**Exhibit10.3**

**SHAREAPPRECIATION RIGHTS AGREEMENT**

ThisShare Appreciation Rights Agreement (the “Agreement”) is made and entered intoas of October 3, 2006 by and between Crown Media Holdings, Inc., a Delawarecorporation (“Crown”) and Henry Schleiff (“Executive”). 

1.             Share Appreciation Rights.  TheBoard of Directors has authorized the creation of a phantom share appreciationrights (“SARs”) program. The value of each SAR shall correspond to the value ofone share of Class A Stock from time to time. The SARs will be granted andvested and otherwise governed by the terms set forth herein. The SARs will havenone of the rights associated with common stock such as voting or dividendrights and will have no value outside the context of this Agreement. 

2.             SAR Grant Triggers.  SARswill be granted during the term of Executive’s employment by Crown the dayafter the Fair Market Value of Crown Stock reaches the Threshold Price andstays at the Threshold Price or higher for 60 consecutive calendar days. SARswill then be granted each time that the Fair Market Value of Crown Stockincreases another incremental five dollars over the previous price at which anSAR grant was triggered and stays at such price or higher for 60 consecutivecalendar days (each sustained price shall be the “Crown Stock Price”). TheThreshold Price and each subsequent Crown Stock Price resulting in a grant ofSARs will be an “SAR Trigger.” 

3.             SAR Grant Amounts.  Uponthe occurrence of each SAR Trigger, Executive shall be granted that number ofSARs with a value equal to eight-tenths of one percent (.8%) of the EnterpriseGrowth as of the Grant Date divided by the Crown Stock Price. The date of eachsuch grant shall be a “Grant Date.” 

4.             Change in Control. 

(a)           In the event there is a Change inControl, then as of the Change in Control: 

                (i)            if there has been no prior SARTrigger and the Change in Control Price exceeds the Start Price, then Executiveshall be granted that number of SARs equal to eight-tenths of one percent (.8%)of the Enterprise Growth divided by the Change in Control Price; or 

                (ii)           if there has been a previous SARTrigger and the Change in Control Price exceeds the previous SAR Trigger, thenExecutive shall be granted that number of SARs equal to eight-tenths of onepercent (.8%) of the Enterprise Growth divided by the Change in Control Price. 

(b)           In the event of a Change in Control, then subsequent to the DeliveryDate in connection with the grant set forth in 4(a) hereof, this Agreementshall terminate and no further grants shall be made hereunder. 

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(c)           Notwithstanding Section 4(b), ifExecutive’s employment terminates pursuant to Section 5(b) hereof or due toExecutive’s death or disability (as provided for in the Employment Agreement)and (i) a Change in Control occurs within ninety (90) days thereafter, or (ii)an agreement that will result in a Change in Control is executed by Crown priorto such termination and a Change in Control occurs within one hundred-eighty(180) days after such termination, then Executive will receive a grant of SARspursuant to Section 4(a) which will vest pursuant to Section 5(c). 

5.             Vesting. 

(a)           Subject to continued employment withCrown andlor its affiliates as of the third anniversary of each Grant Date(unless one of the events enumerated in Section 5(b) or Section 5(c) hereofshall have earlier occurred) each SAR shall vest and become nonforfeitable onthe third anniversary of its Grant Date. 

(b)           Any outstanding SARs shall vestimmediately upon Executive’s involuntary termination of employment pursuant toParagraph 8(b) of the Employment Agreement or Executive’s termination of hisemployment for Good Reason (as defined in the Employment Agreement). 

(c)           Any outstanding SARs shall vestimmediately in the event of a Change in Control including without limitation,those SARs granted simultaneously with a Change in Control. 

6.             Termination of SARs.  Ifprior to the Vesting Date, Executive’s employment is terminated other than fortermination pursuant to Paragraph 8(b) of the Employment Agreement then, otherthan as set forth in Section 5 above, Executive’s rights with respect to anyoutstanding unvested SARs shall immediately terminate and no payment shall bemade in respect thereof. Furthermore, in the event Executive’s employment isterminated other than for termination pursuant to Paragraph 8(b) of theEmployment Agreement, then this Agreement shall terminate and no further grantsshall be made hereunder. 

7.             Settlement of SARs. 

(a)           Settlement.  Subjectto any termination of SARs pursuant to Section 6, Crown shall deliver toExecutive on the Delivery Date, at Crown’s sole discretion, either: (1) thenumber of shares of Class A Stock corresponding to such SARs; or (2) cash in anamount equal to the number of shares of Class A Stock corresponding to suchSARs multiplied by the average of the Fair Market Value for the 14 businessdays immediately preceding and including the Vesting Date (or, if such VestingDate does not fall on a business day, as of the business day immediatelypreceding the Vesting Date). Crown shall have sole, absolute and unfettereddiscretion in determining whether to deliver shares of Class A Stock or cash. 

                (b)           StockSplit Equivalents.  For so long as Executive holds SARs, at thetime any forward or reverse stock split of Class A Stock occurs, Crown shallcredit or debit, as the case may be, to the SAR award of the Executive on thesame date (or as soon as practicable thereafter) in respect of each SAR held bythe Executive as of the record date for such split 

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amount at Crown’s sole,absolute and unfettered discretion, in cash, Common Stock, or other property,or in a combination thereof, in each case having a value equal to the split.Such amounts shall vest and shall be paid on a *prorata*basis at the same time as the underlying SAR award with whichsuch stock split is associated is settled. 

8.             Withholding Tax.  Executivemay be subject to withholding taxes as a result of the settlement of SARs.Unless the Compensation Committee of Crown permits otherwise, Executive shallpay to Crown in cash, promptly when the amount of such obligations becomedeterminable, all applicable federal, state, local and foreign withholdingtaxes that Crown determines result from such settlement. Unless theCompensation Committee otherwise determines and subject to such rules andprocedures as the Committee may establish, Executive may make an election tohave shares of Stock withheld by Crown or to tender any such securities toCrown to pay the amount of tax that Crown in its discretion determines to berequired so to be withheld by Crown upon settlement of SARs, subject tosatisfying any applicable requirements for compliance with Section 16(b) of theExchange Act. Any shares of Class A Stock or other securities so withheld ortendered will be valued as of the date they are withheld or tendered, providedthat Class A Stock shall be valued at Fair Market Value on such date. Unlessotherwise permitted by the Compensation Committee, the value of shares withheldor tendered may not exceed the minimum federal, state, local and foreignwithholding tax obligations as computed by Crown. 

9.             Non-transferability.  NoSARs shall be assignable or otherwise transferable by Executive. Any electionswith respect to SARs may be made only by Executive or Executive’s guardian orlegal representative. 

10.           Definitions.  Forpurposes of this Agreement: 

“BaseDebt” shall mean the total balance of the debt and obligations identified onSchedule A hereto as of September 30, 2006, less any Library Proceeds. 

“BaseMarket Capitalization” shall mean the Start Price multiplied times the totalnumber of shares of Crown Stock outstanding on the date Executive commencesemployment with Crown. 

“Changein Control” shall mean (i) the sale of shares, or a merger or other businesscombination of Crown so that immediately thereafter, Hallmark Cards,Incorporated or its current or future subsidiaries (“Hallmark”) no longer owndirectly or indirectly 50% or more of the Crown Stock or (ii) a sale of all orsubstantially all of the assets of Crown to persons other than Hallmark. 

“Changein Control Price” shall mean (i) with respect to the sale or exchange of CrownStock as described in clause (i) of the definition of Change in Control, theaverage per share sale price of the Crown Stock in the Change in Control, afterdeducting transaction costs borne by the Company multiplied times the totalnumber of shares of Crown Stock outstanding; and (ii) with respect to a sale ofall or substantially all of the assets of Crown, then the sale price for theassets after deducting transaction costs borne by the Company plus the amountof any Debt assumed by 

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buyer less the amount of anyDebt required to be paid, retained or forgiven by any shareholders or theiraffiliates. 

“ClassA Stock” shall mean Class A common stock, par value $.O1 per share of Crown. 

“ClassB Stock” shall mean Class B common stock, par value $.O1 per share of Crown. 

“CrownStock” shall mean Class A Stock and Class B Stock. 

“Debt”shall mean (i) any indebtness for borrowed money, whether by loan or theissuance and sale of debt securities and (ii) any draws upon letters of creditor guaranties. 

“DebtIncreases” shall mean any increases (including interest accruing) to thebalance of the Base Debt plus any additional Debt incurred, plus theliquidation preference and accrued but unpaid dividends on any Preferred Stock,all determined as of the applicable Grant Date. 

“DebtReduction” shall mean any pay down of Debt (excluding the conversion of anyDebt into Crown Stock) and any payment with respect to any Preferred Stock, alldetermined as of the applicable Grant Date. 

“DeliveryDate” shall mean any date designated by Crown within thirty (30) days followinga given Vesting Date. 

“EmploymentAgreement” shall mean Executive’s Employment Agreement with Crown dated as ofthe date hereof, as the same may be amended from time to time. 

“EnterpriseGrowth” shall mean Market Capitalization Increase less any Debt Increases andplus any Debt Reduction. 

“FairMarket Value” shall mean as of any given date, the closing price of the Class AStock on The NASDAQ Stock Market as of the close of the regular business hoursof The NASDAQ Stock Market, without regard to any after-hours trading that mayhereinafter be commenced on the NASDAQ Stock Market, on the immediatelypreceding date or, if there are no reported sales on such immediately precedingdate, on the last day prior to such date on which there were sales of the ClassA Stock on The NASDAQ Stock Market or, if the Class A Stock is not listed onThe NASDAQ Stock Market, on any national securities exchange on which the ClassA Stock is listed. If there is no regular public trading market for such ClassA Stock, the Fair Market Value of the Class A Stock shall be determined by theCompensation Committee of Crown in good faith. 

“LibraryProceeds” shall mean the amount of money received by Crown or its subsidiariesless costs, expenses and fees in connection with any sale of its film libraryto RHI Enterprises, LLC or any of its affiliates or any other such sale of itsfilm library within twelve months of the date hereof. 

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“MarketCapitalization” shall mean the Fair Market Value of the Crown Stock on a givendate multiplied times the total number of shares of Crown Stock outstanding onsuch date. 

“MarketCapitalization Increase” shall mean (i) with respect to the first SAR Trigger,the Market Capitalization on the date of the first SAR Trigger less the BaseMarket Capitalization; (ii) with respect to all SAR Triggers other than thefirst one, the Market Capitalization on the date of such SAR Trigger less theMarket Capitalization on the date of the previous SAR Trigger and (iii) withrespect to a Change in Control, the Change in Control Price less the MarketCapitalization on the date of the previous SAR Trigger or if there has not beenan SAR Trigger, then less the Base Market Capitalization. 

“PreferredStock” shall mean any equity securities senior to the Crown Stock. 

“StartPrice” shall mean the average of the Fair Market Value for the 5 business daysprior to earlier of (i) the date of announcement of Executive’s employment or(ii) the date of announcement of any Crown transaction requiring the filing ofa Form 8-K with the SEC. 

“ThresholdPrice” shall mean the Start Price plus five dollars. 

11.           Administration. 

ThisAgreement shall be administered by the Compensation Committee of Crown. TheCompensation Committee shall have full power to construe and interpret thisAgreement to establish and amend rules for its administration, to decide anydispute which may arise hereunder and to correct any defect or omission orreconcile any inconsistency between this Agreement and the EmploymentAgreement. All actions taken and decisions made by the Compensation Committeepursuant to this Agreement in good faith shall be binding and conclusive. Nomember of the Compensation Committee shall be liable for any action ordetermination made in good faith with respect to this Agreement. 

12.           Counterparts.

ThisAgreement may be executed in any number of counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the sameinstrument. 

13.           Governing Law.

ThisAgreement shall be governed by the laws of the State of Delaware, withoutregard to conflict of law principles. 

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IN WITNESS WHEREOF, theparties hereto have executed this SAR Agreement as of the date first writtenabove.
|        |   | CROWN MEDIA HOLDINGS, INC. |
|--------|--------|----------------------------|
|   |   |                       |
|   |   | By:                        | /s/ Donald J. Hall, Jr. |
|   |   | Name:                      | Donald J. Hall, Jr. |
|   |   | Title:                     | Co-Chairman |
|   |   |                       |   |
|   |   |                       |   |
|   |   |                       |   |
|   |   | /s/ Hernry Schleiff        |
|   |   | Henry Schleiff             |   |
|        |        |                            |  |  |  |  |

 

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Schedule A

·                                          Credit, Security, Guaranty and PledgeAgreement dated as of August 31, 2001, as amended, among Crown Media Holdings,Inc. and its subsidiaries and the lenders named therein and JP Morgan Chase asAgent, as the same may be sold or assigned. 

·                                          The Promissory Note dated as of December 14,2001 of Crown Media Holdings, Inc. and guaranteed by Crown Media United States,LLC in the original principal amount of $75million payable to HCC. 

·                                          The 10.25% Senior Unsecured Discount Noteissue date August 5, 2003 of Crown Holdings in the initial accreted value of$400 million payable to HCC. 

·                                          The Promissory Note dated as of March 31,2006 of Crown Media Holdings, Inc. in the original principal amount of$70,414,087.87 originally payable to Hallmark Entertainment Holdings, Inc. 

·                                          The Promissory Note dated as of October 1,2005 of Crown Media United States, LLC in the original principal amount of$132,785,424 originally payable to Hallmark Entertainment Distribution, LLC. 

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