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Crown Settles Programming Dispute

12/13/2005 10:53 AM Eastern

Hallmark Channel’s parent has reached a $47 million settlement of a dispute over a programming and production deal with one of the network’s part owners, the National Interfaith Cable Coalition, according to a securities filing Tuesday.

Crown Media Holdings Inc. outlined in detail a Dec. 1 agreement to resolve a dispute with the NICC. A for-profit subsidiary of NICC, the VISN Management Group, is one of Crown’s investors.

The settlement contains several clauses relating to what happens if Hallmark is sold. The NICC is promised, among other things, $15 million out of the proceeds of such a sale.

The NICC, alleging damages in excess of $100 million, in a letter this May charged that Hallmark had failed to honor its 2001 commitment regarding the production and financing NICC programming.

Under the agreement, Crown will finance and broadcast a raft of NICC programming on Hallmark through the end of 2007, according to the filing with the Securities and Exchange Commission.

Some of those programming initiatives include:

•A Sunday morning series called New Morning With Naomi Judd, at a cost of $3.5 million this year, $4.6 million next year and $5.6 million in 2007.

•A weekday daily series called New Morning, for $1.9 million this year, $4.2 million in 206 and $5.13 million in 2007.

•Four specials, for $1.3 8 million in 2005 and 2006 and $1.25 million in 2006 and 2007.

•A Sunday morning block, from 6 a.m. to noon, at $485,000 in 2005, and $5.8 million each in 2006 and 2007.

•$2 million each in 2005, 2006 and 2007 for NICC to develop made-for-TV movies.

Crown earlier this year put Hallmark on the sales block, and has received bids from companies such as News Corp., Viacom Inc. and Time Warner Inc. Crown’s settlement with the NICC contains several clauses setting forth what will happen to the NICC’s programming if the network is in fact sold.

For example, the filing said that if there is a change of control of Crown, the NICC will receive “a $15 million termination payment, any remaining portions of the payments for the non-dramatic specials and the made-for-TV movie development.”

The Hallmark Channel will also be obligated to continue to broadcast and pay for Sunday New Morning With Naomi Judd and the weekday New Morning series, as well as the Sunday morning block, for an additional six months following the change in control, after which all funding and broadcast obligations to NICC will end.

The total amount payable in the event of a change of control would be about $25 million if that change closed in June 2006. If there has not been a change of control by June 30, 2007, Crown is required to negotiate with the NICC for a period of 60 days regarding continuation of the programming commitments, according to the agreement.

If Hallmark is sold to a third party, Crown will use “reasonable business efforts” to have the buyer elect to continue the NICC programming, according to the settlement agreement.

 

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