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LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT

Limited Partnership Agreement

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DWA ESCROW LLLP

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Title: LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT
Governing Law: Delaware     Date: 3/28/2005

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Exhibit 10.24

 

EXECUTION COPY

 

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT

 

of

 

DWA ESCROW LLLP

 

dated as of October 27, 2004


TABLE OF CONTENTS

 

 

 

 

 

 

 

  

 

  

Page


 

ARTICLE I

 

Definitions and Usage

 

 

 

SECTION 1.01.

  

Definitions

  

4

SECTION 1.02.

  

Terms and Usage Generally

  

11

 

ARTICLE II

 

The Partnership

 

 

 

SECTION 2.01.

  

Effectiveness of this Agreement

  

12

SECTION 2.02.

  

Formation

  

12

SECTION 2.03.

  

Name

  

12

SECTION 2.04.

  

Term

  

12

SECTION 2.05.

  

Registered Agent and Registered Office

  

12

SECTION 2.06.

  

Limited Purpose

  

12

SECTION 2.07.

  

Treatment as Partnership

  

13

 

ARTICLE III

 

Capital Contributions; Partners

 

 

 

SECTION 3.01.

  

Initial Capital Contributions

  

13

SECTION 3.02.

  

Admission of Partners

  

13

 

ARTICLE IV

 

Reports

 

 

 

SECTION 4.01.

  

Reports to Partners

  

13

SECTION 4.02.

  

Tax Returns

  

14

SECTION 4.03.

  

Other Tax Information

  

14

SECTION 4.04.

  

Fiscal Year

  

15

 

ARTICLE V

 

Adjusted DreamWorks Participation Percentages

 

 

 

SECTION 5.01.

  

General

  

15

 

i


 

 

 

 

 

ARTICLE VI

 

Tax Matters

 

 

 

SECTION 6.01.

  

Identification, Sale and Distribution of Shares of Common Stock

  

15

SECTION 6.02.

  

Allocation of Tax Items; Tax Treatment of Certain Distributions

  

16

SECTION 6.03.

  

Amounts Withheld

  

16

SECTION 6.04.

  

Tax Matters Partner

  

17

 

ARTICLE VII

 

Calculations; Distributions

 

 

 

SECTION 7.01.

  

Calculations

  

17

SECTION 7.02.

  

Transactions In the Event of a Follow-on Offering

  

21

SECTION 7.03.

  

Transactions in the Event of a Universal Triggered Offering

  

22

SECTION 7.04.

  

Mandatory Share Distributions

  

22

SECTION 7.05.

  

Vulcan GP Date

  

23

SECTION 7.06.

  

General Provisions

  

24

SECTION 7.07.

  

No Set-Off

  

26

SECTION 7.08.

  

Sample Calculations

  

26

 

ARTICLE VIII

 

Management of the Partnership

 

 

 

SECTION 8.01.

  

General Partners

  

26

SECTION 8.02.

  

Voting of Contributed Stock

  

27

SECTION 8.03.

  

Substitute General Partner

  

27

SECTION 8.04.

  

Restrictions on Activities

  

28

 

ARTICLE IX

 

Transfers of Interests

 

 

 

SECTION 9.01.

  

Restrictions on Transfers

  

29

SECTION 9.02.

  

Admission of Transferees

  

29

SECTION 9.03.

  

Further Restrictions

  

29

 

ARTICLE X

 

Limitation on Liability, Exculpation

 

 

 

SECTION 10.01.

  

Limitation on Liability

  

30

SECTION 10.02.

  

Exculpation of Covered Persons

  

30

SECTION 10.03.

  

Indemnification

  

30

 

ii


 

 

 

 

 

 

ARTICLE XI

 

Dissolution and Termination

 

 

 

SECTION 11.01.

  

Dissolution

  

31

SECTION 11.02.

  

Winding Up of the Partnership

  

32

SECTION 11.03.

  

Claims of Partners

  

33

SECTION 11.04.

  

Termination

  

33

 

ARTICLE XII

 

Miscellaneous

 

 

 

SECTION 12.01.

  

Notices

  

33

SECTION 12.02.

  

No Third Party Beneficiaries

  

34

SECTION 12.03.

  

Waiver

  

34

SECTION 12.04.

  

Assignment; Amendments

  

34

SECTION 12.05.

  

Integration

  

34

SECTION 12.06.

  

Headings

  

35

SECTION 12.07.

  

Counterparts

  

35

SECTION 12.08.

  

Severability

  

35

SECTION 12.09.

  

Applicable Law

  

35

SECTION 12.10.

  

Jurisdiction; Waivers

  

35

SECTION 12.11.

  

Enforcement

  

35

 

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 27, 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, and 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:

 

Definitions and Usage

 

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.

 

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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.

 

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

 

6


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 (A) 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) or (B) any allocation pursuant to Section 11.02(b).

 

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.

 

7


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 Effective Time, (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 Effective Time, (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.

 

8


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 Effective Time is set forth opposite such Partner’s name on Schedule A.

 

9


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.

 

10


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 GP Date ” is defined in Section 7.05.

 

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

 

Vulcan Triggered Follow-on Offering ” is defined in the Formation Agreement.

 

Terms and Usage Generally. i)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”.

 

11


The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

 

The Partnership

 

Effectiveness of this Agreement. This Agreement constitutes the partnership agreement (as defined in the Delaware Act) of the parties hereto. This Agreement shall become effective at the Effective Time.

 

Formation. The parties hereto agree to form the Partnership as a limited partnership and unanimously agree that the Partnership shall be qualified as a limited liability limited partnership under and pursuant to Section 17-214 of the Delaware Act and Section 15-1001 of the Delaware Revised Uniform Partnership Act (6 Del. C. §§ 15-101 et seq. ) (“ DRUPA ”) by filing with the Secretary of State of the State of Delaware a certificate of limited partnership of the Partnership and a statement of qualification as a limited liability limited partnership. The General Partners shall execute, file and record the certificate of limited partnership of the Partnership, such statement of qualification and such other documents as may be required or appropriate under the laws of the State of Delaware and of any other jurisdiction in which the Partnership may conduct business. The General Partners shall, on request, provide any Partner with copies of each such document as filed and recorded.

 

Name. The name of the Partnership is DWA Escrow LLLP. The General Partners may change the name of the Partnership or adopt such trade or fictitious names as they may determine, in each case consistent with the requirements of the Delaware Act, including Sections 17-102 and 17-214 thereof, and all other applicable law ( e.g. , fictitious name statutes). The General Partners will give all Partners prompt written notice of any such name change (or adoption of any such trade or fictitious name).

 

Term. The term of the Partnership shall begin on the date the certificate of limited partnership of the Partnership becomes effective (the “ Effective Time ”) and shall continue until the Partnership is dissolved in accordance with Section 11.01.

 

Registered Agent and Registered Office. The name of the registered agent for service of process is Capitol Services, Inc., and the address of the registered agent and the address of the registered office in the State of Delaware is 615 South Dupont Highway, Dover, Kent County, Delaware. Such office and such agent may be changed from time to time by the General Partners consistent with the requirements of the Delaware Act, including Sections 17-104 and 17-202 thereof.

 

Limited Purpose. The Partnership is formed for the sole object and purpose of, and the nature of the business to be conducted and promoted by the Partnership is limited to, holding and voting shares of Common Stock in accordance with the Transaction Documents, effecting the transactions and fulfilling the obligations contemplated in the Transaction Documents to be effected and fulfilled by the

 

12


Partnership and making the distributions contemplated in this Agreement. Without the prior written consent of each Partner, the Partnership will not engage in any business or activities (including those activities described in Section 8.04) other than those described above. Notwithstanding anything in this Agreement to the contrary, without the need for any additional act or consent of any Person, the Partnership, and either General Partner acting on behalf of the Partnership, may execute, deliver and perform the Transaction Documents on behalf of the Partnership. The foregoing authorization shall not be construed as a limitation on the powers of Partnership or the General Partners to enter into other agreements expressly permitted by this Agreement.

 

Treatment as Partnership. The Partnership shall not elect to be treated as a corporation for U.S. federal income tax purposes. The parties shall treat the Partnership as a partnership for U.S. federal income tax purposes and agree not to take any position inconsistent with such treatment.

 

Capital Contributions; Partners

 

Initial Capital Contributions. ii)At the Effective Time, the Partners shall contribute to the Partnership such number of shares of Common Stock set forth opposite such Partner’s name on Schedule A, in accordance with Section 2.04 of the Formation Agreement.

 

In return for such capital contributions, Interests shall be issued to the Partners. Schedule D indicates the amount of capital contributions attributable to Interests for each Partner.

 

No Partner shall be entitled to make additional capital contributions, withdraw capital or receive distributions except as specifically provided herein. No Partner shall have any obligation to the Partnership, to any other Partner or to any creditor of the Partnership to make any capital contribution, except as specifically contemplated in Section 3.01(a).

 

Admission of Partners. At the Effective Time, without the need for any further action of any Person, the Persons set forth on Schedule C attached hereto who have executed this Agreement shall be admitted as Partners, and each such Person shall be shown as such in the books and records of the Partnership. Following the Effective Time, no Person shall be admitted as a Partner (except in accordance with Section 9.02) and no additional Interests shall be issued.

 

Reports

 

Reports to Partners. iii)The General Partners shall deliver a statement to each Partner of the balance of each Partner’s Unreturned DreamWorks Capital (i) as soon as practicable after consummation of a Follow-on Offering (subject to revision in

 

13


accordance with the first sentence of each of Section 7.01(a), Section 7.01(b) and Section 7.01(c)), (ii) within 80 days after the end of each Fiscal Year and (iii) within 30 days after the end of each of the first three quarters of each Fiscal Year.

 

The General Partners shall deliver a draft of the schedule required to be prepared pursuant to Section 7.01(a), Section 7.01(b) or Section 7.01(c), as applicable, to each Limited Partner for its review five Business Days prior to the pricing of the Follow-on Offering or conclusion of the Pricing Period, as applicable, and a draft of the schedule required to be prepared pursuant to Section 7.04 to each Limited Partner for its review five Business Days prior to the end of the 20-trading day period used to determine the Mandatory Distribution Price. Such draft schedule shall be prepared based on, as applicable, the mid-point of the price range for the applicable offering (or, if such mid-point price shall not exist, then a good faith estimate by the underwriters for such offering of the price per share for the applicable offering) or the Pricing Period Price as calculated from the beginning of the Pricing Period to such day. If any of the Limited Partners have any objection to any such calculations, they shall give the General Partners notice thereof and the parties shall use reasonable efforts to resolve any such disputes prior to the pricing date for such offering or the end of the applicable Pricing Period.

 

As soon as practicable after the end of each Fiscal Year but in any event within 80 days after the end of each Fiscal Year, the Tax Matters Partner shall deliver to each Partner an Internal Revenue Service Schedule K-1 and all similar state, local or foreign forms, schedules or returns required by law to be provided to each Partner. For purposes of Sections 4.01(a), (c), (d) and (e), Section 4.02 and Section 4.03, (i) a “Partner” shall be deemed to include any Person that was a Partner at any time during the relevant taxable period or at the time of the relevant event, even if such Person is no longer a Partner at the time the relevant information is to be provided and (ii) the “Tax Matters Partner” means the Tax Matters Partner for the relevant taxable period or at the time of the relevant event, even if such Person is no longer the Tax Matters Partner at the time the relevant information is to be prepared.

 

As soon as practicable after consummation of a Follow-on Offering but in any event within 80 days after such consummation, the Tax Matters Partner shall deliver to each Participating Partner a statement of the Partnership taxable income or tax loss allocable to such Partner in connection with the Follow-on Offering.

 

As soon as practicable but within 80 days after the distribution of shares of Common Stock to a Partner, the Tax Matters Partner shall deliver to each Partner that was distributed shares of Common Stock a statement of the tax basis (in the hands of the Partnership) of the shares of Common Stock distributed to such Partner.

 

Tax Returns. The Tax Matters Partner shall timely cause to be prepared all tax returns (including information returns) required to be filed by the Partnership.

 

Other Tax Information. The Partners shall cooperate with one another and the Tax Matters Partner (on behalf of the Partnership), and the Tax Matters Partner (on behalf of the Partnership) shall cooperate with each Partner, to provide all reasonable necessary financial and tax information and related analysis with respect to Partnership tax matters.

 

14


Fiscal Year. The fiscal year of the Partnership (the “ Fiscal Year ”) shall be the 12-month (or shorter) period ending on December 31 of each year, unless otherwise determined by the General Partners.

 

Adjusted DreamWorks Participation Percentages

 

General. As of the Effective Time, the Adjusted DreamWorks Participation Percentage of each Partner shall be as set forth below:

 

 

 

 

 

Partner


 

  

Adjusted

Dream Works

Participation
Percentage


 

 

M&J K B

  

0.0723

%

M&J K

  

21.6963

%

DG-DW

  

21.7686

%

DW Lips

  

21.7686

%

DWI II

  

29.4173

%

Lee Entertainment, L.L.C.

  

5.2769

%

Universal

  

0

%

 

Tax Matters

 

Identification, Sale and Distribution of Shares of Common Stock. iv)Each share of Common Stock held by the Partnership shall, for as long as such share is held by the Partnership, be associated with the Partner that contributed that share to the Partnership. The Partners acknowledge that shares contributed by different Partners may have different tax bases to the Partnership for U.S. federal income tax purposes.

 

If Common Stock is to be sold by the Partnership and the cash proceeds are to be distributed to one or more Partners, then, (i) to the extent possible and on a Partner by Partner basis, the particular shares of Common Stock that are sold shall be the shares associated with the Partner receiving such cash proceeds and (ii) to the extent that clause (i) applies, the Partnership shall identify the proceeds of the sale of each such share as being specifically distributed to the Partner with which such share is associated. To the extent that any Partner is to receive more cash proceeds than the total proceeds from the sale of all shares associated with such Partner, (x) the necessary additional shares that must be sold in order to pay such additional cash distribution to such Partner shall be taken pro rata from the shares (not then needed for sale or distribution to the Partners associated with such shares) that are associated with each of the other Partners and (y) the Partnership shall use the same method to identify the proceeds of any such stock sales as being distributed to the applicable Partner.

 

15


If shares of Common Stock are to be distributed by the Partnership to a Partner, then, to the extent possible, the particular shares distributed to any particular Partner shall be shares associated with such Partner. To the extent that any Partner is to receive more shares than the total number of shares associated with such Partner, the necessary additional shares that must be distributed to such Partner shall be taken, in the case of Universal, first from the shares associated with DWI II (to the extent not then needed for sale or distribution to DWI II) and then, in the case of any additional distribution to Universal or a distribution to any other Partner pro rata from the shares (not then needed for sale or distribution to the Partners associated with such shares) that are associated with each of the other Partners. For the avoidance of doubt, this paragraph (c) is not intended to affect the number of shares of Common Stock or cash to be distributed or allocated to any Partner in accordance with Article VII hereof.

 

Allocation of Tax Items; Tax Treatment of Certain Distributions . v)Any gain or loss on any sale of Common Stock by the Partnership, and any selling expense associated with any such sale, shall be allocated to the Partner that is treated as receiving the cash proceeds of such sale in accordance with clauses (b)(ii) and (b)(y) of Section 6.01. The Partners acknowledge that such gain or loss may be allocable to a Partner other than the Partner associated with the shares that are sold.

 

Any other item of income, gain or loss of the Partnership shall be allocated in the discretion of the Tax Matters Partner in a manner consistent with which a Partner or Partners receive the economic benefit or detriment of such item.

 

A distribution of shares of Common Stock by the Partnership to Universal pursuant to this Agreement (other than a distribution of shares pursuant to Section 7.08) shall be treated by the Partnership as a distribution in liquidation of Universal’s Interest and shall be reported by the Partnership as such under Section 732(b) of the Code.

 

The Partners agree that the allocations in clauses (a) and (b) best reflect their respective economic interests in the Partnership and agree that they shall not take any position inconsistent with such allocations, or with the treatment described in Section 6.02(c), except as otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Code.

 

Amounts Withheld. The Partnership, as directed by the Tax Matters Partner, is authorized to withhold from distributions, including any deemed distributions, or with respect to allocations, to the Partners and to pay over to any taxing authority any amounts that it reasonably determines may be required to be so withheld pursuant to any provisions of applicable law. All amounts so withheld with respect to any Partner shall be treated as amounts distributed to such Partner pursuant to this Agreement for all purposes and shall reduce on a dollar-for-dollar basis any amounts otherwise distributable to such Partner. The Partners will cooperate to minimize the amount of any withholding that would otherwise be required pursuant to this Section 6.03.

 

16


Tax Matters Partner. vi)DG-DW shall act as the “tax matters partner” of the Partnership within the meaning of Section 6231(a)(7) of the Code (the “ Tax Matters Partner ”) and in any similar capacity under applicable state, local or foreign tax law. In the event of a Trigger Event with respect to DG-DW, M&J K B shall be the Tax Matters Partner.

 

The Tax Matters Partner shall serve as such with all powers granted to a tax matters partner under the Code, except as expressly provided in this Agreement. The Tax Matters Partner shall be entitled to make all decisions with respect to all tax matters of the Partnership consistent with this Agreement, including with respect to tax elections of the Partnership and the calculation and allocation of the taxable income or loss of the Partnership. All matters relating to all tax returns (including information returns) filed by the Partnership, including tax audits and related matters and controversies, shall be conducted by the Tax Matters Partner. For the avoidance of doubt, the Tax Matters Partner shall be bound by Section 6.01 and Section 6.02 and agrees that it will not take a position inconsistent with such provisions, except as otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Code.

 

Calculations; Distributions

 

Calculations. i)On the date of the pricing of a Follow-on Offering, the General Partners on behalf of the Partnership shall prepare and deliver to each of the Partners a written schedule setting forth as of such date and prior to giving effect to such Follow-on Offering (x) the value of each Partner’s Retained Shares (valued at the Net Offering Price in such Follow-on Offering in the case of shares representing the return of such Partner’s Fifty Percent Return as of such time and valued at the Gross Offering Price in such Follow-on Offering in the case of all other shares), (y) each Partner’s Unreturned DreamWorks Capital (if any) after crediting the value of such Partner’s Retained Shares as set forth in Section 7.01(a)(x) above (in accordance with clause (b) of the definition of Unreturned DreamWorks Capital and without duplication) and, if the amount of such credit exceeds such Partner’s Unreturned DreamWorks Capital at such time, then the number of shares representing such excess (valued at the Gross Offering Price in such Follow-on Offering) shall be set forth in such schedule and shall be referred to as such Partner’s “ 7.01(a) Additional Shares ”, and (z) the number of shares of Common Stock each Partner would receive after giving effect to Section 7.01(a)(y) if the Partnership were allocating all shares of Common Stock then held by the Partnership (prior to giving effect to such Follow-on Offering) pursuant to the following subparagraphs (excluding, for purposes of the calculations set forth in clauses (ii) and (iii) below, Universal as a Partner):

 

first , to each Partner a number of shares of Common Stock (valued at the Net Offering Price in such Follow-on Offering) having a value equal to such Partner’s Fifty Percent Return as of such time (or if insufficient shares remain, then pro rata among all Partners in proportion to, and to the extent of, their Fifty Percent Return as of such time (in relation to the aggregate Fifty Percent Returns as of such time of all Partners));

 

17


second , after giving effect to Section 7.01(a)(i), to each


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