EXHIBIT 10.7.4
August 30, 2001
Crown Media Holdings, Inc.
6430 S. Fiddlers Green Circle
Suite 500
Greenwood Village, CO 80111
Attention: Charles Stanford, General Counsel
Re: Side Letter to Stock Purchase Agreement
Dear Gentlemen:
This Side Letter (this "Side Letter") sets forth the understanding and
agreement between Crown Media Holdings, Inc. (the "Company") and DIRECTV, Inc.
("DIRECTV") with respect to the following:
6. DIRECTV and the Company shall negotiate in good faith an agreement
for the pay-per-view distribution of up to ten (10) motion pictures or
mini-series per year.
7. When required by law or regulation to add a Public Interest
Obligation ("PIO") service, consistent with the applicable regulations of the
Federal Communications Commission ("FCC"), DIRECTV shall, given the Company's
commitments to the National Interfaith Coalition ("NIC"), consider in good faith
the distribution of NIC's PIO service tentatively called "The Faith and Values
Network" on substantially similar terms pursuant to which DIRECTV distributes
other similar PIO services, provided that: (x) DIRECTV shall use reasonable
efforts to [*]; (y) DIRECTV shall have no obligation whatsoever under this
Section 2 if any action contemplated under said Section conflicts with any
applicable law, including, without limitation, any rules or regulations of the
FCC; and (z) NIC's proposed PIO service and the programming contained therein
qualify under FCC's PIO rules and regulations for PIO carriage by DIRECTV.
DIRECTV anticipates that it will add additional PIO service(s) in December 2002.
For purposes of this provision, "reasonable" shall include [*].
[*] Portion omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
1
8. If the "Hallmark Channel" contains and maintains over 85% Spanish
secondary audio for program (as opposed to promotional and advertising) content,
DIRECTV. shall carry the Hallmark Channel on DIRECTV's "PARA TODOS" platform in
the "Option Especial" package (or successor package) for license fees (per PARA
TODOS subscriber) that equal the amount of the License Fees payable under
Section 2(b) of the Affiliation Agreement for DBS Satellite Exhibition of Cable
Network Programming dated as of March 6, 2000 between DIRECTV and the Company
for the carriage of the Odyssey Channel (the "Odyssey Affiliation Agreement")
(i.e., the rates for the first, second, third, etc. year (if applicable) of
carriage of the Hallmark Channel on the PARA TODOS platform shall be the same as
the first, second, third, etc. year rates under the Odyssey Affiliation
Agreement). All other terms shall be substantially similar to the terms set
forth in the Odyssey Affiliation Agreement, provided that the parties shall
mutually agree on the term of said agreement.
9. The parties shall negotiate in good faith an agreement regarding
DIRECTV's carriage of the Company's interactive application known as "V-Cards",
subject to the technical feasibility of the interactive application and the
parties' negotiation of acceptable business terms reflecting an agreed business
model and prevailing market conditions. As part of such discussion, the parties
shall assign appropriate personnel to determine the technical feasibility and
requirements associated with deploying the V-Card service using DIRECTV's
advanced settop receivers. It is anticipated that the initial version of the
V-Card service shall utilize Company-supplied and produced video objects and
template messages. Subsequent versions will offer users, to the extent
technically feasible and commercially practical, an increased ability to
customize and personalize their V-Cards. As part of their service relationship,
the parties agree to discuss processes that will allow DIRECTV customers to send
V-Cards to other V-Card enabled DIRECTV subscribers as well as V-Card users
outside the DIRECTV system. The parties also agree to discuss the deployment of
other Company interactive applications over the DIRECTV system such as "Crayola
Kids" and the Company's Video-on-Demand service.
10. Consistent with and limited by its fiduciary responsibilities to the
shareholders of XM Satellite Radio, Inc. ("XM Radio"), and recognizing that
DIRECTV does not control XM Radio, DIRECTV shall undertake in good faith to
induce XM Radio to negotiate with Company for the distribution of an audio
service owned by the Company or a subsidiary.
11. The parties' good faith obligations to negotiate an agreement as set
forth in items 1 and 4 above shall expire on December 31, 2002. The parties'
good faith obligations as set forth in item 2 and the parties' good faith
obligations as set forth in item 5 above shall expire on December 31, 2003, and
the parties' obligations set forth in item 3 above shall expire on December 31,
2003, provided that, as to items 2 and 4, DIRECTV and NIC have not reached an
agreement as to item 2 and/or the Company and DIRECTV have not reached an
agreement as to item 4.
7. This Side Letter shall be governed by and construed in accordance
with the laws of the State of California, without giving effect to any
provisions relating to conflict of laws.
8. Provided that the parties have acted in good faith, the failure by
the parties to reach an agreement in connection with items 1, 2, 4 and 5 above
or to reach an agreement as to the term of the agreement referenced in item 3
above shall not constitute a breach hereunder or under the Stock Purchase
Agreement dated August 20, 2001 by and between the Company and DIRECTV.
[SIGNATURE PAGE FOLLOWS]
Sincerely,
DIRECTV, Inc.
By: /s/ Michael Thornton
--------------------------------
Michael Thornton
Senior Vice President
AGREED TO AND ACCEPTED BY:
CROWN MEDIA HOLDINGS, INC.
By: /s/ Charles Stanford
--------------------------------
Name: Charles Stanford
Title: Executive Vice President