Exhibit 10.3
FORMATION AGREEMENT
Among
DREAMWORKS ANIMATION SKG, INC.,
DREAMWORKS L.L.C.,
[HOLDCO] LLLP
and
THE STOCKHOLDERS AND OTHER PERSONS PARTY HERETO
Dated As Of [ ], 2004
TABLE OF CONTENTS
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ARTICLE I
Definitions
Section 1.01. Certain Defined Terms.............................................................................. 1 Section 1.02. Other Definitional Provisions...................................................................... 6
ARTICLE II
Distribution and Contribution; Holdco Transactions
Section 2.01. Contributions and Redemptions of Preferred Interests; Distribution of DWA LLC Interests;
Execution of LLC Agreement..................................................................... 6 Section 2.02. Contribution of the DWA LLC Interests to the Company; Issuance of Common Stock by the Company...... 7 Section 2.03. Formation of Holdco; Contribution of Common Stock to Holdco........................................ 7
ARTICLE III
Follow-on Offering
Section 3.01. Initial Follow-on Offering......................................................................... 8 Section 3.02. Pricing Period..................................................................................... 8 Section 3.03. Subsequent Follow-on Offering...................................................................... 9 Section 3.04. Registration Rights................................................................................ 9 Section 3.05. Size of Follow-on Offering......................................................................... 10 Section 3.06. Anti-Manipulation.................................................................................. 10
ARTICLE IV
Universal/Thomson Triggered Offering
Section 4.01. Universal/Thomson Triggered Offering............................................................... 11
ARTICLE V
Additional Agreements; Further Assurances
Section 5.01. Certain Holdco Expenses............................................................................ 12 Section 5.02. Further Assurances................................................................................. 12
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ARTICLE VI
Representations and Warranties; Indemnification
Section 6.01. Representations and Warranties of Each Party....................................................... 13 Section 6.02. Tax Representation................................................................................. 14 Section 6.03. Representation and Warranty of the Company......................................................... 14 Section 6.04. Survival........................................................................................... 14 Section 6.05. Indemnification.................................................................................... 14
ARTICLE VII
General Provisions
Section 7.01. Notices............................................................................................ 16 Section 7.02. Counterparts....................................................................................... 16 Section 7.03. Entire Agreement; No Third Party Beneficiaries..................................................... 17 Section 7.04. Governing Law...................................................................................... 17 Section 7.05. Severability....................................................................................... 17 Section 7.06. Assignment; Amendments............................................................................. 17 Section 7.07. Enforcement........................................................................................ 18 Section 7.08. Titles and Subtitles............................................................................... 18 Section 7.09. Submission to Jurisdiction; Waivers................................................................ 18
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FORMATION AGREEMENT, dated as of [ ], 2004, among
DREAMWORKS ANIMATION SKG, INC., a Delaware corporation (the
"Company"), DREAMWORKS L.L.C., a Delaware limited liability
company ("DW"), [HOLDCO] LLLP, a Delaware limited liability
limited partnership ("Holdco"), and the stockholders and other
persons party hereto.
WHEREAS, DW, the Company and DreamWorks Animation L.L.C., a Delaware limited liability company ("DWA LLC"), have entered into a Separation Agreement dated as of the date hereof, providing for the separation of the animation business from DW;
WHEREAS, DW has determined to make a distribution-in-kind to its members (in accordance with Article VIII of the Sixth Amended and Restated Limited Liability Company Agreement of DW) of its 99% interest in DWA LLC;
WHEREAS, the DWA LLC interests to be distributed must be contributed to the Company in exchange for Common Stock (as defined below);
WHEREAS, each Contributing Member (as defined below) desires to form Holdco and to contribute its shares of Common Stock, other than the IPO Sale Shares (as defined below) and other than as set forth in Section 2.03, to Holdco in exchange for partnership interests in Holdco;
WHEREAS, the Contributing Members desire to provide for the sale, in a follow-on secondary offering, of all or a portion of the shares of Common Stock held by the Contributing Members and the shares of Common Stock contributed to Holdco by the Contributing Members; and
WHEREAS, the Company, Holdco and certain other parties hereto have entered into a Registration Rights Agreement, dated as of the date hereof (the "Registration Rights Agreement"), that, among other things, provides for certain procedures with respect to the Follow-on Offering (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Certain Defined Terms. As used in this Agreement:
"Agreement" means this Formation Agreement, as it may be amended, supplemented, restated or modified from time to time.
"Amended LLC Agreement" means the Seventh Amended and Restated Limited Liability Company Agreement of DW, dated as of [ ], 2004, as it may be amended, supplemented, restated or modified from time to time.
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"Asserted Liability" has the meaning assigned to such term in Section 6.05(d).
"Business Day" means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York.
"Charter" means the Restated Certificate of Incorporation of the Company, as amended or restated from time to time.
"Claims" has the meaning assigned to such term in Section 6.05(a).
"Claims Notice" has the meaning assigned to such term in Section 6.05(d).
"Class A Stock" means the Company's Class A Common Stock, par value $0.01 per share.
"Class B Stock" means the Company's Class B Common Stock, par value $0.01 per share.
"Class C Stock" means the Company's Class C Common Stock, par value $0.01 per share.
"Class B Stockholder Agreement" means the Stockholder Agreement, dated as of [ ], 2004, among Holdco, M&J K, The JK Annuity Trust, The MK Annuity Trust, Katzenberg 1994 Irrevocable Trust, DG-DW, Jeffrey Katzenberg and David Geffen, as in effect on the date hereof.
"Class T/T Interests" means Class T/T limited liability company interests in DW.
"Class U Interests" means Class U limited liability company interests in DW.
"Common Stock" means the Class A Stock, Class B Stock and Class C Stock.
"Company" has the meaning assigned to such term in the preamble hereto.
"Contribution" has the meaning assigned to such term in Section 2.02.
"Contributing Members" means M&J K, [The JK Annuity Trust], [The MK Annuity Trust], DG-DW, DW Lips, [Vulcan affiliate], Lee Entertainment, L.L.C., Universal and Thomson.
"Control" (including the terms "Controlled By" and "Under Common Control With") has the meaning assigned to such term in the Charter as in effect at consummation of the IPO.
"DG-DW" means DG-DW, L.P., a Delaware limited partnership.
"DW" has the meaning assigned to such term in the preamble hereto.
"DW Distribution" has the meaning assigned to such term in Section 2.01.
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"DWA LLC" has the meaning assigned to such term in the recitals hereto.
"DWA LLC Interest" means a limited liability company interest in DWA LLC.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
"Final Allocation" has the meaning assigned to such term in the Holdco Partnership Agreement as in effect on the Separation Date.
"Follow-on Offering" means either the Initial Follow-on Offering or the Subsequent Follow-on Offering, as applicable.
"Group" has the meaning assigned to such term in Section 13(d)(3) of the Exchange Act.
"Holdco" has the meaning assigned to such term in the preamble hereto.
"Holdco Contribution" has the meaning assigned to such term in Section 2.03.
"Holdco Obligations" has the meaning assigned to such term in Section 5.01(b).
"Holdco Partnership Agreement" means the Limited Liability Limited Partnership Agreement of Holdco, dated as of [ ], 2004, among the Contributing Members, as in effect on the Separation Date.
"Indemnitee" has the meaning assigned to such term in Section 6.05(d).
"Indemnitor" has the meaning assigned to such term in Section 6.05(d).
"Initial Follow-on Offering" has the meaning assigned to such term in Section 3.01(a).
"Initial Period" has the meaning assigned to such term in Section 3.01(a).
"IPO" means the initial public offering by the Company and the selling stockholders identified in the IPO Registration Statement of shares of Class A Stock pursuant to the IPO Registration Statement.
"IPO Price" means the gross public offering price per share (calculated before deduction of any underwriting discounts or commissions) in the IPO.
"IPO Registration Statement" means the registration statement on Form S-1 (File No. 333-117528) filed under the Securities Act, pursuant to which the Class A Stock to be issued in the IPO will be registered, together with all amendments thereto.
"IPO Sale Shares" means, with respect to any Contributing Member, the number of shares of Class A Stock to be sold in the IPO for the account of such Contributing Member pursuant to the IPO Registration Statement.
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"JK/DG Trigger Notice" has the meaning assigned to such term in Section 3.01(a).
"JK/DG Triggered Follow-on Offering" means an Initial Follow-on Offering initiated by M&J K and DG-DW, acting together, pursuant to Section 3.01(a) or converted to such pursuant to Section 3.01(b).
"Liens" has the meaning assigned to such term in Section 6.01.
"Losses" has the meaning assigned to such term in Section 6.05(a).
"M&J K" means M&J K Dream Limited Partnership, a Delaware limited partnership.
"Member" means each member of DW.
"Minimum Registrable Amount" has the meaning assigned to such term in Section 3.05.
"Parent" means each of Steven Spielberg, Jeffrey Katzenberg, David Geffen, Paul Allen, GE, [others].
"Participating Partner" has the meaning assigned to such term in the Holdco Partnership Agreement.
"Person" has the meaning assigned to such term in the Charter (as modified in Section 2(f) of Article IV thereof) as in effect at consummation of the IPO.
"Preferred Contributions" has the meaning assigned to such term in Section 2.01(a).
"Preferred Redemptions" has the meaning assigned to such term in Section 2.01(a).
"Pricing Period" means the 20 consecutive trading days on The New York Stock Exchange beginning on the date specified in the Pricing Period Notice.
"Pricing Period Notice" has the meaning assigned to such term in Section 3.02(a).
"Pricing Period Price" has the meaning assigned to such term in Section 3.02(b).
"Proceeding" has the meaning assigned to such term in Section 7.09.
"Registration Rights Agreement" has the meaning assigned to such term in the recitals hereto.
"Satisfaction Event" has the meaning assigned to such term in the Holdco Partnership Agreement.
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"Securities Act" means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.
"Separation Agreement" means the Separation Agreement, dated as of [ ], 2004, among DW, DWA LLC and the Company, as it may be amended, supplemented, restated or modified from time to time.
"Separation Date" has the meaning assigned to such term in the Separation Agreement.
"Subsequent Follow-on Offering" has the meaning assigned to such term in Section 3.03(a).
"Subsequent Period" has the meaning assigned to such term in Section 3.03(a).
"Subsequent Vulcan Trigger Notice" has the meaning assigned to such term in Section 3.03(a).
"Thomson" means Thomson Inc.
"Universal" means Vivendi Universal Entertainment LLLP.
"Universal/Thomson Period" has the meaning assigned to such term in Section 4.01(a).
"Universal/Thomson Trigger Notice" has the meaning assigned to such term in Section 4.01(a).
"Universal/Thomson Triggered Offering" has the meaning assigned to such term in Section 4.01(a).
"Volume Weighted Average Price" over any period means, with respect to the Class A Stock, the volume weighted average price per share for the entire applicable period on the principal national securities market or exchange on which the Class A Stock is listed or quoted.
"Vulcan" means [ ], a [ ].
"Vulcan Stockholder Agreement" means the Stockholder Agreement, dated as of [ ], 2004, among the Company, Holdco, M&J K, The JK Annuity Trust, The MK Annuity Trust, Katzenberg 1994 Irrevocable Trust, DG-DW, Vulcan, Jeffrey Katzenberg, David Geffen and Paul Allen, as it may be amended, supplemented, restated or modified from time to time.
"Vulcan Trigger Notice" has the meaning assigned to such term in Section 3.01(a).
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"Vulcan Triggered Follow-on Offering" means an Initial Follow-on Offering initiated by Vulcan pursuant to Section 3.01(a) unless converted into a JK/DG Triggered Follow-on Offering pursuant to Section 3.01(b).
Section 1.02. Other Definitional Provisions. (a) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article and Section references are to this Agreement unless otherwise specified. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation".
(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
ARTICLE II
Distribution and Contribution; Holdco Transactions
Section 2.01. Contributions and Redemptions of Preferred Interests; Distribution of DWA LLC Interests; Execution of LLC Agreement. (a) On the Separation Date, immediately after consummation of the transactions contemplated in Section 2.01 of the Separation Agreement, (x) Thomson shall contribute 50% of the Class T/T Interests to the Company in exchange for the number of shares of Common Stock set forth on Schedule 2.02 and (y) Universal shall contribute 50% of the Class U Interests to the Company in exchange for the number shares of Common Stock set forth on Schedule 2.02 (the "Preferred Contributions"). Immediately after consummation of the Preferred Contributions, DW shall redeem such Class T/T Interests and such Class U Interests from the Company in exchange for [ ] (the "Preferred Redemptions"). DW acknowledges that it intends to treat the Preferred Redemptions as a liquidating distribution with respect to the Class T/T Interests and Class U Interests so redeemed and shall report the Preferred Redemptions as such under Section 732(b) of the Internal Revenue Code.
(b) On the Separation Date, immediately after consummation of the Preferred Redemptions, DW shall distribute (in accordance with Article VIII of the Sixth Amended and Restated Limited Liability Company Agreement of DW) all its right, title and interest in and to the DWA LLC Interests held directly by DW to the Members listed on Schedule 2.01(b) hereto, in the amounts set forth on Schedule 2.01(b) (the "DW Distribution").
(c) On the Separation Date, immediately after consummation of the DW Distribution, the Members shall execute and deliver the Amended LLC Agreement.
(d) On the Separation Date, immediately after consummation of the DW Distribution, each Member (other than Universal and Thomson) shall execute and deliver a pledge agreement in favor of the lenders under DW's revolving credit facility, which pledge agreements shall provide for the pledge of Common Stock having an aggregate value of $300 million, allocated pro rata among such Members in proportion to their DreamWorks Participation Percentages (as defined in the Holdco Partnership Agreement).
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Section 2.02. Contribution of the DWA LLC Interests to the Company; Issuance of Common Stock by the Company. On the Separation Date, immediately after consummation of the DW Distribution, each Member (or [the Vulcan affiliate], in the case of Vulcan) shall contribute all its right, title and interest in and to the DWA LLC Interests to the Company in exchange for the number of shares of Class A Stock, Class B Stock or Class C Stock, as applicable, set forth on Schedule 2.02 (the "Contribution"). The Company hereby acknowledges that it intends to continue the existence of DWA LLC as a partnership for Federal income tax purposes.
Section 2.03. Formation of Holdco; Contribution of Common Stock to Holdco. (a) Immediately prior to the Holdco Contribution (as defined below), each Contributing Member shall execute and deliver the Holdco Partnership Agreement, and the Contributing Members shall form Holdco.
(b) On the Separation Date, immediately after the formation of Holdco, Holdco shall execute and deliver a pledge agreement in favor of the lenders under DW's revolving credit facility and each Contributing Member shall contribute all its right, title and interest in and to the Common Stock received by such Contributing Member in either the Contribution or the Preferred Contributions, as applicable (other than (w) such Contributing Member's IPO Sale Shares, (x) in the case of each of M&J K, DG-DW and DW Lips, the respective number of shares of Class A Stock or Class B Stock set forth on Schedule 2.03(b)(x) to be held in lieu of sale in the IPO, (y) in the case of each Contributing Member other than Universal and Thomson, the respective number of shares of Class A Stock or Class B Stock set forth on Schedule 2.03(b)(y) and (z) in the case of Vulcan, the one share of Class C Stock) to Holdco, and in exchange therefor shall receive the interests in Holdco set forth in Section 5.01 of the Holdco Partnership Agreement (the "Holdco Contribution").
(c) Each Contributing Member shall, to the extent it has not already done so, appoint an agent for service of process in the State of Delaware.
(d) Each Continuing Partner (as defined in the Holdco Partnership Agreement) agrees (for itself and its permitted transferees) that it shall remain a partner in Holdco for at least six months after the Vulcan GP Date (as defined in the Holdco Partnership Agreement) and that such Continuing Partner shall not amend or modify the Holdco Partnership Agreement or take or cause to be taken any action in each case which would effect the dissolution of Holdco prior to the end of such six month period (it being understood that distributions to such Continuing Partners of shares of Common Stock not constituting Continuing Partner Minimum Ownership Shares (as defined in the Holdco Partnershi ...
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