Exhibit 10.23
LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT
of
DWA ESCROW LLLP
dated as of October [ ], 2004
TABLE OF CONTENTS
Page
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ARTICLE I
Definitions and Usage
SECTION 1.01. Definitions................................................................1
SECTION 1.02. Terms and Usage Generally..................................................8
ARTICLE II
The Partnership
SECTION 2.01. Effectiveness of this Agreement............................................9
SECTION 2.02. Formation..................................................................9
SECTION 2.03. Name.......................................................................9
SECTION 2.04. Term.......................................................................9
SECTION 2.05. Registered Agent and Registered Office.....................................9
SECTION 2.06. Limited Purpose............................................................9
SECTION 2.07. Treatment as Partnership..................................................10
ARTICLE III
Capital Contributions; Partners
SECTION 3.01. Initial Capital Contributions.............................................10
SECTION 3.02. Admission of Partners.....................................................10
ARTICLE IV
Reports
SECTION 4.01. Reports to Partners.......................................................11
SECTION 4.02. Tax Returns...............................................................12
SECTION 4.03. Other Tax Information.....................................................12
SECTION 4.04. Fiscal Year...............................................................12
ARTICLE V
Adjusted DreamWorks Participation Percentages
SECTION 5.01. General...................................................................12
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ARTICLE VI
Tax Matters
SECTION 6.01. Identification, Sale and Distribution of Shares of Common Stock...........12
SECTION 6.02. Allocation of Tax Items; Tax Treatment of Certain Distributions...........13
SECTION 6.03. Amounts Withheld..........................................................14
SECTION 6.04. Tax Matters Partner.......................................................14
ARTICLE VII
Calculations; Distributions
SECTION 7.01. Calculations..............................................................14
SECTION 7.02. Transactions In the Event of a Follow-on Offering.........................18
SECTION 7.03. Transactions in the Event of a Universal Triggered Offering...............19
SECTION 7.04. Mandatory Share Distributions.............................................19
SECTION 7.05. Vulcan GP Date............................................................20
SECTION 7.06. General Provisions........................................................21
SECTION 7.07. No Set-Off................................................................23
SECTION 7.08. Sample Calculations.......................................................23
ARTICLE VIII
Management of the Partnership
SECTION 8.01. General Partners..........................................................24
SECTION 8.02. Voting of Contributed Stock...............................................24
SECTION 8.03. Substitute General Partner................................................24
SECTION 8.04. Restrictions on Activities................................................25
ARTICLE IX
Transfers of Interests
SECTION 9.01. Restrictions on Transfers.................................................26
SECTION 9.02. Admission of Transferees..................................................26
SECTION 9.03. Further Restrictions......................................................26
ARTICLE X
Limitation on Liability, Exculpation
SECTION 10.01. Limitation on Liability...................................................27
SECTION 10.02. Exculpation of Covered Persons............................................27
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SECTION 10.03. Indemnification...........................................................27
ARTICLE XI
Dissolution and Termination
SECTION 11.01. Dissolution...............................................................28
SECTION 11.02. Winding Up of the Partnership.............................................29
SECTION 11.03. Claims of Partners........................................................30
SECTION 11.04. Termination...............................................................30
ARTICLE XII
Miscellaneous
SECTION 12.01. Notices...................................................................31
SECTION 12.02. No Third Party Beneficiaries..............................................31
SECTION 12.03. Waiver....................................................................31
SECTION 12.04. Assignment; Amendments....................................................31
SECTION 12.05. Integration...............................................................32
SECTION 12.06. Headings..................................................................32
SECTION 12.07. Counterparts..............................................................32
SECTION 12.08. Severability..............................................................32
SECTION 12.09. Applicable Law............................................................32
SECTION 12.10. Jurisdiction; Waivers.....................................................32
SECTION 12.11. Enforcement...............................................................32
Schedules
Schedule A - Contributed Stock
Schedule B - Initial DreamWorks Capital
Schedule C - Partners
Schedule D - Initial Capital Contributions
Schedule E - Sample Calculations
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LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT of
DWA ESCROW LLLP (the "Partnership") dated as of October
[ ], 2004, by and among M&J K B LIMITED PARTNERSHIP, a
Delaware limited partnership ("M&J K B"), as general
partner, ▇▇-▇▇, L.P. a Delaware limited partnership
("▇▇-▇▇"), as general partner, M&J K DREAM LIMITED
PARTNERSHIP, a Delaware limited partnership ("M&J K"),
DW LIPS, L.P., a California limited partnership ("DW
Lips"), DW INVESTMENT II, INC., a Washington corporation
("DWI II"), and the other Partners (as defined below)
party hereto, as limited partners.
Preliminary Statement
WHEREAS, the parties hereto are parties to the Formation Agreement
(the "Formation Agreement"), dated as of October 27, 2004;
WHEREAS, the parties hereto will contribute their shares of common
stock in DreamWorks Animation SKG, Inc., a Delaware corporation (the "Company"),
other than shares that will be sold in a secondary component of the IPO (as
defined herein) or retained in lieu of such sale and additional shares that will
be retained for later sale (or retained in lieu of such later sale), to the
Partnership in exchange for Interests (as defined below) pursuant to the
Formation Agreement;
WHEREAS, in accordance with the Formation Agreement and the
Registration Rights Agreement, dated as of October 27, 2004 (the "Registration
Rights Agreement"), among the Company, the Partnership, the parties hereto and
the other parties thereto, a portion of the Contributed Stock (as defined
herein) will be sold in a secondary offering;
WHEREAS, the parties hereto are party to the Seventh Amended and
Restated Limited Liability Company Agreement of DreamWorks L.L.C., dated as of
October 27, 2004; and
WHEREAS, M&J K B and ▇▇-▇▇, as general partners of the Partnership,
have duly executed and filed with the Secretary of State of the State of
Delaware (i) a statement of qualification as a limited liability limited
partnership and (ii) a certificate of limited partnership.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
Definitions and Usage
SECTION 1.01. Definitions. The terms shall have the following
meanings for purposes of this Agreement:
"Adjusted DreamWorks Participation Percentage" means, with respect
to any Partner, the percentage set forth opposite such Partner's name in Section
5.01.
"Affiliate" of any specified Person means any other Person directly
or indirectly Controlling, Controlled By or under direct or indirect common
Control with such specified Person.
"Agreement" means this Limited Liability Limited Partnership
Agreement, as it may be amended, supplemented, restated or modified from time to
time.
"Applicable Law" is defined in Section 7.10.
"Bankruptcy" of a Person means (i) the filing by such Person of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States Code
(or corresponding provisions of future laws) or any other bankruptcy or
insolvency law, whether foreign or domestic, or such Person's filing an answer
consenting to or acquiescing in any such petition, (ii) the making by such
Person of any assignment for the benefit of its creditors or the admission by
such Person in writing of its inability to pay its debts as they mature or (iii)
the expiration of 60 days after the filing of an involuntary petition under
Title 11 of the United States Code (or corresponding provisions of future laws),
an application for the appointment of a receiver for the assets of such Person,
or an involuntary petition seeking liquidation, reorganization, arrangements,
composition, dissolution or readjustment of its debts or similar relief under
any bankruptcy or insolvency law, provided that the same shall not have been
vacated, set aside or stayed within such 60-day period. This definition of
"Bankruptcy" is intended to replace the bankruptcy related events set forth in
Sections 17-402(a)(4) and (a)(5) of the Delaware Act.
"Business Day" means any day other than a Saturday, a Sunday or a
U.S. Federal holiday.
"Change in Control Transaction" is defined in Section 7.04(a).
"Charter" means the Restated Certificate of Incorporation of the
Company, as amended or restated from time to time.
"Class A Stock" means the Company's Class A Common Stock, par value
$0.01 per share.
"Class B Stock" means the Company's Class B Common Stock, par value
$0.01 per share.
"Class B Stockholder Agreement" means the Stockholder Agreement,
dated as of October 27, 2004, among the Partnership, M&J K B, M&J K, The JK
Annuity Trust, The MK Annuity Trust, ▇▇▇▇▇▇▇▇▇▇ 1994 Irrevocable Trust, ▇▇-▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, as it may be amended, supplemented,
restated or modified from time to time.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Commencement Date" is defined in Section 7.05.
"Common Stock" means Class A Stock and Class B Stock.
"Company" is defined in the Preliminary Statement to this Agreement.
"Continuing Partner" means each of (i) DWI II and (ii) ▇▇▇
Entertainment, L.L.C.
"Continuing Partner Minimum Ownership Shares" means, with respect to
any Continuing Partner, the shares of Common Stock (including Pledged Common
Stock), if any, allocated to such Continuing Partner in the schedule prepared
pursuant to Section 7.01(a)(z), 7.01(b)(z) or 7.01(c)(z), as applicable, but not
associated with such Continuing Partner as set forth in Article VI.
"Contributed Stock" means, with respect to each Partner, the number
of shares of Class B Stock (including Pledged Common Stock) set forth opposite
such Partner's name on Schedule A.
"Control" (including the term "Controlled By") is defined in the
Charter as in effect at consummation of the IPO.
"Covered Person" means (i) each Partner, (ii) each Affiliate of a
Partner and (iii) each officer, director, shareholder, partner, employee,
member, manager, representative, agent or trustee of a Partner or of an
Affiliate of a Partner; provided that the Company, DreamWorks L.L.C. and their
respective subsidiaries shall not be Covered Persons.
"Delaware Act" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C.Sections 17-101 et seq., as amended from time to
time or any successor statute.
"▇▇-▇▇" is defined in the preamble to this Agreement.
"Dissolution Additional Shares" is defined in Section 11.02(b).
"DRUPA" is defined in Section 2.02.
"DW Lips" is defined in the preamble to this Agreement.
"DWI II" is defined in the preamble to this Agreement.
"Effective Time" is defined in Section 2.04.
"Equity Security" is defined in Rule 405 under the Securities Act,
and in any event includes any security having the attendant right to vote for
directors or similar
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representatives and any general or limited partner interest in a General Partner
or in a Parent.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
"Fair Market Value" of a share of Common Stock as of any date of
determination means the Volume Weighted Average Price of the Class A Stock over
a 20 consecutive trading day period ended one trading day prior to the date of
determination.
"Fifty Percent Return" means, (A) with respect to each Partner other
than Universal, at any time, the amount necessary to reduce such Partner's
Unreturned DreamWorks Capital at such time to 50% of such Partner's Initial
DreamWorks Capital and (B) with respect to Universal, at any time, the amount
necessary to reduce Universal's Unreturned DreamWorks Capital at such time to
zero.
"Final Allocation" means the allocation by the Partnership of shares
of Common Stock in accordance with Article VII (which, for the avoidance of
doubt, shall be (a) in the case of a JK/DG Triggered Follow-on Offering or a
Subsequent Follow-on Offering, pursuant to Section 7.01(a) on the date of
pricing of such offering, (b) in the case of a Vulcan Triggered Follow-on
Offering, pursuant to Section 7.01(b) or Section 7.01(c), as applicable, on the
date of the conclusion of the Pricing Period relating to such offering, except
to the extent the last sentence of Section 7.02(b) shall be applicable to such
offering in which case such allocation shall occur on the date of pricing of
such offering, (c) in the event that a Follow-on Offering has not been
consummated prior to January 1, 2008 (July 1, 2008 in the event that a Universal
Triggered Offering has been consummated), pursuant to Section 7.04 on the date
of determination of the Mandatory Distribution Price or (d) in the event of a
Change in Control Transaction, pursuant to Section 7.04 on the date of
determination of the Mandatory Distribution Price).
"Fiscal Year" is defined in Section 4.04.
"Follow-on Offering" is defined in the Formation Agreement.
"Formation Agreement" is defined in the Preliminary Statement to
this Agreement.
"General Partner" means (a) subject to Section 8.03, prior to the
Vulcan GP Date, M&J K B and ▇▇-▇▇ and (b) on and after the Vulcan GP Date, DWI
II, in each case, for so long as such Person continues to be a general partner
of the Partnership.
"Gross Offering Price" means, with respect to a Follow-on Offering,
the gross public offering price per share (calculated before deduction of any
underwriting discounts or commissions) in such offering.
"Initial DreamWorks Capital" means, with respect to each Partner,
the amount set forth opposite such Partner's name on Schedule B.
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"Initial Follow-on Offering" is defined in the Formation Agreement.
"Interest" means the partnership interest of a Partner in the
Partnership.
"IPO" means the initial public offering by the Company of Class A
Stock.
"JK/DG Triggered Follow-on Offering" is defined in the Formation
Agreement.
"Limited Partner" means DW Lips, DWI II, ▇▇▇ Entertainment, L.L.C.,
Universal and, on and after the Vulcan GP Date, M&J K B and ▇▇-▇▇, in each case
for so long as such Person continues to be a limited partner of the Partnership.
"Mandatory Distribution Price" means the Volume Weighted Average
Price of the Class A Stock over the 20 consecutive trading days on The New York
Stock Exchange beginning on the trading date specified in the applicable
sentence of Section 7.04(a).
"M&J K" is defined in the preamble to this Agreement.
"M&J K B" is defined in the preamble to this Agreement.
"Net Offering Price" means, with respect to a Follow-on Offering or
the Universal Triggered Offering, the net public offering price per share
(calculated after deduction of any underwriting discounts or commissions) in
such offering.
"Non-Participating Partner" means (i) if a Follow-on Offering is
consummated prior to the first anniversary of the pricing date of the IPO, (a)
each of DW Lips, M&J K B, M&J K, ▇▇-▇▇ and (b) in the case of a Vulcan Triggered
Follow-on Offering, any Partner other than DWI II, except in the case of clause
(b), and subject to clause (a), to the extent such Partner delivers written
notice to the General Partners electing to participate in such Vulcan Triggered
Follow-on Offering within 10 Business Days after the date the Partnership
delivers to each such Partner written notice of the Partnership's exercise of
the demand request relating to such Follow-on Offering, (ii) if a Follow-on
Offering is consummated after the first anniversary of the pricing date of the
IPO, (x) each of M&J K B, and ▇▇-▇▇, except to the extent they deliver written
notice to the other Partners electing to participate in such Follow-on Offering
and (y) in the case of a Vulcan Triggered Follow-on Offering, any Partner other
than DWI II, except to the extent such Partner delivers written notice to the
General Partners electing to participate in such Vulcan Triggered Follow-on
Offering, in the case of each of clauses (x) and (y) within 10 Business Days
after the date the Partnership delivers to each such Partner written notice of
the Partnership's exercise of the demand request relating to such Follow-on
Offering and (iii) in the case of a Universal Triggered Offering, all Partners
other than Universal.
"Parent" means any Person that directly or indirectly owns any
equity or voting interest in a Partner.
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"Participating Partner" means any Partner other than a
Non-Participating Partner.
"Partner" means a General Partner or a Limited Partner.
"Partnership" is defined in the preamble to this Agreement.
"Person" is defined in the Charter (as modified in Section 2(f) of
Article IV thereof) as in effect at consummation of the IPO.
"Pledge Agreement" means the Pledge Agreement, dated as of October
27, 2004, among the Partnership, JPMorgan Chase Bank, as collateral agent, and
the other lenders party thereto, as it may be amended, supplemented, restated or
modified from time to time.
"Pledged Common Stock" means, at any time, the shares of Common
Stock then pledged as collateral for the Revolving Credit Facility. The number
of shares of Pledged Common Stock (if any) contributed to the Partnership by
each Partner pursuant to Section 3.01(a) is set forth opposite such Partner's
name on Schedule A.
"Pricing Period" is defined in the Formation Agreement.
"Pricing Period Price" is defined in the Formation Agreement.
"Principal" means (i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (with respect to M&J K B
and any successor General Partner admitted pursuant to this Agreement that is
Controlled By ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇) and (ii) ▇▇▇▇▇ ▇▇▇▇▇▇ (with respect to ▇▇-▇▇
and any successor General Partner admitted pursuant to this Agreement that is
Controlled By ▇▇▇▇▇ ▇▇▇▇▇▇).
"Proceeding" is defined in Section 12.10.
"Registration Rights Agreement" is defined in the Preliminary
Statement to this Agreement.
"Retained Shares" of any Partner means the number of shares of
Common Stock retained by such Partner pursuant to Section 2.04(b)(x) of the
Formation Agreement, less the number of shares sold by (or credited to) such
Partner in the IPO or in any IPO "overallotment option" exercise. In the case of
any Partner that does not sell shares of Common Stock in the IPO or in any IPO
"overallotment option" exercise, as applicable, the number of shares of Common
Stock credited in the IPO or such IPO "overallotment option" exercise, as
applicable, shall be the number of shares of Common Stock (valued at the Net
Offering Price in the IPO) that would result in such Partner having a Returned
Capital Ratio equal to the Returned Capital Ratio of each of the Partners (other
than Universal) that actually sold shares of Common Stock in the IPO or such IPO
"overalloment option" exercise, as applicable, after giving effect to such
sales. The number of Retained Shares of each Partner (if any) as of the pricing
date of the IPO is set forth opposite such Partner's name on Schedule A.
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"Returned Capital Ratio" of any Partner at any time means the ratio
(not to exceed 100%) of the Returned DreamWorks Capital of such Partner at such
time to the Initial DreamWorks Capital of such Partner.
"Returned DreamWorks Capital" of any Partner at any time means the
Initial DreamWorks Capital of such Partner minus the Unreturned DreamWorks
Capital of such Partner at such time.
"Revolving Credit Facility" means the revolving credit facility,
dated as of October 27, 2004, among DreamWorks L.L.C. and the lenders
party thereto (or any refinancing thereof that does not extend the term
thereof).
"Satisfaction Event" means, with respect to each Partner, the event
as a result of which the Fifty Percent Return of such Partner would be equal to
zero (or such greater amount as results from the restriction set forth in the
last sentence of Section 7.02(b)).
"Securities Act" means the United States Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"7.01(a) Additional Shares" is defined in Section 7.01(a).
"7.01(b) Additional Shares" is defined in Section 7.01(b).
"7.01(c) Additional Shares" is defined in Section 7.01(c).
"SKG Minimum Ownership Shares" means with respect to each of DW
Lips, M&J K B, M&J K and ▇▇-▇▇, the shares of Common Stock (including Pledged
Common Stock), if any, allocated to such Partner in the schedule prepared
pursuant to Section 7.01(a)(z), 7.01(b)(z) and 7.01(c)(z), as applicable, but
not associated with such Partner as set forth in Section 6.01.
"Subsequent Follow-on Offering" is defined in the Formation
Agreement.
"Tax Matters Partner" is defined in Section 6.04(a).
"Transaction Documents" means, collectively, this Agreement, the
Formation Agreement, the Pledge Agreement, the Class B Stockholder Agreement and
the Vulcan Stockholder Agreement.
"Transfer" is defined in the Class B Stockholder Agreement as in
effect at consummation of the IPO.
"Trigger Event" means, in respect of a General Partner, (i) the
death, incapacity, retirement, Bankruptcy, commencement of liquidation
proceedings, resignation, insolvency or dissolution of a General Partner or the
Principal that Controls such General Partner or (ii) the failure by the
applicable Principal to Control such General Partner.
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"Ultimate Parent" of any Partner means the Parent that Controls,
directly or indirectly, both such Partner and each other Parent of such Partner.
"Universal" means Vivendi Universal Entertainment LLLP.
"Universal Triggered Offering" is defined in the Formation
Agreement.
"Unreturned DreamWorks Capital" means, with respect to any Partner
as of any time, such Partner's Initial DreamWorks Capital less: (a) the value of
any shares of Common Stock sold (or credited, as determined in accordance with
the definition of "Retained Shares") by such Partner in the IPO or in any IPO
"overallotment option" exercise prior to such time (in each case, valued at the
Net Offering Price in the IPO) and (b) the value of such Partner's Retained
Shares plus the value of any other shares sold by the Partnership on behalf of
such Partner, if any, pursuant to Section 7.02(b), in each case, as such value
is determined in accordance with the applicable provision of Section 7.01,
Section 7.04 or Section 11.02, as applicable (except that any such valuation
done in accordance with Section 7.01(a) shall be undone prior to performing any
calculation under Section 7.01(b) or Section 7.01(c) and shall be recalculated
in accordance with such other applicable provision).
"Volume Weighted Average Price" over any period means, with respect
to the Class A Stock, the volume weighted average price per share for the entire
applicable period on the principal national securities market or exchange on
which the Class A Stock is listed or quoted.
"Vulcan Discount" means the ratio of (x) the Net Offering Price in
the Vulcan Triggered Follow-on Offering to (y) the Gross Offering Price in the
Vulcan Triggered Follow-on Offering.
"Vulcan GP Date" is defined in Section 7.05.
"Vulcan Stockholder Agreement" means the Stockholder Agreement,
dated as of October 27, 2004, among the Company, the Partnership, M&J K B, M&J
K, The JK Annuity Trust , The MK Annuity Trust, ▇▇▇▇▇▇▇▇▇▇ 1994 Irrevocable
Trust, ▇▇-▇▇, DWI II, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, as it may
be amended, supplemented, restated or modified from time to time.
"Vulcan Triggered Follow-on Offering" is defined in the Formation
Agreement.
SECTION 1.02. Terms and Usage Generally. (a) The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Article and Section references are to this Agreement unless
otherwise specified. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation".
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(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE II
The Partnership
SECTION 2.01. Effectiveness of this Agreement. This Agreement
constitutes the partnership agreement (as defined in the Delaware Act) of the
parties hereto. This Agreement shall become effective at the Effective Time.
SECTION 2.02. Formation. The parties hereto agree to form the
Partnership as a limited partnership and unanimously agree that the Partnership
shall be qualified as a limited liability limited partnership under and pursuant
to Section 17-214 of the Delaware Act and Section 15-1001 of the Delaware
Revised Uniform Partnership Act (6 Del. C. Sections 15-101 et seq.)
("DRUPA") by filing with the Secretary of State of the State of Delaware a
certificate of limited partnership of the Partnership and a statement of
qualification as a limited liability limited partnership. The General Partners
shall execute, file and record the certificate of limited partnership of the
Partnership, such statement of qualification and such other documents as may be
required or appropriate under the laws of the State of Delaware and of any other
jurisdiction in which the Partnership may conduct business. The General Partners
shall, on request, provide any Partner with copies of each such document as
filed and recorded.
SECTION 2.03. Name. The name of the Partnership is DWA Escrow LLLP.
The General Partners may change the name of the Partnership or adopt such trade
or fictitious names as they may determine, in each case consistent with the
requirements of the Delaware Act, including Sections 17-102 and 17-214 thereof,
and all other applicable law (e.g., fictitious name statutes). The General
Partners will give all Partners prompt written notice of any such name change
(or adoption of any such trade or fictitious name).
SECTION 2.04. Term. The term of the Partnership shall begin on the
date the certificate of limited partnership of the Partnership becomes effective
(the "Effective Time") and shall continue until the Partnership is dissolved in
accordance with Section 11.01.
SECTION 2.05. Registered Agent and Registered Office. The name of
the registered agent for service of process is Capitol Services, Inc., and the
address of the registered agent and the address of the registered office in the
State of Delaware is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
Such office and such agent may be changed from time to time by the General
Partners consistent with the requirements of the Delaware Act, including
Sections 17-104 and 17-202 thereof.
SECTION 2.06. Limited Purpose. The Partnership is formed for the
sole object and purpose of, and the nature of the business to be conducted and
promoted by the Partnership is limited to, holding and voting shares of Common
Stock in accordance
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with the Transaction Documents, effecting the transactions and fulfilling the
obligations contemplated in the Transaction Documents to be effected and
fulfilled by the Partnership and making the distributions contemplated in this
Agreement. Without the prior written consent of each Partner, the Partnership
will not engage in any business or activities (including those activities
described in Section 8.04) other than those described above. Notwithstanding
anything in this Agreement to the contrary, without the need for any additional
act or consent of any Person, the Partnership, and either General Partner acting
on behalf of the Partnership, may execute, deliver and perform the Transaction
Documents on behalf of the Partnership. The foregoing authorization shall not be
construed as a limitation on the powers of Partnership or the General Partners
to enter into other agreements expressly permitted by this Agreement.
SECTION 2.07. Treatment as Partnership. The Partnership shall not
elect to be treated as a corporation for U.S. federal income tax purposes. The
parties shall treat the Partnership as a partnership for U.S. federal income tax
purposes and agree not to take any position inconsistent with such treatment.
ARTICLE III
Capital Contributions; Partners
SECTION 3.01. Initial Capital Contributions. (a) On the pricing date
of the IPO, the Partners shall contribute to the Partnership such number of
shares of Common Stock set forth opposite such Partner's name on Schedule A, in
accordance with Section 2.04 of the Formation Agreement.
(b) In return for such capital contributions, Interests shall be
issued to the Partners. Schedule D indicates the amount of capital contributions
attributable to Interests for each Partner.
(c) No Partner shall be entitled to make additional capital
contributions, withdraw capital or receive distributions except as specifically
provided herein. No Partner shall have any obligation to the Partnership, to any
other Partner or to any creditor of the Partnership to make any capital
contribution, except as specifically contemplated in Section 3.01(a).
SECTION 3.02. Admission of Partners. At the Effective Time, without
the need for any further action of any Person, the Persons set forth on Schedule
C attached hereto who have executed this Agreement shall be admitted as
Partners, and each such Person shall be shown as such in the books and records
of the Partnership. Following the Effective Time, no Person shall be admitted as
a Partner (except in accordance with Section 9.02) and no additional Interests
shall be issued.
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ARTICLE IV
Reports
SECTION 4.01. Reports to Partners. (a) The General Partners shall
deliver a statement to each Partner of the balance of each Partner's Unreturned
DreamWorks Capital (i) as soon as practicable after consummation of a Follow-on
Offering (subject to revision in accordance with the first sentence of each of
Section 7.01(a), Section 7.01(b) and Section 7.01(c)), (ii) within 80 days after
the end of each Fiscal Year and (iii) within 30 days after the end of each of
the first three quarters of each Fiscal Year.
(b) The General Partners shall deliver a draft of the schedule
required to be prepared pursuant to Section 7.01(a), Section 7.01(b) or Section
7.01(c), as applicable, to each Limited Partner for its review five Business
Days prior to the pricing of the Follow-on Offering or conclusion of the Pricing
Period, as applicable, and a draft of the schedule required to be prepared
pursuant to Section 7.04 to each Limited Partner for its review five Business
Days prior to the end of the 20-trading day period used to determine the
Mandatory Distribution Price. Such draft schedule shall be prepared based on, as
applicable, the mid-point of the price range for the applicable offering (or, if
such mid-point price shall not exist, then a good faith estimate by the
underwriters for such offering of the price per share for the applicable
offering) or the Pricing Period Price as calculated from the beginning of the
Pricing Period to such day. If any of the Limited Partners have any objection to
any such calculations, they shall give the General Partners notice thereof and
the parties shall use reasonable efforts to resolve any such disputes prior to
the pricing date for such offering or the end of the applicable Pricing Period.
(c) As soon as practicable after the end of each Fiscal Year but in
any event within 80 days after the end of each Fiscal Year, the Tax Matters
Partner shall deliver to each Partner an Internal Revenue Service Schedule K-1
and all similar state, local or foreign forms, schedules or returns required by
law to be provided to each Partner. For purposes of Sections 4.01(a), (c), (d)
and (e), Section 4.02 and Section 4.03, (i) a "Partner" shall be deemed to
include any Person that was a Partner at any time during the relevant taxable
period or at the time of the relevant event, even if such Person is no longer a
Partner at the time the relevant information is to be provided and (ii) the "Tax
Matters Partner" means the Tax Matters Partner for the relevant taxable period
or at the time of the relevant event, even if such Person is no longer the Tax
Matters Partner at the time the relevant information is to be prepared.
(d) As soon as practicable after consummation of a Follow-on
Offering but in any event within 80 days after such consummation, the Tax
Matters Partner shall deliver to each Participating Partner a statement of the
Partnership taxable income or tax loss allocable to such Partner in connection
with the Follow-on Offering.
(e) As soon as practicable but within 80 days after the distribution
of shares of Common Stock to a Partner, the Tax Matters Partner shall deliver to
each
11
Partner that was distributed shares of Common Stock a statement of the tax basis
(in the hands of the Partnership) of the shares of Common Stock distributed to
such Partner.
SECTION 4.02. Tax Returns. The Tax Matters Partner shall timely
cause to be prepared all tax returns (including information returns) required to
be filed by the Partnership.
SECTION 4.03. Other Tax Information. The Partners shall cooperate
with one another and the Tax Matters Partner (on behalf of the Partnership), and
the Tax Matters Partner (on behalf of the Partnership) shall cooperate with each
Partner, to provide all reasonable necessary financial and tax information and
related analysis with respect to Partnership tax matters.
SECTION 4.04. Fiscal Year. The fiscal year of the Partnership (the
"Fiscal Year") shall be the 12-month (or shorter) period ending on December 31
of each year, unless otherwise determined by the General Partners.
ARTICLE V
Adjusted DreamWorks Participation Percentages
SECTION 5.01. General. As of the Effective Time, the Adjusted
DreamWorks Participation Percentage of each Partner shall be as set forth below:
Adjusted DreamWorks Participation
Partner Percentage
------- ---------------------------------
M&J K B 0.0723%
M&J K 21.6963%
▇▇-▇▇ 21.7686%
DW Lips 21.7686%
DWI II 29.4173%
▇▇▇ Entertainment, L.L.C. 5.2769%
Universal 0%
ARTICLE VI
Tax Matters
SECTION 6.01. Identification, Sale and Distribution of Shares of
Common Stock. (a) Each share of Common Stock held by the Partnership shall, for
as long as such share is held by the Partnership, be associated with the Partner
that contributed that share to the Partnership. The Partners acknowledge that
shares contributed by different Partners may have different tax bases to the
Partnership for U.S. federal income tax purposes.
(b) If Common Stock is to be sold by the Partnership and the cash
proceeds are to be distributed to one or more Partners, then, (i) to the extent
possible and
12
on a Partner by Partner basis, the particular shares of Common Stock that are
sold shall be the shares associated with the Partner receiving such cash
proceeds and (ii) to the extent that clause (i) applies, the Partnership shall
identify the proceeds of the sale of each such share as being specifically
distributed to the Partner with which such share is associated. To the extent
that any Partner is to receive more cash proceeds than the total proceeds from
the sale of all shares associated with such Partner, (x) the necessary
additional shares that must be sold in order to pay such additional cash
distribution to such Partner shall be taken pro rata from the shares (not then
needed for sale or distribution to the Partners associated with such shares)
that are associated with each of the other Partners and (y) the Partnership
shall use the same method to identify the proceeds of any such stock sales as
being distributed to the applicable Partner.
(c) If shares of Common Stock are to be distributed by the
Partnership to a Partner, then, to the extent possible, the particular shares
distributed to any particular Partner shall be shares associated with such
Partner. To the extent that any Partner is to receive more shares than the total
number of shares associated with such Partner, the necessary additional shares
that must be distributed to such Partner shall be taken, in the case of
Universal, first from the shares associated with DWI II (to the extent not then
needed for sale or distribution to DWI II) and then, in the case of any
additional distribution to Universal or a distribution to any other Partner pro
rata from the shares (not then needed for sale or distribution to the Partners
associated with such shares) that are associated with each of the other
Partners. For the avoidance of doubt, this paragraph (c) is not intended to
affect the number of shares of Common Stock or cash to be distributed or
allocated to any Partner in accordance with Article VII hereof.
SECTION 6.02. Allocation of Tax Items; Tax Treatment of Certain
Distributions. (a) Any gain or loss on any sale of Common Stock by the
Partnership, and any selling expense associated with any such sale, shall be
allocated to the Partner that is treated as receiving the cash proceeds of such
sale in accordance with clauses (b)(ii) and (b)(y) of Section 6.01. The Partners
acknowledge that such gain or loss may be allocable to a Partner other than the
Partner associated with the shares that are sold.
(b) Any other item of income, gain or loss of the Partnership shall
be allocated in the discretion of the Tax Matters Partner in a manner consistent
with which a Partner or Partners receive the economic benefit or detriment of
such item.
(c) A distribution of shares of Common Stock by the Partnership to
Universal pursuant to this Agreement (other than a distribution of shares
pursuant to Section 7.08) shall be treated by the Partnership as a distribution
in liquidation of Universal's Interest and shall be reported by the Partnership
as such under Section 732(b) of the Code.
(d) The Partners agree that the allocations in clauses (a) and (b)
best reflect their respective economic interests in the Partnership and agree
that they shall not take any position inconsistent with such allocations, or
with the treatment described in Section 6.02(c), except as otherwise required
pursuant to a determination within the meaning of Section 1313(a)(1) of the
Code.
13
SECTION 6.03. Amounts Withheld. The Partnership, as directed by the
Tax Matters Partner, is authorized to withhold from distributions, including any
deemed distributions, or with respect to allocations, to the Partners and to pay
over to any taxing authority any amounts that it reasonably determines may be
required to be so withheld pursuant to any provisions of applicable law. All
amounts so withheld with respect to any Partner shall be treated as amounts
distributed to such Partner pursuant to this Agreement for all purposes and
shall reduce on a dollar-for-dollar basis any amounts otherwise distributable to
such Partner. The Partners will cooperate to minimize the amount of any
withholding that would otherwise be required pursuant to this Section 6.03.
SECTION 6.04. Tax Matters Partner. (a) ▇▇-▇▇ shall act as the "tax
matters partner" of the Partnership within the meaning of Section 6231(a)(7) of
the Code (the "Tax Matters Partner") and in any similar capacity under
applicable state, local or foreign tax law. In the event of a Trigger Event with
respect to ▇▇-▇▇, M&J K B shall be the Tax Matters Partner.
(b) The Tax Matters Partner shall serve as such with all powers
granted to a tax matters partner under the Code, except as expressly provided in
this Agreement. The Tax Matters Partner shall be entitled to make all decisions
with respect to all tax matters of the Partnership consistent with this
Agreement, including with respect to tax elections of the Partnership and the
calculation and allocation of the taxable income or loss of the Partnership. All
matters relating to all tax returns (including information returns) filed by the
Partnership, including tax audits and related matters and controversies, shall
be conducted by the Tax Matters Partner. For the avoidance of doubt, the Tax
Matters Partner shall be bound by Section 6.01 and Section 6.02 and agrees that
it will not take a position inconsistent with such provisions, except as
otherwise required pursuant to a determination within the meaning of Section
1313(a)(1) of the Code.
ARTICLE VII
Calculations; Distributions
SECTION 7.01. Calculations. (a) On the date of the pricing of a
Follow-on Offering, the General Partners on behalf of the Partnership shall
prepare and deliver to each of the Partners a written schedule setting forth as
of such date and prior to giving effect to such Follow-on Offering (x) the value
of each Partner's Retained Shares (valued at the Net Offering Price in such
Follow-on Offering in the case of shares representing the return of such
Partner's Fifty Percent Return as of such time and valued at the Gross Offering
Price in such Follow-on Offering in the case of all other shares), (y) each
Partner's Unreturned DreamWorks Capital (if any) after crediting the value of
such Partner's Retained Shares as set forth in Section 7.01(a)(x) above and, if
the amount of such credit exceeds such Partner's Unreturned DreamWorks Capital
at such time, then the number of shares representing such excess (valued at the
Gross Offering Price in such Follow-on Offering) shall be set forth in such
schedule and shall be referred to as such Partner's "7.01(a) Additional Shares",
and (z) the number of shares of Common Stock
14
each Partner would receive after giving effect to Section 7.01(a)(y) if the
Partnership were allocating all shares of Common Stock then held by the
Partnership (prior to giving effect to such Follow-on Offering) pursuant to the
following subparagraphs (excluding, for purposes of the calculations set forth
in clauses (ii) and (iii) below, Universal as a Partner):
(i) first, to each Partner a number of shares of Common Stock
(valued at the Net Offering Price in such Follow-on Offering) having a
value equal to such Partner's Fifty Percent Return as of such time (or if
insufficient shares remain, then pro rata among all Partners in proportion
to, and to the extent of, their Fifty Percent Return as of such time (in
relation to the aggregate Fifty Percent Returns as of such time of all
Partners));
(ii) second, after giving effect to Section 7.01(a)(i), to each
Partner a number of shares of Common Stock (valued at the Gross Offering
Price in such Follow-on Offering) having a value equal to such Partner's
Unreturned DreamWorks Capital (or if insufficient shares remain, then pro
rata among all Partners in proportion to, and to the extent of, their
Unreturned DreamWorks Capital as of such time (in relation to the
aggregate Unreturned DreamWorks Capital as of such time of all Partners));
and
(iii) third, any remaining shares of Common Stock to each Partner,
pro rata in accordance with their Adjusted DreamWorks Participation
Percentages; provided, that if any Partner has a positive number of
7.01(a) Additional Shares then the aggregate positive amount of 7.01(a)
Additional Shares of all Partners shall be added to the total shares to be
allocated under this Section 7.01(a)(iii), and such pro rata calculation
under this Section 7.01(a)(iii) shall be made on such aggregate total
amount and then each such Partner's positive number of 7.01(a) Additional
Shares shall reduce (but not below zero) the number of shares that
otherwise would have been allocated to such Partner under this Section
7.01(a)(iii).
(b) On the date of the conclusion of a Pricing Period occurring
after consummation of a Vulcan Triggered Follow-on Offering, if the Pricing
Period Price is less than or equal to the Gross Offering Price realized in the
Vulcan Triggered Follow-on Offering, the General Partners on behalf of the
Partnership shall prepare and deliver to each of the Partners a written schedule
as of such date setting forth (w) the value of each Participating Partner's
Retained Shares that were sold in the Vulcan Triggered Follow-on Offering and
any additional shares sold by the Partnership on behalf of such Partner, if any,
pursuant to Section 7.02(b) (in each case valued at the Net Offering Price in
such Follow-on Offering in the case of shares representing the return of such
Participating Partner's Fifty Percent Return at the time of such Follow-on
Offering and valued at the Gross Offering Price in such Follow-on Offering in
the case of all other shares) and the value of any additional Retained Shares of
such Partner that were not so sold (valued at the Pricing Period Price), (x) the
value of each Non-Participating Partner's Retained Shares (valued at the Net
Offering Price in the Follow-on Offering in the case of shares representing the
return of such Non-Participating Partner's Fifty Percent Return as of
15
such time and valued at the Pricing Period Price in the case of all other
shares), (y) each Partner's Unreturned DreamWorks Capital (if any) after
crediting the value of such Partner's Retained Shares and other shares sold by
the Partnership on behalf of such Partner as set forth in Section 7.01(b)(w) or
Section 7.01(b)(x) above (as the case may be) and, if the amount of such credit
exceeds such Partner's Unreturned DreamWorks Capital at such time, then the
number of shares representing such excess (valued at the Pricing Period Price)
shall be set forth in such schedule and shall be referred to as such Partner's
"7.01(b) Additional Shares", and (z) the number of shares of Common Stock each
Partner would receive after giving effect to Section 7.01(b)(y) if the
Partnership were allocating all shares of Common Stock then held by the
Partnership pursuant to the following subparagraphs (excluding, for purposes of
the calculations set forth in clauses (i), (ii) and (iii) below, Universal as a
Partner or a Non-Participating Partner, as the case may be):
(i) first, to each Non-Participating Partner, a number of shares of
Common Stock (valued at the Pricing Period Price (except, in the case of
shares representing the return of such Non-Participating Partner's Fifty
Percent Return as of such time, the valuation price shall be the Net
Offering Price in the Follow-on Offering) until each such
Non-Participating Partner has a Returned Capital Ratio equal to the ratio
of (x) the aggregate Returned DreamWorks Capital of all Participating
Partners (other than Universal) to (y) the aggregate Initial DreamWorks
Capital of all Participating Partners (other than Universal) (or if
insufficient shares remain, then pro rata among all Non-Participating
Partners in proportion to, and to the extent of, their Unreturned
DreamWorks Capital as of such time (in relation to the aggregate
Unreturned DreamWorks Capital as of such time of all Non-Participating
Partners));
(ii) second, after giving effect to Section 7.01(b)(i), to each
Partner, a number of shares of Common Stock (valued at the Pricing Period
Price) having a value equal to such Partner's Unreturned DreamWorks
Capital (or if insufficient shares remain, then pro rata among all
Partners in proportion to, and to the extent of, their Unreturned
DreamWorks Capital as of such time); and
(iii) third, any remaining shares of Common Stock to each Partner,
pro rata in accordance with their Adjusted DreamWorks Participation
Percentages; provided, that if any Partner has a positive number of
7.01(b) Additional Shares then the aggregate positive amount of 7.01(b)
Additional Shares of all Partners shall be added to the total shares to be
allocated under this Section 7.01(b)(iii), and such pro rata calculation
under this Section 7.01(b)(iii) shall be made on such aggregate total
amount and then each such Partner's positive number of 7.01(b) Additional
Shares shall reduce (but not below zero) the number of shares that
otherwise would have been allocated to such Partner under this Section
7.01(b)(iii).
(c) On the date of the conclusion of a Pricing Period occurring
after consummation of a Vulcan Triggered Follow-on Offering, if the Pricing
Period Price exceeds the Gross Offering Price realized in the Vulcan Triggered
Follow-on Offering,
16
the General Partners on behalf of the Partnership shall prepare and deliver to
each of the Partners a written schedule as of such date setting forth (w) the
value of each Participating Partner's Retained Shares that were sold in such
Follow-on Offering and any additional shares sold by the Partnership on behalf
of such Partner, if any, pursuant to Section 7.02(b) (in each case valued at the
Pricing Period Price multiplied by the Vulcan Discount in the case of shares
representing the return of such Participating Partner's Fifty Percent Return at
the time of such Follow-on Offering and valued at the Pricing Period Price in
the case of all other shares) and the value of any additional Retained Shares of
such Partner that were not so sold (valued at the Pricing Period Price), (x) the
value of each Non-Participating Partner's (in the Vulcan Triggered Offering)
Retained Shares (valued at the Pricing Period Price multiplied by the Vulcan
Discount in the case of shares representing the return of such Non-Participating
Partner's Fifty Percent Return as of such time and valued at the Pricing Period
Price in the case of all other shares), (y) each Partner's Unreturned DreamWorks
Capital (if any) after crediting the value of such Partner's Retained Shares and
other shares sold by the Partnership on behalf of such Partner as set forth in
Section 7.01(c)(w) or Section 7.01(c)(x) above (as the case may be) and, if the
amount of such credit exceeds such Partner's Unreturned DreamWorks Capital at
such time, then the number of shares representing such excess (valued at the
Pricing Period Price) shall be set forth in such schedule and shall be referred
to as such Partner's "7.01(c) Additional Shares", and (z) the number of shares
of Common Stock each Partner would receive after giving effect to Section
7.01(c)(y) if the Partnership were allocating all shares of Common Stock then
held by the Partnership pursuant to the following subparagraphs (excluding, for
purposes of the calculations set forth in clauses (i), (ii) and (iii) below,
Universal as a Partner or a Non-Participating Partner, as the case may be):
(i) first, to each Non-Participating Partner, a number of shares of
Common Stock (valued at the Pricing Period Price (reduced, in the case of
shares representing the return of such Non-Participating Partner's Fifty
Percent Return as of such time, by multiplying the Pricing Period Price by
the Vulcan Discount)) until each such Non-Participating Partner has a
Returned Capital Ratio equal to the ratio of (x) the aggregate Returned
DreamWorks Capital of all Participating Partners (other than Universal) to
(y) the aggregate Initial DreamWorks Capital of all Participating Partners
(other than Universal) (or if insufficient shares remain, then pro rata
among all Non-Participating Partners in proportion to, and to the extent
of, their Unreturned DreamWorks Capital as of such time (in relation to
the aggregate Unreturned DreamWorks Capital as of such time of all
Non-Participating Partners));
(ii) second, to each Partner, after giving effect to Section
7.01(c)(i), a number of shares of Common Stock (valued at the Pricing
Period Price) having a value equal to such Partner's Unreturned DreamWorks
Capital (or if insufficient shares remain, then pro rata among all
Partners in proportion to, and to the extent of, their Unreturned
DreamWorks Capital as of such time); and
(iii) third, any remaining shares of Common Stock to each Partner,
pro rata in accordance with their Adjusted DreamWorks Participation
Percentages; provided, that if any Partner has a positive number of
7.01(c) Additional Shares
17
then the aggregate positive amount of 7.01(c) Additional Shares of all
Partners shall be added to the total shares to be allocated under this
Section 7.01(c)(iii), and such pro rata calculation under this Section
7.01(c)(iii) shall be made on such aggregate total amount and then each
such Partner's positive number of 7.01(c) Additional Shares shall reduce
(but not below zero) the number of shares that otherwise would have been
allocated to such Partner under this Section 7.01(c)(iii).
SECTION 7.02. Transactions In the Event of a Follow-on Offering. In
the event of a Follow-on Offering, after preparing the schedule required by
Section 7.01(a):
(a) Immediately prior to consummation of such offering, the
Partnership shall distribute to Universal in complete liquidation of its
Interests the number of shares of Common Stock allocated to Universal under
clause (i) of such schedule.
(b) Each Participating Partner in such Follow-on Offering shall sell
in such Follow-on Offering a sufficient number of such Partner's Retained Shares
(valued at the Net Offering Price) (or, in the case of Universal, shares
received pursuant to Section 7.02(a)) to cause a Satisfaction Event (with
respect to such Participating Partner) plus any additional Retained Shares
permitted to be sold in such offering; provided, that in the event the sale by
such Participating Partner (other than Universal) of all of its Retained Shares
in such Follow-on Offering would not cause a Satisfaction Event (with respect to
such Participating Partner), then the Partnership shall also sell an additional
number of shares of Common Stock (not to exceed the total number of shares
allocated to such Participating Partner under clause (i) of such schedule) in
such Follow-on Offering on behalf of such Participating Partner as necessary to
cause a Satisfaction Event (with respect to such Participating Partner).
Notwithstanding the foregoing, in no event shall the Partnership sell, on behalf
of any such Participating Partner, any shares that were not associated with such
Participating Partner (or with Universal) as set forth in Section 6.01 at the
pricing date of the IPO, and if, as a result of the foregoing (or as a result of
the Partnership not being permitted to sell any shares of such Partner's Pledged
Common Stock as a result of the Pledge Agreement), there are insufficient shares
available for sale by the Partnership on behalf of such Participating Partner to
generate such Participating Partner's Fifty Percent Return, then, for purposes
of determining whether a Follow-on Offering was of a sufficient size to be
consummated by the Partnership, a Satisfaction Event shall be deemed to occur
with respect to such Participating Partner at the point the maximum number of
shares associated with such Participating Partner as set forth in Section 6.01
(and not constituting Pledged Common Stock) have been sold by the Partnership
(and, in the case of a Vulcan Triggered Follow-on Offering, in such event, to
the extent that the total number of shares allocated to all Partners under
clause (i) of such schedule equals the total number of shares held by the
Partnership, then all shares held by the Partnership and not sold in the Vulcan
Triggered Follow-on Offering shall be permanently allocated as set forth on such
schedule and there shall be no further Pricing Period or reallocation pursuant
to Section 7.01(b) or Section 7.01(c)).
18
(c) In the case of a JK/DG Triggered Follow-on Offering or a
Subsequent Follow-on Offering, (x) on the date of consummation of such Follow-on
Offering (and the date of the closing of the exercise of any overallotment
option relating to such offering, if any), the Partnership shall distribute to
each Partner the net cash proceeds, if any, generated on behalf of such Partner
pursuant to the proviso to the first sentence of Section 7.02(b) and (y) except
as otherwise provided in Section 7.06(f) with respect to DWI II, upon the
written request of any Partner from time to time, the Partnership shall
distribute to such Partner a number of shares of Common Stock equal to the
aggregate amount of shares of Common Stock allocated to such Partner pursuant to
Section 7.01(a)(z) less any such shares sold on behalf of such Partner in
accordance with the proviso to the first sentence of Section 7.02(b) (other
than, in the case of the Continuing Partners, the Continuing Partner Minimum
Ownership Shares and, in the case of DW Lips, M&J K B, M&J K and ▇▇-▇▇, the SKG
Minimum Ownership Shares) in exchange for a proportionate amount of Interests of
such Partner.
(d) In the case of a Vulcan Triggered Follow-on Offering, (x) on the
date of consummation of such Vulcan Triggered Follow-on Offering (and the date
of the closing of the exercise of any overallotment option relating to such
offering, if any), the Partnership shall distribute to each Partner the net cash
proceeds, if any, generated on behalf of such Partner pursuant to the proviso to
the first sentence of Section 7.02(b) and (y) upon the conclusion of a Pricing
Period, immediately after preparing the applicable schedule required by Section
7.01(b) or Section 7.01(c), except as otherwise provided in Section 7.06(e) with
respect to DWI II, upon the written request of any Partner from time to time,
the Partnership shall distribute to such Partner a number of shares of Common
Stock equal to the aggregate amount of shares of Common Stock allocated to such
Partner pursuant to Section 7.01(b)(z) or Section 7.01(c)(z) less any such
shares sold on behalf of such Partner in accordance with the proviso to the
first sentence of Section 7.02(b) (other than, in the case of the Continuing
Partners, the Continuing Partner Minimum Ownership Shares and, in the case of DW
Lips, M&J K B, M&J K and ▇▇-▇▇, the SKG Minimum Ownership Shares) in exchange
for a proportionate amount of Interests of such Partner.
SECTION 7.03. Transactions in the Event of a Universal Triggered
Offering. In the event of a Universal Triggered Offering, immediately prior to
consummation of such offering, the Partnership shall distribute to Universal the
number of shares of Common Stock allocated to Universal in the schedule prepared
pursuant to Section 7.01(a)(z)(i) as if such schedule were prepared for
Universal on the date of the pricing of the Universal Triggered Offering (using
the Net Offering Price in the Universal Triggered Offering where applicable).
SECTION 7.04. Mandatory Share Distributions. (a) In the event that a
Follow-on Offering has not been consummated prior to January 1, 2008 (July 1,
2008 in the event that a Universal Triggered Offering has been consummated),
then at any time thereafter and prior to March 31, 2008 (September 30, 2008 in
the event that a Universal Triggered Offering has been consummated), the General
Partners and DWI II, acting together, shall cause the Mandatory Distribution
Price to be determined (with the applicable 20-trading day period commencing on
the date of notice from the General
19
Partners to the other Partners that such price is to be calculated). In
addition, subject to the prior written consent of DWI II (which consent shall
not be unreasonably withheld or delayed), on the second trading day (or such
other date as agreed in writing by the General Partners and DWI II) prior to
consummation of a merger, consolidation, share exchange, tender offer, sale of
all or substantially all of the assets of the Company or reclassification or
other reorganization involving the Company and, in each case, not constituting a
Control Transaction (as defined in the Charter as in effect at consummation of
the IPO) (a "Change in Control Transaction"), the General Partners shall cause
the Mandatory Distribution Price to be determined (with the applicable
20-trading day period commencing on the 20th trading day immediately prior to
such second trading day). In either case, upon the determination of the
applicable Mandatory Distribution Price, the General Partners on behalf of the
Partnership shall prepare and deliver to each of the Partners a written schedule
as of such date of determination setting forth (x) the value of each Partner's
Retained Shares (valued at the Mandatory Distribution Price), (y) each Partner's
Unreturned DreamWorks Capital (if any) after crediting the value of such
Partner's Retained Shares as set forth in Section 7.04(a)(x) above and, if the
amount of such credit exceeds such Partner's Unreturned DreamWorks Capital, then
the number of shares representing such excess (valued at the Mandatory
Redemption Price) shall be set forth in such schedule and shall be referred to
as such Partner's "Mandatory Additional Shares", and (z) the number of shares of
Common Stock each Partner would receive after giving effect to Section
7.04(a)(y) if the Partnership were allocating all shares of Common Stock then
held by the Partnership pursuant to Section 7.01(a) (valuing such shares at the
Mandatory Distribution Price and treating Mandatory Additional Shares as if they
were 7.01(a) Additional Shares).
(b) Subject to the prior written consent of DWI II (which consent
shall not be unreasonably withheld or delayed), in the event of a Change in
Control Transaction, immediately prior to consummation of a Change in Control
Transaction, and in the event that a Follow-on Offering has not been consummated
prior thereto, then on March 31, 2008 (September 30, 2008 in the event that a
Universal Triggered Offering has been consummated), each Partner shall have the
right to exchange its Interests for a number of shares of Common Stock equal to
the aggregate amount allocated to such Partner in the schedule prepared in
accordance with Section 7.04(a)(z) (other than, in the case of the Continuing
Partners, the Continuing Partner Minimum Ownership Shares and, in the case of DW
Lips, M&J K B, M&J K and ▇▇-▇▇, the SKG Minimum Ownership Shares).
SECTION 7.05. Vulcan GP Date. (a) At any time after the date (the
"Commencement Date") that is six months after consummation of a Follow-on
Offering or the date a Partner may exercise its exchange rights pursuant to
Section 7.04(b), DWI II may deliver written notice to each of the other Partners
that it intends to assume the role of General Partner on the date specified in
such notice (the "Vulcan GP Date"). Under no circumstances, however, shall the
Vulcan GP Date be earlier than the fifth Business Day after the date of such
notice or later than the date that is one month after the Commencement Date, and
if no such written notice shall have been delivered prior to the date that is
one month after the Commencement Date, then the Vulcan GP Date shall be deemed
to occur on the date that is one month after the Commencement Date.
20
(b) Upon exercise of DWI II's exchange rights under Section
7.06(e)(ii) or Section 7.06(f)(ii) (which become exercisable on the date that is
six months after the Vulcan GP Date), or upon the written request of any other
Continuing Partner at any time on or after the date that is six months after the
Vulcan GP Date, the Partnership shall distribute to such Partner its Continuing
Partner Minimum Ownership Shares in exchange for such Partner's equity interests
in the Partnership, and such Continuing Partner shall have the right to withdraw
from the Partnership at any time thereafter.
(c) Immediately prior to the Vulcan GP Date, each of DW Lips, M&J K
B, M&J K and ▇▇-▇▇ shall receive their respective SKG Minimum Ownership Shares
and any other shares to which they are entitled in full redemption of their
Interests, except to the extent such Partner delivers written notice to the
General Partners electing not to be redeemed. Effective as of the Vulcan GP
Date, DWI II shall become the General Partner. From and after the Vulcan GP
Date, DWI II may admit, without the need for any further action or consent of
any Person, one or more additional limited partners to the Partnership;
provided, that such admission does not adversely affect in any way the rights or
economic interests of any other Continuing Partner.
SECTION 7.06. General Provisions. (a) For the avoidance of doubt,
any distribution or exchange under this Agreement of shares of Common Stock to
any Partner shall be made solely (x) in the form of Class B Stock to any of M&J
K B, M&J K or ▇▇-▇▇ and (y) in the form of Class A Stock to each other Partner.
References in this Article VII to M&J K B, M&J K, ▇▇-▇▇ and DWI II shall be
deemed to include their permitted transferees. Immediately upon the Final
Allocation, the Partnership shall convert all remaining shares of Common Stock
held by the Partnership, other than shares allocated to M&J K B, M&J K or ▇▇-▇▇,
to Class A Stock.
(b) To the extent practicable and in all cases consistent with this
Article VII and Article XI, and subject to Section 6.01(c), for purposes of any
allocation of shares of Common Stock of the Partnership to the Partners under
this Agreement (including for purposes of the calculations set forth in Sections
7.01(a)(z), 7.01(b)(z) and 7.01(c)(z)), the Partnership shall allocate shares of
Common Stock in the following order of priority: first, shares of Common Stock
that do not constitute Pledged Common Stock and, second, shares of Common Stock
that constitute Pledged Common Stock (with the intent that the Pledged Common
Stock shall be the final shares allocated and distributed under the applicable
distribution provisions). In addition, if there are any Continuing Partner
Minimum Ownership Shares with respect to any Partner, such shares shall be
first, shares of Pledged Common Stock allocable to such Partner and, second,
shares of Common Stock that do not constitute shares of Pledged Common Stock
(not to exceed in the aggregate the number of Continuing Partner Minimum
Ownership Shares).
(c) No fractional share shall be issued upon the distribution of any
share or shares of Common Stock under this Agreement. All shares of Common Stock
(including fractions thereof) to be distributed hereunder at any time shall be
aggregated for purposes of determining whether the distribution would result in
the allocation or distribution of any fractional share. If, after such
aggregation, the applicable calculations in Section 7.01 would result in the
allocation or distribution of a fraction of a share of
21
Common Stock, the Partnership shall, in lieu of distributing or causing the
Company to issue any fractional share, round that fraction of a share up or down
as reasonably determined by the General Partners.
(d) Except as expressly provided in this Article VII or Article XI,
the General Partners shall not cause the Partnership to make any distributions.
(e) From and after the date on which a Vulcan Triggered Follow-on
Offering shall be consummated, DWI II shall have the right to exchange its
equity interest in the Partnership for a number of shares of Common Stock
(including Pledged Common Stock) allocable to DWI II under Section 7.01(b) or
Section 7.01(c) (as applicable); provided, that the exercisability of such
exchange right shall vest in two parts, (i) first, with respect to the number of
shares of Common Stock equal to (A) the number of shares of Common Stock
(including Pledged Common Stock) allocable to DWI II under Section 7.01(b) or
Section 7.01(c) (as applicable) minus (B) the number of shares of Common Stock
represented by DWI II's Continuing Partner Minimum Ownership Shares, upon the
conclusion of the Pricing Period in connection with such Vulcan Triggered
Follow-on Offering and (ii) second, with respect to the number of shares of
Common Stock represented by DWI II's Continuing Partner Minimum Ownership
Shares, upon the date that is six months after the Vulcan GP Date. DWI II shall
tender to the Partnership (x) upon the exercise described in clause (i) above, a
fraction of DWI II's equity interest in the Partnership equal to the quotient of
(A) the number of shares of Common Stock issuable upon such exercise divided by
(B) the number of shares of Common Stock equal to the number in clause (i)(A)
above; and (y) upon the exercise described in clause (ii) above, DWI II's
remaining equity interest in the Partnership. DWI II shall have no rights, and
the Partnership shall have no obligations to DWI II, to make distributions of
shares of Common Stock to DWI II pursuant to Section 7.02(d) in respect of a
given Pricing Period other than pursuant to the exchange rights set forth in
this Section 7.06(e). For the avoidance of doubt, this Section 7.06(e) shall not
give DWI II any priority over other Partners with respect to the timing or
amount of distributions of shares of Common Stock pursuant to the other
provisions of this Article VII and shall not relieve DWI II of its obligations
under Section 7.05.
(f) From and after the date on which a JK/DG Triggered Follow-on
Offering or a Subsequent Follow-on Offering shall be consummated, DWI II shall
have the right to exchange its equity interest in the Partnership for a number
of shares of Common Stock (including Pledged Common Stock) allocable to DWI II
under Section 7.01(a)(z); provided, that the exercisability of such exchange
right shall vest in two parts, (i) first, with respect to the number of shares
of Common Stock equal to (A) the number of shares of Common Stock (including
Pledged Common Stock) allocable to DWI II under Section 7.01(a) minus (B) the
number of shares of Common Stock represented by DWI II's Continuing Partner
Minimum Ownership Shares, upon the closing of a JK/DG Triggered Follow-on
Offering or a Subsequent Follow-on Offering, as applicable (unless an
over-allotment option shall have been granted to the underwriters of such
Follow-on Offering, in which case DWI II may not exercise such portion of the
foregoing exchange right under this clause (i) before the earlier of the closing
or expiration of such over-allotment option) and (ii) second, with respect to
the number of
22
shares of Common Stock represented by DWI II's Continuing Partner Minimum
Ownership Shares, upon the date that is six months after the Vulcan GP Date. If
no JK/DG Triggered Follow-on Offering or Subsequent Follow-on Offering shall
have occurred before January 1, 2008 (July 1, 2008, in the event that a
Universal Triggered Offering shall have been consummated), then the Vulcan
Subsequent Exchange Right shall expire immediately upon such date. DWI II shall
tender to the Partnership (x) upon the exercise described in clause (i) above, a
fraction of DWI II's equity interest in the Partnership equal to the quotient of
(A) the number of shares of Common Stock issuable upon such exercise divided by
(B) such number of shares of Common Stock allocable to DWI II under Section
7.01(a); and (y) upon the exercise described in clause (ii) above, DWI II's
remaining equity interest in the Partnership. From and after the date on which a
JK/DG Triggered Follow-on Offering or a Subsequent Follow-on Offering shall be
consummated, DWI II shall have no rights, and the Partnership shall have no
obligations to DWI II to distribute Common Stock, in each case pursuant to
Section 7.02(d), unless such exchange right set forth in this Section 7.06(f)
shall have expired without first having become exercisable. For the avoidance of
doubt, this Section 7.06(f) shall not give DWI II any priority over other
Partners with respect to the timing or amount of distributions of shares of
Common Stock pursuant to the other provisions of this Article VII and shall not
relieve DWI II of its obligations under Section 7.05.
(g) At or prior to the time of the distribution of any shares of
Pledged Common Stock to any Partner pursuant to this Article VII, and as a
condition to such distribution, to the extent not previously executed and
delivered, such Partner shall execute a pledge agreement in substantially the
form of the Pledge Agreement relating to the number of such shares of Pledged
Common Stock so distributed, and the identical number of shares of Pledged
Common Stock secured by the Pledge Agreement shall simultaneously be decreased
by the number of shares of Pledged Common Stock distributed to such Partner.
SECTION 7.07. No Set-Off. The General Partners shall not have any
right to off-set or set-off any payment due to any Partner pursuant to this
Agreement against any other payment to be made by such Partner pursuant to this
Agreement, any of the Transaction Documents or otherwise.
SECTION 7.08. Sample Calculations. Attached hereto as Schedule E are
illustrative calculations of the amounts allocable to the Partners under this
Article VII under various assumptions set forth therein. The Partnership shall
calculate the amounts allocable to the Partners under this Article VII in a
manner consistent with the provisions hereof as illustrated by such illustrative
calculations. All schedules delivered to the Partners under this Article VII
shall be no less detailed than the schedules attached hereto as Schedule E.
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ARTICLE VIII
Management of the Partnership
SECTION 8.01. General Partners. (a) Subject to the terms of this
Agreement, the business and affairs of the Partnership shall be managed
exclusively by the General Partners and the tax matters of the Partnership shall
be managed exclusively by the Tax Matters Partner, in each case, in a manner
consistent with this Agreement, without the need for, except as set forth in
Section 2.06 and Section 8.04 and except in the case of a Vulcan Triggered
Follow-on Offering, a Subsequent Follow-on Offering, a Universal Triggered
Offering or as provided in Section 7.04, any consent or approval of any other
Partner. Subject to Section 8.02 and the terms of this Agreement, the General
Partners shall have the exclusive power and authority, on behalf of the
Partnership, to effect allocations and distributions in accordance with Article
VII and to take any action of any kind not inconsistent with this Agreement and
to do anything and everything they deem necessary or appropriate to carry on the
business and purposes of the Partnership in a manner consistent with this
Agreement, including taking all actions permitted or required under the
Formation Agreement. Except as expressly provided herein, the General Partners
shall act jointly in all matters. No other Partner shall participate in the
management and control of the business of the Partnership, and in no event shall
any Partner other than the General Partners have any authority to bind the
Partnership for any purpose. No other Partner or Partners shall have any right
to remove or replace one or more of the General Partners, except in the case of
any act or omission that constitutes fraud, bad faith or willful misconduct of a
General Partner, as finally determined by a judgment of a court of competent
jurisdiction which judgment is final and nonappealable, in which case such
General Partner may be removed by Partners owning a majority-in-interest of the
Interests then outstanding (based upon their Adjusted DreamWorks Participation
Percentages). Persons dealing with the Partnership are entitled to rely
conclusively upon the power and authority of the General Partners.
(b) The General Partners are, to the extent of their rights and
powers set forth in this Agreement, agents of the Partnership for the purpose of
the Partnership's business, and the actions of the General Partners taken in
accordance with such rights and powers shall bind the Partnership.
SECTION 8.02. Voting of Contributed Stock. The General Partners
shall exercise voting control over all shares of Contributed Stock and shall
vote (or act by written consent) with respect to all such shares as they deem
appropriate in their sole discretion; provided, that any such vote relating to a
matter addressed in the Class B Stockholder Agreement or the Vulcan Stockholder
Agreement shall be in accordance with the Class B Stockholder Agreement or the
Vulcan Stockholder Agreement, as applicable.
SECTION 8.03. Substitute General Partner. Upon the occurrence of a
Trigger Event with respect to a General Partner at any time prior to the Vulcan
GP Date, then such General Partner shall immediately cease to be a General
Partner and shall no longer have any right or authority to act on behalf of the
Partnership as a General Partner.
24
In such event, such General Partner shall be treated for all purposes as a
Limited Partner and the remaining General Partner shall be the sole General
Partner. In the event of Trigger Events with respect both of the initial General
Partners, then DWI II shall, without any further action on the part of the
Partners or the Partnership, become the sole General Partner and concurrently
therewith, the Partnership shall convert all shares of Common Stock held by the
Partnership to Class A Stock and shall continue without dissolution.
SECTION 8.04. Restrictions on Activities. Notwithstanding any other
provision of this Agreement (except the third sentence of Section 2.06), the
General Partners shall not, without the prior written consent of each of the
other Partners, cause or permit the Partnership to do any of the following: (i)
engage in any business or activity other than those expressly set forth in
Section 2.06; (ii) incur any indebtedness or assume or guarantee, or otherwise
provide credit support directly or indirectly for, any indebtedness or
obligation of any other Person; (iii) make a general assignment for the benefit
of creditors; (iv) file a petition commencing a voluntary Bankruptcy case; (v)
file a petition or answer seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation; (vi) file an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution (to the fullest extent permitted by law) or similar
relief under any statute, law or regulation, or the entry of any order
appointing a trustee, liquidator or receiver of it or of its assets or any
substantial portion thereof; (vii) seek, consent to or acquiesce in the
appointment of a trustee, receiver or liquidator of it or of all or any
substantial part of its assets; (viii) consolidate or merge with or into any
other Person or convey or transfer any shares of Common Stock, cash or other
property of the Partnership to any Person except in accordance with the terms of
the Transaction Documents; (ix) amend the certificate of limited partnership, or
take action in furtherance of any such action; (x) except as expressly
contemplated in the Transaction Documents, purchase or otherwise acquire any
equity interest of any class in any Person; (xi) take any act that would subject
any Partner to personal liability for the debts, liabilities or obligations of
the Partnership; (xii) take any act in contravention of any of the Transaction
Documents; (xiii) enter into any contract or arrangement whereby any General
Partner, Principal or any of their respective Affiliates would receive any fee
or other compensation from the Partnership or its assets in connection with the
management of the Partnership or otherwise (it being understood that the General
Partners and any successor General Partners are providing services to the
Partnership pursuant to this Agreement on a no-fee basis); (xiv) exercise any
demand or piggy-back registration rights under the Registration Rights Agreement
that would not result in a Satisfaction Event with respect to the applicable
Participating Partners (or, if such offering would not result in a Satisfaction
Event, fail to request that the Company withdraw any registration statement of
the Company in which the Partnership was the Requesting Holder (as defined in
the Registration Rights Agreement) or otherwise remove all securities of the
Partnership and the Partners requested to be included in any registration
statement of the Company); (xv) request that the Company withdraw any
registration statement of the Company in which the Partnership was the
Requesting Holder or otherwise remove any securities of the Partnership and the
Partners requested to be included in any registration
25
statement of the Company, in each case unless such offering would not result in
a Satisfaction Event; (xvi) settle or compromise any material litigation
involving the Partnership or any of its property; (xvii) dissolve the
Partnership, other than as provided in Section 11.01; or (xviii) except as
expressly contemplated in the Transaction Documents, directly or indirectly
Transfer, pledge or otherwise encumber any shares of Common Stock held by the
Partnership. In addition, no General Partner shall withdraw as a General Partner
except as expressly permitted herein.
ARTICLE IX
Transfers of Interests
SECTION 9.01. Restrictions on Transfers. Without the prior written
consent of the General Partners and DWI II, (a) no Partner shall directly or
indirectly Transfer all or any part of its Interests, or any rights to receive
capital, profits or distributions of the Partnership pursuant thereto, (b)
except in the case of any Parent of ▇▇▇ Entertainment, L.L.C. and any Parent of
Universal, no Parent of any Partner shall Transfer any Equity Security or other
interest in such Partner or any other Parent of such Partner, or the right to
receive capital or profits of such Partner or such other Parent pursuant thereto
and (c) except in the case of Universal and any Parent of Universal, no Partner
or any Parent of such Partner (other than the Ultimate Parent) shall issue any
Equity Security or other interest, and, in each case, any such Transfer or
issuance by a Partner or its Parents shall be deemed a Transfer by such Partner
of Interests in violation of this Agreement and a breach of this Agreement by
such Partner. To the fullest extent permitted by law, any such Transfer in
violation of this Agreement shall be null and void.
SECTION 9.02. Admission of Transferees. A transferee of an Interest
permitted under Section 9.01 shall be admitted to the Partnership as a partner
of the Partnership upon (i) the prior written consent of the General Partners
and DWI II (which consent of the General Partners and DWI II shall not be
unreasonably withheld or delayed) and (ii) its execution of an instrument
signifying its agreement to be bound by the terms and conditions of this
Agreement, which instrument may be a counterpart signature page to this
Agreement. If a Partner Transfers all of its Interest pursuant to Section 9.01,
such admission shall be deemed effective immediately prior to such transfer and,
immediately following such admission, the transferor Partner shall cease to be a
partner of the Partnership.
SECTION 9.03. Further Restrictions. Notwithstanding anything to the
contrary in this Agreement, to the fullest extent permitted by law, any Transfer
that would otherwise be permitted by this Agreement shall be null and void if
(a) such Transfer requires the registration of such Transferred Interest
pursuant to any applicable Federal or state securities laws; (b) such Transfer
subjects the Partnership to regulation under the Investment Company Act of 1940,
the Investment Advisers Act of 1940 or the Employee Retirement Income Security
Act of 1974, each as amended; (c) such Transfer results in a violation of
applicable laws to which the Partnership is subject; (d) such Transfer is made
to any Person that lacks the legal right, power or capacity to own such
Interest; (e) such Transfer would cause the assets of the Partnership to
constitute "plan
26
assets" under 29 C.F.R. Section 2510.3-101; or (f) such Transfer would cause the
Partnership to be taxable as a corporation for U.S. federal income tax purposes.
ARTICLE X
Limitation on Liability, Exculpation
SECTION 10.01. Limitation on Liability. An obligation of the
Partnership incurred while the Partnership is a Delaware limited liability
limited partnership, whether arising in contract, tort or otherwise, is solely
the obligation of the Partnership. A General Partner is not personally liable,
directly or indirectly, by way of indemnification, contribution, assessment or
otherwise, for such obligation solely by reason of being or so acting as a
general partner of the Partnership. No Partner shall have any liability in any
manner whatsoever for any debt, liability or other obligation of the
Partnership, whether such debt, liability or other obligation arises in
contract, tort or otherwise, under Section 17-303(a) of the Delaware Act. No
Covered Person shall be obligated personally for any debt, obligation or
liability of the Partnership. The foregoing Section 10.01 shall not alter each
Partner's obligation to return funds wrongfully distributed to it if required to
do so under the Delaware Act.
SECTION 10.02. Exculpation of Covered Persons. (a) Except as
expressly provided herein, and to the fullest extent permitted by law, no
Covered Person shall be liable, including under any legal or equitable theory of
fiduciary duty or other theory of liability, to the Partnership or to any other
Covered Person for any losses, claims, damages or liabilities incurred by reason
of any act or omission performed or omitted by such Covered Person except for
any losses, claims, damages or liabilities arising from such Covered Person's
fraud, bad faith or willful misconduct. Whenever in this Agreement a Covered
Person is permitted or required to make decisions, such Covered Person shall
make such decisions in good faith and shall not be subject to any other or
different standard (including any legal or equitable standard of fiduciary or
other duty) imposed by this Agreement or any relevant provisions of law or in
equity or otherwise.
(b) A Covered Person shall be fully protected in relying in good
faith upon the records of the Partnership and upon such information, opinions,
reports or statements presented to the Partnership or management by any Person
as to matters the Covered Person reasonably believes are within such Person's
professional or expert competence.
SECTION 10.03. Indemnification. The Partnership shall, to the
fullest extent permitted under the Delaware Act as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Partnership to provide broader indemnification
rights than said law permitted the Partnership to provide prior to such
amendment), indemnify and hold harmless any Covered Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, investigation or proceeding, whether civil, criminal or
administrative and whether by or in the right of the Partnership, by reason of
27
the fact that he or a Covered Person of whom he is the legal representative is
or was an officer of the Partnership against all expenses, liability and loss
(including reasonable attorneys' fees and judgments, fines or penalties and
amounts paid or to be paid in settlement) incurred or suffered by him in
connection therewith, except in a case where such expenses, liabilities or
losses resulted from the fraud, bad faith or willful misconduct of such
indemnified Person. The right to indemnification conferred in this Agreement
shall be a contract right and shall include the right to be paid by the
Partnership the expenses incurred in defending any such proceeding in advance of
its final disposition upon receipt by the Partnership of an unsecured written
promise by or on behalf of such Covered Person to repay such advances if a court
of competent jurisdiction shall determine in a final, non-appealable judgment
that such Covered Person is not entitled to be indemnified by the Partnership
for such expenses, such advances to be paid by the Partnership within 20 days
after the receipt by the Partnership of a statement or statements from the
claimant requesting such advance or advances from time to time.
ARTICLE XI
Dissolution and Termination
SECTION 11.01. Dissolution. (a) Except as otherwise provided herein,
no Partner shall withdraw from the Partnership and, to the fullest extent
permitted by applicable law, no Partner shall take any action to dissolve,
terminate or liquidate the Partnership or to require apportionment, appraisal or
partition of the Partnership or any of its assets, or to file a ▇▇▇▇ for an
accounting, except as specifically provided in this Agreement, and each Partner,
to the fullest extent permitted by applicable law, hereby waives any rights to
take any such actions (or have such actions taken on its behalf) under
applicable law, including any right to petition a court for judicial dissolution
under Section 17-802 of the Delaware Act. Notwithstanding any other provision of
this Agreement, the Bankruptcy of a Partner shall not cause such Partner to
cease to be a partner of the Partnership, and, upon the occurrence of such an
event, the Partnership shall continue without dissolution.
(b) The Partnership shall be dissolved and its business wound up
upon the earliest to occur of any one of the following events:
(i) the final distribution of all cash and all shares of Common
Stock allocated in accordance with Article VII;
(ii) the written agreement of all the Partners to dissolve the
Partnership;
(iii) the entry of a decree of judicial dissolution under Section
17-802 of the Delaware Act, in contravention of this Agreement;
(iv) an event of withdrawal of a General Partner, unless at the time
there is at least one other General Partner, including a successor General
Partner selected in accordance with Article VII or 8.03 (such General
Partner being hereby
28
authorized to and shall continue the business of the Partnership without
dissolution); and
(v) the first time there are no Limited Partners, unless the
Partnership is continued without dissolution in accordance with the
Delaware Act.
(c) Except as provided herein, the resignation, insolvency or
dissolution of a Partner or the occurrence of any other event that terminates
the continued membership of a Partner in the Partnership shall not in and of
itself cause a dissolution of the Partnership.
SECTION 11.02. Winding Up of the Partnership. (a) Upon dissolution,
the Partnership's business shall be liquidated in an orderly manner. The General
Partners shall be the liquidating trustees to wind up the affairs of the
Partnership pursuant to this Agreement. If there shall be no General Partner,
the remaining Partners owning at least a majority-in-interest of the Interests
(based on Adjusted DreamWorks Participation Percentages) then outstanding may
approve one or more liquidating trustees to act as the liquidating trustee in
carrying out such liquidation. In performing their duties, the liquidating
trustees are authorized to sell, distribute, exchange or otherwise dispose of
the assets of the Partnership in accordance with the Delaware Act and in any
reasonable manner that they shall determine to be in the best interest of the
Partners.
(b) In the event of any dissolution other than a dissolution under
Section 11.01(b)(i), the General Partners on behalf of the Partnership shall
prepare and deliver to each of the Partners a written schedule as of the date of
the applicable written agreement (in the case of a dissolution under Section
11.01(b)(ii)) or the date of entry of the applicable decree (in the case of a
dissolution under Section 11.01(b)(iii)) or the date of the event of withdrawal
of a General Partner (in the case of a dissolution under Section 11.01(b)(iv))
or the first date on which there are no Limited Partners (in the case of a
dissolution under Section 11.01(b)(v)) setting forth (x) the value of each
Partner's Retained Shares (valued at their Fair Market Value as of such
applicable date) and (y) each Partner's Unreturned DreamWorks Capital (if any)
after crediting the value of such Partner's Retained Shares as set forth in
Section 11.02(b)(x) above and, if the amount of such credit exceeds such
Partner's Unreturned DreamWorks Capital, then the number of shares representing
such excess (valued at such Fair Market Value) shall be set forth in such
schedule and shall be referred to as such Partner's "Dissolution Additional
Shares". In the event of any dissolution (other than a dissolution under Section
11.01(b)(i)), the proceeds of the liquidation of the Partnership shall be
distributed in the following order and priority, after giving effect to Section
11.02(b)(y):
(i) first, to the creditors (including any Partners or their
respective Affiliates that are creditors) of the Partnership, to the
extent otherwise permitted by law, in satisfaction of all of the
Partnership's liabilities (whether by payment or by making reasonable
provision for payment thereof, including the setting up of any reserves
which are, in the judgment of the liquidating trustee, reasonably
necessary therefor);
29
(ii) second, to the extent such dissolution is not a dissolution
under Section 11.01(b)(i), to the Partners pro rata and in proportion to
and to the extent of their respective Fifty Percent Return as of such time
(with shares of Common Stock being distributed in kind and valued at their
Fair Market Value as of the date of the applicable written agreement (in
the case of a dissolution under Section 11.01(b)(ii)) or the date of entry
of the applicable decree (in the case of a dissolution under Section
11.01(b)(iii)) or the date of the event of withdrawal of a General Partner
(in the case of a dissolution under Section 11.01(b)(iv)) or the first
date on which there are no Limited Partners (in the case of a dissolution
under Section 11.01(b)(v)));
(iii) third, to the extent such dissolution is not a dissolution
under Section 11.01(b)(i), to the Partners pro rata in proportion to and
to the extent of their respective Unreturned DreamWorks Capital (with
shares of Common Stock being distributed in kind and valued at their Fair
Market Value as of the date of the applicable written agreement (in the
case of a dissolution under Section 11.01(b)(ii)) or the date of entry of
the applicable decree (in the case of a dissolution under Section
11.01(b)(iii)) or the date of the event of withdrawal of a General Partner
(in the case of a dissolution under Section 11.01(b)(iv)) or the first
date on which there are no Limited Partners (in the case of a dissolution
under Section 11.01(b)(v))); and
(iv) fourth, to the extent such dissolution is not a dissolution
under Section 11.01(b)(i), a distribution in kind of shares of Common
Stock to the Partners pro rata in accordance with their Adjusted
DreamWorks Participation Percentages; provided, that if any Partner has a
positive number of Dissolution Additional Shares then the aggregate
positive number of Dissolution Additional Shares shall be added to the
total number of shares to be allocated under this Section 11.02(b)(iv),
and such pro rata distribution under this Section 11.02(b)(iv) shall be
made as if such aggregate total number of shares were available for
distribution and as if each Partner had received a distribution of such
Partner's Dissolution Additional Shares.
SECTION 11.03. Claims of Partners. The Partners shall look solely to
the Partnership's assets for the return of their capital contributions, and if
the assets of the Partnership remaining after payment of or reasonable provision
for the payment of all liabilities of the Partnership are insufficient to return
such capital contributions, the Partners shall have no recourse against the
Partnership or any Partner.
SECTION 11.04. Termination. The Partnership shall terminate when all
of the assets of the Partnership, after payment of or reasonable provision for
the payment of all debts and liabilities of the Partnership, shall have been
distributed to the Partners in the manner provided for in this Article XI and
when permitted by this Agreement, and the certificate of limited partnership of
the Partnership and the statement of qualification of the Partnership as a
limited liability limited partnership shall be canceled in the manner required
by the Delaware Act.
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ARTICLE XII
Miscellaneous
SECTION 12.01. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed duly given and received (a) on
the date of delivery if delivered personally, or by facsimile upon confirmation
of transmission by the sender's fax machine if sent on a Business Day (or
otherwise on the next Business Day), (b) on the first Business Day following the
date of dispatch if delivered by a recognized next-day courier service or (c) on
the second Business Day following the date of dispatch if delivered by a
recognized international courier service. All notices hereunder shall be
delivered as set forth on Schedule C, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice
SECTION 12.02. No Third Party Beneficiaries. Except as provided in
Article X, this Agreement is not intended to confer any rights or remedies
hereunder upon, and shall not be enforceable by, any Person other than the
parties hereto.
SECTION 12.03. Waiver. No failure by any party to insist upon the
strict performance of any covenant, agreement, term or condition of this
Agreement or to exercise any right or remedy consequent upon a breach of such or
any other covenant, agreement, term or condition shall operate as a waiver of
such or any other covenant, agreement, term or condition of this Agreement. Any
Partner by notice given in accordance with Section 12.01 may, but shall not be
under any obligation to, waive any of its rights or conditions to its
obligations hereunder, or any duty, obligation or covenant of any other Partner.
No waiver shall affect or alter the remainder of this Agreement but each and
every covenant, agreement, term and condition hereof shall continue in full
force and effect with respect to any other then existing or subsequent breach.
The rights and remedies provided by this Agreement are cumulative and the
exercise of any one right or remedy by any party shall not preclude or waive its
right to exercise any or all other rights or remedies.
SECTION 12.04. Assignment; Amendments. (a) Except as otherwise
provided herein, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, in whole or in part, by any of the
Partners, in whole or in part (whether by operation of law or otherwise),
directly or indirectly, without the prior written consent of the General
Partners and DWI II, and, to the fullest extent permitted by law, any attempt to
make any such assignment without such consent shall be null and void.
Notwithstanding any provision of this Agreement to the contrary and without the
need for any action or consent of any Person, any such transferee shall be
deemed to be a Partner effective immediately upon notice thereof from the then
General Partners to the Partnership. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the Partners and their respective successors and assigns.
(b) No amendment to this Agreement shall be effective unless it
shall be signed in writing by each of the General Partners and Partners
(including the General
31
Partners) owning at least a majority-in-interest of the Interests then
outstanding (based upon their Adjusted DreamWorks Participation Percentages);
provided, that no amendment to the second sentence of Section 2.06 shall be
effective unless it shall be signed in writing by each Partner; provided
further, that no amendment shall affect the rights or obligations of a Partner
without the consent of such Partner.
SECTION 12.05. Integration. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the parties in connection
herewith, and no covenant, representation or condition not expressed in this
Agreement shall affect, or be effective to interpret, change or restrict, the
express provisions of this Agreement.
SECTION 12.06. Headings. The titles of Articles and Sections of this
Agreement are for convenience only and shall not be interpreted to limit or
amplify the provisions of this Agreement.
SECTION 12.07. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which, taken together, shall constitute one and the same instrument.
SECTION 12.08. Severability. Each provision of this Agreement shall
be considered separable and if for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid.
SECTION 12.09. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to the conflicts of law principles thereof.
SECTION 12.10. Jurisdiction; Waivers. With respect to any suit,
action or proceeding relating to this Agreement (collectively, a "Proceeding"),
each Partner irrevocably (a) consents and submits to the exclusive jurisdiction
of the courts of the States of New York and the Court of Chancery of the State
of Delaware and any court of the United States located in the Borough of
Manhattan in New York City; (b) waives, to the fullest extent permitted by law,
any objection which such Partner may have at any time to the laying of venue of
any Proceeding brought in any such court, waives any claim that such Proceeding
has been brought in an inconvenient forum and further waives the right to
object, with respect to such Proceeding, that such court does not have
jurisdiction over such party; (c) consents, to the fullest extent permitted by
law, to the service of process at the address set forth for notices in Section
12.01 herein; provided, that such manner of service of process shall not
preclude the service of process in any other manner permitted under applicable
law; and (d) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY PROCEEDING.
SECTION 12.11. Enforcement. (a) Each party hereto acknowledges that
the other parties would not have an adequate remedy at law for money damages in
the
32
event that any of the covenants or agreements of any of the other parties to
this Agreement were not performed in accordance with its terms, and it is
therefore agreed that each party hereto, in addition to and without limiting any
other remedy or right it may have, will have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any such
breach and enforcing specifically the terms and provisions hereof, and each
party hereto hereby waives any and all defenses it may have on the ground of
lack of jurisdiction or competence of the court to grant such an injunction or
other equitable relief.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
33
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the day and year first above written.
M&J K DREAM LIMITED
PARTNERSHIP,
By M&J K DREAM CORP.,
General Partner
By
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
M&J K B PARTNERSHIP,
By M&J K DREAM CORP.,
General Partner
By
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
▇▇-▇▇, L.P.,
By ▇▇-▇▇, INC.,
General Partner
By
-------------------------------------
Name:
Title:
DW LIPS, L.P.,
By DW SUBS, INC.,
General Partner
By
-------------------------------------
Name:
Title:
34
DW INVESTMENT II, INC.,
By
-------------------------------------
Name:
Title:
▇▇▇ ENTERTAINMENT, L.L.C.,
By
-------------------------------------
Name:
Title:
VIVENDI UNIVERSAL ENTERTAINMENT LLLP,
By
-------------------------------------
Name:
Title:
35
SCHEDULE A
Contributed Stock
Number of Total Retained
Number of Shares of Number of Shares as of
Shares of Pledged Shares the Pricing
Partner Class B Stock Common Stock Contributed Date of the IPO
------- ------------- ------------ ----------- ---------------
M&J K B
M&J K
▇▇-▇▇
DW Lips
DWI II
▇▇▇
Entertainment,
L.L.C.
Vivendi 0 0
Universal
Entertainment
LLLP
SCHEDULE B
Initial DreamWorks Capital
50% of Initial
Partner Initial DreamWorks Capital DreamWorks Capital
------- -------------------------- ------------------
M&J K B $ 32,212,261 $ 16,106,130.50
M&J K $ 101,962 $ 50,981
▇▇-▇▇ $ 32,314,223 $ 16,157,111.50
DW Lips $ 32,314,223 $ 16,157,111.50
DWI II $707,164,269 $353,582,134.50
▇▇▇ Entertainment, L.L.C $111,835,731 $ 55,917,865.50
Vivendi Universal
Entertainment LLLP $ 75,000,000 n/a
SCHEDULE C
Partners
1. M&J K B Limited Partnership and M&J K Dream Limited Partnership
Address for Notices:
2. ▇▇-▇▇, L.P.
Address for Notices:
3. DW Lips, L.P.
Address for Notices:
4. DWI II
Address for Notices:
5. ▇▇▇ Entertainment, L.L.C.
Address for Notices:
6. Vivendi Universal Entertainment LLLP
Address for Notices:
SCHEDULE D
Capital Contributions
Capital
Partner Contribution
------- ------------
M&J K B
M&J K
▇▇-▇▇
DW Lips
DWI II
▇▇▇ Entertainment, L.L.C.
Vivendi Universal Entertainment LLLP
SCHEDULE E
Sample Calculations