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
Date of Report (Date of Earliest Event Reported): OCTOBER 11, 2005
CROWN MEDIA HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 000-30700 84-1524410
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
12700 VENTURA BOULEVARD
STUDIO CITY, CALIFORNIA 91604
(Address of principal executive offices) (zip code)
(818) 755-2400
----------------------------------------------------
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing 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)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On October 11, 2005, Crown Media United States, LLC ("Licensee"), a wholly owned
subsidiary of Crown Media Holdings, Inc. (the "Registrant"), entered into an
amended and restated program license agreement with Hallmark Entertainment
Distribution, LLC ("Licensor"), a wholly owned subsidiary of Hallmark Cards,
Incorporated ("Hallmark Cards"), dated and effective as of January 1, 2005 (the
"Restated Agreement"). The Restated Agreement amends, restates and supersedes
(except as otherwise noted therein) the Amended and Restated Program License
Agreement between Licensor and Licensee, dated as of January 1, 2001 (the "First
Restated Agreement"), and the Program License Agreement between Licensor and
Licensee, dated as of November 13, 1998 (the "Original Agreement" and, together
with the First Restated Agreement, the "Previous Agreements"). The First
Restated Agreement would have automatically renewed for a three-year term on
January 1, 2006, and the parties have been in discussions since early in the
year regarding a proposed restated agreement.
Under the Restated Agreement, Licensee licenses certain television movies and
mini-series (the "Licensed Programs") from Licensor for exhibition via all forms
of television (including high-definition television) on the Hallmark Channel and
the Hallmark Movie Channel (both owned and operated by Licensee) in the United
States, together with its possessions and territories, including Puerto Rico
(the "Territory"). The First Restated Agreement had limited the license to the
Hallmark Channel and did not include Puerto Rico. The term of the Restated
Agreement expires on December 31, 2008; provided, however, that any rights
exercised with respect to any Licensed Programs prior to such expiration date
shall remain in effect in accordance with its terms. The license is exclusive to
Licensee in the Territory during the term against all forms of television, and
Licensor may not license or otherwise authorize the exhibition of any Licensed
Program in the Territory to any other party during the time such Licensed
Program is licensed to Licensee. While the First Restated Agreement provided
that Licensor was the exclusive source of original programming, under the
Restated Agreement Licensee may freely license original programs from third
party licensors during the term.
While the First Restated Agreement did not require Licensor to produce and
deliver a minimum number of original movies ("Original Movies") or original
mini-series ("Original Mini-Series") to Licensee, under the Restated Agreement,
Licensor is required to produce and deliver to Licensee, and Licensee is
required to order and license from Licensor, 13 Original Movies and 3 Original
Mini-Series in 2005, 31 Original Movies and 6 Original Mini-Series in 2006 and
18 Original Movies and 3 Original Mini-Series in 2007. Licensee may elect to
reduce the number of Original Movies required to be licensed under the Restated
Agreement in 2006 by up to six Original Movies (and, under certain conditions,
to reduce the number of Original Mini-Series to be licensed in 2006 by up to
three) and may elect to cancel its obligation to license any Original Movies and
Original Mini-Series in 2007. Under certain conditions, Licensor may similarly
reduce or eliminate the number of Original Movies or Original Mini-Series that
it is required to produce under the Restated Agreement in those years.
The license term for the Original Movies and Original Mini-Series is three years
(or five years with respect to certain holiday-themed programs and programs
delivered in 2005), and Licensee has the right to exhibit the programs on 30
days during the term (with unlimited runs per exhibition day). The Restated
Agreement also grants Licensee the right to an additional 15
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exhibition days to six specified Original Movies during their initial term.
Licensor has an option to extend the term of the Original Mini-Series for an
additional three-year period (for an additional licensee fee equal to 50% of the
fee paid for the initial term). Licensor's option under the First Restated
Agreement to extend the term of the Original Movies for an additional three-year
period was eliminated under the Restated Agreement. Instead, Licensee shall
have a right of first negotiation on a product-by-product basis with respect to
a potential second license term for Original Movies delivered on or after
January 1, 2005. Licensee and Licensor agree to negotiate in good faith with
respect to any such product for a period of 45 days beginning not earlier than
the one year anniversary of the beginning of the initial license term. Licensor
will negotiate exclusively with Licensee during such period.
In addition to the Original Movies and Original Mini-Series referred to above,
Licensee also agreed to license from Licensor (a) specified previously Licensed
Programs for a second three-year license term as to which Licensor had the
option to extend under the First Restated Agreement, and (b) specified movies
and mini-series (the "New Pictures") for an initial three-year license term,
with an option in favor of Licensor to extend the license term for an additional
three-year period (for an additional licensee fee equal to 50% of the fee paid
for the initial term). The Restated Agreement limits the number of New Pictures
that Licensee may be required to license from Licensor during 2006 through 2008
to a maximum of 15 per year, compared to a maximum of 50 per year under the
First Restated Agreement.
The Restated Agreement provides for additional licensing fees for Original
Movies and Original Mini-Series, provided that the additional license fees
payable by Licensee to Licensor for Original Movies and Original Mini-Series
delivered in 2005 are not payable by Licensee to Licensor until July 1, 2006.
The license fees payable for New Pictures and Library Pictures are unchanged
from the amounts specified in the First Restated Agreement.
Under the Restated Agreement, Licensee for the first time is granted pay per
view, video on demand and internet/interactive rights to Original Movies and
Original Mini-Series in their initial three-year term, subject to sharing the
net revenues therefrom equally with Licensor. Licensee may sublicense its rights
to the Licensed Programs to a third party for exhibition in any television
media, subject to Licensor's prior approval, not to be unreasonably withheld;
provided, however, that Licensee shall have the right to sublicense its pay per
view, video on demand or internet/interactive rights with respect to Original
Movies and Original Mini-Series during their initial license term to a third
party without Licensor's prior approval. If the total compensation Licensee
receives from such sublicenses for any Licensed Program exceeds the license fee
it is obligated to pay Licensor for the Licensed Program, such excess shall be
divided equally between Licensor and Licensee.
The Restated Agreement is attached hereto as Exhibits 99.1, and is hereby
incorporated herein by reference. The description of the Restated Agreement
contained herein is qualified in its entirety by reference to such agreement.
A special committee of the Board of Directors (the "Board") of the Registrant
consisting of independent directors (the "Special Committee") approved the terms
of the Restated Agreement and recommended that the Board of Directors of the
Registrant approve the Restated Agreement, and the Board (with directors
affiliated with Hallmark Cards and J.P. Morgan Partners abstaining from the
vote) approved the Restated Agreement and authorized its execution and delivery.
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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
- Not Applicable
(b) Pro forma financial information.
- Not Applicable
(c) Exhibits.
99.1 Second Amended and Restated Program License Agreement, dated as of
January 1, 2005
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunder duly authorized.
CROWN MEDIA HOLDINGS, INC.
By:/s/ William J. Aliber
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Name: William J. Aliber
Title: Executive Vice President and Chief
Financial Officer
Date: October 17, 2005
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EXHIBIT INDEX
99.1 Second Amended and Restated Program License Agreement,
dated as of January 1, 2005