Subordinated Loan Agreement - DreamWorks Animation SKG Inc. and Home Box Office Inc.
SUBORDINATED LOAN AGREEMENT
dated as of
______________, 2004
between
DREAMWORKS ANIMATION SKG, INC.
and
HOME BOX OFFICE, INC.
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TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS ................................................................. 1
SECTION 1.01 Definitions ....................................................... 1
SECTION 1.02 Accounting Terms .................................................. 10
ARTICLE 2 LOAN ........................................................................ 10
SECTION 2.01 Intentionally Deleted ............................................. 10
SECTION 2.02 Funding of Original Subordinated Loan ............................. 10
SECTION 2.03 Subordinated Note ................................................. 11
SECTION 2.04 Maturity of the Subordinated Loan ................................. 11
SECTION 2.05 Prepayments and Repayments of the Subordinated Loan ............... 11
(a) Mandatory Prepayments .................................................. 11
(b) Voluntary Prepayments .................................................. 11
(c) Payment Mechanics ...................................................... 11
SECTION 2.06 Interest .......................................................... 11
SECTION 2.07 Use of Proceeds ................................................... 12
ARTICLE 3 REPRESENTATIONS AND WARRANTIES .............................................. 12
SECTION 3.01 Organization, Powers, Qualification, Good Standing and
Subsidiaries ...................................................... 12
(a) Organization and Powers ................................................ 12
(b) Qualification and Good Standing ........................................ 12
(c) Subsidiaries ........................................................... 13
SECTION 3.02 Authorization, Execution and Enforceability ....................... 13
SECTION 3.03 Financial Condition ............................................... 13
SECTION 3.04 Title to Properties; Liens ........................................ 14
SECTION 3.05 Litigation; Adverse Facts ......................................... 14
SECTION 3.06 Governmental Regulation ........................................... 14
SECTION 3.07 Disclosure ........................................................ 14
SECTION 3.08 Governmental Authorization and Required Consents .................. 15
SECTION 3.09 No Conflicts ...................................................... 15
SECTION 3.10 No Material Adverse Change ........................................ 15
SECTION 3.11 Taxes ............................................................. 15
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SECTION 3.12 Matters Relating to Collateral .................................... 16
(a) Creation, Perfection and Priority of Liens ............................. 16
(b) Governmental Authorizations ............................................ 16
(c) Absence of Third-Party Filings ......................................... 16
ARTICLE 4 CONDITIONS PRECEDENT TO CLOSING ............................................. 16
SECTION 4.01 Closing Documents ................................................. 16
(a) Agreement and Subordinated Note ........................................ 16
(b) DreamWorks Documents ................................................... 16
(c) HBO License Agreement Amendment ........................................ 16
(d) Collateral Documents ................................................... 17
(e) Consents ............................................................... 17
(f) Corporate Documents .................................................... 17
(g) Opinions of Counsel to DreamWorks Animation ............................ 18
(h) UCC Searches ........................................................... 18
(i) Closing Certificate .................................................... 18
(j) Other Documents ........................................................ 18
SECTION 4.02 Additional Closing Conditions ..................................... 18
ARTICLE 5 COVENANTS ................................................................... 19
SECTION 5.01 Financial Statements and Other Reports ............................ 19
SECTION 5.02 Conduct of Business and Maintenance of Existence .................. 20
SECTION 5.03 Maintenance of Properties ......................................... 20
SECTION 5.04 Compliance with Laws, etc. ........................................ 20
SECTION 5.05 Debt .............................................................. 20
SECTION 5.06 Prohibition on Liens .............................................. 21
SECTION 5.07 Restricted Payments ............................................... 21
SECTION 5.08 Transactions with Shareholders and Affiliates ..................... 22
SECTION 5.09 Restrictions on Organizational Documents .......................... 22
ARTICLE 6 EVENTS OF DEFAULT; REMEDIES; LIMITATION EVENTS .............................. 22
SECTION 6.01 Events of Default ................................................. 22
SECTION 6.02 Remedies for Events of Default .................................... 23
SECTION 6.03 Other Remedies for Breach ......................................... 24
SECTION 6.04 Limitation Events ................................................. 25
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SECTION 6.05 No Effect Upon HBO License Agreement or HBO Senior
Security Agreement ................................................ 25
ARTICLE 7 MISCELLANEOUS ............................................................... 26
SECTION 7.01 Notices ........................................................... 26
SECTION 7.02 No Waivers; Cumulative Remedies; Amendments ....................... 26
SECTION 7.03 Indemnification ................................................... 26
SECTION 7.04 Expenses; Documentary Taxes ....................................... 27
SECTION 7.05 Successors and Assigns ............................................ 27
SECTION 7.06 Assignment ........................................................ 27
SECTION 7.07 Confidentiality ................................................... 28
SECTION 7.08 New York Law; Submission to Jurisdiction; Waiver of
Jury Trial ........................................................ 28
SECTION 7.09 Severability ...................................................... 28
SECTION 7.10 Captions .......................................................... 29
SECTION 7.11 Counterparts ...................................................... 29
SCHEDULES
Schedule 1.01(f) - Existing Liens
Schedule 3.01 - Subsidiaries
Schedule 3.03 - Certain Dispositions
Schedule 7.01 - Addresses for Notices
EXHIBITS
Exhibit A - Form of Animation Security Agreement
Exhibit B - Form of Subordinated Note
Exhibit C-1 - Form of Opinion of Cravath, Swaine & Moore LLP
Exhibit C-2 - Form of Opinion of Katherine Kendrick, General Counsel of
DreamWorks Animation
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SUBORDINATED LOAN AGREEMENT
This SUBORDINATED LOAN AGREEMENT is dated as of ____________________, 2004
and entered into by and between DREAMWORKS ANIMATION SKG, INC., a Delaware
corporation ("DREAMWORKS ANIMATION"), and HOME BOX OFFICE, INC., a Delaware
corporation ("HBO").
R E C I T A L S
WHEREAS, HBO and DreamWorks L.L.C. ("DREAMWORKS") are parties to the HBO
License Agreement (as defined below);
WHEREAS, in connection with an amendment to the HBO License Agreement
dated as of May 3, 2000, HBO and DreamWorks entered into that certain
Subordinated Loan Agreement dated as of December 15, 2000, as amended by that
certain letter agreement dated as of December 20, 2000 (the "ORIGINAL
SUBORDINATED LOAN AGREEMENT"), pursuant to which HBO made a subordinated term
loan to DreamWorks in an aggregate principal amount equal to One Hundred
Twenty-Five Million Dollars ($125,000,000) (the "ORIGINAL SUBORDINATED LOAN");
and
WHEREAS, in connection with the transactions described in that certain
letter agreement dated as of __________, 2004 (the "TRANSACTION AGREEMENT")
among HBO, DreamWorks Animation and DreamWorks, including, but not limited to
(i) the formation, separation and initial public offering of DreamWorks
Animation; (ii) the execution of an amendment to the HBO License Agreement dated
of even date herewith (the "HBO LICENSE AGREEMENT AMENDMENT"); and (iii) the
execution of the Attornment Agreement, the Animation Security Agreement (each
such term, as defined below) and certain other documents in connection
therewith, HBO and DreamWorks have agreed to amend and restate certain of the
terms of the Original Subordinated Loan Agreement and DreamWorks Animation has
agreed to assume and repay a portion of the Original Subordinated Loan in a
principal amount equal to Eighty Million Dollars ($80,000,000) (of which, a
principal amount equal to Thirty Million Dollars ($30,000,000) will be prepaid
by DreamWorks Animation on the date hereof).
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
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management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" means this Subordinated Loan Agreement dated as of
_______________, 2004, by and between DreamWorks Animation and HBO, as such
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with its terms.
"ANIMATION SECURITY AGREEMENT" means that certain Security Agreement dated
of even date herewith between DreamWorks Animation and HBO substantially in the
form of Exhibit A hereto, as such agreement may be amended, supplemented or
otherwise modified from time to time in accordance with its terms, which
security agreement secures DreamWorks Animation's obligations to HBO with
respect to the Subordinated Loan and under all Subordinated Loan Documents,
including, but not limited to, this Agreement and the Attornment Agreement.
"ATTORNMENT AGREEMENT" means that certain Attornment Agreement dated of
even date herewith between DreamWorks Animation and HBO, as such agreement may
be amended, supplemented or otherwise modified from time to time in accordance
with its terms.
"AUTHORIZED OFFICER" means, with respect to any Person, its chairman,
chief executive officer, president, chief financial officer or chief operating
officer.
"BANKRUPTCY CODE" means Title 11 of the United States Code.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York or City of Los Angeles are
authorized or required by law to close.
"CLOSING" means the delivery of all of the documents set forth in SECTION
4.01 in form and substance satisfactory to HBO and the satisfaction of all of
the additional conditions set forth in SECTION 4.02.
"CLOSING DATE" means the date on which the Closing occurs.
"COLLATERAL" has the meaning assigned to such term in the Animation
Security Agreement.
"COLLATERAL DOCUMENTS" means the Animation Security Agreement and all
other instruments or documents delivered by DreamWorks Animation pursuant to
this Agreement or any of the other Subordinated Loan Documents in order to grant
to HBO, or perfect in favor of HBO, a Lien on the Collateral as security for the
Subordinated Loan.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED" means, when applied to an accounting term used with respect
to more than one Person, such accounting term determined on a consolidated basis
for such Persons in accordance with GAAP, including principles of consolidation
under GAAP.
"CONTROLLING PERSON" has the meaning set forth in SECTION 7.03.
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"DEBT" has the meaning assigned to the term "Indebtedness" in the Senior
Credit Agreement, as such agreement may be amended, modified, amended and
restated, supplemented or waived from time to time.
"DEFAULT" means any Event of Default or any event or condition which, with
the giving of notice or lapse of time or both, would, unless cured or waived,
become an Event of Default.
"DESIGNATED SENIOR AGENT" means JPMorgan Chase Bank, as administrative
agent under the Senior Credit Agreement, or any replacement Person designated by
the Designated Senior Lenders as the Designated Senior Agent with respect to the
matters set forth herein.
"DESIGNATED SENIOR LENDERS" means, from time to time, the lenders party to
the Senior Credit Agreement.
"DOLLARS" and "$" mean dollars in lawful currency of the United States of
America.
"DREAMWORKS" has the meaning set forth in the Recitals to this Agreement,
and includes any of its successors.
"DREAMWORKS ANIMATION" has the meaning set forth in the introduction to
this Agreement, and includes any of its successors.
"DREAMWORKS DISTRIBUTION AGREEMENT" means that certain Distribution
Agreement dated ____________ between DreamWorks and DreamWorks Animation, as
such agreement may be amended, supplemented or otherwise modified from time to
time in accordance with its terms and the terms of the Subordinated Loan
Documents.
"DREAMWORKS LOAN AGREEMENT" means that certain Amended and Restated
Subordinated Loan Agreement dated of even date herewith between HBO and
DreamWorks, as such agreement may be amended, supplemented or otherwise modified
from time to time in accordance with its terms.
"DREAMWORKS SERVICES AGREEMENT" means that certain Services Agreement
dated ____________ between DreamWorks and DreamWorks Animation, as such
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with its terms and the terms of the Subordinated Loan Documents.
"ELIGIBLE ASSIGNEE" means (a) any Person that is a commercial bank
organized under the laws of the United States, or any state thereof, and having
total assets in excess of $1,000,000,000, calculated in accordance with GAAP;
(b) any Person that is a commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or any political subdivision of any such country, and
having total assets in excess of $1,000,000,000, calculated in accordance with
GAAP, provided that such commercial bank is acting, through a branch or agency
located in the country in which it is organized or another country that is also
a member of the OECD; (c) any Affiliate of HBO; and (d) any other Person
consented to by DreamWorks Animation in writing as an "Eligible Assignee" for
the purposes of this Agreement. DreamWorks Animation agrees not to unreasonably
withhold its consent to any request by HBO to designate any Person as an
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"Eligible Assignee" pursuant to clause (d) of the preceding sentence for the
purposes of making an assignment pursuant to SECTION 7.06.
"EMPLOYEE EQUITY PLAN" means the DreamWorks Animation Equity Compensation
Plan dated _________, 2004, as such plan may be amended from time to time.
"EMPLOYEE EQUITY REPURCHASE" has the meaning set forth in SECTION 5.07(A).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EURODOLLAR RATE" means, with respect to the Subordinated Loan during a
specified Interest Period, the rate per annum obtained by dividing (a) the rate
of interest determined on the basis of the rate for deposits in Dollars for a
period equal to such Interest Period, commencing on the first day of such
Interest Period, appearing on page 3750 of the Dow Jones Markets screen as of
11:00 a.m., London time, two Business Days prior to the beginning of such
Interest Period by (b) a percentage equal to 100% minus the stated maximum rate
of all reserve requirements (including any marginal, emergency, supplemental,
special or other reserves) applicable on the first day of such Interest Period
to any member bank of the Federal Reserve System in respect of "Eurocurrency
liabilities" as defined in Regulation D (or any successor category of
liabilities under Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time). In the event that such rate does not
appear on Page 3750 of the Dow Jones Markets screen (or otherwise on such
screen), the "EURODOLLAR RATE" shall be determined by reference to such other
publicly available service for displaying eurodollar rates as may be agreed upon
by HBO and DreamWorks Animation, or in the absence of such agreement, the
"EURODOLLAR RATE" shall instead be the rate per annum equal to the rate at which
the Designated Senior Agent is offered Dollar deposits at or about 11:00 a.m.,
New York City time, two Business Days prior to the beginning of such Interest
Period, in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Eurodollar Loans (as defined
in the Senior Credit Agreement) are then being conducted for delivery on the
first day of such Interest Period, for a period equal to such Interest Period
and in an amount comparable to the amount of the Subordinated Loan to be
outstanding during such Interest Period.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 6.01.
"EQUITY INTEREST" means any equity, ownership or profit participation
interest in a Person.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 3.03.
"FINANCING LEASE" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"FUNDING DATE" means December 28, 2000.
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"GAAP" means, subject to SECTION 1.02, generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other Person as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the time of determination.
"GUARANTEE OBLIGATION" has the meaning assigned to such term in the Senior
Credit Agreement, as such agreement may be amended, modified, amended and
restated, supplemented or waived from time to time.
"HBO" has the meaning set forth in the introduction to this Agreement, and
includes any of its successors (other than any Person to whom a sale, assignment
or participation in the Subordinated Loan is made or sold).
"HBO LICENSE AGREEMENT" means that certain License Agreement between
DreamWorks and HBO dated as of March 7, 1995, as amended by that certain
amendment dated as of March 7, 1995, that certain amendment dated as of January
15, 1997, that certain amendment dated as of January 15, 1998, that certain
amendment dated as of June 24, 1999, that certain amendment dated as of
September 14, 1999, that certain amendment dated as of May 3, 2000, that certain
amendment dated as of December 26, 2000, that certain amendment dated as of
September 11, 2002 and the HBO License Agreement Amendment, as the same may
hereafter be amended, modified or supplemented from time to time.
"HBO LICENSE AGREEMENT AMENDMENT" has the meaning set forth in the
Recitals to this Agreement.
"HBO PAYMENT ACCOUNT" means that certain bank account located at JPMorgan
Chase Bank, 4 New York Plaza, New York, NY 10004; Account Name: Home Box Office;
Account Number: 323011101; ABA Number: 021000021.
"HBO SENIOR SECURITY AGREEMENT" means that certain Security Agreement
between DreamWorks and HBO dated as of March 7, 1995, as the same may hereafter
be amended, modified or supplemented from time to time.
"INDEMNIFIED PARTIES" or "INDEMNIFIED PARTY" has the meaning set forth in
SECTION 7.03.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 7.03.
"INTEREST PAYMENT DATE" has the meaning set forth in SECTION 2.06(B).
"INTEREST PERIOD" means, initially, the period commencing on the Funding
Date and ending three months thereafter, and thereafter, each period commencing
on the last day of the next preceding Interest Period and ending three months
thereafter; provided, that, (a) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event such
Interest Period
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shall end on the immediately preceding Business Day; (b) no Interest Period may
extend beyond the Scheduled Maturity Date; and (c) any Interest Period that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month.
"INTEREST RATE" has the meaning set forth in SECTION 2.06(A).
"LEVERAGE RATIO" has the meaning assigned to such term in the Senior
Credit Agreement, as such agreement may be amended or waived from time to time.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, but not limited to, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the ability
of DreamWorks Animation and its Subsidiaries, taken as a whole, to perform their
respective covenants and obligations in a timely manner under the Subordinated
Loan Documents.
"ORGANIZATIONAL DOCUMENTS" of a corporation means the certificate or
articles of incorporation and the bylaws of such corporation.
"ORIGINAL SUBORDINATED LOAN" has the meaning set forth in the Recitals to
this Agreement.
"ORIGINAL SUBORDINATED LOAN AGREEMENT" has the meaning set forth in the
Recitals to this Agreement.
"PERMITTED ENCUMBRANCES" means the following types of Liens; provided,
however, for the avoidance of doubt, any Lien on the Collateral, including, but
not limited to, DreamWorks Animation's rights to receive payments from
DreamWorks or HBO in connection with the Attornment Agreement or the HBO License
Agreement shall not be a Permitted Encumbrance; and, provided, further, no
Permitted Encumbrance shall be construed or interpreted as having any effect or
limitation on HBO's security interest under the Animation Security Agreement:
(a) Liens for taxes (so long as the documentation relating to such
obligations is reasonably satisfactory to HBO) not yet due or which are
being contested in good faith by appropriate proceedings; provided that
adequate reserves with respect thereto are maintained on the books of
DreamWorks Animation or its Subsidiaries, as the case may be, in
conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings;
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(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which do not in
any case materially detract from the value of the property subject thereto
or materially interfere with the ordinary conduct of the business of
DreamWorks Animation or the applicable Subsidiary;
(f) Liens in existence on the date hereof and listed on Schedule
1.01(f).
(g) Liens securing Debt of DreamWorks Animation and its Subsidiaries
incurred to finance the acquisition of fixed or capital assets; provided
that (1) such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets; (2) such Liens do not at any
time encumber any property other than the property financed by such Debt;
and (3) the amount of Debt secured thereby is not increased;
(h) Liens arising out of any financing or other transaction in which
a Person purchases, factors or otherwise finances accounts receivable (or
interests therein) of DreamWorks or any of its Subsidiaries;
(i) rights of licensees under access agreements pursuant to which
such licensees have access to duplicating material for the purpose of
making prints of films licensed to them, and rights of distributors,
exhibitors, licensees and other Persons in films created in connection
with the distribution and exploitation of such films in the ordinary
course of business and not securing any Debt;
(j) Liens securing Debt incurred in connection with acquiring rights
to films in the ordinary course of business; provided that (1) the Debt
secured by such Liens does not constitute a general obligation of
DreamWorks Animation or any of its Subsidiaries and that under the terms
of such Debt the lender thereof has recourse only to such films and the
rights pertaining thereto and, in each case, to the proceeds thereof; (2)
such Liens shall be created substantially simultaneously with the
acquisition or production of such films; and (3) such Liens do not at any
time encumber any property other than the films being produced or
acquired;
(k) Liens securing Debt arising from advances to DreamWorks
Animation or any of its Subsidiaries made by licensees of product in order
to finance the production thereof; provided that the aggregate principal
amount of such Debt shall not exceed (as to DreamWorks Animation and all
of its Subsidiaries) $50,000,000 at any time outstanding;
(l) Liens (not otherwise permitted hereunder) which secure
Indebtedness not exceeding (as to DreamWorks Animation and all of its
Subsidiaries) $25,000,000 in aggregate principal amount at any time
outstanding;
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(m) Liens in favor of HBO securing the obligations of DreamWorks
Animation to HBO in connection with the Attornment Agreement and the
Animation Security Agreement;
(n) Liens in favor of the Designated Senior Agent, on behalf of the
Designated Senior Lenders, in the assets and property of DreamWorks
Animation, but excluding therefrom any Liens on the Collateral, including,
but not limited to, any Liens on DreamWorks Animation's rights to receive
payments of license fees from DreamWorks or HBO in connection with the
Attornment Agreement or HBO License Agreement, as security for the Senior
Debt;
(o) Liens securing the performance of DreamWorks Animation's
obligations to DreamWorks under the DreamWorks Distribution Agreement;
provided, that such Liens do not include any Liens on the Collateral,
including, but not limited to, any Liens on DreamWorks Animation's rights
to receive payments of license fees from DreamWorks or HBO in connection
with the Attornment Agreement or HBO License Agreement, as security for
the Senior Debt; and
(p) other Liens (not otherwise permitted hereunder) that are
permitted by the Senior Credit Agreement, as such agreement or guarantee
may be amended, modified, amended and restated, supplemented or waived
from time to time.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"POST-DEFAULT RATE" has the meaning set forth in SECTION 2.06(A).
"PROJECTED SOURCES" has the meaning assigned to such term in the Senior
Credit Agreement.
"PROJECTED USES" has the meaning assigned to such term in the Senior
Credit Agreement.
"REMEDIES BAR PERIOD" means a period of up to one year commencing with the
delivery, as provided in SECTION 7.01, of written notice to HBO and DreamWorks
Animation by the Designated Senior Agent but only so long as any Event of
Default (as defined in the Senior Credit Agreement) shall have occurred and be
continuing under the Senior Credit Agreement; provided, however, the Designated
Senior Agent shall only be permitted to give one such notice with respect to any
one Event of Default; and provided, further, that any and all Remedies Bar
Periods from time to time in effect hereunder shall expire no later than 120
days after the Scheduled Maturity Date.
"REORGANIZATION" means any voluntary or involuntary dissolution,
winding-up, total or partial liquidation or reorganization, or bankruptcy,
insolvency, receivership or other statutory or common law proceedings or
arrangements involving DreamWorks Animation or any of its assets or the
readjustment of its liabilities or any assignment for the benefit of creditors
or any marshaling of its assets or liabilities.
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"RESTRICTED PAYMENT" means (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock or membership
interests of DreamWorks Animation now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock or membership interest
to the holders of that class; (b) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of stock or membership interests of DreamWorks Animation
now or hereafter outstanding; and (c) any payment made to retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock or membership interest of DreamWorks Animation now
or hereafter outstanding.
"SCHEDULED MATURITY DATE" means November 1, 2007.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR CREDIT AGREEMENT" means: (a) that certain Credit Agreement dated
as of October ___, 2004, among DreamWorks Animation, the several banks and other
financial institutions from time to time parties to such Credit Agreement,
_______________, as syndication agent, _______________, as documentation agent,
and JPMorgan Chase Bank, as administrative agent, as the same hereafter may be
modified, amended, amended and restated or supplemented (including any such
modification, amendment, amendment and restatement or supplement that increases
the principal amount available under such Credit Agreement); and (b) any
successor or replacement senior credit facility that is designated as such by
DreamWorks Animation, as such senior credit facility may be modified, amended,
amended and restated or supplemented (including any such modification,
amendment, amendment and restatement or supplement that increases the principal
amount available under such Credit Agreement); provided, however, that only one
such Senior Credit Agreement may exist at any one time.
"SENIOR DEBT" means all principal, premium, if any, and interest
(including interest accruing subsequent to the filing of, or which would have
accrued but for the filing of, a petition for bankruptcy or other
Reorganization, whether or not such interest is an allowable claim in such
bankruptcy proceeding or other Reorganization, calculated at the rate set forth
for overdue loans in the Senior Credit Agreement) of or on (including
obligations under interest rate agreements entered into in connection with) Debt
of DreamWorks Animation incurred under the Senior Credit Agreement, and all
other amounts payable pursuant to the Senior Credit Agreement or any of the loan
documents referred to therein, or any document executed and delivered by
DreamWorks Animation in connection therewith, in each case, whether presently
outstanding or hereafter created or incurred.
"SENIOR LENDERS" means the lenders party to the Senior Credit Agreement
and the term "SENIOR LENDER" means any lender party to the Senior Credit
Agreement.
"SUBORDINATED LOAN" means an aggregate principal amount equal to Eighty
Million Dollars ($80,000,000), which amount reflects the portion of the Original
Subordinated Loan that, from and after the date hereof, is being assumed by
DreamWorks Animation in accordance with the terms of this Agreement and the
Subordinated Note.
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"SUBORDINATED LOAN DOCUMENTS" means this Agreement, the Subordinated Note,
the Transaction Agreement, the Collateral Documents, the Attornment Agreement
and all Subordinated Loan Documents (as defined in the DreamWorks Loan
Agreement).
"SUBORDINATED NOTE" means the Subordinated Note, substantially in the form
set forth as Exhibit B hereto, issued by DreamWorks Animation in accordance with
the terms of this Agreement, as such note may be amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"TEST PERIOD" means, as of the last day of any fiscal quarter (each such
day, a "TEST DATE"), the 12 month period commencing on the date immediately
succeeding such Test Date.
"TRANSACTION AGREEMENT" has the meaning set forth in the Recitals to this
Agreement, as such agreement may be amended, supplemented or otherwise modified
from time to time in accordance with its terms.
SECTION 1.02 ACCOUNTING TERMS. Unless otherwise specified herein, all
accounting terms used herein (and in any other Subordinated Loan Document and
any certificate or document pursuant hereto or thereto) shall be interpreted,
all accounting determinations shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with GAAP as
applied from time to time under the Senior Credit Agreement.
ARTICLE 2
LOAN
SECTION 2.01 INTENTIONALLY DELETED .
SECTION 2.02 FUNDING OF ORIGINAL SUBORDINATED LOAN. Each of the parties
hereto acknowledges that the Original Subordinated Loan was fully funded on the
Funding Date and that a principal amount equal to Forty-Five Million Dollars
($45,000,000) is payable by DreamWorks in accordance with the terms of the
DreamWorks Loan Agreement. Each of the parties hereto further acknowledges and
agrees that DreamWorks Animation has assumed a principal amount equal to Eighty
Million Dollars ($80,000,000), which amount shall be payable, together with
interest thereon, by DreamWorks Animation in accordance with the terms hereof.
The parties further acknowledge and agree that DreamWorks Animation has agreed
to prepay a principal amount equal to Thirty Million Dollars ($30,000,000) on
the date hereof. The parties further acknowledge and agree that amounts borrowed
under the Original Subordinated Loan Agreement and subsequently repaid or
prepaid may not be reborrowed.
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SECTION 2.03 SUBORDINATED NOTE. DreamWorks Animation shall execute and
deliver to HBO on or prior to the Closing Date the Subordinated Note to evidence
the Subordinated Loan to DreamWorks Animation in accordance with this Agreement,
in the principal amount of the Subordinated Loan and with other appropriate
insertions.
SECTION 2.04 MATURITY OF THE SUBORDINATED LOAN. The Subordinated Loan is
not subject to any scheduled interim amortization. The Subordinated Loan shall
mature, and the then unpaid principal amount thereof shall become due and
payable (together with interest accrued thereon), in cash, on the Scheduled
Maturity Date. Notwithstanding the foregoing, all payments with respect to the
Subordinated Loan are subject to the subordination provisions set forth in
Section 2 of the Subordinated Note.
SECTION 2.05 PREPAYMENTS AND REPAYMENTS OF THE SUBORDINATED LOAN.
(a) Mandatory Prepayments. DreamWorks Animation shall make a payment of
principal in an amount equal to Thirty Million Dollars ($30,000,000) on the date
hereof. Such payment shall be accompanied by all interest accrued on the amount
so paid.
(b) Voluntary Prepayments. Subject to the consent of the Senior Lenders as
long as any Senior Debt remains unpaid (if such consent is required under the
terms of the Senior Debt as in effect at the time of such prepayment),
DreamWorks Animation at its option may, upon 30 days' written notice to HBO, at
any time, prepay, without premium or penalty, all or any part of the principal
amount of the Subordinated Loan. Any voluntary prepayments made pursuant to this
SECTION 2.05(B) shall be applied to reduce the outstanding principal amount of
the Subordinated Loan that is unpaid at the time of such prepayment, together
with accrued interest through the date of prepayment.
(c) Payment Mechanics. All payments of principal and interest with respect
to the Subordinated Loan shall be made by wire transfer in Dollars in same day
funds to the HBO Payment Account (or to such other account as HBO may direct in
writing to DreamWorks Animation). Whenever any payment on the Subordinated Loan
is stated to be due on a day that is not a Business Day, such payment shall
instead be made on the next Business Day, and such extension of time shall be
included in the computation of interest payable on the Subordinated Loan. Each
payment made hereunder will be credited first to interest then due and the
remainder of such payment will be credited to principal, and interest will
thereupon cease to accrue upon the principal so credited.
SECTION 2.06 INTEREST.
(a) Subject to SECTION 6.04, the Subordinated Loan shall bear interest for
each day during each Interest Period with respect thereto at a rate per annum
equal to the Eurodollar Rate plus 0.50% (50 basis points) per annum (the
"INTEREST RATE"); provided, that upon the occurrence and during the continuance
of any of the following events: (1) an Event of Default; (2) a material default
by DreamWorks under the HBO License Agreement; (3) a material default by
DreamWorks Animation under the Attornment Agreement; or (4) the failure on the
part of DreamWorks Animation duly to observe or perform the covenants and
agreements contained in
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SECTION 5.05, the outstanding principal amount of the Subordinated Loan and, to
the extent permitted by applicable law, any interest and other amounts not paid
when due, shall bear interest at a rate that is 4.00% (400 basis points) per
annum in excess of the Interest Rate (the "POST-DEFAULT RATE").
(b) Subject to Section 2 of the Subordinated Note, interest on the
Subordinated Loan shall be due and payable (1) quarterly in arrears on the last
day of each Interest Period; (2) upon any prepayment or repayment of the
Subordinated Loan (to the extent so prepaid or repaid); and (3) on the Scheduled
Maturity Date (each such date, an "INTEREST PAYMENT DATE"), at the rate per
annum determined in accordance with SECTION 2.06(A). Interest on the
Subordinated Loan shall accrue from and including the most recent Interest
Payment Date to which interest has been paid on the Subordinated Loan to but not
including the date of payment, or if no interest has been paid thereon, from the
date of issuance thereof until payment in full of the principal thereof.
Interest shall be calculated on the basis of a 360-day year and paid for the
actual number of days elapsed.
(c) Anything in this Agreement or the Subordinated Note to the contrary
notwithstanding, the interest rate on the Subordinated Loan shall in no event be
in excess of the maximum rate permitted by applicable law.
SECTION 2.07 USE OF PROCEEDS. The proceeds from the Subordinated Loan have
been used to repay, in part, the senior debt of DreamWorks and for working
capital and general corporate purposes.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
DreamWorks Animation represents and warrants to HBO as set forth below:
SECTION 3.01 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING AND
SUBSIDIARIES.
(a) Organization and Powers. DreamWorks Animation is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware.
DreamWorks Animation has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Subordinated Loan Documents to which
it is a party and to carry out the transactions contemplated thereby.
(b) Qualification and Good Standing. DreamWorks Animation is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified or in good standing has
not had and would not reasonably be expected to have a Material Adverse Effect.
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(c) Subsidiaries. All of the Subsidiaries of DreamWorks Animation as of
the Closing Date are identified in Schedule 3.01 annexed hereto. The capital
stock of each of the Subsidiaries of DreamWorks Animation identified in Schedule
3.01 annexed hereto is duly authorized, validly issued, fully paid and
nonassessable. Each of the Subsidiaries of DreamWorks Animation identified in
Schedule 3.01 annexed hereto is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation set forth therein, has all requisite corporate power and authority
to own and operate its properties and to carry on its business as now conducted
and as proposed to be conducted, and is qualified to do business and in good
standing in every jurisdiction where its assets are located and wherever
necessary to carry out its business and operations, in each case except where
failure to be so qualified or in good standing or a lack of such corporate power
and authority has not had and would not reasonably be expected to have a
Material Adverse Effect. Schedule 3.01 annexed hereto correctly sets forth, as
of the Closing Date, the ownership interest of DreamWorks Animation and each of
its Subsidiaries in each of the Subsidiaries of DreamWorks Animation identified
therein.
SECTION 3.02 AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The execution,
delivery and performance by DreamWorks Animation of each of the Subordinated
Loan Documents to which it is a party and the issuance by DreamWorks Animation
of the Subordinated Note have been duly and validly authorized and are within
its corporate or other powers. Each of the Subordinated Loan Documents to which
DreamWorks Animation is a party has been duly executed and delivered by
DreamWorks Animation and constitutes its valid and binding agreement,
enforceable against DreamWorks Animation in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
SECTION 3.03 FINANCIAL CONDITION. The audited Consolidated balance sheet
of DreamWorks Animation as at December 31, 2001, December 31, 2002 and December
31, 2003, and the related Consolidated statements of income and retained
earnings and of cash flows for the fiscal years ended on such dates, reported on
by and accompanied by an unqualified report from Ernst & Young LLP, present
fairly the Consolidated financial condition of DreamWorks Animation as at such
date, and the Consolidated results of its operations and its Consolidated
retained earnings and cash flows for the fiscal years then ended. The unaudited
Consolidated balance sheets of DreamWorks Animation as at March 31, 2004 and
June 30, 2004, and the related unaudited Consolidated statements of income and
retained earnings and of cash flows for the portion of the fiscal year ended on
such date, present fairly the Consolidated financial condition of DreamWorks
Animation as at such date, and the Consolidated results of its operations and
its Consolidated retained earnings and cash flows for the portion of the fiscal
year then ended (subject to normal year-end audit adjustments). All such audited
and unaudited financial statements (with the related notes and schedules
thereto, the "FINANCIAL STATEMENTS"), have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). Except as set forth
on Schedule 3.03 annexed hereto, DreamWorks Animation and its Subsidiaries do
not have any material Guarantee Obligation, contingent liabilities or
liabilities for taxes, or any long-term leases or unusual forward or long-term
commitments, including any
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interest rate or foreign currency swap or exchange transaction or other
obligation in respect of derivatives, that are not reflected in the audited
financial statements as at December 31, 2003 referred to in this paragraph.
Except as set forth on Schedule 3.03 annexed hereto, during the period from
December 31, 2003 to and including the date hereof, there has been no sale,
transfer or other disposition by DreamWorks Animation or any of its Subsidiaries
of any material part of its business or property other than in the ordinary
course of business and other than with respect to the transactions described in
the Transaction Agreement.
SECTION 3.04 TITLE TO PROPERTIES; LIENS . DreamWorks Animation has (a)
good, sufficient and legal title to (in the case of fee interests in real
property); (b) valid leasehold interests in (in the case of leasehold interests
in real or personal property); or (c) good title to (in the case of all other
personal property), all of its properties and assets reflected in the Financial
Statements, except for assets disposed of since the date of the last of the
Financial Statements in the ordinary course of business or in accordance with
the transactions described in the Transaction Agreement and except where the
failure to have a valid leasehold interest or such title would not reasonably be
expected to have a Material Adverse Effect. Except as permitted by this
Agreement, all such properties and assets are free and clear of Liens, except
for Permitted Encumbrances.
SECTION 3.05 LITIGATION; ADVERSE FACTS. There are no actions, suits,
proceedings, arbitrations or governmental investigations (whether or not
purportedly on behalf of DreamWorks Animation) at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign (including any
environmental claims) that are pending or, to the knowledge of DreamWorks
Animation, threatened against DreamWorks Animation or any property of DreamWorks
Animation and that, individually or in the aggregate, would, if determined
adversely, reasonably be expected to result in a Material Adverse Effect.
DreamWorks Animation is not (a) in violation of any applicable laws (including,
but not limited to, environmental laws and ERISA) that, individually or in the
aggregate, would reasonably be expected to result in a Material Adverse Effect;
or (b) subject to or in default with respect to any final judgments, writs,
injunctions, decrees, rules or regulations of any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
would reasonably be expected to result in a Material Adverse Effect.
SECTION 3.06 GOVERNMENTAL REGULATION. Neither DreamWorks Animation nor any
of its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce
Act or the Investment Company Act of 1940, as amended, or under any other
federal or state statute or regulation (other than Regulation X of the Board of
Governors of the Federal Reserve System) which may limit its ability to incur
Debt or which may otherwise render all or any portion of the Subordinated Loan
unenforceable.
SECTION 3.07 DISCLOSURE. No representation or warranty of DreamWorks
Animation contained in the Subordinated Loan Documents to which it is a party or
in any other document,
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certificate or written statement furnished to HBO by or on behalf of DreamWorks
Animation for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact (known to DreamWorks Animation, in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading in any material respect in light of the circumstances in
which the same were made.
SECTION 3.08 GOVERNMENTAL AUTHORIZATION AND REQUIRED CONSENTS. The
execution and delivery by DreamWorks Animation of each of the Subordinated Loan
Documents to which it is a party does not and will not, the assumption of the
Subordinated Loan will not, the grant by DreamWorks Animation of the Liens
purported to be created in favor of HBO pursuant to any of the Collateral
Documents does not and will not and the consummation of the transactions
contemplated hereby and thereby will not, require any action by or in respect
of, or filing with, any governmental body, agency or governmental official or
the consent, authorization or approval of any other Person except (a) such
actions or filings that have been undertaken or made prior to the Closing Date
and that will be in full force and effect on and as of the Closing Date or which
are not required to be filed on or prior to the Closing Date; and (b) such
actions or filings (1) the failure of which to take or obtain has not had and
would not reasonably be expected to have a Material Adverse Effect; or (2) that
relate to the security interests granted or to be granted pursuant to the
Collateral Documents.
SECTION 3.09 NO CONFLICTS. Subject to the consent of the Senior Lenders,
the execution and delivery by DreamWorks Animation of each of the Subordinated
Loan Documents to which it is a party does not and will not, the assumption of
the Subordinated Loan will not, the consummation of the transactions
contemplated hereby and thereby will not and the compliance with the terms and
provisions of the Subordinated Loan Documents to which it is a party will not
(a) conflict with or result in a breach of, or require any consent under (1) the
Organizational Documents of DreamWorks Animation; (2) subject to SECTION 3.08,
any provision of applicable law or regulation, the violation of which would
reasonably be expected to have a Material Adverse Effect; or (3) any agreement,
judgment, injunction, order, decree or other instrument binding upon DreamWorks
Animation or any of its assets, the violation of which would reasonably be
expected to have a Material Adverse Effect; (b) constitute a default under, or
result in the termination of, or result in the acceleration or mandatory
prepayment of any Debt evidenced by, any such agreement or instrument; or (c)
result in the creation or imposition of any Lien upon any property of DreamWorks
Animation pursuant to the terms of any such agreement or instrument.
SECTION 3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 2003, and
other than as a result of the transactions described in the Transaction
Agreement, there has been no development or event that has had or could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.11 TAXES. Each of DreamWorks Animation and its Subsidiaries has
filed or caused to be filed all material tax returns which, to the knowledge of
DreamWorks Animation, are required to be filed and has paid all taxes shown to
be due and payable on said returns or on
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any assessments made against it or any of its property by any governmental
authority (other than any the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of DreamWorks
Animation or its Subsidiaries, as the case may be); no tax Lien has been filed,
and, to the knowledge of DreamWorks Animation, no claim is being asserted with
respect to any such tax, fee or other charge.
SECTION 3.12 MATTERS RELATING TO COLLATERAL.
(a) Creation, Perfection and Priority of Liens. The execution and delivery
of the Collateral Documents by DreamWorks Animation, together with the actions
taken on or prior to the Closing Date pursuant to SECTION 4.01(D), are effective
to create in favor of HBO, as security for the Secured Obligations (as defined
in the Animation Security Agreement), a valid and perfected first priority lien
on all of the Collateral.
(b) Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (1) the grant by DreamWorks Animation of
the Liens purported to be created in favor of HBO pursuant to any of the
Collateral Documents; or (2) the exercise by HBO of any rights or remedies in
respect of any Collateral (whether specifically granted or created pursuant to
any of the Collateral Documents or created or provided for by applicable law),
except for Collateral filings and for advance notices of foreclosure required
under applicable law.
(c) Absence of Third-Party Filings. Except such as may have been filed in
favor of HBO or with respect to Permitted Encumbrances, no effective UCC
financing statement, fixture filing or other instrument similar in effect
covering all or any part of the Collateral is on file in any filing or recording
office.
ARTICLE 4
CONDITIONS PRECEDENT TO CLOSING
SECTION 4.01 CLOSING DOCUMENTS. The Closing shall be deemed to have
occurred upon the receipt by HBO of the following documents, each of which shall
be satisfactory to HBO and its counsel in form and substance and the
satisfaction of the additional closing conditions set forth in SECTION 4.02:
(a) Agreement and Subordinated Note. This Agreement and the Subordinated
Note, each duly executed and delivered by DreamWorks Animation.
(b) DreamWorks Documents. The DreamWorks Loan Agreement and all
Subordinated Loan Documents (as defined in the DreamWorks Loan Agreement), each
duly executed and delivered by DreamWorks.
(c) HBO License Agreement Amendment. The HBO License Agreement Amendment,
duly executed and delivered by DreamWorks and the Attornment Agreement, duly
executed and delivered by DreamWorks Animation and DreamWorks.
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(d) Collateral Documents. The Animation Security Agreement, duly executed
and delivered by DreamWorks Animation and granting to HBO a first priority
security interest in the Collateral, accompanied by (1) appropriately completed
UCC-1 financing statements naming HBO as secured party and DreamWorks Animation
as debtor with respect to the Collateral filed in the State of Delaware and such
other jurisdictions as HBO shall determine in its sole good faith discretion;
(2) a copyright mortgage, duly executed by DreamWorks Animation which has been
or will be submitted for recordation with the U.S. Copyright Office; and (3)
such other documents as the Animation Security Agreement shall specify or as HBO
shall have reasonably requested, in order to create, perfect and establish the
priority of the Lien granted by the Animation Security Agreement.
(e) Consents. All consents of other Persons, if any, in each case that are
necessary in connection with the transactions contemplated by the Subordinated
Loan Documents and DreamWorks Loan Agreement, and each of the foregoing shall be
in full force and effect.
(f) Corporate Documents. The following documents with respect to
DreamWorks Animation, each certified as indicated below:
(1) a copy of DreamWorks Animation's certificate of incorporation
certified as of a recent date by the Secretary of State of Delaware, together
with copies of any agreements entered into by DreamWorks Animation governing the
terms or relative rights of its shares and any agreements entered into by
shareholders relating to DreamWorks Animation;
(2) a certificate of the Secretary of State of Delaware, dated as of
a recent date, and certifying as to the good standing of, and payment of taxes
by, DreamWorks Animation, and if available, which lists the charter documents on
file in the office of such Secretary of State;
(3) a copy of DreamWorks Animation's foreign qualification
certificate, certified as of a recent date by the Secretary of State of
California and each other jurisdiction where DreamWorks Animation is qualified
as a foreign corporation, together with a certificate dated as of a recent date
as to the good standing and/or authority to do business of, and payment of taxes
by, DreamWorks Animation issued by the Secretary of State of each jurisdiction
in which DreamWorks Animation is qualified as a foreign corporation;
(4) a certificate of the secretary of DreamWorks Animation (or other
person with proper authority to execute the same on behalf of DreamWorks
Animation), dated the Closing Date and certifying (i) that attached to such
certificate is a true and complete copy of resolutions duly adopted by the board
of directors of DreamWorks Animation authorizing the execution, delivery and
performance of the DreamWorks Distribution Agreement, the DreamWorks Services
Agreement, the Subordinated Loan Documents to which it is a party and the
Subordinated Loan under this Agreement, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect; (ii) that the
certificate of incorporation of DreamWorks Animation has not been amended since
the date of the last amendment thereto indicated on the certificate of the
Secretary of State furnished pursuant to clause (1) above except to the extent
specified in such certificate; and (iii) as to the incumbency and specimen
signature of each officer of DreamWorks Animation executing the Subordinated
Loan Documents to
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which it is a party and each other document to be delivered by DreamWorks
Animation from time to time in connection with any Subordinated Loan Document
(and HBO may conclusively rely on such certificate until HBO receives notice in
writing from DreamWorks Animation); and
(5) such additional supporting documents as HBO or its counsel may
reasonably request.
(g) Opinions of Counsel to DreamWorks Animation. Opinions, in
substantially the form of Exhibits C-1 and C-2 attached hereto, dated the
Closing Date, of Cravath, Swaine & Moore LLP, outside counsel to DreamWorks
Animation, and of Katherine Kendrick, general counsel of DreamWorks Animation,
covering such matters as HBO may reasonably request.
(h) UCC Searches. UCC, copyright office and other searches satisfactory to
HBO in the States of California, New York and Delaware, the U.S. Copyright
Office and such other jurisdictions as HBO shall determine in its sole good
faith discretion, indicating that no other filings (other than in connection
with Permitted Encumbrances) with regard to the Collateral are of record in any
jurisdiction in which it shall be necessary or desirable for HBO to make a
filing to provide HBO with a first priority perfected security interest in the
Collateral pursuant to the applicable laws of the United States, any state
thereof or any other jurisdiction specified by HBO in its good faith discretion.
(i) Closing Certificate. A certificate, executed by an Authorized Officer
of DreamWorks Animation, dated the Closing Date, certifying as to the matters
set forth in SECTION 4.02(A), (B) and (C), in each case, as of the Closing Date.
(j) Other Documents. Such other documents as HBO or its counsel may
reasonably request.
SECTION 4.02 ADDITIONAL CLOSING CONDITIONS. The Closing is subject to the
satisfaction of the following additional conditions precedent:
(a) No Default or Event of Default shall have occurred and be continuing
and no Event of Default (as defined in the Original Subordinated Loan Agreement)
shall have occurred and be continuing under the Original Subordinated Loan
Agreement.
(b) The representations and warranties made by DreamWorks Animation in
SECTION 3 shall be true and complete in all material respects on and as of the
Closing Date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date).
(c) No material default by DreamWorks shall have occurred and be
continuing under the HBO License Agreement and no material default by DreamWorks
Animation shall have occurred and be continuing under the Attornment Agreement.
(d) All of the conditions precedent to closing set forth in the
Transaction Agreement and in the DreamWorks Loan Agreement shall have been
satisfied, including, but not limited to, the
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prepayment by DreamWorks Animation of the Subordinated Loan in a principal
amount equal to Thirty Million Dollars ($30,000,000).
ARTICLE 5
COVENANTS
DreamWorks Animation hereby agrees that, from and after the Closing Date
and so long as any part of the Subordinated Loan remains outstanding and unpaid
or any other amount is owing to HBO, and for the benefit of HBO:
SECTION 5.01 FINANCIAL STATEMENTS AND OTHER REPORTS. DreamWorks Animation
shall furnish to HBO:
(a) as soon as available, but in any event within 90 days after the end of
each fiscal year of DreamWorks Animation, a copy of the Consolidated balance
sheet of DreamWorks Animation and its Consolidated Subsidiaries as at the end of
such year and the related Consolidated statements of income and retained
earnings and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without
qualification, by independent certified public accountants of nationally
recognized standing;
(b) as soon as available, but in any event not later than 45 days after
the end of each of the first three quarterly periods of each fiscal year of
DreamWorks Animation (commencing with the fiscal quarter ending on September 30,
2004), a copy of the unaudited Consolidated balance sheet of DreamWorks
Animation and its Consolidated Subsidiaries as at the end of such quarter and
the related unaudited Consolidated statements of income and retained earnings
and of cash flows of DreamWorks Animation and its Consolidated Subsidiaries for
such quarter and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the previous
year;
(c) within 15 days after the delivery of the financial statements referred
to in SECTION 5.01(A), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;
(d) concurrently with the delivery of the financial statements referred to
in SECTION 5.01(A) and within 15 days after the delivery of the financial
statements referred to in SECTION 5.01(B), a certificate of an Authorized
Officer (1) stating that such Authorized Officer has obtained no knowledge of
any Default or Event of Default except as specified in such certificate; (2)
including calculations in reasonable detail with respect to compliance with
SECTION 5.05 and SECTION 5.07; and (3) certifying that the financial statements
delivered for such period are fairly stated in all material respects (subject to
normal year end adjustments);
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(e) concurrently with the delivery of the financial statements referred to
in SECTION 5.01(A) and within 15 days after the delivery of the financial
statements referred to in SECTION 5.01(B), projections in form and scope
reasonably acceptable to HBO for the Test Period commencing immediately after
the fiscal period covered by such financial statements, including an operating
budget and cash flow budget of DreamWorks Animation and its Subsidiaries for
such period and sufficient information in reasonable detail to support the
calculation of Projected Sources and Projected Uses for such Test Period, such
projections to be accompanied by a certificate of an Authorized Officer to the
effect that such projections have been prepared on the basis of sound financial
planning practice and that such Authorized Officer has no reason to believe they
are incorrect or misleading in any material respect;
(f) promptly after the same become publicly available, copies of all
periodic reports, proxy statements and other materials filed by DreamWorks
Animation or any of its Subsidiaries with the Securities and Exchange Commission
(or any successor thereto) or any national securities exchange, or distributed
by DreamWorks Animation or any of its Subsidiaries to its security holders
generally, as the case may be; and
(g) with reasonable promptness, such other information and data with
respect to DreamWorks Animation or any of its Subsidiaries as from time to time
may be reasonably requested by HBO.
All such financial and other statements shall be complete and correct in all
material respects and shall be prepared in reasonable detail. All such financial
statements shall be prepared in accordance with GAAP applied consistently
throughout the periods reflected therein (except as may be approved by such
Authorized Officer or accountants, as the case may be, and disclosed therein).
SECTION 5.02 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. DreamWorks
Animation shall continue to engage in the entertainment business. DreamWorks
Animation shall preserve, renew and keep in full force and effect its existence
and take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business.
SECTION 5.03 MAINTENANCE OF PROPERTIES. DreamWorks Animation shall
maintain or cause to be maintained in good repair, working order and condition,
ordinary wear and tear excepted, all properties necessary to the operation of
the business of DreamWorks Animation.
SECTION 5.04 COMPLIANCE WITH LAWS, ETC. DreamWorks Animation shall comply
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority (including, but not limited to, all environmental
laws, ERISA and payment of taxes), noncompliance with which would reasonably be
expected to cause, individually or in the aggregate, a Material Adverse Effect.
SECTION 5.05 DEBT. DreamWorks Animation shall not, directly or indirectly,
create, incur, assume or directly or indirectly guaranty, or otherwise become or
remain directly or indirectly liable with respect to, any Debt unless, after
giving pro forma effect thereto and the
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application of proceeds thereof, DreamWorks Animation shall be in compliance
with the Leverage Ratio covenant set forth in Section 7.1(b) of the Senior
Credit Agreement (or such other debt to capitalization ratio covenant as may
appear in any successor or replacement Senior Credit Agreement, as such
provisions may be amended or waived from time to time by DreamWorks Animation
and the applicable Senior Lenders (including, but not limited to, any such
amendment or waiver that results from the amendment or modification of the
definition of any term that is used (or any interpretive provision that is
applied) in the calculation of the Leverage Ratio covenant); provided, however,
that for purposes of determining compliance by DreamWorks Animation with this
SECTION 5.05, the maximum permitted Leverage Ratio or other debt to
capitalization ratio (as such ratio may be amended or waived from time to time)
shall be deemed to be increased by 0.25 over the ratio then set forth in the
then-existing Senior Credit Agreement, as the case may be (in either case, as so
amended or waived). By way of example, and solely for the avoidance of
confusion, if the then-applicable Leverage Ratio as set forth in Section 7.1(b)
of the Senior Credit Agreement were 0.60 to 1.00, DreamWorks shall be deemed to
be in compliance with this SECTION 5.05 if the Leverage Ratio is not greater
than 0.85 to 1.00.
SECTION 5.06 PROHIBITION ON LIENS. DreamWorks Animation shall not,
directly or indirectly, create, incur, assume or permit to exist any Lien on or
with respect to any property or asset of any kind of DreamWorks Animation,
whether now owned or hereafter acquired, or any income, profits or proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom, unless DreamWorks Animation shall make or cause the obligations of
DreamWorks Animation to HBO hereunder and under the other Subordinated Loan
Documents to be secured by such Lien equally and ratably with any and all other
Debt secured thereby as long as any such Debt shall be so secured; provided,
however, that such Liens may not include a Lien on the Collateral, including,
but not limited to, DreamWorks Animation's rights to receive payments of license
fees from DreamWorks or HBO in connection with the Attornment Agreement or the
HBO License Agreement. Notwithstanding the foregoing, the following Liens shall
be permitted hereunder:
(a) Permitted Encumbrances; and
(b) Liens granted pursuant to the Collateral Documents.
SECTION 5.07 RESTRICTED PAYMENTS. Subject to the last sentence of this
SECTION 5.07, DreamWorks Animation and its Subsidiaries shall be permitted to
make Restricted Payment(s) in the following circumstances:
(a) DreamWorks Animation shall be permitted to repurchase Equity Interests
in DreamWorks Animation issued under the Employee Equity Plan, by means of cash
payments (any such repurchase, an "EMPLOYEE EQUITY REPURCHASE"), so long as the
aggregate cash amount so expended in making such repurchases shall not exceed
(1) $10,000,000 in any fiscal year plus (2) any portion of the $10,000,000
available under clause (1) above in any previous fiscal year which has not been
expended plus (3) the aggregate cash proceeds received in connection with the
sale of any Equity Interests in DreamWorks Animation to any employee (other than
Jeffrey Katzenberg) of DreamWorks Animation or any of its Subsidiaries after the
Closing Date and on or prior to the date of such repurchase; and
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(b) DreamWorks Animation shall be permitted to make any Restricted Payment
if, at the time of making thereof, such Restricted Payment is then permitted
under the terms of the Senior Credit Agreement, as such agreement or guarantee
may be amended or waived from time to time.
Notwithstanding the foregoing, DreamWorks Animation shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, declare, order, pay,
make or set apart any sum for any Restricted Payment under SECTION 5.07(A) or
(B) unless at the time of the proposed Restricted Payment, all interest and
principal due and payable on the Subordinated Loan (including any interest
and/or principal prohibited from being paid on a current basis in accordance
with the Remedies Bar Period and/or the subordination provisions of Section 2 of
the Subordinated Note) are being paid currently to HBO.
SECTION 5.08 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. DreamWorks
Animation shall not, directly or indirectly, enter into any transaction,
including, but not limited to, any purchase, sale, lease or exchange of property
or the rendering of any service, with any of its Affiliates (each of the
foregoing, an "AFFILIATE TRANSACTION"), unless such Affiliate Transaction is on
terms that are no less favorable to DreamWorks Animation or the relevant
Affiliate or Subsidiary than those that would have been obtained in a comparable
arm's-length transaction by DreamWorks Animation or such Affiliate or Subsidiary
with an unrelated Person; provided that this SECTION 5.08 shall not restrict the
ability (a) of DreamWorks Animation to make Restricted Payments otherwise
permitted under SECTION 5.07; (b) of DreamWorks Animation to enter into the
DreamWorks Distribution Agreement; (c) of DreamWorks Animation to enter into the
DreamWorks Services Agreement; and (d) transactions permitted by the terms of
the Senior Credit Agreement, as such agreement may be amended or waived.
SECTION 5.09 RESTRICTIONS ON ORGANIZATIONAL DOCUMENTS. DreamWorks
Animation will not amend any of its Organizational Documents, if such amendment
would materially adversely affect DreamWorks Animation's ability to repay the
Subordinated Loan in accordance with the provisions of the Subordinated Loan
Documents or materially adversely affect HBO's Lien on the Collateral.
ARTICLE 6
EVENTS OF DEFAULT; REMEDIES; LIMITATION EVENTS
SECTION 6.01 EVENTS OF DEFAULT. The occurrence of one or more of the
following events shall constitute an "EVENT OF DEFAULT" hereunder, whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body:
(a) a default in the payment of all or any part of the principal on the
Subordinated Loan as and when the same shall become due and payable whether at
maturity, upon any redemption, by declaration or otherwise and irrespective of
whether any such payment is barred by the
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pendency of a Remedies Bar Period and/or the subordination provisions of Section
2 of the Subordinated Note; or
(b) a default in the payment of any installment of interest upon the
Subordinated Loan or any other obligations payable under this Agreement as and
when the same shall become due and payable (irrespective of whether any such
payment is barred by the pendency of a Remedies Bar Period and/or the
subordination provisions of Section 2 of the Subordinated Note), and continuance
of such default for a period of 10 Business Days; or
(c) the Senior Lenders take remedies with respect to the Senior Debt that
causes the Senior Debt to become due prior to the stated maturity thereof or the
Senior Debt shall not be paid in full at its final stated maturity (as the same
may be extended from time to time); or
(d) the failure of any Collateral Document to be in full force and effect
at all times or the failure of HBO to have a valid and perfected first priority
lien in any Collateral purported to be covered thereby unless, in each case,
such failure occurs as the result of an action or failure to act by HBO; or
(e) (1) DreamWorks Animation shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to Reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts; or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or DreamWorks Animation shall make a general
assignment for the benefit of its creditors; or (2) there shall be commenced
against DreamWorks Animation any case, proceeding or other action of a nature
referred to in clause (1) above which (i) results in the entry of an order for
relief or any such adjudication or appointment; or (ii) remains undismissed,
undischarged or unbonded for a period of 60 days; or (3) there shall be
commenced against DreamWorks Animation any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged or stayed or bonded pending appeal within 60 days from the entry
thereof; or (4) DreamWorks Animation shall take any action in furtherance of, or
indicating its consent to, approval of or acquiescence in, any of the acts set
forth in clause (1), (2) or (3) above; or (5) DreamWorks Animation shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due.
SECTION 6.02 REMEDIES FOR EVENTS OF DEFAULT. Upon the occurrence of each
and every Event of Default, and at any time thereafter during the continuance of
such Event of Default, the following shall occur and HBO may take any or all of
the following actions at the same or different times:
(a) interest on the Subordinated Loan shall accrue at the Post-Default
Rate;
(b) subject to the pendency of a Remedies Bar Period, by notice in writing
to DreamWorks Animation, HBO may declare the entire principal amount of the
Subordinated
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Loan, together with all accrued interest thereon, to be immediately due and
payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by DreamWorks Animation; provided, however,
(1) in the case of the occurrence of an Event of Default referred to
in clause (1) or (2) of SECTION 6.01(E), notwithstanding any Remedies Bar Period
or the provisions of Section 2 of the Subordinated Note, the principal amount
then outstanding of, and the accrued interest on, the Subordinated Loan shall
automatically become due and payable without presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by
DreamWorks Animation; and
(2) in the case of an occurrence of an Event of Default other than
an Event of Default referred to in clause (1) or (2) of SECTION 6.01(E), so long
as any part of the Senior Debt remains unpaid, HBO shall provide to the
Designated Senior Agent a copy of the notice provided to DreamWorks in
accordance with this SECTION 6.02(B) and shall not exercise its remedies under
this SECTION 6.02(B) until 5 Business Days after such notice is delivered to the
Designated Senior Agent.
(c) subject to the pendency of a Remedies Bar Period, HBO may exercise its
rights and remedies in the Collateral and against DreamWorks Animation as
provided under the Animation Security Agreement; provided, however, so long as
any part of the Senior Debt remains unpaid, HBO shall not be entitled to
exercise its rights and remedies provided in this SECTION 6.02(C) until the
Scheduled Maturity Date (but without limiting any of HBO's other rights and
remedies hereunder or under any other Subordinated Loan Document).
For the avoidance of doubt, subject to SECTION 6.02(C), HBO shall be entitled to
exercise any and all of its rights and remedies against DreamWorks upon the
conclusion of any Remedies Bar Period.
SECTION 6.03 OTHER REMEDIES FOR BREACH.
(a) HBO shall be entitled to charge interest at the Post-Default Rate in
accordance with SECTION 2.06(A).
(b) Subject to Section 2 of the Subordinated Note, if:
(1) any representation, warranty, certification or statement made by
DreamWorks Animation in any Subordinated Loan Document shall prove to have been
incorrect in any material respect when made or furnished; or
(2) DreamWorks Animation shall fail to duly observe or perform any
covenants or agreements contained in the Subordinated Loan Documents to which it
is a party;
HBO shall be entitled to exercise any of its equitable remedies arising by
contract or under applicable law, including the right to seek injunctive relief;
provided, however,
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(i) in no event would such breaches or defaults give rise to any
right of HBO to accelerate the maturity of the Subordinated Loan or to
foreclose upon or otherwise exercise remedies in respect of the
Collateral;
(ii) so long as any part of the Senior Debt remains unpaid, HBO
shall provide to the Designated Senior Agent a notice of such default and
shall not exercise its remedies under this SECTION 6.03(B) until 5
Business Days after such notice is delivered to the Designated Senior
Agent; and
(iii) so long as any part of the Senior Debt remains unpaid, in the
case of a breach or default with respect to SECTION 5.05, HBO shall not
exercise its remedies under this SECTION 6.03(B) without the consent of
the Senior Lenders (although interest on the Subordinated Loan shall
accrue at the Post-Default Rate with respect to such default regardless of
whether any such consent has been obtained).
SECTION 6.04 LIMITATION EVENTS. If Jeffrey Katzenberg does not continue to
remain actively involved in the operation of the business of DreamWorks
Animation, the interest rate on the Subordinated Loan will automatically
increase by 2.00% (200 basis points) per annum in excess of the interest rate
otherwise payable in accordance with SECTION 2.06(A).
SECTION 6.05 NO EFFECT UPON HBO LICENSE AGREEMENT OR HBO SENIOR SECURITY
AGREEMENT. For the avoidance of doubt, the parties hereby agree that nothing in
this Agreement or in any other Subordinated Loan Document shall be construed or
interpreted as having any impact of any kind or nature whatsoever on HBO's
rights and remedies arising under the HBO License Agreement, the HBO Senior
Security Agreement, the Attornment Agreement and all related documentation.
Without limiting the generality of the foregoing, for the avoidance of doubt,
the parties hereby agree that nothing in this Agreement or in any other
Subordinated Loan Document shall be construed so as to amend, modify or alter
the calculation, amount or payment of the Annual Prepayment or License Fee (as
each such term is defined in the HBO License Agreement) under the HBO License
Agreement.
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ARTICLE 7
MISCELLANEOUS
SECTION 7.01 NOTICES. All notices, demands and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address set forth on Schedule 7.01 annexed
hereto, or such other address as such party may hereafter specify in writing for
the purpose (in the case of DreamWorks Animation, by notice to HBO, and in the
case of HBO, by notice to DreamWorks Animation). Each such notice, demand or
other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified on Schedule 7.01
annexed hereto and upon receipt of confirmation of a successful complete
transmission; (b) if given by mail, four days after such communication is
deposited in the mail with first class postage prepaid, addressed as aforesaid;
or (c) if given by any other means, when delivered at the address specified in
this SECTION 7.01.
SECTION 7.02 NO WAIVERS; CUMULATIVE REMEDIES; AMENDMENTS.
(a) No failure or delay on the part of any party in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to any party at law or in equity or otherwise.
(b) Any provision of this Agreement, the Subordinated Note or any other
Subordinated Loan Document to which DreamWorks Animation is a party may be
amended, supplemented or waived if, but only if, such amendment, supplement or
waiver is in writing and is signed by DreamWorks Animation and HBO.
SECTION 7.03 INDEMNIFICATION. DreamWorks Animation (for the purposes of
this Section, the "INDEMNIFYING PARTY") agrees to indemnify and hold harmless
HBO, its Affiliates, and each Person, if any, who controls HBO, or any of its
affiliates, within the meaning of the Securities Act or the Exchange Act (a
"CONTROLLING PERSON"), and the respective partners, agents, employees, officers
and directors of HBO, its Affiliates and any such Controlling Person (each an
"INDEMNIFIED PARTY" and collectively, the "INDEMNIFIED Parties"), from and
against any and all losses, claims, damages, liabilities and reasonable expenses
(including, but not limited to and as incurred, reasonable costs of
investigating, preparing or defending any such claim or action, whether or not
such Indemnified Party is a party thereto) arising out of, or in connection with
the transactions contemplated by this Agreement including, but not limited to,
the use of proceeds of the Subordinated Loan by DreamWorks and/or DreamWorks
Animation, and the other Subordinated Loan Documents; provided that the
Indemnifying Party will not be responsible for any claims, liabilities, losses,
damages or expenses that are determined by judgment of a court of competent
jurisdiction to result from such Indemnified Party's gross negligence, willful
misconduct or bad faith. The Indemnifying Party also agrees that (a) the
Indemnified Parties shall have no liability (except in the case of HBO for
breach of provisions of this Agreement) for claims, liabilities, damages, losses
or reasonable expenses, including legal fees, incurred by the Indemnifying Party
in connection with this Agreement or any other
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Subordinated Loan Document or any of the transactions contemplated hereunder or
thereunder unless they are determined by judgment of a court of competent
jurisdiction to result from HBO's gross negligence, willful misconduct or bad
faith; and (b) the Indemnified Parties shall in no event have any liability to
the Indemnifying Party or DreamWorks Animation on any theory of liability for
any special, indirect, consequential or punitive damages (as opposed to direct,
actual damages) arising out of, in connection with, or as a result of this
Agreement or any other Subordinated Loan Document or any of the transactions
contemplated hereunder or thereunder.
The indemnification, contribution and expense reimbursement obligations
set forth in this SECTION 7.03 (a) shall be in addition to any liability the
Indemnifying Party may have to any Indemnified Party at common law or otherwise;
(b) shall survive the termination of this Agreement and the payment in full of
the Subordinated Loan; and (c) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of HBO or any other
Indemnified Party.
SECTION 7.04 EXPENSES; DOCUMENTARY TAXES. If an Event of Default occurs,
DreamWorks Animation agrees to pay all out-of-pocket expenses incurred by HBO,
including reasonable fees and disbursements of counsel, in connection with such
Event of Default and collection, bankruptcy, insolvency, the realization upon
any Collateral and other judicial or enforcement proceedings resulting
therefrom. In addition, DreamWorks Animation agrees to pay any and all stamp,
transfer and other similar taxes, assessments or charges payable in connection
with the execution and delivery of this Agreement or the issuance of the
Subordinated Loan.
SECTION 7.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
DreamWorks Animation and upon HBO and their respective permitted successors and
assigns.
SECTION 7.06 ASSIGNMENT. HBO shall have the right at any time to (a) sell,
assign or transfer to any Eligible Assignee, with the prior written consent of
DreamWorks Animation (not to be unreasonably withheld), undivided interests in
the Subordinated Loan made by it or any other interest herein or any other
obligation owed to it; or (b) sell participations to any Person in undivided
interests in the Subordinated Loan made by it or any other interest herein or in
any other obligations owed to it. Notwithstanding the foregoing, (i) each Person
to whom any such sale, assignment or participation is made shall agree with HBO
in writing, for the benefit of DreamWorks Animation and the Senior Lenders, to
be bound by all of the provisions of the Subordinated Loan Documents, including,
but not limited to, SECTION 7.07 and the provisions of the Subordinated Note;
(ii) no such sale, assignment or transfer shall, without the prior written
consent of DreamWorks Animation, require DreamWorks Animation to file a
registration statement with the Commission or apply to qualify such sale,
assignment or transfer under the securities laws of any state; (iii) all such
assignments, sales and transfers shall be in an amount at least equal to
$10,000,000; (iv) interests in the Subordinated Loan shall not be held by more
than five different holders at any one time; (v) HBO shall at all times continue
to hold a majority interest in the Subordinated Loan; (vi) such assignees,
participants and transferees shall not have the right to participate in or
consent to any amendment with respect to the Subordinated Loan Documents except
for amendments with respect to any extension of the Schedule Maturity Date, any
reduction of the principal amount of the Subordinated Loan or any reduction of
the Interest
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Rate or the Post-Default Rate; and (vii) other than to an Affiliate of HBO, HBO
shall not (without the prior written consent of DreamWorks Animation (not to be
unreasonably withheld)) assign, transfer or sell any interest in the
Subordinated Loan to a competitor of DreamWorks Animation. DreamWorks Animation
may not assign or otherwise transfer its rights or obligations under this
Agreement to any other Person without the prior written consent of HBO.
SECTION 7.07 CONFIDENTIALITY. HBO shall hold all non-public information
obtained pursuant to the requirements of this Agreement which has been
identified as confidential by DreamWorks Animation in accordance with HBO's
customary procedures for handling confidential information of this nature, it
being understood and agreed by DreamWorks Animation that in any event HBO may
(a) with DreamWorks Animation's prior written consent (not to be unreasonably
withheld), make disclosures reasonably required by any bona fide prospective
assignee, transferee or participant that agrees to be bound by this SECTION 7.07
in connection with the contemplated assignment or transfer by HBO of the
Subordinated Loan or any participations therein; or (b) make disclosures
required or requested by any governmental agency or representative thereof or
pursuant to court order, subpoena or other legal process; provided that, unless
specifically prohibited by applicable law, regulation or court order, HBO shall
notify DreamWorks Animation of any request by any governmental agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of HBO by such governmental agency) for
disclosure of any such non-public information prior to disclosure of such
information; and provided, further, that in no event shall HBO be obligated or
required to return any materials furnished by or on behalf of DreamWorks
Animation.
SECTION 7.08 NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 7.09 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
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SECTION 7.10 CAPTIONS. The table of contents and captions and section
headings appearing in this Agreement are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
SECTION 7.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(remainder of page intentionally left blank)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
DREAMWORKS ANIMATION SKG, INC.
By:
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Name:
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Title:
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HOME BOX OFFICE, INC.
By:
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Name:
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Title:
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