Exhibit 10.9
 
(JPMORGAN LOGO) [y64250y6425001.gif]
CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT
Dated as of June 23, 2008
among
RHI ENTERTAINMENT, LLC
as Borrower,
THE GUARANTORS REFERRED TO HEREIN,
THE LENDERS REFERRED TO HEREIN
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
 
J.P. MORGAN SECURITIES INC.
as Sole Bookrunner and Sole Lead Arranger
 

 

--------------------------------------------------------------------------------

 

     CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT dated as of June 23, 2008
(as amended, supplemented or otherwise modified, renewed or replaced from time
to time, the “Credit Agreement”) among (i) RHI ENTERTAINMENT, LLC, a Delaware
limited liability company, as Borrower, (ii) the GUARANTORS referred to herein,
(iii) the LENDERS referred to herein and (iv) JPMORGAN CHASE BANK, N.A., a
national banking association, as agent for the Lenders.
INTRODUCTORY STATEMENT
     Terms not otherwise defined above or in this Introductory Statement are as
defined in Article 1 hereof or as defined elsewhere herein.
     The Borrower, the Guarantors, the lenders party thereto and the
Administrative Agent are parties to a Credit, Security, Guaranty and Pledge
Agreement dated as of January 12, 2006, as amended and restated as of April 13,
2007 (the “Existing Second Lien Facility”).
     The Borrower has requested that the Lenders make available a $55,000,000
seven-year single draw, secured term loan credit facility (the “Facility”),
subject to increase via up to two additional draws in accordance with
Section 2.16 hereof. The Borrower intends to, contemporaneously on the Closing
Date (as defined herein), (a) consummate a Qualified IPO (as defined herein) of
Public Co. (as defined herein), and (b) increase the revolving credit
commitments under the First Lien Facilities (as defined herein) from
$275,000,000 to $350,000,000. A portion of the net proceeds from the Qualified
IPO will be used to retire all Indebtedness outstanding under the Parent Credit
Agreement (as defined herein) and to pay all fees and expenses incurred in
connection therewith (including any applicable prepayment premiums). The
proceeds of the Facility extended on the Closing Date, together with the
remaining net proceeds from the Qualified IPO and/or borrowings under the First
Lien Facilities, will be used to (a) refinance all Indebtedness outstanding
under the Existing Second Lien Facility and (b) pay all fees and expenses
incurred in connection with the refinancing of the Existing Second Lien
Facility, including, without limitation, any applicable prepayment premiums
payable to the lenders under the Existing Second Lien Agreement. The
consummation of the Qualified IPO, the extension of the Facility, the
effectiveness of the Registration Statement (as defined herein) and other
transactions described in the preceding sentence are collectively referred to
herein as the “2008 Transactions”.
     To provide assurance for the repayment of the Loans and the other
Obligations of the Borrower hereunder, the Borrower will, among other things,
provide or cause to be provided to the Administrative Agent, for the benefit of
itself and the Lenders, the following (each as more fully described herein):

  (i)   a security interest in the Collateral from each of the Credit Parties
pursuant to Article 8 hereof;     (ii)   a guaranty of the Obligations by each
of the Guarantors pursuant to Article 9 hereof; and

 

--------------------------------------------------------------------------------

 

  (iii)   a pledge by each of the Pledgors of the Pledged Securities owned by it
pursuant to Article 10 hereof.

     In connection with the execution of this Credit Agreement, the
Intercreditor Agreement (as defined herein) shall be entered into in order to,
among other things, set forth certain agreements between the Administrative
Agent and the First Lien Agent (as defined herein) with respect to their
respective rights relating to the Collateral securing this Credit Agreement and
the collateral securing the First Lien Facilities.
     Subject to the terms and conditions set forth herein, the Administrative
Agent is willing to act as agent for the Lenders and each Lender is willing to
make a Loan to the Borrower on the Closing Date in an amount not in excess of
its Commitment hereunder.
     Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
     SECTION 1.1. Definitions. For the purposes hereof unless the context
otherwise requires, all Article and Section references herein shall be deemed to
correspond with Articles and Sections herein, the following terms shall have the
meanings indicated, all accounting terms not otherwise defined herein shall have
the respective meanings accorded to them under GAAP and all terms defined in the
UCC and not otherwise defined herein shall have the respective meanings accorded
to them therein and if defined in more than one article of the UCC, shall have
the meaning set forth in Article 9 thereof. Unless the context otherwise
requires, any of the following terms may be used in the singular or the plural,
depending on the reference:
     “2008 Transactions” shall have the meaning given to such term in the
Introductory Statement.
     “Acceptable Obligors” shall mean any Person listed or Affiliated Group on
Schedule 2 to the First Lien Facilities (as modified from time to time in
accordance with Section 2.17 thereof) and such other Persons that are acceptable
to the lenders under the First Lien Facilities (or, at any time after the First
Priority Obligations Payment Date, the Lenders) in their reasonable discretion.
     “Account Control Agreement” shall mean an account control agreement
substantially in the form of Exhibit K hereto or such other account control
agreement in form and substance reasonably satisfactory to the First Lien Agent
or, after the First Priority Obligations Payment Date, the Administrative Agent.
     “Adjusted Receivables Amount” shall be as defined in the First Lien
Agreement as currently in existence; provided, however, that subsequent to the
First Priority Obligations Payment Date, the actions which the First Priority
Agreement as currently in existence contemplates being taken by the First
Priority Agent with regard to “Eligible Receivables” and “Acceptable Obligors”
(each as defined in the First Lien Agreement) will be taken by the
Administrative Agent.

2

--------------------------------------------------------------------------------

 

     “Administrative Agent” shall mean JPMorgan Chase Bank, N.A., in its
capacity as agent for the Lenders hereunder, or such successor Administrative
Agent as may be appointed pursuant to Section 12.11 hereof.
     “Affiliate” shall mean any Person, which, directly or indirectly, is in
control of, is controlled by, or is under common control with, another Person.
For purposes of this definition, a Person shall be deemed to be “controlled by”
another Person if such latter Person possesses, directly or indirectly, power
either to direct or cause the direction of the management and policies of such
controlled Person whether by contract or otherwise.
     “Affiliated Group” shall mean a group of Persons, each of which is an
Affiliate (other than by reason of having common directors or officers) of some
other Person in the group.
     “Alternate Base Rate” shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect for such day plus 1/2 of 1%. For purposes hereof, “Prime Rate” shall mean
the rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office in New
York City. “Federal Funds Effective Rate” shall mean, for any day, the weighted
average (rounded upwards, if necessary to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average (rounded upwards, if
necessary to the next 1/100 of 1%) of the quotations for the day of such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms hereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective on the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
     “Alternate Base Rate Loan” shall mean a Loan based on the Alternate Base
Rate in accordance with the provisions of Article 2 hereof.
     “Applicable Law” shall mean all provisions of statutes, rules, regulations
and orders of the United States of America, any state thereof or municipality
therein or of any foreign governmental body or of any regulatory agency
applicable to the Person in question, and all orders and decrees of all courts
and arbitrators in proceedings or actions in which the Person in question is a
party.
     “Applicable Margin” shall mean (i) in the case of Alternate Base Rate
Loans, 6.50% per annum and (ii) in the case of LIBOR Loans, 7.50% per annum.

3

--------------------------------------------------------------------------------

 

     “Approved Fund” shall mean any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.
     “Arranger” shall mean J.P. Morgan Securities Inc., in its capacity as sole
lead arranger and sole bookrunner in connection with the Facility.
     “Assignment and Assumption” shall mean an agreement substantially in the
form of Exhibit I hereto, executed by the assignor, assignee and other parties
as contemplated thereby.
     “Authorized Officer” shall mean with respect to any Person, any one of its
Chairman, Chief Executive Officer, President, Chief Financial Officer, Chief
Operating Officer, Executive Vice President of Finance or Senior Vice President
of Finance.
     “Bankruptcy Code” shall mean the Bankruptcy Reform Act of 1978, as
heretofore and hereafter amended, as codified at 11 U.S.C. § 101 et seq.
     “Board” shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
     “Borrower” shall mean RHI Entertainment, LLC, a Delaware limited liability
company.
     “Borrowing” shall mean a group of Loans of a single Type and as to which a
single Interest Period is in effect on a single day.
     “Borrowing Base” shall have the meaning given to such term in the First
Lien Agreement.
     “Borrowing Base Certificate” shall have the meaning given to such term in
Section 5.1(c) hereof.
     “Borrowing Certificate” shall mean a borrowing certificate, substantially
in the form of Exhibit H hereto, to be delivered by the Borrower to the
Administrative Agent in connection with the Borrowing of the initial Loans on
the Closing Date or of the incremental Loans (if any) extended thereafter in
accordance with Section 2.16.
     “Budgeted Negative Cost” shall mean for any Item of Product, the aggregate
amount of the pre-production expenses with regard to such Item of Product plus
the cost of all production elements usually and customarily included as part of
the negative cost of an Item of Product of like cost and quality plus the usual
and customary post production costs of such Item of Product, and shall
specifically include charges for any completion guaranty fee which is to be
paid.
     “Business Day” shall mean any day other than a Saturday, Sunday or other
day on which banks are required or permitted to close in the State of New York;
provided, however, that

4

--------------------------------------------------------------------------------

 

when used in connection with a LIBOR Loan, the term “Business Day” shall also
exclude any day on which banks are not open for dealings in Dollar deposits on
the London Interbank Market.
     “Business Plan” shall mean the business plan for the Credit Parties dated
December 1, 2005, delivered to the Administrative Agent prior to the date
hereof.
     “Cap Amount” means as of any date of determination $525 million plus an
amount not in excess of $52.5 million in the aggregate advanced in the context
of a workout and/or a debtor-in-possession financing, less an amount equal to
the sum, without duplication, of (i) the aggregate amount of all principal
payments and prepayments of the term loans under the First Lien Agreement as in
effect on the date hereof (other than any principal payments made on account or
as a result of a Permitted First Lien Refinancing), (ii) the amount of all
Proceeds of Common Collateral received after the date hereof by the First Lien
Agent, which pursuant to the provisions of Section 2.10(f) of the First Lien
Agreement as in effect on the date hereof, are to be applied to pay First
Priority Obligations and which are not so applied and (iii) the aggregate amount
of all permanent reductions of the Revolving Credit Commitments (as such term
(or any term comparable to such term) is defined in the First Lien Agreement)
other than a reduction on account of or as a result of a Permitted First Lien
Refinancing.
     “Capital Expenditures” shall mean, with respect to any Person for any
period, the aggregate of all expenditures (whether paid in cash or accrued as a
liability) by such Person during that period which, in accordance with GAAP, are
required to be included in “additions to property, plant or equipment” or
similar items included in cash flows (including Capital Leases); provided,
however, that Capital Expenditures shall not include: (a) expenditures (i) to
the extent they are made with proceeds of the issuance of Equity Interests of
the Borrower (other than Specified Equity Contributions) contributed after the
Closing Date or (ii) that constitute Net Proceeds of a Disposition that are
reinvested in Productive Assets pursuant to Sections 2.10(f) or 6.6(d) hereof;
(b) expenditures of proceeds of insurance settlements, condemnation awards and
other settlements in respect of lost, destroyed, damaged or condemned assets,
equipment or other property to the extent such expenditures are made to replace
or repair such lost, destroyed, damaged or condemned assets, equipment or other
property or otherwise to acquire, maintain, develop, construct, improve, upgrade
or repair Productive Assets within 12 months of receipt of such proceeds;
(c) interest capitalized during such period; (d) the book value of any asset
owned by such Person prior to or during such period to the extent that such book
value is included as a capital expenditure during such period as a result of
such Person reusing or beginning to reuse such asset during such period without
a corresponding expenditure actually having been made in such period, provided
that (i) any expenditure necessary in order to permit such asset to be reused
shall be included as a Capital Expenditure during the period that such
expenditure actually is made and (ii) such book value shall have been included
in Capital Expenditures when such asset was originally acquired; (e) the
purchase price of equipment purchased during such period to the extent the
consideration therefor consists of any combination of (i) used equipment traded
in at the time of such purchase and (ii) the proceeds of a concurrent sale of
used equipment, in each case, in the ordinary course of business;
(f) expenditures relating to Investments in respect of a Permitted Business
Acquisition to the extent permitted by Section 6.4; (g) expenditures to the
extent they are financed with the proceeds of a disposition of

5

--------------------------------------------------------------------------------

 

used, obsolete or worn out equipment or property in the ordinary course of
business; or (h) customary expenditures related to the production of Items of
Product.
     “Capital Lease”, as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is required to be accounted for as a capital lease on the
balance sheet of that Person.
     “Cash Collateral Account” shall have the meaning given to such term in
Section 11.1 hereof.
     “Cash Equivalents” means: (a) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in each
case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within one year from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or from Moody’s; (c) investments in certificates of
deposit, banker’s acceptances and time deposits maturing within one year from
the date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of any
commercial bank organized under the laws of the United States of America or any
State thereof which has a combined capital and surplus and undivided profits of
not less than $250,000,000 or that it is a Lender; (d) fully collateralized
repurchase agreements with a term of not more than 30 days for securities
described in clause (a) above and entered into with a financial institution
satisfying the criteria described in clause (c) above; (e) money market funds
that (i) comply with the criteria set forth in Securities and Exchange
Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated
AAA by S&P or Aaa by Moody’s, and (iii) have portfolio assets of at least
$500,000,000; and (f) direct obligations of any State of the United States of
America (or by any subdivision thereof to the extent such obligations are backed
by the full faith and credit of such State), in each case, (i) maturing within
one year from the date of acquisition thereof, and (ii) rated AAA by S&P or Aaa
by Moody’s.
     “Change in Control” shall mean (i) the first day on which a majority of the
members of the Board of Directors of the Borrower are not Continuing Directors,
(ii) any “person” (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the SEC
thereunder as in effect from time to time) other than KRH or the Kelso Group or
any of their respective beneficial owners or any Permitted Group shall own,
directly or indirectly, beneficially or of record, Equity Interests representing
more than 50% of the voting Equity Interests of Public Co. or such person shall
own, directly or indirectly, beneficially or of record, Equity Interests
representing more than 50% of the voting Equity Interests of the Parent
(measured by voting power rather than number of shares or membership interests),
(iii) the Parent shall cease to have both beneficial ownership and control of
100% of the voting Equity Interests of the Borrower or (iv) the Borrower shall
cease to have both beneficial ownership and control of 100% of the voting Equity
Interests of each of RHI Entertainment Distribution, LLC, RHI Entertainment
Productions, LLC and RHI International Distribution, Inc., except as a result of
a disposition permitted under Section 6.6 hereof.

6

--------------------------------------------------------------------------------

 

     “Change in Law” shall mean (a) the adoption of any law, rule or regulation
after the date of this Credit Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Credit Agreement or (c) compliance by any
Lender (or, for purposes of Section 2.10(b) by any Lending Office of such Lender
or by such Lender’s holding company, if any) with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Credit Agreement.
     “Clearing Account” shall mean the account of the Administrative Agent (for
the benefit of itself and the Lenders) maintained at the office of JPMorgan
Chase Bank, N.A., JPMorgan Loan Services Group, 21 South Clark Street, 17th
Floor, Chicago, Illinois 60603, Attention: Sharon Bosch, designated as the “LS2
Incoming Account”, Account No. 9008109962 C2547, Reference: “RHI Entertainment”.
     “Closing Date” shall mean the date on which the conditions precedent to the
extension of credit under this Credit Agreement set forth in Section 4.1 hereof
have been satisfied or waived.
     “Code” shall mean the Internal Revenue Code of 1986 and the rules and
regulations issued thereunder, as now and hereafter in effect, as codified at 26
U.S.C. § 1 et seq. or any successor provision thereto.
     “Collateral” shall mean with respect to each Credit Party, all of such
Credit Party’s right, title and interest in and to all personal property,
tangible and intangible, wherever located or situated and whether now owned,
presently existing or hereafter acquired or created, including, but not limited
to, all goods, accounts, instruments, intercompany obligations, contract rights,
partnership and joint venture interests, documents, chattel paper, general
intangibles, goodwill, equipment, machinery, inventory, investment property,
copyrights, trademarks, trade names, insurance proceeds, cash, deposit accounts,
letter of credit rights and the Pledged Securities, and any proceeds thereof,
products thereof or income therefrom, further including but not limited to, all
of such Credit Party’s right, title and interest in and to each and every item
and type of Item of Product, including with respect to each and every Item of
Product and without limiting the foregoing language, each and all of the
following particular rights and properties (in each case to the extent any of
the foregoing is now owned or hereafter created or acquired by such Credit
Party):

  (i)   all scenarios, screenplays and/or scripts at every stage thereof;    
(ii)   all common law and/or statutory copyright and other rights in all
literary and other properties (hereinafter called “said literary properties”)
which form the basis of such Item of Product and/or which are or will be
incorporated into such Item of Product, all component parts of such Item of
Product consisting of said literary properties, all motion picture rights in and
to the story, all treatments of said story and said literary properties,
together with all preliminary and final screenplays used and to be used in
connection with such Item of Product, and all other literary material upon which
such Item of Product is based or from which it is adapted;

7

--------------------------------------------------------------------------------

 

  (iii)   all rights for all media in and to all music and musical compositions
used and to be used in such Item of Product, if any, including, each without
limitation, all rights to record, re-record, produce, reproduce or synchronize
all of said music and musical compositions, including, without limitation, reuse
fees, royalties and all other amounts payable with respect to said music and
musical compositions;     (iv)   all tangible personal property relating to such
Item of Product, including, without limitation, all exposed film, developed
film, positives, negatives, prints, positive prints, answer prints, special
effects, preparing materials (including interpositives, duplicate negatives,
internegatives, color reversals, intermediates, lavenders, fine grain master
prints and matrices, and all other forms of pre-print elements), sound tracks,
cutouts, trims and any and all other physical properties of every kind and
nature relating to such Item of Product whether in completed form or in some
state of completion, and all masters, duplicates, drafts, versions, variations
and copies of each thereof, in all formats whether on film, videotape, disk or
otherwise and all music sheets and promotional materials relating to such Item
of Product (collectively, the “Physical Materials”);     (v)   all collateral,
allied, subsidiary and merchandising rights appurtenant or related to such Item
of Product including, without limitation, the following rights: all rights to
produce remakes, sequels or prequels to such Item of Product based upon such
Item of Product, said literary properties or the theme of such Item of Product
and/or the text or any part of said literary properties; all rights throughout
the world to broadcast, transmit and/or reproduce by means of television
(including commercially sponsored, sustaining and subscription or “pay”
television) or by any process analogous thereto, now known or hereafter devised,
such Item of Product or any remake, sequel or prequel to the Item of Product;
all rights to produce primarily for television or similar use, a motion picture
or series of motion pictures, by use of film or any other recording device or
medium now known or hereafter devised, based upon such Item of Product, said
literary properties or any part thereof, including, without limitation, based
upon any script, scenario or the like used in such Item of Product; all
merchandising rights including, without limitation, all rights to use, exploit
and license others to use and exploit any and all commercial tie-ups of any kind
arising out of or connected with said literary properties, such Item of Product,
the title or titles of such Item of Product, the characters of such Item of
Product and/or said literary properties and/or the names or characteristics of
said characters and including further, without limitation, any and all
commercial exploitation in connection with or related to such Item of Product,
any remake, sequel or prequel thereof and/or said literary properties;     (vi)
  all statutory copyrights, domestic and foreign, obtained or to be obtained on
such Item of Product, together with any and all copyrights obtained or

8

--------------------------------------------------------------------------------

 

      to be obtained in connection with such Item of Product or any underlying
or component elements of such Item of Product, including, in each case without
limitation, all copyrights on the property described in subparagraphs (i)
through (v) inclusive, of this definition, together with the right to copyright
(and all rights to renew or extend such copyrights) and the right to sue in the
name of any of the Credit Parties for past, present and future infringements of
copyright;

  (vii)   all insurance policies and completion bonds connected with such Item
of Product and all proceeds which may be derived therefrom;     (viii)   all
rights to distribute, sell, rent, license the exhibition of and otherwise
exploit and turn to account such Item of Product, the Physical Materials, the
motion picture rights in and to the story and/or other literary material upon
which such Item of Product is based or from which it is adapted, and the music
and musical compositions used or to be used in such Item of Product;     (ix)  
any and all sums, proceeds, money, products, profits or increases, including
money profits or increases (as those terms are used in the UCC or otherwise) or
other property obtained or to be obtained from the distribution, exhibition,
sale or other uses or dispositions of such Item of Product or any part of such
Item of Product, including, without limitation, all sums, proceeds, profits,
products and increases, whether in money or otherwise, from the sale, rental or
licensing of such Item of Product and/or any of the elements of such Item of
Product including, without limitation, from collateral, allied, subsidiary and
merchandising rights, and further including, without limitation, all monies held
in any Cash Collateral Account, Production Account or Collection Account, or any
“Cash Collateral Account,” “Production Account” or “Collection Account”
maintained in accordance with the First Lien Agreement;     (x)   the dramatic,
nondramatic, stage, television, radio and publishing rights, title and interest
in and to such Item of Product, and the right to obtain copyrights and renewals
of copyrights therein;     (xi)   the name or title of such Item of Product and
all rights of such Credit Party to the use thereof, including, without
limitation, rights protected pursuant to trademark, service mark, unfair
competition and/or any other applicable statutes, common law, or other rule or
principle of law;     (xii)   any and all contract rights and/or chattel paper
which may arise in connection with such Item of Product;     (xiii)   all
accounts and/or other rights to payment which such Credit Party presently owns
or which may arise in favor of such Credit Party in the future, including,
without limitation, any refund or rebate in connection

9

--------------------------------------------------------------------------------

 

      with a completion bond or otherwise, all accounts and/or rights to payment
due from Persons in connection with the distribution of such Item of Product, or
from the exploitation of any and all of the collateral, allied, subsidiary,
merchandising and other rights in connection with such Item of Product;

  (xiv)   any and all “general intangibles” (as that term is defined in the UCC)
not elsewhere included in this definition, including, without limitation, any
and all general intangibles consisting of any right to payment which may arise
in connection with the distribution or exploitation of any of the rights set out
herein, and any and all general intangible rights in favor of such Credit Party
for services or other performances by any third parties, including actors,
writers, directors, individual producers and/or any and all other performing or
nonperforming artists in any way connected with such Item of Product, any and
all general intangible rights in favor of such Credit Party relating to licenses
of sound or other equipment, or licenses for any photograph or photographic or
other processes, and any and all general intangibles related to the distribution
or exploitation of such Item of Product including general intangibles related to
or which grow out of the exhibition of such Item of Product and the exploitation
of any and all other rights in such Item of Product set out in this definition;
    (xv)   any and all goods including, without limitation, inventory (as that
term is defined in the UCC) which may arise in connection with the creation,
production or delivery of such Item of Product and which goods pursuant to any
production or distribution agreement or otherwise are owned by such Credit
Party;     (xvi)   all and each of the rights, regardless of denomination, which
arise in connection with the acquisition, creation, production, completion of
production, delivery, distribution, or other exploitation of such Item of
Product, including, without limitation, any and all rights in favor of such
Credit Party, the ownership or control of which are or may become necessary or
desirable, in the opinion of the Administrative Agent, in order to complete
production of such Item of Product in the event that the Administrative Agent
exercises any rights it may have to take over and complete production of such
Item of Product;     (xvii)   any and all documents issued by any pledgeholder
or bailee with respect to such Item of Product or any Physical Materials
(whether or not in completed form) with respect thereto;     (xviii)   any and
all Production Accounts or other bank accounts established by such Credit Party
with respect to such Item of Product;     (xix)   any and all rights of such
Credit Party under any Distribution Agreements relating to such Item of Product;
and

10

--------------------------------------------------------------------------------

 

  (xx)   any and all rights of such Credit Party under contracts relating to the
production or acquisition of such Item of Product or otherwise, including, but
not limited to, all such contracts which have been delivered to the
Administrative Agent pursuant to this Credit Agreement;

provided, however, that, notwithstanding the foregoing, Collateral shall not
include (a) any motor vehicles and other equipment subject to a certificate of
title statute, (b) commercial tort claims valued at less than $1,000,000,
(c) fee interests in or real property valued at less than $1,000,000,
(d) leasehold interests, (e) fixtures, except to the extent that the same are
equipment under the UCC or are related to real property covered by a mortgage in
favor of the Lenders, (f) crops, farm products or as extracted collateral,
(g) any contract, license, letter of credit, property right, permit or franchise
to the extent that the grant of a Lien therein would constitute or result in a
breach, termination or default thereunder or would otherwise be prohibited under
Applicable Law (it being understood that the exclusion provided under this
clause (g) shall not apply to any Distribution Agreements or any contract,
license, letter of credit, property right, permit or franchise that was entered
into after the Closing Date), so long as the sum of all amounts to which any
Credit Party has any rights to payment under all such contracts, licenses,
permits, property rights and franchises (other than letters of credit and those
listed on Schedule 1(b) hereto) does not at any time exceed an aggregate
principal amount of $17,000,000, but in each case only to the extent, and for so
long as, any such contractual or other prohibition is not terminated or rendered
or otherwise deemed ineffective by the UCC or any other Applicable Law, (h) any
assets to which title is contributed as an Investment in a Person that is not a
Credit Party to the extent such Investment is permitted by Section 6.4 hereof,
(i) any outstanding capital stock of a Controlled Foreign Subsidiary in excess
of 65% of the voting power of all classes of capital stock of such controlled
foreign corporation entitled to vote (within the meaning of Treasury Regulations
§ 1.956-2(c)(2)) and (j) any “intent to use” trademark or service mark
applications for which a statement of use has not been filed (but only until
such statement is filed); provided, that, at all times, notwithstanding the
foregoing, any proceeds received by any Credit Party from any such contract,
license, property right, permit, franchise or asset invested referred to clauses
(g) and (h) above shall be included in this definition of Collateral.
     “Collection Account” shall have the meaning given to such term in
Section 8.3(a) hereof.
     “Commitment” shall mean the commitment of each Lender to make a Loan to
Borrower on the Closing Date in the amount set forth opposite its name under the
column entitled “Second Lien Loan Commitment” in the Schedule of Commitments
appearing in Schedule 1.
     “Completed” and “Completion” shall mean with respect to any Item of
Product, that (A) a Laboratory has in its possession a complete final 35 mm or
70mm (or other size or medium which has become standard in the industry)
composite positive print, video master or other equivalent master copy of the
Item of Product as finally cut, main and end titled, edited, scored and
assembled with sound track printed thereon in perfect synchronization with the
photographic action and fit and ready for exhibition and distribution in the
medium for which the Item of Product is intended for initial exploitation, and
(B) if such Item of Product was acquired from a third party, the entire fixed
acquisition price or minimum advance shall have been paid to

11

--------------------------------------------------------------------------------

 

the extent then due and there shall be no condition or event (other than the
payment of money not yet due) the occurrence of which might result in such
Credit Party losing any of its rights in such Item of Product.
     “Consolidated Net Income” shall mean, for any period for which such amount
is being determined, the consolidated net income of such Person after taxes for
such period in accordance with GAAP; provided, however, that, without
duplication, (i) any net after-tax income or loss from discontinued operations
and any net after-tax gain or loss on disposal of discontinued operations shall
be excluded, (ii) any net after-tax gain or loss (less all fees and expenses or
charges relating thereto) attributable to business dispositions or asset
dispositions other than in the ordinary course of business (as determined in
good faith by the board of directors of the Borrower) shall be excluded,
(iii) any net after-tax income or loss (less all fees and expenses or charges
relating thereto) attributable to the early extinguishment of indebtedness shall
be excluded, (iv) any non-cash compensation expense realized from or related to
profit interest awards, grants of stock appreciation or similar rights, stock
options or other rights to directors, officers and employees of the Borrower or
any of its Subsidiaries shall be excluded, (v) Consolidated Net Income for such
period shall not include the cumulative effect of a change in accounting
principles during such period, and (vi) accruals and reserves that were
established within twelve months after the Original Closing Date and that were
so required to be established as a result of the Transactions and in accordance
with GAAP shall be excluded; provided, that for purposes of determinations of
Consolidated Net Income, it shall be assumed that amounts actually paid or
payable by the Borrower to the Parent pursuant to Section 6.5(b)(i) were taxes
expensed by the Borrower.
     “Consolidated Subsidiaries” shall mean all Subsidiaries of a Person which
are required or permitted to be consolidated with such Person for financial
reporting purposes in accordance with GAAP.
     “Continuing Director” shall mean, as of any date of determination, each
member of the Board of Directors of the Borrower who (a) was a member of such
Board of Directors on May 29, 2008 or (b) was nominated for election or elected
to such Board of Directors either (x) with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election or (y) by or with the consent of KRH.
     “Contribution Agreement” shall mean the contribution agreement
substantially in the form of Exhibit G hereto, as the same may be amended,
supplemented or otherwise modified, renewed or replaced from time to time.
     “Controlled Foreign Subsidiary” shall mean a Subsidiary that is a
“controlled foreign corporation” as defined in Section 957(a) of the Code or any
successor provision thereto.
     “Copyright Security Agreement” shall mean the Copyright Security Agreement,
substantially in the form of Exhibit C-1 hereto, as the same may be amended,
supplemented or otherwise modified, renewed or replaced from time to time by
delivery of a Copyright Security Agreement Supplement or otherwise.

12

--------------------------------------------------------------------------------

 

     “Copyright Security Agreement Supplement” shall mean a Copyright Security
Agreement Supplement substantially in the form of Exhibit C-2 hereto.
     “Coverage Ratio” shall be as defined in Section 6.21 hereof.
     “Credit Parties” shall mean the Borrower and each of the Guarantors.
     “Crown Media” shall mean Crown Media United States, LLC
     “Current Valuation” shall mean that certain library valuation of Salem
Partners LLC, dated as of December 31, 2007.
     “Default” shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
     “Direct Film Cost” shall mean, with respect to any period, the sum (without
duplication) of (a) net cash outflows actually spent by Borrower and its
Consolidated Subsidiaries in connection with Items of Product in development
during such period and (b) production costs actually spent by Borrower and its
Consolidated Subsidiaries in connection with Items of Product during such
period, in each case, determined in accordance with the methodology utilized in
the Initial Projections.
     “Disposition” means any transaction, or series of related transactions,
pursuant to which any Credit Party sells, assigns, transfers or otherwise
disposes of any property or assets (whether now owned or hereafter acquired) to
any Person (other than a Credit Party or any Subsidiary of any Credit Party), in
each case, whether or not the consideration therefor consists of cash,
securities or other assets owned by the acquiring Person, excluding any
(i) sales or licenses in the ordinary course of business on ordinary business
terms, (ii) sales of used, obsolete or worn-out tangible assets, (iii) sale and
leaseback transactions permitted by Section 6.8, (iv) the sale of defaulted
receivables in the ordinary course of business and not as part of an accounts
receivables financing transaction, (v) sales, assignments, transfers or other
dispositions that would otherwise constitute Investments permitted under
Section 6.4, Liens permitted under Section 6.2 or Restricted Payments permitted
under Section 6.5, (vi) licensing and cross-licensing arrangements involving any
technology or other intellectual property of the Credit Parties in the ordinary
course of business, (vii) sales, leases or other dispositions of inventory of a
Credit Party in the ordinary course of business and reasonably determined in
good faith by the management of such Credit Party to be no longer useful or
necessary in the operation of the business of such Credit Party and
(viii) leases, occupancy agreements and subleases of real property in the
ordinary course of business.
     “Distribution Agreements” shall mean (i) any and all agreements entered
into by a Credit Party, pursuant to which such Credit Party has sold, leased,
licensed or assigned distribution rights or other exploitation rights to any
Item of Product to an un-Affiliated Person, and (ii) any and all agreements
hereafter entered into by a Credit Party pursuant to which such Credit Party
sells, leases, licenses or assigns distribution rights or other exploitation
rights to an Item of Product to an un-Affiliated Person.

13

--------------------------------------------------------------------------------

 

     “Dollars” and “$” shall mean lawful money of the United States of America.
     “EBITDA” shall mean, for any period, all as determined in accordance with
GAAP, the Consolidated Net Income of the Borrower and its Consolidated
Subsidiaries for such period, plus (a) the sum of (in each case without
duplication and to the extent the respective amounts described in subclauses
(i) through (vii) of this clause (a) reduced such Consolidated Net Income for
the respective period for which EBITDA is being determined): (i) gross interest
expense for such period less gross interest income for such period,
(ii) provision for federal, state and local taxes based on income, profits,
dividends, or capital of the Borrower and its Consolidated Subsidiaries for such
period, including, without limitation, state, franchise and similar taxes,
(iii) depreciation expense, (iv) amortization expense, (v) any extraordinary,
unusual or non-recurring charges, expenses or losses, (vi) any non-cash charges,
expenses or losses; provided that, for purposes of this clause (vi), any
non-cash charges, expenses or losses shall be treated as cash charges, expenses
or losses in any subsequent period during which cash disbursements attributable
thereto are made, and (vii) the amount of management, consulting, monitoring,
transaction and advisory fees and related expenses paid to the Kelso Group or
any of its affiliates (or any accruals related to such fees and related
expenses) during such period permitted pursuant to Section 6.10(ix) hereof,
minus (b) the sum of (without duplication and to the extent the amounts
described in clause (b)(ii) increased such Consolidated Net Income for the
respective period for which EBITDA is being determined): (i) Direct Film Cost
for such period and (ii) the sum of non-cash, income, gains and other items
increasing Consolidated Net Income of the Borrower and its Consolidated
Subsidiaries for such period (but excluding any such items in respect of which
cash was received in a prior period or will be received in a future period).
     EBITDA shall be calculated on a Pro Forma Basis (including any synergies
and cost savings relating to Permitted Business Acquisitions as certified by the
chief financial officer of the Borrower as being factually supportable,
reasonably achievable and as having been determined in good faith to be
reasonably anticipated to be realizable within 12 months following any such
acquisition or disposition, provided, that in no event shall the EBITDA
attributable to synergies and cost savings under such Pro Forma Basis
calculations exceed five percent (5%) of the aggregate Pro Forma Basis EBITDA
that would have existed in the absence of having included such synergies and
cost savings) and shall not include any non-cash impact attributable to purchase
accounting adjustments as a result of the fair value exercise undertaken as
required by purchase accounting for the transactions contemplated by such
acquisition, in accordance with GAAP.
     “Eligible Assignee” shall mean (i) a commercial bank organized under the
laws of the United States of America, or any State thereof, and having total
assets in excess of $1,000,000,000, (ii) a savings and loan association or
savings bank organized under the laws of the United States of America, or any
State thereof, and having a net worth of at least $100,000,000, calculated in
accordance with GAAP, (iii) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development (“OECD”), or a political subdivision of any such country, and having
total assets in excess of $1,000,000,000; provided, that such bank is acting
through a branch, subsidiary or agency located in the country in which it is
organized or another country which is also a member of the OECD, (iv) the
central bank of any country which is a member of the OECD, (v) a financial
institution, insurance company or fund which regularly engages in making,
purchasing

14

--------------------------------------------------------------------------------

 

or otherwise investing in commercial loans, (vi) a “Qualified Institutional
Buyer”, as defined in Rule 144A under the Securities Act of 1933, (vii) an
Approved Fund or (viii) any other Person consented to by the Borrower (which
consent shall not be unreasonably withheld or delayed and which consent shall
not be required if an Event of Default shall have occurred and be continuing)
and the Administrative Agent.
     “Eligible Library Amount” (A) prior to the First Priority Obligations
Payment Date shall (subject to the provisions in the Intercreditor Agreement
limiting amendments to the definition of the term “Eligible Library Amount”
under the First Lien Agreement) have the meaning set forth for such term in the
First Lien Agreement, including that it shall as of the Closing Date be equal to
$717,586,000, which amount is equal to the present value at 10% of the
unexploited rights to the Completed Items of Product of the Credit Parties as
set forth in the Current Valuation; provided, however, that the First Lien Agent
may in its discretion reduce the Eligible Library Amount to reflect interim
decreases, if any, in the remaining value of unsold library rights resulting
from one or more agreements pertaining to the licensing, distribution or sale of
library product under which the aggregate amount received or due exceeds
$20,000,000 at any time and (B) from and after the First Priority Obligations
Payment Date shall be established as follows: (i) the Eligible Library Amount
shall be redetermined with respect to the Credit Parties on an annual basis
(and, to the extent from time to time requested by the Borrower, at more
frequent intervals) by an independent consultant approved by the Administrative
Agent, acting reasonably and in good faith, using methodology consistent with
that used in the Current Valuation or otherwise approved by the Administrative
Agent acting reasonably and in good faith and shall be accompanied by a variance
analysis of the value of such Eligible Library Amount against the Eligible
Library Amount for the preceding period, (ii) the Administrative Agent shall be
entitled to exclude from the computation of Eligible Library Amount any library
credit which has not been valued by an independent consultant and in a manner,
in each case, meeting the requirements set forth in clause (i) above, (iii) the
Eligible Library Amount may be increased in the case of a significant library
acquisition upon the delivery of a supplemental valuation report meeting the
requirements of clause (i) above and (iv) the Eligible Library Amount will be
decreased to reflect (a) any write-down of the assets contained in the
Borrower’s financial statements provided pursuant to Section 5.1 hereof to the
extent that such assets were theretofore included in the Eligible Library
Amount, (b) for purposes of the computations required by Sections 2.10(f) and
6.21, any asset sales sold or disposed of since the last valuation report and
(c) for purposes of computing the Eligible Library Amount for inclusion in the
Borrowing Base, subsequent to the sale or disposition of Items of Product
representing more than the lesser of $15,000,000 and 2% of the Eligible Library
Amount since the last valuation report, any assets sold or disposed of since the
last valuation report.
All new valuations shall be deemed approved unless the First Lien Agent or
Required Lenders under the First Lien Agreement, in either case acting
reasonably, object thereto in writing with the reasons for such objection(s). If
the First Lien Agent or Required Lenders under the First Lien Agreement so
object in writing to any new valuation within 45 days after receipt thereof, the
Borrower shall have 60 days from its receipt of such written notice to deliver
or cause to be delivered a revised valuation to the First Lien Agent (which will
be subject to the same objection process set forth above, but subject to an
outside resolution date not more than 30 days after receipt by the Borrower of a
second written notice from the First Lien Agent) and during such

15

--------------------------------------------------------------------------------

 

period the “Eligible Library Amount” shall be deemed to be the lesser of (x) the
amount (as adjusted above for subsequent events) last accepted by the First Lien
Agent and the First Lien Lenders and (y) the amount (as adjusted for subsequent
events) in the most recent valuation presented to the First Lien Agent;
notwithstanding the foregoing, the First Lien Agent may object to the inclusion
of any value in any new valuation on the Eligible Library Amount attributable to
an Item of Product for which the Borrower prior to the delivery of such new
valuation to the First Lien Agent has not provided a fully executed Copyright
Security Agreement Supplement covering its interest under copyright in that Item
of Product (whether such rights are as copyright proprietor or as licensee)
containing the registration numbers assigned by the United States Copyright
Office to the underlying copyright interest (other than the registration and/or
recordation numbers for Items of Product for which filings have been made and
the appropriate expedited filing fee has been paid but for which registration
and/or recordation numbers have not yet been received). For purposes of the
definition of Eligible Library Amount, to the extent any Credit Party is
required to act within a certain number of days the last day of which is not a
Business Day, then the due date for such action shall be extended to the next
succeeding Business Day.
Subsequent to the First Priority Obligations Payment Date, all determinations
and/or other action to be taken by the First Lien Agent pursuant to the
definition “Eligible Library Amount” shall instead be taken by the
Administrative Agent.
     “Environmental Laws” shall mean any and all applicable federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of any Governmental Authority regulating,
relating to, or imposing liability or standards of conduct concerning, any
Hazardous Material or environmental protection, occupational health and safety,
as now or at any time hereafter in effect, including without limitation, the
Clean Water Act also known as the Federal Water Pollution Control Act (“FWPCA”),
33 U.S.C. § 1251 et seq., the Clean Air Act (“CAA”), 42 U.S.C. §§ 7401 et seq.,
the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”), 7 U.S.C. §§
136 et seq., the Surface Mining Control and Reclamation Act (“SMCRA”), 30 U.S.C.
§§ 1201 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq., the Superfund Amendments and
Reauthorization Act of 1986 (“SARA”), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act (“ECPCRKA”), 42 U.S.C. §
11001 et seq., the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §
6901 et seq., the Occupational Safety and Health Act as amended (“OSHA”), 29
U.S.C. § 655 and § 657 (only to the extent related to workplace exposure to
Hazardous Materials), together, in each case, with any amendment thereto, and
the regulations adopted and the publications promulgated thereunder and all
substitutions thereof.
     “Equity Interests” shall mean shares of the capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity interests in any Person or any warrants,
options or other rights to acquire such interests.
     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
heretofore and hereafter amended, as codified at 29 U.S.C. § 1001 et seq. and
the regulations promulgated thereunder.

16

--------------------------------------------------------------------------------

 

     “ERISA Affiliate” shall mean each Person (as defined in Section 3(9) of
ERISA) which is treated as a single employer with any Credit Party under
Section 414(b), (c), (m) or (o) of the Code.
     “Event of Default” shall have the meaning given to such term in Article 7
hereof.
     “Excluded Proceeds” shall mean (i) any proceeds realized in a single
transaction or series of related transactions not exceeding $2,500,000 and
(ii) any proceeds realized from one or more transactions not exceeding
$17,000,000 in the aggregate; provided, that upon the aggregate amount of
Excluded Proceeds realized by the Credit Parties meeting or exceeding
$17,000,000, the entirety of such proceeds shall be deemed to be Net Proceeds
that the Borrower shall prepay or reinvest in accordance with Section 2.10(f) or
6.6(d) hereof (less any amounts previously prepaid or reinvested in accordance
with Section 2.10(f) or 6.6(d)), following which prepayment or reinvestment of
all such Excluded Proceeds, the amount of Excluded Proceeds shall be reset to
zero.
     “Excluded Taxes” shall mean, with respect to the Administrative Agent, any
Lender or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income (or minimum tax or similar taxes imposed in lieu
thereof) by the United States of America, or by the jurisdiction under the laws
of which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable Lending Office is
located, or otherwise imposed as a result of a connection between the
Administrative Agent or any Lender, as applicable, and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
such Administrative Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or enforced, this Credit
Agreement), (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction in which the Borrower is
located, (c) any withholding tax (in the case of a Foreign Lender) or backup
withholding tax (in the case of any Lender) that is imposed on amounts payable
to such Lender at the time such Lender becomes a party to this Credit Agreement
(or designates a new Lending Office), except to the extent that such Lender (or
its assignor, if any) was entitled, at the time of designation of a new Lending
Office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.14(a) and (d) any
withholding tax that is attributable to such Lender’s failure to comply with
Section 2.14(e).
     “Existing Second Lien Facility” shall have the meaning given such term in
the Introductory Statement hereof.
     “Facility” shall have the meaning given such term in the Introductory
Statement hereof.
     “FASB” shall mean the Financial Accounting Standards Board.
     “Fee Letters” shall mean, collectively, any fee letters entered into
between the Borrower and any of its affiliates on the one hand and the
Administrative Agent and any of its

17

--------------------------------------------------------------------------------

 

affiliates on the other hand, as they may be amended, supplemented or otherwise
modified, renewed or replaced from time to time.
     “First Lien Agent” shall mean JPMorgan Chase Bank, N.A., in its capacity as
administrative agent under the First Lien Facilities.
     “First Lien Agreement” shall mean that certain Credit, Security, Guaranty
and Pledge Agreement, dated as of January 12, 2006, as amended and restated as
of April 13, 2007 (as the same has been amended via that certain Amendment No. 1
dated as of October 12, 2007 and that certain Amendment No. 2 dated as of
May 29, 2008 and as the same may be further amended, supplemented or otherwise
modified, renewed or replaced from time to time in accordance with the
Intercreditor Agreement), among the Borrower, the Guarantors, the First Lien
Agent and the First Lien Lenders pursuant to which the following first-lien
loans are to be extended to Borrower: (a) a revolving credit facility of
$275,000,000 (which revolving credit facility has been increased to $350,000,000
in connection with the consummation of the 2008 Transactions), which matures on
April 13, 2013 and (b) a term loan of $175,000,000 which matures on April 13,
2013.
     “First Lien Amendment No. 2” shall mean that certain Amendment No. 2 dated
as of May 29, 2008 to the First Lien Agreement.
     “First Lien Facilities” shall mean each of the loans contemplated by the
First Lien Agreement and all other obligations of the Borrower in connection
therewith.
     “First Lien Lenders” shall mean the “Lenders” as such term is defined in
the First Lien Agreement.
     “First Lien Notes” shall mean the “Notes” as such term is defined in the
First Lien Agreement.
     “First Priority Obligations” shall have meaning given to such term in the
Intercreditor Agreement.
     “First Priority Obligations Payment Date” shall have meaning given to such
term in the Intercreditor Agreement.
     “Foreign Lender” shall mean any Lender that is not a United States person,
within the meaning of Section 7701(a)(30) of the Code.
     “Foreign Production Subsidiary” shall mean any Foreign Subsidiary
established or existing solely for the purpose of producing or acquiring an Item
of Product, which Foreign Subsidiary may control the bare copyright but the not
economic benefits of such Item of Product and may have the right to manage funds
utilized to produce such Item of Product; it being understood that such economic
benefits (including, without limitation, the distribution rights and the
proceeds generated from the exploitation of such Item of Product) of such Item
of Product and the beneficial ownership of the funds utilized to produce such
Item of Product shall be held by a Credit Party.

18

--------------------------------------------------------------------------------

 

     “Foreign Subsidiary” shall mean any Subsidiary that is incorporated or
organized under the laws of any jurisdiction other than the United States of
America, any State thereof or the District of Columbia.
     “Fundamental Documents” shall mean this Credit Agreement, the Notes, the
Pledgeholder Agreements, the Copyright Security Agreement, the Fee Letters, the
Copyright Security Agreement Supplements, any Trademark Security Agreement, the
Hallmark Guaranty, the Contribution Agreement, the Instruments of Assumption and
Joinder, UCC financing statements, the Incremental Amendment (if any) and any
other ancillary documentation which is required to be or is otherwise executed
by any Credit Party and delivered to the Administrative Agent in connection with
this Credit Agreement or any of the documents listed above.
     “GAAP” shall mean generally accepted accounting principles in the United
States of America in effect (i) with respect to the determination of the Credit
Parties’ compliance with the financial covenant set forth in Section 6.21
hereof, on April 13, 2007 consistently applied and (ii) for all other purposes
hereunder, from time to time consistently applied (except for accounting changes
in response to FASB releases, or other authoritative pronouncements).
     “Governmental Authority” shall mean any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
or any court, in each case whether of the United States of America or any
foreign jurisdiction.
     “Greenshoe Proceeds” shall mean the gross proceeds of any “greenshoe”
offering relating to the Qualified IPO, minus the aggregate of all underwriting
discounts and commissions and fees and expenses incurred in connection such
greenshoe offering, fees and expenses of outside accountants and counsel, SEC
and FINRA filing and registration fees, exchange listing fees and expenses,
transfer agent fees and expenses, printing and financial printer service
expenses and road show expenses, in each case to the extent incurred in
connection with such greenshoe offering).
     “Guarantors” shall mean all the entities listed on Schedule 3 hereto and
(a) all other direct and indirect Subsidiaries of the Borrower, whether now
existing or hereafter acquired or created, (i) with assets valued at $250,000 or
greater and (ii) formed under the laws of a jurisdiction located in the United
States of America and (b) any entity which is not a Guarantor hereunder but
becomes a “Guarantor” under the First Lien Facilities.
     “Guaranty” shall mean, as to any Person, any direct or indirect obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, Capital
Lease, dividend or other monetary obligation (“primary obligation”) of any other
Person (the “primary obligor”) in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, or (c) to purchase
property, securities or services, in each case, primarily for the purpose of
assuring the performance by the primary obligor of any such primary obligation;
provided, however, that the term Guaranty shall not include endorsements for
collection or collections for

19

--------------------------------------------------------------------------------

 

deposit, in either case in the ordinary course of business or customary and
reasonable indemnity obligations in effect on the Closing Date listed on
Schedule 3.171 or entered into in connection with an acquisition or disposition
of assets permitted under this Credit Agreement. The amount of any Guaranty
shall be deemed to be an amount equal to (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranty is made (or, if the
amount of such primary obligation is not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder)), or (y) the stated maximum liability under such
Guaranty, whichever is less.
     “Hallmark Guaranty” shall mean that certain Guaranty of Hallmark Cards,
Inc. for the benefit of the Borrower, in the form attached hereto as Exhibit L.
     “Hazardous Materials” shall mean any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances or similar materials defined in any Environmental Law.
     “Indebtedness” shall mean (without double counting), at any time and with
respect to any Person, (i) indebtedness of such Person for borrowed money
(whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services purchased (other than amounts
constituting trade payables (payable within 365 days or such longer terms as may
be customary in the industry), accrued expenses, deferred compensation
arrangements and advance payments in the ordinary course of business);
(ii) obligations of such Person in respect of letters of credit, acceptance
facilities, or drafts or similar instruments issued or accepted by banks and
other financial institutions for the account of such Person; (iii) obligations
of such Person under Capital Leases and any financing lease involving
substantially the same economic effect; (iv) deferred payment obligations
relating to a lump-sum judgment or settlement of such Person resulting from the
adjudication or settlement of any litigation to the extent not already reflected
as a current liability on the balance sheet of such Person; and (v) indebtedness
of others of the type described in clauses (i), (ii), (iii) and (iv) hereof
which such Person has (a) directly or indirectly assumed or guaranteed in
connection with a Guaranty, or (b) secured by a Lien on the assets of such
Person, whether or not such Person has assumed such indebtedness (but only to
the extent of the lesser of the amount of such Indebtedness and the aggregate
fair market value of all assets of such Person securing such Indebtedness);
provided, that Indebtedness shall not include any non-refundable advance made to
a Credit Party by a third party distributor in connection with the production,
distribution or sale of any Item of Product.
     “Indemnified Taxes” shall mean Taxes other than Excluded Taxes and Other
Taxes.
     “Initial Date” shall mean (i) in the case of the Administrative Agent, the
date hereof, (ii) in the case of each Lender which is an original party to this
Credit Agreement, the date hereof and (iii) in the case of any other Lender, the
effective date of the Assignment and Assumption pursuant to which it became a
Lender.
 

1   RHI to prepare updated disclosure schedules.

20

--------------------------------------------------------------------------------

 

     “Initial Projections” shall mean the projections included in the Business
Plan Detail dated May 9, 2008 delivered by Borrower to the Administrative Agent.
     “Instrument of Assumption and Joinder” shall mean an Instrument of
Assumption and Joinder substantially in the form of Exhibit J hereto.
     “Intercreditor Agreement” shall mean that certain Intercreditor Agreement
among the Credit Parties, Parent, KRH Investments LLC (f/k/a RHI Entertainment
Holdings, LLC), the Administrative Agent and the First Lien Agent dated as of
the date hereof, and substantially in the form attached hereto as Exhibit D (as
amended, supplemented or otherwise modified, renewed or replaced from time to
time in accordance herewith and therewith).
     “Incremental Amendment” shall have the meaning given to such term in
Section 2.16 hereof.
     “Incremental Loans” shall have the meaning given to such term in
Section 2.16 hereof.
     “Interest Deficit” shall have the meaning given to such term in Section
2.15(a) hereof.
     “Interest Payment Date” shall mean (i) as to any LIBOR Loan having an
Interest Period of one, two or three months, the last day of such Interest
Period, (ii) as to any LIBOR Loan having an Interest Period of more than three
months, the last day of such Interest Period and, in addition, each date during
such Interest Period that would be the last day of an Interest Period commencing
on the same day as the first day of such Interest Period but having a duration
of three months or an integral multiple thereof, and (iii) with respect to
Alternate Base Rate Loans, the last Business Day of each March, June, September
and December (commencing the last Business Day of June 2008).
     “Interest Period” shall mean as to any LIBOR Loan, the period commencing on
the date of such Loan or the last day of the preceding Interest Period and
ending on the numerically corresponding day (or if there is no corresponding
day, the last day) in the calendar month that is one, two, three or six months
thereafter as the Borrower may elect; provided, however, that (i) if any
Interest Period would end on a day which shall not be a Business Day, such
Interest Period shall be extended to the next succeeding Business Day, unless
such next succeeding Business Day would fall in the next calendar month, in
which case, such Interest Period shall end on the next preceding Business Day
and (ii) no Interest Period may be selected which would end later than the
Maturity Date .
     “Investment” shall mean any stock, evidence of indebtedness or other
securities of any Person, any loan, advance, contribution of capital, extension
of credit or commitment therefor (including, without limitation, the Guaranty of
loans made to others, but excluding current trade and customer accounts
receivable arising in the ordinary course of business and payable in accordance
with customary trading terms in the ordinary course of business), or any
purchase of any security of another Person. The amount of each Investment will
be determined at the time such Investment is made and without giving effect to
subsequent changes in value.

21

--------------------------------------------------------------------------------

 

     “IPO Net Proceeds” shall mean the gross proceeds of the Qualified IPO (but
if there is a contemporaneous secondary offering on behalf of shareholders of
Public Co. shall not include any proceeds applicable to the shares being sold by
them) minus the aggregate of all underwriting discounts and commissions and fees
and expenses incurred in connection with the Reorganization and a Qualified IPO,
including without limitation $6.0 million to be paid to the Kelso Group in
exchange for the termination of the Management Agreement, fees and expenses of
outside accountants and counsel, SEC and FINRA filing and registration fees,
exchange listing fees and expenses, transfer agent fees and expenses, printing
and financial printer service expenses and road show expenses.
     “Item of Product” shall mean any made-for-television product including
movies of the week, mini-series and series or any episode thereof produced for
release on any form of television viewing or transmission or via internet or
electronic mobile devices in any case whether recorded on film, videotape,
cassette, cartridge, disc, digital medium or on or by any other means, method,
process or device whether now known or hereafter developed, with respect to
which a Credit Party (i) is the copyright owner, or (ii) acquires an equity
interest (whether directly, through a joint venture or partnership or otherwise)
or distribution rights; provided, that all of the episodes of any television
series for a broadcast season shall be collectively regarded as being one Item
of Product. The term “Item of Product” shall include, without limitation, the
scenario, screenplay or script upon which such Item of Product is based, all of
the properties thereof, tangible and intangible, and whether now in existence or
hereafter to be made or produced, whether or not in possession of such Credit
Party, and all rights therein and thereto, of every kind and character, in each
case, solely to the extent that a Credit Party owns, creates or acquires a
copyrightable interest therein and/or distribution rights thereto.
     “Kelso Group” shall mean Kelso & Company L.P. (“Kelso”), members of the
Borrower’s management (“Management”), Five Arrows Capital AG (“Rothschild”),
Magnetite Asset Investors III L.L.C. (“Magnetite”) and OCM Hallmark Holdings,
Inc., a Delaware corporation (“Oak Tree” and, together with Management,
Rothschild and Magnetite, the “Co-Investors”) and their respective Affiliates.
     “KRH” shall mean KRH Investments LLC, a Delaware limited liability company
formerly known as RHI Entertainment Holdings, LLC (and which was, under the
Existing Second Lien Facility, defined as the “Parent”), which upon consummation
of a Qualified IPO and the Reorganization will own a portion of the Equity
Interests of Parent.
     “Laboratory” shall mean, collectively (i) The Television Center in Los
Angeles, California, (ii) Bonded Services in Fort Lee, New Jersey and (iii) any
other domestic laboratory or film vault at which a Credit Party from time to
time will store Physical Materials relating to a Completed Item of Product (as
opposed to processing laboratories for video, film, sound or effects during
production or post production of an Item of Product or duplication of Completed
Items of Product that are not first-generation Items of Product) and that
delivers a Pledgeholder Agreement in favor of the Administrative Agent.
     “Lender” and “Lenders” shall mean the financial institutions whose names
appear on Schedule of Commitments and each Additional Lender signatory to an
Incremental

22

--------------------------------------------------------------------------------

 

Amendment in accordance with Section 2.16, and any assignee of a Lender pursuant
to Section 13.3 hereof, and their respective successors.
     “Lending Office” shall mean, with respect to any of the Lenders, the branch
or branches (or affiliate or affiliates) from which such Lender’s LIBOR Loans or
Alternate Base Rate Loans, as the case may be, are made or maintained and for
the account of which all payments of principal of, and interest on, such
Lender’s LIBOR Loans or Alternate Base Rate Loans are made, as notified to the
Administrative Agent from time to time.
     “Leverage Ratio” shall mean, at any date of determination, the ratio of
(i) the aggregate principal amount of Indebtedness of the Borrower and its
Consolidated Subsidiaries on such date (net of unrestricted cash and Cash
Equivalents) to (ii) the EBITDA for the Borrower and its Consolidated
Subsidiaries for the four-fiscal-quarter-period ending as of the Borrower’s most
recently completed fiscal quarter for which internal financial statements are
available.
     “LIBOR” shall mean, with respect to the Interest Period for a LIBOR Loan,
an interest rate per annum equal to the quotient (rounded upwards, if necessary,
to the next 1/100 of 1%) of (A) the rate for Dollar deposits for a period equal
to the applicable Interest Period commencing on the first day of such Interest
Period appearing on Reuters Screen LIBOR 01 Page or any successor service as of
11:00 A.M., London Time, two Business Days prior to the beginning of such
Interest Period (or, in the event that such rate does not appear on such page,
by reference to such other comparable publicly available service for displaying
Eurodollar rates as may be reasonably selected by the Administrative Agent or,
in the absence of such availability, by reference to the rate at which Dollar
deposits are offered to the Lending Office of the Administrative Agent in
immediately available funds in the London Interbank Market for LIBOR at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period) divided by (B) one minus the applicable
statutory reserve requirements of the Administrative Agent, expressed as a
decimal (including without duplication or limitation, basic, supplemental,
marginal and emergency reserves), from time to time in effect under Regulation D
or similar regulations of the Board. It is agreed that for purposes of this
definition, LIBOR Loans made hereunder shall be deemed to constitute
Eurocurrency Liabilities as defined in Regulation D and to be subject to the
reserve requirements of Regulation D.
     “LIBOR Loan” shall mean a Loan based on LIBOR in accordance with the
provisions of Article 2 hereof.
     “Lien” shall mean any mortgage, copyright mortgage, pledge, security
interest, encumbrance, lien or charge of any kind whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
agreement to grant a security interest at a future date, any lease in the nature
of security, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code of any jurisdiction); provided, however, that
this term shall not include contractual encumbrances which do not afford
security of the type described in this definition or the rights of a licensee as
a licensee.
     “Liquidity Ratio” shall mean the ratio, calculations of which shall be
determined in accordance with Exhibit M, of (i) all projected known cash sources
of the Borrower and its

23

--------------------------------------------------------------------------------

 

Consolidated Subsidiaries (including cash on hand, borrowings under the First
Lien Facilities and cash receipts from operations) to (ii) all projected known
cash uses of the Borrower and its Consolidated Subsidiaries (including debt
service, tax disbursements, amounts to be spent to acquire film inventory, print
and advertising expenses, overhead, development expenses, capital expenditures
and all other cash expenditures), all as projected by the Borrower in good
faith.
     “Loans” shall mean the loans made hereunder in accordance with Section 2.2
hereof and each series of Incremental Loans made hereunder in accordance with
Section 2.16.
     “Management Agreement” shall mean that certain letter agreement between
Borrower and Kelso & Company L.P., dated January 12, 2006.
     “Margin Stock” shall be as defined in Regulation U of the Board.
     “Material Adverse Effect” shall mean any change or effect that individually
or in the aggregate (a) has had or would reasonably be expected to have a
materially adverse effect on the business, assets, operations, properties,
financial condition, liabilities (including contingent liabilities) or Material
Agreements of the Borrower and its Subsidiaries, taken as a whole, (b)
materially impairs the legal right, power or authority of the Borrower or the
Credit Parties, taken as a whole, to perform their obligations under the
Fundamental Documents to which they are a party or (c) materially impairs the
validity or enforceability of, or materially impairs the rights, remedies or
benefits available to the Administrative Agent for the benefit of itself and the
Lenders under, the Fundamental Documents.
     “Material Agreement” shall mean any Distribution Agreement, credit
agreement, indenture, joint venture agreement, or other agreement, contract,
license or lease under which a Credit Party reasonably expects that it would,
pursuant to the terms thereof, (a) recognize future revenues in excess of
$17,000,000, (b) incur liabilities or obligations in excess of $17,000,000 or
(c) likely suffer damages or losses in excess of $17,000,000 by reason of the
breach or termination thereof; provided, that no production services agreement
or other relevant agreement principally relating to the production of an Item of
Product shall constitute a “Material Agreement” hereunder.
     “Maturity Date” shall mean the earlier of (i) June 23, 2015, and (ii) such
other date as the Loans shall become due and payable in accordance with
Article 7 hereof.
     “Moody’s” means Moody’s Investors Service, Inc.
     “Multiemployer Plan” shall mean a plan described in Section 4001(a)(3) of
ERISA.
     “Negative Pick-up Obligation” means, with respect to any Item of Product
produced by a third party, a commitment to pay a certain sum of money or other
Investment made by the Credit Party in order to obtain ownership or distribution
rights in such Item of Product, but which does not require any payment unless or
until the requirements of clause (A) of the definition of Completion have been
satisfied. Negative Pick-up Obligation includes both “traditional” negative
pick-up arrangements and indirect structures.

24

--------------------------------------------------------------------------------

 

     “Net Proceeds” shall mean 100% of the cash proceeds actually received by
any of the Credit Parties (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
purchase price adjustment or otherwise, but only as and when received) from any
Disposition to any Person or the issuance of Indebtedness by such Credit Party
or Subsidiary, net of (i) reasonable attorneys’ fees, accountants’ fees,
investment banking fees, survey costs, title insurance premiums, and related
search and recording charges, transfer taxes, deed or mortgage recording taxes,
required debt payments and required payments of other obligations relating to
the applicable asset (other than with respect to any subordinated debt), other
customary and reasonable expenses and brokerage, consultant and other customary
and reasonable fees actually incurred in connection therewith and (ii) Taxes
paid or payable as a result thereof, provided, that, Net Proceeds shall not
include Excluded Proceeds except as expressly provided in the proviso in the
definition of Excluded Proceeds.
     “Note” or “Notes” shall have the meaning given to such term in Section 2.4
hereof.
     “Obligations” shall mean the obligation of the Borrower to make due and
punctual payment of (i) principal of and interest on the Loans, costs and
attorneys’ fees and all other monetary obligations of the Borrower to the
Administrative Agent or any Lender under this Credit Agreement, the Notes, any
other Fundamental Document or any fee letter in respect of the Facility,
(ii) from and after the First Priority Obligations Payment Date, all amounts
payable by the Borrower to any Lender under any Swap Agreement; provided, that
the Administrative Agent shall have received written notice thereof within ten
(10) Business Days after execution of such Swap Agreement and (iii) amounts
payable to JPMorgan Chase Bank, N.A. or its affiliates in connection with any
bank account maintained by the Borrower or any other Credit Party at JPMorgan
Chase Bank, N.A., or its affiliates or any other banking services provided to
the Borrower or any other Credit Party by JPMorgan Chase Bank, N.A. or its
affiliates.
     “Original Closing Date” shall mean January 12, 2006.
     “Other Taxes” shall mean any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Credit Agreement.
     “Parent” shall mean RHI Entertainment Holdings II, LLC, a Delaware limited
liability company.
     “Parent Credit Agreement” shall mean that certain Credit Agreement dated as
of May 8, 2008 among RHI Entertainment Holdings, LLC (which in connection with
the Reorganization will change its name to KRH Investments LLC), the lenders
referred to therein and JPMorgan Chase Bank, N.A., as administrative agent,
pursuant to which the lenders party thereto made available a $30,000,000
unsecured term loan, the net proceeds of which were contributed to the Borrower
as an additional investment in Equity Interests of the Borrower.

25

--------------------------------------------------------------------------------

 

     “Parent LLC Agreement” shall mean the limited liability operating agreement
of Parent, as the same may be amended, supplemented, replaced, restated or
otherwise modified from time to time, provided that the Administrative Agent may
not (without the consent of the Required Lenders) approve changes which would
materially increase the Tax Distributions or, materially change the management
structure of the Parent or the Borrower.
     “Parent Note Obligations” shall mean, as of any date of determination, the
aggregate amount of all “Obligations” (as defined in the Parent Credit
Agreement).
     “PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
     “Percentage” shall mean with respect to any Lender, the percentage of the
Total Commitment represented by such Lender’s Commitment.
     “Permitted Business Acquisition” shall mean any acquisition of all or
substantially all the assets of, or all the Equity Interests (other than
directors’ qualifying shares) in, a Person or division or line of business of a
Person if (a) such acquisition was not preceded by, or effected pursuant to, an
unsolicited or hostile offer by the acquirer or an Affiliate of the acquirer,
(b) in the case of acquisitions of all Equity Interests of a Person, such Person
shall become a Guarantor hereunder if required by Section 5.21 and
(c) immediately after giving effect thereto: (i) no Event of Default shall have
occurred and be continuing or would result therefrom; (ii) all transactions
related thereto shall be consummated in accordance with Applicable Laws; and
(iii) either (x) such acquisition is entirely funded by the issuance of
additional Equity Interests (other than Specified Equity Contributions) or
(y) on a Pro Forma Basis after giving effect to such acquisition the Liquidity
Ratio, as evidenced by a certificate executed by an Authorized Officer of the
Borrower, for the ensuing four fiscal quarters is projected by the Borrower to
be at least 1.125:1.0.
     “Permitted Encumbrances” shall mean Liens permitted under Section 6.2
hereof.
     “Permitted First Lien Refinancing” shall be as defined in the Intercreditor
Agreement.
     “Permitted Group” shall mean any group of investors that is deemed to be a
“person” (as that term is used in Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the rules of the SEC thereunder as in effect from time
to time) by virtue of the Parent LLC Agreement and/or the limited liability
company agreement of KRH, as the same may be amended, modified or supplemented
from time to time.
     “Permitted Refinancing” shall be as defined in the Intercreditor Agreement.
     “Permitted Slate Financing” shall mean a Slate Financing with respect to
one or more Items of Product: (a) that is designated as a Slate Financing for
such Items of Product by an Authorized Officer of the Borrower in a certificate
delivered to the Administrative Agent prior to the Borrower engaging in such
Slate Financing and which certifies that such Slate Financing

26

--------------------------------------------------------------------------------

 

qualifies as such pursuant to the terms and conditions of this Credit Agreement,
(b) in which the third party providing such Slate Financing is a Slate Financing
Permitted Counterparty, (c) the amount of which Slate Financing does not exceed
the exposure limitation set forth for such Slate Financing Permitted
Counterparty on Schedule 2A hereto to the extent such Slate Financing Permitted
Counterparty is listed therein, and (d) for which a Slate Financing
Intercreditor Agreement has been executed and delivered to the Administrative
Agent by the applicable parties thereto.
          “Person” shall mean any natural person, corporation, division of a
corporation, limited liability company, partnership, trust, joint venture,
association, company, estate, unincorporated organization or government or any
agency or political subdivision thereof.
          “Physical Materials” shall have the meaning given to such term in
paragraph (iv) of the definition of “Collateral” herein.
          “Plan” shall mean an employee benefit plan within the meaning of
Section 3(3) of ERISA, other than a Multiemployer Plan, maintained or
contributed to by any Credit Party, or any ERISA Affiliate, or any other plan
covered by Title IV of ERISA that covers employees of the Credit Parties.
          “Pledged Collateral” shall mean the Pledged Securities and any
proceeds (as defined in Section 9-102(64) of the UCC) including cash proceeds
(as defined in Section 9-102(9) of the UCC) of the Pledged Securities.
          “Pledged Securities” shall mean (i) all of the issued and outstanding
capital stock or other Equity Interests in each of the Credit Parties, (ii) all
other equity securities or interests now owned or hereafter acquired by any of
the Credit Parties (other than Equity Interests of any Controlled Foreign
Subsidiary) and (iii) 65% of the Equity Interests of any Controlled Foreign
Subsidiary held by any Credit Party, in each case, including without limitation
the securities listed on Schedules 3.7(a) and 3.7(b) hereto.
          “Pledgeholder Agreement” shall mean a laboratory pledgeholder
agreement among a Credit Party (or Credit Parties), the First Lien Agent, the
Administrative Agent and one or more Laboratories, substantially in the form of
Exhibit E hereto, or in such other form and with such additional parties as
shall be reasonably acceptable to the First Lien Agent.
          “Pledgors” shall mean the Parent and those Credit Parties that own any
of the Pledged Securities.
          “Proceeds of Common Collateral” shall be as defined in the
Intercreditor Agreement.
          “Production Account(s)” shall mean individually or collectively, as
the context so requires, each demand deposit account(s) established by a Credit
Party at a commercial bank located in the United States of America or otherwise
acceptable to the Administrative Agent, for the sole purpose of paying the
production or acquisition costs of a particular Item of Product.

27

--------------------------------------------------------------------------------

 

          “Production Exposure” for an Item of Product that is not Completed
shall mean (i) with respect to any Item of Product for which and to the extent a
Credit Party has financial responsibility for production costs, the Budgeted
Negative Cost allocable to such Credit Party for such Item of Product and
(ii) with respect to all other Items of Product, the acquisition price paid or
to be paid by a Credit Party for such Item of Product or any rights therein
Negative Pick-up Obligations or co-financing obligation, in each case net of
(x) amounts being cash-flowed as and when needed by an Acceptable Obligor and
pursuant to contractual arrangements with such Acceptable Obligor and a Credit
Party reasonably acceptable to the Administrative Agent and (y) amounts being
cash-flowed as and when needed by obligors that are not Acceptable Obligors not
in excess of $1,000,000 per obligor and $20,000,000 in the aggregate for all
obligors that are not Acceptable Obligors. For the avoidance of doubt, the
calculation of Production Exposure shall not be applicable to any Slate
Financing Items of Product unless the Credit Parties have any equity exposure
relating thereto.
          “Productive Assets” shall mean, (a) when used in connection with the
sale or other disposition of assets constituting Collateral, any Items of
Product or other assets used or useful in the business of the Borrower and its
Subsidiaries, at least 80% of the value of which shall be pledged as Collateral
hereunder and (b) when used in connection with the sale or other disposition of
assets not constituting Collateral, any Items of Product or other assets used or
useful in the business of the Borrower and its Subsidiaries.
          “Pro Forma Basis” shall mean, as to any Person, for any events as
described below that occur subsequent to the commencement of a period for which
the financial effect of such events is being calculated, and giving effect to
the events for which such calculation is being made, such calculation as will
give pro forma effect to such events as if such events occurred on the first day
of the four consecutive fiscal quarter period ended on or before the occurrence
of such event (the “Reference Period”): in making any determination on a Pro
Forma Basis, (x) all Indebtedness (including Indebtedness incurred or assumed
and for which the financial effect is being calculated, whether incurred under
this Credit Agreement or otherwise, but excluding normal fluctuations in
revolving Indebtedness incurred for working capital purposes and, in each case
not to finance any acquisition) incurred or permanently repaid during the
Reference Period or thereafter and through and including the date upon which the
Permitted Business Acquisition is consummated shall be deemed to have been
incurred or repaid at the beginning of such period, (y) interest expense of such
Person attributable to interest on any Indebtedness, for which pro forma effect
is being given as provided in preceding clause (x), bearing floating interest
rates shall be computed on a pro forma basis as if the rates that would have
been in effect during the period for which pro forma effect is being given had
been actually in effect during such periods and (z) in the case of a sale or
other disposition of an asset during the Reference Period, or if the computation
is being made specifically with regard to a sale or other disposition of an
asset, the contribution to EBITDA of such asset during the Reference Period
shall be excluded.
          Pro forma calculations made pursuant to the definition of the term
“Pro Forma Basis” shall be determined in good faith by an Authorized Officer of
the Borrower. In the context of determining the permissibility of any Permitted
Business Acquisitions pro forma calculations may, for any fiscal period ending
on or prior to the first anniversary of such Permitted Business Acquisition,
include adjustments to reflect operating expense reductions and

28

--------------------------------------------------------------------------------

 

other operating improvements or synergies reasonably expected to result from
such Permitted Business Acquisition, as follows: such adjustments may reflect
additional operating expense reductions and other additional operating
improvements and synergies that would not be includable in pro forma financial
statements prepared in accordance with Regulation S-X but for which
substantially all of the steps necessary for the realization thereof have been
taken or are reasonably anticipated by the Borrower to be taken in the next
12 month period following the consummation thereof and, are estimated on a good
faith basis by the Borrower. The Borrower shall deliver to the Administrative
Agent a certificate of a financial Authorized Officer of the Borrower setting
forth such demonstrable or additional operating expense reductions and other
operating improvements or synergies and information and calculations supporting
them in reasonable detail.
          “Pro Rata Share” shall mean with respect to any Obligation or other
amount, each Lender’s pro rata share of such Obligation or other amount
determined in accordance with such Lender’s Percentage.
          “Public Co.” shall mean RHI Entertainment, Inc., a Delaware
corporation that is initially wholly-owned by Robert Halmi, Jr. and will become
owned by Robert Halmi, Jr. and public investors upon consummation of the
Qualified IPO and the Reorganization and will thereafter own a portion of the
Equity Interests of Parent.
          “Qualified IPO” shall mean an initial public offering of the common
stock of Public Co. by Public Co.
          “Quiet Enjoyment” shall be as defined in Section 8.13 hereof.
          “Refinancing Indebtedness” shall mean any Indebtedness issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund (collectively, to “Refinance”), the Indebtedness
being Refinanced (or previous refinancings thereof constituting Refinancing
Indebtedness); provided that (a) the principal amount (or accreted value, if
applicable) of such Refinancing Indebtedness does not exceed the principal
amount (or accreted value, if applicable) of the Indebtedness so Refinanced
(plus unpaid, accrued interest and premiums thereon and underwriting discounts,
fees, commissions and expenses), (b) the maturity date of such Refinancing
Indebtedness shall not occur prior to the Maturity Date, (c) if the Indebtedness
being refinanced is subordinated in right of payment to the Obligations under
this Credit Agreement, such Refinancing Indebtedness shall be subordinated in
right of payment to the Obligations on terms at least as favorable to the
Lenders as those contained in the documentation governing the Indebtedness being
Refinanced, (d) no Refinancing Indebtedness shall have different obligors, or
greater guarantees or security, than the Indebtedness being Refinanced and
(e) if the Indebtedness being Refinanced is secured by any collateral (whether
equally and ratably with, or junior to, the Lenders or otherwise), such
Refinancing Indebtedness may be secured by such collateral on terms no less
favorable to the Administrative Agent and the Lenders than those contained in
the documentation governing the Indebtedness being Refinanced.

29

--------------------------------------------------------------------------------

 

          “Refinancing IPO Proceeds” means that portion of the IPO Net Proceeds
that are used by Borrower, KRH or Parent to repay Obligations (under and as
defined in the Existing Second Lien Facility) and all Parent Note Obligations.
          “Registration Statement” shall mean Public Co.’s registration
statement on Form S-1 (Registration No. 333-146098) initially filed with the SEC
on September 14, 2007, in connection with a Qualified IPO.
          “Regulation D” shall mean Regulation D of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
          “Reorganization” shall mean the transactions and arrangements
concerning the corporate structure and ownership of the Borrower as described in
the Registration Statement (at the time it is declared effective) under the
heading “corporate history and reorganization”, provided that the terms thereof
do not differ from those set forth in Amendment No. 3 to the Registration
Statement (filed with the SEC on May 2, 2008) in a manner that is materially
adverse to the Lenders.
          “Reportable Event” shall mean any reportable event as defined in
Section 4043(c) of ERISA, other than a reportable event as to which provision
for 30-day notice to the PBGC has been waived under applicable regulations.
          “Required Lenders” shall mean Lenders holding (i) prior to the Closing
Date at least a majority of the Total Commitments and (ii) on or after the
Closing Date, at least a majority of the then-outstanding Loans.
          “Restricted Payment” shall mean (i) any distribution, cash dividend or
other direct or indirect payment on account of shares of any Equity Interest in
any Credit Party, (ii) any redemption or other acquisition, re-acquisition or
retirement by a Credit Party of any Equity Interests in any Credit Party or any
Subsidiary thereof, now or hereafter outstanding, other than redemptions or
repurchases funded from the proceeds of the issuance of additional Equity
Interests, other than Specified Equity Contributions, (iii) any payment made by
any Credit Party to retire, or obtain the surrender of, any outstanding
warrants, puts or options or other rights to purchase or otherwise acquire any
Equity Interest in any Credit Party or any Subsidiary thereof, now or hereafter
outstanding, (iv) any voluntary prepayment of unsecured Indebtedness and (v) any
payment under any Synthetic Purchase Agreement.
          “S&P” shall mean Standard & Poor’s Ratings Group.
          “Schedule of Commitments” shall mean, with respect to all Loans, the
schedule of Commitments of the Lenders set forth on Schedule 1 hereto, as the
same may be amended from time to time by operation of Assignments and
Assumptions in accordance with Section 13.3 hereof (as determined by the
Administrative Agent) in connection with or amendment to this Credit Agreement
that is executed in accordance with Section 13.10 hereof.
          “SEC” shall mean the U.S. Securities and Exchange Commission and any
successor agency.

30

--------------------------------------------------------------------------------

 

          “Slate Financing” shall mean the financing, in whole or in part, by a
third party of the development and production of a slate (i.e. more than one) of
Items of Product with respect to which the Borrower and its Subsidiaries
otherwise would not produce or acquire any rights or interest therein, and which
requires (i) that the Borrower or any of its Subsidiaries grant a security
interest to such third party in and to any of such Items of Product, or
(ii) that such third party receive a participation in revenue derived from the
Borrower’s or any of its Subsidiaries’ exploitation of its rights in such Items
of Product. For the avoidance of doubt, (1) the financing by third parties of
Items of Product in the ordinary course of business which does not include the
requirements set forth in (i) or (ii) above shall not constitute a Slate
Financing; (2) any co-financing of Items of Product in the ordinary course of
business which involves a splits rights relationship between the Borrower and
its Subsidiaries and one or more third parties pursuant to which a Credit Party
is not obligated to account to a third party with regard to the economic
performance of the Item of Product distributed by it in its territories and/or
media shall not constitute a Slate Financing and (3) and a Slate Financing shall
not per se be a sale and leaseback subject to the restrictions of Section 6.8;
provided, that: (x) with regard to any Slate Financing Item of Product which is
not wholly financed by third parties, that the Borrower is entitled to no less
than its pro rata share of the cash flow from that Slate Financing Item of
Product based upon the contribution by the Borrower or one of its subsidiaries
(other than as a result of non-recourse financing) to the cost of developing,
producing and exploiting such Slate Financing Item of Product, and (y) such
Slate Financing results in a Credit Party acquiring specified rights relating to
the distribution and exploitation of such Item of Product (which rights may
include, without limitation, distribution fees, copyright for specified
territories or media, or other rights).
          “Slate Financing Intercreditor Agreement” shall mean, in respect of a
Slate Financing Item of Product, an intercreditor agreement among the
Administrative Agent, the Second Lien Agent, the applicable Credit Party, the
applicable Slate Financing Permitted Counterparty and other interested parties,
if any, in form and substance reasonably satisfactory to the Administrative
Agent (as the same may be amended, supplemented or otherwise modified, renewed
or replaced from time to time in accordance with the terms hereof and thereof)
and governing, among other things, the terms of the applicable Slate Financing
arrangements and the remittance to the Slate Financing Permitted Counterparty of
the proceeds of such Slate Financing Item of Product. Such intercreditor
agreement shall, among other things:

  (i)   acknowledge that a Credit Party will be the exclusive distributor or
sales agent of the Slate Financing Item of Product for specified territories and
media and for a specified period of time, but in no event less than ten years;  
  (ii)   provide for the Administrative Agent to have a first priority security
interest (subject to the Permitted Slate Financing Counterparty’s negotiated
recoupment position), including control by the Administrative Agent in the event
of a liquidation of any common collateral, and (other than with respect to any
territory or media over which, in the context of a tax benefit transaction, the
tax counter-party has a priority claim in a specified foreign territory in which
the tax benefit counterparty or an Affiliate thereof is located) provide the
Administrative Agent with (x) control of remedies against the Credit Party’s
licensees of the Slate

31

--------------------------------------------------------------------------------

 

      Financing Item of Product, and (y) the right to deduct from the cash
proceeds realized from the exercise of such remedies, its costs in pursuing
remedies against the Credit Party’s licensee of such Slate Financing Item of
Product;

  (iii)   prohibit such Slate Financing Permitted Counterparty from interfering
with the rights of the licensees of the Slate Financing Item of Product (other
than with respect to any territories or media over which such Slate Financing
Permitted Counterparty has a priority claim); and     (iv)   permit the Slate
Financing Permitted Counterparty to pursue remedies only against the applicable
Credit Parties (and only for money damages), and not the Slate Financing Item of
Product or the licensees thereof.

          “Slate Financing Item of Product” shall mean any Item of Product that
is the subject of a Slate Financing.
          “Slate Financing Permitted Counterparty” shall mean (i) each Person
listed on Schedule 2A hereto (or a majority-owned Subsidiary of any such Person,
provided that such Subsidiary’s obligations with respect to any relevant Slate
Financing Item of Product is guaranteed by such Person in a manner satisfactory
to the Administrative Agent or such Subsidiary’s capitalization and
credit-worthiness are otherwise acceptable to the Administrative Agent in the
exercise of its reasonable commercial judgment), provided that the contemplated
Slate Financing to be provided by such Person for such Slate Financing Item of
Product, together with the aggregate of all Slate Financings to be provided by
such Person but not yet funded for other Slate Financing Items of Product, does
not exceed the exposure limitation set forth for such Person on Schedule 2A;
provided further, that the Administrative Agent may from time to time by written
notice to the Borrower (which notice shall be prospective only, i.e., such
reduction shall not be given effect in the context of any Item of Product for
which a Slate Financing Intercreditor Agreement has already been executed, but
such reduction shall nevertheless be effective for all other purposes
immediately upon the Borrower’s receipt of such notice) reduce the exposure
limitation set forth on Schedule 2A for such Person or its Subsidiaries, as the
Administrative Agent, acting in good faith and, to the extent reasonably
practicable, giving its reasons to the Borrower, may in its discretion deem
appropriate, and (ii) any other Person acceptable (with respect to such Person’s
identity and creditworthiness) to the Administrative Agent with regard to a
specific transaction.
          “Specified Equity Contribution” shall have the meaning given such term
in Section 1.2 hereof.
          “Specified Permitted Encumbrances” shall mean those Liens permitted
under Sections 6.2(b), (c), (d), (e), (f), (h), (i), (j), (k), (l), (o), (r),
(s), (t) and, to the extent that the applicable party to a sale-leaseback will
require the Administrative Agent to release its Lien on an Item of Product and
subsequently reattach its Lien to the distribution rights related thereto, (p).

32

--------------------------------------------------------------------------------

 

     “Subsidiary” shall mean with respect to any Person, any corporation,
association, joint venture, partnership or other business entity (whether now
existing or hereafter organized) of which at least a majority of the voting
stock or other ownership interests having ordinary voting power for the election
of directors (or the equivalent) is, at the time as of which any determination
is being made, owned or controlled by such Person or one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person.
     “Swap Agreement” means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided, that no phantom
stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
any Credit Party shall be a Swap Agreement.
     “Synthetic Purchase Agreement” means any Swap Agreement or similar
agreement or combination of agreements pursuant to which any Credit Party is or
may become obligated to make (i) any payment in connection with a purchase by
any third party from a Person other than a Credit Party of any Equity Interest
in any Credit Party or any subordinated Indebtedness, or (ii) any payment (other
than on account of a permitted purchase by it of any Equity Interest in any
Credit Party or any subordinated Indebtedness) the amount of which is determined
by reference to the price or value at any time of any Equity Interest in any
Credit Party or any subordinated Indebtedness; provided, that no phantom stock
or similar plan providing for payments only on account of services provided by
current or former directors, officers, employees or consultants of a Credit
Party or its Subsidiaries shall be a Synthetic Purchase Agreement.
     “Tax Distributions” shall mean, with respect to any taxable period, an
amount not to exceed the product of (i) the estimated (in the case of a payment
on account of quarterly estimated tax payments or extension payments) or actual
(in the case of a payment on account of the filing of a tax return) taxable
income of the Parent (determined without regard to net positive adjustments to
the basis of the Parent’s or its Subsidiaries’ assets resulting from an Internal
Revenue Code Section 754 election), as determined for federal income tax
purposes and (ii) the highest combined federal, state and local marginal tax
rate applicable to corporations residing in New York City, New York, or, if
greater and KRH’s percentage ownership of the outstanding membership interests
of Parent is at least 20%, the highest combined federal, state and local
marginal tax rate applicable to individuals residing in New York City, New York,
in each case taking into account the deductibility of state and local income
taxes for federal income tax purposes, reduced by any tax credits of Parent and
its Subsidiaries allocated to its members and in the reasonable judgment of the
Borrower would be utilizable by the members or their direct or indirect owners
if their allocated income of the Parent (determined without regard to net
positive adjustments to the basis of the Parent’s or its Subsidiaries’ assets
resulting from an Internal Revenue Code Section 754 election) was their only
taxable income; provided, it is understood and agreed that (a) Tax Distributions
with regard to estimated and extension tax payments may be made not earlier than
15 days prior to the date that the quarterly estimated

33

--------------------------------------------------------------------------------

 

or extension tax payment is due (using the earlier of the corporate or
individual due date for such payment), (b) not earlier than 15 days prior to the
date that the federal income tax return for Parent is filed, a final Tax
Distribution may be made equal to the excess of (1) the product of clause
(i) and clause (ii) above with respect to a taxable year over (2) the prior Tax
Distributions with respect to estimated and extension tax payments made for such
taxable year, (c) if the amount in clause (b) above is negative, such amount
shall reduce otherwise permitted future Tax Distributions, (d) in the event that
the taxable income of the Parent or its Subsidiaries (determined without regard
to net positive adjustments to the basis of the Parent’s or its Subsidiaries’
assets resulting from an Internal Revenue Code Section 754 election) is
increased for a taxable period pursuant to a federal income tax audit or
challenge by the Internal Revenue Service or the filing of an amended federal
income tax return, the calculation of the taxable income of the Parent shall be
appropriately increased and the Borrower shall be permitted to distribute a
corresponding additional amount pursuant to Section 6.5(b) (reduced by any
distribution made pursuant to clause (e) below for such taxable period) in the
year during which a settlement occurs, a decision of a court having jurisdiction
with respect to such matters becomes final or it files an amended federal income
tax return, (e) in the event that the taxable income of the Parent or its
Subsidiaries (determined without regard to net positive adjustments to the basis
of the Parent’s or its Subsidiaries’ assets resulting from an Internal Revenue
Code Section 754 election, but taking into account any increases described in
clause (d) above for such taxable period) is increased for a taxable period
pursuant to an state or local income tax audit or challenge by the state or
local taxing authority, the calculation of the taxable income of the Parent
shall be appropriately increased and the Borrower shall be permitted to
distribute a corresponding additional amount pursuant to Section 6.5(b) in the
year during which a settlement occurs or a decision of a court having
jurisdiction with respect to such matters becomes final provided that the tax
rate used shall be the applicable state or local income tax rate (reduced by the
federal tax benefit using the higher of the maximum federal corporate or
individual rate) and (f) except as permitted in clauses (d) and (e) above, no
Tax Distribution with respect to a taxable year may be made more than 30 days
after the date on which the federal income tax return for such year is filed.
          “Taxes” shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings imposed by any Governmental
Authority.
          “Total Commitment” shall mean, at any time, the aggregate amount of
the Commitments then in effect of all of the Lenders.
          “Trademark Security Agreement” shall mean a Trademark Security
Agreement substantially in the form of Exhibit F hereto to be executed by the
Borrower and the Guarantors, as such agreement may be amended, supplemented or
otherwise modified, renewed or replaced from time to time.
          “Transactions” shall mean, collectively, (x) the acquisition of all of
the Equity Interests of Hallmark Entertainment, LLC in connection with the
Existing Second Lien Facility and any transactions in connection therewith and
(y) the merger of HEI Acquisition, LLC with and into Hallmark Entertainment, LLC
(currently RHI Entertainment, LLC) and any transactions

34

--------------------------------------------------------------------------------

 

in connection therewith, including the making of the initial loans under the
Existing Second Lien Facility.
          “Type”, when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Alternate Base Rate or to LIBOR.
          “UCC” shall mean the Uniform Commercial Code as in effect in the State
of New York on the date of execution of this Credit Agreement (as such Uniform
Commercial Code is amended from time to time).
          “USA Patriot Act” shall mean the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (USA Patriot Act) (Title III of Pub. L. 107-56 (signed into law October 26,
2001)).
          “Valuation Items of Product” shall mean all Items of Product which
were analyzed in connection with, and included as a component of, the Current
Valuation.
          SECTION 1.2. Determination of Financial Covenants. For the purposes of
determining compliance with Section 6.21, the Borrower may include investments
made by the Kelso Group in the Borrower (the “Specified Equity Contribution”);
provided that (i) such investment is in the form of common equity or other
equity which is not entitled to receive any cash payments prior to the repayment
in full of the Facilities and the Second Lien Facility and is not entitled to
any mandatory redemptions, (ii) is made within ten (10) days of the date on
which compliance is determined in Section 6.21, (iii) in each four fiscal
quarter period, there shall be a period of at least two consecutive fiscal
quarters in which no Specified Equity Contribution is made and (iv) in each
eight fiscal quarter period there shall be a period of at least four consecutive
fiscal quarters during which no Specified Equity Contribution is made.

2.   THE LOANS

          SECTION 2.1. Term Loan Commitments
          (a) Each Lender, severally and not jointly, agrees, upon the terms and
subject to the conditions hereof, to make a loan (the “Loans”) to the Borrower
on the Closing Date in the amount of such Lender’s Commitment as part of a
single-draw term loan to the Borrower.
          (b) The Commitments are not revolving in nature, and the principal
amount of any Loan, once repaid, may not be reborrowed.
          SECTION 2.2. Term Loans and Borrowings.
          (a) The Loan of each Lender shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
respective Commitments. The failure of any Lender to make any Loan required to
be made by it shall not relieve any other Lender of its obligations hereunder;
provided that the Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.

35

--------------------------------------------------------------------------------

 

          (b) Subject to Section 2.11, each Borrowing shall be comprised
entirely of Alternate Base Rate Loans or LIBOR Loans as the Borrower may request
in accordance herewith; provided that all Borrowings made on the Closing Date
must be made as Alternate Base Rate Loans unless the Borrower shall have
provided three Business Days’ prior notice thereof and shall have agreed on or
prior to the date of the request to protect the Lenders against the failure to
borrow a LIBOR Loan on the date requested on terms substantially similar to
those contained in Section 2.10(b). Subject to Section 2.11(e), each Lender may
at its option fulfill its obligation to make any LIBOR Loan by causing a foreign
branch or affiliate to fund such Loan, provided that any exercise of such option
shall not affect the obligation of the Borrower to repay such Loan in accordance
with the terms hereof and of the relevant Note or increase the costs to the
Borrower payable hereunder in respect of LIBOR Loans. Subject to the other
provisions of this Section 2.2, Section 2.8(b), Section 2.9 and Section 2.11,
Loans of more than one Type may be outstanding at the same time.
          (c) The Borrower shall give the Administrative Agent prior written,
facsimile or telephonic (promptly confirmed in writing) notice of each Borrowing
hereunder; such notice shall be irrevocable and to be effective, must be
received by the Administrative Agent not later than 2:00 p.m., New York City
time, (i) in the case of Alternate Base Rate Loans, on the Business Day
preceding the date on which such Loan is to be made and (ii) in the case of
LIBOR Loans, on the third Business Day preceding the date on which such Loan is
to be made. Such notice shall specify (A) the amount of the requested Loan,
(B) the date on which such Loan is to be made (which shall be a Business Day),
and (C) whether the Loan then being requested is to be (or what portion or
portions thereof are to be) an Alternate Base Rate Loan or a LIBOR Loan and the
Interest Period or Interest Periods with respect thereto in the case of LIBOR
Loans. In the case of a LIBOR Loan, if no election of an Interest Period is
specified in such notice, such notice shall be deemed a request for an Interest
Period of one month. If no election is made as to the Type of any Loan, such
notice shall be deemed a request for an Alternate Base Rate Loan.
Notwithstanding anything to the contrary contained in this Section 2.2, the
Borrower shall not have the right to request more than one Borrowing.
          (d) Notwithstanding any provision to the contrary in this Credit
Agreement, the Borrower shall not, in any notice of borrowing under this
Section 2.2 request any LIBOR Loan which, if made, would result in an aggregate
of more than six (6) separate LIBOR Loans of any Lender being outstanding
hereunder at any one time. For purposes of the foregoing, LIBOR Loans having
Interest Periods commencing or ending on different days shall be considered
separate LIBOR Loans.
          (e) The aggregate amount of any Borrowing consisting of LIBOR Loans
shall be in a minimum aggregate principal amount of $500,000 or such greater
amount which is an integral multiple of $100,000 and the aggregate amount of any
Borrowing consisting of Alternate Base Rate Loans shall be in a minimum
aggregate principal amount of $500,000 or such greater amount which is an
integral multiple of $100,000.
          (f) Notwithstanding any other provision of this Credit Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing, if the Interest Period with respect thereto would end after the
Maturity Date.

36

--------------------------------------------------------------------------------

 

          (g) The Administrative Agent shall disburse the proceeds of Loans by
depositing them directly to the account specified to the Administrative Agent by
the Borrower in writing.
          SECTION 2.3. [Intentionally Omitted].
          SECTION 2.4. Notes; Repayment.
          (a) Any Lender may request that the Loan made by such Lender hereunder
be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto (each a “Note”) in the face amount of such Lender’s Commitment,
payable to such Lender, duly executed on behalf of the Borrower and dated as of
the date hereof. The principal amount of the Loans shall be payable in full on
the Maturity Date.
          (b) Each of the Loans shall bear interest on the outstanding principal
balance thereof as set forth in Section 2.5 hereof. Each Lender and the
Administrative Agent on its behalf is hereby authorized by the Borrower, but not
obligated, to enter the amount of each Loan and the amount of each payment or
prepayment of principal or interest thereon in the appropriate spaces on the
reverse of or on an attachment to its Note, if any; provided, however, that the
failure of any Lender or the Administrative Agent to set forth such Loans,
principal payments or other information shall not in any manner affect the
obligations of the Borrower to repay such Loans.
          SECTION 2.5. Interest on Loans.
          (a) In the case of a LIBOR Loan, interest shall be payable at a rate
per annum (computed on the basis of the actual number of days elapsed over a
year of 360 days) equal to LIBOR plus the Applicable Margin. Interest shall be
payable on each LIBOR Loan on each applicable Interest Payment Date, on the
Maturity Date and on the date of a conversion of such LIBOR Loan to an Alternate
Base Rate Loan. The Administrative Agent shall determine the applicable LIBOR
for each Interest Period as soon as practicable on the date when such
determination is to be made in respect of such Interest Period and shall notify
the Borrower and the Lenders of the applicable interest rate so determined. Such
determination shall be conclusive absent manifest error.
          (b) In the case of an Alternate Base Rate Loan, interest shall be
payable at a rate per annum (computed on the basis of the actual number of days
elapsed over a year of 360 days for Federal Funds Effective Rate loans, and over
a year of 365/366 days for Prime Rate loans) equal to the Alternate Base Rate
plus the Applicable Margin. Interest shall be payable in arrears on each
Alternate Base Rate Loan on each applicable Interest Payment Date and on the
Maturity Date.
          (c) Anything in this Credit Agreement or any Note to the contrary
notwithstanding, the interest rate on the Loans shall in no event be in excess
of the maximum permitted by Applicable Law.

37

--------------------------------------------------------------------------------

 

          SECTION 2.6. Fees. The Borrower agrees to pay to the Administrative
Agent on the Closing Date any and all fees, if any, that are then due and
payable by it to the Administrative Agent.
          SECTION 2.7. Termination of Commitment. Unless previously terminated,
the Commitment shall terminate upon the earlier of (a) 4:00 p.m. New York time
on the Closing Date and (b) 4:00 p.m. New York time on August 30, 2008.
          SECTION 2.8. Default Interest; Alternate Rate of Interest.
          (a) If the Borrower shall default in the payment when due of the
principal of, or interest on any Loan becoming due hereunder, whether at stated
maturity, by acceleration or otherwise, or the payment of any other amount
becoming due hereunder after written notification from the Administrative Agent
to the Borrower of such amount, the Borrower shall on demand in writing from
time to time pay interest, to the extent permitted by Applicable Law, on all
overdue amounts outstanding from the due date thereof up to the date of actual
payment of such defaulted amount (after as well as before judgment) (i) for the
overdue principal or interest in respect of any LIBOR Loan, at 2% in excess of
the rate then in effect for each such LIBOR Loan, and (ii) for the overdue
principal or interest in respect of any Alternate Base Rate Loan and for all
other overdue amounts hereunder, at 2% in excess of the rate then in effect for
Alternate Base Rate Loans.
          (b) In the event, and on each occasion, that on the day two Business
Days prior to the commencement of any Interest Period for a LIBOR Loan, (i) the
Administrative Agent shall have received notice from any Lender of such Lender’s
determination (which determination, absent manifest error, shall be conclusive)
that Dollar deposits in the amount of the principal amount of such LIBOR Loan
are not generally available in the London Interbank Market or that the rate at
which such Dollar deposits are being offered will not adequately and fairly
reflect the cost to such Lender of making or maintaining the principal amount of
such LIBOR Loan during such Interest Period, or (ii) the Administrative Agent
shall have determined that reasonable means do not exist for ascertaining the
applicable LIBOR, the Administrative Agent shall, as soon as practicable
thereafter, give written or facsimile notice of such determination to the
Borrower and the Lenders, and any request by the Borrower for a LIBOR Loan (or
conversion to or continuation as a LIBOR Loan pursuant to Section 2.9 hereof),
made after receipt of such notice and until the circumstances giving rise to
such notice no longer exist, shall be deemed to be a request for an Alternate
Base Rate Loan; provided, however, that in the circumstances described in clause
(i) above such deemed request shall only apply to the affected Lender’s portion
thereof. After such notice shall have been given and until the circumstances
giving rise to such notice no longer exist, each request (or portion thereof, as
the case may be) for a LIBOR Loan, to the extent such request relates to such
affected Lender’s portion shall be deemed to be a request for an Alternate Base
Rate Loan.
          SECTION 2.9. Continuation and Conversion of Loans. The Borrower shall
have the right, at any time, (i) to convert any LIBOR Loan or portion thereof to
an Alternate Base Rate Loan or to continue such LIBOR Loan or a portion thereof
for a successive Interest Period, or (ii) to convert any Alternate Base Rate
Loan or a portion thereof to a LIBOR Loan, subject to the following:

38

--------------------------------------------------------------------------------

 

          (a) the Borrower shall give the Administrative Agent prior written,
facsimile or telephonic (promptly confirmed in writing) notice of each
continuation or conversion hereunder of at least three Business Days for
continuation as or conversion to a LIBOR Loan; such notice shall be irrevocable
and to be effective, must be received by the Administrative Agent on the day
required not later than 2:00 p.m., New York City time;
          (b) unless the Required Lenders otherwise consent, no Event of Default
or Default shall have occurred and be continuing at the time of any conversion
to a LIBOR Loan or continuation of any such LIBOR Loan into a subsequent
Interest Period;
          (c) no Alternate Base Rate Loan may be converted to a LIBOR Loan and
no LIBOR Loan may be continued as a LIBOR Loan if, after such conversion or
continuance, and after giving effect to any concurrent prepayment of Loans, an
aggregate of more than six (6) separate LIBOR Loans would be outstanding
hereunder with respect to each Lender (for purposes of determining the number of
such Loans outstanding, Loans with different Interest Periods shall be counted
as different Loans even if made on the same date);
          (d) if fewer than all Loans at the time outstanding shall be continued
or converted, such continuation or conversion shall be made pro rata among the
Lenders in accordance with the respective Percentage of the principal amount of
such Loans held by the Lenders immediately prior to such continuation or
conversion;
          (e) the aggregate principal amount of Loans continued as or converted
to LIBOR Loans as part of the same Borrowing shall be $500,000 or such greater
amount which is an integral multiple of $100,000;
          (f) accrued interest on the LIBOR Loans (or portion thereof) being
continued shall be paid by the Borrower at the time of continuation;
          (g) the Interest Period with respect to a new LIBOR Loan effected by a
continuation or conversion shall commence on the date of such continuation or
conversion;
          (h) if a LIBOR Loan is converted to another type of Loan prior to the
last day of the Interest Period with respect thereto, the amounts required by
Section 2.10(b) shall be paid upon such conversion;
          (i) each request for a continuation as or conversion to a LIBOR Loan
which fails to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one month; and
          (j) in the event that the Borrower shall not give notice to continue
or convert any LIBOR Loan as provided above, such Loan (unless repaid) shall
automatically be converted to an Alternate Base Rate Loan at the expiration of
the then current Interest Period.
The Administrative Agent shall, after it receives notice from the Borrower,
promptly give the Lenders notice of any continuation or conversion.

39

--------------------------------------------------------------------------------

 

          SECTION 2.10. Voluntary and Mandatory Prepayment of Loans;
Reimbursement of Lenders.
          (a) Subject to the terms of the Intercreditor Agreement and this
Section 2.10, the Borrower shall have the right at its option at any time and
from time to time to prepay without premium or penalty (i) any Alternate Base
Rate Loan, in whole or in part, upon at least one Business Day’s prior written,
telephonic (promptly confirmed in writing) or facsimile notice to the
Administrative Agent, in the principal amount of $500,000 or such greater amount
which is an integral multiple of $100,000 if prepaid in part, or the remaining
balance of such Loan if prepaid in full, and (ii) any LIBOR Loan, in whole or in
part, upon at least three Business Days’ prior written, telephonic (promptly
confirmed in writing) or facsimile notice, in the principal amount of $500,000
or such greater amount which is an integral multiple of $100,000 if prepaid in
part, or the remaining balance of such Loan if prepaid in full. Each notice of
prepayment shall specify the prepayment date, each Loan to be prepaid and the
principal amount thereof, shall be irrevocable and shall commit the Borrower to
prepay such Loan in the amount and on the date stated therein. All prepayments
under this Section 2.10(a) shall be accompanied by accrued but unpaid interest
on the principal amount being prepaid to (but not including) the date of
prepayment. All payments under this Section 2.10(a) consummated prior to the
first anniversary of the Closing Date will be subject to a prepayment premium of
1% of the Loans so prepaid. Notwithstanding the foregoing, prior to the First
Priority Obligations Payment Date, the Borrower may not repay the principal
amount of the Loans (but may adjust Loans for pricing alternative purposes),
without the prior written consent of the Required Lenders (as that term is
defined under the First Lien Agreement) but may engage in a Permitted
Refinancing of the Loans.
          (b) The Borrower shall reimburse each Lender on demand for any loss
(excluding the loss of the Applicable Margin) incurred or to be incurred by any
such Lender in the reemployment of the funds released (i) by any prepayment (for
any reason) of any LIBOR Loan if such Loan is repaid prior to the last day of
the Interest Period for such Loan, or (ii) in the event that after the Borrower
delivers a notice of borrowing under Section 2.2(c) or Section 2.9(a) in respect
of LIBOR Loans, such Loan is not made, converted to or continued as a LIBOR Loan
on the first day of the Interest Period specified in such notice of borrowing
for any reason other than (A) a breach by any such Lender of its obligation to
fund such borrowing when it is otherwise required to do so hereunder, or (B) a
repayment resulting from a conversion required by a Lender pursuant to
Section 2.12(a). Such loss shall be the amount as reasonably determined by such
Lender as the excess, if any, of (I) the amount of interest which would have
accrued to such Lender on the amount so paid or not borrowed, continued or
converted at a rate of interest equal to the interest rate applicable to such
Loan pursuant to Section 2.5, for the period from the date of such payment or
failure to borrow, continue or convert to the last day (x) in the case of a
payment prior to the last day of the Interest Period for such Loan, of the then
current Interest Period for such Loan, or (y) in the case of such failure to
borrow, continue or convert, of the Interest Period for such Loan which would
have commenced on the date of such failure to borrow, continue or convert, over
(II) the amount realized or to be realized by such Lender in reemploying the
funds not advanced or the funds received in prepayment or realized from the Loan
not so continued or converted during the period referred to above. Each Lender
shall deliver to the Borrower from time to time one or more certificates setting
forth the amount of

40

--------------------------------------------------------------------------------

 

such loss (and in reasonable detail the manner of computation thereof) as
determined by such Lender, which certificates shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amounts shown on such
certificate within thirty (30) days of the Borrower’s receipt of such
certificate.
          (c) In the event the Borrower fails to prepay any Loan on the date
specified in any prepayment notice delivered pursuant to Section 2.10(a), the
Borrower shall pay to the Administrative Agent for the account of the applicable
Lender any amounts required to compensate such Lender for any actual loss
incurred by such Lender as a result of such failure to prepay, including,
without limitation, any loss, cost or expenses incurred by reason of the
acquisition of deposits or other funds by such Lender to fulfill deposit
obligations incurred in anticipation of such prepayment. Each Lender shall
deliver to the Borrower and the Administrative Agent from time to time one or
more certificates setting forth the amount of such loss (and in reasonable
detail the manner of computation thereof) as determined by such Lender, which
certificates shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amounts shown on such certificate within ten (10) Business Days
of the Borrower’s receipt of such certificate.
          (d) Any remaining Obligations under the Facility shall be paid in full
on the Maturity Date.
          (e) [Intentionally Omitted.]
          (f) From and after the First Priority Obligations Payment Date, the
Borrower shall prepay the Obligations in an amount equal to (i) 100% of the Net
Proceeds from Dispositions by any Credit Party; provided however, that the
Borrower shall have no obligation to prepay any portion of the Net Proceeds from
such Dispositions if (x) the Borrower or the relevant Credit Party, as
applicable, reinvests such Net Proceeds in, or enters into a binding agreement
to acquire with such Net Proceeds, Productive Assets and/or Permitted Business
Acquisitions within three hundred and sixty (360) days of such Disposition,
(y) such Disposition is in connection with the sale or license of any Item of
Product in the ordinary course of business or in connection with a sale and
leaseback transaction or similar financial incentive transaction as permitted
herein, or (z) after giving effect to such Disposition, the Leverage Ratio is
less than 6.0:1.0 and (ii) 100% of the Net Proceeds from issuance of any
Indebtedness for borrowed money by any Credit Party (other than Indebtedness
permitted pursuant to Section 6.1).
          (g) [Intentionally Omitted.]
          (h) [Intentionally Omitted.]
          (i) All prepayments shall be accompanied by accrued but unpaid
interest on the principal amount being prepaid to but not including the date of
prepayment.
          (j) If on any day on which the Loans would otherwise be required to be
prepaid but for the operation of this Section 2.10(j) (each a “Prepayment
Date”), the amount of such required prepayment exceeds the then outstanding
aggregate principal amount of the Loans that constitute Alternate Base Rate
Loans, and no Default or Event of Default is then continuing,

41

--------------------------------------------------------------------------------

 

then on such Prepayment Date the Borrower may, at its option, deposit Dollars
into the Cash Collateral Account in an amount equal to such excess. If the
Borrower makes such deposit then (i) only the outstanding Alternate Base Rate
Loans shall be required to be prepaid on such Prepayment Date and (ii) on the
last day of each Interest Period with respect to any LIBOR Loan in effect after
such Prepayment Date, the Administrative Agent is irrevocably authorized and
directed to apply funds from the Cash Collateral Account, if any, (and liquidate
investments held in such Cash Collateral Account as necessary) to prepay LIBOR
Loans for which the Interest Period is then ending until the aggregate of such
prepayments equals the prepayment which would have been required on such
Prepayment Date but for the operation of this Section 2.10(j).
          (k) Except as otherwise specifically provided in this Article 2,
should any payment or prepayment of principal of or interest on the Loans or any
other amount due hereunder, become due and payable on a day other than a
Business Day, the due date of such payment or prepayment shall be extended to
the next succeeding Business Day and, in the case of a payment or prepayment of
principal, interest shall be payable thereon at the rate herein specified during
such extension.
          SECTION 2.11. Increased Costs.

  (a)   If any Change in Law shall:     (i)   impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the LIBOR); or     (ii)   impose on any Lender
or the London Interbank Market any other condition affecting this Credit
Agreement or LIBOR Loans made by such Lender or any participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBOR Loan (or of maintaining its obligation
to make any such Loan) or to increase the cost to such Lender or to reduce the
amount of any sum received or receivable by such Lender hereunder (whether of
principal, interest or otherwise), then the Borrower will pay to such Lender,
such additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered; provided, however, that the
Borrower shall not be obligated to pay such compensation to any Lender on
account of any Taxes pursuant to this Section 2.11 and Taxes shall be solely
governed by Section 2.14.
          (b) If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as
a consequence of this Credit Agreement or the Loans made by such Lender to a
level below that which such Lender or the or such Lender’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s policies and the policies of such Lender’s holding company with respect
to capital adequacy), then from time to time the Borrower will pay to such
Lender, such

42

--------------------------------------------------------------------------------

 

additional amount or amounts as will compensate such Lender or such Lender’s
holding company for any such reduction suffered.
          (c) A certificate of a Lender setting forth in reasonable detail the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, the changes as a result of which such amounts are due and the
manner of computing such amounts, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender, the amount shown as due on
any such certificate within 10 Business Days after receipt thereof.
          (d) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s right to
demand such compensation.
          (e) Each Lender agrees that with reasonable promptness after it
becomes aware of the occurrence of an event or the existence of a condition that
(i) would cause it to incur any increased cost hereunder or render it unable to
perform its agreements hereunder for the reasons specifically set forth in
Section 2.8(b), this Section 2.11 or Section 2.12 or (ii) would require the
Borrower to pay an increased amount under Section 2.8(b), this Section 2.11 or
Section 2.14, it will use reasonable efforts to notify the Borrower of such
event or condition and, to the extent not inconsistent with such Lender’s
internal policies, will use its reasonable efforts to make, fund or maintain the
affected Loans of such Lender, through another Lending Office of such Lender if
as a result thereof the additional monies which would otherwise be required to
be paid or the reduction of amounts receivable by such Lender thereunder in
respect of such Loans or participations therein would be materially reduced, or
such inability to perform would cease to exist, or the increased costs which
would otherwise be required to be paid in respect of such Loans or
participations therein pursuant to Section 2.8(b), this Section 2.11 or
Section 2.14 would be materially reduced or taxes or other amounts otherwise
payable under Section 2.8(b), this Section 2.11 or Section 2.14 would be
materially reduced, and if, as determined by the such Lender, in its discretion,
the making, funding or maintaining of such Loans through such other Lending
Office would not otherwise materially adversely affect such Loans or such
Lender. Notwithstanding the foregoing, a failure on the part of any Lender to
provide notice or take any other action pursuant to this Section 2.11(e) shall
not affect the Borrower’s obligation to make any payments or deductions required
by this Article 2.
          SECTION 2.12. Change in Legality.
          (a) Notwithstanding anything to the contrary contained elsewhere in
this Credit Agreement, if any change after the date hereof in Applicable Law,
guideline or order, or in the interpretation thereof by any Governmental
Authority charged with the administration thereof, shall make it unlawful for
any Lender to make or maintain any LIBOR Loan or to give effect to its
obligations as contemplated hereby with respect to a LIBOR Loan, then, by
written notice to the Borrower and the Administrative Agent, such Lender may
(i) declare that LIBOR Loans will not thereafter be made by such Lender
hereunder for as long as such condition may be continuing, and/or (ii) require
that, subject to Section 2.10(b), all outstanding LIBOR Loans made by it be
converted to Alternate Base Rate Loans, whereupon all of such LIBOR Loans shall
automatically be converted to Alternate Base Rate Loans, as of the effective
date of such

43

--------------------------------------------------------------------------------

 

notice as provided in paragraph (b) below. Such Lender’s pro rata portion of any
subsequent LIBOR Loan shall, instead, be an Alternate Base Rate Loan unless such
declaration is subsequently withdrawn.
          (b) A notice to the Borrower by any Lender pursuant to paragraph
(a) above shall be effective for purposes of clause (ii) thereof, if lawful, on
the last day of the current Interest Period for each outstanding LIBOR Loan; and
in all other cases, on the date of receipt of such notice by the Borrower.
          SECTION 2.13. Manner of Payments. All payments of principal and
interest by the Borrower in respect of any Loans shall be pro rata among the
Lenders holding such Loans in accordance with the then outstanding principal
amounts of such Loans held by them. All payments by the Borrower hereunder and
under the Notes shall be made in Dollars in Federal or other immediately
available funds at the office of JPMorgan Chase Bank, N.A., JPMorgan Loan
Services Group, 21 South Dearborn, 7th Floor, Chicago, Illinois 60603,
Attention: Judy Warren (Telecopy No.: (312) 385-7095), for credit to the
Clearing Account no later than 2:00 p.m., New York City time, on the date on
which such payment shall be due. Interest in respect of any Loan hereunder shall
accrue from and including the date of such Loan to but excluding the date on
which such Loan is paid or converted to a Loan of a different Type.
          SECTION 2.14. Taxes.
          (a) Any and all payments by or on account of any obligation of the
Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required by Applicable Law to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or Lender
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with Applicable Law.
          (b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with Applicable Law.
          (c) The Borrower shall indemnify the Administrative Agent and each
Lender, within ten (10) Business Days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes paid by the Administrative
Agent or such Lender, as the case may be, on or with respect to any payment by
or on account of any obligation of the Borrower hereunder (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section), whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority
and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, except for penalties, interest and expenses to the extent
arising from gross negligence or willful misconduct on the part of the
Administrative Agent or such Lender. A certificate as to the amount of such

44

--------------------------------------------------------------------------------

 

payment or liability delivered to the Borrower by a Lender, or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.
          (d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
          (e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Credit Agreement shall deliver to the Borrower
(with a copy to the Administrative Agent), on or prior to the Initial Date with
respect to such Lender (and from time to time thereafter at the time or times
prescribed by Applicable Law or upon the request of the Borrower or the
Administrative Agent), such properly completed and duly executed documentation
prescribed by Applicable Law or reasonably requested by the Borrower as will
permit such payments to be made without withholding or at a reduced rate of
withholding. Without limiting the generality of the foregoing, any Foreign
Lender shall deliver to the Borrower and the Administrative Agent on or prior to
the Initial Date with respect to such Lender (and promptly from time to time
thereafter upon the expiration, obsolescence or invalidity of any form
previously delivered, if any form previously delivered becomes inaccurate or
upon the request of the Borrower or the Administrative Agent, but only if such
Foreign Lender is legally entitled to do so), two copies of whichever of the
following is applicable:
          (i) duly completed copies of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the United
States of America is a party;
          (ii) duly completed copies of Internal Revenue Service Form W-8ECI;
          (iii) in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a “bank” within
the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder”
of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in Section 881(c)(3)(C) of the Code
and (y) duly completed copies of Internal Revenue Service Form  W-8BEN;
          (iv) duly completed copies of Internal Revenue Service Form W-8IMY
together with the additional documentation that must be transmitted with Form
W-8IMY, including the appropriate forms described in Sections 2.14(e)(i), (ii)
and (iii); or
          (v) any other form prescribed by Applicable Law as a basis for
claiming exemption from or a reduction in United States Federal withholding tax
duly completed together with such supplementary documentation as may be
prescribed by Applicable Law to permit the Borrower to determine the withholding
or deduction required to be made.

45

--------------------------------------------------------------------------------

 

Each Lender shall promptly notify the Borrower and the Administrative Agent at
any time it determines that it is no longer in a position to provide any
previously delivered form or certificate (or any other form or certification
adopted by the U.S. taxing authorities for such purpose).
Any Lender that is not a Foreign Lender and has not otherwise established to the
reasonable satisfaction of the Borrower and the Administrative Agent that it is
an exempt recipient (as defined in section 6049(b)(4) of the Code and the
regulations thereunder) shall deliver to the Borrower (with a copy to the
Administrative Agent) on or prior to the Initial Date with respect to such
Lender (and from time to time thereafter as prescribed by Applicable Law or upon
the request of the Borrower or the Administrative Agent), two duly executed and
properly completed copies of Internal Revenue Service Form W-9 (or applicable
successor form). Each Lender (other than a Foreign Lender) shall deliver such
forms promptly upon the obsolescence, invalidity or inaccuracy of any form
previously delivered by such Lender. Each Lender (other than a Foreign Lender)
shall promptly notify the Borrower and the Administrative Agent at any time that
it determines that it is no longer in a position to provide any previously
delivered form or certification (or any other form of certification adopted by
the U.S. taxing authorities for such purpose).
          (f) If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of or any credit for any Taxes or
Other Taxes as to which it has been indemnified by the Borrower or with respect
to which the Borrower have paid additional amounts pursuant to this
Section 2.14, it shall pay over such refund or credit to the Borrower (but only
to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section 2.14 with respect to the Taxes or Other Taxes giving
rise to such refund or credit), net of all out-of-pocket expenses of the
Administrative Agent or such Lender and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such refund
or credit); provided, that the Borrower, upon the request of the Administrative
Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund or credit
to such Governmental Authority. This Section shall not be construed to require
the Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.
          (g) Each Lender agrees that when it becomes aware of the occurrence of
an event that would cause the Borrower to pay any amount pursuant to clause
(a) of this Section 2.14, it will notify the Borrower of such event and, to the
extent not inconsistent with such Lender’s internal policies, will use it
reasonable efforts to make, fund or maintain the affected Loans of such Lender
through another Lending Office of such Lender if as a result thereof the
additional amounts which would otherwise be required to be paid by reason of
Section 2.14(a) in respect of such Loans would be materially reduced, and if, as
determined by such Lender, in its discretion, the making, funding or maintaining
of such Loans through such other Lending Office would not otherwise adversely
affect such Loans or such Lender. Notwithstanding the foregoing, a failure on
the part of any Lender to provide notice pursuant to this Section 2.14(g)

46

--------------------------------------------------------------------------------

 

shall not affect the Borrower’s obligation to make any payments or deductions
required by Section 2.14(a).
          SECTION 2.15. Interest Adjustments.
          (a) If the provisions of this Credit Agreement or any Note would at
any time require payment by the Borrower to a Lender of any amount of interest
in excess of the maximum amount then permitted by the law applicable to any
Loan, the interest payments to that Lender shall be reduced to the extent
necessary so that such Lender shall not receive interest in excess of such
maximum amount. If, as a result of the foregoing, a Lender shall receive
interest payments hereunder or under a Note in an amount less than the amount
otherwise provided hereunder, such deficit (hereinafter called the “Interest
Deficit”) will, to the fullest extent permitted by Applicable Law, cumulate and
will be carried forward (without interest) until the termination of this Credit
Agreement. Interest otherwise payable to a Lender hereunder and under a Note for
any subsequent period shall be increased by the maximum amount of the Interest
Deficit that may be so added without causing such Lender to receive interest in
excess of the maximum amount then permitted by the law applicable to the Loans.
          (b) The amount of any Interest Deficit relating to a particular Loan
and Note shall be treated as a prepayment penalty and shall, to the fullest
extent permitted by Applicable Law, be paid in full at the time of any optional
prepayment by the Borrower of all the Loans at that time outstanding pursuant to
Section 2.10(a) hereof. The amount of any Interest Deficit relating to a
particular Loan and Note at the time of any complete payment of such Loans at
that time outstanding (other than an optional prepayment thereof pursuant to
Section 2.10(a) hereof) shall be canceled and not paid.
          SECTION 2.16. Incremental Loans. The Borrower may at any time and from
time to time prior to June 23, 2013 (but on no more than two occasions), by
notice to the Administrative Agent (whereupon the Administrative Agent shall
promptly deliver a copy to each of the Lenders), request that an additional
single-draw term loan be extended (“Incremental Loans”) without consent from the
Lenders (but subject to the approval by the Required Lenders of the identity of
the Lenders or Additional Lenders (as defined below) making such Incremental
Loans (as set forth below); provided that all conditions and parameters set
forth in this Section 2.16 have been satisfied. Any Borrowing of Incremental
Loans shall be in an aggregate principal amount that is not less than $2,500,000
and in integral multiples of $500,000 in excess thereof, and the Borrowings of
Incremental Loans shall be in an aggregate principal amount (including any
Incremental Loans previously extended) not in excess of $20,000,000. The
Incremental Loans (A) shall rank pari passu in right of payment and of security
with the other Loans, (B) shall mature on the Maturity Date and (C) except as
set forth in an Incremental Amendment (as defined below), shall have terms
identical to, and be treated the same as, the other Loans hereunder (including
with respect to mandatory and voluntary prepayments, the proceeds of which shall
be shared pro rata among the Lenders (including the Lenders that extended the
Incremental Loans)). The Incremental Loans may be made by any existing Lender or
by any Eligible Assignee (any such Eligible Assignee which is not a Lender at
the time of the making of the Incremental Loans being called an “Additional
Lender”), provided, that both the Administrative Agent and the Required Lenders
(each in their sole discretion) have approved the identity of all Lenders or
Additional Lenders making such Incremental Loans; provided, further,

47

--------------------------------------------------------------------------------

 

that, subject to the other conditions set forth herein with respect to the
making of Incremental Loans, the following entities are pre-approved as
Additional Lenders so long as the applicable entity constitutes an Eligible
Assignee at the time of making the relevant Incremental Loans: (x) Kelso &
Company L.P. and any of its Affiliates are pre-approved with respect to
Incremental Loans in the aggregate principal amount not to exceed $6,000,000,
and (y) Kelso AIV VII, L.P. and KEP VI AIV, LLC are pre-approved for any portion
of the Incremental Loans. The commitments in respect of the Incremental Loans
shall become “Commitments” under this Credit Agreement, and the Incremental
Loans shall become “Loans” under this Credit Agreement, pursuant to an amendment
to this Credit Agreement (an “Incremental Amendment”) and, as appropriate, the
other Fundamental Documents. An Incremental Amendment may effect such amendments
to this Credit Agreement and the other Fundamental Documents as may be necessary
or appropriate, in the reasonable opinion of the Administrative Agent and the
Borrower, to effect the provisions and intent of this Section and the
application of the proceeds of the relevant Incremental Loans; provided, that
the Incremental Amendment may not contain any terms which would have the effect
of treating the Incremental Loans differently from the other Loans hereunder
other than (in each case, subject to the provisions of this Section 2.16)
interest rates and use of proceeds. No Lender shall be obligated to provide any
Incremental Loans, unless it so agrees. The Borrower may use the proceeds of the
Incremental Loans for any purpose not prohibited by this Credit Agreement or the
relevant Incremental Amendment. In the event that it is necessary for the
interest rates (whether as a function of the reference rate or the Applicable
Margin) of the Incremental Loans to be higher than the interest rates applicable
to the previously extended Loans, the interest rates on such previously extended
Loans shall be automatically increased to the interest rates applicable to such
Incremental Loans, but if the interest rates of the Incremental Loans are lower
than those applicable to the previously extended Loans, the interest rates
applicable to the previously extended loans shall be unaffected. In addition to
the contemplated Incremental Loans meeting the parameters set forth above in
this Section 2.16 the following conditions precedent shall have been satisfied
with respect to thereto:
          (a) at the time of the request for the extension of the Incremental
Loans, upon the effectiveness of the Incremental Amendment, and at the time that
the Incremental Loans are made (and immediately after giving effect thereto), no
Default or Event of Default shall exist;
          (b) the Borrower and its Subsidiaries shall be in compliance, on a Pro
Forma Basis after giving effect to the borrowing of the Incremental Loans, with
the provisions of Section 6.21;
          (c) The Administrative Agent shall have received one or more
certificates dated as of the effective date of the proposed extension of the
Incremental Loans certifying as to the matters set forth in clauses (a) and
(b) above as well as to the accuracy of all representations and warranties made
by the Borrower herein, and attaching certified copies of resolutions of the
governing body of the Borrower approving the Incremental Loans and the
corresponding modifications, if any, to the Fundamental Documents required under
an Incremental Amendment; and
          (d) The Borrower shall have (i) delivered to the Administrative Agent
a borrowing notice which, in addition to the information contained in the
Borrowing Certificate, shall set forth the requested amount and proposed
interest rates for, and use of proceeds of, the

48

--------------------------------------------------------------------------------

 

relevant Incremental Loans, and (ii) paid any fees required under any Fee Letter
in connection with the issuance of the Incremental Loans.
3. REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES
          In order to induce the Administrative Agent and the Lenders to enter
into this Credit Agreement and to make the Loans provided for herein, as
applicable, the Credit Parties, jointly and severally, make the following
representations and warranties, all of which shall survive the execution and
delivery of this Credit Agreement, the issuance of the Notes and the making of
the Loans.
          SECTION 3.1. Existence and Power.
          (a) Each Credit Party is a corporation, limited liability company or
limited partnership (w) duly incorporated or otherwise organized, (x) validly
existing, (y) in jurisdictions in which it is applicable, in good standing under
the laws of its jurisdiction of organization and (z) where applicable, in good
standing as a foreign entity in all jurisdictions where the nature of its
properties or business so requires, except to the extent that the failure to be
so qualified or be in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. A list of such
jurisdictions as of the date hereof is attached hereto as Schedule 3.1.
          (b) Each Credit Party has the power and authority (i) to own its
respective properties and carry on its respective business as now being
conducted, (ii) to execute, deliver and perform, as applicable, its obligations
under the Fundamental Documents and any other documents contemplated thereby to
which it is or will be a party, and (iii) to grant to the Administrative Agent,
for the benefit of the Administrative Agent and the Lenders, a security interest
in the Collateral as contemplated by Article 8 hereof and in the Pledged
Securities as contemplated by Article 11 hereof; and in the case of the
Guarantors, to guaranty the Obligations as contemplated by Article 9 hereof.
          SECTION 3.2. Authority and No Violation.
          (a) The execution, delivery and performance of this Credit Agreement
and the other Fundamental Documents to which it is a party by each Credit Party,
the grant to the Administrative Agent for the benefit of the Administrative
Agent and the Lenders of the security interest in the Collateral and the Pledged
Securities as contemplated herein and by the other Fundamental Documents by each
Credit Party and, in the case of the Borrower, the Borrowings hereunder and the
execution, delivery and performance of the Notes and, in the case of each
Guarantor, the guaranty of the Obligations as contemplated in Article 9 hereof,
(x) have been duly authorized by all necessary corporate action (or similar
action) on the part of each Credit Party or (y) will not (i) constitute a
violation of any provision of Applicable Law or any order of any Governmental
Authority applicable to such Credit Party, or any of its properties or assets,
(ii) violate any provision of the Certificate of Incorporation, By–Laws,
operating agreement, partnership agreement or any other organizational document
of such Credit Party, (iii) violate any provision of any Distribution Agreement,
indenture, agreement, bond, note or other similar instrument to which such
Credit Party is a party or by which such Credit Party or any of its

49

--------------------------------------------------------------------------------

 

properties or assets are bound, (iv) be in conflict with, result in a breach of,
or constitute (with due notice or lapse of time or both) a default under, or
create any right to terminate, any such Distribution Agreement, indenture,
agreement, bond, note or other similar instrument, other than where any such
violation referred to in clauses (x) and (y) (i)-(iv) could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and (v) result in the creation or imposition of any Lien, charge
or encumbrance of any nature whatsoever (other than Permitted Encumbrances) upon
any of the properties or assets of any of such Credit Parties other than
pursuant to this Credit Agreement or the other Fundamental Documents.
          (b) Other than the restrictions listed on Schedule 3.2(b), there are
no restrictions on the transfer of any of the Pledged Securities other than as a
result of this Credit Agreement or applicable securities laws and the
regulations promulgated thereunder.
          SECTION 3.3. Governmental Approval. All authorizations, approvals,
registrations or filings from or with any Governmental Authority (other than UCC
financing statements, the Copyright Security Agreement and the Trademark
Security Agreement which will be delivered to the Administrative Agent on or
prior to the Closing Date, in form suitable for recording or filing with the
appropriate filing office) required for the execution, delivery and performance
by any Credit Party of this Credit Agreement and the other Fundamental Documents
to which it is a party, and the execution and delivery by the Borrower of the
Notes, have been duly obtained or made or duly applied for, and are in full
force and effect, except those which, if not obtained, could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and if any further authorizations, approvals, registrations or
filings should hereafter become necessary, the Credit Parties shall obtain or
make all such authorizations, approvals, registrations or filings, except those
which, if not obtained, could not reasonably be expected to have a Material
Adverse Effect.
          SECTION 3.4. Binding Agreements. The First Lien Agreement constitutes,
and this Credit Agreement and the other Fundamental Documents when executed,
will constitute, the legal, valid and binding obligations of each Credit Party
that is a party thereto, enforceable against each Credit Party in accordance
with their respective terms, subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights generally and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and implied covenants of good faith and fair dealing.
          SECTION 3.5. Financial Statements. (a) The (i) audited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at
December 31, 2007 and related audited consolidated statements of operations,
member’s equity (deficit) and comprehensive loss and cash flows for the fiscal
year then ended, together with related notes and (ii) the unaudited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at March 31,
2008, and, in each case, together with the related statements of operations,
member’s equity (deficit) and comprehensive loss and cash flows and for the
fiscal quarter then ended, but without related notes thereto have, in each case,
been prepared in accordance with GAAP in effect as of such date consistently
applied, except as otherwise indicated in the notes, if any, to such financial
statements and subject in the case of unaudited financial statements to changes
resulting from year-end and audit adjustments. All of such financial statements
fairly present the financial

50

--------------------------------------------------------------------------------

 

position or the results of operations of the Borrower and its Consolidated
Subsidiaries on a consolidated basis at the dates or for the periods indicated,
subject, in the case of the financial statements referred to in clause
(ii) above, to year-end and audit adjustments. Except as disclosed on
Schedule 3.5(a) or as, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, the Borrower does not have any
material Guaranties, contingent liabilities and liabilities for taxes, or any
long-term leases or unusual forward or long-term commitments, including any
interest rate or foreign currency swap or exchange transaction or other
obligations in respect of derivatives, that are not reflected in the most recent
financial statements referred to in this paragraph.
          (b) [Intentionally Omitted].
          SECTION 3.6. No Material Adverse Change. There has been no material
adverse change with respect to the business, assets, operations, properties or
financial condition of the Credit Parties, in each case taken as a whole, from
December 31, 2007.
          SECTION 3.7. Ownership of Pledged Securities, Subsidiaries, etc.
          (a) Annexed hereto as Schedule 3.7(a) is a correct and complete list
as of the date hereof, of each Credit Party showing, as to each, (i) its name,
(ii) the jurisdiction in which it was incorporated or organized and (iii) its
authorized capitalization, the number of Equity Interests outstanding, the
ownership of its Equity Interests and whether or not its Equity Interests are
certificated.
          (b) Except as set forth on Schedule 3.7(b), no Credit Party owns any
voting stock, Equity Interest or other beneficial interest, either directly or
indirectly, in any Person other than another Credit Party or an entity formed
under the laws of a jurisdiction located outside of the United States of America
with respect to which an investment therein is permitted under the terms of
Section 6.4 hereof.
          SECTION 3.8. Copyrights, Trademarks and Other Rights.
          (a) The Items of Product listed on Schedule 3.8(a) hereto, comprise
all of the Valuation Items of Product. Except as set forth on Schedule 3.8(a),
the copyright registration number assigned to a Credit Party’s interest therein
(when issued) and whether such Credit Party owns or licenses from a third party
such Completed Items of Product are set forth across from the description of
such Completed Item of Product, and as to each Valuation Item of Product listed
on Schedule 3.8(a), the Credit Party owning or licensing a copyright therein has
duly filed for recordation (or, on the Closing Date, will duly file for
recordation) its interests in the United States Copyright Office.
Schedule 3.8(a) also identifies the location of the best available Physical
Materials related to each Valuation Item of Product owned by the Credit Parties.
To the best of each Credit Party’s knowledge, all Valuation Items of Product and
all component parts thereof do not violate or infringe upon any copyright, right
of privacy or publicity, trademark, patent, trade name, performing right or any
literary, dramatic, musical, artistic, personal, private, several, care,
contract, property or copyright right or any other right of any Person or
contain any libelous or slanderous material. Except as set forth in
Schedule 3.12, there is no claim, suit, action or proceeding pending relating to
the foregoing or, to the best of each Credit Party’s

51

--------------------------------------------------------------------------------

 

knowledge, threatened against any Credit Party or any other Person with respect
to any Valuation Item of Product, and no Credit Party has any knowledge of any
existing infringement by any other Person of any copyright or trademark held by
any Credit Party with respect to any Valuation Item of Product which, in each
case, either individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
          (b) Schedule 3.8(b) hereto (i) lists all the trademarks registered by
any Credit Party as of the date hereof (or to be registered on the Closing Date)
and identifies the Credit Party which registered (or which will register) each
such trademark, (ii) specifies as to each such trademark, the jurisdictions in
which such trademark has been issued or registered (or, if applicable, in which
an application for such issuance or registration has been or will be filed),
including the respective registration or application numbers and applicable
dates of registration or application, and (iii) specifies as to each such
trademark, as applicable, material licenses, sublicenses and other material
agreements as of the date hereof (other than any Distribution Agreements), to
which any Credit Party is a party and/or pursuant to which any Person is
authorized to use such trademark. Each U.S. trademark set forth on
Schedule 3.8(b) that is registered in the name of a Credit Party (other than
“intent to use” trademark and service mark applications for which a statement of
use has not been filed) will be included on Schedule A to the Trademark Security
Agreement to be delivered to the Administrative Agent on or prior to the Closing
Date pursuant to Section 4.1(h).
          (c) Except as set forth on Schedule 3.8(c), all applications and
registrations for (i) all registered copyright interests owned by or licensed to
a Credit Party and relating to all Valuation Items of Product and (ii) all
registered trademarks, service marks, trade names and service names owned by or
licensed to any Credit Party, are subsisting and in full force and effect (other
than trademarks, service marks, trade names and service names that individually
or in the aggregate are not material). The Credit Parties have taken and will
take any other reasonable actions necessary to maintain such applications and
registrations and the effectiveness thereof.
          SECTION 3.9. Fictitious Names. Except as disclosed on Schedule 3.9, no
Credit Party has done business, is doing business or intends to do business
other than under its full corporate name, including, without limitation, under
any trade name or other doing business name.
          SECTION 3.10. Title to Properties. As of the Closing Date, the Credit
Parties will have good title to each of the material properties and assets
reflected in the most recent financial statements delivered pursuant to
Section 5.1(a) hereof and all such properties and assets are free and clear of
Liens, except Permitted Encumbrances, in each case, except for defects in title
that do not interfere with its ability to conduct its business as currently
conducted or to utilize such properties and assets for their intended purpose
and except where the failure to have such title could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
          SECTION 3.11. Places of Business. The chief executive office of each
Credit Party is, on the date hereof, as set forth on Schedule 3.11 hereto.

52

--------------------------------------------------------------------------------

 

          SECTION 3.12. Litigation. Except as set forth on Schedule 3.12, there
are no actions, suits or other proceedings at law or in equity by or before any
arbitrator, arbitration panel or Governmental Authority (including, but not
limited to, matters relating to environmental liability) or, to the Borrower’s
knowledge, any threatened action, suit or other proceeding against or affecting,
any Credit Party or of any of their respective properties or rights which either
(A) if adversely determined, could reasonably be expected to have a Material
Adverse Effect, or (B) relate to this Credit Agreement, any other Fundamental
Documents or any of the transactions contemplated hereby. No Credit Party is in
default with respect to any order, writ, injunction, decree, rule or regulation
of any Governmental Authority binding upon such Person.
          SECTION 3.13. Federal Reserve Regulations. None of the Credit Parties
is engaged principally or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock. No
part of the proceeds of the Loans will be used, directly or indirectly, whether
immediately, incidentally or ultimately (i) to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock, or (ii) for any other purpose, in each case, violative of or
inconsistent with any of the provisions of any regulation of the Board,
including, without limitation, Regulations T, U and X thereto.
          SECTION 3.14. Investment Company Act. None of the Credit Parties is,
or will during the term of this Credit Agreement be, (i) an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended
or (ii) a “holding company” under the Public Utility Holding Company Act of
1935, as amended.
          SECTION 3.15. Taxes. Each Credit Party has filed or caused to be filed
all material federal, state, local and foreign tax returns which are required to
be filed with any Governmental Authority after giving effect to applicable
extensions, and has paid or has caused to be paid all material taxes as shown on
said returns or on any assessment received by it in writing, to the extent that
such taxes have become due, except as permitted by Section 5.13 hereof. No
Credit Party knows of any material additional assessments or any basis therefor.
The Credit Parties believe that the charges, accruals and reserves on its books
in respect of taxes or other governmental charges are accurate and adequate.
          SECTION 3.16. Compliance with ERISA. Except as individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect:
(a) each of the Credit Parties’ Plans, each of which has been maintained and
operated in all material respects in accordance with all Applicable Laws,
including ERISA and the Code, and each Plan intended to qualify under section
401(a) of the Code satisfies the requirements of such section; (b) no Reportable
Event has occurred in the last five years as to any Plan, and the present value
of all benefits under all Plans subject to Title IV of ERISA (based on those
assumptions used to fund such Plans) did not, in the aggregate, as of the last
annual valuation date (if any) applicable thereto, exceed the actuarial value of
the assets of such Plans allocable to such benefits; (c) no liability has been,
and no circumstances exist pursuant to which any material liability is
reasonably likely to be, imposed upon any Credit Party or ERISA Affiliate
(i) under sections 4971 through 4980E of the Code, sections 502(i) or 502(l) of
ERISA, or Title IV of ERISA with respect to any Plan or Multiemployer Plan,
(ii) for the failure to fulfill any obligation to contribute to any
Multiemployer Plan, or (iii) with respect to any Plan that provides post-

53

--------------------------------------------------------------------------------

 

retirement welfare coverage (other than as required pursuant to Section 4980B of
the Code); and (d) neither any Credit Party nor any ERISA Affiliate has received
any notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated.
          SECTION 3.17. Agreements.
          (a) No Credit Party is in default in the performance, observance or
fulfillment of any of the material obligations, covenants or conditions
contained in any Material Agreement which either (i) relates to any Item of
Product for which credit is provided under the Borrowing Base or (ii) would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
          (b) Schedule 3.17 is a true and complete listing as of the date hereof
of all Material Agreements.
          SECTION 3.18. Security Interest. This Credit Agreement and the other
Fundamental Documents, when executed and delivered and upon the making of the
initial Loan hereunder, will create and grant to the Administrative Agent for
the benefit of the Administrative Agent and the Lenders (upon (i) the filing of
the appropriate UCC-1 financing statements with the filing offices listed on
Schedule 3.18, (ii) the filing of the Copyright Security Agreement with the U.S.
Copyright Office, (iii) the filing of a Trademark Security Agreement with the
U.S. Patent and Trademark Office, and (iv) following the First Priority
Obligations Payment Date, the delivery of the Pledged Securities with (in the
case of Pledged Securities comprising capital stock) appropriate stock powers to
the Administrative Agent) valid and perfected security interests in the
Collateral including in the Pledged Securities (other than (x) letter of credit
rights, (y) insurance and (z) with respect to perfection in intellectual
property in any jurisdiction other than the United States) and subject only to
Specified Permitted Encumbrances. Each Credit Party’s taxpayer identification
number and organizational identification number is listed on Schedule 3.18
hereto.
          SECTION 3.19. Environmental Liabilities.
          (a) Except as set forth in Schedule 3.19, no Credit Party has used,
stored, treated, transported, manufactured, refined, handled, produced or
disposed of any Hazardous Materials on, under, at, from or in any way affecting,
any of its properties or assets owned or leased by a Credit Party, in any manner
which at the time of the action in question materially violated any
Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials
and to the best of each Credit Party’s knowledge, no prior owner of such
property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on or affecting such property or asset, or
otherwise, in any manner which at the time of the action in question materially
violated any Environmental Law governing the use, storage, treatment,
transportation, manufacture, refinement, handling, production or disposal of
Hazardous Materials.

54

--------------------------------------------------------------------------------

 

          (b) To the best of each Credit Party’s knowledge (i) no Credit Party
has any obligations or liabilities, known or unknown, matured or not matured,
absolute or contingent, assessed or unassessed, which could reasonably be
expected to have a Material Adverse Effect, and (ii) no claims have been made
against any of the Credit Parties in the past five years and no presently
outstanding citations or notices have been issued against any of the Credit
Parties, which in either case could reasonably be expected to have a Material
Adverse Effect and which in either case have been or are imposed by reason of or
based upon any provision of any Environmental Law, including, without
limitation, any such obligations or liabilities relating to or arising out of or
attributable, in whole or in part, to the manufacture, processing, distribution,
use, treatment, storage, disposal, transportation or handling of any Hazardous
Materials by any Credit Party, or any of its employees, agents, representatives
or predecessors in interest in connection with or in any way arising from or
relating to any of the Credit Parties or any of their respective owned or leased
properties, or relating to or arising from or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any such substance, by any other Person at or on
or under any of the real properties owned or used by any of the Credit Parties
or any other location where such obligations or liabilities could reasonably be
expected to have a Material Adverse Effect.
          SECTION 3.20. Pledged Securities.
          (a) All of the Pledged Securities are duly authorized, validly issued,
fully paid and non-assessable, and are owned and held by the Pledgors, free and
clear of any Liens, other than those created pursuant to this Credit Agreement
and other Permitted Encumbrances, and there are no restrictions on the transfer
of the Pledged Securities other than as a result of this Credit Agreement, the
First Lien Agreement or applicable securities laws and the regulations
promulgated thereunder. The Pledged Securities are owned by the Persons
specified on Schedules 3.7(a) and (b).
          (b) Except as set forth on Schedules 3.7(a) and (b), there are no
outstanding rights, warrants, options, conversion or similar rights currently
outstanding with respect to, and no agreements to purchase or otherwise acquire,
any shares of the capital stock or other Equity Interests of any issuer of any
of the Pledged Securities; and there are no securities or obligations of any
kind convertible into any shares of the capital stock or other Equity Interests
of any issuer of any of the Pledged Securities.
          SECTION 3.21. Compliance with Laws. No Credit Party is in violation of
any Applicable Law except for such violations in the aggregate which could not
reasonably be expected to have a Material Adverse Effect. The Borrowings
hereunder, the intended use of the proceeds of the Loans as described in the
Introductory Statement hereto and as contemplated by Section 5.18 hereof and any
other transactions contemplated hereby will not violate any Applicable Law,
except to the extent that any such violations would not, individually or in the
aggregate, have a Material Adverse Effect.
          SECTION 3.22. Subsidiaries. As of the Closing Date, no Credit Party
has a direct or indirect Subsidiary other than as listed on Schedule 3.7(b).

55

--------------------------------------------------------------------------------

 

          SECTION 3.23. Solvency. No Credit Party has entered or is entering
into the arrangements contemplated hereby and by the other Fundamental
Documents, or intends to make any transfer or incur any obligations hereunder or
thereunder, with actual intent to hinder, delay or defraud either present or
future creditors. As of the Closing Date, (i) the aggregate fair market value of
the business and/or assets of each of (x) the Borrower and (y) the Credit
Parties, taken as a whole, will in each case exceed its or their respective
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities), (ii) the Borrower will, and the Credit Parties, taken as a whole
will, have sufficient cash flow to enable it or them (as the case may be) to pay
its or their debts as they mature and (iii) the Borrower will not, and the
Credit Parties, taken as a whole will not, have unreasonably small capital for
the business in which it or they (as the case may be) is or are engaged.
          SECTION 3.24. Distribution Rights. Each Credit Party has sufficient
right, title and interest in each Valuation Item of Product (including both
rights under copyright and ownership of or access to Physical Materials) to
enable it (i) to enter into and perform all of the Material Agreements to which
it is a party and (ii) to charge, earn, realize and retain all fees and profits
to which such Credit Party is entitled thereunder, and is not in breach of any
of its obligations under such agreements, nor does any Credit Party have any
knowledge of any breach or anticipated breach by any other parties thereto,
which breach in either case either individually or when aggregated with all
other such breaches could reasonably be expected to have a Material Adverse
Effect.
          SECTION 3.25. Bank Accounts. Schedule 3.25 sets forth a complete list
as of the Closing Date of all bank accounts of each Credit Party.
          SECTION 3.26. Disclosure. The written information contained in this
Credit Agreement, any other Fundamental Document or any Material Agreement, or
other document, certificate or statement (other than the Initial Projections,
estimates and information of a general economic or industry nature) furnished to
the Administrative Agent and the Lenders by or on behalf of any Credit Party in
connection with the transactions contemplated hereby, when taken as a whole at
the time they were furnished, did not contain any untrue statement of a material
fact made by or on behalf of any Credit Party regarding the Credit Parties or
omit to state a material fact, under the circumstances under which it was made,
necessary in order to make the statements contained herein or therein not
misleading (considered in the context of all other information provided to the
Lenders). The Initial Projections, estimates and information of a general
economic or industry nature, unless otherwise disclosed, were prepared in good
faith based upon assumptions believed by the Borrower to be reasonable at the
time made, it being understood that actual results may vary materially
therefrom. At the date hereof, there is no fact known to any Credit Party (other
than general industry conditions) which could reasonably be expected to have a
Material Adverse Effect.
4. CONDITIONS OF LENDING
          SECTION 4.1. Conditions Precedent to Initial Loan. The obligation of
each initial Lender to make its initial Loan is subject to the satisfaction in
full of the following conditions precedent:

56

--------------------------------------------------------------------------------

 

          (a) Corporate Documents. The Administrative Agent shall have received,
with copies for each of the Lenders:

  (i)   a copy of the articles or certificate of incorporation or certificate of
formation (or equivalent document) of each Credit Party, certified on a recent
date (not more than five (5) Business Days prior to the Closing Date) by the
Secretary of State or other relevant office of such Person’s jurisdiction of
incorporation or organization, as the case may be;     (ii)   from each
jurisdiction in which it is available, a certificate of the Secretary of State
of such jurisdiction of organization, dated as of a recent date (not more than
five (5) Business Days prior to the Closing Date) as to the good standing of,
and payment of taxes by, each Credit Party, which certificate lists (if
available) the charter documents on file in the office of such Secretary of
State;     (iii)   from each jurisdiction in which it is available, a
certificate dated as of a recent date (not more than five (5) Business Days
prior to the Closing Date) as to the good standing of each Credit Party issued
by the Secretary of State or other relevant office of each jurisdiction in which
such Credit Party is qualified as a foreign corporation as listed in Schedule
3.1 hereto;     (iv)   a certificate of the Secretary, Assistant Secretary or
other appropriate officer acceptable to the Administrative Agent of each Credit
Party, dated the Closing Date and certifying (A) that attached thereto is a true
and complete copy of the by-laws, articles of organization, limited liability
company agreement (or equivalent document) of such party as in effect on the
date of such certification; (B) that attached thereto is a true and complete
copy of the resolutions adopted by the board of directors (or equivalent body)
of such party authorizing the execution, delivery and performance in accordance
with their respective terms of the Fundamental Documents executed by such Credit
Party, as applicable, and any other documents required or contemplated hereunder
or thereunder, the grant of the security interests in the Collateral, and in the
case of the Borrower, the borrowings hereunder, and that such resolutions have
not been amended, rescinded or supplemented and are currently in effect;
(C) that the articles, certificate of incorporation or certificate of formation
(or equivalent document) of such party has not been amended since the date of
the last amendment thereto indicated on the certificates of the Secretary of
State or other appropriate office furnished pursuant to clause (i) above; (D) as
to the incumbency and specimen signature of each officer of such party executing
any Fundamental Document (such certificate to contain a certification by another
officer of such party as to the incumbency and signature of the officer signing
the certificate referred to in this clause (iv)) and (E) that all copies or
originals of documents delivered pursuant to this Section 4.1 are true, correct
and complete; and

57

--------------------------------------------------------------------------------

 

  (v)   an organizational chart of the Borrower and its subsidiaries reflecting
the organizational structure of such entities.

          (b) Credit Agreement; Notes. The Administrative Agent shall have
received (i) executed counterparts of this Credit Agreement, which, when taken
together, bear the signatures of the Administrative Agent, all of the Credit
Parties and all of the Lenders, and (ii) the Notes which have been requested by
Lenders, executed by the Borrower.
          (c) Opinion of Counsel. The Administrative Agent shall have received
the written opinion of Latham & Watkins LLP, counsel to the Credit Parties,
dated the Closing Date and addressed to the Administrative Agent and the Lenders
which opinion shall be in form and substance satisfactory to the Administrative
Agent, a copy of which is attached hereto as Exhibit B.
          (d) Termination of Existing Second Lien Facility. (i) The
Administrative Agent shall have received evidence reasonably satisfactory to it
that (a) all Loans extended and other obligations (including any prepayment
premiums) under the Existing Second Lien Agreement have been, or on the Closing
Date shall be, paid or repaid (as applicable) in full and all other Obligations
(as defined under the Existing Second Lien Agreement) have been, or on the
Closing Date shall be, retired (including any prepayment premiums thereunder),
together with any accrued interest thereon and any accrued fees payable under
the Existing Second Lien Facility, and (b) all security interests granted by the
Credit Parties under the Existing Second Lien Agreement have been, or on the
Closing Date shall be, terminated.
          (e) Guaranty of Crown Media’s Performance. The Hallmark Guaranty shall
be in effect.
          (f) No Material Adverse Effect. No event shall have occurred that has
had or could reasonably be expected to have a Material Adverse Effect on the
Credit Parties, taken as a whole, since December 31, 2007.
          (g) Insurance. The Credit Parties shall have furnished the
Administrative Agent with (i) evidence acceptable to the Administrative Agent
that the insurance policies required by Section 5.5 have been obtained and are
in full force and effect and (ii) certificates of insurance with respect to all
existing insurance coverage which certificates shall name JPMorgan Chase Bank,
N.A., as Administrative Agent, as the certificate holder (i.e., as additional
insured or loss payee, as appropriate) and shall evidence the Credit Parties’
compliance with Section 5.5 with respect to all insurance coverage existing as
of the Closing Date.
          (h) Security and Other Documentation. The Administrative Agent shall
have received: (i) fully executed copies of Pledgeholder Agreements for each
Valuation Item of Product; (ii) fully executed copy of the Copyright Security
Agreement listing each U.S. copyright registration owned by a Credit Party in a
Valuation Item of Product and each other U.S. registered copyright interest
licensed, acquired or otherwise held by a Credit Party therein executed by each
such Credit Party; (iii) fully executed copy of a Trademark Security Agreement
for each U.S. registered trademark owned by any Credit Party, other than “intent
to use” trademark and service use applications for which a statement of use has
not been filed (as listed

58

--------------------------------------------------------------------------------

 

on Schedule 3.8(b) hereto) executed by each such Credit Party; and
(iv) appropriate UCC-1 financing statements relating to the Collateral.
          (i) Payment of Fees. All fees and expenses then due and payable by the
Parent or any Credit Party to the Administrative Agent, the Arranger and/or the
Lenders in connection with the Facility, including those set forth in the Fee
Letters, shall have been paid.
          (j) Searches. The Administrative Agent shall have received UCC and
other searches satisfactory to it indicating that no other filings, encumbrances
or transfers (other than in connection with Permitted Encumbrances) with regard
to the Collateral are of record in any jurisdiction in which it shall be
necessary for the Administrative Agent to make a UCC filing in order to provide
the Administrative Agent (for the benefit of the Administrative Agent and the
Lenders) with a perfected security interest in the Collateral.
          (k) Account Control Agreement. The Administrative Agent shall have
received fully executed Account Control Agreements for each account of a Credit
Party other than accounts for which, pursuant to the provisions of Section 5.20
hereof, the Credit Parties do not need to maintain Account Control Agreements.
          (l) Compliance with Laws. The Administrative Agent shall be satisfied
that the transactions contemplated hereby will not (i) violate any provision of
Applicable Law, or any order of any court or other agency of the United States
of America or any state thereof applicable to any of the Credit Parties or any
of their respective properties or assets, other than such as could not
reasonably be expected to have a materially adverse effect upon the business,
assets, properties, operations, financial condition, liabilities (including
contingent liabilities) and Material Agreements of the Borrower and its
Subsidiaries, taken as a whole or (ii) conflict with, or result in a default,
breach or right of termination or acceleration under, any Material Agreement to
which any Credit Party is a party, other than such as could not reasonably be
expected to result in a Material Adverse Effect.
          (m) USA Patriot Act. The Administrative Agent shall have received any
information required and requested by the Administrative Agent or any Lender
under or in connection with the USA Patriot Act.
          (n) Borrowing Certificate. The Administrative Agent shall have
received a Borrowing Certificate with respect to such Borrowing, duly executed
by an Authorized Officer of the Borrower.
          (o) Representations and Warranties. The representations and warranties
set forth in Article 3 hereof (as updated from time to time by any amendment of
the Schedules attached to this Credit Agreement in accordance with
Section 5.1(g) hereof) and in the other Fundamental Documents shall be true and
correct in all material respects on and as of the date of the Borrowing.
          (p) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing, nor shall any such event occur by reason
of the making of such Loan.

59

--------------------------------------------------------------------------------

 

          (q) Consummation of 2008 Transactions. The simultaneous consummation
of the 2008 Transactions, including (a) that the Registration Statement shall
have been declared effective, (b) the consummation of a Qualified IPO of Public
Co., (c) the consummation of the Reorganization and (d) the retirement of all
Parent Note Obligations.
          (r) Conditions of First Lien Amendment No. 2. All conditions to the
effectiveness of the First Lien Amendment No. 2 shall have been satisfied or
waived by the Administrative Agent.
          (s) Availability Under Senior Facilities. The Administrative Agent
shall have received evidence satisfactory to it that the following have been
satisfied on the Closing Date with respect to the Revolving Credit Facility (as
defined in the First Lien Agreement, as such revolving credit facility is being
increased contemporaneously with the occurrence of the Closing Date): (i) the
total commitments under the Revolving Credit Facility exceed sum of the
aggregate principal amount of the outstanding loans under the Revolving Credit
Facility plus the L/C Exposure (as defined in the First Lien Credit Agreement)
by at least $25,000,000; and (ii) the Borrowing Base exceeds sum of the
aggregate principal amount of outstanding loans under the First Lien Credit
Agreement plus the L/C Exposure by at least $25,000,000.
          (t) Parent LLC Agreement. The Administrative Agent shall have
received, and be satisfied with (in its reasonable discretion; provided that it
is agreed that the copy provided to the Administrative Agent prior to the date
hereof is satisfactory) the provisions of an executed copy, certified by
Borrower to be true and correct, of the Parent LLC Agreement.
          (u) Intercreditor Agreement. The Administrative Agent shall have
received a fully-executed copy of the Intercreditor Agreement duly executed by
each party thereto.
          (v) Contribution Agreement. The Administrative Agent shall have
received a fully executed Contribution Agreement duly executed by each of the
Credit Parties.
          (w) Other Documents. The Administrative Agent shall have received such
other closing documentation as the Administrative Agent may reasonably request.
5. AFFIRMATIVE COVENANTS
          From the date hereof and for so long as any amount shall remain
outstanding under any Note or any other Obligation shall remain unpaid or
unsatisfied, each of the Credit Parties agrees that, unless the Required Lenders
shall otherwise consent in writing, it will (it being understood that, for
purposes of this Article 5, to the extent that any Credit Party is required to
act within a certain number of days the last day of which is not a Business Day,
then the due date for such action shall be extended to the next succeeding
Business Day):
          SECTION 5.1. Financial Statements and Reports. Furnish or cause to be
furnished to the Administrative Agent and each of the Lenders:
          (a) Within one hundred twenty (120) days after the end of each fiscal
year of the Borrower commencing with the fiscal year ending December 31, 2008,
the audited

60

--------------------------------------------------------------------------------

 

consolidated balance sheet of Borrower and its Consolidated Subsidiaries as at
the end of, and the related consolidated statements of operations, member’s
equity (deficit) and comprehensive loss for, such fiscal year, accompanied by an
unqualified report and opinion of KPMG LLP or such other independent public
accountants of nationally recognized standing as shall be retained by the
Borrower, which report and opinion shall be prepared in accordance with
generally accepted auditing standards relating to reporting and which report and
opinion shall contain no material exceptions or qualifications except for
qualifications relating to accounting changes (with which such independent
public accountants concur) in response to FASB releases or other authoritative
pronouncements, together with a certificate signed by an Authorized Officer of
the Borrower, to the effect that such financial statements fairly present the
financial position of the Borrower ands its Consolidated Subsidiaries as at the
dates indicated and the results of their operations for the periods indicated in
conformity with GAAP;
          (b) Within sixty (60) days after the end of each of the first three
fiscal quarters of each of fiscal year of the Borrower and its Consolidated
Subsidiaries, commencing with the fiscal quarter ending June 30, 2008, the
unaudited consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of, and the related unaudited consolidated operation,
member’s equity (deficit) and comprehensive loss for, such fiscal quarter, and
for the portion of the fiscal year through the end of such fiscal quarter,
together with a certificate signed by an Authorized Officer of the Borrower to
the effect that such financial statements, while not examined by independent
public accountants, reflect, in the opinion of the Borrower, all adjustments
necessary to present fairly in all material respects the financial position of
the Borrower ands its Consolidated Subsidiaries as at the end of the fiscal
quarter and the results of operations for the quarter then ended in conformity
with GAAP, subject to normal year-end audit adjustments and the absence of
footnotes;
          (c) Prior to the First Priority Obligations Payment Date, copies of
each Borrowing Base Certificate delivered under the First Lien Facilities
simultaneous with such delivery (the “Borrowing Base Certificate”);
          (d) Simultaneously with or prior to the delivery of the statements
referred to in paragraph (a) of this Section 5.1, both (i) a detailed
consolidated annual budget for the then-current fiscal year in a form consistent
with the Business Plan (including a projected consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal year,
and the related consolidated statements of projected cash flow and projected
income for such fiscal year), which budget shall be accompanied by the statement
of an Authorized Officer of the Borrower to the effect that, to the best of his
or her knowledge, such budget is a reasonable estimate for the period covered
thereby and (ii) the calculation of the Eligible Library Amount computed as of
the last Business Day of the prior fiscal year as contemplated by the definition
of “Eligible Library Amount”;
          (e) Simultaneously with the delivery of the statements referred to in
paragraphs (a) and (b) of this Section 5.1, a certificate of an Authorized
Officer of the Borrower, as applicable, in form and substance reasonably
satisfactory to the Administrative Agent (i) stating whether or not such
Authorized Officer has knowledge of any Event of Default or Default and, if so,
specifying each such condition or event, the nature thereof and any action taken
or proposed to be taken with respect thereto, (ii) demonstrating in reasonable
detail

61

--------------------------------------------------------------------------------

 

compliance with the provisions of Section 6.21 hereof and including supporting
schedules, (iii) certifying that all filings required under Section 5.7 hereof
have been made and listing each such filing that has been made since the date of
the last certificate delivered in accordance with this Section 5.1(e),
(iv) stating whether any change in GAAP or in the application thereof has
occurred (x) since the date of the most recent audited financial statements
delivered to the Administrative Agent hereunder (but until the delivery of any
audited financial statements hereunder, since the date of the unaudited
financial statements referred to in Section 3.5) and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate or (y) since April 13, 2007 that would affect the
calculations described in clause (ii) above and reconciling such calculations
with the most recent financial statements delivered hereunder and
(v) identifying all Subsidiaries existing on the date of such certificate and
indicating, for each such Subsidiary, whether such Subsidiary was formed or
acquired since the end of the previous fiscal quarter;
          (f) Promptly upon their becoming publicly available, copies of (i) all
registration statements, proxy statements, notices and reports any Credit Party
shall file with any securities exchange or with the Securities and Exchange
Commission or any successor agency, if any, and (ii) all reports, financial
statements, press releases and other information which any Credit Party shall
release, send or make available to its common stockholders generally; provided,
that any such documents that are filed or furnished with the Securities and
Exchange Commission on via EDGAR or any successor electronic document submission
program shall be deemed to have been provided to the Administrative Agent when
so filed or furnished;
          (g) From time to time such information as may be required to keep
current each of Schedules 3.7(a), 3.7(b), 3.8(a) and 3.18;
          (h) Simultaneously with delivery of financial statements required
under Section 5.1(a) and (b) above, a report by management outlining the
financial condition and results of operations of the Credit Parties, taken as a
whole, as well as comparisons against the prior period performance in a form
reasonably acceptable to the Administrative Agent in its sole discretion;
          (i) Simultaneously with delivery of the financial statements required
under Sections 5.1(a) and (b) above, (x) a direct cash flow statement for the
fiscal period presented in such financial statements, prepared with a
methodology consistent in all material respects with Initial Projections and
(y) a reconciliation of operating cash flow only for that fiscal period between
the Section 5.1(a) or (b) financial statements and such direct cash flow
statement;
          (j) Promptly upon request therefor, any information required by the
Administrative Agent on behalf of itself or any Lender under or in connection
with the USA Patriot Act;
          (k) From time to time such additional information regarding the
financial condition or business of any Credit Party, any Item of Product, any
Distribution Agreement, any Eligible Receivable or the Collateral, as the
Administrative Agent may reasonably request, including, but not limited to,
management letters issued to a Credit Party by its auditors; and

62

--------------------------------------------------------------------------------

 

          (l) Promptly upon receipt thereof, any and all correspondence
delivered or received by (whether originating from or to Public Co., Parent or
KRH) any Credit Party to the extent that such correspondence relates to any
calculation of Tax Distributions.
          SECTION 5.2. Corporate Existence; Compliance with Laws. Do or cause to
be done all things reasonably necessary (i) to preserve, renew and keep in full
force and effect its legal existence and material rights, licenses, permits and
franchises and (ii) to comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, any Governmental
Authority, except (a) as otherwise permitted under Section 6.6, (b) that any
Credit Party other than the Borrower may be liquidated or dissolved if (x) in
the reasonable judgment of the governing body of the Borrower, such Credit Party
is no longer necessary or desirable for the proper conduct of the business of
the Borrower and (y) such liquidation or dissolution could not reasonably be
expected to have a Material Adverse Effect or (c) in the case of clause
(ii) only, where the failure to do so could not individually or in the aggregate
reasonably be expected to result in a Material Adverse Effect.
          SECTION 5.3. Maintenance of Properties. Keep its tangible properties
which are material to its business in good repair, working order and condition
(ordinary wear and tear excepted) and, from time to time (i) make (or cause to
be made) all necessary and proper repairs, renewals, replacements, additions and
improvements thereto, and (ii) comply at all times with the provisions of all
material leases and other material agreements to which it is a party so as to
prevent any loss or forfeiture thereof or thereunder unless compliance therewith
is being currently contested in good faith by appropriate proceedings and
appropriate reserves, if any, have been established in accordance with GAAP;
provided, however, that nothing in this Section 5.3 shall prevent any Credit
Party from discontinuing the use, operation or maintenance of such properties or
disposing of them if (x) such discontinuance or disposal is, in the reasonable
judgment of such Credit Party, desirable in the conduct of business and (y) such
discontinuance or disposal could not reasonably be expected to result in a
Material Adverse Effect.
          SECTION 5.4. Notice of Material Events.
          (a) Upon any executive officer of the Borrower obtaining knowledge of
(i) any Default or Event of Default, (ii) any event which could reasonably be
expected to result in a Material Adverse Effect or (iii) any other event which
could reasonably be expected to materially and adversely impact upon the
collection of at least $17,000,000 worth of Eligible Receivables (as defined in
the First Lien Agreement) of the Credit Parties, in each case, the Borrower
shall promptly give written notice thereof to the Administrative Agent
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such Person and the nature of
such claimed Event of Default or condition and what action any Credit Party has
taken, is taking and proposes to take with respect thereto.
          (b) Upon any Authorized Officer of the Borrower obtaining actual
knowledge of the filing or commencement of, or any written threat or notice of
intention of any Person to file or commence, any action, suit or proceeding,
whether at law or in equity or by or before any Governmental Authority or in
arbitration, against the Borrower or any of its Subsidiaries as to which a
determination in favor of the Borrower or such Subsidiary is not reasonably
probable and which, if adversely determined, would reasonably be expected to
result in a judgment in

63

--------------------------------------------------------------------------------

 

excess of $17,000,000, the Borrower shall promptly (and, in any event, within
five (5) Business Days after such Authorized Officer obtains such knowledge)
give notice to the Administrative Agent specifying the nature of such action,
suit or proceeding and what actions the Credit Parties have taken, are taking
and propose to take with respect thereto.
     SECTION 5.5. Insurance.
          (a) Keep its assets which are of an insurable character insured (to
the extent and for the time periods consistent with customary industry
standards) by financially sound and reputable insurers against loss or damage by
fire, explosion, theft or other hazards which are included under extended
coverage in amounts not less than the insurable value of the property insured or
such lesser amounts, and with such self-insured retention or deductible levels,
as are consistent with normal industry standards for companies similarly
situated owning similar properties and engaged in similar business as the Credit
Parties.
          (b) Maintain with financially sound and reputable insurers, insurance
against other hazards and risks and liability to Persons and property to the
extent and in the manner consistent with or customary standards for companies
similarly situated owning similar properties and engaged in similar business as
the Credit Parties.
          (c) Maintain, or cause to be maintained, in effect during the period
from the commencement of production of each Item of Product produced by any
Credit Party or from the date of acquisition of each Item of Product acquired by
any Credit Party, through the third anniversary of the date on which such Item
of Product is Completed and as otherwise required by applicable contracts, a
so-called “Errors and Omissions” policy covering all such Items of Product, and
cause such Errors and Omissions policy to provide coverage to the extent and in
such manner as is customary for Items of Product of like type for companies
similarly situated owning similar properties and engaged in similar business as
the Credit Parties but, at minimum, to the extent and in such manner as is
required under all applicable contracts relating thereto.
          (d) Maintain, or cause to be maintained, in effect during the period
from the commencement of production of each Item of Product produced by any
Credit Party, (i) until such time as the Administrative Agent shall have been
provided with satisfactory evidence of the existence of one negative or master
tape in one location and an interpositive, internegative or duplicate master
tape in another location of the final version of the Completed Item of Product,
insurance on the negatives and sound tracks or master tapes of such Item of
Product in such amounts and in such manner as is consistent with customary
industry standards for companies similarly situated owning similar properties
and engaged in similar business as the Credit Parties for similar Items of
Product, and (ii) until production of such Item of Product has been concluded, a
cast insurance policy with respect to such Item of Product, which provides
coverage to the extent and in such manner as is customary for Items of Product
of a like type, but at minimum, to the extent required under all applicable
contracts relating thereto.
          (e) Maintain, or cause to be maintained, in effect distributor’s
“Errors and Omissions” insurance to the extent and in amounts consistent with or
customary industry standards for companies similarly situated owning similar
properties and engaged in similar business as the Credit Parties.

64

--------------------------------------------------------------------------------

 

     (f) Cause all such above-described insurance (excluding worker’s
compensation insurance) to: (i) use commercially reasonable efforts to provide
for the benefit of the Lenders that ten (10) days’ prior written notice (or, for
the policies described in clauses (c) and (e) above, thirty (30) days) of
cancellation, termination, non-renewal or lapse or material change of coverage
shall be given to the Administrative Agent; (ii) name the Administrative Agent
for the benefit of the Administrative Agent and the Lenders as a loss payee
(except for “Errors and Omissions” insurance and other third party liability
insurance); provided, however, that production insurance recoveries received
prior to Completion or abandonment of an Item of Product may be utilized to
finance the production of such an Item of Product, and; provided, further, that
so long as no Event of Default has occurred or is continuing, property insurance
proceeds may be used to repair damage in respect of which such proceeds were
received; and (iii) to the extent that none of the Administrative Agent and the
Lenders shall be liable for premiums or calls, name the Administrative Agent
(for the benefit of the Administrative Agent and the Lenders) as additional
insureds including, without limitation, under any “Errors and Omissions” policy.
     (g) Subject to Section 5.27, maintain a key man life insurance policy for
the life of Robert J. Halmi, Jr. in an amount of at least $5,000,000 with an
insurer reasonably acceptable to the Administrative Agent; provided that, so
long as no Event of Default has occurred and is continuing, key man life
insurance recoveries may be used to pay any compensation or similar “signing
bonuses” necessary to obtain a replacement for Robert J. Halmi, Jr.
     SECTION 5.6. [Intentionally Omitted.]
     SECTION 5.7. Copyrights and Trademarks.
     (a) Within sixty (60) days after the initial release or broadcast of each
Item of Product, to the extent any Credit Party (i) is or becomes the U.S. or
foreign copyright proprietor thereof or otherwise acquires a U.S. or foreign
copyrightable interest therein, or (ii) acquires any material U.S. or foreign
trademark, service mark, trade name or service name, such Credit Party shall
take any and all actions necessary to register such copyright or trademark,
service mark, trade name or service name, in the name of such Credit Party
(subject, in the case of the Credit Parties, to a Lien in favor of the
Administrative Agent for the benefit of itself and the Lenders to the extent
such copyright, trademark or service mark would be included as Collateral
hereunder) in conformity with the laws of the United States of America and such
other jurisdictions as the Administrative Agent may reasonably specify, and
promptly deliver to the Administrative Agent (x) written evidence of the
registration of any and all such copyrights and trademarks for inclusion in the
Collateral under this Credit Agreement, and (y) a Copyright Security Agreement
Supplement or a Trademark Security Agreement relating to such copyright or such
trademark, service mark, trade name or service name, executed by such Credit
Party; provided that such registration shall only be required for foreign
copyrights, copyrightable interests, trademarks, service marks, trade names or
service names upon the reasonable request of the Administrative Agent after
consultation with the Borrower if, in the reasonable judgment of the
Administrative Agent, such foreign registration is necessary in order to perfect
its security interest in the related distribution rights.

65

--------------------------------------------------------------------------------

 

          (b) Obtain instruments of transfer of ownership or other documents
evidencing the exclusive license of any Credit Party with respect to (i) the
copyright relating to Items of Product in which such Credit Party is not
entitled to be the initial copyright proprietor and (ii) any trademark, service
mark, trade name or service name which such Credit Party acquires, and promptly
record if such interest may be registered with the United States Copyright
Office, the United States Patent and Trademark Office or such other
jurisdictions, any such assignments of ownership or documents evidencing such
exclusive license at the United States Copyright Office or the United States
Patent and Trademark Office and such other jurisdictions as the Administrative
Agent may reasonably request after consultation with the Borrower if, in the
reasonable judgment of the Administrative Agent, such foreign registration is
necessary in order to perfect its security interest in the related distribution
rights.
          SECTION 5.8. Books and Records, Examination.
          (a) Maintain or cause to be maintained at all times true and complete
books and records of its financial operations and permit any Persons designated
by the Administrative Agent (as a single group) or, upon the occurrence and
during the continuance of an Event of Default, any Lender to visit and inspect
the financial records and the properties of the Credit Parties at reasonable
times, upon reasonable prior notice to the Borrower, and as often as reasonably
requested and to make extracts from and copies of such financial records, and
permit any Persons designated by the Administrative Agent or, upon the
occurrence and during the continuance of an Event of Default, any Lender upon
reasonable prior notice to the Borrower to discuss the affairs, finances and
condition of any of the Credit Parties with the officers thereof and independent
accountants therefor (subject to reasonable requirements of confidentiality,
including requirements imposed by law or by contract); provided that the
Borrower shall be entitled to participate in any such meeting with accountants.
The Administrative Agent and the Lenders agree to use reasonable efforts to
coordinate and manage the exercise of their rights under this Section 6.6 so as
to minimize the disruption to the business of the Borrower and its Subsidiaries
resulting therefrom.
          (b) If, at any time when an Event of Default is not in existence, the
Administrative Agent wishes to confirm with account debtors and other payors the
amounts and terms of any or all Eligible Receivables, the Administrative Agent
will so notify the Credit Parties. The Administrative Agent agrees to have such
confirmation made through the Credit Parties’ auditors. If for any reason such
auditors fail to proceed with the confirmations in a timely manner and the First
Lien Agent has not itself commenced such confirmations, the Administrative Agent
may proceed to make such confirmations directly with account debtors and other
payors after prior written notice to the Borrower. Each of the Credit Parties
hereby agrees that, upon the occurrence and during the continuance of an Event
of Default, if the First Lien Agent has not itself commenced such confirmations,
the Administrative Agent shall be entitled to confirm directly with account
debtors and other payors, the amounts and terms of all accounts receivable.
          SECTION 5.9. Third Party Audit Rights. Upon the Administrative Agent’s
request, promptly notify the Administrative Agent of, and at all times allow the
Administrative Agent access to the results of, all audits conducted by any
Credit Party of any third party licensee, partnership or joint venture under any
agreement with respect to any Item of Product

66

--------------------------------------------------------------------------------

 

included in the Collateral. After an Event of Default has occurred and is
continuing, the Administrative Agent shall have the right to exercise directly
or through any Credit Party at the option of the Administrative Agent, such
Credit Party’s right to audit any obligor under an agreement with respect to any
Item of Product included in the Collateral.
          SECTION 5.10. Observance of Agreements. Except to the extent that the
failure to so observe and perform could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, duly observe and
perform all material terms and conditions of all material agreements to which a
Credit Party is a party with respect to the production, development and/or
exploitation of Items of Product, including but not limited to production
services agreement, Distribution Agreements and any agreement included in the
chain of title for an Item of Product, and diligently protect and enforce the
rights of the Credit Parties under all such agreements in a manner consistent
with and subject to the terms and conditions of such agreements as from time to
time in effect.
          SECTION 5.11. Film Properties and Rights; Borrower to Act as
Pledgeholder. Act as pledgeholder for the Administrative Agent for the benefit
of the Lenders with the same effect as if the Administrative Agent for the
benefit of the Lenders were a pledgee in possession of all Physical Materials
relating to an Item of Product that a Credit Party owns or licenses and/or for
which a Credit Party has access which are now or hereafter in the actual or
constructive possession of any Credit Party, subject to such access as shall be
necessary to produce and distribute such Item of Product.
          SECTION 5.12. Laboratories; No Removal. With respect to each Item of
Product Completed from and after the Closing Date, deliver a Pledgeholder
Agreement promptly upon the delivery of the related Physical Materials to a
Laboratory (or, if applicable, a revised schedule of Completed Items of Product
with respect to an existing Pledgeholder Agreement). Prior to any Credit Party
requesting any such Laboratory to deliver any first generation negative or other
first generation preprint or first generation sound track material or first
generation master tapes with respect to a Completed Item of Product to another
Laboratory, such Credit Party shall provide the Administrative Agent with a
Pledgeholder Agreement, executed by such other Laboratory and all other parties
to such Pledgeholder Agreement (including the Administrative Agent). Each Credit
Party hereby agrees not to deliver or remove or cause the delivery or removal of
the first generation negative and film or first generation sound materials or
first generation master tapes with respect to any Completed Item of Product
owned by any Credit Party or in which any Credit Party has an interest to a
location outside the United States of America, Canada or the United Kingdom;
provided that the Completed Items of Product may only be stored in Canada or the
United Kingdom if and for so long as such jurisdiction permits the perfection of
the Administrative Agent’s security interest in such Item of Product by filing
notice of such security interest with a governmental recording body.
          SECTION 5.13. Taxes and Charges. Duly pay and discharge, or cause to
be paid and discharged, before the same shall become in arrears (after giving
effect to applicable extensions), all material taxes, assessments, levies and
other governmental charges, imposed upon any Credit Party or its properties,
sales and activities, or any part thereof, or upon the income or profits
therefrom, as well as all claims for labor, materials, or supplies which if
unpaid might by law become a Lien (other than a Permitted Encumbrance) upon any
property of any

67

--------------------------------------------------------------------------------

 

Credit Party; provided, however, that any such tax, assessment, levy or charge
need not be paid if the validity or amount thereof shall currently be contested
in good faith by appropriate proceedings and if such Credit Party shall have set
aside on its books reasonable reserves (the presentation of which is segregated
to the extent required by GAAP) adequate with respect thereto if reserves shall
be deemed necessary; and provided, further, that such Credit Party will pay all
such taxes, assessments, levies or other governmental charges forthwith upon the
commencement of proceedings to foreclose any Lien which may have attached as
security therefor or post a bond or other security therefor.
          SECTION 5.14. Liens. Defend the Collateral (including, without
limitation, the Pledged Securities) against any and all Liens howsoever arising,
other than Permitted Encumbrances, and in any event defend against any attempted
foreclosure on Collateral.
          SECTION 5.15. Further Assurances; Security Interests.
          (a) Upon the reasonable request of the Administrative Agent, duly
execute and deliver, or cause to be duly executed and delivered, at the cost and
expense of the Credit Parties, such further instruments as may be necessary in
the reasonable judgment of the Administrative Agent to carry out the provisions
and purposes of this Credit Agreement and the other Fundamental Documents.
          (b) Upon the reasonable request of the Administrative Agent, promptly
execute and deliver or cause to be executed and delivered, at the cost and
expense of the Credit Parties, such further instruments as may be appropriate in
the reasonable judgment of the Administrative Agent, to provide the
Administrative Agent for the benefit of the Administrative Agent and the Lenders
a perfected Lien in the Collateral (subject only to Specified Permitted
Encumbrances) and any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other Applicable Law,
and perform or cause to be performed such other ministerial acts which are
reasonably necessary or advisable, from time to time, in order to grant and
maintain in favor of the Administrative Agent for the benefit of itself and the
Lenders the security interest in the Collateral contemplated hereunder and under
the other Fundamental Documents, subject only to Permitted Encumbrances.
          SECTION 5.16. ERISA Compliance and Reports. Furnish to the
Administrative Agent (a) as soon as possible, and in any event within thirty
(30) days after any Authorized Officer of a Credit Party has knowledge that
(i) any Reportable Event with respect to any Plan has occurred, a statement of
an Authorized Officer of the Credit Party, setting forth on behalf of such
Credit Party details as to such Reportable Event and the action which it
proposes to take with respect thereto, together with a copy of the notice, if
any, required to be filed of such Reportable Event given to the PBGC, or (ii) an
accumulated funding deficiency has been incurred or an application has been made
to the Secretary of the Treasury for a waiver or modification of the minimum
funding standard or an extension of any amortization period under Section 412 of
the Code with respect to a Plan, a Plan or Multiemployer Plan has been or is
proposed to be terminated, reorganized, partitioned or declared insolvent under
Title IV of ERISA, proceedings have been instituted to terminate a Plan, a
proceeding has been instituted

68

--------------------------------------------------------------------------------

 

pursuant to Section 515 of ERISA to collect a material delinquent contribution
to a Multiemployer Plan, or any such Credit Party or ERISA Affiliate will incur
any material liability (including any contingent or secondary liability) to or
on account of the termination of or withdrawal from a Plan or Multiemployer Plan
under Sections 4062, 4063, 4201 or 4204 of ERISA, a statement of an executive
officer of the Credit Party, setting forth details as to such event and the
action the applicable Credit Party proposes to take with respect thereto,
(b) promptly upon reasonable request of the Administrative Agent, copies of each
annual and other report with respect to each Plan subject to Title IV of ERISA
and (c) promptly after receipt thereof, a copy of any notice any Credit Party or
ERISA Affiliate may receive from the PBGC relating to the PBGC’s intention to
terminate any Plan or to appoint a trustee to administer any Plan.
          SECTION 5.17. Environmental Laws.
          (a) Promptly notify the Administrative Agent upon an executive officer
of any Credit Party becoming aware of any violation or potential violation or
non-compliance with, or liability or potential liability under any Environmental
Laws which, when taken together with all other pending violations could
reasonably be expected to have a Material Adverse Effect, and promptly furnish
to the Administrative Agent all notices of any nature which any Credit Party may
receive from any Governmental Authority or other Person with respect to any
violation, or potential violation or non-compliance with, or liability or
potential liability under any Environmental Laws which, in any case or when
taken together with all such other notices, could reasonably be expected to have
a Material Adverse Effect.
          (b) Comply with and use reasonable efforts to ensure compliance by all
tenants and subtenants with all Environmental Laws, and obtain and comply in all
respects with and maintain and use best efforts to ensure that all tenants and
subtenants (if applicable) obtain and comply in all respects with and maintain
any and all licenses, approvals, registrations or permits required by
Environmental Laws, except where failure to do so could not have a Material
Adverse Effect.
          (c) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under all
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities, except where failure to
do so could not have a Material Adverse Effect. Any order or directive whose
lawfulness is being contested in good faith by appropriate proceedings shall be
considered a lawful order or directive when such proceedings, including any
judicial review of such proceedings, have been finally concluded by the issuance
of a final non-appealable order; provided, however, that the appropriate Credit
Party shall have set aside on its books reasonable reserves (the presentation of
which is segregated to the extent required by GAAP) adequate with respect
thereto if reserves shall be deemed necessary.
          (d) Defend, indemnify and hold harmless the Administrative Agent and
the Lenders, and their respective employees, agents, officers and directors,
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of, or in any way related to the
violation of or non-compliance by any Credit Party with any Environmental

69

--------------------------------------------------------------------------------

 

Laws, or any orders, requirements or demands of Governmental Authorities related
thereto, including, without limitation, reasonable attorney and consultant fees,
investigation and laboratory fees, court costs and litigation expenses, but
excluding therefrom all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses arising out of or resulting from
(i) the gross negligence or willful acts or willful misconduct of any
indemnified party, (ii) any claims, demand, penalties, fines, liabilities,
settlements, damages, costs and expenses against an indemnified party by any
Credit Party in which (but only to the extent that) such Credit Party is the
prevailing party or (iii) any acts or omissions of any indemnified party
occurring after any indemnified party is in possession of, or controls the
operation of, any property or asset.
          (e) Refrain from causing or permitting any of its properties or assets
to be used to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce or process Hazardous Materials, except in compliance
in all material respects with all applicable Environmental Laws, or releasing,
discharging, disposing of or permitting or suffering any release or disposal as
a result of any intentional act or omission on its part of Hazardous Materials
onto any such property or asset in violation of any Environmental Law, in each
case, except where the same could not reasonably be expected to result in a
Material Adverse Effect.
          SECTION 5.18. Use of Proceeds. Use the proceeds of the Facility
extended on the Closing Date to fund the 2008 Transactions (including to
refinance outstanding loans under the Existing Second Lien Facility (including
the 1% prepayment premium set forth in section 2.10(a) thereof)) and to pay
fees, commissions and expenses incurred in connection with the 2008
Transactions.
          SECTION 5.19. Distribution Agreements, Letters of Credit, Etc.
          (a) Promptly upon receipt thereof (but in any event no later than
thirty (30) days), deliver to the Administrative Agent to be held as part of the
Collateral, a copy of all letters of credit (including any amendments thereto)
which are received by a Credit Party (whether pursuant to a Distribution
Agreement or otherwise) after the date hereof and provide the Administrative
Agent access to the originals of all such letters of credit (to the extent such
letter of credit is assignable).
          (b) Furnish to the Administrative Agent, concurrently with the
delivery of each quarterly compliance certificate, a list in the form of
Schedule 3.17 hereto of all Material Agreements executed during the preceding
quarter and all material amendments to existing Material Agreements which
amendments were executed during the preceding quarter.
          (c) Take all action on its part to be performed necessary to effect
timely payments under all letters of credit, including, without limitation,
timely preparation, acquisition and presentation of all documents, drafts or
other instruments required to effect payment thereunder.
          SECTION 5.20. Deposit Accounts. With respect to all deposit accounts
that are not Excluded Accounts, either (i) maintain such accounts at the
Administrative Agent or, prior to the First Priority Obligations Payment Date,
the First Lien Agent or (ii) provide the Administrative Agent with written
notice prior to opening or maintaining any account with any

70

--------------------------------------------------------------------------------

 

financial institution other than the Administrative Agent and deliver to the
Administrative Agent an Account Control Agreement with respect thereto. For
purposes of complying with Section 5.20 only, the following types of accounts
shall be “Excluded Accounts”: (a) Production Accounts and (b) deposit accounts
maintained in the ordinary course of business maintained solely for funding:
(v) 401(k) and other retirement plans and employee benefits, including rabbi
trusts for deferred compensation, (w) payroll, (x) health care benefits,
(y) escrow arrangements and (z) deposit accounts or defeasance accounts, in each
case under this clause (z) set up in connection with sale leaseback agreements
in existence on the Closing Date or permitted to be completed thereafter
pursuant to Section 6.8 hereof.
          SECTION 5.21. Subsidiaries. Simultaneously with any Subsidiary which
is not a Guarantor hereunder becoming a “Guarantor” under the First Lien
Facilities in connection with a refinancing thereof and within ten (10) Business
Days of the acquisition or formation of any new Subsidiary of a Credit Party
with assets valued at $250,000 or greater and promptly following any Subsidiary
that is not a Credit Party holding assets valued at $250,000 or greater, the
Credit Parties shall cause such Subsidiary to deliver to the Administrative
Agent: (x) with respect to each such Subsidiary that is not a Controlled Foreign
Subsidiary, (i) an Instrument of Assumption and Joinder duly executed by such
Subsidiary, (ii) an appropriate UCC-1 financing statement for such Subsidiary,
(iii) to the extent that 100% of the Equity Interests of such Subsidiary have
not previously been pledged to the Administrative Agent (for the benefit of the
Lenders), an executed pledge agreement and, unless delivered to the First Lien
Agent, the certificates representing 100% of the Equity Interests of such
Subsidiary held by a Credit Party together (in the case of Pledged Securities
comprising capital stock) with undated stock powers executed in blank, as
applicable, or any comparable documents for non-corporate entities and
(iv) organizational documents to the extent set forth in Section 4.1 hereof, and
(y) with respect to each such Subsidiary that is a Controlled Foreign Subsidiary
(that is not a Subsidiary of another Controlled Foreign Subsidiary), to the
extent that 65% of the Equity Interests of such Subsidiary have not previously
been pledged to the Administrative Agent (for the benefit of the Lenders), an
executed pledge agreement and (unless delivered to the First Lien Agent) the
certificates representing 65% of the Equity Interests of such Subsidiary held by
a Credit Party together (in the case of Pledged Securities comprising capital
stock) with undated stock powers executed in blank, as applicable, or any
comparable documents for non-corporate entities.
          SECTION 5.22. [Intentionally Omitted.]
          SECTION 5.23. [Intentionally Omitted.]
          SECTION 5.24. Negative Cost Statements. If reasonably requested by the
Administrative Agent, deliver to the Administrative Agent, within ninety
(90) days after each miniseries constituting an Item of Product with a Budgeted
Negative Cost of more than $17,000,000 produced by a Credit Party is Completed,
a tentative negative cost statement, and/or within one hundred twenty 120 days
after each such Item of Product is Completed, a final negative cost statement.
          SECTION 5.25. Cash Receipts. Except to the extent remitted to the
First Lien Agent, in the event any Credit Party receives (i) payment from any
account debtor or obligor, which payment should have been remitted to the
Administrative Agent or (ii) the proceeds of any

71

--------------------------------------------------------------------------------

 

sale of an Item of Product, in the form of cash or otherwise, such Credit Party
shall as soon as practicable remit such payment or proceeds to the
Administrative Agent for deposit to the Collection Account for application in
accordance with Section 2.10 herein.
          SECTION 5.26. Guild Undertakings. Deliver to the Administrative Agent
within thirty (30) days (or such longer period as is agreed in the sole
discretion of the Administrative Agent, of the Closing Date undertakings from
any guild holding a senior lien on any material portion of the Collateral that
such guild will give the Administrative Agent notice of and an opportunity to
cure any payment default by the Borrower or any Guarantor prior to exercising
any remedies it may have with respect to such liens.
          SECTION 5.27. Key Man Life Insurance. Pay the periodic premiums on the
key man life insurance policy in the amount of $5,000,000 on the life of Robert
J. Halmi, Jr. held by the Administrative Agent and maintain such policy in full
force and effect unless replaced by a comparable policy from any insurance
company reasonably acceptable to the Administrative Agent.
          SECTION 5.28. Copyrights and Trademarks. The Credit Parties shall use
commercially reasonable efforts to transfer ownership of any copyright or
trademark related to any Completed Item of Product with a fair market value of
more than $17,000,000 to RHI Entertainment Distribution, LLC or any successor to
RHI Entertainment Distribution, LLC permitted by this Credit Agreement (the
“Distribution Entity”), to the extent not already held thereby, within thirty
(30) days of the Completion of such Item of Product; provided that this covenant
shall be satisfied with respect to any such Completed Item of Product that is
the subject of a sale and leaseback permitted under Section 6.8 or any similar
arrangement permitted by this Credit Agreement involving a co-production treaty
or other arrangements with Governmental Authorities for the purposes of
receiving tax or other incentives so long as beneficial ownership is held by the
Distribution Entity. The Distribution Entity shall maintain ownership of any
such copyright or trademark interests; provided that the Distribution Entity may
sell or transfer such copyright interests to a person that is not an Affiliate
of the Distribution Entity in any manner permitted by Section 6.6.
          SECTION 5.29. Post-Closing Covenant. Upon the request of the
Administrative Agent, use commercially reasonable efforts to cause any third
party who is party to any pledgeholder agreement, account control agreement or
other Fundamental Document (as defined in the Existing Second Lien Facility) in
connection with the Existing Second Lien Facility to confirm in a writing
reasonably satisfactory to the Administrative Agent that such third party shall
afford to the Administrative Agent the same treatment as such third party had
afforded to the Administrative Agent (as defined in the Existing Second Lien
Facility) pursuant to the relevant documentation entered into in the context of
the Existing Second Lien Facility.
          SECTION 5.30. Greenshoe Proceeds. Within three (3) Business Days of
any Greenshoe Proceeds having been raised, cause such Greenshoe Proceeds to
(a) be contributed to Borrower, and (b) be used by the Borrower to repay
Indebtedness under the Revolving Credit Facility (as defined in the First Lien
Agreement), but without a requirement that the revolving credit commitments
thereunder be permanently reduced in connection with such repayment.

72

--------------------------------------------------------------------------------

 

6. NEGATIVE COVENANTS
          From the date hereof and for so long as any amount shall remain
outstanding under any Note or any other Obligation shall remain unpaid or
unsatisfied, each of the Credit Parties agrees that, unless the Required Lenders
shall otherwise consent in writing, it will not:
          SECTION 6.1. Limitations on Indebtedness. Incur, create, assume or
suffer to exist any preferred stock or Indebtedness or permit any partnership or
joint venture in which any Credit Party is a general partner, subject to
Section 6.4(c), to incur, create, assume or suffer to exist any Indebtedness
other than (in each case, including to the extent constituting Indebtedness, all
premium (if any), interest, fees, expenses, charges and additional or contingent
interest on the obligations described):
          (a) the Indebtedness represented by the Notes and the other
Obligations or otherwise arising pursuant to any Fundamental Document in favor
of the Administrative Agent and the Lenders;
          (b) Guaranties permitted pursuant to Section 6.3 hereof;
          (c) Indebtedness in respect of secured purchase money financing
(including Capital Leases) to the extent permitted by Section 6.2(d), including
any Refinancing Indebtedness in respect thereof in an amount not to exceed
$11,000,000 in the aggregate at any time outstanding;
          (d) unsecured liabilities for acquisition of rights or Items of
Product and trade payables incurred in the ordinary course of business and
payable on normal trade terms and not otherwise prohibited hereunder;
          (e) liabilities relating to net or gross profit participations and
other contingent compensation, including royalties, deferments and guild
residuals with respect to the production, distribution, acquisition or other
exploitation of Items of Product;
          (f) Indebtedness in respect of inter-company advances constituting
Investments permitted under Section 6.4(c) or currently in effect or pursuant to
Refinancing Indebtedness relating thereto;
          (g) existing Indebtedness listed on Schedule 6.1 hereto;
          (h) Indebtedness incurred under the First Lien Agreement in an amount
not to exceed the Cap Amount and under any Permitted First Lien Refinancing;
          (i) other Indebtedness provided (i) after giving effect to the
incurrence thereof, the Leverage Ratio on a Pro Forma Basis is less than 7.0:1.0
and (ii) such Indebtedness is unsecured, does not provide for any amortization
or a final maturity date earlier than 6 months subsequent to the later of the
Maturity Date, and does not have covenants or events of default more restrictive
than the covenants or Events of Default contained in this Credit Agreement;
          (j) [Intentionally Omitted];

73

--------------------------------------------------------------------------------

 

          (k) Refinancing Indebtedness of Indebtedness permitted under clause
(a), (c), (g), (i) or (l) of this Section 6.1;
          (l) Indebtedness of any Credit Party to another Credit Party or to any
wholly-owned domestic Subsidiary of the Borrower; provided that (i) all such
Indebtedness in excess of $1,000,000 shall be evidenced by promissory notes and
all such promissory notes shall be subject to a Lien in favor of the
Administrative Agent (for the benefit of itself and the Lenders) and delivered
to the Administrative Agent pursuant to this Credit Agreement and (ii) all such
Indebtedness shall be unsecured and subordinated to the Obligations;
          (m) Indebtedness in respect of netting services, overdraft protections
and otherwise in connection with deposit accounts;
          (n) Indebtedness in respect of workers’ compensation claims,
self-insurance obligations, performance bonds, bid bonds, appeal bonds, surety
bonds, financial assurances and completion guarantees and similar obligations,
in each case provided in the ordinary course of business, including those
incurred to secure health, safety and environmental obligations in the ordinary
course of business;
          (o) (i) Indebtedness of a Credit Party acquired after the Closing Date
or of a corporation merged into or consolidated with the Borrower or any Credit
Party after the Closing Date and Indebtedness assumed in connection with the
acquisition of assets, which Indebtedness in each case, exists at the time of
such acquisition, merger or consolidation and is not created in contemplation of
such event and where such acquisition, merger or consolidation is permitted by
this Credit Agreement and (ii) any Refinancing Indebtedness incurred to
Refinance such Indebtedness permitted by subclause (i), provided that the
aggregate principal amount of such Indebtedness at the time of, and after giving
effect to, such acquisition, merger or consolidation, such assumption or such
incurrence, as applicable (together with Indebtedness (including Refinancing
Indebtedness) then outstanding pursuant to this paragraph (o)), would not exceed
$11,000,000 at any time outstanding;
          (p) Sale and leaseback transactions as permitted under Section 6.8 and
Swap Agreements as permitted under Section 6.17, in each case to the extent
characterized as indebtedness;
          (q) Indebtedness of any Credit Party arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument
inadvertently drawn by such Credit Party in the ordinary course of business
against insufficient funds, so long as such Indebtedness is repaid within five
(5) Business Days; and
          (r) Indebtedness of any Credit Party pursuant to Swap Agreements
entered into as a risk management strategy and not for speculative purposes.
          SECTION 6.2. Limitations on Liens. Incur, create, assume or suffer to
exist any Lien on any of its revenue stream, property or assets, whether now
owned or hereafter acquired, except:

74

--------------------------------------------------------------------------------

 

          (a) the Liens of the Administrative Agent (for the benefit of the
Administrative Agent and the Lenders) under this Credit Agreement, the other
Fundamental Documents and any other document contemplated hereby or thereby;
          (b) existing Liens listed on Schedule 6.2 hereof;
          (c) Liens securing any Indebtedness incurred under Section 6.1(h),
subject, in the case of such Indebtedness, to the terms of the Intercreditor
Agreement;
          (d) purchase money Liens in connection with Capital Expenditures
granted to the vendor or Person financing the acquisition of property, plant or
equipment if: (x) the Lien is limited to the particular assets acquired and
proceeds thereof and (y) the Indebtedness secured by the Lien does not exceed
the acquisition cost of the particular assets acquired;
          (e) Liens pursuant to written security agreements in favor of guilds
which are required pursuant to collective bargaining agreements on terms
consistent with those in existence as of the Closing Date or otherwise
reasonably satisfactory to the Administrative Agent;
          (f) deposits under worker’s compensation, unemployment insurance and
social security and similar laws or to secure statutory obligations or surety,
appeal, performance or other similar bonds (other than completion bonds) or to
secure performance as lessee under leases of real or personal property and other
obligations of a like nature, in each case incurred in the ordinary course of
business;
          (g) Liens customarily granted or incurred in the ordinary course of
business with regard to goods provided or services rendered by laboratories and
production houses, record warehouses, common carriers, landlords, warehousemen,
mechanics and suppliers of materials and equipment or other service providers;
          (h) Liens arising out of attachments, judgments or awards as to which
an appeal or other appropriate proceedings for contest or review are timely
commenced (and as to which foreclosure and other enforcement proceedings shall
not have been commenced (unless fully bonded or otherwise effectively stayed))
and as to which appropriate reserves, if any, have been established in
accordance with GAAP;
          (i) Liens for taxes, assessments or other governmental charges or
levies the validity or amount of which is not yet due or is currently being
contested in good faith by appropriate proceedings pursuant to the terms of
Section 5.13 hereof;
          (j) possessory Liens (other than those of Laboratories and production
houses) which (i) occur in the ordinary course of business, (ii) secure normal
trade debt which is not yet due and payable and (iii) do not secure
Indebtedness;
          (k) Liens arising by virtue of any statutory or common law provision
relating to banker’s Liens, rights of setoff or similar rights with respect to
deposit accounts;
          (l) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar encumbrances on real property which do
not materially detract from the

75

--------------------------------------------------------------------------------

 

value of the property subject thereto or materially interfere with the ordinary
conduct of business of the Borrower or any of its Subsidiaries;
          (m) Liens in favor of licensees to secure their right to enjoy their
licensed rights pursuant to Distribution Agreements entered into in the ordinary
course of business on terms reasonably satisfactory to the Administrative Agent;
          (n) Liens in favor of a co-financier of an Item of Product, provided
that (i) such Lien shall only secure the co-financier’s pro-rata share of any
proceeds of the Item of Product, (ii) such Lien is upon terms reasonably
acceptable to the Administrative Agent; (iii) the co-financier, the Borrower or
relevant Credit Party, the Administrative Agent and the First Lien Agent (prior
to the First Priority Obligations Payment Date) enter into an intercreditor
agreement with respect to the priority of such Lien; and (iv) such Lien shall
not affect the control of the First Priority Agent (prior to the First Priority
Obligations Payment Date and the Administrative Agent thereafter) over such Item
of Product upon the occurrence of an Event of Default;
          (o) Liens to secure purchase money Indebtedness permitted under
Section 6.1(c);
          (p) Liens to secure sale leaseback transactions permitted under
Section 6.8;
          (q) Liens in favor of completion guarantors in connection with Items
of Product to secure the rights of such completion guarantors to recoup their
contributions to negative cost of such Items of Product, provided that such
Liens are in form and substance reasonably satisfactory to the Administrative
Agent;
          (r) Liens to secure Refinancing Indebtedness of secured Indebtedness
in each case permitted to be incurred under Section 6.1 hereof and this
Section 6.2; provided that such Liens shall encumber only those assets that
secured the Indebtedness that is being Refinanced and are of the same rank as
the Liens that secured the Indebtedness that is being Refinanced;
          (s) Liens to secure Indebtedness of acquired assets permitted under
Section 6.1(o), provided that such Liens shall encumber only those assets being
so acquired;
          (t) Liens with respect to operating leases not prohibited under this
Credit Agreement and entered into in the ordinary course of business;
          (u) other Liens securing Indebtedness permitted hereunder in an
aggregate principal amount not to exceed $11,000,000 at any time outstanding;
          (v) Liens on an Item of Product in favor of a licensor of that Item of
Product to secure the licensor’s right to receive from a Credit Party the
licensor’s share of the revenues from the exploitation of that Item of Product
where the Credit Party (i) is acting as the distributor or sales agent thereof,
(ii) has not made an investment in the production or acquisition cost thereof,
(iii) is not guaranteeing the economic performance thereof and (iv) is not
taking the risk of recoupment of substantial amounts of distribution expenses
(including the cost of duplicating home video devices); and

76

--------------------------------------------------------------------------------

 

          (w) Liens in favor of a Slate Financing Permitted Counterparty in a
Permitted Slate Financing.
          SECTION 6.3. Limitation on Guaranties. Incur, create, assume or suffer
to exist any Guaranty (including any obligation as a general partner of a
partnership or as a joint venturer of a joint venture in respect of Indebtedness
of such partnership or joint venture), either directly or indirectly, except:
          (a) performance guarantees in the ordinary course of business under
guild agreements, or to suppliers, licensees or laboratories which are providing
services in connection with the production, acquisition, distribution or
exploitation of any Item of Product by or for a Credit Party;
          (b) the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
          (c) the Guaranties made by the Guarantors pursuant to Article 9
hereof;
          (d) existing Guaranties listed on Schedule 6.3 hereto and any
extensions and renewals thereof on the same terms or on terms no more adverse to
the interests of the Lenders hereunder than the applicable listed Guaranty, or
as otherwise reasonably acceptable to the Administrative Agent;
          (e) Guaranties under the First Lien Agreement and any other document
contemplated thereby; and
          (f) any Guaranty by any Credit Party of the obligations of any other
Credit Party or any wholly-owned Subsidiary of the Borrower, provided that the
obligation being so guaranteed is permitted pursuant to Section 6.1 hereof and
if the Subsidiary is not a wholly-owned domestic subsidiary, such Guaranty is of
performance of services or payments for goods or services where the asset or
value to be created will be beneficially owned by a Credit Party.
          SECTION 6.4. Limitations on Investments. Create, make or incur any
Investment after the date hereof, except:
          (a) the purchase of Cash Equivalents;
          (b) Indebtedness permitted under Section 6.1 and Guaranties permitted
under Section 6.3, in each case, to the extent constituting Investments;
          (c) Investments by any Credit Party in any Subsidiaries which are not
Credit Parties not to exceed $4,000,000 in the aggregate at any time
outstanding;
          (d) Investments (including debt obligations) received (i) in
connection with the bankruptcy or reorganization of, or disputes with or
judgments against, suppliers, customers or other debtors or (ii) in settlement
of delinquent obligations arising in the ordinary course of business;

77

--------------------------------------------------------------------------------

 

          (e) Investments constituting Permitted Business Acquisitions;
          (f) Investments consisting of deposits, prepayments and other credits
to suppliers made in the ordinary course of business of the Credit Parties or
any wholly-owned domestic Subsidiary of the Borrower;
          (g) other Investments, whether in the form of cash or library assets,
in an aggregate amount (or the value of such Investments if not cash) not to
exceed $11,000,000 at any one time outstanding;
          (h) Investments constituting promissory notes or non-cash
consideration received from third parties as a portion of the purchase price for
an asset disposition permitted pursuant to the terms hereof so long as any such
notes or non-cash consideration are, to the extent received in connection with
dispositions of assets that constitute Collateral, pledged to the Administrative
Agent as Collateral hereunder;
          (i) Investments existing on the Closing Date and listed on
Schedule 6.4 hereto;
          (j) Investments in (i) any Credit Party and (ii) non-domestic
wholly-owned Subsidiaries for the purpose of funding the production of Items of
Product the value of which will be beneficially owned by a Credit Party;
          (k) Swap Agreements permitted pursuant to Section 6.17;
          (l) Investments of a Credit Party acquired after the Closing Date or
of a corporation merged into the Borrower or merged into or consolidated with a
Credit Party in accordance with Section 6.6 after the Closing Date to the extent
that such Investments were not made in contemplation of or in connection with
such acquisition, merger or consolidation and were in existence on the date of
such acquisition, merger or consolidation;
          (m) (i) loans and advances to employees or consultants of the Borrower
or any Subsidiary in the ordinary course of business not to exceed $550,000 in
the aggregate at any time outstanding and (ii) advances of payroll payments and
expenses to employees in the ordinary course of business;
          (n) acquisitions by the Borrower of obligations of one or more
officers or other employees of the Borrower or its Subsidiaries in connection
with such officer’s or employee’s acquisition of Equity Interests of the
Borrower, so long as no cash is actually advanced by the Borrower or any of the
Subsidiaries to such officers or employees in connection with the acquisition of
any such obligations;
          (o) Investments in Foreign Production Subsidiaries, provided, that
such Investments are (i) managed by but not beneficially owned by any such
Foreign Production Subsidiary but are rather beneficially owned directly by a
Credit Party and (ii) made solely for the purpose of such Foreign Production
Subsidiary producing Items of Product for delivery to a Credit Party;

78

--------------------------------------------------------------------------------

 

          (p) Investments at any one time outstanding that do not exceed the
aggregate amount of all cash proceeds received from the issuance by the Borrower
of Equity Interests after the Closing Date, other than Specified Equity
Contributions minus the amount of any such Equity Interest proceeds used to make
Restricted Payments pursuant to Section 6.5(d) or otherwise utilized to justify
an exception from a negative covenant contained in this Article 6 (i.e., to fund
a Permitted Business Acquisition); and
          (q) Investments in (a) any co-financed Items of Product or (b) any
Slate Financing Item of Product in connection with a Permitted Slate Financing.
          SECTION 6.5. Restricted Payments. Pay or declare or enter into any
agreement to pay or otherwise become obligated to make any Restricted Payment,
other than:
          (a) dividends or distributions payable solely in additional shares of
common or preferred stock of a Credit Party;
          (b) so long as no Event of Default or Default has occurred and is
continuing or would be created thereby, distributions by the Borrower to the
Parent (i) in an amount necessary to pay all Tax Distributions (provided that
the Borrower shall have certified to the Administrative Agent that all
correspondence and other documents described in Section 5.1(l) have been
delivered to the Administrative Agent and shall have provided a certificate of
either (x) its independent auditor or (y) its Chief Financial Officer and its
Tax Director, confirming the computation thereof), and for any purpose, provided
that (w) the Leverage Ratio is less than 7.0:1.0 (calculated on a Pro Forma
Basis after giving effect to the contemplated dividend), (x) the Liquidity Ratio
of the Borrower and the Guarantors (calculated on a Pro Forma Basis after giving
effect to the contemplated dividend) is at least 1.125:1 for the ensuing four
fiscal quarters, (y) the aggregate amount of all dividends paid under this
clause (ii) does not exceed $55,000,000 and (z) no dividends are paid under this
clause (ii) until the first anniversary of the Closing Date; provided, however,
that such dividends may not be used for (A) payments of principal of
Indebtedness which is subordinate or otherwise junior to the Obligations or (B)
payments of principal of Indebtedness incurred in accordance with the provisions
of Section 6.1(i) hereof;
          (c) so long as no Event of Default has occurred and is continuing, for
any purpose, the payment of dividends with cash proceeds received from the
issuance by the Borrower of Equity Interests after the Closing Date, other than
(i) the Specified Equity Contributions, (ii) the Refinancing IPO Proceeds,
(iii) any Greenshoe Proceeds (iv) to the extent such proceeds have been
otherwise utilized consistent with an exception from a negative covenant
contained in this Article 6 (i.e., as an Investment permitted under
Section 6.4(p) or to fund a Permitted Business Acquisition);
          (d) payments to the Borrower or to any other Credit Party that is
directly or indirectly wholly owned by the Borrower from any other Credit Party;
          (e) payments with respect to intercompany Indebtedness permitted by
Sections 6.1(f) or 6.1(l), intercompany receivables permitted by Sections 6.1(f)
or 6.1(l) or intercompany advances constituting Investments permitted under
Section 6.4(c) hereof;

79

--------------------------------------------------------------------------------

 

          (f) repurchases of Equity Interests in a Credit Party that is directly
or indirectly wholly-owned by the Borrower;
          (g) the repurchase, redemption, defeasance or other acquisition or
retirement for value of unsecured Indebtedness with the net cash proceeds from a
substantially concurrent incurrence of Refinancing Indebtedness relating
thereto;
          (h) repurchases of Equity Interests in the Borrower, or warrants,
puts, options or rights to purchase or otherwise acquire an Equity Interest in
the Borrower from any present or former officer, director or employee of a
Credit Party (other than an officer of the Kelso Group) or the estates or family
members thereof pursuant to an agreement (including, without limitation, an
employment agreement) or plan approved in good faith by the board of directors
of such Credit Party under which such Person purchases or sells or is granted an
option to purchase or sell such Equity Interests, in each fiscal year in an
amount not to exceed $5,000,000; provided that the aggregate unspent amount
permitted to be used in any fiscal year may be rolled over and added to the
amount available under this clause (i) in subsequent fiscal years;
          (i) non-cash repurchases of Equity Interests deemed to occur upon
exercise of stock options if such Equity Interests represent a portion of the
exercise price of such options;
          (j) other Restricted Payments in an aggregate amount not to exceed
$17,000,000 for purposes other than (i) payments of principal of Indebtedness
that is subordinate or otherwise junior to the Obligations or (ii) payments of
principal of Indebtedness incurred in accordance with the provisions of
Section 6.1(i) hereof, provided that no Default or Event of Default shall have
occurred and be continuing or would occur as a result of such Restricted
Payment;
          (k) the payment of dividends or other distributions by any Credit
Party that is a Subsidiary of the Borrower to the owners of its Equity Interests
on a pro rata basis based on their relative ownership interests; and
          (l) So long as no Event of Default has occurred and is continuing,
distributions by the Borrower to the Parent in an amount necessary to pay
corporate overhead expenses and legal, accounting and other professional fees
and expenses of Parent, Public Co. and KRH, without duplication in each case
incurred in connection with any activity not prohibited by this Credit
Agreement, not to exceed $2,200,000 in the aggregate per fiscal year.
          SECTION 6.6. Consolidation, Merger, Recapitalization or Sale of
Assets, etc. Whether in one transaction or a series of transactions, wind up,
liquidate or dissolve its affairs, or enter into any transaction of merger or
consolidation, or engage in any recapitalization, or sell or otherwise dispose
of all or substantially all of its property, stock, Equity Interests or assets
or a sale or disposition of Items of Product representing more than 50% of the
Eligible Library Amount or agree to do or suffer any of the foregoing, except
that (a) any Credit Party or Subsidiary of the Borrower may merge with and into,
or transfer assets to, another Credit Party (including without limitation any
Person which becomes a Guarantor immediately upon the completion of such merger
or transfer; provided, that at the time of such merger or transfer and after
giving effect thereto no Default or Event of Default shall have occurred and be
continuing;

80

--------------------------------------------------------------------------------

 

provided further, that in any such merger or consolidation involving the
Borrower, the Borrower must be the surviving entity), (b) any Credit Party other
than the Borrower may be liquidated in accordance with Section 5.2 hereof,
(c) any sale, transfer, lease or other disposition that would not constitute a
Disposition shall be permitted under this Section 6.6 unless otherwise
specifically prohibited elsewhere in this Article 6, (d) sales, transfers,
leases or other dispositions of assets not otherwise permitted by this
Section 6.6 for aggregate gross proceeds (including non-cash proceeds) not
exceeding $17,000,000 in any fiscal year shall be permitted, provided that
(i) such sale is for fair market value, (ii) to the extent that any such sales,
transfers, leases or other dispositions involves assets in excess of $6,000,000,
at least 75% of the consideration shall be in cash and (iii) prior to the First
Priority Obligations Payment Date, within 360 days of the such Disposition, the
Credit Parties (A) apply the Net Proceeds of such Disposition to the repayment
of First Priority Obligations and/or (B) reinvest the Net Proceeds of such
Disposition, or enter into a binding agreement to acquire with such Net
Proceeds, Productive Assets and/or a business acquisition not prohibited by this
Credit Agreement (including any Permitted Business Acquisition) and from and
after the First Priority Obligations Payment Date, the Net Proceeds thereof are
applied in accordance with Section 2.10(f) hereof, and (e) any merger or
consolidation in connection with a Permitted Business Acquisition; provided
that, with respect to any such merger or consolidation involving a Credit Party,
the Credit Party is the surviving entity.
          SECTION 6.7. Receivables. Sell, discount or otherwise dispose of
notes, accounts receivable or other obligations owing to any Credit Party except
for the purpose of collection in the ordinary course of business.
          SECTION 6.8. Sale and Leaseback.
          (a) Enter into any arrangement with any Person or Persons, whereby in
contemporaneous transactions any Credit Party sells essentially all of its
right, title and interest in an Item of Product and acquires or licenses the
right to distribute or exploit such Item of Product in media and markets
accounting for substantially all the value of such Item of Product, unless such
arrangement does not impair the collateral position of the Administrative Agent
and the Lenders and is evidenced by documentation reasonably acceptable to the
Administrative Agent; provided that a sale and leaseback transaction shall be
permitted if either (x) at any time prior to the First Priority Obligations
Payment Date, such transaction would be permitted under the First Lien
Agreement, as such agreement exists on the date hereof and without giving effect
to any subsequent amendments thereto (unless, in the case of a proposed sale and
leaseback transaction which is substantially identical to a preceding
transaction for which the First Lien Agent was unwilling to deliver a consent
and step-back letter, in which case, such transaction shall be evidenced by
documentation reasonably acceptable to the Administrative Agent), or (y) (1) it
is substantially similar to sale and leaseback transactions previously approved
by legal counsel for the First Lien Agent in the context of previous credit
facilities between the Credit Parties and the First Lien Agent or their
predecessors and (2) the Borrower delivers to the Administrative Agent a
certificate from an Approved Officer certifying that (i) the underlying
documents for such transaction are substantially similar to previously approved
transactions in the same jurisdiction or otherwise setting forth any immaterial
differences, (ii) based upon the advice of its counsel, there is no structural
risk inherent in such transaction (i.e. there is no risk that a bankruptcy or
other adverse credit event with respect to the tax licensor would result in a

81

--------------------------------------------------------------------------------

 

loss or reduction of the applicable Credit Party’s rights in the distribution
rights or income stream from the applicable Item of Product or the loss of the
Administrative Agent’s Lien thereon), (iii) to its knowledge, having made no
independent inquiry, no similarly-situated theatrical motion picture or
television producer or its production lender has suffered a material loss in the
applicable jurisdiction as a result of an adverse credit event of its relevant
tax licensor and (iv) such documents contain a provision requiring notice to the
Administrative Agent of, and permitting the Administrative Agent to cure, if
such breach is curable, any material default by the applicable Credit Party
prior to the exercise of remedies by any other party to such transaction.
          (b) Upon satisfaction of sub-clause (x) set forth in clause (a) above
or receipt of the officer’s certificate described in clause (a) above, as
applicable, the Administrative Agent will issue a customary consent and step
back letter or Lien release (as applicable) in standard form consistent with
past practice unless the Administrative Agent notifies the Borrower in writing
that in the Administrative Agent’s reasonable judgment, a change in the relevant
circumstances has made it unwilling to issue such a letter (including, without
limitation, the occurrence of any circumstances set forth in clauses (a)(ii) or
(iii) above). The Credit Parties shall not incur any Indebtedness in connection
with a sale and leaseback except as permitted pursuant to Section 6.1(i).
          (c) Notwithstanding anything to the contrary in this Section 6.8,
Items of Product which are part of a Permitted Slate Financing shall only be
subject to this Section 6.8 if the Credit Parties have equity exposure with
respect to such Items of Product.
          SECTION 6.9. Places of Business; Change of Name, Jurisdiction. Change
the location of its chief executive office or principal place of business or
change its name or jurisdiction of organization without in each case giving the
Administrative Agent ten (10) Business Days’ prior written notice of such
change, and providing any information reasonably requested by the Administrative
Agent in order to file additional Uniform Commercial Code financing statements
or other relevant security documents.
          SECTION 6.10. Transactions with Affiliates. Enter into any transaction
with any of its Affiliates unless such transaction meets any of the following
criteria: (i) occurs in the ordinary course of business on an arm’s-length
basis, (ii) is described on Schedule 6.10 hereto, (iii) is between or among any
of the Credit Parties or any wholly-owned Subsidiary of the Borrower,
(iv) subject to the terms of Section 6.5 and not otherwise inconsistent with the
terms hereof, involves any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved by the
board of directors (or other governing body) of the Borrower, (v) constitutes
loans or advances to employees or consultants of any Credit Party in accordance
with Section 6.4(n), (vi) involves the payment of reasonable fees and
indemnities to directors, officers, consultants and employees of the Borrower
and the Subsidiaries in the ordinary course of business and consistent with
industry practice, (vii) consists of (A) any employment agreements entered into
by any Credit Party in the ordinary course of business, and (B) any employee
compensation, benefit plan or arrangement, any health, disability or similar
insurance plan which covers employees, and any reasonable employment contract
and transactions pursuant thereto, (viii) constitutes dividends, redemptions and
repurchases permitted

82

--------------------------------------------------------------------------------

 

under Section 6.5, (ix) [intentionally omitted], (x) is a transaction in respect
of which the Borrower delivers to the Administrative Agent (for delivery to the
Lenders) a letter addressed to the board of directors of the Borrower from an
accounting, appraisal or investment banking firm, in each case of nationally
recognized standing that is (A) in the good faith determination of the Borrower
qualified to render such letter and (B) reasonably satisfactory to the
Administrative Agent, which letter states that such transaction is on terms that
are no less favorable to the applicable Credit Party, than would be obtained in
a comparable arm’s-length transaction with a Person that is not an Affiliate;
provided, that such transaction is not otherwise prohibited under the terms of
this Article VI, (xi) involves any purchase of or contributions to, the equity
capital of the Borrower by the Parent and (xii) involves the consummation of the
Qualified IPO and/or the Reorganization or the performance of any obligations
under the Reorganization Agreement (as described in the Registration Statement),
the Parent LLC Agreement, the Director Designation Agreement (as described in
the Registration Statement), the Registration Rights Agreement (as described in
the Registration Statement) or the KRH Value Units (as described in the
Registration Statement).
          SECTION 6.11. Business Activities. Engage in any business activities
other than activities in which Hallmark Entertainment, LLC engaged on
January 12, 2006, the Borrower and/or one of its Subsidiaries is currently
engaged or any business or business activities incidental or related thereto, or
any business activity that is reasonably similar thereto or a reasonable
extension, development or expansion thereof or ancillary thereto (including, but
not limited to, activities relating to the production, development, distribution
or exploitation of Items of Product and Slate Financings), but specifically
excluding the production, development or investment in theatrical motion
pictures; provided, however, that if an Item of Product developed for television
is thereafter released theatrically, such release shall not be deemed a
violation of this Section 6.11; provided, further, that Borrower shall not be
allowed to engage in theatrical distribution of Items of Product where it is
either advancing or taking the economic risk of recoupment of print and
advertising expenses, except with respect to limited theatrical releases
necessary to qualify for sale and leaseback or similar financial incentives for
which the aggregate unrecouped exposure for theatrical distribution expenses
does not exceed $2,500,000 for all such releases. In amplification and not in
limitation of the foregoing, the Credit Parties (x) may act as sales agent
and/or distributor for an Item of Product owned by other parties provided
(i) the Credit Parties do not make an investment in the Items of Product other
than as permitted with regard to a Permitted Slate Financing Item of Product and
do not have an economic risk for the recoupment of distribution expenses or
guaranty any specific level of economic performance of the applicable Slate
Financing Item of Product and (y) may engage in the acquisition, production and
exploitation of Items of Product in Permitted Slate Financings.
          SECTION 6.12. Fiscal Year End. Change its fiscal year end to other
than December 31, for any year.
          SECTION 6.13. [Intentionally Omitted.]
          SECTION 6.14. [Intentionally Omitted.]
          SECTION 6.15. [Intentionally Omitted.]

83

--------------------------------------------------------------------------------

 

          SECTION 6.16. [Intentionally Omitted.]
          SECTION 6.17. Swap Agreements. Enter into any Swap Agreement, except
Swap Agreements entered into in order to (a) hedge or mitigate risks to which
any Credit Party has actual exposure, including currency exchange risks or
(b) effectively cap, collar or exchange interest rates on Material Agreements
(from fixed to floating rates, from one floating rate to another floating rate
or otherwise, including foreign currency hedging exchanges) with respect to any
interest-bearing liability or investment of a Credit Party.
          SECTION 6.18. Modification of Indebtedness, Material Agreements. Make
or permit to be made any modification to the terms of any Material Agreement
without the prior consent of the Administrative Agent if the modification of
such Material Agreement would be materially adverse to the Lenders; provided,
that without limiting any of the other covenants or agreements contained in this
Credit Agreement modifications to the First Lien Agreement shall be permitted to
the extent permitted under the Intercreditor Agreement.
          SECTION 6.19. No Negative Pledge. Enter into any agreement
(i) prohibiting the creation or assumption of any Lien in favor of (a) the
Administrative Agent (for the benefit of itself and the Lenders) or (b) an
administrative agent or collateral agent (including any successor to the
Administrative Agent) under a potential refinancing of the Facility, upon the
properties or assets of any Credit Party, whether now owned or hereafter
acquired, or (ii) requiring an obligation to be secured as a result of any Lien
being granted to the Administrative Agent (for the benefit of itself and the
Lenders), except this Credit Agreement and the other Fundamental Documents and
the First Lien Agreement; provided, however, that this provision shall not apply
to any agreement executed pursuant to Section 6.2(e) hereof to the extent of
such assets and proceeds thereof.
          SECTION 6.20. [Intentionally Omitted.]
          SECTION 6.21. Coverage Ratio. Subject to adjustments in connection
with Specified Equity Contributions as specified in Section 1.2 hereof, permit
the ratio (the “Coverage Ratio”), of (i) the Eligible Library Amount (without
any advance rate discount) plus, the Adjusted Receivables Amount, plus to the
extent contributed, Specified Equity Contributions (but only to the extent such
contributions are held by the First Lien Agent as cash collateral (or after the
First Priority Obligations Payment Date, the Administrative Agent), which may be
released if no Event of Default is continuing and the Borrower is in compliance
with such test, without taking credit for the amount of cash collateral to be
released) to (ii) the aggregate amount of secured Indebtedness to be less than
1:1.
          SECTION 6.22. Additional Limitation on Production and Acquisition of
Product. (a) Produce or acquire any Item of Product that is a miniseries after
the Closing Date with a Production Exposure at any time in excess of 40% of the
Budgeted Negative Cost or (b) cause the total Production Exposure of the
Borrower at any time for all Items of Product (other than miniseries) to exceed
$40,000,000 in the aggregate, in the case of each of (a) and (b), without the
prior written consent of the Required Lenders.
          SECTION 6.23. Activities of Parent and Public Co.

84

--------------------------------------------------------------------------------

 

          (a) Permit the Parent to (i) own assets other than the membership
interests of the Borrower, (ii) engage in any business activities other than
such ownership or (iii) incur any lien upon its ownership of membership
interests of the Borrower.
          (b) Permit Public Co. to incur any lien upon its ownership of the
membership interests of the Parent.
          (c) Permit Public Co. to engage in any business activities which are
currently engaged in by the Borrower or any of its Subsidiaries or which may be
engaged in by the Borrower and its Subsidiaries pursuant to Section 6.11 hereof.
          SECTION 6.24. Certification of Equity Interests. Permit its Equity
Interests to become certificated without simultaneously (unless remitted to the
First Lien Agent) delivering to the Administrative Agent the definitive
instruments representing all its Equity Interests, accompanied by undated stock
powers, duly endorsed or executed in blank by the appropriate Pledgor, and such
other instruments or documents as the Administrative Agent or its counsel shall
reasonably request.
7. EVENTS OF DEFAULT
          In the case of the happening and during the continuance of any of the
following events (herein called “Events of Default”):
     (a) any representation, warranty or certification made by a Credit Party in
this Credit Agreement or any other Fundamental Document to which it is a party
or in any report, financial statement, certificate or other document furnished
to the Administrative Agent or any Lender pursuant to this Credit Agreement or
any other Fundamental Document, shall prove to have been false or misleading in
any material respect when made or delivered;
     (b) default shall be made in the payment of principal of the Loans
hereunder as and when due and payable, whether by reason of maturity, mandatory
prepayment, acceleration or otherwise;
     (c) default shall be made in the payment of interest on the Loans hereunder
or any other monetary Obligations, when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed for payment thereof
or otherwise and such default shall continue unremedied for three (3) Business
Days;
     (d) default shall be made in the due observance or performance of any
covenant, condition or agreement contained in Section 5.4 or, subject to
Section 1.2 hereof, Article 6 of this Credit Agreement;
     (e) default shall be made in the due observance or performance of any
covenant, condition or agreement contained in Section 5.1 (a), (b) or (e) or
Sections 5.20 of this Credit Agreement and such default shall continue
unremedied for ten (10) days after date on which such performance is required
under such section;

85

--------------------------------------------------------------------------------

 

     (f) default shall be made by any Credit Party in the due observance or
performance of any other covenant, condition or agreement to be observed or
performed pursuant to the terms of this Credit Agreement or any other
Fundamental Document, and such default shall continue unremedied for thirty
(30) days after the applicable Credit Party receives written notice or obtains
knowledge of such occurrence;
     (g) default shall be made with respect to any payment of any Indebtedness
of any Credit Party (excluding Indebtedness pursuant to Section 6.1(f) or
Section 6.1(l)) in excess of $17,000,000 in the aggregate (other than the
Obligations) of principal or interest on such Indebtedness when due, or in the
performance of any other obligation incurred in connection with any such
Indebtedness if the effect of such non-payment default is to accelerate the
maturity of such Indebtedness or (other than the First Priority Obligations) to
permit the holder thereof to cause such Indebtedness to become due prior to its
stated maturity and such payment or non-payment default shall not be remedied,
cured, waived or consented to within the period of grace with respect thereto;
     (h) any Credit Party shall generally not pay its debts as they become due
or shall admit in writing its inability to pay its debts, or shall make a
general assignment for the benefit of creditors; any Credit Party shall commence
any case, proceeding or other action seeking to have an order for relief entered
on its behalf as a debtor or to adjudicate it a bankrupt or insolvent or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property or shall file an answer or other pleading in
any such case, proceeding or other action admitting the material allegations of
any petition, complaint or similar pleading filed against it or consenting to
the relief sought therein; any Credit Party shall take any action to authorize,
or in contemplation of, any of the foregoing;
     (i) any involuntary case, proceeding or other action against any Credit
Party shall be commenced seeking to have an order for relief entered against it
as debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding or other action
(i) results in the entry of any order for relief against it, or (ii) shall
remain undismissed for a period of sixty (60) days;
     (j) any final judgment(s) for the payment of money in the case of any
Credit Party, in excess of $17,000,000 in the aggregate shall be rendered
against any Credit Party (to the extent not adequately covered by insurance
issued by a solvent and unaffiliated insurance company which has acknowledged
such coverage in writing) and within sixty (60) days from the entry of such
judgment shall not have been discharged or stayed pending appeal or shall not
have been discharged or bonded in full within sixty (60) days from the entry of
a final order of affirmance on appeal;

86

--------------------------------------------------------------------------------

 

     (k) (i) failure by any Credit Party or ERISA Affiliate to make any
contributions required to be made to a Plan subject to Title IV of ERISA or
Multiemployer Plan, (ii) any accumulated funding deficiency (within the meaning
of Section 4971 of the Code) shall exist with respect to any Plan (whether or
not waived), (iii) the present value of all benefits under all Plans subject to
Title IV of ERISA (based on those assumptions used to fund such Plans) exceeds,
in the aggregate, as of the last annual valuation date applicable thereto, the
actuarial value of the assets of such Plans allocable to such benefits, (iv) any
Credit Party or ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred withdrawal liability to such
Multiemployer Plan, or that a Multiemployer Plan is being terminated, (v) a
Reportable Event with respect to a Plan shall have occurred which is reasonably
likely to result in a termination of such Plan for purposes of ERISA, (vi) the
termination of a Plan, or the filing of a notice of intent to terminate a Plan
under section 4041(c) of ERISA, (vii) the institution of proceedings to
terminate, or the appointment of a trustee with respect to, a Plan by the PBGC,
(viii) any other event or condition which could constitute grounds under section
4042(a) of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or (ix) the imposition of a Lien pursuant to section 412
of the Code or section 302 of ERISA as to any Credit Party or ERISA Affiliate;
provided that with respect to items (i) through (ix), only if such event or
condition would reasonably be expected to result in a Material Adverse Effect;
     (l) this Credit Agreement, the Copyright Security Agreement, any Copyright
Security Agreement Supplement, any Trademark Security Agreement, any
Pledgeholder Agreement, or any Account Control Agreement (each a “Security
Document”) shall, for any reason other than the action or inaction of the
Administrative Agent or any Lender, with respect to Collateral having an
aggregate value in excess of $250,000, not be or shall cease to be in full force
and effect or shall be declared null and void or any of the Security Documents
shall not give or shall cease to give the Administrative Agent the Liens,
rights, powers and privileges purported to be created thereby with respect to
Collateral having an aggregate value in excess of $250,000 in favor of the
Administrative Agent for the benefit of the Administrative Agent and the
Lenders, superior to and prior to the rights of all third Persons and subject to
no other Liens (other than Permitted Encumbrances, excluding those under
Section 6.2(c)), or the validity or enforceability of the Guaranties under
Article 9 hereof or the Liens granted, to be granted, or purported to be
granted, by any of the Fundamental Documents shall be contested by any Credit
Party or any of their respective Affiliates;
     (m) the validity or enforceability of the Guaranties under Article 9 hereof
or the Liens granted, to be granted, or purported to be granted, by any of the
Fundamental Documents shall be contested by any Credit Party or any of their
respective Affiliates; or
     (n) a Change in Control shall occur;
then, in every such event and at any time thereafter during the continuance of
such event, the Administrative Agent may, or if directed by the Required
Lenders, shall, take any or all of the following actions, at the same or
different times: (x) terminate forthwith the Commitments, and/or (y) declare the
principal of and the interest on the Loans and the Notes and all other

87

--------------------------------------------------------------------------------

 

amounts payable hereunder or thereunder to be forthwith due and payable,
whereupon the same shall become and be forthwith due and payable, without
presentment, demand, protest, notice of acceleration or other notice of any
kind, all of which are hereby expressly waived, anything in this Credit
Agreement or in the Notes to the contrary notwithstanding. If an Event of
Default specified in paragraph (h) or (i) above shall have occurred, the
principal of, and interest on, the Loans and the Notes and all other amounts
payable hereunder and thereunder shall automatically become due and payable
without presentment, demand, protest, or other notice of any kind, all of which
are hereby expressly waived, anything in this Credit Agreement or the Notes to
the contrary notwithstanding. Such remedies shall be in addition to any other
remedy available to the Administrative Agent or the Lenders pursuant to
Applicable Law or otherwise.
8. GRANT OF SECURITY INTEREST; REMEDIES
          SECTION 8.1. Security Interests. The Borrower, as security for the due
and punctual payment of the Obligations (including interest accruing on and
after the filing of any petition in bankruptcy or of reorganization of the
Borrower whether or not post filing interest is allowed in such proceeding), and
each of the Guarantors, as security for its obligations under Article 9 hereof,
hereby mortgage, pledge, collaterally assign and deliver to the Administrative
Agent (for the benefit of the Administrative Agent, the Lenders) and grant to
the Administrative Agent (for the benefit of the Administrative Agent and the
Lenders) a security interest in the Collateral (subject only to Specified
Permitted Encumbrances).
          SECTION 8.2. Use of Collateral. So long as no Event of Default shall
have occurred and be continuing, and subject to the various provisions of this
Credit Agreement and the other Fundamental Documents, a Credit Party may use its
Collateral (including amounts held in the Collection Accounts or “Collection
Accounts” maintained under the First Lien Agreement) in any lawful manner except
as otherwise provided hereunder or thereunder.
          SECTION 8.3. Collection Accounts. From and after the First Priority
Obligations Payment Date:
          (a) The Credit Parties will maintain or establish one or more
collection bank accounts (each, a “Collection Account”) maintained at an office
of (i) prior to the First Priority Obligations Payment Date, the First Lien
Agent and (ii) thereafter, the Administrative Agent, and will direct, all
Persons who become licensees, buyers or account debtors under receivables with
respect to any Item of Product included in the Collateral to make payments under
or in connection with the license agreements, sales agreements or receivables
directly to the Collection Account. Upon agreement between the Administrative
Agent and the Credit Parties, the Collection Account maintained by the First
Lien Agent or the Administrative Agent, as applicable, may also serve as the
Cash Collateral Account; provided, that such Collection Account is in the name
of the Administrative Agent (for the benefit of itself and the Lenders) and is
under the control (within the meaning of Section 9-104 of the UCC) of the
Administrative Agent.
          (b) The Credit Parties will execute such documentation as may be
reasonably required by the Administrative Agent in order to effectuate the
provisions of this Section 8.3.

88

--------------------------------------------------------------------------------

 

          (c) In the event a Credit Party receives payment from any Person or
proceeds under a letter of credit or otherwise, which payment should have been
remitted directly to the Collection Account, such Credit Party shall promptly
remit such payment or proceeds to the appropriate Collection Account to be
applied in accordance with the terms of this Credit Agreement.
          SECTION 8.4. Credit Parties to Hold in Trust. From and after the First
Priority Obligations Payment Date, upon the occurrence and during the
continuance of an Event of Default, each of the Credit Parties will, upon
receipt by it of any revenue, income, profits or other sums in which a security
interest is granted by this Article 8, payable pursuant to any agreement or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the sum or instrument in
trust for the Administrative Agent (for the benefit of itself and the Lenders),
segregate such sum or instrument from their own assets and forthwith, without
any notice, demand or other action whatsoever (all notices, demands, or other
actions on the part of the Administrative Agent or the Lenders being expressly
waived), endorse, transfer and deliver any such sums or instruments or both, to
the Administrative Agent to be applied to the repayment of the Obligations in
accordance with the provisions of Section 8.7 hereof.
          SECTION 8.5. Collections, etc. Subject to the provisions of the
Intercreditor Agreement, upon the occurrence and during the continuance of an
Event of Default and written notice to the Credit Parties, the Administrative
Agent may, in its sole discretion, in its name (on behalf of the Administrative
Agent and the Lenders) or in the name of any Credit Party or otherwise, demand,
sue for, collect or receive any money or property at any time payable or
receivable on account of or in exchange for, or make any compromise or
settlement deemed desirable with respect to, any of the Collateral, but shall be
under no obligation to do so, or the Administrative Agent may extend the time of
payment, arrange for payment in installments, or otherwise modify the terms of,
or release, any of the Collateral, without thereby incurring responsibility to,
or discharging or otherwise affecting any liability of, any Credit Party. The
Administrative Agent will not be required to take any steps to preserve any
rights against prior parties to the Collateral. Upon the occurrence and during
the continuance of an Event of Default, if any Credit Party fails to make any
payment or take any action required hereunder, the Administrative Agent may make
such payments and take all such actions as the Administrative Agent reasonably
deems necessary to protect the Administrative Agent’s (on behalf of the
Administrative Agent and the Lenders) security interests in the Collateral
and/or the value thereof, and the Administrative Agent is hereby authorized
(without limiting the general nature of the authority hereinabove conferred) to
pay, purchase, contest or compromise any Liens that in the judgment of the
Administrative Agent appear to be equal to, prior to or superior to the security
interests of the Administrative Agent (on behalf of the Administrative Agent and
the Lenders) in the Collateral (other than Permitted Encumbrances) and any Liens
not expressly permitted by this Credit Agreement.
          SECTION 8.6. Possession, Sale of Collateral, etc. Upon the occurrence
and during the continuance of an Event of Default, subject to the provisions of
the Intercreditor Agreement, the Administrative Agent and the Lenders may, upon
reasonable notice to the applicable Credit Party, enter upon the premises of any
Credit Party or wherever the Collateral may be, and take possession of the
Collateral, and may demand and receive such possession

89

--------------------------------------------------------------------------------

 

from any Person who has possession thereof, and the Administrative Agent and the
Lenders may take such measures as they deem necessary or proper for the care or
protection thereof, including the right to remove all or any portion of the
Collateral, and with or without taking such possession may sell or cause to be
sold, whenever the Administrative Agent and the Lenders shall decide, in one or
more sales or parcels, at such prices as the Administrative Agent and the
Lenders may deem appropriate, and for cash or on credit or for future delivery,
without assumption of any credit risk, all or any portion of the Collateral, at
any broker’s board or at public or private sale, without demand of performance
but with 10 days’ prior written notice to the Credit Parties of the time and
place of any such public sale or sales (which notice the Credit Parties hereby
agree is reasonable) and with such other notices as may be required by
Applicable Law and cannot be waived, and none of the Administrative Agent and
the Lenders shall have any liability should the proceeds resulting from a
private sale be less than the proceeds realizable from a public sale, and the
Administrative Agent, on behalf of itself, the Lenders or any other Person may
be the purchaser of all or any portion of the Collateral so sold and thereafter
hold the same absolutely, free (to the fullest extent permitted by Applicable
Law) from any claim or right of whatever kind, including any equity of
redemption, of any Credit Party, any such demand, notice, claim, right or equity
being hereby expressly waived and released. At any sale or sales made pursuant
to this Article 8, the Administrative Agent, on behalf of itself and the Lenders
may bid for or purchase, free (to the fullest extent permitted by Applicable
Law) from any claim or right of whatever kind, including any equity of
redemption, of any Credit Party, any such demand, notice, claim, right or equity
being hereby expressly waived and released, any part of or all of the Collateral
offered for sale, and may make any payment on account thereof by using any claim
for moneys then due and payable to the Administrative Agent and Lenders by any
Credit Party hereunder as a credit against the purchase price. The
Administrative Agent, on behalf of itself and the Lenders shall in any such sale
make no representations or warranties with respect to the Collateral or any part
thereof, and none of the Administrative Agent and the Lenders shall be
chargeable with any of the obligations or liabilities of any Credit Party. Each
Credit Party hereby agrees (i) that it will indemnify and hold the
Administrative Agent and the Lenders harmless from and against any and all
claims with respect to the Collateral asserted before the taking of actual
possession or control of the relevant Collateral by the Administrative Agent
pursuant to this Article 8, or arising out of any act of, or omission to act on
the part of, any Person (other than the Administrative Agent or Lenders) prior
to such taking of actual possession or control by the Administrative Agent
(whether asserted before or after such taking of possession or control), or
arising out of any act on the part of any Credit Party or its Affiliates or
agents before or after the commencement of such actual possession or control by
the Administrative Agent, but excluding therefrom all claims with respect to the
Collateral resulting from (x) the gross negligence or willful misconduct of any
of the Administrative Agent or the Lenders (y) any claims with respect to the
Collateral asserted against an indemnified party by a Credit Party in which such
Credit Party is the prevailing party, or (z) claims of parties under the First
Lien Agreement; and (ii) none of the Administrative Agent and the Lenders shall
have any liability or obligation to any Credit Party arising out of any such
claim except for acts of willful misconduct or gross negligence. Subject only to
the lawful rights of third parties, any laboratory which has possession of any
of the Collateral is hereby constituted and appointed by the Credit Parties as
pledgeholder for the Administrative Agent, on behalf of itself, and the Lenders
and, upon the occurrence and during the continuation of an Event of Default,
each such pledgeholder is hereby authorized (to the fullest extent permitted by
Applicable Law) to sell all or any portion

90

--------------------------------------------------------------------------------

 

of the Collateral upon the order and direction of the Administrative Agent, and
each Credit Party hereby waives any and all claims, for damages or otherwise,
for any action taken by such pledgeholder in accordance with the terms of the
UCC not otherwise waived hereunder. In any action hereunder, the Administrative
Agent shall be entitled if permitted by Applicable Law to the appointment of a
receiver without notice, to take possession of all or any portion of the
Collateral and to exercise such powers as the court shall confer upon the
receiver. Notwithstanding the foregoing, upon the occurrence and during the
continuation of an Event of Default, the Administrative Agent and the Lenders
shall be entitled to apply, without prior notice to any of the Credit Parties,
any cash or cash items constituting Collateral in the possession of the
Administrative Agent, and the Lenders to payment of the Obligations.
          SECTION 8.7. Application of Proceeds after Event of Default. Subject
to the provisions of the Intercreditor Agreement, upon the occurrence and during
the continuance of an Event of Default, the balances in the Clearing Account,
the Collection Account(s), the Cash Collateral Account(s) or in any other
account of any Credit Party with a Lender, all other income on the Collateral,
and all proceeds from any sale of the Collateral pursuant hereto shall be
applied first toward payment of the reasonable out-of-pocket costs and expenses
paid or incurred by the Administrative Agent in enforcing this Credit Agreement,
in realizing on or protecting any Collateral and in enforcing or collecting any
Obligations or any Guaranty thereof, including, without limitation, court costs
and the reasonable attorney’s fees and expenses incurred by the Administrative
Agent, and then to the payment in full of the Obligations in accordance with
Section 12.2 hereof; provided, however, that, the Administrative Agent may in
its discretion apply funds comprising the Collateral to pay the cost (i) of
completing any Item of Product owned in whole or in part by any Credit Party in
any stage of production, and (ii) of making delivery to the distributors of such
Item of Product. Any amounts remaining after such payment in full shall be
remitted to the appropriate Credit Party or as a court of competent jurisdiction
may otherwise direct.
          SECTION 8.8. Power of Attorney. Upon the occurrence and during the
continuance of an Event of Default which is not waived in writing by the
Required Lenders, (a) each Credit Party does hereby irrevocably make, constitute
and appoint the Administrative Agent or any of its officers or designees its
true and lawful attorney-in-fact with full power in the name of the
Administrative Agent, such other Person or such Credit Party to (in each case,
subject to the provisions of the Intercreditor Agreement) receive, open and
dispose of all mail addressed to any Credit Party, endorse any notes, checks,
drafts, money orders or other evidences of payment relating to the Collateral
that may come into the possession of the Administrative Agent with full power
and right to cause the mail of such Persons to be transferred to the
Administrative Agent’s own offices or otherwise, and to do any and all other
acts necessary or proper to carry out the intent of this Credit Agreement and
the grant of the security interests hereunder and under the Fundamental
Documents, and each Credit Party hereby ratifies and confirms all that the
Administrative Agent or its substitutes shall properly do by virtue hereof; and
(b) each Credit Party does hereby further irrevocably make, constitute and
appoint the Administrative Agent or any of its officers or designees its true
and lawful attorney-in-fact in the name of the Administrative Agent or any
Credit Party (in each case, subject to the provisions of the Intercreditor
Agreement) (i) to enforce all of such Credit Party’s rights under and pursuant
to all agreements with respect to the Collateral, all for the sole benefit of
the Administrative Agent

91

--------------------------------------------------------------------------------

 

for the benefit of the Administrative Agent and the Lenders as contemplated
hereby and under the other Fundamental Documents and to enter into such other
agreements as may be necessary or appropriate in the judgment of the
Administrative Agent to complete the production, distribution or exploitation of
any Item of Product which is included in the Collateral, (ii) to enter into and
perform such agreements as may be necessary in order to carry out the terms,
covenants and conditions of the Fundamental Documents that are required to be
observed or performed by such Credit Party, (iii) to execute such other and
further mortgages, pledges and assignments of the Collateral, and related
instruments or agreements, as the Administrative Agent may reasonably require
for the purpose of perfecting, protecting, maintaining or enforcing the security
interests granted to the Administrative Agent for the benefit of the
Administrative Agent and the Lenders hereunder and under the other Fundamental
Documents, and (iv) to do any and all other things necessary or proper to carry
out the intention of this Credit Agreement and the grant of the security
interests hereunder and under the other Fundamental Documents. Each of the
Credit Parties hereby ratifies and confirms in advance all that the
Administrative Agent as such attorney-in-fact or its substitutes shall properly
do by virtue of this power of attorney.
          SECTION 8.9. Financing Statements, Direct Payments. Each Credit Party
hereby authorizes the Administrative Agent to file UCC financing statements and
any amendments thereto or continuations thereof, the Copyright Security
Agreement, any Copyright Security Agreement Supplement, any Trademark Security
Agreement and any other appropriate security documents or instruments and to
give any notices necessary or desirable to perfect the Lien of the
Administrative Agent for the benefit of itself and the Lenders in the
Collateral, in all cases without the signature of any Credit Party or to execute
such items as attorney-in-fact for any Credit Party; provided, that the
Administrative Agent shall provide copies of any such documents or instruments
to the Borrower. Each Credit Party authorizes the Administrative Agent to use
the collateral description “all assets” in any such UCC financing statements.
Each Credit Party further authorizes the Administrative Agent to notify, at the
time from and after the First Priority Obligations Payment Date that any Event
of Default shall have occurred and be continuing, any account debtors that all
sums payable to such Credit Party relating to the Collateral shall be paid
directly to the Administrative Agent.
          SECTION 8.10. Further Assurances. Upon the request of the
Administrative Agent, each Credit Party hereby agrees to duly and promptly
execute and deliver, or cause to be duly executed and delivered, at the cost and
expense of the Credit Parties, such further instruments as may be necessary or
proper, in the reasonable judgment of the Administrative Agent, to carry out the
provisions and purposes of this Article 8 or to perfect and preserve the Liens
of the Administrative Agent (for the benefit of itself and the Lenders)
hereunder and under the Fundamental Documents in the Collateral or any portion
thereof.
          SECTION 8.11. Termination and Release. The security interests granted
under this Article 8 shall terminate when all the Obligations have been fully
and indefeasibly paid and performed. Upon request by the Credit Parties (and at
the sole expense of the Credit Parties) after such termination, the
Administrative Agent will promptly take all reasonable action and do all things
reasonably necessary, including executing UCC termination statements,
Pledgeholder Agreement terminations, termination letters to account debtors and
copyright and trademark releases, to terminate the security interest granted to
it (for the benefit of the Administrative

92

--------------------------------------------------------------------------------

 

Agent and the Lenders) hereunder, provided that the Administrative Agent shall
only be required to deliver such documents to the Borrower or applicable Credit
Party and shall have no obligation to file or record any such document. In
addition, the Administrative Agent shall take steps reasonably requested by the
Borrower to evidence the release of any Guarantor from its obligations under
Article 9 hereof in the event that such Guarantor ceases to be a Credit Party in
connection with a transaction permitted by the terms of this Credit Agreement.
          SECTION 8.12. Remedies Not Exclusive. The remedies conferred upon or
reserved to the Administrative Agent in this Article 8 are intended to be in
addition to, and not in limitation of, any other remedy or remedies available to
the Administrative Agent. Without limiting the generality of the foregoing, the
Administrative Agent and the Lenders shall have all rights and remedies of a
secured creditor under Article 9 of the UCC and under any other Applicable Law.
          SECTION 8.13. Quiet Enjoyment. The Administrative Agent and the
Lenders acknowledge and agree that their security interest hereunder is subject
to the rights of Quiet Enjoyment (as defined below) of parties (which are not
Affiliates of any Credit Party) to Distribution Agreements, whether existing on
the date hereof or hereafter executed. For the purpose hereof, “Quiet Enjoyment”
shall mean in connection with the rights of a licensee (which is not an
Affiliate of any Credit Party) under a Distribution Agreement, the
Administrative Agent and the Lenders’ agreement that their rights under this
Credit Agreement and the other Fundamental Documents and in the Collateral are
subject to the rights of such licensee to distribute, exhibit and/or to exploit
the Item of Product licensed to them under such Distribution Agreement, and to
receive prints or tapes and other delivery items or have access to preprint
material or master tapes and other items to which they are entitled in
connection therewith and that even if the Lenders shall become the owner of the
Collateral in case of an Event of Default, the Lenders’ ownership rights shall
be subject to the rights of said parties under such agreement; provided,
however, that such licensee shall not be in default under the relevant
Distribution Agreement. The Administrative Agent agrees that, upon the
reasonable request of a Credit Party, it will provide written confirmation (in
form reasonably acceptable to the Administrative Agent) of such rights of Quiet
Enjoyment to licensees under the Distribution Agreements. None of the foregoing
constitutes an agreement by the Administrative Agent or the Lenders to the
granting of any security interest to any Person under any Distribution
Agreement, except as otherwise permitted pursuant to Section 6.2.
          SECTION 8.14. Continuation and Reinstatement. Each Credit Party
further agrees that the security interest granted hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment or any
part thereof of any Obligation is rescinded or must otherwise be restored by the
Administrative Agent or the Lenders upon the bankruptcy or reorganization of any
Credit Party or otherwise.
9. GUARANTY
          SECTION 9.1. Guaranty.
          (a) Each Guarantor unconditionally and irrevocably guarantees to the
Administrative Agent and the Lenders the due and punctual payment by, and
performance of,

93

--------------------------------------------------------------------------------

 

the Obligations (including interest accruing on and after the filing of any
petition in bankruptcy or of reorganization of the obligor whether or not post
filing interest is allowed in such proceeding). Each Guarantor further agrees
that the Obligations may be extended or renewed, in whole or in part, without
notice or further assent from it (except as may be otherwise required herein),
and it will remain bound upon this Guaranty notwithstanding any extension or
renewal of any Obligation.
          (b) Each Guarantor waives presentation to, demand for payment from and
protest to, as the case may be, any Credit Party or any other guarantor of any
of the Obligations, and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of each
Guarantor hereunder shall not be affected by (i) the failure of the
Administrative Agent or the Lenders to assert any claim or demand or to enforce
any right or remedy against the Borrower or any Guarantor or any other guarantor
under the provisions of this Credit Agreement or any other agreement or
otherwise; (ii) any extension or renewal of any provision hereof or thereof;
(iii) the failure of the Administrative Agent or the Lenders to obtain the
consent the Guarantor with respect to any rescission, waiver, compromise,
acceleration, amendment or modification of any of the terms or provisions of
this Credit Agreement, the Notes or of any other agreement; (iv) the release,
exchange, waiver or foreclosure of any security held by the Administrative Agent
for the Obligations or any of them; (v) the failure of the Administrative Agent
or the Lenders to exercise any right or remedy against any other Guarantor or
any other guarantor of the Obligations; or (vi) the release or substitution of
any Guarantor or any other guarantor of the Obligations.
          (c) Each Guarantor further agrees that this Guaranty constitutes a
guaranty of performance and of payment when due and not just of collection, and
waives any right to require that any resort be had by the Administrative Agent
or any Lender to any security held for payment of the Obligations or to any
balance of any deposit, account or credit on the books of the Administrative
Agent or any Lender in favor of the Borrower, or any Guarantor, or to any other
Person.
          (d) Each Guarantor hereby expressly assumes all responsibilities to
remain informed of the financial condition of the Borrower, the Guarantors and
any other guarantors of the Obligations and any circumstances affecting the
Collateral or the Pledged Securities or the ability of the Borrower to perform
under this Credit Agreement.
          (e) Each Guarantor’s obligations under the Guaranty shall not be
affected by the genuineness, validity, regularity or enforceability of the
Obligations, the Notes or any other instrument evidencing any Obligations, or by
the existence, validity, enforceability, perfection, or extent of any collateral
therefor or by any other circumstance relating to the Obligations which might
otherwise constitute a defense to this Guaranty. The Administrative Agent and
the Lenders make no representation or warranty with respect to any such
circumstances and have no duty or responsibility whatsoever to any Guarantor in
respect to the management and maintenance of the Obligations or any collateral
security for the Obligations.
          SECTION 9.2. No Impairment of Guaranty, etc. The obligations of each
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (except payment and performance in full
of the Obligations), including, without

94

--------------------------------------------------------------------------------

 

limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense (other than payment in full) or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of each Guarantor hereunder
shall not be discharged or impaired or otherwise affected by the failure of the
Administrative Agent or any Lender to assert any claim or demand or to enforce
any remedy under this Credit Agreement or any other agreement, by any waiver or
modification of any provision hereof or thereof, by any default, failure or
delay, willful or otherwise, in the performance of the Obligations, or by any
other act or thing or omission or delay to do any other act or thing which may
or might in any manner or to any extent vary the risk of such Guarantor or would
otherwise operate as a discharge of such Guarantor as a matter of law, unless
and until the Obligations are paid in full.
          SECTION 9.3. Continuation and Reinstatement, etc.
          (a) Each Guarantor further agrees that its guaranty hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by the Administrative Agent or the Lenders upon the bankruptcy or
reorganization of the Borrower or a Guarantor, or otherwise. In furtherance of
the provisions of this Article 9, and not in limitation of any other right which
the Administrative Agent or the Lenders may have at law or in equity against the
Borrower, a Guarantor or any other Person by virtue hereof, upon failure of the
Borrower to pay any Obligation when and as the same shall become due, whether at
maturity, by acceleration, after notice or otherwise, each Guarantor hereby
promises to and will, upon receipt of written demand by the Administrative Agent
on behalf of itself and/or the Lenders, forthwith pay or cause to be paid to the
Administrative Agent for the benefit of itself and/or the Lenders (as
applicable) in cash an amount equal to the unpaid amount of such unpaid
Obligations with interest thereon from the due date at a rate of interest equal
to the rate specified in Section 2.8(a) hereof, and thereupon the Administrative
Agent shall assign such Obligation, together with all security interests, if
any, then held by the Administrative Agent in respect of such Obligation, to the
Guarantor or Guarantors making such payment; such assignment to be subordinate
and junior to the rights of the Administrative Agent on behalf of itself and the
Lenders with regard to amounts payable by the Borrower in connection with the
remaining unpaid Obligations and to be pro tanto to the extent to which the
Obligation in question was discharged by the Guarantor or Guarantors making such
payments.
          (b) All rights of each Guarantor against the Borrower, arising as a
result of the payment by such Guarantor of any sums to the Administrative Agent
for the benefit of the Administrative Agent and/or the Lenders or directly to
the Lenders hereunder by way of right of subrogation or otherwise, shall in all
respects be subordinated and junior in right of payment to, and shall not be
exercised by such Guarantor until and unless, the prior final payment in full of
all the Obligations. If any amount shall be paid to such Guarantor for the
account of the Borrower, such amount shall be held in trust for the benefit of
the Administrative Agent, segregated from such Guarantor’s own assets, and shall
forthwith be paid to the Administrative Agent on behalf of the Administrative
Agent and/or the Lenders to be credited and applied to the Obligations, whether
matured or unmatured.

95

--------------------------------------------------------------------------------

 

          SECTION 9.4. Limitation on Guaranteed Amount, etc. Notwithstanding any
other provision of this Article 9, the amount guaranteed by each Guarantor
hereunder shall be limited to the extent, if any, required so that its
obligations under this Article 9 shall not be subject to avoidance under
Section 548 of the Bankruptcy Code or to being set aside or annulled under any
Applicable Law relating to fraud on creditors. In determining the limitations,
if any, on the amount of any Guarantor’s obligations hereunder pursuant to the
preceding sentence, it is the intention of the parties hereto that any rights of
subrogation or contribution which such Guarantor may have under this Article 9,
any other agreement or Applicable Law shall be taken into account.
10. PLEDGE
          SECTION 10.1. Pledge. Each Pledgor, as security for the due and
punctual payment of the Obligations (including interest accruing on and after
the filing of any petition in bankruptcy or of reorganization of the Borrower
whether or not post filing interest is allowed in such proceeding) in the case
of the Borrower, and as security for its obligations hereunder in the case of a
Pledgor other than the Borrower, hereby pledges, hypothecates, assigns,
transfers, sets over and delivers unto the Administrative Agent for the benefit
of itself and the Lenders, a security interest in all Pledged Collateral now
owned or hereafter acquired by it. Upon the First Priority Obligations Payment
Date, the Pledgors shall deliver to the Administrative Agent the definitive
instruments (if any) representing all Pledged Securities, accompanied by undated
stock powers (in the case of Pledged Securities comprising capital stock), duly
endorsed or executed in blank by the appropriate Pledgor, and such other
instruments or documents as the Administrative Agent or its counsel shall
reasonably request.
          SECTION 10.2. Covenant. Each Pledgor covenants that as the owner of
Equity Interests in each of its respective Subsidiaries it will not take any
action to allow any additional shares of common stock, preferred stock or other
Equity Interests of any of its respective Subsidiaries or any securities
convertible or exchangeable into common or preferred stock or other Equity
Interests of such Subsidiaries to be issued, or grant any options or warrants,
unless all of such securities (or, in the case of a Subsidiary that is a
Controlled Foreign Subsidiary, 65% of such securities) are pledged to the
Administrative Agent (for the benefit of itself and the Lenders) as security for
the Obligations and, if applicable, such Pledgor’s obligations under Article 9
hereof.
          SECTION 10.3. Registration in Nominee Name; Denominations. From and
after the First Priority Obligations Payment Date, the Administrative Agent
shall have the right (in its sole and absolute discretion) to hold the
certificates representing any Pledged Securities (a) upon the occurrence and
continuance of an Event of Default, in its own name (on behalf of the
Administrative Agent and the Lenders) or in the name of its nominee, or
(b) prior to such time, in the name of the appropriate Pledgor, endorsed or
assigned in blank or in favor of the Administrative Agent. Upon receipt thereof,
the Administrative Agent shall have the right to exchange the certificates
representing any of the Pledged Securities for certificates of smaller or larger
denominations for any purpose consistent with this Credit Agreement.
          SECTION 10.4. Voting Rights; Dividends; etc.

96

--------------------------------------------------------------------------------

 

          (a) The appropriate Pledgor shall be entitled to exercise any and all
voting and/or consensual rights and powers accruing to an owner of the Pledged
Securities being pledged by it hereunder or any part thereof for any purpose not
inconsistent with the terms hereof, at all times, except as expressly provided
in paragraph (c) below.
          (b) From and after the First Priority Obligations Payment Date, all
dividends or distributions of any kind whatsoever (other than cash dividends or
cash distributions paid while no Event of Default is continuing) received by a
Pledgor, whether resulting from a subdivision, combination, or reclassification
of the outstanding capital stock or Equity Interests of the issuer or received
in exchange for the Pledged Securities or any part thereof or as a result of any
merger, consolidation, acquisition, or other exchange of assets to which the
issuer may be a party, or otherwise, shall be and become part of the Pledged
Securities pledged hereunder and shall immediately be delivered to the
Administrative Agent to be held subject to the terms hereof. All dividends and
distributions which are received contrary to the provisions of this subsection
(b) shall be received in trust for the benefit of the Administrative Agent and
the Lenders, segregated from such Pledgor’s own assets, and shall be delivered
to the Administrative Agent.
          (c) From and after the First Priority Obligations Payment Date, upon
the occurrence and during the continuance of an Event of Default and notice from
the Administrative Agent of the transfer of such rights to the Administrative
Agent, all rights of such Pledgor (i) to exercise the voting and/or consensual
rights and powers which it is entitled to exercise pursuant to this Section, and
(ii) to receive and retain cash dividends and cash distributions shall cease,
and all such rights shall thereupon become vested in the Administrative Agent,
which shall have the sole and exclusive right and authority to exercise such
voting and/or consensual rights and receive such cash dividends and cash
distributions until such time as such Event of Default has been cured or waived.
          SECTION 10.5. Remedies Upon Default. Subject to the provisions of the
Intercreditor Agreement, if an Event of Default shall have occurred and be
continuing, the Administrative Agent, on behalf of itself and the Lenders, may
sell the Pledged Securities, or any part thereof, at public or private sale or
at any broker’s board or on any securities exchange, for cash, upon credit or
for future delivery as the Administrative Agent shall deem appropriate subject
to the terms hereof or as otherwise provided in the UCC. The Administrative
Agent shall be authorized at any such sale (if it deems it advisable to do so)
to restrict to the full extent permitted by Applicable Law the prospective
bidders or purchasers to Persons who will represent and agree that they are
purchasing the Pledged Securities for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale, the Administrative Agent shall have the right to assign, transfer,
and deliver to the purchaser or purchasers thereof the Pledged Securities so
sold. Each such purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of any Pledgor. The
Administrative Agent shall give the Pledgors ten (10) days’ prior written notice
of any such public or private sale, or sale at any broker’s board or on any such
securities exchange, or of any other disposition of the Pledged Securities. Such
notice, in the case of public sale, shall state the time and place for such sale
and, in the case of sale at a broker’s board or on a securities exchange, shall
state the board or exchange at which such sale is to be made and the day on
which the Pledged Securities, or portion thereof, will first be offered for sale
at such board or

97

--------------------------------------------------------------------------------

 

exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Administrative Agent
may fix and shall state in the notice of such sale. At any such sale, the
Pledged Securities, or portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as the Administrative Agent may (in its sole
and absolute discretion) determine. The Administrative Agent shall not be
obligated to make any sale of the Pledged Securities if it shall determine not
to do so, regardless of the fact that notice of sale of the Pledged Securities
may have been given. The Administrative Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case the sale of all or any part of the
Pledged Securities is made on credit or for future delivery, the Pledged
Securities so sold shall be retained by the Administrative Agent until the sale
price is paid by the purchaser or purchasers thereof, but the Administrative
Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Pledged Securities so sold and, in case of
any such failure, such Pledged Securities may be sold again upon like notice. At
any sale or sales made pursuant to this Section 10.5, the Administrative Agent
(on behalf of itself and/or the Lenders) may bid for or purchase, free from any
claim or right of whatever kind, including any equity of redemption, of the
Pledgors, any such demand, notice, claim, right or equity being hereby expressly
waived and released, any or all of the Pledged Securities offered for sale, and
may make any payment on the account thereof by using any claim for moneys then
due and payable to the Administrative Agent or any consenting Lender by any
Credit Party as a credit against the purchase price; and the Administrative
Agent, upon compliance with the terms of sale, may hold, retain and dispose of
the Pledged Securities without further accountability therefor to any Pledgor or
any third party (other than the Lenders). The Administrative Agent shall in any
such sale make no representations or warranties with respect to the Pledged
Securities or any part thereof, and shall not be chargeable with any of the
obligations or liabilities of the Pledgors with respect thereto. Each Pledgor
hereby agrees (i) it will indemnify and hold the Administrative Agent and the
Lenders harmless from and against any and all claims with respect to the Pledged
Securities asserted before the taking of actual possession or control of the
Pledged Securities by the Administrative Agent pursuant to this Credit
Agreement, or arising out of any act of, or omission to act on the part of, any
Person prior to such taking of actual possession or control by the
Administrative Agent (whether asserted before or after such taking of possession
or control), or arising out of any act on the part of any Pledgor, its agents or
Affiliates before or after the commencement of such actual possession or control
by the Administrative Agent but excluding from therefrom all claims with respect
to the Pledged Securities resulting from (x) the gross negligence or willful
misconduct of any of the Administrative Agent or the Lenders, (y) any claims
with respect to the Pledged Securities asserted against an indemnified party by
a Credit Party in which such Credit Party is the prevailing party, or (z) claims
of parties under the First Lien Agreement and the Administrative Agent and the
Lenders shall have no liability or obligation arising out of any such claim
except for acts of willful misconduct or gross negligence. As an alternative to
exercising the power of sale herein conferred upon it, the Administrative Agent
may proceed by a suit or suits at law or in equity to foreclose upon the
Collateral and Pledged Securities under this Credit Agreement and to sell the
Pledged Securities, or any portion thereof, pursuant to a judgment or decree of
a court or courts having competent jurisdiction.

98

--------------------------------------------------------------------------------

 

          SECTION 10.6. Application of Proceeds of Sale and Cash. The proceeds
of sale of the Pledged Securities sold pursuant to Section 10.5 hereof shall,
subject to the provisions of the Intercreditor Agreement, be applied by the
Administrative Agent on behalf of itself and the Lenders as follows:

  (i)   to the payment of all reasonable out-of-pocket costs and expenses paid
or incurred by the Administrative Agent in connection with such sale, including,
without limitation, all court costs and the reasonable fees and expenses of
counsel for the Administrative Agent in connection therewith, and the payment of
all out-of-pocket costs and expenses paid or incurred by the Administrative
Agent in enforcing this Credit Agreement, in realizing or protecting any
Collateral and in enforcing or collecting any Obligations or any guaranty
thereof, including, without limitation, court costs and the attorney’s fees and
expenses incurred by the Administrative Agent in connection therewith; and    
(ii)   to the payment in full of the Obligations in accordance with Section 12.2
hereof;

provided, however, that the Administrative Agent may in its discretion apply
funds comprising the proceeds of sale of the Pledged Securities to pay the cost
(i) of completing any Item of Product owned in whole or in part by any Credit
Party in any stage of production, and (ii) of making delivery to the
distributors of such Item of Product. Any amounts remaining after such payment
in full shall be remitted to the appropriate Pledgor, or as a court of competent
jurisdiction may otherwise direct.
          SECTION 10.7. Securities Act, etc. In view of the position of each
Pledgor in relation to the Pledged Securities pledged by it, or because of other
present or future circumstances, a question may arise under the Securities Act
of 1933, as amended, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect (such Act and any such similar
statute as from time to time in effect being hereinafter called the “Federal
Securities Laws”), with respect to any disposition of the Pledged Securities
permitted hereunder. Each Pledgor understands that compliance with the Federal
Securities Laws may very strictly limit the course of conduct of the
Administrative Agent if the Administrative Agent were to attempt to dispose of
all or any part of the Pledged Securities, and may also limit the extent to
which or the manner in which any subsequent transferee of any Pledged Securities
may dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Administrative Agent in any attempt to dispose of all
or any part of the Pledged Securities under applicable Blue Sky or other state
securities laws, or similar laws analogous in purpose or effect. Under
Applicable Law, in the absence of an agreement to the contrary, the
Administrative Agent may perhaps be held to have certain general duties and
obligations to a Pledgor to make some effort towards obtaining a fair price even
though the Obligations may be discharged or reduced by the proceeds of a sale at
a lesser price. Each Pledgor waives to the fullest extent permitted by
Applicable Law any such general duty or obligation to it, and the Pledgors
and/or the Credit Parties will not attempt to hold the Administrative Agent
responsible for selling all or any part of the Pledged Securities at an
inadequate price, even if the Administrative Agent shall accept the first offer
received or does not approach more than one possible purchaser. Without limiting
the

99

--------------------------------------------------------------------------------

 

generality of the foregoing, the provisions of this Section 10.7 would apply if,
for example, the Administrative Agent were to place all or any part of the
Pledged Securities for private placement by an investment banking firm, or if
such investment banking firm purchased all or any part of the Pledged Securities
for its own account, or if the Administrative Agent placed all or any part of
the Pledged Securities privately with a purchaser or purchasers.
          SECTION 10.8. Continuation and Reinstatement. Each Pledgor further
agrees that its pledge hereunder shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by the Administrative
Agent or the Lenders upon the bankruptcy or reorganization of any Pledgor or
otherwise.
          SECTION 10.9. Termination. The pledge referenced herein shall
terminate when all of the Obligations shall have been fully paid and performed,
at which time the Administrative Agent shall promptly assign and deliver to the
appropriate Pledgor, or to such Person or Persons as such Pledgor shall
designate, against receipt, such of the Pledged Securities (if any) as shall not
have been sold or otherwise applied by the Administrative Agent pursuant to the
terms hereof and shall still be held by it hereunder, together with appropriate
instruments of reassignment and release. Any such reassignment shall be free and
clear of all Liens, arising by, under or through the Administrative Agent but
shall otherwise be without recourse upon or warranty by the Administrative Agent
and at the expense of the Pledgors.
11. CASH COLLATERAL
          SECTION 11.1. Cash Collateral Accounts. Upon the First Priority
Obligations Payment Date, there shall be established with the Administrative
Agent a collateral account in the name of the Credit Parties subject to the
security interests of Administrative Agent (the “Cash Collateral Account”), into
which the appropriate Credit Parties shall from time to time deposit amounts
pursuant to the express provisions of this Credit Agreement requiring or
permitting such deposits. Except to the extent otherwise provided in this
Article 11, the Cash Collateral Accounts shall be under the control (within the
meaning of Section 9-104 of the UCC) of the Administrative Agent.
          SECTION 11.2. Investment of Funds.
          (a) The Administrative Agent is hereby authorized and directed to
invest and reinvest the funds from time to time transferred or deposited into
the Cash Collateral Account, so long as no Event of Default has occurred and is
continuing, on the instructions of the Borrower (provided, that any such
instructions given orally shall be confirmed promptly in writing and shall be
limited to instructions with respect to investments in cash and Cash
Equivalents) or, if the Borrower shall fail to give such instructions upon
delivery of any such funds, in the sole discretion of the Administrative Agent,
provided that in no event may the Borrower give instructions to the
Administrative Agent to, or may the Administrative Agent in its discretion,
invest or reinvest funds in the Cash Collateral Account in other than Cash
Equivalents.
          (b) Any net income or gain on the investment of funds from time to
time held in the Cash Collateral Account, shall be promptly reinvested by the
Administrative Agent as a

100

--------------------------------------------------------------------------------

 

part of the Cash Collateral Account; and any net loss on any such investment
shall be charged against the Cash Collateral Account.
          (c) Neither the Administrative Agent nor the Lenders shall be a
trustee for any Credit Party, or shall have any obligations or responsibilities,
or shall be liable for anything done or not done, in connection with the Cash
Collateral Account except for any acts of gross negligence or willful
misconduct, except as expressly provided herein and except that the
Administrative Agent shall have the obligations of a secured party under the
UCC. The Administrative Agent and the Lenders shall not have any obligation or
responsibility and shall not be liable in any way for any investment decision
made in accordance with this Section 11.2 or for any decrease in the value of
the investments held in the Cash Collateral Account except for any acts of gross
negligence or willful misconduct.
          SECTION 11.3. Grant of Security Interest. For value received and to
induce the Lenders to make Loans to the Borrower as provided for in this Credit
Agreement, as security for the payment of all of the Obligations, each of the
Credit Parties hereby assigns to the Administrative Agent (for the benefit of
itself and the Lenders) and grants to the Administrative Agent (for the benefit
of itself and the Lenders), a Lien upon all of such Credit Party’s rights in and
to the Cash Collateral Account, all cash, documents, instruments and securities
from time to time held therein, and all rights pertaining to investments of
funds in the Cash Collateral Account and all products and proceeds of any of the
foregoing. All cash, documents, instruments and securities from time to time on
deposit in the Cash Collateral Account, and all rights pertaining to investments
of funds in the Cash Collateral Account shall immediately and without any need
for any further action on the part of any of the Credit Parties, any Lender or
the Administrative Agent, become subject to the Lien set forth in this
Section 11.3, be deemed Collateral for all purposes hereof and be subject to the
provisions of this Credit Agreement.
          SECTION 11.4. Remedies. At any time during the continuation of an
Event of Default, the Administrative Agent may sell any documents, instruments
and securities held in the Cash Collateral Account and may immediately apply the
proceeds thereof and any other cash held in the Cash Collateral Account in
accordance with Section 8.7.
12. THE ADMINISTRATIVE AGENT
          SECTION 12.1. Administration by the Administrative Agent.
          (a) The general administration of the Fundamental Documents and any
other documents contemplated by this Credit Agreement or any other Fundamental
Document shall be by the Administrative Agent or its designees; provided, that,
at any time when a single Lender constitutes the Required Lenders,
notwithstanding anything in any Fundamental Document (including this
Section 12.1) to the contrary, the Administrative Agent shall, except with
respect to exchanging or submitting information or notices from the Borrower to
the Lenders, performing the activities permitted by Section 12.1(b), or its
responsibilities under Sections 12.2 or 12.4 hereof, not act or exercise or
refrain from exercising its powers or discretion hereunder or under the
Fundamental Documents, the Notes or any other documents contemplated by this
Credit Agreement or any other Fundamental Document except as directed by the
Required Lenders in writing. Except as otherwise expressly provided herein, each
of the Lenders hereby

101

--------------------------------------------------------------------------------

 

irrevocably authorizes the Administrative Agent, at its discretion, to take or
refrain from taking such actions as agent on its behalf and to exercise or
refrain from exercising such powers under the Fundamental Documents, the Notes
and any other documents contemplated by this Credit Agreement or any other
Fundamental Document as are expressly delegated by the terms hereof or thereof,
as appropriate, together with all powers reasonably incidental thereto. The
Administrative Agent shall have no duties or responsibilities except as set
forth in the Fundamental Documents. Notwithstanding the foregoing or anything to
the contrary in any Fundamental Document (including this Section 12.1), the
Administrative Agent may at any time elect, prior to performing any action (or
inaction) requiring the exercise of its discretion or making any determination
requiring such determination, to notify the Lenders of the relevant issue and
forbear from taking any such action or making any such determination until it
shall have been instructed to do so by the Required Lenders;
            (b) The Lenders hereby authorize the Administrative Agent (in its
sole discretion):

  (i)   in connection with the sale or other disposition of any asset included
in the Collateral or the capital stock of any Guarantor, to the extent
undertaken in accordance with the terms of this Credit Agreement, to release a
Lien granted to it (for the benefit of the Administrative Agent and the Lenders)
on such asset or capital stock and/or to release such Guarantor from its
obligations hereunder;     (ii)   to appoint subagents to be the holder of
record of a Lien to be granted to the Administrative Agent (for the benefit of
the Administrative Agent and the Lenders);     (iii)   to confirm in writing the
right of Quiet Enjoyment of licensees pursuant to the terms of Section 8.13; and
    (iv)   to enter into the Fundamental Documents contemplated to be entered
into on the Closing Date.

             (c) The Lenders hereby authorize the Administrative Agent, (i) at
any time when a single Lender constitutes the Required Lenders, at the
instruction of the Required Lenders, and (ii) at all other times, in the
Administrative Agent’s sole discretion:

  (i)   to determine that the cost to the Borrower or another Credit Party is
disproportionate to the benefit to be realized by the Administrative Agent and
the Lenders by perfecting a Lien in a given asset or group of assets included in
the Collateral and that the Borrower or other Credit Party should not be
required to perfect such Lien in favor of the Administrative Agent (for the
benefit of itself and the Lenders);     (ii)   to enter into and perform its
obligations under the Fundamental Documents entered into after the Closing Date;

102

--------------------------------------------------------------------------------

 

  (iii)   to enter into intercreditor and/or subordination agreements on terms
acceptable to the Administrative Agent with (A) the unions and/or the guilds
with respect to the security interests in favor of such unions and/or guilds
required pursuant to the terms of the collective bargaining agreements, (B) any
licensee or licensor having any rights to any Item of Product, (C) Persons
providing any services in connection with any Item of Product, (D) Persons
providing tax benefit and/or production subsidies or co-financing for Items of
Product or (E) any Permitted Slate Financing Intercreditor Agreement; and    
(iv)   to make determinations under the Hallmark Guaranty (including
determinations as to the acceptability of credit enhancements offered by a
purchaser of Crown Media Holdings, Inc. in connection with a potential
termination of the Hallmark Guaranty under Section 3(b)(vi) thereof).

          SECTION 12.2. Payments. As between the Administrative Agent and the
Lenders, any amounts received by the Administrative Agent in connection with the
Fundamental Documents, the application of which is not otherwise provided for in
Article 2 hereof, shall be applied (subject to the terms of the Intercreditor
Agreement), first, to pay accrued but unpaid interest on the Loans in accordance
with the amount of outstanding Loans owed to each Lender and second, to pay the
principal balance outstanding on the Loans (with amounts payable on the
principal balance outstanding on the Loans in accordance with the amount of
outstanding Loans owed to each Lender), amounts outstanding under Swap
Agreements and to pay any other obligations then due under this Credit
Agreement. All amounts to be paid to any Lender by the Administrative Agent
shall be credited to that Lender, after collection by the Administrative Agent,
in immediately available funds either by wire transfer or deposit in such
Lender’s correspondent account with the Administrative Agent, or as such Lender
and the Administrative Agent shall from time to time agree.
          SECTION 12.3. Sharing of Setoffs and Cash Collateral. Each of the
Lenders agrees that if it shall, through the exercise of a right of banker’s
Lien, setoff or counterclaim against any Credit Party (including, but not
limited to, a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim and received by such Lender under any applicable bankruptcy, insolvency or
other similar law) or otherwise, obtain payment in respect of its Loans as a
result of which the unpaid portion of its Loans is proportionately less than the
unpaid portion of Loans of any of the other Lenders (a) it shall promptly
purchase at par (and shall be deemed to have thereupon purchased) from such
other Lenders a participation in the Loans of such other Lenders, so that the
aggregate unpaid principal amount of each of the Lender’s Loans shall be in the
same proportion to the aggregate unpaid principal amount of all Loans then
outstanding and as the principal amount of its Loans prior to the obtaining of
such payment was to the principal amount of all Loans outstanding prior to the
obtaining of such payment, and (b) such other adjustments shall be made from
time to time as shall be equitable to ensure that the Lenders share such payment
pro rata. If all or any portion of such excess payment is thereafter recovered
from the Lender which originally received such excess payment, such purchase (or
portion thereof) shall be canceled and the purchase price restored to the extent
of such recovery. The Credit Parties expressly consent to the foregoing
arrangements and agree that any Lender or Lenders holding (or deemed

103

--------------------------------------------------------------------------------

 

to be holding) a participation in a Note may exercise any and all rights of
banker’s Lien, setoff or counterclaim with respect to any and all moneys owing
by the Borrower to such Lender or Lenders as fully as if such Lender or Lenders
held a Note and was the original obligee thereon, in the amount of such
participation.
          SECTION 12.4. Notice to the Lenders. Upon receipt by the
Administrative Agent from any of the Credit Parties of any communication calling
for an action on the part of the Lenders, or upon notice to the Administrative
Agent of any Event of Default, the Administrative Agent will in turn immediately
inform the other Lenders in writing (which shall include facsimile
communications) of the nature of such communication or of the Event of Default,
as the case may be.
          SECTION 12.5. Liability of the Administrative Agent.
          (a) The Administrative Agent, when acting on behalf of the Lenders,
may execute any of its duties under this Credit Agreement or the other
Fundamental Documents by or through its officers, agents or employees and
neither the Administrative Agent nor its officers, agents or employees shall be
liable to the Lenders or any of them for any action taken or omitted to be taken
in good faith, nor be responsible to the Lenders or to any of them for the
consequences of any oversight or error of judgment, or for any loss, unless the
same shall happen through its gross negligence or willful misconduct. The
Administrative Agent and its respective directors, officers, agents, and
employees shall in no event be liable to the Lenders or to any of them for any
action taken or omitted to be taken by it pursuant to instructions received by
it from the Required Lenders or in reliance upon the advice of counsel selected
by it with reasonable care. Without limiting the foregoing, neither the
Administrative Agent nor any of its respective directors, officers, employees,
or agents shall be responsible to any of the Lenders for the due execution,
validity, genuineness, effectiveness, sufficiency, or enforceability of, or for
any statement, warranty, or representation in, or for the perfection of any
security interest contemplated by, this Credit Agreement, any other Fundamental
Document or any related agreement, document or order, or for freedom of any of
the Collateral or any of the Pledged Securities from prior Liens or security
interests, or shall be required to ascertain or to make any inquiry concerning
the performance or observance by the Borrower or any other Credit Party of any
of the terms, conditions, covenants, or agreements of this Credit Agreement, any
other Fundamental Document, or any related agreement or document.
          (b) Neither the Administrative Agent (in its capacity as agent for the
Lenders), nor any of its directors, officers, employees or agents shall have any
responsibility to the Borrower or any other Credit Party on account of the
failure or delay in performance or breach by any of the Lenders (other than
JPMorgan Chase Bank, N.A.) of any of such Lender’s obligations under this Credit
Agreement, the other Fundamental Documents or any related agreement or document
or in connection herewith or therewith. No Lender nor any of its directors,
officers, employees or agents shall have any responsibility to the Borrower or
any other Credit Party on account of the failure or delay in performance or
breach by any other Lender of such other Lender’s obligations under this Credit
Agreement, the other Fundamental Documents or any related agreement or document
or in connection herewith or therewith.

104

--------------------------------------------------------------------------------

 

          (c) The Administrative Agent, in its capacity as agent for the Lenders
hereunder shall be entitled to rely on any communication, instrument or document
believed by it to be genuine or correct and to have been signed or sent by a
Person or Persons believed by it to be the proper Person or Persons, and it
shall be entitled to rely on advice of legal counsel, independent public
accountants, and other professional advisers and experts selected by it with
reasonable care.
          SECTION 12.6. Reimbursement and Indemnification. Each of the Lenders
agrees (i) to reimburse the Administrative Agent for such Lender’s Pro Rata
Share of any expenses and fees incurred for the benefit of the Lenders under the
Fundamental Documents, including, without limitation, counsel fees and
compensation of agents and employees paid for services rendered on behalf of the
Lenders, and any other expense incurred in connection with the operations or
enforcement thereof not reimbursed by or on behalf of the Borrower and (ii) to
indemnify and hold harmless the Administrative Agent and any of its directors,
officers, employees, or agents, on demand, in accordance with such Lender’s
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against, it or any of them in any way relating to or arising out of any
of the Fundamental Documents or any related agreement or document, or any action
taken or omitted by it or any of them under any Fundamental Documents or any
related agreement or document, to the extent not reimbursed by or on behalf of
the Borrower or any Credit Party (except such as shall result from its gross
negligence or willful misconduct). To the extent indemnification payments made
by the Lenders pursuant to this Section 12.6 are subsequently recovered by the
Administrative Agent from a Credit Party, the Administrative Agent will promptly
refund such previously paid indemnity payments to the Lenders.
          SECTION 12.7. Rights of Administrative Agent. It is understood and
agreed that the Administrative Agent shall have the same duties, rights and
powers as a Lender hereunder (including the right to give such instructions) as
any of the other Lenders and may exercise such rights and powers, as well as its
rights and powers under other agreements and instruments to which it is or may
be party, and engage in other transactions with any Credit Party or Affiliate
thereof, as though it were not the Administrative Agent of the Lenders under
this Credit Agreement and the other Fundamental Documents.
          SECTION 12.8. Independent Investigation by Lenders. Each of the
Lenders acknowledges that it has decided to enter into this Credit Agreement and
the other Fundamental Documents and to make the Loans hereunder based on its own
analysis of the transactions contemplated hereby and of the creditworthiness of
the Credit Parties and agrees that the Administrative Agent shall not bear any
responsibility therefor.
          SECTION 12.9. Agreement of Required Lenders. (a) Except as set forth
in Section 13.10 hereof, upon any occasion requiring or permitting an approval,
consent, waiver, election or other action on the part of the Lenders, action
shall be taken by the Administrative Agent for and on behalf of, or for the
benefit of, all Lenders upon the direction of the Required Lenders and any such
action shall be binding on all Lenders. No amendment, modification, consent or
waiver shall be effective except in accordance with the provisions of
Section 13.10 hereof.

105

--------------------------------------------------------------------------------

 

          (b) The Administrative Agent shall not deliver a Buy Out Notice (as
defined in the Intercreditor Agreement) to the First Lien Agent in accordance
with the Intercreditor Agreement without having obtained the prior written
consent of each Lender to such delivery.
          SECTION 12.10. Notice of Transfer. The Administrative Agent may deem
and treat any Lender which is a party to this Credit Agreement as the owner of
such Lender’s respective portions of the Loans for all purposes, unless and
until a written notice of the assignment or transfer thereof executed by any
such Lender shall have been received by the Administrative Agent and become
effective in accordance with Section 13.3 hereof.
          SECTION 12.11. Successor Administrative Agent. The Administrative
Agent may resign at any time by giving ten days’ prior written notice thereof to
the Lenders and the Borrower and shall resign upon the written request of the
Required Lenders, but such resignation shall not become effective until
acceptance by a successor agent of its appointment pursuant hereto, provided,
however, that any resignation by JPMorgan Chase Bank, N.A. from its position as
Administrative Agent shall become effective no later than thirty (30) days from
the delivery of such a resignation. Upon any such resignation, the retiring
Administrative Agent shall consult with the Borrower and shall promptly appoint
a successor agent from among the Lenders; provided, that in the case of a
resignation at the Administrative Agent’s option, such replacement is reasonably
acceptable (as evidenced in writing) to the Required Lenders and, in any case,
is reasonably acceptable to the Borrower; provided, however, that (a) such
approval by the Borrower shall not be required at any time when a Default or
Event of Default is continuing and (b) in no case shall any “hedge fund”, as
such term is currently understood, become a Successor Administrative Agent. If
no successor agent shall have been so appointed by the retiring Administrative
Agent and shall have accepted such appointment, within 30 days after the
retiring agent’s giving of notice of resignation, the Required Lenders may
appoint a successor agent. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor agent, such successor agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Credit
Agreement, the other Fundamental Documents and any other credit documentation.
After any retiring Administrative Agent’s resignation hereunder as
Administrative Agent, the provisions of this Article 12 and Article 13 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Credit Agreement.
13. MISCELLANEOUS
          SECTION 13.1. Notices.
          (a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to paragraph (b) below), all
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy or electronic photocopy (i.e. “PDF”), as
follows:

  (i)   if to the Borrower, to it at RHI Entertainment, LLC, 1325 Sixth Avenue,
Ste. 2100, New York, New York 10022 (Telecopy No. (212) 977-9049),

106

--------------------------------------------------------------------------------

 

      Attention: William Aliber and Michael Isaacson; e-mail:
BAliber@rhifilms.com and MIsaacson@rhifilms.com, with a copy to Latham & Watkins
LLP, 885 Third Avenue, Suite 1000, New York, New York 10022, Attention: Dennis
D. Lamont, (Telecopy No. (212) 751-4864), e-mail: dennis.lamont@lw.com;     (ii)
  if to the Administrative Agent or to JPMorgan Chase Bank, N.A., to (x) 
JPMorgan Chase Bank, N.A., 10 South Dearborn, 9th Floor, Mail Code: IL1-0364,
Chicago, Illinois 60603-5506, Attention: Stephen C. Price (Telecopy No.:
312-325-3239; email: stepen.c.price@jpmorgan.com, with copies to (y) JPMorgan
Chase Bank, N.A., Loan and Agency Services Group, 10 South Dearborn, Floor 7,
Chicago, Illinois 60603-2003, Attention: (A) for communications relating to
assignments, Medy Hernandez (Telecopy No. (312) 385-7096; email:
medy.hernandez@jpmchase.com) and (B) for communications not relating to
assignments, Judy Warren (Telecopy No. (312) 385-7096;
email:judy.a.warren@jpmchase.com) and to (z) J.P. Morgan Securities Inc., 1999
Avenue of the Stars, 27th Floor, Los Angeles, California 90067, Attention:
Christa Thomas (Telecopy No. (310) 860-7260; email:
christa.thomas@jpmorgan.com); and     (iii)   if to any other Lender, to it at
its address (or telecopy number) set forth on the signature pages hereto.

        (b) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided, that the foregoing shall not
apply to notices pursuant to Article 2 unless otherwise agreed by the
Administrative Agent and the applicable Lender. Each of the Administrative Agent
and the Borrower may, each in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided, that approval of such procedures may be
limited to particular notices or communications.
          (c) Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to all of the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Credit Agreement shall be deemed to have
been given on the date of receipt.
          SECTION 13.2. Survival of Agreement, Representations and Warranties,
etc. All warranties, representations and covenants made by any of the Credit
Parties herein, in any other Fundamental Document or in any certificate or other
instrument delivered by it or on its behalf in connection with this Credit
Agreement or any other Fundamental Document shall be considered to have been
relied upon by the Administrative Agent and the Lenders and, except for any
terminations, amendments, modifications or waivers thereof in accordance with
the terms hereof, shall survive the making of the Loans herein contemplated and
the execution and delivery to the Administrative Agent of the Notes regardless
of any investigation made by the Administrative Agent or the Lenders or on their
behalf and shall continue in full force and effect

107

--------------------------------------------------------------------------------

 

so long as any Obligation is outstanding and unpaid. All statements in any such
certificate or other instrument shall constitute representations and warranties
by the Credit Parties hereunder.
          SECTION 13.3. Successors and Assigns; Syndications; Loan Sales;
Participations.
          (a) Whenever in this Credit Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party; provided, however, that neither the Borrower nor any
other Credit Party may assign its rights hereunder without the prior written
consent of the Administrative Agent and all Lenders, and all covenants, promises
and agreements by or on behalf of any of the Credit Parties which are contained
in this Credit Agreement shall inure to the benefit of the successors and
assigns of the Administrative Agent and the Lenders.
          (b) Each of the Lenders may (but only with the prior written consent
of the Administrative Agent, which consent shall not be unreasonably withheld or
delayed and, at any time prior to the occurrence of a Default or Event of
Default under Section 7(b), (c), (h) or (i) with the prior written consent of
the Borrower, which consent will not be unreasonably withheld or delayed) assign
to an Eligible Assignee all or any portion of its interests, rights and
obligations under this Credit Agreement (including, without limitation, all or a
portion of all Loans at the time owing to it and the Notes, if any, held by it);
provided, however, that (i) each assignment shall be of a constant, and not a
varying, percentage of the assigning Lender’s interests, rights and obligations
under this Credit Agreement, (ii) each assignment shall be in a minimum
principal amount equal to $1,000,000; provided that, such minimum amount shall
not apply to assignments by Lenders who then hold Loans in a principal amount of
less than $1,000,000 in the aggregate so long as the entirety of their remaining
Loans are being assigned in full, (iii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register (as defined below), an Assignment and Assumption,
together with the assigning Lender’s original Note if one has been issued to the
Lender pursuant to Section 2.4 hereof and a processing and recordation fee of
$3,500 to be paid to the Administrative Agent by the assigning Lender or the
assignee and (iv) the assignee, if it shall not be a Lender, shall deliver to
the Administrative Agent an “Administrative Questionnaire” in which the assignee
designates one or more credit contacts to whom all syndicate-level information
(which may contain material non-public information about the Borrower and its
related parties or their respective securities) will be made available and who
may receive such information in accordance with the assignee’s compliance
procedures and Applicable Laws, including federal and state securities laws.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Assumption, which effective date
shall not (unless otherwise agreed to by the Administrative Agent) be earlier
than five Business Days after the date of acceptance and recording by the
Administrative Agent, (x) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Assumption, have the rights and
obligations of a Lender hereunder and under the other Fundamental Documents and
shall be bound by the provisions hereof, and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Assumption, relinquish its
rights and be released from its obligations under this Credit Agreement except
that, notwithstanding such assignment, any rights and remedies available to the
Borrower for any breaches by such assigning Lender of its obligations hereunder
while a

108

--------------------------------------------------------------------------------

 

Lender shall be preserved after such assignment and such Lender shall not be
relieved of any liability to the Borrower due to any such breach. In the case of
an Assignment and Assumption covering all or the remaining portion of the
assigning Lender’s rights and obligations under this Credit Agreement, such
assigning Lender shall cease to be a party hereto.
          (c) Notwithstanding any provision herein otherwise requiring the
consent of the Borrower, each Lender may at any time make an assignment of its
interests, rights and obligations under this Credit Agreement without the
consent of the Borrower or the Administrative Agent, to any Eligible Assignee
that is (i) an Affiliate of such Lender, (ii) a Person, or Affiliate of a
Person, that manages such Lender (a “Related Fund”), (iii) another Lender
hereunder or (iv) an Approved Fund. Any such assignment to any Affiliate of the
assigning Lender, a Related Fund or any other Lender hereunder shall not be
subject to the requirement of Section 13.3(b)(ii) that the amount of the Loans
of the assigning Lender subject to each assignment be in a minimum principal
amount of $1,000,000, and any such assignment to any Affiliate of the assigning
Lender shall not release the assigning Lender of its remaining obligations
hereunder, if any.
          (d) By executing and delivering an Assignment and Assumption, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby and that such interest is free and clear of any
adverse claim, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or any other
Fundamental Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Fundamental Documents or any other
instrument or document furnished pursuant hereto or thereto; (ii) such assignor
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Credit Party or the performance or
observance by any Credit Party of any of their obligations under the Fundamental
Documents or any other instrument or document furnished pursuant thereto;
(iii) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Sections 5.1(a) and 5.1(b) (if such financial statements
shall have theretofore been delivered) and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Assumption; (iv) such assignee agrees that it
will, independently and without reliance upon the assigning Lender, the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Credit Agreement or
any other Fundamental Document; (v) such assignee appoints and authorizes the
Administrative Agent to take such action as the agent on its behalf and to
exercise such powers under this Credit Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will be
bound by the provisions of this Credit Agreement and will perform in accordance
with their terms all of the obligations which by the terms of this Credit
Agreement are required to be performed by it as a Lender.
          (e) The Administrative Agent (acting for this purpose on behalf of the
Borrower) shall maintain at its address at which notices are to be given to it
pursuant to Section

109

--------------------------------------------------------------------------------

 

13.1 a copy of each Assignment and Assumption and a register for the recordation
of the names and addresses of the Lenders and the principal amount of the Loans
owing to, each Lender from time to time (the “Register”). The entries in the
Register shall be conclusive, in the absence of manifest error, and the Credit
Parties, the Administrative Agent and the Lenders shall treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of the
Fundamental Documents. Any assignment of any Loan, whether or not evidenced by a
Note, shall be effective only upon appropriate entries with respect thereto
being made in the Register. The Register shall be available for inspection by
any Credit Party or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
          (f) Subject to the foregoing, upon its receipt of an Assignment and
Assumption executed by an assigning Lender and an assignee together with the
assigning Lender’s original Notes, if applicable, and the processing and
recordation fee, the Administrative Agent shall, if such Assignment and
Assumption has been completed, is in the form of Exhibit I hereto, and has been,
if applicable, consented to in writing by the Borrower, (i) accept such
Assignment and Assumption, and (ii) record the information contained therein in
the Register. Within five (5) Business Days after receipt of the notice and upon
the request of the assignee, the Borrower, at its own expense, shall execute and
deliver to the Administrative Agent, in exchange for the surrendered Note (if
any), a new Note payable to such assignee in an amount equal to the Loan owing
to it assumed by it pursuant to such Assignment and Assumption and if the
assigning Lender has retained a portion of the Loan owing to it hereunder and so
requests, a new Note to the assigning Lender in an amount equal to the portion
of the Loan owing to it and retained hereunder. Any such new Notes shall be in
an aggregate principal amount equal to the aggregate principal amount of the
surrendered Note, if any, and shall otherwise be substantially in the form of
Exhibit A hereto. In addition the Credit Parties will promptly, at their own
expense, execute such amendments to the Fundamental Documents to which each is a
party and such additional documents, and take such other actions as the
Administrative Agent or the assignee Lender may reasonably request in order to
give such assignee Lender the full benefit of the Liens contemplated by the
Fundamental Documents.
          (g) Each of the Lenders may, without the consent of any of the Credit
Parties, the Administrative Agent or the other Lenders, sell participations to
one or more banks or other entities in all or a portion of its rights and
obligations under this Credit Agreement (including, without limitation, all or a
portion of the Loans owing to it and the Note, if any, held by it); provided,
however, that (i) such Lender’s obligations under this Credit Agreement shall
remain unchanged, (ii)  such participant shall not be granted any voting rights
or any right to control the vote of such Lender under this Credit Agreement,
except with respect to (A) proposed reductions in, or releases (in whole or in
part) of any obligation with respect to the payment of, any interest rates, the
principal amount of any Loans or any fees, (B) increases in the amounts of Loans
made hereunder, (C) extensions of any scheduled amortization or the final
maturity of any Loan, or (D) releases of all or substantially all the Collateral
(in each case, only as applicable to such participant), (iii) any such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iv) the participating banks or other entities shall be
entitled to the cost protection provisions contained in Sections 2.10, 2.11,
2.12 and 2.14 (subject to the last sentence of this Section 13.3(g)) and 13.8
hereof but a participant shall not be entitled to receive pursuant to such
provisions an amount larger than its share of the amount to which the

110

--------------------------------------------------------------------------------

 

Lender granting such participation would have been entitled to receive, and
(v) the Credit Parties, the Administrative Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s and its participants’ rights and obligations under this Credit
Agreement. No holder of a participating interest shall be entitled to the
benefits of Section 2.14, unless the Borrower is notified of the participation
sold to such holder and such holder agrees, for the benefit of the Borrower, to
comply with Section 2.14(e) and Section 2.14(f) as though it were a Lender.
          (h) A Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 13.3, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to any Credit Party furnished to the Administrative Agent
or such Lender by or on behalf of the Borrower or another Credit Party (provided
that such proposed assignee or participant agrees to hold such information
confidential in accordance with Section 13.18 hereof).
          (i) Any assignment pursuant to paragraph (b) or (c) of this
Section 13.3 shall constitute an amendment of the Schedule of Commitments as of
the effective date of such assignment without any other further action required.
          (j) The Credit Parties consent that any Lender may at any time and
from time to time pledge or otherwise grant a security interest in any Loan or
in any Note evidencing the Loans (or any part thereof) to (i) any Federal
Reserve Bank or (ii) in the case of any Lender that is not a commercial bank,
savings and loan association or savings bank, to any holders of obligations
owed, or securities issued, by such Lender including to any trustee for, or any
other representative of, such holders; and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or grant of security interest under this Section 13.3(j) shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or assignee
for such Lender as a party hereto.
          SECTION 13.4. Expenses; Documentary Taxes. Whether or not the
transactions hereby contemplated shall be consummated, the Borrower agrees to
pay (i) all reasonable and documented out-of-pocket expenses incurred by the
Administrative Agent, the Arranger or JPM Mezzanine Capital, LLC in connection
with, or growing out of, the performance of due diligence, the syndication of
the credit facilities contemplated hereby, (ii) all reasonable and documented
out-of-pocket expenses incurred by the Administrative Agent, the Arranger or JPM
Mezzanine Capital, LLC in connection with, or growing out of, the negotiation,
preparation, execution, delivery, waiver or modification and administration of
this Credit Agreement and any other documentation contemplated hereby, the
making of the Loans, the Pledged Securities or any Fundamental Document,
including but not limited to, the reasonable and documented out-of-pocket costs
and reasonable internally allocated charges of audit or field examinations of
the Administrative Agent in connection with the administration of this Credit
Agreement (provided that so long as no Event of Default shall have occurred and
be continuing, the Credit Parties shall not be responsible for the cost of more
than one (1) such audit or field examination during any calendar year) and the
reasonable fees and disbursements of Morgan, Lewis & Bockius, LLP, counsel for
the Administrative Agent and JPM Mezzanine Capital, LLC and if necessary, one
other local counsel per jurisdiction that the Administrative Agent shall retain,
and (iii) all reasonable and documented out-of-pocket expenses incurred by the
Administrative Agent or the

111

--------------------------------------------------------------------------------

 

Lenders in the enforcement or protection (as distinguished from administration)
of the rights and remedies of the Lenders in connection with this Credit
Agreement, the Notes, or the other Fundamental Documents, or as a result of any
transaction, action or non-action arising from any of the foregoing, including,
the fees and disbursements of a single counsel for the Administrative Agent or
the Lenders. Such payments shall be made on the date this Credit Agreement is
executed by the Borrower and thereafter on demand. The Borrower agrees that it
shall indemnify the Administrative Agent and the Lenders from and hold them
harmless against any documentary taxes, assessments or charges made by any
Governmental Authority by reason of the execution and delivery of this Credit
Agreement or the Notes. Notwithstanding any provision to the contrary, the
Borrower’s obligations under this Section 13.4 shall not be duplicative of any
amounts paid by Borrower under any other provision of this Credit Agreement. The
obligations of the Borrower under this Section shall survive the termination of
this Credit Agreement and the payment of the Loans.
          SECTION 13.5. Indemnity. The Credit Parties agree (a) to indemnify and
hold harmless the Administrative Agent, the Arranger and the Lenders and their
respective directors, officers, employees, controlling persons, Affiliates and
agents (each an “Indemnified Party”) (to the full extent permitted by Applicable
Law) from and against any and all demands, losses, claims, damages, liabilities
or related out-of-pocket expenses (including liabilities for penalties and
reasonable fees, disbursements and other charges of one counsel plus one counsel
per local jurisdiction) incurred by any of them as a result of, or arising out
of, or in any way related to, or by reason of, any investigation, litigation or
other proceeding (whether or not any Lender, the Administrative Agent or the
Arranger is a party thereto) related to the entering into and/or performance of
any Fundamental Document or the use of the proceeds of any Loans hereunder or
the consummation of the transaction contemplated in any Fundamental Document
(but excluding (i) any such losses, liabilities, claims, damages or expenses of
an Indemnified Party to the extent they are found in a final judgment of a court
of competent jurisdiction to have been incurred by reason of the gross
negligence, bad faith or willful misconduct of, or breach of any Fundamental
Document by such Indemnified Party or its directors, officers, employees,
Affiliates, agents and controlling persons, (ii) litigation solely between a
Credit Party or Credit Parties, on the one hand, and the Administrative Agent or
the Lenders, on the other hand, in connection with this Credit Agreement or the
other Fundamental Documents or in any way relating to the transactions
contemplated hereby or thereby if, after final non-appealable judgment, the
Administrative Agent or the Lenders are not the prevailing party or parties in
such litigation and (iii) litigation solely among the Lenders or solely between
the Administrative Agent and the Lenders in connection with this Credit
Agreement, the Fundamental Documents or in any way relating to the transactions
contemplated thereby or hereby). If any proceeding, including any governmental
investigation, shall be instituted involving any Indemnified Party, in respect
of which indemnity may be sought against the Credit Parties, such Indemnified
Party shall promptly notify the Borrower in writing. The foregoing indemnity
agreement includes any costs incurred by an Indemnified Party in connection with
any action or proceeding in connection with which any officer or employee of the
Administrative Agent, the Arranger or the Lenders is called as a witness or
deponent, including, but not limited to, the reasonable fees and disbursements
of outside counsel to the Administrative Agent and the Arranger and any
reasonable out-of-pocket costs incurred by the Administrative Agent, the
Arranger or the Lenders in appearing as a witness or in otherwise complying with
legal process served upon

112

--------------------------------------------------------------------------------

 

them. The obligations of the Borrower under this Section 13.5 shall survive the
termination of this Credit Agreement and the payment of the Loans and shall
inure to the benefit of any Lender and its associated Indemnified Parties
notwithstanding the assignment by such Lender of all of its Loans hereunder.
          If a Credit Party shall fail to do any act or thing which it has
covenanted to do hereunder or under a Fundamental Document, which failure would
cause a Default or Event of Default to occur hereunder, or any representation or
warranty of a Credit Party shall be breached, the Administrative Agent may (but
shall not be obligated to) do the same or cause it to be done or remedy any such
breach and there shall be added to the Obligations hereunder the cost or expense
incurred by the Administrative Agent in so doing, and any and all amounts
expended by the Administrative Agent in taking any such action shall be
repayable to it upon its demand therefor and shall bear interest at a rate per
annum of 2% in excess of the rate then in effect for Alternate Base Rate Loans
from time to time in effect from the date advanced to the date of repayment.
          SECTION 13.6. CHOICE OF LAW. THIS CREDIT AGREEMENT AND THE NOTES SHALL
IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONS RELATING TO INTEREST
RATES, ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.
          SECTION 13.7. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH CREDIT PARTY HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT OR
THE SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH CREDIT PARTY
ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THE
PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH
OTHER PARTIES HAVE RELIED, ARE RELYING AND WILL RELY IN ENTERING INTO THIS
CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT. ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13.7 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF ANY CREDIT PARTY TO THE WAIVER OF ITS RIGHTS TO TRIAL
BY JURY.
          SECTION 13.8. WAIVER WITH RESPECT TO DAMAGES. EACH CREDIT PARTY
ACKNOWLEDGES THAT NEITHER THE ADMINISTRATIVE AGENT, THE ARRANGER NOR ANY LENDER
HAS ANY FIDUCIARY RELATIONSHIP WITH, OR FIDUCIARY DUTY TO, ANY CREDIT PARTY
ARISING OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OTHER
FUNDAMENTAL DOCUMENT AND THE RELATIONSHIP BETWEEN THE ADMINISTRATIVE AGENT, THE

113

--------------------------------------------------------------------------------

 

ARRANGER AND THE LENDERS, ON THE ONE HAND, AND THE CREDIT PARTIES, ON THE OTHER
HAND, IN CONNECTION THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, NO CREDIT PARTY SHALL ASSERT, AND EACH
CREDIT PARTY HEREBY WAIVES, ANY CLAIMS AGAINST THE ADMINISTRATIVE AGENT, THE
ARRANGER AND THE LENDERS ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES)
ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS CREDIT AGREEMENT,
ANY FUNDAMENTAL DOCUMENT, ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR
THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
          SECTION 13.9. No Waiver. No failure on the part of the Administrative
Agent or any Lender to exercise, and no delay in exercising, any right, power or
remedy hereunder, under the Notes or any other Fundamental Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law.
          SECTION 13.10. Amendments, etc.
          (a) No modification, amendment or waiver of any provision of this
Credit Agreement, the Intercreditor Agreement or any Fundamental Document
(except to the extent expressly contemplated herein or therein, including
without limitation a up to two Incremental Amendments entered into in accordance
with Section 2.16 which shall not require the signature of the Required
Lenders), and no consent to any departure by a Credit Party herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Required Lenders and the Administrative Agent, and acknowledged and agreed to by
the Borrower and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that (A) no such modification, amendment, waiver or consent shall,
without the written consent of all Lenders, (i) amend or modify any provision of
this Credit Agreement which provides for the unanimous consent or approval of
the Lenders, (ii) release all or substantially all of the Collateral and the
Pledged Securities (except as contemplated herein) or release any Guarantor from
its obligations hereunder (except as contemplated herein), (iii) subordinate the
Obligations hereunder to other Indebtedness or subordinate the security
interests of the Administrative Agent in the Collateral except (A) as permitted
by Section 12.1, and (B) subordinating the security interests of the
Administrative Agent to those of the First Lien Agent with respect to
Indebtedness under the First Lien Agreement and the Cap Amount, each as in
effect from time to time (it being understood and agreed that any change to the
Cap Amount under this Credit Agreement and the Intercreditor Agreement shall
require the consent only of the Required Lenders hereunder), (iv) amend the
definition of “Required Lenders”, (v) amend the definition of “Collateral” if
such amendment would have the effect of releasing all or substantially all of
the Collateral, (vi) amend or modify this Section 13.10(a), (B) no such
modification, amendment, waiver or consent shall (i) increase the Commitment of
any Lender or (ii) alter the final scheduled maturity or principal amount of any
Loan, or decrease the rate of interest payable thereon, or delay the fixed
scheduled maturity of any payment required to be made under this Credit
Agreement, in each case, without the written consent of each Lender so

114

--------------------------------------------------------------------------------

 

affected and (C) no such modification, amendment, waiver or consent shall amend
Section 2.1 hereof without the written consent of the Administrative Agent. No
notice to or demand on any of the Credit Parties shall entitle such Credit Party
to any other or further notice or demand in the same, similar or other
circumstances. Each holder of a Note shall be bound by any amendment,
modification, waiver or consent authorized as provided herein, whether or not
such Note shall have been marked to indicate such amendment, modification,
waiver or consent and any consent by any holder of such Note shall bind any
Person subsequently acquiring such Note, whether or not such Note is so marked.
          (b) If any Lender (i) requests compensation under Sections 2.10(b),
2.11 or 2.14 or converts Loans of a Type pursuant to Section 2.12, or
(ii) defaults in its obligation to fund Loans hereunder, then the Borrower may,
at its sole expense and effort and upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 13.3), all of its interests, rights and obligations under this Credit
Agreement to another Lender or an Eligible Assignee which shall assume such
obligations and which accepts such assignment; provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent in its
sole and absolute discretion, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans, accrued interest
thereon, accrued fees and all other amounts then payable to it hereunder from
the assignee (to the extent of such outstanding principal and accrued interest
and fees) or the Borrower (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for compensation under
Section 2.11 or payments required to be made pursuant to Sections 2.10(b) or
2.14 or conversion of Loans of a Type pursuant to Section 2.12, such assignment
will result in a reduction in such compensation or payments or rate of interest
thereafter. No Lender shall be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
          (c) If, in connection with any proposed amendment, waiver or consent
requiring the consent of “each Lender” or “each Lender affected thereby,” the
consent of the of the Lenders holding at least 662/3% of the aggregate principal
amount of Loans then outstanding, but the consent of other necessary Lenders is
not obtained (any such Lender whose consent is necessary but not obtained being
referred to herein as a “Non-Consenting Lender”), then, so long as an
Administrative Agent is not a Non-Consenting Lender, the Borrower may elect to
replace a Non-Consenting Lender as a Lender party to this Credit Agreement,
provided that, concurrently with such replacement, (i) another Lender or
Eligible Assignee, which is reasonably satisfactory to the Borrower and the
Administrative Agent in each’s sole and absolute discretion, shall agree, as of
such date, to purchase for cash the Loans and other Obligations due to the
Non-Consenting Lender pursuant to an Assignment and Assumption and to become a
Lender for all purposes under this Credit Agreement and to assume all
obligations of the Non-Consenting Lender to be terminated as of such date and to
comply with the requirements of Section 13.3, and (ii) such Non-Consenting
Lender shall receive in same day funds on the day of such replacement (1) an
amount equal to the outstanding principal of its Loans, accrued interest
thereon, accrued fees and all other amounts then payable to it hereunder from
the assignee (to the extent of such outstanding principal and accrued interest
and fees) or the Borrower (in the case of all other

115

--------------------------------------------------------------------------------

 

amounts), including without limitation payments due to such Non-Consenting
Lender under Sections 2.11 and 2.14, and (2) an amount from the Borrower, if
any, equal to the payment which would have been due to such Lender on the day of
such replacement under Section 2.10(b) had the Loans of such Non-Consenting
Lender been prepaid on such date rather than sold to the replacement Lender.
          SECTION 13.11. Severability. Any provision of this Credit Agreement or
of the Notes which is invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without invalidating the remaining provisions
hereof, and any such invalidity, illegality or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
          SECTION 13.12. SERVICE OF PROCESS; SUBMISSION TO JURISDICTION. EACH
CREDIT PARTY (EACH A “SUBMITTING PARTY”) HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK IN NEW YORK COUNTY AND
TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF OR BASED UPON THIS CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF,
ANY OTHER FUNDAMENTAL DOCUMENT AND THE SUBJECT MATTER THEREOF. EACH SUBMITTING
PARTY TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES
NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT,
ACTION OR OTHER PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS, ANY CLAIM THAT IT
IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT ITS PROPERTY
IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR THAT THIS CREDIT AGREEMENT, THE SUBJECT
MATTER HEREOF, THE OTHER FUNDAMENTAL DOCUMENTS OR THE SUBJECT MATTER THEREOF (AS
APPLICABLE) MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT
TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE ADMINISTRATIVE
AGENT OR A LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY WAIVES THE
RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR
COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM
THE SAME SUBJECT MATTER. EACH SUBMITTING PARTY HEREBY CONSENTS TO SERVICE OF
PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TO IT PURSUANT
TO SECTION 13.1 HEREOF. EACH SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO
JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS
BENEFIT OF EACH OF THE OTHER SUBMITTING PARTIES. FINAL JUDGMENT AGAINST ANY
SUBMITTING PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND
MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON
THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF
THE FACT AND OF THE AMOUNT OF INDEBTEDNESS

116

--------------------------------------------------------------------------------

 

OR LIABILITY OF THE SUBMITTING PARTY THEREIN DESCRIBED, OR (Y) IN ANY OTHER
MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION; PROVIDED,
HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A LENDER MAY AT ITS OPTION BRING SUIT,
OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST A SUBMITTING PARTY OR ANY OF ITS
ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OF AMERICA OR OF ANY
COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCH ASSETS MAY BE FOUND.
          SECTION 13.13. Headings. Section headings used herein and the Table of
Contents are for convenience only and are not to affect the construction of or
be taken into consideration in interpreting this Credit Agreement.
          SECTION 13.14. Execution in Counterparts. This Credit Agreement may be
executed by facsimile and in any number of counterparts, each of which shall
constitute an original, but all of which taken together shall constitute one and
the same instrument.
          SECTION 13.15. Subordination of Intercompany Indebtedness, Receivables
and Advances.
          (a) Each Credit Party hereby agrees that any intercompany Indebtedness
or other intercompany receivables or intercompany advances of any other Credit
Party, directly or indirectly, in favor of such Credit Party of whatever nature
at any time outstanding shall be completely subordinate in right of payment to
the prior payment in full of the Obligations, and that no payment on any such
Indebtedness, receivable or advance shall be made (i) except intercompany
receivables and intercompany advances permitted pursuant to the terms hereof may
be repaid and intercompany Indebtedness permitted pursuant to the terms hereof
may be repaid, in each case so long as no Default or Event of Default shall have
occurred and be continuing, and (ii) except as specifically consented to by all
the Lenders in writing, until the prior payment in full of all the Obligations.
          (b) In the event that any payment on any such Indebtedness shall be
received by such Credit Party other than as permitted by Section 13.15(a) before
payment in full of all Obligations, such Credit Party shall receive such
payments and hold the same in trust for, segregate the same from its own assets
and shall immediately pay over to, the Administrative Agent on behalf of itself
and the Lenders all such sums to the extent necessary so that the Administrative
Agent and the Lenders shall have been paid all Obligations owed or which may
become owing.
          SECTION 13.16. USA Patriot Act. Each Lender hereby notifies the
Borrower that, pursuant to the requirements of the USA Patriot Act or similar
foreign statutory requirements, it is required to obtain, verify and record
information that identifies the Borrower, which information includes, among
other things the name and address of the Borrower, certified copies of a current
passport or driving license of the directors of the Borrower, certified copies
of utility bills of the Borrower, local authority tax bill or building account
statement for the main directors of the Borrower, copies of resolutions
authorizing the Borrower to open accounts and details of principal directors,
signatories and shareholders of the Borrower and other information

117

--------------------------------------------------------------------------------

 

that will allow such Lender to identify the Borrower in accordance with the USA
Patriot Act or such similar foreign statutory requirements.
          SECTION 13.17. Entire Agreement. This Credit Agreement (including the
Exhibits and Schedules hereto) represents the entire agreement of the parties
with regard to the subject matter hereof and the terms of any letters and other
documentation entered into between any of the parties hereto prior to the
execution of this Credit Agreement which relate to Loans to be made hereunder
shall be replaced by the terms of this Credit Agreement.
          SECTION 13.18. Confidentiality.
          (a) Each of the Administrative Agent and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to it and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by Applicable Laws or by any subpoena or
similar legal process, (d) to any other party to this Credit Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Credit Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to (i) any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations
under this Credit Agreement, or (ii) any actual or prospective counterparty (or
its advisors) to any swap or derivative transaction relating to the Borrower and
its obligations, (g) with the consent of the Borrower, or (h) to the extent such
Information (x) becomes publicly available other than as a result of a breach of
this Section, or (y) becomes available to the Administrative Agent or any Lender
on a non-confidential basis from a source other than a Credit Party. For the
purposes of this Section, “Information” means all information received from any
Credit Party relating to any Credit Party or its business, other than any such
information that is available to the Administrative Agent or any Lender on a
non-confidential basis prior to disclosure by such Credit Party; provided, that
in the case of information received from a Credit Party after the date hereof,
such information is clearly identified at the time of delivery as confidential.
Any Person required to maintain the confidentiality of Information as provided
in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information. This Section 13.18 shall replace in its entirety any
confidentiality agreements entered into by any member of the Kelso Group, the
Borrower and the Credit Parties with the Administrative Agent and the Lenders
hereto prior to the Closing Date.
          (b) Each lender acknowledges that Information furnished to it pursuant
to this Credit Agreement may include material non-public Information concerning
the Borrower and its related parties or their respective securities, and
confirms that it has developed compliance procedures regarding the use of
material non-public Information and that it will handle such material non-public
Information in accordance with those procedures and Applicable Law, including
federal and state securities laws.

118

--------------------------------------------------------------------------------

 

          (c) all Information, including requests for waivers and amendments,
furnished by the Borrower or the Administrative Agent pursuant to, or in the
course of administering, this Credit Agreement will be syndicate-level
Information, which may contain material non-public Information about the
Borrower and its related parties or their respective securities. Accordingly,
each Lender represents to the Borrower and the Administrative Agent that it has
identified in its “Administrative Questionnaire” a credit contact who may
receive information that may contain material non-public Information in
accordance with its compliance procedures and Applicable Law.
[Signature Pages Follow]

119

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed as of the day and the year first written.

                  BORROWER:    
 
                RHI ENTERTAINMENT, LLC    
 
           
 
  By   /s/ Henry S. Hoberman    
 
           
 
  Name:   Henry S. Hoberman    
 
  Title:   Executive Vice President, General Counsel and Secretary    
 
           
 
  PARENT:        
 
                RHI ENTERTAINMENT HOLDINGS II, LLC    
 
           
 
  By   /s/ Henry S. Hoberman    
 
           
 
  Name:   Henry S. Hoberman    
 
  Title:   Executive Vice President, General Counsel and Secretary    

Signature Page to Amended and Restated Credit Agreement (Second Lien)

--------------------------------------------------------------------------------

 

GUARANTORS:
RHI ENTERTAINMENT DISTRIBUTION, LLC

         
By
  /s/ Henry S. Hoberman    
 
        Name: Henry S. Hoberman     Title: Executive Vice President, General
Counsel and Secretary
 
        RHI ENTERTAINMENT PRODUCTIONS, LLC    
 
       
By
  /s/ Henry S. Hoberman    
 
        Name: Henry S. Hoberman     Title: Executive Vice President, General
Counsel and Secretary
 
        RHI INTERNATIONAL DISTRIBUTION, INC.      
By
  /s/ Peter von Gal    
 
        Name: Peter von Gal     Title: President    

Signature Page to Post-IPO Credit Agreement (Second Lien)

--------------------------------------------------------------------------------

 

                  ADMINISTRATIVE AGENT    
 
                JPMORGAN CHASE BANK, N.A.    
 
           
 
  By :   /s/ Kim W. Cheng    
 
           
 
  Name:   Kim W. Cheng    
 
  Title:   Vice President    

Signature Page to Post-IPO Credit Agreement (Second Lien)

--------------------------------------------------------------------------------

 

                  LENDERS    
 
                JPM MEZZANINE CAPITAL, LLC    
 
           
 
  By   /s/ Aized Rabbani    
 
           
 
  Name:   Aized Rabbani    
 
  Title:   Vice President    
 
                Address for Notices:    

Signature Page to Post-IPO Credit Agreement (Second Lien)

--------------------------------------------------------------------------------

 

SCHEDULE 1
Schedule of Commitments

          Second Lien Lenders   Loan Commitment
JPM Mezzanine Capital, LLC
  $     55,000,000
 
         
TOTAL:
  $     55,000,000      

This Schedule of Commitments presents the identity of the Lenders and their
respective Commitments as of the Closing Date, and may be amended from time to
time by operation of Assignments and Assumptions in accordance with Section 13.3
of the Credit Agreement or, if the Administrative Agent elects to so amend this
Schedule of Commitments in connection therewith, by amendment to the Credit
Agreement that is executed by the Credit Parties in accordance with
Section 13.10 of the Credit Agreement.

i

--------------------------------------------------------------------------------

 

SCHEDULE 2
Guarantors

ii

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
(continued)

          Page Schedules
 
   
1
  Schedule of Commitments
1(b)
  Contracts Excluded From Collateral
2
  [Intentionally Omitted.]
2A
  Slate Financing Permitted Counterparties
3
  Guarantors
3.1
  List of Jurisdictions
3.2(b)
  Restrictions on Transfer of Pledged Securities
3.5(a)
  Guaranties, Contingent Liabilities, Tax Liabilities, Long Term Leases, Unusual
Forward
Long-Term Commitments
3.7(a)
  Ownership of the Capital Stock of the Credit Parties
3.7(b)
  Ownership of Pledged Securities other than Credit Parties
3.8(a)
  Valuation Items of Product
3.8(b)
  Trademarks
3.8(c)
  Copyright and Trademark Exceptions
3.9
  Fictitious Names
3.11
  Chief Executive Office
3.12
  Litigation
3.17
  Material Agreements
3.18
  Filing Offices for UCC-1 Financing Statements, Tax ID and Organizational ID
3.19
  Environmental Liabilities
3.25
  Bank Accounts
6.1
  Existing Indebtedness
6.2
  Existing Liens
6.3
  Existing Guaranties
6.4
  Existing Investments
6.10
  Transactions with Affiliates

iii

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
(continued)

          Page Exhibits
 
   
A
  Form of Note
B
  Form of Opinion of Latham & Watkins LLP, counsel to the Credit Parties
C-1
  Copyright Security Agreement
C-2
  Form of Copyright Security Agreement Supplement
D
  Form of Intercreditor Agreement
E
  Form of Pledgeholder Agreement (Completed Items of Product)
F
  Form of Trademark Security Agreement
G
  Form of Contribution Agreement
H
  Form of Borrowing Certificate
I
  Form of Assignment and Assumption
J
  Form of Instrument of Assumption and Joinder
K
  Form of Account Control Agreement
L
  Hallmark Guaranty
M
  Form of Liquidity Certificate

iv

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

              Page
1. DEFINITIONS
    2  
 
       
SECTION 1.1. Definitions
    2  
SECTION 1.2. Determination of Financial Covenants
    31  
 
       
2. THE LOANS
    31  
 
       
SECTION 2.1. Term Loan Commitments
    31  
SECTION 2.2. Term Loans and Borrowings
    32  
SECTION 2.3. [Intentionally Omitted]
    33  
SECTION 2.4. Notes; Repayment
    33  
SECTION 2.5. Interest on Loans
    33  
SECTION 2.6. Fees
    34  
SECTION 2.7. Termination of Commitment
    34  
SECTION 2.8. Default Interest; Alternate Rate of Interest
    34  
SECTION 2.9. Continuation and Conversion of Loans
    35  
SECTION 2.10. Voluntary and Mandatory Prepayment of Loans; Reimbursement of
Lenders
    36  
SECTION 2.11. Increased Costs
    38  
SECTION 2.12. Change in Legality
    39  
SECTION 2.13. Manner of Payments
    40  
SECTION 2.14. Taxes
    40  
SECTION 2.15. Interest Adjustments
    43  
 
       
3. REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES
    43  
 
       
SECTION 3.1. Existence and Power
    43  
SECTION 3.2. Authority and No Violation
    44  
SECTION 3.3. Governmental Approval
    44  
SECTION 3.4. Binding Agreements
    45  
SECTION 3.5. Financial Statements
    45  
SECTION 3.6. No Material Adverse Change
    45  
SECTION 3.7. Ownership of Pledged Securities, Subsidiaries, etc.
    45  
SECTION 3.8. Copyrights, Trademarks and Other Rights
    46  
SECTION 3.9. Fictitious Names
    47  
SECTION 3.10. Title to Properties
    47  
SECTION 3.11. Places of Business
    47  
SECTION 3.12. Litigation
    47  
SECTION 3.13. Federal Reserve Regulations
    47  
SECTION 3.14. Investment Company Act
    48  
SECTION 3.15. Taxes
    48  
SECTION 3.16. Compliance with ERISA
    48  
SECTION 3.17. Agreements
    48  
SECTION 3.18. Security Interest
    48  

-1-

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
(continued)

              Page
SECTION 3.19. Environmental Liabilities
    49  
SECTION 3.20. Pledged Securities
    49  
SECTION 3.21. Compliance with Laws
    50  
SECTION 3.22. Subsidiaries
    50  
SECTION 3.23. Solvency
    50  
SECTION 3.24. Distribution Rights
    50  
SECTION 3.25. Bank Accounts
    51  
SECTION 3.26. Disclosure
    51  
 
       
4. CONDITIONS OF LENDING
    51  
 
       
SECTION 4.1. Conditions Precedent to Initial Loan
    51  
 
       
5. AFFIRMATIVE COVENANTS
    55  
 
       
SECTION 5.1. Financial Statements and Reports
    55  
SECTION 5.2. Corporate Existence; Compliance with Laws
    57  
SECTION 5.3. Maintenance of Properties
    58  
SECTION 5.4. Notice of Material Events
    58  
SECTION 5.5. Insurance
    58  
SECTION 5.6. [Intentionally Omitted.]
    60  
SECTION 5.7. Copyrights and Trademarks
    60  
SECTION 5.8. Books and Records, Examination
    61  
SECTION 5.9. Third Party Audit Rights
    61  
SECTION 5.10. Observance of Agreements
    62  
SECTION 5.11. Film Properties and Rights; Borrower to Act as Pledgeholder
    62  
SECTION 5.12. Laboratories; No Removal
    62  
SECTION 5.13. Taxes and Charges
    62  
SECTION 5.14. Liens
    63  
SECTION 5.15. Further Assurances; Security Interests
    63  
SECTION 5.16. ERISA Compliance and Reports
    63  
SECTION 5.17. Environmental Laws
    64  
SECTION 5.18. Use of Proceeds
    65  
SECTION 5.19. Distribution Agreements, Letters of Credit, Etc.
    65  
SECTION 5.20. Deposit Accounts
    65  
SECTION 5.21. Subsidiaries
    66  
SECTION 5.22. [Intentionally Omitted.]
    66  
SECTION 5.23. [Intentionally Omitted.]
    66  
SECTION 5.24. Negative Cost Statements
    66  
SECTION 5.25. Cash Receipts
    66  
SECTION 5.26. Guild Undertakings
    67  
SECTION 5.27. Key Man Life Insurance
    67  
SECTION 5.28. Copyrights and Trademarks
    67  

-2-

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
(continued)

              Page
6. NEGATIVE COVENANTS
    67  
 
       
SECTION 6.1. Limitations on Indebtedness
    67  
SECTION 6.2. Limitations on Liens
    69  
SECTION 6.3. Limitation on Guaranties
    71  
SECTION 6.4. Limitations on Investments
    72  
SECTION 6.5. Restricted Payments
    73  
SECTION 6.6. Consolidation, Merger, Recapitalization or Sale of Assets, etc.
    75  
SECTION 6.7. Receivables
    76  
SECTION 6.8. Sale and Leaseback
    76  
SECTION 6.9. Places of Business; Change of Name, Jurisdiction
    77  
SECTION 6.10. Transactions with Affiliates
    77  
SECTION 6.11. Business Activities
    78  
SECTION 6.12. Fiscal Year End
    78  
SECTION 6.13. [Intentionally Omitted.]
    78  
SECTION 6.14. [Intentionally Omitted.]
    78  
SECTION 6.15. [Intentionally Omitted.]
    78  
SECTION 6.16. [Intentionally Omitted.]
    78  
SECTION 6.17. Swap Agreements
    78  
SECTION 6.18. Modification of Indebtedness, Material Agreements
    79  
SECTION 6.19. No Negative Pledge
    79  
SECTION 6.20. [Intentionally Omitted.]
    79  
SECTION 6.21. Coverage Ratio
    79  
SECTION 6.22. Additional Limitation on Production and Acquisition of Product
    79  
SECTION 6.23. Activities of Parent
    79  
SECTION 6.24. Certification of Equity Interests
    79  
 
       
7. EVENTS OF DEFAULT
    80  
 
       
8. GRANT OF SECURITY INTEREST; REMEDIES
    82  
 
       
SECTION 8.1. Security Interests
    82  
SECTION 8.2. Use of Collateral
    83  
SECTION 8.3. Collection Accounts
    83  
SECTION 8.4. Credit Parties to Hold in Trust
    83  
SECTION 8.5. Collections, etc.
    84  
SECTION 8.6. Possession, Sale of Collateral, etc.
    84  
SECTION 8.7. Application of Proceeds after Event of Default
    85  
SECTION 8.8. Power of Attorney
    86  
SECTION 8.9. Financing Statements, Direct Payments
    86  
SECTION 8.10. Further Assurances
    87  
SECTION 8.11. Termination and Release
    87  
SECTION 8.12. Remedies Not Exclusive
    87  

-3-

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
(continued)

              Page
SECTION 8.13. Quiet Enjoyment
    87  
SECTION 8.14. Continuation and Reinstatement
    88  
 
       
9. GUARANTY
    88  
 
       
SECTION 9.1. Guaranty
    88  
SECTION 9.2. No Impairment of Guaranty, etc.
    89  
SECTION 9.3. Continuation and Reinstatement, etc.
    89  
SECTION 9.4. Limitation on Guaranteed Amount, etc.
    90  
 
       
10. PLEDGE
    90  
 
       
SECTION 10.1. Pledge
    90  
SECTION 10.2. Covenant
    91  
SECTION 10.3. Registration in Nominee Name; Denominations
    91  
SECTION 10.4. Voting Rights; Dividends; etc.
    91  
SECTION 10.5. Remedies Upon Default
    92  
SECTION 10.6. Application of Proceeds of Sale and Cash
    93  
SECTION 10.7. Securities Act, etc.
    94  
SECTION 10.8. Continuation and Reinstatement
    94  
SECTION 10.9. Termination
    94  
 
       
11. CASH COLLATERAL
    95  
 
       
SECTION 11.1. Cash Collateral Accounts
    95  
SECTION 11.2. Investment of Funds
    95  
SECTION 11.3. Grant of Security Interest
    95  
SECTION 11.4. Remedies
    96  
 
       
12. THE ADMINISTRATIVE AGENT
    96  
 
       
SECTION 12.1. Administration by the Administrative Agent
    96  
SECTION 12.2. Payments
    97  
SECTION 12.3. Sharing of Setoffs and Cash Collateral
    97  
SECTION 12.4. Notice to the Lenders
    98  
SECTION 12.5. Liability of the Administrative Agent
    98  
SECTION 12.6. Reimbursement and Indemnification
    99  
SECTION 12.7. Rights of Administrative Agent
    99  
SECTION 12.8. Independent Investigation by Lenders
    99  
SECTION 12.9. Agreement of Required Lenders
    100  
SECTION 12.10. Notice of Transfer
    100  
SECTION 12.11. Successor Administrative Agent
    100  
 
       
13. MISCELLANEOUS
    101  
 
       
SECTION 13.1. Notices
    101  

-4-

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
(continued)

              Page
SECTION 13.2. Survival of Agreement, Representations and Warranties, etc.
    101  
SECTION 13.3. Successors and Assigns; Syndications; Loan Sales; Participations
    102  
SECTION 13.4. Expenses; Documentary Taxes
    105  
SECTION 13.5. Indemnity
    106  
SECTION 13.6. CHOICE OF LAW
    107  
SECTION 13.7. WAIVER OF JURY TRIAL
    107  
SECTION 13.8. WAIVER WITH RESPECT TO DAMAGES
    107  
SECTION 13.9. No Waiver
    108  
SECTION 13.10. Amendments, etc.
    108  
SECTION 13.11. Severability
    109  
SECTION 13.12. SERVICE OF PROCESS; SUBMISSION TO JURISDICTION
    110  
SECTION 13.13. Headings
    111  
SECTION 13.14. Execution in Counterparts
    111  
SECTION 13.15. Subordination of Intercompany Indebtedness, Receivables and
Advances
    111  
SECTION 13.16. USA Patriot Act
    111  
SECTION 13.17. Entire Agreement
    111  
SECTION 13.18. Confidentiality
    112  
SECTION 13.19. Termination of Agreements
    112  
SECTION 13.20. Effect of Amendment and Restatement of the Existing Senior
Facilities
    112  
SECTION 13.21. Commitments Under the Existing Senior Facilities
    113  

-5-