EXHIBIT 2.1
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PURCHASE AND SALE AGREEMENT
DATED AS OF FEBRUARY 23, 2005
BY AND AMONG
CM INTERMEDIARY, LLC,
BAGBRIDGE LIMITED
AND, SOLELY WITH RESPECT TO SECTION 10.14 OF THIS AGREEMENT,
CROWN MEDIA HOLDINGS, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE 1 CERTAIN
DEFINITIONS................................................2
ARTICLE 2 PURCHASE PRICE AND
PAYMENT........................................13
2.1
Purchase
Price....................................................13
2.2
Allocation of
Purchase Price......................................14
2.3
Post-Closing
Purchase Price Adjustment............................14
2.4
Sales
Tax.........................................................18
ARTICLE 3 REPRESENTATIONS AND
WARRANTIES OF SELLER..........................18
3.1
Organization and
Qualification....................................18
3.2
Subsidiaries......................................................19
3.3
Authorization
and Validity of Agreement...........................19
3.4
Capitalization....................................................19
3.5
Financial
Statements..............................................20
3.6
No Violation;
Consents and Approvals..............................20
3.7
Absence of
Certain Changes or Events..............................21
3.8
Legal
Proceedings.................................................22
3.9
Compliance with
Applicable Laws and Permits.......................22
3.10
No Undisclosed
Liabilities........................................23
3.11
Taxes.............................................................24
3.12
Employee
Matters..................................................25
3.13
United Kingdom
Pensions...........................................29
3.14
Contracts.........................................................30
3.15
Title to
Properties...............................................31
3.16
Intellectual Property
Rights......................................32
3.17
Subscribers and
Suppliers of Programming..........................33
3.18
Brokers...........................................................33
3.19
Insolvency........................................................33
3.20
Machinery, Vehicles
and Equipment.................................33
3.21
Debts.............................................................34
3.22
Insurance.........................................................34
3.23
Information
Technology............................................34
3.24
Financial.........................................................34
ARTICLE 4 REPRESENTATIONS AND
WARRANTIES OF BUYER...........................35
4.1
Organization and
Qualification....................................35
4.2
Authorization
and Validity of Agreement...........................35
4.3
No Violation;
Consents and Approvals..............................36
4.4
Legal
Proceedings.................................................36
4.5
Investment
Purpose................................................36
4.6
Available
Funds...................................................36
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ARTICLE 5
COVENANTS.........................................................37
5.1
Access to
Information.............................................37
5.2
Information.......................................................37
5.3
Operations in
the Ordinary Course of Business.....................38
5.4
Forbearance by
Seller.............................................38
5.5
Notification of
Claims............................................40
5.6
Regulatory
Consents, Authorizations, etc..........................41
5.7
No Inconsistent
Action; Financial Assistance......................42
5.8
Employee
Matters..................................................42
5.9
Third Party
Consents..............................................45
5.10
Distributions.....................................................46
5.11
No Additional
Representations.....................................46
5.12
Updating
Schedules................................................46
5.13
Financing
Commitments.............................................47
5.14
Additional
Agreements.............................................47
5.15
Tax
Matters.......................................................52
5.16
Post-Closing
Withholding Obligations..............................56
5.17
Confidentiality...................................................57
5.18
Indemnity.........................................................57
5.19
Voting; Subsidiary
Interests......................................57
ARTICLE 6 CONDITIONS TO
CLOSING.............................................58
6.1
Conditions of
Each Party's Obligation to Close....................58
6.2
Conditions to
Buyer's Obligation to Close.........................59
6.3
Conditions to
Seller's Obligation to Close........................60
6.4
Undertakings......................................................60
ARTICLE 7 THE
CLOSING.......................................................61
7.1
Time and
Location of Closing......................................61
7.2
Actions by
Seller at Closing......................................61
7.3
Resolutions.......................................................63
7.4
Actions by Buyer
at Closing.......................................63
ARTICLE 8
INDEMNIFICATION...................................................63
8.1
Indemnification
by Seller.........................................63
8.2
Indemnification
by Buyer..........................................64
8.3
Defense of
Claims.................................................64
8.4
Survival of
Representations and Warranties........................65
8.5
Limitation on
Rights..............................................65
8.6
Indemnity
Payments................................................67
ARTICLE 9 PROTECTION OF
GOODWILL............................................67
ARTICLE 10 GENERAL
PROVISIONS................................................68
10.1
Further
Assurances................................................68
10.2
Termination.......................................................68
10.3
Arbitration.......................................................69
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10.4
Successors and
Assigns............................................70
10.5
No
Waiver.........................................................70
10.6
Entire Agreement;
Amendments......................................71
10.7
Notices...........................................................71
10.8
Governing
Law.....................................................72
10.9
Publicity.........................................................72
10.10
Section
Headings..................................................72
10.11
Severability......................................................72
10.12 No
Third-Party
Beneficiaries......................................73
10.13
Counterparts......................................................73
10.14
Guarantee.........................................................73
10.15 No
Set-Off........................................................75
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Schedules
Seller
Disclosure Schedules
Buyer
Disclosure Schedules
Exhibits
Exhibit A
Form of
Transition Services Agreement
Exhibit B
Form of
NOC Agreement
Exhibit C
Form of
Amendment to the Amended and Restated
Program License
Agreement
Exhibit D
Form of
Trademark License Agreement
Exhibit E
Form of
Assignment and Assumption Agreement
Exhibit F
Form of
Lease Guaranty Novation Agreement
Exhibit G
Form of
KSE Media Novation Agreement
Exhibit H
Form of
Universal Programming Novation Agreement
Exhibit I
Form of
Guaranty and Indemnity Agreement
Exhibit J
Form of
Transponder/Uplink Services Agreement
Exhibit K
Form of
Library Services Continuation Agreement
Exhibit L
Form of
Director Resignation Letters
Exhibit M
Illustration of the Calculation of Net Capital
Annexes
Annex A
Debt Commitment Letter
Annex B
Equity Financing Commitment Letters
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THIS PURCHASE AND SALE AGREEMENT is made and entered into as of
February 23, 2005 by and among CM
Intermediary, LLC, a Delaware limited
liability company ("SELLER"), Bagbridge
Limited (No. 5325383), a company
registered in England and Wales ("BUYER"),
and, solely with respect to
Section 10.14 of this Agreement, Crown
Media Holdings, Inc., a Delaware
corporation ("HOLDINGS").
WHEREAS, Seller owns all of the outstanding CMI Membership
Interests (as defined below) and owns all
of the outstanding CEL Shares (as
defined below); and
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell, assign, transfer and
convey to Buyer, the CMI Membership
Interests and the CEL Shares on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations,
warranties and agreements contained
herein, the parties hereto agree as
follows:
ARTICLE 1
CERTAIN DEFINITIONS
Capitalized terms not otherwise defined herein shall have the
following
meanings when used in this Agreement:
1.1 "2002 ACT" shall be as defined in Section 6.1(c).
1.2 "ADDITIONAL CONSIDERATION" shall be as defined in Section
2.3(c).
1.3 "AFFILIATE" shall mean with respect to any Person, any
other
Person that, directly or indirectly,
through one or more intermediaries,
Controls, is Controlled by, or is under
common Control with, such Person.
1.4 "AFFILIATION AGREEMENT" shall mean any contract, agreement
or
other arrangement for or relating to
programming on CMI's and/or CEL's
television channels, whether or not for a
fee or other consideration.
1.5
"AGREEMENT" shall mean this Purchase and Sale Agreement as
amended
and modified from time to time in
accordance with Section 10.6.
1.6 "AMENDED PROGRAM LICENSE AGREEMENT" shall mean the Amended
and
Restated Program License Agreement to be
entered into between Hallmark
Entertainment Distribution, LLC and Buyer
or Buyer's nominee substantially in
the form attached as Exhibit C.
1.7 "APSTAR-IIR AGREEMENT" shall mean the APSTAR-IIR Transponder
Lease
Agreement, dated as of February 13, 1998,
by and between APT Satellite
Enterprise Limited and CMI.
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1.8 "ASBESTOS" shall mean the fibrous silicate material in any
form
commonly referred to as asbestos and
includes without limitation asbestos fibers
and asbestos-containing materials.
1.9 "ASSET PURCHASE AGREEMENT" shall mean an agreement as of the
date
hereof entered into by Crown Media
Distribution, LLC, Buyer and, solely with
respect to Section 10.14 thereof, Holdings,
relating to rights in respect of
certain theatrical films,
made-for-television movies, specials, mini-series,
series and other television programming
outside the United States.
1.10 "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the agreement
to
be entered into by Seller and Buyer or
Buyer's nominee substantially in the form
attached as Exhibit E.
1.11 "ASSUMED LIABILITIES" shall mean any Liability that is
assigned
to Buyer, CMI and/or CEL pursuant to
Section 5.8 (other than Retained
Liabilities).
1.12 "BALANCE SHEET" shall be as defined in Section 3.5.
1.13 "BALANCE SHEET DATE" shall mean December 31, 2003.
1.14 "BASE CAPITAL" shall be as defined in Section 2.3(c).
1.15 "BENEFIT PLAN" shall mean each "employee benefit plan," as
defined in Section 3(3) of ERISA (including
any "multiemployer plan" as defined
in Section 3(37) of ERISA) and each
profit-sharing, bonus, stock option, stock
purchase, stock ownership, pension,
retirement, employment, retention, change in
control, severance, deferred compensation,
excess benefit, supplemental
unemployment, post-retirement medical or
life insurance, welfare or incentive
plan, or sick leave, long-term disability,
medical, hospitalization, life
insurance, other insurance plan, or other
employee benefit plan, program or
arrangement, whether written or unwritten,
qualified or non-qualified, funded or
unfunded, maintained or contributed to by
Crown Media Holdings, Inc., its
Subsidiaries, Seller, CMI, CEL or any of
the Subsidiaries of CMI and CEL in
which current or former Subsidiary
Employees or other persons who provide or
have provided services to CMI, CEL or any
other Subsidiaries of CMI and CEL,
participate or are a party to, but
excluding any Employment Agreements.
1.16 "BT" shall mean British Telecommunications plc.
1.17 "BUSINESS INTELLECTUAL PROPERTY" shall be as defined in
Section
3.16.
1.18 "BUYER" shall be as defined in the preamble to this
Agreement.
1.19 "BUYER
CONFIDENTIAL INFORMATION" shall be as defined in Section
5.17.
1.20 "BUYER MATERIAL ADVERSE EFFECT" shall mean any event,
occurrence,
fact, condition, change or effect that has
a materially adverse effect on the
ability of Buyer to consummate the
transactions contemplated hereby or that
would materially delay or prevent the
Closing.
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1.21 "BUYER'S FLEX PLAN" shall be as defined in Section 5.8(e).
1.22 "CALCULATION STATEMENT" shall be as defined in Section
2.3(a).
1.23 "CASH CONSIDERATION" shall be as defined in Section
2.1(a).
1.24 "CASH EQUITY" shall be as defined in Section 4.6(b).
1.25 "CEL" shall mean Crown Entertainment Limited, a
corporation
formed under the laws of England and
Wales.
1.26 "CEL SHARES" shall mean the ordinary shares, par value
(pound)1.00, of CEL.
1.27 "CLOSING" shall be as defined in Section 7.1.
1.28 "CLOSING DATE" shall be as defined in Section 7.1.
1.29 "CLOSING STATEMENT" shall be as defined in Section 2.3(a).
1.30 "CM PLAN" shall mean any Benefit Plan that is sponsored,
maintained or contributed to by Crown Media
Holdings, Inc. and/or any of its
Subsidiaries that is not a Subsidiary
Plan.
1.31 "CMI" shall mean Crown Media International, LLC, a
Delaware
limited liability company.
1.32 "CMI MEMBERSHIP INTERESTS" shall mean the membership interests
of
CMI.
1.33 "COBRA COVERAGE" means the health continuation coverage
required
by Section 601 et seq. of ERISA and Section
4980B of the Code.
1.34 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
1.35 "COLLECTIVE BARGAINING AGREEMENTS" shall mean all
collective
bargaining agreements and other similar
labor agreements covering Subsidiary
Employees.
1.36 "COMMITMENTS" shall be as defined in Section 4.6(b).
1.37 "COMPANY MATERIAL ADVERSE EFFECT" shall mean any event,
occurrence, fact, condition, change or
effect that is materially adverse to the
business, results of operations or
financial condition of CMI, CEL and their
Subsidiaries, taken as a whole, other than
any event, occurrence, fact,
condition, change or effect arising out of
or relating to (a) general economic
or political conditions or the securities
markets in the U.S. or any country or
region in which any of CMI, CEL or their
Subsidiaries operate, including market
fluctuations and changes in interest rates,
or the internationally distributed
television network industry generally, (b)
changes in laws, rules, regulations
or orders of any Governmental Entity, (c)
any Retained Liability or (d) the
announcement or consummation of this
Agreement (without limiting the provisions
of Section 3.6 or Section 3.12(e)) or the
transactions contemplated hereby. For
the avoidance of doubt, an
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event, occurrence, fact, condition, change
or effect affecting only one Group
Company may be capable of being a Company
Material Adverse Effect.
1.38 "CONFIDENTIAL INFORMATION" shall mean all information relating
to
business, financial or other affairs
(including, without limitation, future
programming and distribution plans and
targets and subscriber counts) that is
not in the public domain.
1.39 "CONFIDENTIAL MEMORANDUM" shall be as defined in Section
5.11.
1.40 "CONTRACT" shall mean any note, bond, indenture, mortgage,
deed
of trust, contract, instrument or other
agreement.
1.41 "CONTROL" shall mean the possession, directly or indirectly,
of
the affirmative power to direct or cause
the direction of the management and
policies of a Person (whether through
ownership of securities, partnership
interests or other ownership interests, by
contract, by membership or
involvement in the board of directors,
management committee or management
structure of such Person, or otherwise) and
"CONTROLLED" and "CONTROLLING" shall
be construed accordingly.
1.42 "CONTROLLED GROUP LIABILITY" shall mean any and all
liabilities
(a) under Title IV of ERISA, (b) under
Section 302 of ERISA, (c) under Sections
412 and 4971 of the Code or (d) arising as
a result of a failure to comply with
the continuation coverage requirements of
Section 601 ET SEQ. of ERISA and
Section 4980B of the Code, other than such
liabilities that arise solely out of,
or relate solely to, the Subsidiary
Plans.
1.43 "CONTROLLING PARTY" shall be as defined in Section
5.15(f).
1.44 "COVERED
EMPLOYEES" shall be as defined in Section 5.8(e).
1.45 "CREDIT AGREEMENT" shall mean the Credit, Security, Guaranty
and
Pledge Agreement, dated as of August 31,
2001, as amended, among Crown Media
Holdings, Inc., the guarantors named
therein, the lenders referred to therein
and JPMorgan Chase Bank, as administrative
agent and issuing bank for the
lenders.
1.46 "DATA ROOM" shall mean the online data room made available
to
Seller beginning on May 28, 2004 up to and
including the date hereof, as
modified and supplemented from time to
time.
1.47 "DEBT AGREEMENT" shall mean the agreement to be entered into
by
Buyer, ABN AMRO Bank N.V., Barclays Bank
PLC, Societe Generale and others as
contemplated by the Debt Commitment
Letter.
1.48 "DEBT COMMITMENT LETTER" shall be as defined in Section
4.6(a).
1.49 "DEBT FINANCING" shall be as defined
in Section 4.6(a).
1.50 "DISCLOSED SCHEMES" shall be as defined in Section
3.13(a).
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1.51 "DISTRIBUTORS" shall be as defined in Section 3.17.
1.52 "EMPLOYEE SHARE SCHEMES" shall be as defined in Section
3.12(g).
1.53 "EMPLOYMENT AGREEMENT" shall mean a contract, offer letter
or
agreement of Crown Media Holdings, Inc.,
its Subsidiaries, Seller, CMI, CEL or
any of the Subsidiaries of CMI and CEL with
or addressed to any Subsidiary
Employee pursuant to which CMI, CEL or any
of the Subsidiaries of CMI and CEL
has any actual or contingent liability or
obligation to provide compensation
and/or benefits in consideration for past,
present or future services.
1.54 "EQUITY FINANCING COMMITMENT LETTERS" shall be as defined
in
Section 4.6(b).
1.55 "EQUITY INTERESTS" shall mean any capital stock,
partnership
interest, membership interest, limited
liability company interest or other
equity interest in any Person.
1.56 "ERISA" shall mean the Employee Retirement Income Security Act
of
1974, as amended.
1.57 "ESTIMATED NET CAPITAL" shall be as defined in Section
2.3(g).
1.58 "FINAL CALCULATION STATEMENT" shall be as defined in
Section
2.3(c).
1.59 "FINAL NET CAPITAL" shall be as defined in Section 2.3(c).
1.60 "FINANCIAL STATEMENTS" shall be as defined in Section 3.5.
1.61 "FINANCING" shall be as defined in Section 4.6(b).
1.62 "FORMER SCHEME" shall be as defined in Section 3.13(a).
1.63 "HOLDINGS" shall be as defined in the preamble to this
Agreement.
1.64 "GAAP" shall mean United States generally accepted
accounting
principles as in effect as of the date
hereof.
1.65 "GOVERNMENTAL ENTITY" shall mean any court, arbitrator,
administrative or other governmental
department, agency, commission, authority
or instrumentality, domestic (including
federal, state or local) or foreign,
including, without limitation and for the
avoidance of doubt, any Tax authority,
the EC Commission, the EFTA Surveillance
Authority and any national competition
authority.
1.66 "GPP" shall be as defined in Section 3.13(a).
1.67 "GROUP" shall mean CEL and CMI and the Subsidiaries of CMI,
and
"GROUP COMPANY" shall mean any one of
them.
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1.68 "HIGH POINTE LEASE" shall mean the lease between, inter alia,
CMI
and High Pointe I Development Group LLC,
dated 1 June 1998 in respect of space
in the building at 6430 South Fiddler's
Green Circle, Englewood, Colorado, USA.
1.69 "HOT BIRD CONTRACT" shall mean the Contract for a Combined
Uplink
and Space Segment Service, dated as of
December 17, 1999, as amended on March
20, 2001, by and between BT and CMI.
1.70 "INDEBTEDNESS" shall mean the aggregate amount of indebtedness
of
the Group for borrowed monies, loan notes,
all outstanding balances and future
financial commitments related to all
capital lease obligations held by the Group
(or similar arrangements where the Group
does not receive good title to goods
until such goods have been paid for in
full) other than balances and financial
commitments contemplated by Section 5.14,
all accrued, due and payable employee
related costs (other than Taxes and other
than to the extent accounted for in
the Post-Closing Purchase Price Adjustment
pursuant to Section 2.3) relating to
Retained Employees (including, but not
limited to, accrued salaries (not
including bonuses) and wages, vacation and
sickness days and deferred employee
compensation), all dividends declared by
any Group Company prior to Closing
which remain unpaid as at Closing and all
balances owing to Seller's Affiliated
Group (other than (a) any Liability in
respect of obligations reflected on the
Closing Statement under the line item
"License fees payable to affiliates" to
the extent in respect of any Window that
commenced on or after the Closing Date,
(b) the Retained Liabilities and (c) as
contemplated by this Agreement, any
Transaction Agreement or any of the
transactions contemplated hereby or thereby)
as of the Closing Date (including any
accrued interest and penalties thereon and
including any break fees payable in
connection with the termination of such
facilities at Closing), in each case as set
forth in the Calculation Statement
and calculated in accordance with Section
2.3 and on the basis of the accounting
policies and procedures set forth in
Schedule 2.3(a).
1.71 "INDEMNIFIED BUYERS" shall be as defined in Section 8.1.
1.72 "INDEMNIFIED CM PARTIES" shall be as defined in Section
8.2.
1.73 "INDEPENDENT ACCOUNTANTS" shall mean any of Deloitte &
Touche
LLP, PricewaterhouseCoopers LLP, KPMG
L.L.P. and Ernst & Young, L.L.P. mutually
acceptable to Buyer and Seller, PROVIDED
that if Buyer and Seller do not agree
upon a mutually acceptable public
accounting firm within ten days of the first
date of any dispute on which any party
elects to submit such dispute to the
Independent Accountants in accordance with
the terms of this Agreement, the New
York City office of the American
Arbitration Association shall choose an
internationally recognized certified public
accounting firm.
1.74 "INTELLECTUAL PROPERTY" shall mean all of the (a) patents,
patent
applications, patent disclosures and
improvements thereto, (b) trademarks,
service marks, logos, trade names, domain
names and corporate names and
registrations and applications for
registration thereof, (c) any and all other
intellectual property assets of any nature
whatever which may now or in the
future exist in any part of the world,
including, but not limited to, all marks
registered in the United States Patent and
Trademark Office, (d) copyrights
(including, without limitation, all rights
to distribute, reproduce and prepare
derivative works) and
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registrations and applications for
registration thereof, (e) computer software,
data and documentation, (f) trade secrets,
confidential business information and
know-how and (g) any copies and tangible
embodiments thereof (in whatever form
or medium).
1.75 "INTERIM STATEMENTS" shall be as defined in Section 3.5.
1.76 "INVESTMENT" shall be as defined in Section 3.2.
1.77 "LICENSE FEES" shall be as defined in Section 5.14(c).
1.78 "LIABILITY" shall mean, with respect to any Person, any direct
or
indirect liability, indebtedness,
obligation, commitment, expense, claim, or
guaranty of such Person of any kind,
whether accrued or unaccrued, and whether
or not the same is required by GAAP to be
accrued on the financial statements of
such Person.
1.79 "LIBRARY SERVICES CONTINUATION AGREEMENT" shall mean the
agreement to be entered into by Hallmark
Distribution, LLC and Buyer or Buyer's
nominee substantially in the form attached
as Exhibit K.
1.80 "LIEN" shall mean any lien, encumbrance, pledge, mortgage,
charge
(fixed or floating) under English law,
hypothecation, right of set off, right of
pre-emption, assignment by way of security,
reservation of title or any other
security interest, howsoever created or
arising, claim under bailment or storage
contract.
1.81 "LIFE ASSURANCE PLAN" shall be as defined in Section
3.13(a).
1.82 "LOSSES" shall be as defined in Section 8.1.
1.83 "MATERIAL CONTRACTS" shall be as defined in Section
3.14(a).
1.84 "MULTIEMPLOYER PLAN" means any "multiemployer plan" within
the
meaning of Section 4001(a)(3) of ERISA that
is subject to ERISA.
1.85 "MULTIPLE EMPLOYER PLAN" shall mean a pension plan subject
to
ERISA that has two or more contributing
sponsors at least two of whom are not
under common control, within the meaning of
Section 4063 of ERISA.
1.86 "NET CAPITAL" shall be as defined in Section 2.3(d).
1.87 "NOC AGREEMENT" shall mean the agreement to be entered into
by
Crown Media United States, LLC and Buyer or
Buyer's nominee substantially in the
form attached as Exhibit B.
1.88 "NON-RETAINED EMPLOYEES" shall be as defined in Section
5.8(a).
1.89 "NOTICE OF DISAGREEMENT" shall be as defined in Section
2.3(b).
1.90 "NOVATION AGREEMENTS" shall be as defined in Section
5.14(a).
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1.91 "OUTSIDE DATE" shall be as defined in Section 6.4.
1.92 "OVERRIDING
INTERESTS" shall mean such matters as are overriding
interests for the purposes of the UK Land
Registration Act 2002.
1.93 "PAS-9 AGREEMENT" shall mean the Full-Time Transponder
Lease
Agreement (Pre-Launch), dated as of April
7, 2000, by and between PanAmSat
International Systems, Inc. and CMI.
1.94 "PERFORMING RIGHTS SOCIETY" shall be as defined in Section
3.9(c).
1.95 "PERMIT" shall mean a material permit, license, consent,
approval, certificate, qualification,
registration or other authorization or a
filing of a notification report or
assessment necessary in any jurisdiction for
the operation of each Group Company's
business, its ownership, possession,
occupation or use of its assets, each as
currently conducted.
1.96 "PERMITTED LIENS" shall mean (a) Liens for taxes or
governmental
assessments, charges or claims the payment
of which is not yet due, or for taxes
the validity of which are being contested
in good faith; (b) Liens of carriers,
warehousemen, mechanics, materialmen and
other similar persons and other Liens
imposed by applicable law incurred in the
ordinary course of business for sums
not yet delinquent or being contested in
good faith exerciseable against Seller;
and (c) Liens securing executory
obligations under any lease that constitutes an
"operating lease" under generally accepted
accounting principles.
1.97 "PERSON" shall mean an individual, partnership,
corporation,
business trust, limited liability company,
limited liability partnership, joint
stock company, trust, unincorporated
association, joint venture or other entity
or a Governmental Entity.
1.98 "POLICIES" shall be as defined in Section 3.22.
1.99 "POST-CLOSING PERIOD" shall mean any taxable period
beginning
after the Closing Date.
1.100 "PRE-CLOSING PERIOD" shall mean any taxable period ending on
or
before the Closing Date.
1.101 "PROGRAM LICENSE AGREEMENT" shall mean the Amended and
Restated
Program License Agreement, dated as of
January 1, 2001, by and between Hallmark
Distribution LLC and CMI.
1.102 "PROGRAMMING AGREEMENTS" shall mean any contract, agreement
or
other arrangement pursuant to which CMI or
CEL acquires license rights to
programming outside the United States.
1.103 "PROPERTIES" means the leasehold properties listed in
Schedule
3.15(b), and "PROPERTY" shall mean any one
of them.
1.104 "PURCHASE PRICE" shall be as defined in Section 2.1.
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1.105 "PURCHASED INTERESTS" shall mean all the outstanding CMI
Membership Interests and CEL Shares.
1.106 "RECEIVING PARTY" shall be as defined in Section 5.17.
1.107 "REDUCTION AMOUNT" shall be as defined in Section 2.1(e).
1.108 "RELATED PARTY" shall be as defined in Section 5.17.
1.109 "REFUND" shall be as defined in Section 2.3(c).
1.110 "REGULATION" shall be as defined in Section 5.6.
1.111 "RELEVANT BENEFITS" shall be as defined in Section
3.13(a).
1.112 "RETAINED ASSETS" shall mean those assets (a) set forth
on
Schedule 1.112 and (b) reflected on the
Closing Statement under the line item
"Receivable from Hallmark affiliate."
1.113 "RETAINED EMPLOYEES" shall be as defined in Section
5.8(a).
1.114 "RETAINED LIABILITIES" shall mean (a) any Liability that
is
assigned to Seller pursuant to Section 5.8,
(b) any Liability set forth on
Schedule 1.114, (c) any Liability arising
out of or in connection with the
claims described in the section heading
"Pending Negotiations and/or Disputes"
in Schedule 3.9(c), (d) any Liability in
respect of obligations reflected on the
Closing Statement under the line item
"License fees payable to affiliates"
solely to the extent in respect of any
Window under the Amended Program License
Agreement that commenced on or before the
Closing Date (assuming that the
Amended Program License Agreement had been
effective prior to the Closing Date);
PROVIDED, that such Liabilities shall not
be in excess of or otherwise different
than those that would have been payable
under the Program License Agreement had
the Program License Agreement continued in
effect in accordance with its current
terms in effect as of the date hereof), (e)
any Liability in respect of
obligations reflected on the Closing
Statement under the line item "Payable to
Hallmark affiliates" and (f) any Liability
in respect of obligations reflected
on the Closing Statement under the line
item "Note payable to third party";
PROVIDED that in no event shall Retained
Liabilities include any Liability for
or relating to Taxes or any Liabilities
included in the Post-Closing Purchase
Price Adjustment calculated in accordance
with Section 2.3.
1.115 "REVISED CALCULATION STATEMENT" shall be as defined in
Section
2.3(b).
1.116 "RIGHTS" shall be as defined in Section 3.4(b).
1.117 "SECTION 5.4 FAILURE" shall be as defined in Section 5.4.
1.118 "SECURITIES ACT" shall mean the Securities Act of 1933,
as
amended.
1.119 "SELLER" shall be as defined in the preamble to this
Agreement.
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1.120 "SELLER CONFIDENTIAL INFORMATION" shall be as defined in
Section
5.17.
1.121 "SELLER DISCLOSURE SCHEDULE" shall mean the schedules of
Seller
attached hereto.
1.122 "SELLER SAVINGS PLAN" shall be as defined in Section
3.12(c).
1.123 "SELLER'S AFFILIATED GROUP" shall mean Seller's Group
together
with Hallmark Cards, Inc. and its
Affiliates (other than CMI, CEL or any of
their Subsidiaries).
1.124 "SELLER'S FLEX PLAN" shall be as defined in Section
5.8(e).
1.125 "SELLER'S GROUP" shall mean Seller and its Subsidiaries
together
with Crown Media Holdings, Inc. and its
Subsidiaries (other than CMI, CEL or any
of their Subsidiaries).
1.126 "SELLER'S INDEMNIFICATION CLAIM" shall be as defined in
Section
8.1.
1.127 "SELLER'S KNOWLEDGE" shall mean the actual knowledge of David
J.
Evans, Russel H. Givens, Jr., William J.
Aliber, Charles L. Stanford, Jeffery
Henry, Richard Buchanan, Eduardo Vera,
Terrance Yau, Mark Thompson, Peter
Lamberti or Leslie Park and the knowledge
that any of these individuals would
have had if they had made reasonable
inquiry in connection with the (a) normal
performance of their respective duties and
(b) sale of the Purchased Interests.
1.128 "SERVICE PROVIDER AGREEMENT" shall mean any Employment
Agreement
and any other Contract pursuant to which
any individual who is not an employee
of an Affiliate of CEL or CMI or their
Subsidiaries directly or indirectly
provides services to any Group Company
(other than any such individual who, in
addition to providing services to any Group
Company, provides services to at
least one other Person that is not
affiliated with the Group Companies).
1.129 "SEVERANCE BENEFITS" shall mean any and all Liabilities
in
respect of severance, redundancy and
similar pay and benefits, salary
continuation and any other liabilities,
costs, claims, demands, expenses and
obligations relating to the termination or
alleged termination of employment,
whether arising under an Employment
Agreement, Collective Bargaining Agreement,
a Benefit Plan, applicable law or
otherwise.
1.130 SOFTWARE ARRANGEMENTS" shall mean those arrangements set
forth
on Schedule 1.130.
1.131 "STATEMENT OF OPERATIONS" shall be as defined in Section
3.5.
1.132 "STRADDLE PERIOD" shall mean any taxable period beginning on
or
before and ending after the Closing
Date.
1.133 "SUBSIDIARY" of any Person means any corporation or other
entity
of which securities or other ownership
interests having ordinary voting power to
elect a majority of the
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Board of Directors or other Persons
performing similar functions are at the time
directly or indirectly owned or Controlled
by such Person or one or more
Subsidiaries of such Person.
1.134 "SUBSIDIARY EMPLOYEE" shall mean any individual employed by
CMI,
CEL or any of their respective Subsidiaries
as of the time in question, whether
actively at work or on approved leave of
absence.
1.135 "SUBSIDIARY SERVICE PROVIDER" shall be as defined in
Section
3.12(f).
1.136 "SUBSIDIARY PLAN" shall mean any Benefit Plan that is
sponsored
solely by CMI, CEL and/or their respective
Subsidiaries or is maintained solely
for the benefit of Subsidiary
Employees.
1.137 "SUBSTANTIAL DISTRIBUTORS" shall mean parties to
Affiliation
Agreements providing for payments in excess
of $100,000 annually.
1.138 "SUBSTANTIAL PROGRAM SUPPLIERS" shall mean parties to
Programming Agreements involving license
fees in excess of $250,000 annually.
1.139 "SYSTEMS" shall mean all computer hardware (including
peripheral
devices), printers, photocopiers, scanners,
telecommunication equipment,
microprocessors or software and computer
networks (other than public networks).
1.140 "TAX CONTEST" shall be as defined in Section 5.15(f).
1.141 "TAX RETURN" and "TAX RETURNS" shall be as defined in
Section
3.11(c).
1.142 "TAX" and "TAXES" shall be as defined in Section 3.11(c).
1.143 "TERRITORY" shall be as defined in Section 9.1(a).
1.144 "TITLE COMPANY" shall be as defined in Section 7.2(p).
1.145 "TRADEMARK LICENSE AGREEMENT" shall mean the agreement to
be
entered into by Hallmark Cards, Inc. and
Buyer or Buyer's nominee substantially
in the form attached as Exhibit D.
1.146 "TRANSACTION AGREEMENTS" shall mean the Asset Purchase
Agreement, the NOC Agreement, the
Transition Services Agreement, the Trademark
License Agreement, the Amended Program
License Agreement, the Transponder/Uplink
Agreement and the Library Services
Continuation Agreement.
1.147 "TRANSFER REGULATIONS" shall mean the Transfer of
Undertakings
(Protection of Employment) Regulations 1981
enacted in the United Kingdom.
1.148 "TRANSFERRED ACCOUNT BALANCES" shall be as defined in
Section
5.8(e).
1.149 "TRANSITION SERVICES AGREEMENT" shall mean the agreement to
be
entered into by Seller and Buyer or Buyer's
nominee substantially in the form
attached as Exhibit A.
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1.150 "TRANSPONDER/UPLINK AGREEMENT" shall mean the agreement to
be
entered into by Seller and Buyer or Buyer's
nominee substantially in the form
attached as Exhibit J.
1.151 "TREASURY REGULATIONS" shall mean the U.S. Treasury
Department
regulations promulgated under the Code.
1.152 "WELFARE BENEFITS" shall mean employee benefits of the
type
described in Section 3(1) of ERISA (whether
or not covered by ERISA), other than
Severance Benefits.
1.153 "WINDOW" shall be as defined in the Amended Program
License
Agreement.
1.154 References to any United States or English legislation or
legal
term for any action, remedy, method of
judicial proceeding, legal document,
legal status, court, official or any legal
concept or thing shall in respect of
any jurisdiction other than the United
States or England (as the case may be) be
deemed to include what most nearly
approximates in that jurisdiction to the
United States or English legislation or
term (as the case may be). All laws,
statutes, ordinances, rules, regulations
and orders referred to herein shall be
deemed to refer to provisions under the
laws of the United States unless
expressly stated otherwise.
ARTICLE 2
PURCHASE PRICE AND PAYMENT
2.1 PURCHASE PRICE. Upon the terms and subject to conditions set
forth
in this Agreement, at Closing Seller shall
sell, assign, grant, convey and
deliver to Buyer or Buyer's nominee, and
Buyer or Buyer's nominee shall acquire,
or procure the acquisition by such nominee
of, from Seller with effect from
Closing and free and clear from any Lien,
together with all accrued benefits and
rights attached thereto, all of its right,
title and interest in and to the
Purchased Interests. The full and complete
consideration for the Purchased
Interests shall be as follows (which amount
shall be subject to adjustment as
set forth in this Article 2) (the "PURCHASE
PRICE"):
(a) At Closing, Buyer shall pay or procure the payment to Seller
of
$62 (Sixty-Two) million (the "CASH
CONSIDERATION") (subject to adjustment
pursuant to Section 2.1(e)) in United
States dollars by wire transfer of
immediately available funds to such account
of Seller as Seller shall direct for
the purchase of the CMI Membership
Interests and the CEL Shares.
(b) At Closing, Buyer shall assume the Assumed Liabilities pursuant
to
the Assignment and Assumption
Agreement.
(c) Seller waives or agrees to procure the waiver of any rights
or
restrictions conferred upon it or any other
person which may exist in relation
to the Purchased Interests under the
bylaws, articles of association or similar
organizational documents of CEL and
CMI.
(d) Buyer shall not be obliged to complete the purchase of, and
Seller
shall not be obliged to complete the
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sale of, any of the Purchased Interests
unless Seller completes the sale of, and
Buyer completes the purchase of, all of the
Purchased Interests simultaneously
in accordance with the terms and subject to
the conditions of this Agreement.
(e) In the event that the Estimated Net Capital is less than the
Base
Capital, the Cash Consideration payable
pursuant to Section 2.1(a) shall be
reduced by the amount (the "REDUCTION
AMOUNT") by which the Estimated Net
Capital is less than the Base Capital.
2.2 ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree to
allocate
the total consideration in accordance with
Schedule 2.2. Buyer and Seller's
Group shall (except as may be required by a
"determination" within the meaning
of Section 1313(a) of the Code or any
similar state, local or foreign Tax law)
(i) report the allocation of the total
consideration among the assets of CMI and
CEL (including the assets of the
Subsidiaries of CMI) in accordance with
Schedule 2.2 and (ii) act in accordance
with Schedule 2.2 (x) in the preparation
and filing of all Tax Returns (including
filing Form 8594 with their respective
federal income Tax Returns for the taxable
year that includes the Closing Date
and any other forms or statements required
by the Code, Treasury Regulations,
the Internal Revenue Service or any
applicable state, local or foreign Tax
authority) and (y) in the course of any Tax
proceeding. Buyer and Seller shall
promptly inform one another of any
challenge by any Governmental Entity to
Schedule 2.2 and agree to consult and keep
one another informed with respect to
the status of, and any discussion, proposal
or submission with respect to, such
challenge.
2.3 POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(a) CLOSING STATEMENT. As promptly as practicable, but in no
event
later than 45 days after the Closing Date,
Seller shall cause to be prepared and
delivered to Buyer: (i) a combined
statement with respect to the Indebtedness
and asset and liability accounts of CMI and
CEL and their respective
Subsidiaries as of the Closing Date (the
"CLOSING STATEMENT") in the format set
forth in Part I of Schedule 2.3(a),
certified by Seller's independent certified
public accountants in the form of a review
report, to have been prepared on the
basis of the accounting policies and
procedures set forth in Part II of Schedule
2.3(a), and (ii) a statement setting forth
the calculation of Indebtedness and
Net Capital based on the Closing Statement
(together with the Closing Statement,
the "CALCULATION STATEMENT").
(b) DISPUTES. If Buyer in good faith disagrees with the
Calculation
Statement, then Buyer shall notify Seller
in writing (the "NOTICE OF
DISAGREEMENT") of such disagreement within
30 days after delivery of the
Calculation Statement to Buyer. During such
30-day period, Buyer and its
representatives shall be permitted to
review during normal business hours the
working papers of Seller, but not the
working papers of Seller's accountants,
relating to the Calculation Statement. The
Notice of Disagreement shall set
forth in reasonable detail the basis for
the disagreement and specify the
adjustments which, in its opinion, should
be made to the Calculation Statement
in order to comply with the requirements of
this Agreement. Thereafter, Buyer
and Seller shall attempt in good faith to
reconcile their differences, and any
resolution by them as to any disputed items
shall be final, binding and
conclusive on the parties and shall be
evidenced by a writing signed by Buyer
and Seller, including a revised Calculation
Statement reflecting such resolution
(a "REVISED CALCULATION STATEMENT"). If
Buyer and Seller are unable to resolve
the disagreement within 20 days after
delivery of the Notice of Disagreement,
then Buyer and Seller shall instruct the
Independent Accountants to resolve the
disputed items and make a
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determination with respect thereto, which
determination shall be provided to
Buyer and Seller by the Independent
Accountants in a written notice, within 30
days after selection of the Independent
Accountants. Buyer and Seller shall
instruct the Independent Accountants to
include a Revised Calculation Statement
in such written notice provided by the
Independent Accountants. The Independent
Accountants shall, for purposes of English
law, act as experts and not as
arbitrators (as such terms are understood
in English law) in making their
determination, and such determination shall
be final, binding and conclusive
upon the parties hereto. The scope of such
Independent Accountants' engagement
(which shall not be an audit) shall be
limited to the resolution of the items
contained in the Notice of Disagreement and
the recalculation, if any, of items
in the Calculation Statement in light of
such resolution. The following
provisions shall apply to the Independent
Accountants' determination: (i) Buyer
and/or Buyer's accountants and Seller
and/or Seller's accountants shall each
promptly (and in any event within such time
frame as reasonably enables the
Independent Accountants to make their
decision in accordance with the time frame
set forth in this Section 2.3(b)) prepare
and deliver to the Independent
Accountants a written statement on the
matters in dispute (together with the
relevant documents); (ii) in giving their
determination, the Independent
Accountants shall state what adjustments
(if any) are necessary to the draft
Calculation Statement in respect of the
matters in dispute in order to comply
with the requirements of this Agreement and
shall give their reasons therefor;
(iii) each of Buyer and Seller shall bear
the costs and expenses of all counsel
and other advisers, witnesses and employees
retained by it, and the fees, costs
and expenses of the Independent
Accountants, if any, selected in accordance with
this Section 2.3(b) will be shared equally
by Buyer, on the one hand, and
Seller, on the other hand.
(c) ADJUSTMENT. The Calculation Statement, or, if one has been
adopted
pursuant to Section 2.3(b), the Revised
Calculation Statement, shall be deemed
to be final, binding and conclusive on
Buyer and Seller (the "FINAL CALCULATION
STATEMENT") upon the earliest of (i) the
failure of Buyer to deliver to Seller
the Notice of Disagreement within 30 days
of Seller's delivery of the
Calculation Statement to Buyer; (ii) the
resolution of all disputes by Buyer and
Seller, as evidenced by a Revised
Calculation Statement and (iii) the resolution
of all disputes by the Independent
Accountants, as evidenced by the Revised
Calculation Statement. As used herein, (x)
"ADDITIONAL CONSIDERATION" shall
mean:
(I) the sum of (A) the amount by which the Net Capital set forth
on
the Final Calculation Statement (the "FINAL NET CAPITAL")
exceeds
$31.5 million (Thirty-One Million Five Hundred Thousand) (the
"BASE
CAPITAL") plus (B) the Reduction Amount, if any; PROVIDED, that in
no
event shall such Additional Consideration calculated pursuant to
this
clause (I) less the Reduction Amount, if any, exceed $1,575,000
(One
Million Five Hundred Seventy-Five Thousand); or
(II) in the event that the Final Net Capital is less than the
Base
Capital, and the Reduction Amount, if any, is greater than the
amount
equal to the amount by which the Final Net Capital is less than
the
Base Capital, the amount by which the Reduction Amount exceeds
the
amount by which the Final Net Capital is less than the Base
Capital;
and (y) "REFUND" shall mean:
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(I) the positive amount equal to the difference of (A) the amount
by
which the Final Net Capital is less than the Base Capital minus
(B)
the Reduction Amount, if any; or (II) in the event that the
Reduction
Amount is greater than the amount equal to the amount by which
the
Final Net Capital is less than the Base Capital, zero.
Within five days after the Final
Calculation Statement is deemed final, binding
and conclusive, an adjustment to the
Purchase Price shall be made as follows:
(i) Buyer shall pay or procure the payment to Seller of, the
Additional Consideration (if any) by wire transfer in
immediately
available funds to a U.S. based account specified by Seller.
The
beneficial owner for U.S. tax purposes of such U.S. based
account
shall be a U.S. person (as defined under Section 7701(a)(30) of
the
Code) and such U.S. person shall provide a properly and
accurately
completed Internal Revenue Service Form W-9 "Request for
Taxpayer
Identification Number and Certification."
(ii) Seller shall pay to Buyer or Buyer's nominee the Refund
(if
any) by wire transfer in immediately available funds to an
account
specified by Buyer.
(iii) In the event that outstanding Indebtedness is set forth
on
the Final Calculation Statement, then Seller shall pay to Buyer
or
Buyer's nominee such amount by wire transfer in immediately
available
funds to an account specified by Buyer.
Any
adjustments to the Purchase Price made pursuant to this Section
2.3(c) shall bear interest from the Closing
Date through the date of payment at
the rate 1% above the rate of interest
publicly announced by Citibank, N.A., in
New York, New York, from time to time as
its prime rate. Any adjustments to the
Purchase Price made pursuant to this
Section 2.3(c) shall be paid by wire
transfer of immediately available funds to
the account or accounts of Seller
specified by Seller, if Seller is owed
payment, or to the account or accounts
specified by Buyer, if Buyer is owed
payment, within five (5) business days of
such determination. If any amounts are
payable under this Section 2.3(c), Buyer
and Seller shall agree to such
consequential adjustments as are reasonably
required to any amounts allocated in
accordance with Section 2.2(c).
(d) As used herein, "Net Capital" shall mean (a + b) - (c + d)
where:
a = the sum of
the following current assets: accounts receivable (less
allowance for
doubtful accounts), program license fees--non-affiliates
(net of
accumulated amortization), subtitling and dubbing (net of
accumulated
amortization), and prepaid expenses and other assets;
b = the sum of
the following non-current assets: program license
fees--non-affiliates (net of accumulated amortization) and
subtitling and
dubbing;
c = the sum of
the following current liabilities (as adjusted in
accordance with
Part II of Schedule 2.3(a) and other than to the extent
referred to in
Indebtedness):
accounts payable
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and accrued
liabilities, license fees payable to non-affiliates, and
deferred
revenue, in each case, as shown on the Closing Statement; and
d = the sum of
the following Taxes:
any VAT (as reduced by any
available credit
for input tax incurred), wage, payroll, sales or
similar
non-income Taxes incurred in the ordinary course within the
four
months prior to
the Closing Date that are due and payable as of the
Closing Date and
that have not been paid on or before the Closing Date,
PROVIDED,
HOWEVER, that:
(I) save to the extent set
out in (d) above, all Tax assets and
liabilities and
all provisions, accruals and reserves for or with
respect thereto
(in each case whether current or deferred, contingent or
otherwise),
(II)
all
Indebtedness, Retained Assets and Retained Liabilities, and
(III)
Liabilities for leases
assumed by Seller pursuant to Sections
5.14(d), (e) and
(f),
shall in each
case be excluded from the calculation of Net Capital.
For clarification purposes only, attached as Exhibit M is a
calculation of the Net Capital based upon
the unaudited combined balance sheet
of CMI and CEL and their respective
Subsidiaries as of September 30, 2004.
(e) Subject to any rule of law or regulatory body or any provision
of
any contract or arrangement entered into
prior to the date of this Agreement to
the contrary, Seller shall procure that
each member of Seller's Group shall, and
Buyer shall procure that the Group shall,
as promptly as reasonably practicable,
provide each other, the Independent
Accountants, Buyer's accountants and
Seller's accountants with all information
(in their respective possession or
control) relating to operations of Seller's
Group and/or the Group, as the case
may be, including reasonable access during
normal business hours to Seller's
Group and Group employees, books, records
and such other relevant information
and all cooperation and assistance as may
be reasonably required, to (i) enable
Seller's production of the Calculation
Statement and (ii) enable the Independent
Accountants to satisfy their obligations as
contemplated hereby, if necessary.
(f) If Buyer objects to only one of either of the Net Capital
or
Indebtedness in the Calculation Statement,
then the element in respect of which
Buyer has no objection shall be deemed to
have been agreed in accordance with
Section 2.3(c), and Buyer and Seller shall
comply with Section 2.3(c) in respect
of that element.
(g) ESTIMATED NET CAPITAL. Seller shall prepare in good faith
an
estimate of the Net Capital of CMI and CEL
and their respective Subsidiaries
(the "ESTIMATED NET CAPITAL") as of the
Closing, and shall deliver a statement
of the Estimated Net Capital to Buyer no
later than 10 business days prior to
the Closing.
2.4 SALES TAX. Buyer shall be liable for, and timely pay, 75% of,
and
Seller shall be liable for, and timely pay,
25% of, any sales, transfer, stamp,
stock transfer, use, real
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property, goods and services and similar
Taxes (other than any value-added Tax
in the United Kingdom, which shall be borne
solely by Buyer) which are payable
in connection with the purchase of the
Purchased Interests by Buyer pursuant to
this Agreement. Buyer shall prepare the Tax
Returns in connection therewith.
Seller shall cooperate with Buyer in the
determination of such Taxes and the
preparation of such Tax Returns as
reasonably requested by Buyer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as
disclosed in the Seller Disclosure Schedule, Seller hereby
represents and warrants to Buyer as
follows:
3.1 ORGANIZATION AND QUALIFICATION. (a) Seller, CMI and CEL and
each
of their Subsidiaries (i) is a corporation
or limited liability company, as
applicable, duly organized, validly
existing and is in good standing under the
laws of the jurisdiction of its
incorporation or organization and (ii) has all
requisite corporate or limited liability
company, as applicable, power and
authority to own, lease and operate its
properties and to carry on its business
as it is now being conducted. Seller, CMI
and CEL and each of their Subsidiaries
is duly qualified or licensed to do
business and in good standing in each
jurisdiction in which the ownership or
lease of its properties or the conduct of
its business makes such qualification
necessary, other than in such
jurisdictions where the failure to be so
qualified (individually or in the
aggregate) would not reasonably be expected
to have a Company Material Adverse
Effect.
(b) Seller has provided Buyer with access in the Data Room to true
and
complete copies of the organizational
documents (including, without limitation,
the bylaws or operating agreement, as
applicable) of CMI and CEL and each of
their Subsidiaries, as amended through and
in effect on the date hereof.
(c) Seller has made available to Buyer the corporate minute
books
containing the records of meetings of the
membership interest holders or
stockholders and managing board, board of
directors or similar governing body,
the membership interest or stock
certificate books and the interest and stock
record books of CMI and CEL, as the case
may be. The interest and stock record
books of CMI and CEL, as the case may be,
made available to Buyer are complete
and correct in all material respects and
accurately reflect the ownership of all
of the outstanding interests or shares, as
the case may be, of such companies.
All corporate actions taken by CMI or CEL
since their respective organization
and incorporation have been duly authorized
or subsequently ratified as
necessary, except where the failure to do
so would not have a material impact on
that Group Company.
3.2 SUBSIDIARIES. Schedule 3.2(a) sets forth a complete list of
the
Subsidiaries of CMI and CEL. Seller owns,
free and clear of any Lien, one
hundred percent (100%) of the outstanding
Equity Interests of CMI and CEL (and,
in the case of CEL, is the legal and
beneficial owner (as such terms are
understood under English law) of such
Equity Interests) and there are no Rights
issued or outstanding (or any agreements to
issue any such Right) with respect
to such Equity Interests. CMI owns, free
and clear of any Lien, one hundred
percent (100%) of the outstanding Equity
Interests of its Subsidiaries, and
there are no Rights issued or outstanding
(or
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any agreements to issue any such Right)
with respect to such Equity Interests.
All of the Equity Interests of CMI, CEL and
each Subsidiary of CMI are validly
issued, fully paid and nonassessable. Other
than their investments in their
Subsidiaries, none of CMI, CEL or their
Subsidiaries owns any Equity Interest in
any other Person or have any Rights to
acquire any such Equity Interest (such
Equity Interests or Rights to acquire any
such Equity Interests, an
"INVESTMENT") or takes part in the
management of any other corporation or
business organization outside of the Group.
None of CMI or CEL or any of their
Subsidiaries is a party to any joint
venture, partnership or similar
arrangements.
3.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. Seller has all
requisite
power and authority to execute and deliver
this Agreement and to carry out and
perform its obligations under this
Agreement and to consummate the transactions
contemplated hereby. The execution,
delivery and performance by Seller of this
Agreement, and the consummation of the
transactions contemplated hereby, have
been duly and validly authorized by all
necessary action of Seller and no other
action on the part of Seller is necessary
for the authorization, execution,
delivery or performance by Seller of this
Agreement and the consummation of the
transactions contemplated hereby. This
Agreement has been duly executed and
delivered by Seller and, assuming the due
authorization, execution and delivery
by Buyer constitutes the valid and binding
obligation of Seller enforceable
against Seller in accordance with its terms
(except insofar as enforceability
may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium
or similar laws affecting creditors' rights
generally, or by principles
governing the availability of equitable
remedies).
3.4 CAPITALIZATION. (a) As of the date hereof, Seller is the
record
and beneficial owner of all of the
authorized and outstanding CMI Membership
Interests and CEL Shares. CMI has no
outstanding membership interests other than
the CMI Membership Interests and CEL has
not allotted any shares other than the
CEL Shares. All of the outstanding CMI
Membership Interests and CEL Shares have
been duly authorized, validly issued and
fully paid, and none of the CMI
Membership Interests and CEL Shares were
issued in violation of any preemptive
rights or any Lien in favor of any other
Person. The sale of the CMI Membership
Interests and the CEL Shares will not be
subject to any rights of first offer,
first refusal, tagalong rights or other
similar rights or restrictions and,
assuming the accuracy of Section 4.5, the
acquisition of the CMI Membership
Interests and the CEL Shares by Buyer will
be exempt from registration under the
Securities Act or state securities laws.
None of the CMI Membership Interests
and the CEL Shares have been issued in
violation of the Securities Act or state
securities laws. There are no voting
trusts, voting agreements, proxies or other
agreements with respect to any of the CMI
Membership Interests and CEL Shares.
(b) There are not as of the date hereof any authorized, issued
or
outstanding (i) securities convertible
into, or exercisable or exchangeable for,
or evidencing the right to subscribe for,
any Equity Interest of CMI or CEL or
any of their Subsidiaries; (ii) phantom
shares, phantom equity interests, stock
or equity appreciation rights (full or
limited) or profit participation rights
or interests with respect to CMI or CEL or
any of their Subsidiaries; or (iii)
subscriptions, purchase rights, options,
warrants or any other agreements or
undertakings of any character (the
securities, instruments or agreements
referred to in clauses (i), (ii) and (iii)
are hereinafter referred to
collectively as "RIGHTS") to or by which
Seller, CMI or CEL or any of their
Subsidiaries is a party or is bound which,
directly or indirectly, obligate
Seller, CMI or CEL
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<PAGE>
or any of their Subsidiaries to issue,
deliver or sell or cause to be issued,
delivered or sold any Equity Interest (or
any Rights to acquire any such Equity
Interest) with respect thereto of CMI or
CEL or any of their Subsidiaries or
obligating CMI or CEL or any of their
Subsidiaries to grant, extend or enter
into any of the foregoing. None of Seller,
CMI or CEL or any of their
Subsidiaries is subject to any obligation
(contingent or otherwise) to
repurchase, redeem or otherwise acquire or
retire any Equity Interest (or Rights
to acquire any such Equity Interest) of CMI
or CEL or any of their Subsidiaries,
or to make any investment (in the form of a
loan, capital contribution or
otherwise) in any Person.
3.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.5 are (a)
the
audited combined balance sheet of CMI and
CEL and their respective Subsidiaries
as of the Balance Sheet Date (the "BALANCE
SHEET") and the audited related
combined statement of operations and cash
flows for the fiscal year ended on the
Balance Sheet Date (the "STATEMENT OF
OPERATIONS") and (b) the unaudited
combined balance sheet of CMI and CEL and
their respective Subsidiaries as of
September 30, 2004 and the related combined
statement of operations for the
nine-month period ended on September 30,
2004 (such unaudited combined balance
sheet and related statement of operations,
collectively with the Balance Sheet
and the Statement of Operations, the
"FINANCIAL STATEMENTS"). The Financial
Statements and related notes have been
prepared in accordance with the
standards, principles and practices
specified on the face of the Financial
Statements and fairly present in all
material respects the financial condition
and results of operations, cash flows and
assets and liabilities as at December
31, 2003 and the financial condition and
results of operations, assets and
liabilities as at September 30, 2004 of CMI
and CEL, in accordance with GAAP,
consistently applied throughout the periods
involved, except as disclosed in the
related notes thereto, and subject, in the
case of interim Financial Statements,
to normal recurring year-end adjustments
and the absence of notes. Attached
hereto as Schedule 3.5A are the unaudited
combined balance sheet of CMI and CEL
and their respective Subsidiaries as of
November 30, 2004 and the related
combined statement of operations for the
eleven-month period ended on November
30, 2004 (such unaudited combined balance
sheet and related statement of
operations, the "INTERIM STATEMENTS"). The
Interim Statements have been prepared
in good faith and reflect, in all material
respects, the financial condition and
results of operations of CMI and CEL,
subject to normal recurring monthly and
year-end adjustments and the absence of
notes. The accounting reference date of
CEL, CMI and each of their Subsidiaries is,
and during the last three years has
always been, December 31.
3.6 NO VIOLATION; CONSENTS AND APPROVALS. Neither the execution
and
delivery of this Agreement by Seller, nor
the consummation of the transactions
contemplated hereby, do or would after the
giving of notice or the lapse of time
or both, (a) violate, conflict with, result
in a breach of, or constitute a
default under, the certificate of
incorporation, certificate of formation,
bylaws, limited liability corporation
agreement or other similar governing
documents of Seller, CMI or CEL; (b)
violate or conflict with U.S. federal,
state or local law or violate or conflict
in any material respect with any
foreign law, statute, regulation or court
or administrative order or process;
(c) result in the creation of, or give any
party the right to create, any Lien
upon the CMI Membership Interests or the
CEL Shares or any material assets of
CMI or CEL; (d) violate or conflict with in
any material respect, or result in
the loss of any material right with respect
to or result in a material breach
of, or constitute a material default under,
or terminate or give any party the
right to terminate, amend, abandon or
refuse to perform any Material Contract to
which CMI or CEL is subject or bound; (e)
modify in any material
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<PAGE>
respect or accelerate, or give any party
thereto the right to modify in any
material respect or accelerate, the time
within which, or the terms under which,
any party is to perform any duties or
obligations or receive any rights or
benefits under any agreement or contract
affecting the CMI Membership Interest
or the CEL Shares; (f) result in any Group
Company losing the benefit of a
Permit held or enjoyed by Seller or that
Group Company as of the date of this
Agreement in any applicable jurisdiction or
(g) result in the loss of the
benefit of any asset of CMI or CEL, except
for such loss as would not reasonably
be expected to be material to the business
of the Group as currently conducted.
All consents, approvals, authorizations and
other requirements prescribed by
law, rule or regulation that are necessary
for the execution and delivery by
Seller of this Agreement or the
consummation by Seller of the transactions
contemplated by this Agreement have been
obtained and satisfied, other than as
required under the antitrust, trade
regulation or competition laws of any
jurisdiction or as would not reasonably be
expected to have a material adverse
effect on the ability of Seller to
consummate the transactions contemplated
hereby.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated
by
this Agreement, including the impact of the
transfer or other exclusion of the
Retained Assets and Retained Liabilities,
or set forth in the Financial
Statements or the Interim Financial
Statements, since the Balance Sheet Date,
the Group has conducted its business in all
material respects in the ordinary
course consistent with past practice
(taking into account the proposed sale of
the Group) and there has been no material
reduction in the value of those fixed
assets (other than diminution in value in
the ordinary course) specified in the
Financial Statements and no material
adverse change in the assets, financial
condition or results of operations of the
Group, no Substantial Program
Suppliers or Substantial Distributors have
ceased or substantially reduced their
trade with any Group Company or have
materially and adversely altered the terms
of trade to any Group Company or, to
Seller's Knowledge, given notice of any
intention to do the same, and none of CMI,
CEL or any of their Subsidiaries have
(a) issued any Equity Interests; (b)
declared or made any payment or
distribution to stockholders in respect of
the capital stock or membership
interests of such stockholders (other than
cash dividends or distributions) or
repaid, purchased or redeemed any of its
capital stock (or agreed to do any of
the same); (c) taking into account the
proposed sale of the Group, sold,
assigned, leased, mortgaged, pledged,
subjected to any Lien or otherwise
conveyed or transferred (or agreed to do
any of the same) any asset, or
cancelled any debt or claim owed to CMI,
CEL or any of their Subsidiaries, in
each case other than in the ordinary course
of business; (d) taking into account
the proposed sale of the Group, assumed,
guaranteed or incurred, or agreed to
assume, guarantee or incur, a liability,
obligation or expense (actual or
contingent) other than in the ordinary
course of business; (e) acquired, or
agreed to acquire, from an Affiliate an
asset on other than on arm's-length
terms; (f) made or incurred, or agreed to
make or incur, capital expenditures,
or a commitment or connected commitments
involving capital expenditures, in
relation to the Denver, Colorado Network
Operating Center in excess of $1
million or otherwise in excess of $300,000;
(g) waived any right of material
value; (h) made any material change in
officer or director compensation except
in the ordinary course of business and
consistent with past practice; (i)
entered into, assumed, renewed or modified
in any material respect any
employment, consulting, severance or
termination agreement with any officer or
director of CMI, CEL or any of their
Subsidiaries (other than agreements entered
into in the ordinary course of business) or
(j) changed any financial accounting
methods, principles or practices by CMI or
CEL, except insofar as may have been
required by a change in GAAP.
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<PAGE>
3.8 LEGAL PROCEEDINGS. There are no, nor have there been during the
18
months ending on the date of this
Agreement, any suits, actions, claims or
litigation, or legal, administrative,
arbitration, mediation or other
proceedings, or investigations or inquiries
of any Governmental Entity (other
than in respect of Taxes) pending or, to
Seller's Knowledge, threatened against
Seller (with respect to assets or
operations of the Group) or any Group Company,
except for such suits, actions, claims or
litigation, or legal, administrative,
arbitration, mediation or other proceedings
as would not, individually or, in
the case of related claims, in the
aggregate, reasonably be expected to be
material to the business of the Group as
currently conducted, nor is there any
judgment, decree, injunction, ruling,
award, order or writ of any court,
governmental department, commission,
agency, instrumentality, arbitration or
other Person outstanding against or binding
upon Seller (with respect to assets
or operations of the Group) or any Group
Company. To Seller's Knowledge, no
matter exists which would reasonably be
expected to give rise to a civil,
criminal, arbitration, administrative or
other proceeding in any jurisdiction
involving any Group Company, except for
such proceedings as would not,
individually or, in the case of related
claims, in the aggregate, reasonably be
expected to be material to the business of
the Group as currently conducted. To
Seller's Knowledge, there are no
outstanding threats of legal, administrative,
arbitration, mediation or other proceedings
pending, except for such threats as
would not reasonably be expected to be
material to the business of the Group as
currently conducted.
3.9 COMPLIANCE WITH APPLICABLE LAWS AND PERMITS. (a) The
Group's
operations, including, but not limited to,
the use or right of occupancy of any
Group Company in respect of Properties, are
in compliance with all laws,
statutes, ordinances, rules, regulations
and orders of all Governmental Entities
applicable to its business except for such
non-compliance as would not be
material to the business of the Group as
currently conducted. To Seller's
Knowledge, prior to the date hereof there
have been no events of non-compliance
with laws, statutes, ordinances, rules,
regulations or orders of Governmental
Entities applicable to its business that
continue to be, or would reasonably be
expected to be, material to the business of
the Group as currently conducted.
(b) Each Group Company has obtained all material permits,
licenses,
consents, approvals, certificates,
qualifications, registrations or other
authorizations or filings of notification
reports or assessments necessary in
each jurisdiction in which Group operates
its business, and each Group Company
has complied in all material respects with
the terms and conditions of each
Permit and each Permit is in full force and
effect. There are no pending or, to
Seller's Knowledge, threatened proceedings
which would reasonably be expected to
adversely affect such Permits, and, to
Seller's Knowledge, no such Permits are
threatened to be suspended, revoked or
otherwise rendered invalid.
(c) Schedule 3.9(c) contains a true and correct list of all
pending
negotiations and/or disputes as of the date
hereof with respect to performing
rights and mechanical rights societies (or
similar bodies fulfilling similar
functions) (each a "PERFORMING RIGHTS
SOCIETY") in each jurisdiction in which
the Group conducts its business, none of
which is reasonably expected to be
material to the business of the Group as
currently conducted. To Seller's
Knowledge, no member of Seller's Group and
no Group Company has had any formal
contact with any Performing Rights Society
in respect of any business of the
Group, and no investigation or inquiry of
any Performing Rights Society is
pending or threatened against Seller (with
respect to
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<PAGE>
assets or operations of the Group) or any
Group Company, except for such contact
as would not reasonably be expected to
result in Liability (whether in respect
of operations pre- or post-Closing) to any
such Group Company in excess of
$35,000 annually. To Seller's Knowledge,
there are no outstanding threats of
enforcement by any Performing Rights
Society, except for such enforcement as
would not reasonably be expected to be
material to the business of the Group as
currently conducted.
(d) No Group Company: (i) has given any written undertaking,
commitment or assurance to any Governmental
Entity; (ii) is subject to any
order, regulation or decision made by any
Governmental Entity against such Group
Company or (iii) has received a written
communication or request for information
in relation to any aspect of their business
from any Governmental Entity, in the
case of clauses (i) through (iii) above,
under anti-trust or similar legislation
applicable to such Group Company in any
jurisdiction.
(e) To Seller's Knowledge, no complaints in relation to the conduct
of
the business or business practices of any
Group Company have been made or
threatened by any third party to any
Governmental Entity under any anti-trust or
similar legislation.
(f) To Seller's Knowledge, no Group Company has ever received, or
is
expecting to receive, any aid (in whatever
form) from a Member State of the
European Community or from State resources
such as could be regarded as State
aid for the purposes of Articles 87 to 89
of the Treaty of Rome.
(g) Each of the Group Companies is in compliance in all respects
with
laws, statutes, ordinances, rules,
regulations and orders of all Governmental
Entities relating to any Asbestos at the
properties identified in Schedule
3.15(b), except for such non-compliance as
would not be material to the business
of the Group as currently conducted. To
Seller's Knowledge, prior to the date
hereof there have been no events of
non-compliance with laws, statutes,
ordinances, rules, regulations or orders of
Governmental Entities relating to
Asbestos at the properties identified in
Schedule 3.15(b) that continue to be,
or would reasonably be expected to be,
material to the business of the Group as
currently conducted.
3.10 NO UNDISCLOSED LIABILITIES. Except for liabilities (a) set
forth
or reflected in the Financial Statements
(or referred to in the notes thereto)
or (b) contemplated or expressly permitted
by this Agreement, the Transactions
Agreements, or as otherwise set forth in or
referred to in a schedule to such
agreement, no Group Company has any
liabilities of a nature required to be set
forth or reflected in the Financial
Statements. To Seller's Knowledge, there are
no contingent obligations incurred other
than in the ordinary course or
otherwise as set forth or reflected in the
Financial Statements, except for such
liabilities as would not reasonably be
expected to be material to the business
of the Group as currently conducted. No
Group Company is engaged in any
financing (including the incurring of any
Indebtedness in the nature of
acceptances or acceptance credits) of a
type which would not be required to be
shown or reflected in the Financial
Statements.
3.11 TAXES. (a) (i) All material Tax Returns required to be filed
on
or before the date hereof by each member of
the Group (and with respect to the
income, properties or operations of any
member of the Group) and with respect to
the CMI Membership Interests and
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<PAGE>
the CEL Shares have been timely filed
(taking into account extensions of time
approved by the appropriate Tax authority)
and all such Tax Returns are true,
complete and correct; (ii) all material
Taxes required to be shown on such Tax
Returns or otherwise due (except for Taxes
being contested in good faith
pursuant to appropriate proceedings, the
details of which are set forth in
Schedule 3.11) have been timely paid; (iii)
all Taxes for which any Group
Company may be liable under Treasury
Regulation section 1.1502-6 (or analogous
state or foreign law) due to such Group
Company's membership in an affiliated
group or other group filing on a combined
basis, if required to be paid, have
been paid, on a timely basis; (iv) there
are (x) no unpaid assessments for any
material amounts of additional Taxes for
any fiscal period for any Group Company
and (y) no Tax Liens, whether imposed by
any U.S. federal, state, county,
municipal or foreign Tax authority,
outstanding or which are, to Seller's
Knowledge, likely to arise against the
assets or businesses of any Group
Company, except for Permitted Liens; (v)
all material withholding Tax
requirements imposed on or with respect to
any Group Company have been satisfied
in full, and each Group Company has timely
withheld and paid over to the proper
Governmental Entity all material amounts
required to be withheld and paid over;
(vi) no Group Company has waived any
statute of limitations with respect to
Taxes which waiver remains in effect; (vii)
there are not pending or threatened
in writing any audits, examinations,
investigations or other proceedings in
respect of material Taxes or material Tax
Returns of any Group Company (or with
respect to the income, properties or
operations of any of them); (viii) no Group
Company is a party to any agreement or
arrangement that would result, separately
or in the aggregate, in the payment of any
"excess parachute payments" within
the meaning of section 280G of the Code by
reason of the transactions
contemplated hereunder; (ix) no Group
Company is a party to any Tax allocation
or sharing agreement; (x) none of CEL or
any of CEL's and CMI's Subsidiaries has
been a United States real property holding
corporation within the meaning of
section 897(c)(2) of the Code during the
applicable period specified in section
897(c)(1)(A)(ii) of the Code; (xi) none of
CEL or any of CMI's and CEL's
Subsidiaries has been a passive foreign
investment company within the meaning of
section 1297 of the Code; (xii) since
January 1, 2001 no written claim has been
made by any Governmental Entity with
respect to any Group Company in a
jurisdiction where any of them does not
file Tax Returns that such Group Company
is required to file a Tax Return in such
jurisdiction; (xiii) for all periods
(or portions thereof) prior to the Closing
Date, Seller has been disregarded as
a separate entity for U.S. federal income
tax purposes; (xiv) from and after
March 26, 2002, CMI has been disregarded as
a separate entity for U.S. federal
income tax purposes; (xv) from and after
June 1, 1998, CEL has been disregarded
as a separate entity for U.S. federal
income tax purposes; (xvi) from and after
January 1, 2004, Crown Media International
(Australia) Pty Ltd. has been
disregarded as a separate entity for U.S.
federal income tax purposes; and
(xvii) from and after December 28, 1998,
Hallmark India Private, Ltd. has been
disregarded as a separate entity for U.S.
federal income tax purposes.
(b) All Tax Returns, examination reports and statements of
deficiencies assessed with respect to CMI,
CEL or any of their Subsidiaries (and
with respect to the income, properties or
operations of CMI or CEL or any of
their Subsidiaries) made available to Buyer
in the Data Room were correct and
complete .
(c) For the purposes of this Agreement, (i) the term "TAX" or
"TAXES"
includes any and all taxes imposed by any
U.S. federal, state, local and foreign
or other Tax authority, including all
income, gross receipts, gains, profits,
windfall profits, gift, severance, ad
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<PAGE>
valorem, capital, social security,
unemployment disability, premium, recapture,
credit, excise, property, sales, use,
occupation, service, service use, leasing,
leasing use, value added, transfer,
payroll, employment, withholding, estimated,
license, stamp, franchise or similar taxes
of any kind whatsoever, including
interest, penalties or additions thereto;
and (ii) the term "TAX RETURN" or "TAX
RETURNS" shall mean any report, return,
documents, declaration or other
information (and any supporting schedules
or attachments thereto) required to be
supplied to any Tax authority or
jurisdiction with respect to Taxes (including
any returns or reports filed on a
consolidated, unitary, or combined basis). It
is understood and agreed that Seller
provides no representations or warranties
in respect of Taxes in this Agreement,
other than the representations and
warranties contained in this Section 3.11
and Section 3.12.
3.12 EMPLOYEE MATTERS.
(a) AGREEMENTS AND PLANS. Schedule 3.12 lists all Employment
Agreements and Benefit Plans, and
specifically identifies which Benefit Plans
are CM Plans and which are Subsidiary
Plans. Seller has made available to Buyer
a true, correct and complete copy of all
Service Provider Agreements and
Collective Bargaining Agreements. With
respect to each Benefit Plan, Seller has
made available to Buyer true and complete
copies of the most recent plan
document and the most recent summary plan
description, if any, and, where
applicable, the most recent form of
individual award agreement. There are no
amendments to any Subsidiary Plans that
have been adopted or approved that are
not reflected in the plan document, and
neither Seller nor its Affiliates have
undertaken to or committed to make any such
amendments or to establish adopt or
approve any new Benefit Plan.
(b) SUBSIDIARY PLANS. Each Subsidiary Plan has been
established,
funded and operated in material compliance
with its terms and any applicable
law, including without limitation ERISA and
the Code. All Subsidiary Plans that
are subject to the laws of any jurisdiction
outside of the United States (i)
have been maintained in accordance with all
applicable requirements and operated
in accordance with their governing rules or
terms; (ii) if they are intended to
qualify for special tax treatment meet all
requirements for such treatment and
(iii) if they are intended to be funded
and/or book-reserved are fully funded
and/or book reserved, as appropriate, based
upon reasonable actuarial
assumptions, except in the case of (i)
through (iii), as would not reasonably be
expected to have a Company Material Adverse
Effect. To Seller's Knowledge, no
Subsidiary Employee or any dependant has
made any claim in respect of the
Subsidiary Plans, other than claims for
benefits in the ordinary course. There
are no pending or, to the knowledge of
Seller, threatened, material claims,
lawsuits, arbitrations or audits asserted
or instituted against any Subsidiary
Plan, any fiduciary (as defined by Section
3(21) of ERISA) of any Subsidiary
Plan, or any employee or administrator
thereof, in connection with the
existence, operation or administration of a
Subsidiary Plan, other than routine
claims for benefits. With respect to each
Subsidiary Plan, all premiums,
contributions or other payments required to
have been made by applicable law or
under the terms of any such plan or any
contract or agreement relating thereto
as of the Closing Date have been timely
made, and all other obligations of each
relevant Group Company in respect of such
Subsidiary Plan have been complied
with in all material respects. With respect
to each Subsidiary Plan, no
non-exempt prohibited transaction (as
defined in Section 406 of ERISA or Section
4975 of the Code) has occurred that could
be a liability of CMI, CEL and/or
their respective Subsidiaries following the
Closing Date.
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<PAGE>
(c) SELLER SAVINGS PLANS. The Hallmark Affiliates Employee
Savings
Plan (the "SELLER SAVINGS PLAN") has
received a favorable determination letter
from the Internal Revenue Service, and
there are no existing circumstances and
no events have occurred that could
materially adversely affect the qualified
status of the Seller Savings Plan or the
related trust.
(d) TITLE IV OF ERISA; CONTROLLED GROUP LIABILITIES. No
Subsidiary
Plan is subject to Title IV or Section 302
of ERISA or Section 412 or 4971 of
the Code. No CM Plan is a Multiemployer
Plan or a Multiple Employer Plan. None
of CMI, CEL and their respective
Subsidiaries has, at any time during the last
six years, contributed to or been obligated
to contribute to any Multiemployer
Plan or Multiple Employer Plan. There does
not now exist, nor do any
circumstances exist that would be
reasonably expected to result in, any
Controlled Group Liability that would be a
liability of CMI, CEL or any of their
respective Subsidiaries following
Closing.
(e) NO ACCELERATION OF BENEFITS; "EXCESS PARACHUTE PAYMENTS".
Neither
the execution, delivery and performance of
this Agreement nor the consummation
of the transactions contemplated hereby
will (either alone or in conjunction
with any other event) (i) cause or result
in the accelerated vesting, funding or
delivery of, or increase the amount or
value of any benefits under any
Subsidiary Plan, (ii) cause or result in
the funding of any Subsidiary Plan
(iii) cause or result in a limitation on
the right of CMI, CEL or any of their
respective Subsidiaries to amend, merge,
terminate or receive a reversion of
assets from any Subsidiary Plan or related
trust or (iv) entitle any Subsidiary
Employee to receive any payment or benefit
or increase any Subsidiary Employee's
rights under such Subsidiary Employee's
Employment Agreement. Without limiting
the generality of the foregoing, no amount
paid or payable by CMI, CEL or any of
their respective Subsidiaries or any
Subsidiary Plan in connection with the
transactions contemplated hereby (either
solely as a result thereof or as a
result of such transactions in conjunction
with any other event) will be an
"excess parachute payment" within the
meaning of Section 280G of the Code. There
are no terms and conditions in any contract
with any Subsidiary Employee
pursuant to which such person will be
entitled to receive any payment or benefit
or such person's rights will change, in
each case, as a direct consequence of
the transactions contemplated by this
Agreement.
(f) LABOR ISSUES. As of the date of this Agreement, with respect
to
each Subsidiary Employee and any individual
who is not an employee of an
Affiliate of CEL or CMI or their
Subsidiaries, who directly provides services to
any Group Company (other than any such
individual who, in addition to providing
services to any Group Company, directly or
indirectly, provides services to at
least one other Person that is not
affiliated with the Group Companies) (a
"SUBSIDIARY SERVICE PROVIDER"): (i) there
is not presently existing or (to
Seller's Knowledge) pending, and to
Seller's Knowledge there is not threatened,
nor has there occurred during the past
three years any material strike,
slowdown, picketing or work stoppage or
other labor dispute, or any application
for certification of a collective
bargaining agent; (ii) no labor organization
or group of Subsidiary Service Providers or
other body representing Subsidiary
Service Providers has made a pending demand
for recognition or certification;
(iii) there are no representation or
certification proceedings or petitions
seeking a representation proceeding,
pending with the National Labor Relations
Board or any other labor relations tribunal
or authority; (iv) no industrial
relations or employment matter has been
referred either by CEL or any Subsidiary
Service Providers or by any trade union
staff association or any other body
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<PAGE>
representing Subsidiary Service Providers
to any conciliation or arbitration
body; and (v) to Seller's Knowledge, no
Subsidiary Service Provider is a member
of a trade union, staff association or
other body representing workers. No
Subsidiary Service Provider is covered by a
Collective Bargaining Agreement and
no trade union, staff association or other
body is recognized by any Group
Company for the purposes of collective
bargaining in relation to any of the
Subsidiary Service Providers.
(g)
OTHER LABOR WARRANTIES. Seller warrants the following:
(i) Schedule 3.12 sets forth with respect to each Subsidiary
Employee (other than Non-Retained Employees) the base rate of pay
and
bonuses paid during the past twelve (12) months preceding the date
of
this Agreement or such shorter period as the Subsidiary Employee
has
been employed by the relevant Group Company and the number of
awards,
options and share-based incentive rights granted to each such
Subsidiary Employee in connection with the Benefit Plan and the
Employee Share Schemes (as defined in Section 3.12(h) that are
outstanding as of the date hereof;
(ii) There is not in existence any Service Provider Agreement
which cannot be terminated by three months' notice or less
without
giving rise to any claims for damages or compensation (other
than
statutory redundancy payment or statutory compensation for
unfair
dismissal);
(iii) There are no material amounts owing or agreed to be
loaned
or advanced by any Group Company to any Subsidiary Service
Providers
(other than "cashless" exercises pursuant to any Employee Share),
any
loans pursuant to any qualified plans maintained by any Group
Company
or their respective Affiliates, any travel advances, use of
company
credit cards, amounts representing remuneration accrued due for
the
current pay
period, accrued holiday pay for the current year or for
reimbursement of expenses);
(iv) As of the date hereof, no Subsidiary Service Provider
whose
gross remuneration exceeds (pound)50,000 with respect to CEL
Subsidiary Service Providers or $100,000 with respect to
non-CEL
Subsidiary Service Providers or equivalent amounts of other
currencies
has given or received notice to terminate his employment or
engagement;
(v) As of the date hereof, there are no Subsidiary Service
Providers who are on secondment, maternity leave or absent on
grounds
of disability or other leave of absence (other than normal holidays
or
absence of no more than three weeks due to illness);
(vi) As of the date hereof, there are no outstanding offers of
employment or engagement by any Group Company to any person
whose
gross remuneration by the Group Company upon hiring is
reasonably
expected to exceed (pound)50,000 with respect to CEL or $100,000
with
respect to CMI and no person has accepted such an offer but not
yet
taken up the position accepted;
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<PAGE>
(vii) During the eighteen (18) month period prior to the date
hereof, no Group Company has given notice of any redundancies to
any
Subsidiary Service Provider or government department with respect
to
Subsidiary Service
Providers;
(viii) Full and accurate details are disclosed in Schedule 3.12
of any redundancy payment (whether pursuant to a redundancy scheme
or
formula or policy or otherwise whether contractual or
discretionary)
made by any Group Company during the eighteen (18) month period
prior
to the date hereof in excess of the legal minimum redundancy
entitlement to any Subsidiary Service Provider or former
Subsidiary
Service Provider;
(ix) All health and safety policies and procedures, in effect
in
the last eighteen (18) months prior to the date hereof and details
of
any material health and safety complaints or investigations
during
that time, in either case affecting any Group Company and its
Subsidiary Service Providers have been previously made available
to
Buyer;
(x) During the two (2) year period preceding the date hereof no
Subsidiary Service Providers have transferred into the employment
of
any Group Company by operation of the Transfer of Undertakings
(Protection of Employment) Regulations 1981 and, to Seller's
Knowledge, no event has occurred which may involve any transfer of
any
employees to or from any Group Company;
(xi) No Group Company has entered into any agreement or
arrangement for the management or operation of any significant
portion
of its business other than with its Subsidiary Employees; and
(xii) Since the Balance Sheet Date, no Group Company has made
or
announced any changes to the remuneration or benefits or any
bonus
opportunity of any Subsidiary Employee in a manner that would
increase
the cost in the aggregate to the Group of such remuneration
benefits
and/or bonus opportunity by more than 5%, and no Group Company
is
under any obligation to make any such changes with or without
retrospective operation.
Except for
the Benefit Plans disclosed in Schedule 3.12, no share
incentive, share option, profit sharing,
bonus or other incentive
arrangements (the "EMPLOYEE SHARE SCHEMES")
are being participated in by any
of the Subsidiary Employees.
(h) DEED OF RESTRICTIVE COVENANTS. Notwithstanding anything to
the
contrary in this Agreement, Seller makes no
representation, warranty or other
agreement to or with Buyer with respect to
the Deed of Restrictive Covenants
between Jeffrey Henry and CMI, dated as of
the date hereof, and Seller shall
have no Liability whatsoever in connection
with the Deed of Restrictive
Covenants between Jeffrey Henry and CMI,
dated as of the date hereof.
3.13 UNITED KINGDOM PENSIONS.
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<PAGE>
(a) UNITED KINGDOM PENSIONS ARRANGEMENTS DISCLOSED. Save under
the
Crown Entertainment Limited / Hallmark
Entertainment Limited Group Pension Plan
(the "GPP") and the Sterling Life Limited
Life Assurance Plan (the "LIFE
ASSURANCE PLAN" and, together with the GPP,
the "DISCLOSED SCHEMES") and the
state pension schemes, no Group Company is
under any legal obligation or
commitment, and no Group Company is a party
to any custom or practice which has
established a legal obligation or
commitment by any Group Company, to pay,
provide or contribute towards any relevant
benefits within the meaning of
section 612 of the TA in the United
Kingdom, including the making of any payment
of contributions to, or remuneration
specifically referable to contributions to,
any personal pension scheme, stakeholder
pension scheme, retirement annuity
contract or similar arrangement ("RELEVANT
BENEFITS") to or in respect of any
such person and nothing has been done to
create a legal entitlement to any such
payments, provision or contributions. No
Group Company has at any time
participated in or contributed towards any
former scheme or arrangement (in the
United Kingdom ("FORMER SCHEME") which has
at its purpose or one of its purposes
the provision of Relevant Benefits (other
than schemes which have been fully
wound up).
(b) MONEY PURCHASE SCHEMES. Other than lump sum death in
service
benefits and a return of contributions, the
GPP provides only money purchase
benefits (as defined in Section 181 of the
Pension Schemes Act 1993), and no
promise or assurance (oral or written) has
been given to any person that his or
her benefits under the GPP (other than lump
sum death in service benefits and a
return of contributions) will be calculated
by reference to any person' s
remuneration or equate (approximately or
exactly) to any particular amount other
than the value of the GPP's assets
referable to each of the GPP members.
(c) EX GRATIA PAYMENTS. No Group Company has made or proposed, and
no
Group Company will before Closing make or
propose, any voluntary or ex gratia
payments of Relevant Benefits to or in
respect of any person and no Group
Company is due to make any such payments in
the future in circumstances which
would impose a legally binding obligation
on any Group Company to provide such
benefits. No legally binding undertaking or
assurance has been given or will
before Closing be given by any Group
Company to any person as to the
introduction, continuance, increase or
improvement or any Relevant Benefits.
(d) PAYMENT OF CONTRIBUTIONS. All contributions and premiums
which
have been payable to or under the Disclosed
Schemes by or in respect of any
current and former employees and officers
have been duly paid within any
applicable prescribed period under the
Pensions Act 1995 and the Disclosed
Schemes' governing documentation. Since the
date of the last schedule of
contributions or payment schedule (as
applicable) prepared under the Pensions
Act 1995, no material increase or decrease
in the percentage rate of
contributions to the relevant Disclosed
Scheme has occurred or been recommended
and none will foreseeably be required. The
contribution rates disclosed to Buyer
are those paid by the relevant
participating employers in respect of the
Subsidiary Employees in the GPP.
3.14 CONTRACTS. (a) Schedule 3.14 sets forth a true and complete
list
as of the date of this Agreement of each
Contract to which CMI, CEL or any of
their Subsidiaries is a party or by which
it or they may be bound (i) that
contains a covenant by CMI, CEL or any of
their Subsidiaries not to compete with
others (other than Affiliation Agreements);
(ii) that is with an Affiliate of
CMI, CEL or any of their Subsidiaries or
any director or officer thereof, other
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<PAGE>
than Employment Agreements; (iii) with
respect to Indebtedness (other than
intercompany indebtedness or loans from
Seller's Affiliated Group where the
liability of CMI, CEL or any of their
Subsidiaries thereunder will be terminated
prior to Closing); (iv) that constitutes a
material Business Intellectual
Property contract or agreement (other than
Programming Agreements); (v) that
constitutes a consulting, agency or
commission agreement (including, for the
avoidance of doubt and without limitation,
any agreements for advertising and
sales representation) to which CMI, CEL or
any of their Subsidiaries is a party
or bound and which is material to the
business and operations of CMI, CEL and
their Subsidiaries taken as a whole; (vi)
that is an Affiliation Agreement
involving revenue in excess of $100,000
annually, including any amendments or
modifications thereto or waivers of rights;
(vii) that is a Programming
Agreement involving payments in excess of
$250,000 in the aggregate during the
term of such agreement, including any
amendments or modifications thereto or
waivers of rights; (viii) for the
acquisition, lease or servicing of satellite
transponders and other uplink arrangements
(including maintenance); (ix) that
constitutes a guarantee, make-well
agreement, surety contract, letter of credit
or indemnity agreement (other than the
standard indemnification provisions of
any Contract), which is material to the
business and operations of CMI, CEL and
their Subsidiaries taken as a whole; (x)
that involves payments or other
financial liabilities by a Group Company of
more than $250,000 annually or
$1,000,000 in the aggregate or (xi) any
other contract necessary for the Group
to conduct its business in its current form
or the termination, cancellation or
expiry of which would reasonably be
expected to result in a Company Material
Adverse Effect (the Contracts required to
be disclosed on Schedule 3.14 being
referred to herein as "MATERIAL
CONTRACTS"). Seller has provided Buyer with
access in the Data Room to true and
complete copies of each Material Contract.
Except as set forth on Schedule 3.14, each
such Material Contract is a valid and
binding agreement, enforceable in
accordance with its terms, and in full force
and effect, subject to applicable
bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting
creditors' rights generally and to general
principles of equity, regardless of whether
enforcement is sought in a
proceeding at law or in equity, of CMI, CEL
or one of their Subsidiaries, as
applicable, and, to Seller's Knowledge, of
each other party thereto. There are
no material breaches or defaults under any
Material Contract to which any Group
Company is a party, by which any Group
Company is bound, or pursuant to which
any Group Company has any rights, by such
Group Company or, to Seller's
Knowledge, by any other party thereto, nor
has any Group Company, or to Seller's
Knowledge, any other party thereto,
performed any act or omitted to perform any
act under any such Material Contract which,
with notice or lapse of time or
both, will become or result in a material
breach or default thereunder or give
such party thereto the right to terminate,
amend, abandon or refuse to perform
thereunder. As of the date hereof, neither
Seller nor any Group Company has
received any written notice of termination
of any Material Contract and, to
Sellers' Knowledge, there is no pending or
threatened service of a notice of
termination by any party to any Material
Contract.
(b) No Group Company has executed any power of attorney or
conferred
on any person other than its directors,
officers and employees any authority to
enter into any material tra
