**EXHIBIT 10.12**

**EMPLOYMENT AGREEMENT**

Agreement, made as of this 24th day of July, 2006 (“EffectiveDate”), between Crown Media Holdings, Inc., a Delaware corporation, withoffices at 12700 Ventura Boulevard, Los Angeles, California 91604 (“Employer”)and Brian Stewart (“Employee”).

WHEREAS, Employer desires to continue to employEmployee as provided herein and Employee desires to be employed by Employerupon the terms and conditions set forth:

NOW, THEREFORE, inconsideration of the covenants herein contained, the parties hereto agree asfollows:

1.      EmploymentDuties.

(a)    As of theEffective Date, Employer and Employee agree to terminate any and all existingagreements between them and agree to extend Employee’s employment pursuant tothe terms of this agreement (“Employment Agreement”).  Employee agrees to serve as Senior VicePresident, Finance.  Employee agrees toserve in such capacity and perform responsibilities as shall be designated fromtime to time by Employer, including as interim Chief Financial Officer.  Employee shall use Employee’s best efforts topromote the interests of Employer and shall devote Employee’s full businesstime, energy and skill exclusively to the business and affairs of Employerduring the “Term” (as “Term” is defined in Paragraph 2 below).

(b)    During thecourse of Employee’s employment hereunder, Employer may create or utilizesubsidiary companies for the production and distribution of programming or toconduct the other activities and businesses of Employer.  Employer shall have the right, withoutadditional compensation to Employee, to loan or make Employee available to anysubsidiary of Employer or company in common ownership with Employer to performservices for any programming, property or project owned or controlled byEmployer or any such entity, provided that Employee’s services for any suchentity shall be consistent with Employee’s duties hereunder.  Employee further agrees that all the terms ofthis Employment Agreement shall be applicable to Employee’s services for eachsuch entity.

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2.      Termof Employment.  The term of Employee’semployment (“Term”) with Employer shall commence on the Effective Date andshall end on the second anniversary of the Effective Date, unless terminatedearlier as provided in Paragraph 8 of this Agreement or extended by mutualagreement of the parties.

3.      Compensation.

(a)    Salary.  As compensation for Employee’s serviceshereunder, Employer shall pay to Employee a base salary at the rate of ThreeHundred Forty Thousand Dollars ($340,000) per year.  During the Term and any extensions, Employerwill consider an adjustment of Employee’s base salary on an annual basis.

(b)    PerformanceBonus.  Contingent on employmentthrough each year end; the end of the Term; or for termination of employmentpursuant to paragraph 8(b) below, following the end of each calendar yearduring the Term, Employee will be paid a bonus, to be prorated for partialcalendar years within the Term, in an amount based on achievement of the financialgoals set forth in Schedule A, attached hereto. Such bonus will be paid to Employee on the date following the applicablecalendar year that Employer designates for payment of bonuses to its employeesin general.

(c)    RSUs.  Employer will award to Employee RestrictedStock Units (“RSUs”) in an RSU agreement (attached as Schedule B) and pursuantto the terms of and conditions of the Amended and Restated Crown MediaHoldings, Inc. 2000 Long Term Incentive Plan (attached as Schedule C).  Employee has also been granted RSUs underprior agreements which are attached hereto as Schedule D (collectively, withthe Schedule B agreement, referred to herein as the “RSU Agreements’).

(d)    Withholding.  All payments of salary shall be made inappropriate installments to conform with the regular payroll dates for salariedpersonnel of Employer.  Employer shall beentitled to deduct from each payment of compensation amounts required underapplicable laws or for participation in any employee benefit plans.

(e)    Expenses.  During the Term, Employer shall pay orreimburse Employee on an accountable basis for all reasonable and necessaryout-of-pocket expenses for entertainment, travel, meals, hotel accommodationsand other expenditures incurred by Employee in connection with Employee’sservices to Employer in accordance with Employer’s expense account policies.

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(f)     FringeBenefits.  During the Term, Employeeshall be entitled to receive the following fringe benefits: (i) groupmedical, dental, life and disability insurance as per Employer policy, and (ii)any other fringe benefits on terms that are or may become available generallyto comparable employees of Employer.

4.      Placeof Employment.  During the Term,Employee shall be required to perform Employee’s duties at the principaloffices of Employer, or such other location as may be mutually agreeable toEmployer and Employee, and Employee shall undertake a reasonable travelrequired by Employer in connection with the performance of Employee’s dutieshereunder.

5.      Confidentiality,Intellectual Property; Name and Likeness.

(a)    Employeeagrees that Employee will not during the Term or thereafter divulge to anyone(other than Employer and its executives, representatives and employees who needto know such information or any persons designated by Employer) any knowledgeor information of any type whatsoever designated or treated as confidential byEmployer relating to the business of Employer or any of its subsidiaries oraffiliates, including, without limitation, all types of trade secrets, businessstrategies, marketing and distribution plans as well as concrete proposals,plans, scripts, treatments and formats described in subparagraph (b)below.  Employee further agrees thatEmployee will not disclose, publish or make use of any such knowledge orinformation of a confidential nature (other than in the performance of Employee’sduties hereunder) without the prior written consent of Employer.  This provision does not apply to informationwhich becomes available publicly without the fault of Employee or informationwhich Employee discloses in confidence to Employee’s****own privileged representatives or is required to disclose inlegal proceedings, provided Employee gives advance notice to the Executive VicePresident, Legal and Business Affairs and General Counsel of Employer and anopportunity to Employer to resist such disclosure in legal proceedings.

(b)    During theTerm, Employee will disclose to Employer all concrete proposals, plans,scripts, treatments, and formats invented or developed by Employee during theTerm which relate directly or indirectly to the business of Employer or any ofits subsidiaries or affiliates including, without limitation, any proposals andplans which 

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may be copyrightable,trademarkable, patentable or otherwise exploitable.  Employee agrees that all such proposals,plans, scripts, treatments and formats are and will be the property ofEmployer.  Employee further agrees, atEmployer’s request, to do whatever is necessary or desirable to secure for theEmployer the rights to said proposals, plans, scripts, treatments, and formats,whether by copyright, trademark, patent or otherwise and to assign, transferand convey the rights thereto to Employer at Employer’s expense.

(c)    Employershall have the right in perpetuity to use Employee’s name reasonably inconnection with credits for programming, properties and projects for whichEmployee performs any services pursuant to this Agreement.

6.      Employee’sRepresentations.  Employee representsand warrants that Employee has the right to enter into this Agreement and isnot subject to any contract, commitment, agreement, arrangement or restrictionof any kind which would prevent Employee from performing Employee’s duties andobligations hereunder.

7.      Non-Competition;No Raid.

(a)    During theTerm, Employee shall not engage directly or indirectly, whether throughself-employment or as an employee, independent contractor, consultant, partner,shareholder or otherwise, in a business or other endeavor which materiallyinterferes with any of Employee’s duties or obligations hereunder or which isdirectly competitive with the business of the Employer or its subsidiaries,including but not limited to the production, distribution or any otherexploitation of audiovisual television material (the “Other Business”).  In the event of a breach of this Paragraph7(a) by Employee or a claim by Employee pursuant to this paragraph, bothEmployer and Employee shall have all of the remedies available to Employer atlaw or equity.  In the event time is ofthe essence, notwithstanding paragraph 9 below, Employee and Employer agreethat temporary and permanent injunctive relief may be sought by either in acourt of law.

(b)    Employeefurther agrees that during the Term and for a period of one year thereafter,Employee will not employ, or attempt to employ or assist anyone else to employ,any person who is, at the date of termination of Employee’s employment, workingas an officer, policymaker or in high-level creative development ordistribution 

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(including withoutlimitation executive employees) for or rendering substantially full-timeservices as Employer.

8.      Termination.

(a)    ThisAgreement may be terminated and the Term ended on five (5) business days’written notice for any one of the following reasons (except (i) in which casetermination shall occur on the date of death):

(i)     The deathof Employee;

(ii)    A serioushealth condition of Employee that incapacitates Employee (as defined under theFamily Medical Leave Act) for a period exceeding an aggregate of twelve workweeks during any twelve month period of the Term.  For purposes of counting the aggregate workweeks, days properly designated by Employee as vacation days shall not becounted;

(iii)   For “cause,”which for purposes of this Agreement shall be defined as:

(A)   The use ofdrugs and/or alcohol which interfere materially with Employee’s performance ofEmployee’s services under this Agreement;

(B)   Employee’sconviction of any act which constitutes a felony under federal, state or locallaws or the law of any foreign country;

(C)   Employee’spersistent and material failure or refusal after written notice of Employee’spersistent refusal to perform after written notice, any of Employee’s dutiesand responsibilities pursuant to this Agreement; or

(D)   Employee’sdishonesty in non-trivial financial dealings with or on behalf of Employer, itssubsidiaries, affiliates and parent corporation or in connection withperformance of Employee’s duties hereunder.

(E)    Employee’smaterial breach of any provision of this Agreement.

(b)    Employershall also have the right to terminate Employee prior to the expiration of theTerm in addition to pursuant to Paragraph 8(a) above by providing Employee withwritten notice.  In the event of atermination pursuant to this Paragraph 8(b), Employee shall not be entitled toany further compensation or benefits except (1) as may be provided under theRSU Agreements; (2) the greater of twelve (12) months base 

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salary or the remainingbase salary described in Paragraph 3(a) above for the balance of the Term (asthough no termination had occurred) (“Severance Period”), paid in a lump sumand discounted at “prime” rate’s to present value at the time of payment; (3)vested ERISA benefits (e.g., 401k plan); (4) benefits that may be required bylaw (e.g., COBRA); and (5) prorata bonus through the date Employee’s job dutiesend to be paid as provided in paragraph 3(b) above.  Employee shall have no obligation to seekcomparable employment and if Employee does accept other employment during theSeverance Period, there will be no offset by Employer against the amountspayable under this Paragraph 8(b).  IfEmployer terminates Employee under this Paragraph 8(b), Paragraph 7(a) shallnot apply from the date of termination.

(c)    In theevent that Employer terminates this Agreement due to any of the reasons setforth in Paragraph 8(a) above, Employee shall be paid Employee’s salary throughthe later of the expiration of the five (5) business days period referred to inParagraph 8(a) or the end of the month in which the termination event occurs,after which Employer’s obligation to pay salary to Employee shallterminate.  After making the paymentsprovided for in this sub-paragraph (c), Employer shall have no furtherobligations to Employee pursuant to this Agreement, except (1) as may beprovided under the RSU Agreements; (2) vested ERISA benefits; or (3) benefitsthat may be required by law (e.g., COBRA).

(d)    Upontermination of this Agreement Employee shall promptly return all of Employer’srecords and property to Employer.

(e)    Upontermination of Employee’s employment for any reason, Employee shall tenderEmployee’s resignation from the Board of Directors of any of Employer’ssubsidiaries or affiliates on which Employee is serving, and Employer shallaccept such resignation forthwith.

9.      Arbitration.  Any dispute between the Employee and Employerinvolving any provision of this Agreement of employment matter; including anyclaim of discrimination under state and federal law, other than an action incourt requesting temporary or permanent injunctive relief as set forth inparagraph 7 above, shall be resolved by arbitration under the employment rulesof the American Arbitration Association and in accordance with applicable law,allowing all damages and remedies 

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available in a courtaction.  Such arbitration shall beconducted in the New York City metropolitan area before one (1) neutralarbitrator who is a lawyer with expertise in employment law.  Employer shall pay the expenses of thearbitration and each party shall pay its own legal fees and expenses.  The arbitrator shall provide a reasonedopinion supporting his/her conclusion, including detailed findings of fact andconclusions of law.  Such findings offact shall be final and binding on the parties, but such conclusions of lawshall be subject to appeal in any court of competent jurisdiction.  The parties further stipulate that the lawsof the state of New York shall apply to any dispute or action regarding thisAgreement.

10.    Assignment.  This Agreement is a personal contract and,without the prior written consent of Employer, shall not be assignable by theEmployee.  The rights and obligations ofEmployer may be assigned and such assignment shall bind in their entirety thesuccessors and assigns of Employer.  Asused in this Agreement, the term “successor” shall include any person, firm,corporation or other business entity which at the time, whether by merger,purchase or otherwise, acquires all of substantially all of the assets orbusiness of Employer.

11.    Amendment;Captions.  This Agreement containsthe entire agreement between the parties. It may not be changed orally, but only by agreement in writing signed bythe party against whom enforcement of any waiver, change, modification or dischargeis sought.  Paragraph headings are forconvenience of reference only and shall not be considered a part of thisAgreement.  If any clause in thisAgreement is found to be unenforceable, illegal or contrary to public policy,the parties agree that this Agreement shall remain in full force and effectexcept for such clause.

12.    PriorAgreements.  This Agreementsupersedes and terminates all prior employment agreements between the parties;provided, however, that in the event of a Change in Control as defined inSchedule C attached hereto, the severance provided in the Severance Plan(attached as Schedule E) will control for so long as the Plan is ineffect.  Subject to the foregoingprovision,****this EmploymentAgreement and the schedules attached hereto set out the full agreement betweenthe parties concerning Employee’s employment.

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13.    Notices.  Any notices or other communications requiredor permitted hereunder shall be in writing and shall be deemed effective whendelivered in person or if mailed, by registered or certified mail, returnreceipt requested, in which case the notice shall be deemed effective on thedate of deposit in the mails, postage prepaid, addressed to Employee at theaddress for Employee appearing in Employer’s records.  Notices to Employer shall be addressed to itsChief Executive Officer at the address first written above, with a copy to theExecutive Vice President of Legal and Business Affairs, Crown Media Holdings,Inc., 12700 Ventura Blvd., Studio City, CA 91604.  Either party may changethe address to which notices are to be addressed by notice in writing given tothe other in accordance with the terms hereof.

14.    Periodsof Time.  Whenever in this Agreementthere is a period of time specified for the giving of notices or the taking ofaction, the period shall be calculated excluding the day on which the giversends notice and excluding the day on which action to be taken is actuallytaken.

15.    Counterparts.  This Agreement may be signed in any number ofcounterparts, each of which shall be an original, and all of which, takentogether, shall constitute one instrument.

IN WITNESS WHEREOF, Employer has by its appropriateofficer signed this Agreement and Employee has signed this Agreement as of theday and year first above written.
|        | CROWN MEDIA HOLDINGS, INC. |
|--------|----------------------------|
|   |                       |
|   | By                         | /s/ Charles Stanford |
|   | Title                      | EVP, General Counsel |
|   |                       |
|   |                       |
|   | EMPLOYEE                   |
|   |                       |
|   | /s/ Brian Stewart          |
|        |                            |  |  |

 

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