EXHIBIT 2.2
________________________________________________________________________________
ASSET PURCHASE AND SALE AGREEMENT
DATED AS OF FEBRUARY 23, 2005
BY AND AMONG
CROWN MEDIA DISTRIBUTION, 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................................................1
ARTICLE 2 PURCHASE AND SALE.................................................10
2.1 Purchased Assets..................................................10
2.2 Rights under the Excluded License Agreements......................11
2.3 No Assignment in Conflict with Existing Agreements................11
2.4 Compliance with Bulk Sales Law....................................11
2.5 Assumption of Liabilities.........................................11
ARTICLE 3 PURCHASE PRICE AND PAYMENT........................................11
3.1 Purchase Price....................................................11
3.2 Allocation of Purchase Price......................................12
3.3 Post-Closing Purchase Price Adjustment............................12
3.4 Sales Tax.........................................................14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER..........................14
4.1 Organization and Qualification....................................14
4.2 Authorization and Validity of Agreement...........................14
4.3 No Violation; Consents and Approvals..............................15
4.4 Legal Proceedings.................................................15
4.5 Compliance with Applicable Laws and Permits.......................16
4.6 Taxes.............................................................16
4.7 Contracts.........................................................17
4.8 Liens.............................................................17
4.9 Film Properties and Rights........................................17
4.10 Music Rights......................................................18
4.11 Film Rights and Availabilities of Films...........................18
4.12 Quality of Film Properties........................................19
4.13 Brokers...........................................................19
4.14 Intellectual Property.............................................19
4.15 No Change.........................................................19
4.16 Sale and Leaseback................................................20
4.17 Information.......................................................20
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER...........................20
5.1 Organization and Qualification....................................20
5.2 Authorization and Validity of Agreement...........................20
5.3 No Violation; Consents and Approvals..............................21
5.4 Legal Proceedings.................................................21
5.5 Availability of Funds.............................................21
ARTICLE 6 COVENANTS.........................................................22
6.1 Access to Information.............................................22
6.2 Information.......................................................22
6.3 Operations in the Ordinary Course of Business.....................22
6.4 Forbearance by Seller.............................................22
6.4 Notification of Claims............................................23
6.6 Regulatory Consents, Authorizations, etc..........................23
6.7 No Inconsistent Action............................................24
6.8 Laboratory Letters................................................24
6.9 Third Party Consents..............................................25
6.10 No Additional Representations.....................................25
6.11 Updating Schedules................................................25
6.12 Financing Commitments.............................................26
6.13 Participations and Residuals......................................26
6.14 Additional Agreements.............................................27
6.15 Confidentiality...................................................28
6.16 Right of First Offer..............................................28
ARTICLE 7 CONDITIONS TO CLOSING.............................................29
7.1 Conditions of Each Party's Obligation to Close....................29
7.2 Conditions to Buyer's Obligation to Close.........................30
7.3 Conditions to Seller's Obligation to Close........................30
7.4 Undertakings......................................................31
ARTICLE 8 THE CLOSING.......................................................31
8.1 Time and Location of Closing......................................31
8.2 Actions by Seller at the Closing..................................31
8.3 Actions by Buyer at the Closing...................................31
ARTICLE 9 INDEMNIFICATION...................................................32
9.1 Indemnification by Seller.........................................32
9.2 Indemnification by Buyer..........................................33
9.3 Defense of Claims.................................................33
9.4 Survival of Representations and Warranties........................34
9.5 Limitation on Rights..............................................34
9.6 Indemnity Payments................................................35
ARTICLE 10 GENERAL PROVISIONS................................................36
10.1 Further Assurances................................................36
10.2 Termination.......................................................36
10.3 Arbitration.......................................................37
10.4 Successors and Assigns............................................38
10.5 No Waiver.........................................................38
10.6 Entire Agreement; Amendments......................................38
10.7 Notices...........................................................39
10.8 Governing Law.....................................................40
10.9 Publicity.........................................................40
10.10 Section Headings..................................................40
10.11 Severability......................................................40
10.12 No Third-Party Beneficiaries......................................40
10.13 Counterparts......................................................40
10.14 Guarantee.........................................................41
10.15 No Set-Off........................................................43
Schedules
Seller Disclosure Schedules
Buyer Disclosure Schedules
Exhibits
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Xxxx of Sale
Exhibit C Form of Copyright Assignment Agreement
Exhibit D Form of Laboratory Letter
Annexes
Annex A Debt Commitment Letter
Annex B Equity Financing Commitment Letters
THIS ASSET PURCHASE AND SALE AGREEMENT is made and entered into as of
February 23, 2005 by and among Crown Media Distribution, LLC, a Delaware limited
liability company ("SELLER"), Bagbridge Limited, 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 a library of theatrical films,
made-for-television movies, specials, mini-series, series and other television
programming as described herein; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell, assign, transfer and convey to Buyer, certain rights in such library 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 7.1(c).
1.2 "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.
1.3 "AGREEMENT" shall mean this Asset Purchase and Sale Agreement as
amended and modified from time to time in accordance with Section 10.6.
1.4 "ANCILLARY RIGHTS" shall mean:
(a) the production, remake, prequel, sequel, serial or series
production rights for programming, based upon, derived from or inspired by any
Film or any part thereof,
(b) the rights to use, exploit and license others to use or exploit
the novelization, publishing or, arising out of or connected with or inspired by
any Film, the characters appearing in any Film or the names or characteristics
of these characters,
(c) the rights to exploit the rights in paragraph (b) above
commercially in connection with or related to any Film or any remakes, prequels,
sequels or other derivative works thereof, and
(d) music publishing rights or merchandising rights relating to any
Film.
1.5 "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the Assignment
and Assumption Agreement substantially in the form attached as Exhibit A.
1.6 "ASSUMED LIABILITIES" shall mean any Liability in, of, or related
to any Purchased Asset arising on or after the Closing Date (other than Retained
Liabilities).
1.7 "AVAILABILITIES SCHEDULE" shall be as defined in Section 4.11(b).
1.8 "BASE AMOUNT" shall be as defined in Section 3.3(c).
1.9 "XXXX OF SALE" shall mean the Xxxx of Sale substantially in the
form attached as Exhibit B.
1.10 "BUYER" shall be as defined in the preamble to this Agreement.
1.11 "BUYER CONFIDENTIAL INFORMATION" shall be as defined in Section
6.15.
1.12 "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 Closing. In this definition, "materially"
means that the financial consequences of the adverse effect or the delay exceeds
$100,000.
1.13 "CASH CONSIDERATION" shall be as defined as in Section 3.1(a).
1.14 "CASH EQUITY" shall be as defined in Section 5.5(b).
1.15 "CLOSING" shall be as defined in Section 8.1.
1.16 "CLOSING DATE" shall be as defined in Section 8.1.
1.17 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.18 "COMMITMENTS" shall be as defined in Section 5.5(b).
1.19 "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.
1.20 "CONFIDENTIAL MEMORANDUM" shall be as defined in Section 6.10.
1.21 "CONFIDENTIALITY AGREEMENT" shall mean the Confidentiality
Agreement dated as of May 11, 2004, by and between Crown Media Holdings, Inc.
and Xxxxxx Production Limited.
1.22 "CONTRACT" shall mean any note, bond, indenture, mortgage, deed
of trust, contract, instrument or other agreement.
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1.23 "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.
1.24 "COPYRIGHT ASSIGNMENT" shall mean a short form assignment of
copyright substantially in the form attached as Exhibit C.
1.25 "COPYRIGHT REGISTRATION" shall mean the copyright registration
with respect to the Films, issued by the U.S. Copyright Office in the claimant
or author name of Seller, or such foreign Copyright Office, or equivalent
thereof.
1.26 "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.
1.27 "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.
1.28 "DEBT COMMITMENT LETTER" shall be as defined in Section 5.5(a).
1.29 "DEBT FINANCING" shall be as defined in Section 5.5(a).
1.30 "EQUITY FINANCING COMMITMENT LETTERS" shall be as defined in
Section 5.5(b).
1.31 "EXCLUDED LICENSE AGREEMENTS" shall mean the Excluded Preexisting
HEI License Agreements and the Excluded Seller License Agreements.
1.32 "EXCLUDED PREEXISTING HEI LICENSE AGREEMENTS" shall mean those
Contracts entered into by Hallmark Entertainment Distribution LLC or any of its
Affiliates or any of their predecessors in interest (or any such Contracts of
which any of them is the assignee, transferee, or beneficiary, in whole or in
part), prior to January 1, 2001 pursuant to which any of them licensed, granted,
conveyed, assigned and/or transferred, in whole or in part, any rights in the
Purchased Assets, to any Person. A true, complete and accurate list of the
Excluded Preexisting HEI License Agreements is set forth on Schedule 1.32.
1.33 "EXCLUDED SELLER LICENSE AGREEMENTS" shall mean those Contracts
set forth on Schedule 1.33.
1.34 "EXPLOITATION" shall mean, in relation to any Film, the release,
sale, distribution, sub-distribution, leasing, sub-leasing, marketing,
licensing, sub-licensing, exhibition, broadcasting or other exploitation of such
Film, and "EXPLOIT" shall be construed accordingly.
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1.35 "FILM AGREEMENTS" shall mean those Contracts, documents, judicial
awards and/or rulings pursuant to which Seller or its predecessors in interest
acquired from any other Person any of the Film Rights, as such agreements have
been amended from time to time. Such agreements shall include, but not be
limited to, any and all: production services agreements, writer agreements,
literary or other rights acquisition agreements, work-for-hire agreements,
producer agreements, talent agreements, assignment of rights agreements,
assignments of Film Rights, releases and/or any and all other documents,
agreements, letters, releases, contracts, or memoranda, (whether in written or
electronic format) pertaining to the Film Rights of each such Film.
1.36 "FILM PROPERTIES" shall mean all existing and future physical
properties (other than Literary Property) owned or controlled by Seller or,
where Seller does not own or control, to which Seller has rights of access, of
or relating to the Films, including, but not limited to, film, film negatives
and positives; sound effect tracks; master tapes and other duplicating materials
of any kind; original art work; and other tangible elements and materials and
properties in respect of the Films; foreign language dubbed and titled versions;
prints and negatives of stills; trailers and television spots and all
promotional and other advertising and publicity materials of all kinds; cuts,
trims, outtakes and stock footage together with digital copies of any of the
foregoing.
1.37 "FILM RIGHTS" shall mean any and all right and interest outside
the United States of Seller, Crown Media Holdings, Inc. or any of their
respective Subsidiaries in or relating to the Films (other than any Literary
Properties (subject to subsection (e) below) or Ancillary Rights, and subject to
any License Agreements, Excluded License Agreements and Film Agreements),
including, but not limited to, the following:
(a) copyrights, rights and interests in copyrights, renewals and
extensions of copyrights outside the United States, including any such rights
that revert to Seller after the date hereof pursuant the Sale and Leaseback
Rights or otherwise, obtained upon any Film, rights (but not the obligation) to
make publication thereof for copyright purposes and to register claims under
copyright, rights (but not the obligation) to renew and extend such copyrights
and rights (but not the obligation) to xxx in the name of any Person for past,
present or future infringements of copyright;
(b) the right to Exploit any Film in any Media in any language outside
the United States or authorize third parties to do so, including, without
limitation, the music synchronization rights for the music composition and
musical recording rights as contained in such Films and language dubbing rights
including, without limitation, the rights to edit, alter, dub, subtitle and
voiceover;
(c) rights to advertise, promote and publicize the Films in any Media
and any language outside the United States in connection with the Exploitation
of the Films outside the United States, including, but not limited to, the right
to create and use trailers and promotional material, the use of synopses of or
brief excerpts from the Films, or from the literary material on which the Films
are based; the use of music and dialogue of the Films, and the names, voices,
images, likenesses and biographies of the lead cast, director, producer,
writers, composers, and other significant personnel or entities rendering
services for or connected with the Films;
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(d) rights to use in connection with the Exploitation of the Films in
any Media and any language, the soundtrack, the names, credits, logos,
tradenames, trademarks and titles contained in or incorporated into the Films,
trailers, positive prints, preprint materials and video masters of the Films and
marketing, advertising and publicity materials relating to the Films; and
(e) the perpetual, irrevocable, royalty-free, fully paid-up and
non-exclusive right to use the Literary Properties as necessary to Exploit any
Film in any Media and any language outside the United States and to market,
advertise, promote and publicize such Exploitation.
1.38 "FILMS" shall mean the Group A Films and the Group B Films.
1.39 "FINAL RECEIVABLES STATEMENT" shall be as defined in Section
3.3(c).
1.40 "FINANCING" shall be as defined in Section 5.5(b).
1.41 "GAAP" shall mean United States generally accepted accounting
principles as in effect on the date hereof.
1.42 "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.
1.43 "GROUP A AVAILABILITIES SCHEDULE" shall be as defined in Section
4.11(a).
1.44 "GROUP B AVAILABILITIES SCHEDULE" shall be as defined in Section
4.11(b).
1.45 "GROUP A FILMS" shall mean those Films set forth on Schedule
1.45.
1.46 "GROUP B FILMS" shall mean those Films set forth on Schedule
1.46.
1.47 "GUILD" shall mean the Screen Actors Guild (SAG), American
Federation of Television and Radio Artists (AFTRA), American Federation of
Musicians (AFM), Directors Guild of America (DGA), Writers Guild of America
(WGA), British Equity, ACTRA, DGC, American Society of Composers and all or any
other applicable guilds or unions anywhere in the world.
1.48 "GUILD ASSUMPTION AGREEMENTS" shall mean the standard assumption
agreements required by any Guild in connection with the sale of the Purchased
Assets.
1.49 "HED LIABILITY" shall be as defined in Section 6.14(e).
1.50 "HEI" shall mean Hallmark Entertainment, Inc.
1.51 "HOLDINGS" shall be as defined in the preamble to this Agreement.
1.52 "INDEMNIFIED BUYERS" shall be as defined in Section 9.1.
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1.53 "INDEMNIFIED SELLER PARTIES" shall be as defined in Section 9.2.
1.54 "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.
1.55 "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 registrations and applications for registration thereof,
(e) trade secrets, confidential business information and know-how and (f) any
copies and tangible embodiments thereof (in whatever form or medium).
1.56 "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 applicable GAAP to be accrued on the financial
statements of such Person.
1.57 "LICENSE AGREEMENT" shall mean those Contracts, other than the
Excluded License Agreements, entered into by Seller or Seller's predecessor in
interest (or any such Contracts of which Seller or Seller's predecessor in
interest is the assignee, transferee or beneficiary, in whole or in part), on or
after January 1, 2001 and prior to the date hereof pursuant to which Seller or
Seller's predecessor in interest licensed, in whole or in part, any rights in
the Purchased Assets or granted an option in respect of any of the foregoing, to
any Person, PROVIDED, HOWEVER, that to the extent that such Contracts licensed
any rights in or to assets other than the Purchased Assets, such term shall only
mean those rights under such Contracts that relate to the Purchased Assets.
License Agreements shall be deemed to include any Sale and Leaseback Rights. A
true, accurate and complete list of the material License Agreements as of the
date hereof is set forth on Schedule 1.57.
1.58 "LICENSE PAYMENTS" shall mean all payments due or which may
become due after Closing under the Excluded Preexisting HEI License Agreements
or the Excluded Seller License Agreements, as applicable.
1.59 "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.
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1.60 "LITERARY PROPERTY" shall mean the literary and musical material
upon which, in whole or in part, any Film is based, or which has been used or
included in any Film, including, without limitation, the screenplay, and all
other scripts, scenarios, stories, treatments, movies, outlines, titles,
concepts, manuscripts, recorded music scores and lead sheets or other properties
or materials of any kind or nature, in whatever state of completion and all
drafts, versions and variations thereof.
1.61 "LOSSES" shall be as defined in Section 9.1.
1.62 "MATERIAL CONTRACTS" shall be as defined in Section 4.7.
1.63 "MEDIA" shall mean any and all forms of exhibition and delivery
by every means, method, process, medium or device now or hereafter known,
invented, contemplated or devised throughout the universe, including without
limitation: theatrical, television, Internet, broadband and narrowband digital
delivery, and Videogram (as defined below) exhibition, free (or over-the-air),
cable and basic cable television and community antenna systems, low and full
power television, multi-point distribution systems, wire, fiber optics,
microwave, Telstar-type, DBS, all other forms of satellite and relay television,
so-called "interactive television," video-on-demand, near-video-on-demand,
high-definition television (HDTV) and any and all other kinds of open or closed
circuit systems (as now or hereafter known), only to the extent distribution and
exploitation over such Media occurs solely outside the United States.
1.64 "NOTICE OF DISAGREEMENT" shall be as defined in Section 3.3(b).
1.65 "OUTSIDE DATE" shall be as defined in Section 7.4.
1.66 "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 ownership, possession, occupation or use of the Purchased Assets for
Exploitation as currently conducted.
1.67 "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
laboratories, carriers, warehousemen, mechanics, materialmen and other similar
persons and other Liens imposed by applicable law, other than Liens in respect
of amounts due and owing prior to the Closing, incurred in the ordinary course
of business for sums not yet delinquent or being contested in good faith
exerciseable against Seller; (c) Liens set forth in the agreements related to
the Purchased Assets, access to which has been provided to Buyer; and (d) Liens
granted in connection with tax financings in relation to those sale and
leaseback films set forth on Schedule 4.16.
1.68 "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.
1.69 "PURCHASE AND SALE AGREEMENT" shall mean an agreement as of the
date hereof entered into by CM Intermediary LLC, Buyer and, solely with respect
to Section 10.14
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thereof, Holdings, relating to the acquisition of Crown Media International, LLC
and Crown Entertainment Limited.
1.70 "PURCHASE PRICE" shall be as defined in Section 3.1.
1.71 "PURCHASED ASSETS" shall mean:
(a) the Film Rights,
(b) all the rights of Seller under the Film Agreements outside the
United States,
(c) the Copyright Registration for rights outside the United States,
(d) the right to perpetual, irrevocable, assignable and unconditional
access to and the right to use the Film Properties for purposes of exercising
the rights granted to Buyer hereunder,
(e) the goodwill associated with the foregoing,
(f) the License Agreements and, to the extent Buyer does not make the
election set forth in Section 3.1(b), the Excluded Seller License Agreements,
and
(g) those Contracts entered into by Seller on or after the date hereof
and prior to the Closing pursuant to which Seller licensed, in whole or in part,
any rights in the Purchased Assets or granted an option in respect of any of the
foregoing, to any Person, PROVIDED, HOWEVER, that to the extent that such
Contracts licensed any rights in or to assets other than the Purchased Assets,
such term shall only mean those rights under such Contracts that relate to the
Purchased Assets (the "NEW LICENSE AGREEMENTS");
PROVIDED, HOWEVER, that the Purchased Assets are subject to the License
Agreements and the Excluded License Agreements and shall not include the right
to receive License Payments made or to be made pursuant to the Excluded
Preexisting HEI License Agreements, or in the event Buyer makes the election set
forth in Section 3.1(b), License Payments made or to be made pursuant to the
Excluded Seller License Agreements; and PROVIDED, FURTHER, that notwithstanding
anything to the contrary in this Agreement, the Purchased Assets shall not
include any Retained Assets or be subject to any Retained Liabilities.
1.72 "RECEIVABLES AMOUNT" shall be as defined in Section 3.3(c).
1.73 "RECEIVABLES STATEMENT" shall be as defined in Section 3.3(a).
1.74 "RECEIVING PARTY" shall be as defined in Section 6.15.
1.75 "RELATED PARTY" shall be as defined in Section 6.15.
1.76 "REFUND" shall be as defined in Section 3.3(c).
1.77 "REGULATION" shall be as defined in Section 6.6.
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1.78 "RETAINED ASSETS" shall mean
(a) any and all assets, contracts and agreements that are not
expressly described as Purchased Assets and all rights and interests, tangible
and intangible, in, of, or related to the Films in the United States, including
the Film Rights in the United States, the rights of Seller under the Film
Agreements in the United States, the Copyright Registration for rights in the
United States, the Film Properties that relate solely or in part to Films
exploited in the United States, and the goodwill associated with the foregoing,
(b) all trademark registrations with respect to the Films in the
United States,
(c) any Ancillary Rights or Literary Properties,
(d) the Excluded Preexisting HEI License Agreements and, in the event
Buyer makes the election set forth in Section 3.1(c), the Excluded Seller
License Agreements, and
(e) the masters and other original copies of the Film Properties
1.79 "RETAINED LIABILITIES" shall mean (a) any Liability in, of, or
related to any Purchased Asset arising prior to the Closing Date and any
Liability in, of, or related to any Excluded Preexisting HEI License Agreement,
and to the extent Buyer makes the election set forth in Section 3.1(b), the
Excluded Seller License Agreements, (b) any Liability to pay any profit
participation due and payable related to any Film Rights, solely to the extent
arising prior to the tenth anniversary of the Closing Date and (c) any Liability
to pay any residual costs due and payable to creative artists or Guilds for the
exploitation of the Film Rights, solely to the extent arising prior to the tenth
anniversary of the Closing Date, no matter whether such exploitation takes
places within or outside the group of Buyer's Affiliates and no matter in which
country such exploitation takes place, so long as such exploitation is pursuant
to licenses granted by Buyer or one of its Affiliates; PROVIDED that Retained
Liabilities shall not include any penalties, interest, fees, or other
Liabilities resulting from Buyer's failure to promptly perform its obligations
under Section 6.13.
1.80 "REVISED RECEIVABLES STATEMENT" shall be as defined in Section
3.3(b).
1.81 "SALE AND LEASEBACK RIGHTS" shall mean rights granted to or
retained by third parties in connection with sale and leaseback and other
financing transactions related to the Films.
1.82 "SECONDARY FILM LOSSES" shall be as defined in Section 9.1.
1.83 "SECTION 6.4 FAILURE" shall be as defined in Section 6.4.
1.84 "SELLER" shall be as defined in the preamble to this Agreement.
1.85 "SELLER CONFIDENTIAL INFORMATION" shall be as defined in Section
6.15.
1.86 "SELLER DISCLOSURE SCHEDULE" shall mean the schedules of Seller
attached hereto.
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1.87 "SELLER'S INDEMNIFICATION CLAIM" shall be as defined in Section
9.1.
1.88 "SELLER'S KNOWLEDGE" shall mean the actual knowledge of Xxxxx X.
Xxxxx, Xxxxxx Xxxxx, Xx., Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxx Xxxxxxxx,
Xxxxx Xxxxxxxx, Xxxxx Xxxxxxx or Xxxxxx Xxxx 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) the sale of
the Purchased Assets.
1.89 "SERVICE AGREEMENT" shall mean the Service Agreement, dated
September 28, 2001, by and between HEI and Holdings, as assigned to Seller
pursuant to letter dated December 14, 2001.
1.90 "SUBSIDIARY" of any Person means any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the Board of Directors or other Persons performing similar
functions are at the time directly or indirectly owned or Controlled by such
Person or one or more Subsidiaries of such Person.
1.91 "TAX" or "TAXES" shall include all taxes imposed by any U.S.
federal, state, local, foreign or other taxing authority, including all income,
gross receipts, gains profits, windfall profits, gift, severance, ad 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.
1.92 "TAX RETURN" shall mean any report, return, documents,
declaration or other information (and any supporting schedules or attachments
thereto) required to be supplied to any taxing authority or jurisdiction with
respect to Taxes (including any returns or reports filed on a consolidated,
unitary, or combined basis).
1.93 "UNITED STATES" shall mean the United States of America, its
territories and possessions including Puerto Rico.
1.94 "UPFRONT PAYMENTS" shall be as defined in Section 3.3(c).
1.95 "VIDEOGRAM" shall mean any and all forms of videocassette, DVD,
CD-Rom, videodisc, video cartridge, audiovisual tape, or other device now known
or hereafter devised and designed primarily (but not exclusively) for in-home
exhibition by means of any playback device which causes a visual image (whether
or not synchronized with sound and/or whether or not two or three dimensional)
to be seen through any device now known or hereafter devised.
ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASED ASSETS. Upon the terms and subject to conditions set
forth in this Agreement, Seller shall, at Closing, sell, assign, grant, convey
and deliver to Buyer or
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Buyer's nominee, and Buyer or Buyer's nominee shall acquire from Seller free
from any Lien, other than Permitted Liens, all of its right, title and interest
in and to the Purchased Assets. For the avoidance of doubt, nothing in this
Agreement shall constitute a transfer of legal or beneficial title of the Film
Properties.
2.2 RIGHTS UNDER THE EXCLUDED LICENSE AGREEMENTS. Seller shall retain
all rights and obligations under the Excluded Preexisting HEI License
Agreements, and in the event Buyer makes the election set forth in Section
3.1(b), the Excluded Seller License Agreements (including the right to receive
and retain License Payments thereunder). If after Closing, Buyer receives any
License Payments attributable to the Excluded Preexisting HEI License Agreements
or the Excluded Seller License Agreements, if applicable, Buyer shall promptly
deliver or pay the same over to Seller in the form as so received (with any
necessary endorsements).
2.3 NO ASSIGNMENT IN CONFLICT WITH EXISTING AGREEMENTS.
Notwithstanding any other provision of this Agreement, this Agreement shall not
constitute an assignment of, or an agreement to assign, any Film Rights if any
attempted assignment thereof without the consent of a third party (a) would
constitute a breach of a Film Agreement or any License Agreement; (b) would in
any other way materially and adversely affect the rights of Seller or Buyer
thereunder or (c) is ineffective so that Buyer would be unable to exercise such
Film Rights with respect to any Film subject to such Film Agreement or License
Agreement. In such event, Seller shall, for the benefit of Buyer, cooperate in
any reasonable arrangement that Buyer may request to enable Buyer to receive and
enjoy the full benefits of the Film Rights, including, without limitation,
collecting payments (without the deduction of any fee or commission for the
account of Seller) for the account and benefit of Buyer.
2.4 COMPLIANCE WITH BULK SALES LAW. Buyer and Seller hereby waive
compliance with the provisions of any bulk sales or transfer laws that may be
applicable to the sale of the Purchased Assets. Seller shall indemnify and hold
Buyer harmless from and against any and all losses, costs, damages, liabilities
and expenses (including, without limitation, reasonable attorneys' fees and
court costs) which Buyer may incur due to, or as a result of, Seller's failure
to comply with any bulk sales or transfer laws which may be applicable to the
transactions contemplated by this Agreement.
2.5 ASSUMPTION OF LIABILITIES. Notwithstanding anything to the
contrary herein, at the Closing, Buyer shall assume and become liable for, and
shall pay, perform and discharge as and when due, the Assumed Liabilities
pursuant to the Assignment and Assumption Agreement.
ARTICLE 3
PURCHASE PRICE AND PAYMENT
3.1 PURCHASE PRICE. The full and complete consideration for the
Purchased Assets shall be as follows (the "PURCHASE PRICE"):
(a) At Closing, Buyer or Buyer's nominee shall pay or procure the
payment to Seller of $180 (One Hundred Eighty) million (subject to adjustment
pursuant to Section 3.1(b)
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(the "CASH CONSIDERATION") in United States dollars by wire transfer of
immediately available funds to such account as Seller shall direct for the
purchase of the Purchased Assets.
(b) Buyer shall have the right to elect not to purchase the Excluded
Seller License Agreements. In the event Buyer elects in writing not to purchase
the Excluded Seller License Agreements, the Cash Consideration shall be
decreased by $20 million.
3.2 ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree to allocate
the total consideration in accordance with Schedule 3.2. Buyer and Seller 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 Purchased Assets in
accordance with Schedule 3.2 and (ii) act in accordance with Schedule 3.2 (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 3.2 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.
3.3 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 a statement setting forth the amount of accounts receivable
as of the Closing Date (the "RECEIVABLES STATEMENT") in the format set forth in
Part I of Schedule 3.3(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
3.3(a).
(b) DISPUTES. If Buyer in good faith disagrees with the Receivables
Statement, then Buyer shall notify Seller in writing (the "NOTICE OF
DISAGREEMENT") of such disagreement within 30 days after delivery of the
Receivables 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 Receivables 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 Receivables 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 Receivables Statement reflecting such resolution
(a "REVISED RECEIVABLES 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 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
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Accountants to include a Revised Receivables 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 final 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 the items in the Receivables
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
3.3(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 preliminary Receivables 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 3.3(b)
will be shared equally by Buyer, on the one hand, and Seller, on the other hand.
(c) ADJUSTMENT. The Receivables Statement, or, if one has been adopted
pursuant to Section 3.3(b), the Revised Receivables Statement, shall be deemed
to be final, binding and conclusive on Buyer and Seller (the "FINAL RECEIVABLES
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
Receivables Statement to Buyer; (ii) the resolution of all disputes by Buyer and
Seller, as evidenced by a Revised Receivables Statement and (iii) the resolution
of all disputes by the Independent Accountants, as evidenced by the Revised
Receivables Statement. As used herein, (x) "REFUND" shall mean the amount, if
any, by which the accounts receivable set forth on the Final Receivables
Statement (the "RECEIVABLES AMOUNT") is less than the sum of $4 (Four) million
plus the Upfront Payments (collectively, the "BASE AMOUNT"). In the event that
the Receivable Amount is less than the Base Amount, then within five days after
the Final Receivables Statement is deemed final, binding and conclusive, Seller
shall pay to Buyer or Buyer's nominee the Refund by wire transfer in immediately
available funds to an account specified by Buyer. As used herein, "UPFRONT
PAYMENT" shall mean, in respect of each applicable License Agreement or New
License Agreement the positive amount equal to, (the quotient of "a" divided by
"b") multiplied by "c" where:
a = that number of months by which the term of that License Agreement or New
License Agreement exceeds a period of 18 months following Closing;
b = the total number of months in the term of that License Agreement or New
License Agreement; and
c = the aggregate amount of any cash down payment or other cash advance or
extraordinary payment or any other payment not consistent with pro rata amounts
over the term of such License Agreement or New License Agreement received by
Seller or CMI prior to the Closing Date in respect of such License Agreement or
New License Agreement.
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and "UPFRONT PAYMENTS" shall mean the aggregate of all such amounts that
constitute an Upfront Payment.
Any adjustments to the Purchase Price made pursuant to this
Section 3.3(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.
If any amounts are payable under this Section 3.3(c), Buyer and Seller shall
agree to such consequential adjustments as are reasonably required to any
amounts allocated in accordance with Section 3.2(c).
(d) 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 (as
defined in the Purchase and Sale Agreement) shall, and Buyer shall procure that
the Group (as defined in the Purchase and Sale Agreement) 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 the Purchased Assets, including reasonable
access during normal business hours to 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.
3.4 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 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 Assets
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 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in the Seller Disclosure Schedule, Seller hereby
represents and warrants to Buyer as follows:
4.1 ORGANIZATION AND QUALIFICATION. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of Delaware and has all requisite corporate power and authority to
own, license and/or lease the Purchased Assets being transferred by it, and to
carry on its business as now being conducted and as and where the business is
located.
4.2 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
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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).
4.3 NO VIOLATION; CONSENTS AND APPROVALS. (a) 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, (i) violate, conflict with, result in a breach of, or
constitute a default under, the certificate of incorporation, certificate of
formation, bylaws or other similar governing documents of Seller; (ii) violate
or conflict with in any material respect any U.S. federal, state, local or
foreign law, statute, regulation or court or administrative order or process;
(iii) to Seller's Knowledge, result in the creation of, or give any party the
right to create, any Lien upon the Purchased Assets; (iv) 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 the Purchased Assets are
subject or bound; (v) modify in any material 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 Purchased Assets; (vi) result in the loss of the benefit of a
Permit held or enjoyed by Seller as of the date of this Agreement in any
applicable jurisdiction or (vii) result in the loss of the benefit of any
Purchased Assets, except for such loss as would not reasonably be expected to be
material to the Exploitation of the Films as currently conducted.
(b) 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.
4.4 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, Guild actions, arbitration, mediation or
other proceedings, or investigations or inquiries of any Governmental Entity
pending or, to Seller's Knowledge, threatened against Seller in respect of the
Purchased Assets, 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 Purchased Assets taken as a whole, or that
challenge or restrict the ability of Seller to consummate the transactions
contemplated hereby, nor is there any judgment, decree, injunction, ruling,
award, order or writ of any court, governmental department, commission, agency,
Guild,
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instrumentality, arbitration or other Person outstanding against or binding upon
Seller in respect of the Purchased Assets or that challenges or restricts the
ability of Seller to consummate the transactions contemplated hereby. To
Seller's Knowledge, there are no outstanding threats of legal, administrative,
arbitration, mediation or other proceedings pending in respect of the Purchased
Assets, except for such threats as would not reasonably be expected to be
material to the Purchased Assets taken as a whole.
4.5 COMPLIANCE WITH APPLICABLE LAWS AND PERMITS. (a) Seller is in
compliance with all laws, statutes, ordinances, rules, regulations and orders of
all Governmental Entities applicable to the Purchased Assets, except for such
non-compliance as would not be material to the Purchased Assets taken as a
whole. 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 or Guilds applicable to the Purchased Assets that
continue to be, or would reasonably be expected to be, material to the Purchased
Assets taken as a whole.
(b) Seller has obtained all material permits, licenses, consents,
approvals, certificates, qualifications, registrations or other authorizations
or filings of notification reports or assessments required of Seller and
necessary for the Exploitation of the Purchased Assets as currently Exploited by
Seller in each jurisdiction in which such assets are Exploited, and Seller 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) Seller: (i) has not given any written undertaking, commitment or
assurance to any Governmental Entity in relation to the Purchased Assets; (ii)
is not subject to any order, regulation or decision made by any Governmental
Entity in relation to the Purchased Assets (iii) has not received a written
communication or request for information in relation to the Purchased Assets
from any Governmental Entity, in the case of clauses (i) through (iii) above,
under anti trust or similar legislation applicable to Seller in any
jurisdiction.
(d) To Seller's knowledge, no complaints in relation to the Purchased
Assets have been made or threatened by any third party to any Governmental
Entity under any anti trust or similar legislation.
(e) To Seller's Knowledge, no Group Company (as defined in the
Purchase and Sale Agreement) 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.
4.6 TAXES. (a) (i) All Tax Returns required to be filed with respect
to the Purchased Assets have been duly filed (taking into account extensions of
time approved by the appropriate taxing authority) and all such Tax Returns are
true, complete and correct in all material respects; (ii) all Taxes due and
payable with respect to the Purchased Assets have been paid in all material
respects and (iii) there are no material Tax Liens, whether imposed by any
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U.S. federal, state, county, municipal or foreign taxing authority, outstanding
against the Purchased Assets, except for Permitted Liens.
(b) (i) Seller does not have a Seller's Permit as that term is used in
Section 6006.5(a) of the State of California Revenue and Tax Code, and (ii) to
Seller's Knowledge, Seller has not engaged in any taxable sale in respect of the
Purchased Assets, such that it would be required to have a Seller's Permit as
that term is used in Section 6006.5(a) of the State of California Revenue and
Tax Code. Nothing in this Section 4.6(b) shall affect the sales tax liability
allocation set forth in Section 3.4. Seller shall not have any liability under
Article 9 or otherwise with respect to the representation and warranty in
Section 4.6(b)(ii), other than in determining whether the condition set forth in
Section 7.2(a) has been satisfied.
4.7 CONTRACTS. Seller has provided Buyer with access to true and
complete copies of (a) all material agreements, to which Seller is a party, that
relate to the Purchased Assets and which would reasonably be expected to have a
material effect on the ability of Buyer to Exploit the Films in accordance with
the Availabilities Schedule (other than agreements that will not affect the
Purchased Assets following Closing) and (b) all License Agreements (the
"MATERIAL CONTRACTS"). A true, accurate and complete list of the material
License Agreements as of the date hereof is set forth on Schedule 1.57. As of
the date hereof, other than the Service Agreement, Seller is not party to any
material distribution, advertising or sales agency contracts relating to the
Purchased Assets, except as set forth on Schedule 4.7. Each License Agreement
and, to Seller's Knowledge, each other 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 Seller and, to Seller's Knowledge, each other party thereto. There
are no material breaches or defaults under any License Agreement by Seller or,
to Seller's Knowledge, by any other party thereto, nor has Seller, or to
Seller's Knowledge, any other party thereto, performed any act or omitted to
perform any act under any such License Agreement which, with notice or lapse of
time or both, will become or result in a material breach or default thereunder.
To Seller's Knowledge, there are no material breaches or defaults under any
Material Contract other than the License Agreements, by Seller or any other
party thereto, nor, to Seller's Knowledge, has Seller or 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, Seller
has not received any written notice of termination of any Material Contract and,
to Sellers' Knowledge, there are no pending or threatened service of a notice of
termination by any party to any Material Contract.
4.8 LIENS. The Purchased Assets transferred hereunder shall be
transferred to Buyer, free and clear of any and all Liens, other than Permitted
Liens.
4.9 FILM PROPERTIES AND RIGHTS. Schedule 4.9 sets forth a true,
accurate and complete list of the Films, together with a list of the locations
of all masters and principal promotional materials relating thereto as of the
date of this Agreement, and the locations and laboratories with whom they are
deposited or kept, and indicates whether such Film Properties
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are owned by Seller and, where not owned by Seller, what rights of access Seller
has thereto. Seller acquired all of the Film Rights from HEI, and Seller has not
subsequently transferred, assigned or otherwise conveyed such rights to any
other Person other than to Holdings and its Subsidiaries or pursuant to License
Agreements and Excluded License Agreements. Other than the rights contemplated
to be conveyed hereunder, no member of Seller's Group (as defined in the
Purchase and Sale Agreement) or, to Seller's Knowledge, HEI, owns any rights to
Exploit the Films outside of the United States other than as granted under the
License Agreements, Excluded License Agreements or as granted to Crown Media
International, LLC or Crown Entertainment Limited.
4.10 MUSIC RIGHTS. To Seller's Knowledge, the small performance rights
in the music contained in the Films are either: (a) controlled by and available
for licensing from ASCAP, BMI, SESAC or, if not by these United States
performing rights societies, by other music performance rights societies outside
of the United States; (b) in the public domain or (c) controlled by Seller and
not available for licensing through the music performance rights societies (in
the case of clause (c), such small performance rights shall be deemed licensed
to Buyer hereby by way of non-exclusive, irrevocable, perpetual, royalty-free
and fully paid up, license outside of the United States to use such music for
the purpose of exploiting the Film Rights).
4.11 FILM RIGHTS AND AVAILABILITIES OF FILMS. (a) Schedule 4.11(a)
sets forth a true, accurate and complete list of the following rights by title
with respect to all of the Group A Films: (i) the expiration date of the Film
Rights, (ii) the rights of Seller in each territory by the following categories:
pay television rights, free television rights, Videogram rights and
non-theatrical rights, (iii) if such rights are not currently available for
Exploitation in those categories, the name of the current licensee, whether the
rights of such licensee are exclusive or non-exclusive and the date on which
such licensee's right's expire, and (iv) the Media and territory in which Seller
does not hold rights, each as of January 6, 2005 (the "GROUP A AVAILABILITIES
SCHEDULE"). The Group A Films will be available for Exploitation by Buyer as
indicated in the Group A Availabilities Schedule, and all such rights will be
available for assignment or transfer by Buyer to third parties. Buyer
acknowledges certain Group A Films have limited or no material available
distribution rights as identified in the Group A Availabilities Schedule. There
are no material limitations on the Exploitation rights of the Group A Films set
forth in the Group A Availabilities Schedule other than as set forth therein or
pursuant to any License Agreements or Excluded License Agreements (so long as
such agreements do not conflict with the rights expressly set forth in the Group
A Availabilities Schedule). Schedule 4.11(a) sets forth a true, complete and
correct list of the profit participants related to the Group A Films.
(b) Schedule 4.11(b) sets forth a true, accurate and complete list of
the following rights by title with respect to all of the Group B Films: (i) the
expiration date of the Film Rights, (ii) the rights of Seller in each territory
by the following categories: pay television rights, free television rights,
Videogram rights and non-theatrical rights, (iii) if such rights are not
currently available for Exploitation in those categories, the name of the
current licensee, whether the rights of such licensee are exclusive or
non-exclusive and the date on which such licensee's right's expire, and (iv) the
Media and territory in which Seller does not hold rights, each as of January 6,
2005 (the "GROUP B AVAILABILITIES SCHEDULE" and, together with the Group A
Availabilities Schedule, the "AVAILABILITIES SCHEDULE"). The Group B Films will
be available
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for Exploitation by Buyer as indicated in the Group B Availabilities Schedule,
and all such rights will be available for assignment or transfer by Buyer to
third parties. Buyer acknowledges certain Group B Films have limited or no
material available distribution rights as identified in the Group B
Availabilities Schedule. There are no material limitations on the Exploitation
rights of the Group B Films set forth in the Group B Availabilities Schedule
other than as set forth therein or pursuant to any License Agreements or
Excluded License Agreements (so long as such agreements do not conflict with the
rights expressly set forth in the Group B Availabilities Schedule). Schedule
4.11(b) sets forth a true, complete and correct list of the profit participants
related to the Group B Films.
4.12 QUALITY OF FILM PROPERTIES. (a) There are sufficient Film
Properties relating to the Group A Films which are of suitable technical quality
to create copies of the Group A Films for Exploitation by major television
exhibitors and Videogram companies at the present time and (b) Seller has in its
possession, or has access to, pursuant to written agreements with Laboratories,
or otherwise (which access is assignable to Buyer), sufficient materials
relating to each Group A Film to enable Buyer to manufacture one-inch, D3 or
Beta format Videograms to exercise the Film Rights. There are sufficient Film
Properties relating to the Group B Films which are of suitable technical quality
to create copies of the Group B Films for Exploitation by major television
exhibitors and Videogram companies at the present time, subject, however, to the
original quality of production and age of such Group B Films. Each Film is
completed and ready for exhibition and distribution for use by Buyer as set
forth in the Group A Availabilities Schedule or Group B Availabilities Schedule,
as the case may be.
4.13 BROKERS. Except for UBS Securities LLC, Seller has not employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with the sale of the Purchased Assets
or related transactions contemplated by this Agreement.
4.14 INTELLECTUAL PROPERTY. Seller owns exclusively and solely, or has
the valid right and title to use, and, to the extent owned, has good and
marketable title to all of the Film Rights, free and clear of all Liens (except
Permitted Liens). To Seller's Knowledge, use of the Film Rights has not violated
or infringed upon or interfered with, nor will the use of such rights by Buyer
violate, infringe or interfere with, any third party-owned Intellectual Property
in any material respect. To Seller's Knowledge, no person is violating,
infringing upon or interfering with any Film Rights in any material respect. No
Intellectual Property other than the Film Rights is required by Buyer to Exploit
the Films in accordance with the Group A Availabilities Schedule and Group B
Availabilities Schedule, as the case may be, and to make the Films available via
any Media outside of the United States without limitation.
4.15 NO CHANGE. Other than as set forth in the Availabilities Schedule
or Schedule 4.15(a), since November 22, 2004, there has been no material adverse
change to the Purchased Assets, including without limitation, their condition,
availability and composition. The April 2004 availability schedule attached as
Schedule 4.15(b) (the "APRIL AVAILS LIST") is complete, true and correct in all
material respects and constitutes the list which was provided by Seller to an
adviser of Buyer for the purpose of the valuation of the Purchased Assets. There
have been no material changes in respect of the rights set forth in the April
Avails List, other than (a) in respect of agreements to license a Purchased
Asset for a term of more than 18 months
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as set forth on Schedule 4.15(a), (b) in respect of agreements to license a
Purchased Asset for a term of less than 18 months, or (c) as a result of the
expiration of such rights in accordance with the April Avails List. The
Availabilities Schedule constitutes an updated version of the April Avails List
amended to reflect such changes through to January 6, 2005. Seller shall provide
to Buyer an updated Group A Availabilities Schedules and Group B Availabilities
Schedules, each updated as of a date no more than three business days prior to
the Closing Date.
4.16 SALE AND LEASEBACK. Schedule 4.16 constitutes a true and correct
list of all material Films and principal sale and leaseback agreements relating
to Films that are subject to sale and leaseback agreements.
4.17 INFORMATION. The information set forth in Schedule 4.17 has been
prepared by Seller in good faith and the information contained therein,
considered in the aggregate, does not contain any untrue statement of material
fact or omit to state any material fact necessary to make such information, in
light of the circumstances in which it was provided to Buyer, not materially
misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 ORGANIZATION AND QUALIFICATION. Buyer is duly organized, validly
existing and in good standing under its jurisdiction of incorporation. Buyer has
not conducted any business and has no assets, liabilities or obligations of any
nature other than those incident to its formation and pursuant to this Agreement
and the transactions contemplated by this Agreement or under an investment
agreement (the "INVESTMENT AGREEMENT") dated as of the date hereof and entered
into by and among (1) Rightfolder Limited, (2) Buyer, (3) the Managers (as
defined and listed in the Investment Agreement), (4) the Investors (as defined
and listed in the Investment Agreement) and (5) 3i Investments plc relating to
Rightfolder Limited and Buyer.
5.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Buyer has all requisite
corporate power and authority to execute this Agreement and to carry out and
perform its obligations under this Agreement, subject to the terms of this
Agreement, and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Buyer of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly and validly
authorized by all necessary action of Buyer and no other corporate action on the
part of Buyer is necessary for the authorization, execution, delivery or
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Buyer and, assuming the due authorization, execution and delivery by the other
parties hereto, constitutes the valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
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5.3 NO VIOLATION; CONSENTS AND APPROVALS. (a) Neither the execution
and delivery of this Agreement by Buyer nor the consummation of the transactions
contemplated hereby, do or would after the giving of notice or the lapse of time
or both (i) violate, conflict with, result in a breach of, or constitute a
default under, the Articles of Incorporation or Bylaws of Buyer, or any U.S.
federal, state, or local court or administrative order or process, or any
agreement, contract, or other instrument, to which Buyer is a party or by which
Buyer (or any of its rights, properties or assets) is subject or bound or (ii)
violate or conflict with, any U.S. federal, state, local, or foreign law,
statute or regulation, except in the case of (i) and (ii), as would not
reasonably be expected to have a Buyer Material Adverse Effect.
(b) All consents, approvals, authorizations and other requirements
prescribed by any law, rule or regulation that are necessary for the execution
and delivery by Buyer of this Agreement and, subject to the terms of this
Agreement, the consummation by Buyer of the transactions contemplated by this
Agreement have been obtained and satisfied, other than as required under the
antitrust, trade regulation or competition laws of any jurisdiction or as would
not reasonably be expected to have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby.
5.4 LEGAL PROCEEDINGS. Other than any actions initiated by the
European Commission in respect of Council Regulation EC 139/2004 in connection
with the transaction contemplated hereby, there are no material suits, actions,
claims or litigation, or legal, administrative, arbitration, mediation or other
proceedings, pending or, to Buyer's knowledge, threatened against Buyer that
would materially delay or prevent Buyer from consummating the transactions
contemplated hereby, nor is there any judgment, decree, injunction, ruling,
award, order or writ of any court, governmental department, commission, agency,
instrumentality, arbitration or other person outstanding against or binding upon
Buyer that would materially delay or prevent Buyer from consummating the
transactions contemplated hereby.
5.5 AVAILABILITY OF FUNDS. (a) Buyer has accepted and agreed to a
valid and binding commitment from certain lenders committing them to provide
Buyer with debt-financing, subject to the terms and conditions set forth therein
(the "DEBT COMMITMENT LETTER" and the financing thereunder, the "DEBT
FINANCING").
(b) Subject always to the terms and conditions of the Equity Financing
Commitment Letters (as defined below), Buyer has, or will have available to it
at the Closing, cash equity ("CASH EQUITY") which, together with the Debt
Financing, assuming the Debt Financing is funded in accordance with its terms
(collectively, the "FINANCING"), will be used by Buyer to satisfy, and will be
sufficient to satisfy, all obligations of Buyer in connection with the
transactions contemplated by this Agreement and the Purchase and Sale Agreement
(including, without limitation, all fees and expenses to be paid as a condition
to the consummation of the Financing). Buyer has received, accepted and agreed
to one or more valid and binding commitments from certain Persons (together, the
"EQUITY FINANCING COMMITMENT LETTERS" and, together with the Debt Commitment
Letter, the "COMMITMENTS"), committing them to provide to Buyer (or Affiliates
of Buyer) the Cash Equity, subject to the terms and conditions set forth
therein. True and complete copies of the executed Debt Commitment Letter and
Equity Financing Commitment Letters have been provided to Seller on or prior to
the date hereof and are attached hereto as Annex A and Annex B, respectively.
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(c) As of the date hereof, the Commitments delivered to Seller are in
full force and effect. As of the date hereof, no event has occurred which, with
or without notice, lapse of time or both, would reasonably be expected to
constitute a breach or failure to satisfy a condition precedent on the part of
Buyer under the Commitments that has not been waived or remedied to the
satisfaction of the lenders under the Commitments. Buyer has fully paid any and
all commitment fees or other fees on the dates and to the extent required by the
Commitments.
ARTICLE 6
COVENANTS
6.1 ACCESS TO INFORMATION. Subject to Section 6.15, Seller agrees to
provide Buyer and Buyer's officers, directors, employees, accountants, counsel,
financial advisors, agents and other representatives, from time to time prior to
the Closing Date with such information as Buyer shall reasonably request with
respect to the Purchased Assets, and the officers of Seller shall be instructed
to give as promptly as reasonably practicable all such information and
explanations as Buyer or any such person may reasonably request. Except as
required by law, Buyer shall hold, and shall cause Buyer's Affiliates and
officers, directors, employees, accountants, counsel, financial advisors, agents
and other representatives to hold, any non-public information received from
Seller, directly or indirectly, in accordance with the Confidentiality
Agreement.
6.2 INFORMATION. Seller undertakes to Buyer, and Buyer undertakes to
Seller, that it will disclose as promptly as reasonably practicable in writing
to the other party any matter or thing which becomes known to such party after
the date of this Agreement and prior to Closing that would reasonably be
expected to (i) in the case of Seller, cause the condition set forth in Section
7.2(a) not to be satisfied and (ii) in the case of Buyer, cause the condition
set forth in Section 7.3(a) not to be satisfied; PROVIDED, HOWEVER, that for
purposes of Article 9 of this Agreement, the representations and warranties
shall be qualified by any information provided pursuant to this Section.
6.3 OPERATIONS IN THE ORDINARY COURSE OF BUSINESS. From the date
hereof through the Closing Date, except as otherwise contemplated by this
Agreement or any Transaction Agreement, Seller agrees that it will conduct its
business with respect to the Purchased Assets in the ordinary course in all
material respects.
6.4 FORBEARANCE BY SELLER. From the date hereof through the Closing
Date, except as otherwise contemplated by this Agreement, the Purchase and Sale
Agreement and the transactions contemplated hereby or thereby, Seller covenants
and agrees that it shall not, without the prior written consent of Buyer:
(a) except as not expressly prohibited by subsection (c) below, sell,
transfer, dispose of, enter into any agreement to dispose, assign, lease,
mortgage, pledge, subject to any Lien, other than Permitted Liens, or otherwise
convey or transfer any of the Purchased Assets, other than Retained Assets, or
assume or incur a liability, obligation or expense (actual or contingent)
relating to the Purchased Assets except in the ordinary course of business;
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(b) enter into, vary, amend, modify, terminate, cancel or extend the
term of any Material Contract, or enter into any further contracts that would
reasonably be considered Material Contracts as defined herein, other than in the
ordinary course of business; or
(c) enter into an agreement to license any Purchased Asset (i) for a
term of more than 36 months , (ii) to Crown Media International, LLC (other than
in the ordinary course of business) or (iii) at any time following delivery of
the updated availabilities schedules contemplated by the last sentence of
Section 4.15.
If Seller breaches any of its representations, warranties or covenants
in this Agreement or fails to cure or mitigate the results of a breach of such
representation, warranty or covenant as a primary result of a Section 6.4
Failure, and PROVIDED that such breach, or failure to cure or mitigate, would
not reasonably be expected to have occurred but for a Section 6.4 Failure, such
breach or failure to cure or mitigate shall (to the extent arising primarily as
a result of such Section 6.4 Failure) be deemed not to constitute a breach of a
representation, warranty or covenant, as the case may be, for the purposes of
Section 7.2 or Article 9. For the purposes of this Section 6.4, a "SECTION 6.4
FAILURE" shall be a failure by Buyer to grant a consent under this Section 6.4
in circumstances where it would have been commercially reasonable for Buyer to
grant such consent, having regard to Buyer's proposed acquisition of the
Purchased Assets.
6.5 NOTIFICATION OF CLAIMS. From the date hereof through the Closing
Date, Seller shall, as promptly as practicable, notify Buyer of the commencement
or threatened commencement of any material lawsuits, claims, proceedings or
investigations against Seller affecting any of the Purchased Assets, or seeking
to enjoin the transactions contemplated herein; and, Buyer shall, as promptly as
practicable, notify Seller of the commencement or threatened commencement of any
material lawsuits, claims, proceedings or investigations against Buyer affecting
any of the Purchased Assets, or seeking to enjoin the transactions contemplated
herein.
6.6 REGULATORY CONSENTS, AUTHORIZATIONS, ETC. Each of the parties
hereto shall use its reasonable best efforts to do all things necessary, proper
or advisable to (a) promptly make all registrations and filings with, and obtain
all necessary or advisable actions or non-actions, waivers, consents and
approvals from, all Governmental Entities and taking all steps as may be
necessary or advisable to obtain an approval or waiver from, or to avoid an
action or proceeding by, a Governmental Entity, PROVIDED that Buyer shall use
its reasonable best efforts to make a draft filing with the European Commission
in respect of the Council Regulation (EC) 139/2004 (the "REGULATION") as soon as
practicable, but in no event later than the first working day following the date
of this Agreement, and shall make a final filing with the European Commission in
respect of the Regulation as soon as practicable thereafter, but in no event
later than 14 days following the date on which a draft filing to the European
Commission is made, or such other date as soon as practicable thereafter in the
event the final filing is required to be delayed as a result of actions of the
European Commission in respect of the filing; and (b) defend any legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any order, stay or temporary
restraining order or preliminary or permanent injunction entered by any
Governmental Entity vacated or reversed. For purposes of this Section 6.6, a
decision by the European Commission to initiate proceedings under Article
6(1)(c) of the Regulation will not constitute legal proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby. Nothing
in this
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Section 6.6 shall require Seller or Buyer to agree to any modification of the
terms of this Agreement which is not reasonably acceptable to Seller or Buyer
(as the case may be). In order to avoid any competition authority from
taking any other action, to forbid or delay the consummation of the
transactions contemplated hereby, Buyer shall offer and agree to
undertakings, conditions or obligations acceptable to the relevant
competition authority, except where such undertakings, conditions or
obligations would, if given effect, have:
o in the view of 3i an adverse effect on 3i or any part of 3i (other
than any interest in the Group (as defined in the Purchase and Sale
Agreement)); or
o in the view of Providence, an adverse effect on Providence or any part
of Providence (other than any interest in the Group (as defined in the
Purchase and Sale Agreement)); or
o an adverse impact on the Group (as defined in the Purchase and Sale
Agreement) and the Purchased Assets, the net value of which, in the
view of Buyer, acting reasonably, exceeds $750,000.
For purposes of this Section 6.6, (a) "PROVIDENCE" shall mean
Providence Equity Partners Inc. and its Affiliates from time to time, funds
managed or advised by Providence Equity Partners Inc. and/or any of its
Affiliates from time to time, participants in funds managed or advised by
Providence Equity Partners Inc. and/or any of its Affiliates from time to time,
participants in other funds where those other funds are participants in funds
managed or advised by Providence Equity Partners Inc. and/or any of its
Affiliates from time to time, and any company or business in which any fund
managed or advised by Providence Equity Partners Inc. and/or any of its
Affiliates from time to time has invested, and (b) "3I" shall mean 3i Group plc
and its Affiliates from time to time, funds managed or advised by 3i Group plc
and/or any of its Affiliates from time to time, participants in funds managed or
advised by 3i Group plc and/or any of its Affiliates from time to time,
participants in other funds where those other funds are participants in funds
managed or advised by 3i Group plc and/or any of its Affiliates from time to
time, and any company or business in which any fund managed or advised by 3i
Group plc and/or any of its Affiliates from time to time has invested.
6.7 NO INCONSISTENT ACTION. Each party hereto shall use its reasonable
best efforts to consummate the transactions contemplated by this Agreement and
shall not take any action inconsistent with its obligations hereunder or which
could hinder or delay the consummation of the transactions contemplated hereby,
save to the extent required by any Governmental Entity.
6.8 LABORATORY LETTER. At Closing, Seller shall provide Buyer with an
executed laboratory letter from HEI with respect to the Film Properties stored
by HEI, as set forth in Schedule 4.9, in the form attached hereto as Exhibit D.
Seller shall use its reasonable best efforts to obtain laboratory letters from
third parties (other than HEI) entrusted with the storage and security of the
other Film Properties as soon as practicable after Closing, but in no event
later than the expiration of the Transition Services Agreement (as defined in
the Purchase and Sale Agreement), in substantially the form attached hereto as
Exhibit D, but in any event on terms no less favorable than the relevant
laboratory letters in effect as of the Closing Date.
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6.9 THIRD PARTY CONSENTS. The parties hereto shall reasonably
cooperate to obtain any required third party consents and waivers including
those referred to in Section 7.2(c) and where any such consent or waiver is
required but is not obtained, and until such consent or waiver is obtained:
(a) Seller shall hold each Material Contract and any monies, goods or
other benefits received under the Material Contract as trustee (on terms
reasonably satisfactory to Buyer) for Buyer and shall, promptly following
receipt, account for them and pay or deliver them to Buyer without any deduction
or withholding, save as required by law; and
(b) if sub-licensing, sub-contracting, declaration of trust or agency
is permissible under the relevant Material Contract, Buyer shall perform on
behalf of Seller all Seller's obligations arising under the Material Contracts
after the date of Closing, as Seller's sub-licensee, sub-contractor or agent in
accordance with their terms and conditions, and Buyer shall promptly reimburse
Seller for any Liability incurred by Seller in performance of such obligations.
6.10 NO ADDITIONAL REPRESENTATIONS. Buyer acknowledges that it and its
representatives have received access to such books and records, facilities,
equipment, contracts and other assets of Seller which it and its representatives
have desired or requested to review, and that it and its representatives have
had full opportunity to meet with the management of Seller to discuss the
Purchased Assets. Buyer acknowledges that (a) should the Closing occur, Buyer
shall acquire the Purchased Assets in an "as is" condition and on a "where is"
basis, except as expressly represented or warranted in this Agreement (which
includes the Schedules hereto); (b) neither Seller nor any other Person has made
any representation or warranty, expressed or implied, as to the accuracy or
completeness of any information regarding the Purchased Assets furnished or made
available to Buyer and its representatives except as expressly set forth in this
Agreement (which includes the Schedules hereto) and (c) neither Seller nor any
other Person shall have or be subject to any liability to Buyer or any other
Person resulting from Seller's making available to Buyer or Buyer's use of any
such information, including the presentation materials delivered to Buyer by UBS
Securities LLC and dated May 12, 2004, as subsequently updated, supplemented or
amended (the "CONFIDENTIAL MEMORANDUM") or any information, documents or
material made available to Buyer in certain "data rooms," other management
presentations (formal or informal) or in any other form in connection with the
transactions contemplated hereby. Without limiting the foregoing, and except as
expressly set forth in this Agreement (including the schedules hereto), Seller
makes no representation or warranty to Buyer with respect to (a) the information
set forth in the Confidential Memorandum or (b) any financial projection or
forecast relating to Seller or the Purchased Assets, whether or not included in
the Confidential Memorandum.
6.11 UPDATING SCHEDULES. From and after the date of this Agreement and
through the Closing Date, each party hereto agrees to notify the other parties
if any information disclosed, or required to be disclosed, in the Schedules to
this Agreement becomes incomplete, untrue, obsolete or inaccurate in any
material respect. Any such notice or update to any Schedule to this Agreement
shall not affect the rights of any party hereunder; PROVIDED, HOWEVER, that for
purposes of Article 9 of this Agreement, the representations and warranties
shall be qualified by any information provided pursuant to this Section. For the
avoidance of doubt, no
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information provided pursuant to this Section shall, for the purposes of Article
9, qualify the representations and warranties as of the date of this Agreement.
6.12 FINANCING COMMITMENTS. Buyer shall not amend or otherwise modify
the Commitments attached hereto in any manner that would materially adversely
affect Seller or materially delay the consummation of the transactions
contemplated hereby. Buyer shall use its reasonable best efforts to cause the
closing conditions in the Commitments which are wholly within its control to be
satisfied, and shall use its commercially reasonable efforts to cause the
closing conditions in the Commitments which are not wholly within its control to
be satisfied. Buyer shall enforce its rights under the Commitments. In the event
that any portion of such financing contemplated by the Commitments becomes
unavailable, regardless of the reason therefor, Buyer shall use its reasonable
efforts to obtain alternative financing as promptly as practicable from other
sources.
6.13 PARTICIPATIONS AND RESIDUALS. (a) Buyer shall provide Seller, or
its designee, with all sales data, payee information and other information and
reasonable access to Buyer's employees, books and records and other relevant
information required to enable Seller to discharge promptly when due the
Retained Liabilities in respect of profit participations and residual costs for
the Film Rights. The information provided by Buyer to Seller shall, to the
extent necessary to enable Seller to discharge the Retained Liabilities,
include, but not be limited to, (i) the relevant information from all license
agreements and other Contracts entered into by Buyer relating to the Purchased
Assets; (ii) the revenues received by Buyer and its licensees from exploitation
of the Purchased Assets; (iii) the media and territories in which the licensed
exhibitions have taken place, (iv) any discussions or agreements with any
creative artist or Guild in respect of any Film Rights and (v) any other
information required for calculation of residuals and participations under
applicable Guild agreements and the Film Agreements. Seller will advise Buyer of
the time period within which such information must be provided in order to
ensure that the profit participations and residuals are paid in a timely manner
and Buyer agrees to provide such information within the designated time periods.
(b) In the event and at the time that the Films hereunder are sold or
licensed by Buyer or its agents in transactions involving other films or
programs (a "film package"), Buyer shall in good faith ensure that any license
revenues allocated to any Films in a film package are reasonably and fairly
based on the relative value of the Films in relation to the other films or
programs in the film package. Buyer shall give Seller prompt written notice of
any claim for such participation and residual costs to enable Seller to defend,
dispute or mitigate such residual costs at its option and in its sole
discretion.
(c) If any or all of the Guilds require payment in respect of
participations and/or residuals for the Films directly from Buyer, its nominee
or HED, Seller shall indemnify Buyer, its nominee and HED against all such
payments which either Buyer or its nominee make to such Guilds or which HED
makes to such Guild on their behalf in accordance with this Section and which
form part of the Retained Liabilities. Any reimbursement by Seller for payments
made by HED shall be on the payment terms set forth in the Library Services
Continuation Agreement (as defined in the Purchase and Sale Agreement). Buyer
and Seller shall reasonably cooperate to resolve any actions or claims brought
by or on behalf of the Guilds. Within a reasonable time period prior to the
tenth anniversary of the Closing Date, Seller shall, at
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Buyer's request, provide information with respect to the calculation of any
residuals and participations relating to the Films which are payable following
the date of this Agreement.
(d) Prior to or immediately following the tenth anniversary of the
Closing Date, Buyer shall enter into the Guild Assumption Agreements in a form
consistent with industry standards and sufficient to fully terminate and
discharge Seller's obligations and liability arising after the tenth anniversary
of the Closing Date under any Guild Assumption Agreements Seller has entered
into with respect to any Exploitation of or revenues received from the Purchased
Assets.
6.14 ADDITIONAL AGREEMENTS.
(a) Buyer and Seller shall use their reasonable commercial efforts to
prevent the transmission of the Films through any Media outside of their
respective territories.
(b) Seller hereby assigns and shall, at the request of Buyer or its
nominee at any time in the future, assign any copyrights, right in interests in
copyrights, renewal and extensions of copyrights outside of the United States
that revert to Seller after the date hereof pursuant to the Sale and Leaseback
Rights or otherwise in respect of the Purchased Assets upon such reversion. As
between Buyer and Seller, Seller shall be responsible for all payments due and
payable under Contracts relating to the Sale and Leaseback Rights.
(c) As soon as reasonably practicable after the Closing Date, Seller
shall deliver to Buyer a complete set of copies of the License Agreements,
together with certified extracts from all Excluded License Agreements and
Excluded Preexisting HEI License Agreements in Seller's possession or control
showing all the terms and conditions which relate to the license of any Films
thereunder outside the United States. As soon as reasonably practicable, and in
any event within 30 days after the expiration of the Library Services
Continuation Agreement (as defined in the Purchase and Sale Agreement), Seller
shall deliver to Buyer originals of the License Agreements which relate
exclusively to territories outside of the United States and copies of any other
License Agreements and in any event, Seller shall, at Buyers' request, as
promptly as reasonably practicable provide access to the originals of all
contracts relating to the Purchased Assets which are in its possession or
control. If Seller does not have possession or control of any of the other
agreements referred to in this Section, Seller shall provide Buyer with all
information and confirmation of those terms and conditions of such agreements
insofar as reasonably required by Buyer to Exploit the Films outside the United
States and to confirm the availability of the Films for Exploitation, such
information and confirmation to be in a form reasonably acceptable to Buyer.
(d) Seller shall take all reasonable steps to ensure that all Film
Properties are kept in an environment which maintains their quality and safety
and in accordance with disaster recovery and contingency procedures which are
consistent with industry practice. Seller shall notify Buyer at least one month
prior to changing the location where any Film Properties are kept. If the
identity of the Person holding copies of the Film Properties changes, Seller
shall procure new laboratory letters from that new Person on terms which are
substantially similar to the terms of the relevant pre-existing laboratory
letters.
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(e) Seller agrees to indemnify and hold harmless Buyer against all
Liability suffered by Buyer under the indemnity set out in section 7(i) of the
Library Services Continuation Agreement (as defined in the Purchase and Sale
Agreement) (a "HED LIABILITY") to the extent that such Liability was caused by
any failure by Seller to provide Buyer with the right to Exploit as set forth in
the Availabilities Schedule, PROVIDED that Seller shall have no Liability under
this indemnity to the extent that a HED Liability was caused by: (i) use of the
Purchased Assets other than as contemplated by the Availabilities Schedule; or
(ii) any act or omission on the part of Buyer which is a breach of its
obligations under the Library Services Continuation Agreement (as defined in the
Purchase and Sale Agreement). If a HED Liability arises, Buyer shall: (A)
reasonably promptly notify Seller of the HED Liability; (B) provide Seller, at
Seller's cost, with any assistance reasonably requested by Seller in defending
the HED Liability; (C) allow Seller to conduct the defense of the HED Liability;
and (D) not settle or compromise the HED Liability without the prior written
approval from Seller, not to be unreasonably withheld.
6.15 CONFIDENTIALITY. (a) In respect of Confidential Information of or
relating to Seller ("SELLER CONFIDENTIAL INFORMATION"), Buyer shall not, and
shall procure that no Affiliate of Buyer or any director, officer or employee or
adviser or agent of Buyer shall, use or disclose to any person any Seller
Confidential Information, and (b) in respect of Confidential Information of or
relating to Buyer or the Purchased Assets after the Closing ("BUYER CONFIDENTIAL
INFORMATION"), Seller shall not, and shall procure that no director, officer or
employee or adviser or agent of Seller shall, use or disclose to any person any
Buyer Confidential Information. Clauses (a) and (b) do not apply (where the
party receiving the Confidential Information is the "RECEIVING PARTY") to (i)
Confidential Information which at the time of disclosure to the Receiving Party
was generally available to the public other than by a breach of clauses (a) and
(b), (ii) Confidential Information which was already in the possession of the
Receiving Party on a non-confidential basis prior to disclosure to such
Receiving Party, (iii) Confidential Information which becomes available to the
Receiving Party on a non-confidential basis from a third party, PROVIDED that
such third party is not known by such Receiving Party to be in breach of an
obligation of confidentiality in respect of such Confidential Information, (iv)
disclosure by Seller of Buyer Confidential Information to or at the written
request of Buyer, (v) disclosure by Buyer of Seller Confidential Information to
or at the written request of Seller, (vi) use or disclosure of Confidential
Information required to be disclosed by law, regulation, any revenue authority
or any listing authority or exchange, or (vii) disclosure of Confidential
Information to affiliates, officers, directors, employees, agents,
representatives, professional advisers (including legal counsel, accountants and
auditors) for the purpose of advising Seller or Buyer (as applicable) (each a
"RELATED PARTY"), PROVIDED, that such Related Party shall be instructed as to
the confidential nature of such Confidential Information.
6.16 RIGHT OF FIRST OFFER. If, within the four year period following
the Closing Date, Seller intends or proposes to sell, assign, license or
otherwise transfer or Exploit, all or substantially all of the Ancillary Rights,
Seller shall deliver written notice to Buyer to such effect. If Buyer notifies
Seller in writing of its desire to conduct negotiations regarding such transfer
or Exploitation within 45 days of its receipt of such notice from Seller, Seller
and Buyer shall negotiate in good faith during the period ending on the
thirtieth day after the date of such notice by Seller to reach an agreement for
the sale of the Ancillary Rights to Buyer. If a binding agreement for a sale of
the Ancillary Rights is not reached by the end of such period,
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Seller may freely sell (or enter into a binding agreement, letter of intent or
any other similar document) the Ancillary Rights to any other Person.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 CONDITIONS OF EACH PARTY'S OBLIGATION TO CLOSE. The obligation of
the parties hereto to consummate the transactions contemplated hereby shall be
subject to the fulfillment, at or before Closing, of the conditions set forth
below in this Section 7.1. The parties hereto may mutually agree to waive any or
all of these conditions.
(a) Without prejudice to Buyer's obligations in Section 6.6, it being
established that it is not the intention of the European Commission, pursuant to
Council Regulation (EC) 139/2004, to initiate proceedings under Article 6(1)(c)
or make a referral to a competent authority of the United Kingdom or another
member state of the European Union or EFTA under Article 9(1) in respect of the
proposed acquisition.
(b) All required filings having been made and all or any applicable
waiting and other time periods (including extensions thereto) under the United
States Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (as amended) and the
regulations thereunder having expired, lapsed or been terminated as appropriate
in respect of the proposed acquisition.
(c) Without prejudice to Buyer's obligations in Section 6.6, in the
event that the UK Secretary of State serves a European intervention notice under
Section 67(2) of the UK Enterprise Xxx 0000 (the "2002 ACT") the Secretary of
State not making a reference to the UK Competition Commission under Section 67
of the 2002 Act in respect of the proposed acquisition.
(d) All authorizations, orders, grants, consents, clearances,
licenses, permissions and approvals from the relevant competition authorities of
Governmental Entities in any jurisdiction necessary for, or in respect of, the
proposed acquisition being obtained, except where the failure to obtain such
authorizations, orders, grants, consents, clearances, licenses, permissions and
approvals would not reasonably be expected to have a material adverse effect on
the Purchased Assets taken as a whole.
(e) As of the Closing Date, without prejudice to Buyer's obligations
in Section 6.6, there shall be no statute, regulation, injunction, restraining
order or decree of any nature of any court or governmental agency or body of
competent jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated by this Agreement.
(f) All of the conditions precedent set forth in the Purchase and Sale
Agreement shall been satisfied or waived (in accordance with the Purchase and
Sale Agreement (with the exception of that contained in Section 6.1(f) of the
Purchase and Sale Agreement)) save for those for which Closing is necessary.
(g) The approval of the transactions contemplated hereby under the
Credit Agreement and the written authorization of the necessary lenders under
the Credit Agreement to
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file UCC-3s as are required to release all Liens to which all or any of the
Purchased Assets are subject in respect of borrowings pursuant to the Credit
Agreement.
7.2 CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer
to consummate the transactions contemplated hereby shall be subject to the
fulfillment, at or before Closing, of all of the conditions set forth below in
this Section 7.2. Buyer may waive in writing any or all of these conditions in
whole or in part without prior notice.
(a) The representations and warranties of Seller contained in Article
4 shall be true and correct on and as of the Closing Date with the same effect
as if such representations and warranties had been made on and as of the Closing
Date (except for representations and warranties which are as of a particular
date, which shall be true and correct as of such date), except in either such
case to the extent that the breach thereof would not reasonably be expected to
have a material adverse effect on the Purchased Assets taken as a whole, and
Seller shall have performed in all material respects its obligations and
complied in all material respects with its agreements and covenants required by
this Agreement to be performed or complied with on its part on or prior to the
Closing Date.
(b) Buyer shall have received from Seller a certificate dated as of
the Closing Date and signed by an authorized officer of Seller certifying its
compliance with the conditions set forth in Section 7.2(a).
(c) Seller shall have obtained all consents or waivers of the parties
to the agreements or consents listed on Schedule 7.2(c).
(d) Since November 22, 2004, there shall not have occurred any event,
development or change which, individually or in the aggregate, has had a
material adverse effect on the Purchased Assets taken as a whole.
(e) The Debt Agreement shall have been entered into substantially on
the basis of the terms set forth in the Debt Commitment Letter, and Buyer shall
be contractually entitled to drawdown and receive funds under the Debt
Agreement, and the conditions to drawdown thereunder shall have been satisfied
or waived by the financial institution(s) party to the Debt Agreement.
7.3 CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of
Seller to consummate the transactions contemplated hereby shall be subject to
the fulfillment, at or before Closing, of all of the conditions set forth below
in this Section 7.3. Seller may waive in writing any or all of these conditions
in whole or in part without prior notice.
(a) The representations and warranties of Buyer contained in Article 5
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if such representations and warranties had been made on
and as of the Closing Date (except for representations and warranties which are
as of a particular date, which shall be true and correct in all material
respects as of such date), and Buyer shall have performed in all material
respects its obligations and complied in all material respects with its
agreements and covenants required by this Agreement to be performed or complied
with on its part on or prior to the Closing Date.
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(b) Seller shall have received from Buyer a certificate dated as of
the Closing Date and signed by an authorized officer of Buyer certifying Buyer's
compliance with the conditions set forth in Section 7.3(a).
(c) Buyer shall have executed and delivered to Seller the Assignment
and Assumption Agreement and Xxxx of Sale.
7.4 UNDERTAKINGS. Seller undertakes to use its reasonable best efforts
to procure the fulfillment of the conditions specified in Section 7.1 and
Section 7.2 by April 30, 2005 (the "OUTSIDE DATE") and Buyer undertakes to use
its reasonable best efforts to procure the fulfillment of the conditions set
forth in Section 7.1 and Section 7.3 by the Outside Date, in each case subject
to the extension as contemplated by Section 10.2(b). Seller shall keep Buyer
advised of the progress towards the satisfaction of its obligations under this
Section 7.4 (and vice versa).
ARTICLE 8
THE CLOSING
8.1 TIME AND LOCATION OF CLOSING. Subject to the fulfillment of all of
the conditions specified in Article 7 (any or all of which may be waived in
writing by the respective party whose performance is conditioned upon the
satisfaction of such conditions), the purchase and sale of the Purchased Assets
and the other transactions contemplated by this Agreement shall be consummated
at a closing ("CLOSING") to be held at the offices of Ashurst, Xxxxxxxxx Xxxxx,
0 Xxxxxx Xxxxxx, Xxxxxx, XX0X 0XX at 10:00 A.M., local time, on the date falling
five days following the date when all of the conditions specified in Article 7
shall have been fulfilled or waived (other than those conditions which by their
nature are contemplated to be satisfied on the Closing Date) or on such other
date as the parties shall mutually agree (the "CLOSING DATE").
8.2 ACTIONS BY SELLER AT CLOSING. At Closing, Seller shall deliver to
Buyer the following:
(a) The Xxxx of Sale and Assignment and Assumption Agreement, duly
executed by Seller.
(b) The Copyright Assignment, duly executed by Seller, as applicable.
(c) True and correct copies of all Copyright Registration
certificates.
(d) The certificate described in Section 7.2(b).
(e) A letter guarantying access to the Film Properties held at
Hallmark Entertainment Distribution, LLC as contemplated by Section 6.8.
8.3 ACTIONS BY BUYER AT CLOSING. At Closing, Buyer shall deliver to
Seller the following:
(a) The Cash Consideration in the manner set forth in Section 3.1(a).
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(b) Certified copies of minutes or unanimous written consents of the
board of directors and stockholders or members, if necessary, of Buyer approving
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby.
(c) The Assignment and Assumption Agreement, duly executed by Buyer,
or Buyer's nominee.
(d) The certificate described in Section 7.3(b).
(e) The Copyright Assignment, duly executed by Buyer, or Buyer's
nominee.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER. Seller shall defend, indemnify and hold
Buyer and its officers, directors, shareholders, partners, employees,
representatives, agents, attorneys, licensees, Affiliates and assigns (the
"INDEMNIFIED BUYERS") harmless from and against any and all claims, demands,
actions or causes of action, assessments, judgments, awards, fines, sanctions,
charges, damages, liabilities, losses, costs, interest, penalties, amounts paid
in settlement and expenses (including, without limitation, reasonable attorneys'
fees and expenses) ("LOSSES") which may be incurred or suffered by the
Indemnified Buyers or any of them, arising out of or relating to (a) any breach
of any representation or warranty made by Seller in this Agreement, other than
Section 4.6(b)(ii); (b) any material failure on the part of Seller to perform
any covenant or agreement in this Agreement (or any failure to make any payment
in accordance with any express payment obligation set forth herein); (c) any
Retained Liabilities or (d) the failure of Seller to convey to Buyer at least
10% of the rights contemplated by the Availabilities Schedule; PROVIDED, that
the indemnification contemplated by this Section 9.1(d) shall not apply, and
Seller shall have no Liability in respect of this Section 9.1(d), if Seller
conveys more than 10% of the rights contemplated to be conveyed by the
Availabilities Schedule (each, a "SELLER'S INDEMNIFICATION CLAIM"). Save (i) in
the case of fraud (including, without limitation, fraudulent concealment); (ii)
in respect of the representations and warranties set forth in Sections 4.1 and
4.2 and (iii) in respect of the indemnity set forth in Section 6.14(e), in no
event will Seller have any liability with respect to any indemnification
pursuant to (a) above where the Losses relating to any individual item (or group
of related items) is less than $25,000 (subject to the last sentence of this
Section 9.1) and until the total dollar amount of all such indemnification
obligations that would otherwise be indemnifiable pursuant to such clause (a),
when aggregated with all indemnification obligations indemnifiable by Crown
Media Intermediary, LLC pursuant to clause (a) of Section 8.1 of the Purchase
and Sale Agreement, shall exceed $750,000, in which event Seller will be liable
from dollar one for the whole amount and not only the excess; PROVIDED that
(save in the case clauses (i) and (ii) above) in no event shall Seller's
aggregate liability in respect of clause (a) hereof, together with CM
Intermediary, LLC's aggregate liability in respect of clause (a) of Section 8.1
of the Purchase and Sale Agreement, in the aggregate exceed $70,000,000. In
determining whether the $25,000 requirement set forth above is satisfied with
respect to breaches of the representations and warranties set forth in Section
4.11, all Losses under $25,000 related to a single Film in any territory may be
aggregated, and where the
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aggregate of all such Losses relating to a single Film is under $25,000
("SECONDARY FILM LOSSES"), such Secondary Film Losses may be aggregated with
Secondary Film Losses in respect of other Films to the extent such losses are
within the same territory.
9.2 INDEMNIFICATION BY BUYER. Buyer shall defend, indemnify and hold
Seller and its officers, directors, shareholders, partners, employees,
representatives, agents, attorneys, licensees, Affiliates and assigns (the
"INDEMNIFIED SELLER PARTIES") harmless from and against any and all Losses which
may be sustained, incurred or suffered by the Indemnified Seller Parties as a
result of, arising out of or relating to (a) any breach of any representation or
warranty made by Buyer in this Agreement, (b) any material failure on the part
of Buyer to perform any covenant or agreement in this Agreement and (c) any
Assumed Liabilities. Save in the case of fraud or fraudulent concealment, in no
event shall Buyer's liability in respect of clause (a) hereof together with
Buyer's aggregate liability in respect of clause (a) of Section 8.2 of the
Purchase and Sale Agreement, in the aggregate exceed $222,000,000.
9.3 DEFENSE OF CLAIMS. If any claim is brought against any of the
indemnified parties by a third party, and if such indemnified party intends to
seek indemnity with respect thereto under this Article 9, such indemnified party
shall promptly notify in writing Buyer or Seller, as the case may be, of such
claim. If any indemnified party fails to provide the foregoing written notice in
a timely manner, which failure to notify results in or otherwise gives rise to
any material prejudice to the defense of such claim, the indemnified party or
parties shall be deemed to have waived its or their rights to indemnification
under this Article 9 from the indemnifying party or parties only to the extent
of the prejudice suffered as a result of failure to timely notify.
Upon receipt of such notice, the indemnifying party shall have 30 days
to commence to undertake, conduct and control, through counsel of its own
choosing and its sole cost and expense, the settlement or defense thereof, and
the indemnified party shall cooperate in connection therewith (including,
without limitation, providing to the indemnifying party, at the indemnifying
party's request, and at no cost, any information and reasonable assistance from
the indemnified party's staff which may be necessary for such settlement or
defense); PROVIDED that:
(a) without the indemnified party's consent, the indemnifying party
shall not consent to the entry of any judgment or enter into any settlement that
(i) provides for an injunctive or equitable relief adversely affecting the
indemnified party or (ii) materially adversely affects the goodwill of the
business of the Group (as defined in the Purchase and Sale Agreement), PROVIDED,
that at the time the indemnified party notified the indemnifying party as
required by the first sentence of this Section 9.3, such notification shall have
included a statement prepared in good faith by such indemnified party that it
has determined on reasonable grounds that a judgment or settlement would be
reasonably likely to materially adversely affect the goodwill of the Group (as
defined in the Purchase and Sale Agreement), and PROVIDED, FURTHER, that in the
event such indemnified party does not provide its consent (which consent shall
not be unreasonably withheld) within 15 days of the indemnifying party's request
for consent, the indemnifying party's Liability in respect of the Losses related
to such judgment or settlement shall be limited solely to the amount for which
such Losses could have reasonably been settled by the indemnifying party;
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(b) the indemnifying party shall permit the indemnified party to
participate in such settlement or defense through counsel chosen by the
indemnified party; PROVIDED that the fees and expenses of such counsel shall be
borne by the indemnified party; and
(c) the indemnifying party shall agree promptly to reimburse the
indemnified party for the full amount of any loss, damage or third party costs
incurred by the indemnified party as a result of such claim, but not including
any attorney's fees or expenses of the indemnified party when the indemnifying
party has assumed the defense and not including overhead or personnel costs of
the indemnified party arising from cooperating with the indemnifying party; and
so long as the indemnifying party is reasonably contesting any such claim in
good faith, the indemnified party shall not pay or settle any claim. If the
indemnifying party does not notify the indemnified party within 30 days after
receipt of the indemnified party's written notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof, the indemnified party
shall have the right to contest, settle or compromise the claim at the expense
of the indemnifying party; PROVIDED that the indemnified party shall use its
reasonable best efforts to minimize any Losses and shall act in good faith in
contesting, settling or compromising such claim. Whether or not the indemnifying
party will have assumed the defense, such party will not be obligated to
indemnify the indemnified party for any settlement entered into without the
indemnifying party's prior written consent, which consent will not be withheld
unreasonably or delayed.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties in this Agreement shall survive the Closing for a period of 21
months, except for (a) the representations and warranties set forth in Section
4.11, which shall survive the Closing for a period of 36 months, and (b) the
representations and warranties set forth in Section 4.6, which shall survive the
Closing until close of business on the 30th day following the expiration of the
applicable statute of limitations (taking into account any extensions or waivers
thereof) with respect thereto. The indemnification obligations of Section 9.1(c)
and Section 9.2(c) shall survive the Closing until the expiration of the
applicable statute of limitations with respect thereto. No claim may be brought
for breaches or alleged breaches of any representations or warranties after the
expiration of the survival period.
9.5 LIMITATION ON RIGHTS. (a) Each party hereto acknowledges and
agrees that the sole and exclusive remedy of such party hereto with respect to
any and all claims for Losses of the types referred to in Section 9.1 and
Section 9.2 shall be pursuant to the indemnification provisions set forth in
this Article 9 and Section 10.14. In furtherance of the foregoing, each party
hereby waives, and agrees to cause its Affiliates to waive, any and all rights,
claims and causes of action they may have against any other party hereto or any
Affiliate thereof arising under or based upon any statutory or common law or
otherwise (except pursuant to the indemnification provisions set forth in this
Article 9) to the extent relating to claims for Losses of the types referred to
in Section 9.1 and Section 9.2; PROVIDED that nothing in this Section 9.5 shall
preclude a party from (i) bringing an action for specific performance or other
available equitable remedy for a breach of covenant or agreement contained in
this Agreement or (ii) pursuing remedies under applicable law for fraud or
intentional misrepresentation. Nothing in this Section 9.5 shall relieve any
party from liability for fraud.
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(b) Losses shall not include lost profits or consequential, special,
punitive, incidental or indirect damages and, no indemnifying party shall have
any indemnification obligations with respect to such amounts. In addition,
Seller shall have no indemnification obligation or liability with respect to any
Loss resulting from any misrepresentation or breach of warranty if the
conditions or facts giving rise to such misrepresentation or breach were fully
and fairly disclosed or reasonably apparent to a reasonable person from the
disclosure in this Agreement (including the schedules hereto) or were otherwise
known to Buyer or its Affiliates to be a breach under this Agreement prior to or
at Closing (and in such event such misrepresentation or breach of warranty shall
not constitute a breach of this Agreement).
(c) The amount of any Losses for which indemnification is provided
under this Article 9 shall be net of any amounts recovered by any indemnified
party from third parties (including without limitation amounts recovered under
insurance policies), and the indemnified party shall use reasonable efforts to
recover such amounts from insurers and other third parties. Any indemnifying
party shall be subrogated to the rights of the indemnified parties. An insurer
who would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto or, by virtue of the indemnification
provisions hereof, have any subrogation rights with respect thereto. For the
avoidance of doubt, Buyer shall not be obliged to seek to recover such amounts
from insurers and other third parties before seeking to recover any Losses from
Seller under this Article 9. If any indemnified party receives an amount from an
insurer or other third party in respect of Losses for which indemnification has
been paid under this Article 9, the indemnified party shall promptly reimburse
the indemnifying party so much of the amount originally paid by the indemnifying
party as does not exceed the sum recovered from the insurer or other third
party, less the indemnified party's reasonable costs of recovery.
(d) The amount of any Losses for which indemnification is provided
shall be reduced to take account of any Tax benefit received by the indemnified
party as a result of such indemnification.
(e) Neither party hereto shall be liable to pay any Losses more than
once with respect to a Loss resulting from the same facts, events or
circumstances, even if and to the extent such facts, events or circumstances
constitute both a matter accounted for in the post-closing purchase price
adjustment set forth in Section 3.3, an Assumed Liability or a Retained
Liability, as the case may be, and a breach of any representations and
warranties or covenants for which a party shall or would but for this provision
be obligated to pay Losses hereunder.
9.6 INDEMNITY PAYMENTS. The parties agree that any indemnity payments
pursuant to this Agreement will be treated for Tax purposes as an adjustment to
the Purchase Price and that such treatment shall govern for purposes hereof
except to the extent that the laws of a particular jurisdiction provide
otherwise, in which case such payments shall be made in an amount sufficient to
indemnify the relevant party on an after-Tax basis.
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ARTICLE 10
GENERAL PROVISIONS
10.1 FURTHER ASSURANCES. Each of the parties hereto agrees to execute
and deliver to the other party hereto, at any time and from time to time upon
written request by such other party, such additional documents or instruments
consistent herewith and to perform such further acts as such other party may
reasonably require to fully effectuate the purposes and intent of this
Agreement.
10.2 TERMINATION. This Agreement may be terminated at any time prior
to Closing, as follows:
(a) by mutual written consent of Buyer and Seller duly authorized by
their respective boards of directors;
(b) by either of Buyer or Seller, if the Closing shall not have
occurred on or before the Outside Date, PROVIDED, HOWEVER, that in the event
that the conditions set forth in Section 7.1(a) or 7.1(c) shall not have been
fulfilled but all other conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then the Outside Date shall be extended by 60 days
and, PROVIDED, FURTHER, that the right to terminate this Agreement under this
Section 10.2 shall not be available to the party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or resulted in,
the failure of the Closing to occur on or before such date; PROVIDED, FURTHER,
that in the event that such party is entitled to terminate this Agreement
pursuant to an independent termination right under this Section 10.2, nothing
contained herein shall prevent such party from terminating this Agreement
pursuant to such independent right.
(c) by either of Buyer or Seller if any order, injunction or decree
preventing the consummation of the transactions contemplated hereby shall have
been entered by any court of competent jurisdiction or Governmental Entity and
shall have become final and non-appealable;
(d) by Buyer if (i) there shall have been a breach of any
representation or warranty on the part of Seller set forth in this Agreement or
if any representation or warranty of Seller shall have become untrue in either
case such that the condition set forth in Section 7.2(a) would be incapable of
being satisfied by the Outside Date (and for the purposes of this clause, any
information provided by Seller pursuant to Section 6.11 shall be deemed not to
qualify Seller's representations and warranties) or (ii) there shall have been a
breach or breaches by Seller of its respective covenants or agreements hereunder
such that the condition set forth in Section 7.2(a) would be incapable of being
satisfied by the Outside Date; or
(e) by Seller if (i) there shall have been a breach of any
representation or warranty on the part of Buyer set forth in this Agreement or
if any representation or warranty of Buyer shall have become untrue in either
case such that the condition set forth in Section 7.3(a) would be incapable of
being satisfied by the Outside Date or (ii) there shall have been a breach or
breaches by Buyer of its covenants or agreements hereunder such that the
condition set forth in Section 7.3(a) would be incapable of being satisfied by
the Outside Date.
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In each of the cases set out in clauses (a) to (e) above, the rights
and liabilities of the parties which have accrued prior to termination
(including without limitation, to the extent applicable, in respect of Article
9) shall continue to subsist and such termination shall be in addition to any
other rights or remedies the terminating party may have against the other party.
10.3 ARBITRATION. The parties hereto irrevocably agree that each and
every controversy or claim arising out of, or in connection with or relating to
this Agreement or the interpretation, performance or breach thereof shall be
settled by binding arbitration under the rules then in effect of the American
Arbitration Association or its successor and in accordance with applicable law
but subject to the following agreed provisions. The arbitration shall be
conducted in New York, New York, and the proceedings shall be kept confidential.
Notice of papers or processes relating to any arbitration proceeding, or for the
confirmation of award and entry of judgment on an award may be served on each of
the parties by registered or certified mail at the addresses set forth in
Section 10.7. Each dispute shall be promptly adjudicated by a panel of three
neutral arbitrators appointed as follows:
(a) each party shall nominate an arbitrator, and the two arbitrators
so appointed shall appoint a third arbitrator who shall act as president of the
arbitral tribunal;
(b) if either party fails to nominate an arbitrator within 30 days of
receiving notice of the nomination of an arbitrator by the other party, such
arbitrator shall at the request of that party be appointed by the American
Arbitration Association;
(c) if the two arbitrators to be nominated by the parties fail to
agree upon a third arbitrator within 30 days of the appointment of the second
arbitrator, the third arbitrator shall be appointed on the nomination of the
American Arbitration Association at the written request of either party; and
(d) should a vacancy arise because any arbitrator dies, resigns,
refuses to act, or becomes incapable of performing his functions, the vacancy
shall be filled by the method by which that arbitrator was originally appointed.
All arbitrators shall be of good reputation and character and shall be
highly knowledgeable of entertainment industry matters. Seller shall pay
one-half of the arbitrators' expenses and Buyer shall pay one-half. The parties
shall pay their own legal expenses. The arbitrators shall provide a reasoned
opinion supporting their conclusion, including detailed findings of fact and
conclusions of law. Such findings of fact shall be final and binding on the
parties but such conclusions of law shall be subject to appeal in any court of
competent jurisdiction. The arbitrators may award damages and/or permanent
injunctive relief, but in no event shall the arbitrators have the authority to
award punitive or exemplary damages. Notwithstanding anything to the contrary in
this Section 10.3, either party may apply to a court of competent jurisdiction
for relief in the form of a temporary restraining order or preliminary
injunction, or other provisional remedy pending final determination of a claim
through arbitration in accordance with this Section 10.3. If proper notice of
any hearing has been given, the arbitrators will have full power to proceed to
take evidence or to perform any other acts necessary to arbitrate the matter in
the absence of any party who fails to appear.
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10.4 SUCCESSORS AND ASSIGNS. (a) This Agreement is personal to the
parties and accordingly (subject to Sections 10.4(b), 10.4(c) and 10.4(d)) no
party without the prior written consent of the others shall assign, transfer or
declare a trust of the benefit of all or any of the other party's obligations
nor any benefit arising under this Agreement. Notwithstanding anything contained
herein to the contrary, at no time shall any such assignment relieve such
assigning party of any of its obligations or agreements hereunder unless
expressly agreed to in writing by the other party hereto in its sole discretion.
For the avoidance of doubt, nothing in this Section 10.4 shall be construed to
prohibit an assignment or transfer of the Purchased Assets by Buyer after the
Closing.
(b) Any party may (without the consent of the others) assign to an
Affiliate the benefit of all or any of the parties' obligations or any benefit
it enjoys under this Agreement PROVIDED, HOWEVER, that such assignment shall not
be absolute but shall be expressed to have effect only for so long as the
assignee remains an Affiliate and that immediately before ceasing to be an
Affiliate the assignee shall assign the benefit to an Affiliate of the party
concerned.
(c) Buyer may (without the consent of the others) assign and/or charge
all or any of its rights under this Agreement by way of security to any bank(s)
and/or holders of debt securities and/or financial institutions(s) and/or hedge
counterparties and/or any other person lending money or making other banking
facilities available to Buyer or any Affiliate of Buyer in connection with the
acquisition of the Purchased Assets and/or any refinancing of the existing debt
or to any financiers who provide funds on or in connection with any subsequent
refinancing of such funding or to any person from time to time appointed by any
financier to act as security trustee on behalf of such financier; without
limitation to the foregoing, any such person or financier may assign such rights
on any enforcement of the security under such finance arrangements without the
further consent of any party to this Agreement.
(d) Buyer may assign its rights under Sections 6.13, 6.14 and 6.15 in
connection with any purchase of all or substantially all of the Purchased
Assets.
For purposes of this Section 10.4, "AFFILIATE" shall mean with respect
to any Person, any other Person that from time to time, directly or indirectly,
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, such Person.
10.5 NO WAIVER. No waiver by either party hereto of any breach of any
covenant, agreement, representation or warranty hereunder shall be deemed a
waiver of any preceding or succeeding breach of the same. The exercise of any
right, power or privilege granted to either party herein shall not operate as a
waiver of any default or breach on the part of the other party hereto nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. Each and all of the several rights and remedies of either party
hereto under this Agreement shall be construed as cumulative and no one right as
exclusive of the others.
10.6 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, including the
exhibits attached hereto, the Transaction Agreements (as defined in the Purchase
and Sale Agreement) and the Purchase and Sale Agreement and exhibits attached
thereto, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all
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prior or contemporaneous written or oral agreements, arrangements,
understandings, representations and correspondence between them or any of their
related entities or Affiliates with respect to the subject matter hereof, except
for the Confidentiality Agreement, which shall continue in full force and
effect, and shall survive any termination of this Agreement or Closing, in
accordance with its terms. No change, modification, alteration, amendment or
agreement to discharge in whole or in part, or waiver of any of the terms and
conditions of this Agreement, shall be binding upon either party, unless the
same shall be made by a written instrument signed and executed by the authorized
representatives of each party, with the same formality as the execution of this
Agreement.
10.7 NOTICES. All notices, requests, demands and other communications
given or made hereunder or in connection with the matters contemplated by this
Agreement, shall be in writing made by personal service, or sent by certified
mail, return receipt requested, postage prepaid, by overseas courier or by
facsimile addressed as follows, or to such other address as may hereafter be
designated in writing by the respective parties hereto, and shall be deemed
received when delivered to the designated address or, if sent by facsimile, when
received as evidenced by a fax confirmation of such receipt:
(a) if to Seller or Holdings, to:
Crown Media Holdings, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx, Jr., Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to Buyer, to:
Providence Equity Partners
00 Xxxxx Xxxxxx, Xxxxxx X0X0XX
Attention: Bis Subramanian, Esq.
Telephone: x00(0) 00 0000 0000
Facsimile: x00(0) 00 0000 0000
3i Group PLC
00 Xxxxxxxx Xxxx
-00-
Xxxxxx XX0 0XX
Attention: Xxxxx Xxxxxxx
Telephone: x00 00 0000 0000
Facsimile: x00 00 0000 0000
with a copy to:
Ashurst
Xxxxxxxxx Xxxxx
0 Xxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Attention: Xxxxxxx Xxxxx, Esq.
Telephone: x00 00 0000 0000
Facsimile: x00 00 0000 0000
10.8 GOVERNING LAW. This Agreement (and any dispute, controversy,
proceedings or claim of whatever nature arising out of or in any way relating to
this Agreement or its formation) shall be governed and construed in accordance
with the laws of the State of New York without reference to such State's
principles of conflicts of law.
10.9 PUBLICITY. Prior to Closing, each party hereto agrees not to
issue any press release or otherwise make any public statement in any general
circulation medium with respect to the transactions contemplated by this
Agreement, without the consent, which shall not be unreasonably withheld or
delayed, of the other party hereto; PROVIDED, HOWEVER, that the parties hereto
may, without the consent of the other, make any disclosures required to comply
with applicable law or the regulations of any securities exchange or national
securities association.
10.10 SECTION HEADINGS. The section headings of this Agreement are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
10.11 SEVERABILITY. If any provision of this Agreement is held or
deemed to be or is or becomes, in fact, inoperative, illegal or unenforceable as
applied in any particular case under any constitution or statute or rule of
public policy of any jurisdiction:
(a) the operation, legality and enforceability under the constitution
or statute or rule of public policy of that jurisdiction of any other provision;
and
(b) the operation, legality and enforceability under the constitution
or statute or rule of public policy of any other jurisdiction of that or any
other provision shall not be affected or impaired in any way.
10.12 NO THIRD PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns, and nothing herein
express or implied is intended to, or shall be construed to, provide or create
any legal or equitable rights or benefits to any Person other than the parties
hereto.
10.13 COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original but all of
which together shall
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constitute one and the same instrument. Any party may enter into this Agreement
by executing a counterpart and this Agreement shall not take effect until it has
been executed by all parties.
10.14 GUARANTEE.
(a) GENERAL. Holdings hereby unconditionally and irrevocably
guarantees without offset or limitation, as primary obligor and not merely as
surety, the due, punctual and full (i) payment of all amounts for which Seller
is liable under this Agreement and (ii) performance of all covenants, terms and
conditions for the performance of, or compliance with, which Seller is liable
under this Agreement. This is a continuing guarantee and shall remain in full
force and effect in accordance with the terms hereof until all of Seller's
obligations under the this Agreement have been finally and indefeasibly
performed in full. This is a guarantee of payment, performance and compliance
and not of collectibility, and is in no way conditioned or contingent upon any
attempt to collect from or enforce performance or compliance by any person or to
exercise or assert any right or remedy, or upon any other event, contingency or
circumstance whatsoever, and shall be binding upon and against Holdings
irrespective of any breach of Section 4.1 or of Section 4.2, or any incapacity
or change in the articles of incorporation or bylaws of, or any reorganization
or consolidation of Holdings.
(b) OBLIGATIONS UNCONDITIONAL. Holdings acknowledges that its
obligations hereunder are absolute and unconditional, notwithstanding any
dispute or controversy among the parties arising in connection with this
Agreement or otherwise. Without limiting the generality of the foregoing, the
obligations of the Holdings hereunder shall not be released, discharged or
otherwise affected by (i) the amendment or modification of this Agreement
(except that the Holdings' obligations shall apply to this Agreement as amended
or modified), (ii) any failure, omission or delay to assert any claim or demand
or to enforce any remedy under, or any waiver, exercise or nonexercise by any
person of any right, remedy, power or privilege under, this Agreement ( in each
case except as may be expressly stipulated by the terms of this Agreement to
have such effect), (ii) any assignment, conveyance, mortgage or other transfer
of all or any part of the rights, obligations or interests of Buyer or Seller
under this Agreement, (iv) any voluntary or involuntary bankruptcy, insolvency,
liquidation, dissolution, sale of assets, marshalling, receivership, assignment
for the benefit of creditors, winding up or similar proceeding with respect to
any of Buyer, Seller or Holdings, (v) any rejection of any of this Agreement in
a bankruptcy or insolvency proceeding, (vi) any failure or delay in the
fulfillment of any of Seller's obligations under this Agreement, (vii) any
action to obtain or enforce any judgment or the satisfaction of any judgment for
partial payment or performance (except to the extent of such payment or
performance), (viii) any merger or consolidation of any of Buyer, Seller or
Holdings, or any other corporate change in any thereof, or any sale, lease or
transfer of any of the assets of any thereof, or any change in the ownership of
any equity interests in any thereof, (ix) any default, failure, breach or delay
in performance by Seller of any obligations under this Agreement, (x) any other
circumstance or occurrence which might otherwise constitute a legal or equitable
defense or discharge of the liabilities of a Holdings or indemnitor or (ix) any
counterclaim, set off, deduction, or defense which Holdings may have against
Buyer and in no event may Holdings assert (and Holdings hereby agrees not to
assert) as a counterclaim, set off, deduction or defense to the obligations of
Holdings hereunder any claim that Holdings may have against Buyer, other than
any counterclaim, set off, deduction or defense
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that Seller or Holdings may have in respect of any matter giving rise to the
relevant claim under this Section 10.14.
(c) WAIVER AND ACKNOWLEDGEMENT. Holdings waives diligence, promptness,
presentation to, demand of payment or performance from and protest to any person
or entity of any obligations under this Agreement and any requirement that Buyer
exhaust any right or take any action against Seller or any other person, in each
case except as may otherwise be required by this Agreement. Buyer shall have the
right to bring suit directly against Holdings prior to, concurrently with, or
without bringing any suit against any other person.
(d) SUBROGATION; SUBORDINATION. Holdings shall not be entitled to
receive payment in respect of any claim arising from payment or performance by
Holdings pursuant to the terms of this guaranty, and any such claim shall be
subordinate to, and junior in right of payment of, Seller's obligations under
this Agreement until all obligations hereunder shall be finally and indefeasibly
paid in full and satisfied.
(e) PROVISO. Notwithstanding any other provision of this Agreement to
the contrary, Holdings shall not be liable under this Agreement for the payment
or performance of any obligation unless, and except to the extent that, Seller
is liable to Buyer for the payment or performance of such obligation, and
Holdings shall have the benefit of, and be entitled to assert as a defense,
offset, counterclaim or deduction to the claims of Buyer against Holdings, all
claims of Seller or Holdings against Buyer and all obligations of Buyer to
Seller or Holdings to the extent only that such claims or obligations do not
arise or have not arisen in connection with the Transaction Agreements (as
defined in the Purchase and Sale Agreement), or transactions entered into, or
services provided, in the ordinary course of business after the Closing Date
between Buyer or Buyer's Affiliates and Seller or Holdings, as the case may be.
(f) INDEMNITY. Holdings hereby agrees to indemnify and hold harmless
the Indemnified Buyers from and against any and all Losses imposed upon or
incurred by the Indemnified Buyers resulting from or arising directly or
indirectly out of failure by Seller to duly, punctually and fully (i) pay all
amounts for which Seller is liable under this Agreement and (ii) perform all
covenants, terms and conditions for the performance of, or compliance with,
which Seller is liable under this Agreement.
(g) AUTHORIZATION AND VALIDITY OF AGREEMENT. Holdings hereby
represents and warrants to Buyer that Holdings has all requisite power and
authority to execute and deliver this Agreement solely with respect to this
Section 10.14 and to carry out and perform its obligations under this Section
10.14. The execution, delivery and performance by Holdings of this Agreement
have been duly and validly authorized by all necessary action of Holdings and no
other action on the part of Holdings is necessary for the authorization,
execution, or delivery by Holdings of this Agreement or Holding's performance
under this Section 10.14. This Agreement has been duly executed and delivered by
Holdings and, assuming the due authorization, execution and delivery by Buyer
constitutes the valid and binding obligation of Holdings with respect to this
Section 10.14 enforceable against Holdings in accordance with its terms (except
insofar as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
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10.15 NO SET-OFF. All amounts due under this Agreement shall be paid
in full without any deduction or withholding save as may be required by law and
neither Buyer nor Seller shall be entitled to any set-off or counterclaim as
against the other in respect of any amount so due under this Agreement, except
to the extent that such deduction or withholding or set-off or counterclaim does
not arise or have not arisen in connection with the Transition Services
Agreement, the NOC Agreement or Transponder/Uplink Agreement (as each is defined
in the Purchase and Sale Agreement) or transactions entered into, or services
provided in the ordinary course of business after the Closing Date between Buyer
or Buyer's Affiliates and Seller or Holdings, as the case may be.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CROWN MEDIA DISTRIBUTION, LLC
By: /s/ Xxxxxxx X. Xxxxxx
________________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
BAGBRIDGE LIMITED
By: /s/ Xxxxx Xxxxxxx
________________________________________
Name: Xxxxx Xxxxxxx
Title: Director
CROWN MEDIA HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
________________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
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