EXHIBIT 2.1
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PURCHASE AND SALE AGREEMENT
DATED AS OF FEBRUARY 23, 2005
BY AND AMONG
CM INTERMEDIARY, LLC,
BAGBRIDGE LIMITED
AND, SOLELY WITH RESPECT TO SECTION 10.14 OF THIS AGREEMENT,
CROWN MEDIA HOLDINGS, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE 1 CERTAIN DEFINITIONS................................................2
ARTICLE 2 PURCHASE PRICE AND PAYMENT........................................13
2.1 Purchase Price....................................................13
2.2 Allocation of Purchase Price......................................14
2.3 Post-Closing Purchase Price Adjustment............................14
2.4 Sales Tax.........................................................18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER..........................18
3.1 Organization and Qualification....................................18
3.2 Subsidiaries......................................................19
3.3 Authorization and Validity of Agreement...........................19
3.4 Capitalization....................................................19
3.5 Financial Statements..............................................20
3.6 No Violation; Consents and Approvals..............................20
3.7 Absence of Certain Changes or Events..............................21
3.8 Legal Proceedings.................................................22
3.9 Compliance with Applicable Laws and Permits.......................22
3.10 No Undisclosed Liabilities........................................23
3.11 Taxes.............................................................24
3.12 Employee Matters..................................................25
3.13 United Kingdom Pensions...........................................29
3.14 Contracts.........................................................30
3.15 Title to Properties...............................................31
3.16 Intellectual Property Rights......................................32
3.17 Subscribers and Suppliers of Programming..........................33
3.18 Brokers...........................................................33
3.19 Insolvency........................................................33
3.20 Machinery, Vehicles and Equipment.................................33
3.21 Debts.............................................................34
3.22 Insurance.........................................................34
3.23 Information Technology............................................34
3.24 Financial.........................................................34
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER...........................35
4.1 Organization and Qualification....................................35
4.2 Authorization and Validity of Agreement...........................35
4.3 No Violation; Consents and Approvals..............................36
4.4 Legal Proceedings.................................................36
4.5 Investment Purpose................................................36
4.6 Available Funds...................................................36
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ARTICLE 5 COVENANTS.........................................................37
5.1 Access to Information.............................................37
5.2 Information.......................................................37
5.3 Operations in the Ordinary Course of Business.....................38
5.4 Forbearance by Seller.............................................38
5.5 Notification of Claims............................................40
5.6 Regulatory Consents, Authorizations, etc..........................41
5.7 No Inconsistent Action; Financial Assistance......................42
5.8 Employee Matters..................................................42
5.9 Third Party Consents..............................................45
5.10 Distributions.....................................................46
5.11 No Additional Representations.....................................46
5.12 Updating Schedules................................................46
5.13 Financing Commitments.............................................47
5.14 Additional Agreements.............................................47
5.15 Tax Matters.......................................................52
5.16 Post-Closing Withholding Obligations..............................56
5.17 Confidentiality...................................................57
5.18 Indemnity.........................................................57
5.19 Voting; Subsidiary Interests......................................57
ARTICLE 6 CONDITIONS TO CLOSING.............................................58
6.1 Conditions of Each Party's Obligation to Close....................58
6.2 Conditions to Buyer's Obligation to Close.........................59
6.3 Conditions to Seller's Obligation to Close........................60
6.4 Undertakings......................................................60
ARTICLE 7 THE CLOSING.......................................................61
7.1 Time and Location of Closing......................................61
7.2 Actions by Seller at Closing......................................61
7.3 Resolutions.......................................................63
7.4 Actions by Buyer at Closing.......................................63
ARTICLE 8 INDEMNIFICATION...................................................63
8.1 Indemnification by Seller.........................................63
8.2 Indemnification by Buyer..........................................64
8.3 Defense of Claims.................................................64
8.4 Survival of Representations and Warranties........................65
8.5 Limitation on Rights..............................................65
8.6 Indemnity Payments................................................67
ARTICLE 9 PROTECTION OF GOODWILL............................................67
ARTICLE 10 GENERAL PROVISIONS................................................68
10.1 Further Assurances................................................68
10.2 Termination.......................................................68
10.3 Arbitration.......................................................69
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10.4 Successors and Assigns............................................70
10.5 No Waiver.........................................................70
10.6 Entire Agreement; Amendments......................................71
10.7 Notices...........................................................71
10.8 Governing Law.....................................................72
10.9 Publicity.........................................................72
10.10 Section Headings..................................................72
10.11 Severability......................................................72
10.12 No Third-Party Beneficiaries......................................73
10.13 Counterparts......................................................73
10.14 Guarantee.........................................................73
10.15 No Set-Off........................................................75
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Schedules
Seller Disclosure Schedules
Buyer Disclosure Schedules
Exhibits
Exhibit A Form of Transition Services Agreement
Exhibit B Form of NOC Agreement
Exhibit C Form of Amendment to the Amended and Restated
Program License Agreement
Exhibit D Form of Trademark License Agreement
Exhibit E Form of Assignment and Assumption Agreement
Exhibit F Form of Lease Guaranty Novation Agreement
Exhibit G Form of KSE Media Novation Agreement
Exhibit H Form of Universal Programming Novation Agreement
Exhibit I Form of Guaranty and Indemnity Agreement
Exhibit J Form of Transponder/Uplink Services Agreement
Exhibit K Form of Library Services Continuation Agreement
Exhibit L Form of Director Resignation Letters
Exhibit M Illustration of the Calculation of Net Capital
Annexes
Annex A Debt Commitment Letter
Annex B Equity Financing Commitment Letters
THIS PURCHASE AND SALE AGREEMENT is made and entered into as of
February 23, 2005 by and among CM Intermediary, LLC, a Delaware limited
liability company ("SELLER"), Bagbridge Limited (No. 5325383), a company
registered in England and Wales ("BUYER"), and, solely with respect to
Section 10.14 of this Agreement, Crown Media Holdings, Inc., a Delaware
corporation ("HOLDINGS").
WHEREAS, Seller owns all of the outstanding CMI Membership
Interests (as defined below) and owns all of the outstanding CEL Shares (as
defined below); and
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell, assign, transfer and convey to Buyer, the CMI Membership
Interests and the CEL Shares on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements contained
herein, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Capitalized terms not otherwise defined herein shall have the following
meanings when used in this Agreement:
1.1 "2002 ACT" shall be as defined in Section 6.1(c).
1.2 "ADDITIONAL CONSIDERATION" shall be as defined in Section 2.3(c).
1.3 "AFFILIATE" shall mean with respect to any Person, any other
Person that, directly or indirectly, through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such Person.
1.4 "AFFILIATION AGREEMENT" shall mean any contract, agreement or
other arrangement for or relating to programming on CMI's and/or CEL's
television channels, whether or not for a fee or other consideration.
1.5 "AGREEMENT" shall mean this Purchase and Sale Agreement as amended
and modified from time to time in accordance with Section 10.6.
1.6 "AMENDED PROGRAM LICENSE AGREEMENT" shall mean the Amended and
Restated Program License Agreement to be entered into between Hallmark
Entertainment Distribution, LLC and Buyer or Buyer's nominee substantially in
the form attached as Exhibit C.
1.7 "APSTAR-IIR AGREEMENT" shall mean the APSTAR-IIR Transponder Lease
Agreement, dated as of February 13, 1998, by and between APT Satellite
Enterprise Limited and CMI.
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1.8 "ASBESTOS" shall mean the fibrous silicate material in any form
commonly referred to as asbestos and includes without limitation asbestos fibers
and asbestos-containing materials.
1.9 "ASSET PURCHASE AGREEMENT" shall mean an agreement as of the date
hereof entered into by Crown Media Distribution, LLC, Buyer and, solely with
respect to Section 10.14 thereof, Holdings, relating to rights in respect of
certain theatrical films, made-for-television movies, specials, mini-series,
series and other television programming outside the United States.
1.10 "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the agreement to
be entered into by Seller and Buyer or Buyer's nominee substantially in the form
attached as Exhibit E.
1.11 "ASSUMED LIABILITIES" shall mean any Liability that is assigned
to Buyer, CMI and/or CEL pursuant to Section 5.8 (other than Retained
Liabilities).
1.12 "BALANCE SHEET" shall be as defined in Section 3.5.
1.13 "BALANCE SHEET DATE" shall mean December 31, 2003.
1.14 "BASE CAPITAL" shall be as defined in Section 2.3(c).
1.15 "BENEFIT PLAN" shall mean each "employee benefit plan," as
defined in Section 3(3) of ERISA (including any "multiemployer plan" as defined
in Section 3(37) of ERISA) and each profit-sharing, bonus, stock option, stock
purchase, stock ownership, pension, retirement, employment, retention, change in
control, severance, deferred compensation, excess benefit, supplemental
unemployment, post-retirement medical or life insurance, welfare or incentive
plan, or sick leave, long-term disability, medical, hospitalization, life
insurance, other insurance plan, or other employee benefit plan, program or
arrangement, whether written or unwritten, qualified or non-qualified, funded or
unfunded, maintained or contributed to by Crown Media Holdings, Inc., its
Subsidiaries, Seller, CMI, CEL or any of the Subsidiaries of CMI and CEL in
which current or former Subsidiary Employees or other persons who provide or
have provided services to CMI, CEL or any other Subsidiaries of CMI and CEL,
participate or are a party to, but excluding any Employment Agreements.
1.16 "BT" shall mean British Telecommunications plc.
1.17 "BUSINESS INTELLECTUAL PROPERTY" shall be as defined in Section
3.16.
1.18 "BUYER" shall be as defined in the preamble to this Agreement.
1.19 "BUYER CONFIDENTIAL INFORMATION" shall be as defined in Section
5.17.
1.20 "BUYER MATERIAL ADVERSE EFFECT" shall mean any event, occurrence,
fact, condition, change or effect that has a materially adverse effect on the
ability of Buyer to consummate the transactions contemplated hereby or that
would materially delay or prevent the Closing.
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1.21 "BUYER'S FLEX PLAN" shall be as defined in Section 5.8(e).
1.22 "CALCULATION STATEMENT" shall be as defined in Section 2.3(a).
1.23 "CASH CONSIDERATION" shall be as defined in Section 2.1(a).
1.24 "CASH EQUITY" shall be as defined in Section 4.6(b).
1.25 "CEL" shall mean Crown Entertainment Limited, a corporation
formed under the laws of England and Wales.
1.26 "CEL SHARES" shall mean the ordinary shares, par value
(pound)1.00, of CEL.
1.27 "CLOSING" shall be as defined in Section 7.1.
1.28 "CLOSING DATE" shall be as defined in Section 7.1.
1.29 "CLOSING STATEMENT" shall be as defined in Section 2.3(a).
1.30 "CM PLAN" shall mean any Benefit Plan that is sponsored,
maintained or contributed to by Crown Media Holdings, Inc. and/or any of its
Subsidiaries that is not a Subsidiary Plan.
1.31 "CMI" shall mean Crown Media International, LLC, a Delaware
limited liability company.
1.32 "CMI MEMBERSHIP INTERESTS" shall mean the membership interests of
CMI.
1.33 "COBRA COVERAGE" means the health continuation coverage required
by Section 601 et seq. of ERISA and Section 4980B of the Code.
1.34 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.35 "COLLECTIVE BARGAINING AGREEMENTS" shall mean all collective
bargaining agreements and other similar labor agreements covering Subsidiary
Employees.
1.36 "COMMITMENTS" shall be as defined in Section 4.6(b).
1.37 "COMPANY MATERIAL ADVERSE EFFECT" shall mean any event,
occurrence, fact, condition, change or effect that is materially adverse to the
business, results of operations or financial condition of CMI, CEL and their
Subsidiaries, taken as a whole, other than any event, occurrence, fact,
condition, change or effect arising out of or relating to (a) general economic
or political conditions or the securities markets in the U.S. or any country or
region in which any of CMI, CEL or their Subsidiaries operate, including market
fluctuations and changes in interest rates, or the internationally distributed
television network industry generally, (b) changes in laws, rules, regulations
or orders of any Governmental Entity, (c) any Retained Liability or (d) the
announcement or consummation of this Agreement (without limiting the provisions
of Section 3.6 or Section 3.12(e)) or the transactions contemplated hereby. For
the avoidance of doubt, an
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event, occurrence, fact, condition, change or effect affecting only one Group
Company may be capable of being a Company Material Adverse Effect.
1.38 "CONFIDENTIAL INFORMATION" shall mean all information relating to
business, financial or other affairs (including, without limitation, future
programming and distribution plans and targets and subscriber counts) that is
not in the public domain.
1.39 "CONFIDENTIAL MEMORANDUM" shall be as defined in Section 5.11.
1.40 "CONTRACT" shall mean any note, bond, indenture, mortgage, deed
of trust, contract, instrument or other agreement.
1.41 "CONTROL" shall mean the possession, directly or indirectly, of
the affirmative power to direct or cause the direction of the management and
policies of a Person (whether through ownership of securities, partnership
interests or other ownership interests, by contract, by membership or
involvement in the board of directors, management committee or management
structure of such Person, or otherwise) and "CONTROLLED" and "CONTROLLING" shall
be construed accordingly.
1.42 "CONTROLLED GROUP LIABILITY" shall mean any and all liabilities
(a) under Title IV of ERISA, (b) under Section 302 of ERISA, (c) under Sections
412 and 4971 of the Code or (d) arising as a result of a failure to comply with
the continuation coverage requirements of Section 601 ET SEQ. of ERISA and
Section 4980B of the Code, other than such liabilities that arise solely out of,
or relate solely to, the Subsidiary Plans.
1.43 "CONTROLLING PARTY" shall be as defined in Section 5.15(f).
1.44 "COVERED EMPLOYEES" shall be as defined in Section 5.8(e).
1.45 "CREDIT AGREEMENT" shall mean the Credit, Security, Guaranty and
Pledge Agreement, dated as of August 31, 2001, as amended, among Crown Media
Holdings, Inc., the guarantors named therein, the lenders referred to therein
and JPMorgan Chase Bank, as administrative agent and issuing bank for the
lenders.
1.46 "DATA ROOM" shall mean the online data room made available to
Seller beginning on May 28, 2004 up to and including the date hereof, as
modified and supplemented from time to time.
1.47 "DEBT AGREEMENT" shall mean the agreement to be entered into by
Buyer, ABN AMRO Bank N.V., Barclays Bank PLC, Societe Generale and others as
contemplated by the Debt Commitment Letter.
1.48 "DEBT COMMITMENT LETTER" shall be as defined in Section 4.6(a).
1.49 "DEBT FINANCING" shall be as defined in Section 4.6(a).
1.50 "DISCLOSED SCHEMES" shall be as defined in Section 3.13(a).
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1.51 "DISTRIBUTORS" shall be as defined in Section 3.17.
1.52 "EMPLOYEE SHARE SCHEMES" shall be as defined in Section 3.12(g).
1.53 "EMPLOYMENT AGREEMENT" shall mean a contract, offer letter or
agreement of Crown Media Holdings, Inc., its Subsidiaries, Seller, CMI, CEL or
any of the Subsidiaries of CMI and CEL with or addressed to any Subsidiary
Employee pursuant to which CMI, CEL or any of the Subsidiaries of CMI and CEL
has any actual or contingent liability or obligation to provide compensation
and/or benefits in consideration for past, present or future services.
1.54 "EQUITY FINANCING COMMITMENT LETTERS" shall be as defined in
Section 4.6(b).
1.55 "EQUITY INTERESTS" shall mean any capital stock, partnership
interest, membership interest, limited liability company interest or other
equity interest in any Person.
1.56 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.57 "ESTIMATED NET CAPITAL" shall be as defined in Section 2.3(g).
1.58 "FINAL CALCULATION STATEMENT" shall be as defined in Section
2.3(c).
1.59 "FINAL NET CAPITAL" shall be as defined in Section 2.3(c).
1.60 "FINANCIAL STATEMENTS" shall be as defined in Section 3.5.
1.61 "FINANCING" shall be as defined in Section 4.6(b).
1.62 "FORMER SCHEME" shall be as defined in Section 3.13(a).
1.63 "HOLDINGS" shall be as defined in the preamble to this Agreement.
1.64 "GAAP" shall mean United States generally accepted accounting
principles as in effect as of the date hereof.
1.65 "GOVERNMENTAL ENTITY" shall mean any court, arbitrator,
administrative or other governmental department, agency, commission, authority
or instrumentality, domestic (including federal, state or local) or foreign,
including, without limitation and for the avoidance of doubt, any Tax authority,
the EC Commission, the EFTA Surveillance Authority and any national competition
authority.
1.66 "GPP" shall be as defined in Section 3.13(a).
1.67 "GROUP" shall mean CEL and CMI and the Subsidiaries of CMI, and
"GROUP COMPANY" shall mean any one of them.
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1.68 "HIGH POINTE LEASE" shall mean the lease between, inter alia, CMI
and High Pointe I Development Group LLC, dated 1 June 1998 in respect of space
in the building at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇.
1.69 "HOT BIRD CONTRACT" shall mean the Contract for a Combined Uplink
and Space Segment Service, dated as of December 17, 1999, as amended on March
20, 2001, by and between BT and CMI.
1.70 "INDEBTEDNESS" shall mean the aggregate amount of indebtedness of
the Group for borrowed monies, loan notes, all outstanding balances and future
financial commitments related to all capital lease obligations held by the Group
(or similar arrangements where the Group does not receive good title to goods
until such goods have been paid for in full) other than balances and financial
commitments contemplated by Section 5.14, all accrued, due and payable employee
related costs (other than Taxes and other than to the extent accounted for in
the Post-Closing Purchase Price Adjustment pursuant to Section 2.3) relating to
Retained Employees (including, but not limited to, accrued salaries (not
including bonuses) and wages, vacation and sickness days and deferred employee
compensation), all dividends declared by any Group Company prior to Closing
which remain unpaid as at Closing and all balances owing to Seller's Affiliated
Group (other than (a) any Liability in respect of obligations reflected on the
Closing Statement under the line item "License fees payable to affiliates" to
the extent in respect of any Window that commenced on or after the Closing Date,
(b) the Retained Liabilities and (c) as contemplated by this Agreement, any
Transaction Agreement or any of the transactions contemplated hereby or thereby)
as of the Closing Date (including any accrued interest and penalties thereon and
including any break fees payable in connection with the termination of such
facilities at Closing), in each case as set forth in the Calculation Statement
and calculated in accordance with Section 2.3 and on the basis of the accounting
policies and procedures set forth in Schedule 2.3(a).
1.71 "INDEMNIFIED BUYERS" shall be as defined in Section 8.1.
1.72 "INDEMNIFIED CM PARTIES" shall be as defined in Section 8.2.
1.73 "INDEPENDENT ACCOUNTANTS" shall mean any of Deloitte & Touche
LLP, PricewaterhouseCoopers LLP, KPMG L.L.P. and Ernst & Young, L.L.P. mutually
acceptable to Buyer and Seller, PROVIDED that if Buyer and Seller do not agree
upon a mutually acceptable public accounting firm within ten days of the first
date of any dispute on which any party elects to submit such dispute to the
Independent Accountants in accordance with the terms of this Agreement, the New
York City office of the American Arbitration Association shall choose an
internationally recognized certified public accounting firm.
1.74 "INTELLECTUAL PROPERTY" shall mean all of the (a) patents, patent
applications, patent disclosures and improvements thereto, (b) trademarks,
service marks, logos, trade names, domain names and corporate names and
registrations and applications for registration thereof, (c) any and all other
intellectual property assets of any nature whatever which may now or in the
future exist in any part of the world, including, but not limited to, all marks
registered in the United States Patent and Trademark Office, (d) copyrights
(including, without limitation, all rights to distribute, reproduce and prepare
derivative works) and
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registrations and applications for registration thereof, (e) computer software,
data and documentation, (f) trade secrets, confidential business information and
know-how and (g) any copies and tangible embodiments thereof (in whatever form
or medium).
1.75 "INTERIM STATEMENTS" shall be as defined in Section 3.5.
1.76 "INVESTMENT" shall be as defined in Section 3.2.
1.77 "LICENSE FEES" shall be as defined in Section 5.14(c).
1.78 "LIABILITY" shall mean, with respect to any Person, any direct or
indirect liability, indebtedness, obligation, commitment, expense, claim, or
guaranty of such Person of any kind, whether accrued or unaccrued, and whether
or not the same is required by GAAP to be accrued on the financial statements of
such Person.
1.79 "LIBRARY SERVICES CONTINUATION AGREEMENT" shall mean the
agreement to be entered into by Hallmark Distribution, LLC and Buyer or Buyer's
nominee substantially in the form attached as Exhibit K.
1.80 "LIEN" shall mean any lien, encumbrance, pledge, mortgage, charge
(fixed or floating) under English law, hypothecation, right of set off, right of
pre-emption, assignment by way of security, reservation of title or any other
security interest, howsoever created or arising, claim under bailment or storage
contract.
1.81 "LIFE ASSURANCE PLAN" shall be as defined in Section 3.13(a).
1.82 "LOSSES" shall be as defined in Section 8.1.
1.83 "MATERIAL CONTRACTS" shall be as defined in Section 3.14(a).
1.84 "MULTIEMPLOYER PLAN" means any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA that is subject to ERISA.
1.85 "MULTIPLE EMPLOYER PLAN" shall mean a pension plan subject to
ERISA that has two or more contributing sponsors at least two of whom are not
under common control, within the meaning of Section 4063 of ERISA.
1.86 "NET CAPITAL" shall be as defined in Section 2.3(d).
1.87 "NOC AGREEMENT" shall mean the agreement to be entered into by
Crown Media United States, LLC and Buyer or Buyer's nominee substantially in the
form attached as Exhibit B.
1.88 "NON-RETAINED EMPLOYEES" shall be as defined in Section 5.8(a).
1.89 "NOTICE OF DISAGREEMENT" shall be as defined in Section 2.3(b).
1.90 "NOVATION AGREEMENTS" shall be as defined in Section 5.14(a).
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1.91 "OUTSIDE DATE" shall be as defined in Section 6.4.
1.92 "OVERRIDING INTERESTS" shall mean such matters as are overriding
interests for the purposes of the UK Land Registration ▇▇▇ ▇▇▇▇.
1.93 "PAS-9 AGREEMENT" shall mean the Full-Time Transponder Lease
Agreement (Pre-Launch), dated as of April 7, 2000, by and between PanAmSat
International Systems, Inc. and CMI.
1.94 "PERFORMING RIGHTS SOCIETY" shall be as defined in Section
3.9(c).
1.95 "PERMIT" shall mean a material permit, license, consent,
approval, certificate, qualification, registration or other authorization or a
filing of a notification report or assessment necessary in any jurisdiction for
the operation of each Group Company's business, its ownership, possession,
occupation or use of its assets, each as currently conducted.
1.96 "PERMITTED LIENS" shall mean (a) Liens for taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for taxes
the validity of which are being contested in good faith; (b) Liens of carriers,
warehousemen, mechanics, materialmen and other similar persons and other Liens
imposed by applicable law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith exerciseable against Seller;
and (c) Liens securing executory obligations under any lease that constitutes an
"operating lease" under generally accepted accounting principles.
1.97 "PERSON" shall mean an individual, partnership, corporation,
business trust, limited liability company, limited liability partnership, joint
stock company, trust, unincorporated association, joint venture or other entity
or a Governmental Entity.
1.98 "POLICIES" shall be as defined in Section 3.22.
1.99 "POST-CLOSING PERIOD" shall mean any taxable period beginning
after the Closing Date.
1.100 "PRE-CLOSING PERIOD" shall mean any taxable period ending on or
before the Closing Date.
1.101 "PROGRAM LICENSE AGREEMENT" shall mean the Amended and Restated
Program License Agreement, dated as of January 1, 2001, by and between Hallmark
Distribution LLC and CMI.
1.102 "PROGRAMMING AGREEMENTS" shall mean any contract, agreement or
other arrangement pursuant to which CMI or CEL acquires license rights to
programming outside the United States.
1.103 "PROPERTIES" means the leasehold properties listed in Schedule
3.15(b), and "PROPERTY" shall mean any one of them.
1.104 "PURCHASE PRICE" shall be as defined in Section 2.1.
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1.105 "PURCHASED INTERESTS" shall mean all the outstanding CMI
Membership Interests and CEL Shares.
1.106 "RECEIVING PARTY" shall be as defined in Section 5.17.
1.107 "REDUCTION AMOUNT" shall be as defined in Section 2.1(e).
1.108 "RELATED PARTY" shall be as defined in Section 5.17.
1.109 "REFUND" shall be as defined in Section 2.3(c).
1.110 "REGULATION" shall be as defined in Section 5.6.
1.111 "RELEVANT BENEFITS" shall be as defined in Section 3.13(a).
1.112 "RETAINED ASSETS" shall mean those assets (a) set forth on
Schedule 1.112 and (b) reflected on the Closing Statement under the line item
"Receivable from Hallmark affiliate."
1.113 "RETAINED EMPLOYEES" shall be as defined in Section 5.8(a).
1.114 "RETAINED LIABILITIES" shall mean (a) any Liability that is
assigned to Seller pursuant to Section 5.8, (b) any Liability set forth on
Schedule 1.114, (c) any Liability arising out of or in connection with the
claims described in the section heading "Pending Negotiations and/or Disputes"
in Schedule 3.9(c), (d) any Liability in respect of obligations reflected on the
Closing Statement under the line item "License fees payable to affiliates"
solely to the extent in respect of any Window under the Amended Program License
Agreement that commenced on or before the Closing Date (assuming that the
Amended Program License Agreement had been effective prior to the Closing Date);
PROVIDED, that such Liabilities shall not be in excess of or otherwise different
than those that would have been payable under the Program License Agreement had
the Program License Agreement continued in effect in accordance with its current
terms in effect as of the date hereof), (e) any Liability in respect of
obligations reflected on the Closing Statement under the line item "Payable to
Hallmark affiliates" and (f) any Liability in respect of obligations reflected
on the Closing Statement under the line item "Note payable to third party";
PROVIDED that in no event shall Retained Liabilities include any Liability for
or relating to Taxes or any Liabilities included in the Post-Closing Purchase
Price Adjustment calculated in accordance with Section 2.3.
1.115 "REVISED CALCULATION STATEMENT" shall be as defined in Section
2.3(b).
1.116 "RIGHTS" shall be as defined in Section 3.4(b).
1.117 "SECTION 5.4 FAILURE" shall be as defined in Section 5.4.
1.118 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
1.119 "SELLER" shall be as defined in the preamble to this Agreement.
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1.120 "SELLER CONFIDENTIAL INFORMATION" shall be as defined in Section
5.17.
1.121 "SELLER DISCLOSURE SCHEDULE" shall mean the schedules of Seller
attached hereto.
1.122 "SELLER SAVINGS PLAN" shall be as defined in Section 3.12(c).
1.123 "SELLER'S AFFILIATED GROUP" shall mean Seller's Group together
with Hallmark Cards, Inc. and its Affiliates (other than CMI, CEL or any of
their Subsidiaries).
1.124 "SELLER'S FLEX PLAN" shall be as defined in Section 5.8(e).
1.125 "SELLER'S GROUP" shall mean Seller and its Subsidiaries together
with Crown Media Holdings, Inc. and its Subsidiaries (other than CMI, CEL or any
of their Subsidiaries).
1.126 "SELLER'S INDEMNIFICATION CLAIM" shall be as defined in Section
8.1.
1.127 "SELLER'S KNOWLEDGE" shall mean the actual knowledge of ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇ and the knowledge that any of these individuals would
have had if they had made reasonable inquiry in connection with the (a) normal
performance of their respective duties and (b) sale of the Purchased Interests.
1.128 "SERVICE PROVIDER AGREEMENT" shall mean any Employment Agreement
and any other Contract pursuant to which any individual who is not an employee
of an Affiliate of CEL or CMI or their Subsidiaries directly or indirectly
provides services to any Group Company (other than any such individual who, in
addition to providing services to any Group Company, provides services to at
least one other Person that is not affiliated with the Group Companies).
1.129 "SEVERANCE BENEFITS" shall mean any and all Liabilities in
respect of severance, redundancy and similar pay and benefits, salary
continuation and any other liabilities, costs, claims, demands, expenses and
obligations relating to the termination or alleged termination of employment,
whether arising under an Employment Agreement, Collective Bargaining Agreement,
a Benefit Plan, applicable law or otherwise.
1.130 SOFTWARE ARRANGEMENTS" shall mean those arrangements set forth
on Schedule 1.130.
1.131 "STATEMENT OF OPERATIONS" shall be as defined in Section 3.5.
1.132 "STRADDLE PERIOD" shall mean any taxable period beginning on or
before and ending after the Closing Date.
1.133 "SUBSIDIARY" of any Person means any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the
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Board of Directors or other Persons performing similar functions are at the time
directly or indirectly owned or Controlled by such Person or one or more
Subsidiaries of such Person.
1.134 "SUBSIDIARY EMPLOYEE" shall mean any individual employed by CMI,
CEL or any of their respective Subsidiaries as of the time in question, whether
actively at work or on approved leave of absence.
1.135 "SUBSIDIARY SERVICE PROVIDER" shall be as defined in Section
3.12(f).
1.136 "SUBSIDIARY PLAN" shall mean any Benefit Plan that is sponsored
solely by CMI, CEL and/or their respective Subsidiaries or is maintained solely
for the benefit of Subsidiary Employees.
1.137 "SUBSTANTIAL DISTRIBUTORS" shall mean parties to Affiliation
Agreements providing for payments in excess of $100,000 annually.
1.138 "SUBSTANTIAL PROGRAM SUPPLIERS" shall mean parties to
Programming Agreements involving license fees in excess of $250,000 annually.
1.139 "SYSTEMS" shall mean all computer hardware (including peripheral
devices), printers, photocopiers, scanners, telecommunication equipment,
microprocessors or software and computer networks (other than public networks).
1.140 "TAX CONTEST" shall be as defined in Section 5.15(f).
1.141 "TAX RETURN" and "TAX RETURNS" shall be as defined in Section
3.11(c).
1.142 "TAX" and "TAXES" shall be as defined in Section 3.11(c).
1.143 "TERRITORY" shall be as defined in Section 9.1(a).
1.144 "TITLE COMPANY" shall be as defined in Section 7.2(p).
1.145 "TRADEMARK LICENSE AGREEMENT" shall mean the agreement to be
entered into by Hallmark Cards, Inc. and Buyer or Buyer's nominee substantially
in the form attached as Exhibit D.
1.146 "TRANSACTION AGREEMENTS" shall mean the Asset Purchase
Agreement, the NOC Agreement, the Transition Services Agreement, the Trademark
License Agreement, the Amended Program License Agreement, the Transponder/Uplink
Agreement and the Library Services Continuation Agreement.
1.147 "TRANSFER REGULATIONS" shall mean the Transfer of Undertakings
(Protection of Employment) Regulations 1981 enacted in the United Kingdom.
1.148 "TRANSFERRED ACCOUNT BALANCES" shall be as defined in Section
5.8(e).
1.149 "TRANSITION SERVICES AGREEMENT" shall mean the agreement to be
entered into by Seller and Buyer or Buyer's nominee substantially in the form
attached as Exhibit A.
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1.150 "TRANSPONDER/UPLINK AGREEMENT" shall mean the agreement to be
entered into by Seller and Buyer or Buyer's nominee substantially in the form
attached as Exhibit J.
1.151 "TREASURY REGULATIONS" shall mean the U.S. Treasury Department
regulations promulgated under the Code.
1.152 "WELFARE BENEFITS" shall mean employee benefits of the type
described in Section 3(1) of ERISA (whether or not covered by ERISA), other than
Severance Benefits.
1.153 "WINDOW" shall be as defined in the Amended Program License
Agreement.
1.154 References to any United States or English legislation or legal
term for any action, remedy, method of judicial proceeding, legal document,
legal status, court, official or any legal concept or thing shall in respect of
any jurisdiction other than the United States or England (as the case may be) be
deemed to include what most nearly approximates in that jurisdiction to the
United States or English legislation or term (as the case may be). All laws,
statutes, ordinances, rules, regulations and orders referred to herein shall be
deemed to refer to provisions under the laws of the United States unless
expressly stated otherwise.
ARTICLE 2
PURCHASE PRICE AND PAYMENT
2.1 PURCHASE PRICE. Upon the terms and subject to conditions set forth
in this Agreement, at Closing Seller shall sell, assign, grant, convey and
deliver to Buyer or Buyer's nominee, and Buyer or Buyer's nominee shall acquire,
or procure the acquisition by such nominee of, from Seller with effect from
Closing and free and clear from any Lien, together with all accrued benefits and
rights attached thereto, all of its right, title and interest in and to the
Purchased Interests. The full and complete consideration for the Purchased
Interests shall be as follows (which amount shall be subject to adjustment as
set forth in this Article 2) (the "PURCHASE PRICE"):
(a) At Closing, Buyer shall pay or procure the payment to Seller of
$62 (Sixty-Two) million (the "CASH CONSIDERATION") (subject to adjustment
pursuant to Section 2.1(e)) in United States dollars by wire transfer of
immediately available funds to such account of Seller as Seller shall direct for
the purchase of the CMI Membership Interests and the CEL Shares.
(b) At Closing, Buyer shall assume the Assumed Liabilities pursuant to
the Assignment and Assumption Agreement.
(c) Seller waives or agrees to procure the waiver of any rights or
restrictions conferred upon it or any other person which may exist in relation
to the Purchased Interests under the bylaws, articles of association or similar
organizational documents of CEL and CMI.
(d) Buyer shall not be obliged to complete the purchase of, and Seller
shall not be obliged to complete the
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sale of, any of the Purchased Interests unless Seller completes the sale of, and
Buyer completes the purchase of, all of the Purchased Interests simultaneously
in accordance with the terms and subject to the conditions of this Agreement.
(e) In the event that the Estimated Net Capital is less than the Base
Capital, the Cash Consideration payable pursuant to Section 2.1(a) shall be
reduced by the amount (the "REDUCTION AMOUNT") by which the Estimated Net
Capital is less than the Base Capital.
2.2 ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree to allocate
the total consideration in accordance with Schedule 2.2. Buyer and Seller's
Group shall (except as may be required by a "determination" within the meaning
of Section 1313(a) of the Code or any similar state, local or foreign Tax law)
(i) report the allocation of the total consideration among the assets of CMI and
CEL (including the assets of the Subsidiaries of CMI) in accordance with
Schedule 2.2 and (ii) act in accordance with Schedule 2.2 (x) in the preparation
and filing of all Tax Returns (including filing Form 8594 with their respective
federal income Tax Returns for the taxable year that includes the Closing Date
and any other forms or statements required by the Code, Treasury Regulations,
the Internal Revenue Service or any applicable state, local or foreign Tax
authority) and (y) in the course of any Tax proceeding. Buyer and Seller shall
promptly inform one another of any challenge by any Governmental Entity to
Schedule 2.2 and agree to consult and keep one another informed with respect to
the status of, and any discussion, proposal or submission with respect to, such
challenge.
2.3 POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(a) CLOSING STATEMENT. As promptly as practicable, but in no event
later than 45 days after the Closing Date, Seller shall cause to be prepared and
delivered to Buyer: (i) a combined statement with respect to the Indebtedness
and asset and liability accounts of CMI and CEL and their respective
Subsidiaries as of the Closing Date (the "CLOSING STATEMENT") in the format set
forth in Part I of Schedule 2.3(a), certified by Seller's independent certified
public accountants in the form of a review report, to have been prepared on the
basis of the accounting policies and procedures set forth in Part II of Schedule
2.3(a), and (ii) a statement setting forth the calculation of Indebtedness and
Net Capital based on the Closing Statement (together with the Closing Statement,
the "CALCULATION STATEMENT").
(b) DISPUTES. If Buyer in good faith disagrees with the Calculation
Statement, then Buyer shall notify Seller in writing (the "NOTICE OF
DISAGREEMENT") of such disagreement within 30 days after delivery of the
Calculation Statement to Buyer. During such 30-day period, Buyer and its
representatives shall be permitted to review during normal business hours the
working papers of Seller, but not the working papers of Seller's accountants,
relating to the Calculation Statement. The Notice of Disagreement shall set
forth in reasonable detail the basis for the disagreement and specify the
adjustments which, in its opinion, should be made to the Calculation Statement
in order to comply with the requirements of this Agreement. Thereafter, Buyer
and Seller shall attempt in good faith to reconcile their differences, and any
resolution by them as to any disputed items shall be final, binding and
conclusive on the parties and shall be evidenced by a writing signed by Buyer
and Seller, including a revised Calculation Statement reflecting such resolution
(a "REVISED CALCULATION STATEMENT"). If Buyer and Seller are unable to resolve
the disagreement within 20 days after delivery of the Notice of Disagreement,
then Buyer and Seller shall instruct the Independent Accountants to resolve the
disputed items and make a
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determination with respect thereto, which determination shall be provided to
Buyer and Seller by the Independent Accountants in a written notice, within 30
days after selection of the Independent Accountants. Buyer and Seller shall
instruct the Independent Accountants to include a Revised Calculation Statement
in such written notice provided by the Independent Accountants. The Independent
Accountants shall, for purposes of English law, act as experts and not as
arbitrators (as such terms are understood in English law) in making their
determination, and such determination shall be final, binding and conclusive
upon the parties hereto. The scope of such Independent Accountants' engagement
(which shall not be an audit) shall be limited to the resolution of the items
contained in the Notice of Disagreement and the recalculation, if any, of items
in the Calculation Statement in light of such resolution. The following
provisions shall apply to the Independent Accountants' determination: (i) Buyer
and/or Buyer's accountants and Seller and/or Seller's accountants shall each
promptly (and in any event within such time frame as reasonably enables the
Independent Accountants to make their decision in accordance with the time frame
set forth in this Section 2.3(b)) prepare and deliver to the Independent
Accountants a written statement on the matters in dispute (together with the
relevant documents); (ii) in giving their determination, the Independent
Accountants shall state what adjustments (if any) are necessary to the draft
Calculation Statement in respect of the matters in dispute in order to comply
with the requirements of this Agreement and shall give their reasons therefor;
(iii) each of Buyer and Seller shall bear the costs and expenses of all counsel
and other advisers, witnesses and employees retained by it, and the fees, costs
and expenses of the Independent Accountants, if any, selected in accordance with
this Section 2.3(b) will be shared equally by Buyer, on the one hand, and
Seller, on the other hand.
(c) ADJUSTMENT. The Calculation Statement, or, if one has been adopted
pursuant to Section 2.3(b), the Revised Calculation Statement, shall be deemed
to be final, binding and conclusive on Buyer and Seller (the "FINAL CALCULATION
STATEMENT") upon the earliest of (i) the failure of Buyer to deliver to Seller
the Notice of Disagreement within 30 days of Seller's delivery of the
Calculation Statement to Buyer; (ii) the resolution of all disputes by Buyer and
Seller, as evidenced by a Revised Calculation Statement and (iii) the resolution
of all disputes by the Independent Accountants, as evidenced by the Revised
Calculation Statement. As used herein, (x) "ADDITIONAL CONSIDERATION" shall
mean:
(I) the sum of (A) the amount by which the Net Capital set forth on
the Final Calculation Statement (the "FINAL NET CAPITAL") exceeds
$31.5 million (Thirty-One Million Five Hundred Thousand) (the "BASE
CAPITAL") plus (B) the Reduction Amount, if any; PROVIDED, that in no
event shall such Additional Consideration calculated pursuant to this
clause (I) less the Reduction Amount, if any, exceed $1,575,000 (One
Million Five Hundred Seventy-Five Thousand); or
(II) in the event that the Final Net Capital is less than the Base
Capital, and the Reduction Amount, if any, is greater than the amount
equal to the amount by which the Final Net Capital is less than the
Base Capital, the amount by which the Reduction Amount exceeds the
amount by which the Final Net Capital is less than the Base Capital;
and (y) "REFUND" shall mean:
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(I) the positive amount equal to the difference of (A) the amount by
which the Final Net Capital is less than the Base Capital minus (B)
the Reduction Amount, if any; or (II) in the event that the Reduction
Amount is greater than the amount equal to the amount by which the
Final Net Capital is less than the Base Capital, zero.
Within five days after the Final Calculation Statement is deemed final, binding
and conclusive, an adjustment to the Purchase Price shall be made as follows:
(i) Buyer shall pay or procure the payment to Seller of, the
Additional Consideration (if any) by wire transfer in immediately
available funds to a U.S. based account specified by Seller. The
beneficial owner for U.S. tax purposes of such U.S. based account
shall be a U.S. person (as defined under Section 7701(a)(30) of the
Code) and such U.S. person shall provide a properly and accurately
completed Internal Revenue Service Form W-9 "Request for Taxpayer
Identification Number and Certification."
(ii) Seller shall pay to Buyer or Buyer's nominee the Refund (if
any) by wire transfer in immediately available funds to an account
specified by Buyer.
(iii) In the event that outstanding Indebtedness is set forth on
the Final Calculation Statement, then Seller shall pay to Buyer or
Buyer's nominee such amount by wire transfer in immediately available
funds to an account specified by Buyer.
Any adjustments to the Purchase Price made pursuant to this Section
2.3(c) shall bear interest from the Closing Date through the date of payment at
the rate 1% above the rate of interest publicly announced by Citibank, N.A., in
New York, New York, from time to time as its prime rate. Any adjustments to the
Purchase Price made pursuant to this Section 2.3(c) shall be paid by wire
transfer of immediately available funds to the account or accounts of Seller
specified by Seller, if Seller is owed payment, or to the account or accounts
specified by Buyer, if Buyer is owed payment, within five (5) business days of
such determination. If any amounts are payable under this Section 2.3(c), Buyer
and Seller shall agree to such consequential adjustments as are reasonably
required to any amounts allocated in accordance with Section 2.2(c).
(d) As used herein, "Net Capital" shall mean (a + b) - (c + d) where:
a = the sum of the following current assets: accounts receivable (less
allowance for doubtful accounts), program license fees--non-affiliates
(net of accumulated amortization), subtitling and dubbing (net of
accumulated amortization), and prepaid expenses and other assets;
b = the sum of the following non-current assets: program license
fees--non-affiliates (net of accumulated amortization) and subtitling and
dubbing;
c = the sum of the following current liabilities (as adjusted in
accordance with Part II of Schedule 2.3(a) and other than to the extent
referred to in Indebtedness): accounts payable
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and accrued liabilities, license fees payable to non-affiliates, and
deferred revenue, in each case, as shown on the Closing Statement; and
d = the sum of the following Taxes: any VAT (as reduced by any
available credit for input tax incurred), wage, payroll, sales or
similar non-income Taxes incurred in the ordinary course within the four
months prior to the Closing Date that are due and payable as of the
Closing Date and that have not been paid on or before the Closing Date,
PROVIDED, HOWEVER, that:
(I) save to the extent set out in (d) above, all Tax assets and
liabilities and all provisions, accruals and reserves for or with
respect thereto (in each case whether current or deferred, contingent or
otherwise),
(II) all Indebtedness, Retained Assets and Retained Liabilities, and
(III) Liabilities for leases assumed by Seller pursuant to Sections
5.14(d), (e) and (f),
shall in each case be excluded from the calculation of Net Capital.
For clarification purposes only, attached as Exhibit M is a
calculation of the Net Capital based upon the unaudited combined balance sheet
of CMI and CEL and their respective Subsidiaries as of September 30, 2004.
(e) Subject to any rule of law or regulatory body or any provision of
any contract or arrangement entered into prior to the date of this Agreement to
the contrary, Seller shall procure that each member of Seller's Group shall, and
Buyer shall procure that the Group shall, as promptly as reasonably practicable,
provide each other, the Independent Accountants, Buyer's accountants and
Seller's accountants with all information (in their respective possession or
control) relating to operations of Seller's Group and/or the Group, as the case
may be, including reasonable access during normal business hours to Seller's
Group and Group employees, books, records and such other relevant information
and all cooperation and assistance as may be reasonably required, to (i) enable
Seller's production of the Calculation Statement and (ii) enable the Independent
Accountants to satisfy their obligations as contemplated hereby, if necessary.
(f) If Buyer objects to only one of either of the Net Capital or
Indebtedness in the Calculation Statement, then the element in respect of which
Buyer has no objection shall be deemed to have been agreed in accordance with
Section 2.3(c), and Buyer and Seller shall comply with Section 2.3(c) in respect
of that element.
(g) ESTIMATED NET CAPITAL. Seller shall prepare in good faith an
estimate of the Net Capital of CMI and CEL and their respective Subsidiaries
(the "ESTIMATED NET CAPITAL") as of the Closing, and shall deliver a statement
of the Estimated Net Capital to Buyer no later than 10 business days prior to
the Closing.
2.4 SALES TAX. Buyer shall be liable for, and timely pay, 75% of, and
Seller shall be liable for, and timely pay, 25% of, any sales, transfer, stamp,
stock transfer, use, real
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property, goods and services and similar Taxes (other than any value-added Tax
in the United Kingdom, which shall be borne solely by Buyer) which are payable
in connection with the purchase of the Purchased Interests by Buyer pursuant to
this Agreement. Buyer shall prepare the Tax Returns in connection therewith.
Seller shall cooperate with Buyer in the determination of such Taxes and the
preparation of such Tax Returns as reasonably requested by Buyer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in the Seller Disclosure Schedule, Seller hereby
represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND QUALIFICATION. (a) Seller, CMI and CEL and each
of their Subsidiaries (i) is a corporation or limited liability company, as
applicable, duly organized, validly existing and is in good standing under the
laws of the jurisdiction of its incorporation or organization and (ii) has all
requisite corporate or limited liability company, as applicable, power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Seller, CMI and CEL and each of their Subsidiaries
is duly qualified or licensed to do business and in good standing in each
jurisdiction in which the ownership or lease of its properties or the conduct of
its business makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified (individually or in the
aggregate) would not reasonably be expected to have a Company Material Adverse
Effect.
(b) Seller has provided Buyer with access in the Data Room to true and
complete copies of the organizational documents (including, without limitation,
the bylaws or operating agreement, as applicable) of CMI and CEL and each of
their Subsidiaries, as amended through and in effect on the date hereof.
(c) Seller has made available to Buyer the corporate minute books
containing the records of meetings of the membership interest holders or
stockholders and managing board, board of directors or similar governing body,
the membership interest or stock certificate books and the interest and stock
record books of CMI and CEL, as the case may be. The interest and stock record
books of CMI and CEL, as the case may be, made available to Buyer are complete
and correct in all material respects and accurately reflect the ownership of all
of the outstanding interests or shares, as the case may be, of such companies.
All corporate actions taken by CMI or CEL since their respective organization
and incorporation have been duly authorized or subsequently ratified as
necessary, except where the failure to do so would not have a material impact on
that Group Company.
3.2 SUBSIDIARIES. Schedule 3.2(a) sets forth a complete list of the
Subsidiaries of CMI and CEL. Seller owns, free and clear of any Lien, one
hundred percent (100%) of the outstanding Equity Interests of CMI and CEL (and,
in the case of CEL, is the legal and beneficial owner (as such terms are
understood under English law) of such Equity Interests) and there are no Rights
issued or outstanding (or any agreements to issue any such Right) with respect
to such Equity Interests. CMI owns, free and clear of any Lien, one hundred
percent (100%) of the outstanding Equity Interests of its Subsidiaries, and
there are no Rights issued or outstanding (or
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any agreements to issue any such Right) with respect to such Equity Interests.
All of the Equity Interests of CMI, CEL and each Subsidiary of CMI are validly
issued, fully paid and nonassessable. Other than their investments in their
Subsidiaries, none of CMI, CEL or their Subsidiaries owns any Equity Interest in
any other Person or have any Rights to acquire any such Equity Interest (such
Equity Interests or Rights to acquire any such Equity Interests, an
"INVESTMENT") or takes part in the management of any other corporation or
business organization outside of the Group. None of CMI or CEL or any of their
Subsidiaries is a party to any joint venture, partnership or similar
arrangements.
3.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. Seller has all requisite
power and authority to execute and deliver this Agreement and to carry out and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Seller of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly and validly authorized by all necessary action of Seller and no other
action on the part of Seller is necessary for the authorization, execution,
delivery or performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and, assuming the due authorization, execution and delivery
by Buyer constitutes the valid and binding obligation of Seller enforceable
against Seller in accordance with its terms (except insofar as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies).
3.4 CAPITALIZATION. (a) As of the date hereof, Seller is the record
and beneficial owner of all of the authorized and outstanding CMI Membership
Interests and CEL Shares. CMI has no outstanding membership interests other than
the CMI Membership Interests and CEL has not allotted any shares other than the
CEL Shares. All of the outstanding CMI Membership Interests and CEL Shares have
been duly authorized, validly issued and fully paid, and none of the CMI
Membership Interests and CEL Shares were issued in violation of any preemptive
rights or any Lien in favor of any other Person. The sale of the CMI Membership
Interests and the CEL Shares will not be subject to any rights of first offer,
first refusal, tagalong rights or other similar rights or restrictions and,
assuming the accuracy of Section 4.5, the acquisition of the CMI Membership
Interests and the CEL Shares by Buyer will be exempt from registration under the
Securities Act or state securities laws. None of the CMI Membership Interests
and the CEL Shares have been issued in violation of the Securities Act or state
securities laws. There are no voting trusts, voting agreements, proxies or other
agreements with respect to any of the CMI Membership Interests and CEL Shares.
(b) There are not as of the date hereof any authorized, issued or
outstanding (i) securities convertible into, or exercisable or exchangeable for,
or evidencing the right to subscribe for, any Equity Interest of CMI or CEL or
any of their Subsidiaries; (ii) phantom shares, phantom equity interests, stock
or equity appreciation rights (full or limited) or profit participation rights
or interests with respect to CMI or CEL or any of their Subsidiaries; or (iii)
subscriptions, purchase rights, options, warrants or any other agreements or
undertakings of any character (the securities, instruments or agreements
referred to in clauses (i), (ii) and (iii) are hereinafter referred to
collectively as "RIGHTS") to or by which Seller, CMI or CEL or any of their
Subsidiaries is a party or is bound which, directly or indirectly, obligate
Seller, CMI or CEL
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or any of their Subsidiaries to issue, deliver or sell or cause to be issued,
delivered or sold any Equity Interest (or any Rights to acquire any such Equity
Interest) with respect thereto of CMI or CEL or any of their Subsidiaries or
obligating CMI or CEL or any of their Subsidiaries to grant, extend or enter
into any of the foregoing. None of Seller, CMI or CEL or any of their
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase, redeem or otherwise acquire or retire any Equity Interest (or Rights
to acquire any such Equity Interest) of CMI or CEL or any of their Subsidiaries,
or to make any investment (in the form of a loan, capital contribution or
otherwise) in any Person.
3.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.5 are (a) the
audited combined balance sheet of CMI and CEL and their respective Subsidiaries
as of the Balance Sheet Date (the "BALANCE SHEET") and the audited related
combined statement of operations and cash flows for the fiscal year ended on the
Balance Sheet Date (the "STATEMENT OF OPERATIONS") and (b) the unaudited
combined balance sheet of CMI and CEL and their respective Subsidiaries as of
September 30, 2004 and the related combined statement of operations for the
nine-month period ended on September 30, 2004 (such unaudited combined balance
sheet and related statement of operations, collectively with the Balance Sheet
and the Statement of Operations, the "FINANCIAL STATEMENTS"). The Financial
Statements and related notes have been prepared in accordance with the
standards, principles and practices specified on the face of the Financial
Statements and fairly present in all material respects the financial condition
and results of operations, cash flows and assets and liabilities as at December
31, 2003 and the financial condition and results of operations, assets and
liabilities as at September 30, 2004 of CMI and CEL, in accordance with GAAP,
consistently applied throughout the periods involved, except as disclosed in the
related notes thereto, and subject, in the case of interim Financial Statements,
to normal recurring year-end adjustments and the absence of notes. Attached
hereto as Schedule 3.5A are the unaudited combined balance sheet of CMI and CEL
and their respective Subsidiaries as of November 30, 2004 and the related
combined statement of operations for the eleven-month period ended on November
30, 2004 (such unaudited combined balance sheet and related statement of
operations, the "INTERIM STATEMENTS"). The Interim Statements have been prepared
in good faith and reflect, in all material respects, the financial condition and
results of operations of CMI and CEL, subject to normal recurring monthly and
year-end adjustments and the absence of notes. The accounting reference date of
CEL, CMI and each of their Subsidiaries is, and during the last three years has
always been, December 31.
3.6 NO VIOLATION; CONSENTS AND APPROVALS. Neither the execution and
delivery of this Agreement by Seller, nor the consummation of the transactions
contemplated hereby, do or would after the giving of notice or the lapse of time
or both, (a) violate, conflict with, result in a breach of, or constitute a
default under, the certificate of incorporation, certificate of formation,
bylaws, limited liability corporation agreement or other similar governing
documents of Seller, CMI or CEL; (b) violate or conflict with U.S. federal,
state or local law or violate or conflict in any material respect with any
foreign law, statute, regulation or court or administrative order or process;
(c) result in the creation of, or give any party the right to create, any Lien
upon the CMI Membership Interests or the CEL Shares or any material assets of
CMI or CEL; (d) violate or conflict with in any material respect, or result in
the loss of any material right with respect to or result in a material breach
of, or constitute a material default under, or terminate or give any party the
right to terminate, amend, abandon or refuse to perform any Material Contract to
which CMI or CEL is subject or bound; (e) modify in any material
-20-
respect or accelerate, or give any party thereto the right to modify in any
material respect or accelerate, the time within which, or the terms under which,
any party is to perform any duties or obligations or receive any rights or
benefits under any agreement or contract affecting the CMI Membership Interest
or the CEL Shares; (f) result in any Group Company losing the benefit of a
Permit held or enjoyed by Seller or that Group Company as of the date of this
Agreement in any applicable jurisdiction or (g) result in the loss of the
benefit of any asset of CMI or CEL, except for such loss as would not reasonably
be expected to be material to the business of the Group as currently conducted.
All consents, approvals, authorizations and other requirements prescribed by
law, rule or regulation that are necessary for the execution and delivery by
Seller of this Agreement or the consummation by Seller of the transactions
contemplated by this Agreement have been obtained and satisfied, other than as
required under the antitrust, trade regulation or competition laws of any
jurisdiction or as would not reasonably be expected to have a material adverse
effect on the ability of Seller to consummate the transactions contemplated
hereby.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated by
this Agreement, including the impact of the transfer or other exclusion of the
Retained Assets and Retained Liabilities, or set forth in the Financial
Statements or the Interim Financial Statements, since the Balance Sheet Date,
the Group has conducted its business in all material respects in the ordinary
course consistent with past practice (taking into account the proposed sale of
the Group) and there has been no material reduction in the value of those fixed
assets (other than diminution in value in the ordinary course) specified in the
Financial Statements and no material adverse change in the assets, financial
condition or results of operations of the Group, no Substantial Program
Suppliers or Substantial Distributors have ceased or substantially reduced their
trade with any Group Company or have materially and adversely altered the terms
of trade to any Group Company or, to Seller's Knowledge, given notice of any
intention to do the same, and none of CMI, CEL or any of their Subsidiaries have
(a) issued any Equity Interests; (b) declared or made any payment or
distribution to stockholders in respect of the capital stock or membership
interests of such stockholders (other than cash dividends or distributions) or
repaid, purchased or redeemed any of its capital stock (or agreed to do any of
the same); (c) taking into account the proposed sale of the Group, sold,
assigned, leased, mortgaged, pledged, subjected to any Lien or otherwise
conveyed or transferred (or agreed to do any of the same) any asset, or
cancelled any debt or claim owed to CMI, CEL or any of their Subsidiaries, in
each case other than in the ordinary course of business; (d) taking into account
the proposed sale of the Group, assumed, guaranteed or incurred, or agreed to
assume, guarantee or incur, a liability, obligation or expense (actual or
contingent) other than in the ordinary course of business; (e) acquired, or
agreed to acquire, from an Affiliate an asset on other than on arm's-length
terms; (f) made or incurred, or agreed to make or incur, capital expenditures,
or a commitment or connected commitments involving capital expenditures, in
relation to the Denver, Colorado Network Operating Center in excess of $1
million or otherwise in excess of $300,000; (g) waived any right of material
value; (h) made any material change in officer or director compensation except
in the ordinary course of business and consistent with past practice; (i)
entered into, assumed, renewed or modified in any material respect any
employment, consulting, severance or termination agreement with any officer or
director of CMI, CEL or any of their Subsidiaries (other than agreements entered
into in the ordinary course of business) or (j) changed any financial accounting
methods, principles or practices by CMI or CEL, except insofar as may have been
required by a change in GAAP.
-21-
3.8 LEGAL PROCEEDINGS. There are no, nor have there been during the 18
months ending on the date of this Agreement, any suits, actions, claims or
litigation, or legal, administrative, arbitration, mediation or other
proceedings, or investigations or inquiries of any Governmental Entity (other
than in respect of Taxes) pending or, to Seller's Knowledge, threatened against
Seller (with respect to assets or operations of the Group) or any Group Company,
except for such suits, actions, claims or litigation, or legal, administrative,
arbitration, mediation or other proceedings as would not, individually or, in
the case of related claims, in the aggregate, reasonably be expected to be
material to the business of the Group as currently conducted, nor is there any
judgment, decree, injunction, ruling, award, order or writ of any court,
governmental department, commission, agency, instrumentality, arbitration or
other Person outstanding against or binding upon Seller (with respect to assets
or operations of the Group) or any Group Company. To Seller's Knowledge, no
matter exists which would reasonably be expected to give rise to a civil,
criminal, arbitration, administrative or other proceeding in any jurisdiction
involving any Group Company, except for such proceedings as would not,
individually or, in the case of related claims, in the aggregate, reasonably be
expected to be material to the business of the Group as currently conducted. To
Seller's Knowledge, there are no outstanding threats of legal, administrative,
arbitration, mediation or other proceedings pending, except for such threats as
would not reasonably be expected to be material to the business of the Group as
currently conducted.
3.9 COMPLIANCE WITH APPLICABLE LAWS AND PERMITS. (a) The Group's
operations, including, but not limited to, the use or right of occupancy of any
Group Company in respect of Properties, are in compliance with all laws,
statutes, ordinances, rules, regulations and orders of all Governmental Entities
applicable to its business except for such non-compliance as would not be
material to the business of the Group as currently conducted. To Seller's
Knowledge, prior to the date hereof there have been no events of non-compliance
with laws, statutes, ordinances, rules, regulations or orders of Governmental
Entities applicable to its business that continue to be, or would reasonably be
expected to be, material to the business of the Group as currently conducted.
(b) Each Group Company has obtained all material permits, licenses,
consents, approvals, certificates, qualifications, registrations or other
authorizations or filings of notification reports or assessments necessary in
each jurisdiction in which Group operates its business, and each Group Company
has complied in all material respects with the terms and conditions of each
Permit and each Permit is in full force and effect. There are no pending or, to
Seller's Knowledge, threatened proceedings which would reasonably be expected to
adversely affect such Permits, and, to Seller's Knowledge, no such Permits are
threatened to be suspended, revoked or otherwise rendered invalid.
(c) Schedule 3.9(c) contains a true and correct list of all pending
negotiations and/or disputes as of the date hereof with respect to performing
rights and mechanical rights societies (or similar bodies fulfilling similar
functions) (each a "PERFORMING RIGHTS SOCIETY") in each jurisdiction in which
the Group conducts its business, none of which is reasonably expected to be
material to the business of the Group as currently conducted. To Seller's
Knowledge, no member of Seller's Group and no Group Company has had any formal
contact with any Performing Rights Society in respect of any business of the
Group, and no investigation or inquiry of any Performing Rights Society is
pending or threatened against Seller (with respect to
-22-
assets or operations of the Group) or any Group Company, except for such contact
as would not reasonably be expected to result in Liability (whether in respect
of operations pre- or post-Closing) to any such Group Company in excess of
$35,000 annually. To Seller's Knowledge, there are no outstanding threats of
enforcement by any Performing Rights Society, except for such enforcement as
would not reasonably be expected to be material to the business of the Group as
currently conducted.
(d) No Group Company: (i) has given any written undertaking,
commitment or assurance to any Governmental Entity; (ii) is subject to any
order, regulation or decision made by any Governmental Entity against such Group
Company or (iii) has received a written communication or request for information
in relation to any aspect of their business from any Governmental Entity, in the
case of clauses (i) through (iii) above, under anti-trust or similar legislation
applicable to such Group Company in any jurisdiction.
(e) To Seller's Knowledge, no complaints in relation to the conduct of
the business or business practices of any Group Company have been made or
threatened by any third party to any Governmental Entity under any anti-trust or
similar legislation.
(f) To Seller's Knowledge, no Group Company has ever received, or is
expecting to receive, any aid (in whatever form) from a Member State of the
European Community or from State resources such as could be regarded as State
aid for the purposes of Articles 87 to 89 of the Treaty of Rome.
(g) Each of the Group Companies is in compliance in all respects with
laws, statutes, ordinances, rules, regulations and orders of all Governmental
Entities relating to any Asbestos at the properties identified in Schedule
3.15(b), except for such non-compliance as would not be material to the business
of the Group as currently conducted. To Seller's Knowledge, prior to the date
hereof there have been no events of non-compliance with laws, statutes,
ordinances, rules, regulations or orders of Governmental Entities relating to
Asbestos at the properties identified in Schedule 3.15(b) that continue to be,
or would reasonably be expected to be, material to the business of the Group as
currently conducted.
3.10 NO UNDISCLOSED LIABILITIES. Except for liabilities (a) set forth
or reflected in the Financial Statements (or referred to in the notes thereto)
or (b) contemplated or expressly permitted by this Agreement, the Transactions
Agreements, or as otherwise set forth in or referred to in a schedule to such
agreement, no Group Company has any liabilities of a nature required to be set
forth or reflected in the Financial Statements. To Seller's Knowledge, there are
no contingent obligations incurred other than in the ordinary course or
otherwise as set forth or reflected in the Financial Statements, except for such
liabilities as would not reasonably be expected to be material to the business
of the Group as currently conducted. No Group Company is engaged in any
financing (including the incurring of any Indebtedness in the nature of
acceptances or acceptance credits) of a type which would not be required to be
shown or reflected in the Financial Statements.
3.11 TAXES. (a) (i) All material Tax Returns required to be filed on
or before the date hereof by each member of the Group (and with respect to the
income, properties or operations of any member of the Group) and with respect to
the CMI Membership Interests and
-23-
the CEL Shares have been timely filed (taking into account extensions of time
approved by the appropriate Tax authority) and all such Tax Returns are true,
complete and correct; (ii) all material Taxes required to be shown on such Tax
Returns or otherwise due (except for Taxes being contested in good faith
pursuant to appropriate proceedings, the details of which are set forth in
Schedule 3.11) have been timely paid; (iii) all Taxes for which any Group
Company may be liable under Treasury Regulation section 1.1502-6 (or analogous
state or foreign law) due to such Group Company's membership in an affiliated
group or other group filing on a combined basis, if required to be paid, have
been paid, on a timely basis; (iv) there are (x) no unpaid assessments for any
material amounts of additional Taxes for any fiscal period for any Group Company
and (y) no Tax Liens, whether imposed by any U.S. federal, state, county,
municipal or foreign Tax authority, outstanding or which are, to Seller's
Knowledge, likely to arise against the assets or businesses of any Group
Company, except for Permitted Liens; (v) all material withholding Tax
requirements imposed on or with respect to any Group Company have been satisfied
in full, and each Group Company has timely withheld and paid over to the proper
Governmental Entity all material amounts required to be withheld and paid over;
(vi) no Group Company has waived any statute of limitations with respect to
Taxes which waiver remains in effect; (vii) there are not pending or threatened
in writing any audits, examinations, investigations or other proceedings in
respect of material Taxes or material Tax Returns of any Group Company (or with
respect to the income, properties or operations of any of them); (viii) no Group
Company is a party to any agreement or arrangement that would result, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of section 280G of the Code by reason of the transactions
contemplated hereunder; (ix) no Group Company is a party to any Tax allocation
or sharing agreement; (x) none of CEL or any of CEL's and CMI's Subsidiaries has
been a United States real property holding corporation within the meaning of
section 897(c)(2) of the Code during the applicable period specified in section
897(c)(1)(A)(ii) of the Code; (xi) none of CEL or any of CMI's and CEL's
Subsidiaries has been a passive foreign investment company within the meaning of
section 1297 of the Code; (xii) since January 1, 2001 no written claim has been
made by any Governmental Entity with respect to any Group Company in a
jurisdiction where any of them does not file Tax Returns that such Group Company
is required to file a Tax Return in such jurisdiction; (xiii) for all periods
(or portions thereof) prior to the Closing Date, Seller has been disregarded as
a separate entity for U.S. federal income tax purposes; (xiv) from and after
March 26, 2002, CMI has been disregarded as a separate entity for U.S. federal
income tax purposes; (xv) from and after June 1, 1998, CEL has been disregarded
as a separate entity for U.S. federal income tax purposes; (xvi) from and after
January 1, 2004, Crown Media International (Australia) Pty Ltd. has been
disregarded as a separate entity for U.S. federal income tax purposes; and
(xvii) from and after December 28, 1998, Hallmark India Private, Ltd. has been
disregarded as a separate entity for U.S. federal income tax purposes.
(b) All Tax Returns, examination reports and statements of
deficiencies assessed with respect to CMI, CEL or any of their Subsidiaries (and
with respect to the income, properties or operations of CMI or CEL or any of
their Subsidiaries) made available to Buyer in the Data Room were correct and
complete .
(c) For the purposes of this Agreement, (i) the term "TAX" or "TAXES"
includes any and all taxes imposed by any U.S. federal, state, local and foreign
or other Tax authority, including all income, gross receipts, gains, profits,
windfall profits, gift, severance, ad
-24-
valorem, capital, social security, unemployment disability, premium, recapture,
credit, excise, property, sales, use, occupation, service, service use, leasing,
leasing use, value added, transfer, payroll, employment, withholding, estimated,
license, stamp, franchise or similar taxes of any kind whatsoever, including
interest, penalties or additions thereto; and (ii) the term "TAX RETURN" or "TAX
RETURNS" shall mean any report, return, documents, declaration or other
information (and any supporting schedules or attachments thereto) required to be
supplied to any Tax authority or jurisdiction with respect to Taxes (including
any returns or reports filed on a consolidated, unitary, or combined basis). It
is understood and agreed that Seller provides no representations or warranties
in respect of Taxes in this Agreement, other than the representations and
warranties contained in this Section 3.11 and Section 3.12.
3.12 EMPLOYEE MATTERS.
(a) AGREEMENTS AND PLANS. Schedule 3.12 lists all Employment
Agreements and Benefit Plans, and specifically identifies which Benefit Plans
are CM Plans and which are Subsidiary Plans. Seller has made available to Buyer
a true, correct and complete copy of all Service Provider Agreements and
Collective Bargaining Agreements. With respect to each Benefit Plan, Seller has
made available to Buyer true and complete copies of the most recent plan
document and the most recent summary plan description, if any, and, where
applicable, the most recent form of individual award agreement. There are no
amendments to any Subsidiary Plans that have been adopted or approved that are
not reflected in the plan document, and neither Seller nor its Affiliates have
undertaken to or committed to make any such amendments or to establish adopt or
approve any new Benefit Plan.
(b) SUBSIDIARY PLANS. Each Subsidiary Plan has been established,
funded and operated in material compliance with its terms and any applicable
law, including without limitation ERISA and the Code. All Subsidiary Plans that
are subject to the laws of any jurisdiction outside of the United States (i)
have been maintained in accordance with all applicable requirements and operated
in accordance with their governing rules or terms; (ii) if they are intended to
qualify for special tax treatment meet all requirements for such treatment and
(iii) if they are intended to be funded and/or book-reserved are fully funded
and/or book reserved, as appropriate, based upon reasonable actuarial
assumptions, except in the case of (i) through (iii), as would not reasonably be
expected to have a Company Material Adverse Effect. To Seller's Knowledge, no
Subsidiary Employee or any dependant has made any claim in respect of the
Subsidiary Plans, other than claims for benefits in the ordinary course. There
are no pending or, to the knowledge of Seller, threatened, material claims,
lawsuits, arbitrations or audits asserted or instituted against any Subsidiary
Plan, any fiduciary (as defined by Section 3(21) of ERISA) of any Subsidiary
Plan, or any employee or administrator thereof, in connection with the
existence, operation or administration of a Subsidiary Plan, other than routine
claims for benefits. With respect to each Subsidiary Plan, all premiums,
contributions or other payments required to have been made by applicable law or
under the terms of any such plan or any contract or agreement relating thereto
as of the Closing Date have been timely made, and all other obligations of each
relevant Group Company in respect of such Subsidiary Plan have been complied
with in all material respects. With respect to each Subsidiary Plan, no
non-exempt prohibited transaction (as defined in Section 406 of ERISA or Section
4975 of the Code) has occurred that could be a liability of CMI, CEL and/or
their respective Subsidiaries following the Closing Date.
-25-
(c) SELLER SAVINGS PLANS. The Hallmark Affiliates Employee Savings
Plan (the "SELLER SAVINGS PLAN") has received a favorable determination letter
from the Internal Revenue Service, and there are no existing circumstances and
no events have occurred that could materially adversely affect the qualified
status of the Seller Savings Plan or the related trust.
(d) TITLE IV OF ERISA; CONTROLLED GROUP LIABILITIES. No Subsidiary
Plan is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of
the Code. No CM Plan is a Multiemployer Plan or a Multiple Employer Plan. None
of CMI, CEL and their respective Subsidiaries has, at any time during the last
six years, contributed to or been obligated to contribute to any Multiemployer
Plan or Multiple Employer Plan. There does not now exist, nor do any
circumstances exist that would be reasonably expected to result in, any
Controlled Group Liability that would be a liability of CMI, CEL or any of their
respective Subsidiaries following Closing.
(e) NO ACCELERATION OF BENEFITS; "EXCESS PARACHUTE PAYMENTS". Neither
the execution, delivery and performance of this Agreement nor the consummation
of the transactions contemplated hereby will (either alone or in conjunction
with any other event) (i) cause or result in the accelerated vesting, funding or
delivery of, or increase the amount or value of any benefits under any
Subsidiary Plan, (ii) cause or result in the funding of any Subsidiary Plan
(iii) cause or result in a limitation on the right of CMI, CEL or any of their
respective Subsidiaries to amend, merge, terminate or receive a reversion of
assets from any Subsidiary Plan or related trust or (iv) entitle any Subsidiary
Employee to receive any payment or benefit or increase any Subsidiary Employee's
rights under such Subsidiary Employee's Employment Agreement. Without limiting
the generality of the foregoing, no amount paid or payable by CMI, CEL or any of
their respective Subsidiaries or any Subsidiary Plan in connection with the
transactions contemplated hereby (either solely as a result thereof or as a
result of such transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code. There
are no terms and conditions in any contract with any Subsidiary Employee
pursuant to which such person will be entitled to receive any payment or benefit
or such person's rights will change, in each case, as a direct consequence of
the transactions contemplated by this Agreement.
(f) LABOR ISSUES. As of the date of this Agreement, with respect to
each Subsidiary Employee and any individual who is not an employee of an
Affiliate of CEL or CMI or their Subsidiaries, who directly provides services to
any Group Company (other than any such individual who, in addition to providing
services to any Group Company, directly or indirectly, provides services to at
least one other Person that is not affiliated with the Group Companies) (a
"SUBSIDIARY SERVICE PROVIDER"): (i) there is not presently existing or (to
Seller's Knowledge) pending, and to Seller's Knowledge there is not threatened,
nor has there occurred during the past three years any material strike,
slowdown, picketing or work stoppage or other labor dispute, or any application
for certification of a collective bargaining agent; (ii) no labor organization
or group of Subsidiary Service Providers or other body representing Subsidiary
Service Providers has made a pending demand for recognition or certification;
(iii) there are no representation or certification proceedings or petitions
seeking a representation proceeding, pending with the National Labor Relations
Board or any other labor relations tribunal or authority; (iv) no industrial
relations or employment matter has been referred either by CEL or any Subsidiary
Service Providers or by any trade union staff association or any other body
-26-
representing Subsidiary Service Providers to any conciliation or arbitration
body; and (v) to Seller's Knowledge, no Subsidiary Service Provider is a member
of a trade union, staff association or other body representing workers. No
Subsidiary Service Provider is covered by a Collective Bargaining Agreement and
no trade union, staff association or other body is recognized by any Group
Company for the purposes of collective bargaining in relation to any of the
Subsidiary Service Providers.
(g) OTHER LABOR WARRANTIES. Seller warrants the following:
(i) Schedule 3.12 sets forth with respect to each Subsidiary
Employee (other than Non-Retained Employees) the base rate of pay and
bonuses paid during the past twelve (12) months preceding the date of
this Agreement or such shorter period as the Subsidiary Employee has
been employed by the relevant Group Company and the number of awards,
options and share-based incentive rights granted to each such
Subsidiary Employee in connection with the Benefit Plan and the
Employee Share Schemes (as defined in Section 3.12(h) that are
outstanding as of the date hereof;
(ii) There is not in existence any Service Provider Agreement
which cannot be terminated by three months' notice or less without
giving rise to any claims for damages or compensation (other than
statutory redundancy payment or statutory compensation for unfair
dismissal);
(iii) There are no material amounts owing or agreed to be loaned
or advanced by any Group Company to any Subsidiary Service Providers
(other than "cashless" exercises pursuant to any Employee Share), any
loans pursuant to any qualified plans maintained by any Group Company
or their respective Affiliates, any travel advances, use of company
credit cards, amounts representing remuneration accrued due for the
current pay period, accrued holiday pay for the current year or for
reimbursement of expenses);
(iv) As of the date hereof, no Subsidiary Service Provider whose
gross remuneration exceeds (pound)50,000 with respect to CEL
Subsidiary Service Providers or $100,000 with respect to non-CEL
Subsidiary Service Providers or equivalent amounts of other currencies
has given or received notice to terminate his employment or
engagement;
(v) As of the date hereof, there are no Subsidiary Service
Providers who are on secondment, maternity leave or absent on grounds
of disability or other leave of absence (other than normal holidays or
absence of no more than three weeks due to illness);
(vi) As of the date hereof, there are no outstanding offers of
employment or engagement by any Group Company to any person whose
gross remuneration by the Group Company upon hiring is reasonably
expected to exceed (pound)50,000 with respect to CEL or $100,000 with
respect to CMI and no person has accepted such an offer but not yet
taken up the position accepted;
-27-
(vii) During the eighteen (18) month period prior to the date
hereof, no Group Company has given notice of any redundancies to any
Subsidiary Service Provider or government department with respect to
Subsidiary Service Providers;
(viii) Full and accurate details are disclosed in Schedule 3.12
of any redundancy payment (whether pursuant to a redundancy scheme or
formula or policy or otherwise whether contractual or discretionary)
made by any Group Company during the eighteen (18) month period prior
to the date hereof in excess of the legal minimum redundancy
entitlement to any Subsidiary Service Provider or former Subsidiary
Service Provider;
(ix) All health and safety policies and procedures, in effect in
the last eighteen (18) months prior to the date hereof and details of
any material health and safety complaints or investigations during
that time, in either case affecting any Group Company and its
Subsidiary Service Providers have been previously made available to
Buyer;
(x) During the two (2) year period preceding the date hereof no
Subsidiary Service Providers have transferred into the employment of
any Group Company by operation of the Transfer of Undertakings
(Protection of Employment) Regulations 1981 and, to Seller's
Knowledge, no event has occurred which may involve any transfer of any
employees to or from any Group Company;
(xi) No Group Company has entered into any agreement or
arrangement for the management or operation of any significant portion
of its business other than with its Subsidiary Employees; and
(xii) Since the Balance Sheet Date, no Group Company has made or
announced any changes to the remuneration or benefits or any bonus
opportunity of any Subsidiary Employee in a manner that would increase
the cost in the aggregate to the Group of such remuneration benefits
and/or bonus opportunity by more than 5%, and no Group Company is
under any obligation to make any such changes with or without
retrospective operation.
Except for the Benefit Plans disclosed in Schedule 3.12, no share
incentive, share option, profit sharing, bonus or other incentive
arrangements (the "EMPLOYEE SHARE SCHEMES") are being participated in by any
of the Subsidiary Employees.
(h) DEED OF RESTRICTIVE COVENANTS. Notwithstanding anything to the
contrary in this Agreement, Seller makes no representation, warranty or other
agreement to or with Buyer with respect to the Deed of Restrictive Covenants
between ▇▇▇▇▇▇▇ ▇▇▇▇▇ and CMI, dated as of the date hereof, and Seller shall
have no Liability whatsoever in connection with the Deed of Restrictive
Covenants between ▇▇▇▇▇▇▇ ▇▇▇▇▇ and CMI, dated as of the date hereof.
3.13 UNITED KINGDOM PENSIONS.
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(a) UNITED KINGDOM PENSIONS ARRANGEMENTS DISCLOSED. Save under the
Crown Entertainment Limited / Hallmark Entertainment Limited Group Pension Plan
(the "GPP") and the Sterling Life Limited Life Assurance Plan (the "LIFE
ASSURANCE PLAN" and, together with the GPP, the "DISCLOSED SCHEMES") and the
state pension schemes, no Group Company is under any legal obligation or
commitment, and no Group Company is a party to any custom or practice which has
established a legal obligation or commitment by any Group Company, to pay,
provide or contribute towards any relevant benefits within the meaning of
section 612 of the TA in the United Kingdom, including the making of any payment
of contributions to, or remuneration specifically referable to contributions to,
any personal pension scheme, stakeholder pension scheme, retirement annuity
contract or similar arrangement ("RELEVANT BENEFITS") to or in respect of any
such person and nothing has been done to create a legal entitlement to any such
payments, provision or contributions. No Group Company has at any time
participated in or contributed towards any former scheme or arrangement (in the
United Kingdom ("FORMER SCHEME") which has at its purpose or one of its purposes
the provision of Relevant Benefits (other than schemes which have been fully
wound up).
(b) MONEY PURCHASE SCHEMES. Other than lump sum death in service
benefits and a return of contributions, the GPP provides only money purchase
benefits (as defined in Section 181 of the Pension Schemes Act 1993), and no
promise or assurance (oral or written) has been given to any person that his or
her benefits under the GPP (other than lump sum death in service benefits and a
return of contributions) will be calculated by reference to any person' s
remuneration or equate (approximately or exactly) to any particular amount other
than the value of the GPP's assets referable to each of the GPP members.
(c) EX GRATIA PAYMENTS. No Group Company has made or proposed, and no
Group Company will before Closing make or propose, any voluntary or ex gratia
payments of Relevant Benefits to or in respect of any person and no Group
Company is due to make any such payments in the future in circumstances which
would impose a legally binding obligation on any Group Company to provide such
benefits. No legally binding undertaking or assurance has been given or will
before Closing be given by any Group Company to any person as to the
introduction, continuance, increase or improvement or any Relevant Benefits.
(d) PAYMENT OF CONTRIBUTIONS. All contributions and premiums which
have been payable to or under the Disclosed Schemes by or in respect of any
current and former employees and officers have been duly paid within any
applicable prescribed period under the Pensions ▇▇▇ ▇▇▇▇ and the Disclosed
Schemes' governing documentation. Since the date of the last schedule of
contributions or payment schedule (as applicable) prepared under the Pensions
▇▇▇ ▇▇▇▇, no material increase or decrease in the percentage rate of
contributions to the relevant Disclosed Scheme has occurred or been recommended
and none will foreseeably be required. The contribution rates disclosed to Buyer
are those paid by the relevant participating employers in respect of the
Subsidiary Employees in the GPP.
3.14 CONTRACTS. (a) Schedule 3.14 sets forth a true and complete list
as of the date of this Agreement of each Contract to which CMI, CEL or any of
their Subsidiaries is a party or by which it or they may be bound (i) that
contains a covenant by CMI, CEL or any of their Subsidiaries not to compete with
others (other than Affiliation Agreements); (ii) that is with an Affiliate of
CMI, CEL or any of their Subsidiaries or any director or officer thereof, other
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than Employment Agreements; (iii) with respect to Indebtedness (other than
intercompany indebtedness or loans from Seller's Affiliated Group where the
liability of CMI, CEL or any of their Subsidiaries thereunder will be terminated
prior to Closing); (iv) that constitutes a material Business Intellectual
Property contract or agreement (other than Programming Agreements); (v) that
constitutes a consulting, agency or commission agreement (including, for the
avoidance of doubt and without limitation, any agreements for advertising and
sales representation) to which CMI, CEL or any of their Subsidiaries is a party
or bound and which is material to the business and operations of CMI, CEL and
their Subsidiaries taken as a whole; (vi) that is an Affiliation Agreement
involving revenue in excess of $100,000 annually, including any amendments or
modifications thereto or waivers of rights; (vii) that is a Programming
Agreement involving payments in excess of $250,000 in the aggregate during the
term of such agreement, including any amendments or modifications thereto or
waivers of rights; (viii) for the acquisition, lease or servicing of satellite
transponders and other uplink arrangements (including maintenance); (ix) that
constitutes a guarantee, make-well agreement, surety contract, letter of credit
or indemnity agreement (other than the standard indemnification provisions of
any Contract), which is material to the business and operations of CMI, CEL and
their Subsidiaries taken as a whole; (x) that involves payments or other
financial liabilities by a Group Company of more than $250,000 annually or
$1,000,000 in the aggregate or (xi) any other contract necessary for the Group
to conduct its business in its current form or the termination, cancellation or
expiry of which would reasonably be expected to result in a Company Material
Adverse Effect (the Contracts required to be disclosed on Schedule 3.14 being
referred to herein as "MATERIAL CONTRACTS"). Seller has provided Buyer with
access in the Data Room to true and complete copies of each Material Contract.
Except as set forth on Schedule 3.14, each such Material Contract is a valid and
binding agreement, enforceable in accordance with its terms, and in full force
and effect, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally and to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, of CMI, CEL or one of their Subsidiaries, as
applicable, and, to Seller's Knowledge, of each other party thereto. There are
no material breaches or defaults under any Material Contract to which any Group
Company is a party, by which any Group Company is bound, or pursuant to which
any Group Company has any rights, by such Group Company or, to Seller's
Knowledge, by any other party thereto, nor has any Group Company, or to Seller's
Knowledge, any other party thereto, performed any act or omitted to perform any
act under any such Material Contract which, with notice or lapse of time or
both, will become or result in a material breach or default thereunder or give
such party thereto the right to terminate, amend, abandon or refuse to perform
thereunder. As of the date hereof, neither Seller nor any Group Company has
received any written notice of termination of any Material Contract and, to
Sellers' Knowledge, there is no pending or threatened service of a notice of
termination by any party to any Material Contract.
(b) No Group Company has executed any power of attorney or conferred
on any person other than its directors, officers and employees any authority to
enter into any material transaction on behalf of or to bind a Group Company in
any way, which power remains in force as of the date hereof, other than with
respect to (i) advertising and distribution sales and media buying
representatives in the ordinary course; (ii) legal counsel for the purposes of
bringing legal actions for infringement of the rights of the Group with respect
to the unlawful interception and distribution of its programming and (iii)
banking representatives as required by
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applicable law in several countries in connection with the administration of the
Group's bank accounts in those countries.
3.15 TITLE TO PROPERTIES.
(a) TITLE TO PROPERTIES AND ASSETS. The Properties and material
tangible assets (other than Retained Assets) owned or leased by each Group
Company represent, in the aggregate, those necessary for the conduct of their
respective businesses and operations as conducted as of the date hereof in all
material respects and, where capable of possession, such properties or assets
are possessed by the relevant Group Company. The Group has good and valid title
to, or valid leasehold interests in, all material properties and assets
currently used by each Group Company (other than the Retained Assets). All such
material properties and assets, other than properties and assets in which CMI,
CEL or any of their Subsidiaries have leasehold interests or the Retained
Assets, are free and clear of all Liens, other than Permitted Liens, and no
Group Company has agreed to create any such Lien.
(b) PROPERTIES. No Group Company owns any freehold estate. The
Properties set forth in Schedule 3.15(b) comprise all of the properties leased
by and, to the extent material to the business of the Group, otherwise used or
occupied by, each Group Company and all agreements whereby any Group Company has
any financial entitlement relating to any land at the date hereof. No Group
Company has any material actual or contingent obligations or liabilities (in any
capacity including as principal contracting party or guarantor) in relation to
any lease, license or other interest in, or agreement relating to, land apart
from the Properties, and a Group Company is solely entitled to possession of the
Properties pursuant to the terms of the applicable lease and applicable law.
(c) TITLE AND LEASE DOCUMENTS. Each Group Company has under its
control all lease documents of the Properties necessary to prove their leasehold
interests therein. The lease documents shall include reasonably satisfactory
details of all memoranda of rent increases where appropriate; where any of the
Properties is subject to leases, underleases, agreements or licenses, the lease
documents include all necessary consents in connection therewith and evidence of
registration of the grant of the same where appropriate.
(d) RIGHTS. Other than pursuant to the terms of the leases relating to
the Properties and applicable law, no right, easement, license or other
arrangement is enjoyed or, to Seller's Knowledge, is in the course of being
acquired by or against the Properties and none is needed for obtaining access to
or occupying any land or for repair of any premises of the Properties or to
comply with any applicable fire regulations.
(e) NO DEFAULT. Each Group Company has duly performed, observed and
complied with all covenants, restrictions, exceptions, reservations, conditions,
agreements, statutory and common law requirements, by-laws, orders, building
regulations and other stipulations and regulations affecting the Properties and
the uses of the Properties including the terms of any lease, underlease or
tenancy agreement under which any part of any of the Properties is held and the
terms of any joint venture, finance or development agreement or agreement for
lease and the development and/or uses of the Properties do not contravene in any
material respect the same and (without prejudice to the generality of the
foregoing) all amounts
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due and payable have been paid to date and (in the case of leasehold property)
all rents and service charges due and payable have been paid to date and, to
Seller's Knowledge, no notice of any alleged breach of any of the terms of any
such lease or tenancy agreement as aforesaid has been served on any Group
Company, except in such case as would not reasonably be expected to be material
to the business of the Group as currently conducted, and no Group Company has
served a notice of any alleged material breach of any of the terms of any such
lease or tenancy agreement with respect to a Property in the United States or
United Kingdom on any landlord or lessor thereunder.
(f) NO COMPULSORY ACQUISITION OR ENFORCEMENT PROCEEDINGS. There are no
outstanding enforcement or other written notices or proceedings issued in
respect of any of the Properties for compulsory acquisition by the local or any
other authority nor any outstanding order, notice or other requirement of any
such authority that adversely affects such existing use as aforesaid or involves
expenditure in a material amount in complying with it nor any other
circumstances to Seller's Knowledge which may result in any such order or notice
being made or served.
(g) LOCAL AUTHORITIES - LAND CHARGES AND REPLIES TO ENQUIRIES. Except
in respect of any matter which would be revealed on the date hereof by a local
land charges search in respect of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ which a reasonable
buyer would make, the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ lease is not materially adversely
affected by any matter or thing which would be revealed by official certificates
of search in the register of local land charges or by replies to inquiries on
form CON 29 Part I that would materially and adversely affect such property.
(h) NO OVERRIDING INTERESTS. The ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ lease is not
subject to any material Overriding Interests that affect the use or occupation
of the Property by any Group Company.
(i) LEASES; DEVELOPMENTS. Seller has provided Buyer with access in the
Data Room to true and complete copies of all leases with respect to Properties.
All material alterations on such Properties by any Group Company have been
lawfully carried out, and all necessary consents and permissions have been or
are being obtained for such alterations.
3.16 INTELLECTUAL PROPERTY RIGHTS. As of the date hereof, the Group
does not own, use, license or hold any material Intellectual Property other than
the Programming Agreements, the Software Arrangements, Affiliation Agreements
and other distribution agreements, and other incidental creative materials
related to programming, such as music rights, interstitials, publicity and other
marketing materials, and such other Intellectual Property set forth on Schedule
3.16 (collectively, the "BUSINESS INTELLECTUAL PROPERTY"). Except with respect
to the current use of "Hallmark" and its derivations in its business, such
Business Intellectual Property constitutes all material intellectual property
and similar proprietary information necessary to permit CMI, CEL and their
Subsidiaries to conduct their businesses in all material respects as currently
conducted. None of CMI, CEL and their Subsidiaries has received any written
claim of infringement or other complaint (other than immaterial infringement
claims or other complaints) that any of their operations infringe any non-U.S.
rights under Intellectual Property of any other Person, nor, to Seller's
Knowledge, is there any reason to believe that there is any valid basis for such
claim. CMI, CEL or their Subsidiaries own, or have a valid right to
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use, free and clear of all Liens, other than Permitted Liens, all of the
Business Intellectual Property except as would not reasonably be expected to be
material to the business of the Group as currently conducted. To Seller's
Knowledge, no third party is infringing any Business Intellectual Property and
no such claims, suits, arbitrations or other adversarial proceedings have been
brought against any third party by CMI, CEL or their Subsidiaries.
3.17 SUBSCRIBERS AND SUPPLIERS OF PROGRAMMING. Set forth on Schedule
3.17 is a list of the largest 50 distributors, ranked by number of subscribers
to which CMI or CEL programming is distributed as of December 1, 2004
("DISTRIBUTORS"), of CMI and CEL and their Subsidiaries as of December 1, 2004,
and set forth opposite the name of each such Distributor is the number of
subscribers attributable to such Distributor as of such date, as represented to
CMI or CEL by such Distributor and, to Seller's Knowledge, such number is
correct.
3.18 BROKERS. Except for UBS Securities LLC and ▇▇▇▇▇▇▇ & Associates,
L.P., none of Seller or any of its Subsidiaries has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with the acquisition of the Purchased Interests or related
transactions contemplated by this Agreement. Seller is solely liable for all
fees, commissions and/or finder's fees payable or owing (whether demanded or
not) to UBS Securities LLC and ▇▇▇▇▇▇▇ and Associates.
3.19 INSOLVENCY. No Group Company is the subject of any pending or, to
Seller's Knowledge, threatened insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary. No Group
Company has made an assignment for the benefit of creditors or taken any action
in contemplation of or which would constitute a valid basis for the institution
of any such insolvency proceedings. No Group Company is insolvent with respect
to any third parties and nor will any such companies become insolvent as a
result of entering into this transaction.
3.20 MACHINERY, VEHICLES AND EQUIPMENT. All machinery, vehicles and
equipment owned or used by any Group Company that are material for the operation
of the business of the Group as currently conducted are in good condition and
working order and have been regularly and properly maintained in all material
respects.
3.21 DEBTS. Except to the extent to which specific provision or
reserve has been made in the Balance Sheet or Statement of Operations, none of
the debts owed to any Group Company included in the Financial Statements has
been factored, sold or agreed to be sold by such Group Company. As of the
Closing Date, no Group Company will have any outstanding Indebtedness.
3.22 INSURANCE. Each Group Company is covered by valid and currently
effective insurance policies (the "POLICIES") that are valid and enforceable and
not void or voidable, and customary, appropriate and consistent with industry
practice under the circumstances. As of the date hereof, the Policies, taken
together, provide adequate insurance coverage for the assets and the operations
of the Group, and are sufficient to comply with applicable law. No material
claim (other than employee-related claims) initiated by Seller or any
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Group Company is outstanding under any of the Policies, and, to Seller's
Knowledge, no matter exists which would reasonably be expected to give rise to a
claim under any of the Policies.
3.23 INFORMATION TECHNOLOGY. (a) The Systems used in connection with
the business of each Group Company as currently conducted are maintained in
accordance with customary industry practice and are adequate for the current
needs of that business, including, without limitation, as to the system capacity
and ability to process current peak volumes in a timely manner.
(b) In the 12 months prior to the date hereof, no Group Company has
suffered and, to Seller's Knowledge, no other person has suffered any failures
in or breakdowns of any System used in connection with the business of any Group
Company (other than those disruptions as would reasonably be expected to occur
in the ordinary course from time-to-time) which have caused any material
disruption or interruption in or to its use and, to Seller's Knowledge, there is
no fact or matter existing as of the date hereof which may so disrupt or
interrupt or affect the use of such equipment.
(c) As of the Closing Date, all Systems, excluding software, material
to the business of any Group Company as currently conducted will be owned and
operated by and will be under the control of such Group Company and will not be
wholly or partly dependent on any facilities which are not under the ownership,
operation or control of such Group Company except as contemplated by the
Transition Services Agreement.
(d) Each Group Company has taken appropriate steps in accordance with
customary industry practice to provide for the back-up and recovery of the data
and information critical to the conduct of its business (including without
limitation, such data and information that is stored on magnetic or optical
media in the ordinary course) without material disruption to, or material
interruption in, the conduct of such business.
3.24 FINANCIAL. (a) No Group Company is party to or liable (including
contingently) under a guarantee, indemnity or other agreement to third parties
to secure or incur a financial or other obligation with respect to another
person's obligation (other than another Group Company). Other than with respect
of the Indebtedness, no part of the loan capital, borrowing or indebtedness in
the nature of borrowing of any Group Company is dependent on the guarantee or
indemnity of, or security provided by, another person other than a Group
Company.
(b) No Group Company is, nor upon the execution and performance of
this Agreement will be, liable to repay an investment or other grant or subsidy
made to it by any Governmental Entity (including the Department of Trade and
Industry or its predecessor).
(c) No Group Company and, to Seller's Knowledge, no employee or agent
of a Group Company, has: (i) induced a person to enter into an agreement or
arrangement with any Group Company by means of an unlawful payment,
contribution, gift or other inducement; (ii) offered or made an unlawful
payment, contribution, gift or other inducement to a government official or
employee or (iii) directly or indirectly made an unlawful contribution to a
political activity.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND QUALIFICATION. Buyer is duly organized, validly
existing and in good standing under its jurisdiction of incorporation. Buyer has
not conducted any business and has no assets, liabilities or obligations of any
nature other than those incident to its formation and pursuant to this Agreement
and the transactions contemplated by this Agreement or under an investment
agreement (the "INVESTMENT AGREEMENT") dated as of the date hereof and entered
into by and among (1) Rightfolder Limited, (2) Buyer, (3) the Managers (as
defined and listed in the Investment Agreement), (4) the Investors (as defined
and listed in the Investment Agreement) and (5) 3i Investments plc relating to
Rightfolder Limited and Buyer.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Buyer has all requisite
corporate power and authority to execute this Agreement and to carry out and
perform its obligations under this Agreement and subject to the terms of this
Agreement, to consummate the transactions contemplated hereby. The execution,
delivery and performance by Buyer of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly and validly authorized by all
necessary corporate action of Buyer and no other corporate action on the part of
Buyer is necessary for the authorization, execution, delivery or performance by
Buyer of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Buyer and,
assuming the due authorization, execution and delivery by the other parties
hereto constitutes the valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms (except insofar as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies).
4.3 NO VIOLATION; CONSENTS AND APPROVALS. (a) Neither the execution
and delivery of this Agreement by Buyer nor the consummation of the transactions
contemplated hereby, do or would after the giving of notice or the lapse of time
or both (i) violate, conflict with, result in a breach of, or constitute a
default under, the Articles of Incorporation or Bylaws of Buyer, or any U.S.
federal, state, or local court or administrative order or process, or any
agreement, contract, or other instrument, to which Buyer is a party or by which
Buyer (or any of its rights, properties or assets) is subject or bound or (ii)
violate or conflict with, any U.S. federal, state, local, or foreign law,
statute or regulation, except in the case of (i) and (ii), as would not
reasonably be expected to have a Buyer Material Adverse Effect.
(b) All consents, approvals, authorizations and other requirements
prescribed by any law, rule or regulation which are necessary for the execution
and delivery by Buyer of this Agreement and, subject to the terms of this
Agreement, the consummation by Buyer of the transactions contemplated by this
Agreement have been obtained and satisfied, other than as required under the
antitrust, trade regulation or competition laws of any jurisdiction or as would
not reasonably be expected to have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby.
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4.4 LEGAL PROCEEDINGS. Other than any actions initiated by the
European Commission in respect of Council Regulation EC 139/2004 in connection
with the transactions contemplated hereby, there are no material suits, actions,
claims or litigation, or legal, administrative, arbitration, mediation or other
proceedings, pending or, to Buyer's knowledge, threatened against Buyer that
would materially delay or prevent Buyer from consummating the transactions
contemplated hereby, nor is there any judgment, decree, injunction, ruling,
award, order or writ of any court, governmental department, commission, agency,
instrumentality, arbitration or other person outstanding against or binding upon
Buyer that would materially delay or prevent Buyer from consummating the
transactions contemplated hereby.
4.5 INVESTMENT PURPOSE. Buyer is acquiring the CMI Membership
Interests and the CEL Shares for its own account solely for the purpose of
investment and not with a view to, or for offer or sale in connection with, any
distribution thereof. Buyer understands that the CMI Membership Interests and
the CEL Shares have not been registered under the Securities Act or applicable
state and other securities laws by reason of a specific exemption from the
registration provisions of the Securities Act and applicable state and other
securities laws, the availability of which depends upon, among other things, the
bona fide nature of the investment interest and the accuracy of this
representation. Buyer is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Securities Act.
4.6 AVAILABLE FUNDS. (a) Buyer has accepted and agreed to a valid and
binding commitment from certain lenders committing them to provide Buyer with
debt-financing, subject to the terms and conditions set forth therein (the "DEBT
COMMITMENT LETTER" and the financing thereunder, the "DEBT FINANCING").
(b) Subject always to the terms and conditions of the Equity Financing
Commitment Letters (as defined below), Buyer has, or will have available to it
at the Closing, cash equity ("CASH EQUITY") which, together with the Debt
Financing, assuming the Debt Financing is funded in accordance with its terms
(collectively, the "FINANCING"), will be used by Buyer to satisfy, and will be
sufficient to satisfy, all obligations of Buyer in connection with the
transactions contemplated by this Agreement and the Asset Purchase Agreement
(including, without limitation, all fees and expenses to be paid as a condition
to the consummation of the Financing). Buyer has received, accepted and agreed
to one or more valid and binding commitments from certain Persons (together, the
"EQUITY FINANCING COMMITMENT LETTERS" and, together with the Debt Commitment
Letter, the "COMMITMENTS"), committing them to provide to Buyer (or Affiliates
of Buyer) the Cash Equity, subject to the terms and conditions set forth
therein. True and complete copies of the executed Debt Commitment Letter and
Equity Financing Commitment Letters have been provided to Seller on or prior to
the date hereof and are attached hereto as Annex A and Annex B, respectively.
(c) As of the date hereof, the Commitments delivered to Seller are in
full force and effect. As of the date hereof, no event has occurred which, with
or without notice, lapse of time or both, would reasonably be expected to
constitute a breach or failure to satisfy a condition precedent on the part of
Buyer under the Commitments that has not been waived or remedied to the
satisfaction of the lenders under the Commitments. Buyer has fully paid any and
all commitment fees or other fees on the dates and to the extent required by the
Commitments.
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ARTICLE 5
COVENANTS
5.1 ACCESS TO INFORMATION. Subject to Section 5.17, Seller agrees to
provide Buyer and Buyer's officers, directors, employees, accountants, counsel,
financial advisors, agents and other representatives, from time to time prior to
the Closing Date with:
(a) such information as Buyer shall reasonably request with respect to
the Purchased Interests, or the business, assets or liabilities of CMI, CEL and
their Subsidiaries, and the officers of each Group Company shall be instructed
to give as promptly as reasonably practicable all such information and
explanations as Buyer or any such person may reasonably request; and
(b) reasonable access to the Properties and to the books and records
of each Group Company during normal business hours.
Except as required by law, Buyer shall hold, and shall cause Buyer's
Affiliates and officers, directors, employees, accountants, counsel, financial
advisors, agents and other representatives to hold, any non-public information
received from Seller, directly or indirectly, in accordance with the
Confidentiality Agreement.
5.2 INFORMATION. Any information supplied by or on behalf of any Group
Company to Seller in connection with the representations and warranties set out
in Article 3, the Seller Disclosure Schedules or otherwise in relation to the
business and affairs of any Group Company shall not constitute a representation
or warranty or guarantee as to the accuracy thereof by any Group Company and
Seller undertakes to Buyer and each Group Company (and their respective
officers, directors and employees) that it will not bring any claims that it
might otherwise have against any Group Company or any of their respective
officers, directors and employees in respect thereof; PROVIDED, HOWEVER, that
nothing in this Section 5.2(a) shall prevent Seller from bringing any claim it
may have against any director, officer or employee of any Group Company in
connection with circumstances involving fraud (including without limitation
fraudulent concealment), willful misconduct, gross negligence, bad faith or
willful misrepresentation. Seller undertakes to Buyer, and Buyer undertakes to
Seller, that it will disclose as promptly as reasonably practicable in writing
to the other party any matter or thing which becomes known to such party after
the date of this Agreement and prior to Closing that would reasonably be
expected to (i) in the case of Seller, cause the condition set forth in Section
6.2(a) not to be satisfied and (ii) in the case of Buyer, cause the condition
set forth in Section 6.3(a) not to be satisfied; PROVIDED, HOWEVER, that for
purposes of Article 8 of this Agreement, the representations and warranties
shall be qualified by information provided pursuant to this Agreement.
5.3 OPERATIONS IN THE ORDINARY COURSE OF BUSINESS. From the date
hereof through the Closing Date, except as otherwise contemplated by this
Agreement or any of the Transaction Agreements, Seller agrees that it will cause
each Group Company to conduct its business in the ordinary course in all
material respects.
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5.4 FORBEARANCE BY SELLER. (a) From the date hereof through the
Closing Date, except as otherwise contemplated by this Agreement, the
Transaction Agreements or the transactions contemplated hereby or thereby,
Seller covenants and agrees that it will cause each of CMI, CEL and their
Subsidiaries not to, without the prior written consent of Buyer:
(i) amend its certificate of incorporation, certificate of
formation, bylaws (or other similar governing documents);
(ii) authorize, create, allot, issue, sell, acquire, reduce,
repay, redeem or pledge any Equity Interest or agree, arrange or
undertake to do any of those things, or acquire or agree to acquire
any Equity Interest;
(iii) declare or make any payment or distribution to stockholders
or members (other than cash dividends or distributions or Retained
Assets distributions) or purchase or redeem any of its capital stock
or membership interests;
(iv) sell, assign, lease, license, mortgage, pledge, subject to
any Lien or otherwise convey, transfer or dispose of any of its
assets, other than Retained Assets except in the ordinary course of
business or assume or incur, a liability, obligation or expense
(actual or contingent) except in the usual course of its trade, or
cancel any debt or claim owed to it except in the ordinary course of
business;
(v) acquire or agree to acquire a material asset except in the
ordinary course of its business or as otherwise contemplated in
subsection (vii) below;
(vi) enter into, materially amend, modify, terminate or cancel
any Material Contract; PROVIDED that none of CMI, CEL or any of their
Subsidiaries shall enter into, materially amend, modify, terminate or
cancel any Affiliation Agreement, other than those involving fewer
than 50,000 subscribers or that are not material within any territory,
or any Programming Agreement in an amount in excess of $100,000 per
annum;
(vii) make or commit to make any capital expenditures or capital
additions in excess of $200,000 in the aggregate;
(viii) waive any right of substantial value;
(ix) change any financial accounting methods, principles or
practices, except insofar as may be required by a change in GAAP;
(x) pass a shareholders' resolution other than with respect to
matters contemplated by this Agreement, the Transaction Agreements or
the transactions contemplated hereby or thereby;
(xi) fail to continue its insurance policies in place or do or
omit to do anything which would reasonably be expected to make any
such policies void or voidable;
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(xii) in relation to any Properties:
(A) change its existing use in any material respect;
(B) terminate or give notice to terminate, a lease, tenancy
or license;
(C) grant or refuse an application by a tenant, licensee or
occupier to do something requiring its consent under a
lease, tenancy or license; or
(D) agree a new rent or fee payable under a lease, tenancy
or license;
(xiii) give, or agree to give, a guarantee, indemnity or other
agreement to secure or incur financial or other obligations with
respect to, another person's obligation other than any Group Company;
(xiv) initiate formal litigation or arbitration proceedings other
than debt collecting in the ordinary course of business;
(xv) except in the usual course of its business, compromise,
settle, release or discharge any litigation or arbitration proceedings
or a material liability, claim, action, demand or dispute, or waive a
right in relation to litigation;
(xvi) enter into or terminate, or vary or amend any Employment
Agreement, or materially increase the salary or wage rate or any other
benefits of any Retained Employee, (including, without limitation, the
creation by Seller of a severance plan for employees, under which
Seller would bear all costs and expenses, and any increases resulting
from regular salary and wage review processes and from promotions), or
agree to provide a gratuitous payment or benefit to any Retained
Employee or any of their dependants (and for the purposes of this
Section 5.4(a)(xvi) "Retained Employee" shall include (in addition to
any persons covered by the definition of Retained Employee in Article
1 above) any individual directly or indirectly engaged to provide
services to any Group Company); PROVIDED, HOWEVER, that for the
avoidance of doubt, Seller shall be fully entitled to distribute
retention and/or annual bonuses payable by Seller, as the case may be,
to such employees in respect of and accrued for 2004; or
(xvii) adopt or amend any Benefit Plan, except as would not
materially increase the costs of the compensation and benefits of the
Subsidiary Employees for which Buyer, CMI, CEL or any of their
respective Subsidiaries is made responsible under Section 5.8.
(b) From the date hereof through the Closing Date, Seller covenants
and agrees that it shall not, without the prior written consent of Buyer:
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(i) create or agree to create any new Lien on the Purchased
Interests or any portion of the Purchased Interests, or agree to
redeem an existing Lien over the Purchased Interests or any portion of
the Purchased Interests; or
(ii) sell, lease, transfer or dispose of, or enter into any
agreement to dispose of, any portion of the Purchased Interests.
If Seller breaches any of its representations, warranties or covenants
in this Agreement or fails to cure or mitigate the results of a breach of such
representation, warranty or covenant as a primary result of a Section 5.4
Failure, and PROVIDED that such breach, or failure to cure or mitigate, would
not reasonably be expected to have occurred but for a Section 5.4 Failure, such
breach or failure to cure or mitigate shall (to the extent arising primarily as
a result of such Section 5.4 Failure) be deemed not to constitute a breach of a
representation, warranty or covenant, as the case may be, for the purposes of
Section 6.2 or Article 8. For the purposes of this Section 5.4, a "SECTION 5.4
FAILURE" shall be a failure by Buyer to grant a consent under this Section 5.4
in circumstances where it would have been commercially reasonable for Buyer to
grant such consent, having regard to Buyer's proposed acquisition of the
Purchased Interests.
5.5 NOTIFICATION OF CLAIMS. From the date hereof through the Closing
Date, Seller shall, as promptly as practicable, notify Buyer of the commencement
or threatened commencement of any material lawsuits, claims, proceedings or
investigations against Seller affecting the business of CMI or CEL, or seeking
to enjoin the transactions contemplated herein, and, Buyer shall, as promptly as
practicable, notify Seller of the commencement or threatened commencement of any
material lawsuits, claims, proceedings or investigations against Buyer affecting
the business of CMI or CEL, or seeking to enjoin the transactions contemplated
herein.
5.6 REGULATORY CONSENTS, AUTHORIZATIONS, ETC. Each of the parties
hereto shall use its reasonable best efforts to do all things necessary, proper
or advisable to (a) promptly make all registrations and filings with, and obtain
all necessary or advisable actions or non-actions, waivers, consents and
approvals from, all Governmental Entities and taking all steps as may be
necessary or advisable to obtain an approval or waiver from, or to avoid an
action or proceeding by, a Governmental Entity, PROVIDED that Buyer shall use
its reasonable best efforts to make a draft filing with the European Commission
in respect of the Council Regulation (EC) 139/2004 (the "REGULATION") as soon as
practicable, but in no event later than the first working day following the date
of this Agreement, and shall make a final filing with the European Commission in
respect of the Regulation as soon as practicable thereafter, but in no event
later than 14 days following the date on which a draft filing to the European
Commission is made, or such other date as soon as practicable thereafter in the
event the final filing is required to be delayed as a result of actions of the
European Commission in respect of the filing; and (b) defend any legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any order, stay or temporary
restraining order or preliminary or permanent injunction entered by any
Governmental Entity vacated or reversed. For purposes of this Section 5.6, a
decision by the European Commission to initiate proceedings under Article
6(1)(c) of the Regulation will not constitute legal proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby. Nothing
in this Section 5.6 shall require Seller or Buyer to agree to any modification
of the terms of this Agreement which is not reasonably acceptable to Seller or
Buyer (as the case may be). In order
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to avoid any competition authority from taking any action, to forbid or delay
the consummation of the transactions contemplated hereby, Buyer shall offer and
agree to undertakings, conditions or obligations acceptable to the relevant
competition authority except where such undertakings, conditions or obligations
would, if given effect, have:
o in the view of 3i an adverse effect on 3i or any part of 3i (other
than any interest in the Group); or
o in the view of Providence, an adverse effect on Providence or any part
of Providence (other than any interest in the Group); or
o an adverse impact on the Group and the Purchased Assets (as defined in
the Asset Purchase Agreement), the net value of which, in the view of
Buyer, acting reasonably, exceeds $750,000.
For purposes of this Section 5.6, (a) "PROVIDENCE" shall mean
Providence Equity Partners Inc. and its Affiliates from time to time, funds
managed or advised by Providence Equity Partners Inc. and/or any of its
Affiliates from time to time, participants in funds managed or advised by
Providence Equity Partners Inc. and/or any of its Affiliates from time to time,
participants in other funds where those other funds are participants in funds
managed or advised by Providence Equity Partners Inc. and/or any of its
Affiliates from time to time, and any company or business in which any fund
managed or advised by Providence Equity Partners Inc. and/or any of its
Affiliates from time to time has invested, and (b) "3I" shall mean 3i Group plc
and its Affiliates from time to time, funds managed or advised by 3i Group plc
and/or any of its Affiliates from time to time, participants in funds managed or
advised by 3i Group plc and/or any of its Affiliates from time to time,
participants in other funds where those other funds are participants in funds
managed or advised by 3i Group plc and/or any of its Affiliates from time to
time, and any company or business in which any fund managed or advised by 3i
Group plc and/or any of its Affiliates from time to time has invested.
5.7 NO INCONSISTENT ACTION; FINANCIAL ASSISTANCE. Each party hereto
shall use its reasonable best efforts to consummate the transactions
contemplated by this Agreement and shall not take any action inconsistent with
its obligations hereunder or which could hinder or delay the consummation of the
transactions contemplated hereby, save to the extent required by any
Governmental Entity. In connection with Closing, Seller shall use its reasonable
best efforts to amend the articles of association of CEL to be effective as of
the Closing Date to enable Buyer to undertake a financial assistance procedure
at Closing.
5.8 EMPLOYEE MATTERS.
(a) POST-CLOSING EMPLOYMENT OF SUBSIDIARY EMPLOYEES. Set forth on
Schedule 5.8 is a list of Subsidiary Employees who will not transfer to Buyer
and its Affiliates or with the Group in connection with the transactions
contemplated by this Agreement (such employees, "NON-RETAINED EMPLOYEES"). The
Subsidiary Employees who are not Non-Retained Employees are referred to as
"RETAINED EMPLOYEES." Buyer shall ensure that the terms and conditions of the
continued employment of the Retained Employees after the Closing shall satisfy
all requirements of applicable law. The Closing shall not, in itself, result in
any interruption of the employment of the Retained Employees. Seller shall
cooperate with Buyer by
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providing such information as Buyer may reasonably request to assist Buyer in
complying with the foregoing obligations. Buyer and Seller shall cooperate so
that, not later than the Closing or as soon as practicable and consistent with
applicable law thereafter, the employment of the Non-Retained Employees by CMI,
CEL or the relevant Subsidiary thereof is terminated; PROVIDED that Seller shall
have the right, but not the obligation, to offer any Non-Retained Employee
employment with Seller or one of its remaining Subsidiaries.
(b) COMPENSATION AND BENEFITS GENERALLY. Until the first anniversary
of the Closing Date, or for such longer period as may be required by applicable
law, Buyer shall provide, or shall cause one of its Subsidiaries to provide,
Retained Employees with (i) compensation and benefits that are substantially
similar in the aggregate to the aggregate compensation (other than bonuses) and
benefits provided to such employees immediately before Closing and (ii) such
additional compensation and benefits, if any, as are required to be provided to
Retained Employees pursuant to applicable law.
(c) CREDITED SERVICE. With respect to Retained Employees who are
employed in the United States only: Buyer shall recognize, or shall cause the
appropriate Benefit Plan to recognize, (i) for purposes of satisfying any
applicable deductibles during the coverage period that includes the Closing
Date, any payment made by any Retained Employee towards the satisfaction of any
deductibles in any Benefit Plan and (ii) for purposes of determining eligibility
to participate, vesting and benefit accrual (other than for benefit accrual
under any defined benefit plan) of Retained Employees, all service with Seller
or any of its Subsidiaries, including service with predecessor employers that
was recognized by Seller or any of its Subsidiaries. Buyer agrees that its
health and welfare plans in which Retained Employees participate on and after
Closing shall waive any pre-existing condition exclusion (to the extent such
exclusion was waived under applicable health and welfare plans offered to the
Retained Employees by Seller or any Subsidiary) and any proof of insurability
for such Retained Employees and their eligible dependents.
(d) SAVINGS PLAN ELECTIVE ROLLOVER. Buyer shall permit each Retained
Employee who is a participant in the Seller Savings Plan, and who elects to
receive a distribution of his or her account balance under the Seller Savings
Plan, to effect a "direct rollover" (within the meaning of Section 401(a)(31) of
the Code) of his or her account balance to a qualified savings plan sponsored by
Buyer or one of its Subsidiaries PROVIDED that each of Buyer and Seller are
reasonably satisfied, consistent with the regulations under Section 401(a)(31)
of the Code, that the Seller Savings Plan and that Buyer Savings Plan, as
applicable, meet the requirements under Section 401(a) on the date of such
rollover.
(e) FLEXIBLE SPENDING ACCOUNTS. Seller and Buyer shall take all
actions necessary or appropriate so that, effective as of the Closing Date, (i)
the account balances (whether positive or negative) (the "TRANSFERRED ACCOUNT
BALANCES") under Crown Media Holdings, Inc. Cafeteria Plan (the "SELLER'S FLEX
PLAN") of the Retained Employees who are participants in Seller's Flex Plan (the
"COVERED EMPLOYEES") shall be transferred to one or more comparable plans of
Buyer (collectively, the "BUYER'S FLEX PLAN"); (ii) the elections, contribution
levels and coverage levels of the Retained Employees shall apply under the
Seller's Flex Plan in the same manner as under the Seller's Flex Plan and (iii)
the Retained Employees shall be reimbursed from the Seller's Flex Plan for
claims incurred at any time during the plan year of the
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Seller's Flex Plan in which the Closing Date occurs submitted to the Seller's
Flex Plan from and after the Closing Date on the same basis and the same terms
and conditions as under the Seller's Flex Plan. As soon as practicable after the
Closing Date, and in any event within ten business days after the amount of the
Transferred Account Balances is determined, Seller shall pay Buyer the net
aggregate amount of the Transferred Account Balances, if such amount is
positive, and Buyer shall pay Seller the net aggregate amount of the Transferred
Account Balances, if such amount is negative.
(f) RETENTION OF LIABILITIES BY SELLER. Except as specifically
provided in this Section 5.8: (i) neither Buyer nor any of its Subsidiaries
shall adopt, become a sponsoring employer of or have any obligations under or
with respect to the CM Plans or any Employee Share Schemes operated by Seller or
a member of Seller's Group, and Seller and its Subsidiaries shall be solely
responsible for (and Seller hereby indemnifies Buyer and its Affiliates and the
Group against) any and all Liabilities which have arisen or may arise under or
in connection with any CM Plan or any Employee Share Schemes operated by Seller
or a member of Seller's Group (including Liabilities arising from income or
excise tax assessments, participant benefit claims, fiduciary conduct, or under
Title IV of ERISA) and any and all Liabilities for Taxes in connection with such
plans or schemes (save to the extent such Taxes have been reimbursed to Buyer,
its Affiliates or the Group pursuant to such plan or scheme or Section 5.16(c)
or 5.16(d)) and the settlement of any awards under any Employee Share Schemes
operated by Seller or a member of Seller's Group and (ii) Seller and its
Subsidiaries shall be solely responsible for any and all Severance Benefits of
(and any other liabilities, costs, claims, obligations, expenses and/or demands
relating to) any Non-Retained Employee. Seller and its Subsidiaries shall be
solely responsible for (and Seller hereby indemnifies Buyer and its Affiliates
and the Group against) any liabilities, costs, claims, obligations, expenses
and/or demands arising out of or relating to accrued salaries (not including
bonuses) and wages, vacation and sickness days and deferred employee
compensation for all and any Subsidiary Employees accrued (even though not due
and payable) up until and including Closing.
(g) ASSUMPTION OF LIABILITIES BY BUYER. Except as specifically
provided in this Section 5.8, Buyer and its Subsidiaries shall be solely
responsible for any and all Liabilities (i) which have arisen or may arise under
or in connection with any Subsidiary Plan (including Liabilities arising from
income or excise tax assessments, participant benefit claims, fiduciary conduct,
or under Title IV of ERISA); (ii) relating to or arising out of the employment
of any Retained Employee by Buyer, CMI, CEL and their respective Subsidiaries,
including, without limitation, all Liabilities for Severance Benefits arising
out of or relating to any termination or deemed or constructive termination of
employment of any Retained Employee that occurs at or after the Closing; and
(iii) relating to or arising out of any failure of Buyer to comply with the
covenants set forth in Section 5.8(a).
(h) CLAIMS. Without limiting the generality of Section 5.8(f) above,
and except as specifically provided otherwise herein: (i) Seller and its
Subsidiaries shall be solely responsible for (A) claims for Welfare Benefits
arising under any CM Plans, and for workers' compensation, in each case that are
incurred by or with respect to any Subsidiary Employee before the Closing Date;
(B) claims relating to COBRA Coverage under CM Plans attributable to "qualifying
events" with respect to any Subsidiary Employee and his or her beneficiaries and
dependents that occur on or before the Closing Date and, in both (A) and (B),
Seller and its
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Subsidiaries shall be solely responsible for claims by or with respect to any
Non-Retained Employee on or after the Closing Date; and (ii) Buyer and its
Subsidiaries shall be solely responsible for (A) claims for Welfare Benefits and
for workers compensation, in each case that are incurred by or with respect to
any Retained Employee on or after the Closing Date, and (B) claims relating to
COBRA Coverage attributable to "qualifying events" with respect to any Retained
Employee and his or her beneficiaries and dependents that occur after the
Closing Date. For purposes of the foregoing, a medical/dental claim shall be
considered incurred when the services are rendered, the supplies are provided or
medication is prescribed, and not when the condition arose; PROVIDED that claims
relating to a hospital confinement that begins on or before Closing but
continues thereafter shall be treated as incurred on or before Closing. A
disability or workers' compensation claim shall be considered incurred on or
before Closing if the injury or condition giving rise to the claim occurs on or
before Closing, but only if such claim is actually filed on or before the first
anniversary of Closing.
(i) ANNUAL BONUSES. Seller shall pay and be solely liable for the
annual bonuses of the Retained Employees in respect of the calendar year 2004.
Buyer shall be solely responsible for any and all annual bonus programs for
Retained Employees for calendar year 2005, and shall be solely liable for paying
any bonuses thereunder. Seller shall pay and be solely liable for all
Liabilities arising out of any retention or transaction or stay bonuses that are
or may become due as a result of the transactions to be effected by this
Agreement to any Subsidiary Employee, including without limitation to ▇▇▇▇ ▇▇▇▇▇
and/or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and to any Vice President of any Group Company. Seller
hereby indemnifies Buyer and its Affiliates against all Severance Benefits and
other Liabilities, costs, claims, expenses and demands arising out of ▇▇▇▇ ▇▇▇▇▇
exercising any of his rights pursuant to that certain letter from ▇▇▇▇▇ ▇▇▇▇▇ of
Crown Media Holdings, Inc., dated January 9, 2004.
(j) VACATION, PERSONAL TIME AND SICKNESS DAYS. Buyer shall provide
each Retained Employee with credit for the same number of vacation, personal
time and sickness benefit days he or she has accrued but not used in the
calendar year in which the Closing Date occurs, PROVIDED, that, to the extent
required by law, such amount shall be paid by Buyer in cash. Buyer shall treat
all service accrued or deemed accrued prior to the Effective Time with Seller,
CMI, CEL and their Subsidiaries and their respective predecessors, successors
and assigns as service rendered to Buyer and its Affiliates for purposes of
determining the rate of accrual of vacation benefits, personal time and sick
days for Retained Employees. The amount of any accrued but unpaid vacation and
personal time accrued by Retained Employees shall be properly reflected as a
liability on the Balance Sheet.
(k) RESERVATION OF RIGHTS/TERMINATION OF PARTICIPATION. Nothing
contained in this Agreement shall restrict the ability of Buyer and its
Subsidiaries to terminate the employment of any Retained Employee or Subsidiary
Employees for any reason at any time after Closing. Moreover, nothing contained
in this Agreement shall require Buyer and its Subsidiaries to maintain any
specific Subsidiary Plan or other compensation or employee benefit plan,
program, policy or practice following the Closing Date. As of Closing, all
Retained Employees shall cease to participate as active employees in or accrue
any additional benefits under any CM Plans.
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(l) SAVINGS CLAUSE. In no event shall any party hereto be required to
comply with the provisions of this Section 5.8 to the extent that such
provisions violate applicable law. With respect to any provision of this Section
5.8 that conflicts with applicable law or is finally determined by a court of
competent jurisdiction to be unenforceable, the parties hereto hereby agree that
such provision shall be reformed so that it is enforceable to the maximum extent
permitted by law. If any of the provisions of this Section 5.8 are determined to
be wholly or partially unenforceable in any jurisdiction, such determination
shall not be a bar to or in any way diminish the rights of the parties to
enforce any such provision in any other jurisdiction. The invalidity or
unenforceability of any provision of this Section 5.8 shall not affect the
validity or enforceability of any other provision of this Agreement.
5.9 THIRD PARTY CONSENTS. (a) Other than as set forth in subsection
(b) below, the parties hereto shall reasonably cooperate to obtain any required
third party consents and waivers pursuant to Section 6.2(c) and to obtain the
fully executed and delivered Novation Agreements pursuant to Section 5.14(a). To
the extent any Novation Agreement shall not be fully executed and delivered,
Buyer shall enter into a Guaranty and Indemnity Agreement in respect thereto
substantially in the form set forth on Exhibit I hereto.
(b) With respect to the Contracts set forth on Schedule 5.9(b), Seller
shall use its reasonable best efforts, including as set forth on Section 5.9(b),
to obtain any required third party consents or waivers prior to Closing, or as
soon thereafter as practicable, PROVIDED, that the manner in which Seller
exercises such efforts shall be in its sole discretion. In the event that Seller
is unable to obtain such required consents or waivers and any Contract set forth
on Schedule 5.9(b) is terminated, Seller shall reimburse Buyer in respect of
such Contract in an amount equal to the cost of services that are, in Buyer's
reasonable opinion, substantially equivalent to those as provided under such
Contract immediately prior to Closing, less the amount that would have otherwise
been payable under such Contract following Closing pursuant to its terms in the
event such Contract had not been so terminated, PROVIDED that Seller shall also
be responsible for any termination costs, fees, accelerated payments or
penalties in respect of the termination of such Contracts; PROVIDED, FURTHER,
that nothing in this Section 5.9(b) shall relieve Buyer from its Liability for
that amount that would have otherwise been payable under such Contract following
Closing pursuant to its terms in the event such Contract had not been so
terminated.
5.10 DISTRIBUTIONS. At any time and from time to time prior to the
Closing Date, Seller shall have the right to cause CMI, CEL or any of their
Subsidiaries to declare any distribution of, or pay, distribute or dividend any
cash, profits, surplus, capital, distributable reserves, retained earnings or
Retained Assets of CMI, CEL or any of their Subsidiaries.
5.11 NO ADDITIONAL REPRESENTATIONS. Buyer acknowledges that it and its
representatives have received access to such books and records, facilities,
equipment, contracts and other assets of CMI, CEL and their Subsidiaries which
it and its representatives have desired or requested to review, and that it and
its representatives have had full opportunity to meet with the management of
Seller and its Subsidiaries to discuss the businesses and assets of CMI, CEL and
their Subsidiaries. Buyer acknowledges that neither Seller nor any other Person
has made any representation or warranty, expressed or implied, as to the
accuracy or completeness of any information regarding CMI, CEL or their
Subsidiaries furnished or made available to Buyer and
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its representatives except as expressly set forth in this Agreement (which
includes the Schedules hereto), and neither Seller nor any other Person shall
have or be subject to any liability to Buyer or any other Person resulting from
Seller's making available to Buyer or Buyer's use of any such information,
including the presentation materials delivered to Buyer by UBS Securities LLC
and dated May 12, 2004, as subsequently updated, supplemented or amended (the
"CONFIDENTIAL MEMORANDUM") or any information, documents or material made
available to Buyer in certain "data rooms," other management presentations
(formal or informal) or in any other form in connection with the transactions
contemplated hereby. Without limiting the foregoing, and except as expressly set
forth in this Agreement (including the schedules hereto), Seller makes no
representation or warranty to Buyer with respect to (a) the information set
forth in the Confidential Memorandum or (b) any financial projection or forecast
relating to Seller or its Subsidiaries, whether or not included in the
Confidential Memorandum.
5.12 UPDATING SCHEDULES. From and after the date of this Agreement and
through the Closing Date, each party hereto agrees to notify the other parties
if any information disclosed, or required to be disclosed, in the Schedules to
this Agreement becomes incomplete, untrue, obsolete or inaccurate in any
material respect. Any such notice or update to any Schedule to this Agreement
shall not affect the rights of any party hereunder; PROVIDED, HOWEVER, that for
purposes of Article 8 of this Agreement, the representations and warranties
shall be qualified by any information provided pursuant to this Section. For the
avoidance of doubt, no information provided pursuant to this Section shall, for
the purposes of Article 8, qualify the representations and warranties as of the
date of this Agreement.
5.13 FINANCING COMMITMENTS. Buyer shall not amend or otherwise modify
the Commitments attached hereto in any manner that would materially adversely
affect Seller or materially delay the consummation of the transactions
contemplated hereby. Buyer shall use its reasonable best efforts to cause the
closing conditions in the Commitments which are wholly within its control to be
satisfied, and shall use its commercially reasonable efforts to cause the
closing conditions in the Commitments which are not wholly within its control to
be satisfied. Buyer shall enforce its rights under the Commitments. In the event
that any portion of such financing contemplated by the Commitments becomes
unavailable, regardless of the reason therefor, Buyer shall use its reasonable
efforts to obtain alternative financing as promptly as practicable from other
sources.
5.14 ADDITIONAL AGREEMENTS. (a) At or prior to Closing, Buyer shall
enter into (i) a Lease Guaranty Novation Agreement substantially in the form set
forth on Exhibit F hereto; (ii) a KSE Media Novation Agreement substantially in
the form set forth on Exhibit G hereto and (iii) a Universal Programming
Novation Agreement substantially in the form set forth on Exhibit H hereto
(collectively, the "NOVATION AGREEMENTS") or, to the extent any Novation
Agreement shall not be fully executed and delivered, Buyer shall enter into a
Guaranty and Indemnity Agreement in respect thereto substantially in the form
set forth on Exhibit I hereto.
(b) The parties hereto acknowledge and agree that, notwithstanding
anything contained herein to the contrary, neither this Agreement nor the
transactions contemplated hereby shall in any way grant any rights, title or
interest in or to the names, logos or marks which include the words "Hallmark"
or "Crown," the crown symbol or any derivative thereof or thereto, whatsoever;
PROVIDED, that Buyer and the Group shall be permitted by Seller to continue
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to use the name "Crown" as prior to the Closing Date for a period of 12 months
following the Closing Date. On or before the 12-month anniversary of the Closing
Date, (i) Buyer shall, and shall cause CMI, CEL and their respective
Subsidiaries to (i) amend the organizational documents of CMI, CEL and their
respective Subsidiaries to change their names to a name which does not include
"Crown" or any other similar names and (ii) remove all names, logos or marks
which include such words from, or render the same illegible on, all assets,
signage, supplies and stationary, owned or used by CMI, CEL or any of their
Subsidiaries.
(c) Seller shall be responsible solely for the programming license
fees incurred by CMI, Buyer, or Buyer's nominee, as applicable, for the period
beginning at the Closing Date and ending on the expiry of the two-month period
following the Closing Date pursuant to the terms and conditions of the Amended
Program License Agreement in effect as of the Closing Date (the "LICENSE FEES").
For clarification purposes, the amount of any License Fees shall be determined
as follows:
a = the quotient of b divided by c multiplied by d
where:
a = the amount of any License Fees;
b = the number of days for which a Window is open during the
two-month period following the Closing Date;
c = the total number of days within the relevant Window; and
d = the total license fee payable in respect of the relevant
Window.
In no event shall Seller have any liability for any license fees, costs or
other obligations under the Program License Agreement or the Amended Program
License Agreement arising out of or related to any amendment, renewal or
other modification to the Program License Agreement or the Amended Program
License Agreement entered into after the Closing Date, PROVIDED, that no
amendment, renewal or other modification to the Program License Agreement or
the Amended Program License Agreement entered into following the Closing Date
shall reduce or otherwise discharge Seller's obligations hereunder unless
expressly set forth therein. Notwithstanding anything to the contrary, but
other than as a result of Seller's breach of its payment obligations under
this Section 5.14(c) Seller shall not be responsible for any liability
arising out of or related to any breach of the Program License Agreement or
the Amended Program License Agreement or failure to perform any obligation
under the Program License Agreement or the Amended Program License Agreement,
or any other act or omission by any Person that causes any other liability
under the Program License Agreement or the Amended Program License Agreement,
where such breach, failure, act or omission occurs after Closing. Buyer
shall, or shall cause its nominee to, promptly provide Seller, or its
designee, with all information necessary to enable Seller to calculate and
pay promptly when due the License Fees. Buyer shall, or shall cause its
nominee to, promptly provide Seller, or its designee, with notice of any
amendment, termination, renewal, extension or other modification to the
Amended Program License Agreement, together with a copy thereof.
(d) Seller shall be responsible solely for payments of the Service
Charge (as defined in the Hot Bird Contract but being deemed for the purposes of
this Section 5.14(d) to
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include: (i) any interest that may become payable by CMI under the Hot Bird
Contract in respect of any Service Charge as a result of Seller's failure to
timely pay the Service Charges required under this provision and (ii) any Taxes
(other than VAT) that may become payable by CMI in respect of any Service Charge
pursuant to the terms of the Hot Bird Contract in effect as of the Closing Date)
that become due and payable by or accrue in respect of CMI during the period
beginning with the Closing Date and ending on November 30, 2008 pursuant to the
terms and conditions of the Hot Bird Contract in effect as of the Closing Date;
PROVIDED, that, in the event that any services to be provided by BT under the
Hot Bird Contract become unavailable prior to such date (in whole or in part) in
circumstances where CMI is excused from its obligation to pay for such services
under the Hot Bird Contract (in whole or in part), Seller shall be responsible
for any Termination Payments (as defined in the Hot Bird Contract) (including
interest payments) and any other payments for transponder services obtained by
Buyer (substantially similar to those provided under the Hot Bird Contract prior
to such unavailability); PROVIDED, FURTHER, notwithstanding anything contained
herein to the contrary, at no time shall Seller be liable to Buyer for
Termination Payments or other amounts in excess of the remaining Service Charges
as would have been payable pursuant to the terms of the Hot Bird Contract had
the Hot Bird Contract continued on its terms as of the Closing Date through
November 30, 2008. In no event shall Seller have any liability for any Service
Charge, fee, cost or other obligation under the Hot Bird Contract arising out of
or related to any amendment, renewal, extension or other modification to the Hot
Bird Contract entered into after the Closing Date; PROVIDED, that no amendment,
renewal, extension or other modification to the Hot Bird Contract entered into
following the Closing Date shall reduce or otherwise discharge Seller's
obligations hereunder unless expressly set forth therein. Notwithstanding
anything to the contrary, but other than as a result of Seller's breach of its
payment obligations under this Section 5.14(d), Seller shall not be responsible
for any liability arising out of or related to any breach of the Hot Bird
Contract or failure to perform any obligation under the Hot Bird Contract, or
any other act or omission by any Person that causes any other liability under
the Hot Bird Contract, where such breach, failure, act or omission occurs after
Closing. Buyer shall, or shall cause CMI to, promptly provide Seller, or its
designee, with notice of any amendment, termination, renewal, extension or other
modification to the Hot Bird Contract, together with a copy thereof. If Seller
fails to pay any amount of the Service Charge as it falls due in accordance with
the terms of the Hot Bird Contract, upon 48 hours prior written notice by Buyer
to Seller, Buyer shall be entitled to pay such amount directly to BT, and Seller
shall promptly reimburse to Buyer such amount. Seller shall pay to CMI at the
same time it pays the Service Charge to BT any amount of the Service Charge that
would have been payable to BT but for the application of any Service Credits (as
defined in the Hot Bird Contract) by BT in respect of the relevant period.
(e) Seller shall be responsible for payments of the Lease Fee (as
defined in the PAS-9 Agreement but being deemed for the purposes of this Section
5.14(e) to include: (i) any interest that may become payable by CMI under the
PAS-9 Agreement in respect of any Lease Fee as a result of Seller's failure to
timely pay the Lease Fees required under this provision and (ii) any Taxes
(other than VAT) that may become payable by CMI in respect of any Lease Fee
pursuant to the terms of the PAS-9 Agreement in effect as of the Closing Date)
solely to the extent in respect of the reorganization charge related to Seller's
2002 reorganization, in an amount equal to that amount set forth on the Closing
Statement under the line item "Reorganization Provision" related to the PAS-9
Agreement (which shall be expressed as a gross amount and not as a net present
value of a gross amount and for clarification purposes, the net
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present value of such amount, applying a discount rate of 8.75% per annum, was
$5,520,689.08 as of December 31, 2004) that become due and payable by or accrue
in respect of CMI during the period beginning with the Closing Date and ending
on March 31, 2011 pursuant to the terms and conditions of the PAS-9 Agreement in
effect as of the Closing Date; PROVIDED, that, in the event that the any
services to be provided by PanAmSat International Systems, Inc. under the PAS-9
Agreement become unavailable prior to such date (in whole or in part) in
circumstances where CMI is excused from its obligation to pay for such services
under the PAS-9 Agreement (in whole or in part), Seller shall be responsible for
any Termination Payments (as defined in the PAS-9 Agreement) (including interest
payments) and any other payments for transponder services obtained by Buyer
(substantially similar to those provided under the PAS-9 Agreement prior to such
unavailability); PROVIDED, FURTHER, notwithstanding anything contained herein to
the contrary, at no time shall Seller be liable to Buyer for Termination
Payments or other amounts in excess of the remaining Lease Fees as would have
been payable pursuant to the terms of the PAS-9 Agreement had the PAS-9
Agreement continued on its terms as of the Closing Date through March 31, 2011.
In no event shall Seller have any liability for any Lease Fee, cost or other
obligation under the PAS-9 Agreement arising out of or related to any amendment,
renewal, extension or other modification to the PAS-9 Agreement entered into
after the Closing Date; PROVIDED, that no amendment, renewal, extension or other
modification to the PAS-9 Agreement entered into following the Closing Date
shall reduce or otherwise discharge Seller's obligations hereunder unless
expressly set forth therein. Notwithstanding anything to the contrary, but other
than as a result of Seller's breach of its payment obligations under this
Section 5.14(e), Seller shall not be responsible for any liability arising out
of or related to any breach of the PAS-9 Agreement or failure to perform any
obligation under the PAS-9 Agreement, or any other act or omission by any Person
that causes any other liability under the PAS-9 Agreement, where such breach,
failure, act or omission occurs after Closing. Buyer shall, or shall cause CMI
to, promptly provide Seller, or its designee, with notice of any amendment,
termination, renewal, extension or other modification to the PAS-9 Agreement,
together with a copy thereof. If Seller fails to pay any amount of the Lease Fee
(solely to the extent in respect of the reorganization charge related to
Seller's 2002 reorganization) as it falls due in accordance with the terms of
the PAS-9 Agreement, upon 48 hours prior written notice by Buyer to Seller,
Buyer shall be entitled to pay such amount directly to PanAmSat International
Systems, Inc., and Seller shall promptly reimburse to Buyer such amount.
(f) Seller shall be responsible for payments of the Rental Amount (as
defined in Section 4.02 of the APSTAR-IIR Agreement but being deemed for the
purposes of this Section 5.14(f) to include (i) any interest that may become
payable by CMI under the APSTAR-IIR Agreement in respect of any Rental Amount as
a result of Seller's failure to timely pay the Rental Amounts required under
this provision and (ii) any Taxes (other than VAT) that may become payable by
CMI in respect of any Rental Amount pursuant to the terms of the APSTAR-IIR
Agreement in effect as of the Closing Date) solely to the extent in respect of
the reorganization charge related to Seller's 2002 reorganization, in an amount
equal to that amount set forth on the Closing Statement under the line item
"Reorganization Provision" related to the APSTAR-IIR Agreement (which shall be
expressed as a gross amount and not as a net present value of a gross amount and
for clarification purposes, the net present value of such amount, applying a
discount rate of 8.75% per annum, was $3,559,871.34 as of December 31, 2004)
that become due and payable by or accrue in respect of CMI during the period
beginning with the Closing Date and ending on July 1, 2008 pursuant to the terms
and conditions of the APSTAR-
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IIR Agreement in effect as of the Closing Date; PROVIDED, that in the event that
any services to be provided by APT Satellite Enterprise Limited under the
APSTAR-IIR Agreement become unavailable prior to such date (in whole or in part)
in circumstances where CMI is excused from its obligation to pay for such
services under the APSTAR-IIR Agreement (in whole or in part), Seller shall be
responsible for any termination payments (as required under the APSTAR-IIR
Agreement) (including interest payments) and any other payments for transponder
services obtained by Buyer (substantially similar to those provided under the
APSTAR-IIR Agreement prior to such unavailability); PROVIDED, FURTHER,
notwithstanding anything contained herein to the contrary, at no time shall
Seller be liable to Buyer for amounts in excess of the remaining Rental Amounts
as would have been payable pursuant to the terms of the APSTAR-IIR Agreement had
the APSTAR-IIR Agreement continued on its terms as of the Closing Date through
July 1, 2008. In no event shall Seller have any liability for any Rental Amount,
fee, cost or other obligation under the APSTAR-IIR Agreement arising out of or
related to any amendment, renewal, extension or other modification to the
APSTAR-IIR Agreement entered into after the Closing Date; PROVIDED, that no
amendment, renewal, extension or other modification to the APSTAR-IIR Agreement
entered into following the Closing Date shall reduce or otherwise discharge
Seller's obligations hereunder unless expressly set forth therein.
Notwithstanding anything to the contrary, but other than as a result of Seller's
breach of its payment obligations under this Section 5.14(f), Seller shall not
be responsible for any liability arising out of or related to any breach of the
APSTAR-IIR Agreement or failure to perform any obligation under the APSTAR-IIR
Agreement, or any other act or omission by any Person that causes any other
liability under the APSTAR-IIR Agreement, where such breach, failure, act or
omission occurs after Closing. Buyer shall, or shall cause CMI to, promptly
provide Seller, or its designee, with notice of any amendment, termination,
renewal, extension or other modification to the APSTAR-IIR Agreement, together
with a copy thereof. If Seller fails to pay any amount of the Rental Amount
(solely to the extent in respect of the reorganization charge related to
Seller's 2002 reorganization) as it falls due in accordance with the terms of
the APSTAR-IIR Agreement, upon 48 hours prior written notice by Buyer to Seller,
Buyer shall be entitled to pay such amount directly to APT Satellite Enterprise
Limited, and Seller shall promptly reimburse to Buyer such amount.
(g) Seller shall pay to Buyer or Buyer's nominee, such amounts as are
equal to the rental charges due and payable by or accruing in respect of CMI
under the High Pointe Lease from time to time, one business day in advance of
such rental charges becoming due and payable, solely to the extent in respect of
the reorganization charge related to Seller's 2002 reorganization, in an amount
equal to that amount set forth on the Closing Statement under the line item
"Reorganization Provision" related to the High Pointe Lease (which shall be
expressed as a gross amount and not as a net present value of a gross amount and
for clarification purposes, the net present value of such amount, applying a
discount rate of 8.75% per annum, was $1,060,104.00 as of December 31, 2004)
during the period beginning with the Closing Date and ending on September 10,
2008 pursuant to the terms and conditions of the High Pointe Lease in effect as
of the Closing Date. In no event shall Seller have any liability for any rental
charges, fees, costs or other obligations under the High Pointe Lease arising
out of or related to any amendment, renewal, extension or other modification to
the High Pointe Lease entered into after the Closing Date; PROVIDED, that no
amendment, renewal, extension or other modification to the High Pointe Lease
entered into following the Closing Date shall reduce or otherwise discharge
Seller's obligations hereunder unless expressly set forth therein.
Notwithstanding anything to
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the contrary, but other than as a result of Seller's breach of its payment
obligations under this Section 5.14(g), Seller shall not be responsible for any
liability arising out of or related to any breach of the High Pointe Lease or
failure to perform any obligation under the High Pointe Lease, or any other act
or omission by any Person that causes any other liability under the High Pointe
Lease, where such breach, failure, act or omission occurs after Closing. Buyer
shall, or shall cause CMI to, promptly provide Seller, or its designee, with
notice of any amendment, termination, renewal, extension or other modification
to the High Pointe Lease, together with a copy thereof.
(h) Following Closing, Seller shall make available to Buyer such
information as Buyer may reasonably request relating to insurance coverage of
the Group to the extent in respect of a potential loss by the Group. Following
Closing, Buyer may notify to Seller claims under insurance policies held or
previously held by Seller or another member of Seller's Group in respect of
insured losses or liabilities of any Group Company incurred or suffered by such
Group Company prior to Closing. Seller shall, and shall procure that members of
Seller's Group shall, subject to Buyer indemnifying Seller to Seller's
reasonable satisfaction against all reasonable out-of-pocket expenses in this
respect, use commercially reasonable efforts to make a recovery under any such
policy of insurance. For the avoidance of doubt, the parties hereto acknowledge
and agree that, following the Closing Date, Seller shall not be obligated to
maintain or otherwise provide any insurance coverage in favor of the Group or
its properties or assets.
5.15 TAX MATTERS.
(a) COOPERATION AND EXCHANGE OF INFORMATION. Seller and Buyer shall
provide each other, and Seller shall cause the relevant member of Seller's Group
to provide Buyer, with such assistance as may reasonably be requested by each of
them in connection with (i) the preparation of any Tax Returns required to be
filed (x) by any Group Company (or with respect to the income, properties or
operations of CMI or CEL) or (y) with respect to the CMI Membership Interests
and the CEL Shares and (ii) any audit or other examination by any Tax authority
or any judicial or administrative proceedings relating to such Tax Returns.
Seller, Buyer and the relevant Member of Seller's Group shall retain for the
full period of any statute of limitations all Tax Returns, schedules and work
papers, and all material records and other documents relating to Tax matters, of
the Group Companies, and shall provide to each other, any records or information
reasonably requested in connection with the preparation of such Tax Returns or
any audit, examination or proceeding relating to such Tax Returns.
(b) TAX RETURNS.
(i) Seller shall prepare and file (or cause to be prepared and
filed) in a timely manner all Tax Returns of CMI, CEL and any of their
Subsidiaries (and with respect to the income, properties or operations
of CMI and CEL) that are due on or before the Closing Date. Seller
shall prepare such Tax Returns, and each item thereon shall be
treated, in a manner consistent with past practices employed by CMI,
CEL and their respective Subsidiaries, as appropriate, unless
otherwise required by law; PROVIDED, HOWEVER, that for the avoidance
of doubt the foregoing shall not apply to any Tax Returns of Seller's
Affiliated Group.
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(ii) Buyer shall prepare and file (or cause to be prepared and
filed) in a timely manner all Tax Returns of CMI, CEL and any of their
Subsidiaries (and with respect to the income, properties or operations
of CMI and CEL) for any Pre-Closing Period that are due after the
Closing Date and for any Straddle Period. Buyer shall prepare such Tax
Returns, and each item thereon shall be treated, in a manner
consistent with past practices employed by CMI, CEL and their
respective Subsidiaries, as appropriate, unless otherwise required by
law. Buyer shall provide Seller with a copy of such completed Tax
Return (and, in the case of any Tax Return for a Straddle Period, a
statement certifying the amount of Tax shown on such Tax Return that
is allocable to Seller in accordance with Section 5.15(f) hereof),
together with appropriate supporting information and schedules, at
least 20 business days prior to the due date (including any extension
thereof) for the filing of such Tax Return. Seller shall have the
right to review and comment on such Tax Returns prior to the filing
thereof. In the case of any Tax Return for a Pre-Closing Period, Buyer
shall make any changes reasonably requested by Seller with respect to
any such Tax Return. No Tax Return for a Pre-Closing Period shall be
filed without Seller's prior written approval (which approval shall
not be unreasonably withheld, conditioned or delayed).
(iii) Buyer shall prepare and file (or cause to be prepared and
filed) in a timely manner all Tax Returns of CMI, CEL and any of their
Subsidiaries (and with respect to the income, properties or operations
of CMI and CEL) for any Post-Closing Period.
(c) TAX PAYMENTS.
(i) Seller shall pay (or cause to be paid) to the relevant Tax
authority all Taxes shown on Tax Returns required to be filed by
Seller pursuant to Section 5.15(b)(i) hereof on or prior to the due
date for payment thereof.
(ii) Buyer shall pay (or cause to be paid) to the relevant Tax
authority all Taxes shown on Tax Returns required to be filed by Buyer
pursuant to Section 5.15(b)(ii) hereof on or prior to the due date for
payment thereof. Seller shall remit to Buyer (x) the amount of such
Taxes, in the case of Pre-Closing Periods or (y) the portion of such
Taxes that is allocable to Seller in accordance with Section 5.15(g)
hereof, in the case of Straddle Periods (except, in each case, to the
extent reflected in the calculation of Net Capital). Payment of such
amounts shall be made to Buyer in immediately available funds at least
two business days before the date on which such Taxes are due.
(iii) Buyer shall pay (or cause to be paid) to the relevant Tax
authority all Taxes shown on Tax Returns required to be filed by Buyer
pursuant to Section 5.15(b)(iii) hereof on or prior to the due date
for payment thereof.
(d) TAX INDEMNITY. Except to the extent reflected in the calculation
of Net Capital, Seller shall defend, indemnify and hold Buyer and each Group
Company harmless from and against any (i) Taxes of or with respect to CMI, CEL
or any of their Subsidiaries, or for
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which any of them may be liable, for any Pre-Closing Period (or portion of a
Straddle Period ending on the Closing Date), (ii) Taxes of or which are
primarily the liability of Seller's Affiliated Group and (iii) any Taxes imposed
on any Group Company arising as a result of a breach of the representations and
warranties contained in Section 3.11, in each case together with reasonable
out-of-pocket attorneys' and accountants' fees and, in each case, without
duplication of amounts previously paid by Seller pursuant to Section 5.15(c)(i).
Indemnity payments under this Section 5.15(d) shall be made to Buyer in
immediately available funds at least two business days before the date payment
of the Taxes to which such payment relates is due, or, if such Tax has been paid
by Buyer or any of its Affiliates, within ten days after written demand is made
for such payment.
(e) TAX REFUNDS/BENEFITS. Any credit which has the result of reducing
the Tax payable by a Group Company in any Post-Closing Period and any Tax credit
or refund (including any interest with respect thereto), in each case relating
to CMI, CEL and any of their Subsidiaries for any Pre-Closing Period (or portion
of any Straddle Period ending on the Closing Date) shall be the property of
Seller, and if received by Buyer, CEL, CMI or any of their Subsidiaries shall be
payable promptly to Seller (other than any credit or Tax refund that arises out
of the carry back of a loss or credit incurred by any Group Company in the
Post-Closing Period). Any other Tax refund or credit shall be the property of
Buyer.
(f) CONTESTS.
(i) After the Closing, Buyer shall promptly notify Seller in
writing of (x) any correspondence from any Tax authority relating to
any Tax Return filed by Seller pursuant to Section 5.15(b)(i) or by
Buyer pursuant to Section 5.15(b)(ii) and (y) any written notice of a
proposed assessment or claim in an audit or administrative or judicial
proceeding involving CMI, CEL or any of their Subsidiaries (clauses
(x) and (y) together, a "TAX CONTEST") which, if determined adversely
to the taxpayer, would be grounds for indemnification by Seller
(including any payment under Section 5.15(c)); PROVIDED, HOWEVER, that
a failure to give such notice will not affect Buyer's right to
indemnification (including any payment under Section 5.15(d))
hereunder except to the extent, if any, that, but for such failure,
such Group Company and Seller could have avoided the Tax liability in
question.
(ii) In the case of a Tax Contest that relates to a Pre-Closing
Period, Seller shall have the right at its expense to control the
conduct of such Tax Contest; PROVIDED that (x) Seller shall indemnify
any Group Company in respect of all third-party costs and expenses
incurred by such Group Company at Seller's request in connection with
such Tax Contest, (y) Seller shall keep Buyer informed of all material
progress (and shall send Buyer copies of all material correspondence
relating thereto) of the Tax Contest and (z) Seller shall not enter
into any compromise or agree to settle any claim pursuant to such Tax
Contest with respect to any issue that recurs for any Straddle Period
or Post-Closing Period or any item resulting in a reciprocal
adjustment to any Straddle Period or Post-Closing Period without the
prior written consent of Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed). Buyer also may
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participate at its own expense in any such Tax Contest and, if Seller
does not notify Buyer within 30 days of receiving notice of such Tax
Contest pursuant to Section 5.15(e)(i) hereof of its intent to assume
the defense of such Tax Contest, Buyer may defend the same in such
manner as it may deem appropriate, including, but not limited to,
settling such Tax Contest after giving five days' prior written notice
to Seller setting forth the terms and conditions of settlement.
(iii) In the case of a Tax Contest that relates to a Straddle
Period, (x) each of Seller and Buyer may participate in the Tax
Contest, and (y) the Tax Contest shall be controlled by that party
which would bear the burden of the greater portion of the adjustment
(the "CONTROLLING PARTY"); PROVIDED that (a) the Controlling Party
shall indemnify any Group Company in respect of all third-party costs
and expenses incurred by such Group Company at the Controlling Party's
request in connection with such Tax Contest, (b) the Controlling Party
shall keep the other party informed of all material progress (and
shall send such party copies of all material correspondence relating
thereto) of the Tax Contest and (c) if Seller is the Controlling
Party, Seller shall not enter into any compromise or agree to settle
any claim pursuant to such Tax Contest with respect to any issue that
recurs for any Straddle Period or Post-Closing Period or any item
resulting in a reciprocal adjustment to any Straddle Period or
Post-Closing Period without the prior written consent of Buyer (which
consent shall not be unreasonably withheld, conditioned or delayed).
The principle set forth in clause (b) of the preceding sentence also
shall govern for purposes of deciding any issue that must be decided
jointly (in particular, choice of judicial forum) in situations in
which separate issues are otherwise controlled hereunder by Buyer and
Seller.
(iv) In the case of a Tax Contest that relates to a Post-Closing
Period, Buyer shall have the right at its expense to control the
conduct of such Tax Contest.
(v) Except as provided in paragraph (ii) above, neither Buyer nor
Seller shall enter into any compromise or agree to settle any claim
pursuant to any Tax Contest which would adversely affect the other
party for such year or a subsequent year, or which would result in a
payment under Section 5.15(d), without the written consent of the
other party, which consent may not be unreasonably withheld. Buyer and
Seller agree to cooperate, and Buyer agrees to cause CMI, CEL and any
of their Subsidiaries to cooperate, in the defense against or
compromise of any claim in any Tax Contest.
(g) ALLOCATION OF TAX FOR STRADDLE PERIODS. With respect to any Tax
that is payable with respect to a Straddle Period, the portion of any such Tax
allocable to the portion of the period ending on the Closing Date shall be
deemed to equal: (i) in the case of Taxes that are based upon or related to
income or receipts, the amount that would be payable if the taxable year ended
with the Closing Date (giving effect to any Tax credit or net operating loss
carryover available as of the Closing Date), and (ii) in the case of Taxes
imposed on a periodic basis and measured by the level of any item, the amount of
such Taxes for the entire period multiplied by a
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fraction the numerator of which is the number of calendar days in the period
ending with the Closing Date and the denominator of which is the number of
calendar days in the entire period.
(h) MISCELLANEOUS. On and prior to the Closing Date, Seller and the
relevant members of Seller's Group shall not, without the prior written consent
of Buyer (which consent shall not be unreasonably withheld, conditioned or
delayed) make or revoke, or cause or permit to be made or revoked, any Tax
election of any Group Company, or adopt or change any method of accounting of
any Group Company, in each case that would adversely affect such Group Company
after the Closing Date.
(i) TAX RETURNS OF SELLER'S AFFILIATED GROUP. Notwithstanding any
other provision of this Agreement, (i) Seller's Affiliated Group shall be
entitled to control in all respects, and neither Buyer nor any of its Affiliates
shall be entitled to participate in, any Tax Contest or other Tax proceeding
with respect to any consolidated, combined or unitary Tax Return that includes
any member of Seller's Affiliated Group and (ii) no member of Seller's
Affiliated Group shall be required to provide any person with any consolidated,
combined or unitary Tax Return or copy thereof that includes any member of
Seller's Affiliated Group (PROVIDED, HOWEVER, that to the extent that such Tax
Returns would be required to be delivered but for this Section 5.15(i), the
person that would be required to deliver such Tax Returns shall instead deliver
pro forma Tax Returns relating solely to the relevant Group Company).
5.16 POST-CLOSING WITHHOLDING OBLIGATIONS. If (i) any of the shares in
Seller or any member of Seller's Group (including Crown Media Holdings, Inc.)
are acquired by, released to or otherwise vest in any Subsidiary Employees or
former Subsidiary Employees under any Benefit Plan and (ii) that event would
give rise to an obligation on Buyer's group to account to the Inland Revenue or
any other authority wherever situated any liability for Tax (including without
limitation employers' and employees' national insurance contributions or any
other tax or social security liabilities in any jurisdiction) arising in respect
of such acquisition, release or vesting:
(a) Seller shall permit the Subsidiary Employees and former Subsidiary
Employees to participate after Closing in any facility it or any member of
Seller's Group operates to allow for the collection of Tax liabilities;
(b) Seller shall notify Buyer of such acquisition, release or vesting
within seven days and shall in such notice include the identity of the
Subsidiary Employee or former Subsidiary Employee, the price, if any, being paid
for the shares, the number of shares, and market value of shares and the date on
which such Tax liabilities arose together with any further information which may
be required to calculate such Tax liabilities;
(c) Seller shall require the relevant Subsidiary Employee or former
Subsidiary Employee to pay to his employer, former employer or Seller an amount
equal to the Tax liabilities (other than employers' national insurance
contributions or employers' social security liabilities in any jurisdiction) and
Seller shall, except to the extent that Seller has made payment to Buyer in
respect thereof pursuant to Section 5.15(d), account to Buyer forthwith on
receipt of any sums received by Seller and Buyer shall pay such sums received
from Seller to the Inland Revenue or other relevant authority forthwith, and
Buyer shall indemnify and hold harmless
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Seller against any Liability related to Buyer's failure to pay such sums to
Inland Revenue or other relevant authority forthwith; and
(d) Seller shall, except to the extent that Seller has made payment to
Buyer in respect thereof pursuant to Section 5.15(d), pay to Buyer an amount
equal to the employers' national insurance contributions or employers' social
security liabilities in any jurisdiction arising in respect of such acquisition,
release or vesting, and Buyer shall pay such sums received from Seller to the
Inland Revenue or other relevant authority forthwith, and Buyer shall indemnify
and hold harmless Seller against any Liability related to Buyer's failure to pay
such sums to Inland Revenue or other relevant authority forthwith.
(e) Seller agrees to make all returns of information required to be
supplied in respect of any Benefit Plan to all relevant tax authorities wherever
situated within the appropriate time limits and to supply copies of the returns
to Buyer within 14 days after Seller files the returns with the relevant tax
authorities.
5.17 CONFIDENTIALITY. (a) In respect of Confidential Information of or
relating to Seller's Group or Seller's Affiliated Group ("SELLER CONFIDENTIAL
INFORMATION"), Buyer shall not, and shall procure that no Affiliate of Buyer or
any director, officer or employee or adviser or agent of Buyer shall, use or
disclose to any person any Seller Confidential Information, and (b) in respect
of Confidential Information of or relating to Buyer ("BUYER CONFIDENTIAL
INFORMATION"), Seller shall not, and shall procure that no other member of
Seller's Group or Seller's Affiliated Group or any director, officer or employee
or adviser or agent of Seller's Group or Seller's Affiliated Group shall, use or
disclose to any person any Buyer Confidential Information. Clauses (a) and (b)
do not apply (where the party receiving the Confidential Information is the
"RECEIVING PARTY") to (i) Confidential Information which at the time of
disclosure to the Receiving Party was generally available to the public other
than by a breach of clauses (a) and (b), (ii) Confidential Information which was
already in the possession of the Receiving Party on a non-confidential basis
prior to disclosure to such Receiving Party, (iii) Confidential Information
which becomes available to the Receiving Party on a non-confidential basis from
a third party, PROVIDED that such third party is not known by such Receiving
Party to be in breach of an obligation of confidentiality in respect of such
Confidential Information, (iv) disclosure by Seller of Buyer Confidential
Information to or at the written request of Buyer, (v) disclosure by Buyer of
Seller Confidential Information to or at the written request of Seller, (vi) use
or disclosure of Confidential Information required to be disclosed by law,
regulation, any revenue authority or any listing authority or exchange, or (vii)
disclosure of Confidential Information to affiliates, officers, directors,
employees, agents, representatives, professional advisers (including legal
counsel, accountants and auditors) for the purpose of advising Seller or Buyer
(as applicable) (each a "RELATED PARTY"), PROVIDED, that such Related Party
shall be instructed as to the confidential nature of such Confidential
Information.
5.18 INDEMNITY. Seller shall defend, indemnify and hold the
Indemnified Buyers harmless from and against any and all Losses which may be
incurred or suffered by the Indemnified Buyers or any of them, arising out of or
relating to (a) HEN (L) Limited, a company registered in Labuan or (b) the
termination or purported termination of that certain Channel Distribution
Agreement, dated as of April 1, 2000, by and between Crown Media, Inc. (n/k/a/
Crown Media International, LLC) and TVTEL Grande Porto-Communicacoes, S.A.,
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PROVIDED that such indemnification shall be net of any amounts received by Buyer
or any of its Affiliates, including without limitation (after Closing), any
Group Company, in respect of such contract.
5.19 VOTING; SUBSIDIARY INTERESTS. (a) Seller acknowledges that,
immediately following Closing until such time as the transfer(s) of the
Purchased Interests have been registered in the register of members of CEL or
CMI (as the case may be), Seller will hold the Purchased Interests registered in
its name on trust for and as nominee for Buyer or its nominees and undertakes to
hold all dividends and distributions and exercise all voting rights available in
respect of the Purchased Interests in accordance with the directions of Buyer or
its nominees and if Seller is in breach of the undertakings contained in this
Section 5.19 Seller irrevocably authorises Buyer to appoint some person or
persons to execute all instruments or proxies (including consents to short
notice) or other documents which Buyer or its nominees may reasonably require
and which may be necessary to enable Buyer or its nominees to attend and vote at
general meetings of CMI and CEL and to do any thing or things necessary to give
effect to the rights contained in this Section 5.19; PROVIDED that Buyer shall
use its commercially reasonable efforts to cause the Purchased Interests to be
registered in its name or the name of its nominee as soon as possible following
the Closing.
(b) In the event that any Subsidiary of any Group Company shall not be
wholly owned as of the Closing Date, Seller shall cause such unowned interests
to be conveyed to Buyer or Buyer's nominee free of charge as soon as practicable
after the Closing Date.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 CONDITIONS OF EACH PARTY'S OBLIGATION TO CLOSE. The obligation of
the parties hereto to consummate the transactions contemplated hereby shall be
subject to the fulfillment, at or before Closing, of the conditions set forth
below in this Section 6.1. The parties hereto may mutually agree to waive any or
all of these conditions.
(a) Without prejudice to Buyer's obligations in Section 5.6, it being
established that it is not the intention of the European Commission, pursuant to
Council Regulation (EC) 139/2004, to initiate proceedings under Article 6(1)(c)
or make a referral to a competent authority of the United Kingdom or another
member state of the European Union or EFTA under Article 9(1) in respect of the
proposed acquisition.
(b) All required filings having been made and all or any applicable
waiting and other time periods (including extensions thereto) under the United
States ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 (as amended) and the
regulations thereunder having expired, lapsed or been terminated as appropriate
in respect of the proposed acquisition.
(c) Without prejudice to Buyer's obligations in Section 5.6, in the
event that the UK Secretary of State serves a European intervention notice under
Section 67(2) of the UK Enterprise ▇▇▇ ▇▇▇▇ (the "2002 ACT") the Secretary of
State not making a reference to the UK
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Competition Commission under Section 67 of the 2002 Act in respect of the
proposed acquisition.
(d) All authorizations, orders, grants, consents, clearances,
licenses, permissions and approvals from the relevant competition authorities of
Governmental Entities in any jurisdiction necessary for, or in respect of, the
proposed acquisition being obtained, except where the failure to obtain such
authorizations, orders, grants, consents, clearances, licenses, permissions and
approvals would not reasonably be expected to have a Company Material Adverse
Effect.
(e) As of the Closing Date, without prejudice to Buyer's obligations
in Section 5.6, there shall be no statute, regulation, injunction, restraining
order or decree of any nature of any court or governmental agency or body of
competent jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated by this Agreement.
(f) All of the conditions precedent set forth in the Asset Purchase
Agreement shall been satisfied or waived (in accordance with the Asset Purchase
Agreement) save for those for which Closing is necessary.
(g) The approval of the transactions contemplated hereby under the
Credit Agreement and the written authorization of the necessary lenders under
the Credit Agreement to file UCC-3s as are required to release all Liens to
which all or any of the Purchased Interests, any Group Company or any assets of
any Group Company are subject in respect of borrowings pursuant to the Credit
Agreement.
6.2 CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer
to consummate the transactions contemplated hereby shall be subject to the
fulfillment, at or before Closing, of all of the conditions set forth below in
this Section 6.2. Buyer may waive in writing any or all of these conditions in
whole or in part without prior notice.
(a) The representations and warranties of Seller contained in Article
3 shall be true and correct on and as of the Closing Date with the same effect
as if such representations and warranties had been made on and as of the Closing
Date (except for representations and warranties which are as of a particular
date, which shall be true and correct as of such date), except in either such
case to the extent that the breach thereof would not reasonably be expected to
have a Company Material Adverse Effect, and Seller shall have performed in all
material respects its obligations and complied in all material respects with its
agreements and covenants required by this Agreement to be performed or complied
with on its part on or prior to the Closing Date.
(b) Buyer shall have received from Seller a certificate dated as of
the Closing Date and signed by an authorized officer of Seller certifying its
compliance with the conditions set forth in Section 6.2(a).
(c) Seller shall have obtained (i) all consents of the parties to the
agreements or consents listed on Schedule 6.2(c), (ii) all waivers from such
parties of any rights (including rights of termination) and remedies such
parties would be entitled to exercise as a result of the transactions
contemplated by this Agreement, and (iii) written confirmation from Universal
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Studios International BV that the counterparty to the program license agreement
dated ▇▇▇▇▇ ▇▇, ▇▇▇▇ (▇▇▇ revised May 7, 2004) and referred to in Schedule
6.2(c) is CEL and not CMI.
(d) Since December 31, 2004, there shall not have occurred any event,
development or change which, individually or in the aggregate, has had a Company
Material Adverse Effect.
(e) Each of the Transaction Agreements in substantially the forms set
forth in the Exhibits hereto shall have been duly executed and delivered by the
parties thereto other than Buyer (save that immediately prior to Closing, the
Amended Program License Agreement shall be amended as follows: (i) Schedule A
and Schedule C thereto shall be amended and updated such that all pictures
identified in Schedule A with Windows opening between 1st January 2005 and the
Closing Date shall be deleted from Schedule A and inserted in Schedule C and
(ii) the rights and obligations of the parties thereto contained therein shall
be bifurcated between two separate agreements (the first being in relation to
rights in the UK and Eire and the second being in relation to rights in the rest
of the world (excluding the UK and Eire and the USA)).
(f) The Debt Agreement shall have been entered into substantially on
the basis of the terms set forth in the Debt Commitment Letter, and Buyer shall
be contractually entitled to drawdown and receive funds under the Debt
Agreement, and the conditions to drawdown thereunder shall have been satisfied
or waived by the financial institution(s) party to the Debt Agreement.
6.3 CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of
Seller to consummate the transactions contemplated hereby shall be subject to
the fulfillment, at or before Closing, of all of the conditions set forth below
in this Section 6.3. Seller may waive in writing any or all of these conditions
in whole or in part without prior notice.
(a) The representations and warranties of Buyer contained in Article 4
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if such representations and warranties had been made on
and as of the Closing Date (except for representations and warranties which are
as of a particular date, which shall be true and correct in all material
respects as of such date), and Buyer shall have performed in all material
respects its obligations and complied in all material respects with its
agreements and covenants required by this Agreement to be performed or complied
with on its part on or prior to the Closing Date.
(b) Seller shall have received from Buyer a certificate dated as of
the Closing Date and signed by an authorized officer of Buyer certifying Buyer's
compliance with the conditions set forth in Section 6.3(a).
(c) Each of the Transaction Agreements in substantially the forms set
forth in the Exhibits hereto shall have been duly executed and delivered by the
parties thereto other than Seller, Holdings, Crown Media United States, LLC,
Hallmark Cards, Inc., Hallmark Entertainment Distribution, LLC and/or Hallmark
Distribution, LLC (as the case may be) (save that immediately prior to Closing,
the Amended Program License Agreement shall be amended as follows: (i) Schedule
A and Schedule C thereto shall be amended and updated such that all pictures
identified in Schedule A with Windows opening between 1st January 2005 and the
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Closing Date shall be deleted from Schedule A and inserted in Schedule C and
(ii) the rights and obligations of the parties thereto contained therein shall
be bifurcated between two separate agreements (the first being in relation to
rights in the UK and Eire and the second being in relation to rights in the rest
of the world (excluding the UK and Eire and the USA)).
6.4 UNDERTAKINGS. Seller undertakes to use its reasonable best efforts
to procure the fulfillment of the conditions specified in Section 6.1 and
Section 6.2 by April 30, 2005 (the "OUTSIDE DATE") and Buyer undertakes to use
its reasonable best efforts to procure the fulfillment of the conditions set
forth in Section 6.1 and Section 6.3 by the Outside Date, in each case subject
to the extension as contemplated by Section 10.2(b). Seller shall keep Buyer
advised of the progress towards the satisfaction of its obligations under this
Section 6.4 (and vice versa).
ARTICLE 7
THE CLOSING
7.1 TIME AND LOCATION OF CLOSING. Subject to the fulfillment of all of
the conditions specified in Article 8 (any or all of which may be waived in
writing by the respective party whose performance is conditioned upon the
satisfaction of such conditions), the purchase and sale of the Purchased
Interests and the other transactions contemplated by this Agreement shall be
consummated at a closing ("CLOSING") to be held at the offices of Ashurst,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ at 10:00 A.M., local time, on
the date falling five days following the date when all of the conditions
specified in Article 6 shall have been fulfilled or waived (other than those
conditions which by their nature are contemplated to be satisfied on the Closing
Date) or on such other date as the parties shall mutually agree (the "CLOSING
DATE").
7.2 ACTIONS BY SELLER AT CLOSING. At Closing, except as and to the
extent required to be retained by Seller in connection with its performance of
the Transition Services Agreement, Seller shall deliver to Buyer the following:
(a) Membership interest powers or transfers in common form relating to
the CMI Membership Interests, duly executed in favor of Buyer (or as Buyer may
direct).
(b) All certificates, if any, representing the CMI Membership
Interests in proper form for transfer.
(c) Stock powers or other transfers in common form relating to the CEL
Shares, duly executed in favor of Buyer (or as Buyer may direct).
(d) All certificates representing the CEL Shares in proper form for
transfer.
(e) Stock or membership interest powers or other transfers in common
form of each share or membership interest in the Subsidiaries of CMI or CEL not
registered in the name of any Group Company duly executed in favor of Buyer (or
as it may direct).
(f) All certificates, if any, representing the issued shares and
membership interests in the capital of each of the Subsidiaries.
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(g) The stock or membership interest ledgers, certificates of
incorporation, minute books, common seals, statutory books, share certificate
books and other similar corporate books and records of each of CMI and CEL.
(h) Certified copies of minutes or unanimous written consents of
stockholders or members, if necessary, of Seller, Holdings and each Group
Company, approving the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
(i) The certificate described in Section 6.2(b).
(j) Any waivers or consents by members of any Group Company or other
persons which Buyer has specified prior to Closing solely so as to enable Buyer
or its nominees to be registered as the holders of the Purchased Interests and
any shares or interests of Subsidiaries.
(k) Resignations effective upon Closing substantially in the form set
forth on Exhibit M duly executed of all the directors and the secretary of any
Group Company from their offices as director or secretary of any Group Company,
containing a confirmation that they have no claims (whether statutory,
contractual or otherwise) against any Group Company for compensation for loss of
office or termination of employment or for unpaid remuneration or otherwise.
(l) To the extent not in the possession of any Group Company, all
original leases, title deeds and other material documents (or copies thereof in
the event originals are not available) relating to the Properties.
(m) To the extent not in the possession of any Group Company, copies
of all bank mandates of each Group Company together with copies of statements of
all bank accounts and all check books of each Group Company in current use
together with cash book balances of each Group Company as at Closing with
reconciliation statements reconciling such balances with the said bank
statements.
(n) To the extent not in the possession of any Group Company, all
documents relating to the Business Intellectual Property in the possession of
Seller, including, for the avoidance of doubt, any all certificates and
documents of title and manuals.
(o) To the extent not in the possession of any Group Company, all
necessary books of account or references as to material customers and/or
suppliers in the possession of Seller.
(p) A non-foreign person affidavit from Seller in compliance with
Section 1445 of the Code and the Treasury Regulations issued thereunder) and, if
required by a reputable title insurance company (the "TITLE COMPANY") in order
to issue a leasehold policy insuring the Lease/issue a "Non-imputation"
endorsement, an affidavit in favor of the Title Company containing such
commercially reasonable and customary certifications reasonably required in
order to issue the leasehold policy endorsement.
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(q) The Novation Agreements or the Guaranty and Indemnification
Agreement, duly executed by Holdings or Hallmark Entertainment, Inc., as the
case may be.
7.3 RESOLUTIONS. Immediately following Closing (and prior to the
resignations of the directors referred to in Section 7.2(k)), Seller shall
procure the passing of board resolutions of each Group Company effective as of
Closing:
(a) sanctioning for registration (subject where necessary to due
stamping) transfers in respect of the Purchased Interests and any shares or
membership interests to which Section 7.2(e) refers;
(b) appointing new directors and secretary of each Group Company as
Buyer directs; and
(c) resolving that the registered office of each Group Company be
changed as Buyer directs.
7.4 ACTIONS BY BUYER AT CLOSING. At Closing, Buyer shall deliver to
Seller the following:
(a) The Cash Consideration in the manner set forth in Section 2.1(a).
(b) The Novation Agreements or the Guaranty and Indemnification
Agreement, duly executed by Buyer.
(c) Certified copies of minutes or unanimous written consents of the
board of directors and stockholders or members, if necessary, of Buyer approving
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby.
(d) The certificate described in Section 6.3(b).
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLER. Seller shall defend, indemnify and hold
Buyer and each Group Company and their respective officers, directors,
shareholders, partners, employees, representatives, agents, attorneys,
licensees, Affiliates and assigns (the "INDEMNIFIED BUYERS") harmless from and
against any and all claims, demands, actions or causes of action, assessments,
judgments, awards, fines, sanctions, charges, damages, liabilities, losses,
costs, interest, penalties, amounts paid in settlement and expenses (including,
without limitation, reasonable attorney fees and expenses) ("LOSSES") which may
be incurred or suffered by the Indemnified Buyers or any of them, arising out of
or relating to (a) any breach of any representation or warranty made by Seller
in this Agreement (other than any representation or warranty contained in
Section 3.11 hereof), (b) any material failure on the part of Seller to perform
any covenant or agreement in this Agreement (or any failure to make any payment
in accordance with any express payment obligation set forth herein) or (c) any
Retained Liabilities
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(each, a "SELLER'S INDEMNIFICATION CLAIM"). Save (i) in the case of fraud
(including, without limitation, fraudulent concealment) and (ii) in respect of
the representations and warranties set forth in Sections 3.1, 3.2, 3.3 and 3.4,
in no event will Seller have any liability with respect to any indemnification
pursuant to (a) above where the Losses relating to any individual item (or group
of related items) is less than $25,000 and until the total dollar amount of all
such indemnification obligations that would otherwise be indemnifiable pursuant
to such clause (a), when aggregated with all indemnification obligations
indemnifiable by Crown Media Distribution, LLC pursuant to clause (a) of Section
9.1 of the Asset Purchase Agreement, shall exceed $750,000, in which event
Seller will be liable from the first dollar for the whole amount and not only
the excess; PROVIDED that (save in the case of clauses (i) and (ii) above) in no
event shall Seller's aggregate liability in respect of clause (a) hereof,
together with Crown Media Distribution, LLC's aggregate liability in respect of
clause (a) of Section 9.1 of the Asset Purchase Agreement, in the aggregate
exceed $70,000,000.
8.2 INDEMNIFICATION BY BUYER. Buyer shall defend, indemnify and hold
each Seller and its officers, directors, shareholders, partners, employees,
representatives, agents, attorneys, licensees, Affiliates and assigns (the
"INDEMNIFIED CM PARTIES") harmless from and against any and all Losses which may
be sustained, incurred or suffered by the Indemnified CM Parties as a result of,
arising out of or relating to (a) any breach of any representation or warranty
made by Buyer in this Agreement, (b) any material failure on the part of Buyer
to perform any covenant or agreement in this Agreement and (c) any Assumed
Liabilities. Save in the case of fraud or fraudulent concealment, in no event
shall Buyer's liability in respect of clause (a) hereof together with Buyer's
aggregate liability in respect of clause (a) of Section 9.2 of the Asset
Purchase Agreement, in the aggregate exceed $222,000,000.
8.3 DEFENSE OF CLAIMS. If any claim is brought against any of the
indemnified parties by a third party, and if such indemnified party intends to
seek indemnity with respect thereto under this Article 8, such indemnified party
shall promptly notify in writing Buyer or Seller, as the case may be, of such
claim. If any indemnified party fails to provide the foregoing written notice in
a timely manner, which failure to notify results in or otherwise gives rise to
any material prejudice to the defense of such claim, the indemnified party or
parties shall be deemed to have waived its or their rights to indemnification
under this Article 8 from the indemnifying party or parties only to the extent
of the prejudice suffered as a result of failure to timely notify.
Upon receipt of such notice, the indemnifying party shall have 30 days
to commence to undertake, conduct and control, through counsel of its own
choosing and its sole cost and expense, the settlement or defense thereof, and
the indemnified party shall cooperate in connection therewith (including,
without limitation, providing to the indemnifying party, at the indemnifying
party's request, and at no cost, any information and reasonable assistance from
the indemnified party's staff which may be necessary for such settlement or
defense); PROVIDED that:
(a) without the indemnified party's consent, the indemnifying party
shall not consent to the entry of any judgment or enter into any settlement that
(i) provides for an injunctive or equitable relief adversely affecting the
indemnified party or (ii) materially adversely affects the goodwill of the
business of the Group, PROVIDED, that at the time the indemnified party notified
the indemnifying party as required by the first sentence of this Section 8.3,
such notification shall have included a statement prepared in good faith by such
indemnified
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party that it has determined on reasonable grounds that a judgment or settlement
would be reasonably likely to materially adversely affect the goodwill of the
Group, and PROVIDED, FURTHER, that in the event such indemnified party does not
provide its consent (which consent shall not be unreasonably withheld) within 15
days of the indemnifying party's request for consent, the indemnifying party's
Liability in respect of the Losses related to such judgment or settlement shall
be limited solely to the amount for which such Losses could have reasonably been
settled by the indemnifying party;
(b) the indemnifying party shall permit the indemnified party to
participate in such settlement or defense through counsel chosen by the
indemnified party; PROVIDED that the fees and expenses of such counsel shall be
borne by the indemnified party; and
(c) the indemnifying party shall agree promptly to reimburse the
indemnified party for the full amount of any loss, damage or third party costs
incurred by the indemnified party as a result of such claim, but not including
any attorney's fees or expenses of the indemnified party when the indemnifying
party has assumed the defense and not including overhead or personnel costs of
the indemnified party arising from cooperating with the indemnifying party; and
so long as the indemnifying party is reasonably contesting any such claim in
good faith, the indemnified party shall not pay or settle any claim. If the
indemnifying party does not notify the indemnified party within 30 days after
receipt of the indemnified party's written notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof, the indemnified party
shall have the right to contest, settle or compromise the claim at the expense
of the indemnifying party, PROVIDED that the indemnified party shall use its
reasonable best efforts to minimize any Losses and shall act in good faith in
contesting, settling or compromising such claim. Whether or not the indemnifying
party will have assumed the defense, such party will not be obligated to
indemnify the indemnified party for any settlement entered into without the
indemnifying party's prior written consent, which consent will not be withheld
unreasonably or delayed.
(d) The foregoing provisions of Section 8.3 shall not apply to Tax
matters, which instead shall be governed by Section 5.15(f).
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties in this Agreement shall survive the Closing for a period of 21
months, except for the representations and warranties set forth in Section 3.11,
which shall survive the Closing until close of business on the 30th day
following the expiration of the applicable statute of limitations with respect
thereto. The indemnification obligations of Sections 5.15(d), 8.1(c) and 8.2(c)
shall survive the Closing until the expiration of the applicable statute of
limitations (taking into account any extensions or waivers thereof) with respect
thereto; and with respect to Section 5.15(d) an additional 30 days following
such expiration. No claim may be brought for breaches or alleged breaches of any
representations or warranties after the expiration of the survival period.
8.5 LIMITATION ON RIGHTS. (a) Each party hereto acknowledges and
agrees that the sole and exclusive remedy of such party hereto with respect to
any and all claims for Losses of the types referred to in Section 8.1 and
Section 8.2 shall be pursuant to the indemnification provisions set forth in
this Article 8 or in Section 10.14. In furtherance of the foregoing, each
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party hereby waives, and agrees to cause its Affiliates to waive, any and all
rights, claims and causes of action they may have against any other party hereto
or any Affiliate thereof arising under or based upon any statutory or common law
or otherwise (except pursuant to the indemnification provisions set forth in
this Article 8) to the extent relating to claims for Losses of the types
referred to in Section 8.1 and Section 8.2; PROVIDED that nothing in this
Section 8.5 shall preclude a party from (i) bringing an action for specific
performance or other available equitable remedy for a breach of covenant or
agreement contained in this Agreement or (ii) pursuing remedies under applicable
law for fraud or intentional misrepresentation. Nothing in this Section 8.5
shall relieve any party from any liability for fraud.
(b) Losses shall not include lost profits or consequential, special,
punitive, incidental or indirect damages, and no indemnifying party shall have
any indemnification obligations with respect to such amounts. In addition,
Seller shall have no indemnification obligation or liability with respect to any
Loss resulting from any misrepresentation or breach of warranty if the
conditions or facts giving rise to such misrepresentation or breach were fully
and fairly disclosed or reasonably apparent to a reasonable person from the
disclosure in this Agreement (including the schedules hereto) or were otherwise
known to Buyer or its Affiliates to be a breach under this Agreement prior to or
at the Closing (and in such event such misrepresentation or breach of warranty
shall not constitute a breach of this Agreement).
(c) The amount of any Losses for which indemnification is provided
under this Article 8 shall be net of any amounts recovered by any indemnified
party from third parties (including without limitation amounts recovered under
insurance policies), and the indemnified party shall use reasonable efforts to
recover such amounts from insurers and other third parties. Any indemnifying
party shall be subrogated to the rights of the indemnified parties. An insurer
who would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto or, by virtue of the indemnification
provisions hereof, have any subrogation rights with respect thereto. For the
avoidance of doubt, Buyer shall not be obliged to seek to recover such amounts
from insurers and other third parties before seeking to recover any Losses from
Seller under this Article 8. If any indemnified party receives an amount from an
insurer or other third party in respect of Losses for which indemnification has
been paid under this Article 8, the indemnified party shall promptly reimburse
the indemnifying party so much of the amount originally paid by the indemnifying
party as does not exceed the sum recovered from the insurer or other third
party, less the indemnified party's reasonable costs of recovery.
(d) The amount of any Losses for which indemnification is provided
shall be reduced to take account of any net Tax benefit received by the
indemnified party as a result of such indemnification (including, for the
avoidance of doubt, any reduction in the corporation tax liability of any Group
Company or Buyer or Affiliates of Buyer attributable to a compensation expense
by way of corporation tax relief pursuant to schedule 23 of the Finance ▇▇▇
▇▇▇▇, or otherwise, and further to any acquisition, release or vesting under any
Benefit Plan), but with the intent that the indemnified party shall not be
placed in any better or worse position (taking into account the time value of
money) than it would have been in had the Losses giving rise to indemnification
not arisen, and provided always that no party shall be obliged to organize its
tax affairs differently to the manner in which it otherwise would have done.
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(e) Neither party hereto shall be liable to pay any Losses more than
once with respect to a Loss resulting from the same facts, events or
circumstances, even if and to the extent such facts, events or circumstances
constitute both a matter accounted for in the post-closing purchase price
adjustment set forth in Section 2.3, an Assumed Liability or a Retained
Liability, as the case may be, and a breach of any representations and
warranties or covenants for which a party shall or would but for this provision
be obligated to pay Losses hereunder.
8.6 INDEMNITY PAYMENTS. The parties agree that any indemnity payments
pursuant to this Agreement and any payments pursuant to Section 5.14(d) will be
treated for Tax purposes as an adjustment to the Purchase Price and that such
treatment shall govern for purposes hereof except to the extent that the laws of
a particular jurisdiction provide otherwise, in which case such payments shall
be made in an amount sufficient to indemnify the relevant party on an after-Tax
basis.
ARTICLE 9
PROTECTION OF GOODWILL
9.1 Seller hereby undertakes to procure that (except as otherwise
agreed in writing with Buyer) none of Seller's Group will, either directly or
indirectly, and either solely or jointly with any other person (either on its
own account or as the agent of any other person), and in any capacity
whatsoever:
(a) for a period of three years from Closing, carry on or be engaged
or (except as the holder of shares in a listed company which confer not more
than five per cent of the votes which can generally be cast at a general meeting
of the company) interested in a business that competes with the television
business of the Group as conducted at Closing (PROVIDED, that the sale of
programming shall not be deemed to be competitive), in any territory in the
world except for the United States (the "TERRITORY");
(b) for a period of 24 months from Closing, induce, solicit or
endeavor to entice any Retained Employee to leave the service or employment of
Buyer or any Group Company; PROVIDED, HOWEVER, that the foregoing restrictions
shall not apply to any Retained Employee who was terminated by Buyer or the
Group prior to the commencement of any such solicitation or to general
solicitations of employment not specifically directed towards any employees of
Buyer or Group; or
(c) for a one year period (except for any such use other than in the
Territory), use, in respect of services similar to those provided by the cable
television network business of the Group conducted at Closing, any trade name
(including the expression "Hallmark," "Crown" or the crown logo and any
derivative) actively used by any member of the Group at Closing or trade name
similar thereto.
9.2 Seller agrees that the undertakings contained in this Article 9
are reasonable and are entered into for the purpose of protecting the goodwill
of the business of each member of the Group.
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9.3 Each undertaking contained in this Article 9 is and shall be
construed as separate and severable and if one or more of the undertakings is
held to be against the public interest or unlawful or in any way an unreasonable
restraint of trade or unenforceable in whole or in part for any reason the
remaining undertakings or parts thereof, as appropriate, shall continue to bind
Seller.
9.4 If any undertaking contained in this Article 9 shall be held to be
void but would be valid if deleted in part or reduced in application, such
undertaking shall apply with such deletion or modification as may be necessary
to make it valid and enforceable.
9.5 Notwithstanding anything contained herein to the contrary, Buyer
acknowledges and agrees that this Article 9 shall not apply to any acquirer of
Seller or any Affiliate of Seller, but shall continue in full force and effect
with respect to Seller's Group.
ARTICLE 10
GENERAL PROVISIONS
10.1 FURTHER ASSURANCES. Each of the parties hereto agrees to execute
and deliver to the other party hereto, at any time and from time to time upon
written request by such other party, such additional documents or instruments
consistent herewith and to perform such further acts as such other party may
reasonably require to fully effectuate the purposes and intent of this
Agreement.
10.2 TERMINATION. This Agreement may be terminated at any time prior
to Closing, as follows:
(a) by mutual written consent of Buyer and Seller duly authorized by
their respective boards of directors;
(b) by either of Buyer or Seller, if the Closing shall not have
occurred on or before the Outside Date, PROVIDED, HOWEVER, that in the event
that the conditions set forth in Section 6.1(a) or 6.1(c) shall not have been
fulfilled but all other conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then the Outside Date shall be extended by 60 days
and, PROVIDED, FURTHER, that the right to terminate this Agreement under this
Section 10.2 shall not be available to the party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or resulted in,
the failure of the Closing to occur on or before such date; PROVIDED, FURTHER,
that in the event that such party is entitled to terminate this Agreement
pursuant to an independent termination right under this Section 10.2, nothing
contained herein shall prevent such party from terminating this Agreement
pursuant to such independent right.
(c) by either of Buyer or Seller if any order, injunction or decree
preventing the consummation of the transactions contemplated hereby shall have
been entered by any court of competent jurisdiction or Governmental Entity and
shall have become final and non-appealable;
(d) by Buyer if (i) there shall have been a breach of any
representation or warranty on the part of Seller set forth in this Agreement or
if any representation or warranty of
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Seller shall have become untrue in either case such that the condition set forth
in Section 6.2(a) would be incapable of being satisfied by the Outside Date (and
for the purposes of this clause, any information provided by Seller pursuant to
Section 5.12 shall be deemed not to qualify Seller's representations and
warranties) or (ii) there shall have been a breach or breaches by Seller of its
respective covenants or agreements hereunder such that the condition set forth
in Section 6.2(a) would be incapable of being satisfied by the Outside Date; or
(e) by Seller if (i) there shall have been a breach of any
representation or warranty on the part of Buyer set forth in this Agreement or
if any representation or warranty of Buyer shall have become untrue in either
case such that the condition set forth in Section 6.3(a) would be incapable of
being satisfied by the Outside Date or (ii) there shall have been a breach or
breaches by Buyer of its covenants or agreements hereunder such that the
condition set forth in Section 6.3(a) would be incapable of being satisfied by
the Outside Date.
In each of the cases set out in clauses (a) to (e) above, the rights
and liabilities of the parties which have accrued prior to termination
(including without limitation, to the extent applicable, in respect of Article
8) shall continue to subsist and such termination shall be in addition to any
other rights or remedies the terminating party may have against the other party.
10.3 ARBITRATION. The parties hereto irrevocably agree that each and
every controversy or claim arising out of, or in connection with or relating to
this Agreement or the interpretation, performance or breach thereof shall be
settled by binding arbitration under the rules then in effect of the American
Arbitration Association or its successor and in accordance with applicable law
but subject to the following agreed provisions. The arbitration shall be
conducted in New York, New York, and the proceedings shall be kept confidential.
Notice of papers or processes relating to any arbitration proceeding, or for the
confirmation of award and entry of judgment on an award may be served on each of
the parties by registered or certified mail at the addresses set forth in
Section 10.7. Each dispute shall be promptly adjudicated by a panel of three
neutral arbitrators appointed as follows:
(a) each party shall nominate an arbitrator, and the two arbitrators
so appointed shall appoint a third arbitrator who shall act as president of the
arbitral tribunal;
(b) if either party fails to nominate an arbitrator within 30 days of
receiving notice of the nomination of an arbitrator by the other party, such
arbitrator shall at the request of that party be appointed by the American
Arbitration Association;
(c) if the two arbitrators to be nominated by the parties fail to
agree upon a third arbitrator within 30 days of the appointment of the second
arbitrator, the third arbitrator shall be appointed on the nomination of the
American Arbitration Association at the written request of either party; and
(d) should a vacancy arise because any arbitrator dies, resigns,
refuses to act, or becomes incapable of performing his functions, the vacancy
shall be filled by the method by which that arbitrator was originally appointed.
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All arbitrators shall be of good reputation and character and shall be
highly knowledgeable of entertainment industry matters. Seller shall pay
one-half of the arbitrators' expenses and Buyer shall pay one-half. The parties
shall pay their own legal expenses. The arbitrators shall provide a reasoned
opinion supporting their conclusion, including detailed findings of fact and
conclusions of law. Such findings of fact shall be final and binding on the
parties but such conclusions of law shall be subject to appeal in any court of
competent jurisdiction. The arbitrators may award damages and/or permanent
injunctive relief, but in no event shall the arbitrators have the authority to
award punitive or exemplary damages. Notwithstanding anything to the contrary in
this Section 10.3, either party may apply to a court of competent jurisdiction
for relief in the form of a temporary restraining order or preliminary
injunction, or other provisional remedy pending final determination of a claim
through arbitration in accordance with this Section 10.3. If proper notice of
any hearing has been given, the arbitrators will have full power to proceed to
take evidence or to perform any other acts necessary to arbitrate the matter in
the absence of any party who fails to appear.
10.4 SUCCESSORS AND ASSIGNS. (a) This Agreement is personal to the
parties and accordingly (subject to Sections 10.4(b) and 10.4(c)) no party
without the prior written consent of the others shall assign, transfer or
declare a trust of the benefit of all or any of the other party's obligations
nor any benefit arising under this Agreement. Notwithstanding anything contained
herein to the contrary, at no time shall any such assignment relieve such
assigning party of any of its obligations or agreements hereunder unless
expressly agreed to in writing by the other party hereto in its sole discretion.
(b) Any party may (without the consent of the others) assign to an
Affiliate the benefit of all or any of the parties' obligations or any benefit
it enjoys under this Agreement PROVIDED, HOWEVER, that such assignment shall not
be absolute but shall be expressed to have effect only for so long as the
assignee remains an Affiliate and that immediately before ceasing to be an
Affiliate the assignee shall assign the benefit to an Affiliate of the party
concerned.
(c) Buyer may (without the consent of the others) assign and/or charge
all or any of its rights under this Agreement by way of security to any bank(s)
and/or holders of debt securities and/or financial institutions(s) and/or hedge
counterparties and/or any other person lending money or making other banking
facilities available to Buyer or any Affiliate of Buyer in connection with the
acquisition of the Purchased Interests and/or any refinancing of the existing
debt of any Group Member or to any financiers who provide funds on or in
connection with any subsequent refinancing of such funding or to any person from
time to time appointed by any financier to act as security trustee on behalf of
such financier; without limitation to the foregoing, any such person or
financier may assign such rights on any enforcement of the security under such
finance arrangements without the further consent of any party to this Agreement.
For purposes of this Section 10.4, "AFFILIATE" shall mean with respect
to any Person, any other Person that from time to time, directly or indirectly,
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, such Person.
10.5 NO WAIVER. No waiver by either party hereto of any breach of any
covenant, agreement, representation or warranty hereunder shall be deemed a
waiver of any preceding or succeeding breach of the same. The exercise of any
right, power or privilege
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granted to either party herein shall not operate as a waiver of any default or
breach on the part of the other party hereto nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. Each
and all of the several rights and remedies of either party hereto under this
Agreement shall be construed as cumulative and no one right as exclusive of the
others.
10.6 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, including the
exhibits attached hereto, and the Transaction Agreements, constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior or contemporaneous written or oral agreements,
arrangements, understandings, representations and correspondence between them or
any of their related entities or Affiliates with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or
Closing, in accordance with its terms. No change, modification, alteration,
amendment or agreement to discharge in whole or in part, or waiver of any of the
terms and conditions of this Agreement, shall be binding upon either party,
unless the same shall be made by a written instrument signed and executed by the
authorized representatives of each party, with the same formality as the
execution of this Agreement.
10.7 NOTICES. All notices, requests, demands and other communications
given or made hereunder or in connection with the matters contemplated by this
Agreement, shall be in writing made by personal service, or sent by certified
mail, return receipt requested, postage prepaid, by overseas courier or by
facsimile addressed as follows, or to such other address as may hereafter be
designated in writing by the respective parties hereto, and shall be deemed
received when delivered to the designated address or, if sent by facsimile, when
received as evidenced by a fax confirmation of such receipt:
(a) if to Seller or Holdings, to:
Crown Media Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Jr., Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Buyer, to:
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with copies to:
Providence Equity Partners
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
Attention: Bis Subramanian, Esq.
Telephone: ▇▇▇(▇) ▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇(▇) ▇▇ ▇▇▇▇ ▇▇▇▇
3i Group PLC
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
Ashurst
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
Fascimile: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
10.8 GOVERNING LAW. This Agreement (and any dispute, controversy,
proceedings or claim of whatever nature arising out of or in any way relating to
this Agreement or its formation) shall be governed and construed in accordance
with the laws of the State of New York without reference to such State's
principles of conflicts of law.
10.9 PUBLICITY. Prior to Closing, each party hereto agrees not to
issue any press release or otherwise make any public statement in any general
circulation medium with respect to the transactions contemplated by this
Agreement, without the consent, which shall not be unreasonably withheld or
delayed, of the other party hereto; PROVIDED, HOWEVER, that the parties hereto
may, without the consent of the other, make any disclosures required to comply
with applicable law or the regulations of any securities exchange or national
securities association.
10.10 SECTION HEADINGS. The section headings of this Agreement are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
10.11 SEVERABILITY. If any provision of this Agreement is held or
deemed to be or is or becomes, in fact, inoperative, illegal or unenforceable as
applied in any particular case under any constitution or statute or rule of
public policy of any jurisdiction:
(a) the operation, legality and enforceability under the constitution
or statute or rule of public policy of that jurisdiction of any other provision;
and
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(b) the operation, legality and enforceability under the constitution
or statute or rule of public policy of any other jurisdiction of that or any
other provision shall not be affected or impaired in any way.
10.12 NO THIRD PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns, and nothing herein
express or implied is intended to, or shall be construed to, provide or create
any legal or equitable rights or benefits to any Person other than the parties
hereto.
10.13 COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. Any party may enter
into this Agreement by executing a counterpart and this Agreement shall not take
effect until it has been executed by all parties.
10.14 GUARANTEE.
(a) GENERAL. Holdings hereby unconditionally and irrevocably
guarantees without offset or limitation, as primary obligor and not merely as
surety, the due, punctual and full (i) payment of all amounts for which Seller
is liable under this Agreement and (ii) performance of all covenants, terms and
conditions for the performance of, or compliance with, which Seller is liable
under this Agreement. This is a continuing guarantee and shall remain in full
force and effect in accordance with the terms hereof until all of Seller's
obligations under the this Agreement have been finally and indefeasibly
performed in full. This is a guarantee of payment, performance and compliance
and not of collectibility, and is in no way conditioned or contingent upon any
attempt to collect from or enforce performance or compliance by any person or to
exercise or assert any right or remedy, or upon any other event, contingency or
circumstance whatsoever, and shall be binding upon and against Holdings
irrespective of any breach of the first sentence of Section 3.1 to the extent
relating to Seller, or of Section 3.3, or any incapacity or change in the
articles of incorporation or bylaws of, or any reorganization or consolidation
of Holdings.
(b) OBLIGATIONS UNCONDITIONAL. Holdings acknowledges that its
obligations hereunder are absolute and unconditional, notwithstanding any
dispute or controversy among the parties arising in connection with this
Agreement or otherwise. Without limiting the generality of the foregoing, the
obligations of the Holdings hereunder shall not be released, discharged or
otherwise affected by (i) the amendment or modification of this Agreement
(except that the Holdings' obligations shall apply to this Agreement as amended
or modified), (ii) any failure, omission or delay to assert any claim or demand
or to enforce any remedy under, or any waiver, exercise or nonexercise by any
person of any right, remedy, power or privilege under, this Agreement (in each
case except as may be expressly stipulated by the terms of this Agreement to
have such effect), (ii) any assignment, conveyance, mortgage or other transfer
of all or any part of the rights, obligations or interests of Buyer or Seller
under this Agreement, (iv) any voluntary or involuntary bankruptcy, insolvency,
liquidation, dissolution, sale of assets, marshalling, receivership, assignment
for the benefit of creditors, winding up or similar proceeding with respect to
any of Buyer, Seller or Holdings, (v) any rejection of any of this Agreement in
a bankruptcy or insolvency proceeding, (vi) any failure or delay in the
fulfillment of any of Seller's obligations under this Agreement, (vii) any
action to obtain or enforce any judgment or
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the satisfaction of any judgment for partial payment or performance (except to
the extent of such payment or performance), (viii) any merger or consolidation
of any of Buyer, Seller or Holdings, or any other corporate change in any
thereof, or any sale, lease or transfer of any of the assets of any thereof, or
any change in the ownership of any equity interests in any thereof, (ix) any
default, failure, breach or delay in performance by Seller of any obligations
under this Agreement, (x) any other circumstance or occurrence which might
otherwise constitute a legal or equitable defense or discharge of the
liabilities of a Holdings or indemnitor, or (ix) any counterclaim, set off,
deduction, or defense which Holdings may have against Buyer and in no event may
Holdings assert (and Holdings hereby agrees not to assert) as a counterclaim,
set off, deduction or defense to the obligations of Holdings hereunder any claim
that Holdings may have against Buyer, other than any counterclaim, set off,
deduction or defense that Seller or Holdings may have in respect of any matter
giving rise to the relevant claim under this Section 10.14.
(c) WAIVER AND ACKNOWLEDGEMENT. Holdings waives diligence, promptness,
presentation to, demand of payment or performance from and protest to any person
or entity of any obligations under this Agreement and any requirement that Buyer
exhaust any right or take any action against Seller or any other person, in each
case except as may otherwise be required by this Agreement. Buyer shall have the
right to bring suit directly against Holdings prior to, concurrently with, or
without bringing any suit against any other person.
(d) SUBROGATION; SUBORDINATION. Holdings shall not be entitled to
receive payment in respect of any claim arising from payment or performance by
Holdings pursuant to the terms of this guaranty, and any such claim shall be
subordinate to, and junior in right of payment of, Seller's obligations under
this Agreement until all obligations hereunder shall be finally and indefeasibly
paid in full and satisfied.
(e) PROVISO. Notwithstanding any other provision of this Agreement to
the contrary, Holdings shall not be liable under this Agreement for the payment
or performance of any obligation unless, and except to the extent that, Seller
is liable to Buyer for the payment or performance of such obligation, and
Holdings shall have the benefit of, and be entitled to assert as a defense,
offset, counterclaim or deduction to the claims of Buyer against Holdings, all
claims of Seller or Holdings against Buyer and all obligations of Buyer to
Seller or Holdings to the extent only that such claims or obligations do not
arise or have not arisen in connection with the Transition Services Agreement,
the NOC Agreement, or the Transponder/Uplink Agreement, or transactions entered
into, or services provided, in the ordinary course of business after the Closing
Date between Buyer or Buyer's Affiliates and Seller or Holdings, as the case may
be.
(f) INDEMNITY. Holdings hereby agrees to indemnify and hold harmless
the Indemnified Buyers from and against any and all Losses imposed upon or
incurred by the Indemnified Buyers resulting from or arising directly or
indirectly out of failure by Seller to duly, punctually and fully (i) pay all
amounts for which Seller is liable under this Agreement and (ii) perform all
covenants, terms and conditions for the performance of, or compliance with,
which Seller is liable under this Agreement.
(g) AUTHORIZATION AND VALIDITY OF AGREEMENT. Holdings hereby
represents and warrants to Buyer that Holdings has all requisite power and
authority to execute and deliver this Agreement solely with respect to this
Section 10.14 and to carry out and perform its obligations
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under this Section 10.14. The execution, delivery and performance by Holdings of
this Agreement have been duly and validly authorized by all necessary action of
Holdings and no other action on the part of Holdings is necessary for the
authorization, execution, or delivery by Holdings of this Agreement or Holding's
performance under this Section 10.14. This Agreement has been duly executed and
delivered by Holdings and, assuming the due authorization, execution and
delivery by Buyer constitutes the valid and binding obligation of Holdings with
respect to this Section 10.14 enforceable against Holdings in accordance with
its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies).
10.15 NO SET-OFF. All amounts due under this Agreement shall be paid
in full without any deduction or withholding save as may be required by law and
neither Buyer nor Seller shall be entitled to any set-off or counterclaim as
against the other in respect of any amount so due under this Agreement, except
to the extent that such deduction or withholding or set-off or counterclaim does
not arise or have not arisen in connection with the Transition Services
Agreement, the NOC Agreement or the Transponder/Uplink Agreement or transactions
entered into, or services provided in the ordinary course of business after the
Closing Date between Buyer or Buyer's Affiliates and Seller or Holdings, as the
case may be.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CM INTERMEDIARY, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
BAGBRIDGE LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
CROWN MEDIA HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
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