Exhibit 2.1
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SEPARATION AGREEMENT
BY AND AMONG
DREAMWORKS L.L.C.,
DREAMWORKS ANIMATION L.L.C.,
AND
DREAMWORKS ANIMATION SKG, INC.
DATED AS OF OCTOBER 27, 2004
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions
ARTICLE II
The Separation
SECTION 2.01. Transfer of Contributed Assets and Assumption of Contributed Liabilities...................16
SECTION 2.02. Preferred Transactions and DWA LLC Transactions............................................18
SECTION 2.03. PDI and Other Transactions.................................................................18
SECTION 2.04. Termination of Agreements..................................................................19
SECTION 2.05. Insurance Matters..........................................................................19
SECTION 2.06. Documents Relating to Other Transfers of Assets and Assumption of Liabilities..............21
SECTION 2.07. Other Ancillary Agreements.................................................................21
SECTION 2.08. Disclaimer of Representations and Warranties...............................................21
SECTION 2.09. Governmental Approvals and Consents........................................................22
SECTION 2.10. Novation of Contributed Liabilities........................................................23
SECTION 2.11. Novation of Liabilities other than Contributed Liabilities.................................24
SECTION 2.12. Employee Benefit Arrangements..............................................................25
ARTICLE III
The IPO and Actions Pending the IPO
SECTION 3.01. The IPO....................................................................................29
SECTION 3.02. Proceeds of the IPO........................................................................29
SECTION 3.03. Charter; Bylaws............................................................................29
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ARTICLE IV
Conditions Precedent to Consummation of Separation Transactions
SECTION 4.01. Separation Date............................................................................29
ARTICLE V
Mutual Releases; Indemnification
SECTION 5.01. Release of Pre-Closing Claims..............................................................30
SECTION 5.02. Indemnification by the Corporation.........................................................32
SECTION 5.03. Indemnification by the LLC.................................................................33
SECTION 5.04. Indemnification Obligations Net of Insurance Proceeds and Other
Amounts; Shared Contract Liabilities ............. ........................................34
SECTION 5.05. Procedures for Indemnification of Third Party Claims.......................................34
SECTION 5.06. Additional Matters.........................................................................35
SECTION 5.07. Remedies Cumulative........................................................................36
SECTION 5.08. Survival of Indemnities....................................................................36
ARTICLE VI
Certain Business Matters
SECTION 6.01. Certain Business Matters...................................................................36
SECTION 6.02. Late Payments..............................................................................37
ARTICLE VII
Exchange of Information; Confidentiality
SECTION 7.01. Agreement for Exchange of Information; Archives............................................37
SECTION 7.02. Ownership of Information...................................................................38
SECTION 7.03. Compensation for Providing Information.....................................................38
SECTION 7.04. Record Retention...........................................................................39
SECTION 7.05. Limitations of Liability...................................................................39
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SECTION 7.06. Other Agreements Providing for Exchange of Information.....................................39
SECTION 7.07. Production of Witnesses; Records; Cooperation..............................................39
SECTION 7.08. Confidentiality............................................................................40
SECTION 7.09. Protective Arrangements....................................................................41
ARTICLE VIII
Dispute Resolution
SECTION 8.01. Disputes...................................................................................41
SECTION 8.02. Escalation; Mediation......................................................................41
SECTION 8.03. Court Actions..............................................................................42
ARTICLE IX
Further Assurances
SECTION 9.01. Further Assurances.........................................................................42
ARTICLE X
Termination
SECTION 10.01. Termination by Mutual Consent..............................................................43
SECTION 10.02. Effect of Termination......................................................................43
ARTICLE XI
Miscellaneous
SECTION 11.01. Counterparts; Entire Agreement; Corporate Power............................................43
SECTION 11.02. Governing Law..............................................................................44
SECTION 11.03. Assignability..............................................................................44
SECTION 11.04. Third Party Beneficiaries..................................................................44
SECTION 11.05. Notices....................................................................................44
SECTION 11.06. Severability...............................................................................45
SECTION 11.07. Force Majeure..............................................................................45
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SECTION 11.08. Publicity..................................................................................45
SECTION 11.09. Expenses...................................................................................45
SECTION 11.10. Headings...................................................................................46
SECTION 11.11. Survival of Covenants......................................................................46
SECTION 11.12. Waivers of Default.........................................................................46
SECTION 11.13. Specific Performance.......................................................................46
SECTION 11.14. Amendments.................................................................................46
SECTION 11.15. Interpretation.............................................................................46
SECTION 11.16. Submission to Jurisdiction; Waivers........................................................47
SECTION 11.17. Special Damages............................................................................47
SCHEDULES
Schedule 1.01(a) Animated Motion Pictures
Schedule 1.01(b) Contributed Assets
Schedule 1.01(c) Contributed Intellectual Property
Schedule 1.01(d) Assumed Litigation
Schedule 1.01(e) Corporation Contracts
Schedule 1.01(f) DW Distribution
Schedule 1.01(g) DWA Employees
Schedule 1.01(h) Excluded Assets
Schedule 1.01(i) Shared Contracts
Schedule 1.01(j) Material Consents
Schedule 2.04(b)(ii) Excluded Terminated Agreements
EXHIBITS
Exhibit A Restated Certificate of Incorporation of DreamWorks
Animation SKG, Inc.
Exhibit B Amended and Restated Bylaws of DreamWorks Animation SKG,
Inc.
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THIS SEPARATION AGREEMENT, dated as of
October 27, 2004, is by and among DREAMWORKS L.L.C.,
a Delaware limited liability company (the "LLC"),
DREAMWORKS ANIMATION L.L.C., a Delaware limited
liability company ("DWA LLC"), and DREAMWORKS
ANIMATION SKG, INC., a Delaware corporation (the
"Corporation"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings
assigned to them in Article I hereof.
R E C I T A L S
WHEREAS, DreamWorks Inc., a Delaware corporation ("DW Inc")
and a Subsidiary of the LLC, has previously contributed all of its various
limited liability company interests (other than its 1% limited liability company
interest in DWA LLC and its 1% limited liability company interest in DreamWorks
Post-Production LLC) to Blue Sea Productions Inc., a Delaware corporation ("Blue
Sea");
WHEREAS, DW Inc has previously distributed all of its capital
stock in Blue Sea to the LLC, leaving a 1% limited liability company interest in
DWA LLC and a 1% limited liability company interest in DreamWorks
Post-Production LLC as DW Inc's only assets;
WHEREAS, the members of the LLC have determined that it is in
the best interests of the LLC and its members to separate the LLC's existing
businesses into two independent businesses;
WHEREAS, the LLC and the Corporation have obtained all
Material Consents or a waiver thereof;
WHEREAS, the PDI Merger Agreement has been entered into by the
parties thereto;
WHEREAS, in furtherance of the foregoing, it is appropriate
and desirable to effect the separation transactions, all as more fully described
in this Agreement and the Ancillary Agreements;
WHEREAS, the members of the LLC have further determined that
it is appropriate and desirable, on the terms and conditions contemplated
hereby, to cause the Corporation, together with certain selling stockholders, to
offer and sell in the IPO shares of Class A Common Stock; and
WHEREAS, it is appropriate and desirable to set forth the
transactions required to effect the foregoing;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties, intending to
be legally bound, hereby agree as follows:
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ARTICLE I
Definitions
SECTION 1.01. For the purpose of this Agreement the following
terms shall have the following meanings:
"Action" means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or before any federal,
state, local, foreign or international Governmental Authority or any arbitration
or mediation tribunal.
"Actual E Shares" means actual limited liability company
interests in the LLC granted pursuant to the LLC's Employee Equity Participation
Plan.
"Administrative Agent" has the meaning set forth in the
definition of LLC Credit Facility.
"Affiliate" of any Person means a Person that controls, is
controlled by, or is under common control with such Person. As used herein,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such entity, whether
through ownership of voting securities or other interests, by contract or
otherwise.
"Agreement" means this Separation Agreement, including all of
the Schedules and Exhibits hereto.
"Ancillary Agreements" means the Ancillary Services Agreement,
the Film Distribution Agreement, the Services Agreement, the Trademark License
Agreement, the Trademark Assignment, the Copyright Assignments and the Tax
Receivable Agreement.
"Ancillary Services Agreement" means the Merchandise &
Promotion Ancillary Services Agreement, dated as of the Separation Date, between
the Corporation and the LLC.
"Animated Film Assumption Agreement" means the Animated Film
Assumption Agreement, dated as of the Separation Date, between the Corporation
and the LLC related to the assumption by the Corporation of indebtedness of the
LLC incurred in connection with the purchase by the LLC of certain Animated Film
Assets from DW Funding.
"Animated Motion Picture" means any means a Motion Picture
that is created predominantly by one or more non-live action production methods
(e.g., hand-drawn animation such as "Prince of Egypt", CGI such as "Shrek",
stop-motion such as "Chicken Run" and/or motion capture such as "Polar Express")
(each, an "Animation Method"). However, a Motion Picture shall not be deemed to
be an Animated Motion Picture if digital Animation Method(s) are used, in whole
or in part, to create photorealistic characters that interact with live-action
characters in live-action settings. (Photorealistic characters include both
"real world" characters modified by an Animation Method e.g., Babe the pig in
"Babe" and characters that are invented but which are depicted in a "real world"
manner by an Animation Method (e.g., Yoda in "Star Wars II:
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Attack of the Clones," Gollum in "Lord of the Rings," the dinosaurs in "Jurassic
Park," the robots in "I, Robot," and the toy soldiers in "Small Soldiers.")
"Animated Motion Picture Business" means the business,
activities and operations of the LLC and its Subsidiaries (prior to the
Separation) that constitute the creation, development, pre-production,
production and post-production of animated content for distribution into various
existing and future media channels, including for theatrical, television, home
video and internet distribution, as well as the business of merchandising
consumer products and related materials; provided, for the avoidance of doubt,
it is understood and agreed that the Animated Motion Picture Business shall not
include the business activities and operations that constitute the distribution
of Animated Motion Pictures (except to the extent that the merchandising of
consumer products may be considered a "distribution" business).
"Animated Film Assets" means the Film Assets related primarily
to the Animated Motion Pictures listed on Schedule 1.01(a), which, for the
avoidance of doubt, excludes all Film Assets related primarily to the Retained
Motion Pictures.
"Assets" means assets, properties and rights (including
goodwill), wherever located (including in the possession of vendors or other
third parties or elsewhere), whether real, personal or mixed, tangible,
intangible or contingent, in each case whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any Person, including the following:
(a) all accounting and other books, records and files whether
in paper, microfilm, microfiche, computer tape or disk, magnetic tape
or any other form;
(b) all apparatus, computers, computer generated animation
equipment, other animation equipment, other electronic data processing
equipment, studio equipment, fixtures, machinery, other equipment,
furniture, office equipment, automobiles, motor vehicles and other
transportation equipment, special and general tools, test devices,
prototypes and models and other tangible personal property;
(c) all inventories of materials, parts, raw materials,
supplies, work-in-process and finished goods and products;
(d) all interests in real property of whatever nature,
including easements, whether as owner, mortgagee, lessor, sublessor,
lessee, sublessee or otherwise;
(e) all interests in any capital stock or other equity
interests of any other Person, all bonds, notes, debentures or other
securities issued by any other Person, all loans, advances or other
extensions of credit or capital contributions to any other Person and
all other investments in any Person;
(f) all license agreements, leases of personal property, open
purchase orders for supplies, parts or services and other contracts,
agreements or commitments;
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(g) all deposits, letters of credit and performance and surety
bonds;
(h) all written technical information, data, specifications,
research and development information, engineering drawings, operating
and maintenance manuals, animation techniques and processes and
materials and analyses prepared by consultants and other third parties;
(i) all domestic and foreign patents, copyrights, trade names,
trademarks, service marks and registrations and applications for any of
the foregoing, mask works, trade secrets, inventions, other proprietary
information, rights to films and television programs and licenses from
third Persons granting the right to use any of the foregoing;
(j) all computer applications, programs and other software,
including operating software, network software, firmware, middleware,
design software, design tools, systems documentation, animation
software and instructions;
(k) all cost information, sales and pricing data, customer
prospect lists, supplier records, customer and supplier lists, customer
and vendor data, correspondence and lists, product literature, artwork,
design, development and manufacturing files, vendor and customer
drawings, formulations and specifications, quality records and reports
and other books, records, studies, surveys, reports, plans and
documents;
(l) all prepaid expenses, trade accounts and other accounts
and notes receivable;
(m) all rights under contracts or agreements, all claims or
rights against any Person arising from the ownership of any Asset, all
rights in connection with any bids or offers and all claims, choices in
action and similar rights, whether accrued or contingent;
(n) all rights under insurance policies and all rights in the
nature of insurance, indemnification or contribution;
(o) all licenses, permits, approvals and authorizations which
have been issued by any Governmental Authority;
(p) cash or cash equivalents, bank accounts, lock boxes and
other deposit arrangements; and
(q) interest rate, currency, commodity or other swap, collar,
cap or other hedging or similar agreements or arrangements.
"Blue Sea" has the meaning set forth in the recitals hereto.
"Class A Common Stock" means the Class A Common Stock, $0.0l
par value per share, of the Corporation.
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"Class B Common Stock" means the Class B Common Stock, $0.01
par value per share, of the Corporation.
"Class C Common Stock" means the Class C Common Stock, $0.01
par value per share, of the Corporation.
"Compensation Committee" has the meaning set forth in Section
2.13(e).
"Consents" means any consents, waivers or approvals from, or
notification requirements to, any third parties.
"Contributed Assets" means all Assets used, held for use or
intended to be used primarily in the operation or conduct of the Animated Motion
Picture Business other than Excluded Assets, including (without limitation):
(a) the Assets listed or described on Schedule 1.01(b);
(b) the Animated Film Assets;
(c) all intellectual property listed or described on Schedule
1.01(c);
(d) all Corporation Contracts;
(e) the LLC's 99% limited liability company interest in
DreamWorks Post-Production LLC;
(f) the Redwood City Lease;
(g) the Grandview Lease; and
(h) all accounting and other books, records and files whether
in paper, microfilm, microfiche, computer tape or disk, magnetic tape or any
other form, in each case, primarily relating to the business and operations of
the animation group of the LLC or any of its Subsidiaries
"Contributed Liabilities" means (without duplication) (a) all
Liabilities primarily related to, arising out of or resulting from the operation
or conduct of the Animated Motion Picture Business, including any Liabilities to
the extent relating to, arising out of or resulting from any Contributed Asset,
in each case whether arising before, on or after the Separation Date, (b) all
Shared Contract Liabilities, whether arising before, on or after the Separation
Date, (c) all Liabilities of, or relating to, DWA Employees arising out of, or
resulting from future, present or former employment with the Animated Motion
Picture Business (including any Liabilities relating to, arising out of or
resulting from any Plan to the extent they relate to DWA Employees), (d) the
Revolver Debt that the Corporation expressly assumes on the Separation Date, (e)
all Liability for the Advances (as defined in the Universal Agreement) that the
Corporation expressly assumes pursuant to the Universal Interparty Agreement,
(f) all Liability for the subordinated debt that the Corporation expressly
assumes pursuant to the HBO Loan
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Agreement, (g) all Liabilities relating to the actions, suits, claims and
proceedings listed on Schedule 1.01(d), (h) all Liabilities primarily related
to, arising out of or resulting from the merger of PDI and Merger Sub,
including, without limitation, any claim brought by or on behalf of a
stockholder of PDI, (i) all Liabilities primarily related to the business and
operations of PDI, (j) all Liabilities of the LLC under any agreement between
the LLC and any of the directors or director nominees of the Corporation entered
into prior to the Separation Date that indemnifies such directors or directors
nominees for actions taken in their capacity as directors or director nominees
of the Corporation (or, in the case of Xxxxx Xxxxxx, as an employee of the
Corporation) and (k) all Liabilities that the Corporation expressly assumes
pursuant to the Animated Film Assumption Agreement.
"Contribution" has the meaning set forth in the Formation
Agreement.
"Contributing Member" has the meaning set forth in the
Formation Agreement.
"Copyright Assignments" means the Copyright Assignments, dated
as of the Separation Date, between DW Funding and the LLC and between the LLC
and the Corporation or DWA LLC.
"Corporation" has the meaning set forth in the preamble
hereto.
"Corporation Contracts" means the contracts, agreements and
other documents listed or described on Schedule 1.01(e).
"Corporation Credit Facility" means the Credit Agreement to be
entered into by the Corporation, as borrower, the agent banks named therein and
the other lending banks from time to time party thereto.
"Corporation Group" means the Corporation, each Subsidiary of
the Corporation, including PDI, and each other Affiliate of the Corporation
before or after the Separation Date (other than the LLC and its Subsidiaries or
any Person that controls the Corporation before or after the Separation Date,
including, for the avoidance of doubt, Xxxxxxx Xxxxxxxxxx, Xxxxxx Xxxxxxxxx,
Xxxxx Xxxxxx and Xxxx Xxxxx).
"Corporation Indemnitees" has the meaning set forth in Section
5.03.
"Corporation Shared Contract" means those contracts set forth
on Schedule 1.01(i) under the caption Corporation Shared Contract.
"Distribution Servicing Agreements" has the meaning set forth
in the Film Distribution Agreement.
"DWA LLC Interest" means an interest in DreamWorks Animation
L.L.C., a Delware limited liability company.
"DWA Restricted Stock" means a share of Class A Common Stock
granted pursuant to the 2004 Omnibus Incentive Compensation Plan that is subject
to
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certain transfer restrictions, forfeiture provisions and/or other terms and
conditions of the applicable award agreement governing such award.
"DW Distribution" means the distribution, in accordance with
Article VIII of the Sixth Amended and Restated Limited Liability Company
Agreement of the LLC, as amended up to and including its third amendment, by the
LLC of all of its right, title and interest in and to the DWA LLC Interests held
directly by the LLC (other than the amount of DWA LLC Interests to be used for
the Preferred Redemptions as set forth on Schedule 2.01(a) of the Formation
Agreement) to the members of the LLC listed on Schedule 1.01(f) hereto, in the
amounts set forth on Schedule 1.01(f).
"DW Funding" means DW Funding, LLC, a Delaware limited
liability company.
"DW Inc" has the meaning set forth in the recitals hereto.
"DWA Employee" means any individual who is (a) either actively
employed by, or on a leave of absence from (including short-term or long-term
disability), any Person in the Corporation Group on the Separation Date, (b)
employed by the Corporation Group following the Separation Date, (c) a DWA
Terminated Employee or (d) listed on Schedule 1.01(g).
"DWA Option" means an option to purchase shares of Class A
Common Stock granted pursuant to the 2004 Omnibus Incentive Compensation Plan.
"DWA Terminated Employee" means any individual who is (a) a
former employee of any Person in the LLC Group whose primary responsibilities
were to the Animated Motion Picture Business and who was terminated on or before
the Separation Date or (b) a former employee any Person in the Corporation
Group, provided, however that a DWA Terminated Employee shall not include any
individual who otherwise would be a DWA Terminated Employee, but who is
subsequently employed by any Person in the LLC Group prior to the Separation
Date.
"DWA LLC" has the meaning set forth in the preamble hereto.
"Employee Equity Participation Plan" means the amended and
restated employee equity participation plan of DreamWorks L.L.C. and its
subsidiaries for employees and officers of the LLC.
"Escalation Notice" has the meaning set forth in Section 8.02.
"Exercise Price" has the meaning set forth in the 2004 Omnibus
Incentive Compensation Plan.
"Exchange Ratio" has the meaning set forth in the PDI Merger
Agreement.
"Excluded Insurance" has the meaning set forth in Section
2.05.
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"Excluded Assets" means (i) all Retained Motion Pictures and
(ii) all Assets listed on Schedule 1.01(h) hereto.
"Excluded Liabilities" means (a) all Liabilities arising from
any Distribution Servicing Agreements (other than those described in clause (e)
and (f) of the definition of Contributed Liability), whether before or after the
Separation Date, and all Liabilities of the LLC in its capacity as Distributor
under the Film Distribution Agreement, provided that the foregoing shall not in
any way abrogate or limit any Liabilities of the Corporation to the LLC under
the Film Distribution Agreement, including those specified in Section 10 thereof
(which Liabilities shall not be Excluded Liabilities), (b) any indebtedness that
the LLC incurs following the Separation Date under the LLC Credit Facility, (c)
any Liability of DreamWorks Post-Production LLC that is not primarily related to
the Animated Motion Picture Business and (d) any Liability relating to, arising
out of or resulting from the operation or conduct by any Person in the LLC Group
of any business other than the Animated Motion Picture Business.
"Fair Market Value" has the meaning set forth in the 2004
Omnibus Incentive Compensation Plan.
"Film Assets" means, with respect to any Motion Picture, all
of the specified party's right, title and interest in (i) the Film Property for
the Motion Picture, (ii) the Tangible Film Materials relating to such Motion
Picture, (iii) all Gross Receipts derived from or in respect of such Motion
Picture, and (iv) all other products, proceeds and rights or other interests of
whatever nature relating to the Motion Picture.
"Film Distribution Agreement" means the Distribution
Agreement, dated as of October 7, 2004, by and between the LLC and the
Corporation.
"Film Securitization Facility" means DW Funding's structured
financing facility, which is secured by certain rights in the LLC Group's film
library, including certain Animated Film Assets.
"Film Property" means, with respect to any Motion Picture, all
of the specified party's right, title and interest in and to the following:
(i) all common law and statutory copyrights, rights in copyrights,
interests in copyrights, applications for copyrights and
renewal and extensions in copyrights, domestic and foreign,
from time to time with respect to such Motion Picture and to
all Literary Material upon which such Motion Picture is based,
including the original screenplay for such Motion Picture, or
any part thereof, including without limitation all rights
throughout the universe to use, reproduce, distribute,
license, sublicense, create derivative works of, publicly
perform, publicly display, digitally perform, make, have made,
sell, offer for sale, import and in any way exploit such
Motion Picture and all Literary Material upon which such
Motion Picture is based, in any media now known or hereafter
devised;
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(ii) the ownership of and rights to use and sublicense the use of
(a) the title of such Motion Picture (to the extent such title
is a registered trademark) in any and all print styles and
forms and in connection with the distribution, marketing and
promotion of such Motion Picture, (b) all trade marks and
service marks associated with the Motion Picture, and (c) all
goodwill associated therewith or symbolized thereby;
(iii) the license to use, in connection with such Motion Picture,
all Literary Material, and all common law and statutory
copyrights, and rights and interests in copyrights and
renewals and extensions of copyrights, in and to said Literary
Material;
(iv) all rights in all agreements and understandings (whether or
not evidenced in writing) with third parties primarily
relating to such Motion Picture or to any of the elements
thereto, and any rights derived therefrom or related thereto,
including all rights derived under contract with writers,
performers, trademark holders, copyright holders, licensors,
licensees, distributors, fulfillment service providers and
others with respect to the Picture;
(v) the license to use, in connection with such Motion Picture,
all original or licensed music included in the soundtrack of
such Motion Picture and all musical material created for such
Motion Picture or upon which such Motion Picture is based or
to be based, in whole or in part, and all common law and
statutory copyrights, and rights and interests in copyrights
and renewals and extensions of copyrights, in and to said
musical material;
(vi) all titles, designs, artwork, characters, stills, drawings,
film materials, computer models, logos, stories, plots and any
other intellectual properties and rights in, to, or arising
out of the Motion Picture or any element thereof regardless of
whether created by the specified party or by any other person
on the specified party's behalf;
(iii) all common law and statutory copyrights, rights in copyrights,
interests in copyrights, applications for copyrights and
renewal and extensions in copyrights (domestic and foreign)
trademarks, service marks and all other proprietary rights in
and to all documentary materials (including without limitation
"behind-the-scenes" productions and programming, "making-of"
productions and programming) and materials commonly termed
"bonus materials" on DVD's (including without limitation
deleted scenes, "bloopers", director's commentaries, alternate
and extended endings, interviews) and all animation created
for whatever purpose relating to such Motion Picture
(including but not limited to custom animation created in
connection with any promotions and merchandising programs) and
all rights throughout the universe to use, reproduce,
distribute, license, sublicense, create derivative works of,
publicly perform, publicly display,
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digitally perform, make, have made, sell, offer for sale,
import and in any way exploit such materials and animation,
except to the extent that any of the above constitutes
"Marketing Materials" as that term is defined in the Film
Distribution Agreement;
(iv) joint ownership of all common law and statutory copyrights,
rights in copyrights, interests in copyrights, applications
for copyrights and renewal and extensions in copyrights
(domestic and foreign) trademarks, service marks and all other
proprietary rights in and to "Marketing Materials" relating to
such Motion Picture as that term is defined in the Film
Distribution Agreement; and
(vii) all rights to xxx at law or in equity for any infringement,
impairment or other unauthorized use or conduct in derogation
of the copyrights, trademark rights or other rights described
herein, including the right to receive all proceeds and
damages therefrom.
"Formation Agreement" means the Formation Agreement, dated as
of the Separation Date, by and among the Corporation, the LLC, a limited
liability limited partnership to be named and the Members party thereto.
"Founders Shares Awards" means 100 shares of Class A Common
Stock, grossed-up for withholding taxes.
"401(k) Plan", when immediately preceded by "LLC" means the
DreamWorks 401(k) Plan. When immediately preceded by "Corporation", "401(k)
Plan" shall mean the corresponding qualified profit-sharing plan, which contains
a Code Section 401(k) feature, that the Corporation shall establish, sponsor,
and maintain pursuant to this Agreement.
"FSA Plan", when immediately preceded by "LLC" means the
health flexible spending arrangement component of the DreamWorks L.L.C. Section
125 Plan. When immediately preceded by "Corporation," "FSA Plan" shall mean the
corresponding health flexible spending arrangement operating through a plan or
other arrangement that satisfies the requirements of Section 125 of the Code
that the Corporation shall establish, sponsor and maintain pursuant to this
Agreement.
"Governmental Approvals" means any notices, reports or other
filings to be made, or any consents, registrations, approvals, permits or
authorizations to be obtained from, any Governmental Authority.
"Governmental Authority" means any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or governmental
authority.
"Grandview Lease" means the Standard Industrial/Commercial
Multi-Tenant Lease - Gross, dated as of August 7, 1996, between the LLC and the
lessors party thereto, as amended.
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"Gross Receipts" means, with respect to any Motion Picture,
all amounts paid or payable in cash to the owner of the Film Property in such
Motion Picture.
"Group" means either the LLC Group or the Corporation Group,
as the context requires.
"HBO Loan Agreement" means the Subordinated Loan Agreement,
dated as of the Separation Date, between Home Box Office, Inc. and the
Corporation, and the promissory note related thereto.
"Hybrid Motion Picture" means a Motion Picture that is
predominantly live-action, but in which at least two of the four characters with
the most screen time, or in which a majority of the characters with speaking
roles, are created (non-photorealistically) by an Animation Method. "Who Framed
Xxxxx Rabbit," "Looney Tunes - Back in Action" and "Space Jam" would be Hybrid
Motion Pictures.
"Indemnifying Party" has the meaning set forth in Section
5.04(a).
"Indemnitee" has the meaning set forth in Section 5.04(a).
"Indemnity Payment" has the meaning set forth in Section
5.04(a).
"Information" means information in written, oral, electronic
or other tangible or intangible forms, stored in any medium, including studies,
reports, records, books, contracts, instruments, films, surveys, discoveries,
ideas, concepts, know-how, techniques, designs, specifications, drawings,
blueprints, diagrams, models, prototypes, samples, flow charts, data, computer
data, disks, diskettes, tapes, computer programs or other software, marketing
plans, customer names, communications by or to attorneys (including
attorney-client privileged communications), memoranda and other materials
prepared by attorneys or under their direction (including attorney work
product), and other technical, financial, employee or business information or
data.
"Insurance Proceeds" means those monies (a) received by an
insured from an insurance carrier or (b) paid by an insurance carrier on behalf
of the insured, in each such case net of any applicable premium adjustments
(including reserves and retrospectively rated premium adjustments) and net of
any costs or expenses incurred in the collection thereof.
"IPO" means the initial public offering by the Corporation and
the selling stockholders identified in the IPO Registration Statement of shares
of Class A Common Stock pursuant to the IPO Registration Statement.
"IPO Document" has the meaning set forth in Section 5.02.
"IPO Registration Statement" means the registration statement
on Form S-l (File No. 333-117528) filed under the Securities Act, pursuant to
which the Class A Common Stock to be issued in the IPO will be registered,
together with all amendments thereto.
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"Liabilities" means any and all losses, claims, charges,
debts, demands, actions, causes of action, suits, damages, obligations,
payments, costs and expenses, reckonings, indemnities and similar obligations,
covenants, controversies, guarantees, make whole agreements and similar
obligations, and other liabilities and requirements, including all contractual
obligations, whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising, and
including those arising under any law, rule, regulation, Action, threatened or
contemplated Action (including the costs and expenses of demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees and
any and all costs and expenses, whatsoever reasonably incurred in investigating,
preparing or defending against any such Actions or threatened or contemplated
Actions), order or consent decree of any Governmental Authority or any award of
any arbitrator or mediator of any kind, and those arising under any contract,
commitment or undertaking, including those arising under this Agreement or any
Ancillary Agreement, in each case, whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any Person.
"Literary Material" means written matter, whether published or
unpublished, in any form, including a novel, book, article, treatment, outline,
poem, screenplay, teleplay, story, manuscript, letter, play or otherwise, which
may be included in or upon which a Motion Picture may be based.
"Live Action Motion Picture" means an means a Motion Picture
which is not an Animated Motion Picture or a Hybrid Motion Picture, as defined
above.
"LLC" has the meaning set forth in the preamble hereto.
"LLC Credit Facility" means the Credit Agreement, dated as of
August 22, 2002, between the LLC, JPMorgan Chase Bank, as administrative agent
(the "Administrative Agent"), and the other agents and lending banks from time
to time party thereto, as may be amended, modified, restated or replaced at any
time.
"LLC Employee Distribution" means the distribution of all of
the LLC's right, title and interest in a number of shares of Class A Common
Stock held by the LLC having a value (based on the initial public offering price
per share appearing on the cover page of the IPO prospectus, without deduction
for underwriters' fees or discounts) necessary for the LLC to make the transfers
in respect of the equity-based compensation awards of the LLC described in
Sections 2.12(k) and 2.12(l).
"LLC Group" means the LLC, each Subsidiary of the LLC and each
other Affiliate of the LLC before or after the Separation Date (other than the
Corporation and its Subsidiaries or any Person that controls the LLC before or
after the Separation Date including, for the avoidance of doubt, Xxxxxxx
Xxxxxxxxxx, Xxxxxx Xxxxxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxx).
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"LLC Operating Agreement" means the Sixth Amended and Restated
Limited Liability Company Agreement, dated as of March 21, 2003, of the LLC, as
amended by each amendment up to and including the third amendment thereto.
"LLC Indemnitees" has the meaning set forth in Section 5.02.
"LLC Shared Contract" means those contracts set forth on
Schedule 1.01(i) under the caption LLC Shared Contract.
"Material Consents" means the consents listed on Schedule
1.01(j).
"Member" has the meaning set forth in the Formation Agreement.
"Merger Sub" means DWA Acquisition Corp., a Delaware
corporation that is wholly owned by the Corporation.
"Motion Picture" means audiovisual product produced and
distributed of every kind and character whatsoever, including all present and
future technological developments, whether produced by means of any
photographic, electrical, electronic, mechanical or other processes or devices
now known or hereafter devised, and their accompanying devices and processes
whether pictures, images, visual and aural representations are recorded or
otherwise preserved for projection, reproduction, exhibition, or transmission by
any means or media now known or hereafter devised in such manner as to appear to
be in motion or sequence, including computer generated pictures and graphics
other than video games.
"Motion Picture Copy" means any tangible physical embodiment
of a Motion Picture or any portion thereof, including any negative or positive
Motion Picture film in any gauge, any video or electronic recording, whether on
magnetic tape, electronic disc or any other physical material or substance of
any kind produced by means of any photographic, electrical, electronic,
mechanical or other process or device now know or hereafter devised, on or with
respect to which a Motion Picture or any part thereof is printed, imprinted,
recorded, reproduced, duplicated or otherwise preserved.
"PDI" means Pacific Data Images, Inc., a California
corporation.
"PDI Inc Value" has the meaning set forth in Section 2.03.
"PDI Interest" means the limited liability company interest in
PDI LLC held by the LLC in the form of Class D Stock (as defined in PDI LLC's
limited liability company agreement) having a participation percentage of 40%.
"PDI LLC" means Pacific Data Images, LLC, a Delaware limited
liability company.
"PDI LLC Value" has the meaning set forth in Section 2.03.
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"PDI Merger Agreement" means the Merger Agreement, to be dated
as of October 7, 2004, by and between Merger Sub and PDI.
"Person" means an individual, a general or limited
partnership, a corporation, a trust, a joint venture, an unincorporated
organization, a limited liability entity, any other entity and any Governmental
Authority.
"Phantom E Stock" means phantom limited liability company
interests in the LLC granted pursuant to the LLC's Employee Equity Participation
Plan.
"Phantom E Options" means a phantom limited liability company
option in the LLC granted pursuant to LLC's Employee Equity Participation Plan.
"Plan" means any plan, policy, program, payroll practice,
arrangement, contract, trust, insurance policy, or any agreement or funding
vehicle providing compensation or benefits to employees, former employees,
directors, consultants or former consultants of the LLC or the Corporation.
"Preferred Contributions" has the meaning set forth in the
Formation Agreement.
"Preferred Redemptions" has the meaning set forth in the
Formation Agreement.
"Prime Rate" means the rate which JPMorgan Chase Bank (or any
successor thereto or other major money center commercial bank agreed to by the
parties hereto) announces from time to time as its prime lending rate, as in
effect from time to time.
"Prospectus" means each preliminary, final or supplemental
prospectus forming a part of the IPO Registration Statement.
"Redwood City Lease" means the Triple Net Space Lease, dated
as of May 22, 2002, between Pacific Shores Development LLC, as Lessor, and the
LLC, as Lessee.
"Residual DW Distribution" has the meaning set forth in the
Formation Agreement.
"Retained Motion Pictures" means any picture released prior to
the Separation Date by the LLC under the "Go Fish" label.
"Revolver Debt" means $325 million of indebtedness outstanding
immediately prior to the Separation Date under the LLC Credit Facility.
"RSU" means a restricted stock unit award granted pursuant to
the 2004 Omnibus Incentive Compensation Plan that represents an unfunded and
unsecured promise to deliver Class A Common Stock, cash, other securities, other
awards or other property in accordance with the terms of the applicable
agreement governing such award.
"SAR" means a stock appreciation right award granted pursuant
to the 2004 Omnibus Incentive Compensation Plan that represents an unfunded and
unsecured
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promise to deliver Class A Common Stock, cash, other securities, other awards or
other property equal in value to the excess, if any, of the Fair Market Value
per share of Class A Common Stock over the per share Exercise Price of the SAR,
subject to the terms of the applicable agreement governing such award
"Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, security interest,
pledge, lien, charge, claim, option, right to acquire, voting or other
restriction, right-of-way, covenant, condition, easement, encroachment,
restriction on transfer or other encumbrance of any nature whatsoever.
"Separation" has the meaning set forth in Section 4.01.
"Separation Date" has the meaning set forth in Section 4.01.
"Services Agreement" means the Services Agreement, dated as of
October 7, 2004, by and between the LLC and the Corporation.
"Shared Contract Liability" means any Liability related to,
arising out of or resulting from a Corporation Shared Contract or an LLC Shared
Contract.
"Small Animated Motion Pictures" means an Animated Motion
Picture whose acquisition or production cost is equal to or less than
$10,000,000.
"Subsidiary" means, when used with respect to any Person, (a)
a corporation in which such Person and/or one or more Subsidiaries of such
Person, directly or indirectly, owns capital stock having a majority of the
total voting power in the election of directors of all outstanding shares of all
classes and series of capital stock of such corporation entitled generally to
vote in such election; and (b) any other Person (other than a corporation) in
which such Person and/or one or more Subsidiaries of such Person, directly or
indirectly, has (i) a majority ownership interest or (ii) the power to elect or
direct the election of a majority of the members of the governing body of such
first-named Person.
"Tangible Film Materials" has the meaning set forth in the
Film Distribution Agreement.
"Tax Receivable Agreement" means the Tax Receivable Agreement,
dated as of the Separation Date, among the Corporation and an entity controlled
by Xxxx Xxxxx.
"Third Party Claim" has the meaning set forth in Section
5.05(a).
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"Trademark Assignment" means the Trademark Assignment, dated as of the
Separation Date, by and between the LLC and the Corporation.
"Trademark License Agreement" means the Trademark License Agreement, dated
as of the Separation Date, by and between the LLC and the Corporation, providing
for, among other things, the license of the "DreamWorks" trademark by the
Corporation to the LLC.
"2004 Omnibus Incentive Compensation Plan" means the Corporation's 2004
Omnibus Incentive Compensation Plan for any director, officer, employee or
consultant of the Corporation or any of its Affiliates.
"Underwriters" means the underwriters for the IPO.
"Underwriting Agreement" means the underwriting agreement to be entered
into among the Corporation, the selling stockholders named therein and the
Underwriters with respect to the IPO.
"Universal Agreement" means the Master Agreement, amended and restated as
of October 31, 2003, between the LLC and Vivendi Universal Entertainment LLLP,
as assignee of Universal Studios, Inc.
"Universal Interparty Agreement" means the Interparty Agreement, dated as
of the Separation Date, between Vivendi Universal Entertainment LLLP, the LLC
and the Corporation.
ARTICLE II
The Separation
SECTION 2.01. Transfer of Contributed Assets and Assumption of Contributed
Liabilities. (a) On the Separation Date and subject to Section 2.09 hereof,
immediately prior to consummation of the transactions contemplated in Section
2.01(b), the LLC shall acquire from DW Funding all of DW Funding's right, title
and interest in all Animated Film Assets, in each case, free from any
encumbrances in connection with the Film Securitization Facility and all related
Liabilities.
(b) On the Separation Date and subject to Section 2.09 hereof, (i) the LLC
shall contribute, assign, transfer, convey and deliver to DWA LLC, and shall
cause its applicable Subsidiaries to contribute, assign, transfer, convey and
deliver to DWA LLC, an undivided 99% interest in all of the LLC's and such
Subsidiaries' respective rights, titles and interests in and to all Contributed
Assets not then held by DWA LLC or PDI, (ii) the LLC shall contribute, assign,
transfer, convey and deliver to DW Inc, and shall cause its applicable
Subsidiaries to contribute, assign, transfer, convey and deliver to DWA LLC, an
undivided 1% interest in all of the LLC's and such Subsidiaries' respective
rights, titles and interests in and to all Contributed Assets not then held by
DWA LLC or PDI and (iii) DW Inc shall subsequently contribute, assign, transfer,
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convey and deliver to DWA LLC its undivided 1% interest in the Contributed
Assets received in subparagraph (ii) to DWA LLC.
(c) On the Separation Date, DWA LLC shall assume, and agree to pay,
perform, satisfy and discharge on a timely basis all of the Contributed
Liabilities (other than any Excluded Liability) in accordance with their
respective terms, regardless of (i) when or where such Liabilities arose or
arise, (ii) whether the facts on which they are based occurred on, prior to or
subsequent to the Separation Date, (iii) where or against whom such Liabilities
are asserted or determined, (iv) whether asserted or determined on, prior to or
subsequent to the Separation Date or (v) whether arising from or alleged to
arise from negligence, recklessness, violation of law, fraud or
misrepresentation by any Person in the LLC Group, provided, however, that the
foregoing clause (v) shall not limit the rights of DWA LLC or the Corporation to
make a claim against any Person in the LLC Group for Liabilities suffered by any
person in the Corporation Group as a direct result of such actions on the part
of a Person in the LLC Group after the Separation Date and the Corporation shall
be obligated for Shared Contract Liabilities only as set forth in Section
2.01(d). It is mutually agreed by the parties hereto that, solely with respect
to the assumption by DWA LLC of the Revolver Debt and the indebtedness assumed
by the Corporation pursuant to the Animated Film Assumption Agreement, the
Administrative Agent (on behalf of the lenders party to the LLC Credit Facility)
is a third-party beneficiary of this Section 2.01(c) and the provisions of this
Section 2.01(c) may not be amended without the prior written consent of the
Administrative Agent (on behalf of the lenders party to the LLC Credit
Facility).
(d) On and after the Separation Date, the LLC shall make available to the
Corporation Group the benefits and rights under each LLC Shared Contract to the
extent such benefits and rights have historically been provided to the Animation
Motion Picture Business; provided that (i) no Person in the Corporation Group
shall take any action, or refrain from taking any action, if (A) such action or
inaction is reasonably likely to or does result in a breach on the part of any
Person in the LLC Group under any LLC Shared Contract and (B) such Person in the
Corporation Group would otherwise be obligated to take or not take such action
under the LLC Shared Contract had such Person become severally liable under the
LLC Shared Contract on the Separation Date, (ii) each Person in the Corporation
Group shall cooperate with the LLC and, at the LLC's request, take such actions
that are reasonably necessary or desirable to ensure that the LLC is able to
perform its obligations constituting Shared Contract Liabilities under such LLC
Shared Contract and (iii) to the extent any Liability under an LLC Shared
Contract is either (x) specifically allocated to the Animated Motion Picture
Business or (y) related to the benefits and rights made available to the
Corporation Group under such LLC Shared Contract, such Shared Contract
Liabilities shall be, as between the LLC and the Corporation, the responsibility
of the Corporation. It is understood that, unless otherwise mutually agreed,
there will not be a novation or assignment of the Shared Contract Liabilities
and that the Corporation shall perform its obligations hereunder by taking all
such actions as are reasonably necessary or desirable to ensure that the LLC is
able to perform all of the obligations constituting Shared Contract Liabilities
under each LLC Shared Contract.
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(e) On and after the Separation Date, the Corporation shall make available
to the LLC Group the benefits and rights under each Corporation Shared Contract
to the extent such benefits and rights have historically been provided to the
LLC Group; provided that (i) no Person in the LLC Group shall take any action,
or refrain from taking any action, if (A) such action or inaction is reasonably
likely to or does result in a breach on the part of any Person in the
Corporation Group under any Corporation Shared Contract and (B) such Person in
the LLC Group would otherwise be obligated to take or not take such action under
the Corporation Shared Contract had such Person become severally liable under
the Corporation Shared Contract on the Separation Date, (ii) each Person in the
LLC Group shall cooperate with the Corporation and, at the Corporation's
request, take such actions that are reasonably necessary or desirable to ensure
that the Corporation is able to perform its obligations constituting Shared
Contract Liabilities under such Corporation Shared Contract and (iii) to the
extent any Liability under a Corporation Shared Contract is either (x)
specifically allocated to the LLC Group or (y) related to the benefits and
rights made available to the LLC Group under such Corporation Shared Contract,
such Corporation Shared Contract Liabilities shall be, as between the LLC and
the Corporation, the responsibility of the LLC. It is understood that, unless
otherwise mutually agreed, there will not be a novation or assignment of the
Corporation Shared Contract Liabilities and that the LLC shall perform its
obligations hereunder by taking all such actions as are reasonably necessary or
desirable to ensure that the Corporation is able to perform all of the
obligations constituting Shared Contract Liabilities under each Corporation
Shared Contract.
SECTION 2.02. Preferred Transactions and DWA LLC Transactions. On the
Separation Date, immediately after effecting the transactions contemplated in
Section 2.01 and, in the case of (b), (c) and (d) of this Section 2.02, subject
to the effectiveness of the Underwriting Agreement and the execution of the
Formation Agreement:
(a) the LLC shall make the DW Distribution;
(b) the applicable Persons shall make the Preferred Contributions;
(c) the LLC shall make the Preferred Redemptions; and
(d) each applicable Person shall make the Contribution.
SECTION 2.03. PDI and Other Transactions. On the Separation Date,
immediately after effecting the transactions contemplated in Section 2.02:
(a) the LLC shall contribute, assign, transfer, convey and deliver to the
Corporation all its right, title and interest in and to the PDI Interest in
exchange for that number of shares of Class A Common Stock determined by:
(i) multiplying $6.50 by the total number of outstanding shares of PDI
common stock on the Separation Date (the "PDI Inc Value") and multiplying the
result by 1.66 (the "PDI LLC Value"); and then
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(ii) dividing the excess of the PDI LLC Value over the PDI Inc Value by
the initial public offering price per share of Class A Common Stock in the
IPO, without deduction for underwriter's discounts or commissions.
(b) the merger of Merger Sub with and into PDI shall be consummated in
accordance with the PDI Merger Agreement;
(c) the Corporation shall contribute, assign, transfer, convey and deliver
to PDI all its right, title and interest in and to the PDI Interest;
(d) the LLC shall make the LLC Employee Distribution; and
(e) the LLC shall make the Residual DW Distribution.
SECTION 2.04. Termination of Agreements. (a) Except as set forth in
Section 2.04(b), in furtherance of the releases and other provisions of Section
5.01 hereof, the Corporation and each Person in the Corporation Group, on the
one hand, and the LLC and each Person in the LLC Group, on the other hand,
hereby terminate any and all agreements, arrangements, commitments or
understandings, whether or not in writing, between or among the Corporation
and/or any Person in the Corporation Group, on the one hand, and the LLC and/or
any Person in the LLC Group, on the other hand, effective as of the Separation
Date. No such terminated agreement, arrangement, commitment or understanding
(including any provision thereof which purports to survive termination) shall be
of any further force or effect after the Separation Date, and the net amount of
all intercompany Liabilities owed by the Corporation or any Subsidiary in the
Corporation Group to the LLC or any Subsidiary in the LLC Group that do not
constitute Contributed Liabilities shall be deemed capital contributions of the
LLC to the Corporation. Each party shall, at the reasonable request of any other
party, take, or cause to be taken, such other actions as may be necessary to
effect the foregoing.
(b) The provisions of Section 2.04(a) shall not apply to any of the
following agreements, arrangements, commitments or understandings (or to any of
the provisions thereof): (i) this Agreement and the Ancillary Agreements (and
each other agreement or instrument expressly contemplated by this Agreement or
any Ancillary Agreement to be entered into by any of the parties hereto or any
Person in their respective Groups); (ii) any agreements, arrangements,
commitments or understandings listed or described on Schedule 2.04(b)(ii); (iii)
any agreements, arrangements, commitments or understandings to which any Person
other than the parties hereto and their respective Affiliates is a party (it
being understood that to the extent that the rights and obligations of the
parties and the Persons in their respective Groups under any such agreements,
arrangements, commitments or understandings constitute Contributed Assets or
Contributed Liabilities, they shall be assigned pursuant to Section 2.01); and
(iv) any other agreements, arrangements, commitments or understandings that this
Agreement or any Ancillary Agreement expressly contemplates will survive the
Separation Date.
SECTION 2.05. Insurance Matters.
20
(a) The Corporation acknowledges that, following the Separation Date, no
Person in the Corporation Group, nor any of their respective officers, directors
or employees, will be covered by directors' and officers' insurance policies or
errors and omissions insurance (collectively, the "Excluded Insurance");
provided that the LLC will maintain the Excluded Insurance for a period of not
less than three years from the Separation Date and will assist the Corporation
in making any claims thereunder with respect to events occurring prior to the
Separation Date to the extent covered thereby. The Corporation acknowledges and
agrees that, prior to the Separation Date, it shall obtain its own Excluded
Insurance with respect to events occurring prior to the Separation that would
not be covered by the LLC's policies (e.g. IPO-related claims). With respect to
all other insurance coverage, as soon as reasonably practicable following the
Separation Date, but in no event later than January 1, 2005, the Corporation
shall obtain and maintain insurance policies (whether directly or through
arrangements made through the LLC's risk management department) covering its
risk of loss and such insurance policies shall be separate and apart from the
LLC's insurance programs. Notwithstanding the foregoing the LLC shall use
commercially reasonable efforts to assist the Corporation in the transition to
its own separate insurance programs and shall provide the Corporation with any
information that is in its possession and is reasonably available and necessary
to obtain insurance coverage for the Corporation. In addition, the LLC shall
provide risk management services as set forth in, and subject to the terms of,
the Services Agreement. Prior to January 1, 2005, the LLC shall, subject to
insurance market conditions and other factors beyond its control, maintain
policies of insurance (other than Excluded Insurance), including for the benefit
of the Corporation or any Person in the Corporation Group, that are comparable
to those maintained generally by the LLC. The Corporation acknowledges that such
insurance policies are for the benefit of all companies insured by such
policies, and policy limits may be eroded or exhausted by insureds other than
Persons in the Corporation Group. The Corporation further acknowledges that
policy limits are eroded on a "first paid" basis, without regard to when an
occurrence or loss takes place or when a claim is filed. The Corporation
acknowledges that coverage under such insurance policies will be governed by the
policy terms and conditions.
(b) The Corporation shall promptly pay or reimburse the LLC for premium
expenses and any costs and expenses which the LLC may incur in connection with
the insurance coverage maintained pursuant to this Section 2.05, including but
not limited to any subsequent premium adjustments but excluding any costs or
expenses related to risk management services. All payments and reimbursements by
the Corporation shall be made within thirty days after the Corporations' receipt
of an invoice from the LLC. Any risk management services provided pursuant to
the Services Agreement shall be reimbursed solely as set forth in the Services
Agreement.
(c) Each of the LLC and the Corporation will share such information as is
reasonably necessary in order to permit the other to manage and conduct its
insurance matters in an orderly fashion. Each of the LLC and the Corporation, at
the request of the other, shall cooperate with and use commercially reasonable
efforts to assist the other in recoveries for claims made under any insurance
policy for the benefit of any insured party, and neither the LLC nor the
Corporation, nor any Person in either of their
21
respective Groups, shall take any action which would intentionally jeopardize or
otherwise interfere with either party's ability to collect any proceeds payable
pursuant to any insurance policy. After the Separation Date, neither the LLC nor
the Corporation shall (and shall ensure that no Person in their respective
Groups shall), without the consent of the other, provide any insurance carrier
with a release, or amend, modify or waive any rights under any such policy or
agreement, if such release, amendment, modification or waiver would materially
adversely affect any rights or potential rights of any Person in the other Group
thereunder. However, nothing in this Section 2.05(c) shall (i) preclude any
Person in any Group from presenting any claim or from exhausting any policy
limit, (ii) require any Person in any Group to pay any premium or other amount
or to incur any Liability or (iii) require any Person in any Group to renew,
extend or continue any policy in force.
(d) The defense of claims, suits or actions giving rise to potential or
actual insurance claims in which the Corporation has an interest will be managed
(in conjunction with the LLC's insurers, as appropriate) by the LLC (at its
expense) unless the resolution of such claim, suit or action would be reasonably
likely to result in a Liability the majority of which would be borne by the
Corporation, in which case the Corporation shall bear the expense and may choose
to manage such defense.
SECTION 2.06. Documents Relating to Other Transfers of Assets and
Assumption of Liabilities. In furtherance of the assignment, transfer and
conveyance of Contributed Assets and the assumption of Contributed Liabilities
set forth in Section 2.01 on or prior to the Separation Date, (i) the LLC shall
execute and deliver, and shall cause its Subsidiaries to execute and deliver,
such bills of sale, stock powers, certificates of title, assignments of
contracts, copyright assignments and other instruments of transfer, conveyance
and assignment as and to the extent necessary to evidence the transfer,
conveyance and assignment of all of the LLC's and its Subsidiaries' right, title
and interest in and to the Contributed Assets to DWA LLC, (ii) DWA LLC shall
execute and deliver, and shall cause its Subsidiaries to execute and deliver,
such assumptions of contracts and other instruments of assumption as and to the
extent necessary to evidence the valid and effective assumption of the
Contributed Liabilities by DWA LLC and (iii) the Corporation shall execute and
deliver, and shall cause its Subsidiaries to execute and deliver, such
assumption agreements, credit agreements, security documents, guarantees and
other instruments of assumption as and to the extent necessary to evidence
assumption or guarantee of the Revolver Debt by the Corporation.
SECTION 2.07. Other Ancillary Agreements. On or prior to the Separation
Date, except as provided in Section 2.09, each of the LLC and the Corporation
will execute and deliver all Ancillary Agreements to which it is a party.
SECTION 2.08. Disclaimer of Representations and Warranties. Each of the
LLC (on behalf of itself and each Person in the LLC Group) and the Corporation
(on behalf of itself and each Person in the Corporation Group) understands and
agrees that, except as expressly set forth herein or in any Ancillary Agreement,
no party to this Agreement, any Ancillary Agreement or any other agreement or
document contemplated by this Agreement, any Ancillary Agreement or otherwise,
is representing or warranting
22
in any way, express or implied, as to the Assets, businesses or Liabilities
transferred or assumed as contemplated hereby or thereby, as to any Consents
required in connection therewith, as to the value or freedom from any Security
Interests of, or any other matter concerning, any Assets of such party, or as to
the absence of any defenses or right of setoff or freedom from counterclaim with
respect to any claim or other Asset, including any accounts receivable, of any
party, or as to the legal sufficiency of any assignment, document or instrument
delivered hereunder to convey title to any Asset or thing of value upon the
execution, delivery and filing hereof or thereof. Except as may expressly be set
forth herein or in any Ancillary Agreement, all such Assets are being
transferred on an "as is", "where is" basis (and, in the case of any real
property, by means of a quitclaim or similar form deed or conveyance) and the
respective transferees shall bear the economic and legal risks that (i) any
conveyance shall prove to be insufficient to vest in the transferee good and
marketable title, free and clear of any Security Interest and (ii) any necessary
Consents or Governmental Approvals are not obtained or that any requirements of
laws or judgments are not complied with.
SECTION 2.09. Governmental Approvals and Consents. (a) To the extent that
the Separation requires any Governmental Approvals or Consents, the parties will
use their commercially reasonable efforts to obtain any such Governmental
Approvals and Consents.
(b) If and to the extent that the valid, complete and perfected transfer
or assignment to the Corporation Group of any Contributed Assets would be a
violation of applicable laws or require any Consent or Governmental Approval in
connection with the Separation, the IPO, the DW Distribution or the
Contribution, then, unless the LLC and the Corporation shall otherwise mutually
determine, the transfer or assignment to the Corporation Group of such
Contributed Assets shall be automatically deemed deferred and any such purported
transfer or assignment shall be null and void until such time as all legal
impediments are removed and/or such Consents or Governmental Approvals have been
obtained and the failure to so transfer or assign any such Contributed Asset
shall not be a breach of the LLC's obligations pursuant to Section 2.01 hereof.
Notwithstanding the foregoing, such Asset shall be deemed a Contributed Asset
for purposes of determining whether any Liability is a Contributed Liability.
(c) If the transfer or assignment of any Contributed Asset intended to be
transferred or assigned hereunder is not consummated on the Separation Date,
whether as a result of the provisions of Section 2.09(b) or for any other
reason, then, to the extent permitted by applicable law and subject to
compliance with Section 2.11(b) by the Person to whom the Contributed Asset was
to be transferred, the Person in the LLC Group retaining such Contributed Asset
shall thereafter hold such Contributed Asset for the use and benefit insofar as
reasonably possible, of the Person entitled thereto (at the expense of the
Person entitled thereto). In addition, the Person in the LLC Group retaining
such Contributed Asset shall take such other actions as may be reasonably
requested by the Person to whom such Contributed Asset is to be transferred in
order to place such Person, insofar as reasonably possible, in the same position
as if such Contributed Asset had been transferred as contemplated hereby and so
that all the benefits and burdens relating to such Contributed Asset including
possession, use, risk of loss, potential for gain and
23
dominion, control and command over such Assets, are to inure from and after the
Separation Date to the Corporation Group. Notwithstanding the foregoing, if
following a request from the LLC, the Corporation fails to discharge any due and
outstanding Liability related to a Contributed Asset being held by a Person in
the LLC Group, or otherwise fails to reasonably assure the LLC that such
Liability will be promptly discharged, then such Person in the LLC Group, in
addition to any other rights and remedies the LLC may have hereunder, shall no
longer be required to hold such Contributed Asset for the benefit of the
Corporation and, subject to Section 2.09(d) below, may retain such Contributed
Asset for its own use and benefit.
(d) If and when the Consents and/or Governmental Approvals, the absence of
which caused the deferral of transfer of any Contributed Asset pursuant to
Section 2.09(b), are obtained, the transfer of the applicable Contributed Asset
shall be effected in accordance with the terms of this Agreement; provided,
however, that the Corporation has satisfied its obligations pursuant to Section
2.11(b).
(e) The Person in the LLC Group retaining a Contributed Asset due to the
deferral of the transfer of such Contributed Asset shall not be obligated, in
connection with the foregoing, to expend any money unless the necessary funds
are advanced by the Person entitled to the Contributed Asset, other than
non-material out-of-pocket administrative expenses, attorneys' fees and
recording or similar fees reasonably necessary to protect the value of a
Contributed Asset and where, due to time sensitivity, it is not practicable to
first seek advancement of such funds. Such amounts shall be promptly reimbursed
by the Person in the Corporation Group entitled to such Contributed Asset.
SECTION 2.10. Novation of Contributed Liabilities. (a) Each of the LLC and
the Corporation, at the request of the other, shall use its commercially
reasonable efforts to obtain, or to cause to be obtained, any consent,
substitution, approval or amendment required to novate or assign to the
applicable Person in the Corporation Group all obligations under agreements,
leases, licenses and other obligations or Liabilities of any nature whatsoever
that constitute Contributed Liabilities (other than any Contributed Liability
that constitutes a Shared Contract Liability), or to obtain in writing the
unconditional release of all parties to such arrangements other than any Person
in the Corporation Group, so that, in any such case, the Corporation and its
Subsidiaries will be solely responsible for such Contributed Liabilities;
provided, however, that neither the LLC nor the Corporation shall be obligated
to pay any consideration therefor to any third party from whom such consents,
approvals, substitutions and amendments are requested; provided further,
however, that any legal fees or other administrative costs associated with
obtaining such consents, approvals substitution and amendments shall be borne by
the Corporation.
(b) If the LLC or the Corporation is unable to obtain, or to cause to be
obtained, any such required consent, approval, release, substitution or
amendment, the applicable Person in the LLC Group shall continue to be bound by
such agreements, leases, licenses and other obligations that constitute
Contributed Liabilities and, unless not permitted by law or the terms thereof,
the Corporation shall, as agent or subcontractor
24
for the LLC or such other Person, as the case may be, pay, perform and discharge
fully all such obligations or other Liabilities of the LLC or such other Person
that constitute Contributed Liabilities, as the case may be, thereunder from and
after the Separation Date. The Corporation shall indemnify each LLC Indemnitee,
and hold each of them harmless against any Liabilities arising in connection
therewith. Subject to the last sentence of Section 2.09(c), the LLC shall,
without further consideration, pay or remit, or cause to be paid or remitted, to
the Corporation promptly all money, rights and other consideration received by
it or any Person in its respective Group in respect of such performance. If and
when any such consent, approval, release, substitution or amendment shall be
obtained or such agreement, lease, license or other rights or obligations shall
otherwise become assignable or able to be novated, the LLC shall thereafter
assign, or cause to be assigned, all its rights, obligations and other
Liabilities thereunder or any rights or obligations of any Person in its Group
to the Corporation without payment of further consideration and the Corporation
shall, without the payment of any further consideration, assume such rights and
obligations.
SECTION 2.11. Novation of Liabilities other than Contributed Liabilities.
(a) Each of the LLC and the Corporation, at the request of the other, shall use
its commercially reasonable efforts to obtain, or to cause to be obtained, any
consent, substitution, approval or amendment required to novate or assign all
obligations under agreements, leases, licenses and other obligations or
Liabilities of any nature whatsoever that do not constitute Contributed
Liabilities, or to obtain in writing the unconditional release of all parties to
such arrangements other than any Person in the LLC Group, so that, in any such
case, the Persons in the LLC Group will be solely responsible for such
Liabilities; provided, however, that neither the LLC nor the Corporation shall
be obligated to pay any consideration therefor to any third party from whom such
consents, approvals, substitutions and amendments are requested; provided
further, however, that any legal fees or other administrative costs associated
with obtaining such consents, approvals, substitution and amendments shall be
borne by the LLC.
(b) If the LLC or the Corporation is unable to obtain, or to cause to be
obtained, any such required consent, approval, release, substitution or
amendment, the applicable Person in the Corporation Group shall continue to be
bound by such agreements, leases, licenses and other obligations and, unless not
permitted by law or the terms thereof, the LLC shall cause a Person in the LLC
Group, as agent or subcontractor for such Person in the Corporation Group, to
pay, perform and discharge fully all the obligations or other Liabilities of
such Person in the Corporation Group thereunder from and after the Separation
Date. The LLC shall indemnify each Corporation Indemnitee and hold each of them
harmless against any Liabilities arising in connection therewith. The
Corporation shall cause each Person in the Corporation Group without further
consideration, to pay or remit, or cause to be paid or remitted, to the LLC or
to another Person in the LLC Group specified by the LLC promptly all money,
rights and other consideration received by it or any Person in the Corporation
Group in respect of such performance. If and when any such consent, approval,
release, substitution or amendment shall be obtained or such agreement, lease,
license or other rights or obligations shall otherwise become assignable or able
to be novated, the Corporation shall promptly assign, or cause to be assigned,
all its rights, obligations and other
25
Liabilities thereunder or any rights or obligations of any Person in the
Corporation Group to the LLC or to another Person in the LLC Group specified by
the LLC without payment of further consideration and the LLC, without the
payment of any further consideration shall, or shall cause such other Person in
the LLC Group to, assume such rights and obligations.
SECTION 2.12. Employee Benefit Arrangements. (a) (i) Effective as of the
Separation Date, or other later date that the Corporation and the LLC mutually
agree upon, the Corporation shall adopt, and shall maintain until June 30, 2005,
health and welfare Plans (excluding the Corporation 401(k) Plan and the 2004
Omnibus Incentive Compensation Plan) that, to the extent administratively and
financially practicable, are substantially the same as the corresponding health
and welfare Plans of the LLC as in effect immediately prior to the Separation
Date.
(ii) Effective as of the Separation Date, all DWA Employees shall
cease to be active participants in any Plan maintained by the LLC or an
Affiliate thereof, and no DWA Employee shall be entitled to any additional
accruals or any additional coverage under any Plan maintained by the LLC
or an Affiliate thereof. Without limiting the generality of any express or
implied assumption of Liabilities by the Corporation, the Corporation
shall be solely responsible for and shall assume sole and exclusive
liability and receive the assets, if any, related to such liabilities for
(A) the payment of any termination or severance payments with respect to
any DWA Employee except to the extent paid prior to the Separation Date;
(B) the provision of any post-retirement health, dental, life insurance,
or other welfare benefits to any DWA Employee except to the extent paid
prior to the Separation Date; and (C) any claims made or incurred by the
DWA Employees and their beneficiaries on or subsequent to the Separation
Date under any Plan maintained or sponsored by the Corporation. For
purposes of the immediately preceding sentence, a claim will be deemed
incurred, in the case of hospital, medical or dental benefits, when the
services that are the subject of the claim are performed and, in the case
of other benefits (such as disability or life insurance), when an event
has occurred that entitles the employee to the benefit.
(iii) As of or prior to the Separation Date, the Corporation shall
establish or cause to be established the Corporation FSA Plan. Effective
as of the Separation Date, each DWA Employee shall cease to be an active
participant in the LLC FSA Plan. The Corporation FSA Plan shall take into
account the DWA Employees' salary reduction elections under the LLC FSA
Plan as in effect immediately prior to the Separation Date for the
remainder of the plan year in which the Separation Date occurs and as if
made under the Corporation FSA Plan. As soon as administratively
practicable following the Separation Date, the LLC shall cause an amount
equal to any and all contributions that have been made by the DWA
Employees to the LLC FSA Plan and that have not been reimbursed, or are
not payable in connection with reimbursement claims submitted prior to the
Separation Date, for eligible reimbursable medical expenses incurred by
the DWA Employees prior to the Separation Date to be transferred to the
Corporation or its designated vendor, which shall be the vendor in respect
of the LLC FSA
26
Plan immediately prior to the Separation Date. Such transferred amounts
shall be treated as contributions by the DWA Employees under the
Corporation FSA Plan. Eligible medical expenses incurred by the DWA
Employees on or after the Separation Date, or incurred by the DWA
Employees prior to the Separation Date but submitted for reimbursement on
or after the Separation Date, shall be subject to reimbursement solely and
exclusively under the Corporation FSA Plan and any related liabilities
shall be assumed entirely by the Corporation.
(b) Effective as of the Separation Date, or other later date that applies
to the particular Corporation Plan established thereafter, the Corporation Plans
shall be, with respect to the DWA Employees, in all respects the successors in
interest to, and shall not provide benefits that duplicate benefits provided by,
the corresponding LLC Plans. The LLC and the Corporation shall agree on methods
and procedures, including amending the respective Plan documents, to prevent DWA
Employees from receiving duplicate benefits from the LLC Plans and the
Corporation Plans.
(c) As of or prior to the Separation Date, the Corporation shall
establish, or cause to be established, the Corporation 401(k) Plan, which shall
be a new and separate defined contribution plan that satisfies the requirements
of Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"), and a new and separate trust that shall be tax-exempt under
Section 501(a) of the Code. Effective as of the Separation Date, the Corporation
401(k) Plan shall assume and be solely responsible for all Liabilities relating
to, arising out of, or resulting from DWA Employees (and all of their
beneficiaries and alternate payees pursuant to a qualified domestic relations
order, as defined in Section 414(p) of the Code) under the LLC 401(k) Plan.
Effective as of the Separation Date, each DWA Employee shall cease to be an
active participant in the LLC 401(k) Plan. The LLC shall cause the LLC 401(k)
Plan accounts of the DWA Employees (and all of their beneficiaries and alternate
payees pursuant to a qualified domestic relations order, as defined in Section
414(p) of the Code) that are held by the LLC 401(k) Plan and its related trust
to be transferred, in accordance with Code Section 414(l), to the Corporation
401(k) Plan and its related trust, and the Corporation shall cause such
transferred accounts to be accepted by the Corporation 401(k) Plan and its
related trust. Unless the LLC and the Corporation agree otherwise, such transfer
shall occur on the last business day of a calendar month and shall be in-kind to
the maximum extent practicable. As soon as administratively practicable after
the Separation Date, the Corporation shall file a request for a favorable
determination from the Internal Revenue Service that the Corporation 401(k) Plan
is qualified under Section 401(a) of the Code. The Corporation hereby agrees and
covenants that the Corporation shall make all amendments required by the
Internal Revenue Service to obtain such a favorable determination. The
Corporation shall use its commercially reasonable efforts to enter into
agreements, effective as of the Separation Date, satisfactory to the LLC to
accomplish such assumption and transfer, the maintenance of the necessary
participant records and the appointment of a trustee and a record keeper under
the Corporation 401(k) Plan.
(d) Except as otherwise provided in subsection (a)(i) hereof, nothing in
this Agreement shall preclude the Corporation, at any time after the Separation
Date, from amending, merging, modifying, terminating, eliminating, reducing or
otherwise
27
altering in any respect any Corporation Plan or any employment or
other service arrangement with DWA Employees or vendors (to the extent permitted
by law).
(e) The Corporation shall be solely responsible for providing COBRA
continuation coverage under Section 4980B of the Code (for the applicable period
of time as required by law) to those DWA Employees and their eligible dependents
who become eligible for such coverage prior to, on, or after the Separation
Date.
(f) The LLC and the Corporation agree that none of the DWA Employees shall
be deemed, by reason of the transfer of their employment from the LLC, or any
Affiliate thereof, to the Corporation, or any Affiliate thereof, to have
experienced a termination or severance of employment from the LLC or any
Affiliate thereof for purposes of any Plan maintained or sponsored by the LLC or
any Affiliate thereof that provides for the payment of severance, salary
continuation or similar benefits.
(g) Effective as of the Separation Date, the Corporation shall make all
contributions to and shall assume all Liabilities under any multiemployer plan
(as defined in Section 3(37) of the Employee Retirement Income Security Act of
1974, as amended) in respect of any DWA Employee except to the extent paid prior
to the Separation Date.
(h) On or prior to the Separation Date, each DWA Employee who is employed
by the LLC Group on such date will be given the opportunity to elect to have any
unused vacation days that he or she has accrued prior to the Separation Date for
service with the LLC Group transferred to the Corporation, effective as of the
Separation Date. In the event that any such DWA Employee elects such a transfer,
effective as of the Separation Date, the Corporation shall be solely responsible
for and shall assume sole and exclusive liability for any such accrued vacation
days. In the event that any such employee does not elect such a transfer,
effective as of the Separation Date, such employee shall be entitled to receive
a cash payment from the Corporation for his or her unused vacation days accrued
prior to the Separation Date.
(i) On or prior to the Separation Date, subject to the approval of the
compensation committee of the Board of Directors of the Corporation (the
"Compensation Committee"), the LLC shall grant to Xxx Xxxx fully vested Phantom
E Stock that, upon the closing of the IPO, shall be exchanged for shares of
Class A Common Stock (to be delivered by the Corporation) that have an aggregate
value of $5,700,000, as determined on the Separation Date by reference to the
initial public offering price per share of Class A Common Stock in the IPO,
without deduction for underwriters' discounts or commissions (or, in lieu of
Class A Common Stock, such other form of equity-based compensation as the
Compensation Committee may determine). In the event that the closing of the IPO
fails to occur for any reason by June 28, 2005, then the Phantom E Stock will be
automatically canceled and Xxx Xxxx will not be entitled to any payments or
benefits with respect thereto.
(j) The Corporation will make Founders Shares Awards to substantially all
active DWA Employees and substantially all active employees of the LLC Group
upon the Separation Date. The Corporation will be responsible for payment of
28
withholding taxes to the government and W-2 reporting for such DWA Employees.
The LLC will be responsible for payment of withholding taxes to the government
and W-2 reporting for such employees of the LLC Group.
(k) Pursuant to Section 10 of the Employee Equity Participation Plan, the
LLC will transfer shares of Class A Common Stock held by it in retirement of all
outstanding vested Actual E Shares upon the Separation Date.
(l) Pursuant to Section 10 of the Employee Equity Participation Plan, the
LLC will transfer shares of Class A Common Stock held by it to certain holders
of vested Phantom E Stock upon the Separation Date. The LLC will be responsible
for withholding taxes from such holders of vested Phantom E Stock who are
employees of the LLC Group (without any gross-up), and the Corporation will be
responsible for withholding taxes from such holders of vested Phantom E Stock
who are DWA Employees of the LLC Group (without any gross-up) and, in each case,
remitting such withheld taxes to the government as well as for the W-2 reporting
with respect thereto.
(m) Except as provided in Section 2.12(k) and (l) the Corporation shall,
upon the Separation Date, pursuant to its 2004 Omnibus Incentive Compensation
Plan, make provision for the automatic conversion of all equity and equity-based
awards in the LLC (as agreed upon by the LLC and the Corporation) held by DWA
Employees or employees (or former employees) of the LLC Group into DWA Options,
DWA Restricted Stock, SARs or RSUs of the Corporation. Without limiting the
generality of the foregoing:
(i) certain holders of vested Phantom E Stock shall receive vested RSUs or
shares of vested Class A Common Stock and holders of unvested Phantom E Stock
shall receive unvested RSUs or DWA Restricted Stock, which will vest over the
remaining period in which the Phantom E Stock would have vested;
(ii) Phantom E Options, whether vested or unvested, shall be converted
into vested or unvested DWA Options or SARs, retaining their original vesting
status or schedule. Unvested DWA Options or SARs, as applicable, will vest
over the remaining period in which the Phantom E Options would have vested;
and
(iii) holders of unvested Actual E Shares shall receive unvested RSUs or
DWA Restricted Stock, which will vest over the remaining period in which the
Actual E Shares would have vested.
In general, the conversion of such LLC awards will preserve the value of
the holder's interests based on the IPO date price to the public of Class A
Common Stock, without deduction for underwriters' fees or discounts. In the case
of LLC interests that have a notional "exercise price", such conversions will
preserve the "intrinsic value" of the LLC interests through a formula that
preserves both the holder's "spread" and the ratio of the exercise price to the
value of the underlying interest. Notwithstanding the foregoing, the terms and
conditions of all such conversions and of the Corporation
29
awards into which LLC awards will be converted, and all determinations of value,
shall be made by the Compensation Committee.
In the case of conversions of interests held by employees or former
employee of the LLC Group (other than DWA Employees), the LLC will be
responsible (upon the conversion or upon vesting, exercise or settlement of the
award, as the case may be) for withholding taxes from such employees (without
any gross-up) and remitting such withheld taxes to the government as well as for
the W-2 reporting with respect thereto. In the case of conversions of interests
held by DWA Employees, the Corporation will be responsible (upon the conversion
or upon vesting, exercise or settlement of the award, as the case may be) for
withholding taxes from such DWA employees (without any gross-up) and remitting
such withheld taxes to the government as well as for the W-2 reporting with
respect thereto.
(n) Nothing in this Section 2.12, whether express or implied, is intended
to or shall confer any rights, benefits or remedies under or by reason of this
Section 2.12 on any Persons (including without limitation any DWA Employee or
any employee (or former employee) of the LLC Group) other than the parties to
this Agreement and their respective successors and permitted assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
Liability of any third party to any party to this Agreement, nor shall any
provisions give any third party any right of subrogation over or action against
any party to this Agreement.
ARTICLE III
The IPO and Actions Pending the IPO
SECTION 3.01. The IPO. The LLC and the Corporation shall use their
commercially reasonable efforts to consummate the IPO.
SECTION 3.02. Proceeds of the IPO. The IPO will be both a primary and
secondary offering of Class A Common Stock, and the net proceeds of the IPO will
be retained by the Corporation and the participating selling stockholders as
described in the Prospectus.
SECTION 3.03. Charter; Bylaws. Prior to the effectiveness of the IPO
Registration Statement, the LLC and the Corporation shall each take all actions
that may be required to provide for the adoption by the Corporation of the
Restated Certificate of Incorporation of the Corporation substantially in the
form attached as Exhibit A and the Amended and Restated Bylaws of the
Corporation substantially in the form attached as Exhibit B.
ARTICLE IV
Conditions Precedent to Consummation of Separation Transactions
SECTION 4.01. Separation Date. The closing of the transactions set forth
in Article II (the "Separation") shall take place at the offices of Cravath,
Swaine & Xxxxx
30
LLP, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 8:00 a.m. New York time on
the date (the "Separation Date") set for the pricing of the IPO, subject, other
than in the case of Section 2.01 and 2.02(a), which shall not be conditioned on
the occurrence of clause (b) below, to:
(a) all Material Consents shall have been obtained or waived by the
Corporation;
(b) the execution and delivery of the Formation Agreement.
ARTICLE V
Mutual Releases; Indemnification
SECTION 5.01. Release of Pre-Closing Claims. (a) Except as provided in
Section 5.01(c) and Section 5.03, effective as of the Separation Date, the
Corporation does hereby, for itself and for each of its Subsidiaries that is in
the Corporation Group as of the Separation Date, release and forever discharge
the LLC and each of its Subsidiaries that are in the LLC Group, and all Persons
who at any time prior to the Separation Date have been stockholders, directors,
officers, agents, managers or members of any Person in the LLC Group (in each
case, in their respective capacities as such), and their respective heirs,
executors, administrators, successors and assigns, from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed in each case on or before the Separation
Date, including in connection with the transactions and all other activities to
implement the Separation and the IPO.
(b) Except as provided in Section 5.01(c) and Section 5.02, effective as
of the Separation Date, the LLC does hereby, for itself and for each of its
Subsidiaries that is in the LLC Group, release and forever discharge the
Corporation and each of its Subsidiaries that is in Corporation Group as of the
Separation Date, and all Persons who at any time prior to the Separation Date
have been stockholders, directors, officers, agents or members of any Person in
the Corporation Group (in each case, in their respective capacities as such),
and their respective heirs, executors, administrators, successors and assigns,
from any and all Liabilities whatsoever, whether at law or in equity (including
any right of contribution), whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from any acts or events
occurring or failing to occur or alleged to have occurred or to have failed to
occur or any conditions existing or alleged to have existed in each case on or
before the Separation Date, including in connection with the transactions and
all other activities to implement the Separation and the IPO.
(c) Nothing contained in Section 5.01(a) or (b) shall impair any right of
any Person to enforce this Agreement, any Ancillary Agreement or any agreements,
arrangements, commitments or understandings that are specified in Section
2.04(b) or the
31
applicable Schedules thereto not to terminate as of the Separation Date or
Section 2.06, in each case in accordance with its terms. Nothing contained in
Section 5.01(a) or (b) shall release any Person from:
(i) any Liability provided in or resulting from any agreement among any
Persons in the LLC Group or the Corporation Group that is specified in
Section 2.04(b) or the applicable Schedules thereto as not to terminate as of
the Separation Date, or any other Liability specified in such Section 2.04(b)
as not to terminate as of the Separation Date;
(ii) any Liability assumed, transferred, assigned or allocated to the
Group of which such Person is a member in accordance with, or any other
Liability of any member of any Group under, this Agreement or any Ancillary
Agreement;
(iii) any Liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims brought
against the parties by third Persons, which Liability shall be governed by
the provisions of this Article V and, if applicable, the appropriate
provisions of the Ancillary Agreements; or
(iv) any Liability the release of which would result in the release of any
Person other than a Person released pursuant to this Section 5.01.
(d) The Corporation shall not make, and shall not permit any Person in the
Corporation Group to make, to make, any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any
indemnification, against the LLC or any Person in the LLC Group, or any other
Person released pursuant to Section 5.01(a), with respect to any Liabilities
released pursuant to Section 5.01(a). The LLC shall not make, and shall not
permit any Person in the LLC Group to make, any claim or demand, or commence any
Action asserting any claim or demand, including any claim of contribution or any
indemnification against the Corporation or any Person in the Corporation Group,
or any other Person released pursuant to Section 5.01(b), with respect to any
Liabilities released pursuant to Section 5.0l(b).
(e) It is the intent of each of the LLC and the Corporation, by virtue of
the provisions of this Section 5.01, to provide for a full and complete release
and discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed in each case on or
before the Separation Date, between or among the Corporation or any Person in
the Corporation Group, on the one hand, and the LLC or any Person in the LLC
Group, on the other hand (including any contractual agreements or arrangements
existing or alleged to exist between or among any such Persons on or before the
Separation Date), except as expressly set forth in Section 5.01(c). At any time,
at the request of any other party, each party shall cause each Person in its
respective Group to execute and deliver releases reflecting the provisions
hereof.
32
SECTION 5.02. Indemnification by the Corporation. Except as provided
in Section 5.04, the Corporation shall, and shall cause each of its Subsidiaries
that is in the Corporation Group as of the Separation Date, to jointly and
severally indemnify, defend and hold harmless the LLC, each Person in the LLC
Group and each of their respective members, managers, directors, officers and
employees, and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the "LLC Indemnitees"), from and against any and
all Liabilities of the LLC Indemnitees relating to, arising out of or resulting
from any of the following items without duplication and including, without
limitation, any such Liabilities asserted by way of setoff, counterclaim or
defense or enforcement of any Security Interest:
(i) the failure of the Corporation or any other Person in the
Corporation Group or any other Person to pay, perform or otherwise
promptly discharge any Contributed Liabilities in accordance with their
respective terms, whether prior to or after the Separation Date;
(ii) any material breach by the Corporation or any Person in the
Corporation Group of this Agreement or any Ancillary Agreement that does
not contain its own indemnification provisions;
(iii) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement (or any amendment thereto)
relating to such registration, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement
or alleged untrue statement of a material fact contained in the IPO
Registration Statement or Prospectus or any other document filed by the
Corporation or any Person in the Corporation Group, including all
documents incorporated therein by reference, with the Securities and
Exchange Commission or otherwise used in connection with the IPO or the
transactions contemplated thereby (collectively, the "IPO Documents"), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. In connection with the
foregoing, the Corporation shall, and shall cause each of its Subsidiaries
that is in the Corporation Group as of the Separation Date, to jointly and
severally indemnify, defend and hold harmless each LLC Indemnitee:
(A) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation,
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any other claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the
written consent of the Corporation; and
33
(B) against any and all reasonable expense whatsoever, as
incurred (including reasonable fees and disbursements of counsel)
incurred in investigating, preparing or defending against any
litigation, investigation or proceeding by any governmental agency
or body, commenced or threatened, in each case whether or not such
Person is a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid under
subparagraph (iii) above.
provided, however, that the indemnity contained in this subparagraph
(iii) does not apply to any LLC Indemnitee with respect to any loss,
liability, claim, damage, judgment or expense to the extent arising out of
any untrue statement or omission or alleged untrue statement or omission
(A) made in reliance upon and in conformity with written information
furnished to the Corporation by such LLC Indemnitee expressly for use in
an IPO Document or (B) if such untrue statement or omission or alleged
untrue statement or omission was corrected in an amended or supplemented
registration statement or prospectus and the Corporation had furnished
copies thereof to the LLC Indemnitee from which the Person asserting such
loss, liability, claim, damage, judgment or expense purchased the
securities that are the subject thereof on a timely basis prior to the
date of sale by such LLC Indemnitee to such Person.
Notwithstanding anything to the contrary herein, in no event will
any LLC Indemnitee have the right to seek indemnification from any Person in the
Corporation Group with respect to any claim or demand against any Person in the
LLC Group for the satisfaction of the Excluded Liabilities.
SECTION 5.03. Indemnification by the LLC. Except as provided in
Section 5.04, the LLC shall, and shall cause each of its Subsidiaries that is in
the LLC Group as of the Separation Date, to jointly and severally indemnify,
defend and hold harmless the Corporation, each Person in the Corporation Group,
each shareholder of the Corporation that was a member of the LLC at the time of
the Separation, and each of their respective directors, officers, managers and
employees, and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the "Corporation Indemnitees"), from and against
any and all Liabilities of the Corporation Indemnitees relating to, arising out
of or resulting from any of the following items (without duplication and
including, without limitation, any Liabilities asserted by way of setoff,
counterclaim or defense or enforcement of any Security Interest):
(i) the failure of the LLC or any other Person in the LLC Group or
any other Person to pay, perform or otherwise promptly discharge any
Excluded Liabilities in accordance with their respective terms, whether
prior to or after the Separation Date;
(ii) any material breach by the LLC or any Person in the LLC Group
of this Agreement or any Ancillary Agreement that does not contain its own
indemnification provisions.
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Notwithstanding anything to the contrary herein, in no event will
any Corporation Indemnitee have the right to seek indemnification from any
Person in the Corporation Group with respect to any claim or demand against any
Person in the LLC Group for the satisfaction of the Contributed Liabilities.
SECTION 5.04. Indemnification Obligations Net of Insurance Proceeds
and Other Amounts; Shared Contract Liabilities. (a) The parties intend that any
Liability subject to indemnification or reimbursement pursuant to this Article V
will be net of Insurance Proceeds that actually reduce the amount of the
Liability. Accordingly, the amount which any party (an "Indemnifying Party") is
required to pay to any Person entitled to indemnification hereunder (an
"Indemnitee") will be reduced by any Insurance Proceeds theretofore actually
recovered by or on behalf of the Indemnitee in respect of the related Liability.
If an Indemnitee receives a payment (an "Indemnity Payment") required by this
Agreement from an Indemnifying Party in respect of any Liability and
subsequently receives Insurance Proceeds, then the Indemnitee will pay to the
Indemnifying Party an amount equal to the excess of the Indemnity Payment
received over the amount of the Indemnity Payment that would have been due if
the Insurance Proceeds had been received, realized or recovered before the
Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any claim
shall not be relieved of the responsibility with respect thereto or, solely by
virtue of the indemnification provisions hereof, have any subrogation rights
with respect thereto, it being expressly understood and agreed that no insurer
or any other third party shall be entitled to a "wind-fall" (i.e., a benefit
such insurer or other third party would not be entitled to receive in the
absence of the indemnification provisions) by virtue of the indemnification
provisions hereof. Nothing contained in this Agreement or any Ancillary
Agreement shall obligate any Person in any Group to seek to collect or recover
any Insurance Proceeds.
(c) If an indemnification claim is covered by the indemnification
provisions of an Ancillary Agreement, the claim shall be made under the
Ancillary Agreement to the extent applicable and the provisions thereof shall
govern such claim. In no event shall any party be entitled to double recovery
from the indemnification provisions of this Agreement and any Ancillary
Agreement.
SECTION 5.05. Procedures for Indemnification of Third Party Claims. (a) If
an Indemnitee shall receive notice or otherwise learn of the assertion by a
Person (including any Governmental Authority) who is not a Person in the LLC
Group or the Corporation Group of any claim or of the commencement by any such
Person of any Action (collectively, a "Third Party Claim") with respect to which
an Indemnifying Party may be obligated to provide indemnification to such
Indemnitee pursuant to Section 5.02 or 5.03, or any other Section of this
Agreement, such Indemnitee shall give such Indemnifying Party written notice
thereof within 20 days after becoming aware of such Third Party Claim. Any such
notice shall describe the Third Party Claim in reasonable detail.
Notwithstanding the foregoing, the failure of any Indemnitee or other Person to
give notice as provided in this Section 5.05(a) shall not relieve the related
Indemnifying
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Party of its obligations under this Article V, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise, so long as such settlement or compromise contains an
unconditional release of each Indemnitee, whether or not a party to such Third
Party Claim), at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third Party Claim. Within 30 days after the receipt of
notice from an Indemnitee in accordance with Section 5.05(a) (or sooner, if the
nature of such Third Party Claim so requires), the Indemnifying Party shall
notify the Indemnitee of its election whether the Indemnifying Party will assume
responsibility for defending such Third Party Claim, which election shall
specify any reservations or exceptions. After notice from an Indemnifying Party
to an Indemnitee of its election to assume the defense of a Third Party Claim,
such Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise or settlement thereof,
but the fees and expenses of such counsel shall be the expense of such
Indemnitee; provided, however, in the event that (i) the Indemnifying Party has
elected to assume the defense of the Third Party Claim but has specified, and
continues to assert, any reservations or exceptions in such notice or (ii) the
Third Party Claim involves injunctive or equitable relieve, then, in any such
case, the reasonable fees and expenses of one separate counsel for all
Indemnitees shall be borne by the Indemnifying Party.
(c) If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in Section 5.05(b), such Indemnitee may defend such Third Party
Claim at the cost and expense of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the defense of the
Third Party Claim in accordance with the terms of this Agreement, no Indemnitee
may settle or compromise any Third Party Claim without the consent of the
Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any judgment or enter
into any settlement of any Third Party Claim unless the settlement involves only
monetary relief which the Indemnifying Party has agreed to pay and includes a
full and unconditional release of the Indemnitee.
SECTION 5.06. Additional Matters. (a) Any claim on account of a Liability
which does not result from a Third Party Claim shall be asserted by written
notice given by the Indemnitee to the related Indemnifying Party. Such
Indemnifying Party shall have a period of 30 days after the receipt of such
notice within which to respond thereto. If such Indemnifying Party does not
respond within such 30-day period, such Indemnifying Party shall be deemed to
have refused to accept responsibility to make payment. If such Indemnifying
Party does not respond within such 30-day period or rejects such claim in whole
or in part, such Indemnitee shall be free to pursue such remedies as may be
available to such party as contemplated by this Agreement.
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(b) In the event of payment by or on behalf of any Indemnifying Party to
any Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right,
defense or claim relating to such Third Party Claim against any claimant or
plaintiff asserting such Third Party Claim or against any other Person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense of such Indemnifying Party, in prosecuting any
subrogated right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party is not a
named defendant, if either the Indemnified Party or Indemnifying Party shall so
request, the parties shall endeavor to substitute the Indemnifying Party for the
named defendant, if at all practicable. If such substitution or addition cannot
be achieved for any reason or is not requested, the named defendant shall allow
the Indemnifying Party to manage the Action as set forth in this section, and
the Indemnifying Party shall fully indemnify the named defendant against all
costs of defending the Action (including court costs, sanctions imposed by a
court, attorneys' fees, experts' fees and all other external expenses), the
costs of any judgment or settlement and the cost of any interest or penalties
relating to any judgment or settlement.
SECTION 5.07. Remedies Cumulative. The remedies provided in this Article V
shall be cumulative and, subject to the provisions of Article VIII, shall not
preclude assertion by any Indemnitee of any other rights or the seeking of any
and all other remedies against any Indemnifying Party.
SECTION 5.08. Survival of Indemnities. The rights and obligations of each
of the LLC and the Corporation and their respective Indemnitees under this
Article V shall survive the sale or other transfer by any party of any Assets or
businesses or the assignment by it of any Liabilities.
ARTICLE VI
Certain Business Matters
SECTION 6.01. Certain Business Matters. (a) Until the home video release
of the last Animated Motion Picture subject to the Film Distribution Agreement,
(i) no Person in the LLC Group will develop, produce or exploit Animated Motion
Pictures other than (A) the exploitation of the Retained Motion Pictures, (B)
the development, production and/or exploitation under the "Go Fish" label of
Small Animated Motion Pictures and (C) pursuant to the Film Distribution
Agreement, (ii) no Person in the Corporation Group will develop, produce or
exploit Live Action Motion Pictures and (iii) Persons in either Group may
develop, produce and/or exploit Hybrid Motion Pictures. The LLC and the
Corporation agree that this covenant is reasonable with respect to its scope and
duration. If, at the time of enforcement of this Section 6.01, a court holds
that the restrictions stated herein are unreasonable under the circumstances
then existing, the parties hereto agree that the period and scope legally
permissible under such circumstances will be substituted for the period and
scope stated herein.
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(b) No Person in the Corporation Group or the LLC Group will engage in
theme park activities (as described in the Employment Agreement, dated on or
about the Separation Date, between the LLC and Xxxxxx Xxxxxxxxx) (other than
through Universal Studios, Inc.) until such time as Xx. Xxxxxxxxx confirms to
the LLC in writing (which shall in turn notify the Corporation) that, in his
absolute determination and in his absolute discretion, he has ceased to maintain
exclusive theme park arrangement(s) with third parties, or until the later of
such time as (i) Xx. Xxxxxxxxx no longer has any contractual relationship with
any Person in the Corporation Group or the LLC Group or (ii) Xx. Xxxxxxxxx, his
wife, his or her issue (or trusts for the primary benefit of any of them), his
or her siblings (or trusts for the primary benefit of any of them) or a private
charitable foundation organized by him and/or his wife no longer own or control,
directly or indirectly any (x) shares of the Class A Common Stock of the
Corporation issued to him (or entities controlled by him) by the Corporation or
received by him (or entities controlled by him) in connection with the Final
Allocation (as defined in the Holdco LLLP Agreement) and (y) limited liability
company interests in the LLC (and the prohibition contained in this Section
6.01(b) shall not be renewed if Xx. Xxxxxxxxx, his wife, his or her issue (or
trusts for the primary benefit of any of them), his or her siblings (or trusts
for the primary benefit of any of them) or a private charitable foundation
organized by him and/or his wife subsequently reacquires any Class A Common
Stock or limited liability company interests). It is mutually agreed by the
parties hereto that Diamond Lane Productions, Inc. and Xxxxxx Xxxxxxxxx are
third party beneficiaries of this Section 6.01(b) and that this Section 6.01(b)
may not be amended without the prior written consent of Diamond Lane
Productions, Inc. and Xx. Xxxxxxxxx.
SECTION 6.02. Late Payments. Except as expressly provided to the contrary
in this Agreement, any amount not paid when due pursuant to this Agreement (and
any amounts billed or otherwise invoiced or demanded and properly payable that
are not paid within 30 days of such xxxx, invoice or other demand) shall accrue
interest at a rate per annum equal to the Prime Rate plus 2%.
ARTICLE VII
Exchange of Information; Confidentiality
SECTION 7.01. Agreement for Exchange of Information; Archives. (a) Each of
the LLC and the Corporation, on behalf of its respective Group, agrees to
provide, or cause to be provided, to the other Group, at any time before or
after the Separation Date, as soon as reasonably practicable after written
request therefor, any Information in the possession or under the control of such
respective Group which the requesting party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the requesting
party (including under applicable securities or tax laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in any
other judicial, regulatory, administrative, tax or other proceeding or in order
to satisfy audit, accounting, regulatory, litigation, tax or other similar
requirements, in each case other than claims or allegations that one party to
this Agreement has against the other or (iii) subject to the foregoing clause
(ii), to comply with its obligations under this Agreement; provided, however,
that in the event that any party determines that any
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such provision of Information could be commercially detrimental, violate any law
or agreement or waive any attorney-client privilege, the parties shall take all
commercially reasonable measures to permit the compliance with such obligations
in a manner that avoids any such harm or consequence.
(b) Without limiting the obligation of the LLC to transfer the Contributed
Assets as provided herein, after the Separation Date, the Corporation or the
LLC, as applicable, shall have access during regular business hours (as in
effect from time to time) to the documents and objects of historic significance
that relate to the animation business that are located in archives retained or
maintained by the LLC or that relate to the live-action business that are
located in archives retained or maintained by the Corporation, as applicable.
The Corporation or the LLC, as applicable, may obtain copies (but not originals)
of documents for bona fide business purposes and may obtain objects for
exhibition purposes for reasonable periods of time if required for bona fide
business purposes; provided, however, that the Corporation or the LLC, as
applicable, shall cause any such objects to be returned promptly in the same
condition in which they were delivered to such party and shall comply with any
rules, procedures or other requirements, and shall be subject to any
restrictions (including prohibitions on removal of specified objects) that are
then applicable to the providing party. The Corporation or the LLC, as
applicable, shall pay the applicable fee or rate per hour for archives research
services (subject to increase from time to time to reflect rates then in effect)
for the providing party generally. Nothing herein shall be deemed to restrict
the access of the providing party to any such documents or objects or to impose
any liability on the providing party if any such documents or objects are not
maintained or preserved by such party.
(c) After the Separation Date, each of the LLC and the Corporation (i)
shall maintain in effect at its own cost and expense adequate systems and
controls to the extent necessary to enable the Persons in the other Group to
satisfy their respective reporting, accounting, audit and other obligations and
(ii) shall provide, or cause to be provided, to the other party (in such form as
the providing party retains such information for its own use) all financial and
other data and information as such requesting party determines necessary or
advisable in order to prepare its financial statements and reports or filings
with any Governmental Authority.
SECTION 7.02. Ownership of Information. Any Information owned by one Group
that is provided to a requesting party pursuant to Section 7.01 shall be deemed
to remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
SECTION 7.03. Compensation for Providing Information. The party requesting
Information agrees to reimburse the other party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting party. Except as may
be otherwise specifically provided elsewhere in this Agreement, such costs shall
be computed in accordance with the providing party's standard methodology and
procedures.
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SECTION 7.04. Record Retention. To facilitate the possible exchange of
Information pursuant to this Article VII and other provisions of this Agreement
after the Separation Date, the parties agree to use their commercially
reasonable efforts to retain all Information in their respective possession or
control on the Separation Date in accordance with the policies of the LLC as in
effect on the Separation Date or such other policies as may be reasonably
adopted by the appropriate party after the Separation Date. No party will
destroy, or permit any of its Subsidiaries to destroy, any Information which the
other party may have the right to obtain pursuant to this Agreement prior to the
third anniversary of the Separation Date without first using its commercially
reasonable efforts to notify the other party of the proposed destruction and
giving the other party the opportunity to take possession of such information
prior to such destruction; provided, however, that in the case of any
Information relating to taxes, employee benefits or environmental liabilities,
such period shall be extended to the expiration of the applicable statute of
limitations (giving effect to any extensions thereof).
SECTION 7.05. Limitations of Liability. Except as otherwise provided in
Article V, no party shall have any liability to any other party in the event
that any Information exchanged or provided pursuant to this Agreement is found
to be inaccurate in the absence of willful misconduct by the party providing
such Information. No party shall have any liability to any other party if any
Information is destroyed after commercially reasonable efforts by such party to
comply with the provisions of Section 7.04.
SECTION 7.06. Other Agreements Providing for Exchange of Information. The
rights and obligations granted under this Article VII are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange, retention or confidential treatment of Information set forth in any
Ancillary Agreement.
SECTION 7.07. Production of Witnesses; Records; Cooperation.
(a) After the Separation Date, except in the case of an adversarial Action by
one party or Persons in its Group against another party or Person in its Group,
each party hereto shall use its commercially reasonable efforts to make
available to each other party, upon written request, the then-current directors,
officers, employees, other personnel and agents of the Person in its respective
Group as witnesses and any books, records or other documents within its control
or which it otherwise has the ability to make available, to the extent that any
such person (giving consideration to business demands of such directors,
officers, employees, other personnel and agents) or books, records or other
documents may reasonably be required in connection with any Action in which the
requesting party may from time to time be involved, regardless of whether such
Action is a matter with respect to which indemnification may be sought
hereunder. The requesting party shall bear all costs and expenses in connection
therewith.
(b) If an Indemnifying Party chooses to defend or to seek to compromise or
settle any Third Party Claim, the other party shall make available to such
Indemnifying Party, upon written request then-current directors, officers,
employees, other personnel and agents of the Persons in its respective Group as
witnesses and any books, records or other documents within its control, to the
extent that any such person (giving
40
consideration to business demands of such directors, officers, employees, other
personnel and agents) or books, records or other documents may reasonably be
required in connection with such defense, settlement or compromise, or such
prosecution, evaluation or pursuit, as the case may be, and shall otherwise
reasonably cooperate in such defense, settlement or compromise, or such
prosecution, evaluation or pursuit, as the case may be.
(c) Without limiting the foregoing, the parties shall cooperate and
consult to the extent reasonably necessary with respect to any Actions.
(d) The obligation of the parties to provide witnesses pursuant to this
Section 7.07 is intended to be interpreted in a manner so as to facilitate
cooperation and shall include the obligation to provide as witnesses employees
and other officers without regard to whether the witness or the employer of the
witness could assert a possible business conflict (subject to the exception set
forth in the first sentence of Section 7.07(a)).
(e) In connection with any matter contemplated by this Section 7.07, the
parties will enter into a mutually acceptable joint defense agreement so as to
maintain to the extent practicable any applicable attorney-client privilege or
work product immunity of any Person in any Group.
SECTION 7.08. Confidentiality. (a) Subject to Section 7.09, each of the
LLC and the Corporation, on behalf of itself and each Person in its respective
Group, agrees to hold, and to cause its respective directors, officers,
employees, agents, accountants, counsel and other advisors and representatives
to hold, in strict confidence, with at least the same degree of care that
applies to the LLC's confidential and proprietary information pursuant to
policies in effect as of the Separation Date, all Information concerning the
other Group that is either in its possession (including Information in its
possession prior to the Separation Date) or furnished the other Group or its
respective directors, officers, managers, employees, agents, accountants,
counsel and other advisors and representatives at any time pursuant to this
Agreement or otherwise, and shall not use any such Information other than for
such purposes as shall be expressly permitted hereunder or thereunder, except,
in each case, to the extent that such Information has been (i) in the public
domain through no fault of such party or any Person in such Group or any of
their respective directors, officers, managers, employees, agents, accountants,
counsel and other advisors and representatives, (ii) later lawfully acquired
from other sources by such party (or any Person in such party's Group) which
sources are not themselves bound by a confidentiality obligation or (iii)
independently generated without reference to any proprietary or confidential
Information of the other party.
(b) Each party agrees not to release or disclose, or permit to be released
or disclosed, any Information of the other Group to any other Person, except its
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives who need to know such Information (who shall be advised of
their obligations hereunder with respect to such Information), except in
compliance with Section 7.09.
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SECTION 7.09. Protective Arrangements. In the event that any party or any
Person in its Group either determines on the advice of its counsel that it is
required to disclose any Information pursuant to applicable law (including
pursuant to any rule or regulation of the Securities and Exchange Commission) or
receives any demand under lawful process or from any Governmental Authority to
disclose or provide Information of any other party (or any Person in any other
party's Group) that is subject to the confidentiality provisions hereof, such
party shall notify the other party prior to disclosing or providing such
Information and shall cooperate at the expense of the such other party in
seeking any reasonable protective arrangements (including by seeking
confidential treatment of such Information) requested by such other party.
Subject to the foregoing, the Person that received such a request or determined
that it is required to disclose Information may thereafter disclose or provide
Information to the extent required by such law (as so advised by counsel) or by
lawful process or such Governmental Authority; provided that such Person
provides the other party upon request with a copy of the Information so
disclosed.
ARTICLE VIII
Dispute Resolution
SECTION 8.01. Disputes. Except as otherwise specifically provided in any
Ancillary Agreement, the procedures for discussion, negotiation and mediation
set forth in this Article XIII shall apply to all disputes, controversies or
claims (whether arising in contract, tort or otherwise) that may arise out of or
relate to, or arise under or in connection with this Agreement, or the
transactions contemplated hereby (including all actions taken in furtherance of
the transactions contemplated hereby on or prior to the Separation Date), or the
commercial or economic relationship of the parties relating hereto or thereto,
between or among any Person in the LLC Group and the Corporation Group.
SECTION 8.02. Escalation; Mediation. (a) It is the intent of the parties
to use their respective commercially reasonable efforts to resolve expeditiously
any dispute, controversy or claim between or among them with respect to the
matters covered hereby that may arise from time to time on a mutually acceptable
negotiated basis. In furtherance of the foregoing, any party involved in a
dispute, controversy or claim may deliver a notice (an "Escalation Notice")
demanding an in person meeting involving representatives of the parties at a
senior level of management of the parties (or if the parties agree, of the
appropriate strategic business unit or division within such entity). A copy of
any such Escalation Notice shall be given to the General Counsel, or like
officer or official, of each party involved in the dispute, controversy or claim
(which copy shall state that it is an Escalation Notice pursuant to this
Agreement). Any agenda, location or procedures for such discussions or
negotiations between the parties may be established by the parties from time to
time; provided, however, that the parties shall use their commercially
reasonable efforts to meet within 30 days of the Escalation Notice.
(b) If the parties are not able to resolve the dispute, controversy or
claim through the escalation process referred to above, then the matter shall be
referred to
42
mediation. The parties shall retain a mediator to aid the parties in their
discussions and negotiations by informally providing advice to the parties. Any
opinion expressed by the mediator shall be strictly advisory and shall not be
binding on the parties, nor shall any opinion expressed by the mediator be
admissible in any other proceeding. The mediator may be chosen from a list of
mediators previously selected by the parties or by other agreement of the
parties. Costs of the mediation shall be borne equally by the parties involved
in the matter, except that each party shall be responsible for its own expenses.
Mediation shall be a prerequisite to the commencement of any action by either
party.
SECTION 8.03. Court Actions. (a) In the event that any party, after
complying with the provisions set forth in Section 8.02 above, desires to
commence an Action, such party, subject to Section 11.16, may submit the
dispute, controversy or claim (or such series of related disputes, controversies
or claims) to any court of competent jurisdiction.
(b) Unless otherwise agreed in writing, the parties will continue to
provide, service and honor all other commitments under this Agreement during the
course of dispute resolution pursuant to the provisions of this Article XIII,
except to the extent such commitments are the subject of such dispute,
controversy or claim.
ARTICLE IX
Further Assurances
SECTION 9.01. Further Assurances. (a) In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto shall use its commercially reasonable efforts, prior to, on and after the
Separation Date, to take, or cause to be taken, all actions, and to do, or cause
to be done, all things, reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make effective the
transactions contemplated by this Agreement.
(b) Prior to, on and after the Separation Date, each party hereto shall
cooperate with the other party, and without any further consideration, but at
the expense of the requesting party, to execute and deliver, or use its
commercially reasonable efforts to cause to be executed and delivered, all
instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with, and to obtain all consents, approvals or
authorizations of, any Governmental Authority or any other Person under any
permit, license, agreement, indenture or other instrument (including any
Consents or Governmental Approvals), and to take all such other actions as such
party may reasonably be requested to take by such other party hereto from time
to time, consistent with the terms of this Agreement, in order to effectuate the
provisions and purposes of this Agreement and the transfer of the Contributed
Assets and the release of Persons in the Corporation Group from Liabilities not
constituting Contributed Liabilities and the assignment and assumption of the
Contributed Liabilities and the other transactions contemplated hereby. Without
limiting the foregoing and without limiting Section 2.09 hereof, the LLC will,
at the reasonable request, cost and expense of the Corporation, take such other
actions as may be reasonably necessary to vest in the
43
applicable Person in the Corporation Group good and marketable title, free and
clear of any Security Interest, if and to the extent it is practicable to do so
and so long as no Person in the LLC Group is materially adversely affected by
taking such other actions. In addition, upon the repayment by the Corporation of
the Revolver Debt and the indebtedness incurred by it in connection with the
Animated Film Assumption Agreement, the LLC shall assist the Corporation in
obtaining a release of the Corporation from all of its obligations under the LLC
Credit Facility.
(c) On or prior to the Separation Date, the LLC and the Corporation in
their respective capacities as direct and indirect stockholders of their
respective Subsidiaries, shall each ratify any actions which are reasonably
necessary or desirable to be taken by the LLC, the Corporation or any Subsidiary
of the LLC or the Corporation, as the case may be, to effectuate the
transactions contemplated by this Agreement.
(d) Prior to the Separation Date, if one or both of the parties identifies
any commercial or other service that is needed to assure a smooth and orderly
transition of the businesses in connection with the consummation of the
transactions contemplated hereby, and that is not otherwise governed by the
provisions of this Agreement, the parties will cooperate in determining whether
there is a mutually acceptable arm's-length basis on which the other party will
provide such service.
ARTICLE X
Termination
SECTION 10.01. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Separation Date by the mutual consent of the
LLC and the Corporation.
SECTION 10.02. Effect of Termination. In the event of any termination of
this Agreement, no party to this Agreement (or any of its directors or officers)
shall have any Liability or further obligation to any other party.
ARTICLE XI
Miscellaneous
SECTION 11.01. Counterparts; Entire Agreement; Corporate Power. (a) This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.
(b) This Agreement, the Ancillary Agreements, the Exhibits, the Schedules
and appendices hereto and thereto contain the entire agreement between the
parties with respect to the subject matter hereof, supersede all previous
agreements, negotiations, discussions, writings, understandings, commitments and
conversations with respect to such subject matter and there are no agreements or
understandings between the
44
parties with respect to such subject matter other than those set forth or
referred to herein or therein.
(c) Each party represents on behalf of itself, the LLC represents on
behalf of each other Person in the LLC Group party to this Agreement and the
Corporation represents on behalf of each other Person in the Corporation Group
party to this Agreement, as follows:
(i) each such Person has the requisite corporate, limited liability
company or other power and authority and has taken all corporate, limited
liability company or other action necessary in order to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby; and
(ii) this Agreement has been duly executed and delivered by it and
constitutes a valid and binding agreement of it enforceable in accordance
with the terms thereof.
SECTION 11.02. Governing Law. This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of New
York, irrespective of the choice of laws principles of the State of New York,
except to the extent the substantive laws of the State of Delaware are
mandatorily applicable under Delaware law.
SECTION 11.03. Assignability. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that no party hereto may assign its
respective rights or delegate its respective obligations under this Agreement
without the express prior written consent of the other party or parties hereto.
SECTION 11.04. Third Party Beneficiaries. Except for the
indemnification rights under this Agreement of any LLC Indemnitee or Corporation
Indemnitee in their respective capacities as such, and except as expressly set
forth in Section 2.01(c), Section 6.01(b), (a) the provisions of this Agreement
are solely for the benefit of the parties and are not intended to confer upon
any Person (including employees of the parties hereto) except the parties any
rights or remedies hereunder and (b) there are no third party beneficiaries of
this Agreement and this Agreement shall not provide any third person (including
employees of the parties hereto) with any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 11.05. Notices. All notices or other communications under
this Agreement shall be in writing and shall be deemed to be duly given when (a)
delivered in person or (b) deposited in the United States mail or private
express mail, postage prepaid, addressed as follows:
If to the LLC, to:
DreamWorks L.L.C.
00
Xxxxxxxxx Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
If to the Corporation or DWA LLC to:
DreamWorks Animation SKG, Inc.
Grandview Building
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Any party may, by notice to the other party, change the address to which such
notices are to be given.
SECTION 11.06. Severability. If any provision of this Agreement or
the application thereof to any Person or circumstance is determined by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby, so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable
provision to effect the original intent of the parties.
SECTION 11.07. Force Majeure. No party shall be deemed in default of
this Agreement to the extent that any delay or failure in the performance of its
obligations under this Agreement results from any cause beyond its reasonable
control and without its fault or negligence, such as acts of God, acts of civil
or military authority, embargoes, epidemics, war, riots, insurrections, fires,
explosions, earthquakes, floods, unusually severe weather conditions, labor
problems or unavailability of parts, or, in the case of computer systems, any
failure in electrical or air conditioning equipment. In the event of any such
excused delay, the time for performance shall be extended for a period equal to
the time lost by reason of the delay.
SECTION 11.08. Publicity. Prior to the Separation, each of the
parties shall consult with each other prior to issuing any press releases or
otherwise making public statements with respect to the Separation, the IPO or
any of the other transactions contemplated hereby and prior to making any
filings with any Governmental Authority with respect thereto.
SECTION 11.09. Expenses. Except as expressly set forth in this
Agreement, the LLC and the Corporation shall each be responsible for their own
internal fees, costs and expenses and fees, costs and expenses of their own
counsel. All other third party fees, costs and expenses paid or incurred (a) in
connection with the IPO and
46
the Separation shall be paid by the Corporation and (b) in connection with
obtaining the complete release and discharge of the Corporation from any
obligations with respect to the LLC Credit Facility and the Film Securitization
Facility will be paid by the LLC.
SECTION 11.10. Headings. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 11.11. Survival of Covenants. The covenants, representations
and warranties contained in this Agreement, and liability for the breach of any
obligations contained herein, shall survive the Separation and the IPO and shall
remain in full force and effect.
SECTION 11.12. Waivers of Default. Waiver by any party of any
default by the other party of any provision of this Agreement shall not be
deemed a waiver by the waiving party of any subsequent or other default, nor
shall it prejudice the rights of the other party.
SECTION 11.13. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Agreement, the party or parties who are or are to be thereby aggrieved
shall have the right to specific performance and injunctive or other equitable
relief of its rights under this Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and remedies shall
be cumulative. The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived. Any requirements for the securing or
posting of any bond with such remedy are waived.
SECTION 11.14. Amendments. No provisions of this Agreement shall be
deemed waived, amended, supplemented or modified by any party, unless such
waiver, amendment, supplement or modification is in writing and signed by the
authorized representative of the party against whom it is sought to enforce such
waiver, amendment, supplement or modification.
SECTION 11.15. Interpretation. Words in the singular shall be held
to include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires. The terms "hereof", "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the Schedules,
Exhibits and Appendices hereto) and not to any particular provision of this
Agreement. Article, Section, Exhibit, Schedule and Appendix references are to
the Articles, Sections, Exhibits, Schedules and Appendices to this Agreement
unless otherwise specified. The word "including" and words of similar import
when used in this Agreement shall mean "including, without limitation", unless
the context otherwise requires or unless otherwise specified. The word "or"
shall not be exclusive.
47
SECTION 11.16. Submission to Jurisdiction; Waivers. With respect to
any suit, action or proceeding relating to this Agreement (collectively, a
"Proceeding"), each party to this Agreement irrevocably (a) consents and submits
to the exclusive jurisdiction of the courts of the States of New York and
Delaware and any court of the United States located in the Borough of Manhattan
in New York City or the State of Delaware; (b) waives any objection which such
party may have at any time to the laying of venue of any Proceeding brought in
any such court, waives any claim that such Proceeding has been brought in an
inconvenient forum and further waives the right to object, with respect to such
Proceeding, that such court does not have jurisdiction over such party; and (c)
consents to the service of process at the address set forth for notices in
Section 11.05 herein; provided, however, that such manner of service of process
shall not preclude the service of process in any other manner permitted under
applicable law.
SECTION 11.17. Special Damages. NOTWITHSTANDING ANY OTHER PROVISION
OF THIS AGREEMENT TO THE CONTRARY, AND EXCEPT AS PROVIDED BELOW, IN NO EVENT
WILL EITHER PARTY OR ANY PERSON IN ITS GROUP BE LIABLE FOR SPECIAL, INCIDENTAL,
INDIRECT, COLLATERAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS SUFFERED
BY AN INDEMNITEE, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, IN CONNECTION
WITH ANY DAMAGES ARISING HEREUNDER OR THEREUNDER; PROVIDED, HOWEVER, THAT TO THE
EXTENT AN INDEMNIFIED PARTY IS REQUIRED TO PAY ANY DAMAGES, INCLUDING SPECIAL,
INCIDENTAL, INDIRECT, COLLATERAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST
PROFITS (OTHER THAN DAMAGES OR LOST PROFITS CONSTITUTING EXCLUDED LIABILITIES),
TO A PERSON WHO IS NOT IN EITHER GROUP IN CONNECTION WITH A THIRD PARTY CLAIM,
SUCH DAMAGES WILL CONSTITUTE DIRECT DAMAGES AND WILL NOT BE SUBJECT TO THE
LIMITATION SET FORTH IN THIS SECTION 11.17.
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IN WITNESS WHEREOF, the parties have caused this Separation
Agreement to be executed by their duly authorized representatives.
DREAMWORKS L.L.C.,
by
----------------------
Name:
Title:
DREAMWORKS ANIMATION L.L.C.,
By
----------------------
Name:
Title:
DREAMWORKS ANIMATION SKG, INC.,
by
----------------------
Name:
Title:
