CROWN MEDIA HOLDINGS, INC. MASTER RECAPITALIZATION AGREEMENT by and among HALLMARK CARDS, INCORPORATED, H C CROWN CORP., HALLMARK ENTERTAINMENT HOLDINGS, INC., CROWN MEDIA HOLDINGS, INC., CROWN MEDIA UNITED STATES, LLC, and THE SUBSIDIARIES OF CROWN...
Exhibit10.1
CROWN
MEDIA HOLDINGS, INC.
by and
among
HALLMARK
CARDS, INCORPORATED,
H C CROWN
CORP.,
HALLMARK
ENTERTAINMENT HOLDINGS, INC.,
CROWN
MEDIA HOLDINGS, INC.,
CROWN
MEDIA UNITED STATES, LLC,
and
THE
SUBSIDIARIES OF CROWN MEDIA HOLDINGS, INC. LISTED
AS
GUARANTORS ON THE CREDIT FACILITY
_________________________
Dated as
of February 26, 2010
_________________________
TABLE
OF CONTENTS
|
ARTICLE
I.
|
DEFINITIONS
|
|
|
Section
1.1.
|
Definitions
|
|
|
Section
1.2.
|
Accounting
Terms and Determinations
|
|
ARTICLE
II.
|
RECAPITALIZATION
|
|
|
Section
2.1.
|
Acknowledgement
of Indebtedness.
|
|
|
Section
2.2.
|
Mergers
and Recapitalization
|
|
|
Section
2.3.
|
Reverse
Stock Split
|
|
ARTICLE
III.
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
|
|
Section
3.1.
|
Organization
of the Company
|
|
|
Section
3.2.
|
Authorization
and Validity of Agreement.
|
|
|
Section
3.3.
|
Capitalization
of the Company.
|
|
|
Section
3.4.
|
No
Conflict or Violation; Consents.
|
|
|
Section
3.5.
|
Other
Approvals.
|
|
|
Section
3.6.
|
SEC
Reports and Other Information
|
|
|
Section
3.7.
|
Litigation
|
|
|
Section
3.8.
|
Brokers
and Fees
|
|
ARTICLE
IV.
|
REPRESENTATIONS
AND WARRANTIES OF CERTAIN ENTITIES
|
|
|
Section
4.1.
|
Representations
and Warranties of HCC
|
|
ARTICLE
V.
|
CERTAIN
COVENANTS AND AGREEMENTS
|
|
|
Section
5.1.
|
Conduct
of Business.
|
|
|
Section
5.2.
|
Information
and Access
|
|
|
Section
5.3.
|
Notices
of Certain Events
|
|
|
Section
5.4.
|
Waiver
Agreement and Interim Payment on the HCC Debt.
|
|
|
Section
5.5.
|
Information
Statement
|
|
|
Section
5.6.
|
Certain
Provisions Relating to Consents
|
|
|
Section
5.7.
|
Stockholder
Approvals
|
|
|
Section
5.8.
|
Commercially
Reasonable Efforts
|
|
|
Section
5.9.
|
Further
Assurances
|
|
ARTICLE
VI.
|
MUTUAL
CONDITIONS
|
|
|
Section
6.1.
|
No
Injunction or Action
|
|
|
Section
6.2.
|
Regulatory
Compliance
|
|
ARTICLE
VII.
|
CONDITIONS
TO THE DEBTORS' OBLIGATIONS
|
|
|
Section
7.1.
|
Representations
and Warranties
|
|
|
Section
7.2.
|
Compliance
with Agreement
|
|
|
Section
7.3.
|
Revolving
Credit Facility
|
|
|
Section
7.4.
|
Corporate
Documents
|
|
ARTICLE
VIII.
|
CONDITIONS
TO THE HCC LENDERS' OBLIGATIONS
|
|
|
Section
8.1.
|
Representations
and Warranties
|
|
|
Section
8.2.
|
Compliance
with Agreement
|
|
|
Section
8.3.
|
Proceedings
|
|
|
Section
8.4.
|
Corporate
Documents
|
|
|
Section
8.5.
|
Effective
Credit Agreement
|
|
ARTICLE
IX.
|
THE
CLOSING
|
|
|
Section
9.1.
|
The
Closing
|
|
|
Section
9.2.
|
Deliveries
by the Company at the Closing
|
|
|
Section
9.3.
|
Deliveries
by HCC at the Closing
|
|
ARTICLE
X.
|
TERMINATION
|
|
|
Section
10.1.
|
Termination
|
|
|
Section
10.2.
|
Effect
of Termination
|
|
ARTICLE
XI.
|
MISCELLANEOUS
PROVISIONS
|
|
|
Section
11.1.
|
Notices
|
|
|
Section
11.2.
|
Amendments
|
|
|
Section
11.3.
|
No
Waiver
|
|
|
Section
11.4.
|
Assignment
and Parties in Interest.
|
|
|
Section
11.5.
|
Expenses
|
|
|
Section
11.6.
|
Entire
Agreement
|
|
|
Section
11.7.
|
Descriptive
Headings
|
|
|
Section
11.8.
|
Counterparts
|
|
|
Section
11.9.
|
Governing
Law; Jurisdiction.
|
|
|
Section
▇▇.▇▇.▇▇▇▇▇▇▇▇▇▇▇▇
|
|
|
Section
11.11.Severability
|
|
|
Section
11.12.Specific Performance
|
()
SCHEDULE
NUMBER SCHEDULE
NAME
|
1.1(a)
|
Sample
Calculation of the Conversion Price, the Conversion Price Shares and the
Shares to be issued pursuant to Section
2.2(b)(iii)
|
1.1(b) Knowledge
3.4 Conflicts
or Violations
3.7 Litigation
3.8 Brokers
EXHIBIT EXHIBIT
NAME
A Form
of Credit Agreement
B Form
of Second Amended Charter
C Form
of Certificate of Designation
D Form
of Stockholders Agreement
E Form
of HEIC Merger Agreement
F Form
of HEH Merger Agreement
G Form
of Third Amended Charter
H Form
of Registration Rights Agreement
I Form
of Tax Sharing Agreement Amendment
()
THIS
MASTER RECAPITALIZATION AGREEMENT (the "Agreement"), dated as of
February 26, 2010, is entered into by and among Hallmark Cards, Incorporated, a
Missouri corporation ("Hallmark Cards"), H C Crown
Corp., a Delaware corporation ("HCC" and, together with
Hallmark Cards, the "HCC
Lenders"), Hallmark Entertainment Holdings, Inc., a Delaware corporation
("HEH"), Crown Media
Holdings, Inc., a Delaware corporation (the "Company"), Crown Media United
States, LLC, a Delaware limited liability company ("CMUS"), and the subsidiaries
of the Company listed as Guarantors on the Credit Facility (the "Guarantors," and, together
with the Company and CMUS, the "Debtors").
PRELIMINARY
STATEMENT
WHEREAS,
pursuant to the Existing Credit Documents, the Debtors have substantial
obligations owing to the HCC Lenders;
WHEREAS,
the Debtors and the HCC Lenders have entered into an Amended and Restated Waiver
and Standby Purchase Agreement, dated as of March 10, 2008 (as amended through
immediately prior to the execution hereof, the "Waiver Agreement"), pursuant
to which the HCC Lenders extended certain accommodations to the
Debtors;
WHEREAS,
the Waiver Agreement automatically terminates on May 1, 2010 and, as set forth
herein, this Agreement amends the Waiver Agreement to provide, among other
things, that the Waiver (as defined therein) shall terminate on August 31,
2010;
WHEREAS,
pursuant to the Waiver Agreement, each of the Debtors was obligated to use its
commercially reasonable efforts to refinance the obligations that were the
subject of the Waiver Agreement, and the Debtors have been unable to obtain such
refinancing;
WHEREAS,
the Company desires to refinance the obligations subject to the Existing Credit
Documents and to reduce the amount of its aggregate indebtedness by
restructuring a portion of such obligations and exchanging the balance of such
obligations for equity in the Company and, in connection therewith, to effect
certain additional transactions, all on the terms set forth herein and in the
Ancillary Documents;
WHEREAS,
the Company formed a special committee of the board of directors of the Company
to negotiate and review the terms of the Transactions (the "Special Committee"), and the
Special Committee has engaged its own counsel and financial advisors in
connection therewith;
WHEREAS,
the Special Committee has unanimously recommended to the Board of Directors of
the Company that the Board of Directors of the Company approve the Transactions
and recommend such Transactions to the holders of Class A Common Stock not
affiliated with HCC;
WHEREAS,
the boards of directors of the parties hereto have approved the terms of the
Transactions, this Agreement and the Ancillary Documents;
WHEREAS,
immediately prior to the execution of this Agreement, the Company and Hallmark
Entertainment Investments Co., a Delaware corporation ("HEIC") have entered into the
HEIC Merger Agreement and the Company and HEH have entered into the HEH Merger
Agreement;
NOW,
THEREFORE, in consideration of the premises, the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE
I.
DEFINITIONS
Section
1.1. Definitions. In
addition to the terms defined elsewhere herein, the terms defined in the
introductory paragraph and the Recitals to this Agreement shall have the
respective meanings specified therein, and the following terms shall have the
meanings specified below when used herein with initial capital
letters:
"10.25% Note" has the meaning
set forth in Section
2.1.
"2001 Note" has the meaning
set forth in Section
2.1.
"2005 Note" has the meaning
set forth in Section
2.1.
"2006 Note" has the meaning
set forth in Section
2.1.
"Affiliate" means "affiliate"
as defined in Rule 405 promulgated under the Securities Act of 1933, as
amended. For purposes of this Agreement, the Company and its
Subsidiaries shall not be deemed to be Affiliates of HCC.
"Agreement" has the meaning
set forth in the preamble, and shall include all schedules and exhibits
hereto.
"Ancillary Documents" means
the documents listed in Section 2.2, the Certificate
of Designation, the Third Amended Charter, the Registration Rights Agreement and
the Tax Sharing Agreement Amendment.
"Business Day" means a day
other than a Saturday, a Sunday or any other day on which commercial banks are
not required or authorized to close in the City of New York.
"Certificate of Designation"
means the Form of Certificate of Designation attached hereto as Exhibit
C.
"Class A Common Stock" means
the Company's Class A common stock, par value $0.01 per share.
"Class B Common Stock" means
the Company's Class B common stock, par value $0.01 per share.
"Closing" has the meaning set
forth in Section
9.1.
"CMUS" has the meaning set
forth in the preamble hereto.
"Closing Date" has the meaning
set forth in Section
9.1.
"Common Stock" means the
Company's Class A Common Stock, par value $.01 per share, the terms of which
shall be as set forth in the Second Amended Charter.
"Company" has the meaning set
forth in the preamble hereto and, except where the context otherwise requires,
includes the Company and the Company's Subsidiaries.
"Company Organizational
Documents" means the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws, each as amended to the date
hereof.
"Contracts" as of any date
means, collectively, all contracts, agreements, commitments, instruments and
guaranties to which the Company or any of its Subsidiaries is a party as of such
date.
"Conversion Price" shall mean
the amount equal to (a) the quantity of (i) the total HCC Debt as of the Date of
Determination, less (ii) $500 million, divided by (b) the Conversion Price
Shares. The Conversion Price shall be rounded to the nearest
ten-thousandth. For the avoidance of doubt, Schedule 1.1(a) sets
forth a sample calculation of the Conversion Price.
"Conversion Price Shares"
shall mean a notional number of shares of Common Stock which, when combined with
the number of shares of Common Stock owned directly or indirectly by the HCC
Parties as of the Date of Determination (for purposes of such calculation (x)
with respect to shares of Common Stock owned directly by HEIC, including only
HEH’s pro rata portion of the Common Stock owned by HEIC, and (y) excluding the
shares of Common Stock that will be receivable by HCC upon conversion of the
Series A Preferred Stock and pursuant to Section 2.2(b)(iii)), will
equal 90.1% of the sum of (i) all outstanding shares of Common Stock on the Date
of Determination prior to the Closing, (ii) the Conversion Price Shares and
(iii) all shares potentially issuable upon exercise of all Outstanding Options
as of the Date of Determination. The Conversion Price Shares shall be
rounded to the nearest whole share. For the avoidance of doubt, Schedule 1.1(a) sets
forth a sample calculation of the Conversion Price Shares.
"Date of Determination" shall
mean the Closing Date, provided that if the Closing Date occurs on or after
March 31, 2010, the "Date of Determination" shall be deemed to be March 31,
2010.
"Debtors" has the meaning set
forth in the preamble hereto.
"Designated Court" has the
meaning set forth in Section
11.9.
"DGCL" means the General
Corporation Law of the State of Delaware.
"Exchange Act" means the
Securities Exchange Act of 1934, as amended.
"Existing Credit Documents"
means (a) that certain Credit, Security, Guaranty and Pledge Agreement,
dated August 31, 2001, by and among the Company, its Subsidiaries named therein,
the lenders named therein and The Chase Manhattan Bank (now known as JPMorgan
Chase Bank) ("JPMorgan"), as administrative
agent and issuing bank, (b) that certain Amended and Restated Subordination
and Support Agreement, dated July 27, 2007, by and among the Company, Hallmark
Cards and JPMorgan, (c) that certain Guarantee Agreement, dated March 2,
2009, between Hallmark Cards and JPMorgan, (d) the 10.25% Note,
(e) the 2001 Note, (f) the 2005 Note, (g) the 2006 Note and (h) the Tax
Sharing Agreement.
"Governmental Entity" means
any federal, state, local or foreign governmental, regulatory or administrative
authority, branch, agency or commission or any court, tribunal or judicial
body.
"Guarantors" has the meaning
set forth in the preamble hereto.
"Hallmark Cards" has the
meaning set forth in the preamble hereto.
"HCC" has the meaning set
forth in the preamble hereto.
"HCC Debt" means (a) the
aggregate principal amount of all Indebtedness, including accrued and unpaid
interest thereon through the Closing Date, but excluding accrued but unpaid
interest with respect to the 2001 Note, the 2005 Note and the 2006 Note; (b) all
accounts payable and open intercompany accounts of the Company and its
Subsidiaries owed to the HCC Lenders and their controlled Affiliates (other than
the Company and its Subsidiaries); and (c) any amounts due to Hallmark Cards or
its Affiliates under the Tax Sharing Agreement through December 31, 2009;
provided that for the avoidance of doubt the following shall not constitute HCC
Debt: (i) Reimbursement Obligations, (ii) Ordinary Course of Business
Obligations, and (iii) any amounts due to Hallmark Cards or its Affiliates under
the Tax Sharing Agreement accruing on or after January 1,
2010.
"HCC Lenders" has the meaning
set forth in the preamble hereto.
"HCC Parties" means
collectively the HCC Lenders and HEH.
"HEH" has the meaning set
forth in the preamble hereto.
"HEH Merger Agreement" has the
meaning set forth in Section
2.2.
"HEIC" has the meaning set
forth in the recitals hereto.
"HEIC Merger Agreement" has
the meaning set forth in Section 2.2.
"Indebtedness" means (without
duplication), with respect to any Person, whether recourse is to all or a
portion of the assets of such Person, (a) the principal of and premium, if any,
in respect of any indebtedness of such Person for money borrowed, (b) the
principal, premium, if any, and interest of such Person with respect to
obligations evidenced by bonds, debentures, notes or obligations incurred in
connection with the acquisition of property, assets or businesses (other than
trade payables which are not overdue or in default), (c) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto) but only to the extent of
drawings thereunder, (d) every obligation of such Person issued or assumed as
the deferred purchase price of property or services (excluding trade accounts
payable or accrued liabilities arising in the Ordinary Course of Business which
are not overdue or in default), (e) every capital lease obligation (determined
in accordance with GAAP) of such Person, (f) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, provided, however, that the amount of such
Indebtedness shall be the lesser of (i) the fair market value of such asset at
such date of determination and (ii) the amount of such Indebtedness of such
other Persons, and (g) every obligation of the type referred to in clauses (a)
through (f) of another Person the payment of which, in any case, such Person has
guaranteed or is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise.
"Information Statement" means
an information statement prepared in accordance with the requirements of
Regulation 240.14c-101 promulgated under the Securities Exchange Act of 1934, as
amended.
"Knowledge" as applied to the
Company, means the actual knowledge, after reasonable inquiry, of any person
listed on Schedule 1.1(b)
hereto.
"Legal Requirement" means any
federal, state, local, municipal, foreign, international, multinational, or
other administrative order, constitution, law, rule, ordinance, permit,
principle of common law, regulation, statute, treaty or legally enforceable
requirement enacted, issued, adopted, promulgated or applied by any Governmental
Entity.
"Lien" means any mortgage,
pledge, security interest, encumbrance or title defect, lease, lien (statutory
or other), conditional sale agreement, claim, charge, limitation or
restriction.
"Material Adverse Effect"
means any change or effect that (a) has a materially adverse effect on the
business, assets, properties, operations or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole; provided, however, with respect solely
to subsection (a) of this definition, that no effect, change, event, occurrence,
development, condition or state of facts arising or resulting from any of the
following, either alone or in combination, shall constitute or be taken into
account in determining whether there has been a Material Adverse Effect: (i)
changes in general economic conditions or changes affecting the industry
generally in which the Company and its Subsidiaries operate, except to the
extent such changes have a disproportionate effect on the Company and its
Subsidiaries, (ii) the announcement or performance of the Transactions, (iii)
acts of war or terrorism or natural disasters, unless such acts of war or
terrorism or natural disasters have a disproportionate effect on the Company and
its Subsidiaries, (iv) the fact, in and of itself (and not the underlying causes
thereof) that the Company failed to meet any projections, forecasts, or revenue
or earnings predictions for any period, (v) changes in any applicable Legal
Requirement or generally accepted accounting principles or the interpretation
thereof, or (vi) any change, in and of itself (and not the underlying causes
thereof) in the price of the common stock of the Company; (b) materially impairs
the ability of any of the Debtors to perform its obligations under this
Agreement; or (c) materially impairs the validity or enforceability of, or
materially impairs the security interests, rights, remedies or benefits
available to the HCC Parties under, this Agreement.
"Mergers" has the meaning set
forth in Section
2.2.
"New Credit Agreement" has the
meaning set forth in Section
2.2.
"New Debt" has the meaning set
forth in Section
2.2.
"New Securities" has the
meaning set forth in Section
2.2.
"New Stockholders Agreement"
has the meaning set forth in Section 2.2.
"Ordinary Course of Business"
means an action which is both: (a) consistent with the past practices
of the Company and is taken in the ordinary course of the normal day-to-day
operations of the Company; and (b) similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors, in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of business as the Company.
"Ordinary Course Of Business
Obligations" means all obligations of the Company and its Subsidiaries
owed to Hallmark Cards and its controlled Affiliates (other than the Company and
its Subsidiaries) relating to (x) the licensing of programming or intellectual
property or (y) the provisions of goods or services on an arms’ length basis,
and in either case first accruing on or after January 1, 2010 (including
pursuant to agreements existing prior to such date).
"Outstanding Options" has the
meaning set forth in Section
3.3.
"Permit" means any permit,
approval, consent, authorization, license, variance, or permission required by a
Governmental Entity under any Legal Requirement.
"Permitted Liens" means (a)
Liens for utilities and current Taxes not yet due and payable, (b) statutory
Liens of landlords, banks (and rights of set-off), of carriers, warehousemen,
mechanics, repairmen, workmen and materialmen, and other Liens imposed by law
(other than any such Lien imposed pursuant to Section 401(a)(29) or 430(k) of
the Internal Revenue Code of 1986, as amended, or by the Employee Retirement
Income Security Act of 1974, as amended), in each case incurred in the ordinary
course of business (i) for amounts not yet overdue or (ii) for amounts that are
overdue and that (in the case of any such amounts overdue for a period in excess
of five days) are being contested in good faith by appropriate proceedings, so
long as such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have been made for any such contested amounts, (c) Liens
for Taxes being contested in good faith by appropriate proceedings and for which
appropriate reserves have been included on the Company's balance sheet, (d)
easements, restrictive covenants and similar encumbrances or impediments against
any assets or properties of the Company and which individually or in the
aggregate do not materially interfere with the business of the Company or its
Subsidiaries or the operation of the property to which they apply or materially
detract from the value of the Company's or any of its Subsidiaries' assets, (e)
minor irregularities and defects of title which individually or in the aggregate
do not materially interfere with the business of the Company or its Subsidiaries
or the operation of the property to which they apply or materially detract from
the value of the Company's or any of its Subsidiaries' assets, (f) Liens
disclosed on the existing title policies, title commitments and/or surveys which
have been previously provided or made available to a party hereto, none of which
materially interfere with the business of the Company or its Subsidiaries or the
operation of the property to which they apply or materially detract from the
value of the Company's or any of its Subsidiaries' assets, (g) with respect to
real property that is leased by the Company or its Subsidiaries, any Liens or
other matters caused by or placed upon real property by the owners thereof,
which would not otherwise be in violation of such owner's obligations under the
applicable lease, other than as a result of the Company's or its Subsidiaries'
breach of or default under the lease in respect of such leased real property,
(h) purported Liens evidenced by the filing of precautionary UCC financing
statements relating solely to operating leases or consignments of personal
property entered into in the ordinary course of business and (i) any Liens
securing the Company's existing revolving credit facility with JPMorgan Chase
Bank, N.A. or any replacement facility in respect thereof.
"Person" means any individual,
partnership, corporation, trust, association, limited liability company,
Governmental Entity or any other entity.
"Preferred Shares" has the
meaning set forth in Section
2.2.
"Recapitalization" has the
meaning set forth in Section
2.2.
"Recommendation" has the
meaning set forth in Section
3.2.
"Registration Rights
Agreement" has the meaning set forth in Section 9.2(e).
"Reimbursement Obligations"
means all obligations of the Company and its Subsidiaries to reimburse Hallmark
Cards and its controlled Affiliates (other than the Company and its
Subsidiaries) for obligations which are primarily the obligation of the Company
and its Subsidiaries, but which have been satisfied by Hallmark Cards or its
controlled Affiliates on or after January 1, 2010 (including pursuant to
agreements existing prior to such date) pursuant to any guarantees, letters of
credit, make-whole agreements, co-obligor arrangements or similar arrangement or
agreement.
"Released Matters" has the
meaning set forth in Section
2.4.
"Released Parties" has the
meaning set forth in Section
2.4.
"Representatives" has the
meaning set forth in Section
5.2.
"Reverse Stock Split" has the
meaning set forth in Section
2.3.
"Revolver" has the meaning set
forth in Section
7.3.
"SEC" has the meaning set
forth in Section
3.5.
"SEC Report" has the meaning
set forth in Section
3.5.
"Second Amended Charter" means
the Form of Second Amended and Restated Certificate of Incorporation attached
hereto as Exhibit
B.
"Series A Preferred Stock" means the
Company's Series A Convertible Preferred Stock, par value $.01 per share, the
terms of which shall be as set forth in Certificate of Designation.
"Special Committee" has the
meaning set forth in the recitals hereto.
"Subsidiary" means
"subsidiary" as defined in Rule 405 promulgated under the Securities Act of
1933, as amended.
"Tax Return" means any report,
return, information return, forms, declarations, claims for refund, statements
or other information (including any amendments thereto and including any
schedule or statement thereto) required to be supplied to a Governmental Entity
in connection with Taxes.
"Tax Sharing Agreement" means
the Federal Income Tax Sharing Agreement between HCC and Crown Holdings dated as
of March 11, 2003, as amended to date.
"Tax Sharing Agreement
Amendment" has the meaning set forth in Section 9.2(f).
"Taxes" means all federal,
state, local, foreign and other taxes, assessments and water and sewer charges
and rents, including without limitation, income, gross receipts, excise,
employment, sales, use, transfer, license, payroll, franchise, severance, stamp,
withholding, Social Security, unemployment, real property, personal property,
property gains, registration, capital stock, value added, single business,
occupation, workers' compensation, alternative or add-on minimum, estimated, or
other tax, including without limitation any interest, penalties or additions
thereto.
"Third Amended Charter" means
the Form of Third Amended and Restated Certificate of Incorporation attached
hereto as Exhibit
H.
"Transactions" means all of
the transactions contemplated by this Agreement and by the Ancillary
Documents.
"Waiver Agreement" has the
meaning set forth in the recitals hereto.
Section
1.2. Accounting Terms and
Determinations. All references in this Agreement to "generally accepted accounting
principles" or "GAAP" means generally
accepted accounting principles in effect in the United States of America at the
time of application thereof, applied on a consistent basis. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished hereunder shall be prepared, in
accordance with generally accepted accounting principles, applied on a
consistent basis.
ARTICLE
II.
RECAPITALIZATION
Section
2.1. Acknowledgement
of Indebtedness.
(a) Each of
the Company and CMUS acknowledges that it is validly indebted to HCC pursuant to
the Promissory Note, dated as of December 14, 2001, of the Company, and
guaranteed by CMUS, in the original principal amount of $75 million payable to
HCC (the "2001 Note"),
and that the outstanding amount of the 2001 Note (including accrued interest and
interest which has been added to principal): (i) was $110,048,399 as
of December 31, 2009 and (ii) is estimated to be $108,581,366 as of March 31,
2010 (not including interest that is required to be paid in cash prior to
Closing).
(b) The
Company acknowledges that it is validly indebted to HCC pursuant to the 10.25%
Note, and that the outstanding principal amount of the 10.25% Senior Unsecured
Discount Note, issue date August 5, 2003, of the Company, in the initial
accreted value of $400 million, payable to HCC (the "10.25% Note") (including
accrued interest and interest which has been added to principal): (i)
was $758,755,048 as of December 31, 2009 and (ii) is estimated to be
$778,012,072 as of March 31, 2010 ( including interest that is required to be
paid in kind prior to Closing).
(c) The
Company acknowledges that it is validly indebted to HCC pursuant to the
Promissory Note, dated as of March 21, 2006, of the Company in the original
principal amount of $70,414,087.87 payable to HCC (formerly payable to Hallmark
Entertainment Holdings, Inc.) (the "2006 Note"), and that the
outstanding amount of the 2006 Note (including accrued interest and interest
which has been added to principal): (i) was $62,844,768 as of
December 31, 2009 and (ii) is estimated to be $62,006,997 as of March 31,
2010 (not including interest that is required to be paid in cash prior to
Closing).
(d) CMUS
acknowledges that it is validly indebted to HCC pursuant to the Promissory Note,
dated as of October 1, 2005, of CMUS, in the original principal amount of
$132,785,424, payable to HCC (formerly payable to Hallmark Entertainment
Holdings, Inc.) (the "2005
Note"), and that the outstanding amount of the 2005 Note (including
accrued interest and interest which has been added to principal): (i)
was $172,407,147 as of December 31, 2009 and (ii) is estimated to be
$170,108,821 as of March 31, 2010 (not including interest that is required to be
paid in cash prior to Closing).
(e) The
Company acknowledges that it and its Subsidiaries were validly indebted to HCC
and its Affiliates with respect to the Tax Sharing Agreement as of December 31,
2009 in the amount of $8,525,319 and that such amount of indebtedness HCC and
its Affiliates is not expected to change through March 31, 2010.
(f) The
Company acknowledges that it and its Subsidiaries are validly indebted to HCC
and its Affiliates with respect to accounts payable and open intercompany
accounts as of December 31, 2009 in the amount of $15,233,814 and that any
change to such amount of indebtedness to HCC and its Affiliates through March
31, 2010, if any, is expected to be immaterial.
Section
2.2. Mergers and
Recapitalization. (a) On
the Closing Date the following transactions shall occur in the following
order:
(i) First,
the Company shall file the Second Amended Charter and then the Certificate of
Designation with the Secretary of State of the State of Delaware.
(ii) Second,
the HCC Lenders shall exchange the HCC Debt for the following (the "Recapitalization"):
(A) $315,000,000
principal amount of indebtedness of the Debtors (the "New Debt") on the terms and
subject to the conditions set forth in the Credit Agreement in the form attached
hereto as Exhibit
A (including the exhibits thereto, the "New Credit
Agreement").
(B) 185,000
shares of the Series A Preferred Stock, with an initial liquidation preference
of $185,000,000, issued to HCC (the "Preferred
Shares");
(C) A number
of shares of the Common Stock (the "Common Shares" and, together
with the Preferred Shares, the "New Securities") issued to
HCC equal to (x) the quantity of the HCC Debt as of the Closing Date less $500
million, divided by (y) the Conversion Price, such result rounded to the nearest
whole share (for the avoidance of doubt, Schedule 1.1(a) sets
forth a sample calculation of such number of shares of Common Stock), and HCC
and the Company shall enter into the stockholders agreement in the form attached
hereto as Exhibit
D (the "New
Stockholders Agreement").
(D) A cash
payment equal to all accrued but unpaid interest on the 2001 Note, the 2005 Note
and the 2006 Note.
(iii) Third,
HEIC shall be merged with and into the Company on the terms and subject to the
conditions set forth in the merger agreement in the form attached hereto as
Exhibit E
(the "HEIC Merger
Agreement"), which the Company and HEIC executed immediately prior to the
execution of this Agreement.
(iv) Fourth,
HEH shall be merged (together with the merger described in Section 2.2(c), the
"Mergers") with and
into the Company on the terms and subject to the conditions set forth in the
merger agreement in the form attached hereto as Exhibit F (the
"HEH Merger
Agreement"), which the parties executed immediately prior to the
execution of this Agreement.
(b) As
a result of the Transactions, immediately following the Closing of the
Transactions, all of the HCC Debt, except to the extent converted and continued
as New Debt, shall be extinguished and discharged.
Section
2.3. Reverse Stock
Split. At any time prior to December 31, 2013, at the request
of the Special Committee or any other special committee of the Company's Board
of Directors comprised of disinterested directors who are independent of the HCC
Parties, the Company shall file the Third Amended Charter with the Secretary of
State of the State of Delaware no later than three (3) Business Days following
such request. The exact ratio of the reverse stock split referenced
in the Third Amended Charter shall be determined by the Board of Directors (upon
the recommendation of the Special Committee or such other special committee)
immediately prior to the filing of the Third Amended Charter and shall be
included in a public announcement to all stockholders distributed on the date of
such filing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to the HCC Lenders and HEH as
follows:
Section
3.1. Organization of the
Company. Each of the Company and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate, limited
liability company or limited partnership power (as the case may be) to own its
properties and assets and to conduct its business as now
conducted. Each of the Company and its Subsidiaries is duly qualified
to do business as a foreign corporation, limited liability company or
partnership (as the case may be) and is in good standing in every jurisdiction
in which the character of the properties owned or leased by it or the nature of
the business conducted by it makes such qualification necessary, except where
the failure to be so qualified or in good standing would not, individually or in
the aggregate, have a Material Adverse Effect.
Section
3.2. Authorization and Validity of
Agreement.
(a) Each
Debtor has all requisite power and authority to enter into this Agreement and to
carry out its obligations hereunder.
(b) As of the
date of this Agreement, the Special Committee has received: (x)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.'s advice and recommendation regarding the Transactions,
and (y) the opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Financial Advisors,
Inc. to the effect that, subject to certain assumptions, qualifications,
limitations and other matters, the aggregate consideration to be issued or paid
by the Company or its wholly owned subsidiary, CMUS, in exchange for the HCC
Debt in the Recapitalization pursuant to this Agreement and the outstanding
shares of common stock of HEIC and HEH in the Mergers pursuant to the HEIC
Merger Agreement and the HEH Merger Agreement is, in the aggregate, fair to the
Company from a financial point of view. The Special Committee has
unanimously passed resolutions: (i) determining that the terms
of the Transactions are fair to, and in the best interests of, the Company and
its stockholders (other than the HCC Parties); and (ii) recommending (the "Recommendation") to the
Company's Board of Directors that such Board: (x) approve the
execution, delivery and performance of this Agreement and the Ancillary
Documents and the consummation of the Transactions and (y) declare this
Agreement (and, to the extent applicable, the Ancillary Agreements)
advisable.
(c) The
Company's Board of Directors has adopted resolutions reflecting the
Recommendation by the Special Committee.
(d) The
affirmative vote of the holders of a majority of the voting power of the issued
and outstanding shares of the Class A Common Stock and the Class B Common Stock
voting together as a single class (and, in the case of the Second Amended
Charter, voting separately by class) is the only vote required by the
stockholders of the Company to approve the Transactions and adopt this Agreement
under the DGCL and the Company Organizational Documents, and no other corporate
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement.
(e) This
Agreement has been duly executed by each Debtor and, assuming due execution and
delivery by the HCC Lenders, shall constitute its valid and binding obligation,
enforceable against it in accordance with its terms, subject to (i) the effect
of bankruptcy, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of creditors' rights
generally and (ii) general equitable principles (whether considered in a
proceeding in equity or at law).
Section
3.3. Capitalization
of the Company.
(a) The
authorized capital stock of the Company consists of (i) 200,000,000 shares of
Class A Common Stock, of which 74,117,654 shares are outstanding, (ii)
120,000,000 shares of Class B Common Stock, of which 30,670,422 shares are
outstanding, and (iii) 10,000,000 shares of preferred stock, par value $.01
per share, none of which is issued or outstanding. All outstanding
capital stock of the Company has been duly authorized and validly issued, is
fully paid and nonassessable and is not subject to and was not issued in
violation of any preemptive or similar right, purchase option, call or right of
first refusal or similar right, and no personal liability attaches to the
ownership thereof. The capital stock described as outstanding in
clauses (i) and (ii) above are the sole outstanding shares of capital stock of
the Company. As of the date hereof, there are options to acquire
87,238 shares of Class A Common Stock outstanding (the "Outstanding
Options"). The number of Outstanding Options is expected to be
reduced to 85,813 Outstanding Options after March 17, 2010 as a result of the
anticipated expiration of 1,425 Outstanding Options. Except as set
forth in the preceding sentence and for this Agreement, there are no outstanding
options, warrants, agreements, conversion rights, preemptive rights or other
rights to subscribe for, purchase or otherwise acquire any capital stock of the
Company.
(b) Assuming
the Closing Date is April 30, 2010, immediately following the consummation of
the transactions contemplated by Section 2.2, the
authorized capital stock of the Company will consist of (i) 500,000,000
shares of Common Stock, par value $.01 per share, of which 354,715,466 shares
will be outstanding (excluding 85,813 shares which may be issued upon the
exercise of Outstanding Options), and (ii) 1,000,000 shares of preferred stock,
par value $.01 per share, of which 400,000 will be designated as Series A
Preferred Stock, of which 185,000 will be outstanding. The capital
stock described as outstanding in clauses (i) and (ii) above will be the sole
outstanding shares of capital stock of the Company at such time, and, except for
the rights under this Agreement and for Outstanding Options to the extent not
surrendered, forfeited, expired or exercised prior to such date, there will be
no outstanding options, warrants, agreements, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire any
capital stock of the Company.
(c) The
shares of Common Stock to be issued to HCC pursuant to the terms of this
Agreement or upon conversion of the Series A Preferred Stock, when so issued
will be duly authorized and validly issued, will be fully paid and nonassessable
and will not be subject to (except to the extent expressly set forth in the New
Stockholders Agreement) and will not have been issued in violation of any
preemptive or similar right, purchase option, call or right of first refusal or
similar right, and no personal liability will attach to the ownership
thereof.
(d) The
shares of Series A Preferred Stock to be issued to HCC pursuant to the terms of
this Agreement, when so issued will be duly authorized and validly issued, will
be fully paid and nonassessable, will be entitled to all of the rights provided
for in the Certificate of Designation and will not be subject to and will not
have been issued in violation of any preemptive or similar right, purchase
option, call or right of first refusal or similar right, and no personal
liability will attach to the ownership thereof.
Section
3.4. No
Conflict or Violation; Consents.
(a) The
execution, delivery and performance by the Debtors of this Agreement does not
and will not (i) violate or conflict with any provision of any Company
Organizational Document or any of the organizational documents of the
Subsidiaries of the Company, (ii) violate any Legal Requirement or (iii)
except as set forth on Schedule 3.4, violate
or result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contract or Permit or result in the creation or
imposition of any Lien upon any of the assets, properties or rights of either of
the Company or any of its Subsidiaries or result in or give to others any rights
of cancellation, modification, amendment, acceleration, revocation or suspension
of any of the Contracts, Permits or obligations thereunder.
(b) Except
for the approval of the Company's stockholders as described in Section 3.2, no consent,
waiver, authorization or approval of any Governmental Entity or any other
Person, and no declaration or notice to or filing or registration with any
Governmental Entity or any other Person, is required in connection with the
execution and delivery of this Agreement by the Debtors or the performance by
the Company or its Subsidiaries of their obligations hereunder.
Section
3.5. Other
Approvals.
(a) Section 203. The
Board of Directors has taken all action necessary to render the limitations on
business combinations contained in Section 203 of the DGCL inapplicable to
this Agreement, the Ancillary Documents and the Transactions. Neither
the execution and delivery of this Agreement nor the consummation of
Transactions will prohibit for any period of time, or impose any stockholder
approval requirement with respect to, the Common Stock to be issued to
HCC.
(b) Takeover
Laws. Other than as described in Section 3.5(a), no
anti-takeover Legal Requirement prohibits the consummation of the Transactions
or imposes any additional stockholder approvals or conditions with respect to
the Transactions or the Common Stock.
Section
3.6. SEC Reports and Other
Information. Since December 31, 2005,
the Company, to the Company's Knowledge, has filed, with the Securities and
Exchange Commission (the "SEC"), all filings required
by the Securities Exchange Act of 1934, as amended, and the Securities Act of
1933, as amended, and the rules and regulations of the SEC promulgated
thereunder (the "SEC
Reports"). As of their respective dates, each of the SEC
Reports (a) complied as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, other than any misstatements or omissions in an
SEC filing that were corrected in a subsequent SEC Report filed prior to the
date hereof. The Company, to the Company's Knowledge, is in
compliance in all material respects with the applicable listing and corporate
governance rules and regulations of the Nasdaq Global Market. All
financial projections and other forecasts furnished by the Company to HCC or any
of its Affiliates or to the Special Committee and its advisors were prepared in
good faith based on reasonable assumptions and represent the Company's good
faith estimate of future results based on information available as of the date
such information was furnished.
Section
3.7. Litigation. Except
as set forth in Schedule 3.7, there
are no claims, actions, suits or other proceedings pending or, to the Company's
Knowledge, threatened before any Governmental Entity that would prevent the
consummation of all or any part of the Transactions or otherwise relating to
this Agreement or the Transactions.
Section
3.8. Brokers and
Fees. Except to the extent set forth in Schedule 3.8, no
broker, finder, financial advisor or similar intermediary has acted for or on
behalf of, or is entitled to any broker's, finder's or similar fee, success or
contingency fee or other commission from, the Company or its Subsidiaries in
connection with this Agreement or the Transactions.
ARTICLE
IV.
REPRESENTATIONS
AND WARRANTIES OF CERTAIN ENTITIES
Section
4.1. Representations and Warranties of
HCC. HCC hereby represents and warrants to the Company with
respect to Hallmark Cards, HCC and HEH as follows:
(a) Organization. Each
such Person is duly organized, validly existing and in good standing under the
laws of its state of incorporation and has all requisite corporate power to own
its properties and assets and to conduct its business as now
conducted. Each such Person is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction in which the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or in good standing would not, individually or in the aggregate,
materially impair such Person's ability to consummate the
Transactions.
(b) Authorization and Validity of
Agreement. Each such Person has all requisite power and
authority to enter into this Agreement and to carry out its obligations
hereunder. Each of the HCC Parties has taken all necessary corporate
action to approve the execution of this Agreement and the Transactions. This
Agreement has been duly executed by each such Person and, assuming due execution
and delivery by the other parties hereto, shall constitute its valid and binding
obligation, enforceable against it in accordance with its terms, subject to (i)
the effect of bankruptcy, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally and (ii) general equitable principles (whether considered in a
proceeding in equity or at law).
(c) Investment
Intent. The New Debt, Common Stock and Series A Preferred
Stock will be acquired hereunder solely for the account of HCC for investment,
and not with a view to the resale or distribution thereof in violation of the
Securities Act of 1933, as amended.
(d) Ownership. As of
the date hereof, the HCC Lenders own directly or indirectly 69,997,656 shares of
Class A Common Stock (including, for these purposes, shares of Class A Common
Stock issuable upon conversion of shares of Class B Common Stock) of the Company
(including for purposes hereof with respect to HEIC only HEH’s pro rata portion
of the shares of the Company's common stock owned by HEIC).
(e) Indebtedness. None
of the Company or its Subsidiaries has any outstanding Indebtedness to Hallmark
Cards or its controlled Affiliates, other than (i) prior to the Closing, the HCC
Debt, (ii) accrued but unpaid interest through the Closing Date with respect to
the 2001 Note, the 2005 Note and the 2006 Note, and (iii) for the avoidance of
doubt, (x) Reimbursement Obligations, (y) Ordinary Course of Business
Obligations, and (z) any amounts due to Hallmark Cards or its Affiliates under
the Tax Sharing Agreement accruing on or after January 1,
2010.
(f) Consents and Approvals; No
Violations. None of the execution, delivery or performance of
this Agreement or the HEH Merger Agreement by HEH will: (i) conflict with
or result in any breach of any provision of the organizational documents of HEH,
(ii) require any filing by HEH with, notice to, or permit, authorization,
consent or approval of, any Governmental Entity other than the Secretary of
State of the State of Delaware, (iii) result in a violation or breach by
HEH of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any agreement or other
instrument or obligation to which HEH is a party or by which its properties or
assets may be bound, or (iv) violate any Legal Requirements, excluding from
the foregoing clauses (ii), (iii) and (iv) such filings, notices, permits,
authorizations, consents, approvals, violations, breaches or defaults which
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of HEH to perform its obligations under
this Agreement or the HEH Merger Agreement.
(g) No
Liabilities. Except for (a) liabilities incurred pursuant to
the transactions contemplated by this Agreement and the HEH Merger Agreement,
and (b) liabilities or obligations discharged or paid in full prior to the
date of this Agreement in the ordinary course of business consistent with past
practice, HEH does not have any liabilities or obligations of any nature
whatsoever (whether accrued, absolute, matured, determined, contingent or
otherwise) other than non-material liabilities related to the maintenance of its
existence as a corporation. There are no proceedings pending or, to
the knowledge of the HCC Lenders, threatened against HEH, other than any such
proceedings that would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company following the
Mergers. Neither HEH nor any of its properties is or are subject to
any order, writ, judgment, injunction, decree or award, except for those that
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company following the Mergers.
ARTICLE
V.
CERTAIN
COVENANTS AND AGREEMENTS
Section
5.1. Conduct
of Business.
(a) From the
date hereof through the Closing Date, the Company shall, and shall cause its
Subsidiaries to:
(i) operate
only in the Ordinary Course of Business and continue to maintain, in all
material respects, its assets, properties, rights and operations in accordance
with present practices in a condition suitable for their current
use;
(ii) use
commercially reasonable efforts to keep available generally the services of its
present officers and employees and preserve generally the present relationships
with Persons having business dealings with it;
(iii) use
commercially reasonable efforts to keep in full force and effect insurance
comparable in amount and scope to coverage maintained by it (or on behalf of it)
on the date hereof;
(iv) keep its
books of account, files and records in the Ordinary Course of
Business;
(v) pay in
cash, when due, all accrued but unpaid interest on the 2001 Note, the 2005 Note
and the 2006 Note;
(vi) file,
when due or required, all SEC Reports, all Tax Returns and other reports
required to be filed and pay when due all Taxes lawfully levied or assessed
against it, unless the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted; and
(vii) inform
HCC of the occurrence of any event which could reasonably be expected to result
in a breach of any representation or warranty contained in Article III.
(b) From the
date hereof through the Closing Date, except as expressly contemplated by this
Agreement, the Company shall not, and shall not permit its Subsidiaries
to:
(i) make any
change in any Company Organizational Document;
(ii) sell,
assign, lease, transfer, abandon, sublease or otherwise convey its assets,
properties or rights, other than in the Ordinary Course of
Business;
(iii) incur, or
suffer to exist, any Lien on the assets of the Company other than Permitted
Liens;
(iv) acquire,
lease, sublease, license or dispose of any material assets or properties other
than in accordance with past practices, including, if applicable, upon approval
by a duly authorized committee of the Company's Board of Directors;
(v) settle,
release or forgive any material claim or litigation or waive any material right
for an amount greater than $1,000,000 in the aggregate;
(vi) make,
change or revoke, or permit to be made, changed or revoked, without the consent
of HCC, any material election or method of accounting with respect to
Taxes;
(vii) enter
into, or permit to be entered into, any closing or other agreement or settlement
with respect to Taxes affecting or relating to the Company;
(viii) enter
into, amend or terminate any material lease or any material Contract or
commitment outside of the Ordinary Course of Business or except in accordance
with past practices, including, if applicable, upon approval by a duly
authorized committee of the Company's Board of Directors;
(ix) enter
into any employment Contract with any director, officer or employee of the
Company or make any payment, advance or loan to, or enter into any material
transaction of any other nature with, any director, officer or employee of the
Company, other than the payment, in the Ordinary Course of Business, of salary,
bonus and fringe benefits to the directors, officers and employees of the
Company or its Subsidiaries required pursuant to any documentation filed with
the SEC prior to the date of this Agreement;
(x) issue,
sell or pledge, or authorize or propose the issuance, sale or pledge of
additional shares or units of any class of capital stock, membership interests
or partnership interests, or securities convertible into or exchangeable for
shares or units of capital stock, membership interests or partnership interests,
or any rights, warrants or options to acquire any such shares or units of
capital stock, membership interests or partnership interests, or other
convertible securities of the Company or its Subsidiaries;
(xi) redeem,
retire, repurchase or otherwise acquire, directly or indirectly, or split,
combine or reclassify any shares of the capital stock of the Company or its
Subsidiaries, or declare, set aside for payment or pay any dividend or
distribution, payable in cash, stock, property or otherwise, with respect to any
of the capital stock, membership interests or partnership interests of the
Company or its Subsidiaries;
(xii) (A)
except as may be required by applicable Legal Requirement, or, in respect of any
severance agreement, as may be required by any existing employee benefit plan or
employee pension plan (but without regard to any changes to such plans after the
date hereof), enter into any new (or amend any existing) employee benefit plan,
or materially amend any such plan or agreement; (B) except with respect to an
employee or consultant first hired subsequent to the date of this Agreement,
enter into any new (or amend any existing) employment, severance or consulting
agreement; (C) except as may be required by any existing employee benefit plan
or employee pension plan (but without regard to any changes to such plans after
the date hereof), pay or agree to pay any pension, retirement allowance or other
employee benefit (and, in the case of clauses (A), (B) and (C) of this
subsection, other than in accordance with past practices, including, if
applicable, upon approval by a duly authorized committee of the Company's Board
of Directors); (D) increase in any manner the rate or terms of salary, wage,
bonus or other compensation of any director, officer or employee, except, in
each case, as required by law, required pursuant to pre-existing contractual
provisions or, with respect to annual performance bonuses and salary increases,
to the extent made in the Ordinary Course of Business; or (E) grant any
stock-based or other incentive compensation other than in the Ordinary Course of
Business;
(xiii) make,
enter into, modify, amend, terminate or waive any right or remedy, in any manner
that would be reasonably expected to have a Material Adverse Effect, under any
Contract;
(xiv) make or
commit to make any capital expenditures or programming acquisitions which are
not in the Ordinary Course of Business;
(xv) incur any
Indebtedness (other than pursuant to refinancing the Company's existing
revolving credit facility with JPMorgan Chase Bank, N.A.) or on or after March
31, 2010 pay, redeem, retire, repurchase or otherwise satisfy, in whole or in
part, the HCC Debt;
(xvi) enter
into an agreement or adopt a plan with respect to any merger, consolidation,
liquidation or business combination involving the Company or its Subsidiaries or
any acquisition or disposition of all or substantially all of the assets,
properties or rights or any securities of the Company or its
Subsidiaries;
(xvii) acquire
(whether by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division
thereof;
(xviii) except
for travel and other business expense-related advances to employees made in the
Ordinary Course of Business and intercompany loans, make any loans, advances or
capital contributions to, or investments in, any Person;
(xix) make or
change any Tax election, change an annual accounting period, adopt or change any
accounting method except as required by GAAP, file any amended Tax Return, enter
into any closing agreement, settle any material Tax claim or assessment relating
to the Company or any of its Subsidiaries or surrender any right to claim a
refund of Taxes;
(xx) take any
action that would cause any of the representations and warranties made by the
Company in this Agreement not to remain true and correct; or
(xxi) commit to
do any of the foregoing or authorize or enter into any Contract to do any of the
actions prohibited by the foregoing.
Section
5.2. Information and Access. Upon
reasonable advance notice, the Company shall, and shall cause its Subsidiaries
to, afford to the officers, directors, employees, accountants, counsel,
investment bankers, financial advisors and other representatives (collectively,
"Representatives") of
the HCC Lenders reasonable access throughout the period prior to the Closing
Date, to all of its employees, agents, accountants, properties, books,
contracts, commitments and records (including, but not limited to, Tax
Returns) and, during such period, the Company shall, and shall cause its
Subsidiaries to, furnish promptly to the HCC Lenders and their Representatives,
(i) access to each report, schedule and other document filed or received by
the Company or any of the Company's Subsidiaries pursuant to the requirements of
federal or state securities laws or filed with or sent to the SEC or any other
federal or state regulatory agency or commission and (ii) access to all
information concerning the Company, the Company's Subsidiaries and their
respective directors, officers, stockholders, operations, facilities, properties
and such other matters as may be reasonably requested by the HCC Lenders or
their Representatives in connection with any filings, applications or approvals
required or contemplated by this Agreement or for any other reason related to
the Transactions; provided, that all
such access shall be coordinated through the Company or its designated
representatives, in accordance with such reasonable procedures as the Company
may establish. During any visit to the business or property sites of
the Company or any of the Company's Subsidiaries, the HCC Lenders shall, and
shall cause their Representatives accessing such properties to, conduct itself
in a manner that is consistent with such reasonable procedures as are
established by the Company and would not be reasonably expected to interfere
with the operation of the Company's business. The Company
acknowledges that time is of the essence with respect to its compliance with its
covenants in this Section 5.2. No investigation pursuant to this
Section 5.2 shall affect any representation, warranty or covenant of the Company
in this Agreement or any condition on the obligations of the HCC Lenders in this
Agreement.
Section
5.3. Notices of Certain Events. The
Company shall promptly notify the HCC Lenders of (i) any communication from any
Person alleging that the consent of such Person (or another Person) is or may be
required in connection with the Transactions (and the response thereto from the
Company or its Representatives), (ii) any communication from any Governmental
Entity in connection with the Transactions (and the response thereto from the
Company or its Representatives), (iii) any claims, actions, suits or other
proceedings commenced or, to the Company's Knowledge, threatened before any
Governmental Entity that would prevent the consummation of all or any part of
the Transactions or otherwise relating to this Agreement or the Transactions
(and the response thereto from the Company or its Representatives), (iv) any
material events, changes, discussions, notices, changes or developments relating
to the litigation set forth on Schedule 3.7 and (v)
any event, change, occurrence, circumstance or development between the date of
this Agreement and the Closing Date which causes or is reasonably likely to
cause the conditions set forth in Article VIII of this Agreement not to be
satisfied or result in such satisfaction being materially delayed; provided,
however, that the delivery of any notice pursuant to this Section 5.3 shall not,
and shall not be deemed to, cure any breach of any representation or warranty
requiring disclosure of such matter at or prior to the date of this Agreement or
affect any of the closing conditions or otherwise limit or affect the remedies
available. With respect to any of the foregoing, the Company will
consult with HCC and its Affiliates and their Representatives so as to permit
HCC and its Affiliates and their Representatives to cooperate to take
appropriate measures to avoid or mitigate any adverse consequences that may
result from any of the foregoing.
Section
5.4. Waiver Agreement and Interim Payment
on the HCC Debt.
(a) Section
2(c) of the Waiver Agreement shall be amended by replacing the first sentence
thereof with the following:
This
Waiver shall terminate automatically on August 31, 2010.
(b) Section
7(e) of the Waiver Agreement shall be amended to add the following as the last
sentence thereof:
Notwithstanding
the foregoing, no amounts otherwise due and payable pursuant to this Section
7(e) for the year ended December 31, 2009 shall become due and payable;
provided, that such amounts shall become due and payable on August 31, 2010 if
the “Closing” under the Master Recapitalization Agreement, dated February 26,
2010, shall not have occurred by such date.
(c) From the
date hereof through the Closing, the Debtors shall pay interest on the 2001
Note, the 2005 Note, and the 2006 Note in cash when due, and all other interest
on the HCC Debt shall accrue and be added to principal.
(d) Hallmark
Cards will use its best efforts to ensure that the Company will have continued
access to up to $30 million under the Company's existing revolving credit
facility with JPMorgan Chase Bank, N.A. (or any other revolving credit facility)
while the Waiver Agreement is in effect.
Section
5.5. Information
Statement. The Company will use its best efforts to prepare
and file with the SEC as promptly as is reasonably practicable (but in any event
not later than March 20, 2010) the Information Statement in a form that complies
in all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder. HCC and its Affiliates shall
furnish to the Company all information requested concerning itself which is
required or customary for inclusion in the Information Statement. The
Company and HCC each agrees to respond as promptly as is practicable to any
comments of the SEC on the Information Statement, and the Company agrees to mail
the Information Statement to all of the Company's stockholders promptly after
the Company learns that the Information Statement will not be reviewed or that
the SEC staff has no further comments thereon. The Company covenants
and agrees that the Information Statement and any amendment thereof or
supplement thereto to be sent to the stockholders of the Company in connection
with the Transactions will comply in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations
thereunder. The information provided by any party hereto for use in
or incorporation by reference in the Information Statement shall be true and
correct in all material respects, at the date mailed to stockholders of the
Company, without omission of any material fact which is required to make such
information not false or misleading. All financial projections and
other forecasts prepared by the Company for use in or incorporation by reference
in the Information Statement were, or shall be, as applicable, prepared in good
faith based on reasonable assumptions and represent the Company's good faith
estimate of future results based on information available as of the date of the
Information Statement. No representation, covenant or agreement is
made by any party hereto with respect to information supplied in writing by any
other party specifically for inclusion in the Information
Statement. If at any time prior to the Closing Date any information
relating to the Company or HCC, or any of their respective Affiliates, officers
or directors, should be discovered by the Company or HCC which should be set
forth in an amendment or supplement to the Information Statement, so that the
Information Statement would not include any misstatement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by Law, disseminated to
the shareholders of the Company.
Section
5.6. Certain Provisions Relating to
Consents. The Company shall use commercially reasonable efforts prior to
and after the Closing Date to obtain all consents that are required in
connection with the transactions contemplated by this Agreement.
Section
5.7. Stockholder
Approvals. The Second Amended Charter and the Third Amended
Charter having been approved by the Company's Board of Directors, and the HEH
Merger Agreement and the HEIC Merger Agreement having each been approved by the
board of directors of each of the applicable constituent corporations and
executed and delivered by each of the applicable constituent
corporations:
(a) HEH
as: (i) a stockholder of HEIC hereby approves the HEIC Merger
Agreement and the consummation of the transactions contemplated thereby and
intends that this Agreement shall constitute its written consent as a
stockholder of HEIC to such matters pursuant to Section 228 of the DGCL; and
(ii) a stockholder of the Company immediately following the HEIC Merger hereby
approves the HEH Merger Agreement, the Third Amended Charter and the
consummation of the transactions contemplated thereby and the share issuances
contemplated by this Agreement, and intends that this Agreement shall constitute
its written consent as a stockholder of the Company to such matters pursuant to
Section 228 of the DGCL.
(b) HCC
as: (i) a stockholder of HEH hereby approves the HEH Merger Agreement
and the consummation of the transactions contemplated thereby and intends that
this Agreement shall constitute its written consent as a stockholder of HEH to
such matters pursuant to Section 228 of the DGCL; and (ii) as a stockholder of
the Company (both presently and as a successor to HEH) hereby approves the
Second Amended Charter, the HEIC Merger Agreement, the HEH Merger Agreement, the
Third Amended Charter and the consummation of the transactions contemplated
thereby and the share issuances contemplated by this Agreement, and intends that
this Agreement shall constitute its written consent as a stockholder of the
Company to such matters pursuant to Section 228 of the DGCL.
Section
5.8. Commercially Reasonable
Efforts. Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto shall use commercially reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable consistent with applicable law to
consummate and make effective in the most expeditious manner practicable the
Transactions, including, without limitation, obtaining all necessary actions or
nonactions, waivers, consents and approvals from all applicable Governmental
Entities in connection with the Transactions.
Section
5.9. Further
Assurances. Upon the request of HCC or any of its Affiliates
at any time after the Closing Date, the Company shall forthwith execute and
deliver such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization and other documents as HCC or its
Affiliate may reasonably request in order to perfect title of such entity and
its successors and assigns to the New Debt, Series A Preferred Stock or Common
Stock or otherwise to effectuate the purposes of this Agreement.
ARTICLE
VI.
MUTUAL
CONDITIONS
The
respective obligations of each party to consummate the Transactions is subject
to the satisfaction (unless waived in writing by the party against whom
enforcement is being sought) of each of the following conditions on or prior to
the Closing Date:
Section
6.1. No Injunction or
Action. No order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court or other Governmental Entity which
prohibits or prevents the consummation of the Transactions which has not been
vacated, dismissed or withdrawn prior to the Closing Date.
Section
6.2. Regulatory
Compliance. Twenty (20) calendar days shall have elapsed since
the date on which the Company shall have mailed the Information Statement to all
of its stockholders as required by the Exchange Act.
ARTICLE
VII.
CONDITIONS
TO THE DEBTORS' OBLIGATIONS
The
obligation of each Debtor to consummate the Transactions is subject to the
satisfaction (unless waived in writing by the Company with the consent of the
Special Committee) of each of the following conditions on or prior to the
Closing Date:
Section
7.1. Representations and
Warranties. The representations and warranties of the HCC
Lenders contained in this Agreement which are qualified as to materiality shall
be true and correct on and as of the Closing Date as though such representations
and warranties were made anew on and as of the Closing Date, and all other
representations and warranties of the HCC Lenders contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as though such representations and warranties were made anew on and as of the
Closing Date. HCC shall have delivered to the Company a certificate
of its President or a Vice President, dated the Closing Date, to the foregoing
effect.
Section
7.2. Compliance with
Agreement. Each HCC Lender shall have performed and complied,
in all material respects, with all covenants to be performed or complied with by
it on or prior to the Closing Date. HCC shall have delivered to the
Company a certificate of its President or a Vice President, dated the Closing
Date, to the foregoing effect.
Section
7.3. Revolving Credit
Facility. The Company shall have obtained a revolving credit
facility from a third-party lender (the "Revolver") (with a term of
not less than 360 days from the Closing Date) with availability of at least $30
million and on other terms and conditions reasonably acceptable to the Company,
and Hallmark Cards shall have guaranteed, or caused one or more of its
Affiliates to guarantee, the Revolver.
Section
7.4. Corporate
Documents. The Company shall have received from HCC certified
copies of the resolutions duly adopted by the board of directors of HCC and its
Affiliates party hereto, as applicable, approving the execution and delivery of
this Agreement and the Ancillary Documents and the consummation of the
Transactions, and such resolutions shall be in full force and effect as of the
Closing Date.
ARTICLE
VIII.
CONDITIONS
TO THE HCC LENDERS' OBLIGATIONS
The
obligation of each HCC Lender to consummate the Transactions is subject to the
satisfaction (unless waived in writing by HCC) of each of the following
conditions on or prior to the Closing Date:
Section
8.1. Representations and
Warranties. The representations and warranties of the Debtors
contained in this Agreement which are qualified as to materiality shall be true
and correct on and as of the Closing Date as though such representations and
warranties were made anew on and as of the Closing Date, and all other
representations and warranties of the Debtors contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date as
though such representations and warranties were made anew on and as of the
Closing Date. The Company shall have delivered to HCC a certificate
of its President or a Vice President, dated the Closing Date, to the foregoing
effect.
Section
8.2. Compliance with
Agreement. Each Debtor shall have performed and complied, in
all material respects, with all covenants to be performed or complied with by it
on or prior to the Closing Date. The Company shall have delivered to
HCC a certificate of its President or a Vice President, dated the Closing Date,
to the foregoing effect.
Section
8.3. Proceedings. Hallmark
Cards shall not have delivered a written notice to the Company certifying that
Hallmark Cards, in its sole discretion (but only after consultation with outside
legal counsel), shall have determined that the status of any pending or
threatened litigation (including, without limitation, the action styled ▇. ▇▇▇▇▇ & Co. LLC ▇. ▇▇▇▇▇▇ et
al, C.A.
No. 4729-CC (Del. Ch.)) or regulatory proceeding involving the Company or its
Subsidiaries in connection with this Agreement and/or the Transactions shall be
unsatisfactory to Hallmark Cards.
Section
8.4. Corporate
Documents. HCC shall have received from the Company certified
copies of the resolutions duly adopted by the board of directors or similar
governing body of each Debtor approving the execution and delivery of this
Agreement and the Ancillary Documents and the consummation of the Transactions,
and such resolutions shall be in full force and effect as of the Closing
Date.
Section
8.5. Effective Credit
Agreement. All conditions to the effectiveness of the New
Credit Agreement shall have been satisfied or waived by the party or parties, as
applicable, entitled to the benefit thereof.
ARTICLE
IX.
THE
CLOSING
Section
9.1. The Closing. The
Closing of the transactions contemplated hereby (the "Closing") shall be held no
later than ten (10) Business Days after each of the conditions precedent set
forth in Articles VI, VII and
VIII have been satisfied or waived by the party entitled to the benefit
thereof or on such other date as the Company and HCC shall agree (the "Closing
Date"). The Closing shall be held at the offices of ▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at
such other place as the parties may mutually agree.
Section
9.2. Deliveries by the Company at the
Closing. At the Closing, the Company shall deliver, or cause
to be delivered, to HCC, copies of the following items:
(a) the
certificates referred to in Sections 8.1 and 8.2, duly executed by the
Company;
(b) the
certified resolutions referred to in Section 8.4;
(c) the New
Credit Agreement and all documents and agreements contemplated by the Credit
Agreement, duly executed by the Debtors party thereto;
(d) the
Revolving Credit Agreement, duly executed by the Company and the lender
thereunder;
(e) the
Registration Rights Agreement in the form attached hereto as Exhibit H (the "Registration Rights
Agreement"), duly executed by the Company;
(f) the
Amendment to the Tax Sharing Agreement in the form attached hereto as Exhibit I (the "Tax Sharing Agreement
Amendment"), duly executed by the Company;
(g) evidence
of filing of the Second Amended Charter with the Secretary of State of the State
of Delaware;
(h) evidence
of filing of the Certificate of Designation with the Secretary of State of the
State of Delaware;
(i) stock
certificates representing the New Securities to be issued pursuant to Section
2.2 hereof, duly executed by the Company; and
(j) all other
previously undelivered documents that the Company is required to deliver to HCC
or its Affiliates pursuant to this Agreement.
Section
9.3. Deliveries by HCC at the
Closing. At the Closing, HCC shall deliver, or cause to be
delivered, to the Company, the following items:
(a) the
certificates referred to in Sections 7.1 and 7.2, duly executed by
HCC;
(b) the
certified resolutions referred to in Section 7.4;
(c) the New
Credit Agreement, duly executed by HCC;
(d) the
Registration Rights Agreement, duly executed by HCC;
(e) the Tax
Sharing Agreement Amendment, duly executed by Hallmark Cards; and
(f) all other
previously undelivered documents that HCC is required to deliver to the Company
pursuant to this Agreement.
ARTICLE
X.
TERMINATION
Section
10.1. Termination. Anything
in this Agreement to the contrary notwithstanding, this Agreement and the
Transactions may be terminated in any of the following ways at any time before
the Closing and in no other manner:
(a) By mutual
written consent of all of the parties hereto;
(b) By either
HCC or the Company upon written notice if a Governmental Entity of competent
jurisdiction shall have enacted, issued or entered any restraining order,
preliminary or permanent injunction or similar order or legal restraint or
prohibition that enjoins or otherwise prohibits consummation of all or any part
of the Transactions; or
(c) After the
later of (i) June 30, 2010 and (ii) 45 days following receipt of notice that the
Information Statement will not be reviewed by the SEC or that the SEC staff has
no further comments thereon, by HCC or the Company (if such terminating party or
any of its Affiliates is not then in default of any obligation hereunder), if
the Closing has not occurred on or before such date;
provided, however, that the
termination of this Agreement by the Company pursuant to this Section 10.1 shall
not be effective unless it is first approved by the Special
Committee.
Section
10.2. Effect of
Termination. In the event this Agreement is terminated
pursuant to Section 10.1, all further obligations of the parties hereunder shall
terminate, except that Section
5.4 and Articles X
and XI shall
survive termination and except that nothing in this Section 10.2 shall relieve
any party hereto of any liability for breach of any of the covenants or any of
the representations or warranties contained in this Agreement prior to such
termination.
ARTICLE
XI.
MISCELLANEOUS
PROVISIONS
Section
11.1. Notices. All notices, demands
or other communications to be given or delivered under or by reason of the
provisions of this Agreement shall be in writing and shall be deemed to have
been given (a) when delivered personally to the recipient, (b) when sent to the
recipient by telecopy (receipt electronically confirmed by sender's telecopy
machine) if during normal business hours of the recipient, otherwise on the next
Business Day, (c) one (1) Business Day after the date when sent to the recipient
by reputable express courier service (charges prepaid), or (d) seven (7)
Business Days after the date when mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent to the parties at the
addresses indicated below:
|
If
to the Debtors:
|
Crown
Media Holdings, Inc.
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Chief Executive Officer
|
|
With
a copy to:
(which
shall not constitute notice)
|
Crown
Media Holdings, Inc.
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Chief Financial Officer
|
|
Crown
Media Holdings, Inc.
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
General Counsel
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & Finger, P.A.
▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
If
to the HCC Lenders:
|
Hallmark
Cards, Incorporated
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief
Financial Officer
MD
319
|
|
With
a copy to:
(which
shall not constitute notice)
|
▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
|
or to
such other address as either party hereto may, from time to time, designate in
writing delivered pursuant to the terms of this Section.
Section
11.2. Amendments. The
terms, provisions and conditions of this Agreement may not be changed, modified
or amended in any manner except by an instrument in writing duly executed by all
of the parties hereto. Any change, modification or amendment by the
Company shall only be effective with the consent of the Special
Committee.
Section
11.3. No Waiver. No
failure on the part of the parties hereto to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
Section
11.4. Assignment
and Parties in Interest.
(a) Neither
this Agreement nor any of the rights, duties, or obligations of any party
hereunder may be assigned or delegated (by operation of law or otherwise) by any
of the parties hereto except with the prior written consent of the other parties
hereto; provided, however, that prior to or after the Closing, the HCC Lenders
may assign any or all of their rights hereunder to any of their Affiliates,
provided that no such assignment shall relieve such parties of their obligations
hereunder.
(b) Except as
provided in Section
2.3, this Agreement shall not confer any rights or remedies upon any
person or entity other than the parties hereto and their respective permitted
successors and assigns.
Section
11.5. Expenses. Except as
expressly set forth in this Agreement, each party to this Agreement shall bear
all legal, accounting, investment banking and other expenses incurred by it or
on its behalf in connection with this Agreement and the
Transactions.
Section
11.6. Entire
Agreement. This Agreement and the Ancillary Documents
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, supersedes and is in full substitution for any and all
prior agreements and understandings among them relating to such subject matter,
and no party shall be liable or bound to the other party hereto in any manner
with respect to such subject matter by any warranties, representations,
indemnities, covenants, or agreements except as specifically set forth
herein. The exhibits and schedules to this Agreement are hereby
incorporated and made a part hereof and are an integral part of this
Agreement.
Section
11.7. Descriptive
Headings. The descriptive headings of the several sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
Section
11.8. Counterparts. For
the convenience of the parties, any number of counterparts of this Agreement may
be executed by any one or more parties hereto, and each such executed
counterpart shall be, and shall be deemed to be, an original, but all of which
shall constitute, and shall be deemed to constitute, in the aggregate but one
and the same instrument. Facsimile signatures will be treated as
originals.
Section
11.9. Governing
Law; Jurisdiction.
(a) This
Agreement and the legal relations between the parties hereto shall be governed
by and construed in accordance with the laws of the State of Delaware,
applicable to contracts made and performed therein.
(b) Any and
all claims arising out of, relating to or in connection with this
Agreement or any of the Transactions or the subject matter hereof, shall be
brought exclusively in the Court of Chancery of the State of Delaware or, if
under applicable law exclusive jurisdiction over the matter is vested in the
federal courts, the United States District Court for the District of Delaware
(the "Designated
Court"). Each of the parties hereto hereby irrevocably submits
with regard to any such action or proceeding for itself and in respect of its
property, generally and unconditionally, to the personal jurisdiction of the
Designated Court and agrees that it will not bring any action whether in tort,
contract or otherwise arising out of, relating to or in connection with this
Agreement or any of the Transactions or the subject matter hereof in any court
other than the Designated Court. Each of the parties hereto hereby
irrevocably waives, and agrees not to assert as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any
claim that it is not personally subject to the jurisdiction of the Designated
Court, (b) any claim that it or its property is exempt or immune from
jurisdiction of the Designated Court or from any legal process commenced in such
the Designated Court (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise) and (c) to the fullest extent permitted by applicable law, any claim
that (i) the suit, action or proceeding in such Designated Court is brought in
an inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper or (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such Designated Court.
(c) Each
party acknowledges and agrees that any controversy which may arise under this
Agreement is likely to involve complicated and difficult issues, and, therefore,
each such party hereby irrevocably and unconditionally waives any right such
party may have to a trial by jury in respect of any litigation directly or
indirectly arising out of or relating to this Agreement or the
Transactions. Each party certifies and acknowledges that (i) no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver, (ii) each party understands and has considered
the implications of this waiver, (iii) each party makes this waiver
voluntarily, and (iv) each party has been induced to enter into this agreement
by, among other things, the mutual waivers and certifications in this Section
11.9.
Section
11.10. Construction. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction will
be applied against any party. Any references to any federal, state,
local or foreign statute or law will also refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. Unless
the context otherwise requires: (a) a term has the meaning assigned
to it by this Agreement; (b) including means "including but not limited to";
(c) "or" is disjunctive but not exclusive; (d) words in the singular
include the plural, and in the plural include the singular; and (e) "$" means
the currency of the United States of America. No specific provision,
representation or warranty shall limit the applicability of a more general
provision, representation or warranty. It is the intent of the
parties that each representation, warranty, covenant, condition and agreement
contained in this Agreement shall be given full, separate, and independent
effect and that such provisions are cumulative.
Section
11.11. Severability. In
the event that any one or more of the provisions contained in this Agreement or
in any other instrument referred to herein, shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such
instrument. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a part
of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and
enforceable.
Section
11.12. Specific
Performance. Without limiting or waiving in any respect any
rights or remedies of the HCC Lenders under this Agreement now or hereinafter
existing at law or in equity or by statute, each of the parties hereto shall be
entitled to seek specific performance of the obligations to be performed by the
other in accordance with the provisions of this Agreement.
[Remainder
of page intentionally left blank.]
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the day and year first written above.
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HALLMARK
PARTIES
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HALLMARK
CARDS, INCORPORATED
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
EXECUTIVE VICE PRESIDENT - CFO
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H C CROWN
CORP.
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
VICE PRESIDENT
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HALLMARK
ENTERTAINMENT HOLDINGS, INC.
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
PRESIDENT
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THE
DEBTORS
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CROWN
MEDIA HOLDINGS, INC.
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
EXECUTIVE VICE PRESIDENT
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CROWN
MEDIA UNITED STATES, LLC
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
VICE PRESIDENT
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CM
INTERMEDIARY, LLC
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
VICE PRESIDENT
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CITI
TEEVEE, LLC
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
VICE PRESIDENT
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DOONE
CITY PICTURES, LLC
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
VICE PRESIDENT
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Schedule
1.1(a)
Sample Calculation of the
Conversion Price, the Conversion Price Shares and
the Shares to be issued
pursuant to Section 2.2(b)(iii)
Assumptions:
Closing
Date: April 30, 2010
HCC
DebtDetermination
is the HCC Debt as of the Determination Date: $1,142,468,389.
HCC
DebtClosing is
the HCC Debt as of the Closing Date: $1,149,011,446.
Step One: Calculate
the Conversion Price Shares:
Conversion
Price Shares + HCC SharesDetermination=
90.1% (Shares OutstandingDetermination
+ Conversion Price Shares + Option SharesDetermination)
Where:
HCC
SharesDetermination
are the shares owned directly or indirectly by the HCC Parties on the Date of
Determination calculated pursuant to the definition of Conversion Price Shares =
69,997,656.
Shares
OutstandingDetermination
are the shares outstanding on the Date of Determination prior to the Closing =
104,788,076.
Option
SharesDetermination
= shares issuable upon exercise of all Outstanding Options on the Date of
Determination = 85,813.
Solving
that formula yields Conversion Price Shares of 247,411,294.
Step Two: Calculate
the Conversion Price = (HCC DebtDetermination
– 500,000,000)/Conversion Price Shares
Solving
the formula yields a Conversion Price of $2.5968.
Step
Three: Calculate the number of shares of Common Stock to be
issued pursuant to Section
2.2(b)(iii).
= (HCC
DebtClosing
-500,000,000)/Conversion Price
Solving
the formula yields 249,927,390 shares of Common Stock to be issued pursuant to
Section
2.2(b)(iii).
Schedule
1.1(b)
Knowledge
▇▇▇▇▇▇▇
▇▇▇▇▇▇, President & Chief Executive Officer
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Executive Vice President & General Counsel
▇▇▇▇▇
▇▇▇▇▇▇▇, Executive Vice President & Chief Financial Officer
Schedule
3.4
Conflicts
or Violations
None.
Schedule
3.7
Litigation
On July
13, 2009, a lawsuit was brought in the Delaware Court of Chancery against each
member of the Board of Directors of the Borrower, Hallmark Cards and its
affiliates, as well as the Borrower as a nominal defendant, by a minority
stockholder of the Borrower regarding the recapitalization proposal (the
“Proposal”) which the Borrower received from Hallmark Cards. The
plaintiff is ▇. ▇▇▇▇▇ & Co. LLC which owns beneficially approximately 5.8%
of the Borrower's Class A common stock, according to the complaint and filings
with the Securities and Exchange Commission. The Proposal, which the Borrower
publicly announced on May 28, 2009, provides for a recapitalization of its
outstanding debt to Hallmark Cards affiliates in exchange for new debt and
convertible preferred stock of the Borrower. The lawsuit claims to be a
derivative action and a class action on behalf of the plaintiff and other
minority stockholders of the Borrower. The lawsuit alleges, among other things,
that, the defendants have breached fiduciary duties owed to the Borrower and
minority stockholders in connection with the Proposal. The lawsuit includes
allegations that if the Proposal is consummated, an unfair amount of equity
would be issued to the majority stockholder, thereby reducing the minority
stockholders' equity and voting interests in the Borrower, and that the majority
stockholder would be able to eliminate the minority stockholders through a
short-form merger. The complaint requests the court to enjoin the defendants
from consummating the Proposal and to award plaintiff fees and expenses incurred
in bringing the lawsuit.
On July
22, 2009, a Stipulation Providing for Notice of Transaction (the “Stipulation”)
was filed with the Delaware Court of Chancery. The Stipulation provided
that the Borrower cannot consummate the transaction contemplated in the Proposal
until not less than seven weeks after providing the plaintiff with a notice of
the terms of the proposed transaction, including copies of the final transaction
agreements. If the plaintiff moves for preliminary injunctive relief with
respect to any such transaction, the parties will establish a schedule with the
Court of Chancery to resolve such motion during the seven week period. In
addition, following the decision of the Court of Chancery, the Borrower will not
consummate any transaction for a period of at least one week, during which time
any party may seek an expedited appeal. The Stipulation further provides
that the plaintiff shall withdraw its motion for preliminary injunction filed on
July 13, 2009 and that the action shall be stayed until the earlier of providing
the notice of a transaction or an announcement by the Borrower that it is no
longer considering a transaction.
Schedule
3.8
Brokers &
Fees
▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co.
▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇