**Exhibit10.1**

**EMPLOYMENTAGREEMENT**

Agreement, made as of this 3rd day of October, 2006 (“EffectiveDate”), between Crown Media Holdings, Inc., a Delaware corporation, withoffices at 12700 Ventura Boulevard, Los Angeles, California 91604 (“Employer”)and Henry Schleiff (“Employee”).

WHEREAS, Employer desires to employ Employee asprovided herein and Employee desires to be employed by Employer upon the termsand conditions set forth:

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

1.             EmploymentDuties.

                (a)As of the Effective Date, Employer hereby employs and Employee agrees to serveas President and Chief Executive Officer reporting solely and directly to theBoard of Directors of Employer. Employee agrees to perform such servicesconsistent with Employee’s position as shall, from time to time, be reasonablyassigned to Employee. Employee shall use Employee’s best efforts to promote theinterests of Employer and shall devote Employee’s full business time, energyand skill exclusively to the business and affairs of Employer during the “Term”(as “Term” is defined in Paragraph 2 below); it being understood, however thatEmployee may devote reasonable time to charitable activities, educational andindustry events.

(b)           Employee’s primary duties shall be toact as the chief executive officer and operating head of Employer responsiblefor administering the approved annual budget and directing the overalldevelopment of Employer’s business subject to the guidance of the Board ofDirectors. During the course of Employee’s employment hereunder, Employer maycreate or utilize subsidiary companies to conduct the activities and businessesof Employer. Employer shall have the right, without additional compensation to Employee,to loan or make available Employee’s services to any such subsidiary, providedthat his duties as an officer of such subsidiary shall be consistent with hisduties hereunder. Employee further agrees that all the terms of this EmploymentAgreement shall be applicable to Employee’s services for each such entity. Allemployees of the Company, including employees of any such subsidiaries, shallreport to Employee or his designees. 

2.             Termof Employment*.*The term of Employee’semployment (“Term”) with Employer shall commence on the Effective Date andshall end on the day before the fourth (4th)

 

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anniversary of theEffective Date, unless terminated earlier as provided in Paragraph 8 of thisEmployment Agreement (“Agreement”) or extended by mutual agreement of theparties.

3.             Compensation.

                (a)           Salary*.*Ascompensation for Employee’s services hereunder, Employer shall pay to Employeea base salary at the annual rate of One Million Dollars ($1,000,000.00) with aminimum four percent (4%) annual increase each year on the anniversary date ofthe Effective Date of this Agreement.

                (b)           Performance Bonus*.*So long as Employee is employed through each year end (orthrough the end of the Term for the final year of the Agreement), thenfollowing the end of each calendar year during the Term, Employee is eligibleto be paid an annual performance bonus, to be prorated for partial calendaryears. The target bonus will be 100% of base salary for the applicable period,with a potential payout range of 0% to 200%, with a minimum guarantee of 50%for each year of the Term (subject to proration for partial years).Accordingly, for 2006, Employee will receive a pro-rata bonus, and thereafterthe bonus will be determined on a calendar year basis. The bonus will be basedon achievement of criteria determined by the Crown Media Compensation Committeein consultation with Employee and will include such factors as improved EBITDA,demographics, operating cash, MSO renewal progress, ad revenue and appropriatediscretionary considerations. Such bonus will be paid to Employee on the datefollowing the applicable calendar year that Employer designates for payment ofbonuses to its employees in general, but in no event later than the nextfollowing March 15.

                (c)           LTI-RSUs*.*Employerwill award to Employee Restricted Stock Units (“RSUs”) in an RSU agreement(attached as Schedule B) and pursuant to the terms of and conditions of theAmended and Restated Crown Media Holdings, Inc. 2000 Long Term Incentive Plan(attached as Schedule C).

                (d)           LTI-SAR*s.*Employerwill award to Employee Stock Appreciation Rights (“SAR”) pursuant to the termsof the attached SAR Agreement (attached as Schedule D).

                (e)           Transaction Bonus*.*In the event a Change in Control (“CIC”) (as defined inSchedule D) occurs during the first year of Employee’s employment, unlessEmployee’s employment is terminated pursuant to Paragraph 8(f) below, Employeeshall be entitled to a bonus in the amount of Six Million Dollars ($6,000,000)(“Transaction Bonus”). The Transaction Bonus will be increased by One MillionDollars ($1,000,000) for each succeeding

 

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year Employee remainsemployed with Employer prior to a CIC through the fourthyear of this Agreement, up to a maximum of Nine Million Dollars ($9,000,000).Any such Transaction Bonus will be payable six (6) months after the date of the CIC. If Employee’s employment is terminated pursuant toParagraph 8(a)(i) or 8(a)(ii) or Paragraph 8(b) below and (i) a CIC occurswithin ninety (90) days after such termination or (ii) an agreement that willresult in a CIC is executed by Employer prior to such termination and a CICoccurs within one hundred-eighty (180) days after such termination then,Employee shall be entitled to the applicable Transaction Bonus calculated onthe date (x) Employee’s employment terminates if such termination is pursuantto Paragraph 8(a)(i) or 8(a)(ii) or (y) of the CIC if Employee’s employment isterminated pursuant to Paragraph 8(b). Under no circumstances shall Employee beentitled to any Transaction Bonus if his employment is terminated pursuant tothe provisions of Paragraph 8(a)(iii). Employee will require in any CIC thatthe purchaser assume in writing liability for payment of the Transaction Bonus,it being agreed that no such assumption by the purchaser shall relieve Employerfrom responsibility for such payment, the full and timely payment of which willbe guaranteed by Employer without any need for Employee to exhaust remediesagainst the purchaser in the event of non-payment.

                (f)            Withholding*.*All payments of salary shall be made in appropriateinstallments to conform with the regular payroll dates for salaried personnelof Employer. Employer shall be entitled to deduct from each payment ofcompensation amounts required under applicable laws and for participation inany employee benefit plans.

                (g)           Expenses*.*Duringthe Term, Employer shall pay or reimburse Employee on an accountable basis forall reasonable and necessary out-of-pocket expenses for entertainment, travel,meals, hotel accommodations, business periodicals, professional memberships,cellphone and/or blackberry and other expenditures incurred by Employee inconnection with Employee’s services to Employer in accordance with Employer’sexpense account policies for its senior executive personnel.

                (h)           Fringe Benefits*.*During the Term, Employee shall be entitled to receive thefollowing fringe benefits: (i) group medical, dental, life and disabilityinsurance as per Employer policy; (ii) any other fringe benefits on terms thatare or may become available generally to senior executive level employees ofEmployer. Employee shall also be entitled to four (4) weeks paid vacation foreach year of the Term, a car allowance of $1,667 a month, a

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financial consulting reimbursement of up to $5,000per year, and may upgrade to first class airline travel when business class isunavailable; provided, however, that under all circumstances, Employee shall beentitled to first class airline travel between Los Angeles and New York.

4.             Placeof Employment*.*During the Term, Employee shallbe required to perform Employee’s duties at the offices of Employer in New YorkCity. Employee shall undertake reasonable travel required by Employer inconnection with the performance of Employee’s duties hereunder, but Employee shallnot be required to relocate.

5.             Confidentiality, Intellectual Property; Nameand Likeness.

                (a)           Employee agrees that Employee willnot during the Term or thereafter divulge to anyone (other than Employer andits executives, representatives and employees who need to know such informationor any persons designated by Employer) any knowledge or information of any typewhatsoever designated or treated as confidential by Employer relating to thebusiness of Employer or any of its subsidiaries or affiliates, including,without limitation, all types of trade secrets, business strategies, marketingand distribution plans as well as concrete proposals, plans, scripts,treatments and formats described in subparagraph (b) below. Employee furtheragrees that Employee will not disclose, publish or make use of any suchknowledge or information of a confidential nature (other than in theperformance of Employee’s duties hereunder) without the prior written consentof Employer. This provision does not apply to information which becomesavailable publicly without the fault of Employee or information which Employeediscloses in confidence to Employee’s own privileged representatives or isrequired to disclose in legal proceedings, provided Employee gives advancenotice to the Executive Vice President, Legal and Business Affairs and GeneralCounsel of Employer and an opportunity to Employer to resist such disclosure inlegal proceedings.

                (b)           During the Term, Employee willdisclose to Employer all concrete proposals, plans, scripts, treatments, andformats invented or developed by Employee during the Term which relate directlyor indirectly to the business of Employer or any of its subsidiaries oraffiliates including, without limitation, any proposals and plans which may becopyrightable, trademarkable, patentable or otherwise exploitable. Employeeagrees that all such proposals, plans, scripts, treatments and formats are andwill be the property of Employer. Employee further agrees, at Employer’srequest, to do whatever is necessary or desirable to secure for the

 

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Employer the rights to said proposals, plans,scripts, treatments, and formats, whether by copyright, trademark, patent orotherwise and to assign, transfer and convey the rights thereto to Employer atEmployer’s expense.

                (c)           Employer shall have the right inperpetuity to use Employee’s name in connection with credits for programming,properties and projects for which Employee performs any services pursuant tothis Agreement.

6.             Employee’sRepresentations*.*Employeerepresents and warrants that Employee has the right to enter into thisAgreement and is not subject to any contract, commitment, agreement,arrangement or restriction of any kind which would prevent Employee fromperforming Employee’s duties and obligations hereunder.

7.             Non-Competition;No Raid*.*

                (a)           During the Term, Employee shall notengage directly or indirectly, whether through self-employment or as anemployee, independent contractor, consultant, partner, shareholder orotherwise, in a business or other endeavor which materially interferes with anyof Employee’s duties or obligations hereunder or which is directly competitivewith the primary business of the Employer or its subsidiaries including, butnot limited to, the basic cable distribution of entertainment programming. Bothparties recognize that the services to be rendered under this Agreement byEmployee are special, unique and extraordinary in character. In the event of abreach of this Paragraph 7(a) by Employee or a claim by Employee pursuant tothis paragraph, both Employer and Employee shall have all of the remediesavailable to Employer at law or in equity. Notwithstanding Paragraph 9 below,Employee and Employer agree that temporary and permanent injunctive relief maybe sought by either in a court of law to enforce the provisions of this Paragraph7 (a) and Paragraph 7 (b).

                (b)           Employee further agrees that duringthe Term and for a period of one year thereafter, Employee will not (i) employ,or attempt to employ or assist anyone else to employ, any person who is, at thedate of termination of Employee’s employment, working as an officer,policymaker or in high-level creative development or distribution (includingwithout limitation executive employees) for or rendering substantially full-timeservices as such to Employer, (ii) publicly disparage Employer or its Board ofDirectors, individually or collectively, or (iii) interfere with Employer’srelationships with suppliers, customers, or other organizations or

 

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individuals with which the Employer has a businessrelationship or is pursuing a business relationship during the Term.

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 death of Employee; 

                                (ii)           A serious health condition ofEmployee that incapacitates Employee (as defined under the Family Medical LeaveAct) for a period exceeding an aggregate of twelve (12) work weeks during anytwelve 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 ofthis Agreement shall be defined as: 

                                                (A)          The illegal use of a controlledsubstance, or the immoderate use of alcohol, either of which adversely,materially affects Employee’s performance of Employee’s services under thisAgreement; 

                                                (B)           Employee’s commission of any actwhich constitutes a felony under federal, state or local laws or the law of anyforeign country; 

                                                (C)           Employee’s persistent and materialfailure or refusal after written notice to perform any of Employee’s duties andresponsibilities pursuant to this Agreement as determined by the Board ofDirectors; 

                                                (D)          Employee’s dishonesty in financialdealings with or on behalf of Employer, its subsidiaries, affiliates and parentcorporation or in connection with performance of Employee’s duties hereunder;or 

                                                (E)           Employee’s material breach of anyprovision of this Agreement which is not cured after written notice andreasonable opportunity and time has been given to cure; provided, that noopportunity need be given to cure if Employee’s breach is not curable. 

                                                (F)           Employee’s voluntary resignationother than as permitted in Paragraph 8(c) and other than for Good Reason. Forpurposes hereof, ‘Good Reason’ shall

 

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mean Employer’s material breach of any provision ofthis Agreement which is not cured after written notice and twenty (20) businessdays have been given to cure; provided that no opportunity need be given tocure if Employer’s breach is not curable. Without limitation, events of GoodReason shall include (i) a reduction of Employee’s title, reporting lines and/orauthority and (ii) a change of Employee’s principal place of business tooutside of New York City without Employee’s consent. A termination by Employeefor Good Reason will be treated in the manner described in Paragraph 8(d) andin all other respects in precisely the same fashion as if Employee’s employmenthad been terminated by Employer other than under Paragraph 8(a)(i), (ii) or(iii), even if specific reference to a termination for Good Reason is not madein any applicable provision. 

In the event of termination under Paragraph 8(a)(iii),solely for purposes of Paragraph 7, the Term shall not be deemed terminated andshall continue until the first to occur of twelve (12) months from terminationor the fourth (4th) anniversaryof the Effective Date. 

                                (b)           Employer shall also have the right toterminate Employee at any time for any reason or no reason prior to theexpiration of the Term in addition to pursuant to Paragraph 8(a) above byproviding Employee with written notice. 

                                (c)           In the event of a CIC, Employee shallhave the right to terminate his employment six (6) months after the CIC occurs.

                                (d)           In the event of a terminationpursuant to Paragraph 8(b) or 8(c) or by Employee for Good Reason, Employeeshall not be entitled to any further compensation or benefits except (1) as maybe provided under the RSU and/or SAR Agreements (which shall be paid when due);(2) the remaining base salary described in Paragraph 3(a) above for the balanceof the Term (as though no termination had occurred) (“Severance Period”), paidin a lump sum within ten (10) days following such termination and discounted atthe lower of the “prime rate” or 120% of the applicable Federal rate (withinthe meaning of Section 1274(d) of the Internal Revenue Code) to present valueat the time of payment; (3) vested ERISA benefits (e.g., 401k plan); (4)benefits that may be required by law (e.g., COBRA); (5) pro rata bonus through the date Employee’s job duties end to be paid asprovided in paragraph 3(b) above; (6) a lump sum payment (discounted and paidin accordance with clause 2 above) equal to fifty percent (50%) of performance bonuses due through the end of the Term, calculated attarget (to the extent not yet paid); and (7) if a CIC has occurred, any Transaction Bonus shall be paid within ten (10) days

 

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following such termination. Employee shall have noobligation to seek comparable employment, and if Employee does accept otheremployment during the Severance Period, there will be no offset by Employeragainst the amounts payable under this Paragraph 8(d). If Employer terminatesEmployee under Paragraph 8(b), Paragraph 7(a) shall not apply from the date oftermination. 

                                (e)           In the event that Employee’semployment is terminated due to any of the reasons set forth in Paragraph 8(a)above, Employee shall not be entitled to any further compensation or benefitsexcept as hereafter provided in this Paragraph 8(e). Employee shall be paidEmployee’s salary through the later of the expiration of the five (5)**business days period referred to in Paragraph8(a) or the end of the month in which the termination event occurs, after whichEmployer’s obligation to pay salary to Employee shall terminate. ShouldEmployer terminate this Agreement due to medical absence as defined in paragraph8(a)(ii) above, Employer shall continue to pay Employee base salary for aperiod of six (6) months after the conclusion of the twelve (12) work weeks.After making the payments provided for in this subparagraph, Employer shallhave no further obligations to Employee pursuant to this Agreement, except (1)as may be provided under the RSU and SAR Agreements; (2) as provided underParagraph 3(e) (Transaction Bonus);(3) vested ERISA benefits; or (4) benefitsthat may be required by law (e.g. COBRA).

                                (f)            If Employee is terminated for anyreason set forth in Paragraph 8(a)(iii) within the first six (6) months after aCIC**,**thisAgreement will terminate, except as otherwise provided in Paragraph 8 (a)(iii),and the successor Employer will have no obligation to provide furthercompensation or benefits, except as provided under Paragraph 8(e) above. 

                                (g)           Upon termination of this AgreementEmployee shall promptly return all of Employer’s records (both hard copy andelectronic) and property to Employer. 

                                (h)           Upon termination of Employee’semployment for any reason, Employee shall tender Employee’s resignation fromthe Board of Directors of Employer and any of Employer’s subsidiaries oraffiliates on which Employee is serving, and Employer shall accept such resignationforthwith. 

                9.             Arbitration. Any disputebetween the Employee and Employer involving any provision of this Agreement oremployment matter; including any claim of discrimination under state andfederal law, other than an action in court requesting temporary or permanentinjunctive

 

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relief as set forth in Paragraph 7 above, shall beresolved by arbitration under the employment rules of the American ArbitrationAssociation and in accordance with applicable law, allowing all damages andremedies available in a court action. Such arbitration shall be conducted inthe New York metropolitan area before one (1) neutral arbitrator who is alawyer with expertise in employment law or a panel of three (3) arbitrators, asmutually agreed upon between Employer and Employee. Employer shall pay theexpenses of the arbitration and each party shall pay its own legal fees andexpenses. The arbitrator(s) shall provide a reasoned opinion supporting his/herconclusion, including detailed findings of fact and conclusions of law. Suchfindings of fact shall be final and binding on the parties, but suchconclusions of law shall be subject to appeal in any court of competentjurisdiction. The parties further stipulate that the laws of New York,applicable to contracts made and to be wholly performed therein, shall apply toany dispute or action regarding this Agreement. 

                10.           Assignment. This Agreement isa personal contract and, without the prior written consent of Employer, shallnot be assignable by the Employee. The rights and obligations of Employer maybe assigned and such assignment shall bind in their entirety the successors andassigns of Employer. In the event of a CIC, the Employer shallrequire any successor to assume in writing the rights and obligations of thisAgreement, including, without limitation, payment of the Transaction Bonus, asprovided for in Paragraph 3(e) hereof; provided, however, that same shall notrelease Employer, and the full and timely payment of all obligations dueEmployee will be guaranteed by Employer without any need for Employee toexhaust remedies against the purchaser in the event of non-payment. As used inthis 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 or substantially all of the assets orbusiness of Employer. 

                11.           Indemnification; Insurance. Employeragrees to indemnify Employee to the extent set forth in Employer’s by-laws.Further, Employer agrees to maintain Directors and Officers Liability insurancecoverage for Employee comparable to that provided for other officers anddirectors, subject to existing market conditions. 

                12.           Amendment; Captions. ThisAgreement contains the entire agreement between the parties. It may not bechanged orally, but only by agreement in writing signed by the party againstwhom enforcement of any waiver, change, modification or discharge is sought.

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Paragraph headings are for convenience of referenceonly and shall not be considered a part of this Agreement. If any clause inthis Agreement is found to be unenforceable, illegal or contrary to publicpolicy, the parties agree that this Agreement shall remain in full force andeffect except for such clause. 

                13.           Notices. Any notices or othercommunications required or permitted hereunder shall be in writing and shall bedeemed effective when delivered in person or if mailed, by registered orcertified mail, return receipt requested, in which case the notice shall bedeemed effective on the date of deposit in the mails, postage prepaid,addressed to Employee at the address for Employee appearing in Employer’srecords, and a copy of notices also shall be sent to Daniel M. Wasser,Franklin, Weinrib, Rudell & Vassallo, P.C., 488 Madison Avenue, New York,New York 10022. Notices to Employer shall be addressed to the Board ofDirectors, with a copy to the General Counsel, Crown Media Holdings, Inc.,12700 Ventura Boulevard, Suite 200, Studio City, California, 91604. Eitherparty may change the address to which notices are to be addressed by notice inwriting given to the other in accordance with the terms hereof. 

                14.           Periods of Time. Whenever inthis Agreement there is a period of time specified for the giving of notices orthe taking of action, the period shall be calculated excluding the day on whichthe giver sends notice and excluding the day on which action to be taken isactually taken. 

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

                INWITNESS WHEREOF, Employerhas by its appropriate officer signed this Agreement and Employee has signedthis Agreement as of the day and year first above written.
|        | CROWN MEDIA HOLDINGS, INC. |
|--------|----------------------------|
|   |                       |   |
|   | By:                        | /s/ Donald J. Hall, Jr. |
| :      | Title                      | Co-Chairman |
|   |                       |   |
|   | EMPLOYEE                   |
|   | /s/ Henry  Schleiff        |
|   | Henry Schleiff             |

 

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**ScheduleD**

“Change in Control” shall mean (i) the sale of shares,or a merger or other business combination of Crown so that immediatelythereafter, Hallmark Cards, Incorporated or its current or future subsidiaries(“Hallmark”) no longer own directly or indirectly 50% or more of the CrownStock or (ii) a sale of all or substantially all of the assets of Crown topersons other than Hallmark. 

** **

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