Employment Agreement - DreamWorks Animation SKG Inc. and Jeffrey Katzenberg
DREAMWORKS ANIMATION SKG, INC.
1000 FLOWER STREET
GLENDALE, CA 91201
As of October 8, 2004
Mr. Jeffrey Katzenberg
c/o Mickey Rutman
Breslauer & Rutman
11400 W. Olympic Boulevard, Suite 550
Los Angeles, CA 90064
Dear Jeffrey:
Upon the date ("Effective Date") of the closing ("Closing") of the initial
public offering ("IPO") of DreamWorks Animation SKG, Inc. ("Studio"), Studio
agrees to employ you and you agree to accept such employment upon the terms and
conditions set forth below. In the event the Closing fails to occur for any
reason by June 28, 2005, this agreement ("Agreement") shall be null and void:
1. TERM. The term of your employment hereunder shall commence on the
Effective Date and shall continue for a period of five (5) years thereafter.
This period shall hereinafter be referred to as the "Employment Term".
2. DUTIES/RESPONSIBILITIES/REPORTING.
a. General. Your title shall be "President" and "Chief Executive
Officer" of Studio. You shall have such duties and responsibilities as are
consistent with the traditional positions of President and Chief Executive
Officer of publicly traded major entertainment and media corporations. No other
individual shall have the title President and Chief Executive Officer or hold a
position equal to or superior to yours or have any authority equal to or
superior to yours during the Employment Term without your consent. You shall
report solely and directly to the Board of Directors of Studio.
Without limiting the foregoing, you shall have authority over all
operations and the overall direction of Studio, within maximum individual
project and aggregate cost limits to be established as part of the business plan
or otherwise as approved by the Board of Directors. All other employees of
Studio and such affiliates and subsidiaries as may hereafter be established
shall report directly to you or to you through such other personnel as you may
designate.
b. Services. Except as herein otherwise specified, during the
Employment Term you shall devote your business time and efforts to the affairs
of Studio in substantially the
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same manner as you have previously rendered services in connection with your
previous work experience.
3. EXCLUSIVITY. Except as otherwise provided herein, your personal
professional services shall be exclusive to Studio. Moreover, you shall not make
any investments after the date hereof other than as permitted in Paragraph 3.b.,
below. The foregoing two sentences of this Paragraph 3 shall be collectively
referred to herein as the "Exclusivity Provisions". The following are exceptions
to the Exclusivity Provisions and Paragraph 8 below:
a. DW Services. You shall be permitted to render services for
DreamWorks L.L.C. ("DW") with respect to your consultation with executives of
DW; it being understood that you shall not devote more than approximately ten
percent (10%) of your professional working hours to DW.
b. Investments. The Exclusivity Provisions shall also not prohibit your
ownership or services in connection with investments which you or members of
your family or your charitable trusts or foundations (directly or indirectly)
owned as of June 28, 1995 and future investments which: (a) relate to DW, (b) do
not require devotion of a substantial amount of your personal professional
services which shall include, without limitation, passive investment interests
or limited partnership interests and (c) other than DW, do not compete with
Studio's business when the investment is made, provided however that you may own
directly or indirectly up to 5% of a publicly held company, limited partnership
interests or other passive investment interests in private companies even if it
does compete with Studio's business.
4. COMPENSATION.
a. Base Salary. For all services rendered under this Agreement,
Studio will pay you a base salary at an annual rate of One Dollar ($1.00).
b. Equity-based compensation.
(i) It is our present expectation, subject to the approval of the
compensation committee of the Board of Directors of Studio (the "Compensation
Committee"), that, upon the pricing of the IPO, you will receive, pursuant to
the equity compensation plan to be adopted by Studio (the "Plan"), stock options
with respect to Studio's Class A common stock ("Options") having a grant-date
value of $4,740,000 and restricted shares of Studio's Class A Common Stock
("Restricted Stock") having a grant-date value of $12,990,000 (or, in lieu of
Options and Restricted Stock, such other form of equity-based compensation as
the Compensation Committee may determine) (the "Initial Grants"). In the event
that the Closing fails to occur for any reason by June 28, 2005, then the
Initial Grants will be automatically canceled and you will be entitled to no
payments or benefits with respect thereto.
(ii) You will also be eligible, while you remain employed
hereunder, commencing for the year 2005 (with the amount of the award for 2005
anticipated to be
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determined in the first quarter of 2006), subject to annual approval by the
Compensation Committee, to receive, in lieu of an annual cash bonus, annual
awards of Options and Restricted Stock (or such other form of equity-based
compensation as the Compensation Committee may determine). It is our present
expectation that such annual awards will have an aggregate grant-date value,
depending on company performance, ranging between $1,000,000 (bonus target) and
$3,000,000 (in the case of superior company performance). In the event that such
awards consist of Options and Restricted Stock, they shall be divided, as
determined by the Compensation Committee, between Options and Restricted Stock.
(iii) In addition, you will be eligible, while you remain employed
hereunder, commencing in 2006, subject to annual approval by the Compensation
Committee, to receive annual equity incentive awards of Options and Restricted
Stock (or such other form of equity-based compensation as the Compensation
Committee may determine). It is our present expectation that such annual awards
will have an annual aggregate grant-date value targeted at $5,000,000. In the
event that such awards consist of Options and Restricted Stock, they shall be
divided, as determined by the Compensation Committee, between Options and
Restricted Stock.
(iv) All Options and Restricted Stock (and any other equity-based
awards) referred to in this Paragraph 4.b will (x) be valued using a method or
methods (including where appropriate a Black-Scholes or other fair value method)
as determined by the Compensation Committee from time to time (and, in the case
of the Initial Grants, taking into account the IPO price to the public without
regard to the underwriters' discount), (y) become fully vested, exercisable (if
applicable) and nonforfeitable within a period not to exceed four (4) years from
the date of grant, contingent on both the continuing performance of services to
Studio (subject to Paragraphs 9, 10, 11, 12 and 13) and the achievement of
performance goals as established by the Compensation Committee from time to
time, and (z) otherwise be subject to such terms and conditions as may be set
forth in the Plan or determined by the Compensation Committee from time to time.
Notwithstanding the foregoing, any performance based Initial Grants may, in the
discretion of the Compensation Committee, have a vesting schedule that ends in
the first quarter of 2009.
(v) Following the expiration of the Employment Term (i.e., five
(5) years after the Effective Date), but only if your employment hereunder has
not been terminated earlier, you will not be required to perform any additional
services to Studio in order for all of the equity compensation awards granted to
you during the Employment Term to be fully vested, exercisable (if applicable)
and nonforfeitable; provided that such awards will continue to remain subject to
the achievement of performance goals as provided pursuant to the Plan and the
agreements evidencing such awards and to such other terms and conditions as may
be determined by the Compensation Committee at the time of the grant; and
provided further that, subject to the foregoing, all Options and any similar
equity-based awards will remain exercisable for the balance of the term of the
grant.
5. BENEFITS. In addition to the foregoing, you shall be entitled to
vacation days and/or personal days to be taken subject to the demands of Studio
(as determined by Studio) and consistent with the amount of days taken by other
senior level executives (provided, however, no vacation time will be accrued
during the Employment Term) and you shall be
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entitled to participate in such other medical, dental and life insurance,
401(k), pension and other benefit plans as Studio may have or establish from
time to time. The foregoing, however, shall not be construed to require Studio
to establish any such plans or to prevent the modification or termination of
such plans once established, and no such action or failure thereof shall affect
this Agreement. All benefits you may be entitled to as an employee of Studio
shall be on a most favored nations basis with any executive of Studio.
6. BUSINESS EXPENSES. During the Employment Term, you shall be
reimbursed for such reasonable travel and other expenses incurred in the
performance of your duties hereunder as are customarily reimbursed for
President/CEO's of major motion picture, television and record companies. Studio
shall reimburse all of your costs and expenses (including reasonable legal fees)
in connection with entering into this Agreement. All Studio business-related air
travel by you shall be by private jet. You shall be entitled to take guests on
such trips at Studio's expense to attend a premiere or industry function, or for
such other business-related travel as you determine necessary. You shall be
entitled to utilize the Studio corporate jet for personal use, subject to its
availability as determined by Studio and to your reimbursement to Studio of the
allocable costs of the personal travel. You shall be entitled to a car
allowance, to limousine transportation and to first class private business
travel expenses, including hotels and per diems (as you determine) in accordance
with Studio's policy for its senior-most executives. You shall be entitled to
the services of such reasonable security personnel as you request. In addition
to the foregoing, you shall be entitled to industry-customary perks as are
normally made available to entertainment industry studio chiefs and in all cases
to treatment no less favorable than accorded any other executive of Studio.
7. INDEMNIFICATION. You shall be fully indemnified and held harmless by
Studio to the fullest extent permitted by law from any claim, liability, loss,
cost or expense of any nature (including attorney's fees of counsel selected by
you, judgments, fines, any amounts paid or to be paid in any settlement, and all
costs of any nature) incurred by you (all such indemnification to be on an
"after tax" or "gross-up" basis) which arises, directly or indirectly, in whole
or in part out of any alleged or actual conduct, action or inaction on your part
in or in connection with or related in any manner to your status as an employee,
agent, officer, corporate director, member, manager, shareholder, partner of, or
your provision of services to, Studio or any of its affiliated entities, or any
entity to which you are providing services on behalf of Studio or which may be
doing business with Studio. To the maximum extent allowed by law, all amounts to
be indemnified hereunder including reasonable attorneys' fees shall be promptly
advanced by Studio until such time, if ever, as it is determined by final
decision pursuant to Paragraph 24 below that you are not entitled to
indemnification hereunder (whereupon you shall reimburse Studio for all sums
theretofore advanced).
8. COVENANTS.
a. Confidential Information. You agree that you shall not, during the
Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for any benefit of any third party, any trade secret or other
confidential information of Studio or
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any of its affiliates (except as may required by law or in the performance of
your duties hereunder consistent with Studio's policies) and that you will
comply with any confidentiality obligations of Studio known by you to a third
party, whether under agreement or otherwise. Notwithstanding the foregoing,
confidential information shall be deemed not to include information which (i) is
or becomes generally available to the public other than as a result of a
disclosure by you or any other person who directly or indirectly receives such
information from you or at your direction or (ii) is or becomes available to you
on a non-confidential basis from a source which you reasonably believe is
entitled to disclose it to you.
b. Studio Ownership. Except as otherwise herein provided as with
respect to your services to DW, the results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment and any works in progress, shall be
works-made-for-hire and Studio shall be deemed the sole owner throughout the
universe of any and all rights of whatsoever nature therein, whether or not now
or hereafter known, existing, contemplated, recognized or developed, with the
right to use the same in perpetuity in any manner Studio determines in its sole
discretion without any further payment to you whatsoever. If, for any reason,
any of such results and proceeds shall not legally be a work-for-hire and/or
there are any rights which do not accrue to Studio under the preceding sentence,
then you hereby irrevocably assign and agree to assign any and all of your
right, title and interest thereto, including, without limitation, any and all
copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever
nature therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed by Studio, and Studio shall have the right to use the
same in perpetuity throughout the universe in any manner Studio may deem useful
or desirable to establish or document Studio's exclusive ownership of any and
all rights in any such results and proceeds, including, without limitation, the
execution of appropriate copyright and/or patent applications or assignments. To
the extent you have any rights in the results and proceeds of your services that
cannot be assigned in the manner described above, you unconditionally and
irrevocably waive the enforcement of such rights. This Paragraph 8.b is subject
to, and shall not be deemed to limit, restrict, or constitute any waiver by
Studio of any rights of ownership to which Studio may be entitled by operation
of law by virtue of Studio or any of its affiliates being your employer.
c. Return of Property. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Studio or any of its affiliates shall remain the
exclusive property of Studio. In the event of the termination of your employment
for any reason, and subject to any other provisions hereof, Studio reserves the
right, to the extent permitted by law and in addition to any other remedy Studio
may have, to deduct from any monies otherwise payable to you the following: (i)
the full amount of any specifically determined debt you owe to Studio or any of
its affiliates at the time of or subsequent to the termination of your
employment with Studio, and (ii) the value of Studio property which you retain
in your possession after the termination of your employment with Studio
following Studio's written request for such item(s) return and your failure to
return such items within thirty (30) day of receiving such notice. In the event
that
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the law of any state or other jurisdiction requires the consent of an employee
for such deductions, this Agreement shall serve as such consent.
d. Promise Not To Solicit. You will not during the period of the
Employment Term or for the period ending one (1) year after the earlier of
expiration of the Employment Term or your termination hereunder, induce or
attempt to induce any employees, exclusive consultants, exclusive contractors or
exclusive representatives of Studio (or those of any of its affiliates) to stop
working for, contracting with or representing Studio or any of its affiliates or
to work for, contract with or represent any of Studio's (or its affiliates')
competitors.
9. INCAPACITY.
a. In the event you become totally medically disabled and cannot
substantially perform your duties at any time during the Employment Term, the
Board of Directors may at any time after such disability has continued for
ninety (90) consecutive days require Studio to give you written notice that it
intends, subject to applicable state and federal law, to suspend this Agreement.
Upon receipt of such notice, prior to any suspension hereunder, you shall be
entitled to an expedited arbitration to determine whether or not you are
medically disabled and have been disabled for at least ninety (90) consecutive
days, provided that you request such arbitration within ten (10) business days
of receipt of such notice from Studio. If you do not so request such an
arbitration, or if the arbitrator rules that you are so disabled, you shall be
placed on a "medical payroll," meaning you will remain employed for the first
twenty-six (26) weeks of consecutive absence commencing at the end of the later
of the ten (10) day period or upon the conclusion of the arbitration.
Thereafter, if you are not able to resume your duties hereunder, your employment
will be terminated.
b. Upon termination of employment as provided in Paragraph 9.a, you
shall remain entitled to receive 50% of your Base Salary, 100% of all medical,
dental, life insurance and other benefits for the remainder of the then current
Employment Term, and all grants of equity-based compensation made to you on or
prior to the date of termination, but will not be entitled to receive any grants
of equity-based compensation thereafter. Unless otherwise specified in the Plan
or in the agreement evidencing the grant, in each case as of the date of the
grant, after termination of employment your grants of equity-based compensation
will be determined as follows. Your rights to receive or exercise the awards
provided by the grants will be determined after the end of the performance
period specified in the grant, or satisfaction of such other criteria pursuant
to the Plan, subject to the applicable performance or other criteria, as if you
had continued to remain employed with Studio throughout such performance period.
You will be entitled to receive or exercise a ratable portion of the amount of
each award determined in the preceding sentence, calculated by multiplying such
amount by a fraction, the numerator of which is the sum of (i) your actual
period of service in months through the date of termination plus (ii) 50% of the
remaining Employment Term in months determined as of the date of termination
(but in no event will the numerator exceed the denominator), and the denominator
of which is the total performance period in months specified in the grant. The
balance of such awards will be forfeited. Subject to this Paragraph 9.b and to
the other terms and conditions of the
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grants, all Options and any similar equity-based awards will remain exercisable
for the remaining term of the grant.
10. DEATH.
a. If you die prior to the end of the Employment Term, this Agreement
shall be terminated as of the date of death and your beneficiary or estate shall
be entitled to receive your Base Salary and all other benefits pro-rated up to
the date on which the death occurs and for 12 months thereafter, but not to
exceed the end of the then current Employment Term.
b. Upon termination of employment as provided in Paragraph 10.a, the
rights to equity-based compensation of your estate or beneficiary will be
determined in the same manner and at the same time as provided in Paragraph 9.b.
11. TERMINATION FOR CAUSE. Studio may, at its option and upon resolution
by the Board of Directors, terminate this Agreement forthwith for "cause",
including, without limitation, any obligation to pay the Base Salary or provide
benefits or equity based compensation under this Agreement (except to the extent
accrued or vested to the date of termination). For purposes of this Agreement,
termination of this Agreement for "cause" shall mean only: (i) conviction of a
felony or other crime involving moral turpitude or for embezzlement or the
misappropriation of corporate assets, in any case, after the exhaustion of all
possible appeals; or (ii) your material breach of Paragraphs 2.b, 3 or 8 hereof.
Anything herein to the contrary notwithstanding, Studio will give you written
notice prior to terminating this Agreement for your material breach under clause
(ii), setting forth the exact nature of any alleged breach and the conduct
required to cure such breach. You shall have thirty (30) days from the receipt
of such notice within which to cure.
12. INVOLUNTARY TERMINATION. Studio may terminate your employment other
than for cause or on account of incapacity, in which case you will receive
continuation of Base Salary and benefits as specified herein, until the end of
the Employment Term. At the end of the Employment Term, you shall have the right
to take over and continue, at your option and at your own expense, any benefits
which by the terms of such benefit plans may be assumed. In the event of
termination of your employment without cause pursuant to this Paragraph 12, all
equity based compensation held by you shall accelerate vesting (on the basis
that any mid-range or "target" goals rather than premium goals are deemed to
have been achieved) and, subject to the other terms and conditions of the
grants, will remain exercisable for the remainder of the term of the grant;
however, you will not be entitled to receive any future equity based
compensation. You agree that you will have no rights or remedies in the event of
your termination without cause other than those set forth in the Agreement to
the maximum extent allowed by law.
13. TERMINATION FOR GOOD REASON. You shall be entitled to terminate
employment for good reason, for the purpose of this Paragraph 13, in the event
of a material breach of this Agreement by Studio, any material reduction of your
title or duties or failure to obtain a Director's and Officer's liability
insurance policy. Notwithstanding anything to
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the contrary contained herein, you will give Studio written notice prior to
terminating this Agreement pursuant to the foregoing sentence, setting forth the
exact nature of any alleged breach and the conduct required to cure such breach.
Studio shall have thirty (30) days from the receipt of such notice within which
to cure. In the event of your voluntary termination for good reason, you shall
be entitled to the payments, benefits (including the post-term assumption of the
applicable benefits) and equity based compensation provided under Paragraph 12
for involuntary termination without cause. You agree that you will have no
rights or remedies in the event of your termination for good reason other than
those set forth in the Agreement to the maximum extent allowed by law.
14. NO MITIGATION. In the event this Agreement is terminated for any
reason prior to its expiration you shall not be required to mitigate your
damages hereunder, nor shall Studio be entitled to offset from any sums owing to
you hereunder any amounts received by you from any third party.
15. SECTION 317 AND 508 OF THE FEDERAL COMMUNICATIONS ACT. You represent
that you have not accepted or given nor will you accept or give, directly or
indirectly, any money, services other valuable consideration from or to anyone
other than Studio for the inclusion of any matter as part of any film,
television program or other production produced, distributed and/or developed by
Studio and/or any of its affiliates.
16. EQUAL OPPORTUNITY EMPLOYER. You acknowledge that Studio is an equal
opportunity employer. You agree that you will comply with Studio policies
regarding employment practices and with applicable federal, state and local laws
prohibiting discrimination or harassment.
17. NOTICES. All notices required to be given hereunder shall be given
in writing, by personal delivery or by mail and confirmed by fax at the
respective addresses of the parties hereto set forth above, or at such address
as may be designated in writing by either party, and in the case of Studio, to
the attention of the General Counsel of Studio. A courtesy copy of any notice to
you hereunder shall be sent to Munger, Tolles & Olson LLP, 355 South Grand
Avenue, 35th Floor, Los Angeles, CA 90071-1560, Fax: (213) 683-5137, Attn: Rob
Knauss and Breslauer & Rutman, 11400 W. Olympic Boulevard, Suite 550, Los
Angeles, CA 90064, Fax: (310) 481-3615 Attn: Mickey Rutman. Any notice given by
mail shall be deemed to have been given three (3) business days following such
mailing.
18. ASSIGNMENT. This is an Agreement for the performance of personal
services by you and may not be assigned by you (other than the right to receive
payments which may be assigned to a company, trust or foundation owned or
controlled by you) and any purported assignment in violation of the foregoing
shall be deemed null and void. Studio shall have the right to assign this
Agreement and your services hereunder only to an entity or person acquiring all
or substantially all of the assets of Studio; provided however, as a condition
to any such assignment, Studio shall require any person or entity acquiring all
or substantially all of the assets of Studio to expressly assume the obligations
of Studio hereunder.
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19. CALIFORNIA LAW. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of California applicable to
contracts entered into and performed entirely therein.
20. NO IMPLIED CONTRACT. The parties intend to be bound only upon
execution of this Agreement and no negotiation, exchange or draft or partial
performance shall be deemed to imply an agreement. Neither the continuation of
employment or any other conduct shall be deemed to imply a continuing agreement
upon the expiration of this Agreement.
21. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter herein
contained, and can be changed only by a writing signed by both parties hereto.
22. VOID PROVISIONS. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement. In the event any such provision (the
"Applicable Provision") is so adjudged void or unenforceable, you and Studio
shall take the following actions in the following order: (i) seek judicial
reformation of the Applicable Provision; (ii) negotiate in good faith with each
other to replace the Applicable Provision with a lawful provision; and (iii)
have an arbitration as provided in Paragraph 24 hereof determine a lawful
replacement provision for the Applicable Provision; provided, however, that no
such action pursuant to either of clauses (i) or (iii) above shall increase in
any respect your obligations pursuant to the Applicable Provision.
23. SURVIVAL / MODIFICATION OF TERMS. Your obligations under Paragraph 8
hereof shall remain in full force and effect for the entire period provided
therein notwithstanding the termination of the Employment Term pursuant to
Paragraph 11 hereof or otherwise. Studio's obligations under Paragraphs 6 (with
respect to expenses theretofore incurred) and 7 hereof shall survive
indefinitely the termination of this Agreement regardless of the reason for such
termination. Further, Paragraphs 4.b(v), 9.b, 10.b, 12 and 13 will continue to
govern your entitlement, if any, to benefits and equity based compensation after
the termination of the Employment Term, and paragraph 24 will continue to govern
any Claims (as defined below) by one party against the other.
24. ARBITRATION OF DISPUTES. Any controversy or claim by you against
Studio or any of its parent companies, subsidiaries, affiliates (and/or
officers, directors, employees, representatives or agents of Studio and such
parent companies, subsidiaries and/or affiliates), including any controversy or
claim arising from, out of or relating to this Agreement, the breach thereof, or
the employment or termination thereof of you by Studio which would give rise to
a claim under federal, state or local law (including, but not limited to, claims
based in tort or contract, claims for discrimination under state or federal law,
and/or claims for violation of any federal, state or local law, statute or
regulation), or any claim against you by Studio (individually and/or
collectively, "Claim[s]") shall be submitted
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to an impartial mediator ("Mediator") selected jointly by the parties. Both
parties shall attend a mediation conference in Los Angeles County, California
and attempt to resolve any and all Claims. If the parties are not able to
resolve all Claims, then upon written demand for arbitration to the other party,
which demand shall be made within a reasonable time after the Claim has arisen,
any unresolved Claims shall be determined by final and binding arbitration in
Los Angeles, California, in accordance with the Model Employment Procedures of
the American Arbitration Association (collectively, "Rules") by a neutral
arbitrator experienced in employment law, licensed to practice law in
California, in accordance with the Rules, except as herein specified. In no
event shall the demand for arbitration be made after the date when the
institution of legal and/or equitable proceedings based upon such Claim would be
barred by the applicable statute of limitations. Each party to the arbitration
will be entitled to be represented by counsel and will have the opportunity to
take depositions in Los Angeles, California of any opposing party or witnesses
selected by such party and/or request production of documents by the opposing
party before the arbitration hearing. By mutual agreement of the parties,
additional depositions may be taken at other locations. In addition, upon a
party's showing of need for additional discovery, the arbitrator shall have
discretion to order such additional discovery. You acknowledge and agree that
you are familiar with and fully understand the need for preserving the
confidentiality of Studio's agreements with third parties and compensation of
Studio's employees. Accordingly, you hereby agree that to the extent the
arbitrator determines that documents, correspondence or other writings (or
portions thereof) whether internal or from any third party, relating in any way
to your agreements with third parties and/or compensation of other employees are
necessary to the determination of any Claim, you and/or your representatives may
discover and examine such documents, correspondence or other writings only after
execution of an appropriate confidentiality agreement. Each party shall have the
right to subpoena witnesses and documents for the arbitration hearing. A court
reporter shall record all arbitration proceedings. With respect to any Claim
brought to arbitration hereunder, either party may be entitled to recover
whatever damages would otherwise be available to that party in any legal
proceeding based upon the federal and/or state law applicable to the matter. The
arbitrator shall issue a written decision setting forth the award and the
findings and/or conclusions upon which such award is based. The decision of the
arbitrator may be entered and enforced in any court of competent jurisdiction by
either Studio or you. Notwithstanding the foregoing, the result of any such
arbitration shall be binding but shall not be made public (including by filing a
petition to confirm the arbitration award), unless necessary to confirm such
arbitration award after non-payment of the award for a period of at least
fifteen (15) days after notice to Studio of the arbitrator's decision. Each
party shall pay the fees of their respective attorneys (except as otherwise
awarded by the arbitrator), the expenses of their witnesses, and all other
expenses connected with presenting their Claims or defense(s). Other costs of
arbitration shall be borne by Studio. Except as set forth below, should you or
Studio pursue any Claim covered by this Paragraph 24 by any method other than
said arbitration, the responding party shall be entitled to recover from the
other party all damages, costs, expenses, and reasonable outside attorneys' fees
incurred as a result of such action. The provisions contained in this Paragraph
24 shall survive the termination of your employment with Studio. Notwithstanding
anything set forth above, you agree that any breach or threatened breach of this
Agreement (particularly, but without limitation, with respect to Paragraphs 3
and 8,
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above) may result in irreparable injury to Studio, and therefore, in addition to
the procedures set forth above, Studio may be entitled to file suit in a court
of competent jurisdiction to seek a Temporary Restraining Order and/or
preliminary or permanent injunction or other equitable relief to prevent a
breach or contemplated breach of such provisions.
25. UNIQUE SERVICES. Notwithstanding anything to the contrary in
Paragraph 24., above, you acknowledge that the services to be rendered by you
under the terms of this Agreement, and the rights and privileges granted to
Studio by you under its terms, are of a special, unique, extraordinary and
intellectual character, which gives them a peculiar value, the loss of which
cannot reasonably or adequately be compensated in damages in any action at law,
and that a breach by you of any of the provisions contained in this Agreement
may cause Studio great and irreparable injury and damage. Notwithstanding
anything to the contrary in Paragraph 24., above, you acknowledge that Studio
shall be entitled, in addition to any other remedies it may have at law, to seek
the remedies of injunction, and other equitable relief for a breach of this
Agreement by you. This provision shall not, however, be construed as a waiver of
any of the rights which Studio and/or you may have for damages or otherwise.
26. NAME AND LIKENESS. During the Employment Term, Studio shall have the
right to use your name, biography and likeness in connection with its business
as follows: You shall promptly submit to Studio a biography of yourself.
Provided that you timely submit such biography, Studio shall not use any other
biographical information other than contained in such biography so furnished,
other than references to your prior professional services and your services
hereunder, without your prior approval (which approval shall not be unreasonably
withheld). If you fail to promptly submit a biography, then you shall not have
the right to approve any biographical material used by Studio. You shall have
the right to approve all likenesses of you used by Studio hereunder. Nothing
herein contained shall be construed to authorize the use of your name, biography
or likeness to endorse any product or service or to use the same for similar
commercial purposes.
27. CHANGE OF CONTROL. In the event of a "change of control", all
equity-based compensation held by you shall accelerate vesting (on the basis
that any mid-range or "target" goals rather than premium goals are deemed to
have been achieved) and remain exercisable for the remainder of the term of the
grant.
(a) For purposes of this Agreement, "change of control" shall mean the
occurrence of any of the following events, not including any events occurring
prior to or in connection with the Closing (including the occurrence of the
Closing):
(i) during any period of fourteen (14) consecutive calendar
months, individuals who were directors of Studio on the first day of such period
(the "Incumbent Directors") cease for any reason to constitute a majority of the
Board of Directors of Studio (the "Board"); provided, however, that any
individual becoming a director subsequent to the first day of such period whose
election, or nomination for election, by Studio's stockholders was approved by a
vote of at least a majority of the Incumbent Directors shall be considered as
though such individual were an Incumbent Director, but excluding, for purposes
of this
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proviso, any such individual whose initial assumption of office occurs as a
result of an actual or threatened proxy contest with respect to election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a "person" (as such term is used in Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (each, a
"Person"), in each case other than the management of Studio, the Board or the
holders of Studio's Class B common stock par value $0.01;
(ii) the consummation of (A) a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving (x) Studio or
(y) any of its Subsidiaries, but in the case of this clause (y) only if Studio
Voting Securities (as defined below) are issued or issuable (each of the events
referred to in this clause (A) being hereinafter referred to as a
"Reorganization") or (B) the sale or other disposition of all or substantially
all the assets of Studio to an entity that is not an Affiliate (a "Sale"), in
each such case, if such Reorganization or Sale requires the approval of Studio's
stockholders under the law of Studio's jurisdiction of organization (whether
such approval is required for such Reorganization or Sale or for the issuance of
securities of Studio in such Reorganization or Sale), unless, immediately
following such Reorganization or Sale, (1) all or substantially all the
individuals and entities who were the "beneficial owners" (as such term is
defined in Rule 13d-3 under the Exchange Act (or a successor rule thereto)) of
the securities eligible to vote for the election of the Board ("Studio Voting
Securities") outstanding immediately prior to the consummation of such
Reorganization or Sale beneficially own, directly or indirectly, more than 50%
of the combined voting power of the then outstanding voting securities of the
corporation resulting from such Reorganization or Sale (including, without
limitation, a corporation that as a result of such transaction owns Studio or
all or substantially all Studio's assets either directly or through one or more
subsidiaries) (the "Continuing Corporation") in substantially the same
proportions as their ownership, immediately prior to the consummation of such
Reorganization or Sale, of the outstanding Studio Voting Securities (excluding
any outstanding voting securities of the Continuing Corporation that such
beneficial owners hold immediately following the consummation of the
Reorganization or Sale as a result of their ownership prior to such consummation
of voting securities of any company or other entity involved in or forming part
of such Reorganization or Sale other than Studio), (2) no Person (excluding (x)
any employee benefit plan (or related trust) sponsored or maintained by the
Continuing Corporation or any corporation controlled by the Continuing
Corporation, (y) you and (z) David Geffen) beneficially owns, directly or
indirectly, 20% or more of the combined voting power of the then outstanding
voting securities of the Continuing Corporation and (3) at least a majority of
the members of the board of directors of the Continuing Corporation were
Incumbent Directors at the time of the execution of the definitive agreement
providing for such Reorganization or Sale or, in the absence of such an
agreement, at the time at which approval of the Board was obtained for such
Reorganization or Sale;
(iii) the stockholders of Studio approve a plan of complete
liquidation or dissolution of Studio; or
(iv) any Person, corporation or other entity or "group" (as used in
Section 14(d)(2) of the Exchange Act) (other than (A) Studio, (B) any trustee or
other fiduciary
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holding securities under an employee benefit plan of Studio or an Affiliate or
(C) any company owned, directly or indirectly, by the stockholders of Studio in
substantially the same proportions as their ownership of the voting power of
Studio Voting Securities) becomes the beneficial owner, directly or indirectly,
of securities of Studio representing 20% or more of the combined voting power of
Studio Voting Securities but only if the percentage so owned exceeds the
aggregate percentage of the combined voting power of Studio Voting Securities
then owned, directly or indirectly, by you and David Geffen; provided, however,
that for purposes of this subparagraph (iv), the following acquisitions shall
not constitute a change of control: (x) any acquisition directly from Studio or
(y) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by Studio or an Affiliate.
b. In the event that it is determined that any payment (other than the
Gross-Up Payments provided for in this Paragraph 27.b) or distribution by Studio
or any of its affiliates to you or for your benefit, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or pursuant
to or by reason of any other agreement, policy, plan, program or arrangement,
including without limitation any stock option or similar right, or the lapse or
termination of any restriction on or the vesting or exercisability of any of the
foregoing (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision thereto), by reason of being considered "contingent on a
change in the ownership or effective control" of Studio, within the meaning of
Section 280G of the Code (or any successor provision thereto) or to any similar
tax imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being hereafter collectively referred to as the "Excise Tax"), then you will be
entitled to receive (or have paid to the applicable taxing authority on your
behalf) an additional payment or payments (collectively, a "Gross-Up Payment").
The Gross-Up Payment will be in an amount such that, after payment by you of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, you retain (or
receive the benefit of a payment to the applicable taxing authority of) an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
For purposes of determining the amount of the Gross-Up Payment, you will be
considered to pay (i) federal income taxes at the highest rate in effect in the
year in which the Gross-Up Payment will be made and (ii) state and local income
taxes at the highest rate in effect in the state or locality in which the
Gross-Up Payment would be subject to state or local tax, net of the maximum
reduction in federal income tax that could be obtained from deduction of such
state and local taxes.
28. MISCELLANEOUS. Your sole and exclusive remedy for Studio's breach,
termination, or cancellation of this Agreement or any term hereof shall be an
action for damages unless otherwise expressly limited hereunder, and you
irrevocably waive any right to seek and/or obtain rescission and/or other
equitable and/or injunctive relief. You agree that Studio may deduct and
withhold from your compensation hereunder the amounts required to be deducted
and withheld under the provisions of the Federal and California Income Tax Acts,
Federal Insurance Contributions Act, California Unemployment Insurance Act, any
and all amendments thereto, and other statutes heretofore or hereafter enacted
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requiring the withholding of compensation. All of Studio's obligations in this
Agreement are expressly conditioned upon you completing and delivering to Studio
an Employment Eligibility Form ("Form I-9") (in form satisfactory to Studio) and
in connection therewith, you submitting to Studio original documentation
demonstrating your employment eligibility.
If the foregoing correctly sets forth your understanding, please sign one
copy of this letter and return it to the undersigned, whereupon this letter
shall constitute a binding agreement between us
Very truly yours,
DREAMWORKS ANIMATION SKG, INC.
By: ____________________________
Its: ____________________________
ACCEPTED AND AGREED AS OF THE
DATE FIRST ABOVE WRITTEN:
_________________________
JEFFREY KATZENBERG
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