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Exhibit 10.2
 

 

 

CREDIT AGREEMENT
 
DATED AS OF [                     ], 2010
 
AMONG
 
CROWN MEDIA HOLDINGS, INC.
 
AS BORROWER
 
AND
 
HC CROWN CORP.,
 
AS LENDER
 
AND
 
EACH OF THE CREDIT
 
PARTIES IDENTIFIED ON
 
THE SIGNATURE PAGES HERETO
 

 

 
 

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5258558.25
 

TABLE OF CONTENTS
 
Page
 
 
1.
DEFINITIONS 
[INSERT PAGE NUMBER]

 
2.
THE LOANS 
[INSERT PAGE NUMBER]

 
Section 2.1
The Term A Loan 
[INSERT PAGE NUMBER]

 
Section 2.2
The Term B Loan 
[INSERT PAGE NUMBER]

 
Section 2.3
Deemed Making of the Loans 
[INSERT PAGE NUMBER]

 
Section 2.4
Notes; Repayment 
[INSERT PAGE NUMBER]

 
Section 2.5
Interest on Loans 
[INSERT PAGE NUMBER]

 
Section 2.6
Default Interest 
[INSERT PAGE NUMBER]

 
Section 2.7
Prepayment of Loans. Voluntary 
[INSERT PAGE NUMBER]

 
Section 2.8
Prepayment of Loans. Mandatory 
[INSERT PAGE NUMBER]

 
Section 2.9
Application of Mandatory and Voluntary Prepayments 
[INSERT PAGE NUMBER]

 
Section 2.10
Manner of Payments 
[INSERT PAGE NUMBER]

 
Section 2.11
United States Withholding 
[INSERT PAGE NUMBER]

 
Section 2.12
Debt Exchange Transaction 
[INSERT PAGE NUMBER]

 
Section 2.13
Change in Circumstances 
[INSERT PAGE NUMBER]

 
3.
REPRESENTATIONS AND WARRANTIES 
[INSERT PAGE NUMBER]

 
Section 3.1
Corporate Existence and Power 
[INSERT PAGE NUMBER]

 
Section 3.2
Authority and No Violation 
[INSERT PAGE NUMBER]

 
Section 3.3
Governmental and Other Approvals 
[INSERT PAGE NUMBER]

 
Section 3.4
Financial Statements 
[INSERT PAGE NUMBER]

 
Section 3.5
No Material Adverse Change 
[INSERT PAGE NUMBER]

 
Section 3.6
Subsidiaries 
[INSERT PAGE NUMBER]

 
Section 3.7
Intellectual Property 
[INSERT PAGE NUMBER]

 
Section 3.8
Fictitious Names 
[INSERT PAGE NUMBER]

 
Section 3.9
Title to Properties 
[INSERT PAGE NUMBER]

 
Section 3.10
Litigation 
[INSERT PAGE NUMBER]

 
Section 3.11
Regulations T, U and X 
[INSERT PAGE NUMBER]

 
Section 3.12
Investment Company Act 
[INSERT PAGE NUMBER]

 
Section 3.13
Binding Agreements 
[INSERT PAGE NUMBER]

 
Section 3.14
Taxes 
[INSERT PAGE NUMBER]

 
Section 3.15
Compliance with ERISA and Applicable Law 
[INSERT PAGE NUMBER]

 
Section 3.16
Indebtedness; Guaranties; Liens 
[INSERT PAGE NUMBER]

 
Section 3.17
Security Interest 
[INSERT PAGE NUMBER]

 
Section 3.18
Disclosure 
[INSERT PAGE NUMBER]

 
Section 3.19
Environmental Liabilities 
[INSERT PAGE NUMBER]

 
Section 3.20
Compliance with Laws 
[INSERT PAGE NUMBER]

 
Section 3.21
Bank Accounts 
[INSERT PAGE NUMBER]

 
Section 3.22
Solvency 
[INSERT PAGE NUMBER]

 
Section 3.23
Fundamental Documents 
[INSERT PAGE NUMBER]

 
Section 3.24
Agreements 
[INSERT PAGE NUMBER]

 
Section 3.25
Licensed Rights 
[INSERT PAGE NUMBER]

 
4.
CONDITIONS TO EFFECTIVENESS 
[INSERT PAGE NUMBER]

 
Section 4.1
Conditions Precedent to Effectiveness 
[INSERT PAGE NUMBER]

 
5.
AFFIRMATIVE COVENANTS 
[INSERT PAGE NUMBER]

 
Section 5.1
Financial Statements and Reports 
[INSERT PAGE NUMBER]

 
Section 5.2
Corporate Existence 
[INSERT PAGE NUMBER]

 
Section 5.3
Maintenance of Properties 
[INSERT PAGE NUMBER]

 
Section 5.4
Notice of Material Events 
[INSERT PAGE NUMBER]

 
Section 5.5
Insurance 
[INSERT PAGE NUMBER]

 
Section 5.6
Music 
[INSERT PAGE NUMBER]

 
Section 5.7
Copyrights and Trademarks 
[INSERT PAGE NUMBER]

 
Section 5.8
Books and Records 
[INSERT PAGE NUMBER]

 
Section 5.9
Observance of Agreements 
[INSERT PAGE NUMBER]

 
Section 5.10
Laboratories; No Removal 
[INSERT PAGE NUMBER]

 
Section 5.11
Taxes and Charges in Ordinary Course of Business 
[INSERT PAGE NUMBER]

 
Section 5.12
Liens 
[INSERT PAGE NUMBER]

 
Section 5.13
ERISA Compliance and Reports 
[INSERT PAGE NUMBER]

 
Section 5.14
Subsidiaries 
[INSERT PAGE NUMBER]

 
Section 5.15
Environmental Laws 
[INSERT PAGE NUMBER]

 
Section 5.16
Further Assurances; Security Interests 
[INSERT PAGE NUMBER]

 
Section 5.17
Bank Accounts 
[INSERT PAGE NUMBER]

 
Section 5.18
Credit Ratings 
[INSERT PAGE NUMBER]

 
6.
NEGATIVE COVENANTS 
[INSERT PAGE NUMBER]

 
Section 6.1
Limitations on Indebtedness 
[INSERT PAGE NUMBER]

 
Section 6.2
Limitations on Liens 
[INSERT PAGE NUMBER]

 
Section 6.3
Guaranties 
[INSERT PAGE NUMBER]

 
Section 6.4
Limitations on Investments 
[INSERT PAGE NUMBER]

 
Section 6.5
Restricted Payments 
[INSERT PAGE NUMBER]

 
Section 6.6
Limitations on Sale of Assets 
[INSERT PAGE NUMBER]

 
Section 6.7
Receivables 
[INSERT PAGE NUMBER]

 
Section 6.8
Tax Shelters, Sale and Leaseback etc 
[INSERT PAGE NUMBER]

 
Section 6.9
Places of Business; Change of Name 
[INSERT PAGE NUMBER]

 
Section 6.10
Limitations on Capital Expenditures 
[INSERT PAGE NUMBER]

 
Section 6.11
Transactions with Affiliates 
[INSERT PAGE NUMBER]

 
Section 6.12
Prohibition of Amendments or Waivers 
[INSERT PAGE NUMBER]

 
Section 6.13
No Negative Pledge 
[INSERT PAGE NUMBER]

 
Section 6.14
Acquisitions or Mergers, etc 
[INSERT PAGE NUMBER]

 
Section 6.15
Change in Business 
[INSERT PAGE NUMBER]

 
Section 6.16
ERISA Compliance 
[INSERT PAGE NUMBER]

 
Section 6.17
Interest Rate Protection Agreements, etc 
[INSERT PAGE NUMBER]

 
Section 6.18
Subsidiaries 
[INSERT PAGE NUMBER]

 
Section 6.19
Hazardous Materials 
[INSERT PAGE NUMBER]

 
Section 6.20
Cash Interest Coverage Ratio 
[INSERT PAGE NUMBER]

 
7.
EVENTS OF DEFAULT 
[INSERT PAGE NUMBER]

 
8.
NICC RESERVE ACCOUNT 
[INSERT PAGE NUMBER]

 
Section 8.1
NICC Reserve Account 
[INSERT PAGE NUMBER]

 
9.
MISCELLANEOUS 
[INSERT PAGE NUMBER]

 
Section 9.1
Notices 
[INSERT PAGE NUMBER]

 
Section 9.2
Survival of Agreement, Representations and Warranties, etc 
[INSERT PAGE NUMBER]

 
Section 9.3
Expenses; Documentary Taxes 
[INSERT PAGE NUMBER]

 
Section 9.4
Indemnification of the Lender 
[INSERT PAGE NUMBER]

 
Section 9.5
Choice of Law 
[INSERT PAGE NUMBER]

 
Section 9.6
Waiver of Jury Trial 
[INSERT PAGE NUMBER]

 
Section 9.7
Waiver with Respect to Damages and Venue 
[INSERT PAGE NUMBER]

 
Section 9.8
No Waiver 
[INSERT PAGE NUMBER]

 
Section 9.9
Extension of Payment Date 
[INSERT PAGE NUMBER]

 
Section 9.10
Amendments, etc 
[INSERT PAGE NUMBER]

 
Section 9.11
Severability 
[INSERT PAGE NUMBER]

 
Section 9.12
Service of Process 
[INSERT PAGE NUMBER]

 
Section 9.13
Headings 
[INSERT PAGE NUMBER]

 
Section 9.14
Execution in Counterparts 
[INSERT PAGE NUMBER]

 
Section 9.15
Confidentiality 
[INSERT PAGE NUMBER]

 
Section 9.16
Entire Agreement 
[INSERT PAGE NUMBER]

 
Section 9.17
Right of Set-Off 
[INSERT PAGE NUMBER]

 
Section 9.18
Assignment 
[INSERT PAGE NUMBER]

 
Section 9.19
Revolver Intercreditor Agreement 
[INSERT PAGE NUMBER]

 

 
 

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5258558.25
 

Exhibits
 
A                      Form of Security Agreement
 
B                      Form of Pledge Agreement
 
Schedules
 
3.1                      List of Credit Parties
 
3.6                      List of Subsidiaries
 
3.8                      Fictitious Names
 
3.10                      Litigation
 
3.16                      Existing Indebtedness, Guarantees and Liens
 
3.21                      Bank Accounts
 
3.24                      Agreements
 

 
 

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5258558.25
 

CREDIT AGREEMENT, dated as of _____, 2010
 
among (i) CROWN MEDIA HOLDINGS, INC.,
 
a Delaware corporation (the “Borrower”),
 
(ii) HC CROWN CORP., a Delaware corporation (the “Lender”), and
 
(iii) EACH OF THE CREDIT PARTIES identified on the signature page hereto.
 
INTRODUCTORY STATEMENTS
 
All terms not otherwise defined above or in this Introductory Statement are as
defined in Article 1 hereof, or as defined elsewhere herein.
 
The Borrower and the Lender, together with its Subsidiaries and Affiliates are a
party to the HCC Debt (as amended, restated, modified or supplemented from time
to time).
 
Immediately prior to the Closing Date, there was outstanding [$__________] (the
“Original Obligations”) under the HCC Debt.
 
Effective upon the Closing Date: (a) $185,000,000 of the Original Obligations
will be exchanged in consideration for Series A Preferred Stock on the terms set
forth in the Master Recapitalization Agreement, (b) $315,000,000 of the Original
Obligations will be exchanged in consideration for the Lender providing a Term A
Loan of $200,000,000 and a Term B Loan of $115,000,000; (c) the balance of the
Original Obligations will be exchanged in consideration for the Lender receiving
common stock in the Borrower at the Conversion Price and on the terms set forth
in the Master Recapitalization Agreement; and (d) Hallmark Entertainment
Holdings, Inc. and Hallmark Entertainment Investments Co., (the “Hallmark
Entities”) will merge with and into the Borrower, with the Borrower being the
surviving entity and the shareholders of the Hallmark Entities prior to such
merger receiving their pro rata issuance of common stock in the Borrower on the
terms set forth in the Master Recapitalization Agreement and the exhibits
thereto.
 
To provide security for the repayment of the Original Obligations, each of the
Credit Parties granted to the Lender a first priority Lien, subject to certain
Permitted Encumbrances, on substantially all of its real and personal property
(the “Original Lien”).  The Credit Parties shall modify the documents which
create the Original Lien such that the liens securing the Original Obligations
shall secure the Obligations, and each of the Credit Parties (other than the
Borrower) will provide a Subsidiary Guaranty in favor of the Lender to guarantee
repayment of the Loans and all other obligations of the Borrower.
 
As a result of the Transactions, all of the HCC Debt, except to the extent
converted and continued as the Term A Loan and Term B Loan, shall be
extinguished and discharged. In consideration of the premises and the covenants
and agreements contained herein, the parties hereto agree as follows:
 
1.  
DEFINITIONS

 
For the purposes hereof unless the context otherwise requires, 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.  Unless the context otherwise
requires, any of the following terms may be used in the singular or the plural,
depending on the reference:
 
“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the person specified.
 
“Agreement” and “Credit Agreement” shall mean this Credit Agreement, as it may
be amended, supplemented or otherwise modified from time to time.
 
“Applicable Law” shall mean, collectively, all international, foreign, Federal,
state and local statutes, treaties, rules, guidelines, regulations, ordinances,
codes and administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directives, requests, licenses, authorizations
and permits of, and agreements with, any Governmental Authority, in each case
whether or not having the force of law.
 
“Authorized Officer” shall mean, with respect to any Person, its chief executive
officer, chief operating officer or chief financial officer.
 
“Board” shall mean the Board of Governors of the Federal Reserve System of the
United States of America.
 
“Borrower” shall have the meaning given to it in the Introductory Statements.
 
“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which banks in the City of New York are permitted to close.
 
“Capital Expenditures” shall mean, with respect to any Person for any period,
the sum of (i) 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 or should be included in “additions to property, plant or
equipment” or similar items included in cash flows (including Capital Leases)
and (ii) to the extent not covered by clause (i) hereof, the aggregate of all
expenditures properly capitalized in accordance with GAAP by such Person to
acquire, by purchase or otherwise, the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any other Person (other than
the portion of such expenditures allocable in accordance with GAAP to net
current assets or which is allocable to the acquisition of items of
Product).  For the avoidance of doubt, no expenditures for the acquisition of
items of Product shall be included in the definition of “Capital Expenditures.”
 
“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 or should be accounted for as a capital lease on the balance sheet
of that Person.
 
“Cash Equivalents” shall mean any of the following types of Investments, to the
extent owned by the Borrower or any of its Subsidiaries free and clear of all
Liens (other than Liens created under the Fundamental Documents and Permitted
Encumbrances):
 
(i)           readily marketable obligations issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than 90 days from the date
of acquisition thereof; provided that the full faith and credit of the United
States of America is pledged in support thereof;
 
(ii)           time deposits with, or insured certificates of deposit or
bankers’ acceptances of, any commercial bank that is (A) organized under the
laws of the United States of America, any state thereof or the District of
Columbia or is the principal banking subsidiary of a bank holding company
organized under the laws of the United States of America, any state thereof or
the District of Columbia, and is a member of the Federal Reserve System, (B)
issues (or the parent of which issues) commercial paper rated as described in
clause (iii) of this definition and (C) has combined capital and surplus of at
least $1,000,000,000, in each case with maturities of not more than 90 days from
the date of acquisition thereof; and
 
(iii)           Investments, classified in accordance with GAAP as current
assets of the Borrower or any of its Subsidiaries, in money market investment
programs registered under the Investment Company Act of 1940, which are
administered by financial institutions that have the highest rating obtainable
from either Moody’s or S&P, and the portfolios of which are limited solely to
Investments of the character, quality and maturity described in clauses (i), and
(ii) of this definition.
 
“Cash Interest Coverage Ratio” shall mean, at any date, with respect to the
Borrower and its Consolidated Subsidiaries, the ratio of (a) EBITDA of such
Persons to (b) the sum of the Term Loan A Cash Interest Expense of such persons
and the Term Loan B Cash Interest Expense of such Persons, in each case for the
most recently completed Measurement Period.
 
“Cash Interest Expense” shall mean the sum of the Term A Loan Cash Interest
Expense and the Term B Loan Cash Interest Expense.
 
“Casualty” shall mean any casualty, loss, damage, destruction or similar loss
with respect to real or personal property or improvements.
 
“Change in Control” shall mean (a) the Lender or its Affiliates shall cease to
own (directly or indirectly) at least 80% of the Equity Interests of the
Borrower, or (b) the Lender shall cease to have sufficient voting power to elect
(or cause to be elected) a majority of the members of the Borrower’s Board of
Directors.
 
“Closing Date” shall have the meaning set forth in Section 4.1.
 
“Code” shall mean the Internal Revenue Code of 1986 and the rules and
regulations issued thereunder, as heretofore and hereafter amended, as codified
at 26 U.S.C. et seq., or any successor provision thereto.
 
“Collateral” shall have the meaning given to it in the Fundamental Documents.
 
“Compliance Certificate” means a certificate in form and substance reasonably
satisfactory to the Lender.
 
“Condemnation” shall mean any taking by a Governmental Authority of property or
assets, or any part thereof or interest therein, for public or quasi-public use
under the power of eminent domain, by reason of any public improvement or
condemnation or in any other matter.
 
“Consolidated Net Income” shall mean, for any period for which such amount is
being determined, the consolidated net income of such Person for such period in
accordance with GAAP.
 
“Consolidated Subsidiaries” shall mean, for any Person, all subsidiaries of such
Person which are required or permitted to be consolidated with such Person for
financial reporting purposes in accordance with GAAP.
 
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power by contract or
otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.
 
“Conversion Price” shall have the meaning given to it in the Master
Recapitalization Agreement.
 
“Copyright Security Agreement” shall mean the Copyright Security Agreement,
dated on or about the date of this Agreement, among the Borrower, the Subsidiary
Guarantors and the Lender, as the same may be amended or supplemented from time
to time by delivery of a copyright security agreement supplement or otherwise.
 
“Credit Parties” shall mean the Borrower and each of the Subsidiary Guarantors.
 
“Currency Agreement” shall mean any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement designed to protect the Borrower against fluctuations in currency
values.
 
“Debt Issuance” shall mean the issuance or incurrence by any Credit Party of any
Indebtedness.
 
“Default” shall mean any event, act or condition which with notice or lapse of
time, or both, would constitute an Event of Default.
 
“Default Rate” shall mean with respect to any Obligation, a rate of interest per
annum equal to the rate of interest otherwise in effect from time to time
pursuant to the terms of this Agreement with respect to such Obligation, plus
two percent (2%).
 
“Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition of any property (except for ad sales and programming time to the
extent Disposed in the ordinary course of business and any other sale, transfer,
license, lease, or other disposition of property in the ordinary course of
business that has a value of less than $100,000 individually or $500,000 in the
aggregate) by any Person (including any sale/leaseback transaction), including
any sale, assignment, transfer or other disposal, with or without recourse, of
any notes or accounts receivable or any rights and claims associated therewith;
provided, however, that a sale under threat of eminent domain shall not be
deemed to be a Disposition.
 
“Dollars” and “$” shall mean lawful money of the United States of America.
 
“EBITDA”  shall mean for any period, for the Borrower and its Subsidiaries on a
consolidated basis the sum of:  (a) Consolidated Net Income, plus (b) to the
extent Consolidated Net Income was reduced by such items: (i) provision for
income taxes during such period, (ii) interest expense deducted in computing
Consolidated Net Income, (iii) total depreciation expense and total amortization
expense (other than the amortization of capitalized film costs), (iv) any
extraordinary, unusual or non-recurring expense or loss, whether or not included
as a separate item in the statement of Consolidated Net Income for such period
(including, but not limited to any loss on the sales of assets outside of the
ordinary course of business, impairment of assets, restructuring charges,
Transaction Costs and write-offs of deferred costs for such period), and (v) any
other non-cash charges (other than write-offs or write-downs during such period
of inventory, accounts receivable or any other current assets or liabilities in
the ordinary course of business), minus (c)(i) any extraordinary, unusual or
non-recurring item of income or gain (including, whether or not such item is
otherwise included as a separate item in the statement of Consolidated Net
Income for such period, any gain on the sale of assets outside of the ordinary
course of business) for such period, and (ii) any other non-cash income items
increasing Consolidated Net Income for such period, all as determined for such
period in conformity with GAAP.
 
“Environmental Laws” shall mean any and all 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 or 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. Section 1251 et seq.,
the Clean Air Act (“CAA”), 42 U.S.C. Sections 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act (“FIFRA”), 7 U.S.C. Sections 136 et
seq., the Surface Mining Control and Reclamation Act (“SMCRA”), 30 U.S.C.
Sections 1201 et seq., the Comprehensive Environmental Response, Compensation
and Liability Act (“CERCLA”), 42 U.S.C. Section 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 (“EPCRA”), 42
U.S.C. Section 11001 et seq., the Resource Conservation and Recovery Act
(“RCRA”), 42 U.S.C. Section 6901 et seq., the Occupational Safety and Health Act
as amended (“OSHA”), 29 U.S.C. Section 655 and Section 657, and other such laws
relating to the storage, transportation, treatment and disposal of Hazardous
Materials into the air, surface water, ground water, land surface, subsurface
strata or any building or structure and, together, in each case, with any
amendment thereto, and the regulations adopted pursuant thereto.
 
“Equity Interest” shall mean shares of the capital stock, partnership interests,
membership interest 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.
 
“Equity Issuance” shall mean: (i) any sale or issuance by any Credit Party to
any Person other than the Lender of any Equity Interests, and (ii) the receipt
by any Credit Party of any cash capital contributions, whether or not paid in
connection with any issuance of Equity Interests of any Credit Party, from any
Person other than the Lender.
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
heretofore and hereafter amended, as codified at 29 U.S.C. Section 1001 et seq.,
and the regulations promulgated thereunder.
 
“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.
 
“Events of Default” shall have the meaning given such term in Article 7 hereof.
 
“Excess Cash Flow” shall mean, with respect to Borrower and its Consolidated
Subsidiaries for any period, an amount equal to the greater of zero or the sum
of:
 
(a) the amount of “Cash Flow from Operating Activities”, as shown in Borrower’s
Consolidated Statement of Cash Flows reported in its filing on form 10-K for
such period, minus;
 
(b) all cash outflows shown in the “Cash Flow from Investing Activities” section
of Borrower’s Consolidated Statement of Cash Flows reported in its filing on
form 10-K for such period to the extent such payments were made in compliance
with this Agreement, minus;
 
(c) any principal payments made on capital lease obligations, as shown in the
“Cash Flow from Financing Activities” section of Borrower’s Consolidated
Statement of Cash Flows reported in its filing on form 10-K for such period to
the extent such payments were made in compliance with this Agreement, minus;
 
(d) any net reduction to the balance of the Revolving Credit Agreement during
such period, minus;
 
(e) any voluntary repayment of the Term A Loan or the Term B Loan, minus;
 
(f) the aggregate amount of cash transferred during such period to the NICC
Reserve Account, minus;
 
(g) any cash dividend on the Series A Preferred Stock during such period, minus;
 
(h) any cash payments made pursuant to the Tax Sharing Agreement.
 
Provided, however that for the purposes of the calculation set forth in Section
2.8(a)(ii) hereof all references herein to the Borrower’s Consolidated Statement
of Cash Flows reported filing on form 10-K for such period shall include the
equivalent section of the Borrower’s filing on form 10-Q for such period as
required in connection with such calculation.
 
“Executive Officer” shall mean, with respect to any Person, its chief executive
officer, chief operating officer, chief financial officer or executive or senior
vice president.
 
“Fundamental Documents” shall mean this Credit Agreement, the Notes, the
Security Agreement, the Pledge Agreement, the Copyright Security Agreement, the
Trademark Security Agreement, the UCC Financing Statements, the Subsidiary
Guaranty, the Intercreditor Agreement and any other ancillary agreement which is
required to be or otherwise executed by such Credit Party and delivered to the
Lender in connection with this Agreement or any other Fundamental Document.
 
“GAAP” shall mean generally accepted accounting principles in the United States
of America consistently applied as in effect on the date hereof; provided,
however, that if either the Lender or the Borrower proposes that GAAP be
modified as a result of any changes allowed by or in response to FASB releases
or other authoritative pronouncements issued after the date hereof, the Lender
or the Borrower (as applicable) agree not to unreasonably withhold or delay
their consent to any such proposal so long as such proposed modification would
not affect the calculation of any of the financial covenants contained herein.
 
“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 or foreign or other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
 
“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 owner of any such primary obligation.  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 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 (1) mean the obligation of Hallmark Cards to guarantee
the Revolving Credit Agreement pursuant to the Stockholders Agreement (as such
term is defined in the Master Recapitalization Agreement), and (2) any Guaranty
of the Revolving Credit Agreement by Hallmark Cards or its Affiliates.
 
“Hazardous Materials” shall mean any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or similar materials defined as such in any Environmental Law.
 
“HCC Debt” shall have the meaning set forth in the Master Recapitalization
Agreement.
 
“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 90 days) arising 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; (iv) deferred
payment obligations of such Person resulting from the adjudication or settlement
of any litigation; (v) obligations of such Person under synthetic leases or
financing leases (but not operating leases); and (vi) indebtedness of others of
the type described in clauses (i), (ii), (iii), (iv) and (v) 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 (provided, that if such Person has not
assumed such indebtedness of another Person then the amount of indebtedness of
such Person pursuant to this clause (vi) for purposes of this Credit Agreement
shall be equal to the lesser of the amount of the indebtedness of the other
Person and the fair market value of the assets of such Person which secure such
other indebtedness).
 
“Interest Expense” shall mean, for any period in respect of the Borrower and its
Consolidated Subsidiaries, the sum of (a) the interest expense (including the
interest component in respect of Capital Lease obligations), plus (b) all
commitment fees, letter of credit fees, issuing bank fees, or similar fees paid
by such Persons during such period in respect of any Indebtedness, plus (c) the
net amounts paid by such Persons during such period in connection with any
Interest Rate Protection Agreement, Currency Agreement or other hedging
arrangement, plus (d) any dividends or similar amounts paid by such Persons
during such period in respect of any preferred stock.
 
“Interest Payment Date” shall mean each March 31, June 30, September 30 and
December 31 of each year commencing on the first of such dates following the
Closing Date; provided that if the Closing Date occurs on the last day of a
quarter, the initial Interest Payment Date shall commence on the Interest
Payment Date following the first full quarter after the Closing Date.
 
“Interest Rate Protection Agreement” shall mean any interest rate swap
agreement, interest rate cap agreement, synthetic cap, collar or floor or other
financial agreement or arrangement designed to protect a Credit Party against
fluctuations in interest rates.
 
“Intercreditor Agreement” shall mean the Intercreditor Agreement, dated on or
about the date of this Agreement among the Borrower, the Lender and the lender
under the Borrower’s revolving credit facility.
 
“Investment” shall mean any stock, evidence of indebtedness or other security 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), any purchase of (i) any
security of another Person or (ii) any business or undertaking of any Person or
any commitment to make any such purchase, or any other investment; provided,
however, that any acquisition of, or licensing agreements or arrangements with
respect to, Product or rights to Product shall not be deemed an Investment for
purposes of this Agreement.
 
“JPM Credit Agreement” means the Credit Agreement, dated August 31, 2001 among
the Borrower, the subsidiaries named therein as guarantors, and the lenders and
agents named therein, as the same may be amended, modified or supplemented from
time to time.
 
“Laboratory” shall mean any laboratory acceptable to the Lender which is located
in the United States and is a party to a Pledgeholder Agreement or a Laboratory
Access Letter.
 
“Laboratory Access Letter” shall mean a letter agreement among: (i) a Laboratory
holding any elements of any Product to which any Credit Party has the right of
access, (ii) such Credit Party and (iii) the Lender, in form and substance
acceptable to the Lender.
 
“Lender” shall have the meaning given to it in the Introductory Statements.
 
“License Agreements” shall mean any and all agreements entered into by any
Credit Party pursuant to which such Credit Party acquires license rights in any
item of Product.
 
“Lien” shall mean any mortgage, pledge, security interest, copyright mortgage,
lien, charge or encumbrance of any kind whatsoever (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
the filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction).
 
“Loans” shall mean the Term A Loan and the Term B Loan.
 
“Master Recapitalization Agreement” shall mean the agreement entered into
between the Borrower and the Lender, dated February 26, 2010.
 
“Material Adverse Effect” shall mean any change or effect that (a) has a
materially adverse effect on the business, assets, properties, operations, or
condition (financial or otherwise) of the Borrower and its Subsidiaries, taken
as a whole, (b) materially impairs the ability of any Credit Party to perform
its respective obligations under the Fundamental Documents to which it is a
party, or (c) materially impairs the validity or enforceability of, or
materially impairs the security interests, rights, remedies or benefits
available to the Lender under any of the Fundamental Documents.  As the term
Material Adverse effect is used in Section 4 hereof, solely with regard to
subsection (a) of the definition, no effect, change, event, occurrence,
development, condition or state of facts arising or resulting from any of the
following, either alone or in combination, shall constitute or be taken into
account in determining whether there has been a Material Adverse Effect: (i)
changes in general economic conditions or changes affecting the industry
generally in which the Borrower and its Subsidiaries operate, except to the
extent such changes have a disproportionate effect on the Borrower and its
Subsidiaries, (ii) the announcement or performance of the Transactions, (iii)
acts of war or terrorism or natural disasters, except to the extent such acts of
war, terrorism or natural disasters have a disproportionate effect on the
Borrower and its Subsidiaries (iv) the fact, in and of itself (and not the
underlying causes thereof) that any Credit Party failed to meet any projections,
forecasts, or revenue or earnings predictions for any period, or (v) any change,
in and of itself (and not the underlying causes thereof) in the stock price of
the common stock of the Borrower.
 
“Maturity Date” shall mean December 31, 2013.
 
“Measurement Period” shall mean, as at any date of determination, the four (4)
consecutive fiscal quarters of the Borrower ending on such day, or, if fewer
than four consecutive fiscal quarters of the Borrower have been completed since
the Closing Date, the fiscal quarters of the Borrower that have been completed
since the Closing Date, provided that: (i) for purposes of determining an amount
of any item/the amount of Cash Interest Expense included in the calculation of
the Cash Interest Coverage Ratio for the first full fiscal quarter ended after
the Closing Date, such amount for the Measurement Period then ended shall equal
such item for such fiscal quarter multiplied by four; (ii) for purposes of
determining an amount of any item/the amount of Cash Interest Expense included
in the calculation of the Cash Interest Coverage Ratio for the second fiscal
quarter ended after the Closing Date, such amount for the Measurement Period
then ended shall equal such item for the two fiscal quarters then ended
multiplied by two; and (iii) for purposes of determining an amount of any
item/the amount of Cash Interest Expense included in the calculation of the Cash
Interest Coverage Ratio for the third fiscal quarter ended after the Closing
Date, such amount for the Measurement Period then ended shall equal such item
for the three fiscal quarters then ended multiplied by 4/3.
 
“Multiemployer Plan” shall mean a plan that is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA to which any Credit Party or ERISA Affiliate is
making or accruing an obligation to make contributions or has within any of the
five preceding plan years made or accrued an obligation to make contributions.
 
“Net Cash Proceeds” shall mean: (a) with respect to any Equity Issuance or Debt
Issuance by any Credit Party, cash payments received in exchange for the
issuance of any debt or equity security by any Credit Party net of commissions
and other reasonable fees and expenses incurred, any taxes payable and
reasonably estimated income taxes payable with respect to the fiscal year during
which such issuance occurs, as a consequence of any repatriation of such cash
payments, (b) with respect to the Disposition of any asset by any Credit Party,
any cash payments (including any cash received by way of a deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received) received from such Disposition, net of any bona fide
direct costs (including professional fees and costs) incurred in connection with
such Disposition, including (i) income taxes reasonably estimated to be actually
payable by any direct or indirect equity owner of Borrower within two years of
the date of such Disposition as a result of any gain recognized in connection
with such Disposition and (ii) the payment of the outstanding principal amount
of, premium or penalty, if any, and interest on any Indebtedness (other than the
Loans) that is (A) secured by a Lien on the stock or assets in question and that
is required to be repaid under the terms thereof as a result of such Disposition
and (B) actually paid within thirty (30) days of receipt of such cash payment to
a Person that is not an Affiliate of any Credit Party; provided, however, that
Net Cash Proceeds shall not include (x) any cash payments received from any
Disposition by a foreign Subsidiary unless and until such proceeds may be
repatriated (by reason of a repayment of an intercompany note or otherwise) to
the United States without resulting in a material tax liability to Borrower or
to any direct or indirect equity owner of Borrower, or (y) amounts provided as a
reserve against any liabilities under any indemnification obligation, or any
anticipated indemnity obligation or purchase price adjustment associated with a
Disposition; provided that such amounts so reserved shall become Net Cash
Proceeds if, when and to the extent, any such reserve is reversed or released,
and (c) with respect to any Casualty or Condemnation, any cash payments or
proceeds received by any Credit Party (i) under any business interruption or
property insurance policy in respect of a covered loss thereunder, or (ii) as a
result of the taking of any assets of any Credit Party or any of its
Subsidiaries by any Person pursuant to the power of eminent domain, condemnation
or otherwise, or pursuant to a sale of any such assets to a purchaser with such
power under threat of such a taking, in each case net of any actual and
reasonable documented costs incurred by any Credit Party or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
any Credit Party or such Subsidiary in respect thereof.
 
“NICC Preferred Interest” shall mean the $25,000,000 preferred interest in Crown
Media United States, LLC described in Section 5 of the Crown Media United
States, LLC limited liability company agreement.
 
“NICC Reserve Account” shall mean, a segregated bank account with a balance not
in excess of $25,000,000, in the name of the Borrower which shall be used by the
Borrower for the sole purpose of paying the NICC Preferred Interest.
 
“Note” or “Notes” shall mean the Term Note(s).
 
“Obligations” shall mean the obligation of the Borrower to make due and punctual
payment of principal of and interest (including, for the avoidance of doubt, any
payment in kind interest) on the Loans, any fees, costs and attorneys’ fees and
all other monetary obligations of the Borrower to the Lender, under this
Agreement, the Notes, or any other Fundamental Document.
 
“Original Obligations” shall have the meaning set forth in the recitals hereto.
 
“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant
to Section 4002 of ERISA, or any successor thereto.
 
“Perfection Certificate” has the meaning given to it in the Security Agreement.
 
“Permitted Encumbrances” shall mean Liens permitted under Section 6.2 hereof.
 
“Person” shall mean any natural person, corporation, division of a corporation,
partnership, trust, joint venture, association, company, estate, unincorporated
organization or Governmental Authority.
 
“Physical Materials” shall mean 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
other optical or electronic media or otherwise and all music sheets and
promotional materials relating to such item of Product.
 
“PIK Election” means an election by Borrower by written notice to the Lender at
least ten (10) Business Days prior to the beginning of a calendar quarter to pay
interest on the Term A Loan and/or the Term B Loan for that calendar quarter, on
any Interest Payment Date entirely in kind, other than elections to pay interest
in kind pursuant to Section 2.5(b)(i); provided, that (a) the Borrower may only
make such written election in respect of three (3) interest payments; and (b)
the parties understand that PIK Elections with respect to the Term A Loan and
the Term B Loan in a single calendar quarter shall constitute two (2) of the
three (3) PIK Elections.
 
“Plan” shall mean an employee benefit plan within the meaning of Section 3(3) of
ERISA (other than a Multiemployer Plan) which is maintained, sponsored or
contributed to by any Credit Party or any ERISA Affiliates, or with respect to
which any Credit Party could otherwise have any liability.
 
“Platform Agreements” shall mean any and all agreements entered into by a Credit
Party with a television distributor pursuant to which the television distributor
agrees to deliver channels owned by a Credit Party to subscribers in exchange
for a fee.
 
“Pledge Agreement” shall mean the Pledge Agreement, substantially in the form
attached as Exhibit B hereto with such changes as are acceptable to the Lender,
dated as of the date hereof, among the Lender, the Borrower and the Subsidiary
Guarantors, as the same may be amended, modified or supplemented from time to
time.
 
“Pledgeholder Agreement” shall mean a Laboratory Pledgeholder Agreement among a
Credit Party, the  Lender and one or more Laboratories located within the
continental United States, in form and substance acceptable to the Lender.
 
“Product” shall mean any movie-of-the-week, episode of a television series,
mini-series, motion picture, film, videotape or other program produced for
television release or for release in any other medium, shown on network, free,
cable, pay and/or other television medium (including without limitation first
run syndication) in each case whether recorded on film, videotape, cassette,
cartridge, disc or on or by any other means, method, process or device whether
now known or hereafter developed.  The term “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 any of the Credit Parties, and all rights therein and thereto, of
every kind and character.
 
“Regulation T”, “Regulation U” and “Regulation X” shall mean such regulation of
the Board.
 
“Reportable Event” shall mean any reportable event as described in Section
4043(c) of ERISA, other than a reportable event as to which provision for 30-day
notice to the PBGC would be waived under applicable regulations had the
regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event.
 
“Restricted Payment” shall mean (i) any distribution, dividend or other direct
or indirect payment on account of any Equity Interest in a Credit Party or an
Affiliate, in each case whether now or hereafter outstanding and (ii) any
redemption or other acquisition or re-acquisition by a Credit Party of any
Equity Interest in a Credit Party or an Affiliate, in each case whether now or
hereafter outstanding.
 
“Revolving Credit Agreement” has the meaning given to it in Section 6.1(vi).
 
“S.E.C.” shall mean the Securities and Exchange Commission or any successor
thereto.
 
“Security Agreement” shall mean the Security Agreement, substantially in the
form attached as Exhibit A hereto with such changes as are acceptable to the
Lender, dated as of the date hereof, among the Lender, the Borrower and the
Subsidiary Guarantors, as the same may be amended, modified or supplemented from
time to time.
 
“Series A Preferred Stock” shall mean the Company’s Series A Convertible
Preferred Stock, par value $.01 per share, the terms of which shall be as set
forth in the Certificate of Designation (as such term is defined in the Master
Recapitalization Agreement).
 
“Solvent” shall mean, with respect to any Person on any date of determination,
that on such date (i) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person, (ii) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (iii) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person’s ability to pay such debts and liabilities as they mature,
(iv) such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person’s property would
constitute an unreasonably small capital and (v) such Person is able to pay its
debts and liabilities, contingent obligations and other commitments as they
mature in the ordinary course of business.  The amount of contingent liabilities
at any time shall be computed as the amount that, in the light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
 
“Stockholders Agreement” shall mean the Stockholders Agreement, dated as of
[________] [__], 2010, by and among Lender, Hallmark Cards, Incorporated, a
Missouri corporation and Borrower.
 
“Subsidiary” shall mean with respect to any Person, any corporation,
association, joint venture, partnership, limited liability company 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.
 
“Subscriber” shall mean any Person or location that receives a channel owned or
operated by a Credit Party either directly from a pay television distributor
party to a Platform Agreement or from cable operators to whom such pay
television distributors sublicense the right to distribute such channel.
 
“Subsidiary Guaranty” shall mean the guaranty granted by the Subsidiary
Guarantors, in form and substance reasonably satisfactory to the Lender, in
favor of the Lender, together with each other guaranty or guaranty supplement.
 
“Subsidiary Guarantor” means each Subsidiary of Borrower on the Closing Date
(other than a foreign Subsidiary) and each Subsidiary of Borrower that becomes a
party to the Subsidiary Guaranty after the Closing Date, by execution of an
agreement in form and substance acceptable to the Lender and Subsidiary
Guarantors shall mean any two or more of them.
 
“Tax Sharing Agreement” shall mean the existing Federal Income Tax Sharing
Agreement between the Lender and the Borrower, dated as of March 11, 2003, as
the same may be amended or supplemented from time to time.
 
“Term A Loan” shall mean the term A loan in the principal amount of $200,000,000
deemed to have been made by the Lender to the Borrower pursuant to this
Agreement.
 
“Term A Loan Cash Interest Expense” shall mean, at any date, with respect to the
Borrower and its Consolidated Subsidiaries, Interest Expense that has been paid
or is payable in cash with respect to the Term A Loan for the most recently
ended Measurement Period.
 
“Term B Loan” shall mean the term B loan in the principal amount of $115,000,000
deemed to have been made by the Lender to the Borrower pursuant to this
Agreement.
 
“Term B Loan Cash Interest Expense” shall mean, at any date, with respect to the
Borrower and its Consolidated Subsidiaries, Interest Expense that has been paid
or is payable in cash with respect to the Term B Loan for the most recently
ended Measurement Period.
 
“Term Loans” shall mean, collectively, the term loans deemed to have been made
hereunder in accordance with the provisions of Article 2.
 
“Term Notes” shall have the meaning given such term in Section 2.4.
 
“Trademark Security Agreement” shall mean the Trademark Security Agreement dated
on or about the date of this Agreement, among the Borrower, the Subsidiary
Guarantors and the Lender, as the same may be amended or supplemented from time
to time by delivery of a  trademark security agreement supplement or otherwise.
 
“Transactions” means the transactions contemplated by this Agreement and the
Master Recapitalization Agreement and the exhibits thereto.
 
“Transaction Costs” shall mean the fees, costs and expenses payable by the
Borrower on or before the sixtieth (60th) day following the Closing Date in
connection with the Transactions.
 
“UCC” shall mean the Uniform Commercial Code as in effect in the State of New
York on the date of execution of this Agreement.
 
2.  
THE LOANS

 
Section 2.1 The Term A Loan.  Subject to the terms and conditions set forth
herein, the Lender agrees on the Closing Date that the Lender holds the HCC
Debt, and $200,000,000 of the HCC Debt shall be deemed to be, and is hereby
converted and exchanged into, on a dollar for dollar basis, the outstanding Term
A Loan hereunder, without constituting a novation.  Any principal amount of the
Term A Loan which is repaid or prepaid may not be reborrowed.
 
Section 2.2 The Term B Loan.  Subject to the terms and conditions set forth
herein, the Lender agrees on the Closing Date that the Lender holds the HCC
Debt, and that $115,000,000 of the HCC Debt shall be deemed to be, and is hereby
exchanged and converted into, on a dollar for dollar basis, the outstanding Term
B Loan hereunder, without constituting a novation.  Any principal amount of the
Term B Loan which is repaid or prepaid may not be reborrowed.
 
Section 2.3 Deemed Making of the Loans.  The Borrower shall give the Lender
prior telephonic notice (immediately confirmed in writing, in form and substance
reasonably satisfactory to the Lender (a “Notice of Deemed Borrowing”)), not
later than 1:00 p.m. (New York City time) on the date which is one (1) Business
Day prior to the Closing Date.  Such Notice of Deemed Borrowing shall be
irrevocable and shall specify: (a) the principal amount of the proposed Loan,
and (b) the proposed borrowing date, which must be a Business Day, and must be
the Closing Date.  The Lender may act without liability upon the basis of
written, telecopied or telephonic notice believed by the Lender in good faith to
be from the Borrower (or from any Authorized Officer).  The Borrower hereby
waives the right to dispute the Lender’s record of the terms of any such
telephonic Notice of Deemed Borrowing.
 
Section 2.4 Notes; Repayment.  (a)The Term Loans deemed to be made by the Lender
hereunder shall be evidenced by a promissory note in form and substance
reasonably satisfactory to the Lender (a “Term Note” and collectively the “Term
Notes”) in the face amount of the Lender’s Term Loan, payable to the order of
the Lender, duly executed on behalf of the Borrower and dated the date
hereof.  The principal amount of the Term Loans, together with any accrued but
unpaid interest shall be payable in full on the Maturity Date subject to
acceleration as provided in Article 7 hereof.
 
(b) The Term Loans shall bear interest on the outstanding principal balance
thereof as set forth in Section 2.5 hereof.  The Lender 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 the Notes; provided,
however, that the failure of the Lender 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.  Subject to the provisions of Section 2.6, the
Term Loans shall bear interest as follows:
 
(a) In the case of the Term A Loan, interest shall be payable by the
Borrower  on the outstanding principal amount of the Term A Loan, at a rate per
annum (computed on the basis of a 365-day or 366-day year, as the case may be)
equal to: (x) commencing on the Closing Date through the calendar quarter ending
on December 31, 2011, nine and one half percent (9.5%) per annum, and (y)
thereafter, at a rate per annum equal to twelve percent (12%) per
annum.  Interest shall be payable on the Term A Loan, on and to each Interest
Payment Date, upon any prepayment of the Term A Loan and on the Maturity Date
and subject to subparagraph (c) of this Section 2.5, is payable entirely in
cash.  Interest shall be payable by the Borrower from and including the first
Business Day of the calendar quarter to (but not including) the last Business
Day of each calendar quarter at the interest rate as determined in this
subparagraph.
 
(b) In the case of the Term B Loan, interest shall be payable by the Borrower on
the outstanding principal amount of the Term B Loan, at a rate per annum
(computed on the basis of a 365-day or 366-day year, as the case may be) equal
to: (x) commencing on the Closing Date through the calendar quarter ending on
December 31, 2011, eleven and one half percent (11.5%) per annum, and (y)
thereafter, at a rate per annum equal to fourteen percent (14%) per
annum.  Interest shall be payable on the Term B Loan, on and to each Interest
Payment Date, upon any prepayment of the Term B Loan and on the Maturity Date
and subject to subparagraph (i) of this Section 2.5(b) and subparagraph (c), is
payable entirely in cash.  Interest shall be payable by the Borrower from and
including the first Business Day of the calendar quarter to (but not including)
the last Business Day of each calendar quarter at the interest rate as
determined in this subparagraph.
 
(i) The Borrower may, prior to January 1, 2011, pay interest on the outstanding
principal amount of the Term B Loan, entirely in kind.  If interest on the Term
B Loan is paid entirely in kind then the amount of interest that the Borrower
elects to pay in kind shall be paid by adding such amount to the outstanding
principal balance of the Term B Loan.  From and after January 1, 2011, interest
on the Term B Loan shall be payable entirely in cash, with the first payment of
interest in cash on the Term B Loan due March 31, 2011.
 
(c) The Borrower may make three (3) PIK Elections, provided that no Default or
Event of Default has occurred and is continuing at the time such election is
made or would result from the PIK Election being made.  If the Borrower does not
timely make the PIK Election prior to any calendar quarter, interest on the
Loans shall be payable entirely in cash during such quarter.  If the Borrower
timely makes the PIK Election prior to any calendar quarter, the amount of
interest that the Borrower elects to pay in kind shall be paid by adding such
amount to the outstanding principal balance of the Term A Loan or the Term B
Loan (as the case may be).
 
(d) Notwithstanding, anything to the contrary in this Agreement, (i) if an
Interest Payment Date would otherwise occur on a day that is not a Business Day,
such Interest Payment Date shall occur on the next succeeding Business Day;
provided that, if any Interest Payment Date would otherwise fall on a day that
is not a Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Payment Date shall occur on the next
preceding Business Day, and (ii) in no event shall the rate of interest payable
by the Borrower with respect to any Term A Loan or Term B Loan exceed the
maximum amount of interest permitted to be charged under Applicable Law.
 
Section 2.6 Default Interest.  (a) If any amount of principal of any Loan is not
paid when due (without regard to any applicable grace periods), whether at
stated maturity, by acceleration or otherwise, such amount shall thereafter bear
interest at an interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by Applicable Laws.
 
(b) If any amount (other than principal of any Loan) payable by the Borrower
under any Fundamental Document is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or
otherwise, then upon the request of the Lender such amount shall thereafter bear
interest at an interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by Applicable Laws.
 
(c) While any Event of Default exists, the Borrower shall pay interest on the
principal amount of all outstanding Obligations at an interest rate per annum at
all times equal to the Default Rate to the fullest extent permitted by
Applicable Laws.
 
(d) Accrued and unpaid interest on past due amounts (including interest on past
due interest) shall be due and payable upon demand.
 
Section 2.7 Prepayment of Loans. Voluntary.  (a)Subject to the terms of
paragraph (b) of this Section 2.7, the Borrower shall have the right at its
option at any time and from time to time to prepay the Loans at par, in whole or
in part, upon at least one (1) Business Day’s written, facsimile or telephonic
(promptly confirmed in writing) notice, in the principal amount of $100,000 or
such greater amount which is an integral multiple of $100,000.  Each notice of
prepayment shall specify the prepayment date, the Loans to be prepaid and the
principal amount thereof, shall be irrevocable and shall commit the Borrower to
prepay such Loans in the amount and on the date stated therein.  Such notice
shall also specify the expected principal amount of Loans to be outstanding
after giving effect to such prepayment.
 
(b) All voluntary prepayments under this Section 2.7 shall be applied as set
forth in Section 2.9.
 
(c) All prepayments shall be accompanied by accrued but unpaid interest on the
principal amount being prepaid to the date of prepayment.
 
Section 2.8 Prepayment of Loans. Mandatory.  (a)Excess Cash Flow.  Within five
(5) Business Days after financial statements are required to have been delivered
pursuant to Section 5.1(a) and the related Compliance Certificate has been
delivered pursuant to Section 5.1(c), the Borrower shall prepay an aggregate
principal amount of Loans equal to seventy-five percent (75%) of Excess Cash
Flow for (i) the fiscal year covered by such financial statements, or (ii) in
the case of fiscal year ending December 31, 2010, the portion of such fiscal
year after the end of the first calendar quarter following the Closing Date,
(such prepayments to be applied as set forth in Section 2.9 below).
 
(b) Dispositions.  If the Borrower or any of its Subsidiaries Disposes of any
asset which results in the realization by such Person of Net Cash Proceeds, the
Borrower shall prepay an aggregate principal amount of Loans equal to one
hundred percent (100%) of such Net Cash Proceeds within three Business Days of
receipt of such Net Cash Proceeds (such prepayments to be applied as set forth
in Section 2.9 below); provided, however, that such Person may reinvest such Net
Cash Proceeds in productive assets of a kind then used or usable in the business
of the Borrower or any of its Subsidiaries within one hundred and eighty (180)
days from the date of such Disposition.
 
(c) Equity Issuances.  Within three (3) Business Days of an Equity Issuance, the
Borrower shall prepay an aggregate principal amount of Loans equal to one
hundred percent (100%) of all Net Cash Proceeds received therefrom upon receipt
thereof by the Borrower or such Subsidiary (such prepayments to be applied as
set forth in Section 2.9 below).
 
(d) Debt Issuances.  Within three (3) Business Days of any Debt Issuance (other
than Indebtedness expressly permitted to be incurred pursuant to Section 6.1,
the Borrower shall prepay an aggregate principal amount of Loans equal to one
hundred percent (100%) of all Net Cash Proceeds received therefrom upon receipt
thereof by the Borrower or a Subsidiary (such prepayments to be applied as set
forth in Section 2.9 below).
 
(e) Casualty/Condemnation.  Upon the sale of any assets in advance of a
condemnation proceeding, or following the occurrence of any Casualty or
Condemnation for which the Borrower or any of its Subsidiaries has received any
proceeds which are not otherwise included in this Section 2.8, then after such
proceeds have been used to replace such sold, lost, damaged, destroyed or
condemned assets, the Borrower shall prepay an aggregate principal amount of
Loans equal to one hundred percent (100%) of all remaining Net Cash Proceeds
received therefrom immediately upon receipt thereof by the Borrower or such
Subsidiary (such prepayments to be applied as set forth in Section 2.9 below).
 
(f) Change in Control.  Upon a Change in Control arising from (i) a Premium
Transaction (as defined in the Stockholders Agreement) or (ii) a transaction
approved by a committee of Borrower's Board of Directors comprised solely of
independent, disinterested members of the Borrower’s Board of Directors, the
principal of and the interest on the Loans and the Notes and all other amounts
related thereto payable hereunder or thereunder shall become and be forthwith
due and payable, without presentment, demand, protest, or other notice of any
kind, all of which are hereby expressly waived, anything in this Agreement or in
the Notes to the contrary notwithstanding.
 
Section 2.9 Application of Mandatory and Voluntary Prepayments.  Each prepayment
of Loans pursuant to Sections 2.7 and 2.8 shall be applied, first, to the
payment of Obligations due pursuant to Section 9.3 and 9.4 of this
Agreement,  second, to the prepayment of payment in kind interest under the Term
A Loan if the PIK Election has been made by the Borrower, third, to the
prepayment of the principal amount outstanding under the Term A Loan, fourth, to
the prepayment of payment-in-kind interest under the Term B Loan and fifth, to
the prepayment of the principal amount outstanding under the Term B Loan.
 
Section 2.10 Manner of Payments.  All payments by the Borrower hereunder and
under the Notes shall be made without offset or counterclaim in Dollars in
Federal or other immediately available funds at the office of the Lender,
Attention:  Chief Financial Officer, by no later than 1:00 p.m., New York City
time, on the date on which such payment shall be due.  Any payment received at
such office after such time shall be deemed received on the following Business
Day.  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.
 
Section 2.11 United States Withholding.  (a)Prior to the Closing Date hereunder
and prior to the effective date set forth in an assignment agreement with
respect to any Lender becoming the Lender after the date hereof, and from time
to time thereafter if requested by the Borrower or required because, as a result
of a change in law or a change in circumstances or otherwise, a previously
delivered form or statement becomes incomplete or incorrect in any material
respect, a Lender organized under the laws of a jurisdiction outside the United
States shall provide, if applicable, the Borrower with complete, accurate and
duly executed forms or other statements prescribed by the internal revenue
service of the United States certifying such Lender’s exemption from, or
entitlement to a reduced rate of, United States withholding taxes (including
backup withholding taxes) with respect to all payments to be made to such Lender
hereunder and under any other Fundamental Document.
 
(b) Any and all payments by or on account of any obligation of the Borrower
hereunder or under any Fundamental Document shall be made free and clear of and
without deduction for any taxes other than income or franchise taxes imposed on
(or measured by) the Lender’s net income by the United States, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or in which its applicable lending office is located
(such taxes, “Excluded Taxes”); provided that, if the Borrower shall be required
to deduct any taxes other than Excluded Taxes from such payments, then 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 2.11(a)) the Lender receives an amount equal to the sum it would
have received had no such deduction been made.  In the event the Borrower or the
Lender shall so deduct or withhold taxes from amounts payable hereunder, it (i)
shall pay to or deposit with the appropriate taxing authority in a timely manner
the full amount of taxes it has deducted or withheld, (ii) shall provide
evidence of payment of such taxes to, or the deposit thereof with, the
appropriate taxing authority and a statement setting forth the amount of taxes
deducted or withheld, the applicable rate, and any other information or
documentation reasonably requested by the Lender from whom the taxes were
deducted or withheld, and (iii) shall forward to the Lender any receipt of the
deducted or withheld taxes as may be issued from time to time by the appropriate
taxing authority.
 
(c) In addition, the Borrower (and, if applicable, the relevant Credit Party)
shall indemnify the Lender for any additional withholding taxes paid by such
Lender or any liability (including penalties and interest) arising therefrom or
with respect thereto, whether or not such additional withholding taxes were
correctly or legally asserted.
 
(d) Each assignee of a Lender’s interest in this Credit Agreement in conformity
with Section 9.18 shall be bound by this Section 2.11, so that such assignee
will have all of the obligations and provide all of the forms and statements and
all indemnities, representations and warranties required to be given under this
Section 2.11.
 
Section 2.12 Debt Exchange Transaction.  On the Closing Date, the following
transactions shall occur: (a) $315,000,000 of the Original Obligations shall be
exchanged for the Term A Loan and the Term B Loan, on the terms set forth in
this Agreement; (b) $185,000,000 of the Original Obligations shall be exchanged
in consideration for the receipt by the Lender of $185,000,000 of Series A
Preferred Stock, on the terms set forth in the Master Recapitalization
Agreement; and (c) the balance of the Original Obligations shall be exchanged in
consideration for receipt by the Lender of common stock of the Borrower at the
Conversion Price, on the terms set forth in the Master Recapitalization
Agreement.  The Lender hereby consents to the foregoing transactions.  As a
result of the Transactions, all of the HCC Debt, except to the extent converted
and continued as the Term A Loan and Term B Loan, shall be extinguished and
discharged.
 
Section 2.13 Change in Circumstances.  (a)In the event that after the Closing
Date hereof any change in Applicable Law or in the interpretation or
administration thereof (including, without limitation, any request, guideline or
policy not having the force of law) by any Governmental Authority charged with
the administration or interpretation thereof or, with respect to clause (ii)
below, any change in conditions shall occur which shall:
 
(i) subject the Lender to, or increase the net amount of, any tax, levy, impost,
duty, charge, fee, deduction or withholding with respect to any Loan; or
 
(ii) change the basis of taxation of any payment to the Lender of principal or
any interest on any Loan or other fees and amounts payable hereunder,
 
and the result of any of the foregoing shall be to increase the actual cost to
such Lender of making or maintaining any Loan hereunder or to reduce the amount
of any payment (whether of principal, interest or otherwise) received or
receivable by the Lender, or to require such Lender to make any payment in
connection with any Loan, in each case by or in an amount which such Lender in
its sole judgment shall deem material, then and in each case the Borrower shall
pay to the Lender such amounts as shall be necessary to compensate such Lender
for such cost, reduction or payment.
 
(b) The Lender shall deliver to the Borrower from time to time, one or more
certificates setting forth the amounts due to the Lender under paragraph (a)
above, the changes as a result of which such amounts are due and the manner of
computing such amounts.  Each such certificate shall be conclusive in the
absence of manifest error.  The Borrower shall pay to the Lender amounts shown
as due on any such certificate within ten (10) Business Days after its receipt
of the same.  No failure on the part of the Lender to demand compensation under
paragraph (a) above on any one occasion shall constitute a waiver of its rights
to demand compensation on any other occasion.
 
3.  
REPRESENTATIONS AND WARRANTIES

 
In order to induce the Lender to enter into this Credit Agreement and to make
the Loans provided for herein, the Credit Parties, jointly and severally, make
the following representations and warranties to, and agreements with the Lender:
 
Section 3.1 Corporate Existence and Power.  (a)Each Credit Party is a
corporation, limited liability company or partnership, duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and is in good standing or has applied for authority to operate as a foreign
entity in all jurisdictions where the nature of its properties or business so
requires it and where a failure to be in good standing as a foreign entity would
have a Material Adverse Effect on the business, assets or condition, financial
or otherwise, of such Credit Party.  As of the Closing Date, the Borrower is
engaged in a U.S. trade or business.
 
(b) Each Credit Party has the power and authority (i) to own its respective
properties and carry on its respective businesses as now being conducted, (ii)
to execute, deliver and perform its obligations (as applicable) under this
Credit Agreement and the other Fundamental Documents and any other documents
contemplated hereby, (iii) in the case of the Borrower, to borrow hereunder,
(iv) to grant to the Lender a security interest in the Collateral, as
contemplated by the Security Agreement and the other Fundamental Documents to
which it is or will be a party, and (v) in the case of the Subsidiary
Guarantors, to guarantee the Obligations as contemplated by the Subsidiary
Guaranty.
 
(c) A list of all of the Credit Parties setting forth their jurisdictions of
organization and the jurisdictions in which they are in good standing as of the
date hereof as provided in Section 3.1(a) hereof is attached hereto as Schedule
3.1.
 
Section 3.2 Authority and No Violation.  (a)The execution, delivery and
performance of this Credit Agreement and the other Fundamental Documents by each
Credit Party and the grant to the Lender of a security interest in the
Collateral as contemplated in the other Fundamental Documents, and in the case
of the Borrower, the Borrowings hereunder and the execution, delivery and
performance of the Notes by the Borrower and, in the case of each  Subsidiary
Guarantor, the guaranty of the Obligations as contemplated by the Subsidiary
Guaranty, (a) have been duly authorized by all necessary corporate or company
(as applicable) action on the part of each Credit Party, (b) will not violate
any provision of any Applicable Law, or any order of any court or other agency
of the United States or any State thereof, applicable to any Credit Party or any
of its respective properties or assets, (c) will not violate any provision of
the certificate of incorporation or by-laws, limited liability company agreement
or other organizational document of any Credit Party, or any indenture, any
agreement for borrowed money, any bond, note or other similar instrument in any
material respect or any other material agreement to which any Credit Party is a
party or by which any Credit Party or any of its properties or assets are bound,
(d) will not be in conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement,
bond, note, instrument or other material agreement and (e) will not result in
the creation or imposition of any Lien of any nature whatsoever upon any
property or assets of any Credit Party other than pursuant to a Fundamental
Document.
 
Section 3.3 Governmental and Other Approvals.  All authorizations, approvals,
registrations or filings with any Governmental Authority or public regulatory
body required for the execution, delivery and performance by the Credit Parties
of this Credit Agreement and the other Fundamental Documents, and the execution
and delivery by the Borrower of the Notes, have been duly obtained or made and
are in full force and effect or have been duly applied for, and if any such
further authorizations, approvals, registrations or filings should hereafter
become necessary, the Credit Parties shall obtain or make all such
authorizations, approvals, registrations or filings.
 
Section 3.4 Financial Statements.  Each of the audited financial statements of
the Borrower and its Consolidated Subsidiaries at December 31, 2008 and the
unaudited consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at September 30, 2009, together with the related statements of
operations and cash flow and the related notes and supplemental information are
complete and correct and have been prepared in accordance with GAAP in effect as
of such date consistently applied, except as otherwise indicated in the notes to
such financial statements and subject in the case of unaudited statements to
changes resulting from year-end audit adjustments.  All of such financial
statements fairly present the financial condition or the results of operations
of the Borrower and its Consolidated Subsidiaries on a consolidated basis at the
dates and for the periods indicated and (in the case of the balance sheets)
reflect (including the notes thereto) all known liabilities and subject in the
case of unaudited statements to changes resulting from year-end audit
adjustments, contingent or otherwise, as of such dates required in accordance
with GAAP to be shown or reserved against, or disclosed in notes to financial
statements.
 
Section 3.5 No Material Adverse Change.  (a)Since the later of September 30,
2009 or the end of the fiscal period covered by the Borrower’s last annual
report filed on form 10-K there has been no change that would be deemed to have
had a Material Adverse Effect.
 
Section 3.6 Subsidiaries.  Annexed hereto as Schedule 3.6 is a correct and
complete list as of the date hereof, of each Credit Party showing, as to each,
(i) its name, (ii) the type of entity it is, (iii) the jurisdiction in which it
was incorporated or otherwise organized, (iv) in the case of each Credit Party
which is a corporation, its authorized capitalization, the number of shares of
its capital stock outstanding and (v) in the case of each Credit Party which is
a limited liability company, the ownership of its membership interests.  Except
as noted on Schedule 3.6, as of the date hereof no Credit Party holds any Equity
Interest or other Investment, either directly or indirectly, in any Person other
than another Credit Party and no Credit Party is a general or limited partner in
any joint venture or partnership.
 
Section 3.7 Intellectual Property.  (a)To the best of each Credit Party’s
knowledge, all items of Product in which any Credit Party has any right, title
or interest and all component parts thereof do not and will not violate or
infringe upon any copyright, right of privacy, 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, in any material respect or contain any libelous or slanderous
material.  There is no claim, suit, action or proceeding pending or, to the best
of each Credit Party’s knowledge, threatened against any Credit Party that
involves a claim of infringement of any copyright with respect to any item of
Product necessary to operate the business of each Credit Party in the manner in
which it is currently operated and no Credit Party has any knowledge of any
existing infringement by any other Person of any copyright held by any Credit
Party with respect to any item of Product necessary to operate the business of
each Credit Party in the manner in which it is currently operated.
 
(b) All necessary applications and registrations for all copyrights, trademarks,
service marks, trade names and service names in which any Credit Party has any
right, title or interest are valid and in full force and effect and are not
subject to the payment of any taxes or maintenance fees or the taking of any
other actions by the Credit Parties (other than standard renewals) to maintain
their validity or effectiveness.
 
Section 3.8 Fictitious Names.  None of the Credit Parties has done business, is
doing business or intends to do business other than under its full corporate or
company name (as applicable), including, without limitation, under any tradename
or other doing business name other than as listed on Schedule 3.8.
 
Section 3.9 Title to Properties.  Each Credit Party has good and valid title to,
valid leasehold interests in, or valid licenses to use, all property and assets
material to its business, free and clear of all Liens, except Permitted
Encumbrances.
 
Section 3.10 Litigation.  Except as set forth on Schedule 3.10, there are no
actions, lawsuits or other proceedings pending (including, but not limited to,
matters relating to environmental liability), or, to the knowledge of any Credit
Party, threatened, against or affecting any Credit Party or any of its
respective properties, by or before any Governmental Authority, arbitration
panel, or arbitrator, which could reasonably be expected to have a Material
Adverse Effect on the financial condition or the business of any Credit Party or
which involve this Agreement 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, which default could reasonably
be expected to have a Material Adverse Effect.
 
Section 3.11 Regulations T, U and X.  No Credit Party 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 (within the meaning of
Regulation T, U or X).  No part of the proceeds of the Loans will be used,
directly or indirectly, and whether immediately, incidentally or ultimately to
purchase or carry any margin stock, to extend credit to others for the purpose
of purchasing or carrying any margin stock.
 
Section 3.12 Investment Company Act.  No Credit Party is an “investment company”
or an “affiliated person” or “promoter” of, or “principal underwriter” of or
for, an “investment company”, as such terms are defined in the Investment
Company Act of 1940, as amended.
 
Section 3.13 Binding Agreements.  This Credit Agreement and the other
Fundamental Documents when executed will constitute, the legal, valid and
enforceable obligations of each Credit Party that is a party thereto enforceable
against such Credit Party in accordance with its respective terms, subject, as
to the enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally and to general principles of equity.
 
Section 3.14 Taxes.  All federal, state and local tax returns which are required
to be filed by or on behalf of the Credit Parties have been filed, and the
Credit Parties have paid or caused to be paid all taxes payable by the Credit
Parties whether or not shown on said returns, to the extent that such taxes have
become due, except as permitted by Section 5.11 hereof.  No Credit Party knows
of any proposed or pending tax assessments, deficiencies, audits or other
proceedings.  The Credit Parties believe that the charges, accruals and reserves
on their books in respect of taxes or other governmental charges are accurate in
all material respects.
 
Section 3.15 Compliance with ERISA and Applicable Law.  (a)Each Plan 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 so qualifies.  No Reportable Event has occurred
in the last five years as to any Plan, or to the knowledge of any Credit Party,
any Multiemployer Plan.  No Plan has failed to satisfy the “minimum funding
standards” within the meaning set forth in section 302(a) of ERISA or Section
412(a) of the Code (whether or not waived) and no application has been made to
the Secretary of the Treasury for a waiver or modification of the minimum
funding standards (including required installment payments).  No material
liability has been, and no circumstances exist pursuant to which any material
liability could be, imposed upon any Credit Party or ERISA Affiliate (i) under
sections 4971 through 4980G of the Code, section 502(i) or 502(l) of ERISA, or
Title IV of ERISA with respect to any Plan or Multiemployer Plan or with respect
to any “employee benefit plan” (within the meaning set forth in section 3(3) of
ERISA) heretofore maintained, sponsored or contributed by any Credit Party or
ERISA Affiliate or any entity that heretofore was an ERISA Affiliate or (ii) for
the failure to fulfill any obligation to contribute to any Multiemployer
Plan.  No material liability has been, and no circumstances exist pursuant to
which any material liability could be, imposed upon any Credit Party with
respect to any Plan that provides post-retirement welfare coverage (other than
as required pursuant to Section 4980B of the Code).  Neither any Credit Party
nor any ERISA Affiliate has received any notification that any Multiemployer
Plan is in reorganization (within the meaning set forth in section 4241 of
ERISA) 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.  No Credit Party or ERISA Affiliate has withdrawn from any
Multiemployer Plan in the previous six years.
 
(b) The execution, delivery and performance of the Fundamental Documents and the
consummation of the transactions contemplated hereby and thereby will not
involve any “prohibited transaction” within the meaning of ERISA or the Code.
 
Section 3.16 Indebtedness; Guaranties; Liens.  (a)Except for this Agreement and
as otherwise disclosed on Schedule 3.16, as of the Closing Date no Credit Party
has any outstanding Indebtedness.
 
(b) Except for this Agreement and as otherwise disclosed on Schedule 3.16, as of
the Closing Date no Credit Party is responsible for any Indebtedness of any
other Person.
 
(c) Except for (i) Liens arising under this Agreement, (ii) Liens disclosed on
Schedule 3.16 and (iii) Permitted Encumbrances, as of the Closing Date no Credit
Party has granted or is aware of the existence of any Liens on any property of
any Credit Party.
 
Section 3.17 Security Interest.  The Fundamental Documents, when executed and
delivered and, to the extent appropriate, filed in locations where required by
law (together with any other actions necessary to perfect a security interest in
accordance with applicable law), will create and grant to the Lender a valid and
first priority perfected security interest in the Collateral located in the
United States subject only to Permitted Encumbrances.
 
Section 3.18 Disclosure.  Neither this Credit Agreement nor any other
Fundamental Document nor any other agreement, document, certificate or statement
furnished to the Lender by or on behalf of any Credit Party in connection with
the transactions contemplated hereby at the time it was furnished contained any
untrue statement of a material fact or omitted to state a material fact, under
the circumstances under which it was made, necessary in order to make the
statements contained herein or in any other Fundamental Document not misleading
in any material respect.  At the date hereof, there is no fact relating to any
Credit Party known to any Credit Party which would have a Material Adverse
Effect or would reasonably be expected to have a Material Adverse Effect in the
future.
 
Section 3.19 Environmental Liabilities.  (a)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
properties or assets owned or leased by a Credit Party, in any manner which at
the time of the action in question violated in any material respect 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
any 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
violated in any material respect any Environmental Law governing the use,
storage, treatment, transportation, manufacture, refinement, handling,
production or disposal of Hazardous Materials.
 
(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 could
reasonably be expected to have a Material Adverse Effect 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 could reasonably be expected to have a Material Adverse Effect.
 
Section 3.20 Compliance with Laws.  No Credit Party is in violation of any
Applicable Law except for such violations which in the aggregate would not
reasonably be expected to have a Material Adverse Effect.
 
Section 3.21 Bank Accounts.  The Credit Parties have no bank accounts other than
those listed on Schedule 3.21.
 
Section 3.22 Solvency.  After giving effect to the transactions contemplated by
this Agreement and the Fundamental Documents, each Credit Party is, and the
Credit Parties on a consolidated basis are, Solvent.
 
Section 3.23 Fundamental Documents.  The Borrower has delivered to the Lender a
complete, correct and executed copy of the Fundamental Documents and the
Revolving Credit Agreement, including all schedules and exhibits thereto.  The
execution, delivery and performance of the Master Recapitalization Agreement has
been duly authorized by all necessary action (including, without limitation, the
obtaining of any consent of stockholders or other holders of capital stock
required by law or by any applicable corporate or other organizational
documents) on the part of each such Person.  No authorization or approval or
other action by, and no notice to filing with or license from, any Governmental
Authority is required for the consummation of the transaction contemplated
thereby other than such as have been obtained on or prior to the Closing
Date.  Each of the representations and warranties contained in the Master
Recapitalization Agreement is true, correct and complete.
 
Section 3.24 Agreements. (a) No Credit Party is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument (including any License Agreement or
Platform Agreement) to which it is a party which could reasonably be expected to
have a Material Adverse Effect or result in the loss of more than 7,500,000
Subscribers and (b) Schedule 3.24 is a true and complete listing as of the date
hereof of (i) all credit agreements, indentures, and other agreements related to
any indebtedness for borrowed money of any Credit Party, other than the
Fundamental Documents and the Revolving Credit Agreement among the Credit
Parties, (ii) all joint venture agreements to which any Credit Party is a party,
(iii) all material License Agreements and Platform Agreements, (iv) all
agreements or other arrangements pursuant to which a Credit Party has granted a
Lien to any Person other than Permitted Encumbrances and (v) all other
contractual arrangements entered into by a Credit Party or by which any Credit
Party is bound which arrangements are material to any Credit Party, including
but not limited to, Guaranties and employment agreements.  The Credit Parties
have delivered or made available to the Lender a true and complete copy of each
agreement described on Schedule 3.24, including all exhibits and schedules.  For
purposes of this Section 3.24, a Platform Agreement, License Agreement or other
contract, agreement or arrangement shall be deemed “material” if the Credit
Parties reasonably expect that any Credit Party would, pursuant to the terms
thereof, (A) recognize future revenues in excess of $1,000,000 per annum or, (B)
incur liabilities, obligations or expenses in excess of $1,000,000 per annum.
 
Section 3.25 Licensed Rights.  The License Agreements grant to the Credit
Parties sufficient rights in and to the items of Product licensed thereunder to
enable the Credit Parties to perform their respective obligations under the
Platform Agreements, and no Credit Party is in breach of any of its material
obligations under such agreements, nor does any Credit Party have any knowledge
of any breach or anticipated breach by any other parties thereto which could
reasonably be expected to result in any material adverse change in the business,
properties, assets, operations or condition (financial or otherwise) of any
Credit Party.
 
4.  
CONDITIONS TO EFFECTIVENESS

 
Section 4.1 Conditions Precedent to Effectiveness.  This Agreement shall become
effective as of the Business Day (the “Closing Date”) when each of the following
conditions precedent have been satisfied in the Lender’s sole discretion:
 
(a) Corporate Documents.  The Lender shall have received:
 
(i) a copy of the articles, certificate of incorporation or other organizational
documents of each Credit Party, certified as of a recent date by the Secretary
of State of the jurisdiction of incorporation or organization of such Credit
Party;
 
(ii) a certificate of such Secretary of State, dated as of a recent date, as to
the good standing of and payment of taxes by each Credit Party;
 
(iii) a certificate dated as of a recent date as to the good standing of each
Credit Party issued by the Secretary of State of each jurisdiction in which such
Credit Party is qualified as a foreign corporation or limited liability company
as listed in Schedule 3.1;
 
(iv) a certificate of the Secretary of each Credit Party dated the Closing Date
and certifying (A) that attached thereto is a true and complete copy of the
by-laws or limited liability company agreement, as the case may be, of such
party as in effect on the date of such certification, (B) that attached thereto
is a true and complete copy of resolutions adopted by the Board of Directors or
other governing body of such party authorizing the execution, delivery and
performance in accordance with their respective terms of this Credit Agreement,
the other Fundamental Documents and any other documents required or contemplated
hereunder or thereunder, the grant of the security interests in the Collateral
and the pledged securities and, in addition, as to the Borrower, the borrowings
hereunder and the Notes and that such resolutions have not been amended,
rescinded or supplemented and are currently in effect, (C) that the certificate
of incorporation or organization of such party has not been amended since the
date of the last amendment thereto indicated on the certificate of the Secretary
of State furnished pursuant to clause (i) above except to the extent specified
in such Secretary’s certificate and (D) as to the incumbency and specimen
signature of each officer of such Credit Party executing any Fundamental
Document (such certificate to contain a certification by another officer of such
Credit Party as to the incumbency and signature of the officer signing the
certificate referred to in this clause (iv)); and
 
(v) such additional supporting documents as the Lender or its counsel may
reasonably request.
 
(b) Credit Agreement; Notes.  The Lender shall have received (i) a complete
executed copy of this Credit Agreement, and (ii) the Notes executed by the
Borrower.
 
(c) No Material Adverse Change.  No change that would be deemed to have had a
Material Adverse Effect shall have occurred since December 31, 200[8].1
 
(d) UCC Searches.  The Lender shall have received UCC, copyright office and
other searches satisfactory to it indicating that no other filings, encumbrances
or transfers with regard to the Collateral are of record in any jurisdiction in
which it shall be necessary or desirable for the Lender to make a UCC filing in
order to provide the Lender with a perfected first priority security interest in
the Collateral, subject only to the Permitted Encumbrances.
 
(e) Required Consents and Approvals.  The Lender shall be satisfied that all
required consents and approvals have been obtained with respect to the
transactions contemplated hereby from all (i) Governmental Authorities with
jurisdiction over the business and activities of any Credit Party, and (ii) from
any other Person whose consent or approval the Lender in its reasonable
discretion deems necessary to the transactions contemplated hereby.
 
(f) Federal Reserve Regulations.  The Lender shall be satisfied that the
provisions of Regulations T, U and X of the Board will not be violated by the
transactions contemplated hereby.
 
(g) Compliance with Laws.  The Lender shall be satisfied that the transactions
contemplated hereby will not violate any provision of Applicable Law or any
order of any court or other agency of the United States or any state thereof
applicable to any of the Credit Parties or any of their respective properties or
assets.
 
(h) Payment of Fees.  All fees and expenses then due and payable by the Borrower
pursuant hereto to the Lender (or its legal counsel) shall have been paid.
 
(i) Fundamental Documents.  This Agreement shall have been duly executed and
delivered by each of the Credit Parties.  In addition, all other Fundamental
Documents as well as the Hallmark Guaranty and the Revolving Credit Agreement
shall have been duly executed and delivered to the Lender by each of the Credit
Parties party thereto.
 
(j) Existing Agreement.  All outstanding obligations under the JPM Credit
Agreement shall have been indefeasibly paid in full concurrently on the Closing
Date.
 
(k) Master Recapitalization Agreement.  The closing of the transactions
contemplated by the Master Recapitalization Agreement shall have occurred.
 
(l) Other Documents.  The Lender shall have received such other documents as the
Lender may reasonably require.
 
(m) Insurance.  The Borrower shall have furnished to the Lender evidence
acceptable to the Lender that the insurance policies required by Section 5.5
have been obtained and are in full force and effect.
 
(n) ERISA.  The Lender shall have received copies of all Plans  of the Credit
Parties that are in existence on the Closing Date and descriptions of those that
are committed to as of the Closing Date.
 
(o) Notice of Deemed Borrowing.  The Borrower shall have delivered a Notice of
Deemed Borrowing.
 
(p) Perfection Certificate.  The Lender shall have received a duly completed
Perfection Certificate.
 
5.  
AFFIRMATIVE COVENANTS

 
For so long as any principal of or interest on any Loan or any other Obligation
(whether nor not due) shall remain unpaid, each Credit Party will:
 
Section 5.1 Financial Statements and Reports.  Furnish or cause to be furnished
to the Lender:
 
(a) Within 90 days after the end of each fiscal year (commencing with fiscal
year _____), (i) the audited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, as at the end of, and the related statements of
operations, shareholders’ equity and cash flow for, such year, and the
corresponding figures as at the end of, and for, the preceding fiscal year,
accompanied, in each case, by an opinion of KPMG LLP or such other independent
public accountants of recognized standing as shall be retained by the Borrower
and satisfactory to the Lender, 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), and (ii) a management discussion and
analysis of such financial statements;
 
(b) Within 45 days after the end of each of the first three fiscal quarters of
each of its fiscal years, the unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries, as at the end of, and the related
unaudited statements of operations, shareholders’ equity and cash flow for, such
quarter, and the corresponding figures as at the end of, and for, the
corresponding period in the preceding fiscal year, in each case together with a
management discussion and analysis of such financial statements and a
certificate signed by an Authorized Officer of the Borrower on behalf 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 the financial position of the Borrower
and its Consolidated Subsidiaries, as at the end of the fiscal quarter and the
results of its operations for the quarter then ended in conformity with GAAP;
 
(c) Simultaneously with the delivery of the statements referred to in paragraphs
(a) and (b) of this Section 5.1, a duly completed Compliance Certificate signed
by an Authorized Officer of the Borrower, in form and substance satisfactory to
the Lender stating that in the course of the performance of his or her duties,
he or she would normally have knowledge of any condition or event which would
constitute an Event of Default or Default (including, without limitation, any
violation of the Cash Interest Coverage Ratio) and stating whether or not he or
she has knowledge of any such condition or event and, if so, specifying each
such condition or event of which he has knowledge and the nature thereof;
 
(d) Promptly upon their becoming available, copies of (i) all management
projections presented to any Credit Party’s Board of Directors in connection
with any action by such Board of Directors, (ii) all audits, studies or
evaluations prepared by independent public accountants for or submitted to any
Credit Party and (iii) copies of all reports submitted by independent public
accountants to the Borrower in connection with each annual, interim or special
audit or review of the financial statements of the Borrower, including, without
limitation, the comment letter submitted by such accountants to management in
connection with their annual audit;
 
(e) Promptly upon their becoming available, copies of (i) all registration
statements, proxy statements, and all reports which any Credit Party shall file
with any securities exchange or with the S.E.C.  and (ii) all reports, financial
statements, press releases and other information which any Credit Party shall
release, send or make available to its stockholders;
 
(f) Notice of (i) any action taken by the Board of Directors or governing body
of any Credit Party in connection with any Debt Issuance or Equity Issuance and
(ii) the date on which such Credit Party will receive the Net Cash Proceeds from
any Debt Issuance or Equity Issuance;
 
(g) Upon request of the Lender, provide the Lender with copies of any and all
material License Agreements;
 
(h) Upon request of the Lender, copies of any and all Platform Agreements;
 
(i) From time to time such additional information regarding the financial
condition, business or business prospects of the Credit Parties, the amount of
film inventory in which any of the Credit Parties has rights on an individual or
market basis or otherwise regarding the Collateral, as any Lender may reasonably
request.
 
Section 5.2 Corporate Existence.  Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its corporate existence
(provided, that any Credit Party may merge into or consolidate with another
Credit Party, provided further that the Borrower, if it is a party thereto, is
the surviving entity), and material rights, licenses, permits and franchises,
and comply in all material respects with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, any Governmental
Authority.
 
Section 5.3 Maintenance of Properties.  Keep its tangible properties which are
material to its business in good repair, working order and condition subject to
ordinary wear and tear and, from time to time (i) make 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 have
been established in accordance with GAAP.
 
Section 5.4 Notice of Material Events.  (a) Promptly upon any Executive Officer
of a Credit Party obtaining knowledge of (i) any Default or Event of Default,
(ii) any material adverse change in the condition or operations of any Credit
Party, financial or otherwise, (iii) any action or event which could reasonably
be expected to materially and adversely affect the performance of the Credit
Parties’ obligations under this Credit Agreement or any other Fundamental
Document, the repayment of the Notes, or the security interests granted to the
Lender under the terms of a Fundamental Document, (iv) any other event which
could reasonably be expected to result in a Material Adverse Effect or would
otherwise cause the loss of greater than 7,500,000 Subscribers, (v) the change
of the jurisdiction or form of organization, or the principal place of business
of any Credit Party or of the location of any Credit Party’s books and records,
(vi) any change in the name of any Credit Party, (vii) any other event which
could reasonably be expected to materially and adversely impact upon the amount
of collectability of any material accounts receivable of the Credit Parties or
materially decrease the value of the Collateral, or (viii) any proposed material
amendment to any material agreements that are part of the Collateral, such
Credit Party shall promptly give written notice thereof to the Lender specifying
the nature and period of existence of any such condition or event and what
action such Credit Party has taken, is taking and proposes to take with respect
thereto.
 
(b) Promptly upon any Executive Officer of a Credit Party obtaining knowledge of
(i) the institution of, or threat of, any action, suit, proceeding,
investigation or arbitration by any Governmental Authority or other Person
against or affecting any Credit Party or any of its assets, or (ii) any material
development in any such action, suit, proceeding, investigation or arbitration
(whether or not previously disclosed to the Lenders), which, in the case of (i)
or (ii) might, if adversely determined, reasonably be expected to have a
Material Adverse Effect or would otherwise cause the loss of greater than
7,500,000 Subscribers, such Credit Party shall promptly give notice thereof to
the Lender and provide such other information as may be available to it (without
waiver of any applicable evidentiary privilege) to enable the Lender to evaluate
such matters; and, in addition to the requirements set forth in clauses (i) and
(ii) of this subsection (b), such Credit Party upon request shall promptly give
notice of the status of any action, suit, proceeding, investigation or
arbitration covered by a report delivered to the Lender pursuant to clause (i)
and (ii) above to the Lender and provide such other information as may be
reasonably available to it to enable the Lender to evaluate such matters.
 
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 normal industry
practices) 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 customary industry practices.
 
(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 customary for companies in similar businesses.
 
(c) Maintain, or cause to be maintained, distributor’s “Errors and Omissions”
insurance to the extent and in amounts consistent with or greater than customary
industry standards.
 
(d) Maintain, or cause to be maintained, broadcaster’s “Errors and Omissions”
insurance to the extent and in amounts consistent with or greater than customary
industry standards.
 
(e) Cause all such above-described insurance (excluding worker’s compensation
insurance) to (1) provide for the benefit of the Lender that 30 days’ prior
written notice of suspension, cancellation, termination, reduction, non-renewal
or lapse or material change of coverage shall be given to the Lender; (2) name
the Lender as a loss payee (except for “Errors and Omissions” insurance and
other third party liability insurance), provided, however, that so long as an
Event of Default has occurred and is continuing, property insurance proceeds may
be used to repair damage in respect of which such proceeds were received or so
long as no Default or Event of Default has occurred and is then continuing, to
reimburse a Credit Party for its own funds expended to repair the applicable
damage; and (3) name the Lender as an additional insured including, without
limitation, under any “Errors and Omissions” insurance and other third party
liability insurance but only from claims arising from the acts or omissions of
any Credit Party or its employees, representatives or contractors.
 
(f) Upon the request of the Lender, the Borrower will render to the Lender a
statement in such detail as the Lender may request as to all such insurance
coverage.
 
Section 5.6 Music.  When an item of Product produced by a Credit Party has been
scored, if requested by the Lender, promptly deliver to the Lender: (a) written
evidence of the music synchronization rights obtained from the composer or the
licensor of the music and (b) copies of all music cue sheets with respect to
such item of Product.
 
Section 5.7 Copyrights and Trademarks.  (a)As soon as practicable (but, in the
case of an item of Product, in no event later than sixty (60) days after the
initial release or broadcast of such item of Product and in the case of a
screenplay, in no event later than five (5) days prior to payment by any Credit
Party for any portion of the cost of the item of Product to be based on such
screenplay), to the extent any Credit Party is or becomes the copyright
proprietor thereof or otherwise acquires a copyrightable interest (other than
with respect to rights in items of Product that are acquired pursuant to (x) any
License Agreement under which the aggregate amount required to be paid in
respect of such License Agreement is less than $1,000,000, (y) any License
Agreement with a term of less than three (3) months or (z) License Agreements
under which the aggregate amounts previously paid to acquire such rights which
are allocable to unexpired license periods are less than $10,000,000 (it being
understood that amounts paid under a License Agreement shall be allocated on a
straight line basis over the relevant license term of such License Agreement),
in which instance the applicable Credit Party shall use prudent business
judgment as to whether or not to register such rights), the applicable Credit
Party shall notify the Lender and promptly upon the request of the Lender take
any and all actions necessary to register the copyright for such item of Product
or screenplay, in the name of such Credit Party (subject to a Lien in favor of
the Lender) in conformity with the laws of the United States and such other
jurisdictions as the Lender may reasonably specify, and immediately deliver to
the Lender written evidence of the registration of any and all such copyrights
for inclusion in the Collateral under the Fundamental Documents.
 
(b) As soon as practicable after any Credit Party acquires any trademark (other
than any rights which any Credit Party may have in and to the “Hallmark”
trademark), service mark, trade name or service name (other than a domain name),
the applicable Credit Party shall notify the Lender and promptly upon the
request of the Lender take any and all actions necessary to register such
trademark, service mark, trade name or service name (other than a domain name)
in the name of such Credit Party (subject to a Lien in favor of the Lender) in
conformity with the laws of the United States and such other jurisdictions as
the Lender may reasonably specify, and immediately deliver to the Lender: (x)
written evidence of the registration of any and all such trademarks, service
marks, trade names or service names (other than a domain name) for inclusion in
the Collateral; and (y) a Trademark Security Agreement relating to such
trademark, service mark, trade name or service name (other than a domain name),
executed by all of the Credit Parties.
 
(c) Obtain instruments of transfer or other documents evidencing the interest of
any Credit Party with respect to the copyright relating to items of Product in
which such Credit Party is not entitled to be the initial copyright proprietor
and any trademark, service mark, trade name or service name which such Credit
Party acquires, and promptly record such instruments of transfer on the United
States Copyright Register or the United States Trademark Register and such other
jurisdictions as the Lender may specify, in each case upon the request of Lender
and to the same extent as would be required under Section 5.7(a) above.
 
Section 5.8 Books and Records.  Maintain or cause to be maintained at all times
true and complete books and records of its financial operations and provide the
Lender and its representatives (and each Lender and its representatives during
the continuance of an Event of Default) access to such books and records and to
any of its properties or assets upon reasonable notice and during regular
business hours in order that the Lender may make such audits and examinations
and make abstracts from such books, accounts, records and other papers
pertaining to the Collateral (including, but not limited to, all on and off
balance sheet receivables) and may discuss the affairs, finances and accounts
with, and be advised as to the same by the Credit Parties’ officers and
independent accountants, all as the Lender may deem appropriate for the purpose
of verifying the various reports delivered by any Credit Party to the Lender
pursuant to this Credit Agreement or for otherwise ascertaining compliance with
this Credit Agreement or any Fundamental Document.
 
Section 5.9 Observance of Agreements.  Duly observe and perform in all material
respects all the terms and conditions of all material agreements with respect to
the distribution and/or exploitation of items of Product and diligently protect
and enforce the rights of the Credit Party under all such agreements in a manner
consistent with prudent business judgment and subject to the terms and
conditions of such agreements.
 
Section 5.10 Laboratories; No Removal.  (a)To the extent any Credit Party has
control over or rights to receive any of the Physical Materials relating to any
item of Product, deliver or cause to be delivered to a Laboratory or
Laboratories all negative and preprint material, master tapes and all sound
track materials with respect to each such item of Product and deliver to the
Lender a fully executed Pledgeholder Agreement with respect to such
materials.  To the extent that any Credit Party has only rights of access to
preprint material or master tapes and has not created duplicate materials
sufficient to exploit its rights and has not stored such duplicate materials at
a Laboratory that has delivered a Pledgeholder Agreement to the Lender, then the
Credit Parties will deliver to the Lender a fully executed Laboratory Access
Letter covering such materials.  Prior to requesting any Laboratory to deliver
such negative or other preprint or sound track material or master tapes to
another Laboratory, any such Credit Party shall provide the Lender with a
Pledgeholder Agreement or Laboratory Access Letter, as appropriate, executed by
such other Laboratory and all other parties to such Pledgeholder Agreement
(including the Lender).  Without the consent of the Lender, no Credit Party
shall deliver or remove or cause the delivery or removal of the original
negative and film or sound materials or master tapes with respect to any item of
Product owned by such Credit Party or in which such Credit Party has an interest
(i) to a location outside the United States or (ii) to any state or jurisdiction
where UCC-1 financing statements are not effective against such Credit Party.
 
(b) With respect to items of Product acquired after the Closing Date, on at
least a quarterly basis, deliver to the Lender and the Laboratories which are
signatories to Pledgeholder Agreements a revised schedule of Product on deposit
with such Laboratories.
 
Section 5.11 Taxes and Charges in Ordinary Course of Business.  Duly pay and
discharge, or cause to be paid and discharged, before the same shall become in
arrears, all 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, over which such Credit Party
has control, as well as all claims for labor, materials, or supplies which if
unpaid could reasonably be expected to become by law a Lien upon any property of
a Credit Party; provided, however, that any such tax, assessment, charge, levy
or claim need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if the Borrower shall
have set aside on its books 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.  The Credit Parties will pay when due, or in conformance with
customary trade terms, all other obligations (other than Indebtedness) incident
to their respective operations.
 
Section 5.12 Liens.  Defend the Collateral to the extent commercially reasonable
against any and all Liens howsoever arising, other than Permitted Encumbrances
and in any event defend against any attempted foreclosure.
 
Section 5.13 ERISA Compliance and Reports.  Furnish to the Lender (i) as soon as
possible, and in any event within thirty (30) days after any Executive Officer
of a Credit Party has knowledge that (A) any Reportable Event with respect to
any Plan or Multiemployer Plan has occurred, a statement of an Executive 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, (B) (v) any Plan fails to satisfy the
minimum funding standards (within the meaning set forth in section 302(a) of
ERISA or section 412(a) of the Code (whether or not waived)) or an application
has been made to the Secretary of the Treasury for a waiver or modification of
the minimum funding standard with respect to a Plan, (w) a Plan or Multiemployer
Plan has been or is proposed to be terminated, reorganized, partitioned or
declared insolvent under Title IV of ERISA, (x) proceedings have been instituted
to terminate a Plan if such Plan is subject to Title IV of ERISA, (y) a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Multiemployer Plan, or (z) any Credit Party or
ERISA Affiliate will incur any liability (including any contingent or secondary
liability) to or on account of the termination of or withdrawal from a Plan
subject to Title IV of ERISA 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, (ii) promptly upon reasonable
request of the Lender, copies of each annual and other report with respect to
each Plan, (iii) 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 subject to Title IV of ERISA or to appoint a
trustee to administer any Plan subject to Title IV of ERISA, and (iv) promptly
after receipt thereof, a copy of any correspondence received by any Credit Party
or ERISA Affiliate from any Multiemployer Plan (or its trustee or
administrator).
 
Section 5.14 Subsidiaries.  Immediately (i) cause each entity which hereafter
becomes a Subsidiary, to become a Subsidiary Guarantor, to be jointly and
severally liable for the Obligations and to become a party to the other
Fundamental Documents, as appropriate, with the same obligations and
responsibilities under this Agreement and the other Fundamental Documents as if
it had originally executed this Agreement and the other Fundamental Documents,
by delivering to the Lender, a joinder agreement, in form and substance
acceptable to Lender, duly executed by such Subsidiary and (ii) deliver to the
Lender certificates evidencing all of the stock or other ownership interest of
the Subsidiary referred to in the preceding clause (i) (which stock has been
pledged to the Lender pursuant to the Pledge Agreement) together with undated
stock powers executed in blank for such certificates (or such other documents
necessary to replace a member of a Subsidiary that is a limited liability
company) and organizational documents to the extent set forth in Section 4.1
hereof, and, upon request, written opinions of counsel in form and substance
satisfactory to the Lender.
 
Section 5.15 Environmental Laws.  (a)Promptly notify the Lender upon any
Executive Officer 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 Lender all notices of any nature which any Credit Party or any Subsidiary
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 in all material respects with and use commercially reasonable efforts
to ensure compliance in all material respects by all tenants and subtenants with
all Environmental Laws, and obtain and comply in all material respects with and
maintain and use reasonable efforts to ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain any and all
licenses, approvals, registrations or permits required by Environmental Laws.
 
(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.  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 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 Lender, and its 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 Laws, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable external 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 misconduct
of any indemnified party or (ii) 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.
 
Section 5.16 Further Assurances; Security Interests.  (a)Upon the request of the
Lender, duly execute and deliver, or cause to be duly executed and delivered, at
the cost and expense of the Borrower, such further instruments as may be
necessary or proper, in the reasonable judgment of the Lender, to provide the
Lender a perfected Lien in the Collateral and to carry out the provisions and
purposes of this Agreement and the other Fundamental Documents.
 
(b) Upon the request of the Lender, promptly perform or cause to be performed
any and all acts and execute or cause to be executed 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 statute, rule or regulation of any applicable foreign, federal,
state or local jurisdiction, which are necessary or advisable, from time to
time, in order to grant and maintain in favor of the Lender the security
interest in the Collateral contemplated under the other Fundamental Documents,
subject only to Permitted Encumbrances.
 
(c) Promptly undertake to deliver or cause to be delivered to the Lender from
time to time such other documentation, consents, authorizations and approvals in
form and substance satisfactory to the Lender, as the Lender shall deem
reasonably necessary or advisable to perfect or maintain the Liens of the
Lender.
 
Section 5.17 Bank Accounts.  Provide the Lender with prompt written notice upon
the opening of any bank account other than those listed on Schedule 3.20.
 
Section 5.18 Credit Ratings.  At the request of the Lender, (a) obtain, at
Borrower’s expense, ratings issued by Moody’s or S&P with respect to the Term
Loans, and/or (b) obtain, at Borrower’s expense, corporate family ratings issued
by Moody’s or S&P.
 
6.  
NEGATIVE COVENANTS

 
For so long as any principal of or interest on any Loan or any other Obligation
(whether or not due) shall remain unpaid, each Credit Party will not and will
not permit any of its Subsidiaries, directly or indirectly, to:
 
Section 6.1 Limitations on Indebtedness.  Incur, create, assume or suffer to
exist any Indebtedness other than:
 
(i) the Indebtedness represented under this Agreement, the Notes and the other
Obligations;
 
(ii) Indebtedness in respect of secured purchase money financings, including
Capital Leases to the extent permitted under Section 6.10 hereof, not to exceed
$30,000,000 at any time outstanding;
 
(iii) ordinary trade payables which are not yet due and payable and are not the
result of a transaction which is essentially the borrowing of money;
 
(iv) Indebtedness by any Credit Party to any other Credit Party to the extent
not otherwise prohibited by this Section 6.1;
 
(v) existing Indebtedness listed on Schedule 3.16 hereto but no increases
thereof;
 
(vi) a revolving credit facility providing for up to $30,000,000 of borrowings
(the “Revolving Credit Agreement”), provided that such Revolving Credit
Agreement is on terms and conditions satisfactory to the Lender;
 
(vii) the Series A Preferred Stock (to the extent classified as Indebtedness
under GAAP) and any refinancing thereof; and
 
(viii) the refinancing of existing Indebtedness listed on Schedule 3.16 hereto
in an amount equal to the principal amount plus accrued and unpaid interest and
related transaction fees, along with the repurchase or redemption of the Series
A Preferred Stock.
 
Section 6.2 Limitations on Liens.  Incur, create, assume or suffer to exist any
Lien on any of the Collateral, whether now owned or hereafter acquired, except:
 
(i) with regard to all items of Product, Liens pursuant to written security
agreements (in form and substance acceptable to the Lender) in favor of guilds
as required pursuant to terms of collective bargaining agreements, which Liens
are (A) subordinated or junior to the claims of the Lender hereunder pursuant to
documentation that is satisfactory in form and substance to the Lender or (B) on
terms otherwise acceptable to the Lender;
 
(ii) deposits under workers’ compensation, unemployment insurance and social
security laws or to secure statutory obligations or surety or appeal bonds or
performance or other similar bonds in the ordinary course of business (other
than completion bonds);
 
(iii) statutory Liens of landlords, banks (and rights of set-off), of carriers,
warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens
imposed by law (other than any such Lien imposed pursuant to Section 401(a)(29)
or 430(k) of the Internal Revenue Code or by ERISA), in each case incurred in
the ordinary course of business (i) for amounts not yet overdue or (ii) for
amounts that are overdue and that (in the case of any such amounts overdue for a
period in excess of five days) are being contested in good faith by appropriate
proceedings, so long as such reserves or other appropriate provisions, if any,
as shall be required by GAAP shall have been made for any such contested
amounts;
 
(iv) purported Liens evidenced by the filing of precautionary UCC financing
statements relating solely to operating leases or consignments of personal
property entered into in the ordinary course of business;
 
(v) Liens for taxes, assessments or other governmental charges or levies due and
payable, the validity or amount of which is currently being contested in good
faith by appropriate proceedings pursuant to the terms of Section 5.11 hereof;
 
(vi) Liens customarily granted or incurred in the ordinary course of business to
secure payment for services rendered by laboratories and production houses and
suppliers of materials and equipment;
 
(vii) mechanic’s liens and Liens in connection with secured purchase money
financings to the extent permitted in Section 6.1(ii) hereof;
 
(viii) possessory Liens other than on Product or physical properties of Product
(other than of laboratories and production houses) which (a) occur in the
ordinary course of business, (b) secure normal trade debt which is not yet due
and payable, (c) do not secure Indebtedness for borrowed money and (d) do not
defer payment terms beyond one hundred and eighty (180) days;
 
(ix) Liens arising out of attachments, judgments or awards as to which an appeal
or other appropriate proceedings for contest or review are promptly commenced
(and as to which foreclosure and other enforcement proceedings (a) shall not
have been commenced (unless fully bonded or otherwise effectively stayed) or (b)
in any event shall be promptly fully bonded or otherwise effectively stayed);
 
(x) Liens arising from zoning restrictions or easements;
 
(xi) the Liens of the Lender under the Fundamental Documents and other documents
contemplated hereby;
 
(xii) the Lien granted by the Borrower which secures the Indebtedness referred
to in Section 6.1(vi); and
 
(xiii) existing Liens listed on Schedule 3.16 hereto; provided, however, that,
without the consent of the Lender, any Indebtedness secured by any such Lien may
not be increased, extended or renewed and such Lien may not extend to any other
property of the Credit Party.
 
Section 6.3 Guaranties.  Incur, create, assume or suffer to exist any Guaranty,
either directly or indirectly, or otherwise in any way become responsible for
any Indebtedness (including working capital maintenance, pay-or-play contracts
or other similar obligations) of any other Person (other than another Credit
Party), contingently or otherwise, except (i) for the endorsement of negotiable
instruments by a Credit Party in the ordinary course of business, (ii) for
Guaranties which would constitute investments in items of Product not otherwise
prohibited hereunder, (iii) for existing Guaranties listed on Schedule 3.16
hereto and (iv) as permitted in Section 6.1 hereof.
 
Section 6.4 Limitations on Investments.  Make any Investment (including any
loans to any shareholder or other Affiliate of the Borrower) except:
 
(i) purchases of Cash Equivalents;
 
(ii) travel advances in the ordinary course of business to employees and/or
officers;
 
(iii) additional Investments not in excess of $5,000,000 in the aggregate in
entities which are not wholly-owned Subsidiaries; and
 
(iv) intercompany advances from the Borrower or any Subsidiary Guarantor to a
Subsidiary Guarantor or from any Subsidiary Guarantor to the Borrower.
 
Section 6.5 Restricted Payments.  Pay or declare or enter into any agreement to
pay or otherwise become obligated to make any Restricted Payments other than:
 
(i) stock dividends paid solely in shares of stock of the Borrower;
 
(ii) payments by a Credit Party to another Credit Party;
 
(iii) payments to Hallmark Cards, Incorporated or an Affiliate pursuant to the
terms of one or more service agreement(s); provided that such service
agreement(s) shall be in form and substance acceptable to the Lender; and
 
(iv) issuance of common stock for or upon conversion of preferred stock of the
Borrower;
 
(v) payment of the NICC Preferred Interest; and
 
(vi) so long as no Default has occurred and is continuing, payments of dividends
on Series A Preferred Stock issued pursuant to the Master Recapitalization
Agreement.
 
Section 6.6 Limitations on Sale of Assets.  Sell, lease, license, transfer or
otherwise dispose of:
 
(i) items of Product other than in the ordinary course of business, provided
that the Credit Parties shall not be entitled to sell, transfer or alienate
their entire right, title or interest in and to items of Product with an
aggregate value in excess of $5,000,000; and
 
(ii) any of the channels owned or operated by a Credit Party (or any Subsidiary
thereof), whether directly (e.g., by way of an outright sale or other
disposition of the Credit Party’s rights as owner or operator) or indirectly
(e.g., by selling, assigning or otherwise transferring the Credit Party’s rights
in any Platform Agreement), provided that a Credit Party shall at all times be
entitled to dispose of some or all of its rights as owner or operator of a
channel in a territory to the extent such disposition is required (x) by
Applicable Law in the territory in which the channel is available or (y) in
order to comply with local practices and/or customs in the relevant territory
relating to the ownership or operation of channels by non-residents; and
 
(iii) any other property of the Credit Parties, other than dispositions made in
the ordinary course of business involving property with an aggregate fair market
value at the time of disposition of less than $100,000.
 
The limitation contained in clause (ii) of the preceding sentence shall not
limit the rights of the Credit Parties to shut down existing operations they
believe to be no longer financially beneficial or to acquire the ownership of,
or rights to operate, channels in new territories, or to expand existing
channels into new territories, through joint ventures or such other arrangements
as may be otherwise permitted by the terms of this Agreement, provided that any
disposition of such rights and interests (once so acquired) may only be made in
compliance with the terms of clause (ii) of the preceding sentence.
 
Section 6.7 Receivables.  Sell, discount or otherwise dispose of notes, accounts
receivable or other obligations owing to a Credit Party except for the purpose
of collection in the ordinary course of business.
 
Section 6.8 Tax Shelters, Sale and Leaseback etc.  Enter into any arrangement
with any Person or Persons other than a Credit Party, whereby in contemporaneous
transactions a Credit Party sells essentially all of its right, title and
interest in an item of Product or upon which an item of Product is based 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; except on terms customary in the entertainment industry and subject to
the Lender’s approval.
 
Section 6.9 Places of Business; Change of Name.  Change the location of any of
the offices where it keeps its books and records with respect to the Collateral
or change its name or the jurisdiction or form of its organization without (i)
giving the Lender thirty (30) days prior written notice of such change and (ii)
filing any additional Uniform Commercial Code financing statements, and such
other documents requested by the Lender or which are otherwise necessary or
desirable, to continue the first priority perfected security interest of the
Lender in the Collateral, subject only to the Permitted Encumbrances.
 
Section 6.10 Limitations on Capital Expenditures.  Make or incur any obligation
to make Capital Expenditures in excess of $10,000,000 for fiscal year 2010,
$5,000,000 for fiscal year 2011, $5,000,000 for fiscal year 2012 and $5,000,000
for fiscal year 2013; provided, however, that in any fiscal year in which the
Capital Expenditures do not meet the threshold Capital Expenditure amount for
such fiscal year, the excess of such Capital Expenditures may be carried into
the next following fiscal year.
 
Section 6.11 Transactions with Affiliates.  Except if expressly permitted under
the terms of this Agreement, effect any transaction with an Affiliate on a basis
less favorable to a Credit Party than would have been the case if such
transaction had been effected at arms-length with a Person other than an
Affiliate.
 
Section 6.12 Amendments and Waivers.  Amend, alter, modify, or waive, or consent
to any amendment, alteration, modification or waiver of, any material agreement
to which any Credit Party is a party or enter into or agree to enter into any
material agreement, (a) in any case in such a manner as could be reasonably
expected to be materially adverse to the Lender without the prior written
consent of the Lender, which consent shall not be unreasonably withheld and (b)
without providing prior written notice to the Lender of any proposal to amend,
alter, modify, or waive, or to consent to any amendment, alteration,
modification or waiver of, any material agreement, regardless of the potential
impact on the Lender.
 
Section 6.13 No Negative Pledge.  Except with respect to (a) specific property
to be sold pursuant to an executed agreement with respect to a permitted sale of
assets, (b) the Revolving Credit Agreement and the Fundamental Documents in
effect on the Closing Date, (c) restrictions imposed by law, (d) restrictions
contained in agreements for or instruments evidencing Indebtedness existing on
the date hereof and listed on Schedule 3.16, (e) restrictions contained in
agreements or instruments assumed or acquired in connection with a permitted
acquisition (in which case any such prohibition or limitation shall apply only
to the assets acquired in such acquisition), (f) restrictions contained in
agreements for or instruments evidencing Indebtedness permitted to be secured
under Section 6.1(ii) (in which case any such prohibition or limitation shall
only apply to the assets subject to the applicable permitted Lien), and (g)
restrictions by reason of customary provisions restricting assignments,
subletting or other transfers contained in leases, licenses and similar
agreements entered into in the ordinary course of business (provided that such
restrictions are limited to the property or assets secured by such Liens or the
property or assets subject to such leases, licenses or similar agreements, as
the case may be), enter into any agreement after the date hereof which prohibits
the creation or assumption of any Lien upon the properties or assets of any
Credit Party, whether now owned or hereafter acquired, or requiring an
obligation to be secured if some other obligation is secured.
 
Section 6.14 Acquisitions or Mergers, etc.  Merge into or consolidate with a
Person or acquire substantially all the assets of another Person, other than (i)
so long as there would not exist any Default or Event of Default hereunder or as
a result thereof, any acquisition the consideration for which does not include
cash and in which a Credit Party shall be the surviving entity and (ii) the
merger of any Subsidiary Guarantor with any other Subsidiary Guarantor or with
the Borrower, provided that in the case of the Borrower, the Borrower is the
surviving entity. For the avoidance of doubt, the merger of Hallmark
Entertainment Holdings, Inc and Hallmark Entertainment Investments Co. with and
into the Borrower, on or prior to the Closing Date, shall be permitted by this
Section 6.14.
 
Section 6.15 Change in Business.  Engage in any business activity other than (i)
activities incident and related to the acquisition, distribution and licensing
of Product; (ii) the operation of television channels or other activities
incident thereto; or (iii) the development and operation of the interactive
television business.
 
Section 6.16 ERISA Compliance.  Engage in a “prohibited transaction,” as defined
in Section 406 of ERISA or Section 4975 of the Code, with respect to any Plan or
Multiemployer Plan or knowingly consent to any other “party in interest” or any
“disqualified person,” as such terms are defined in Section 3(14) or ERISA and
Section 4975(e)(2) of the Code, respectively, engaging in any “prohibited
transaction,” with respect to any Plan or Multiemployer Plan; or permit any Plan
to fail to satisfy any minimum funding standard set forth in Section 302 of
ERISA or Section 412 of the Code (whether or not waived); or terminate any Plan
subject to Title IV of ERISA in a manner which could result in the imposition of
a Lien on any property of any Credit Party pursuant to Section 4068 of ERISA; or
breach or knowingly permit any employee or officer or any trustee or
administrator of any Plan to breach any fiduciary responsibility imposed under
Title I of ERISA with respect to any Plan; engage in any transaction which would
result in the incurrence of a liability under Section 4069 of ERISA; or permit
any Reportable Event to occur with respect to any Plan; or fail to make
contributions to a Plan or Multiemployer Plan which could result in the
imposition of a Lien on any property of any Credit Party pursuant to Section
302(f) of ERISA or Section 412(n) of the Code, if the occurrence of any of the
foregoing events (alone or in the aggregate) could result in a liability which
has a Material Adverse Effect.
 
Section 6.17 Interest Rate Protection Agreements, etc.  Enter into any Interest
Rate Protection Agreement or Currency Agreement for other than bona fide hedging
purposes.
 
Section 6.18 Subsidiaries.  Acquire or create any new direct or indirect
Subsidiary; provided, however, that a Credit Party may organize additional
Subsidiaries under the laws of the United States, any state thereof or the
District of Columbia if (a) each such Subsidiary executes a joinder agreement in
form and substance satisfactory to the Lender whereby such Subsidiary becomes a
Credit Party hereunder, (b) such Subsidiary grants a first priority Lien,
subject only to the Permitted Encumbrances, to the Lender on substantially all
of its assets to secure the Obligations with respect to such Subsidiary Guaranty
in form and substance satisfactory to the Lender, and (c) the certificates
representing 100% of the shares of capital stock or other Equity Interests of
such Subsidiary held by such Credit Party become part of the pledged securities
under the terms of the Pledge Agreement and are delivered to the Lender together
with stock powers for each such certificate or such other documents that are
necessary providing for the transfer of a membership interest of a Subsidiary
that is an LLC.
 
Section 6.19 Hazardous Materials.  Cause or permit 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, nor
release, discharge, dispose of or permit or suffer 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 material violation of any Environmental Law.
 
Section 6.20 Cash Interest Coverage Ratio.  Permit the Cash Interest Coverage
Ratio of the Borrower and its Consolidated Subsidiaries, as at the end of each
fiscal quarter (commencing with the first full fiscal quarter after the Closing
Date) to be less than 2.0:1.0.
 
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 or warranty made by any Credit Party in this Credit
Agreement or in any other Fundamental Document or any statement or
representation made by any Credit Party in any report, financial statements,
certificate or other document furnished by or on behalf of any Credit Parties to
the 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 any principal of or interest on the
Loans or of any fees or other amounts payable by the Borrower hereunder, when
and as the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or by acceleration thereof or otherwise,
and, in the case of payments of interest, such default shall continue unremedied
for five (5) days after receipt by the Borrower of an invoice therefor;
 
(c) default shall be made by any Credit Party in the due observance or
performance of any covenant, condition or agreement contained in Section 5.4,
Section 8.1(b) or Article 6 of this Agreement;
 
(d) 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 Agreement, or any other Fundamental
Document and such default shall continue unremedied for thirty (30) consecutive
days after any Credit Party obtains knowledge thereof or receives written notice
from the Lender thereof;
 
(e) default shall be made with respect to any Indebtedness of any Credit Party
in excess of $1,000,000 when due or the performance of any other obligation
incurred in connection with any such Indebtedness, if the effect of such default
is to accelerate the maturity of such Indebtedness or to permit the holder
thereof to cause such Indebtedness to become due prior to its stated maturity
and such default shall not be remedied, cured, waived or consented to within the
period of grace with respect thereto;
 
(f) 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; or any such Person shall commence any
case, proceeding or other action seeking to have an order for relief entered on
its behalf 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 such Person 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; or any such Person shall take any action to authorize
any of the foregoing;
 
(g) any involuntary case, proceeding or other action against any Credit Party
shall be commenced seeking to have an order for relief entered against it 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 such Person,
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;
 
(h) final judgment(s) for the payment of money in excess of $1,000,000 shall be
rendered in the aggregate against any Credit Party which within thirty (30) days
from the entry of such judgment shall not have been discharged or stayed pending
appeal or which shall not have been discharged within thirty (30) days from the
entry of a final order of affirmance on appeal;
 
(i) this Credit Agreement, the Revolving Credit Agreement, or any other
Fundamental Document shall, for any reason, not be or shall cease to be in full
force and effect or shall be declared null and void or any of the Fundamental
Documents shall not give or shall cease to give the Lender the Liens, rights,
powers and privileges purported to be created thereby in favor of the Lender,
superior to and prior to the rights of all third Persons and subject to no other
Liens (other than Permitted Encumbrances), or the validity or enforceability of
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;
 
(j) (i) any Credit Party or ERISA Affiliate shall fail to make any contributions
required to be made to a Plan subject to Title IV of ERISA or Multiemployer
Plan, (ii) any Plan fails to satisfy the minimum funding standards set forth in
section 302(a) of ERISA or section 412(a) of the Code (whether or not waived) or
an application shall have been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standards (including any required
installment payments), (iii) 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 in
reorganization or is being terminated, (iv) a Reportable Event with respect to a
Plan shall have occurred, (v) any Credit Party or ERISA Affiliate shall withdraw
from a Plan during a plan year in which it was a substantial employer (within
the meaning of section 4001(a)(2) or 4062(e) of ERISA), (vi) a Plan subject to
Title IV of ERISA shall be terminated, or notice of intent to terminate a Plan
under section 4041(c) of ERISA shall be filed, (vii) proceedings to terminate, a
Plan subject to Title IV of ERISA shall be instituted by the PBGC or a trustee
shall be appointed with respect to any such Plan, (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 subject
to Title IV of ERISA shall occur, or (ix) a Lien pursuant to section 412 of the
Code or section 302 of ERISA shall be imposed as to any Credit Party or ERISA
Affiliate;
 
(k) default shall be made with respect to the NICC Preferred Interest under the
Crown Media United States, LLC limited liability company agreement, and such
default shall not be remedied, cured, waived or consented to within the period
of grace with respect thereto;
 
(l) any demand for payment is made pursuant to the Hallmark Guaranty;
 
then, in every such event and at any time thereafter during the continuance of
such event, the Lender may, take any or all of the following actions, at the
same or different times:  (x) declare the principal of and the interest on the
Loans and the Notes and all other 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, or other notice of any kind,
all of which are hereby expressly waived, anything in this Agreement or in the
Notes to the contrary notwithstanding.  If an Event of Default specified in
paragraphs (f) or (g) above shall have occurred, 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 Lender pursuant to Applicable Law or otherwise.
 
8.  
NICC RESERVE ACCOUNT

 
Section 8.1 NICC Reserve Account.  (a)On or prior to the Closing Date, the
Borrower shall establish with a financial institution satisfactory to Lender,
the NICC Reserve Account in the name of the Borrower (the “NICC Reserve
Account”).  The Borrower may deposit into the NICC Reserve Account such amounts
as it may choose as a sinking fund with respect to the NICC Preferred Interest.
 
(b) Amounts deposited by the Borrower shall not be withdrawn by the Borrower
from the NICC Reserve Account, except that so long as no Default has occurred
and is continuing, the Borrower may withdraw funds sufficient to make scheduled
payments with respect to the NICC Preferred Interest.
 
(c) The Borrower agrees that at no time shall the amount (including, for the
avoidance of doubt, any interest) standing to the credit of the NICC Reserve
Account exceed $25,000,000.
 
9.  
MISCELLANEOUS

 
Section 9.1 Notices.  Notices and other communications provided for herein shall
be in writing and shall be delivered or mailed (or in the case of telegraphic
communication, if by telegram, delivered to the telegraph company and, if by
telex, graphic scanning or other telegraphic or facsimile communications
equipment of the sending party hereto, delivered by such equipment) addressed,
if to the Lender, to Hallmark Cards, Inc., 2501 McGee, Mail Drop 342, Kansas
City, MO 64108, Attention: Chief Financial Officer, with a copy to Willkie Farr
& Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, Attention:
Maurice M. Lefkort, Facsimile No. (212) 728-8111 and if to the Borrower, to
Crown Media Holdings, Inc., 1325 Avenue of the Americas, 22nd Floor, New York,
New York 10019, Attention: Chief Executive Officer, with a copy to Crown Media
Holdings, Inc. 12700 Ventura Blvd., Studio City, California 91604, Attention:
Chief Financial Officer and with a copy to Crown Media Holdings, Inc. 12700
Ventura Blvd., Studio City, California 91604, Attention: General Counsel, or
such other address as such party may from time to time designate by giving
written notice to the other parties hereunder.  Any failure of the Lender giving
notice pursuant to this Section 9.1 shall not affect the validity of such
notice.  All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the fifth (5th) Business Day after the date when sent by registered or
certified mail, postage prepaid, return receipt requested, if by mail, or when
delivered to the telegraph company, charges prepaid, if by telegram, or when
receipt is acknowledged, if by any telegraphic or facsimile communications
equipment of the sender, in each case addressed to such party as provided in
this Section 9.1 in accordance with the latest unrevoked written direction from
such party.
 
Section 9.2 Survival of Agreement, Representations and Warranties, etc.  All
warranties, representations and covenants made by any of the Credit Parties
herein or in any other Fundamental Document or in any certificate or other
instrument delivered in connection with this Credit Agreement or any other
Fundamental Document shall be considered to have been relied upon by the Lender
except for any terminations, amendments, modifications or waivers thereof in
accordance with the terms hereof, and shall survive the deemed making of the
Loans herein contemplated and the issuance and delivery to the Lender of the
Notes regardless of any investigation made by the Lender and shall continue in
full force and effect 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 Party hereunder.
 
Section 9.3 Expenses; Documentary Taxes.  Whether or not the transactions hereby
contemplated shall be consummated, the Borrower agrees to pay (a) all reasonable
out-of-pocket expenses incurred by the Lender in connection with, or growing out
of, the performance of due diligence, the negotiation, preparation, execution,
delivery, waiver or modification and administration of this Credit Agreement and
any other documentation contemplated hereby, the deemed making of the Loans, the
Collateral or any Fundamental Document, including, but not limited to, the
reasonable out-of-pocket costs and internally allocated charges of audit or
field examinations of the Lender in connection with the administration of this
Credit Agreement, the verification of financial data and the transactions
contemplated hereby, and (b) all reasonable out-of-pocket expenses incurred by
the Lender in the enforcement or protection of the rights and remedies of the
Lender in connection with this Credit Agreement, the other Fundamental
Documents, or the Notes, or as a result of any transaction, action or non-action
arising from any of the foregoing.  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 Lender 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 or the other Fundamental Documents.  The obligations of the Borrower
under this Section shall survive the termination of this Credit Agreement and
the payment of the Loans.
 
Section 9.4 Indemnification of the Lender.  The Borrower agrees (a) to indemnify
and hold harmless the Lender, in its capacity as such, and the  directors,
officers, employees, trustees, agents and affiliates of the Lender, in their
capacity as such (each, an “Indemnified Party”) (to the full extent permitted by
Applicable Law) from and against any and all claims, demands, losses, judgments
and liabilities (including liabilities for penalties) of whatsoever nature, and
(b) to pay to the Indemnified Parties an amount equal to the amount of all costs
and expenses, including reasonable legal fees and disbursements, and with regard
to both (a) and (b) growing out of or resulting from any litigation,
investigation or other proceedings relating to the Collateral, this Credit
Agreement, the other Fundamental Documents, the Loans deemed to be made under
this Agreement, any attempt to audit, inspect, protect or sell the Collateral,
or the administration and enforcement or exercise of any right or remedy granted
to the Lender hereunder excluding therefrom all claims, demands, losses,
judgments, liabilities, costs and expenses to be found by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnified Party.  The foregoing
indemnity agreement includes any reasonable costs incurred by any Indemnified
Party in connection with any action or proceeding which may be instituted in
respect of the foregoing by any Indemnified Party, or by any other Person either
against any Indemnified Party or in connection with which any officer, director,
agent or employee of any Indemnified Party is called as a witness or deponent,
including, but not limited to, the reasonable fees and disbursements of Willkie
Farr & Gallagher LLP, counsel to the Lender, and any out-of-pocket costs
incurred by any Indemnified Party in appearing as a witness or in otherwise
complying with legal process served upon them.
 
Section 9.5 CHOICE OF LAW.  THIS AGREEMENT AND THE OTHER FUNDAMENTAL DOCUMENTS
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).  THE BORROWER AND EACH OTHER
CREDIT PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE EXCLUSIVE JURISDICTION OF EITHER THE COURTS OF THE STATE OF NEW
YORK SITTING IN NEW YORK COUNTY, THE UNITED STATES DISTRICT COURT OF THE
SOUTHERN DISTRICT OF NEW YORK, THE COURTS OF THE STATE OF DELAWARE SITTING IN
NEW CASTLE COUNTY DELAWARE OR OF THE UNITED STATES DISTRICT COURT OF THE
DISTRICT OF DELAWARE, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER FUNDAMENTAL
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK
STATE COURT, THE DELAWARE STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER FUNDAMENTAL DOCUMENT
SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER FUNDAMENTAL DOCUMENT AGAINST
THE BORROWER OR ANY OTHER CREDIT PARTY OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.
 
Section 9.6 WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER FUNDAMENTAL DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FUNDAMENTAL DOCUMENTS
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
 
Section 9.7 WAIVER WITH RESPECT TO DAMAGES AND VENUE.  TO THE EXTENT PERMITTED
BY APPLICABLE LAW, NO CREDIT PARTY SHALL ASSERT, AND EACH CREDIT PARTY HEREBY
WAIVES, ANY CLAIMS AGAINST THE LENDER, 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 OTHER FUNDAMENTAL DOCUMENT, ANY AGREEMENT OR INSTRUMENT
CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.  THE BORROWER AND EACH OTHER CREDIT PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
FUNDAMENTAL DOCUMENT IN ANY COURT REFERRED TO IN SECTION 9.5.  EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.
 
Section 9.8 No Waiver.  No failure on the part of the 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 9.9 Extension of Payment Date.  Except as otherwise specifically
provided in Article 2 hereof, should any payment or prepayment of principal of
or interest on the Notes 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 9.10 Amendments, etc.  No modification, amendment or waiver of any
provision of this Credit Agreement or any other Fundamental Document, and no
consent to any departure by the Borrower or any other Credit Party herefrom or
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Lender and the Borrower and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
 
Section 9.11 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 or thereof, and any such invalidity, illegality or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
 
Section 9.12 SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.1.  NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
 
Section 9.13 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 9.14 Execution in Counterparts.  This Credit Agreement may be executed
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.  Facsimile signatures will be treated as originals.
 
Section 9.15 Confidentiality.  The Lender and the Borrower hereby agree that
each will use its best efforts to treat any information obtained from the Credit
Parties and their Affiliates in connection with this Credit Agreement as
confidential, except that each of the Lender and the Borrower shall be permitted
to disclose information (i) to their Affiliates and to their (and their
Affiliates’) respective officers, directors, trustees, employees, agents,
auditors, attorneys and representatives (who will be informed of the
confidential nature of the material); (ii) to the extent provided in the
Stockholders Agreement (as such term is defined in the Master Recapitalization
Agreement) and (iii) to the extent required by Applicable Law or by any subpoena
or similar legal process.
 
Section 9.16 Entire Agreement.  This Credit Agreement (including the Exhibits
and Schedules hereto) and the other Fundamental Documents represent 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
deemed to be made shall be replaced by the terms of this Credit Agreement.
 
Section 9.17 Right of Set-Off.  Upon the occurrence and during the continuance
of any Event of Default, the Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law and without order of or
application to any court, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Person to or for the credit or the
account of any Credit Party against any and all of the Obligations, irrespective
of whether or not such Person shall have made any demand under any Fundamental
Document and although the Obligations may not have been accelerated.  The rights
of  the Lender under this Section are in addition to other rights and remedies
which the Lender may have upon the occurrence and during the continuance of any
Event of Default.
 
Section 9.18 Assignment.  The Lender may at any time assign to one or more
assignees all or a portion of its rights and obligations under this Agreement or
any other Fundamental Agreement (including all or a portion of the Loans at the
time owing to it).  In connection with any such assignment, the Borrower and the
Lender agree to enter into an amendment to this Agreement in accordance with
Section 9.10 as appropriate to evidence such assignment.  The Borrower may not
assign its rights and obligations under this Agreement or any other Fundamental
Agreement without the prior written consent of the Lender.
 
Section 9.19 Revolver Intercreditor Agreement.  If at any time the Borrower
enters into a Revolving Credit Agreement, as permitted pursuant to Section
6.1(vi) hereof, the Lender shall enter into the Intercreditor Agreement in such
form as may be required by the lender or lenders providing the commitments under
such Revolving Credit Agreement.  Such Intercreditor Agreement shall be on
customary terms, but in any event shall provide for the subordination of the
Liens granted to the Lender in connection with the Transactions to the Liens on
the collateral for the Revolving Credit Agreement in an amount equal to the
commitments of the lender or lenders providing the commitments under such
Revolving Credit Agreement.  The subordination of the Liens granted to the
Lender in connection with the Transactions to the Liens securing the Revolving
Credit Agreement shall affect only the relative priority of those Liens, and
does not subordinate the Obligations owed to the Lender in right of payment to
the obligations under the Revolving Credit Agreement, which obligations shall be
pari passu with the Obligations.
 

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1
Date of last audited financial statements to be inserted prior to Closing Date.

 

 
 

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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:
 
CROWN MEDIA HOLDINGS, INC.
 

 
 
By:
 

 
 
Name:

 
 
Title:

 
 
LENDER:
 
HC CROWN CORP.
 

 
 
By:
 

 
 
Name:

 
 
Title:

 

 

[Signature Page of Credit Agreement]
 
 
 

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5258558.25
 

CREDIT PARTIES:
 
CROWN MEDIA UNITED STATES, LLC
 
 
By:
 

 
 
Name:

 
 
Title:

 
CM INTERMEDIARY, LLC
 
 
By:
 

 
 
Name:

 
 
Title:

 
CITI TEEVEE, LLC
 
 
By:
 

 
 
Name:

 
 
Title:

 
DOONE CITY PICTURES, LLC
 
 
By:
 

 
 
Name:

 
 
Title:

 

 
[ADDITIONAL CREDIT PARTIES]
 

 

 

 

 
 

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