EXECUTION COPY
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CONTRIBUTION AGREEMENT
by and among
THE XXX XXXXXX COMPANY, INC.
CROWN MEDIA INTERNATIONAL, INC.
and
CROWN MEDIA HOLDINGS, INC.
dated as of
March 15, 2001
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TABLE OF CONTENTS
Page
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ARTICLE 1
DEFINITIONS
1.1 Definitions............................................................1
ARTICLE 2
THE CLOSING
2.1 The Closing............................................................6
ARTICLE 3
THE EXCHANGE
3.1 The Exchange...........................................................6
3.2 Delivery of Assignment and Assumption Agreement........................6
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Corporate Existence....................................................6
4.2 Power and Authority....................................................7
4.3 Enforceability, etc....................................................7
4.4 Capitalization.........................................................7
4.5 Consents and Approvals.................................................7
4.6 Financial Statements...................................................8
4.7 Material Adverse Change................................................8
4.8 Events Subsequent to the Date of the Last Audited Financial
Statement..............................................................9
4.9 Absence of Undisclosed Liabilities.....................................8
4.10 Taxes..................................................................9
4.11 Litigation.............................................................9
4.12 Insurance.............................................................10
4.13 Conflicts of Interests................................................10
4.14 Licenses..............................................................11
4.15 Intellectual Property Rights..........................................11
4.16 Contracts and Commitments.............................................11
4.17 Customers and Suppliers...............................................13
4.18 Plans.................................................................14
4.19 Employee Matters......................................................14
4.20 Brokers, etc..........................................................15
4.21 Year 2000 Compliance..................................................15
4.22 Compliance with Laws..................................................15
4.23 Public Filings........................................................14
4.24 Continuity of Business Enterprise.....................................14
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF XXXXXX
5.1 Existence; Power and Authority........................................15
5.2 Enforceability, etc...................................................16
5.3 Ownership.............................................................16
5.4 Consents and Approvals................................................16
5.5 Purchase for Investment...............................................16
5.6 Financial Matters.....................................................17
5.7 Brokers, etc..........................................................16
5.8 Litigation............................................................17
ARTICLE 6
CONDITIONS PRECEDENT; CONDUCT OF PARTIES PRIOR TO CLOSING
6.1 Conditions Precedent..................................................17
6.2 Conditions Precedent to Obligations of Each of the Company and
Crown.................................................................18
6.3 Conditions Precedent to Obligations of Xxxxxx.........................19
6.4 Access for Investigation; Confidentiality.............................18
6.5 Conduct of Business...................................................18
6.6 Performance of Obligations............................................19
6.7 Further Assurances....................................................19
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Company and Crown..............................21
7.2 Procedure for Indemnification.........................................22
7.3 Time Limitations on Indemnity.........................................23
7.4 Limitations on Indemnity..............................................23
ARTICLE 8
TAX MATTERS
8.1 Tax Compliance........................................................23
8.2 Tax Characterization..................................................22
ARTICLE 9
TERMINATION
9.1 Termination by Mutual Consent.........................................24
9.2 Termination by Any of the Parties.....................................25
9.3 Effect of Termination and Abandonment.................................23
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ARTICLE 10
GENERAL PROVISIONS; OTHER AGREEMENTS
10.1 Current Public Information............................................23
10.2 Consent to Transfer...................................................23
10.3 Expenses..............................................................24
10.4 Governing Law.........................................................24
10.5 Headings..............................................................24
10.6 Notices...............................................................24
10.7 Parties in Interest...................................................25
10.8 Entire Agreement......................................................25
10.9 Counterparts..........................................................25
10.10 Amendment.............................................................25
10.11 Gender, etc...........................................................25
10.12 Severability..........................................................25
10.13 No Waiver.............................................................27
EXHIBITS
Exhibit A Program License Agreement between Odyssey and XX.XX &
Merchandising AG
Exhibit B Amendment to Program License Agreement dated as of
November 13, 1998 by and between Odyssey and Xxxxxx
Exhibit C Trademark License Agreement between Odyssey and Xxxxxx
Exhibit D Side letter among Xxxxxx, H&H, Crown and the Company
Exhibit E Assignment and Assumption Agreement between Xxxxxx and Crown
Exhibit F Assignment and Assumption Agreement between Xxxxxx Cable and
HEN Domestic Holdings, Inc.
SCHEDULES
Schedule I Disclosure Schedule
Company and Crown
Item 4.1 Corporate Existence
Item 4.4 Company Capitalization
Item 4.8 Subsequent Events
Item 4.10 Taxes
Item 4.13 Conflicts of Interest
Item 4.14 Licenses
Item 4.15 Intellectual Property
Item 4.16 Material Agreements
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Item 4.17 Distributors
Item 4.18 Plans
Xxxxxx
Item 5.1 Corporate Existence
Item 5.3 Ownership
Item 5.4 Consents and Approvals
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CONTRIBUTION AGREEMENT, dated as of March 15, 2001 (this "Agreement"), by
and among The Xxx Xxxxxx Company, Inc., a New York corporation ("Xxxxxx"), Crown
Media International, Inc., a Delaware corporation ("Crown"), and Crown Media
Holdings, Inc., a Delaware corporation (the "Company").
WHEREAS, the Parties hereto desire to consummate the transactions
contemplated herein, pursuant to which Xxxxxx will contribute to the Company all
of its Interests in H&H Programming-Asia, LLC ("H&H") and cause Xxxxxx Cable
Networks, Inc. ("Xxxxxx Cable") to contribute all of its equity interest in
Odyssey Holdings, L.L.C. ("Odyssey") in exchange for shares of Common Stock of
the Company.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the Parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the
following meanings:
"Actions" means all complaints, actions, suits, proceedings or
investigations.
"Actually Realizes" or "Actually Realized" means, for purposes of
determining the timing of the incurrence of any Tax liability or the realization
of a Tax refund or any related Tax cost or benefit by a person in respect of a
payment, transaction, occurrence or event, the time at which the amount of Taxes
paid by such person is increased above or reduced below the amount of Taxes that
such person would have been required to pay but for such payment, transaction,
occurrence or event.
"Adjustment" means an adjustment arising in a Tax Proceeding.
"Adverse Consequences" means all claims, judgments, damages, penalties,
fines, costs, losses, liabilities or other monetary obligations (including all
reasonable attorney and expert fees incurred to enforce the terms of this
Agreement) net of any recovery from any third party including, without
limitation, insurance proceeds.
"Affiliate Transactions" is defined in Section 6.5.
"Agreement" is defined in the Preamble.
"Amended and Restated Odyssey Agreement" means the Amended and Restated
Company Agreement of Odyssey effective as of November 13, 1998.
"Balance Sheet" is defined in Section 4.6.
"Blue Sky Laws" is defined in Section 4.4.
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"Class A Stock" means Class A Voting Common Stock of the Company, par value
$0.01 per share.
"Class B Stock" means Class B Voting Common Stock of the Company, par value
$0.01 per share.
"Closing" is defined in Section 2.1.
"Closing Date" is defined in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, collectively, the Class A Stock and the Class B Stock
of the Company.
"Company" means Crown Media Holdings, Inc., a Delaware corporation.
"Company Capitalization Schedule" is defined in Section 4.4.
"Company Indemnified Persons" is defined in Section 7.1.
"Company Stockholders Agreement" means the Amended and Restated
Stockholders Agreement to be entered into by and among the Company, HEI,
Liberty, Liberty Sub, VMC, JPM and Xxxxxx.
"Contributor Indemnified Persons" is defined in Section 7.1.
"Crown" means Crown Media International, Inc., a Delaware corporation.
"Crown Capitalization Schedule" is defined in Section 4.4.
"Crown Programming Agreement" means the Programming Agreement, dated as of
July 1, 1999 by and between HED and Crown.
"Disclosure Schedule" means the Schedule referred to from time to time
herein and set forth as Schedule I hereto.
"Distributors" is defined in Section 4.17.
"Encumbrance" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever, including the interest of a vendor, lessor or
licensor under any conditional sale, capitalized lease, exclusive license or
other title retention agreement.
"ERISA" is defined in Section 4.18.
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"Exchange" means the exchange set forth in Section 3.1.
"Financial Statements" is defined in Section 4.6.
"GAAP" is defined Section 4.6.
"Governmental Entity" means any Federal, state or local government or any
court, administrative agency or commission or other governmental authority or
agency, domestic or foreign.
"H&H" means H&H Programming - Asia, L.L.C., a New York limited liability
company.
"H&H Assignment Agreement" is defined in Section 3.2.
"Hallmark" means Hallmark Cards, Incorporated, a Missouri corporation.
"Hallmark Group" means Hallmark and each of its Subsidiaries (other than
(i) the Company, (ii) Crown and (iii) each Person that is or was at any time a
Subsidiary of or otherwise held directly or indirectly by the Company or Crown,
except, in the case of (iii), for such a Person that was never, on or after the
Closing Date, a Subsidiary of or otherwise held directly or indirectly by the
Company or Crown).
"HED" means Hallmark Entertainment Distribution, LLC, a Delaware limited
liability company.
"HEI" means Hallmark Entertainment, Inc., a Delaware corporation.
"Xxxxxx" means The Xxx Xxxxxx Company, Inc., a New York corporation.
"Xxxxxx Cable" means Xxxxxx Cable Networks, Inc., a New York corporation.
"Xxxxxx Cable Shares" is defined in Section 8.2.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Income Taxes" means federal, state, local or foreign Taxes measured by net
income or capital gains.
"Income Tax Return" means any Tax Return with respect to Income Taxes.
"Indemnified Party" is defined in Section 7.2.
"Indemnifying Party" is defined in Section 7.2.
"Intellectual Property" is defined in Section 4.15.
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"Intercompany Services Agreement" means the Intercompany Services Agreement
dated as of January 1, 2000 by and between Hallmark and Crown.
"Interest" means any evidence of equity ownership of any Person, whether
represented by common stock, preferred stock, securities, options, warrants or
other rights to repurchase or acquire any equity ownership of such Person
(including convertible debentures, notes or other securities convertible or
exchangeable into or exercisable for the purchase or other acquisition of
capital stock), trust certificates, general or limited partnership interests,
limited liability company membership interests or any other type of capital
stock or equity interest.
"IPO" means the initial public offering of shares of the Company's Class A
Stock on May 4, 2000.
"JPM" means XX Xxxxxx Partners (BHCA), L.P., a Delaware limited liability
partnership.
"Law" means any law, statute, regulation, rule, ordinance, requirement or
other binding action or requirement of any governmental, regulatory or
administrative body, agency or authority or any court of judicial authority.
"Liberty" means Liberty Media Corporation, a Delaware corporation.
"Liberty Sub" means Liberty Crown, Inc., a Delaware corporation.
"Licenses" is defined in Section 4.14.
"Material Adverse Effect" means a material adverse effect on (i) with
respect to the Company or Crown, the business, results of operation or financial
condition of Crown and Crown's Subsidiaries, taken as a whole; and (ii) with
respect to Xxxxxx, the legal ability of Xxxxxx to consummate the transactions
contemplated by this Agreement.
"Material Agreements" is defined in Section 4.16.
"NICC" means National Interfaith Cable Coalition, Inc., a Maryland
non-for-profit corporation.
"Odyssey" means Odyssey Holdings, L.L.C., a Delaware limited liability
company.
"Odyssey Assignment Agreement" is defined in Section 3.2.
"Odyssey Common Interests" means the outstanding common equity interests in
Odyssey.
"Order" means any decree, order, judgment, writ, award, injunction,
stipulation or consent of or by any governmental, regulatory or administrative
body, agency or authority or any court or judicial authority.
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"Original Contribution Agreement" means the Contribution Agreement dated as
of January 27, 2000 by and among HEI, Crown, Liberty, VGI, VMC, NICC, Chase
Equity Associates, L.P. (now known as JPM) and the Company.
"Party" means the Company, Crown or Xxxxxx.
"Person" means any individual, corporation, general or limited partnership,
joint venture, association, limited liability company, joint stock company,
trust, business trust, bank, trust company, estate (including any beneficiaries
thereof), unincorporated entity, cooperative, association, government branch,
agency or political subdivision thereof or organization of any kind.
"Prospectus" means the prospectus filed pursuant to Rule 424(b) of the
Securities Act.
"Registration Statement" means a Registration Statement on Form S-1 of the
Company, as amended at the time it was declared effective.
"Related Documents" means the Company Stockholders Agreement, the Original
Contribution Agreement, the Crown Programming Agreement, the Intercompany
Services Agreement, the Amended and Restated Odyssey Agreement and the Tax
Sharing Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations issued in respect thereto.
"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 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.
"Tax Proceeding" means a Tax audit, contest, litigation or other proceeding
with or against a Governmental Entity.
"Tax Returns" is defined in Section 4.10.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of May 9,
2000 entered into by and among HEI, Crown, the Company and others.
"Taxes" is defined in Section 4.10.
"VGI" means Vision Group Incorporated, a Colorado corporation.
"VMC" means VISN Management Corp., a Delaware corporation.
"WARN" is defined in Section 4.19.
"Written Notice" is defined in Section 7.2.
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ARTICLE 2 - THE CLOSING
2.1 The Closing. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated herein (the "Closing") shall take place
at the offices of the Company, Denver, Colorado, at 9:00 a.m., Mountain time, on
March 14, 2001, or such other date as the Parties may agree (the "Closing
Date").
ARTICLE 3 - THE EXCHANGE
3.1 The Exchange. At the Closing, Xxxxxx shall contribute to the Company
all of its Interests in H&H and shall cause Xxxxxx Cable to contribute to the
Company all of its Odyssey Common Interests, representing 22.5% of the
outstanding Odyssey Common Interests, and the Company shall issue to Xxxxxx
5,377,721 shares of Class A Stock, representing 8.22% of the Common Stock
outstanding immediately after the Closing.
3.2 Delivery of Assignment and Assumption Agreements. At the Closing, (i)
Xxxxxx will deliver to the Company an assignment and assumption agreement
substantially in the form attached as Exhibit E (the "H&H Assignment
Agreement"), duly executed by Xxxxxx, transferring to the Company all title and
interest in and to the Interests in H&H to be contributed to the Company
pursuant to Section 3.1, (ii) Xxxxxx Cable will deliver to the Company an
assignment and assumption agreement substantially in the form attached as
Exhibit F (the "Odyssey Assignment Agreement"), duly executed by Xxxxxx Cable,
transferring to the Company all title and interest in and to the Odyssey Common
Interests to be contributed to the Company pursuant to Section 3.1 and (iii) the
Company will deliver to Xxxxxx the H&H Assignment Agreement duly executed by HEN
Domestic Holdings, Inc. (a wholly-owned subsidiary of Crown) and the Odyssey
Assignment Agreement, duly executed by Crown, and share certificates
representing the Common Stock to be issued to Xxxxxx pursuant to Section 3.1.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and Crown jointly and severally hereby represent and warrant as
follows:
4.1 Corporate Existence. Each of the Company and Crown and each of Crown's
Subsidiaries is a corporation or limited liability company duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction set forth
opposite the name of such corporation or limited liability company on Item 4.1
of the Disclosure Schedule, and is duly qualified to do business as a foreign
corporation or limited liability company and is in good standing in each
jurisdiction in which the ownership or use of its assets or properties, or the
conduct or nature of its business, makes such qualification necessary, except
for any jurisdictions in which the failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect on Crown. Except as set
forth on Item 4.1 of the Disclosure Schedule, Crown and each of Crown's
Subsidiaries is wholly-owned directly or indirectly by the Company. The Company
and Crown and each of Crown's Subsidiaries have all requisite power and
authority to conduct their respective businesses and own their respective
properties as now conducted and owned. The Company has previously provided to
Xxxxxx true and complete
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copies of the Certificate of Incorporation and By-laws of the Company and Crown
as in effect on the date hereof.
4.2 Power and Authority. Each of the Company and Crown has the requisite
power and authority, and has taken all required action necessary, to execute,
deliver and perform this Agreement and the Company Stockholders Agreement. None
of the execution, delivery and performance of this Agreement or the Company
Stockholders Agreement by the Company nor the consummation by the Company or
Crown of any transaction related hereto or thereto, nor the issuance or delivery
of the Common Stock will (i) violate any provision of the By-laws, Certificate
of Incorporation or other organizational document of the Company or Crown or any
of Crown's Subsidiaries, (ii) result in the breach of or constitute a default
under any contract, lease, license, franchise, permit, indenture, mortgage, deed
of trust, note, agreement or other instrument to which the Company or Crown, or
any of Crown's Subsidiaries is a party or by which any of them is bound, (iii)
result in the creation or imposition of any material, claim or Encumbrance on
any asset of Crown or any of its Subsidiaries, (iv) to the knowledge of the
Company or Crown, give any Person rights to terminate any contracts or
agreements of Crown or any of its Subsidiaries or otherwise to exercise rights
against Crown or any of its Subsidiaries or (v) violate any Law or Order
applicable to or bearing upon the Company or Crown or any of Crown's
Subsidiaries or any of their assets or businesses except, in the case of each of
clauses (ii), (iii), (iv) or (v) for such violations, breaches, defaults, rights
and impairments that could not reasonably be expected to have a Material Adverse
Effect on Crown.
4.3 Enforceability, etc. Assuming the due authorization, execution and
delivery of this Agreement by Xxxxxx, and the due authorization, execution and
delivery of the Company Stockholders Agreement by each of the other parties to
the Company Stockholders Agreement, this Agreement has been duly executed and
delivered by the Company and constitutes, and when the Company Stockholders
Agreement is executed, the Company Stockholders Agreement will constitute the
legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to (i) the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and (ii) general equitable
principles (whether considered in a proceeding in equity or at law).
4.4 Capitalization.
(a) Item 4.4 of the Disclosure Schedule hereto sets forth, as of the
date of this Agreement, a true and complete statement of the outstanding
Interests of the Company. Except as set forth on Item 4.4 or Item 4.18 of
the Disclosure Schedule or as contemplated by this Agreement, there are no
outstanding rights to acquire or purchase any Interests of the Company,
Crown or any of Crown's Subsidiaries. Except for Encumbrances set forth on
Item 4.4 of the Disclosure Schedule, the shares of Crown Class A Stock
owned by the Company are owned free and clear of any Encumbrances.
(b) The Common Stock to be delivered to Xxxxxx, when issued and
delivered to Xxxxxx pursuant to this Agreement against payment of the
consideration set forth herein, will be duly authorized, validly issued,
fully paid and non-assessable and will be free and clear of any
Encumbrances, preemptive rights, escrows, options, rights of
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first refusal or other agreements, arrangements, commitments,
understandings or obligations, whether written or oral, or any other
restrictions affecting rights and other incidents of record and beneficial
ownership, other than (i) as set forth herein or in the Company
Stockholders Agreement, and (ii) restrictions on transferability imposed
generally under the Securities Act and under the securities laws of the
several states and the rules and regulations issued in respect thereto
(such state laws, rules and regulations, being, collectively, "Blue Sky
Laws").
(c) The issuance and delivery of the Common Stock to Xxxxxx on the
terms and conditions contemplated herein are exempt from the registration
requirements of the Securities Act and the Blue Sky Laws or will be
qualified as may be necessary.
4.5 Consents and Approvals. None of the execution, delivery and performance
of this Agreement by the Company nor the consummation by the Company or Crown of
any transaction related hereto, nor the issuance or delivery of the Common Stock
will require any consent, approval, Order or authorization of, filing,
registration, declaration or taking of any other action with, or notice to, any
Person, other than such consents, approvals, filings or actions (i) under the
Federal securities laws, the Blue Sky Laws or HSR Act, (ii) the failure of which
to obtain, make or take would not reasonably be expected to have a Material
Adverse Effect on the Company or Crown, as applicable or (iii) which have
already been obtained.
4.6 Financial Statements. Crown has furnished to Xxxxxx its audited
consolidated financial statements for the fiscal years ended December 31, 1999,
1998 and 1997 consisting of the audited consolidated balance sheets, income
statements and statements of stockholders' equity for each such fiscal year (all
of the preceding financial statements being, collectively, the "Financial
Statements" and the most recent consolidated balance sheet included within the
Financial Statements being the "Balance Sheet"). The Financial Statements have
been prepared in accordance with U.S. generally accepted accounting principles
("GAAP"), consistently applied, and fairly present in all material respects the
financial position of Crown and its Subsidiaries and the results of its
operations and cash flows for the periods covered thereby.
4.7 Material Adverse Change. Except as described in the Prospectus (other
than the "Risk Factors" included therein) or as contemplated by this Agreement
or the Related Documents, since December 31, 1999, the business of Crown has
been conducted in all material respects in the ordinary course and in
substantially the same manner as previously conducted and there has been no
Material Adverse Effect on Crown.
4.8 Events Subsequent to the Date of the Last Audited Financial Statement.
Since December 31, 1999, except as described in the Prospectus (other than the
"Risk Factors" included therein) or as contemplated by this Agreement or the
Related Documents or as set forth in the Financial Statements or on Item 4.8 of
the Disclosure Schedule or as described in the Registration Statement, none of
the Company, Crown or any of its Subsidiaries has (i) issued any stock, bond or
other security, (ii) incurred any indebtedness except in the ordinary course of
business, (iii) declared or made any payment or distribution to stockholders or
purchased or redeemed any of its capital stock, (iv) sold, assigned, leased,
mortgaged, pledged, subjected to any Encumbrance or otherwise conveyed or
transferred any of its assets except in the ordinary course of business, or
cancelled any debt or claim owed to the Company, Crown or any of its
Subsidiaries except in the ordinary
8
course of business, (v) sold, assigned, transferred or granted any exclusive
license with respect to any Intellectual Property, (vi) suffered any substantial
loss of property or waived any right of substantial value other than in the
ordinary course of business or (vii) made any change in officer compensation
except in the ordinary course of business and consistent with past practice.
4.9 Absence of Undisclosed Liabilities. Since December 31, 1999, except as
described in the Prospectus (other than the "Risk Factors" included therein) or
as contemplated by this Agreement and the Related Documents, Crown and its
Subsidiaries incurred no material liabilities or obligations of any kind,
matured or unmatured, fixed or contingent, which are not fully reflected or
provided for on the Balance Sheet, or any material loss contingency (as defined
in Statement of Financial Accounting Standards No. 5) whether or not required by
GAAP to be shown on the Financial Statements, except (i) liabilities and
contingencies incurred in the ordinary course of business consistent with past
practice or as otherwise disclosed in the Registration Statement and (ii) tax
and related liabilities which have been disclosed pursuant to Section 4.10
below.
4.10 Taxes.
(a) Except as set forth on Item 4.10 of the Disclosure Schedule, or as
would not reasonably be expected to have a Material Adverse Effect on
Crown, each of Crown and its Subsidiaries (i) has timely filed or will
timely file (including extensions of time approved by the appropriate
taxing authority) all Tax Returns required to be filed with the Internal
Revenue Service, the State of Delaware, any other states or governmental
subdivisions, all foreign countries or any other taxing authority and all
such Tax Returns are true, complete and correct and (ii) has paid all Taxes
due and payable (except for Taxes being contested in good faith pursuant to
appropriate proceedings for which adequate accruals in the Financial
Statements have been provided). Except as would not reasonably be expected
to have a Material Adverse Effect on Crown, there are (i) no unpaid
assessments for additional Taxes for any fiscal period for Crown and (ii)
no Tax Encumbrances, whether imposed by any Federal, state, county,
municipal or foreign taxing authority, outstanding against the assets or
businesses of Crown or any of its Subsidiaries, except for Taxes not yet
due and payable. Except as set forth on Item 4.10 of the Disclosure
Schedule or as would not reasonably be expected to have a Material Adverse
Effect on Crown, neither Crown nor any of its Subsidiaries have waived any
statute of limitations with respect to Taxes. Except as set forth on Item
4.10 of the Disclosure Schedule or as would not reasonably be expected to
have a Material Adverse Effect on Crown, no Tax Returns of Crown or any of
its Subsidiaries have ever been audited and there are not pending or
threatened in writing any audits, examinations, investigations or other
proceedings in respect of Taxes or Tax Returns of Crown.
(b) For the purposes of this Agreement, (i) the term "Tax" or "Taxes"
includes all taxes, charges, fees, levies, imposts, or other assessments
imposed by any Federal, state, local, foreign or other taxing authority,
including all income, gross receipts, gains profits, windfall profits,
gift, severance, ad valorem, capital, social
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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, assessments, or other
governmental charges of any kind whatsoever, including interest earned
thereon or penalties, additions, or fines thereto or attributable to any
failure to comply with any requirement regarding Tax Returns and any
interest in respect of such penalties, additions or fines, provided that
any interest, penalties, additions or fines that relate to Taxes for any
taxable period shall be deemed to be Taxes for such taxable period
regardless of when such items are incurred, accrued, assessed or charged,
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 taxing
authority or jurisdiction with respect to Taxes (including any returns or
reports filed on a consolidated, unitary, or combined basis).
4.11 Litigation. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to the knowledge of the Company or Crown,
threatened against or affecting the Company or Crown or any of Crown's
Subsidiaries, or their respective assets or businesses, at law or in equity,
before any court, arbitration panel, tribunal or governmental commission,
bureau, agency or instrumentality which would reasonably be expected to have a
Material Adverse Effect on the Company or Crown or which seeks to enjoin or
restrain the consummation of the transactions contemplated by this Agreement.
4.12 Insurance. Crown and its Subsidiaries hold valid insurance policies in
full force and effect which the Company believes provides adequate coverage and
limits for the business of Crown and its Subsidiaries.
4.13 Conflicts of Interests. Since December 31, 1999, except for the
Related Documents or as set forth on Item 4.13 of the Disclosure Schedule,
neither the Company, Crown nor any of Crown's Subsidiaries has engaged in any
material transactions with HED, HEI or Hallmark, and neither the Company, Crown
nor any of its Subsidiaries is a party to or bound by any contract, lease,
purchase contract, obligation, instrument, arrangement, commitment or other
agreement (oral or written) with any director or executive officer of any such
entities which has not been entered into on an arm's-length basis.
4.14 Licenses. Set forth on Item 4.14 of the Disclosure Schedule is a true
and complete list of all material qualifications, registrations, filings,
privileges, immunities, franchises, permits, licenses and other material rights,
including, without limitation, all material governmental regulatory or
administrative authority approvals, authorizations, consents, licenses and
permits, as of the date of this Agreement, which are necessary or required for
the conduct by Crown and each of its Subsidiaries of the businesses currently
conducted by them (collectively, the "Licenses"). Neither the Company nor Crown
knows of any basis upon which the renewal of any Licenses would be denied in the
future. Each such License has been validly issued to and is in full force and
effect, and neither Crown nor any of its Subsidiaries is in violation of any
such License except for such failure to be validly issued and in full force and
effect or such violations that could not reasonably be expected to have a
Material Adverse Effect on Crown.
10
4.15 Intellectual Property Rights. Set forth on Item 4.15 of the Disclosure
Schedule is a true and complete list of all material patents, trademarks,
service marks, trade names, copyrights or other similar proprietary rights,
whether registered or unregistered, or any rights or licenses to use the same,
and any and all applications therefor, presently owned or held by Crown and its
Subsidiaries as of the date of this Agreement (collectively, the "Intellectual
Property"). Except with respect to Crown's current use of the Hallmark name in
its business, such Intellectual Property constitutes all material intellectual
property and similar proprietary information necessary to permit Crown and its
Subsidiaries to conduct their businesses as currently conducted and as
contemplated to be conducted. None of Crown nor any of its Subsidiaries has
received any formal or informal claim of infringement or other complaint that
any of their operations infringe any rights under intellectual property of any
other Person, nor does Crown or any of its Subsidiaries have any reason to
believe that there is any valid basis for such claim, in either case which would
reasonably be expected to have a Material Adverse Effect on Crown. No material
royalties, honorariums or fees are or will be, as of the Closing Date, payable
by Crown or any of its Subsidiaries to any other Person by reason of the
ownership or use by any of them of any Intellectual Property. Crown or its
Subsidiaries own, or has a valid right to use, free and clear of all
Encumbrances, all of the Intellectual Property except as would not reasonably be
expected to have a Material Adverse Effect on Crown. To Crown's knowledge,
except as would not reasonably be expected to have a Material Adverse Effect on
Crown, no third party is infringing any Intellectual Property owned or used by
Crown or any of its Subsidiaries and no such claims, suits, arbitrations or
other adversarial proceedings have been brought against any third party by Crown
or any of its Subsidiaries.
4.16 Contracts and Commitments.
(a) Except as expressly contemplated by this Agreement or any Related
Documents or as set forth on Item 4.16 of the Disclosure Schedule, as of
the date of this Agreement, neither Crown nor any of its Subsidiaries is a
party to any written or oral agreement (all items set forth thereon are
referred to as "Material Agreements"):
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any contract with any labor union, or any severance
agreements;
(ii) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis providing annual compensation in excess of $100,000 or
contract relating to loans to officers, directors, shareholders or
Affiliates;
(iii) contract under which it has advanced or loaned any other
Person amounts in the aggregate exceeding $100,000;
(iv) agreement or indenture relating to the borrowing of money or
the mortgaging, pledging or otherwise placing an Encumbrance on any
material asset or material group of assets;
11
(v) guarantee of any obligation;
(vi) lease, sublease, license or other agreement under which it
is lessee or sublessee or licensee of or holds, uses, occupies or
operates any property, real or personal, owned by any other party,
except for any such agreement relating to real or personal property
under which the aggregate annual rental payments do not exceed
$100,000;
(vii) lease, sublease, license or other agreement under which it
is lessor or sublessor or licensor of or permits any third party to
hold, use, occupy or operate any property, real or personal, owned or
controlled by it in excess of $100,000;
(viii) assignment, license or indemnification with respect to any
intangible property (including, without limitation, any patent,
trademark, trade name, copyright, know-how, trade secret or
confidential information);
(ix) warranty agreement with respect to its services rendered or
its products sold or leased;
(x) agreement under which it has granted any Person any
registration rights or similar rights (including piggyback rights) or
co-sale or similar rights in respect of any of its securities;
(xi) sales, distribution or franchise agreements involving
amounts in excess of $100,000;
(xii) agreement with a term of more than six months which is not
terminable by it upon less than 30 days' notice without penalty
involving amounts in excess of $100,000;
(xiii) contract or agreement prohibiting it or materially
restricting it from freely engaging in any business or competing
anywhere in the world;
(xiv) contract, agreement or other arrangement, including,
without limitation, any stockholders or voting agreement, voting trust
or similar arrangement with respect to any of its Interests with any
officer, director, employee, or holder of Interests;
(xv) joint venture, partnership or similar agreement involving a
sharing of profits or expenses; or
(xvi) any other agreement which is material to its operations and
business prospects or involves a consideration in excess of $100,000
annually.
(b) True and complete copies of all written Material Agreements, and
accurate and complete summaries of the material terms of all oral Material
Agreements, have been made available to Xxxxxx or its counsel. Except as
set forth on Item 4.16 of
12
the Disclosure Schedule, or where the failure would not have a Material
Adverse Effect on Crown, all of the Material Agreements set forth on such
Item 4.16 are in full force and effect and are valid, binding and
enforceable against Crown and each of its Subsidiaries in accordance with
their respective terms, subject to (i) the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and (ii)
general equitable principles (whether considered in a proceeding in equity
or at law). Each of Crown and each of its Subsidiaries has performed all
material obligations required to be performed by it under such Material
Agreements and neither Crown nor any of its Subsidiaries is in default
under or in breach of, nor is any of them in receipt of any claim of
default or breach under, nor does any of them have knowledge of any event
which, with the passing of time, the giving of notice, or both would
constitute a breach or default under any such Material Agreement to which
it is subject which would reasonably be expected to have a Material Adverse
Effect on Crown; neither Crown nor any of its Subsidiaries has any
knowledge of any breach or anticipated breach by the other parties to any
Material Agreement to which it is a party which would be reasonably
expected to have a Material Adverse Effect on Crown.
4.17 Customers and Suppliers. Set forth on Item 4.17 of the Disclosure
Schedule hereof is a list of the distributors ("Distributors") of Crown and its
Subsidiaries for each of the two years ending December 31, 1999 and December 31,
2000, and set forth opposite the name of each such Distributor is the percentage
of consolidated net sales and subscribers attributable to such Distributor.
Except as contemplated by this Agreement or the Related Documents, to the
knowledge of the Company and Crown, since the date of the Balance Sheet, no
material supplier of Crown or any of its Subsidiaries has indicated that it
shall materially change the pricing of its programming or that it shall stop, or
materially decrease the rate of, distributing programming to Crown or any of its
Subsidiaries, and no Distributor listed on the aforementioned Item 4.17 has
indicated that it shall stop, or materially decrease the rate of, purchasing,
distributing or licensing rights to television programming from Crown and its
Subsidiaries.
4.18 Plans.
(a) Except as set forth on Item 4.18 of the Disclosure Schedule,
neither Crown nor any of its Subsidiaries is a party to any Plan, as
defined in the Employee Retirement Income Security Act of 1974 ("ERISA").
(b) With respect to each Plan, except as set forth on Item 4.18 of the
Disclosure Schedule and except as would not reasonably be expected to have
a Material Adverse Effect on Crown: (i) each Plan has been administered in
compliance with its terms, (ii) there are no proceedings by the IRS, the
Department of Labor or any Plan participant (other than routine claims for
benefits) pending or to the knowledge of Crown, threatened, with respect to
any Plan, the assets of any trust thereunder, or the Plan sponsor or the
Plan administrator with respect to the design or operation of any Plan,
(iii) each Plan which is intended to be qualified within the meaning of
Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service that has not been revoked, and to the
knowledge of Crown, there are no existing
13
circumstances nor any events that have occurred that could adversely affect
the qualified status of any such qualified plan or the related trust, (iv)
no unsatisfied liabilities to participants, the IRS, the Department of
Labor, the Pension Benefit Guaranty Corporation or to any other Person or
Plan have been incurred under Title IV of ERISA as a result of the
termination of any Plan or any partial or complete withdrawal from a Plan
that is a "multiple employer plan" and (v) there has been no event with
respect to a Plan which would require disclosure under Sections 4062(c),
4063(a) or 4041(e) of ERISA.
(c) Neither Crown nor any of its Subsidiaries maintains or is
obligated to contribute to or, during the six-year period prior to the
Closing Date, has maintained or been obligated to contribute to a
Multiemployer Plan or any "multiple employer plan."
(d) Except as would not reasonably be expected to have a Material
Adverse Effect on Crown, the consummation of the transactions contemplated
by this Agreement will not, either alone or in a combination with another
event, (i) entitle any employee of Crown or any of its Subsidiaries to
severance pay or (ii) accelerate the time of payment or vesting or increase
the amount of compensation due to any such employee.
4.19 Employee Matters. Except for occurrences that would not have a
Material Adverse Effect on Crown, (a) to the knowledge of the Company or Crown,
Crown and its Subsidiaries are in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment, health
and safety, and wages and hours; (b) Crown or its Subsidiaries are not party to
any collective bargaining agreement and there is no labor strike, slowdown or
stoppage actually pending or to the knowledge of the Company or Crown,
threatened against or affecting Crown and its Subsidiaries; (c) Crown or its
Subsidiaries have not received notice that any representation petition
respecting the employees of Crown or its Subsidiaries has been filed with the
National Labor Relations Board, and (d) to the knowledge of the Company or
Crown, Crown and its Subsidiaries are and have been in compliance with all
notice and other requirements under the Worker Adjustment and Retaining
Notification Act ("WARN") or similar state statute.
4.20 Brokers, etc. Neither the Company or Crown is obligated to pay any fee
or commission to any broker, finder or other similar Person in connection with
any of the transactions contemplated by this Agreement.
4.21 Year 2000 Compliance. To the knowledge of Crown, the software,
hardware and equipment of Crown and its Subsidiaries will continue to operate
without causing serious interruption in the business of Crown and its
Subsidiaries in the year 2000 and beyond.
4.22 Compliance with Laws. Each of the Company, Crown and Crown's
Subsidiaries is in compliance with, and is not in violation of, any applicable
Laws or Orders (including the Foreign Corrupt Practices Act of 1977, any Federal
"fraud and abuse legislation" or Federal "anti-kickback laws" and any applicable
building, zoning, environmental protection, water use, occupational health and
safety, employment or disability rights, law, ordinance or regulation) affecting
its properties or the operation of its business which would reasonably be
expected to have a Material Adverse Effect on the Company or Crown.
14
4.23 Public Filings. The Company has filed all reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted thereunder. None of the Company's Forms 10-Q for the
quarters ended September 30, 2000, June 30, 2000 or March 31, 2000 contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
4.24 Continuity of Business Enterprise. It is the present intention of the
Company to continue at least one significant historic business line of Xxxxxx
Cable and Odyssey, or to use a significant portion of Xxxxxx Cable's or
Odyssey's historic business assets in a business, in each case within the
meaning of Treasury Regulation ss. 1.368-1(d).
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF XXXXXX
Xxxxxx hereby represents and warrants as follows:
5.1 Existence; Power and Authority. Each of Xxxxxx and Xxxxxx Cable is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction set forth opposite the name of such corporation on Item
5.1 of the Disclosure Schedule. Xxxxxx has all requisite power and authority and
has taken all required action necessary to execute, deliver and perform this
Agreement and the Company Stockholders Agreement, and each other document or
instrument related hereto or thereto to which it is a party, and to carry out
the terms hereof and thereof. Xxxxxx Cable has all requisite power and authority
and has taken all required action necessary to perform the transaction
contemplated by this Agreement. Subject to obtaining the consents and approvals
set forth on Item 5.4 of the Disclosure Schedule, neither the execution,
delivery and performance of this Agreement or the Company Stockholders Agreement
by Xxxxxx, nor the consummation by Xxxxxx or Xxxxxx Cable of any transaction
related hereto or thereto, will (i) violate any provision of the organizational
documents of Xxxxxx or Xxxxxx Cable, (ii) result in the breach of or constitute
a default under any material contract, lease, license, franchise, permit,
indenture, mortgage, deed of trust, note, agreement or other instrument to which
Xxxxxx or Xxxxxx Cable is a party or is bound, (iii) violate any Law or Order
applicable to or bearing upon Xxxxxx or Xxxxxx Cable or any of their respective
assets or business, except, in the case of (ii) and (iii), for such conflicts,
violations, breaches, rights and impairments that could not reasonably be
expected to have a Material Adverse Effect on Xxxxxx.
5.2 Enforceability, etc. Assuming the due authorization, execution and
delivery of this Agreement by the Company, and the due authorization, execution
and delivery of the Company Stockholders Agreement by each of the other parties
to the Company Stockholders Agreement, this Agreement has been duly executed and
delivered by Xxxxxx and constitutes, and when the Company Stockholders Agreement
is executed, the Company Stockholders Agreement will constitute the legal, valid
and binding obligation of Xxxxxx, enforceable against it in accordance with its
terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and (ii) general equitable principles
(whether considered in a proceeding in equity or at law).
15
5.3 Ownership.
(a) Xxxxxx Cable is a wholly-owned subsidiary of Xxxxxx and owns 22.5%
of the Odyssey Common Interests. Except for the Encumbrances set forth on
Item 5.3(a) of the Disclosure Schedule, the Odyssey Common Interests owned
by Xxxxxx Cable are owned free and clear of any Encumbrances.
(b) Xxxxxx owns 50% of the Interests of H&H. Except for the
encumbrances set forth on Item 5.3(b) of the Disclosure Schedule, the
Interests of H&H owned by Xxxxxx are owned free and clear of any
Encumbrances.
5.4 Consents and Approvals. Except as set forth on Item 5.4 of the
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement by Xxxxxx, nor the consummation by Xxxxxx of any transaction related
hereto will require any consent, approval, Order or authorization of, filing,
registration, declaration or taking of any other action with, or notice to, any
Person, other than such consents, approvals, filings or actions (i) under the
Federal securities laws, the Blue Sky Laws or the HSR Act, (ii) the failure of
which to take or obtain would not reasonably be expected to have a Material
Adverse Effect on Xxxxxx or (iii) which have already been obtained.
5.5 Purchase for Investment. Xxxxxx is acquiring the Class A Stock pursuant
to Section 3.1 for its own account and not as a nominee or agent for any other
Person and with no present intention to engage in a distribution thereof. Xxxxxx
understands that the Class A Stock must be held indefinitely unless it is
registered under the Securities Act or an exemption from such registration
becomes available.
5.6 Financial Matters. Xxxxxx represents and understands that the
acquisition of the Class A Stock involves substantial risk and that Xxxxxx 's
financial condition and investments are such that it is in a financial position
to hold the Class A Stock for an indefinite period of time and to bear the
economic risk of, and withstand a complete loss of, such Class A Stock. Xxxxxx
represents that it is an "accredited investor" as that term is defined in
Regulation D promulgated under the Securities Act, and that it is a
sophisticated investor, capable of evaluating the merits and risks of investing
in the Company given its current stage of development.
5.7 Brokers, etc. Xxxxxx is not obligated to pay any fee or commission to
any broker, finder or other similar Person in connection with the Exchange or
any of the transactions contemplated by this Agreement.
5.8 Litigation. Except as set forth on Item 5.8 of the Disclosure Schedule,
there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the knowledge of Xxxxxx, threatened against or affecting Xxxxxx,
at law or in equity, before any court, arbitration panel, tribunal or
governmental commission, bureau, agency or instrumentality which would
reasonably be expected to have a Material Adverse Effect on Xxxxxx or which
seeks to enjoin or restrain the consummation of the transactions contemplated by
this Agreement and the Company Stockholder Agreement.
16
ARTICLE 6 - CONDITIONS PRECEDENT; CONDUCT OF PARTIES PRIOR TO CLOSING
6.1 Conditions Precedent. The respective obligations of each Party to this
Agreement shall be subject to the fulfillment, at or prior to the Closing Date,
of the following conditions, or waiver by the Party to whom such obligation is
owed:
(a) Legality. At the time of the Closing, the transactions
contemplated by this Agreement shall be legally permitted by all applicable
Laws and Orders.
(b) Absence of Proceedings to Restrain Consummation of the Agreement.
No judgment, injunction or order shall have been entered restraining or
prohibiting the transactions contemplated herein.
(c) HSR Act. The waiting periods (and any extensions thereof)
applicable to consummation of the Exchange under the HSR Act shall have
expired or been terminated.
(d) Secretary's Certificates. Each Party shall have received
certificates from a Secretary or Assistant Secretary of the other Party (i)
certifying organizational documents of such Party and relevant board (or
partnership) resolutions authorizing the transactions contemplated by this
Agreement and the Company Stockholders Agreement and (ii) as to the
incumbency of each person signing this Agreement and the Company
Stockholders Agreement on behalf of such Party.
(e) Consent. The consent or approval of each third party whose consent
or approval shall be required in connection with the transactions
contemplated hereby or by the Company Stockholders Agreement shall have
been obtained, except for any such consents the failure of which to obtain
would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company or Crown.
(f) Stockholders Agreement. HEI, Liberty, VMC, Liberty Sub, JPM,
Xxxxxx and the Company shall have duly authorized, executed and delivered
the Company Stockholders Agreement.
(g) Program License Agreements. Odyssey and XX.XX & Merchandising AG
shall have executed and delivered a Program License Agreement dated as of
the Closing Date, substantially in the form attached as Exhibit A, and
Odyssey and Xxxxxx shall have executed and delivered an Amendment to the
Program License Agreement dated as of November 13, 1998, substantially in
the form attached as Exhibit B.
(h) License Agreement. Odyssey and Xxxxxx shall have executed and
delivered a License Agreement dated as of the Closing Date, substantially
in the form attached as Exhibit C.
17
(i) Certain H&H Matters. Each of Xxxxxx, H&H, Crown and the Company
shall have executed a letter agreement substantially in the form attached
as Exhibit D.
6.2 Conditions Precedent to Obligations of Each of the Company and Crown.
The respective obligations of each of the Company and Crown are further subject
to the fulfillment or waiver, at or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Xxxxxx set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of Xxxxxx
set forth in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date (except for representations and
warranties that speak as of a specific date).
(b) Performance of Obligations. Xxxxxx shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, including, without limitation,
paying the amount required under Section 6.8(a).
6.3 Conditions Precedent to Obligations of Xxxxxx . The obligations of
Xxxxxx are further subject to the fulfillment or waiver, at or prior to the
Closing Date, of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company and Crown set forth in this Agreement that are qualified as
to materiality shall be true and correct, and the representations and
warranties of the Company and Crown set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing Date
(except for representations and warranties that speak as of a specific
date).
(b) Performance of Obligations. Each of the Company and Crown shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
including, without limitation, causing payment of the amounts required
under Section 6.8(b).
6.4 Access for Investigation; Confidentiality.
(a) At reasonable times and places, and upon reasonable notice, the
Company and Crown shall permit Xxxxxx and its accountants and counsel and
other representatives to have full access to the premises and to all the
books, contracts, commitments and records (including, but not limited to,
Tax Returns filed and those in preparation) of the Company, Crown and
Crown's Subsidiaries during customary business hours and furnish Xxxxxx
with such financial and operating data and other information with respect
to the business and properties of Crown as they shall from time to time
reasonably request.
18
(b) Except as required by law, each Party will hold, and will cause
its respective officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information received in connection with the transactions contemplated by
this Agreement in confidence until such time as such information becomes
publicly available (otherwise than through the wrongful act of any such
Person) and shall use its best efforts to ensure that such Persons do not
disclose such information to others without the prior written consent of
the applicable Party from whom such information was received. In the event
of the termination of this Agreement for any reason, each Party shall
promptly return or destroy all documents containing nonpublic information
so obtained from any other Party or any of its subsidiaries and any copies
made of such documents.
6.5 Conduct of Business.
(a) Except as disclosed in Item 6.5 of the Disclosure Schedule or as
contemplated by this Agreement or the Related Documents, from the date
hereof and prior to the Closing Date, without the prior written consent of
Xxxxxx (which consent shall not be unreasonably withheld or delayed), Crown
shall and shall cause each of its Subsidiaries to:
(i) conduct its business in the ordinary course in all material
respects, consistent with past practice or as otherwise disclosed in
the Registration Statement;
(ii) use its reasonable best efforts to maintain and preserve its
business organization, material rights, franchises and all Material
Agreements;
(iii) use its reasonable best efforts to retain the services of
its respective officers and key employees and maintain its respective
existing relationships with customers and suppliers;
(iv) not declare or pay any dividend or make any distribution of
any kind in respect of any shares of capital stock of Crown or any of
its Subsidiaries (other than dividends or distributions by Crown's
wholly owned Subsidiaries to Crown or Crown's other wholly owned
Subsidiaries);
(v) not modify or amend its organizational documents;
(vi) not enter into any material transaction with the beneficial
holder of a majority of its outstanding common stock or any of its
affiliates or any officer, director or employee of any of them
(collectively, "Affiliate Transactions") other than Affiliate
Transactions entered into on or after the date hereof that are
consistent with past practice;
(vii) not enter into any agreement to do any of the foregoing;
and
19
(viii) not to take, or agree to take, any action that would make
any representation of the Company or Crown inaccurate in any material
respect at the Closing Date.
6.6 Performance of Obligations. Each of the Company and Crown shall perform
in all material respects all of its respective obligations and comply in all
material respects with all laws affecting the operation of its respective
businesses and pay when due (unless contested in good faith by such Party) all
required Taxes, licenses and fees and file all required Tax Returns as and when
such returns are required to be filed.
6.7 Further Assurances. Each Party agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other Parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
and the Company Stockholders Agreement to which it is a Party, including,
without limitation, (a) the obtaining of all other necessary actions or
nonactions, waivers, consents, licenses, permits, authorizations, orders and
approvals from any Governmental Entity and the making of all other necessary
registrations and filings (including, without limitation, filings required under
the HSR Act), (b) the obtaining of all consents, approvals or waivers from third
parties that are necessary to consummate the transactions contemplated by this
Agreement and the Related Documents or required to prevent a Material Adverse
Effect, and (c) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement.
6.8 Payments of Outstanding Obligations.
(a) Xxxxxx shall pay to H&H the amount of $1,932,396 on the Closing
Date. The parties agree that such amount is equal to the difference of (i)
$2,300,000, constituting the total amount of capital contributions due from
Xxxxxx to H&H through the date hereof, net of the total amount of license
fees due from H&H to Xxxxxx for all periods ending on or before June 30,
2000, minus (ii) $367, 604.
(b) The Company and Crown shall cause H&H to pay to Xxxxxx the amount
of $1,764,383 on the Closing Date.
(c) Each of the payments made pursuant tot his Section 6.8 shall be
delivered by wire transfer of immediately available funds to the account or
accounts designated in writing by the recipient of the payment to the party
making the payment prior to date on which the payment is due.
ARTICLE 7 - INDEMNIFICATION
7.1 Indemnification by the Company and Crown.
(a) The Company and Crown agree jointly and severally from and after
the Closing to (i) indemnify and hold harmless Xxxxxx, its officers,
directors, affiliates, employees and agents, and its successors and assigns
(the "Contributor
20
Indemnified Persons") from and against any Adverse Consequences (but
excluding any consequential damages of the Contributor Indemnified
Persons), and (ii) defend the Contributor Indemnified Persons against any
Actions, to the extent such Adverse Consequences or Actions arise out of or
result from (A) the breach or inaccuracy of any representation or warranty
of the Company contained in Sections 4.1, 4.2, 4.3, 4.4 or 4.20 or the
corresponding Items of the Disclosure Schedules hereto, (B) the breach or
inaccuracy of any representation or warranty of the Company contained in
Section 4.23 or (C) any untrue statement of a material fact in the
Prospectus or omission of a material fact required to be stated in the
Prospectus or necessary to make the statements in the Prospectus, in light
of the circumstances under which they were made, not misleading, provided
that in no event shall the Company be liable for the indemnification
contained (i) in Section 7.l(a)(ii)(B) unless a claim for indemnification
has been asserted in writing by such Contributor Indemnified Person prior
to the expiration of the statue of limitations period that would apply to
such a claim if made by a purchaser of Class A Stock on the Nasdaq market
on the date hereof or (ii) in Section 7.1(a)(ii)(C) unless a claim for
indemnification has been asserted in writing by such Contributor
Indemnified Person prior to the expiration of the statute of limitations
period that would apply to such a claim if made by a purchaser of Class A
Stock in the IPO. For purposes of indemnification under Section
7.1(a)(ii)(B) or (C), the Contributor Indemnified Persons shall be treated
as if they were purchasers of Class A Stock on the Nasdaq market on the
date hereof or as if they were purchasers of Class A Stock in the IPO,
respectively.
(b) Xxxxxx agrees from and after Closing to (i) indemnify and hold
harmless the Company, all of its officers, directors, affiliates, employees
and agents, and each of the successors and assigns of any of the foregoing
(the "Company Indemnified Persons" from and against, and waive any claim
for contribution against the Company with respect to, any Adverse
Consequences (but excluding any consequential damages of the Company
Indemnified Persons), and (ii) defend the Company Indemnified Persons
against any Actions, to the extent such Adverse Consequences or Actions
arise out of or result from the breach or inaccuracy of any of its
representations or warranties contained in Section 5.1, 5.2, 5.3 or 5.7 or
the corresponding Items of the Disclosure Schedule hereto.
To clarify the intention of the Parties with respect to the indemnification
obligations of the Company and Xxxxxx under this Section 7.1, the Parties
acknowledge that if the indemnification of any Indemnified Person(s) pursuant to
this Section 7.1 directly or indirectly reduces or eliminates the Adverse
Consequences suffered by any other Indemnified Person(s), the Indemnifying Party
shall not be required to indemnify such other Indemnified Person(s) to the
extent that such Adverse Consequences have been reduced or eliminated.
7.2 Procedure for Indemnification. If any Person shall claim
indemnification (the "Indemnified Party") hereunder for any claim other than a
third party claim, the Indemnified Party shall promptly give written notice to
the Party from whom indemnification is sought (the "Indemnifying Party") of the
nature and amount of the claim. If an Indemnified Party shall claim
indemnification hereunder arising from any claim or demand of a third party, the
Indemnified Party shall promptly give written notice (a "Written Notice") to the
Indemnifying Party of the basis for such claim or demand, setting forth the
nature of the claim or demand in
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detail. The Indemnifying Party shall have the right to compromise or, if
appropriate, defend at its own cost and through counsel of its own choosing
(reasonably acceptable to the Indemnified Party), any claim or demand set forth
in a Written Notice giving rise to such claim for indemnification. In the event
the Indemnifying Party undertakes to compromise or defend any such claim or
demand, it shall promptly (and in any event, no later than thirty (30) days
after receipt of the Written Notice) notify the Indemnified Party in writing of
its intention to do so. If the Indemnifying Party fails to notify the
Indemnified Party of its intent to undertake the compromise or defense of such
claim or demand, then the Indemnified Party may do so at the expense of the
Indemnifying Party. The Parties shall fully cooperate in the defense or
compromise of any indemnified claim or demand. After the assumption of the
defense by the Indemnifying Party, the Indemnifying Party shall not be liable
for any legal or other expenses subsequently incurred by the Indemnified Party,
in connection with such defense, but the Indemnified Party may participate in
such defense at its own expense. No settlement of a third party claim or demand
defended by the Indemnifying Party shall be made without the written consent of
the Indemnified Party, such consent not to be unreasonably withheld. The
Indemnifying Party shall not, except with written consent of the Indemnified
Party, consent to the entry of a judgment or settlement which does not include
as an unconditional term thereof, the giving by the claimant or plaintiff to the
Indemnified Party of an unconditional release from all liability in respect of
such third party claim or demand.
7.3 Time Limitations on Indemnity. Except as set forth in Section
7.1(a)(ii)(B) and (C), the representations and warranties made herein by the
Parties hereto shall not survive the Closing and no Party shall bring a claim or
action with respect to such representation or warranty at any time following the
Closing or termination of this Agreement; provided, that the representations and
warranties set forth in Sections 4.1, 4.2, 4.3, 4.4, 4.20, 5.1, 5.2, 5.3 and 5.7
and the corresponding indemnifications contained in Section 7.1 shall survive
without limitation. This Section 7.3 shall not limit any covenant or agreement
of the Parties hereto, which by its terms contemplates performance after the
Closing or after the termination of this Agreement.
7.4 Limitations on Indemnity. The sole and exclusive remedies of the
Parties with respect to breaches of this Agreement shall be pursuant to this
Article 7 or Article 8; provided, that nothing herein shall limit the rights of
either Party to seek any relief in equity or limit in any way either Party's
remedies in respect of fraud by another party in connection herewith or the
transactions contemplated hereby.
ARTICLE 8 - TAX MATTERS
8.1 Tax Compliance.
(a) The Company shall, and shall cause its Subsidiaries to, provide
the information relating to the Tax Items of the Company and its
Subsidiaries that is necessary or reasonably useful for Xxxxxx to satisfy
its obligations with respect to any Tax Return for 2000 or 2001.
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(b) Xxxxxx and the Company shall, and shall cause their respective
Subsidiaries, to cooperate with one another with respect to Tax matters.
Such cooperation shall include promptly forwarding copies of the relevant
portions of notices and forms or other communications received from or sent
to any Governmental Entity that pertain to the other Party, and, upon the
request of a Party, making available knowledgeable employees and providing
information and data reasonably requested by such Party (it being agreed
and understood that Xxxxxx and its Subsidiaries shall not be required to
provide any information or data, other than information and data relating
solely to the Company or any of its Subsidiaries.
8.2 Tax Characterization.
(a) The Parties and H&H shall treat the contribution to the Company of
Xxxxxx'x Interests in H&H as a taxable disposition of Xxxxxx'x Interests in
H&H in exchange for the proportion of the 5,377,721 Class A Shares to be
issued by the Company representing the fair market value of the Interests
in H&H for purposes of all federal, state and local income Tax purposes.
The Parties and H&H shall take no action or position inconsistent with such
characterization on any Tax Return.
(b) It is the intent of the Parties and Xxxxxx Cable that the
contribution of the Odyssey Common Interests in exchange for the proportion
of the 5,377,721 Class A Shares (the "Xxxxxx Cable Shares") to be issued by
the Company representing the fair market value of the Odyssey Common
Interests constitute a tax-free "reorganization" as defined in Section
368(a)(1)(C) of the Code and any comparable provision of any applicable
state and local income tax laws. The Parties and Xxxxxx Cable acknowledge
that (i) the Odyssey Common Interests constitute substantially all of the
assets of Xxxxxx Cable, (ii) Xxxxxx Cable will liquidate as part of its
contribution of the Odyssey Common Interests to the Company in exchange for
the Xxxxxx Cable Shares and (iii) the Xxxxxx Cable Shares will be issued by
the Company to Xxxxxx in connection with such liquidation and in accordance
with other provisions of this Agreement. The Parties and Xxxxxx Cable
expect that the contribution of the Odyssey Common Interests to the Company
in exchange for the Xxxxxx Cable Shares will further certain of their
business objectives (including, without limitation, the development and
expansion of the Odyssey business enterprise). The Company intends to
continue at least one significant historic business line of Xxxxxx Cable or
Odyssey, or use at least a significant portion of Xxxxxx Cable's or
Odyssey's historic business assets in a business, in each case within the
meaning of Treasury Regulation ss. 1.368-1(d), except that the Company may
transfer Xxxxxx Cable's or Odyssey's historic business assets (i) to a
corporation that is a member of the Company's "qualified group," within the
meaning of Treasury Regulation ss. 1.368-1(d)(4)(ii), or (ii) to a
partnership if (A) one or more members of the Company's "qualified group"
have active and substantial management functions as a partner with respect
to Xxxxxx Cable's or Odyssey's historic business or (B) members of the
Company's "qualified group" in the aggregate own an interest in the
partnership representing a significant interest in Xxxxxx Cable's or
Odyssey's historic business, in each case within the meaning of Treasury
Regulation ss. 1.368-1(d)(4)(iii). The Parties and Xxxxxx Cable shall take
all additional actions in support of such characterization, including but
not limited to, the filing of any necessary Tax Returns or filings and
shall
23
not take any actions or positions on any Tax Return or otherwise
inconsistent with such characterization.
ARTICLE 9 - TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be terminated and
transactions contemplated hereby may be abandoned at any time prior to the
Closing by the written consent of the Parties.
9.2 Termination by Any of the Parties. This Agreement may be terminated
(upon written notice from the terminating Party to the other Parties) and the
transactions contemplated hereby may be abandoned by action of any Party, if (i)
the Closing shall not have been consummated by March 23, 2001 (provided that the
right to terminate this Agreement under this clause shall not be available to
any Party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Closing to occur on or before
such date) or (ii) any Governmental Entity shall have issued a Law or Order
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and such Law or Order shall have become final and
nonappealable.
9.3 Effect of Termination and Abandonment. In the event of termination of
this Agreement and other transactions contemplated hereby pursuant to this
Article 9, no Party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other Party to this Agreement, except
Article 10 shall survive termination of this Agreement and nothing herein will
relieve any Party from liability for any breach of this Agreement occurring
prior to such termination.
ARTICLE 10 - GENERAL PROVISIONS; OTHER AGREEMENTS
10.1 Current Public Information. At all times after the date hereof, the
Company shall file all reports required to be filed by it under the Securities
Act and the Exchange Act and the rules and regulations adopted thereunder to the
extent required to enable the Parties to sell Class A Stock pursuant to Rule 144
under the Securities Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the Securities and Exchange
Commission. Upon the reasonable request of Xxxxxx, the Company shall deliver to
Xxxxxx a written statement as to whether it has complied with such requirement.
10.2 Consent to Transfer. At Liberty's request, Xxxxxx agrees to consent to
the transfer by Liberty of Liberty's Company Common Stock to UnitedGlobalCom or
an affiliate thereof, subject to the transferee executing a signature page of
the Company Stockholders Agreement and thereby becoming a party to the Company
Stockholders Agreement (as a Stockholder, as defined therein) and agreeing that
it shall receive the same rights thereunder and be bound by the same obligations
thereunder, except as provided in Section 3.4 and Section 3.5 thereof, as
Liberty.
10.3 Expenses. If the transactions contemplated hereby are not consummated,
all legal and other costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Party
incurring such costs and expenses. If
24
the transactions contemplated by this Agreement are consummated, the Company
shall reimburse Xxxxxx for its reasonable expenses (including reasonable legal
fees and expenses) incurred in connection with the transactions contemplated by
this Agreement, up to a maximum reimbursement of $75,000. The Company shall pay
for all of its expenses incurred in connection with the transactions
contemplated by this Agreement.
10.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the procedural and substantive laws of the State of New York,
including Section 5-1401 of the New York General Obligations Law.
10.5 Headings. Article and Section headings used in this Agreement are for
convenience only and shall not affect the meaning or construction of this
Agreement.
10.6 Notices. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any Party when delivered by hand, by
messenger or by a nationally recognized overnight delivery company, when
delivered by facsimile and confirmed by return facsimile, or when delivered by
first class mail, postage prepaid and return receipt requested, in each case to
the applicable addresses set forth below:
(a) if to the Company, HEI or Crown to:
Hallmark Cards, Incorporated
Department 339
0000 XxXxx
Xxxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Vice President, General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
Crown Media Holdings, Inc.
0000 X. Xxxxxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to Xxxxxx to:
The Xxx Xxxxxx Company, Inc.
0000 X. XxXxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxxx & Whitney LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
10.7 Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
Parties and their respective successors and permitted assigns; provided, that,
except as otherwise expressly set forth in this Agreement, neither the rights
nor the obligations of any Party may be assigned or delegated without the prior
written consent of each of the other Parties and any purported assignment in
violation hereof shall be null and void.
10.8 Entire Agreement. This Agreement, the Company Stockholder Agreement,
and any agreements set forth as an exhibit to this Agreement or the Company
Stockholder Agreement constitutes the entire agreement among the Parties hereto
and supersede all prior agreements and understandings, both written and oral,
with respect to the subject matters hereof.
10.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
10.10 Amendment. This Agreement may be modified or amended only by an
instrument in writing signed by all of the Parties.
10.11 Gender, etc. Whenever the context may require, any pronouns used
herein shall be deemed to refer to the masculine, feminine, or neuter forms, and
the singular form of nouns, pronouns and verbs shall include the plural, and
vice versa. Whenever used herein, the terms "include," "includes" and
"including" shall mean to include without limitation.
10.12 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.13 No Waiver. No failure to exercise and no delay in exercising any
right, power or privilege granted under this Agreement shall operate as a waiver
of such right, power or privilege. No single or partial exercise of any right,
power or privilege granted under this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
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10.14 Xxxxxx Name. As soon as reasonably possible after the Closing Date,
the Company and Crown shall cause Xxxxxx (L) Ltd. to legally change its name to
an alternative name which does not contain "Xxxxxx" or any derivation thereof,
or any name confusingly similar thereto. Furthermore, from and after the Closing
Date, the Company and Crown shall not, and shall not permit any of their
respective Affiliates (as defined in the Original Stockholders Agreement) to, do
business under any name containing the word "Xxxxxx" or any derivation thereof,
or any name confusingly similar thereto.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the
date first written above.
Crown Media Holdings, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
Crown Media International, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
The Xxx Xxxxxx Company, Inc.
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title: Secretary and Executive Vice
President for Business &
Legal Affairs
27
