charter
DRAFT -- 5/5/15
THE NORTHWEST SEAPORT ALLIANCE CHARTER
This CHARTER (the "Charter") of The Northwest Seaport Alliance, a Washington port
development authority (the "PDA"), dated as of [August 1], 2015 (the "Effective Date"), is entered into
by and among the Port of Tacoma, a public port district operating under the laws of the state of
Washington, and the Port of Seattle, a public port district operating under the laws of the state of
Washington, as members of the PDA (each, a "Managing Member" and collectively, "Managing
Members"), and, for purposes of Section 4.2, Section 5.5, Section 5.8, Section 11.15, Article VII, and
Article IX, the PDA.
WHEREAS, pursuant to Federal law 46 USC Section 40301(b)(1-2), the United States Congress
has granted authority for ports and marine terminal operators in certain circumstances and if approved by
the Federal Maritime Commission, to "discuss, fix or regulate rate or other conditions of service; or
engage in exclusive, preferential, or cooperative working arrangements, to the extent that such agreements
involve ocean transportation in the foreign commerce of the United States";
WHEREAS, under Washington State law, including Chapter 53.08 RCW, which allows ports to
exercise any of their powers jointly by mutual agreement and allows the Managing Members to form a
port development authority and including the Interlocal Cooperation Act, which allows ports to act jointly
(including the formation of a separate legal entity for such joint cooperative action), the Managing
Members desire to come together to form, establish, and support this PDA to carry out the unified
management and operation of the Marine Cargo operations of each Managing Member; and
WHEREAS, the Managing Members individually will remain separate port districts governed by
locally elected port commissioners; the creation of this PDA will not consolidate or merge the Managing
Members and nothing in this Charter changes the governance of each Managing Member; and neither the
creation of this PDA nor anything in this Charter relieves either Managing Member of any obligation or
responsibility imposed upon it by law or bond covenant;
NOW, THEREFORE, in consideration of the mutual premises and covenants contained herein,
and of other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is mutually agreed as follows:
ARTICLE I
DEFINITIONS
1.1 Listed Definitions. Capitalized terms used but not otherwise defined in the Charter have
the following meanings:
(a) "Affiliate" means, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such Person. For these purposes,
"control" means the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting securities, by contract,
or otherwise.
(b) "Calculation Period" means a period of time approved by the CEO that is no
longer than a fiscal quarter.
(c) "Cash" means cash or financial investments/securities as allowed by Washington
State.
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(d) "Covered Person" means (i) each Managing Member, (ii) each officer, director,
commissioner, member, Affiliate, agent, or representative of each Managing Member, and each of their
Affiliates, and (iii) each CEO, officer, agent, or representative of the PDA.
(e) "Damages" means, collectively, any losses, claims, damages, judgments, fines,
or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending
against such losses, claims, damages, judgments, fines, or liabilities, and any amounts expended in
settlement of any claims.
(f) "Delegation of Authority Master Policy" means the Delegation of Authority
Master Policy attached as Exhibit A hereto, as may be amended by the Managing Members from time to
time.
(g) "Dispute" means a material difference of opinion between the Managing
Members that cannot be resolved via the consent of each Managing Member and that requires the consent
of each Managing Member, and is limited to (i) those matters where a Managing Member believes in
good faith that the other Managing Member is in material breach of any of its obligations under any
agreement in connection with the PDA and that such breach is likely to cause immediate and irreparable
harm to such Managing Member or the PDA, (ii) matters of interpretation of this Charter or other written
Agreements between the PDA and one or both Homeports, or (iii) such other matters as may be agreed to
by both Managing Members.
(h) "Distributable Cash" means an amount equivalent to cash flow provided from
operations as calculated pursuant to GAAP for a Calculation Period.
(i) "Five Year Capital Investment Plan" means a plan of capitalized and expensed
projects that the PDA plans to complete in the following five years.
(j) "GAAP" means United States generally accepted accounting principles.
(k) "Homeport" means either the Port of Seattle or the Port of Tacoma, as
applicable, acting in its capacity as such (rather than in its capacity as a Managing Member).
(l) "Interlocal Cooperation Act" means RCW 39.34, as amended.
(m) "Joint Powers" means RCW 53.08.240, the Port Joint Powers Authority.
(n) "Marine Cargo" means waterborne goods other than grain, liquified natural gas,
or methanol.
(o) "Membership Equity" means the equity of the respective Managing Members
as shown on the PDA's financial statements.
(p) "Net Income" and "Losses" means, for each Fiscal Year or other period, an
amount equal to the PDA's net operating income or losses less depreciation plus non operating income or
losses, including extraordinary and special items for such Fiscal Year or other period, determined in
accordance with GAAP.
(q) "Other Cash" means any Cash other than Distributable Cash not in a dedicated
reserve.
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(r) "Person" means an individual, corporation, association, limited liability
company, limited liability partnership, partnership, estate, trust, joint venture, unincorporated organization
or other entity or a government or any agency or political subdivision thereof.
(s) "Port Development Authority Act" means RCW 53.08.[new sections], as
amended.
(t) "RCW" means Revised Code of Washington.
(u) "Special Covered Person" means any past or present officer or employee of the
PDA.
(v) "Transfer" means, with respect to any Membership Interests, a direct or indirect
transfer, sale, exchange, assignment, pledge, hypothecation, or other encumbrance or other disposition of
such Membership Interests, including the grant of an option or other right, whether directly or indirectly,
whether voluntarily, involuntarily, or by operation of law.
1.2 Other Definitions. The remaining capitalized terms used in the Charter but not defined
in Section 1.1 are defined in this Charter on the following pages:
Bond Income Calculation ................................ 10 Managing Member(s) ........................................ 1
Capital Construction .......................................... 9 Mediation Period ............................................. 16
Charter ............................................................... 1 Membership Interest .......................................... 5
Contingencies ................................................... 22 Membership Interest Affirmation ...................... 6
Dispute Notice Date ......................................... 16 PDA ................................................................... 1
Effective Date .................................................... 1 PDA-Owned Personal Property ......................... 8
Fiscal Year ....................................................... 11 Post-Formation Improvements .......................... 8
Initial Period..................................................... 17 PRA ................................................................. 23
JAMS Rules ..................................................... 16 Tax Matters Person .......................................... 12
Licensed Properties ............................................ 6 Working Capital ................................................ 8
Licensed Property Agreements .......................... 6
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 PDA Name. The name under which the PDA shall conduct its business is "The
Northwest Seaport Alliance." The business of the PDA may be conducted under any other name
permitted by applicable law as the Managing Members may determine from time to time.
2.2 Business Purpose.
(a) The PDA's purpose is to promote and assist economic development of the
Managing Members' Marine Cargo operations with an emphasis on unified business retention and
recruitment, coordinated enhancement of the value of Marine Cargo properties, improved intermodal rail
service, improved freight capabilities, and the general promotion of maritime economic development and
other related Port business activity.
(b) During the term of this Charter and subject to the provisions of Section 2.2(e),
the PDA will be the manager and operator of the Marine Cargo business of both Managing Members, and
will manage and operate such other supporting business properties as may be licensed to the PDA by the
Managing Members from time to time, along with any Post-Formation Improvements in accordance with
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this Charter. The PDA will oversee such operations, capital investments, and investments with unified
management as described in this Charter to (i) optimize the value of Marine Cargo properties; (ii) grow
cargo volumes and protect market share for the benefit of the region and state; (iii) manage overall
terminal capacity, through coordinated investment strategies; (iv) provide enhanced job prospects for the
Managing Members' labor and business partners, and (v) achieve overall financial returns that will not
only enable reinvestment but also ultimately provide additional, unencumbered financial returns for each
Managing Member.
(c) The Managing Members are committed to shared core objectives of financially
viable business models that support customer success, value the port-labor partnership, protect and
increase regional jobs, benefit the citizens of Pierce and King counties, promote the Pacific Northwest
corridor's role in US trade strategies and the greater North American economy, and ensure the ability of
each Managing Member to reinvest in terminal assets and infrastructure.
(d) It is the commitment of each Managing Member that the Managing Members
will act to further the purposes set forth in the foregoing provisions of this Section 2.2 in good faith and
fair dealing pursuant to the terms of this Charter.
(e) The Managing Members affirm and shall adhere to the following allocation of
Marine Cargo activities between the PDA and Homeports:
(i) Marine Cargo activities for the Licensed Properties, which are operated,
managed, and used by PDA, are exclusive to PDA.
(ii) Homeports may continue Marine Cargo activities for existing Homeport
businesses, the operation, management, and use of which are not licensed to the PDA.
(iii) For new Marine Cargo opportunities, the PDA has the right of first
refusal. A Homeport may take up such opportunity if the PDA decides, by vote, to refer such opportunity
to the Homeports.
2.3 Formation. The Managing Members have formed the PDA as of the Effective Date. The
Managing Members shall license the operation, management, and use of the Licensed Properties as set
forth in Schedule 2 effective as of January 1, 2016. The Managing Members shall make the capital
contributions required under Section 3.7 effective as of January 1, 2016. During the period beginning the
Effective Date through December 31, 2015, the Homeports shall continue to receive all revenues and pay
all expenses related to the operations, management, and use of the Licensed Properties.
2.4 Authority; Power. The PDA shall have the power and authority to engage in such
activities and to exercise such powers permitted to port development authorities, including authority to
perform any lawful public purpose or public function related to maritime activities of the Homeports that
created this PDA, under the laws of the State of Washington, and all subject to the limitations provided in
the Port Development Authority Act, provided however, the PDA shall not have authority to issue debt or
to own real property.
2.5 Limitation of Liability. The obligations and liabilities of the PDA, whether arising in
contract, tort, or otherwise, shall be solely the obligations and liabilities of the PDA, and the Managing
Members shall have no obligation whatsoever for any such obligation or liability of the PDA solely by
reason of being a Managing Member. The failure of the PDA to observe any formalities or requirements
relating to the exercise of its power or management of its business or affairs under the Port Development
Authority Act or this Charter shall not be grounds for imposing liability on the Managing Members for
any obligations, or liabilities of the PDA.
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2.6 Ownership.
(a) Formation. The Managing Members (a) have caused the PDA to be formed as a
port development authority under the Interlocal Cooperation Act, the Joint Powers, and the Port
Development Authority Act by resolution, and the Managing Members shall cause the CEO of the PDA
to execute, file, and record (or direct the execution, filing, and recording of) all certificates and documents
as may be appropriate to comply with all requirements for the continuation and operation of a port
development authority, the ownership of personal property, and the conduct of business by the PDA
under the laws of the State of Washington and any other jurisdiction in which the PDA may own personal
property or conduct business; and (b) hereby confirm and agree to their status as Managing Members.
Nothing in this Charter and no actions taken by the parties under this Charter shall constitute a partnership
between any of the parties for any purpose. For the purposes of RCW 25.05.055, the PDA is formed
under the Interlocal Cooperation Act, Joint Powers, and the Port Development Authority Act.
(b) Managing Members. The Managing Members identified in the preamble are the
only members of the PDA. Based on the valuations described in Section 3.1 of the Licensed Properties (as
set forth in Schedule 2), the Managing Members have pro rata percentage interests in the PDA (the
ownership and respective percentage interest, a "Membership Interest") and thus shall share Net Income
or Losses pro rata based on each Managing Member's respective percentage Membership Interest, unless
and until agreed otherwise by both Managing Members pursuant to Section 3.1. No other Person may
become a member of the PDA. Except as otherwise expressly provided in this Charter, the PDA shall not
issue or redeem any Membership Interest without the prior written consent of each Managing Member.
The Managing Members shall not have any equity or possessory interest in the PDA other than the
Membership Interests, which have only the rights provided in this Charter. Nothing in this Section 2.6
precludes a Managing Member from having contractual arrangements with the PDA, subject to the other
provisions of this Charter. Other than as provided in Section 10.1, with respect to dissolution and
liquidation, Membership Interests shall not entitle a Managing Member to any title in or to the whole or
any part of the property of the PDA or right to call for a partition or division of the same.
(c) Limitations on Transfer. No Managing Member may Transfer any Membership
Interests. Any purported Transfer of Membership Interests not in accordance with this Charter shall be
null and void, and the PDA shall refuse to recognize any such Transfer for any purpose and shall not
reflect in its records any change in record ownership of Membership Interests pursuant to any such
Transfer.
(d) Separate Existence. The PDA shall do all things necessary to maintain its port
development authority existence separate and apart from each Managing Member and any Affiliate of any
Managing Member, including maintaining its books and records on a current basis separate from that of
the Managing Members, any Affiliate of the PDA, or any other Person, and shall segregate the PDA's
assets from that of the Managing Members, any Affiliate of the PDA, or any other Person.
(e) Offices. The PDA shall have such locations as the Managing Members may
deem appropriate. The Managing Members acknowledge that PDA staff will be based in locations in both
King and Pierce Counties, and may have staff and locations outside the United States, whether on a
transitional basis or for ongoing operational needs. The Managing Members shall authorize, and the CEO
shall execute, deliver, and file, any certificates (and any amendments and/or restatements thereof)
necessary for the PDA to qualify to do business in any jurisdiction in which the PDA may wish to
conduct business. The Managing Members shall authorize, and the CEO shall cause, the PDA to be
qualified, formed, or registered in any jurisdiction in which the PDA transacts business in which such
qualification, formation, or registration is required or desirable.
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2.7 Term. The PDA commenced on the Effective Date and shall continue indefinitely until
dissolution thereof in accordance with the provisions of this Charter or as otherwise provided by law.
ARTICLE III
MEMBERSHIP INTERESTS, BUDGETING, WORKING CAPITAL, CASH USE AND
RESERVES, AND CAPITAL CONSTRUCTION
3.1 Valuation of Membership Interests.
(a) Each Managing Member will license to the PDA only the operation, use, and
management of certain real and personal property of such Managing Member, and not ownership of such
property (the property for which such operation, use, and management have been so licensed, the
"Licensed Properties"). Such license of operation, use, and management of the Licensed Properties is
needed to carry out the purpose of the PDA, and the Licensed Properties include the real and personal
property, leases, terminals, and infrastructure listed in Schedule 2. The PDA will not take ownership of
the Licensed Properties. Ownership of the Licensed Properties will continue to be separately held by the
applicable Managing Member, including the respective responsibility for debt and debt service, subject to
the allocation of environmental costs as provided in Section 3.2 below. In order for the PDA to carry out
the purposes of the PDA set forth in Section 2.2, the Managing Members agree and acknowledge that the
PDA may enter into one or more agreements with each Managing Member for the PDA's exclusive
management, operation, and use of the Licensed Properties (such agreements, the "Licensed Property
Agreements").
(b) For purposes of determining the Managing Members' respective Membership
Interests, the Managing Members acknowledge and agree on the valuations of the use of the Licensed
Properties set forth in Schedule 2, which valuations are based on a ten year net present value of each such
Licensed Properties' estimated cash flows and enterprise value, including "maintenance and repair"
capital and updated operation, maintenance, and administrative costs provided by each Managing
Member.
(c) Such Membership Interest valuations shall remain in effect until the earlier of
termination or dissolution of the PDA, except as described in Sections 3.1(c)(i) and 3.1(c)(ii) below.
(i) One-time Membership Interest Affirmation. The CEO shall review
the valuation as of December 31, 2017 of the Licensed Properties used to calculate the initial Membership
Interests to confirm if there has been a material change to such value (such review, the "Membership
Interest Affirmation"). This one-time Membership Interest Affirmation shall be limited to those
Licensed Properties where the Marine Cargo terminal revenues were not secured by contractual
agreements throughout the time period covered by the Initial Membership Interest valuation. The CEO
will complete the Membership Interest Affirmation no later than March 31, 2018. If a material change has
occurred, the applicable Membership Interest shall be adjusted by the difference between the initial
valuation of that Licensed Property and the recalculated net present value of that same Licensed Property,
each over the same initial ten year initial cash flow valuation period, such net present value to be
calculated consistently using the methodology used to calculate the Initial Membership Interest under
Section 3.1(b) above. Upon recommendation by the CEO, the Managing Members shall approve any
change in Membership Interest by vote, to include provision for addressing any change to Distributions
and allocations as a result of the change in Membership Interest.
(ii) Addition or Removal of any Property Licensed to the PDA. From
time to time, upon recommendation of the CEO, the Managing Members may approve by vote to add or
remove Licensed Properties from the PDA, specifying the effective date of such addition or removal.
Revenues of each Licensed Property so removed or so added as a Licensed Property shall be valued
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consistently using the methodology used to calculate the initial Membership Interest, and the Membership
Interests shall be adjusted accordingly.
3.2 Allocation of Environmental Costs. Environmental costs shall be allocated by and
between the Homeports and the PDA as follows:
(a) General Intent. Environmental remediation costs and project mitigation costs
associated with Licensed Properties and business activities shall be allocated between the PDA and
Homeports as described herein. Remediation costs associated with contamination on Licensed Properties
that occurred before the Effective Date shall remain the responsibility of the Homeport in which the
Licensed Property is located, provided that any remediation costs necessary to support PDA operations
shall be the responsibility of the PDA, even if the contamination actually occurred before the Effective
Date. For any Post-Formation Improvement not owned by either Homeport prior to PDA formation,
remediation costs shall be the responsibility of the PDA. The allocation of environmental remediation and
project mediation costs described in this Section 3.2(a) are subject to Sections 3.2(b) through 3.2(g)
below. Notwithstanding the foregoing, all such cost allocations may be revised on a project-specific basis
by vote of the Managing Members.
(b) Remediation of Pre-Effective Date Contamination. Regulatory remediation
(whether by regulatory order or by a voluntary cleanup program) of contamination that occurred on a
Licensed Property before the Effective Date shall be the responsibility of the Homeport that owns such
Licensed Property, unless remediation is driven by PDA development or operations.
(c) Maintenance Dredging. Costs of routine maintenance dredging (dredging
required due to sediment deposition) required for operation of Licensed Properties shall be the
responsibility of the PDA, provided, however, that if there are incremental costs associated with
contamination from such maintenance dredging, such costs shall be addressed under Section 3.2(e) below.
(d) Environmental Monitoring for Past Environmental Clean Up Operations.
Environmental monitoring of a Licensed Property required after any environmental clean-up operation
conducted by a Homeport as to any of its Licensed Properties shall be the responsibility of such
Homeport.
(e) Post PDA Redevelopment. Any contamination that occurred before the
Effective Date but is discovered during planning or construction of a PDA project on a Licensed Property
that requires entering into an EPA or Washington State Department of Ecology Order for investigation
and cleanup shall be the responsibility of the Homeport that owns such Licensed Property, provided
however, the Managing Members may choose to approve by vote to contribute to the cost of such cleanup
if it would be advantageous for the PDA.
(f) Environmental Remediation Associated with Homeport Real Property
Acquisition for PDA Development. If a Homeport acquires real property for PDA business, and that real
property has or is later found to have contamination requiring a cleanup under federal or state law, then
environmental remediation associated with that real property shall be the responsibility of the PDA.
(g) Habitat Mitigation Cost Allocation.
(i) Post-Formation Habitat Mitigation. The Homeports expect to develop
advanced and/or mitigation banking credits that could be potentially sold or used by the respective
Homeport(s) and/or the PDA depending on where the development activity impacts occur. These advance
mitigation projects will be managed and paid for by the Homeports in which the advance mitigation
projects are located.
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(ii) Existing Mitigation Sites. To the extent feasible, ongoing operations
and maintenance costs to maintain existing habitat and public access mitigation sites which were created
to support a Licensed Property shall be the responsibility of the PDA.
(iii) Future Mitigation Sites. As each Homeport creates advanced mitigation
sites, each will develop a per acre credit fee associated with the total cost-of-ownership, which will
include land value, design, construction, monitoring and long-term operations and maintenance costs.
Each Homeport shall offer the PDA the option to purchase advanced mitigation credits from such
Homeport as needed to mitigate PDA development.
3.3 Post-Formation Improvements. The Managing Members may by vote authorize and
instruct the PDA to acquire or construct, improvements to terminals, other improvements and
infrastructure such as cranes and other fixtures on Licensed Properties as necessary to support PDA
operations ("Post-Formation Improvements"), which Post-Formation Improvements shall be owned by
the PDA. The PDA shall have exclusive control to determine the nature and manner of the use of any
Post-Formation Improvement as well as the responsibility for its maintenance.
3.4 PDA-Owned Personal Property. The Managing Members may by affirmative vote
authorize and instruct the PDA to, or the CEO may, subject to the Delegation of Authority Master Policy,
acquire personal property necessary or useful to support PDA operations ("PDA-Owned Personal
Property").
3.5 Annual Budget. The Managing Members shall cause the CEO and other PDA
management to prepare an annual operating budget in coordination with the Homeports' budget processes
and timing requirements as required by law, and PDA policies for consideration and approval by the
Managing Members.
3.6 Five Year Capital Investment Plan. The Managing Members shall cause the CEO and
other PDA management to annually prepare a Five Year Capital Investment Plan for Licensed Properties
for approval by the Managing Members. Such approval by the Managing Members denotes conceptual
agreement to the Five Year Capital Investment Plan only; any material capital expenditures shall be
subject to Section 3.11.
3.7 Working Capital. Effective as of January 1, 2016, the Managing Members shall make
initial cash capital contributions to the PDA as set forth on Schedule 1 (collectively, "Working
Capital"). The purpose of Working Capital is to provide the PDA with money required for operations.
The initial contributions of each Managing Member to Working Capital shall be the aggregate estimated
amount of the working capital reserves as established by the Managing Members, which each Managing
Member shall contribute based on the percentage of each Managing Members' respective Membership
Interest. PDA operating cash flow (cash revenue less cash expenses) shall be a component of Working
Capital and be distributed on a periodic basis not less than quarterly to each Managing Member as more
particularly described in Article IV. Working Capital shall not be diverted for capital projects to Capital
Construction.
3.8 Working Capital Reserve Policy. The Managing Members shall develop a reserve
policy establishing a minimum target fund level for Working Capital. The CEO is directed to notify the
Managing Members if Working Capital drops below such targeted minimum level and shall seek
Managing Members' approval by vote to replenish Working Capital accordingly. The Managing
Members may consider other requests for additional contributions to the PDA, the affirmative approval of
which will require a vote by each Managing Member.
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3.9 No Additional Contributions Without Managing Member Vote. Beyond the initial
contribution to Working Capital and the initial contribution for Capital Construction as provided in
Sections 3.7 and 3.12, no Managing Member shall be required to make any additional contributions to the
PDA without the vote of each Managing Member, which vote may be taken as part of a Capital
Construction project approval or vote to fund Capital Construction. If any such additional contribution is
so approved but is not made by a Managing Member, such failure to make such contribution is
acknowledged to be a material breach under clause (i) of the definition of "Dispute." In addition, without
a vote of the Managing Members, no Managing Member shall be permitted to make any additional
contributions to the PDA.
3.10 Additional Reserves. Appropriate additional reserves may be determined and charged to
the Managing Members for contingent liabilities, if any, and as agreed to by the Managing Members as of
the date any such contingent liability becomes known to the PDA management or either Managing
Member, and such other reserves determined and agreed to by the Managing Members; provided,
however, that any such reserves shall be charged to the Managing Members pro rata based on their
respective Membership Interests.
3.11 Capital Expenditures. The CEO shall make recommendations to the Managing
Members regarding any capital expenditures by the PDA but shall not carry out or commit to any such
capital expenditures unless and until such expenditure has been authorized pursuant to the Delegation of
Authority Master Policy.
3.12 Capital Construction. Separate from Working Capital, the PDA shall provide for the
funding of capital expenditures ("Capital Construction") to be funded by a pro rata initial contribution
from each Managing Member based on their respective Membership Interests. Managing Members may
approve by vote contributions to Capital Construction in amounts other than based on each Managing
Members' pro rata respective Membership Interests on a project-specific basis. Requests for funding
Capital Construction shall be based on the CEO's periodic projection of PDA capital project cash flow
needs. Managing Members may consider requests for additional contributions to the PDA, the affirmative
approval of which will require a vote by each Managing Member. Capital Construction shall be funded by
each Managing Member separately and not from Working Capital. Distributions of Capital Construction
funds will be made expressly subject to either (1) Managing Member approval of capital projects or (2)
CEO approval of capital expenditure, where such expenditure is within the levels set in the Delegation of
Authority Master Policy.
3.13 No Interest on Contributions. No Managing Member shall be paid interest on any of its
contributions.
ARTICLE IV
CASH DISTRIBUTIONS, RESERVES, AND MEMBER BOND OBLIGATIONS
4.1 Distributions.
(a) The PDA through the CEO will make distributions of all Distributable Cash to
the Managing Members as soon as practicable after each Calculation Period. Prior to executing any
distribution, the CEO shall provide a report of the planned distribution to the Managing Members.
(b) Distributions to the Managing Members of Distributable Cash shall be distributed
pro rata to the Managing Members based on their respective Membership Interests.
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(c) Distributions of Other Cash may be other than pro rata as approved by the
Managing Members. If the distribution is not consistent with the pro rata Membership Interests, the
distribution will be recalculated at the next re-set date.
(d) Notwithstanding any provision to the contrary contained in this Charter, the PDA
shall not make a distribution to any Managing Member if such distribution would violate applicable law.
4.2 Member Bond Obligations.
(a) Managing Member Bond Obligations. The PDA acknowledges the Managing
Members' debt obligations and their obligations to cause their assets and facilities to be managed in a
manner that will permit them to meet their rate and operating covenants. The Managing Members instruct
the CEO to manage the PDA in a prudent and reasonable manner in support of the Managing Members'
respective bond covenants. The Managing Members shall keep the CEO and PDA management informed
of their respective bond obligations, and shall notify the other Managing Member of any proposed change
to such Managing Member's Master Bond Resolutions as soon as practicable before adoption. Nothing in
this section shall alter the respective share of distributions or revenues of each Managing Member based
on their respective Membership Interest. Nothing in this Charter modifies or alters the obligations of each
Managing Member with respect to its own bond obligations. The PDA does not assume any obligations to
the Managing Members' bond holders.
(b) Bond Income Calculation. Managing Members shall establish and maintain a
requirement for the PDA to calculate and establish a minimum level of net income from the PDA equal to
the amount currently required for the Homeports to meet their current bond rate covenants ("Bond
Income Calculation"). The Managing Members shall require the Bond Income Calculation to be
reviewed annually as part of the PDA budget process and the Managing Members may adjust the Bond
Income Calculation so long as it does not cause any Managing Member to fail to comply with its rate
covenant. The PDA may not take any action that reasonably would reduce PDA income below the
minimum level established by the Bond Income Calculation unless each Homeport separately votes to
approve that action. Such a vote by each Homeport must occur even if the action is within the CEO's
authority under the Delegation of Authority Master Policy. If net income before depreciation of the PDA
is not sufficient for either Homeport to be in compliance with a rate covenant (as currently described in
each Homeport's Master Bond Resolutions in effect as of the Effective Date), then:
(i) Upon that Homeport's request, the PDA shall hire an independent thirdparty
consultant to perform analysis and make recommendations for actions needed to achieve bond
covenant compliance.
(ii) If the consultant recommends an action that the PDA is unwilling, unable
or refuses to undertake, either Managing Member can require dissolution of the PDA following the
dispute resolution process even if within the Initial Period.
(iii) The PDA shall have at least four months to respond, act and or dissolve
following its receipt of the consultant's recommended action, unless a shorter time is required by the
applicable bond covenants.
(c) Pledge for Security Purposes. Each Managing Member's respective share of
revenues received by the PDA with respect to the Licensed Properties may be pledged for security
purposes in connection with the respective bond obligations of each of the Managing Members. The PDA
shall cooperate with each Managing Member in connection with their respective bond obligations
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(d) No Adverse Effect on Managing Member Bonds. Any actions proposed to be
taken by the PDA that have a material and adverse effect on either Managing Member's ability to meet its
bond obligations or regulatory compliance must be approved pursuant to this Section 4.2.
(e) No PDA Debt Issuance. The PDA will not issue bonds or enter into any other
debt instruments or borrow funds from any other entity, including Homeports.
(f) Management of Bond Proceeds. If a Homeport provides a capital contribution
from proceeds of tax-exempt bonds, the Homeport may manage or cause the PDA to manage the proceeds
in a manner that provides for compliance with applicable regulations.
ARTICLE V
ACCOUNTING; TAX MATTERS; PDA OPERATIONS
5.1 No Condemnation Authority or Taxing Authority. As provided in RCW 53.08.[new
section 4], the PDA shall have no power of eminent domain. As provided in RCW 53.08.[new section
4], the PDA shall have no power to levy taxes or special assessments.
5.2 Oversight; Accounting Principles; Accounting Period.
(a) Managing Member Oversight. The Managing Members through the CEO shall
oversee the accounting, tax, and record keeping matters of the PDA, which shall be kept in compliance
with GAAP and applicable laws and regulations.
(b) Fiscal Year. Unless otherwise determined by the Managing Members, the fiscal
year of the PDA (the "Fiscal Year") shall conclude on December 31st of each calendar year. The taxable
year of the PDA for any applicable state and local tax purposes shall be the same as the PDA's Fiscal
Year unless a different taxable year is required by law.
5.3 Allocation of Net Income or Losses. For each Fiscal Year, Net Income or Losses, or
items thereof, shall be allocated among the Managing Members pro rata to the Managing Members based
on their respective Membership Interests.
5.4 Other Allocation Rules. For purposes of determining the Net Income, Losses, or any
other items allocable to any period, Net Income, Losses, and any such other items shall be determined on
a daily, monthly, or other basis, as reasonably determined by the Managing Members using any
permissible method under GAAP.
5.5 Financial Statements and Reports.
(a) The PDA shall comply with all requirements of law and GAAP with respect to its
financial statements.
(b) Subject to Section 5.5(a):
(i) The PDA shall provide to the Managing Members monthly, quarterly,
and annual financial statements of the PDA and such other information as may be reasonably requested
by each Managing Member. Such financial statements shall be delivered to the Managing Members
consistent with current Homeport reporting guidelines.
(ii) Monthly and quarterly financial statements may be unaudited, but the
annual financial statements shall be audited by an accounting firm selected by the Managing Members.
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(iii) Monthly and quarterly financial statements shall include an unaudited
consolidated balance sheet as of the end of such period, as well as an unaudited consolidated income
statement and an unaudited statement of cash flows for such period. Yearly financials shall include the
audited consolidated balance sheet as of the end of such year, and a consolidated income statement,
consolidated statement of Managing Members' equity, and a consolidated statement of cash flows of the
PDA for such year.
(c) The PDA shall establish any subdivision of funds, accounts, or reports for either
Homeport to manage information associated with the PDA.
5.6 Membership Equity. The PDA shall account for Membership Equity in accordance with
the following:
(a) Membership Equity for a Managing Member shall be (i) increased by such
Managing Member's contributions and its share of Net Income, and (ii) reduced by such Managing
Member's share of Losses and Distributions.
(b) Maintenance of Membership Equity is intended to comply with joint venture
accounting under GAAP. If the Managing Members determine it is prudent to modify the manner in
which Membership Equity, or any debits or credits thereto, are computed in order to so comply therewith,
the Managing Members may make such modification unless such modification is likely to have a material
effect on the amounts distributable to either Managing Member upon dissolution of the PDA.
(c) Except upon dissolution of the PDA or as otherwise provided in this Charter, no
Managing Member shall have the right to withdraw from the PDA or to demand or to receive the return of
all or any part of its Membership Equity or its contributions.
5.7 Tax Reports. All tax returns and reports of the PDA shall be prepared at the direction of
the CEO.
5.8 Inspection Rights. The PDA shall, and shall cause its CEO and other PDA management,
employees, auditors, and other agents to afford the officers, commissioners, employees, auditors, and
other agents of the Managing Members or any of their Affiliates, during normal business hours and upon
reasonable advance notice to the PDA, (i) reasonable access at all reasonable times to its management,
employees, auditors, legal counsel, properties, offices, and other facilities and to all books and records
including related financial systems for any purpose reasonably related to such Managing Member's
interest in the PDA, and (ii) the opportunity to consult with PDA management from time to time as such
Managing Member or its Affiliates may reasonably request regarding the affairs, finances, and accounts
of the PDA.
5.9 Elections. Except as otherwise provided in this Charter, all decisions as to accounting
principles, whether for the PDA's books or for tax purposes (and such decisions may be different for each
such purpose) and all elections available to the PDA under applicable tax law, shall be made by the CEO.
However, where that may differ materially from the accounting principles applied by the Managing
Members, the CEO shall consult with the Managing Members' chief financial officers.
5.10 Tax Audits and Litigation.
(a) Designation of Tax Matters Person. The CEO is hereby designated as the tax
matters person ("Tax Matters Person") with respect to the PDA. In such capacity the Tax Matters
Person shall have all of the rights, authority, and power, and shall be subject to all of the obligations,
analogous to those of a tax matters partner to the extent provided in the Internal Revenue Code of 1986,
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as amended, and the Treasury Regulations promulgated thereunder; provided, that the exercise of such
rights, authority, and power shall be consistent with all PDA elections and provided further that if any
exercise of such rights has an adverse impact on a Managing Member, the consent of such Managing
Member shall be required.
(b) Foreign, State, and Local Tax Law. If any foreign, state, or local tax law
provides for a tax matters partner or person having similar rights, powers, authority, or obligations as
described in Section 5.10(a), the CEO shall also serve in such capacity and shall represent the PDA in all
tax audit contest or settlement matters to the extent allowed by law.
5.11 Tax Classification of the PDA. It is intended that the PDA be classified as a tax exempt
entity for United States Federal income tax purposes and no election to the contrary may be made. For
purposes of Washington state and local taxation, the PDA shall be classified and treated consistent with
the Port Development Authority Act and the Interlocal Cooperation Act. No Managing Member or CEO
or member of PDA management shall take any action that causes the PDA to be treated, for Federal
income tax purposes, as a taxable corporation or as a partnership for Federal income tax purposes or
otherwise change the exempt status of the PDA or a Managing Member.
ARTICLE VI
PDA MANAGEMENT, OFFICERS, AND EMPLOYEES
6.1 PDA Management.
(a) The PDA shall be governed by its Managing Members, who will carry out the
provisions of RCW 53.08.[new section 4(1-3)] by overseeing the business of the PDA as decided by the
Managing Members and consulting with and advising the CEO. The Managing Members reserve to
themselves all authority granted to the PDA under state law, including the authority designated in RCW
53.08, except as expressly delegated to the CEO in this Charter or in the Delegation of Authority Master
Policy. Each Managing Member shall act in such capacity through its own elected commissions.
(b) The PDA shall reimburse the Managing Members for all reasonable out-ofpocket
expenses incurred in connection with their attendance at meetings of the Managing Members,
including travel, lodging, and meal expenses, and per diem compensation as allowed by RCW 53.12.260
and as may further be determined by each Managing Member. For purposes of RCW 53.12.260(1),
"performance of other official services or duties on behalf of the Managing Members' port district"
includes the participation and action by PDA Managing Members. Payment by the PDA of Managing
Members' international travel requires prior authorization by both Managing Members.
(c) The CEO will report proposed expenditures for promotion and promotional
hosting as provided in RCW 53.36.120 to the Managing Members as part of the annual budget adoption
under Section 3.5. Expenditures proposed for promotional hosting shall be limited as provided in RCW
53.36.130.
(d) PDA management and agents holding positions responsible for industrial
development and trade promotion that are authorized to host under the Delegation of Authority Master
Policy are authorized to make expenditures for promotional hosting of all appropriate PDA activities,
subject to the Delegation of Authority Master Policy. Payment by the PDA for Managing Member
hosting requires prior authorization by both Managing Members, which may be authorized as part of the
annual budget approval process.
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6.2 Managing Members Meetings.
(a) The Managing Members shall meet at least quarterly. Managing Members'
meetings shall be open to the public to the extent required by RCW 42.30. The Managing Members shall
establish and file regular meeting dates and times per RCW 42.30.075. Special meetings may be called
and shall be noticed pursuant to RCW 42.30.080.
(b) Any vote by a Managing Member referenced in this Charter shall require the vote
of such Managing Member in open session. Approval by each Managing Member is defined as an
affirmative vote of three of the five commissioners of such Managing Member, regardless of quorum. In
any meeting of the Managing Members, a single Managing Member may move to recess the Managing
Members' meeting for the purpose of convening a special public meeting and vote by the port
commission of that Managing Member; provided however, in such case, all appropriate prior public
notice and posting requirements shall have been followed.
(c) The Managing Members may hold executive sessions to consider matters
enumerated in RCW 42.30 or privileged matters recognized by law, including such confidential sessions
as may be authorized pursuant to a Federal Maritime Commission-approved Discussion Agreement.
Notice of meetings shall be given and meeting agendas published in a manner consistent with the Port
Development Authority Act, RCW 42.30, RCW 42.30.077, this Section 6.2(c), and other applicable state
or federal law. Meetings of the Managing Members may be held at any time at any location specified in
the notice thereof in such place within the State of Washington as allowed by RCW 42.30.
(d) Managing Members may participate in Managing Member meetings and
executive sessions by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by any other means permitted by
law, so long as any public portion of such meeting is open to public attendance.
(e) Copies of the minutes of the public portion of all regular or special meetings of
the Managing Members shall be available to any person or organization that requests them as required by
state law.
(f) The Managing Members shall establish bylaws to guide the procedural protocols
of the Managing Members.
6.3 CEO Hiring. The Managing Members shall select an initial CEO, who shall perform
duties for the PDA pursuant to an agreement with an initial term of five years. Additional contract
extension(s) are allowed, if approved by both Managing Members. Such agreement shall set out the CEO
performance expectations, with quantifiable regional metrics where appropriate, and shall provide for not
less than an annual performance evaluation. The Managing Members will undertake the selection of
successor CEOs, which shall require the approval of both Managing Members.
6.4 CEO and Management Dual Role Acknowledgement and Limit on Term.
Managing Members affirm that initially the Port of Tacoma chief executive officer may also serve as the
CEO. The Managing Members acknowledge the duality of these responsibilities, for both the CEO and
other PDA executive management team members. The Managing Members require therefore that the
Managing Members, the CEO and other PDA executive team members with dual responsibilities shall,
with all good faith, conduct themselves in an open and transparent manner, disclose any area of potential
or real conflict of interest, and promote the best interests of the PDA. No individual shall hold dual
executive management responsibilities in the PDA for a period of more than five years. If the initial CEO
is replaced before the five year term described above, the Managing Members shall select a new CEO,
who shall be independent from the management of either Homeport.
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6.5 CEO Authority. The CEO is the principal executive officer of the PDA, has general
charge and supervision of the business of the PDA, and shall see that all orders, actions, and resolutions
of the Managing Members are carried out. The CEO will be responsible for the executive management of
the PDA, and shall report directly to the Managing Members acting in their governing capacity. The CEO
has the authority to establish the reporting structure within the PDA and to take such actions, subject to
this Charter, as are in accordance with the Delegation of Authority Master Policy, and shall have such
other authority and shall perform such other duties as set forth in this Charter or the Delegation of
Authority Master Policy, or, to the extent consistent with this Charter, such other authorities and duties as
prescribed by the Managing Members.
6.6 Other Officers. The Managing Members may designate one or more officers of the PDA
management, and shall so designate officers of the PDA as required by law. Any officer so designated
shall have such authority and perform such duties as the Managing Members may, from time to time,
delegate to him or her.
6.7 Removal and Resignation. The CEO and any other officer of the PDA management may
be removed as such, with or without cause, by the Managing Members (subject to any severance
provisions in any applicable agreement with the PDA as to such person), and may resign as such at any
time upon written notice to the PDA. Such resignation shall be made in writing and shall take effect at the
time specified therein or, if no time is specified therein, at the time of its receipt by the PDA. The
acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the
resignation.
6.8 Fiduciary Duties; Authority.
(a) The CEO and each other officer of the PDA management shall discharge his or
her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under
similar circumstances, and in a manner the CEO or such other officer reasonably believes to be in the
PDA's best interest. Such duties are intended to be analogous to and may be further defined as the duties
of care and loyalty of such officers in a Washington for profit corporation, or as further defined by
contract between the PDA or specific Managing Member, as applicable, and the CEO which governs the
CEO's duties to the PDA.
(b) The Managing Members shall have only the contractual duties to the PDA and to
each other set forth in this Charter, and each Managing Member and the PDA hereby waives and
disclaims any and all fiduciary duties that may be implied to apply pursuant to the relationship created by
this Charter. Nothing in this Charter alters or affects the fiduciary or other duties the elected
commissioners and management of each Managing Member have to such Managing Member.
(c) No Managing Member acting independently shall have the authority under this
Charter to manage the business and affairs of the PDA or contract for or incur on behalf of the PDA any
debts, liabilities, or other obligations, and no such independent action of a Managing Member will be
binding on the PDA in the absence of any authority from the Managing Members to take such action on
behalf of the PDA.
ARTICLE VII
DISPUTE RESOLUTION
7.1 General. The PDA and the Managing Members waive any right to seek recourse in court
for any dispute regarding the PDA, this Charter, or the transactions or other documents contemplated by
this Charter, and agree that resolution efforts under this Article VII shall be the exclusive remedies
available for resolution of such disputes.
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7.2 Notice of Dispute. The resolution procedures in this Article VII may be invoked only for
a Dispute. To invoke such procedures, a Managing Member shall provide written notice of the Dispute to
the other Managing Member (the date on which such notice first becomes effective, the "Dispute Notice
Date").
7.3 Resolution Efforts; Mediation; Arbitration.
(a) Discussions. The Managing Members shall call a special meeting for the sole
purpose of addressing the Dispute as soon as practicable (and in any event within 15 days) after the
Dispute Notice Date. The Managing Members shall attempt to resolve in good faith such Dispute within
15 days after the date of such special meeting. Such efforts shall consist of discussion of the Dispute by
the Managing Members or by responsible lead representatives of and chosen by each Managing Member.
(b) Mediation. If the Dispute is not resolved under Section 7.3(a) above,
thereafter either Managing Member may elect to invoke mediation by a neutral party selected either by
the Managing Members or by such lead representatives. If mediation is invoked, the Managing Members
agree to submit such Dispute to mediation under any format or rule to which the Managing Members
mutually agree, and if no agreement can be reached, then in accordance with the Comprehensive
Arbitration Rules of JAMS, The Resolutions Experts (a provider of dispute resolution services) (the
"JAMS Rules"). The Managing Members may use any mediator upon whom they mutually agree. The
cost of any mediator shall be paid by the PDA, unless the Managing Members agree otherwise.
7.4 Deadlocked Dispute. If the Managing Members are unable to resolve a Dispute under
Section 7.3(b) (Mediation) above within 60 days after the Dispute Notice Date (the "Mediation Period"),
then either Managing Member may declare that such Dispute has become a deadlocked Dispute. For any
deadlocked Dispute, subject to Sections 7.5 and 7.6, the PDA shall continue to conduct its business
without engaging in expenditures or other new activity associated with such Dispute.
7.5 Arbitration.
(a) If the Managing Members are unable to resolve the Dispute under Section 7.3(b)
(Mediation) above within the Mediation Period and such Dispute relates to a Licensed Property
Agreement or to distribution matters upon dissolution pursuant to Section 10.3, then, within 60 days after
the Mediation Period, either Managing Member may elect that such Dispute be submitted to, and settled
by, binding arbitration under this Section 7.5. If the Managing Members are unable to agree upon the
format and rules for such arbitration within [] days after the applicable Dispute Notice Date, the JAMS
Rules shall apply to such arbitration. If the Managing Members are unable to agree on an arbitrator able
to conduct arbitration in Washington within [] days after the applicable Dispute Notice Date, the
Managing Members shall request that JAMS furnish to each Managing Member a list of three such
potential arbitrators, who shall be former federal court judges, and each Managing Member may each
strike one name, thereby nominating the remaining person as the arbitrator. If more than one name
remains as of [] days after the Dispute Notice Date, JAMS may choose the arbitrator from the list of
remaining names.
(b) Any arbitration decision shall be in writing, binding and shall specify the factual
and legal basis for the decision. Judgment upon any decision rendered by the arbitrator may be entered in
any court with jurisdiction. The arbitrator shall expeditiously resolve the applicable Dispute with
reference to the intent of the Managing Members and the PDA in entering into the Licensed Property
Agreement at issue, with the aim that such intent be fulfilled as completely as possible.
7.6 Dissolution. If, after following the procedures set forth in Section 7.3, no resolution of a
Dispute is reached, and only after the expiration of a period of 20 years after the PDA Effective Date (the
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"Initial Period"), then, after two special meetings in open session regarding such Dispute with a
comment period between such special meetings of at least 30 days, either Managing Member may elect
(by vote) that the PDA be wound up and dissolved in accordance with this Charter.
ARTICLE VIII
MANAGING MEMBER REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties of the Managing Members. Each Managing Member
hereby represents and warrants to each other Managing Member and to the PDA that on the date hereof:
(a) Existence; Authority; Enforceability. Such Managing Member has the
necessary power and authority to enter into this Charter and to carry out its obligations hereunder. Such
Managing Member is duly organized and validly existing under the laws of the State of Washington, and
the execution of this Charter, and the consummation of the transactions contemplated herein, have been
authorized by all necessary corporate or other action, and no other act or proceeding, corporate or
otherwise, on its part is necessary to authorize the execution of this Charter or the consummation of any
of the transactions contemplated hereby. This Charter has been duly executed by such Managing Member
and constitutes its legal, valid, and binding obligation, enforceable against it in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law), and any implied covenant of good faith and fair dealing.
(b) Absence of Conflicts. The execution and delivery by such Managing Member of
this Charter and the performance of its obligations hereunder do not and will not (i) conflict with, or result
in the breach of, any provision of the constitutive documents of such Managing Member; (ii) result in any
violation, breach, conflict, default, or event of default (or an event that with notice, lapse of time, or both,
would constitute a default or event of default), or give rise to any right of acceleration or termination or
any additional payment obligation, under the terms of any material contract, agreement, or permit to
which such Managing Member is a party or by which such Managing Member's assets or operations are
bound or affected that would have a material adverse effect on the PDA and its operations as
contemplated in this Charter; or (iii) violate, in any material respect, any law applicable to such Managing
Member or the PDA.
(c) Consents. Other than the consent of the Federal Maritime Commission and any
consents that have already been obtained, no consent, waiver, approval, authorization, exemption,
registration, license, or declaration is required to be made or obtained by such Managing Member in
connection with (i) the execution, delivery, or performance of this Charter or (ii) the operation of the PDA
as contemplated herein.
8.2 Entitlement to Rely on Representations and Warranties. The foregoing
representations and warranties may be relied upon by the PDA, and by the other Managing Member, in
connection with the entering into of this Charter.
ARTICLE IX
EXCULPATION AND INDEMNIFICATION
9.1 Exculpation of Covered Persons.
(a) Exculpation. Except as otherwise provided by the Port Development Authority
Act and this Charter and any other agreement contemplated herein, the debts, obligations, and liabilities
of the PDA, whether arising in contract, tort, or otherwise, shall be solely the debts, obligations, and
liabilities of the PDA, and no Covered Person shall be obligated personally for any such debt, obligation,
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or liability of the PDA solely by reason of being a Covered Person. This Charter is not intended to, and
does not, create or impose any fiduciary duty on any Covered Person other than as set forth in
Section 6.8(a).
(b) Standard of Care. No Covered Person shall be liable to the PDA or any other
Covered Person for any loss, damage, or claim incurred by reason of any action taken or omitted to be
taken by such Covered Person in good-faith reliance on the provisions of the Port Development Authority
Act or this Charter, so long as such action or omission does not constitute fraud, gross negligence, bad
faith, or willful misconduct by such Covered Person.
(c) Good Faith Reliance. A Covered Person shall be fully protected in relying in
good faith upon the records of the PDA and upon such information, opinions, reports, or statements
(including financial statements and information, opinions, reports, or statements as to the value or amount
of the assets, liabilities, net income, or net losses of the PDA or any facts pertinent to the existence and
amount of assets from which distributions might properly be paid) of the following Persons or groups:
(i) the other Managing Member; (ii) the CEO or one or more officers or employees of the PDA; (iii) any
attorney, independent accountant, appraiser, or other expert or professional employed or engaged by or on
behalf of the PDA; or (iv) any other Person selected in good faith by or on behalf of the PDA, in each
case as to matters that such relying Person reasonably believes to be within such other Person's
professional or expert competence.
9.2 Indemnification.
(a) To the fullest extent permitted by the Port Development Authority Act or other
applicable law and including as subject to any requirements of RCW 4.96.041, if applicable, as the same
now exists or may hereafter be amended, substituted, or replaced (but, in the case of any such
amendment, substitution, or replacement only to the extent that such amendment, substitution, or
replacement permits the PDA to provide broader indemnification rights than permitted to the PDA to
provide prior to such amendment, substitution, or replacement), and subject further to the provisions of
Section 9.2(b), the PDA:
(i) shall indemnify, hold harmless, defend, pay and reimburse any Special
Covered Person for Damages, subject to compliance with and the requirements of RCW 4.96.041, and
(ii) may indemnify, hold harmless, defend, pay, and reimburse any Covered
Person (other than Special Covered Person) against any and all Damages.
(b) The indemnification provisions of Section 9.2(a) require that such Special
Covered Person or Covered Person became subject to such Damages by reason of:
(i) Any act or omission or alleged act or omission performed or omitted to
be performed on behalf of the PDA or any Managing Member in connection with the business of the
PDA; or
(ii) The fact that such Person is or was acting in connection with the
business of the PDA as CEO or other employee or agent of the PDA, any Managing Member, or any of
their respective controlling Affiliates, or that such Person is or was serving at the request of the PDA as a
partner, member, manager, director, officer, commissioner, or agent of any Person including the PDA;
such Person acted in good faith, in compliance with this Charter and, with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful, and (2) such Person's conduct
did not constitute fraud, gross negligence, bad faith, willful misconduct, or knowing violation of law, in
either case as determined by a final, nonappealable order of a court of competent jurisdiction. In
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connection with the foregoing, the termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that such Person did not act in good faith or, with respect to any criminal proceeding, had
reasonable cause to believe that such Person's conduct was unlawful, or that such Person's conduct
constituted fraud, gross negligence, or willful misconduct.
(c) Reimbursement. The PDA may promptly reimburse (and/or advance to the
extent reasonably required) each Special Covered Person or Covered Person for reasonable legal or other
expenses (as incurred) of such Person in connection with investigating, preparing to defend, or defending
any claim, lawsuit, or other proceeding relating to any Damages for which such Person may be
indemnified pursuant to this Section 9.2; provided that if it is finally judicially determined that such
Person is not entitled to the indemnification under this Section 9.2, then such Person shall promptly
reimburse the PDA for any reimbursed or advanced expenses.
(d) Indemnity Process Not Exclusive. The process to seek indemnification
provided by this Section 9.2 shall not be deemed exclusive of any other rights to indemnification to which
those seeking indemnification may be entitled under any agreement or otherwise. The provisions of this
Section 9.2 shall continue to afford a process to seek protection to each Covered Person regardless of
whether such Covered Person remains in the position or capacity pursuant to which such Covered Person
became entitled to seek indemnification under this Section 9.2 and shall inure to the benefit of the
executors, administrators, legatees, and distributees of such Covered Person.
(e) Insurance. To the extent available on commercially reasonable terms, the PDA
may purchase, at its expense, insurance to cover Damages covered by the foregoing indemnification
provisions and to otherwise cover Damages for any breach or alleged breach by any Covered Person of
such Covered Person's duties in such amount and with such deductibles as the Managing Members may
determine; provided that the failure to obtain such insurance shall not affect the right to seek
indemnification of any Covered Person under the indemnification provisions contained herein, including
the right to be reimbursed or advanced expenses or otherwise indemnified for Damages hereunder. If any
Covered Person recovers any amounts in respect of any Damages from any insurance coverage, then such
Covered Person shall, to the extent that such recovery is duplicative, reimburse the PDA for any amounts
previously paid to such Covered Person by the PDA in respect of such Damages.
(f) Funding of Indemnification Obligation. Notwithstanding anything contained
herein to the contrary, any indemnity by the PDA relating to the matters covered in this Section 9.2 shall
be provided out of and to the extent of PDA assets only, and no Managing Member shall have liability on
account thereof or shall be required to make additional Capital Contributions to help satisfy such
indemnity by the PDA.
(g) Savings Clause. If this Section 9.2 or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the PDA may nevertheless indemnify and hold
harmless each Covered Person pursuant to this Section 9.2 to the fullest extent permitted by any
applicable portion of this Section 9.2 that shall not have been invalidated and to the fullest extent
permitted by applicable laws or regulations.
(h) Amendment. The provisions of this Section 9.2 shall be binding between the
PDA, on the one hand, and each Covered Person who served in such capacity at any time while this
Section 9.2 is in effect, on the other hand, pursuant to which the PDA and each such Covered Person
intend to be legally bound. No amendment, modification or repeal of this Section 9.2 that adversely
affects the rights of a Covered Person to seek indemnification for Damages incurred or relating to a state
of facts existing prior to such amendment, modification or repeal shall apply in such a way as to eliminate
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or reduce such Covered Person's entitlement to seek indemnification for such Damages without the
Covered Person's prior written consent, unless prohibited by state law.
ARTICLE X
DISSOLUTION, LIQUIDATION, AND TERMINATION
10.1 Managing Member Dissolution Actions. No Managing Member shall take any action to
dissolve, terminate, or liquidate the PDA (other than in connection with an agreement pursuant to
Section 10.2(a)(i) or an election pursuant to Section 10.2(a)(ii)) or to require re-valuation, apportionment,
appraisal or partition of the PDA or any of its assets, or to file a bill for an accounting, except as
specifically provided in this Charter, and each Managing Member, to the fullest extent permitted by
applicable law, hereby waives any rights to take any such actions under applicable law, including any
right to petition a court for judicial dissolution.
10.2 Events Causing Dissolution.
(a) The PDA shall be dissolved and its affairs shall be wound up upon the first of the
following to occur:
(i) a determination by both Managing Members to dissolve the PDA;
(ii) the election by a Managing Member that the PDA be dissolved upon the
declaration by a Managing Member (after following the procedures set forth in Article VII, including the
condition that the Initial Period must have first elapsed) that there is a Dissolution Deadlock;
(iii) A dissolution called by a Managing Member at any time as provided in
Section 4.2(b)(ii), relating to its bond obligations, subject to compliance with the processes outlined in the
Section 4.2(b)(ii) to achieve bond covenant compliance if possible including exhausting the Dispute
Resolution process of Article VII.
(iv) And any dissolution required by operation of law.
(b) Dissolution of the PDA shall be effective as of the day on which the event occurs
giving rise to the dissolution, but the PDA shall not terminate until there has been a winding up of the
PDA's business and affairs, and the PDA's assets have been distributed as provided in Section 10.3 and
under law.
10.3 Distribution.
(a) Properties. In the event of dissolution of the PDA, and as part of the wind down
process, the CEO shall present a full account of the Licensed Properties, Post-Formation Improvements,
PDA-Owned Personal Property, and liabilities of the PDA to the Managing Members. The Managing
Members shall direct the CEO to hire an independent third party consultant to calculate the values for
each Licensed Property and Post-Formation Improvement using the formulas described in this
Section 10.3(a), which shall determine the credits/debits due to the Managing Members upon dissolution,
provided however, all such credit/debit allocations may be revised by vote of the Managing Members.
(i) Licensed Properties and Post-Formation Improvements. The PDA
shall through its CEO relinquish all operation, use, and management of each Licensed Property and Post-
Formation Improvement back to the Managing Member that owns the applicable Licensed Property, and
authorizes the CEO to execute all instruments to accomplish same.
150505 pm charter.docx 20
(A) For Licensed Property that was leased and where the original
lease commenced before the Effective Date and remains substantially intact (with no subsequent
amendments materially affecting cash flows), the Homeport where such Licensed Property is not located
shall receive a final valuation credit in an amount equal to that Homeport's Membership Interest in the net
book value of any Post-Formation Improvements located on that Licensed Property.
(B) For Licensed Property with lease(s) that were entered into after
the Effective Date, the Homeport where the Licensed Property is not located shall receive a final
valuation credit in an amount equal to that Homeport's Membership Interest in the net present value of
the remaining lease cash flows, over the remaining lease term (excluding extension options).
(C) For Licensed Property with lease(s) that were in existence as of
the Effective Date and that were amended after the Effective Date resulting in materially affected positive
cash flow (including term extensions) after the Effective Date the Homeport where the Licensed Property
is not located shall receive a final valuation credit in an amount equal to the greater of (1) that
Homeport's Membership Interest in the net book value of any Post-Formation Improvements on that
Licensed Property, and (2) that Homeport's Membership Interest in the net present value of the difference
between the amended lease cash flows and the original lease cash flows, over the remaining lease term
(excluding extension options).
(D) For Licensed Property that is vacant or not under long-term lease
upon dissolution, the Homeport where such Licensed Property is not located shall receive a final
valuation credit in an amount equal to that Homeport's Membership Interest in the net book value of any
Post-Formation Improvements located on that Licensed Property.
(E) For Licensed Property with lease(s) that were in existence as of
the Effective Date and that were amended after the Effective Date resulting in materially affected
negative cash flow (including term reduction) after the Effective Date, the Homeport where the Licensed
Property is located shall receive a final valuation credit in an amount equal to that Homeport's
Membership Interest in the net present value of the difference between the amended lease cash flows and
the original lease cash flows, over the remaining lease term (excluding extension options).
(ii) PDA-Owned Personal Property. Each Managing Member shall give
notice to the other Managing Member of any of the tangible PDA-Owned Personal Property that such
Managing Member desires be distributed to it.
(A) If neither Managing Member wants a specified item of PDAOwned
Personal Property and Section 10.3(a)(ii)(C) below does not apply, then the Managing Members
shall dispose of such PDA-Owned Personal Property through the statutory process for surplusing of
personal property pursuant to RCW 53.08.[new section(s)].
(B) If only one Managing Member wants a specified item of PDAOwned
Personal Property, then the Managing Members shall surplus such PDA-Owned Personal Property
to such Managing Member at its fair market value.
(C) If both Managing Members want a specified item of PDAOwned
Personal Property, and fail to agree as to which Managing Member shall receive such PDAOwned
Personal Property, then the Managing Members shall dispose of such PDA-Owned Personal
Property through the statutory process for surplusing of personal property pursuant to RCW 53.08.[new
section(s)].
150505 pm charter.docx 21
(iii) The Managing Members shall dispose of the PDA's intangible assets
using equitable apportionment principles if not possible to dispose of usch items on a pro rata basis in
accordance with Membership Interests.
(b) Payment of Liabilities; Reserve for Contingencies. Before any distribution of
any PDA-Owned Personal Property to the Managing Members or the distribution of any proceeds from
the sale of any PDA-Owned Personal Property to the Managing Members pursuant to this Section 10.3,
the PDA shall first pay the debts and liabilities of the PDA and the expenses of liquidation and establish
any reserve that the Managing Members shall deem reasonably necessary for any anticipated liabilities or
obligations of the PDA, including liabilities pursuant to PDA agreements not otherwise transferred in
connection with the winding up of the PDA (collectively, "Contingencies"). Such reserve may be paid
over by the Managing Members to any attorney-at-law, or acceptable party, as escrow agent, to be held
for disbursement to payment of any Contingencies and, at the expiration of such period as shall be
deemed advisable by the Managing Members for distribution of the balance in the manner hereinafter
provided in this Section 10.3. The establishment of such reserve may also involve the use of a liquidating
trust, bonds, and tail period insurance coverage. After the application of Section 10.3(a), any remaining
cash shall be distributed to the Managing Members in accordance with Membership Equity after making
the allocations provided for in Section 10.3(c) and adjusting Membership Equity for any distributions or
sales pursuant to Section 10.3(a).
(c) Other. Net Income and Losses shall be determined for the period of winding up
(including any amounts attributable to the sale or distribution of assets set forth in this Section 10.3 and
allocated in accordance therewith). No Managing Member shall have an obligation to make a contribution
or additional contribution to restore any negative balance in its Membership Equity, with the exception of
any amounts owed by one Managing Member to the other for amounts owed to reconcile values of Post-
Formation Improvements as provided in Section 10.3(a)(i).
10.4 Accounting on Liquidation. Upon liquidation of the PDA, a proper accounting shall be
made by the PDA's accountants of the PDA's assets, liabilities, and results of operations through the last
day of the month in which the PDA is terminated. Allocations of Net Income and Losses upon liquidation
of the PDA shall be as provided in Section 10.3.
10.5 Termination. At such time as the distributions provided for in Section 10.3 have been
made, the PDA and this Charter shall terminate. Upon the termination of this Charter, no party shall have
any liability or obligation to any other party hereunder, provided that:
(a) termination of this Charter shall not relieve a party from liability for any breach
of this Charter on or before the date of termination,
(b) Article IX shall survive termination of this Charter in accordance with its terms,
and
(c) the provisions of Section 5.10 shall survive the dissolution of the PDA and shall
remain binding on all Managing Members for a period of time necessary to resolve with the applicable
taxing authorities all matters (including any litigation) regarding state or local taxation, as the case may
be, of the PDA,
ARTICLE XI
MISCELLANEOUS
11.1 Records. The books and records of the PDA shall be available for inspection by the
Managing Members at any appropriate office and place of business of the PDA. The PDA shall maintain
150505 pm charter.docx 22
its records in a manner consistent with RCW 40.14 and in compliance with RCW 42.56, the Public
Records Act ("PRA"). The PDA shall by resolution adopt and enforce PRA rules and regulations as
deemed necessary or advisable by the Managing Members and shall appoint a public records officer for
the PDA.
11.2 Third Party Beneficiaries. Except as provided in Article IX, this Charter does not create
any rights, claims, or benefits inuring to any Person that is not a party hereto, and it does not create or
establish any third party beneficiary hereto.
11.3 Binding Effect. Except as otherwise provided in this Charter to the contrary, this Charter
shall be binding upon and inure to the benefit of the Managing Members, and their legal representatives,
successors, and permitted assigns.
11.4 Severability. If any provision of this Charter shall be held to be invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby. The Managing Members agree to use good faith efforts to replace such
invalid or unenforceable provision of this Charter with a valid and enforceable provision that will achieve,
to the extent possible, the purposes of such invalid or unenforceable provision. If the Managing Members
cannot reach a mutually agreeable and enforceable replacement for such invalid, illegal, or unenforceable
provision, the balance of the Charter shall be interpreted as if such provision were so excluded so as
reasonably to effectuate the intent of the Managing Members.
11.5 Notices. Unless otherwise specified herein, all notices, consents, approvals, reports,
designations, requests, waivers, elections, and other communications authorized or required to be given
pursuant to this Charter shall be in writing and shall be given or made (and shall be deemed to have been
duly given or made upon receipt) by personal hand-delivery, by facsimile transmission, by electronic
mail, by mailing the same in a sealed envelope, registered first-class mail, postage prepaid, return receipt
requested, or by air courier guaranteeing overnight delivery, sent to the addresses on Schedule 3 hereto
(as such may be updated by notice from time to time).
11.6 Usage Generally; Interpretation.
(a) The captions and headings of this Charter are for convenience of reference only
and shall not affect the interpretation of this Charter.
(b) The meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.
(c) The words "hereof," "herein," "hereunder," and similar words refer to this
Charter as a whole and not to any particular provision of this Charter.
(d) The term "including" is not limiting and means "including but not limited to."
(e) Whenever the context requires, any pronouns used herein shall include the
corresponding masculine, feminine, or neuter forms.
(f) All references herein to Articles, Sections, recitals, paragraphs, Exhibits, and
Schedules shall, unless the context requires a different construction, be deemed to be references to the
Articles, Sections, recitals, paragraphs, Exhibits, and Schedules of this Charter.
150505 pm charter.docx 23
(g) Any statute or law defined or referred to herein means such statute or law as from
time to time amended, modified, or supplemented, including by succession of comparable successor
statutes.
11.7 Entire Agreement. This Charter embodies the entire charter of the PDA and supersedes
all prior agreements and understandings between the Managing Members with respect to the subject
matter hereof.
11.8 Counterparts. This Charter may be executed in any number of counterparts, including
by electronic transmission or facsimile, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
11.9 Amendments. The terms and provisions of this Charter may only be modified or
amended at any time and from time to time by mutual agreement of the Managing Members.
11.10 Further Assurances. Each Managing Member shall execute and deliver any additional
documents and instruments and perform any additional acts that the Managing Members determine to be
necessary or appropriate to effectuate and perform the provisions of this Charter.
11.11 Governing Law.
(a) Governing Law. This Charter shall be governed and construed in accordance
with the laws of the State of Washington, without regard to the conflicts of law principles thereof.
Generally, in the event of a conflict, the following sources of authority shall prevail in descending order
of supremacy: (i) Federal law and regulation, including those of the Federal Maritime Commission;
(ii) state law and regulation, including the Joint Powers, the Port Development Authority Act, and the
Interlocal Cooperation Act; (iii) this Charter; (iv) any policies of the PDA, including the Delegation of
Authority Master Policy.
(b) Waiver of Jury Trial. Each of the parties to this Charter acknowledges and
agrees that any controversy arising under this Charter is likely to involve complicated and difficult issues.
As a result each party to this Charter irrevocably and unconditionally waives any right that such party
may have to resort to the Courts for a judicial remedy and to a trial by jury in respect to litigation arising
out of this Charter or any of the transactions related hereto. Each party to this Charter understands and has
considered the implications of this waiver and makes this waiver voluntarily.
11.12 Registered Office. The registered office of the PDA in the State of Washington is [].
The PDA shall by resolution designate a registered agent appointed to accept service of process and the
name, address, and business hours of the PDA office of risk management for purposes of claims pursuant
to RCW 4.92.
11.13 Fees and Expenses. Except as specifically set forth herein, each Managing Member shall
be responsible for its pro rata portion, in accordance with its Membership Interests, of any legal and other
fees and expenses incurred by such party in connection with the negotiation and preparation of this
Charter and the transactions contemplated hereby.
11.14 Waivers. No waiver of any breach of any of the terms of this Charter shall be effective
unless such waiver is made expressly in writing and executed and delivered by the party against whom
such waiver is claimed. No waiver of any breach shall be deemed to be a further or continuing waiver of
such breach or a waiver of any other or subsequent breach. Except as otherwise expressly provided
herein, no failure on the part of any party to exercise, and no delay in exercising, any right, power, or
remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver
150505 pm charter.docx 24
thereof, nor shall any single or partial exercise of such right, power, or remedy by such party preclude any
other or further exercise thereof, or the exercise of any other right, power, or remedy.
11.15 Dispute Resolution Process Sole Remedy. It is hereby agreed and acknowledged that it
will be impossible to measure in money the damages that would be suffered if the parties fail to comply
with any of the obligations herein imposed on them and that, in the event of any such failure, an
aggrieved person will be irreparably damaged and will not have an adequate remedy at law. Therefore,
parties agree that all disputes are subject to the dispute resolution provisions of Article VII.
[remainder of page intentionally blank]
150505 pm charter.docx 25
THE NORTHWEST SEAPORT ALLIANCE CHARTER SIGNATURE PAGE
IN WITNESS HEREOF, the Managing Members, and, for purposes of Section 4.2,
Section 5.5, Section 5.8, Section 11.15, Article VII, and Article IX, the PDA, have duly executed this
Charter as of the date first above written.
MANAGING MEMBERS:
Port of Seattle Port of Tacoma
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
PDA:
The Northwest Seaport Alliance, a Washington port development authority
By its Managing Members:
Port of Seattle Port of Tacoma
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
_____________________________________ ____________________________________
[Commissioner name] [Commissioner name]
SCHEDULE 1
CAPITAL CONTRIBUTIONS AND MEMBERSHIP INTERESTS
Amount of Initial Amount of Additional
Name Capital Contributions1 Capital Contributions Membership Interests
$[] 0 [50]%
Port of Tacoma
$[] 0 [50]%
Port of Seattle
Total $[] 0 100%
1 Such amounts were determined by the Managing Members to establish equal initial Membership
Interests after taking into account the valuations of the Licensed Properties as set forth in Schedule 2.
SCHEDULE 2
LICENSED PROPERTIES
Description of Licensed Property Owner Agreed Valuation
[Port of Tacoma] $[]
1. []
[Port of Seattle] $[]
2. []
3.
4.
SCHEDULE 3
ADDRESSES OF PDA AND MANAGING MEMBERS
PDA [ADDRESS]/[to each Managing Member]
Port of Tacoma [ADDRESS]
Port of Seattle [ADDRESS]
EXHIBIT A
DELEGATION OF AUTHORITY MASTER POLICY
[to be attached]
THE NORTHWEST SEAPORT ALLIANCE CHARTER
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS ....................................................................................................................................... 1
1.1 LISTED DEFINITIONS........................................................................................................................................... 1
1.2 OTHER DEFINITIONS .......................................................................................................................................... 3
ARTICLE II ORGANIZATIONAL MATTERS .............................................................................................................. 3
2.1 PDA NAME ..................................................................................................................................................... 3
2.2 BUSINESS PURPOSE ........................................................................................................................................... 3
2.3 FORMATION..................................................................................................................................................... 4
2.4 AUTHORITY; POWER.......................................................................................................................................... 4
2.5 LIMITATION OF LIABILITY..................................................................................................................................... 4
2.6 OWNERSHIP..................................................................................................................................................... 5
2.7 TERM.............................................................................................................................................................. 6
ARTICLE III MEMBERSHIP INTERESTS, BUDGETING, WORKING CAPITAL, CASH USE AND RESERVES, AND CAPITAL
CONSTRUCTION ................................................................................................................................................. 6
3.1 VALUATION OF MEMBERSHIP INTERESTS................................................................................................................ 6
3.2 ALLOCATION OF ENVIRONMENTAL COSTS .............................................................................................................. 7
3.3 POST-FORMATION IMPROVEMENTS...................................................................................................................... 8
3.4 PDA-OWNED PERSONAL PROPERTY ..................................................................................................................... 8
3.5 ANNUAL BUDGET.............................................................................................................................................. 8
3.6 FIVE YEAR CAPITAL INVESTMENT PLAN.................................................................................................................. 8
3.7 WORKING CAPITAL............................................................................................................................................ 8
3.8 WORKING CAPITAL RESERVE POLICY ..................................................................................................................... 8
3.9 NO ADDITIONAL CONTRIBUTIONS WITHOUT MANAGING MEMBER VOTE .................................................................... 9
3.10 ADDITIONAL RESERVES....................................................................................................................................... 9
3.11 CAPITAL EXPENDITURES...................................................................................................................................... 9
3.12 CAPITAL CONSTRUCTION .................................................................................................................................... 9
3.13 NO INTEREST ON CONTRIBUTION.......................................................................................................................... 9
ARTICLE IV CASH DISTRIBUTIONS, RESERVES, AND MEMBER BOND OBLIGATIONS .............................................. 9
4.1 DISTRIBUTIONS ................................................................................................................................................. 9
4.2 MEMBER BOND OBLIGATIONS........................................................................................................................... 10
ARTICLE V ACCOUNTING; TAX MATTERS; PDA OPERATIONS .............................................................................. 11
5.1 NO CONDEMNATION AUTHORITY OR TAXING AUTHORITY ....................................................................................... 11
5.2 OVERSIGHT; ACCOUNTING PRINCIPLES; ACCOUNTING PERIOD ................................................................................. 11
5.3 ALLOCATION OF NET INCOME OR LOSSES ............................................................................................................. 11
5.4 OTHER ALLOCATION RULES ............................................................................................................................... 11
5.5 FINANCIAL STATEMENTS AND REPORTS ............................................................................................................... 11
5.6 MEMBERSHIP EQUITY ...................................................................................................................................... 12
5.7 TAX REPORTS ................................................................................................................................................. 12
5.8 INSPECTION RIGHTS......................................................................................................................................... 12
5.9 ELECTIONS ..................................................................................................................................................... 12
5.10 TAX AUDITS AND LITIGATION.............................................................................................................................12
5.11 TAX CLASSIFICATION OF THE PDA ...................................................................................................................... 13
ARTICLE VI PDA MANAGEMENT, OFFICERS, AND EMPLOYEES ............................................................................ 13
6.1 PDA MANAGEMENT ....................................................................................................................................... 13
6.2 MANAGING MEMBERS MEETINGS...................................................................................................................... 14
6.3 CEO HIRING .................................................................................................................................................. 14
6.4 CEO AND MANAGEMENT DUAL ROLE ACKNOWLEDGEMENT AND LIMIT ON TERM .................................................... 14
6.5 CEO AUTHORITY............................................................................................................................................. 15
6.6 OTHER OFFICERS............................................................................................................................................. 15
6.7 REMOVAL AND RESIGNATION ............................................................................................................................ 15
6.8 FIDUCIARY DUTIES; AUTHORITY ......................................................................................................................... 15
ARTICLE VII DISPUTE RESOLUTION ..................................................................................................................... 15
7.1 GENERAL ....................................................................................................................................................... 15
7.2 NOTICE OF DISPUTE......................................................................................................................................... 16
7.3 RESOLUTION EFFORTS; MEDIATION .................................................................................................................... 16
7.4 DEADLOCKED DISPUTE ..................................................................................................................................... 16
7.5 ARBITRATION ................................................................................................................................................. 16
7.6 DISSOLUTION ................................................................................................................................................. 16
ARTICLE VIII MANAGING MEMBER REPRESENTATIONS AND WARRANTIES ........................................................ 17
8.1 REPRESENTATIONS AND WARRANTIES OF THE MANAGING MEMBERS........................................................................ 17
8.2 ENTITLEMENT TO RELY ON REPRESENTATIONS AND WARRANTIES ............................................................................. 17
ARTICLE IX EXCULPATION AND INDEMNIFICATION ............................................................................................ 17
9.1 EXCULPATION OF COVERED PERSONS .................................................................................................................. 17
9.2 INDEMNIFICATION ........................................................................................................................................... 18
ARTICLE X DISSOLUTION, LIQUIDATION, AND TERMINATION ............................................................................. 20
10.1 MANAGING MEMBER DISSOLUTION ACTIONS....................................................................................................... 20
10.2 EVENTS CAUSING DISSOLUTION ......................................................................................................................... 20
10.3 DISTRIBUTION ................................................................................................................................................ 20
10.4 ACCOUNTING ON LIQUIDATION.......................................................................................................................... 22
10.5 TERMINATION ................................................................................................................................................ 22
ARTICLE XI MISCELLANEOUS .............................................................................................................................. 22
11.1 RECORDS....................................................................................................................................................... 22
11.2 THIRD PARTY BENEFICIARIES..............................................................................................................................23
11.3 BINDING EFFECT ............................................................................................................................................. 23
11.4 SEVERABILITY ................................................................................................................................................. 23
11.5 NOTICES........................................................................................................................................................ 23
11.6 USAGE GENERALLY; INTERPRETATION ................................................................................................................. 23
11.7 ENTIRE AGREEMENT ........................................................................................................................................ 24
11.8 COUNTERPARTS .............................................................................................................................................. 24
11.9 AMENDMENTS................................................................................................................................................ 24
11.10 FURTHER ASSURANCES ................................................................................................................................ 24
11.11 GOVERNING LAW ....................................................................................................................................... 24
11.12 REGISTERED OFFICE..................................................................................................................................... 24
11.13 FEES AND EXPENSES .................................................................................................................................... 24
11.14 WAIVERS .................................................................................................................................................. 24
11.15 DISPUTE RESOLUTION PROCESS SOLE REMEDY. ................................................................................................ 25
iii
SCHEDULES AND EXHIBITS
Schedule 1 Capital Contributions, Gross Asset Values, and Membership Interests
Schedule 2 Licensed Properties
Schedule 3 Addresses of PDA and Managing Members
Exhibit A Delegation of Authority Master Policy
iv
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