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EXHIBIT 2.2
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CONTRIBUTION AGREEMENT
by and among
THE ▇▇▇ ▇▇▇▇▇▇ 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.....................................................................................8
4.6 Financial Statements.......................................................................................8
4.7 Material Adverse Change....................................................................................8
4.8 Events Subsequent to the Date of the Last Audited Financial Statement......................................8
4.9 Absence of Undisclosed Liabilities.........................................................................9
4.10 Taxes.....................................................................................................9
4.11 Litigation................................................................................................9
4.12 Insurance................................................................................................10
4.13 Conflicts of Interests...................................................................................10
4.14 Licenses.................................................................................................10
4.15 Intellectual Property Rights.............................................................................11
4.16 Contracts and Commitments................................................................................11
4.17 Customers and Suppliers..................................................................................13
4.18 Plans....................................................................................................13
4.19 Employee Matters.........................................................................................14
4.20 Brokers, etc.............................................................................................14
4.21 Year 2000 Compliance.....................................................................................14
4.22 Compliance with Laws.....................................................................................14
4.23 Public Filings...........................................................................................15
4.24 Continuity of Business Enterprise........................................................................15
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
5.1 Existence; Power and Authority............................................................................15
5.2 Enforceability, etc.......................................................................................15
5.3 Ownership.................................................................................................16
5.4 Consents and Approvals....................................................................................16
5.5 Purchase for Investment...................................................................................16
5.6 Financial Matters.........................................................................................16
5.7 Brokers, etc..............................................................................................16
5.8 Litigation................................................................................................16
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 ▇▇▇▇▇▇.............................................................18
6.4 Access for Investigation; Confidentiality.................................................................18
6.5 Conduct of Business.......................................................................................19
6.6 Performance of Obligations................................................................................20
6.7 Further Assurances........................................................................................20
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Company and Crown..................................................................20
7.2 Procedure for Indemnification.............................................................................21
7.3 Time Limitations on Indemnity.............................................................................22
7.4 Limitations on Indemnity..................................................................................22
ARTICLE 8
TAX MATTERS
8.1 Tax Compliance............................................................................................22
8.2 Tax Characterization......................................................................................23
ARTICLE 9
TERMINATION
9.1 Termination by Mutual Consent.............................................................................24
9.2 Termination by Any of the Parties.........................................................................24
9.3 Effect of Termination and Abandonment.....................................................................24
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ARTICLE 10
GENERAL PROVISIONS; OTHER AGREEMENTS
10.1 Current Public Information...............................................................................24
10.2 Consent to Transfer......................................................................................24
10.3 Expenses.................................................................................................24
10.4 Governing Law............................................................................................25
10.5 Headings.................................................................................................25
10.6 Notices..................................................................................................25
10.7 Parties in Interest......................................................................................26
10.8 Entire Agreement.........................................................................................26
10.9 Counterparts.............................................................................................26
10.10 Amendment................................................................................................26
10.11 Gender, etc..............................................................................................26
10.12 Severability.............................................................................................26
10.13 No Waiver................................................................................................26
EXHIBITS
Exhibit A Program License Agreement between Odyssey and ▇▇.▇▇ &
Merchandising AG
Exhibit B Amendment to Program License Agreement dated as of
November 13, 1998 by and between Odyssey and ▇▇▇▇▇▇
Exhibit C Trademark License Agreement between Odyssey and ▇▇▇▇▇▇
Exhibit D Side letter among ▇▇▇▇▇▇, H&H, Crown and the Company
Exhibit E Assignment and Assumption Agreement between ▇▇▇▇▇▇ and Crown
Exhibit F Assignment and Assumption Agreement between ▇▇▇▇▇▇ 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
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Item 4.16 Material Agreements
Item 4.17 Distributors
Item 4.18 Plans
▇▇▇▇▇▇
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 ▇▇▇ ▇▇▇▇▇▇ Company, Inc., a New York corporation ("▇▇▇▇▇▇"),
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 ▇▇▇▇▇▇ will contribute to the Company all
of its Interests in H&H Programming-Asia, LLC ("H&H") and cause ▇▇▇▇▇▇ Cable
Networks, Inc. ("▇▇▇▇▇▇ 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 ▇▇▇▇▇▇.
"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.
"▇▇▇▇▇▇" means The ▇▇▇ ▇▇▇▇▇▇ Company, Inc., a New York
corporation.
"▇▇▇▇▇▇ Cable" means ▇▇▇▇▇▇ Cable Networks, Inc., a New York
corporation.
"▇▇▇▇▇▇ Cable Shares" is defined in Section 8.2.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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 ▇▇ ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, the legal ability of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇.
"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, ▇▇▇▇▇▇ shall contribute to
the Company all of its Interests in H&H and shall cause ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, 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) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇, when
issued and delivered to ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
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course of business, or cancelled any debt or claim owed to the Company, Crown or
any of its Subsidiaries except in the ordinary 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.
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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;
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(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 ▇▇▇▇▇▇ or
its counsel. Except as set forth on Item 4.16 of
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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
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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.
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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 ▇▇▇▇▇▇ Cable and Odyssey, or to use a significant portion of ▇▇▇▇▇▇
Cable's or Odyssey's historic business assets in a business, in each case within
the meaning of Treasury Regulation Section 1.368-1(d).
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
▇▇▇▇▇▇ hereby represents and warrants as follows:
5.1 Existence; Power and Authority. Each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇
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. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, nor the consummation by ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Cable
of any transaction related hereto or thereto, will (i) violate any provision of
the organizational documents of ▇▇▇▇▇▇ or ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Cable is a party or is bound, (iii) violate
any Law or Order applicable to or bearing upon ▇▇▇▇▇▇ or ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇.
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 ▇▇▇▇▇▇ and constitutes, and when the
Company Stockholders Agreement is executed, the Company Stockholders Agreement
will constitute the legal, valid and binding obligation of ▇▇▇▇▇▇, 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).
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5.3 Ownership.
(a) ▇▇▇▇▇▇ Cable is a wholly-owned subsidiary of
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Cable are owned free and clear
of any Encumbrances.
(b) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, nor the consummation by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or (iii) which have already been obtained.
5.5 Purchase for Investment. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ represents and understands that
the acquisition of the Class A Stock involves substantial risk and that ▇▇▇▇▇▇'▇
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. ▇▇▇▇▇▇
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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, threatened
against or affecting ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇
or which seeks to enjoin or restrain the consummation of the transactions
contemplated by this Agreement and the Company Stockholder Agreement.
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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, ▇▇▇▇▇▇ and the Company shall have duly authorized,
executed and delivered the Company Stockholders Agreement.
(g) Program License Agreements. Odyssey and ▇▇.▇▇ &
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ shall have
executed and delivered a License Agreement dated as of the Closing
Date, substantially in the form attached as Exhibit C.
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(i) Certain H&H Matters. Each of ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ set forth in this Agreement
that are qualified as to materiality shall be true and correct, and the
representations and warranties of ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇. The
obligations of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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.
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(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 ▇▇▇▇▇▇ (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
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(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) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ to H&H through the date hereof, net of
the total amount of license fees due from H&H to ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ the amount of $1,764,383 on the Closing Date.
(c) Each of the payments made pursuant to this
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 ▇▇▇▇▇▇,
its officers, directors, affiliates, employees and agents, and its
successors and assigns (the "Contributor
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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) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ to satisfy its obligations with respect to any Tax Return
for 2000 or 2001.
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(b) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Interests in H&H as a taxable disposition of
▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ Cable
that the contribution of the Odyssey Common Interests in exchange for
the proportion of the 5,377,721 Class A Shares (the "▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Cable acknowledge that (i) the Odyssey
Common Interests constitute substantially all of the assets of ▇▇▇▇▇▇
Cable, (ii) ▇▇▇▇▇▇ Cable will liquidate as part of its contribution of
the Odyssey Common Interests to the Company in exchange for the ▇▇▇▇▇▇
Cable Shares and (iii) the ▇▇▇▇▇▇ Cable Shares will be issued by the
Company to ▇▇▇▇▇▇ in connection with such liquidation and in
accordance with other provisions of this Agreement. The Parties and
▇▇▇▇▇▇ Cable expect that the contribution of the Odyssey Common
Interests to the Company in exchange for the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Cable or Odyssey, or use at least a
significant portion of ▇▇▇▇▇▇ Cable's or Odyssey's historic business
assets in a business, in each case within the meaning of Treasury
Regulation Section 1.368-1(d), except that the Company may transfer
▇▇▇▇▇▇ 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 Section 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Cable's or Odyssey's historic business,
in each case within the meaning of Treasury Regulation Section
1.368-1(d)(4)(iii). The Parties and ▇▇▇▇▇▇ 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
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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 ▇▇▇▇▇▇, the
Company shall deliver to ▇▇▇▇▇▇ a written statement as to whether it has
complied with such requirement.
10.2 Consent to Transfer. At Liberty's request, ▇▇▇▇▇▇ 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
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the transactions contemplated by this Agreement are consummated, the Company
shall reimburse ▇▇▇▇▇▇ 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
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Vice President, General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Crown Media Holdings, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to ▇▇▇▇▇▇ to:
The ▇▇▇ ▇▇▇▇▇▇ Company, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ & Whitney LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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 ▇▇▇▇▇▇ Name. As soon as reasonably possible after the
Closing Date, the Company and Crown shall cause ▇▇▇▇▇▇ (L) Ltd. to legally
change its name to an alternative name which does not contain "▇▇▇▇▇▇" 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
"▇▇▇▇▇▇" 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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Crown Media International, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
The ▇▇▇ ▇▇▇▇▇▇ Company, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: General Counsel and Executive
Vice President, Legal and
Business Affairs
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