Attached files
file | filename |
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EX-3.3 - FORM OF THIRD CERT OF INC - CROWN MEDIA HOLDINGS INC | thirdcert.htm |
EX-2.2 - FORM OF MERGER HEH - CROWN MEDIA HOLDINGS INC | mergerheh.htm |
EX-3.1 - FORM OF SECOND CERT OF INC - CROWN MEDIA HOLDINGS INC | secondcert.htm |
EX-2.1 - FORM OF MERGER HEIC - CROWN MEDIA HOLDINGS INC | mergerheic.htm |
EX-10.3 - FORM OF AMENDMENT NO. 2 TO TAX SHARING - CROWN MEDIA HOLDINGS INC | taxsharing.htm |
EX-10.1 - MASTER RECAPITALIZATION AGREEMENT - CROWN MEDIA HOLDINGS INC | masterrecap.htm |
EX-99.1 - PRESS RELEASE - CROWN MEDIA HOLDINGS INC | pressrelease.htm |
EX-3.2 - FORM OF CERTIFICATE OF DESIGNATION - CROWN MEDIA HOLDINGS INC | certpreferred.htm |
EX-10.2 - FORM OF CREDIT AGREEMENT - CROWN MEDIA HOLDINGS INC | creditagreement.htm |
EX-4.2 - FORM OF REGISTRATION RIGHTS AGREEMENT - CROWN MEDIA HOLDINGS INC | registrationrights.htm |
EX-4.1 - FORM OF STOCKHOLDERS AGREEMENT - CROWN MEDIA HOLDINGS INC | stockholdersagreement.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 or 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
February
26, 2010
Date of
Report (Date of earliest event reported)
CROWN
MEDIA HOLDINGS, INC.
(Exact
name of Registrant as Specified in Charter)
Delaware
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000-30700
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84-1524410
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(State
or other Jurisdiction of Incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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12700
Ventura Boulevard
Studio
City, California 91604
(Address
of Principal Executive Offices)
(818)
755-2400
Registrant’s
telephone number, including area code
Check
the appropriate box below if the Form 8-K is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following
provisions:
[ ]
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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[ ]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
[ ]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
[ ]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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ITEM
1.01
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ENTRY
INTO A MATERIAL DEFINITIVE
AGREEMENT
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ITEM
2.03
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CREATION
OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE
SHEET ARRANGEMENT OF A REGISTRANT
|
Recapitalization
of the Company
As
previously disclosed, the Company’s Board of Directors formed a Special
Committee of three independent directors to review and consider a May 28, 2009
proposal from H C Crown Corp. (“HCC”) regarding a recapitalization of the
amounts owed by the Company to HCC and its affiliates. HCC is a
wholly-owned subsidiary of Hallmark Cards, Incorporated (“Hallmark
Cards”). On February 9, 2010, the Special Committee of the Board and
HCC approved and executed a Recapitalization Term Sheet, representing
non-binding terms of recapitalization transactions for the
Company. On February 26, 2010, the Company entered into the Master
Recapitalization Agreement with Hallmark Cards, HCC and related entities that
provides for the recapitalization transactions and the agreements described
below (the “Recapitalization”). The summary of the terms of the
Recapitalization transactions is qualified entirely by reference to the
agreements to which each summary description relates, each of which we have
filed with the Securities and Exchange Commission (the “SEC”).
The
Recapitalization transactions include, among other things, $315.0 million
principal amount of the HCC Debt (as defined below) being restructured into new
debt instruments, $185.0 million principal amount of the HCC Debt being
converted into convertible preferred stock of the Company, Class B Common Stock
being converted into Class A Common Stock with Class A Common Stock becoming the
only authorized and outstanding common stock of the Company (the “Class A Common
Stock”), and the balance of the HCC Debt being converted into shares of Class A
Common Stock of the Company. Upon execution of the Master
Recapitalization Agreement, the automatic termination of the waiver under the
existing Amended and Restated Waiver and Standby Purchase Agreement (the “Waiver
Agreement”) with Hallmark Cards and HCC was extended until August 31, 2010; the
waiver defers payment dates on HCC Debt (excluding accounts
payable).
Other
aspects of the Recapitalization concern a Credit Agreement for the new debt, an
amendment to the Tax Sharing Agreement with Hallmark Cards, a registration
rights agreement, mergers of two intermediate holding companies with the
Company, efforts to extend or replace the Company’s revolving line of credit,
Hallmark Cards’ willingness to guarantee $30.0 million of a revolving line of
credit, a standstill agreement of Hallmark entities pursuant to which such
entities agree not to acquire, through December 31, 2013, additional shares of
Class A Common Stock of the Company, subject to certain exceptions, and agree to
certain restrictions on their ability to sell or transfer shares of Class A
Common Stock of the Company until December 31, 2013 and, subject to lesser
restrictions, until December 31, 2020.
Each of
the Company (subject to approval by the Special Committee) and HCC has the right
to terminate the Master Recapitalization Agreement at any time after the later
of (x) June 30, 2010 and (y) 45 days following receipt of notice that the
information statement filed by the Company will not be reviewed by the SEC or
that the SEC staff has no further comments thereon, if the Recapitalization has
not been consummated prior to that date. Even if there were such a
termination, the Waiver Agreement will continue to provide that the automatic
termination date of the waiver will extend to August 31, 2010. The
closing of the Recapitalization is subject to a number of conditions, including,
among other things, (a) representations and warranties of the Company being
accurate, (b) obtaining a one-year revolving credit agreement mentioned below,
(c) there being no judgment or order which prohibits the consummation of the
Recapitalization and (d) Hallmark Cards not having delivered a written
notice to the Company certifying that Hallmark Cards in its sole discretion (but
only after consultation with outside legal counsel) shall have determined that
the status of any pending or threatened litigation or regulatory proceeding
involving the Company or its subsidiaries in connection with the
Recapitalization is unsatisfactory to Hallmark Cards.
From the
date of the Master Recapitalization Agreement to the Closing Date, the Company
will be subject to various affirmative covenants (including covenants to operate
in the ordinary course of business and to keep available the services of its
officers and employees and preserve the present relationships with persons doing
business with it) as well as various negative covenants (including, among
others, with respect to sales, leases or transfers outside the ordinary course
of business and acquisitions of material assets other than in accordance with
past practices).
If the
Recapitalization is consummated, the Hallmark parties will own, excluding the
shares of Class A Common Stock that would be received upon conversion of the
preferred stock, at least 90.1% of the sum of the outstanding common stock of
the Company and shares subject to outstanding options (the outstanding options
are for 87,238 shares on the date hereof). Certain aspects of the
Recapitalization require stockholder approval. Hallmark Entertainment
Holdings, Inc. (“HEH”) and certain Hallmark Cards affiliates as direct or
indirect owners of a more than a majority of the Company’s voting stock have
stated in the Master Recapitalization Agreement, or will provide, their written
consent as stockholders to these matters in lieu of holding a meeting of the
Company’s stockholders. No vote of other stockholders will be
requested or required. The closing of the Recapitalization cannot
occur until 20 calendar days after an information statement required by
regulations of the SEC is sent to the stockholders of the Company, or if such
information statement is furnished by sending a Notice of Internet Availability,
until 40 calendar days after such notice is sent to the stockholders of the
Company. The Master Recapitalization Agreement requires that the
Company use best efforts to prepare and file the information statement with the
SEC as promptly as is reasonably practicable (but not later than March 20,
2010).
Morgan
Stanley & Co., Incorporated and Houlihan Lokey Howard & Zukin Financial
Advisors, Inc. served as financial advisors to the Committee.
General
In the
Recapitalization:
·
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$315.0
million principal amount of the HCC Debt will be restructured into new
debt instruments on the terms summarized below (the “New Debt”), $185.0
million principal amount of the HCC Debt will be converted into an equal
amount of convertible preferred stock of the Company on the terms
summarized below (the “Convertible Preferred Stock”), and the balance of
the HCC Debt as of the closing of the Recapitalization (the “Closing
Date”) will be converted into shares of Class A Common Stock at the
Conversion Price (as described below). As a result of the
Recapitalization, immediately following the closing of the
Recapitalization transactions, all of the HCC Debt, except to the extent
converted and continued as New Debt, will be extinguished and
discharged.
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o
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“HCC
Debt” means (i) the aggregate principal amount of all indebtedness owed to
Hallmark Cards, HCC and their controlled affiliates, including accrued and
unpaid interest thereon through the Closing Date, but excluding accrued
but unpaid interest with respect to the 2001 Note, the 2005 Note and the
2006 Note; (b) all accounts payable and open intercompany accounts of the
Company and its subsidiaries owed to HCC and Hallmark Cards and their
controlled affiliates (other than the Company and its subsidiaries); and
(c) any amounts due to Hallmark Cards or its affiliates under the Tax
Sharing Agreement (as defined below) through December 31, 2009; provided
that for the avoidance of doubt the following shall not constitute HCC
Debt: (i) Reimbursement Obligations (as defined in the Master
Recapitalization Agreement), (ii) Ordinary Course of Business Obligations
(as defined in the Master Recapitalization Agreement), and (iii) any
amounts due to Hallmark Cards or its affiliates under the Tax Sharing
Agreement accruing on or after January 1, 2010. “2001 Note”
means the Promissory Note, dated as of December 14, 2001, of the Company
in the original principal amount of $75.0 million payable to HCC; “2005
Note” means the Promissory Note, dated as of October 1, 2005, of a
wholly-owned subsidiary of the Company in the original principal amount of
$132,785,424 payable to HCC; and “2006 Note” means the Promissory Note,
dated as of March 21, 2006, of the Company in the original principal
amount of $70,414,087.87 payable to
HCC.
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o
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“Conversion
Price” means the amount equal to (x) the quantity of (i) the total HCC
Debt as of the Date of Determination, less (ii) $500 million, divided by
(y) the Conversion Price Shares. “Conversion Price Shares”
means a notional number of shares of Class A Common Stock which, when
combined with the number of shares of Class A Common Stock directly or
indirectly owned by Hallmark Cards as of the Date of Determination (for
purposes of such calculation (x) including with respect to shares of Class
A Common Stock owned directly by Hallmark Entertainment Investments Co.
(“HEIC”) only HEH’s pro rata portion of the Class A Common Stock owned by
HEIC, and (y) excluding the shares of Class A Common Stock that will be
receivable by HCC upon conversion of the Convertible Preferred Stock),
will equal 90.1% of the sum of (i) all outstanding shares of Class A
Common Stock on the Date of Determination prior to the Closing Date, (ii)
the Conversion Price Shares and (iii) all shares potentially issuable upon
exercise of all outstanding options as of the Date of
Determination.
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“Date of
Determination” means the Closing Date, provided that if the Closing Date occurs
on or after March 31, 2010, the “Date of Determination” will be deemed to be
March 31, 2010.
·
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The
terms of the New Debt as set forth in the Credit Agreement will include
without limitation the following:
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o
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Maturity: December
31, 2013.
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o
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Tranches:
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§
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Term
A Loan of $200 million will be cash-pay in terms of interest and will bear
interest at the rate of 9.5% per annum through December 31, 2011,
increasing to 12% on and after January 1, 2012 through December 31,
2013.
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§
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Term
B Loan of $115 million will be payable-in-kind, by adding interest to the
principal (“PIK”), through December 31, 2010 and will become cash-pay for
the quarterly period beginning on January 1, 2011 and for all quarterly
periods thereafter. The interest rate will be 11.5% through December 31,
2011, increasing to 14% on and after January 1, 2012 and continuing
through December 31, 2013.
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o
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PIK
Toggle: The Company will have the option to PIK up to three quarterly cash
payments in the aggregate for the Term A Loan and the Term B
Loan. For the avoidance of doubt, contractual PIK payments
under the Term B Loan will not reduce the number of optional PIK payments
available to the Company, and if the Company opts to PIK both the Term A
Loan and the Term B Loan cash payments in a single quarter then that will
count as two of the Company’s three quarterly PIK
options.
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o
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Prepayment:
The New Debt will be pre-payable at any time at par plus accrued
interest.
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o
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Mandatory
Prepayments: 100% of net cash proceeds from asset sales or other
dispositions, except to the extent such net cash proceeds are reinvested
in productive assets of a kind then used or usable in the business of the
Company or its subsidiaries within 180 days of the sale or other
disposition; 100% of net cash proceeds from equity issuances; 100% of net
cash proceeds from debt issuances (exclusive of the Revolver as described
below); 75% of Excess Cash Flow (as defined in the New Debt agreements);
and upon the sale of assets in advance of a condemnation proceeding, or
following the occurrence of a casualty or condemnation for which the
Company or its subsidiaries have received proceeds, after such proceeds
have been used to replace the subject assets. Prepayments must
be applied in the following order (i) first to PIK interest on the Term A
Loan (ii) then to principal on the Term A Loan (iii) then to PIK interest
on the Term B Loan, and (iv) finally to principal on the Term B
Loan.
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o
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Change
in Control: The principal and interest on the New Debt will
become immediately due and payable upon a change in control (as defined in
the Credit Agreement) arising from (i) a Premium Transaction (as described
below) or (ii) a transaction approved by a special committee of the
Company's Board of Directors.
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o
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Collateral: An
existing lien on substantially all of the Company’s assets will be
modified so it secures obligations under the Credit
Agreement. It is contemplated that this security interest will
be subordinate to the lender under the bank revolving credit
facility.
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o
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NICC
Reserve Account: The Company is required to redeem the preferred
interest held by a wholly-owned subsidiary of National Interfaith Cable
Coalition ("NICC") in Crown Media United States, LLC for $25.0
million by December 31, 2010. Prior to closing of the Credit
Agreement, the Company will establish with a financial institution a NICC
Reserve Account in the Company's name and deposit in that account amounts
which the Company chooses as a sinking fund for the mandatory redemption
of that preferred interest. The funds in the NICC Reserve Account
are to be used to make any scheduled payments on the NICC preferred
interest and at no time is the amount to exceed $25.0
million.
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o
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Covenants: Negative
covenants include limitations on debt incurrence; dividends; liens;
capital expenditures; investments; restricted payments; sale/leaseback
transactions; creation of subsidiaries; changes in business conducted;
execution or amendment of material agreements in such a way as could be
reasonably be expected to be materially disadvantageous to the Hallmark
lenders; transactions with affiliates; and dispositions of
property.
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Financial
covenants include: The Company will not permit its Cash
Interest Coverage Ratio as the end of any fiscal quarter to be less than
2.0:1.0.
“Cash
Interest Coverage Ratio” is defined as the ratio of (a) EBITDA to (b) the sum of
the Term A Loan and the Term B Loan cash interest expense (excluding PIK
interest), in each case for a Measurement Period of four consecutive
fiscal quarters ending on the date of determination, adjusted pro rata for the
three full quarters following the Closing Date.
“EBITDA”
means for any period (x) Consolidated Net Income plus (y) to the extent
Consolidated Net Income was reduced by such items: (i) provision for income
taxes during such period; (ii) interest expense deducted in computing
Consolidated Net Income; (iii) total depreciation expense and total amortization
expense (other than amortization of capitalized film costs); (iv) any
extraordinary, unusual or non-recurring expenses or losses, whether or not
includable as a separate item in the statement of such Consolidated Net Income
for such period (including, but not limited to losses on sales of assets outside
of the ordinary course of business, impairment of assets, restructuring charges,
transactions costs of the Recapitalization payable by the Company and write-offs
of deferred costs for such period); (v) any other non-cash charges (other than
write-offs or write-downs during such period of inventory, accounts receivable
or any other current assets or liabilities in the ordinary course of business);
minus (z)(i) any extraordinary, unusual or non-recurring income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on sale of
assets outside of the ordinary course of business) for such period and (ii) any
other non-cash income items increasing Consolidated Net Income for such period,
all as determined for such period in conformity with GAAP.
The
credit agreement for the Term A Loan and Term B Loan includes cross
defaults if there is a default under the Revolver unremedied during the
applicable grace period or a default by the Company on any indebtedness for
borrowed money and similar obligations in excess of $1,000,000 or if there is a
failure to pay the redemption amount of $25.0 million on the preferred interest
held by the NICC subsidiary in Crown Media United States, LLC.
·
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The
terms of the Convertible Preferred Stock will include without limitation
the following:
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o
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Liquidation
preference: In the event of any liquidation or winding up of
the Company, the holders of the Convertible Preferred Stock will be
entitled to receive, in preference to the holders of the common stock of
the Company, an amount equal to the greater of (x) $1,000 per share plus
accrued but unpaid dividends thereon, or (y) that amount that would be
received by such holders on an “as converted” basis (the “Liquidation
Preference”). A consolidation, merger, reorganization or other
form of acquisition of the Company or a sale of all or substantially all
of its assets will be deemed to be a liquidation or winding up for
purposes of the liquidation
preference.
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Dividends:
No dividends will accrue or be payable from the date of issue of the
Convertible Preferred Stock through December 31, 2010; cumulative PIK
dividends will accrue from and after January 1, 2011 through December 31,
2011 at a rate per annum of 14%; cumulative PIK dividends will accrue from
and after January 1, 2012 through December 31, 2014 at a rate per annum of
16%; and cumulative cash-pay dividends will accrue for all periods
thereafter at a rate per annum of 16%, in each case payable solely out of
lawfully available surplus. The Convertible Preferred Stock
will participate with the common stock of the Company as to dividends on
an “as converted” basis. The Company may elect to pay
accumulated PIK dividends in cash at any time, subject to lawfully
available surplus.
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o
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Optional
Conversion: At the option of the holder, each share of
Convertible Preferred Stock becomes and remains convertible at the earlier
of December 31, 2013, or upon a payment or refinancing by the Company
of all or substantially all of the New Debt, into such number of shares of
common stock of the Company as is determined by dividing the Liquidation
Preference of $1,000 plus accrued and unpaid dividends with respect to
such shares of Convertible Preferred Stock by the conversion
price, with anti-dilution protection, including, among other things, an
adjustment for certain issuances of common stock of the Company without
consideration or for a consideration per share less than the then
Conversion Price.
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Redemption: The
Company must redeem (to the extent funds are lawfully available) the
Convertible Preferred Stock when and as the Company receives, upon a
refinancing of the New Debt, net proceeds from such refinancing in excess
of the aggregate outstanding principal and interest amounts of New Debt
(“Excess Refinancing Proceeds”). The Company may voluntarily
redeem the Convertible Preferred Stock at the Liquidation Preference at
any time upon 10-days written
notice.
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Voting: The
Convertible Preferred Stock will vote together with the common stock of
the Company on an “as-converted” basis. In addition, the
consent of holders of more than 50% of the Convertible Preferred Stock,
voting as a separate class, will be required for the Company to do any of
the following, among other things: (i) Authorize or sell any
equity securities pari
passu or senior in right of liquidation to the Preferred Stock;
(ii) except for certain indebtedness permitted by the Credit Agreement,
authorize or issue any debt security unless the debt security has received
the prior approval of the Board of Directors, or amend the terms of any
agreement regarding material indebtedness of the Company unless the
amendment has been approved by the Board of Directors; (iii) repurchase or
redeem equity securities (other than from an employee following
termination pursuant to an arrangement or agreement), or declare or pay
any dividend on the common stock of the Company; (iv) sell, merge,
recapitalize, reorganize, liquidate or dissolve the Company; (v) make any
acquisitions greater than $5,000,000; (vi) amend organizational documents
or enter into an agreement that adversely affects or alters the rights,
preferences or privileges of the Convertible Preferred Stock; and (vii)
issue any additional shares of common stock of the Company (other than
pursuant to options outstanding on the Closing Date) or options or rights
to acquire common stock of the
Company.
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Tax
Sharing Agreement
The
existing Federal Income Tax Sharing Agreement between Hallmark Cards and the
Company will be amended effective as of January 1, 2010 (as amended, the “Tax
Sharing Agreement”). The amendment will provide, among other things,
that:
o
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Hallmark
Cards will not pay any Crown Tax Benefits (defined in the Tax Sharing
Agreement) in cash and instead will carry forward any such amounts to
offset future Crown Tax Liability (defined in the Tax Sharing
Agreement);
|
o
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the
Company will be allowed to deduct both cash-pay and PIK interest due to
Hallmark Cards in calculating tax-sharing
payments;
|
o
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the
conversion of the HCC Debt pursuant to the Recapitalization will not be
deemed the payment of interest expense to Hallmark
Cards;
|
o
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tax
attributable to the cancellation of indebtedness income will be excluded
from the calculation of tax sharing payments;
and
|
o
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any
amounts related to taxes owed to Hallmark Cards prior to December 31,
2009, will be included in the HCC Debt, which will be converted into Class
A Common Stock.
|
The first
payment by the Company pursuant to the Tax Sharing Agreement will occur after
the first full quarter following the Closing Date and will be made in respect of
the period commencing from January 1, 2010 through the last day of the first
full quarter following the Closing Date.
Registration
Rights Agreement
The
Company and HCC will enter into a Registration Rights Agreement providing for
three demand registration rights, three demand resale registration rights and
unlimited piggyback registration rights. The registration rights
concern, among other things, Class A Common Stock issued in the
Recapitalization, Class A Common Stock issuable upon the conversion of the
Convertible Preferred Stock, and Class A Common Stock acquired pursuant to
subscription rights of HCC described below.
Mergers
and Amendments to Certificate of Incorporation
Two
intermediate holding companies (HEIC and HEH) will be merged with and into the
Company, and the stockholders of those companies will receive their pro rata
direct ownership of Class A Common Stock in connection therewith (the
“Mergers”). The Company’s stockholders will receive no consideration
in connection with these mergers.
The
Company will effect an amendment to the Company’s certificate of incorporation
which will automatically convert the shares of Class B Common Stock into shares
of Class A Common Stock and eliminate the super-voting nature of the Class B
Common Stock, resulting in the only authorized common stock being the Class A
Common Stock. The amendment will increase the Company’s authorized
capital stock to 500,000,000 shares of Class A Common Stock and decrease the
authorized Preferred Stock to 1,000,000 shares of preferred stock which may be
issued in series designated by the Board of Directors, of which 400,000 will be
designated as Series A Preferred Stock.
The
provisions dealing with corporate opportunities will be revised to further
delineate the duties of a director or officer of the Company who is also a
director or officer of Hallmark Cards or its affiliates with respect to business
opportunities and corporate transaction opportunities.
Currently
the Company is governed by Section 203 of the Delaware General Corporation Law,
dealing with restrictions on business combinations, although, by the terms of
Section 203, the restrictions on business combinations do not currently apply to
Hallmark Cards or its affiliates. Pursuant to the amendments to the
Certificate of Incorporation, the Company will elect not to be governed by
Section 203 unless and until such time as (i) Section 203, but for the opt-out
provision, would apply to the Company or (ii) there is a transaction in which
Hallmark's beneficial interest in the Company is reduced to less than 50% of the
outstanding shares of Class A Common Stock.
Further,
the Company’s Board of Directors and Hallmark Cards affiliates representing more
than a majority of the voting power of the Company’s capital stock have approved
of an amendment to the Company’s Certificate of Incorporation that provides for
a reverse stock split at any time prior to December 31, 2013 upon the request of
a special committee of the Company’s Board of Directors. The exact
ratio of the reverse stock split will be determined by the Board of Directors,
upon the recommendation of the special committee.
Revolver
As a
condition to closing, the Company must have obtained a revolving credit facility
from a third-party lender with a term of not less than 360 days from the Closing
Date and with availability of at least $30.0 million (the
“Revolver”). The Revolver will have other terms and conditions
reasonably acceptable to the Company, and Hallmark Cards must have guaranteed,
or caused one or more of its affiliates to have guaranteed, the
Revolver.
Waiver
Agreement
The
Amended and Restated Waiver and Standby Purchase Agreement, which was entered
into on March 10, 2008 and most recently amended in May 2009 (the “Waiver
Agreement”), has been amended to provide that the waiver thereunder will
terminate automatically on August 31, 2010. Additionally, Hallmark
will use its best efforts to ensure that the Company will have continued access
to up to $30.0 million under the Company’s existing revolving credit facility
while the Waiver Agreement is in effect.
Standstill
Agreement
Hallmark
Cards and HCC (“Hallmark” in this context) will enter into a stockholders
agreement (the “Stockholders Agreement”) with standstill provisions pursuant to
which they will agree that Hallmark will not acquire any additional shares of
common stock of the Company through December 31, 2013, except:
o
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additional
shares of Class A Common Stock resulting from the conversion of the
Convertible Preferred Stock;
|
o
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acquisitions
pursuant to the subscription rights described in the next
paragraph;
|
o
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with
the prior approval of a special committee of the Company’s Board of
Directors comprised solely of independent, disinterested directors;
and
|
o
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from
January 1, 2012 through December 31, 2013, either (i) pursuant to a tender
offer for all of the Company’s shares of Class A Common Stock, which
tender offer is subject to a majority-of-a-minority tender condition, or
(ii) pursuant to a “Premium Transaction” as described below under “Co-Sale
Rights.”
|
Until
termination of the Stockholders Agreement, in the event that the Company
proposes to issue additional shares of capital stock, options or rights to
acquire equity securities or debt securities convertible into equity securities,
the Company will offer to HCC and its affiliates such additional shares as will
be necessary to ensure that Hallmark continues to own on a fully-diluted basis
at least the same percentage of the shares of all classes of the Company capital
stock as HCC and its affiliates owned immediately prior to such
issuance.
Co-Sale
Rights
The
Stockholders Agreement also provides that:
o
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Until
December 31, 2013, HCC may not sell or transfer its Class A Common Stock
to a third party, except:
|
§
|
from
the Closing Date through December 31, 2013, with the prior approval of a
special committee of the Company’s Board of Directors comprised solely of
independent, disinterested
directors;
|
§
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on
or after January 1, 2012, (i) in a Premium Transaction or (ii) pursuant to
a public offering or block trade in which to the knowledge of HCC, no
purchaser (together with its affiliates and associates) acquires
beneficial ownership of a block of shares of the Company in excess of 5%
(in the case of a public offering) or 2% (in the case of any block trade)
of the outstanding Class A Common Stock;
and
|
§
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to
an affiliate of Hallmark Cards or pursuant to a bona fide pledge of the
shares to a lender that is not an affiliate of Hallmark Cards
(collectively, a “Permitted
Transfer”).
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A
“Premium Transaction” is a transaction involving the sale or transfer by
Hallmark of its shares of Class A Common Stock to a third party (by merger or
otherwise) in which all stockholders unaffiliated with Hallmark will be entitled
to participate and will be entitled to receive both (x) consideration equivalent
in value to the highest consideration per share of Class A Common Stock received
by HCC in connection with such transaction, and (y) a premium of $0.50 per share
of Class A Common Stock (subject to adjustment for any stock splits,
combinations, reclassifications, adjustments, sale of Class A Common Stock by
the Company, or sale of Class A Common Stock by HCC pursuant to a public
offering or block trade as permitted above, or any similar
transaction). For the avoidance of doubt, the aggregate premium shall
not exceed $17,400,880, which is the product of the number of outstanding shares
owned by minority stockholders as of the date of the Master Recapitalization
Agreement multiplied by $0.50. Also, for the avoidance of doubt, HCC
may effectuate a Premium Transaction pursuant to a short-form merger (or other
merger) between the Company and HCC or any purchaser of its shares, so long as
the holders of Class A Common Stock not affiliated with HCC receive the
consideration provided for in this paragraph in connection with such
merger.
o
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From
and after January 1, 2014 until the earlier of December 31, 2020 and such
time as Hallmark and its controlled affiliates no longer beneficially own
a majority of the outstanding Class A Common Stock, HCC may not sell or
transfer, in one or a series of related transactions, a majority of the
outstanding shares of Class A Common Stock to a third party, unless (x) in
a Permitted Transfer, (y) with the prior approval of a special committee
of the Board of Directors or (z) all stockholders unaffiliated with
Hallmark will at Hallmark’s option be entitled to either (i) participate
in such transaction on the same terms as HCC or (ii) receive cash
consideration equivalent in value to the highest consideration per share
of Class A Common Stock received by HCC in connection with such
transaction.
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In
addition, the Stockholders Agreement sets forth the terms on which Hallmark
Cards or one of its affiliates is required to provide a guarantee of the
Revolver. The Hallmark obligations regarding the standstill
provisions, co-sale rights and the guarantee of the Revolver will terminate upon
a payment default on the New Debt, subject to a 60-day grace/cure
period. The Stockholders Agreement also terminates on the earlier of
such time as Hallmark and its affiliates cease to own a majority of the Class A
Common Stock or December 31, 2020.
Listing
Requirements
Pursuant
to the Stockholders Agreement, the Company will use its commercially reasonable
best efforts to maintain the listing of the Class A Common Stock on the NASDAQ
Global Market through December 31, 2013. Until that date, HCC will
(i) vote in favor of any proposed amendment to the Company’s certificate of
incorporation to effect a reverse stock split with respect to the Class A Common
Stock to maintain the listing on the NASDAQ Global Market if recommended by a
majority of directors who are not affiliates of Hallmark and (ii) reasonably
cooperate with the Company in meeting with representatives of the NASDAQ Global
Market in support of such listing. Through December 31, 2013, HCC
will not cause the Company to voluntarily delist the shares of Class A Common
Stock from NASDAQ Global Market or deregister the shares of Class A Common Stock
under the Securities Exchange Act of 1934, as amended (except in connection with
a Premium Transaction or tender offer by Hallmark which is a permitted
acquisition of stock as described above).
ITEM
9.01 FINANCIAL
STATEMENTS AND EXHIBITS.
A list
showing the exhibit filed herewith is contained on the Exhibit Index, which
immediately precedes such exhibit and is incorporated herein by
reference.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
CROWN
MEDIA HOLDINGS, INC.
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||||
(Registrant)
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||||
Date
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March
1, 2010
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By
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/s/
Charles L. Stanford
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Charles
L. Stanford
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||||
Executive
Vice President and General Counsel
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EXHIBIT
INDEX
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Exhibit
Number
|
Description
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2.1
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Agreement
and Plan of Merger of Crown Media Holdings, Inc. and Hallmark
Entertainment Investments Co., dated as of February 26,
2010.
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2.2
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Agreement
and Plan of Merger of Crown Media Holdings, Inc. and Hallmark
Entertainment Holdings, Inc., dated as of February 26,
2010.
|
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3.1
|
Form
of Second Amended and Restated Certificate of Incorporation of Crown Media
Holdings.
|
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3.2
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Form
of Certificate of Designation, Powers, Preferences, Qualifications,
Limitations, Restrictions and Relative Rights of Series A Convertible
Preferred Stock of Crown Media Holdings, Inc.
|
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3.3
|
Form
of Third Amended and Restated Certificate of Incorporation of Crown Media
Holdings, Inc.
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4.1
|
Form
of Stockholders Agreement by and among H C Crown Corp., Hallmark Cards,
Incorporated and Crown Media Holdings, Inc.
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4.2
|
Form
of Registration Rights Agreement among H C Crown Corp., any Other HEIC
Stockholder and Crown Media Holdings, Inc.
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10.1
|
Master
Recapitalization Agreement by and among Hallmark Cards, Incorporated, H C
Crown Corp., Hallmark Entertainment Holdings, Inc., Crown Media Holdings,
Inc., Crown Media United States, LLC, and The Subsidiaries of Crown Media
Holdings, Inc. Listed as Guarantors on the Credit Facility, dated as of
February 26, 2010.
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10.2
|
Form
of Credit Agreement Among Crown Media Holdings, Inc. as
Borrower and HC Crown Corp., as Lender and Each of the Credit Parties
Identified on the Signature Pages Hereto.
|
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10.3
|
Form
of Amendment No. 2 to Federal Income Tax Sharing Agreement between
Hallmark Cards, Incorporated and Crown Media Holdings,
Inc.
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99.1
|
Press
Release regarding
Recapitalization.
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