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Exhibit
99.5
DREAMWORKS ANIMATION SKG,
INC.
1000 FLOWER
STREET
GLENDALE, CA
91201
October 25,
2007
Ann Daly
c/o Munger, Tolles & Olsen
LLP
355 South Grand Avenue
35 th Floor
Los Angeles, CA 90071
Attn: Rob Knauss
Dear Ann:
Reference is made to that
certain executed Employment Agreement, dated as of October 8,
2004, between DreamWorks Animation SKG, Inc., a Delaware
corporation (“Studio”), and you, whereby Studio agreed
to employ you and you agreed to accept such employment upon the
terms and conditions set forth therein (such agreement, as amended
pursuant to the amendment, dated as of December 5, 2005, the
“Prior Agreement”). In order to address the
requirements of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), the parties now hereby
agree to amend and restate the Prior Agreement in its entirety as
set forth in this agreement (the “Agreement”),
effective as of the date shown above:
1. Term . The
term of your employment hereunder commenced on the October 27,
2004, which was the closing date of Studio’s initial public
offering (the “Commencement Date”), and shall continue
until December 31, 2009. This period shall hereinafter be
referred to as the “Employment Term”.
2.
Duties/Responsibilities/Reporting .
a. General . Your
title shall be “Chief Operating Officer” of Studio. You
shall have such duties and responsibilities as are consistent with
the traditional position of Chief Operating Officer of publicly
traded major entertainment and media corporations.
b. Services . During
the Employment Term, you shall render your exclusive full time
business services to Studio and/or its divisions, subsidiaries or
affiliates in accordance with the reasonable directions and
instructions of the President of Studio, all as hereinafter set
forth.
c. Reporting . Studio
hereby employs and retains you to render your exclusive full time
business services to Studio and/or its divisions, subsidiaries or
affiliates in accordance with the reasonable directions and
instructions of the President of Studio, all as hereinafter set
forth. You shall report to the President of Studio (currently Lew
Coleman (“Coleman”)); provided that if Coleman is not
actively involved in the business of Studio or is otherwise
incapable of involvement in the day-to-day business of
Studio,
including by reason of death or
disability, then you shall report to the Chief Executive
Officer of Studio. In addition, if any senior executive of Studio
other than the President reports to the Chief Executive Officer of
Studio, then you shall be entitled to report to the Chief Executive
Officer of Studio.
3. Exclusivity
. You shall not during the Employment Term perform services for any
person, firm or corporation (hereinafter referred to collectively
as a “person”) without the prior written consent of
Studio and will not engage in any activity which would interfere
with the performance of Studio’s services hereunder, or
become financially interested in any other person engaged in the
production, distribution or exhibition of motion pictures or
television programs (including, without limitation, motion pictures
produced for, distributed to or exhibited on free, cable, pay,
satellite and/or subscription television, music and/or
interactive), anywhere in the world. Nothing contained herein shall
prevent you from owning publicly traded minority stock interests
not to exceed five percent (5%), limited partnership interests or
other passive investment interests in businesses performing any of
the aforesaid activities.
4. Compensation
.
a. Base Salary . For
all services rendered under this Agreement, Studio will pay you a
yearly base salary at a rate of One Million Dollars ($1,000,000)
for each full year of the Employment Term, payable in accordance
with Studio’s applicable payroll practices (“Base
Salary”).
b. Equity-Based
Compensation .
(i) Immediately prior to the
Closing, you received a grant of fully vested DreamWorks LLC
Phantom E Interests that, upon the Closing, were converted into
fully vested shares of Studio Class A Common Stock, par value
$0.01 per share (“Shares”), that had an aggregate value
as of October 27, 2004 (which was the IPO pricing date) of
$5,700,000.
(ii) On October 27,
2004, you received, pursuant to the 2004 Omnibus Incentive
Compensation Plan, stock options with respect to Studio’s
Class A common stock (“Options”) having a
grant-date value of $1,990,000 and restricted shares of
Studio’s Class A common stock (“Restricted
Stock”) having a grant-date value of $5,450,000 (the
“Initial Grants”).
(iii) While you remain
employed hereunder (but in no event after October 26, 2009),
in lieu of receiving a larger base salary than the amount set forth
in Paragraph 4.a. of this Agreement, you will be entitled to
receive annual equity awards of Options and Restricted Stock (or
such other form of equity-based compensation as the Compensation
Committee may determine) having an aggregate grant-date value of
$500,000. In the event that such awards consist of Options and
Restricted Stock, they shall be evenly divided between Options and
Restricted Stock based on their grant-date values. For the
avoidance of doubt, the initial grant of such annual awards shall
be guaranteed and not subject to further approval by the
Compensation Committee of the Board of Directors of
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Studio (the “Compensation
Committee”), but the vesting of such Options and Restricted
Stock (or such other form of equity-based compensation as the
Compensation Committee may determine) shall be subject to vesting
conditions (including achievement of performance goals) as referred
to below.
(iv) You will also be
eligible, while you remain employed hereunder (but in no event
after October 26, 2009), commencing for the year 2005 (the
amount of the award for 2005 was determined in the first quarter of
2006), subject to annual approval by the Compensation Committee, to
receive annual awards of Options and Restricted Stock (or such
other form of equity-based compensation as the Compensation
Committee may determine). It is Studio’s present expectation
that such annual awards will have an aggregate grant-date value,
depending on company performance, ranging between $750,000 (bonus
target) and $1,500,000 (in the case of superior company
performance). In the event that such awards consist of Options and
Restricted Stock, they shall be divided, as determined by the
Compensation Committee, between Options and Restricted Stock. These
annual awards shall be in lieu of annual cash bonuses in the event
the Compensation Committee does not pay cash bonuses to
Studio’s most senior executives; provided that if the
Compensation Committee does elect to pay such cash bonuses in
addition to such annual awards, such awards shall also be in
addition to any cash bonuses granted by the Compensation
Committee.
(v) In addition, you will be
eligible, while you remain employed hereunder (but in no event
after October 26, 2009), commencing in 2006, subject to annual
approval by the Compensation Committee, to receive annual equity
incentive awards of Options and Restricted Stock (or such other
form of equity-based compensation as the Compensation Committee may
determine). It is Studio’s present expectation that such
annual awards will have an annual aggregate grant-date value
targeted at $2,500,000. In the event that such awards consist of
Options and Restricted Stock, they shall be divided, as determined
by the Compensation Committee, between Options and Restricted
Stock.
(vi) All Options and
Restricted Stock (and any other equity-based awards) referred to in
this Paragraph 4.b will (x) be valued using a method or
methods (including where appropriate a Black-Scholes or other fair
value method) as determined by the Compensation Committee from time
to time (and, in the case of the Initial Grants, taking into
account the IPO price to the public without regard to the
underwriters discount), (y) become fully vested, exercisable
(if applicable) and nonforfeitable within a period not to exceed
five (5) years from the date of the Initial Grant or four
(4) years from the date of any other grant, in a manner
determined by the Compensation Committee, and will be contingent on
both the continuing performance of services to Studio (subject to
Paragraphs 4.b(vii), 9, 10, 11, 12 and 13) and the achievement of
performance goals as established by the Compensation Committee from
time to time (it being understood that the performance goals and
performance periods will be no more burdensome than the performance
goals and the performance periods for applicable compensation
awards made approximately contemporaneously to the CEO, President,
CFO and the General Counsel of Studio), and (z) otherwise be
subject to such terms and conditions as may be
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set forth in the applicable equity
compensation plan of Studio (each such plan, a “Plan”)
or determined by the Compensation Committee from time to time.
Notwithstanding the foregoing, any performance based Initial Grants
may, in the discretion of the Compensation Committee, have a
vesting schedule that ends in the first quarter of 2010.
(vii) Upon the expiration of
the Employment Term (i.e., December 31, 2009) but only if your
employment hereunder has not been terminated earlier, (x) you
will be entitled to all equity based compensation vested as of such
date, and (y) provided Studio does not continue to employ you
and solely with respect to any grant of equity based compensation
previously awarded to you that is subject to cliff vesting (i.e.,
is not eligible for vesting prior to the end of the applicable
four- or five-year period), you will have the opportunity to vest
in the portion of such grant that would have been eligible for
vesting prior to the expiration of the Employment Term if such
grant had been eligible for 25% vesting in the case of a four year
grant or 20% vesting in the case of a five year grant on each of
the anniversaries of such grant. For purposes of this Agreement, an
award will be deemed to have vested when it is no longer subject to
a substantial risk of forfeiture (within the meaning of Treasury
Regulation Section 1.409A-1(d)). With respect to awards that
are subject to time-based vesting criteria, the full amount of such
awards will vest on December 31, 2009. With respect to
equity-based compensation awards that are subject to
performance-based vesting criteria, such awards will continue to
remain subject to the achievement of performance goals, as provided
pursuant to the Plan and the agreements evidencing such awards and
to such other terms and conditions as may be determined by the
Compensation Committee at the time of the grant, provided that, in
the event that a change of control (as defined in Paragraph 25.a)
occurs prior to the end of the applicable performance period, the
vesting of such awards shall be determined in accordance with
Paragraph 25.a. In the case of restricted stock units that are
subject to time-based vesting criteria, such awards will be settled
within thirty (30) days following December 31, 2009. In
the case of restricted stock units that are subject to
performance-based vesting criteria, except as otherwise set forth
in Paragraph 25, such awards will be settled on the seventieth
(70th) day after the date that such awards become
vested.
5. Benefits .
In addition to the foregoing, during the period of your employment
with Studio, you shall be entitled to participate in such other,
medical, dental and life insurance, 401(k), pension and other
benefit plans as Studio may have or establish from time to time for
its most senior executives. During the Employment Term, unless
earlier terminated as set forth below, you shall be entitled to
utilize the Studio corporate jet for business-related air travel
(subject to Studio policy), you shall be entitled to coverage in
accordance with Studio’s standard leave of absence policy and
you shall be entitled to vacation days and/or personal days to be
taken subject to the demands of Studio (as determined by Studio)
and consistent with the amount of days taken by other senior level
executives; provided, however, no vacation time will be accrued
during the Employment Term. The foregoing, however, shall not be
construed to require Studio to establish any such plans or to
prevent the modification or termination of such plans once
established, and no such action or failure thereof shall affect
this Agreement.
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6. Business
Expenses . Studio shall reimburse you for business expenses
on a regular basis in accordance with its policy regarding the
reimbursement of such expenses for executives of like stature to
you (including travel, at Studio’s request, which, in
accordance with company policy, is currently first class, a car
and/or cellular phone and including the reimbursement or direct
payment of business phone expenses on a regular basis in accordance
with Studio’s policy regarding the reimbursement or payment
of such expenses for executives of like stature to you). Expenses
shall be eligible for reimbursement hereunder to the extent that
they are incurred by you during the period of your employment with
Studio pursuant to this Agreement. All reimbursable expenses shall
be reimbursed to you as promptly as practicable and in any event
not later than the last day of the calendar year after the calendar
year in which the expenses are incurred, and the amount of expenses
eligible for reimbursement during any calendar year will not affect
the amount of expenses eligible for reimbursement in any other
calendar year. During the period of your employment with Studio
hereunder, Studio will provide you with a monthly car allowance of
One Thousand Dollars ($1,000), which allowance shall be paid to you
on a monthly basis and which shall be administered in accordance
with Studio’s then-current policy for similarly situated
executives.
7.
Indemnification . You shall be fully indemnified and
held harmless by Studio to the fullest extent permitted by law from
any claim, liability, loss, cost or expense of any nature
(including attorney’s fees of counsel selected by you,
judgments, fines, any amounts paid or to be paid in any settlement,
and all costs of any nature) incurred by you (all such
indemnification to be on an “after-tax” or
“gross-up” basis) which arises, directly or indirectly,
in whole or in part out of any alleged or actual conduct, action or
inaction on your part in or in connection with or related in any
manner to your status as an employee, agent, officer, corporate
director, member, manager, shareholder, partner of, or your
provision of services to, Studio or any of its affiliated entities
or any entities to which you are providing services on behalf of
Studio or which may be doing business with Studio. To the maximum
extent allowed by law, all amounts to be indemnified hereunder
including reasonable attorneys’ fees shall be promptly
advanced by Studio until such time, if ever, as it is determined by
final decision pursuant to Paragraph 24 below that you are not
entitled to indemnification hereunder (whereupon you shall
reimburse Studio for all sums theretofore advanced). Any tax
gross-up payments that you become entitled to receive pursuant to
this Paragraph 7 will be paid to you (or to the applicable taxing
authority on your behalf) as promptly as practicable and in any
event not later than the last day of the calendar year after the
calendar year in which you remit the related taxes.
8. Covenants
.
a. Non-Competition .
You acknowledge and agree that due to the unique and intellectual
nature of your services and due to your familiarity with the
confidential strategies, creative concepts, proprietary animation
techniques and technology, market studies, marketing and other
confidential information of Studio, including information that you
will develop for Studio, it will be impossible for you to perform
animation services for any other animation employer or animation
division of an employer or animation division of a production or
entertainment company for some time after the termination of your
services with Studio without necessarily using
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confidential information and techniques
of Studio; and you further agree that it would be impossible for
you to discharge your duty to use your best efforts to assist such
other entity without breaching your duties of confidentiality to
Studio, provided, however, that nothing herein shall prevent you
from being in charge of an entertainment company that has an
animation division. Accordingly, to the extent permitted by
California law, you agree that for one (1) year after your
services to Studio terminate for any reason (subject to Paragraphs
12 and 13 below), you shall not perform any services related to
animation for any other entity (including any entity owned or
controlled in whole or in part by you) or assist any other person
or entity to engage in such services. You agree that this
restriction shall not prevent you from obtaining employment,
including employment in the film or entertainment industries in
areas other than animation, and that this restriction is reasonable
and necessary to protect legitimate interests of Studio unless
otherwise provided by California law.
b. Confidential
Information . You agree that you shall not, during the
Employment Term or at any time thereafter, use for your own
purposes, or disclose to or for any benefit of any third party, any
trade secret or other confidential information of Studio or any of
its affiliates (except as may required by law or in the performance
of your duties hereunder consistent with Studio’s policies)
and that you will comply with any confidentiality obligations of
Studio known by you to a third party, whether under agreement or
otherwise. Notwithstanding the foregoing, confidential information
shall be deemed not to include information which (i) is or
becomes generally available to the public other than as a result of
a disclosure by you or any other person who directly or indirectly
receives such information from you or at your direction or
(ii) is or becomes available to you on a non-confidential
basis from a source which you reasonably believe is entitled to
disclose it to you.
c. Studio Ownership .
The results and proceeds of your services hereunder, including,
without limitation, any works of authorship resulting from your
services during your employment and any works in progress, shall be
works-made-for-hire and Studio shall be deemed the sole owner
throughout the universe of any and all rights of whatsoever nature
therein, whether or not now or hereafter known, existing,
contemplated, recognized or developed, with the right to use the
same in perpetuity in any manner Studio determines in its sole
discretion without any further payment to you whatsoever. If, for
any reason, any of such results and proceeds shall not legally be a
work-for-hire and/or there are any rights which do not accrue to
Studio under the preceding sentence, then you hereby irrevocably
assign and agree to assign any and all of your right, title and
interest thereto, including, without limitation, any and all
copyrights, patents, trade secrets, trademarks and/or other rights
of whatsoever nature therein, whether or not now or hereafter
known, existing, contemplated, recognized or developed by Studio,
and Studio shall have the right to use the same in perpetuity
throughout the universe in any manner Studio may deem useful or
desirable to establish or document Studio’s exclusive
ownership of any and all rights in any such results and proceeds,
including, without limitation, the execution of appropriate
copyright and/or patent applications or assignments. To the extent
that you have any rights in the results and proceeds of your
services that cannot be assigned in the manner described above, you
unconditionally and irrevocably waive the enforcement of such
rights. This Paragraph 8.c is
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subject to, and shall not be deemed to
limit, restrict, or constitute any waiver by Studio of any rights
of ownership to which Studio may be entitled by operation of law by
virtue of Studio or any of its affiliates being your
employer.
d. Return of Property
. All documents, data, recordings, or other property, whether
tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by
you in the course of your employment with Studio or any of its
affiliates shall remain the exclusive property of Studio. In the
event of the termination of your employment for any reason, and
subject to any other provisions hereof, Studio reserves the right,
subject to Paragraph 27.b, to the extent required by law, and in
addition to any other remedy Studio may have, to deduct from any
monies otherwise payable to you the following: (i) the full
amount of any specifically determined debt you owe to Studio or any
of its affiliates at the time of or subsequent to the termination
of your employment with Studio, and (ii) the value of Studio
property which you retain in your possession after the termination
of your employment with Studio following Studio’s written
request for such item(s) return and your failure to return such
items within thirty (30) days of receiving such notice. In the
event that the law of any state or other jurisdiction requires the
consent of an employee for such deductions, this Agreement shall
serve as such consent.
e. Promise Not To
Solicit . You will not, during the period of the Employment
Term or for the period ending two (2) years after the earlier
of expiration of the Employment Term or your termination hereunder,
induce or attempt to induce any employees, exclusive consultants,
exclusive contractors or exclusive representatives of Studio (or
those of any of its affiliates) to stop working for, contracting
with or representing Studio or any of its affiliates or to work
for, contract with or represent any of Studio’s (or its
affiliates’) competitors.
9. Incapacity
.
a. In the event you are
unable to perform the services required of you hereunder as a
result of a physical or mental disability and such disability shall
continue for a period of ninety (90) or more consecutive days
or an aggregate of four (4) or more months during any twelve
(12) month period during the Employment Term, Studio shall
have the right, at its option and subject to applicable state and
federal law, to terminate your employment hereunder, and Studio
shall only be obligated to pay you (a) for a period commencing
on the termination of your employment by Studio and ending on the
earlier of the expiration of the Employment Term and the second
anniversary of the termination of your employment, payments at a
rate equal to 50% of your rate of Base Salary, and, except as
otherwise provided in this Paragraph 9.a, such payments will be
payable in accordance with Studio’s regular payroll practices
applicable to similarly situated active employees, and (b) any
additional compensation (including, without limitation, any grants
of equity-based compensation made to you on or prior to the date of
termination (it being understood you will not be entitled to
receive any grants of equity-based compensation thereafter) as
determined pursuant to Paragraph 9.b, car allowance which has
accrued prior to your termination, and expense reimbursement for
expenses incurred prior to your termination) earned by you prior to
the
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termination of your employment.
Notwithstanding the foregoing sentence, you further will be
entitled to continuation of medical, dental, life insurance, car
allowance, financial counseling and other benefits (the
“Continued Benefits̶
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