC, then WWFE
and/or
NBC may agree to lend the Company up to a combined aggregate of $5
million
(but subject to the limitation that such $5 million amount shall be the
maximum
outstanding balance of all such loans made by WWFE and/or NBC pursuant
to
this Section 5.19 at any given time) on terms that, taken as a whole, are at
least
as favorable to the Company as the terms that could then have been
obtained
in an arm's length negotiation from a party that is not a Member or an
Affiliate
of a Member. If both NBC and WWFE desire
to make such loans to the
Company
but are unable to agree on the amount that each such Member will lend to
the
Company, such loans shall be made in proportion to their then respective
Percentage
Interests (which, for purposes of this Section 5.19, shall be deemed
to
include the Percentage Interests of their respective Affiliates).
24
<PAGE>
ARTICLE VI
DISTRIBUTIONS; ALLOCATIONS
OF PROFITS AND
LOSSES FOR FEDERAL INCOME
TAX PURPOSES
--------------------------------------
Section 6.1. Distributions.
-------------
(a) General. Except as
otherwise provided herein, the Board
-------
of
Managers, acting in good faith and in furtherance of the purpose of the
Company,
shall have sole discretion as to the amounts and timing of
distributions
to Members and distributions to Members shall be in proportion to
the
Members' Percentage Interests.
(b) Tax Distributions. The
Board of Managers shall use its
-----------------
best
efforts to estimate the Estimated Tax Amount for each fiscal quarter of the
Company
prior to the close of such fiscal quarter, and shall make distributions
to
each Member in an amount equal to the Estimated Tax Amount for that period
not
later than the thirtieth (30th) day following the close of the fiscal
quarter.
The Board of Managers shall, subject to any applicable covenants and
restrictions
contained in the Company's loan agreements and other agreements or
obligations
to which the Company or its properties are subject, use its best
efforts
to ensure that the Estimated Tax Amount shall be distributed to each
Member.
At the close of the Fiscal Year, the Board of Managers shall make proper
adjustments
as may be necessary to the amounts of such distributions to
reconcile
the final Estimated Tax Amount as of the close of the Fiscal Year with
the
projected Estimated Tax Amount previously distributed to each Member with
respect
to such Fiscal Year.
(c) Property Distributions.
Except as otherwise provided in
----------------------
the
Broadcast Agreement, the Board of Managers may not distribute to the Members
any
property of the Company (other than cash) without the prior approval of the
Members.
Any property so distributed to the Members shall be distributed to the
Members
in accordance with their respective Percentage Interests; provided,
however,
that so long as WWFE is a Member, the XFL logo, all related Trademarks
and
Trademark applications, the XFL URL and all other intellectual property
rights
related to the XFL (the "XFL Property Rights") shall not be
distributed
in
kind to any Member until the dissolution of the Company pursuant to Article
IX,
and then shall be distributed only to WWFE upon such dissolution provided
that
WWFE (i) has a Percentage Interest of at least ten
percent (10%)
immediately
prior to such dissolution and (ii) pays to the Company the fair
market
value of the XFL Property Rights as determined by an appraiser selected
by
the Liquidator.
(d) Priority Distributions.
No later than the 30th day after
----------------------
the
end of each Fiscal Year, the Board of Managers shall use its best efforts to
ensure
that a distribution is made to the Class C Membership Unit holder of
record
in an amount equal to the excess of (i) the
cumulative Priority Return
from
the inception of the Company to the end of such Fiscal Year, over (ii) the
sum
of all prior distributions made to the Class C Membership Unit holder of
record.
Accrual and payment of the Priority Return in any Fiscal Year is
contingent
upon the Company recognizing a net Profit (determined without regard
to
clause (vii) of the definition of Profit) in the Fiscal Year to which such
Priority
Return relates.
25
<PAGE>
Section 6.2. Allocations.
-----------
(a) Profits and Losses. After giving effect to the special
------------------
allocations
set forth in Section 6.2(b), Profits and Losses for any Fiscal Year
shall
be allocated to the Members in proportion to their Percentage Interests.
(b) Special Allocations.
-------------------
The following special allocations
shall be made in the
following
order:
(i) Minimum Gain Chargeback. Except as otherwise
-----------------------
provided in Section 1.704-2(f) of the
Regulations, notwithstanding any
other provisions of this Section 6.2,
if there is a net decrease in
Company Minimum Gain during any
Fiscal Year, each Member shall be
specially allocated items of Company
income and gain for such Fiscal
Year (and, if necessary, subsequent
Fiscal Years) in an amount equal
to such Member's share of the net
decrease in Company Minimum Gain,
determined in accordance with
Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence
shall be made in
proportion to the respective amounts
required to be allocated to each
Member pursuant thereto. The items to
be so allocated shall be
determined in accordance with
sections 1.704-2(f)(6) and 1.704-2(j)(2)
of the Regulations. This Section
6.2(b)(i) is intended to comply with
the minimum gain chargeback
requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted
consistently therewith.
(ii) Member Minimum Gain Chargeback. Except as
------------------------------
otherwise provided in Section
1.704-2(i)(4) of the Regulations,
notwithstanding any other provision
of this Section 6.2, if there is a
net decrease in Member Nonrecourse
Debt Minimum Gain attributable to a
Member Nonrecourse Debt during any
Fiscal Year, each Member who has a
share of the Member Nonrecourse Debt
Minimum Gain attributable to such
Member Nonrecourse Debt, determined
in accordance with Section 1.704-
2(i)(5) of
the Regulations, shall be specially allocated items of
Company income and gain for such
Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount
equal to such Member's share of
the net decrease in Member
Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the
previous sentence shall be made in
proportion to the respective
amounts required to be allocated to
each Member pursuant thereto. The
items to be so allocated shall be
determined in accordance with
Sections 1.704-2(i)(4)
and 1.704-2(j)(2) of the Regulations. This
Section 6.2(b)(ii) is intended to
comply with the minimum gain
chargeback requirement in Section
1.704-2(i)(4) of the Regulations and
shall be interpreted consistently therewith.
(iii) Qualified Income
Offset. In the event any Member
-----------------------
unexpectedly receives any
adjustments, allocations or distributions
described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6) of the Regulations,
items of Company income and gain
shall be specially
26
<PAGE>
allocated to such Member in an amount
and manner sufficient to
eliminate, to the extent required by
the Regulations, the Adjusted
Capital Account Deficit of the Member
as quickly as possible, provided
that an allocation pursuant to this
Section 6.2(b)(iii) shall be made
only if and to the extent that the
Member would have an Adjusted
Capital Account Deficit after all
other allocations provided for in
this Section 6.2 have been
tentatively made as if this Section
6.2(b)(iii) were not in the
Agreement.
(iv) Gross Income Allocation. In the event any Member has a
-----------------------
deficit Capital Account at the end of
any Fiscal Year which is in
excess of the sum of (i) the amount such Member is obligated to
restore pursuant to the penultimate
sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially
allocated items of Company income and
gain in the amount of such
excess as quickly as possible,
provided that an allocation pursuant to
this Section 6.2(b)(iv) shall be made
only if and to the extent that
such Member would have a deficit
Capital Account in excess of such sum
after all other allocations provided
for in this Section 6.2 have been
made as if Section 6.2(b)(iii) and
this Section 6.2(b)(iv) were not in
the Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
----------------------
Fiscal Year shall be specially
allocated to the Members in proportion
to their respective Percentage
Interests.
(vi) Member Nonrecourse Deductions. Any Member Nonrecourse
-----------------------------
Deductions for any Fiscal Year shall
be specially allocated to the
Member who bears the economic risk of
loss with respect to the Member
Nonrecourse Debt to which such Member
Nonrecourse Deductions are
attributable in accordance with
Regulations Section 1.704-2(i)(1).
(vii) Section 754 Adjustments. To the extent an adjustment to
-----------------------
the adjusted tax basis of any Company
asset, pursuant to Code Section
734(b) or Code Section 743(b) is
required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining
Capital Accounts as the result of a
distribution to a Member in complete
liquidation of such Member's
Interest in the Company, the amount
of such adjustment to Capital
Accounts shall be treated as an item
of gain (if the adjustment
increases the basis of the asset) or
loss (if the adjustment decreases
such basis) and such gain or loss shall
be specially allocated to the
Members in accordance with their
Interests in the Company in the event
Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Member
to whom such distribution was made in
the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(viii) Priority Return. The Class C Membership Unit shall be
---------------
allocated items of income in an
amount equal to the Priority Return
accrued during the Fiscal Year.
27
<PAGE>
(ix) Certain Correlative
Adjustments. In the event that the
-------------------------------
taxable income of a Member in respect
of a transaction between a
Member and the Company is increased
by any taxing authority (pursuant
to Section 482 of the Code or
otherwise), an amount of the correlative
deduction equal to the amount of such
increase shall be specially
allocated to such Member.
(c)
Other Allocation Rules.
----------------------
(i) For purposes of determining the Profits,
Losses, or any
other items allocable to any period,
Profits, Losses, and any such
other items shall be determined on a
daily, monthly, or other basis,
as determined by the Board of
Managers using any permissible method
under Code Section 706 and the
Regulations thereunder.
(ii) The Members are aware of
the income tax consequences of the
allocations made by this Section 6.2
and hereby agree to be bound by
the provisions of this Section 6.2 in
reporting their shares of
Company income and loss for income
tax purposes.
(d)
Tax Allocations.
---------------
(i) Section 704(b) Allocations.
(A) Each item of income,
gain, loss, deduction or credit
for federal income tax purposes which
corresponds to an item of
income, gain, loss or expense that is
either taken into account in
computing Profits or Losses or
specially allocated pursuant to Section
6.2(b) (a "Book Item")
shall be allocated among the Members in the
same proportions as the corresponding
Book Item is allocated among
them pursuant to Section 6.2(a) or
6.2(b).
(B) If the Company
recognizes Depreciation Recapture (as
defined below) in respect of the sale
of any Company asset:
(i) the portion of the gain on such sale which is
allocated to a Member pursuant
to Sections 6.2(a) or 6.2(b)
shall be treated as consisting
of a portion of the Company's
Depreciation Recapture on the
sale and a portion of the balance
of the Company's gain on such
sale under principles consistent
with Regulations Section
1.1245-1; and
(ii) if, for federal
income tax purposes, the Company
recognizes both "unrecaptured 1250 gain" (as defined in Section
1(h) of the Code) and gain
treated as ordinary income under
Section 1250(a) of the Code in
respect of such sale the amount
treated as Depreciation
Recapture under Section 6.2(d)(i)(B)(i)
shall be comprised of a
proportionate share of both such types
of gain.
28
<PAGE>
(iii) For purposes of Section 6.2(d)(i)(B)
"Depreciation
Recapture" means the portion of any gain from
the disposition of an asset of
the Company which, for
federal income tax
purposes, (A) is treated as ordinary
income under Section 1245
of the Code, (B) is treated as
ordinary income under
Section 1250 of the Code, or (C) is
"unrecaptured
1250 gain" as such term is defined in Section
1(h) of the Code.
(ii) Section 704(c)
Allocations. In the event any property
of the Company is credited to the
Capital Account of a Member at a
value other than its tax basis
(whether as a result of a contribution
of such property or a revaluation of
such property pursuant to clause
(ii) of the definition of Gross Asset
Value), then allocations of
taxable income, gain, loss and
deductions with respect to such
property shall be made in a manner
which will comply with Section
704(c) of the Code and the
Regulations thereunder. The Company, with
the consent of all Members, may make
"curative" or "remedial"
allocations (within the meaning of
the Regulations under Section
704(c) of the Code) including, but
not limited to:
(A) "curative"
allocations which offset the effect of the
"ceiling rule" for a prior
Fiscal Year (within the meaning of Regulations
Section 1.704-3(c)(3)(ii)); and
(B) "curative"
allocations from dispositions of contributed
property (within the meaning of
Regulations Section 1.704-3(c)(3)(iii)(B)).
(iii) Other Provisions. The tax allocations made pursuant
----------------
to this Section 6.2(d) shall be
solely for tax purposes and shall not
affect any Member's Capital Account
or share of non-tax allocations or
distributions under this Agreement.
(e) Tax Elections. Upon the request of a transferee of Shares
-------------
or
a distributee of a Company distribution, the Company
shall make the election
provided
for in Section 754 of the Code.
Section 6.3. Curative Allocations. The allocations set forth in
--------------------
Sections
6.2(b)(i), 6.2(b)(ii), 6.2(b)(iii), 6.2(b)(iv),
6.2(b)(v), 6.2(b)(vi),
6.2(b)(vii)
and 6.4 (the "Regulatory Allocations") are intended to comply with
certain
requirements of the Regulations. It is
the intent of the Members that,
to
the extent possible, all Regulatory Allocations shall be offset either with
other
Regulatory Allocations or with special allocations of other items of
Company
income, gain, loss or deduction pursuant to this Section 6.3.
Therefore,
notwithstanding any other provision of this Article 6 (other than the
Regulatory
Allocations), the Members jointly shall make such offsetting special
allocations
of Company income, gain, loss or deduction in whatever manner that
the
Members determine appropriate so that, after such offsetting allocations are
made,
each Member's Capital Account balance is, to the extent possible, equal to
the
Capital Account balance such Member would have had if the Regulatory
Allocations
were not part of the Agreement and all Company items were allocated
pursuant
to Sections 6.2(a), 6.2(b)(viii) and 6.2(b)(ix).
29
<PAGE>
Section 6.4. Loss Limitation. Losses allocated pursuant to Section
---------------
6.2(a)
hereof shall not exceed the maximum amount of Losses that can be
allocated
without causing any Member to have an Adjusted Capital Account Deficit
at
the end of any Fiscal Year. In the event
some but not all of the Members
would
have Adjusted Capital Account Deficits as a consequence of an allocation
of
Losses pursuant to Section 6.2(a) hereof, the limitation set forth in this
Section
6.4 shall be applied on a Member-by-Member basis and Losses not
allocable
to any Member as a result of such limitation shall be allocated to the
other
Members in accordance with the positive balances in such Members' Capital
Accounts
so as to allocate the maximum permissible Losses to each Member under
Section
1.704-1(b)(2)(ii)(d) of the Regulations.
ARTICLE VII
ACCOUNTING
----------
Section 7.1. Books and Records.
-----------------
(a) The Board of Managers,
or its designee, shall keep books
of
account in which will be entered fully and accurately every transaction of
the
Company. The books of account shall be kept on the accrual method of
accounting
and in accordance with GAAP.
(b) Such books of account,
together with all correspondence,
papers
and other documents, shall be kept at such offices of the Company as the
Board
of Managers shall designate and shall, upon reasonable notice to the Board
of
Managers, be open to the examination of any Member, Manager or its authorized
representatives
who will be permitted to make copies of all or any part thereof
at
such Member's or Manager's cost.
(c) If the Federal income
tax return of any Member is
audited,
investigated, reviewed, or questioned by the Service, the Tax Matters
Member
shall provide all books, records and other necessary financial
information
regarding the Company which is in its possession, or can be obtained
by
the Tax Matters Member, to such Member.
Section 7.2. Fiscal Year.
To the extent permitted by Code Section
-----------
706
and the Regulations promulgated thereunder, the
Fiscal Year and the tax year
of
the Company shall begin upon the commencement of the existence of the Company
and
shall expire on April 30 thereafter.
Section 7.3. Reports.
-------
(a) The Board of Managers
shall have prepared at Company
expense,
documents containing: (i) Internal Revenue Service
Form K-1 or similar
form
as may be required by the Service stating the Member's allocation of
income,
gain, loss or credit for the fiscal year annually ("Tax Statements")
(if
and
so long as the Company is taxed under Subchapter K of the Code); (ii)
monthly
management reports (to consist of an unaudited profit and loss
statement,
an unaudited statement of cash flows and an unaudited condensed
balance
sheet as of and for the month and year-to-date period then ended)
("Monthly
Management Reports"); and (iii) financial statements (balance sheet,
statement
of profits or losses, Members' equity, and changes in financial
position)
on a quarterly and annual basis, which shall be
30
<PAGE>
prepared
in accordance with GAAP and shall present fairly the financial
condition
and results of operations of the Company as of the end of and for the
period
covered thereby ("Financial Statements"). The quarterly Financial
Statements
shall present the quarterly and year-to-date results of operations of
the
Company, contain a comparative analysis to the same periods in the prior
Fiscal
Year and be certified by the Chief Financial Officer of the Company. The
annual
Financial Statements shall be both unaudited and certified by the Chief
Financial
Officer of the Company, as well as audited and certified by the
Company's
independent public accountants. Tax Statements shall be distributed
within
ninety (90) days after the close of each Fiscal Year. Monthly Management
Reports
shall be distributed within twenty one (21) days after each calendar
month.
The Financial Statements with respect to the first three fiscal quarters
of
the Company shall be distributed within forty-five (45) days after the close
of
each such fiscal quarter and the Financial Statements with respect to the
fourth
fiscal quarter of the Company and the full Fiscal Year shall be
distributed
within ninety (90) days after the close of each Fiscal Year.
(b) The Board of Managers, at
Company expense, shall cause to be
prepared
and timely filed with appropriate federal and state regulatory and
administrative
bodies, all reports required to be filed with such entities under
then-current
applicable laws, rules and regulations.
Such reports shall be
prepared
on the accounting or reporting basis required by such regulatory
bodies. Any Member shall be provided with a copy of
any such report upon
request
and without expense to such Member. The
Board of Managers shall cause
all
income tax information returns for the Company to be prepared and, following
review
and approval by NBC, timely filed with the appropriate authorities. The
Board
of Managers hereby designates Deloitte & Touche
LLP as the independent
public
accountants for the Company; such independent public accountants may not
be
discharged or otherwise replaced without the approval of the Board of
Managers.
(c) The Tax Matters Member shall
give notice to all Members of
any
audit or review of the Company by the Service and shall make such additional
reports
to all the Members as are reasonably necessary to keep them informed of
the
status of any such review or audit and any negotiations, proposed
settlements
or litigation related thereto and shall inform the Members of the
manner
in which they may opt out of any proposed settlements.
ARTICLE VIII
SALE, TRANSFER, AND
ADMISSION
-----------------------------
Section 8.1. General.
-------
(a) WWFE Holding Period. Except as expressly permitted in this
-------------------
Agreement,
WWFE shall not Transfer all or any portion of the Shares held by it
prior
to the earlier to occur of (i) June 1, 2005 or (ii)
the termination of the
Broadcast
Agreement and NBC Parent's obligations thereunder.
(b) NBC Holding Period. Except
as expressly permitted in this
------------------
Agreement,
NBC shall not Transfer all or any portion of the Shares held by it
prior
to the earlier
31
<PAGE>
to
occur of (i) December 31, 2002 or (ii) the
termination of the Broadcast
Agreement
and NBC Parent's obligations thereunder.
Section 8.2. Transfers to Affiliates. Notwithstanding Section 8.1 of
-----------------------
this
Agreement, any Member may, at any time, Transfer all (but not less than
all)
of the Shares held by it to an Affiliate of such Member; provided that any
such
transferee shall automatically be bound by the terms of this Agreement and
shall
be required as a condition precedent to the consummation of such Transfer
to
join in and execute and deliver a copy of this Agreement to the Members as a
party
to this Agreement. No Transfer of Shares
shall relieve the transferring
Member
of any duty, responsibility or obligation hereunder. Notwithstanding the
foregoing,
any Transfer pursuant to this Section 8.2 which, alone or together
with
previous Transfers, causes a termination of the Company pursuant to Section
708
of the Code shall require the prior written consent of the Members.
Section 8.3. Right of First Refusal. If a Member (the "Offering
----------------------
Member")
desires to Transfer (other than to an Affiliate pursuant to Section 8.2
or
in a public offering registered under the Securities Act) all or any portion
of
the Shares held by it (the "Offered Interest"), and such Transfer is
otherwise
permitted by the terms of this Agreement, the Offering Member shall
first
deliver a written notice (the "Transfer Notice") to the Company and
the
other
Members (such other Members, the "Offered Members") indicating that
the
Offering
Member desires to Transfer such Shares.
Each Offered Member shall have
until
the later of (i) thirty (30) Business Days from the
date the Offer Notice
is
given and (ii) five (5) Business Days after the Fair Market Value of the
Offered
Interest is determined pursuant to Section 8.5 (such period, the "Offer
Period")
in which to notify the Offering Member in writing whether it elects to
purchase
all (but not less than all) of its pro rata share (based on the
percentage
such Offered Member's Shares bear to the aggregate number of Shares
held
by all Members other than the Offering Member) of the Offered Interest for
an
aggregate cash purchase price equal to the Fair Market Value of its pro rata
share
of the Offered Interest. If the Offered
Members elect to purchase all of
the
Offered Interest in accordance with this Section 8.3, the closing of such
purchase
and sale shall occur within ten (10) Business Days after the end of the
Offer
Period at such place as the Offering Member and the Offered Members may
agree. After completion of the procedures described
in this Section 8.3, if the
Offered
Members elect not to purchase all of the Offered Interest within the
Offer
Period, the Offering Member may, during the sixty (60) Business Day period
following
the end of the Offer Period, Transfer to any Person (the
"Transferee")
all
(but not less than all) of the Offered Interest at a price not less than the
Fair
Market Value of the Offered Interest so Transferred. As a condition to
such
Transfer, the Transferee shall agree in writing to be bound by this
Agreement
to the same extent as the Offering Member was bound. If the proposed
Transfer
is not completed within the sixty (60) Business Day period described
above,
the Offered Interest shall again be subject to this Section 8.3.
Section 8.4. Put/Call on Termination of Broadcast
Agreement.
----------------------------------------------
(a) WWFE Call Option. At any time following the
----------------
termination
of the Broadcast Agreement, WWFE or an Affiliate thereof may, but
shall
not be required to (except as required by Section 8.4(b)), purchase all
(but
not less than all) of the Shares then owned by NBC (the "WWFE Call
Option")
for
an aggregate cash purchase price equal to the Fair Market Value of the
Shares
then owned by NBC. If WWFE elects to exercise the WWFE Call Option, it
shall
32
<PAGE>
so
notify NBC in writing of such election (the "Call Exercise Notice"),
whereupon
NBC shall be obligated to sell the Shares then owned by it to WWFE.
The
closing of the purchase and sale pursuant to this Section 8.4(a) (the
"Call
Closing")
shall occur on the later of (i) the thirtieth (30th)
Business Day
after
receipt by NBC of the Call Exercise Notice and (ii) the fifth (5th)
Business
Day after the Fair Market Value of the Shares owned by NBC is
determined
pursuant to Section 8.5, at such place as WWFE and NBC may agree. At
the
Call Closing, NBC shall assign the Shares then owned by it to WWFE and WWFE
shall
pay the purchase price for such Shares in cash or other immediately
available
funds.
(b) NBC Put Right. At any time following the termination of the
-------------
Broadcast
Agreement, NBC may, upon written notice to WWFE (the "NBC Put
Notice"),
cause WWFE or an Affiliate thereof to purchase the Shares then owned
by
NBC (the "NBC Put Right") for an aggregate cash purchase price equal
to the
Fair
Market Value of the Shares then owned by NBC.
The closing of the purchase
and
sale pursuant to this Section 8.4(b) (the "Put Closing") shall occur
on the
later
of (i) the thirtieth (30th) Business Day after
receipt by WWFE of the NBC
Put
Notice and (ii) the fifth (5th) Business Day after the Fair Market Value of
the
Shares owned by NBC is determined pursuant to Section 8.5, at such place as
NBC
and WWFE may agree. At the Put Closing, NBC shall assign the Shares then
owned
by it to WWFE and WWFE shall pay the purchase price for such Shares in
cash
or other immediately available funds.
(c) NBC Put Right as a Voluntary
Liquidation. Notwithstanding
----------------------------------------
Section
8.4(b), WWFE shall have the right (exercisable by written notice to NBC
within
thirty (30) Business Days after receipt by WWFE of the NBC Put Notice) to
reject
the exercise by NBC of the NBC Put Right (the "Put Rejection"). Upon
a
Put
Rejection, (i) WWFE shall have no obligation to
purchase the Shares owned by
NBC
pursuant to Section 8.4(b), and the Company shall as promptly as practicable
thereafter
be dissolved in accordance with the provisions of Article 9 of this
Agreement
and the Act and (ii) for a period of three years after such
dissolution,
neither WWFE nor any of its Affiliates shall, directly or
indirectly,
own, operate, support (financially or otherwise) or broadcast (via
network,
cable or otherwise) any teams, games or other events of a professional
football
league, or own, operate or in any way participate in any professional
football
league, provided, however that, nothing in this Section shall prohibit
WWFE
(or any of its Affiliates) from owning, operating, supporting or
broadcasting
any NFL team, game or other event.
Section 8.5. Fair Market Value. The Fair Market Value of any Shares to be
-----------------
Transferred
pursuant to Section 8.3, Section 8.4, Section 14.2 or Section 14.3
shall
be determined in accordance with the procedures set forth in this Section
8.5.
If NBC and WWFE do not agree on the Fair Market Value of any such Shares
within
a period of ten (10) Business Days following receipt of the Transfer
Notice,
the Call Exercise Notice, the NBC Put Notice, the NBC IPO Put Notice or
the
WWFE IPO Call Notice, as the case may be (the "Valuation Date"), the
Fair
Market
Value shall be determined by an appraiser mutually agreed upon by NBC and
WWFE.
If an appraiser is not agreed upon within ten (10) Business Days following
the
Valuation Date, each of NBC and WWFE shall select one appraiser who together
shall
select a single appraiser who shall solely determine the Fair Market Value
of
such Shares. The appraiser who shall determine the Fair Market Value of the
Shares
shall do so within thirty (30) Business Days after the Valuation Date,
and
the determination of such appraiser shall be final and binding
33
<PAGE>
upon
the Members. In making its determination, the appraiser shall take into
consideration
the following factors: the terms and conditions of any bona fide
third-party
offer for the Shares; whether there are currently broadcast
arrangements
in place with respect to XFL games and other events, or the
likelihood
that such arrangements will be made, and the terms thereof; other
sources
of revenue for the Business, whether or not then in existence.
Notwithstanding
the foregoing, if a bona fide third-party (i.e., other than from
an
Affiliate of any Member) offer for the Shares to be Transferred has been made
in
writing, then the Fair Market Value of such Shares shall not be less than the
offer
price therefor. All appraisers shall be investment
banking firms of
national
standing with experience in valuing sports franchises. The costs of the
appraisers
shall be split equally between the Members.
Section 8.6. Additional Members. Additional Persons may be admitted
------------------
to
the Company as Members and membership Interests may be created and issued to
those
Persons upon the unanimous approval of the Members. A Person who becomes
a
new Member shall execute and deliver a joinder to
this Agreement pursuant to
which
that Person agrees to be bound by all of the provisions of this Agreement
applicable
to Members.
Section 8.7. Preemptive Rights.
-----------------
(a) Each Member shall have a
preemptive right in proportion to
its
Percentage Interest to subscribe for or to purchase (i)
any shares of any
class
of equity interest whatsoever which the Company may hereafter issue or
sell
or (ii) any obligations or securities which the Company may hereafter issue
or
sell convertible into or exchangeable for any equity interest in the Company
of
any class or (iii) any warrants, options or other rights which the Company
may
hereafter issue or sell that confer upon the holder or owner thereof the
right
to subscribe for or purchase from the Company any of its equity interest
of
any class or such convertible or exchangeable securities ((i),
(ii) and (iii)
collectively,
"New Securities"). Such preemptive right may be exercised in full
or
in part at the Member's option and shall exist regardless of the character of
the
consideration proposed to be received for the interests to be issued or sold
by
the Company.
(b) In the event that the
Company proposes to undertake an
issuance
of New Securities, the Company shall give the Members written notice of
its
intention, describing the type of New Securities and the price and general
terms
upon which the Company proposes to issue such New Securities. Each Member
shall
have twenty (20) days from the date any such notice is given to agree to
purchase
all or any part of its pro rata share of such New Securities for the
price
and upon the general terms specified in the notice by giving written
notice
to the Company and stating therein the quantity of New Securities to be
purchased.
In the event that any Member fails to exercise in full its preemptive
right
within such twenty (20) day period, the Company shall have sixty (60) days
thereafter
to sell the New Securities with respect to which preemptive rights
were
not exercised at a price and upon general terms no more favorable to the
purchaser(s)
thereof than specified in the Company's notice to the Members. In
the
event the Company has not sold such New Securities within such sixty (60)
day
period, the Company shall not thereafter issue or sell such New Securities
without
first offering such New Securities to the Members in the manner provided
above.
34
<PAGE>
(c) "New Securities" shall
not include Shares or other equity
interests
or securities of the Company (i) issuable upon
conversion of Shares
(or
other equity interests or securities) or pursuant to any options, warrants,
rights
or agreements, provided that the preemptive rights established by this
Section
8.7 shall apply with respect to the initial issuance, sale, grant or
entering
into by the Company of such Shares (or other equity interests or
securities),
options, warrants, rights or agreements, (ii) offered to the public
generally
pursuant to an effective registration statement under the Securities
Act,
(iii) issued pursuant to the acquisition by the Company of all or any part
of
another Person, whether by merger, purchase of shares, purchase of assets or
other
transaction, (iv) issued pursuant to any employee benefit plan approved in
accordance
with this Agreement, (v) issued in connection with any
recapitalization,
reclassification, reorganization or similar transaction or
(vi)
issued pursuant to Section 3.2 of this Agreement.
ARTICLE IX
TERM AND
DISSOLUTION
--------------------
Section 9.1. Term.
The term of the Company commenced on the date of
----
filing
of the Certificate with the Secretary of State of the State of Delaware
and
shall continue with perpetual existence until dissolved as provided herein.
Section 9.2. Dissolution.
In addition to those events listed in
-----------
Section
18-801 of the Act, the Company will be dissolved upon the occurrence of
any
of the following:
(a) Agreement of all Members;
(b) Pursuant to Section 8.4(c); or
(c) An order of a court of
competent jurisdiction ordering the
dissolution
of the Company.
The
death, retirement, resignation, bankruptcy or dissolution of any Member
shall
not constitute an event of dissolution of the Company unless required by
the
Act.
Section 9.3. Liquidation and Termination. On dissolution of the
---------------------------
Company,
NBC and WWFE shall appoint a Liquidator.
The Liquidator shall proceed
diligently
to wind up the affairs of the Company and make final distributions as
provided
herein and in the Act. The costs of
liquidation shall be borne as a
Company
expense. Until final distribution, the
Liquidator shall continue to
operate
the Company properties with all of the power and authority of the Board
of
Managers. The steps to be accomplished
by the Liquidator are as follows:
(a) as promptly as possible after
dissolution and again after final
liquidation,
the Liquidator shall cause a proper accounting to be made by a
recognized
firm of certified public accountants of the Company's assets,
liabilities,
and operations through the last day of the calendar month in which
the
dissolution occurs or the final liquidation is completed, as applicable;
35
<PAGE>
(b) the Liquidator shall pay, satisfy
or discharge from Company funds
all
of the debts, liabilities and obligations of the Company (including, without
limitation,
all expenses incurred in liquidation) or otherwise make adequate
provision
for payment and discharge thereof (including, without limitation, the
establishment
of a cash escrow fund for contingent liabilities in such amount
and
for such term as the Liquidator may reasonably determine); and
(c) all remaining assets of the
Company shall be distributed to the
Members
as follows:
(i) the Liquidator may sell any or all Company
property,
including to Members; and
(ii) Company cash and
property shall be distributed first to
redeem the Class C Membership Unit in
an amount equal to $12.50 plus
any accrued and unpaid Priority
Return (but only to the extent that
the amount of such accrued and unpaid
Priority Return does not exceed
the amount of the Company's net
Profit (determined without regard to
clause (vii) of the definition of
Profit) in the Fiscal Year in which
the distribution occurs) and then
among the Members in proportion to
their respective Percentage
Interests. Such distributions shall be
made by the end of the taxable year
of the Company during which the
liquidation of the Company occurs
(or, if later, 90 days after the
date of the liquidation).
All
distributions in kind to the Members shall be made subject to the liability
of
each distributee for costs, expenses, and liabilities
theretofore incurred or
for
which the Company has committed prior to the date of termination and those
costs,
expenses, and liabilities shall be allocated to the distributee
pursuant
to
this Section 9.3.
Section 9.4.
Deficit Capital Accounts.
Notwithstanding anything to
------------------------
the
contrary contained in this Agreement, and notwithstanding any custom or rule
of
law to the contrary, to the extent that the deficit, if any, in the Capital
Account
of any Member results from or is attributable to deductions and losses
of
the Company (including non-cash items such as depreciation), or distributions
of
money or other property pursuant to this Agreement, upon dissolution of the
Company
such deficit shall not be an asset of the Company and such Member shall
not
be obligated to contribute such amount to the Company to bring the balance
of
such Member's Capital Account to zero.
ARTICLE X
CONVERSION OF
CLASS B MEMBERSHIP
UNITS
------------------------
Section 10.1. Optional Conversion. (a)
Subject to and in compliance
-------------------
with
the provisions of this Section 10.1, all (but not less than all)
outstanding
Class B Membership Units may, at the option of the holder thereof,
be
converted into a like number of Class A Membership Units upon 365 days' prior
written
notice to the Board of Managers given at any time after the second
anniversary
of the date of this Agreement (the "Conversion Notice"). The
Conversion
36
<PAGE>
Notice
shall set forth the effective date of the conversion of the Class B
Membership
Units into Class A Membership Units. The Conversion Notice may be
withdrawn
by the holder of Class B Membership Units by written notice to the
Board
of Managers at any time prior to the Conversion Date without prejudice to
the
rights of such holder under this Article 10 or otherwise. Notwithstanding
the
foregoing, if the audited or unaudited annual Financial Statements provided
pursuant
to Section 7.3(a) with respect to any Fiscal Year ending on or after
April
30, 2002 reflect annual or cumulative operating results that are 5% or
more
below the annual or cumulative operating results projected in the Initial
Business
Plan or the Subsequent Business Plan for such period, as the case may
be,
then, for a period of thirty (30) calendar days following the receipt by the
holder
of the Class B Membership Units of such Financial Statements, such holder
may
convert all (but not less than all) of the Class B Membership Units held by
it
into a like number of Class A Membership Units, effective immediately upon
delivery
at any time during such thirty (30) calendar day period of written
notice
of such conversion to the Board of Managers (the "Performance Based
Conversion
Notice"). In addition, notwithstanding the foregoing, in the event
the
Company undertakes an IPO, the holder of the Class B Membership Units may
convert
all (but not less than all) of the Class B Membership Units held by it
into
a like number of Class A Membership Units by delivering written notice of
such
conversion to the Board of Managers at any time prior to the date of the
closing
of the IPO, and such conversion shall be effective on the date of, and
shall
be expressly conditioned upon, the closing of the IPO.
(b) Reorganization, Recapitalization
or Reclassification. If the
----------------------------------------------------
Class
A Membership Units shall be changed into the same or a different number of
shares
of any class or classes of equity of the Company, whether by
reorganization,
recapitalization, reclassification or otherwise, then and in
each
such event each holder of Class B Membership Units shall have the right
thereafter
to convert such units into the kind and amount of shares of equity
and
other securities and property receivable upon such reorganization,
recapitalization,
reclassification or other change by holders of the number of
Class
A Membership Units into which such Class B Membership Units might have
been
converted immediately prior to such reorganization, recapitalization,
reclassification
or change.
(c) Conversion Date. The date set forth in the Conversion Notice
as
---------------
the
effective date for the conversion of Class B Membership Units into Class A
Membership
Units, or the date of delivery of the Performance Based Conversion
Notice,
or the closing date of the IPO, as applicable, shall be the "Conversion
Date." Such conversion shall be deemed to have been
effected immediately prior
to
the close of business on the Conversion Date, and at such time the rights of
such
holder as a holder of Class B Membership Units shall cease and such Person
shall
be deemed to have become a holder of Class A Membership Units with all
rights
appurtenant thereto. No Class B
Membership Units that have been
converted
shall be reissued without the prior approval of the Members.
(d) Reservation of Class A Membership
Units. The Company hereby
---------------------------------------
expressly
reserves 200,000 of the authorized but unissued Class A Membership
Units
solely for the purpose of effecting the conversion of the Class B
Membership
Units outstanding on the date hereof.
The Members agree to take all
necessary
action to cause the Company to at all times reserve and keep available
out
of the authorized but unissued Class A Membership Units, solely for the
purpose
of effecting the conversion of the Class B Membership Units, such number
of
its
37
<PAGE>
Class
A Membership Units as shall from time to time be sufficient to effect the
conversion
of all outstanding Class B Membership Units.
ARTICLE XI
REDEMPTION OF
THE
CLASS C MEMBERSHIP
UNIT
-----------------------
NBC shall have the right, exercisable
by written notice to the Board
of
Managers at any time on or after the Conversion Date (the "Redemption
Notice"),
to cause the Company to redeem the outstanding Class C Membership Unit
at
a price equal to $12.50 plus any accrued and unpaid Priority Return on the
Class
C Membership Unit. The Company shall, immediately following receipt of the
Redemption
Notice, redeem the Class C Membership Unit from the holder thereof.
The
Class C Membership Unit redeemed pursuant to this Article 11 shall be
canceled
and may not, under any circumstances, be reissued, sold or Transferred
and
the Company shall take such appropriate action as may be necessary to
eliminate
the authorized Class C Membership Unit.
ARTICLE XII
DISPUTE
RESOLUTION
------------------
Section 12.1. Arbitration.
Subject to the provisions of Section 12.2
-----------
below,
all disputes arising out of, or in connection with, this Agreement or the
commercial
relationships between or among the parties that are created by this
Agreement,
including any disputes concerning the formation, validity,
performance
or termination of this Agreement or any of the rights or obligations
created
or transferred hereby, and including any disputes concerning the
jurisdiction
of the arbitral tribunal or the scope of arbitrable
issues
(collectively,
"Disputes"), shall be finally resolved by arbitration pursuant to
the
UNCITRAL Arbitration Rules (the "Rules"). Any such arbitration shall
be
administered
by the American Arbitration Association through its global
headquarters
in New York (the "AAA Global Headquarters"), and the AAA Global
Headquarters
shall act as the appointing authority under the Rules. The place of
arbitration
shall be New York, New York (without prejudice to the powers of the
arbitral
tribunal under Articles 16 (2) and (3) of the Rules). The law to be
applied
to the merits of any Dispute shall be the law of New York and, in the
event
a claim is asserted that is governed by federal law, the arbitral tribunal
shall
apply federal law as it would be applied to such a dispute by a United
States
District Court for the Southern District of New York.
All pleadings, proceedings and
information exchanged or disclosed in
the
arbitration shall be treated as confidential and shall not be disclosed by
the
parties except (1) as necessary in connection with the prosecution or
defense
of the arbitration, (2) to protect or assert a right provided by law, or
(3)
to comply with an obligation imposed by law. The arbitral tribunal shall
have
the power to implement and enforce this agreement concerning
confidentiality
by appropriate order.
Section 12.2. Submission to Member Management Prior to
Arbitration.
----------------------------------------------------
If
a Dispute arises, the Member intending to commence arbitration concerning the
Dispute
shall,
38
<PAGE>
prior
to commencing the arbitration, submit to the other Members who will be
made
parties to the arbitration a letter (the "Notice Letter") setting
forth the
nature
of the Dispute, including the claims proposed to be asserted in
arbitration,
the parties involved in the Dispute, and the nature and amount of
the
relief to be sought in arbitration if the Dispute cannot be resolved. The
affected
Members' executive management teams shall attempt in good faith to
resolve
the Dispute within 10 calendar days after receipt of the Notice Letter,
including
any disagreement concerning the number of arbitrators (one or three)
to
be appointed in the event the Dispute proceeds to arbitration, and including
the
selection of a sole arbitrator if a sole arbitrator is to be appointed. If
the
Dispute is not resolved within such period of 10 calendar days, then any
Member
who is a party to the Dispute may commence arbitration pursuant to the
Rules
and, absent an agreement within such 10 calendar days upon a sole
arbitrator
whom the parties shall jointly nominate, a three-member arbitral
tribunal
shall be formed in accordance with the Rules, and the Member commencing
the
arbitration shall nominate an arbitrator in the Notice of Arbitration (which
shall
include the Statement of Claim provided for in Article 18 of the Rules) at
the
time the arbitration is commenced.
Section 12.3. Consent to Jurisdiction. The parties hereby consent to
-----------------------
the
exclusive jurisdiction of the United States District Court for the Southern
District
of New York for the purposes of any judicial proceedings relating to an
arbitrable
Dispute, including any proceedings to enforce or to set aside an
arbitral
award.
ARTICLE XIII
CERTAIN PRE-CLOSING
MATTERS
---------------------------
Section 13.1. General; Reimbursement of Expenses. The Members
----------------------------------
acknowledge
that, prior to the date of this Agreement, each of NBC and WWFE (and
their
respective Affiliates) has incurred expenses, acquired property or entered
into
contracts in its individual capacity but for the benefit of the Company.
As
soon as practicable after the date hereof (but subject to the approval of NBC
and
WWFE as described below), the Company shall reimburse each of NBC and WWFE
for
the reasonable expenses incurred by each of them (and their respective