Document:

Exhibit 10.38

 

TAX SHARING AGREEMENT

 

TAX SHARING AGREEMENT (the “Agreement”) dated as of May 9,2000 by and among Hallmark Entertainment, Inc., a Delaware corporation (“HEI”), Crown Media, Inc., a Delaware corporation, Crown Media Holdings, Inc., a Delaware corporation (“Newco”), the subsidiaries of Newco that are signatories hereto, the other members of the Newco Group (as defined below) and any entities which become parties hereto pursuant to Section 20 hereof (the “Parties”; each, a “Party”).

 

WHEREAS, Newco and certain of its Subsidiaries may be included in the filing of consolidated, combined or unitary income or franchise Tax Returns that also include members of the Hallmark Group (as defined below);

 

WHEREAS, the Newco Group and the Hallmark Group wish to allocate and settle amongst themselves in an equitable manner the Tax liability in connection with such consolidated, combined or unitary income or franchise Tax Returns; and

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Parties hereby agree as follows:

 

1.             Definitions.  For purposes of this Agreement, the following terms shall be defined as follows:

 

 

(a)                                 “Affiliated Group”  shall mean any affiliated, combined, consolidated or unitary group for state, local or foreign Tax purposes that files Joint Returns.

 

(b)                                 “After-Acquired Subsidiary”  shall mean any Subsidiary of Newco acquired after the Contribution Agreement Closing Date and not as part of the transactions contemplated by the Contribution Agreement.

 

(c)                                  “Contribution Agreement”  shall mean the Contribution Agreement by and among HEI, Crown Media, Inc., Liberty Media Corporation, Vision Group Incorporated, VISN Management Corp., National Interfaith Cable Coalition, Inc., Chase Equity Associates, L.L.C., and Newco, dated as of January 27, 2000.

 

(d)                                 “Contribution Agreement Closing Date”  shall mean the “Closing Date” as defined in the Contribution Agreement.

 

(e)                                  “Final Determination”  shall mean a closing agreement with the Internal Revenue Service or the relevant state, local of foreign Taxing authorities, an agreement contained in Internal Revenue Service Form 870-AD or other comparable form, an agreement that constitutes a determination under Section 1313(a) (4) of the Internal Revenue Code, a claim for refund of Taxes which has been allowed, a Tax 

 

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deficiency notice with respect to which the period for filing ‘a petition with the Tax Court or the relevant state, local or foreign tribunal has expired, or a decision of any court of competent jurisdiction that is not subject to appeal or as to which the time for appeal has expired.

 

(f)                                   “Governmental Authority”  shall have the meaning set forth in the definition of “Tax”.

 

(g)                                  “Group”  shall mean either the Hallmark Group or the Newco Group.

 

(h)                                 “Hallmark”  shall mean Hallmark Cards, Incorporated, a Missouri corporation.

 

(i)                                     “Hallmark Group”  shall mean Hallmark and each of the other Legal Entities that is or was at any time owned directly or indirectly by Hallmark, other than any member of the Newco Group.

 

(j)                                    “Hallmark Indemnitees”  shall have the meaning set forth in Section 7.

 

(k)                                 “Joint Return”  shall mean any Tax Return that includes at least two Legal Entities, of which one Legal Entity is a member of one Group and the other Legal Entity is a member of the other Group.

 

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(l)                                     “Legal Entity”  shall mean a corporation, partnership, limited liability company or other legal entity under the corporation, partnership, limited liability company or other organizational laws of a state or other jurisdiction.

 

(m)                             “Losses”  shall mean costs, expenses, fees, liabilities, obligations and losses.

 

(n)                                 “Newco Group”  shall mean (i) Newco and (ii) each other Legal Entity that is or was at any time owned, directly or indirectly, by Newco or any of its Subsidiaries (in the case of (ii), other than (a) a Legal Entity that was never owned, directly or indirectly, by Newco or any of its Subsidiaries on or after the Contribution Agreement Closing Date and (b) for taxable periods (or portions thereof) beginning after the date that a Legal Entity is transferred by Newco or any of its Subsidiaries to a member of the Hallmark Group, the transferred Legal Entity).

 

(o)                                 “Newco Indemnitees”  shall have the meaning set forth in Section 7.

 

(p)                                 “Party” and “Parties”  shall have the meanings set forth in the recitals hereto.

 

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(q)                                 “Person”  means any individual or corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

 

(r)                                    “Post-Closing Period”  shall mean a taxable period beginning after the Contribution Agreement Closing Date and the portion, beginning after and excluding the Contribution Agreement Closing Date, of any taxable period which includes but does not end on the Contribution Agreement Closing Date.

 

(s)                                   “Separate Return”  shall mean any Tax Return that is not a Joint Return.

 

(t)                                    “Subsidiary”  means, as to any Person, any other Person of which at least (i) 50% of the equity and (ii) 50% of the voting interests are owned, directly or indirectly, by such first Person.

 

(u)                                 “Tax”  shall mean any tax, fee, levy or other like governmental assessment or charge of any kind whatsoever, wherever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, state, foreign, federation or other governmental body (a “Governmental Authority”), and, without limiting the generality of the foregoing, shall 

 

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include income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, unemployment insurance, social security, stamp, environmental, value added, alternative or added minimum, ad valorem, trade, recording, withholding, occupation or transfer tax, custom or duty, together with any related interest, penalties and additions imposed by any Governmental Authority.

 

(v)                                 “Tax Item”  shall mean any item of income, gain, loss, deduction, credit, recapture of credit or any other item which increases or decreases Taxes paid or payable.

 

(w)                               “Tax Proceeding”  shall mean any Tax audit, examination, controversy or litigation by, with or against any Governmental Authority.

 

(x)                                 “Tax Return”  shall mean any Tax report, return or other information (including any attached schedules or any amendments to such report, return or other information) required to be supplied to or filed with a Governmental Authority, including an information return, claim for refund, amended return or declaration or estimated tax return.

 

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2.                                      Filing of Joint Returns.  HEI (and each member of the Hallmark Group) may file any combined, consolidated or unitary state, local or foreign income Tax Returns as HEI (or such member of the Hallmark Group) determines appropriate; provided, however, that for Post-Closing Periods, a member of the Newco Group shall join in the filing of such Tax Return only if (i) HEI (or such other member of the Hallmark Group as is the common parent or comparable entity of the relevant Affiliated Group) reasonably determines that (A) including such member of the Newco Group in the filing of such Tax Return is required under applicable law or (B) including such member of the Newco Group in the filing of such Tax Return will not increase the aggregate Tax liability of the Newco Group (taking into account the effect of this Agreement) or (ii) Newco consents to such member joining in such filing. HEI (or such other member of the Hallmark Group as is the common parent or comparable entity of the relevant Affiliated Group) and the Newco Group shall execute and file such consents, elections and other documents that HEI (or such other member) determines may be required, desirable or appropriate for the proper filing of such Joint Returns. HEI (or such other member of the Hallmark Group as is the common parent or comparable entity of an Affiliated Group) 

 

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shall determine whether any Joint Return shall be filed and the entities to be included in a Joint Return, make or revoke any Tax elections, adopt or change any accounting methods and determine any other positions taken on or in respect of any Joint Return; provided, however, that, for Post-Closing Periods, to the extent such filing, election, revocation, adoption, change or determination, as the case may be, is reasonably expected to affect the Newco Group, such filing, election, revocation, adoption, change or determination shall be made only if (i) HEI (or such other member of the Hallmark Group as is the common parent or comparable entity of the relevant Affiliated Group) reasonably determines that (A) such filing, election, revocation, adoption, change or determination is required under applicable law or (B) such filing, election, revocation, adoption, change or determination will not increase the aggregate Tax liability of the Newco Group (taking into account the effect of this Agreement) or (ii) Newco consents to such filing, election, revocation, adoption, change or determination. HEI (or such other member of the Hallmark Group as is the common parent or comparable entity of an Affiliated Group) shall timely pay, or cause to be paid, the amount of Tax shown as due on any Joint Return.

 

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3.                                      Tax Sharing Payments.  For each Post-Closing Period in which any member of an Affiliated Group files a Joint Return, Newco shall (i) make Tax sharing payments to HEI (or such other member of the Hallmark Group as is the common parent or comparable entity of the Affiliated Group) equal to the Taxes that the Newco Group Legal Entities included in the Joint Return would have been required to pay if they filed a Separate Return with respect to the type of Tax and the jurisdiction of the Joint Return for such Post-Closing Period and (ii) be entitled to Tax sharing payments from HEI (or such other member of the Hallmark Group as is the common parent or comparable entity of the Affiliated Group) equal to the Tax refunds to which the Newco Group Legal Entities included in the Joint Return would have been entitled if they had filed a Separate Return with respect to the type of Tax and the jurisdiction of the Joint Return for such Post- Closing Period. The Separate Return Tax payments and refunds of such Newco Group Legal Entities shall be based on such Legal Entities’ income, gain, loss, deduction and credit for taxable periods (or portions thereof) beginning on or after the day following the Contribution Agreement Closing Date (or, in the case of an After-Acquired Subsidiary, the day following the date such Subsidiary is acquired), and (except in the case of an After-Acquired 

 

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Subsidiary) such payments and refunds shall be calculated without regard to any carryforward of loss, deduction or credit from a Pre-Closing Period or utilization of loss, deduction or credit arising in a Pre-Closing Period. The Newco Group shall not be entitled to any payment under this Section 3 (nor shall any payment by Newco under this Section 3 be reduced) to take account of any refund or credit of Taxes for any taxable period (or portion thereof) ending on or prior to the Contribution Agreement Closing Date arising from any Joint Return or to which the Newco Group would have been entitled if it had filed a Separate Return. The Newco Group shall not be required to make any payment under this Section 3 for any Taxes for any taxable period (or portion thereof) ending on or prior to the Contribution Agreement Closing Date arising from any Joint Return. The Hallmark Group and the Newco Group shall make any Tax sharing payments required pursuant to this Section 3 no later than two business days prior to the due date (including extensions) of any Joint Return of the Affiliated Group.

 

4.                                      Subsidiary Payments.  Each of the Subsidiaries of Newco agrees to pay to Newco or, at Newco’s discretion, to HEI (or such other member of the Hallmark Group as is the common parent or comparable entity of the Affiliated Group), its 

 

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share of each of the payments for which Newco is responsible hereunder no later than one business day prior to the date upon which the relevant payment by Newco is required to be made hereunder.

 

5.                                      Adjustments.  In the event of any redetermination of the consolidated, combined or unitary income or franchise Tax liability of the Affiliated Group as the result of a Tax Proceeding, a claim for refund (including a refund resulting from a carryback) or otherwise, the amounts required to be paid pursuant to Section 3 for such taxable period and any prior and subsequent taxable periods shall be recomputed to take into account such redetermination, and payments pursuant to Section 3 hereof shall be appropriately adjusted. Any payment by HEI, Newco, the Hallmark Group, or the Newco Group required by such adjustment shall be paid within fifteen days after the date of a Final Determination with respect to such redetermination.

 

6.                                      Separate Returns.  Any Separate Return that includes only a member or members of the Newco Group and any Taxes with respect to such Separate Return shall be the responsibility of the Newco Group. If, pursuant to Section 2, HEI determines to include (or not include) a member of the Newco Group in a Joint Return for a taxable period, then Newco 

 

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shall not, and shall cause such member not to, take a position on a Tax Return or otherwise that is contrary to such determination to include (or not include) such member.

 

7.                                      Indemnification.  From and after the Contribution Agreement Closing Date: (a) HEI shall indemnify and hold harmless each Legal Entity that is a member of the Newco Group and their respective directors, officers, employees, affiliates, agents, successors and assigns (the “Newco Indemnitees”) from and against (i) any Joint Return Taxes to the extent the Hallmark Group is required to make a payment hereunder to the Newco Group in respect of such Taxes, (ii) any Separate Return Taxes of a member or members of the Hallmark Group, (iii) any Taxes imposed without the filing of any Tax Return, to the extent such Taxes are the responsibility of, and measured by reference to, a member or members of the Hallmark Group and (iv) any Losses incurred by any Newco Indemnitee by reason of a breach by any member of the Hallmark Group of its obligations or covenants hereunder (including the obligation to pay, or cause to be paid, subject to any applicable right of reimbursement, to the relevant Governmental Authority amounts shown as due on any Joint Return); and 

 

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(b) Each Legal Entity that is a member of the Newco Group shall indemnify and hold harmless each Legal Entity that is a member of the Hallmark Group and their respective directors, officers, employees, affiliates, agents, successors and assigns (the “Hallmark Indemnitees”) from and against (i) any Joint Return Taxes to the extent the Newco Group is required to make payment hereunder to the Hallmark Group in respect of such Taxes, (ii) any Separate Return Taxes of a member or members of the Newco Group, (iii) any Taxes imposed without the filing of any Tax Return, to the extent such Taxes are the responsibility of, and measured by reference to, a member or members of the Newco Group and (iv) any Losses incurred by any Hallmark Indemnitee by reason of a breach by any member of the Newco Group of its obligations or covenants hereunder.

 

8.                                      Contests.  HEI (or such other member of the Hallmark Group as HEI shall designate) shall have the right to control in all respects all Tax Proceedings with respect to any Joint Return; provided, however, that, with respect to taxable periods ending after the Contribution Agreement Closing Date, (A) Newco shall be entitled to participate in any such Tax Proceeding at its expense to the extent relating solely to the Tax liabilities of the Newco Group (including the 

 

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Newco Group’s obligation to make payments pursuant to this Agreement), (B) HEI (or such other member) shall keep Newco updated and informed, and shall consult with Newco, with respect to any Tax Item of the Newco Group that is a subject of such Tax Proceeding, and (C) HEI (or such other member) shall not enter into any settlement of any Tax Proceeding with respect to any Tax Item of the Newco Group without Newco’s prior written consent, which shall not be unreasonably withheld.

 

9.                                      Appointment of HEI as Agent.  Newco and each of the Subsidiaries in the Newco Group hereby appoint HEI (and any other member of the Hallmark Group as HEI may designate) as their agent for the purpose of filing any Joint Return and making any election or application or taking any action in connection with any such Joint Return on behalf of Newco and each Subsidiary in the Newco Group. Newco and each of the Subsidiaries in the Newco Group hereby consent to the filing of such Joint Returns and to the making of such elections and applications.

 

10.                               Cooperation.  The Parties shall cooperate with one another in all matters relating to the Taxes covered in this Agreement. The Newco Group will provide the Hallmark Group with such cooperation and information as is necessary in 

 

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order to enable the Hallmark Group to satisfy its Tax requirements. Such cooperation and information by the members of the Newco Group shall include making their respective knowledgeable employees available during normal business hours, providing the information relating to the Tax Items of the Newco Group that is necessary or reasonably useful for HEI (or any other member of the Hallmark Group) to satisfy its obligations with respect to any Tax Return or to make any calculations or determinations in connection with this Agreement, maintaining such books and records and providing such information as may be necessary or useful in the filing of Joint Returns, and executing any documents and taking any actions which the Hallmark Group may reasonably request in connection therewith. HEI shall provide Newco, upon request, with copies of relevant parts of any Joint Returns, not later than five business days prior to the date such Joint Returns are filed and with copies of relevant parts of schedules and workpapers used to prepare such Joint Returns and to determine payments pursuant to this Agreement. Notwithstanding any other provision, none of Newco, the Newco Group or any other Person (other than the members of the Hallmark Group) shall have any right to receive or obtain any information relating to, or have any rights with respect to, any consolidated, combined or 

 

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unitary Taxes of HEI, Hallmark, the Hallmark Group or any member of the Hallmark Group, other than information and rights relating solely to Tax Items of Newco, the Newco Group or a member of the Newco Group.

 

11.                               Confidentiality.  Any information obtained by any Party under this Agreement shall be kept confidential, except as may be necessary in connection with the filing of Tax Returns or claims for refund or in connection with an audit, dispute, proceeding, suit or action concerning any of the matters addressed in this Agreement, or unless a Party is compelled to disclose information by judicial or administrative process or, in the opinion of its counsel, by other requirements of law. This Section 11 shall not prevent the sharing of information by the Parties with their respective legal advisors or accountants.

 

12.                               Calculation of Tax Sharing Payments and Disputes.  Each calculation of Tax sharing payments pursuant to this Agreement shall be made in good faith. If the Hallmark Group or the Newco Group disputes the administration or interpretation of, or calculation of Tax sharing payments pursuant to, this Agreement with respect to any taxable period covered by this Agreement (hereinafter, for purposes of this Section 12, a “Disputing Party”), it shall within 

 

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the later of (i) one year following the close of such taxable year, or (ii) in the event of any adjustment to Tax liability described in Section 5 of this Agreement, within three months of receiving written notice of such adjustment, give written notice to the other Group, specifying the reason for such dispute. Failure by the Hallmark Group or the Newco Group to so notify shall constitute acceptance and approval of the application of the Agreement to such Group for such taxable year. In the event of any such dispute between the Hallmark Group and the Newco Group with respect to the operation or interpretation of this Agreement, HEI and Newco shall in good faith confer with each other to resolve amicably the dispute. If, after a period of sixty (60) days following the date on which the Disputing Party gave notice of any such dispute, as set forth above, such dispute cannot be resolved in good faith by such Parties, it shall be resolved by an independent certified public accounting firm or law firm that is mutually reasonably satisfactory to HEI and Newco in a manner that best conforms with the intent of the Parties reflected in this Agreement. The judgment of the independent public accounting firm shall be (i) based solely on the terms of this Agreement and on presentations made by the Parties in dispute, (ii) made within thirty (30) days following the date on which the 

 

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dispute is submitted, (iii) set forth in a written statement delivered to the Parties in dispute and (iv) conclusive and binding upon the Parties, in the absence of mathematical error. All costs, fees and expenses of the independent certified public accounting firm or law firm that are attributable to services rendered under this Section 12 shall be borne half by the Hallmark Group and half by the Newco Group.

 

13.                               Binding Effect; Successors and Assigns.  This Agreement shall be binding upon HEI, Newco, each Subsidiary that is a signatory hereto, each other member of the Newco Group and the Subsidiaries that become Parties hereto pursuant to Section 20 hereof. This Agreement shall inure to the benefit of, and be binding upon, any successors or assigns of the Parties hereto (including, without limitation, any Subsidiary that becomes a Party hereto pursuant to Section 20). HEI, Newco and each other Party hereto may not assign any of the rights or obligations under this Agreement without the prior written consent of all other Parties.

 

14.                               Party Leaving the Affiliated Group.  (a) Any Party which ceases to be a member of an Affiliated Group shall be bound by this Agreement for all taxable periods during which such Party was a member of the Affiliated Group and this 

 

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Agreement was in effect. (b) Without duplication of any amounts otherwise payable under this Agreement, if each member of the Newco Group ceases to be a member of an Affiliated Group on a date (the “Departure Date”) and, in connection with the filing after the Departure Date by the Newco Group (or a member thereof) of a Separate Return in a jurisdiction for a taxable period (or portion thereof) ending after the Departure Date, the Newco Group would have been entitled to utilize all or a portion of the Cumulative Loss (as defined below), if any, on such Separate Return but for the utilization on a Joint Return of the Cumulative Loss (or portion thereof), then HEI shall pay Newco (within five days after the filing of such Tax Return or, if later, within five days after notice from Newco to HEI that such Tax Return has been filed) the Tax refund (or reduction in Tax liability) to which the Newco Group would have been entitled but for the utilization of the Cumulative Loss (or portion thereof) on the Joint Return; provided, however, that if an adjustment reverses all or any portion of the amount used to determine the payment under this Section 14(b), then an appropriate adjusting payment shall be made. “Cumulative Loss” shall mean the unexpired net operating loss, as of the Departure Date, of the Newco Group Legal Entities included in Joint Returns (such net operating loss 

 

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to be computed in the manner set forth in Section 3, as if the Newco Group Legal Entities included in Joint Returns had filed Separate Returns with respect to Post-Closing Periods). Except as otherwise set forth above in this Section 14(b), the amounts determined under this Section 14(b) shall disregard any change (other than a change required by law) after the Departure Date in Tax elections, Tax practices, Tax accounting methods and Tax positions of the Newco Group that accelerate the recognition of Newco Group’s income or gain (or decelerate recognition of its losses, deductions or credits).

 

15.                               Interpretation.  This Agreement is intended to calculate and allocate certain federal, state, local and foreign Tax liabilities of the members of the Affiliated Group, the Hallmark Group and the Newco Group, and any situation or circumstance concerning such calculation and allocation that is not specifically contemplated herein or provided for herein shall be dealt with in a manner consistent with the underlying principles of calculation and allocation in this Agreement.

 

16.                               Legal and Accounting Fees.  Unless otherwise specified herein, any fees or expenses for legal, accounting or other professional services rendered in connection with the 

 

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preparation of a Joint Return or the conduct of any Tax Proceeding shall be allocated between HEI and Newco in a manner resulting in HEI and Newco, respectively, bearing a reasonable approximation of the actual amount of such fees or expenses hereunder reasonably related to, and for the benefit of, their respective Groups.

 

17.                               Effect of the Agreement.  This Agreement shall determine the liability of HEI, Newco and the members of their respective Groups to each other as to the matters provided for herein, whether or not such determination is effective for purposes of federal, state, local or foreign Tax laws, or for financial reporting purposes or for any other purposes.

 

18.                               Entire Agreement.  This Agreement (together with the Contribution Agreement) embodies the entire understanding among the Parties relating to its subject matter. Any and all prior correspondence, conversation and memoranda are merged herein and shall be without effect hereon. No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce any Party to enter into this Agreement. This Agreement, including this provision against oral modification, shall not be modified or terminated except by a writing duly signed by each of the Parties hereto, and no waiver of any

 

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provisions of this Agreement shall be effective unless in a writing duly signed by the Party sought to be bound.

 

19.                               Notices.  Any payment, notice or communication required or permitted to be given under this Agreement shall be in writing (including telecopy communication) and mailed, telecopied or delivered:

 

If to HEI or any member of the Hallmark Group:

 

Richard B. Chalker

Division Vice President - Tax & Customs

Hallmark Cards, Incorporated

2501 McGee

PO Box 419480

MD #330

Kansas City, MO 64141-6480

 

Copy to:

 

Judith C. Whittaker

[Vice President & General Counsel]

Hallmark Cards, Incorporated

2501 McGee

Kansas City, MO 64108

 

If to Newco or any member of the Newco Group:

 

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or to any other address as HEI or Newco shall furnish in writing to one another. All such notices and communications shall be effective when received.

 

20.                               New Members.  Each of the Parties to this Agreement recognizes that from time to time, new Subsidiaries of Newco may be added to the Newco Group. Each of the Parties agrees that any new Subsidiary of Newco shall, without the express written consent of the other Parties, become a Party to this Agreement.

 

21.                               Nature of Obligations.  Each of HEI and Newco acknowledges and agrees that its respective obligations under this Agreement shall not be affected by any impossibility, impracticability, frustration of purpose, force  majeure, act of government, bankruptcy or insolvency of any Party to this Agreement, failure or refusal of any Party to this Agreement to perform its obligations hereunder, dispute, setoff or counterclaim, change in amount, composition or terms of the assets, liabilities or equity of HEI or Newco or any other Party to this Agreement, or any other defense or right which HEI or Newco has or may have that might have the effect of releasing HEI or Newco, as the case may be, from such obligations.

 

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22.                               Title and Headings.  Titles and headings of sections herein are inserted for the convenience of reference only and are not intended to be a part or to affect the meaning or interpretation of this Agreement.

 

23.                               Legal Enforceability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any Party hereto, each Party hereto acknowledges that damages would be an inadequate remedy for breach of the provisions of this Agreement and agrees that the obligations of the Parties hereunder shall be specifically enforceable.

 

24.                               Amendment.  This Agreement may be amended, modified or supplemented only by a written agreement signed by all of the Parties hereto.

 

25.                               Termination.  This Agreement shall terminate upon written consent of both HEI and Newco. Notwithstanding such termination, this Agreement shall remain in force with

 

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respect to any payment or refund due for any taxable period prior to termination during which this Agreement was in effect.

 

26.                               Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the internal laws (as distinguished from the conflict of laws provisions) of the State of Delaware.

 

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its respective duly authorized officer as of the date first set forth above.

 

 

	
 
    	
HALLMARK ENTERTAINMENT,   INC.
    
	
 
    	
By:
    	

    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CROWN MEDIA, INC.
    
	
 
    	
By:
    	

    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CROWN MEDIA HOLDINGS,   INC., for itself and for each member of the Newco Group
    
	
 
    	
By:
    	

    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
					

 

26Exhibit 10.52

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

Agreement, made as of January 1, 2012 (“Effective Date”), between Crown Media Holdings, Inc., a Delaware corporation, with offices at 12700 Ventura Boulevard, Los Angeles, California 91604 and 1325 Avenue of the Americas, 22nd Floor, New York, NY 10019 (“Employer”) and Charles Stanford (“Employee”).

 

WHEREAS, Employer desires to employ Employee as provided herein and Employee desires to be employed by Employer upon the terms and conditions set forth;

 

NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows:

 

1.             Employment Duties.

 

(a)           As of the Effective Date, Employer hereby employs and Employee hereby agrees to employment pursuant to the terms of this agreement (“Employment Agreement”). Employee agrees to serve as Executive Vice President, Legal & Business Affairs and General Counsel, reporting to the Chief Executive Officer of Employer. Additionally, Employee agrees to serve in such other capacities and perform responsibilities as shall be designated from time to time by Employer. Employee shall use Employee’s best efforts to promote the interests of Employer and shall devote Employee’s full business time, energy and skill exclusively to the business and affairs of Employer during the “Term” (as “Term” is defined in Paragraph 2 below).

 

(b)           During the course of Employee’s employment hereunder, Employer may create or utilize subsidiary companies for the production and distribution of programming or to conduct the other activities and businesses of Employer. Employer shall have the right, without additional compensation to Employee, to loan or make Employee available to any subsidiary of Employer or company in common ownership with Employer to perform services for any programming, property or project owned or controlled by Employer or any such entity, provided that Employee’s services for any such entity shall be consistent with Employee’s duties hereunder. Employee further agrees that all the terms of this Employment Agreement shall be applicable to Employee’s services for each such entity.

 

(c)           During the Term, Employee shall be required to perform Employee’s duties at the Employer’s office in Los Angeles or at such other principal location in the Los Angeles metropolitan area (or such other location as may be mutually

 

 

agreeable to Employer and Employee), and Employee shall undertake all travel required by Employer in connection with the performance of Employee’s duties hereunder.

 

(d)           Employer shall indemnify Employee for his acts as Employee to the extent provided in Employer’s bylaws.

 

2.             Term of Employment. The term of Employee’s employment (“Term”) with Employer shall commence on the Effective Date and shall end December 31, 2013 thereafter, unless terminated earlier as provided in Paragraph 7 of this Agreement.

 

3.             Compensation.

 

(a)           Salary. As compensation for Employee’s services hereunder, Employer shall pay to Employee a base salary at the annual rate of Five Hundred Forty Three Thousand and Four Hundred Seventy Dollars ($543,470.00) per year. During the Term and any extensions, Employer will consider an adjustment of Employee’s base salary in March of each year, commencing in March 2013.

 

(b)           Performance Bonus. Contingent on employment through each year end; the end of the Term; or for termination of employment pursuant to Paragraph 7(b) below, following the end of each calendar year during the Term, Employee will be paid a bonus, to be pro rated for partial calendar years within the Term, in an amount based on achievement of criteria outlined by the Compensation Committee of Employer, which criteria shall be the same as that established for the senior management team. The bonus target will be set as a percentage of base salary earned for each year, but such target shall be no less than 30%. Such bonus will be paid to Employee on the date following the applicable calendar year that Employer designates for payment of bonuses to its employees in general, but in no event later than March 15.

 

(c)           LTI. Employer will award to Employee Long Term Incentive (“LTI”) pursuant to the terms and conditions of the Amended and Restated Crown Media Holdings, Inc. 2000 Long Term Incentive Plan as amended (collectively, referred to herein as the “Incentive Agreements”).

 

(d)           Withholding. All payments of salary shall be made in appropriate installments to conform with the regular payroll dates for salaried personnel of Employer. Employer shall be entitled to deduct from each payment of compensation amounts required under applicable laws or for participation in any employee benefit plans.

 

(e)           Expenses. During the Term, Employer shall pay or reimburse Employee on an accountable basis for all reasonable and necessary out-of-pocket

 

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expenses for entertainment, travel, meals, hotel accommodations and other expenditures incurred by Employee in connection with Employee’s services to Employer in accordance with Employer’s expense account policies for its senior executive personnel.

 

(f)            Fringe Benefits. During the Term, Employee shall be entitled to receive the following fringe benefits pursuant to plans which may be amended from time to time or discontinued:

 

(i)            group medical, dental, life and disability insurance as per Employer policy; and

 

(ii)           any pension or other fringe benefits on terms that are or may become available generally to senior executives of Employer. Employee shall also be entitled to four (4) weeks paid vacation for each year of the Term, subject to accrual and usage as outlined in Employer’s policies, as may be amended from time to time or discontinued. The allowable maximum accrual for vacation shall be 1.5 times your benefit, and once the maximum has been accrued, no further hours will accrue until vacation time has been used.

 

4.             Confidentiality, Intellectual Property; Name and Likeness.

 

(a)           Employee agrees that Employee will not during the Term or thereafter divulge to anyone (other than Employer and its executives, representatives and employees who need to know such information or any persons designated by Employer) any knowledge or information of any type whatsoever designated or treated as confidential by Employer relating to the business of Employer or any of its subsidiaries or affiliates, including, without limitation, all types of trade secrets, business strategies, marketing and distribution plans as well as concrete proposals, plans, scripts, treatments and formats described in Subparagraph (b) below. Employee further agrees that Employee will not disclose, publish or make use of any such knowledge or information of a confidential nature (other than in the performance of Employee’s duties hereunder) without the prior written consent of Employer. This provision does not apply to information which becomes available publicly without the fault of Employee or information which Employee discloses in confidence to Employee’s own privileged representatives or is required to disclose in legal proceedings, provided Employee gives advance notice to the Chief Executive Officer or General Counsel of Employer and an opportunity to Employer to resist such disclosure in legal proceedings.

 

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(b)           During the Term, Employee will disclose to Employer all concrete proposals, plans, scripts, treatments, and formats invented or developed by Employee during the Term which relate directly or indirectly to the business of Employer or any of its subsidiaries or affiliates including, without limitation, any proposals and plans which may be copyrightable, trademarkable, patentable or otherwise exploitable. Employee agrees that all such proposals, plans, scripts, treatments and formats are and will be the property of Employer. Employee further agrees, at Employer’s request, to do whatever is necessary or desirable to secure for the Employer the rights to said proposals, plans, scripts, treatments, and formats, whether by copyright, trademark, patent or otherwise and to assign, transfer and convey the rights thereto to Employer at Employer’s expense.

 

(c)           Employer shall have the right in perpetuity to use Employee’s name in connection with credits for programming, properties and projects for which Employee performs any services pursuant to this Agreement.

 

5.             Employee’s Representations. Employee represents and warrants that Employee has the right to enter into this Agreement and is not subject to any contract, commitment, agreement, arrangement or restriction of any kind which would prevent Employee from performing Employee’s duties and obligations hereunder.

 

6.             Non-Competition; No Raid.

 

(a)           During the Term, Employee shall not engage directly or indirectly, whether through self-employment or as an employee, independent contractor, consultant, partner, shareholder or otherwise, in a business or other endeavor which materially interferes with any of Employee’s duties or obligations hereunder or which is directly competitive with the business of the Employer or its subsidiaries, including but not limited to the production, distribution or any other exploitation of audiovisual television material (the “Other Business”). Both parties recognize that the services to be rendered hereunder by Employee are special, unique and extraordinary in character. In the event of a breach of this Paragraph 6(a) by Employee or a claim by Employee pursuant to this paragraph, both Employer and Employee shall have all of the remedies available to Employer at law or equity. Notwithstanding Paragraph 8 below, Employee and Employer agree that temporary and permanent injunctive relief may be sought by either in a court of law to enforce this Paragraph 6(a) and Paragraph 6(b) below.

 

(b)           Employee further agrees that during the Term and for a period of one year thereafter, Employee will not:

 

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(i)            employ, or attempt to employ or assist anyone else to employ, any person who is, at the date of termination of Employee’s employment, working as an officer, policymaker or in high-level creative development or distribution (including without limitation executive employees) for or rendering substantially full-time services as such to Employer;

 

(ii)           publicly disparage Employer or its Board of Directors, individually or collectively, or

 

(iii)          interfere with Employer’s relationships with suppliers, customers, or other organizations or individuals with which Employer has a business relationship or is pursuing a business relationship during the Term.

 

7.             Termination.

 

(a)           This Agreement may be terminated and the Term ended on five (5) business days’ written notice for any one of the following reasons (except (i) in which case termination shall occur on the date of death):

 

(i)            The death of Employee;

 

(ii)           A serious health condition of Employee that incapacitates Employee (as defined under the Family and Medical Leave Act) for a period exceeding an aggregate of twelve (12) work weeks during any twelve (12) month period of the Term. For purposes of counting the aggregate work weeks, days properly designated by Employee as vacation days shall not be counted. In the case of termination by virtue of either the death or disability of Employee, Employee or his heirs will be paid any bonuses which Employee has earned and which are attributable to periods prior to the effective date of termination, such payment to occur on the date such bonus would normally be paid;

 

(iii)          For “cause,” which for purposes of this Agreement shall be defined as:

 

(A)          The use of a controlled substance and/or alcohol, either of which materially interfere with Employee’s performance of Employee’s services under this Agreement;

 

(B)           Employee’s commission of any act which constitutes a felony under federal, state or local laws or the law of any foreign country;

 

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(C)           Employee’s persistent failure or refusal after written notice to perform any of Employee’s duties and responsibilities pursuant to this Agreement as determined by the Board of Directors;

 

(D)          Employee’s dishonesty in financial dealings with or on behalf of Employer, its subsidiaries, affiliates and parent corporation or in connection with performance of Employee’s duties hereunder;

 

(E)           Employee’s material breach of any provision of this Agreement; or

 

(F)           Employee’s voluntary resignation.

 

In the event of termination under Paragraph 7(a)(iii), solely for purposes of Paragraph 6, the Term shall not be deemed terminated and shall continue until the first to occur of twelve (12) months from termination or the date the Term would have ended prior to termination.

 

(b)           Employer shall also have the right to terminate Employee prior to the expiration of the Term in addition to pursuant to Paragraph 7(a) above by providing Employee with written notice. In the event of a termination pursuant to this Paragraph 7(b), Employee shall not be entitled to any further compensation or benefits except (1) as may be provided under the Incentive Agreements; (2) twelve (12) months base salary, paid in a lump sum and discounted at “prime rate” to present value at the time of payment; (3) vested ERISA benefits (e.g., 401k plan); (4) benefits that may be required by law (e.g., COBRA); and (5) pro rata bonus through the date Employee’s job duties end to be paid as provided in Paragraph 3(b) above. Employee shall have no obligation to seek comparable employment and if Employee does accept other employment, there will be no offset by Employer against the amounts payable under this Paragraph 7(b). If Employer terminates Employee under this Paragraph 7(b), Paragraph 6(a) shall not apply from the date of termination.

 

(c)           In the event that Employer terminates this Agreement due to any of the reasons set forth in Paragraph 7(a) above, Employee shall be paid Employee’s salary through the later of the expiration of the five (5) business days period referred to in Paragraph 7(a) or the end of the month in which the termination event occurs, after which Employer’s obligation to pay salary to Employee shall terminate. After making the payments provided for in this Subparagraph (c), Employer shall have no further obligations to Employee pursuant to this Agreement, except (1) as may be provided under

 

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the Incentive Agreements; (2) vested ERISA benefits; or (3) benefits that may be required by law (e.g., COBRA).

 

(d)           Upon termination of this Agreement, Employee shall not retain any business records or documents (including electronic) relating to any activity of Employer or any of its parent, subsidiary or affiliated companies, shall not disseminate any such information in any format, and shall return any business records, documents and property (including electronic) belonging to Employer or its parents, subsidiaries and affiliates. This includes all information that the Employee may have in hard copy or on any electronic media (such as CD, DVD, thumb drives, portable hard drives, home computer, etc.).

 

(e)           Upon termination of Employee’s employment for any reason, Employee shall tender Employee’s resignation from any offices Employee holds for Employer or its subsidiaries, and Employer shall accept such resignation forthwith.

 

8.             Arbitration. Any dispute between the Employee and Employer involving any provision of this Agreement of employment matter; including any claim of discrimination under state and federal law, other than an action in court requesting temporary or permanent injunctive relief as set forth in Paragraph 6 above, shall be resolved by arbitration under the employment rules of the American Arbitration Association and in accordance with applicable law, allowing all damages and remedies available in a court action. Such arbitration shall be conducted in the New York City metropolitan area before one (1) neutral arbitrator who is a lawyer with expertise in employment law. Employer shall pay the expenses of the arbitration and each party shall pay its own legal fees and expenses. The arbitrator shall provide a reasoned opinion supporting his/her 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.

 

9.             Assignment. This Agreement is a personal contract and, without the prior written consent of Employer, shall not be assignable by the Employee. The rights and obligations of Employer may be assigned and such assignment shall bind in their entirety the successors and assigns of Employer. As used in this Agreement, the term “successor” shall include any person, firm, corporation or other business entity which at the time, whether by merger, purchase or otherwise, acquires all of substantially all of the assets or business of Employer.

 

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10.           Amendment; Captions. This Agreement contains the entire agreement between the parties. It may not be changed orally, but only by agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. Paragraph headings are for convenience of reference only and shall not be considered a part of this Agreement. If any clause in this Agreement is found to be unenforceable, illegal or contrary to public policy, the parties agree that this Agreement shall remain in full force and effect except for such clause.

 

11.           Notices. Any notices or other communications required or permitted hereunder shall be in writing and shall be deemed effective when delivered in person or if mailed, by registered or certified mail, return receipt requested, in which case the notice shall be deemed effective on the date of deposit in the mails, postage prepaid, addressed to Employee at the address for Employee appearing in Employer’s records. Notices to Employer shall be addressed to its Chief Executive Officer at the address first written above, with a copy to the Executive Vice President of Legal and Business Affairs, Crown Media Holdings, Inc., 12700 Ventura Blvd., Studio City, CA 91604. Either party may change the address to which notices are to be addressed by notice in writing given to the other in accordance with the terms hereof.

 

12.           Periods of Time. Whenever in this Agreement there is a period of time specified for the giving of notices or the taking of action, the period shall be calculated excluding the day on which the giver sends notice and excluding the day on which action to be taken is actually taken.

 

13.           Laws. The laws of the state of New York shall apply to this Agreement and the employment relationship without the application of any conflict of law provisions.

 

14.           Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, and all of which, taken together, shall constitute one instrument.

 

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IN WITNESS WHEREOF, Employer has by its appropriate officer signed this Agreement and Employee has signed this Agreement as of the day and year first above written.

 

 

	
 
    	
CROWN MEDIA HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ William J. Abbott
    
	
 
    	
 
    	
Name:
    	
William J. Abbott
    
	
 
    	
 
    	
Title:
    	
President & Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
/s/ C. Stanford
    
	
 
    	
CHARLES STANFORD
    

 

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