Separation Agreement - DreamWorks LLC, DreamWorks Animation LLC and DreamWorks Animation SKG Inc.
SEPARATION AGREEMENT
BY AND AMONG
DREAMWORKS L.L.C.,
DREAMWORKS ANIMATION L.L.C.,
AND
DREAMWORKS ANIMATION SKG, INC.
DATED AS OF [ ], 2004
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TABLE OF CONTENTS
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ARTICLE I
Definitions
ARTICLE II
The Separation
SECTION 2.01. Transfer of Contributed Assets and Assumption of
Contributed Liabilities ....................................... 15
SECTION 2.02. Preferred Transactions and DWA LLC Transactions ............... 17
SECTION 2.03. PDI and Other Transactions .................................... 17
SECTION 2.04. Termination of Agreements ..................................... 18
SECTION 2.05. Insurance Matters ............................................. 19
SECTION 2.06. Documents Relating to Other Transfers of Assets and
Assumption of Liabilities ..................................... 20
SECTION 2.07. Other Ancillary Agreements .................................... 20
SECTION 2.08. Disclaimer of Representations and Warranties .................. 21
SECTION 2.09. Governmental Approvals and Consents ........................... 21
SECTION 2.10. Novation of Contributed Liabilities ........................... 22
SECTION 2.11. Novation of Liabilities other than Contributed Liabilities .... 23
SECTION 2.12. Employee Benefit Arrangements ................................. 24
ARTICLE III
The IPO and Actions Pending the IPO
SECTION 3.01. The IPO ....................................................... 28
SECTION 3.02. Proceeds of the IPO ........................................... 29
SECTION 3.03. Charter; Bylaws ............................................... 29
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ARTICLE IV
Conditions Precedent to Consummation of Separation Transactions
SECTION 4.01. Separation Date ............................................... 29
ARTICLE V
Mutual Releases; Indemnification
SECTION 5.01. Release of Pre-Closing Claims ................................. 29
SECTION 5.02. Indemnification by the Corporation ............................ 31
SECTION 5.03. Indemnification by the LLC .................................... 33
SECTION 5.04. Indemnification Obligations Net of Insurance Proceeds and Other
Amounts; Shared Contract Liabilities .......................... 33
SECTION 5.05. Procedures for Indemnification of Third Party Claims .......... 34
SECTION 5.06. Additional Matters ............................................ 35
SECTION 5.07. Remedies Cumulative ........................................... 36
SECTION 5.08. Survival of Indemnities ....................................... 36
ARTICLE VI
Certain Business Matters
SECTION 6.01. Certain Business Matters ...................................... 36
SECTION 6.02. Late Payments ................................................. 37
ARTICLE VII
Exchange of Information; Confidentiality
SECTION 7.01. Agreement for Exchange of Information; Archives ............... 37
SECTION 7.02. Ownership of Information ...................................... 38
SECTION 7.03. Compensation for Providing Information ........................ 38
SECTION 7.04. Record Retention .............................................. 38
SECTION 7.05. Limitations of Liability ...................................... 38
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SECTION 7.06. Other Agreements Providing for Exchange of Information ........ 39
SECTION 7.07. Production of Witnesses; Records; Cooperation ................. 39
SECTION 7.08. Confidentiality ............................................... 40
SECTION 7.09. Protective Arrangements ....................................... 40
ARTICLE VIII
Dispute Resolution
SECTION 8.01. Disputes ...................................................... 41
SECTION 8.02. Escalation; Mediation ......................................... 41
SECTION 8.03. Court Actions ................................................. 41
ARTICLE IX
Further Assurances
SECTION 9.01. Further Assurances ............................................ 42
ARTICLE X
Termination
SECTION 10.01. Termination by Mutual Consent ................................. 43
SECTION 10.02. Effect of Termination ......................................... 43
ARTICLE XI
Miscellaneous
SECTION 11.01. Counterparts; Entire Agreement; Corporate Power ............... 43
SECTION 11.02. Governing Law ................................................. 43
SECTION 11.03. Assignability ................................................. 44
SECTION 11.04. Third Party Beneficiaries ..................................... 44
SECTION 11.05. Notices ....................................................... 44
SECTION 11.06. Severability .................................................. 44
SECTION 11.07. Force Majeure ................................................. 45
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SECTION 11.08. Publicity ..................................................... 45
SECTION 11.09. Expenses ...................................................... 45
SECTION 11.10. Headings ...................................................... 45
SECTION 11.11. Survival of Covenants ......................................... 45
SECTION 11.12. Waivers of Default ............................................ 45
SECTION 11.13. Specific Performance .......................................... 46
SECTION 11.14. Amendments .................................................... 46
SECTION 11.15. Interpretation ................................................ 46
SECTION 11.16. Submission to Jurisdiction; Waivers ........................... 46
SECTION 11.17. Special Damages ............................................... 46
SCHEDULES
Schedule 1.01(a)..Animated Film Assets
Schedule 1.01(b)..Contributed Assets
Schedule 1.01(c)..Contributed Intellectual Property
Schedule 1.01(d)..Assumed Litigation
Schedule 1.01(e)..Corporation Contracts
Schedule 1.01(f)..DW Distribution
Schedule 1.01(g)..DWA Employees
Schedule 1.01(h)..Excluded Assets
Schedule 1.01(i)..Shared Contracts
Schedule 1.01(j)..Material Consents
Schedule 2.04(b)(ii) Excluded Terminated Agreements
EXHIBITS
Exhibit A Restated Certificate of Incorporation of DreamWorks Animation SKG,
Inc.
Exhibit B Amended and Restated Bylaws of DreamWorks Animation SKG, Inc.
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THIS SEPARATION AGREEMENT, dated as of , 2004, is by and
among DREAMWORKS L.L.C., a Delaware limited liability company
(the "LLC"), DREAMWORKS ANIMATION L.L.C., a Delaware limited
liability company ("DWA LLC"), and DREAMWORKS ANIMATION SKG,
INC., a Delaware corporation (the "Corporation"). Capitalized
terms used herein and not otherwise defined shall have the
respective meanings assigned to them in Article I hereof.
R E C I T A L S
WHEREAS, DreamWorks Inc., a Delaware corporation ("DW Inc") and a
Subsidiary of the LLC, has previously contributed all of its various limited
liability company interests (other than its 1% limited liability company
interest in DWA LLC and its 1% limited liability company interest in DreamWorks
Post-Production LLC) to Blue Sea Productions Inc., a Delaware corporation ("Blue
Sea");
WHEREAS, DW Inc has previously distributed all of its capital stock
in Blue Sea to the LLC, leaving a 1% limited liability company interest in DWA
LLC and a 1% limited liability company interest in DreamWorks Post-Production
LLC as DW Inc's only assets;
WHEREAS, the members of the LLC have determined that it is in the
best interests of the LLC and its members to separate the LLC's existing
businesses into two independent businesses;
WHEREAS, the LLC and the Corporation have obtained all Material
Consents or a waiver thereof;
WHEREAS, the PDI Merger Agreement has been entered into by the
parties thereto;
WHEREAS, in furtherance of the foregoing, it is appropriate and
desirable to effect the separation transactions, all as more fully described in
this Agreement and the Ancillary Agreements;
WHEREAS, the members of the LLC have further determined that it is
appropriate and desirable, on the terms and conditions contemplated hereby, to
cause the Corporation, together with certain selling stockholders, to offer and
sell in the IPO shares of Class A Common Stock; and
WHEREAS, it is appropriate and desirable to set forth the
transactions required to effect the foregoing;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties, intending to
be legally bound, hereby agree as follows:
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ARTICLE I
Definitions
For the purpose of this Agreement the following terms shall have the
following meanings:
"Action" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
"Actual E Shares" means actual limited liability company interests
in the LLC granted pursuant to the LLC's Employee Equity Participation Plan.
"Affiliate" of any Person means a Person that controls, is
controlled by, or is under common control with such Person. As used herein,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such entity, whether
through ownership of voting securities or other interests, by contract or
otherwise.
"Agreement" means this Separation Agreement, including all of the
Schedules and Exhibits hereto.
"Ancillary Agreements" means the Ancillary Services Agreement, the
Film Distribution Agreement, the Services Agreement, the Trademark License
Agreement, the Trademark Assignment, the Copyright Assignments and the Tax
Receivable Agreement.
"Ancillary Services Agreement" means the Merchandise & Promotion
Ancillary Services Agreement, dated , 2004, between the Corporation and the LLC.
"Animated Motion Picture" means any means a Motion Picture that is
created predominantly by one or more non-live action production methods (e.g.,
hand-drawn animation such as "Prince of Egypt", CGI such as "Shrek", stop-motion
such as "Chicken Run" and/or motion capture such as "Polar Express") (each, an
"Animation Method"). However, a Motion Picture shall not be deemed to be an
Animated Motion Picture if digital Animation Method(s) are used, in whole or in
part, to create photorealistic characters that interact with live-action
characters in live-action settings. (Photorealistic characters include both
"real world" characters modified by an Animation Method e.g., Babe the pig in
"Babe" and characters that are invented but which are depicted in a "real world"
manner by an Animation Method (e.g., Yoda in "Star Wars II: Attack of the
Clones," Gollum in "Lord of the Rings," the dinosaurs in "Jurassic Park," the
robots in "I, Robot," and the toy soldiers in "Small Soldiers.")
"Animated Motion Picture Business" means the business, activities
and operations of the LLC and its Subsidiaries (prior to the Separation) that
constitute the creation, development, pre-production, production and
post-production of animated
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content for distribution into various existing and future media channels,
including for theatrical, television, home video and internet distribution, as
well as the business of merchandising consumer products and related materials;
provided, for the avoidance of doubt, it is understood and agreed that the
Animated Motion Picture Business shall not include the business activities and
operations that constitute the distribution of Animated Motion Pictures (except
to the extent that the merchandising of consumer products may be considered a
"distribution" business).
"Animated Film Assets" means the Film Assets related principally to
the Animated Motion Pictures listed on Schedule 1.01(a), which, for the
avoidance of doubt, excludes all Film Assets related primarily to the Retained
Motion Pictures.
"Assets" means assets, properties and rights (including goodwill),
wherever located (including in the possession of vendors or other third parties
or elsewhere), whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or required to be
recorded or reflected on the books and records or financial statements of any
Person, including the following:
(a) all accounting and other books, records and files whether in
paper, microfilm, microfiche, computer tape or disk, magnetic tape or any
other form;
(b) all apparatus, computers, computer generated animation
equipment, other animation equipment, other electronic data processing
equipment, studio equipment, fixtures, machinery, other equipment,
furniture, office equipment, automobiles, motor vehicles and other
transportation equipment, special and general tools, test devices,
prototypes and models and other tangible personal property;
(c) all inventories of materials, parts, raw materials, supplies,
work-in-process and finished goods and products;
(d) all interests in real property of whatever nature, including
easements, whether as owner, mortgagee, lessor, sublessor, lessee,
sublessee or otherwise;
(e) all interests in any capital stock or other equity interests of
any other Person, all bonds, notes, debentures or other securities issued
by any other Person, all loans, advances or other extensions of credit or
capital contributions to any other Person and all other investments in any
Person;
(f) all license agreements, leases of personal property, open
purchase orders for supplies, parts or services and other contracts,
agreements or commitments;
(g) all deposits, letters of credit and performance and surety
bonds;
(h) all written technical information, data, specifications,
research and development information, engineering drawings, operating and
maintenance
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manuals, animation techniques and processes and materials and analyses
prepared by consultants and other third parties;
(i) all domestic and foreign patents, copyrights, trade names,
trademarks, service marks and registrations and applications for any of
the foregoing, mask works, trade secrets, inventions, other proprietary
information, rights to films and television programs and licenses from
third Persons granting the right to use any of the foregoing;
(j) all computer applications, programs and other software,
including operating software, network software, firmware, middleware,
design software, design tools, systems documentation, animation software
and instructions;
(k) all cost information, sales and pricing data, customer prospect
lists, supplier records, customer and supplier lists, customer and vendor
data, correspondence and lists, product literature, artwork, design,
development and manufacturing files, vendor and customer drawings,
formulations and specifications, quality records and reports and other
books, records, studies, surveys, reports, plans and documents;
(l) all prepaid expenses, trade accounts and other accounts and
notes receivable;
(m) all rights under contracts or agreements, all claims or rights
against any Person arising from the ownership of any Asset, all rights in
connection with any bids or offers and all claims, choices in action and
similar rights, whether accrued or contingent;
(n) all rights under insurance policies and all rights in the nature
of insurance, indemnification or contribution;
(o) all licenses, permits, approvals and authorizations which have
been issued by any Governmental Authority;
(p) cash or cash equivalents, bank accounts, lock boxes and other
deposit arrangements; and
(q) interest rate, currency, commodity or other swap, collar, cap or
other hedging or similar agreements or arrangements.
"Blue Sea" has the meaning set forth in the recitals hereto.
"Class A Common Stock" means the Class A Common Stock, $0.0l par
value per share, of the Corporation.
"Class B Common Stock" means the Class B Common Stock, $0.01 par
value per share, of the Corporation.
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"Class C Common Stock" means the Class C Common Stock, $0.01 par
value per share, of the Corporation.
"Compensation Committee" has the meaning set forth in Section
2.13(e).
"Consents" means any consents, waivers or approvals from, or
notification requirements to, any third parties.
"Contributed Assets" means all Assets used, held for use or intended
to be used primarily in the operation or conduct of the Animated Motion Picture
Business other than Excluded Assets, including (without limitation):
(a) the Assets listed or described on Schedule 1.01(b);
(b) the Animated Film Assets;
(c) all intellectual property listed or described on Schedule
1.01(c);
(d) all Corporation Contracts;
(e) the LLC's 99% limited liability company interest in DreamWorks
Post-Production LLC;
(f) the Redwood City Lease;
(g) the Grandview Lease; and
(h) all accounting and other books, records and files whether in
paper, microfilm, microfiche, computer tape or disk, magnetic tape or any other
form, in each case, primarily relating to the business and operations of the
animation group of the LLC or any of its Subsidiaries
"Contributed Liabilities" means (without duplication) (a) all
Liabilities primarily related to, arising out of or resulting from the operation
or conduct of the Animated Motion Picture Business, including any Liabilities to
the extent relating to, arising out of or resulting from any Contributed Asset,
in each case whether arising before, on or after the Separation Date, (b) all
Shared Contract Liabilities, whether arising before, on or after the Separation
Date, (c) all Liabilities of, or relating to, DWA Employees arising out of, or
resulting from future, present or former employment with the Animated Motion
Picture Business (including any Liabilities relating to, arising out of or
resulting from any Plan to the extent they relate to DWA Employees), (d) the $[
] of Revolver Debt that the Corporation expressly assumes on the Separation
Date, (e) all Liability for the Advances (as defined in the Universal Agreement)
that the Corporation expressly assumes pursuant to the Universal Interparty
Agreement, (f) all Liability for the subordinated debt that the Corporation
expressly assumes pursuant to the HBO Loan Agreement, (g) all Liabilities
relating to the actions, suits, claims and proceedings listed on Schedule
1.01(d), (h) all Liabilities primarily related to, arising out of or resulting
from the merger of PDI and Merger Sub, including, without limitation, any claim
brought by or on behalf of a stockholder of PDI, (i) all Liabilities primarily
related to the business and operations of PDI and (j) all Liabilities of the LLC
under any agreement between the LLC and any of the directors or director
nominees of the Corporation entered into prior to
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the Separation Date that indemnifies such directors or directors nominees for
actions taken in their capacity as directors or director nominees of the
Corporation (or, in the case of Roger Enrico, as an employee of the
Corporation).
"Contribution" has the meaning set forth in the Formation Agreement.
"Contributing Member" has the meaning set forth in the Formation
Agreement.
"Copyright Assignments" means the Copyright Assignments, dated as of
the Separation Date, between DW Funding and the LLC and between the LLC and the
Corporation or DWA LLC.
"Corporation" has the meaning set forth in the preamble hereto.
"Corporation Contracts" means the contracts, agreements and other
documents listed or described on Schedule 1.01(e).
"Corporation Credit Facility" means the Credit Agreement to be
entered into by the Corporation, as borrower, the agent banks named therein and
the other lending banks from time to time party thereto.
"Corporation Group" means the Corporation, each Subsidiary of the
Corporation, including PDI, and each other Affiliate of the Corporation before
or after the Separation Date (other than the LLC and its Subsidiaries or any
Person that controls the Corporation before or after the Separation Date,
including, for the avoidance of doubt, Jeffrey Katzenberg, Steven Spielberg,
David Geffen and Paul Allen).
"Corporation Indemnitees" has the meaning set forth in Section 5.03.
"Corporation Shared Contract" means those contracts set forth on
Schedule 1.01(i) under the caption Corporation Shared Contract.
"Distribution Servicing Agreements" has the meaning set forth in the
Film Distribution Agreement.
"DWA LLC Interest" means an interest in DreamWorks Animation L.L.C.,
a Delware limited liability company.
"DWA Restricted Stock" means a share of Class A Common Stock granted
pursuant to the 2004 Omnibus Incentive Compensation Plan that is subject to
certain transfer restrictions, forfeiture provisions and/or other terms and
conditions of the applicable award agreement governing such award.
"DW Distribution" means the distribution, in accordance with Article
VIII of the Sixth Amended and Restated Limited Liability Company Agreement of
the LLC, as amended up to and including its third amendment, by the LLC of all
of its right, title
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and interest in and to the DWA LLC Interests held directly by the LLC (other
than the amount of DWA LLC Interests to be used for the Preferred Redemptions as
set forth on Schedule 2.01(a) of the Formation Agreement) to the members of the
LLC listed on Schedule 1.01(f) hereto, in the amounts set forth on Schedule
1.01(f).
"DW Funding" means DW Funding, LLC, a Delaware limited liability
company.
"DW Inc" has the meaning set forth in the recitals hereto.
"DWA Employee" means any individual who is (a) either actively
employed by, or on a leave of absence from (including short-term or long-term
disability), any Person in the Corporation Group on the Separation Date, (b)
employed by the Corporation Group following the Separation Date, (c) a DWA
Terminated Employee or (d) listed on Schedule 1.01(g).
"DWA Option" means an option to purchase shares of Class A Common
Stock granted pursuant to the 2004 Omnibus Incentive Compensation Plan.
"DWA Terminated Employee" means any individual who is (a) a former
employee of any Person in the LLC Group whose primary responsibilities were to
the Animated Motion Picture Business and who was terminated on or before the
Separation Date or (b) a former employee any Person in the Corporation Group,
provided, however that a DWA Terminated Employee shall not include any
individual who otherwise would be a DWA Terminated Employee, but who is
subsequently employed by any Person in the LLC Group prior to the Separation
Date.
"DWA LLC" has the meaning set forth in the preamble hereto.
"Employee Equity Participation Plan" means the amended and restated
employee equity participation plan of DreamWorks L.L.C. and its subsidiaries for
employees and officers of the LLC.
"Escalation Notice" has the meaning set forth in Section 8.02.
"Exercise Price" has the meaning set forth in the 2004 Omnibus
Incentive Compensation Plan.
"Exchange Ratio" has the meaning set forth in the PDI Merger
Agreement.
"Excluded Insurance" has the meaning set forth in Section 2.05.
"Excluded Assets" means (i) all Retained Motion Pictures and (ii)
all Assets listed on Schedule 1.01(h) hereto.
"Excluded Liabilities" means (a) all Liabilities arising from any
Distribution Servicing Agreements (other than those described in clause (e) and
(f) of the definition of Contributed Liability), whether before or after the
Separation Date, and all Liabilities of the LLC in its capacity as Distributor
under the Film Distribution
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Agreement, provided that the foregoing shall not in any way abrogate or limit
any Liabilities of the Corporation to the LLC under the Film Distribution
Agreement, including those specified in Section 10 thereof (which Liabilities
shall not be Excluded Liabilities), (b) any indebtedness that the LLC incurs
following the Separation Date under the LLC Credit Facility, (c) any Liability
of DreamWorks Post-Production LLC that is not primarily related to the Animated
Motion Picture Business and (d) any Liability relating to, arising out of or
resulting from the operation or conduct by any Person in the LLC Group of any
business other than the Animated Motion Picture Business.
"Fair Market Value" has the meaning set forth in the 2004 Omnibus
Incentive Compensation Plan.
"Film Assets" means, with respect to any Motion Picture, all of the
specified party's right, title and interest in (i) the Film Property for the
Motion Picture, (ii) the Tangible Film Materials relating to such Motion
Picture, (iii) all Gross Receipts to be paid in respect of such Motion Picture,
and (iv) all other products and proceeds of whatever nature relating to the
Motion Picture.
"Film Distribution Agreement" means the Distribution Agreement,
dated as of , 2004, by and between the LLC and the Corporation.
"Film Securitization Facility" means DW Funding's structured
financing facility, which is secured by certain rights in the LLC Group's film
library, including certain Animated Film Assets.
"Film Property" means, with respect to any Motion Picture, all of
the specified party's right, title and interest in and to the following:
(i) all common law and statutory copyrights, rights in copyrights,
interests in copyrights, applications for copyrights and renewal and
extensions in copyrights, domestic and foreign, from time to time
with respect to such Motion Picture and to all Literary Material
upon which such Motion Picture is based, including the original
screenplay for such Motion Picture, or any part thereof;
(ii) the ownership of and rights to use and sublicense the use of (a) the
title of such Motion Picture (to the extent such title is a
registered trademark) in any and all print styles and forms and in
connection with the distribution, marketing and promotion of such
Motion Picture, (b) all trade marks and service marks associated
with the Motion Picture, and (c) all goodwill associated therewith
or symbolized thereby;
(iii) the license to use, in connection with such Motion Picture, all
Literary Material, and all common law and statutory copyrights, and
rights and interests in copyrights and renewals and extensions of
copyrights, in and to said Literary Material; and
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(iv) the license to use, in connection with such Motion Picture, all
original or licensed music included in the soundtrack of such Motion
Picture and all musical material created for such Motion Picture or
upon which such Motion Picture is based or to be based, in whole or
in part, and all common law and statutory copyrights, and rights and
interests in copyrights and renewals and extensions of copyrights,
in and to said musical material.
"Formation Agreement" means the Formation Agreement, dated as of the
Separation Date, by and among the Corporation, the LLC, a limited liability
limited partnership to be named and the Members party thereto.
"Founders Shares Awards" means 100 shares of Class A Common Stock,
grossed-up for withholding taxes.
"401(k) Plan", when immediately preceded by "LLC" means the
DreamWorks 401(k) Plan. When immediately preceded by "Corporation", "401(k)
Plan" shall mean the corresponding qualified profit-sharing plan, which contains
a Code Section 401(k) feature, that the Corporation shall establish, sponsor,
and maintain pursuant to this Agreement.
"FSA Plan", when immediately preceded by "LLC" means the health
flexible spending arrangement component of the DreamWorks L.L.C. Section 125
Plan. When immediately preceded by "Corporation," "FSA Plan" shall mean the
corresponding health flexible spending arrangement operating through a plan or
other arrangement that satisfies the requirements of Section 125 of the Code
that the Corporation shall establish, sponsor and maintain pursuant to this
Agreement.
"Governmental Approvals" means any notices, reports or other filings
to be made, or any consents, registrations, approvals, permits or authorizations
to be obtained from, any Governmental Authority.
"Governmental Authority" means any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority.
"Grandview Lease" means the Standard Industrial/Commercial
Multi-Tenant Lease - Gross, dated as of August 7, 1996, between the LLC and the
lessors party thereto, as amended.
"Gross Receipts" means, with respect to any Motion Picture, all
amounts paid or payable in cash to the owner of the Film Property in such Motion
Picture.
"Group" means either the LLC Group or the Corporation Group, as the
context requires.
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"HBO Loan Agreement" means the Subordinated Loan Agreement, dated as
of the Separation Date, between Home Box Office, Inc. and the Corporation and
the promissory note related thereto.
"Hybrid Motion Picture" means a Motion Picture that is predominantly
live-action, but in which at least two of the four characters with the most
screen time, or in which a majority of the characters with speaking roles, are
created (non-photorealistically) by an Animation Method. "Who Framed Roger
Rabbit," "Looney Tunes - Back in Action" and "Space Jam" would be Hybrid Motion
Pictures.
"Indemnifying Party" has the meaning set forth in Section 5.04(a).
"Indemnitee" has the meaning set forth in Section 5.04(a).
"Indemnity Payment" has the meaning set forth in Section 5.04(a).
"Information" means information in written, oral, electronic or
other tangible or intangible forms, stored in any medium, including studies,
reports, records, books, contracts, instruments, films, surveys, discoveries,
ideas, concepts, know-how, techniques, designs, specifications, drawings,
blueprints, diagrams, models, prototypes, samples, flow charts, data, computer
data, disks, diskettes, tapes, computer programs or other software, marketing
plans, customer names, communications by or to attorneys (including
attorney-client privileged communications), memoranda and other materials
prepared by attorneys or under their direction (including attorney work
product), and other technical, financial, employee or business information or
data.
"Insurance Proceeds" means those monies (a) received by an insured
from an insurance carrier or (b) paid by an insurance carrier on behalf of the
insured, in each such case net of any applicable premium adjustments (including
reserves and retrospectively rated premium adjustments) and net of any costs or
expenses incurred in the collection thereof.
"IPO" means the initial public offering by the Corporation and the
selling stockholders identified in the IPO Registration Statement of shares of
Class A Common Stock pursuant to the IPO Registration Statement.
"IPO Document" has the meaning set forth in Section 5.02.
"IPO Registration Statement" means the registration statement on
Form S-l (File No. 333-117528) filed under the Securities Act, pursuant to which
the Class A Common Stock to be issued in the IPO will be registered, together
with all amendments thereto.
"Liabilities" means any and all losses, claims, charges, debts,
demands, actions, causes of action, suits, damages, obligations, payments, costs
and expenses, reckonings, indemnities and similar obligations, covenants,
controversies, guarantees, make whole agreements and similar obligations, and
other liabilities and requirements, including all contractual obligations,
whether absolute or contingent, matured or
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unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever arising, and including those arising under any law, rule, regulation,
Action, threatened or contemplated Action (including the costs and expenses of
demands, assessments, judgments, settlements and compromises relating thereto
and attorneys' fees and any and all costs and expenses, whatsoever reasonably
incurred in investigating, preparing or defending against any such Actions or
threatened or contemplated Actions), order or consent decree of any Governmental
Authority or any award of any arbitrator or mediator of any kind, and those
arising under any contract, commitment or undertaking, including those arising
under this Agreement or any Ancillary Agreement, in each case, whether or not
recorded or reflected or required to be recorded or reflected on the books and
records or financial statements of any Person.
"Literary Material" means written matter, whether published or
unpublished, in any form, including a novel, book, article, treatment, outline,
poem, screenplay, teleplay, story, manuscript, letter, play or otherwise, which
may be included in or upon which a Motion Picture may be based.
"Live Action Motion Picture" means an means a Motion Picture which
is not an Animated Motion Picture or a Hybrid Motion Picture, as defined above.
"LLC" has the meaning set forth in the preamble hereto.
"LLC Credit Facility" means the Credit Agreement, dated as of August
22, 2002, between the LLC, JPMorgan Chase Bank, as administrative agent, and the
other agents and lending banks from time to time party thereto, as may be
amended, modified, restated or replaced at any time.
"LLC Employee Distribution" means the distribution of all of the
LLC's right, title and interest in a number of shares of Class A Common Stock
held by the LLC having a value (based on the initial public offering price per
share appearing on the cover page of the IPO prospectus, without deduction for
underwriters' fees or discounts) necessary for the LLC to make the transfers in
respect of the equity-based compensation awards of the LLC described in Sections
2.12(j), 2.12(l) and 2.12(m).
"LLC Group" means the LLC, each Subsidiary of the LLC and each other
Affiliate of the LLC before or after the Separation Date (other than the
Corporation and its Subsidiaries or any Person that controls the LLC before or
after the Separation Date including, for the avoidance of doubt, Jeffrey
Katzenberg, Steven Spielberg, David Geffen and Paul Allen).
"LLC Operating Agreement" means the Sixth Amended and Restated
Limited Liability Company Agreement, dated as of March 21, 2003, of the LLC, as
amended by each amendment up to and including the third amendment thereto.
"LLC Indemnitees" has the meaning set forth in Section 5.02.
"LLC Shared Contract" means those contracts set forth on Schedule
1.01(i) under the caption LLC Shared Contract.
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"Material Consents" means the consents listed on Schedule 1.01(j).
"Member" has the meaning set forth in the Formation Agreement.
"Merger Sub" means DWA Acquisition Corp., a Delaware corporation
that is wholly owned by the Corporation.
"Motion Picture" means audiovisual product produced and distributed
of every kind and character whatsoever, including all present and future
technological developments, whether produced by means of any photographic,
electrical, electronic, mechanical or other processes or devices now known or
hereafter devised, and their accompanying devices and processes whether
pictures, images, visual and aural representations are recorded or otherwise
preserved for projection, reproduction, exhibition, or transmission by any means
or media now known or hereafter devised in such manner as to appear to be in
motion or sequence, including computer generated pictures and graphics other
than video games.
"Motion Picture Copy" means any tangible physical embodiment of a
Motion Picture or any portion thereof, including any negative or positive Motion
Picture film in any gauge, any video or electronic recording, whether on
magnetic tape, electronic disc or any other physical material or substance of
any kind produced by means of any photographic, electrical, electronic,
mechanical or other process or device now know or hereafter devised, on or with
respect to which a Motion Picture or any part thereof is printed, imprinted,
recorded, reproduced, duplicated or otherwise preserved.
"PDI" means Pacific Data Images, Inc., a California corporation.
"PDI Inc Value" has the meaning set forth in Section 2.03.
"PDI Interest" means the limited liability company interest in PDI
LLC held by the LLC in the form of Class D Stock (as defined in PDI LLC's
limited liability company agreement) having a participation percentage of 40%.
"PDI LLC" means Pacific Data Images, LLC, a Delaware limited
liability company.
"PDI LLC Value" has the meaning set forth in Section 2.03.
"PDI Merger Agreement" means the Merger Agreement, to be dated as of
a date prior to the Separation, by and between Merger Sub and PDI.
"Person" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity and any Governmental Authority.
"Phantom E Stock" means phantom limited liability company interests
in the LLC granted pursuant to the LLC's Employee Equity Participation Plan.
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13
"Phantom E Options" means a phantom limited liability company option
in the LLC granted pursuant to LLC's Employee Equity Participation Plan.
"Plan" means any plan, policy, program, payroll practice,
arrangement, contract, trust, insurance policy, or any agreement or funding
vehicle providing compensation or benefits to employees, former employees,
directors, consultants or former consultants of the LLC or the Corporation.
"Preferred Contributions" has the meaning set forth in the Formation
Agreement.
"Preferred Redemptions" has the meaning set forth in the Formation
Agreement.
"Prime Rate" means the rate which JPMorgan Chase Bank (or any
successor thereto or other major money center commercial bank agreed to by the
parties hereto) announces from time to time as its prime lending rate, as in
effect from time to time.
"Prospectus" means each preliminary, final or supplemental
prospectus forming a part of the IPO Registration Statement.
"Redwood City Lease" means the Triple Net Space Lease, dated as of
May 22, 2002, between Pacific Shores Development LLC, as Lessor, and the LLC, as
Lessee.
"Residual DW Distribution" has the meaning set forth in the
Formation Agreement.
"Retained Motion Pictures" means any picture released prior to the
Separation Date by the LLC under the "Go Fish" label.
"Revolver Debt" means $ of indebtedness outstanding immediately
prior to the Separation Date under the LLC Credit Agreement.
"RSU" means a restricted stock unit award granted pursuant to the
2004 Omnibus Incentive Compensation Plan that represents an unfunded and
unsecured promise to deliver Class A Common Stock, cash, other securities, other
awards or other property in accordance with the terms of the applicable
agreement governing such award.
"SAR" means a stock appreciation right award granted pursuant to the
2004 Omnibus Incentive Compensation Plan that represents an unfunded and
unsecured promise to deliver Class A Common Stock, cash, other securities, other
awards or other property equal in value to the excess, if any, of the Fair
Market Value per share of Class A Common Stock over the per share Exercise Price
of the SAR, subject to the terms of the applicable agreement governing such
award
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14
"Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, security interest, pledge,
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer or other encumbrance of any nature whatsoever.
"Separation" has the meaning set forth in Section 4.01.
"Separation Date" has the meaning set forth in Section 4.01.
"Services Agreement" means the Services Agreement, dated as of the
Separation Date, by and between the LLC and the Corporation.
"Shared Contract Liability" means any Liability related to, arising
out of or resulting from a Corporation Shared Contract or an LLC Shared
Contract.
"Small Animated Motion Pictures" means an Animated Motion Picture
whose acquisition or production cost is equal to or less than $10,000,000.
"Subsidiary" means, when used with respect to any Person, (a) a
corporation in which such Person and/or one or more Subsidiaries of such Person,
directly or indirectly, owns capital stock having a majority of the total voting
power in the election of directors of all outstanding shares of all classes and
series of capital stock of such corporation entitled generally to vote in such
election; and (b) any other Person (other than a corporation) in which such
Person and/or one or more Subsidiaries of such Person, directly or indirectly,
has (i) a majority ownership interest or (ii) the power to elect or direct the
election of a majority of the members of the governing body of such first-named
Person.
"Tangible Film Materials" means, with respect to any Motion Picture,
and only to the extent it exists as of the Effective Date with respect to such
Motion Picture, (i) all Motion Picture Copy of every kind or nature of or
relating to such Motion Picture and all versions thereof, including the YCM,
master prints, exposed film, developed film, positives, negatives, prints,
answer prints, special effects, preprint materials (including interpositives,
negatives, videotapes, duplicate negatives, internegatives, color reversals,
intermediates, lavenders, fine grain master prints and matrices, video masters
and all other forms of preprint elements which may be necessary or useful to
produce prints or other copies or additional preprint elements, whether now
known or hereafter devised), sound tracks, recordings, audio and video tapes and
discs of all types and gauges, cutouts, trims, credit-lists, music licenses, all
promotional materials relating to each such Motion Picture, including, without
limitation, transparencies, posters, press books, publicity kids, still
photographs and promotional trailers and any and all other physical properties
of every kind and nature relating to each such Motion Picture in whatever state
of completion, and all duplicates, drafts, versions, variations and copies of
each thereof and (ii) to the extent related to or derived from the delivery,
exhibition, distribution or other exploitation of any Motion Picture, all
documents of title, including any bill of lading,
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15
dock warrant or dock receipt, all rights under any laboratory pledgeholder
agreement, laboratory access agreement, warehouse receipt or order for the
delivery of inventory, and also any other document or receipt which in the
regular course of business or financing is treated as adequately evidencing that
the Person in possession of it is entitled to receive, hold and dispose of the
document and the goods it covers.
"Tax Receivable Agreement" means the Tax Receivable Agreement, dated
as of the Separation Date, among the Corporation and an entity controlled by
Paul Allen.
"Third Party Claim" has the meaning set forth in Section 5.05(a).
"Trademark Assignment" means the Trademark Assignment, dated as of
the Separation Date, by and between the LLC and the Corporation.
"Trademark License Agreement" means the Trademark License Agreement,
dated as of the Separation Date, by and between the LLC and the Corporation,
providing for, among other things, the license of the "DreamWorks" trademark by
the Corporation to the LLC.
"2004 Omnibus Incentive Compensation Plan" means the Corporation's
2004 Omnibus Incentive Compensation Plan for any director, officer, employee or
consultant of the Corporation or any of its Affiliates.
"Underwriters" means the underwriters for the IPO.
"Underwriting Agreement" means the underwriting agreement to be
entered into among the Corporation, the selling stockholders named therein and
the Underwriters with respect to the IPO.
"Universal Agreement" means the Master Agreement, amended and
restated as of October 31, 2003, between the LLC and Vivendi Universal
Entertainment LLLP, as assignee of Universal Studios, Inc.
"Universal Interparty Agreement" means the Interparty Agreement,
dated as of the Separation Date, between Vivendi Universal Entertainment LLLP,
the LLC and the Corporation.
ARTICLE II
The Separation
SECTION 2.01. Transfer of Contributed Assets and Assumption of
Contributed Liabilities. (a) On the Separation Date and subject to Section 2.09
hereof, immediately prior to consummation of the transactions contemplated in
Section 2.01(b), the LLC shall acquire from DW Funding all of DW Funding's
right, title and interest in all Animated Film Assets, in each case, free from
any encumbrances in connection with the Film Securitization Facility.
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(b) On the Separation Date and subject to Section 2.09 hereof, (i)
the LLC shall contribute, assign, transfer, convey and deliver to DWA LLC, and
shall cause its applicable Subsidiaries to contribute, assign, transfer, convey
and deliver to DWA LLC, an undivided 99% interest in all of the LLC's and such
Subsidiaries' respective rights, titles and interests in and to all Contributed
Assets not then held by DWA LLC or PDI and (ii) the LLC shall contribute,
assign, transfer, convey and deliver to DW Inc, and shall cause its applicable
Subsidiaries to contribute, assign, transfer, convey and deliver to DWA LLC, an
undivided 1% interest in all of the LLC's and such Subsidiaries' respective
rights, titles and interests in and to all Contributed Assets not then held by
DWA LLC or PDI and (iii) DW Inc shall subsequently contribute, assign, transfer,
convey and deliver to DWA LLC its undivided 1% interest in the Contributed
Assets received in subparagraph (ii) to DWA LLC.
(c) On the Separation Date, DWA LLC shall assume, and agree to pay,
perform, satisfy and discharge on a timely basis all of the Contributed
Liabilities (other than any Excluded Liability) in accordance with their
respective terms, regardless of (i) when or where such Liabilities arose or
arise, (ii) whether the facts on which they are based occurred on, prior to or
subsequent to the Separation Date, (iii) where or against whom such Liabilities
are asserted or determined, (iv) whether asserted or determined on, prior to or
subsequent to the Separation Date or (v) whether arising from or alleged to
arise from negligence, recklessness, violation of law, fraud or
misrepresentation by any Person in the LLC Group, provided, however, that the
foregoing clause (v) shall not limit the rights of DWA LLC or the Corporation to
make a claim against any Person in the LLC Group for Liabilities suffered by any
person in the Corporation Group as a direct result of such actions on the part
of a Person in the LLC Group after the Separation Date and the Corporation shall
be obligated for Shared Contract Liabilities only as set forth in Section
2.01(d).
(d) On and after the Separation Date, the LLC shall make available
to the Corporation Group the benefits and rights under each LLC Shared Contract
to the extent such benefits and rights have historically been provided to the
Animation Motion Picture Business; provided that (i) no Person in the
Corporation Group shall take any action, or refrain from taking any action, if
(A) such action or inaction is reasonably likely to or does result in a breach
on the part of any Person in the LLC Group under any LLC Shared Contract and (B)
such Person in the Corporation Group would otherwise be obligated to take or not
take such action under the LLC Shared Contract had such Person become severally
liable under the LLC Shared Contract on the Separation Date, (ii) each Person in
the Corporation Group shall cooperate with the LLC and, at the LLC's request,
take such actions that are reasonably necessary or desirable to ensure that the
LLC is able to perform its obligations constituting Shared Contract Liabilities
under such LLC Shared Contract and (iii) to the extent any Liability under an
LLC Shared Contract is either (x) specifically allocated to the Animated Motion
Picture Business or (y) related to the benefits and rights made available to the
Corporation Group under such LLC Shared Contract, such Shared Contract
Liabilities shall be, as between the LLC and the Corporation, the responsibility
of the Corporation. It is understood that, unless otherwise
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17
mutually agreed, there will not be a novation or assignment of the Shared
Contract Liabilities and that the Corporation shall perform its obligations
hereunder by taking all such actions as are reasonably necessary or desirable to
ensure that the LLC is able to perform all of the obligations constituting
Shared Contract Liabilities under each LLC Shared Contract.
(e) On and after the Separation Date, the Corporation shall make
available to the LLC Group the benefits and rights under each Corporation Shared
Contract to the extent such benefits and rights have historically been provided
to the LLC Group; provided that (i) no Person in the LLC Group shall take any
action, or refrain from taking any action, if (A) such action or inaction is
reasonably likely to or does result in a breach on the part of any Person in the
Corporation Group under any Corporation Shared Contract and (B) such Person in
the LLC Group would otherwise be obligated to take or not take such action under
the Corporation Shared Contract had such Person become severally liable under
the Corporation Shared Contract on the Separation Date, (ii) each Person in the
LLC Group shall cooperate with the Corporation and, at the Corporation's
request, take such actions that are reasonably necessary or desirable to ensure
that the Corporation is able to perform its obligations constituting Shared
Contract Liabilities under such Corporation Shared Contract and (iii) to the
extent any Liability under a Corporation Shared Contract is either (x)
specifically allocated to the LLC Group or (y) related to the benefits and
rights made available to the LLC Group under such Corporation Shared Contract,
such Corporation Shared Contract Liabilities shall be, as between the LLC and
the Corporation, the responsibility of the LLC. It is understood that, unless
otherwise mutually agreed, there will not be a novation or assignment of the
Corporation Shared Contract Liabilities and that the LLC shall perform its
obligations hereunder by taking all such actions as are reasonably necessary or
desirable to ensure that the Corporation is able to perform all of the
obligations constituting Shared Contract Liabilities under each Corporation
Shared Contract.
SECTION 2.02. Preferred Transactions and DWA LLC Transactions. (a)
On the Separation Date, immediately after effecting the transactions
contemplated in Section 2.01 and in the case of (b), (c) and (d) of this Section
2.02, subject to the effectiveness of the Underwriting Agreement and the
execution of the Formation Agreement:
(a) the LLC shall make the DW Distribution;
(b) the applicable Persons shall make the Preferred Contributions;
and
(c) the LLC shall make the Preferred Redemptions; and
(d) each applicable Person shall make the Contribution.
SECTION 2.03. PDI and Other Transactions. On the Separation Date,
immediately after effecting the transactions contemplated in Section 2.02:
(i) the LLC shall contribute, assign, transfer, convey and deliver
to the Corporation all its right, title and interest in and to the PDI
Interest in exchange for that number of shares of Class A Common Stock
determined by:
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(A) multiplying the fair market value (as set forth in the PDI
Merger Agreement) of each share of PDI common stock by the total
number of outstanding shares of PDI common stock on the Separation
Date (the "PDI Inc Value") and multiplying the result by 1.66 (the
"PDI LLC Value"); and then
(B) dividing the excess of the PDI LLC Value over the PDI Inc
Value by the initial public offering price per share of Class A
Common Stock in the IPO, without deduction for underwriter's fees or
discounts.
(ii) the merger of Merger Sub with and into PDI shall be consummated
in accordance with the PDI Merger Agreement;
(iii) the Corporation shall contribute, assign, transfer, convey and
deliver to PDI all its right, title and interest in and to the PDI Interest;
(iv) the LLC shall make the LLC Employee Distribution;
(v) the LLC shall make the Residual DW Distribution.
SECTION 2.04. Termination of Agreements. (a) Except as set forth in
Section 2.04(b), in furtherance of the releases and other provisions of Section
5.01 hereof, the Corporation and each Person in the Corporation Group, on the
one hand, and the LLC and each Person in the LLC Group, on the other hand,
hereby terminate any and all agreements, arrangements, commitments or
understandings, whether or not in writing, between or among the Corporation
and/or any Person in the Corporation Group, on the one hand, and the LLC and/or
any Person in the LLC Group, on the other hand, effective as of the Separation
Date. No such terminated agreement, arrangement, commitment or understanding
(including any provision thereof which purports to survive termination) shall be
of any further force or effect after the Separation Date. Each party shall, at
the reasonable request of any other party, take, or cause to be taken, such
other actions as may be necessary to effect the foregoing.
(b) The provisions of Section 2.04(a) shall not apply to any of the
following agreements, arrangements, commitments or understandings (or to any of
the provisions thereof): (i) this Agreement and the Ancillary Agreements (and
each other agreement or instrument expressly contemplated by this Agreement or
any Ancillary Agreement to be entered into by any of the parties hereto or any
Person in their respective Groups); (ii) any agreements, arrangements,
commitments or understandings listed or described on Schedule 2.04(b)(ii); (iii)
any agreements, arrangements, commitments or understandings to which any Person
other than the parties hereto and their respective Affiliates is a party (it
being understood that to the extent that the rights and obligations of the
parties and the Persons in their respective Groups under any such agreements,
arrangements, commitments or understandings constitute Contributed Assets or
Contributed Liabilities, they shall be assigned pursuant to Section 2.01); and
(iv) any
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19
other agreements, arrangements, commitments or understandings that this
Agreement or any Ancillary Agreement expressly contemplates will survive the
Separation Date.
SECTION 2.05. Insurance Matters.
(a) The Corporation acknowledges that, following the Separation
Date, no Person in the Corporation Group, nor any of their respective officers,
directors or employees, will be covered by directors' and officers' insurance
policies or errors and omissions insurance (collectively, the "Excluded
Insurance"); provided that the LLC will maintain the Excluded Insurance for a
period of not less than three years from the Separation Date and will assist the
Corporation in making any claims thereunder with respect to events occurring
prior to the Separation Date to the extent covered thereby. The Corporation
acknowledges and agrees that, prior to the Separation Date, it shall obtain its
own Excluded Insurance with respect to events occurring prior to the Separation
that would not be covered by the LLC's policies (e.g. IPO-related claims). With
respect to all other insurance coverage, as soon as reasonably practicable
following the Separation Date, but in no event later than January 1, 2005, the
Corporation shall obtain and maintain insurance policies (whether directly or
through arrangements made through the LLC's risk management department) covering
its risk of loss and such insurance policies shall be separate and apart from
the LLC's insurance programs. Notwithstanding the foregoing the LLC shall use
commercially reasonable efforts to assist the Corporation in the transition to
its own separate insurance programs and shall provide the Corporation with any
information that is in its possession and is reasonably available and necessary
to obtain insurance coverage for the Corporation. In addition, the LLC shall
provide risk management services as set forth in, and subject to the terms of,
the Services Agreement. Prior to January 1, 2005, the LLC shall, subject to
insurance market conditions and other factors beyond its control, maintain
policies of insurance (other than Excluded Insurance), including for the benefit
of the Corporation or any Person in the Corporation Group, that are comparable
to those maintained generally by the LLC. The Corporation acknowledges that such
insurance policies are for the benefit of all companies insured by such
policies, and policy limits may be eroded or exhausted by insureds other than
Persons in the Corporation Group. The Corporation further acknowledges that
policy limits are eroded on a "first paid" basis, without regard to when an
occurrence or loss takes place or when a claim is filed. The Corporation
acknowledges that coverage under such insurance policies will be governed by the
policy terms and conditions.
(b) The Corporation shall promptly pay or reimburse the LLC for
premium expenses and any costs and expenses which the LLC may incur in
connection with the insurance coverage maintained pursuant to this Section 2.05,
including but not limited to any subsequent premium adjustments but excluding
any costs or expenses related to risk management services. All payments and
reimbursements by the Corporation shall be made within thirty days after the
Corporations' receipt of an invoice from the LLC. Any risk management services
provided pursuant to the Services Agreement shall be reimbursed solely as set
forth in the Services Agreement.
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(c) Each of the LLC and the Corporation will share such information
as is reasonably necessary in order to permit the other to manage and conduct
its insurance matters in an orderly fashion. Each of the LLC and the
Corporation, at the request of the other, shall cooperate with and use
commercially reasonable efforts to assist the other in recoveries for claims
made under any insurance policy for the benefit of any insured party, and
neither the LLC nor the Corporation, nor any Person in either of their
respective Groups, shall take any action which would intentionally jeopardize or
otherwise interfere with either party's ability to collect any proceeds payable
pursuant to any insurance policy. After the Separation Date, neither the LLC nor
the Corporation shall (and shall ensure that no Person in their respective
Groups shall), without the consent of the other, provide any insurance carrier
with a release, or amend, modify or waive any rights under any such policy or
agreement, if such release, amendment, modification or waiver would materially
adversely affect any rights or potential rights of any Person in the other Group
thereunder. However, nothing in this Section 2.05(c) shall (i) preclude any
Person in any Group from presenting any claim or from exhausting any policy
limit, (ii) require any Person in any Group to pay any premium or other amount
or to incur any Liability or (iii) require any Person in any Group to renew,
extend or continue any policy in force.
(d) The defense of claims, suits or actions giving rise to potential
or actual insurance claims in which the Corporation has an interest will be
managed (in conjunction with the LLC's insurers, as appropriate) by the LLC (at
its expense) unless the resolution of such claim, suit or action would be
reasonably likely to result in a Liability the majority of which would be borne
by the Corporation, in which case the Corporation shall bear the expense and may
choose to manage such defense.
SECTION 2.06. Documents Relating to Other Transfers of Assets and
Assumption of Liabilities. In furtherance of the assignment, transfer and
conveyance of Contributed Assets and the assumption of Contributed Liabilities
set forth in Section 2.01 on or prior to the Separation Date, (i) the LLC shall
execute and deliver, and shall cause its Subsidiaries to execute and deliver,
such bills of sale, stock powers, certificates of title, assignments of
contracts, copyright assignments and other instruments of transfer, conveyance
and assignment as and to the extent necessary to evidence the transfer,
conveyance and assignment of all of the LLC's and its Subsidiaries' right, title
and interest in and to the Contributed Assets to DWA LLC, (ii) DWA LLC shall
execute and deliver, and shall cause its Subsidiaries to execute and deliver,
such assumptions of contracts and other instruments of assumption as and to the
extent necessary to evidence the valid and effective assumption of the
Contributed Liabilities by DWA LLC and (iii) the Corporation shall execute and
deliver, and shall cause its Subsidiaries to execute and deliver, such
assumption agreements, credit agreements, security documents, guarantees and
other instruments of assumption as and to the extent necessary to evidence
assumption or guarantee of the Revolver Debt by the Corporation.
SECTION 2.07. Other Ancillary Agreements. On or prior to the
Separation Date, except as provided in Section 2.09, each of the LLC and the
Corporation will execute and deliver all Ancillary Agreements to which it is a
party.
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SECTION 2.08. Disclaimer of Representations and Warranties. Each of
the LLC (on behalf of itself and each Person in the LLC Group) and the
Corporation (on behalf of itself and each Person in the Corporation Group)
understands and agrees that, except as expressly set forth herein or in any
Ancillary Agreement, no party to this Agreement, any Ancillary Agreement or any
other agreement or document contemplated by this Agreement, any Ancillary
Agreement or otherwise, is representing or warranting in any way, express or
implied, as to the Assets, businesses or Liabilities transferred or assumed as
contemplated hereby or thereby, as to any Consents required in connection
therewith, as to the value or freedom from any Security Interests of, or any
other matter concerning, any Assets of such party, or as to the absence of any
defenses or right of setoff or freedom from counterclaim with respect to any
claim or other Asset, including any accounts receivable, of any party, or as to
the legal sufficiency of any assignment, document or instrument delivered
hereunder to convey title to any Asset or thing of value upon the execution,
delivery and filing hereof or thereof. Except as may expressly be set forth
herein or in any Ancillary Agreement, all such Assets are being transferred on
an "as is", "where is" basis (and, in the case of any real property, by means of
a quitclaim or similar form deed or conveyance) and the respective transferees
shall bear the economic and legal risks that (i) any conveyance shall prove to
be insufficient to vest in the transferee good and marketable title, free and
clear of any Security Interest and (ii) any necessary Consents or Governmental
Approvals are not obtained or that any requirements of laws or judgments are not
complied with.
SECTION 2.09. Governmental Approvals and Consents. (a) To the extent
that the Separation requires any Governmental Approvals or Consents, the parties
will use their commercially reasonable efforts to obtain any such Governmental
Approvals and Consents.
(b) If and to the extent that the valid, complete and perfected
transfer or assignment to the Corporation Group of any Contributed Assets would
be a violation of applicable laws or require any Consent or Governmental
Approval in connection with the Separation, the IPO, the DW Distribution or the
Contribution, then, unless the LLC and the Corporation shall otherwise mutually
determine, the transfer or assignment to the Corporation Group of such
Contributed Assets shall be automatically deemed deferred and any such purported
transfer or assignment shall be null and void until such time as all legal
impediments are removed and/or such Consents or Governmental Approvals have been
obtained and the failure to so transfer or assign any such Contributed Asset
shall not be a breach of the LLC's obligations pursuant to Section 2.01 hereof.
Notwithstanding the foregoing, such Asset shall be deemed a Contributed Asset
for purposes of determining whether any Liability is a Contributed Liability.
(c) If the transfer or assignment of any Contributed Asset intended
to be transferred or assigned hereunder is not consummated on the Separation
Date, whether as a result of the provisions of Section 2.09(b) or for any other
reason, then, to the extent permitted by applicable law and subject to
compliance with Section 2.11(b) by the Person to whom the Contributed Asset was
to be transferred, the Person in the LLC Group retaining such Contributed Asset
shall thereafter hold such Contributed Asset for the use and benefit insofar as
reasonably possible, of the Person entitled thereto (at the expense
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of the Person entitled thereto). In addition, the Person in the LLC Group
retaining such Contributed Asset shall take such other actions as may be
reasonably requested by the Person to whom such Contributed Asset is to be
transferred in order to place such Person, insofar as reasonably possible, in
the same position as if such Contributed Asset had been transferred as
contemplated hereby and so that all the benefits and burdens relating to such
Contributed Asset including possession, use, risk of loss, potential for gain
and dominion, control and command over such Assets, are to inure from and after
the Separation Date to the Corporation Group. Notwithstanding the foregoing, if
following a request from the LLC, the Corporation fails to discharge any due and
outstanding Liability related to a Contributed Asset being held by a Person in
the LLC Group, or otherwise fails to reasonably assure the LLC that such
Liability will be promptly discharged, then such Person in the LLC Group, in
addition to any other rights and remedies the LLC may have hereunder, shall no
longer be required to hold such Contributed Asset for the benefit of the
Corporation and, subject to Section 2.09(d) below, may retain such Contributed
Asset for its own use and benefit.
(d) If and when the Consents and/or Governmental Approvals, the
absence of which caused the deferral of transfer of any Contributed Asset
pursuant to Section 2.09(b), are obtained, the transfer of the applicable
Contributed Asset shall be effected in accordance with the terms of this
Agreement; provided, however, that the Corporation has satisfied its obligations
pursuant to Section 2.11(b).
(e) The Person in the LLC Group retaining a Contributed Asset due to
the deferral of the transfer of such Contributed Asset shall not be obligated,
in connection with the foregoing, to expend any money unless the necessary funds
are advanced by the Person entitled to the Contributed Asset, other than
non-material out-of-pocket administrative expenses, attorneys' fees and
recording or similar fees reasonably necessary to protect the value of a
Contributed Asset and where, due to time sensitivity, it is not practicable to
first seek advancement of such funds. Such amounts shall be promptly reimbursed
by the Person in the Corporation Group entitled to such Contributed Asset.
SECTION 2.10. Novation of Contributed Liabilities. (a) Each of the
LLC and the Corporation, at the request of the other, shall use its commercially
reasonable efforts to obtain, or to cause to be obtained, any consent,
substitution, approval or amendment required to novate or assign to the
applicable Person in the Corporation Group all obligations under agreements,
leases, licenses and other obligations or Liabilities of any nature whatsoever
that constitute Contributed Liabilities (other than any Contributed Liability
that constitutes a Shared Contract Liability), or to obtain in writing the
unconditional release of all parties to such arrangements other than any Person
in the Corporation Group, so that, in any such case, the Corporation and its
Subsidiaries will be solely responsible for such Contributed Liabilities;
provided, however, that neither the LLC nor the Corporation shall be obligated
to pay any consideration therefor to any third party from whom such consents,
approvals, substitutions and amendments are requested; provided further,
however, that any legal fees or other administrative costs associated with
obtaining such consents, approvals substitution and amendments shall be borne by
the Corporation.
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23
(b) If the LLC or the Corporation is unable to obtain, or to cause
to be obtained, any such required consent, approval, release, substitution or
amendment, the applicable Person in the LLC Group shall continue to be bound by
such agreements, leases, licenses and other obligations that constitute
Contributed Liabilities and, unless not permitted by law or the terms thereof,
the Corporation shall, as agent or subcontractor for the LLC or such other
Person, as the case may be, pay, perform and discharge fully all such
obligations or other Liabilities of the LLC or such other Person that constitute
Contributed Liabilities, as the case may be, thereunder from and after the
Separation Date. The Corporation shall indemnify each LLC Indemnitee, and hold
each of them harmless against any Liabilities arising in connection therewith.
Subject to the last sentence of Section 2.09(c), the LLC shall, without further
consideration, pay or remit, or cause to be paid or remitted, to the Corporation
promptly all money, rights and other consideration received by it or any Person
in its respective Group in respect of such performance. If and when any such
consent, approval, release, substitution or amendment shall be obtained or such
agreement, lease, license or other rights or obligations shall otherwise become
assignable or able to be novated, the LLC shall thereafter assign, or cause to
be assigned, all its rights, obligations and other Liabilities thereunder or any
rights or obligations of any Person in its Group to the Corporation without
payment of further consideration and the Corporation shall, without the payment
of any further consideration, assume such rights and obligations.
SECTION 2.11. Novation of Liabilities other than Contributed
Liabilities. (a) Each of the LLC and the Corporation, at the request of the
other, shall use its commercially reasonable efforts to obtain, or to cause to
be obtained, any consent, substitution, approval or amendment required to novate
or assign all obligations under agreements, leases, licenses and other
obligations or Liabilities of any nature whatsoever that do not constitute
Contributed Liabilities, or to obtain in writing the unconditional release of
all parties to such arrangements other than any Person in the LLC Group, so
that, in any such case, the Persons in the LLC Group will be solely responsible
for such Liabilities; provided, however, that neither the LLC nor the
Corporation shall be obligated to pay any consideration therefor to any third
party from whom such consents, approvals, substitutions and amendments are
requested; provided further, however, that any legal fees or other
administrative costs associated with obtaining such consents, approvals,
substitution and amendments shall be borne by the LLC.
(b) If the LLC or the Corporation is unable to obtain, or to cause
to be obtained, any such required consent, approval, release, substitution or
amendment, the applicable Person in the Corporation Group shall continue to be
bound by such agreements, leases, licenses and other obligations and, unless not
permitted by law or the terms thereof, the LLC shall cause a Person in the LLC
Group, as agent or subcontractor for such Person in the Corporation Group, to
pay, perform and discharge fully all the obligations or other Liabilities of
such Person in the Corporation Group thereunder from and after the Separation
Date. The LLC shall indemnify each Corporation Indemnitee and hold each of them
harmless against any Liabilities arising in connection therewith. The
Corporation shall cause each Person in the Corporation Group without further
consideration, to pay or remit, or cause to be paid or remitted, to the LLC or
to another Person in the LLC Group specified by the LLC promptly all money,
rights and other
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24
consideration received by it or any Person in the Corporation Group in respect
of such performance. If and when any such consent, approval, release,
substitution or amendment shall be obtained or such agreement, lease, license or
other rights or obligations shall otherwise become assignable or able to be
novated, the Corporation shall promptly assign, or cause to be assigned, all its
rights, obligations and other Liabilities thereunder or any rights or
obligations of any Person in the Corporation Group to the LLC or to another
Person in the LLC Group specified by the LLC without payment of further
consideration and the LLC, without the payment of any further consideration
shall, or shall cause such other Person in the LLC Group to, assume such rights
and obligations.
SECTION 2.12. Employee Benefit Arrangements. (a) (i) Effective as of
the Separation Date, or other later date that the Corporation and the LLC
mutually agree upon, the Corporation shall adopt, and shall maintain until June
30, 2005, health and welfare Plans (excluding the Corporation 401(k) Plan and
the 2004 Omnibus Incentive Compensation Plan) that, to the extent
administratively and financially practicable, are substantially the same as the
corresponding health and welfare Plans of the LLC as in effect immediately prior
to the Separation Date.
(ii) Effective as of the Separation Date, all DWA Employees shall
cease to be active participants in any Plan maintained by the LLC or an
Affiliate thereof, and no DWA Employee shall be entitled to any additional
accruals or any additional coverage under any Plan maintained by the LLC
or an Affiliate thereof. Without limiting the generality of any express or
implied assumption of Liabilities by the Corporation, the Corporation
shall be solely responsible for and shall assume sole and exclusive
liability and receive the assets, if any, related to such liabilities for
(A) the payment of any termination or severance payments with respect to
any DWA Employee except to the extent paid prior to the Separation Date;
(B) the provision of any post-retirement health, dental, life insurance,
or other welfare benefits to any DWA Employee except to the extent paid
prior to the Separation Date; and (C) any claims made or incurred by the
DWA Employees and their beneficiaries on or subsequent to the Separation
Date under any Plan maintained or sponsored by the Corporation. For
purposes of the immediately preceding sentence, a claim will be deemed
incurred, in the case of hospital, medical or dental benefits, when the
services that are the subject of the claim are performed and, in the case
of other benefits (such as disability or life insurance), when an event
has occurred that entitles the employee to the benefit.
(iii) As of or prior to the Separation Date, the Corporation shall
establish or cause to be established the Corporation FSA Plan. Effective
as of the Separation Date, each DWA Employee shall cease to be an active
participant in the LLC FSA Plan. The Corporation FSA Plan shall take into
account the DWA Employees' salary reduction elections under the LLC FSA
Plan as in effect immediately prior to the Separation Date for the
remainder of the plan year in which the Separation Date occurs and as if
made under the Corporation FSA Plan. As soon as administratively
practicable following the Separation Date, the LLC shall cause an amount
equal to any and all contributions that have been made by
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25
the DWA Employees to the LLC FSA Plan and that have not been reimbursed,
or are not payable in connection with reimbursement claims submitted prior
to the Separation Date, for eligible reimbursable medical expenses
incurred by the DWA Employees prior to the Separation Date to be
transferred to the Corporation or its designated vendor, which shall be
the vendor in respect of the LLC FSA Plan immediately prior to the
Separation Date. Such transferred amounts shall be treated as
contributions by the DWA Employees under the Corporation FSA Plan.
Eligible medical expenses incurred by the DWA Employees on or after the
Separation Date, or incurred by the DWA Employees prior to the Separation
Date but submitted for reimbursement on or after the Separation Date,
shall be subject to reimbursement solely and exclusively under the
Corporation FSA Plan and any related liabilities shall be assumed entirely
by the Corporation
(b) Effective as of the Separation Date, or other later date that
applies to the particular Corporation Plan established thereafter, the
Corporation Plans shall be, with respect to the DWA Employees, in all respects
the successors in interest to, and shall not provide benefits that duplicate
benefits provided by, the corresponding LLC Plans. The LLC and the Corporation
shall agree on methods and procedures, including amending the respective Plan
documents, to prevent DWA Employees from receiving duplicate benefits from the
LLC Plans and the Corporation Plans.
(c) As of or prior to the Separation Date, the Corporation shall
establish, or cause to be established, the Corporation 401(k) Plan, which shall
be a new and separate defined contribution plan that satisfies the requirements
of Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"), and a new and separate trust that shall be tax-exempt under
Section 501(a) of the Code. Effective as of the Separation Date, the Corporation
401(k) Plan shall assume and be solely responsible for all Liabilities relating
to, arising out of, or resulting from DWA Employees (and all of their
beneficiaries and alternate payees pursuant to a qualified domestic relations
order, as defined in Section 414(p) of the Code) under the LLC 401(k) Plan.
Effective as of the Separation Date, each DWA Employee shall cease to be an
active participant in the LLC 401(k) Plan. The LLC shall cause the LLC 401(k)
Plan accounts of the DWA Employees (and all of their beneficiaries and alternate
payees pursuant to a qualified domestic relations order, as defined in Section
414(p) of the Code) that are held by the LLC 401(k) Plan and its related trust
to be transferred, in accordance with Code Section 414(l), to the Corporation
401(k) Plan and its related trust, and the Corporation shall cause such
transferred accounts to be accepted by the Corporation 401(k) Plan and its
related trust. Unless the LLC and the Corporation agree otherwise, such transfer
shall occur on the last business day of a calendar month and shall be in-kind to
the maximum extent practicable. As soon as administratively practicable after
the Separation Date, the Corporation shall file a request for a favorable
determination from the Internal Revenue Service that the Corporation 401(k) Plan
is qualified under Section 401(a) of the Code. The Corporation hereby agrees and
covenants that the Corporation shall make all amendments required by the
Internal Revenue Service to obtain such a favorable determination. The
Corporation shall use its commercially reasonable efforts to enter into
agreements, effective as of the Separation Date, satisfactory to the LLC to
accomplish such assumption and transfer, the
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26
maintenance of the necessary participant records and the appointment of a
trustee and a record keeper under the Corporation 401(k) Plan.
(d) Except as otherwise provided in subsection (a)(i) hereof,
nothing in this Agreement shall preclude the Corporation, at any time after the
Separation Date, from amending, merging, modifying, terminating, eliminating,
reducing or otherwise altering in any respect any Corporation Plan or any
employment or other service arrangement with DWA Employees or vendors (to the
extent permitted by law).
(e) The Corporation shall be solely responsible for providing COBRA
continuation coverage under Section 4980B of the Code (for the applicable period
of time as required by law) to those DWA Employees and their eligible dependents
who become eligible for such coverage prior to, on, or after the Separation
Date.
(f) The LLC and the Corporation agree that none of the DWA Employees
shall be deemed, by reason of the transfer of their employment from the LLC, or
any Affiliate thereof, to the Corporation, or any Affiliate thereof, to have
experienced a termination or severance of employment from the LLC or any
Affiliate thereof for purposes of any Plan maintained or sponsored by the LLC or
any Affiliate thereof that provides for the payment of severance, salary
continuation or similar benefits.
(g) Effective as of the Separation Date, the Corporation shall make
all contributions to and shall assume all Liabilities under any multiemployer
plan (as defined in Section 3(37) of the Employee Retirement Income Security Act
of 1974, as amended) in respect of any DWA Employee except to the extent paid
prior to the Separation Date.
(h) On or prior to the Separation Date, each DWA Employee who is
employed by the LLC Group on such date will be given the opportunity to elect to
have any unused vacation days that he or she has accrued prior to the Separation
Date for service with the LLC Group transferred to the Corporation, effective as
of the Separation Date. In the event that any such DWA Employee elects such a
transfer, effective as of the Separation Date, the Corporation shall be solely
responsible for and shall assume sole and exclusive liability for any such
accrued vacation days. In the event that any such employee does not elect such a
transfer, effective as of the Separation Date, such employee shall be entitled
to receive a cash payment from the Corporation for his or her unused vacation
days accrued prior to the Separation Date.
(i) On or before the Separation Date, subject to the approval of the
compensation committee of the Board of Directors of the Corporation (the
"Compensation Committee"), the LLC shall grant to Ann Daly fully vested Phantom
E Stock that, upon the closing of the IPO, shall be exchanged for shares of
Class A Common Stock (to be delivered by the Corporation) that have an aggregate
value of $5,700,000, as determined on the Separation Date by reference to the
initial public offering price per share appearing on the cover page of the IPO
prospectus, without deduction for underwriters' fees or discounts (or, in lieu
of Class A Common Stock, such other form of equity-based compensation as the
Compensation Committee may determine). In the event that the closing of the IPO
fails to occur for any reason by June
<PAGE>
27
28, 2005, then the Phantom E Stock will be automatically canceled and Ann Daly
will not be entitled to any payments or benefits with respect thereto.
(j) The LLC will make Founders Shares Awards (out of Class A Common
Stock held by it) to substantially all active employees of the LLC Group upon
the Separation Date and contingent on the closing of the IPO. The LLC will be
responsible for payment of withholding taxes to the government and W-2 reporting
for such employees.
(k) The Corporation will make Founders Shares Awards to
substantially all active DWA Employees upon the Separation Date and contingent
on the closing of the IPO. The Corporation will be responsible for payment of
withholding taxes to the government and W-2 reporting for such DWA Employees.
(l) Pursuant to Section 10 of the Employee Equity Participation
Plan, the LLC will transfer shares of Class A Common Stock held by it in
retirement of all outstanding vested Actual E Shares upon the Separation Date
and contingent on the closing of the IPO.
(m) Pursuant to Section 10 of the Employee Equity Participation
Plan, the LLC will transfer shares of Class A Common Stock held by it to certain
holders of vested Phantom E Stock, who are employees of the LLC Group, upon the
Separation Date and contingent on the closing of the IPO. The LLC will be
responsible for withholding taxes from such employees (without any gross-up) and
remitting such withheld taxes to the government as well as for the W-2 reporting
with respect thereto.
(n) Pursuant to Section 10 of the Employee Equity Participation
Plan, the Corporation will provide for the issuance of shares of Class A Common
Stock to certain holders of vested Phantom E Stock, who are DWA Employees, upon
the Separation Date and contingent on the closing of the IPO. The Corporation
will be responsible for withholding taxes from such DWA Employees (without any
gross-up) and remitting such withheld taxes to the government as well as for the
W-2 reporting with respect thereto.
(o) Except as provided in Section 2.12(l),(m) and (n) the
Corporation shall, upon the Separation Date and contingent on the closing of the
IPO, pursuant to its 2004 Omnibus Incentive Compensation Plan, make provision
for the automatic conversion of, or offer to exchange, as applicable, all equity
and equity-based awards in the LLC (as agreed upon by the LLC and the
Corporation) held by DWA Employees or employees (or former employees) of the LLC
Group into DWA Options, DWA Restricted Stock, SARs or RSUs of the Corporation.
Without limiting the generality of the foregoing:
(i) certain holders of vested Phantom E Stock shall receive vested
RSUs or shares of vested Class A Common Stock and holders of unvested
Phantom E Stock shall receive unvested RSUs or DWA Restricted Stock, which
will vest over the remaining period in which the Phantom E Stock would
have vested;
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(ii) Phantom E Options, whether vested or unvested, shall be
converted into vested or unvested DWA Options or SARs, retaining their
original vesting status or schedule. Unvested DWA Options or SARs, as
applicable, will vest over the remaining period in which the Phantom E
Options would have vested; and
(iii) holders of unvested Actual E Shares shall receive unvested
RSUs or DWA Restricted Stock, which will vest over the remaining period in
which the Actual E Shares would have vested.
In general, the conversion of such LLC awards will preserve the
value of the holder's interests based on the IPO date price to the public of
Class A Common Stock, without deduction for underwriters' fees or discounts. In
the case of LLC interests that have a notional "exercise price", such
conversions will preserve the "intrinsic value" of the LLC interests through a
formula that preserves both the holder's "spread" and the ratio of the exercise
price to the value of the underlying interest. Notwithstanding the foregoing,
the terms and conditions of all such conversions and of the Corporation awards
into which LLC awards will be converted, and all determinations of value, shall
be made by the Compensation Committee.
In the case of conversions of interests held by employees or former
employee of the LLC Group (other than DWA Employees), the LLC will be
responsible (upon the conversion or upon vesting, exercise or settlement of the
award, as the case may be) for withholding taxes from such employees (without
any gross-up) and remitting such withheld taxes to the government as well as for
the W-2 reporting with respect thereto. In the case of conversions of interests
held by DWA Employees, the Corporation will be responsible (upon the conversion
or upon vesting, exercise or settlement of the award, as the case may be) for
withholding taxes from such DWA employees (without any gross-up) and remitting
such withheld taxes to the government as well as for the W-2 reporting with
respect thereto.
(p) Nothing in this Section 2.12, whether express or implied, is
intended to or shall confer any rights, benefits or remedies under or by reason
of this Section 2.12 on any Persons (including without limitation any DWA
Employee or any employee (or former employee) of the LLC Group) other than the
parties to this Agreement and their respective successors and permitted assigns,
nor is anything in this Agreement intended to relieve or discharge the
obligation or Liability of any third party to any party to this Agreement, nor
shall any provisions give any third party any right of subrogation over or
action against any party to this Agreement.
ARTICLE III
The IPO and Actions Pending the IPO
SECTION 3.01. The IPO. The LLC and the Corporation shall use their
commercially reasonable efforts to consummate the IPO.
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29
SECTION 3.02. Proceeds of the IPO. The IPO will be both a primary
and secondary offering of Class A Common Stock, and the net proceeds of the IPO
will be retained by the Corporation and the participating selling stockholders
as described in the Prospectus.
SECTION 3.03. Charter; Bylaws. Prior to the effectiveness of the IPO
Registration Statement, the LLC and the Corporation shall each take all actions
that may be required to provide for the adoption by the Corporation of the
Restated Certificate of Incorporation of the Corporation substantially in the
form attached as Exhibit A and the Amended and Restated Bylaws of the
Corporation substantially in the form attached as Exhibit B.
ARTICLE IV
Conditions Precedent to Consummation of Separation Transactions
SECTION 4.01. Separation Date. The closing of the transactions set
forth in Article II (the "Separation") shall take place at the offices of
Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019, at
8:00 a.m. New York time on the date (the "Separation Date") set for the pricing
of the IPO, subject, other than in the case of Section 2.01 and 2.02(a), which
shall not be conditioned on the occurrence of clause (c) below, to:
(a) all obligations of the Corporation or any other Person in the
Corporation Group, if any, under the LLC Credit Facility and the Film
Securitization Facility shall have been terminated; and
(b) all Material Consents shall have been obtained or waived by the
Corporation.
(c) the execution and delivery of the Formation Agreement.
ARTICLE V
Mutual Releases; Indemnification
SECTION 5.01. Release of Pre-Closing Claims. (a) Except as provided
in Section 5.01(c) and Section 5.03, effective as of the Separation Date, the
Corporation does hereby, for itself and for each of its Subsidiaries that is in
the Corporation Group as of the Separation Date, release and forever discharge
the LLC and each of its Subsidiaries that are in the LLC Group, and all Persons
who at any time prior to the Separation Date have been stockholders, directors,
officers, agents, managers or members of any Person in the LLC Group (in each
case, in their respective capacities as such), and their respective heirs,
executors, administrators, successors and assigns, from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed in
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30
each case on or before the Separation Date, including in connection with the
transactions and all other activities to implement the Separation and the IPO.
(b) Except as provided in Section 5.01(c) and Section 5.02,
effective as of the Separation Date, the LLC does hereby, for itself and for
each of its Subsidiaries that is in the LLC Group, release and forever discharge
the Corporation and each of its Subsidiaries that is in Corporation Group as of
the Separation Date, and all Persons who at any time prior to the Separation
Date have been stockholders, directors, officers, agents or members of any
Person in the Corporation Group (in each case, in their respective capacities as
such), and their respective heirs, executors, administrators, successors and
assigns, from any and all Liabilities whatsoever, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any acts
or events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed in each
case on or before the Separation Date, including in connection with the
transactions and all other activities to implement the Separation and the IPO.
(c) Nothing contained in Section 5.01(a) or (b) shall impair any
right of any Person to enforce this Agreement, any Ancillary Agreement or any
agreements, arrangements, commitments or understandings that are specified in
Section 2.04(b) or the applicable Schedules thereto not to terminate as of the
Separation Date or Section 2.06, in each case in accordance with its terms.
Nothing contained in Section 5.01(a) or (b) shall release any Person from:
(i) any Liability provided in or resulting from any agreement among
any Persons in the LLC Group or the Corporation Group that is specified in
Section 2.04(b) or the applicable Schedules thereto as not to terminate as
of the Separation Date, or any other Liability specified in such Section
2.04(b) as not to terminate as of the Separation Date;
(ii) any Liability assumed, transferred, assigned or allocated to
the Group of which such Person is a member in accordance with, or any
other Liability of any member of any Group under, this Agreement or any
Ancillary Agreement;
(iii) any Liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims
brought against the parties by third Persons, which Liability shall be
governed by the provisions of this Article V and, if applicable, the
appropriate provisions of the Ancillary Agreements; or
(iv) any Liability the release of which would result in the release
of any Person other than a Person released pursuant to this Section 5.01.
(d) The Corporation shall not make, and shall not permit any Person
in the Corporation Group to make,
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31
any claim or demand, or commence any Action asserting any claim or demand,
including any claim of contribution or any indemnification, against the LLC or
any Person in the LLC Group, or any other Person released pursuant to Section
5.01(a), with respect to any Liabilities released pursuant to Section 5.01(a).
The LLC shall not, make, and shall not permit any Person in the LLC Group to
make any claim or demand, or commence any Action asserting any claim or demand,
including any claim of contribution or any indemnification against the
Corporation or any Person in the Corporation Group, or any other Person released
pursuant to Section 5.01(b), with respect to any Liabilities released pursuant
to Section 5.0l(b).
(e) It is the intent of each of the LLC and the Corporation, by
virtue of the provisions of this Section 5.01, to provide for a full and
complete release and discharge of all Liabilities existing or arising from all
acts and events occurring or failing to occur or alleged to have occurred or to
have failed to occur and all conditions existing or alleged to have existed in
each case on or before the Separation Date, between or among the Corporation or
any Person in the Corporation Group, on the one hand, and the LLC or any Person
in the LLC Group, on the other hand (including any contractual agreements or
arrangements existing or alleged to exist between or among any such Persons on
or before the Separation Date), except as expressly set forth in Section
5.01(c). At any time, at the request of any other party, each party shall cause
each Person in its respective Group to execute and deliver releases reflecting
the provisions hereof.
SECTION 5.02. Indemnification by the Corporation. Except as provided
in Section 5.04, the Corporation shall, and shall cause each of its Subsidiaries
that is in the Corporation Group as of the Separation Date, to jointly and
severally indemnify, defend and hold harmless the LLC, each Person in the LLC
Group and each of their respective members, managers, directors, officers and
employees, and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the "LLC Indemnitees"), from and against any and
all Liabilities of the LLC Indemnitees relating to, arising out of or resulting
from any of the following items without duplication and including, without
limitation, any such Liabilities asserted by way of setoff, counterclaim or
defense or enforcement of any Security Interest:
(i) the failure of the Corporation or any other Person in the
Corporation Group or any other Person to pay, perform or otherwise
promptly discharge any Contributed Liabilities in accordance with their
respective terms, whether prior to or after the Separation Date;
(ii) any material breach by the Corporation or any Person in the
Corporation Group of this Agreement or any Ancillary Agreement that does
not contain its own indemnification provisions;
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32
(iii) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement (or any amendment thereto)
relating to such registration, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement
or alleged untrue statement of a material fact contained in the IPO
Registration Statement or Prospectus or any other document filed by the
Corporation or any Person in the Corporation Group, including all
documents incorporated therein by reference, with the Securities and
Exchange Commission or otherwise used in connection with the IPO or the
transactions contemplated thereby (collectively, the "IPO Documents"), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. In connection with the
foregoing, the Corporation shall, and shall cause each of its Subsidiaries
that is in the Corporation Group as of the Separation Date, to jointly and
severally indemnify, defend and hold harmless each LLC Indemnitee:
(A) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation,
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any other claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the
written consent of the Corporation; and
(B) against any and all reasonable expense whatsoever, as
incurred (including reasonable fees and disbursements of counsel)
incurred in investigating, preparing or defending against any
litigation, investigation or proceeding by any governmental agency
or body, commenced or threatened, in each case whether or not such
Person is a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid under
subparagraph (iii) above.
provided, however, that the indemnity contained in this subparagraph
(iii) does not apply to any LLC Indemnitee with respect to any loss,
liability, claim, damage, judgment or expense to the extent arising out of
any untrue statement or omission or alleged untrue statement or omission
(A) made in reliance upon and in conformity with written information
furnished to the Corporation by such LLC Indemnitee expressly for use in
an IPO Document or (B) if such untrue statement or omission or alleged
untrue statement or omission was corrected in an amended or supplemented
registration statement or prospectus and the Corporation had furnished
copies thereof to the LLC Indemnitee from which the Person asserting such
loss, liability, claim, damage, judgment or expense purchased the
securities that are the subject thereof on a timely basis prior to the
date of sale by such LLC Indemnitee to such Person.
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Notwithstanding anything to the contrary herein, in no event will
any LLC Indemnitee have the right to seek indemnification from any Person in the
Corporation Group with respect to any claim or demand against any Person in the
LLC Group for the satisfaction of the Excluded Liabilities.
SECTION 5.03. Indemnification by the LLC. Except as provided in
Section 5.04, the LLC shall, and shall cause each of its Subsidiaries that is in
the LLC Group as of the Separation Date, to jointly and severally indemnify,
defend and hold harmless the Corporation, each Person in the Corporation Group,
each shareholder of the Corporation that was a member of the LLC at the time of
the Separation, and each of their respective directors, officers, managers and
employees, and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the "Corporation Indemnitees"), from and against
any and all Liabilities of the Corporation Indemnitees relating to, arising out
of or resulting from any of the following items (without duplication and
including, without limitation, any Liabilities asserted by way of setoff,
counterclaim or defense or enforcement of any Security Interest):
(i) the failure of the LLC or any other Person in the LLC Group or
any other Person to pay, perform or otherwise promptly discharge any
Excluded Liabilities in accordance with their respective terms, whether
prior to or after the Separation Date;
(ii) any material breach by the LLC or any Person in the LLC Group
of this Agreement or any Ancillary Agreement that does not contain its own
indemnification provisions.
Notwithstanding anything to the contrary herein, in no event will
any Corporation Indemnitee have the right to seek indemnification from any
Person in the Corporation Group with respect to any claim or demand against any
Person in the LLC Group for the satisfaction of the Contributed Liabilities.
SECTION 5.04. Indemnification Obligations Net of Insurance Proceeds
and Other Amounts; Shared Contract Liabilities. (a) The parties intend that any
Liability subject to indemnification or reimbursement pursuant to this Article V
will be net of Insurance Proceeds that actually reduce the amount of the
Liability. Accordingly, the amount which any party (an "Indemnifying Party") is
required to pay to any Person entitled to indemnification hereunder (an
"Indemnitee") will be reduced by any Insurance Proceeds theretofore actually
recovered by or on behalf of the Indemnitee in respect of the related Liability.
If an Indemnitee receives a payment (an "Indemnity Payment") required by this
Agreement from an Indemnifying Party in respect of any Liability and
subsequently receives Insurance Proceeds, then the Indemnitee will pay to the
Indemnifying Party an amount equal to the excess of the Indemnity Payment
received over the amount of the Indemnity Payment that would have been due if
the Insurance Proceeds had been received, realized or recovered before the
Indemnity Payment was made.
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(b) An insurer who would otherwise be obligated to pay any claim
shall not be relieved of the responsibility with respect thereto or, solely by
virtue of the indemnification provisions hereof, have any subrogation rights
with respect thereto, it being expressly understood and agreed that no insurer
or any other third party shall be entitled to a "wind-fall" (i.e., a benefit
such insurer or other third party would not be entitled to receive in the
absence of the indemnification provisions) by virtue of the indemnification
provisions hereof. Nothing contained in this Agreement or any Ancillary
Agreement shall obligate any Person in any Group to seek to collect or recover
any Insurance Proceeds.
(c) If an indemnification claim is covered by the indemnification
provisions of an Ancillary Agreement, the claim shall be made under the
Ancillary Agreement to the extent applicable and the provisions thereof shall
govern such claim. In no event shall any party be entitled to double recovery
from the indemnification provisions of this Agreement and any Ancillary
Agreement.
SECTION 5.05. Procedures for Indemnification of Third Party Claims.
(a) If an Indemnitee shall receive notice or otherwise learn of the assertion by
a Person (including any Governmental Authority) who is not a Person in the LLC
Group or the Corporation Group of any claim or of the commencement by any such
Person of any Action (collectively, a "Third Party Claim") with respect to which
an Indemnifying Party may be obligated to provide indemnification to such
Indemnitee pursuant to Section 5.02 or 5.03, or any other Section of this
Agreement, such Indemnitee shall give such Indemnifying Party written notice
thereof within 20 days after becoming aware of such Third Party Claim. Any such
notice shall describe the Third Party Claim in reasonable detail.
Notwithstanding the foregoing, the failure of any Indemnitee or other Person to
give notice as provided in this Section 5.05(a) shall not relieve the related
Indemnifying Party of its obligations under this Article V, except to the extent
that such Indemnifying Party is actually prejudiced by such failure to give
notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise, so long as such settlement or compromise contains an
unconditional release of each Indemnitee, whether or not a party to such Third
Party Claim), at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third Party Claim. Within 30 days after the receipt of
notice from an Indemnitee in accordance with Section 5.05(a) (or sooner, if the
nature of such Third Party Claim so requires), the Indemnifying Party shall
notify the Indemnitee of its election whether the Indemnifying Party will assume
responsibility for defending such Third Party Claim, which election shall
specify any reservations or exceptions. After notice from an Indemnifying Party
to an Indemnitee of its election to assume the defense of a Third Party Claim,
such Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise or settlement thereof,
but the fees and expenses of such counsel shall be the expense of such
Indemnitee; provided, however, in the event that (i) the Indemnifying Party has
elected to assume the defense of the Third Party Claim but has specified, and
continues to assert, any reservations or exceptions in such notice or (ii) the
Third Party Claim involves injunctive or equitable
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35
relieve, then, in any such case, the reasonable fees and expenses of one
separate counsel for all Indemnitees shall be borne by the Indemnifying Party.
(c) If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in Section 5.05(b), such Indemnitee may defend such Third Party
Claim at the cost and expense of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the defense
of the Third Party Claim in accordance with the terms of this Agreement, no
Indemnitee may settle or compromise any Third Party Claim without the consent of
the Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement of any Third Party Claim unless the settlement
involves only monetary relief which the Indemnifying Party has agreed to pay and
includes a full and unconditional release of the Indemnitee.
SECTION 5.06. Additional Matters. (a) Any claim on account of a
Liability which does not result from a Third Party Claim shall be asserted by
written notice given by the Indemnitee to the related Indemnifying Party. Such
Indemnifying Party shall have a period of 30 days after the receipt of such
notice within which to respond thereto. If such Indemnifying Party does not
respond within such 30-day period, such Indemnifying Party shall be deemed to
have refused to accept responsibility to make payment. If such Indemnifying
Party does not respond within such 30-day period or rejects such claim in whole
or in part, such Indemnitee shall be free to pursue such remedies as may be
available to such party as contemplated by this Agreement.
(b) In the event of payment by or on behalf of any Indemnifying
Party to any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such Indemnitee
may have any right, defense or claim relating to such Third Party Claim against
any claimant or plaintiff asserting such Third Party Claim or against any other
Person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party is not
a named defendant, if either the Indemnified Party or Indemnifying Party shall
so request, the parties shall endeavor to substitute the Indemnifying Party for
the named defendant, if at all practicable. If such substitution or addition
cannot be achieved for any reason or is not requested, the named defendant shall
allow the Indemnifying Party to manage the Action as set forth in this section,
and the Indemnifying Party shall fully indemnify the named defendant against all
costs of defending the Action (including court costs, sanctions imposed by a
court, attorneys' fees, experts' fees and all other external expenses), the
costs of any judgment or settlement and the cost of any interest or penalties
relating to any judgment or settlement.
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SECTION 5.07. Remedies Cumulative. The remedies provided in this
Article V shall be cumulative and, subject to the provisions of Article VIII,
shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
SECTION 5.08. Survival of Indemnities. The rights and obligations of
each of the LLC and the Corporation and their respective Indemnitees under this
Article V shall survive the sale or other transfer by any party of any Assets or
businesses or the assignment by it of any Liabilities.
ARTICLE VI
Certain Business Matters
SECTION 6.01. Certain Business Matters. (a) Until the home video
release of the last Animated Motion Picture subject to the Film Distribution
Agreement, (i) no Person in the LLC Group will develop, produce or exploit
Animated Motion Pictures other than (A) the exploitation of the Retained Motion
Pictures, (B) the development, production and/or exploitation under the "Go
Fish" label of Small Animated Motion Pictures and (C) pursuant to the Film
Distribution Agreement, (ii) no Person in the Corporation Group will develop,
produce or exploit Live Action Motion Pictures and (iii) Persons in either Group
may develop, produce and/or exploit Hybrid Motion Pictures. The LLC and the
Corporation agree that this covenant is reasonable with respect to its scope and
duration. If, at the time of enforcement of this Section 6.01, a court holds
that the restrictions stated herein are unreasonable under the circumstances
then existing, the parties hereto agree that the period and scope legally
permissible under such circumstances will be substituted for the period and
scope stated herein.
(b) No Person in the Corporation Group or the LLC Group will engage
in theme park activities (as described in the Employment Agreement, dated as of
, between the LLC and Steven Spielberg) (other than through Universal Studios,
Inc.) until such time as Mr. Spielberg confirms to the LLC in writing (which
shall in turn notify the Corporation) that, in his absolute determination and in
his absolute discretion, he has ceased to maintain exclusive theme park
arrangement(s) with third parties, or until the later of such time as (i) Mr.
Spielberg no longer has any contractual relationship with any Person in the
Corporation Group or the LLC Group or (ii) Mr. Spielberg, his wife, his or her
issue (or trusts for the primary benefit of any of them), his or her siblings
(or trusts for the primary benefit of any of them) or a private charitable
foundation organized by him and/or his wife cease to own or control, directly or
indirectly any of the Class A Common Stock of the Corporation issued to him (or
entities controlled by him) by the Corporation or limited liability company
interests in the LLC (and the prohibition contained in this Section 6.01(b)
shall not be renewed if Mr. Spielberg, his wife, his or her issue (or trusts for
the primary benefit of any of them), his or her siblings (or trusts for the
primary benefit of any of them) or a private charitable foundation organized by
him and/or his wife subsequently reacquires any Class A Common Stock or limited
liability company interests). It is mutually agreed by the parties hereto that
Diamond Lane Productions, Inc. and Steven Spielberg are third party
beneficiaries of
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this Section 6.01(b) and that this Section 6.01(b) may not be amended without
the prior written consent of Diamond Lane Productions, Inc. and Mr. Spielberg.
SECTION 6.02. Late Payments. Except as expressly provided to the
contrary in this Agreement, any amount not paid when due pursuant to this
Agreement (and any amounts billed or otherwise invoiced or demanded and properly
payable that are not paid within 30 days of such bill, invoice or other demand)
shall accrue interest at a rate per annum equal to the Prime Rate plus 2%.
ARTICLE VII
Exchange of Information; Confidentiality
SECTION 7.01. Agreement for Exchange of Information; Archives. (a)
Each of the LLC and the Corporation, on behalf of its respective Group, agrees
to provide, or cause to be provided, to the other Group, at any time before or
after the Separation Date, as soon as reasonably practicable after written
request therefor, any Information in the possession or under the control of such
respective Group which the requesting party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the requesting
party (including under applicable securities or tax laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in any
other judicial, regulatory, administrative, tax or other proceeding or in order
to satisfy audit, accounting, regulatory, litigation, tax or other similar
requirements, in each case other than claims or allegations that one party to
this Agreement has against the other or (iii) subject to the foregoing clause
(ii), to comply with its obligations under this Agreement; provided, however,
that in the event that any party determines that any such provision of
Information could be commercially detrimental, violate any law or agreement or
waive any attorney-client privilege, the parties shall take all commercially
reasonable measures to permit the compliance with such obligations in a manner
that avoids any such harm or consequence.
(b) Without limiting the obligation of the LLC to transfer the
Contributed Assets as provided herein, after the Separation Date, the
Corporation or the LLC, as applicable, shall have access during regular business
hours (as in effect from time to time) to the documents and objects of historic
significance that relate to the animation business that are located in archives
retained or maintained by the LLC or that relate to the live-action business
that are located in archives retained or maintained by the Corporation, as
applicable. The Corporation or the LLC, as applicable, may obtain copies (but
not originals) of documents for bona fide business purposes and may obtain
objects for exhibition purposes for reasonable periods of time if required for
bona fide business purposes; provided, however, that the Corporation or the LLC,
as applicable, shall cause any such objects to be returned promptly in the same
condition in which they were delivered to such party and shall comply with any
rules, procedures or other requirements, and shall be subject to any
restrictions (including prohibitions on removal of specified objects) that are
then applicable to the providing party. The Corporation or the LLC, as
applicable, shall pay the applicable fee or rate per hour for archives research
services (subject to increase from time to time to reflect rates then in effect)
for the
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providing party generally. Nothing herein shall be deemed to restrict the access
of the providing party to any such documents or objects or to impose any
liability on the providing party if any such documents or objects are not
maintained or preserved by such party.
(c) After the Separation Date, each of the LLC and the Corporation
(i) shall maintain in effect at its own cost and expense adequate systems and
controls to the extent necessary to enable the Persons in the other Group to
satisfy their respective reporting, accounting, audit and other obligations and
(ii) shall provide, or cause to be provided, to the other party (in such form as
the providing party retains such information for its own use) all financial and
other data and information as such requesting party determines necessary or
advisable in order to prepare its financial statements and reports or filings
with any Governmental Authority.
SECTION 7.02. Ownership of Information. Any Information owned by one
Group that is provided to a requesting party pursuant to Section 7.01 shall be
deemed to remain the property of the providing party. Unless specifically set
forth herein, nothing contained in this Agreement shall be construed as granting
or conferring rights of license or otherwise in any such Information.
SECTION 7.03. Compensation for Providing Information. The party
requesting Information agrees to reimburse the other party for the reasonable
costs, if any, of creating, gathering and copying such Information, to the
extent that such costs are incurred for the benefit of the requesting party.
Except as may be otherwise specifically provided elsewhere in this Agreement,
such costs shall be computed in accordance with the providing party's standard
methodology and procedures.
SECTION 7.04. Record Retention. To facilitate the possible exchange
of Information pursuant to this Article VII and other provisions of this
Agreement after the Separation Date, the parties agree to use their commercially
reasonable efforts to retain all Information in their respective possession or
control on the Separation Date in accordance with the policies of the LLC as in
effect on the Separation Date or such other policies as may be reasonably
adopted by the appropriate party after the Separation Date. No party will
destroy, or permit any of its Subsidiaries to destroy, any Information which the
other party may have the right to obtain pursuant to this Agreement prior to the
third anniversary of the Separation Date without first using its commercially
reasonable efforts to notify the other party of the proposed destruction and
giving the other party the opportunity to take possession of such information
prior to such destruction; provided, however, that in the case of any
Information relating to taxes, employee benefits or environmental liabilities,
such period shall be extended to the expiration of the applicable statute of
limitations (giving effect to any extensions thereof).
SECTION 7.05. Limitations of Liability. Except as otherwise provided
in Article V, no party shall have any liability to any other party in the event
that any Information exchanged or provided pursuant to this Agreement is found
to be inaccurate in the absence of willful misconduct by the party providing
such Information. No party shall have any liability to any other party if any
Information is destroyed after
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39
commercially reasonable efforts by such party to comply with the provisions of
Section 7.04.
SECTION 7.06. Other Agreements Providing for Exchange of
Information. The rights and obligations granted under this Article VII are
subject to any specific limitations, qualifications or additional provisions on
the sharing, exchange, retention or confidential treatment of Information set
forth in any Ancillary Agreement.
SECTION 7.07. Production of Witnesses; Records; Cooperation. (a)
After the Separation Date, except in the case of an adversarial Action by one
party or Persons in its Group against another party or Person in its Group, each
party hereto shall use its commercially reasonable efforts to make available to
each other party, upon written request, the then-current directors, officers,
employees, other personnel and agents of the Person in its respective Group as
witnesses and any books, records or other documents within its control or which
it otherwise has the ability to make available, to the extent that any such
person (giving consideration to business demands of such directors, officers,
employees, other personnel and agents) or books, records or other documents may
reasonably be required in connection with any Action in which the requesting
party may from time to time be involved, regardless of whether such Action is a
matter with respect to which indemnification may be sought hereunder. The
requesting party shall bear all costs and expenses in connection therewith.
(b) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the other party shall make available
to such Indemnifying Party, upon written request then-current directors,
officers, employees, other personnel and agents of the Persons in its respective
Group as witnesses and any books, records or other documents within its control,
to the extent that any such person (giving consideration to business demands of
such directors, officers, employees, other personnel and agents) or books,
records or other documents may reasonably be required in connection with such
defense, settlement or compromise, or such prosecution, evaluation or pursuit,
as the case may be, and shall otherwise reasonably cooperate in such defense,
settlement or compromise, or such prosecution, evaluation or pursuit, as the
case may be.
(c) Without limiting the foregoing, the parties shall cooperate and
consult to the extent reasonably necessary with respect to any Actions.
(d) The obligation of the parties to provide witnesses pursuant to
this Section 7.07 is intended to be interpreted in a manner so as to facilitate
cooperation and shall include the obligation to provide as witnesses employees
and other officers without regard to whether the witness or the employer of the
witness could assert a possible business conflict (subject to the exception set
forth in the first sentence of Section 7.07(a)).
(e) In connection with any matter contemplated by this Section 7.07,
the parties will enter into a mutually acceptable joint defense agreement so as
to maintain to the extent practicable any applicable attorney-client privilege
or work product immunity of any Person in any Group.
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SECTION 7.08. Confidentiality. (a) Subject to Section 7.09, each of
the LLC and the Corporation, on behalf of itself and each Person in its
respective Group, agrees to hold, and to cause its respective directors,
officers, employees, agents, accountants, counsel and other advisors and
representatives to hold, in strict confidence, with at least the same degree of
care that applies to the LLC's confidential and proprietary information pursuant
to policies in effect as of the Separation Date, all Information concerning the
other Group that is either in its possession (including Information in its
possession prior to the Separation Date) or furnished the other Group or its
respective directors, officers, managers, employees, agents, accountants,
counsel and other advisors and representatives at any time pursuant to this
Agreement or otherwise, and shall not use any such Information other than for
such purposes as shall be expressly permitted hereunder or thereunder, except,
in each case, to the extent that such Information has been (i) in the public
domain through no fault of such party or any Person in such Group or any of
their respective directors, officers, managers, employees, agents, accountants,
counsel and other advisors and representatives, (ii) later lawfully acquired
from other sources by such party (or any Person in such party's Group) which
sources are not themselves bound by a confidentiality obligation or (iii)
independently generated without reference to any proprietary or confidential
Information of the other party.
(b) Each party agrees not to release or disclose, or permit to be
released or disclosed, any Information of the other Group to any other Person,
except its directors, officers, employees, agents, accountants, counsel and
other advisors and representatives who need to know such Information (who shall
be advised of their obligations hereunder with respect to such Information),
except in compliance with Section 7.09.
SECTION 7.09. Protective Arrangements. In the event that any party
or any Person in its Group either determines on the advice of its counsel that
it is required to disclose any Information pursuant to applicable law (including
pursuant to any rule or regulation of the Securities and Exchange Commission) or
receives any demand under lawful process or from any Governmental Authority to
disclose or provide Information of any other party (or any Person in any other
party's Group) that is subject to the confidentiality provisions hereof, such
party shall notify the other party prior to disclosing or providing such
Information and shall cooperate at the expense of the such other party in
seeking any reasonable protective arrangements (including by seeking
confidential treatment of such Information) requested by such other party.
Subject to the foregoing, the Person that received such a request or determined
that it is required to disclose Information may thereafter disclose or provide
Information to the extent required by such law (as so advised by counsel) or by
lawful process or such Governmental Authority; provided that such Person
provides the other party upon request with a copy of the Information so
disclosed.
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ARTICLE VIII
Dispute Resolution
SECTION 8.01. Disputes. Except as otherwise specifically provided in
any Ancillary Agreement, the procedures for discussion, negotiation and
mediation set forth in this Article XIII shall apply to all disputes,
controversies or claims (whether arising in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with this
Agreement, or the transactions contemplated hereby (including all actions taken
in furtherance of the transactions contemplated hereby on or prior to the
Separation Date), or the commercial or economic relationship of the parties
relating hereto or thereto, between or among any Person in the LLC Group and the
Corporation Group.
SECTION 8.02. Escalation; Mediation. (a) It is the intent of the
parties to use their respective commercially reasonable efforts to resolve
expeditiously any dispute, controversy or claim between or among them with
respect to the matters covered hereby that may arise from time to time on a
mutually acceptable negotiated basis. In furtherance of the foregoing, any party
involved in a dispute, controversy or claim may deliver a notice (an "Escalation
Notice") demanding an in person meeting involving representatives of the parties
at a senior level of management of the parties (or if the parties agree, of the
appropriate strategic business unit or division within such entity). A copy of
any such Escalation Notice shall be given to the General Counsel, or like
officer or official, of each party involved in the dispute, controversy or claim
(which copy shall state that it is an Escalation Notice pursuant to this
Agreement). Any agenda, location or procedures for such discussions or
negotiations between the parties may be established by the parties from time to
time; provided, however, that the parties shall use their commercially
reasonable efforts to meet within 30 days of the Escalation Notice.
(b) If the parties are not able to resolve the dispute, controversy
or claim through the escalation process referred to above, then the matter shall
be referred to mediation. The parties shall retain a mediator to aid the parties
in their discussions and negotiations by informally providing advice to the
parties. Any opinion expressed by the mediator shall be strictly advisory and
shall not be binding on the parties, nor shall any opinion expressed by the
mediator be admissible in any other proceeding. The mediator may be chosen from
a list of mediators previously selected by the parties or by other agreement of
the parties. Costs of the mediation shall be borne equally by the parties
involved in the matter, except that each party shall be responsible for its own
expenses. Mediation shall be a prerequisite to the commencement of any action by
either party.
SECTION 8.03. Court Actions. (a) In the event that any party, after
complying with the provisions set forth in Section 8.02 above, desires to
commence an Action, such party, subject to Section 11.16, may submit the
dispute, controversy or claim (or such series of related disputes, controversies
or claims) to any court of competent jurisdiction.
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(b) Unless otherwise agreed in writing, the parties will continue to
provide, service and honor all other commitments under this Agreement during the
course of dispute resolution pursuant to the provisions of this Article XIII,
except to the extent such commitments are the subject of such dispute,
controversy or claim.
ARTICLE IX
Further Assurances
SECTION 9.01. Further Assurances. (a) In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto shall use its commercially reasonable efforts, prior to, on and after the
Separation Date, to take, or cause to be taken, all actions, and to do, or cause
to be done, all things, reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make effective the
transactions contemplated by this Agreement.
(b) Prior to, on and after the Separation Date, each party hereto
shall cooperate with the other party, and without any further consideration, but
at the expense of the requesting party, to execute and deliver, or use its
commercially reasonable efforts to cause to be executed and delivered, all
instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with, and to obtain all consents, approvals or
authorizations of, any Governmental Authority or any other Person under any
permit, license, agreement, indenture or other instrument (including any
Consents or Governmental Approvals), and to take all such other actions as such
party may reasonably be requested to take by such other party hereto from time
to time, consistent with the terms of this Agreement, in order to effectuate the
provisions and purposes of this Agreement and the transfer of the Contributed
Assets and the release of Persons in the Corporation Group from Liabilities not
constituting Contributed Liabilities and the assignment and assumption of the
Contributed Liabilities and the other transactions contemplated hereby. Without
limiting the foregoing and without limiting Section 2.09 hereof, the LLC will,
at the reasonable request, cost and expense of the Corporation, take such other
actions as may be reasonably necessary to vest in the applicable Person in the
Corporation Group good and marketable title, free and clear of any Security
Interest, if and to the extent it is practicable to do so and so long as no
Person in the LLC Group is materially adversely affected by taking such other
actions.
(c) On or prior to the Separation Date, the LLC and the Corporation
in their respective capacities as direct and indirect stockholders of their
respective Subsidiaries, shall each ratify any actions which are reasonably
necessary or desirable to be taken by the LLC, the Corporation or any Subsidiary
of the LLC or the Corporation, as the case may be, to effectuate the
transactions contemplated by this Agreement.
(d) Prior to the Separation Date, if one or both of the parties
identifies any commercial or other service that is needed to assure a smooth and
orderly transition of the businesses in connection with the consummation of the
transactions contemplated hereby, and that is not otherwise governed by the
provisions of this Agreement, the
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parties will cooperate in determining whether there is a mutually acceptable
arm's-length basis on which the other party will provide such service.
ARTICLE X
Termination
SECTION 10.01. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Separation Date by the mutual consent of the
LLC and the Corporation.
SECTION 10.02. Effect of Termination. In the event of any
termination of this Agreement, no party to this Agreement (or any of its
directors or officers) shall have any Liability or further obligation to any
other party.
ARTICLE XI
Miscellaneous
SECTION 11.01. Counterparts; Entire Agreement; Corporate Power. (a)
This Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.
(b) This Agreement, the Ancillary Agreements, the Exhibits, the
Schedules and appendices hereto and thereto contain the entire agreement between
the parties with respect to the subject matter hereof, supersede all previous
agreements, negotiations, discussions, writings, understandings, commitments and
conversations with respect to such subject matter and there are no agreements or
understandings between the parties with respect to such subject matter other
than those set forth or referred to herein or therein.
(c) Each party represents on behalf of itself, the LLC represents on
behalf of each other Person in the LLC Group party to this Agreement and the
Corporation represents on behalf of each other Person in the Corporation Group
party to this Agreement, as follows:
(i) each such Person has the requisite corporate, limited liability
company or other power and authority and has taken all corporate, limited
liability company or other action necessary in order to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby; and
(ii) this Agreement has been duly executed and delivered by it and
constitutes a valid and binding agreement of it enforceable in accordance
with the terms thereof.
SECTION 11.02. Governing Law. This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of New
York,
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irrespective of the choice of laws principles of the State of New York, except
to the extent the substantive laws of the State of Delaware are mandatorily
applicable under Delaware law.
SECTION 11.03. Assignability. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that no party hereto may assign its
respective rights or delegate its respective obligations under this Agreement
without the express prior written consent of the other party or parties hereto.
SECTION 11.04. Third Party Beneficiaries. Except for the
indemnification rights under this Agreement of any LLC Indemnitee or Corporation
Indemnitee in their respective capacities as such, and except as expressly set
forth in Section 6.01(b), (a) the provisions of this Agreement are solely for
the benefit of the parties and are not intended to confer upon any Person
(including employees of the parties hereto) except the parties any rights or
remedies hereunder and (b) there are no third party beneficiaries of this
Agreement and this Agreement shall not provide any third person (including
employees of the parties hereto) with any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 11.05. Notices. All notices or other communications under
this Agreement shall be in writing and shall be deemed to be duly given when (a)
delivered in person or (b) deposited in the United States mail or private
express mail, postage prepaid, addressed as follows:
If to the LLC, to:
DreamWorks L.L.C.
Grandview Building
1000 Flower Street
Glendale, California 91201]
Attn: General Counsel
If to the Corporation or DWA LLC to:
DreamWorks Animation SKG, Inc.
Grandview Building
1000 Flower Street
Glendale, California 91201
Attn: General Counsel
Any party may, by notice to the other party, change the address to which such
notices are to be given.
SECTION 11.06. Severability. If any provision of this Agreement or
the application thereof to any Person or circumstance is determined by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof or the
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application of such provision to Persons or circumstances or in jurisdictions
other than those as to which it has been held invalid or unenforceable, shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination, the parties shall negotiate in good faith in an
effort to agree upon such a suitable and equitable provision to effect the
original intent of the parties.
SECTION 11.07. Force Majeure. No party shall be deemed in default of
this Agreement to the extent that any delay or failure in the performance of its
obligations under this Agreement results from any cause beyond its reasonable
control and without its fault or negligence, such as acts of God, acts of civil
or military authority, embargoes, epidemics, war, riots, insurrections, fires,
explosions, earthquakes, floods, unusually severe weather conditions, labor
problems or unavailability of parts, or, in the case of computer systems, any
failure in electrical or air conditioning equipment. In the event of any such
excused delay, the time for performance shall be extended for a period equal to
the time lost by reason of the delay.
SECTION 11.08. Publicity. Prior to the Separation, each of the
parties shall consult with each other prior to issuing any press releases or
otherwise making public statements with respect to the Separation, the IPO or
any of the other transactions contemplated hereby and prior to making any
filings with any Governmental Authority with respect thereto.
SECTION 11.09. Expenses. Except as expressly set forth in this
Agreement, the LLC and the Corporation shall each be responsible for their own
internal fees, costs and expenses and fees, costs and expenses of their own
counsel. All other third party fees, costs and expenses paid or incurred (a) in
connection with the IPO and the Separation shall be paid by the Corporation and
(b) in connection with obtaining the complete release and discharge of the
Corporation from any obligations with respect to the LLC Credit Facility and the
Film Securitization Facility will be paid by the LLC.
SECTION 11.10. Headings. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 11.11. Survival of Covenants. The covenants, representations
and warranties contained in this Agreement, and liability for the breach of any
obligations contained herein, shall survive the Separation and the IPO and shall
remain in full force and effect.
SECTION 11.12. Waivers of Default. Waiver by any party of any
default by the other party of any provision of this Agreement shall not be
deemed a waiver by the waiving party of any subsequent or other default, nor
shall it prejudice the rights of the other party.
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46
SECTION 11.13. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Agreement, the party or parties who are or are to be thereby aggrieved
shall have the right to specific performance and injunctive or other equitable
relief of its rights under this Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and remedies shall
be cumulative. The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived. Any requirements for the securing or
posting of any bond with such remedy are waived.
SECTION 11.14. Amendments. No provisions of this Agreement shall be
deemed waived, amended, supplemented or modified by any party, unless such
waiver, amendment, supplement or modification is in writing and signed by the
authorized representative of the party against whom it is sought to enforce such
waiver, amendment, supplement or modification.
SECTION 11.15. Interpretation. Words in the singular shall be held
to include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires. The terms "hereof", "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the Schedules,
Exhibits and Appendices hereto) and not to any particular provision of this
Agreement. Article, Section, Exhibit, Schedule and Appendix references are to
the Articles, Sections, Exhibits, Schedules and Appendices to this Agreement
unless otherwise specified. The word "including" and words of similar import
when used in this Agreement shall mean "including, without limitation", unless
the context otherwise requires or unless otherwise specified. The word "or"
shall not be exclusive.
SECTION 11.16. Submission to Jurisdiction; Waivers. With respect to
any suit, action or proceeding relating to this Agreement (collectively, a
"Proceeding"), each party to this Agreement irrevocably (a) consents and submits
to the exclusive jurisdiction of the courts of the States of New York and
Delaware and any court of the United States located in the Borough of Manhattan
in New York City or the State of Delaware; (b) waives any objection which such
party 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; and (c)
consents to the service of process at the address set forth for notices in
Section 11.05 herein; provided, however, that such manner of service of process
shall not preclude the service of process in any other manner permitted under
applicable law.
SECTION 11.17. Special Damages. NOTWITHSTANDING ANY OTHER PROVISION
OF THIS AGREEMENT TO THE CONTRARY, AND EXCEPT AS PROVIDED BELOW, IN NO EVENT
WILL EITHER PARTY OR ANY PERSON IN ITS GROUP BE LIABLE FOR SPECIAL, INCIDENTAL,
INDIRECT, COLLATERAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS
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47
SUFFERED BY AN INDEMNITEE, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, IN
CONNECTION WITH ANY DAMAGES ARISING HEREUNDER OR THEREUNDER; PROVIDED, HOWEVER,
THAT TO THE EXTENT AN INDEMNIFIED PARTY IS REQUIRED TO PAY ANY DAMAGES,
INCLUDING SPECIAL, INCIDENTAL, INDIRECT, COLLATERAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES OR LOST PROFITS (OTHER THAN DAMAGES OR LOST PROFITS CONSTITUTING
EXCLUDED LIABILITIES), TO A PERSON WHO IS NOT IN EITHER GROUP IN CONNECTION WITH
A THIRD PARTY CLAIM, SUCH DAMAGES WILL CONSTITUTE DIRECT DAMAGES AND WILL NOT BE
SUBJECT TO THE LIMITATION SET FORTH IN THIS SECTION 11.17.
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IN WITNESS WHEREOF, the parties have caused this Separation
Agreement to be executed by their duly authorized representatives.
DREAMWORKS L.L.C.,
by
--------------------------
Name:
Title:
DREAMWORKS ANIMATION L.L.C.,
By
--------------------------
Name:
Title:
DREAMWORKS ANIMATION SKG, INC.,
by
--------------------------
Name:
Title: