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Limited Liability Limited Partnership Agreement

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Sectors: Media
Governing Law: Delaware, View Delaware State Laws
Effective Date: October 27, 2004
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Exhibit 10.23


LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT


of


DWA ESCROW LLLP


dated as of October [ ], 2004
TABLE OF CONTENTS


Page
----
ARTICLE I


Definitions and Usage


SECTION 1.01. Definitions................................................................1 SECTION 1.02. Terms and Usage Generally..................................................8


ARTICLE II


The Partnership


SECTION 2.01. Effectiveness of this Agreement............................................9 SECTION 2.02. Formation..................................................................9 SECTION 2.03. Name.......................................................................9 SECTION 2.04. Term.......................................................................9 SECTION 2.05. Registered Agent and Registered Office.....................................9 SECTION 2.06. Limited Purpose............................................................9 SECTION 2.07. Treatment as Partnership..................................................10


ARTICLE III


Capital Contributions; Partners


SECTION 3.01. Initial Capital Contributions.............................................10 SECTION 3.02. Admission of Partners.....................................................10


ARTICLE IV


Reports


SECTION 4.01. Reports to Partners.......................................................11 SECTION 4.02. Tax Returns...............................................................12 SECTION 4.03. Other Tax Information.....................................................12 SECTION 4.04. Fiscal Year...............................................................12


ARTICLE V


Adjusted DreamWorks Participation Percentages


SECTION 5.01. General...................................................................12


i
ARTICLE VI


Tax Matters


SECTION 6.01. Identification, Sale and Distribution of Shares of Common Stock...........12 SECTION 6.02. Allocation of Tax Items; Tax Treatment of Certain Distributions...........13 SECTION 6.03. Amounts Withheld..........................................................14 SECTION 6.04. Tax Matters Partner.......................................................14


ARTICLE VII


Calculations; Distributions


SECTION 7.01. Calculations..............................................................14 SECTION 7.02. Transactions In the Event of a Follow-on Offering.........................18 SECTION 7.03. Transactions in the Event of a Universal Triggered Offering...............19 SECTION 7.04. Mandatory Share Distributions.............................................19 SECTION 7.05. Vulcan GP Date............................................................20 SECTION 7.06. General Provisions........................................................21 SECTION 7.07. No Set-Off................................................................23 SECTION 7.08. Sample Calculations.......................................................23


ARTICLE VIII


Management of the Partnership


SECTION 8.01. General Partners..........................................................24 SECTION 8.02. Voting of Contributed Stock...............................................24 SECTION 8.03. Substitute General Partner................................................24 SECTION 8.04. Restrictions on Activities................................................25


ARTICLE IX


Transfers of Interests


SECTION 9.01. Restrictions on Transfers.................................................26 SECTION 9.02. Admission of Transferees..................................................26 SECTION 9.03. Further Restrictions......................................................26


ARTICLE X


Limitation on Liability, Exculpation


SECTION 10.01. Limitation on Liability...................................................27 SECTION 10.02. Exculpation of Covered Persons............................................27


ii SECTION 10.03. Indemnification...........................................................27


ARTICLE XI


Dissolution and Termination


SECTION 11.01. Dissolution...............................................................28 SECTION 11.02. Winding Up of the Partnership.............................................29 SECTION 11.03. Claims of Partners........................................................30 SECTION 11.04. Termination...............................................................30


ARTICLE XII


Miscellaneous


SECTION 12.01. Notices...................................................................31 SECTION 12.02. No Third Party Beneficiaries..............................................31 SECTION 12.03. Waiver....................................................................31 SECTION 12.04. Assignment; Amendments....................................................31 SECTION 12.05. Integration...............................................................32 SECTION 12.06. Headings..................................................................32 SECTION 12.07. Counterparts..............................................................32 SECTION 12.08. Severability..............................................................32 SECTION 12.09. Applicable Law............................................................32 SECTION 12.10. Jurisdiction; Waivers.....................................................32 SECTION 12.11. Enforcement...............................................................32


Schedules


Schedule A - Contributed Stock Schedule B - Initial DreamWorks Capital Schedule C - Partners Schedule D - Initial Capital Contributions Schedule E - Sample Calculations


iii
LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT of
DWA ESCROW LLLP (the "Partnership") dated as of October
[ ], 2004, by and among M&J K B LIMITED PARTNERSHIP, a
Delaware limited partnership ("M&J K B"), as general
partner, DG-DW, L.P. a Delaware limited partnership
("DG-DW"), as general partner, M&J K DREAM LIMITED
PARTNERSHIP, a Delaware limited partnership ("M&J K"),
DW LIPS, L.P., a California limited partnership ("DW
Lips"), DW INVESTMENT II, INC., a Washington corporation
("DWI II"), and the other Partners (as defined below)
party hereto, as limited partners.


Preliminary Statement


WHEREAS, the parties hereto are parties to the Formation Agreement (the "Formation Agreement"), dated as of October 27, 2004;


WHEREAS, the parties hereto will contribute their shares of common stock in DreamWorks Animation SKG, Inc., a Delaware corporation (the "Company"), other than shares that will be sold in a secondary component of the IPO (as defined herein) or retained in lieu of such sale and additional shares that will be retained for later sale (or retained in lieu of such later sale), to the Partnership in exchange for Interests (as defined below) pursuant to the Formation Agreement;


WHEREAS, in accordance with the Formation Agreement and the Registration Rights Agreement, dated as of October 27, 2004 (the "Registration Rights Agreement"), among the Company, the Partnership, the parties hereto and the other parties thereto, a portion of the Contributed Stock (as defined herein) will be sold in a secondary offering;


WHEREAS, the parties hereto are party to the Seventh Amended and Restated Limited Liability Company Agreement of DreamWorks L.L.C., dated as of October 27, 2004; and


WHEREAS, M&J K B and DG-DW, as general partners of the Partnership, have duly executed and filed with the Secretary of State of the State of Delaware (i) a statement of qualification as a limited liability limited partnership and (ii) a certificate of limited partnership.


NOW, THEREFORE, the parties hereto hereby agree as follows:


ARTICLE I


Definitions and Usage


SECTION 1.01. Definitions. The terms shall have the following meanings for purposes of this Agreement:
"Adjusted DreamWorks Participation Percentage" means, with respect to any Partner, the percentage set forth opposite such Partner's name in Section 5.01.


"Affiliate" of any specified Person means any other Person directly or indirectly Controlling, Controlled By or under direct or indirect common Control with such specified Person.


"Agreement" means this Limited Liability Limited Partnership Agreement, as it may be amended, supplemented, restated or modified from time to time.


"Applicable Law" is defined in Section 7.10.


"Bankruptcy" of a Person means (i) the filing by such Person of a voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form, of its debts under Title 11 of the United States Code (or corresponding provisions of future laws) or any other bankruptcy or insolvency law, whether foreign or domestic, or such Person's filing an answer consenting to or acquiescing in any such petition, (ii) the making by such Person of any assignment for the benefit of its creditors or the admission by such Person in writing of its inability to pay its debts as they mature or (iii) the expiration of 60 days after the filing of an involuntary petition under Title 11 of the United States Code (or corresponding provisions of future laws), an application for the appointment of a receiver for the assets of such Person, or an involuntary petition seeking liquidation, reorganization, arrangements, composition, dissolution or readjustment of its debts or similar relief under any bankruptcy or insolvency law, provided that the same shall not have been vacated, set aside or stayed within such 60-day period. This definition of "Bankruptcy" is intended to replace the bankruptcy related events set forth in Sections 17-402(a)(4) and (a)(5) of the Delaware Act.


"Business Day" means any day other than a Saturday, a Sunday or a U.S. Federal holiday.


"Change in Control Transaction" is defined in Section 7.04(a).


"Charter" means the Restated Certificate of Incorporation of the Company, as amended or restated from time to time.


"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 B Stockholder Agreement" means the Stockholder Agreement, dated as of October 27, 2004, among the Partnership, M&J K B, M&J K, The JK Annuity Trust, The MK Annuity Trust, Katzenberg 1994 Irrevocable Trust, DG-DW, Jeffrey Katzenberg and David Geffen, as it may be amended, supplemented, restated or modified from time to time.


2
"Code" means the Internal Revenue Code of 1986, as amended.


"Commencement Date" is defined in Section 7.05.


"Common Stock" means Class A Stock and Class B Stock.


"Company" is defined in the Preliminary Statement to this Agreement.


"Continuing Partner" means each of (i) DWI II and (ii) Lee Entertainment, L.L.C.


"Continuing Partner Minimum Ownership Shares" means, with respect to any Continuing Partner, the shares of Common Stock (including Pledged Common Stock), if any, allocated to such Continuing Partner in the schedule prepared pursuant to Section 7.01(a)(z), 7.01(b)(z) or 7.01(c)(z), as applicable, but not associated with such Continuing Partner as set forth in Article VI.


"Contributed Stock" means, with respect to each Partner, the number of shares of Class B Stock (including Pledged Common Stock) set forth opposite such Partner's name on Schedule A.


"Control" (including the term "Controlled By") is defined in the Charter as in effect at consummation of the IPO.


"Covered Person" means (i) each Partner, (ii) each Affiliate of a Partner and (iii) each officer, director, shareholder, partner, employee, member, manager, representative, agent or trustee of a Partner or of an Affiliate of a Partner; provided that the Company, DreamWorks L.L.C. and their respective subsidiaries shall not be Covered Persons.


"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C.Sections 17-101 et seq., as amended from time to time or any successor statute.


"DG-DW" is defined in the preamble to this Agreement.


"Dissolution Additional Shares" is defined in Section 11.02(b).


"DRUPA" is defined in Section 2.02.


"DW Lips" is defined in the preamble to this Agreement.


"DWI II" is defined in the preamble to this Agreement.


"Effective Time" is defined in Section 2.04.


"Equity Security" is defined in Rule 405 under the Securities Act, and in any event includes any security having the attendant right to vote for directors or similar


3 representatives and any general or limited partner interest in a General Partner or in a Parent.


"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.


"Fair Market Value" of a share of Common Stock as of any date of determination means the Volume Weighted Average Price of the Class A Stock over a 20 consecutive trading day period ended one trading day prior to the date of determination.


"Fifty Percent Return" means, (A) with respect to each Partner other than Universal, at any time, the amount necessary to reduce such Partner's Unreturned DreamWorks Capital at such time to 50% of such Partner's Initial DreamWorks Capital and (B) with respect to Universal, at any time, the amount necessary to reduce Universal's Unreturned DreamWorks Capital at such time to zero.


"Final Allocation" means the allocation by the Partnership of shares of Common Stock in accordance with Article VII (which, for the avoidance of doubt, shall be (a) in the case of a JK/DG Triggered Follow-on Offering or a Subsequent Follow-on Offering, pursuant to Section 7.01(a) on the date of pricing of such offering, (b) in the case of a Vulcan Triggered Follow-on Offering, pursuant to Section 7.01(b) or Section 7.01(c), as applicable, on the date of the conclusion of the Pricing Period relating to such offering, except to the extent the last sentence of Section 7.02(b) shall be applicable to such offering in which case such allocation shall occur on the date of pricing of such offering, (c) in the event that a Follow-on Offering has not been consummated prior to January 1, 2008 (July 1, 2008 in the event that a Universal Triggered Offering has been consummated), pursuant to Section 7.04 on the date of determination of the Mandatory Distribution Price or (d) in the event of a Change in Control Transaction, pursuant to Section 7.04 on the date of determination of the Mandatory Distribution Price).


"Fiscal Year" is defined in Section 4.04.


"Follow-on Offering" is defined in the Formation Agreement.


"Formation Agreement" is defined in the Preliminary Statement to this Agreement.


"General Partner" means (a) subject to Section 8.03, prior to the Vulcan GP Date, M&J K B and DG-DW and (b) on and after the Vulcan GP Date, DWI II, in each case, for so long as such Person continues to be a general partner of the Partnership.


"Gross Offering Price" means, with respect to a Follow-on Offering, the gross public offering price per share (calculated before deduction of any underwriting discounts or commissions) in such offering.


"Initial DreamWorks Capital" means, with respect to each Partner, the amount set forth opposite such Partner's name on Schedule B.


4
"Initial Follow-on Offering" is defined in the Formation Agreement.


"Interest" means the partnership interest of a Partner in the Partnership.


"IPO" means the initial public offering by the Company of Class A Stock.


"JK/DG Triggered Follow-on Offering" is defined in the Formation Agreement.


"Limited Partner" means DW Lips, DWI II, Lee Entertainment, L.L.C., Universal and, on and after the Vulcan GP Date, M&J K B and DG-DW, in each case for so long as such Person continues to be a limited partner of the Partnership.


"Mandatory Distribution Price" means the Volume Weighted Average Price of the Class A Stock over the 20 consecutive trading days on The New York Stock Exchange beginning on the trading date specified in the applicable sentence of Section 7.04(a).


"M&J K" is defined in the preamble to this Agreement.


"M&J K B" is defined in the preamble to this Agreement.


"Net Offering Price" means, with respect to a Follow-on Offering or the Universal Triggered Offering, the net public offering price per share (calculated after deduction of any underwriting discounts or commissions) in such offering.


"Non-Participating Partner" means (i) if a Follow-on Offering is consummated prior to the first anniversary of the pricing date of the IPO, (a) each of DW Lips, M&J K B, M&J K, DG-DW and (b) in the case of a Vulcan Triggered Follow-on Offering, any Partner other than DWI II, except in the case of clause (b), and subject to clause (a), to the extent such Partner delivers written notice to the General Partners electing to participate in such Vulcan Triggered Follow-on Offering within 10 Business Days after the date the Partnership delivers to each such Partner written notice of the Partnership's exercise of the demand request relating to such Follow-on Offering, (ii) if a Follow-on Offering is consummated after the first anniversary of the pricing date of the IPO, (x) each of M&J K B, and DG-DW, except to the extent they deliver written notice to the other Partners electing to participate in such Follow-on Offering and (y) in the case of a Vulcan Triggered Follow-on Offering, any Partner other than DWI II, except to the extent such Partner delivers written notice to the General Partners electing to participate in such Vulcan Triggered Follow-on Offering, in the case of each of clauses (x) and (y) within 10 Business Days after the date the Partnership delivers to each such Partner written notice of the Partnership's exercise of the demand request relating to such Follow-on Offering and (iii) in the case of a Universal Triggered Offering, all Partners other than Universal.


"Parent" means any Person that directly or indirectly owns any equity or voting interest in a Partner.


5
"Participating Partner" means any Partner other than a Non-Participating Partner.


"Partner" means a General Partner or a Limited Partner.


"Partnership" is defined in the preamble to this Agreement.


"Person" is defined in the Charter (as modified in Section 2(f) of Article IV thereof) as in effect at consummation of the IPO.


"Pledge Agreement" means the Pledge Agreement, dated as of October 27, 2004, among the Partnership, JPMorgan Chase Bank, as collateral agent, and the other lenders party thereto, as it may be amended, supplemented, restated or modified from time to time.


"Pledged Common Stock" means, at any time, the shares of Common Stock then pledged as collateral for the Revolving Credit Facility. The number of shares of Pledged Common Stock (if any) contributed to the Partnership by each Partner pursuant to Section 3.01(a) is set forth opposite such Partner's name on Schedule A.


"Pricing Period" is defined in the Formation Agreement.


"Pricing Period Price" is defined in the Formation Agreement.


"Principal" means (i) Jeffrey Katzenberg (with respect to M&J K B and any successor General Partner admitted pursuant to this Agreement that is Controlled By Jeffrey Katzenberg) and (ii) David Geffen (with respect to DG-DW and any successor General Partner admitted pursuant to this Agreement that is Controlled By David Geffen).


"Proceeding" is defined in Section 12.10.


"Registration Rights Agreement" is defined in the Preliminary Statement to this Agreement.


"Retained Shares" of any Partner means the number of shares of Common Stock retained by such Partner pursuant to Section 2.04(b)(x) of the Formation Agreement, less the number of shares sold by (or credited to) such Partner in the IPO or in any IPO "overallotment option" exercise. In the case of any Partner that does not sell shares of Common Stock in the IPO or in any IPO "overallotment option" exercise, as applicable, the number of shares of Common Stock credited in the IPO or such IPO "overallotment option" exercise, as applicable, shall be the number of shares of Common Stock (valued at the Net Offering Price in the IPO) that would result in such Partner having a Returned Capital Ratio equal to the Returned Capital Ratio of each of the Partners (other than Universal) that actually sold shares of Common Stock in the IPO or such IPO "overalloment option" exercise, as applicable, after giving effect to such sales. The number of Retained Shares of each Partner (if any) as of the pricing date of the IPO is set forth opposite such Partner's name on Schedule A.


6
"Returned Capital Ratio" of any Partner at any time means the ratio (not to exceed 100%) of the Returned DreamWorks Capital of such Partner at such time to the Initial DreamWorks Capital of such Partner.


"Returned DreamWorks Capital" of any Partner at any time means the Initial DreamWorks Capital of such Partner minus the Unreturned DreamWorks Capital of such Partner at such time.


"Revolving Credit Facility" means the revolving credit facility, dated as of October 27, 2004, among DreamWorks L.L.C. and the lenders party thereto (or any refinancing thereof that does not extend the term thereof).


"Satisfaction Event" means, with respect to each Partner, the event as a result of which the Fifty Percent Return of such Partner would be equal to zero (or such greater amount as results from the restriction set forth in the last sentence of Section 7.02(b)).


"Securities Act" means the United States Securities Act of 1933, as amended, and the rules and regulations thereunder.


"7.01(a) Additional Shares" is defined in Section 7.01(a).


"7.01(b) Additional Shares" is defined in Section 7.01(b).


"7.01(c) Additional Shares" is defined in Section 7.01(c).


"SKG Minimum Ownership Shares" means with respect to each of DW Lips, M&J K B, M&J K and DG-DW, the shares of Common Stock (including Pledged Common Stock), if any, allocated to such Partner in the schedule prepared pursuant to Section 7.01(a)(z), 7.01(b)(z) and 7.01(c)(z), as applicable, but not associated with such Partner as set forth in Section 6.01.


"Subsequent Follow-on Offering" is defined in the Formation Agreement.


"Tax Matters Partner" is defined in Section 6.04(a).


"Transaction Documents" means, collectively, this Agreement, the Formation Agreement, the Pledge Agreement, the Class B Stockholder Agreement and the Vulcan Stockholder Agreement.


"Transfer" is defined in the Class B Stockholder Agreement as in effect at consummation of the IPO.


"Trigger Event" means, in respect of a General Partner, (i) the death, incapacity, retirement, Bankruptcy, commencement of liquidation proceedings, resignation, insolvency or dissolution of a General Partner or the Principal that Controls such General Partner or (ii) the failure by the applicable Principal to Control such General Partner.


7
"Ultimate Parent" of any Partner means the Parent that Controls, directly or indirectly, both such Partner and each other Parent of such Partner.


"Universal" means Vivendi Universal Entertainment LLLP.


"Universal Triggered Offering" is defined in the Formation Agreement.


"Unreturned DreamWorks Capital" means, with respect to any Partner as of any time, such Partner's Initial DreamWorks Capital less: (a) the value of any shares of Common Stock sold (or credited, as determined in accordance with the definition of "Retained Shares") by such Partner in the IPO or in any IPO "overallotment option" exercise prior to such time (in each case, valued at the Net Offering Price in the IPO) and (b) the value of such Partner's Retained Shares plus the value of any other shares sold by the Partnership on behalf of such Partner, if any, pursuant to Section 7.02(b), in each case, as such value is determined in accordance with the applicable provision of Section 7.01, Section 7.04 or Section 11.02, as applicable (except that any such valuation done in accordance with Section 7.01(a) shall be undone prior to performing any calculation under Section 7.01(b) or Section 7.01(c) and shall be recalculated in accordance with such other applicable provision).


"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 Discount" means the ratio of (x) the Net Offering Price in the Vulcan Triggered Follow-on Offering to (y) the Gross Offering Price in the Vulcan Triggered Follow-on Offering.


"Vulcan G
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