EXHIBIT 10.38
INTERCOMPANY SERVICES AGREEMENT
This Intercompany Services Agreement (this "Agreement") is made and
entered into as of December 23, 2002, by and between Hallmark Cards,
Incorporated, a Missouri corporation ("Hallmark"), and Crown Media Holdings,
Inc., a Delaware corporation ("Crown Holdings").
1. COMMENCEMENT AND TERM OF AGREEMENT.
a. Beginning as of January 1, 2003 (the "Effective Date"),
Hallmark shall provide to Crown Holdings in a manner consistent with
past practices those services set forth in Section 2 of this Agreement
("Corporate Services").
b. The term of this Agreement shall be one (1) year from the
Effective Date and shall automatically renew for two (2) successive one
(1) year terms unless either party notifies the other party of its
intent to terminate sixty (60) days prior to the start of any renewal
term, subject to any earlier termination in accordance with the terms
of this Agreement.
c. Hallmark may terminate this Agreement if at any time
Hallmark no longer directly or indirectly owns at least 51% of the
voting interest and 35% of the equity interest of Crown Holdings.
2. CORPORATE SERVICES.
The Corporate Services provided under this Agreement shall include the
following as more specifically described in this Agreement:
1) Tax services
2) Risk management, health, safety and environmental advice and
Insurance
3) Legal services
4) Treasury and cash management
5) Real estate consulting
3. COSTS AND FEES FOR CORPORATE SERVICES.
a. In return for Corporate Services provided hereunder, Crown
Holdings shall pay Hallmark a fee of Five Hundred Fifteen Thousand
Dollars ($515,000) plus out of pocket expenses and third party fees (as
set forth in 3(b)) for each year of the Agreement. Crown Holdings shall
pay these costs and fees in arrears on the last business day of each
quarter of the Agreement.
b. In some cases, the Corporate Services provided to Crown
Holdings by Hallmark will include services provided by third parties
(e.g. insurance brokers and carriers, accountants, actuaries, financial
printers). Such third party services shall be approved by Crown
Holdings in advance and shall be billed directly to Crown Holdings. In
the event Crown Holdings denies approval of services to be provided by
any third party, Hallmark shall not be required to provide such
services.
4. TAX SERVICES. Subject to the terms of that certain Contribution
Agreement and that certain Tax Sharing Agreement by and among Hallmark
Entertainment, Inc., Crown Holdings, and others, the Hallmark tax department
shall, except to the extent otherwise requested by Crown Holdings, provide the
tax services for Crown Holdings set forth below.
a. Tax compliance services which shall consist of the
preparation and timely filing of federal and state income tax returns
(including quarterly estimated payments) and state sales and use tax
returns. Crown Holdings shall furnish
Hallmark with full and complete financial information necessary or
appropriate to prepare or timely file such returns. Crown Holdings
shall promptly reimburse Hallmark for any tax payments made by Hallmark
on Crown Holdings' behalf. Crown Holdings shall be responsible for all
other tax compliance matters, including without limitation, property
tax and payroll tax.
b. Tax audit services which shall consist of the
administration of each audit agreement, representation of Crown
Holdings at all administrative hearings, and consultation with regard
to any appeals through the judicial system, including the selection of
legal counsel.
c. Tax consulting services which shall consist of (1) periodic
(no less than semi-annual) reviews with Crown Holdings financial and
operating personnel to identify and implement tax savings
opportunities, and (2) transactional tax planning.
5. RISK MANAGEMENT AND INSURANCE. The Hallmark risk management
department shall provide the services set forth below.
a. Risk management services, which will include leading the
process for identifying and analyzing property and casualty risks (not
business risks), for developing loss prevention and risk control
strategies, for developing and implementing insurance programs and
other loss funding programs and for claims administration practices.
b. Advice and supervision with respect to health, safety and
environmental issues.
c. At Crown Holdings' request, Hallmark will arrange or assist
in arranging for insurance coverage for Crown Holdings ("Insurance").
Hallmark may arrange for an insurance policy covering only Crown
Holdings' risks or interests or may include Crown Holdings in
Hallmark's or Hallmark's subsidiaries' insurance coverages, at
Hallmark's discretion. If Hallmark arranges for an insurance policy
covering only Crown Holdings' risks or interests, Crown Holdings shall
pay the costs of such policy at the direction of Hallmark, either to
Hallmark or to the insurance provider. If Hallmark arranges for an
insurance policy that covers risks or interests of Hallmark or its
subsidiaries in addition to Crown Holdings, then the following terms
and conditions shall apply:
1) Crown Holdings shall, within 30 days of its
receipt of a reasonably detailed invoice from Hallmark, pay
the portion of the premiums and other charges for the
Insurance attributable to the coverage provided to Crown
Holdings. The portion of such premiums and other charges
payable by Crown Holdings shall be allocated in good faith by
Hallmark in a manner to reflect the cost to Hallmark of the
insurance premiums and other charges that are properly
attributable to Crown Holdings. The Insurance provided shall
be subject to such policies of insurance or self-insurance,
and such guidelines or procedures in respect of insurance or
self-insurance, as Hallmark shall determine. In the event the
terms of the Insurance materially change from those terms in
effect immediately prior to the date hereof, Hallmark agrees
(i) to the extent Hallmark is aware of a material change prior
to the effective date of the change, to provide notice to
Crown Holdings of the change prior to its effective date, or
(ii) otherwise to provide notice to Crown Holdings upon
becoming aware of the change. It is expressly agreed by Crown
Holdings and Hallmark that any self-insurance, retention or
deductible shall be for the account of and be an obligation of
Crown Holdings, and that Crown Holdings' obligations in
respect of such self-insurance, retention or deductible shall
survive the termination of this Agreement.
2) Either Crown Holdings or Hallmark may terminate
all or any portion of the Insurance placed in policies
specific to Crown Holdings at any time on 90 days' prior
written notice to the other party hereto. Notwithstanding the
foregoing, so long as Hallmark directly or indirectly owns 50%
or more of the voting power of all then-outstanding shares of
capital stock of Crown Holdings, Crown Holdings may not,
without the prior written consent of Hallmark, terminate all
or any portion of the Insurance without providing evidence
satisfactory to Hallmark in Hallmark's sole discretion that
Crown Holdings has obtained, or upon termination of such
Insurance will obtain, comparable insurance coverage. In the
event all or any portion of the Insurance is terminated, if
appropriate, the charges therefor shall be adjusted equitably
to reflect such termination.
3) Notwithstanding anything herein to the contrary,
the parties hereto recognize that Hallmark is neither an
insurance broker nor an insurance carrier. At no time will
Hallmark be required by this Agreement or otherwise by Crown
Holdings to act as an insurance broker or carrier.
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6. LEGAL SERVICES. Hallmark shall provide general legal services of the
type previously provided to Crown Holdings not including advice previously
provided by outside counsel, advice regarding securities laws,
telecommunications law and other specialized areas for which Hallmark does not
have in-house expertise. It is contemplated that Hallmark will not act as
general counsel for Crown Holdings but will coordinate or recommend services of
outside counsel as appropriate.
7. TREASURY. The Hallmark finance department will provide treasury
services which shall include cash management, foreign exchange, arranging debt
or letters of credit, managing investments (both corporate and benefit plans)
and assisting in structuring financing leasing arrangements.
8. REAL ESTATE. The Hallmark real estate department shall assist Crown
Holdings in identifying and analyzing office space and negotiating leases in
connection with such space.
9. COOPERATION. Hallmark and Crown Holdings shall cooperate with each
other with respect to all provisions of this Agreement and the Corporate
Services and Insurance (if any) provided hereunder. Hallmark may agree to
provide additional Corporate Services at its discretion.
10. LIMITATION OF LIABILITY. Except as may be provided in Section 11
below, Hallmark, its subsidiaries, affiliates, directors, officers, employees,
agents and permitted assigns (each, a "Hallmark Party") shall not be liable to
Crown Holdings, any subsidiary or any affiliate, director, officer, employee,
agent or permitted assign of Crown Holdings or any of its subsidiaries, (each, a
"Crown Party") for any liabilities, claims, damages, losses or expenses,
including, but not limited to, any special, indirect, incidental or
consequential damages, of a Crown Party arising in connection with this
Agreement, the Corporate Services or the Insurance.
11. HALLMARK INDEMNIFICATION. Hallmark shall indemnify, defend and hold
harmless each of the Crown Parties from and against all liabilities, claims,
damages, losses, settlements and expenses (including, but not limited to, court
costs and reasonable attorneys' fees) (collectively referred to as "Damages") of
any kind or nature, of any third party unrelated to any Crown Party caused by or
arising in connection with the gross negligence or willful misconduct of any
employee of Hallmark in connection with the performance of the Corporate
Services, or provision of the Insurance, except to the extent that Damages were
caused directly or indirectly by acts or omissions of any Crown Party.
Notwithstanding the foregoing, Hallmark shall not be liable for any special,
indirect, incidental, or consequential damages relating to such Damages. In the
event that Crown has actual knowledge of a claim that may be the subject of
indemnification under this Section, it shall promptly notify Hallmark of such
claim and Hallmark, in its sole discretion, may defend, settle, or otherwise
litigate such claim.
12. CROWN HOLDINGS INDEMNIFICATION. Crown Holdings shall indemnify,
defend and hold harmless each of the Hallmark Parties, from and against all
Damages of any kind or nature, caused by or arising in connection with this
Agreement, the performance of Corporate Services, or provision of the Insurance
so long as (i) Hallmark acted in good faith pursuant to and within the scope of
authority granted to it by this Agreement and in a manner it believed to be in
the best interest of Crown Holdings and (ii) Hallmark's conduct did not
constitute gross negligence or willful misconduct. In the event that Hallmark
has actual knowledge of a claim that may be the subject of indemnification under
this Section 12, it shall promptly notify Crown Holdings of such claim and Crown
Holdings, in its sole discretion, may defend, settle, or otherwise litigate such
claim.
13. INFORMATION. Subject to applicable law, each party hereto covenants
and agrees to provide the other party with all information regarding itself and
transactions under this Agreement as are required by such other party to comply
with all applicable federal, state, county and local laws, ordinances,
regulations and codes, including, but not limited to, securities laws and
regulations.
14. ASSIGNMENT. Neither party may assign or transfer any of its rights
or duties under this Agreement to any person or entity without the prior written
consent of the other party.
15. NOTICES. Any notice, instruction, direction or demand under the
terms of this Agreement required to be in writing will be duly given upon
delivery, by hand, facsimile transmission or intercompany mail, or five (5) days
after posting if sent by U.S. mail, return receipt requested to the following
addresses:
Hallmark Cards, Incorporated
2501 McGee
P.O. Box 419126
Kansas City, Missouri 64141-6126
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Attn: General Counsel
Fax No.: (816) 274-7171
Crown Media Holdings, Inc.
6430 South Fiddlers Green Circle
Suite 500
Englewood, Colorado 80111
Attn: David Evans
Fax No.: (303) 220-7660
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 15.
16. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Missouri except its choice of law rules
and except to the extent preempted by federal law.
17. SUSPENSION. The obligations of any party to perform any acts
hereunder may be suspended if such performance is prevented by fires, strikes,
embargoes, riot, invasions, governmental interference, inability to secure goods
or materials, or other circumstances outside the control of the parties.
18. SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not render the
entire Agreement invalid. Rather, the Agreement shall be construed as if not
containing the particular invalid or unenforceable provision, and the rights and
obligations of each party shall be construed and enforced accordingly.
19. RIGHTS UPON ORDERLY TERMINATION; SURVIVAL. Upon termination or
expiration of this Agreement or any of the Corporate Services or Insurance
described herein, each party shall, upon request, forthwith return to the other
party all reports, paper, materials and other information required to be
provided to the other party by this Agreement. In addition, each party shall
assist the other in the orderly termination of this Agreement or any of the
Corporate Services or Insurance described herein. Notwithstanding any
termination of this Agreement, the obligations of the parties hereto to make
payments hereunder and the provisions of Sections 10, 11 and 12 shall survive.
20. AMENDMENT. This Agreement may only be amended by a written
agreement executed by all of the parties hereto.
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements, representations,
negotiations, statements or proposals related to the subject matter hereof.
22. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which deemed an original and all of which, when taken
together, shall constitute one agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their duly authorized representatives.
HALLMARK CARDS, INCORPORATED CROWN MEDIA HOLDINGS, INC.
By /s/ Judith Whittaker By /s/ C. Stanford
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Title Executive Vice President Title Executive Vice President
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