**Exhibit10.3**

** **

AMENDMENTNO. 7 dated as of October 28, 2004 to the Credit,Security, Guaranty and Pledge Agreement dated as of August 31, 2001 asamended by Amendment 1 through 6 thereto, dated as of December 14,2001, December 31, 2001, March 29, 2002, May 14, 2002,February 5, 2003 and August 4, 2003, among Crown Media Holdings, Inc.(the “Borrower”), the Guarantors named therein, the Lenders referred to thereinand JPMorgan Chase Bank, as Administrative Agent and as Issuing Bank for theLenders (the “Agent”) (as the same may be further amended, supplemented orotherwise modified, the “Credit Agreement”).

 

INTRODUCTORY STATEMENT

 

WHEREAS,the Lenders have made available to the Borrower a credit facility pursuant tothe terms of the Credit Agreement;

 

WHEREAS,the Borrower intends to sell its foreign assets, including its foreignchannels, foreign subsidiaries and foreign distribution rights in its filmlibrary, as generally described in Exhibit Q (such sale being referred toherein as the “Foreign Asset Sale”);

 

WHEREAS,the Borrower has requested certain consents, waivers, and amendments to theCredit Agreement to, among other things, permit it to enter into and performits obligations in connection with the Foreign Asset Sale, and the Lenders andthe Agent have agreed to such consents, waivers, and amendments, all on theterms and subject to the conditions hereinafter set forth;

 

WHEREAS,the Borrower has agreed, simultaneously with closing the Foreign Asset Sale, torepay the Term Loan and to permanently reduce the Revolving Credit Commitment;

 

NOW THEREFORE, theparties hereto hereby agree as follows:

 

Section 1.                                            Defined Terms. Capitalized terms used herein and not otherwise defined herein shallhave the meaning given them in the Credit Agreement.

 

Section 2.                                            Amendments to the Credit Agreement.  Subject to the satisfaction of the conditionsprecedent set forth in Section 5 hereof, the Credit Agreement is hereby amendedas of the Effective Date (as hereinafter defined) as follows:

 

(A)                              Onthe Effective Date, the Credit Agreement is amended as follows:

 

(1)                                  Article1 is hereby amended by adding the following definitions in the appropriatealphabetic sequence:

 

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“‘ForeignAsset Sale’ shall mean the sale by the Borrower of its foreign assets,including its foreign Platform Agreements, foreign subsidiaries and foreigndistribution rights in its film library, as contemplated in Exhibit Q hereto,as approved by the Agent.

 

‘ForeignAsset Sale Effective Date’ shall mean the date upon which the Foreign AssetSale becomes effective.”

 

(2)                                  Article1 is hereby further amended by replacing the references to “The Chase ManhattanBank” appearing in the definitions of “Agent” and “Administrative Agent”and “Issuing Bank”, with “JPMorgan Chase Bank”.

 

(3)                                  Thedefinition of “Commitment Termination Date” in Article 1 is amended inits entirety to read as follows:

 

“‘CommitmentTermination Date’ shall mean the earlier to occur of (i)August 31,2005 and (ii) such earlier date on which the Total Commitmentshall terminate in accordance with Section 2.8(a) or Article 7 hereof.”

 

(4)                                  Thedefinition of “Maturity Date” in Article 1 is amended in its entirety toread as follows:

 

“‘MaturityDate’ shall mean September 1, 2005.”

 

(5)                                  Thelast sentence of Section 2.5(b) is amended in its entirety to read as follows:

 

“Theprincipal amount of the Term Loans, as evidenced by the Term Notes, shall bepayable in full on the earlier of (i) the Foreign Asset Sale Effective Date or(ii) the Maturity Date, subject to acceleration as provided in Article 7hereof.”

 

(6)                                  Section2.8 is hereby amended by adding the following additional paragraph (d):

 

“(d)  On the Foreign Asset Sale Effective Date, theRevolving Credit Commitment shall be reduced automatically from $220,000,000 to$180,000,000, the Total Commitment shall be reduced automatically from$320,00,000 to $180,000,000 and Loans will be repaid so that the aggregateCredit Exposure of the Lenders does not exceed the reduced amount of the TotalCommitment.”

 

(7)                                  Article12.1 of the Credit Agreement is hereby amended by adding the followingsubclause (xii) to clause (b):

 

(xii)to approve the final terms of the Foreign Asset Saleand the related documentation, and to execute the related collateral releasedocuments in connection with the Foreign Asset Sale.

 

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(8)                                  TheCredit Agreement is hereby amended to add Exhibit Q to this Amendment No. 7 asExhibit Q to the Credit Agreement.

 

(B)                                Onthe Foreign Asset Sale Effective Date, the Credit Agreement is hereby amendedas follows:

 

(1)                                  Thedefinition of “Guarantor” in Article 1 of the Credit Agreement is herebyamended by adding the following proviso at the end of the definition:

 

“provided,however, that any Subsidiaries of the Borrower sold as part of theForeign Asset Sale (including Crown Entertainment Limited, Crown MediaInternational (Australia) Pty. Ltd., Crown Media International (HK) Limited,Crown Media International, LLC, Hallmark India Private Limited, HEN (L) Ltd.,and HEN, LLC) shall not be Guarantors under this Agreement.”

 

(2)                                  Section 6.5is amended by deleting the “and” at the end of clause (xii), deleting theperiod at the end of clause (xiii) and by adding the following:

 

“; and (xiv)payments by the Borrower to Hallmark Cards or its Affiliates from the net cashproceeds of the Foreign Asset Sale not in excess of the lesser of (A)$100,000,000 and (B) the amount by which the net cash proceeds after deductionof all costs of the sale exceed $195,000,000.”

 

(3)                                  Section6.10 is amended in its entirety to read as follows:

 

“SECTION 6.10.  Limitations on CapitalExpenditures.  Make or incurany obligation to make Capital Expenditures in excess of $25,000,000 for fiscalyear 2001 (provided, however, that at least $13,000,000 of such Capital Expendituresis used in connection with a Capital Lease of a transponder on a satellite),$34,000,000 for fiscal year 2002 (provided, however, that at least $23,000,000of such Capital Expenditures is used in connection with a Capital Lease of atransponder on a satellite), $12,000,000 for fiscal year 2003, $13,000,000 forfiscal year 2004, and $5,000,000 for fiscal year 2005.”

 

(4)                                  Section6.23 is hereby amended in its entirety to read as follows:

 

“SECTION 6.23.  EBITDA.  Permit EBITDA (i) for the preceding quarterto be less than the amounts set forth below measured at the end of each fiscalquarter through December 31, 2003 or (ii) for any consecutive rollingfour-quarter period to be less than the amount set forth below starting withthe fiscal quarter ending March 31, 2004; provided, however,that cash and non-cash charges related to the Foreign Asset Sales shall beexcluded from the calculation of EBITDA:

 

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| **“Fiscal Quarter** | ** ** | **Amount**   | ** ** |
|--------------------------|------------|--------------|------------|
| March 31, 2003           |       | - 20,000,000 |       |
| June 30, 2003            |       | - 10,000,000 |       |
| September 30, 2003       |       | - 10,000,000 |       |
| December 31, 2003        |       | 0            |       |
| March 31, 2004           |       | 0            |       |
| June 30, 2004            |       | 0            |       |
| September 30, 2004       |       | 0            |       |
| December 31, 2004        |       | - 5,000,000  |       |
| March 31, 2005           |       | 0            |       |
| June 30, 2005            |       | 0            |       |

 

(5)                                  Section6.24 is hereby amended in its entirety to read as follows:

 

“SECTION 6.24.  Platform Agreements.  Permit (i) the aggregate amount of all cashpayments to pay television distributors for Subscribers pursuant to thePlatform Agreements to be greater than $36,000,000 for fiscal year 2002,$48,000,000 for fiscal year 2003, $20,000,000 for fiscal year 2004 and$35,000,000 for fiscal year 2005, (ii) allow the aggregate number ofSubscribers (both paying and non-paying Subscribers) to be less than 95,000,000for fiscal year 2002, 100,000,000 for fiscal year 2003, 65,000,000 for fiscalyear 2004 and 68,000,000 for fiscal year 2005, and (iii) allow annual aggregategross Subscriber revenue of Credit Parties under the Platform Agreements to beless than (u) for fiscal year 2001, $16,000,000 for the third quarter and$18,000,000 for the fourth quarter, (v) for fiscal year 2002, $19,500,000 foreach of the first, second and third quarters and $16,000,000 for the fourthquarter, (w) for fiscal year 2003, $14,000,000 for the first quarter,$16,000,000 for the second quarter, $17,000,000 for the third quarter and$18,000,000 for the fourth quarter, (x) $60,000,000 for fiscal year 2004 and(y) $25,000,000 for fiscal year 2005.”

 

(6)                                  Section 6.25is hereby amended by adding at the end thereof the following:

 

“For purposes ofcomputing Consolidated Net Income in determining the minimum level of Net Worthrequired for compliance with this Section 6.25, cash and non-cash chargesrelated to the Foreign Asset Sale shall not be treated as an expense.  For purposes of computing Net Worth indetermining compliance with this Section 6.25, cash and non-cash chargesrelated to the Foreign Asset Sale whether treated as an expense for incomepurposes or as a direct charge to the balance sheet shall be added back to NetWorth, as computed in accordance with the definition thereof”.

 

(7)                                  Sections6.27 and 6.28 are deleted in their entirety.

 

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(8)                                  Asof  the ForeignAsset Sale Effective Date, Schedule 1 of the Credit Agreement is herebyreplaced in its entirety with a new Schedule 1 attached hereto.

 

(9)                                  Asof  the ForeignAsset Sale Effective Date, Schedule 3.18(a) is hereby deleted in its entiretyand replaced by the Schedule 3.18(a) attached hereto.

 

(10)                            Asof  the ForeignAsset Sale Effective Date, Schedule 3.18(c) is hereby deleted in its entiretyand replaced by the Schedule 3.18(c) attached hereto.

 

(11)                            Asof  the ForeignAsset Sale Effective Date, Schedule 3.25****is herebydeleted in its entirety and replaced by the Schedule 3.25 attached hereto.

 

Section 3.                                            Notice of Foreign Asset Sale.  The Borrower agrees to give the Agent noticeon the Foreign Asset Sale Effective Date of the occurrence of the Foreign AssetSale.

 

Section 4.                                            Conditions to Effectiveness. The effectiveness ofthis Amendment is subject to the satisfaction in full of each of the conditionsprecedent set forth in this Section 4 (the date on which all suchconditions have been satisfied being herein called the “Effective Date”):

 

(A)                              the Agent shall have received counterparts of this Amendmentwhich, when taken together, bear the signatures of the Borrower, eachGuarantor, the Agent and each Lender;

 

(B)                                the representations and warranties in Section 5 shallbe true on the Effective Date;

 

(C)                                theAgent shall have received and be satisfied with an updated library valuation,pro formaed to give effect to the Foreign Asset Sale, prepared by anindependent third party reasonably acceptable to the Agent, in substantiallythe same form and methodology as was used in preparing the initial libraryvaluation delivered to the Agent pursuant to Section 4.1(h) of the CreditAgreement or using such other form and methodology as is otherwise acceptableto the Agent in its sole discretion;

 

(D)                               the Agent shall have received a release/novation from theappropriate guilds with respect to the foreign rights for any items of Product,sold as part of the Foreign Asset Sale, for which a guild lien remains inplace;

 

(E)                                 all legal matters incident to this Amendment shall besatisfactory to Morgan, Lewis & Bockius, counsel for the Agent.

 

Section 5.                                            Representations and Warranties of the Credit Parties.  Each Credit Party represents and warrantsthat:

 

(A)                              after giving effect to this Amendment, the representationsand warranties contained in the Credit Agreement are true and correct in allmaterial respects on and as of the date hereof as if such representations andwarranties had been made on 

 

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and as of the date hereof (exceptto the extent that any such representations and warranties specifically relateto an earlier date); and

 

(B)                                after giving effect to this Amendment, no Event of Defaultor Default will have occurred and be continuing on and as of the date hereof.

 

(C)                                the****current intention of the Borrower with regard to theForeign Asset Sale is as set forth in Exhibit Q hereto, and all acquisitiondocuments approved by the Agent in connection with the Foreign Asset Saleaccurately represent all aspects of the transaction, including, withoutlimitation, the items of Product, the distribution rights, the foreignsubsidiaries, and all other assets to be sold as part of the Foreign AssetSale.

 

Section 6.                                            Fees. In consideration for the Lenders and the Agententering into the Amendment, on the Effective Date, the Borrowers agree to paythe Agent for the account of each of the Lenders which executes this Amendmenta fee equal to 1/20 of 1% of the aggregate Commitments of such Lenders underthe Credit Agreement.

 

Section 7.                                            Further Assurances. At any time and from time to time, upon the Agent’s request and at thesole expense of the Credit Parties, each Credit Party will promptly and dulyexecute and deliver any and all further instruments and documents and take suchfurther action as the Agent reasonably deems necessary to effect the purposesof this Amendment.

 

Section 8.                                            Fundamental Documents.  This Amendment is designated a FundamentalDocument by the Agent.

 

Section 9.                                            Full Force and Effect.  Except as expressly amended hereby, theCredit Agreement and the other Fundamental Documents shall continue in fullforce and effect in accordance with the provisions thereof on the datehereof.  As used in the Credit Agreement,the terms “Agreement”, “this Agreement”, “herein”,  “hereafter”, “hereto”, “hereof”, and words ofsimilar import, shall, unless the context otherwise requires, mean the CreditAgreement as amended by this Amendment.

 

Section 10.                                      APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THELAWS OF THE STATE OF NEW YORK.

 

Section 11.                                      Counterparts. This Amendment may be executed in two or more counterparts, each ofwhich shall constitute an original, but all of which when taken together shallconstitute but one instrument.

 

Section 12.                                      Expenses.  TheBorrower agrees to pay all out-of-pocket expenses incurred by the Agent inconnection with the preparation, execution and delivery of this Amendment,including, but not limited to, the reasonable fees and disbursements of counselfor the Agent.

 

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Section 13.                                      Headings.  Theheadings of this Amendment are for the purposes of reference only and shall notaffect the construction of or be taken into consideration in interpreting this Amendment.

 

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INWITNESS WHEREOF, the parties hereby have caused this Amendment to be dulyexecuted as of the date first written above.

 
|   | **BORROWER**:                                      |
|--------|----------------------------------------------------|
|   | ** **                                         |
|   | CROWN MEDIA HOLDINGS,  INC.                        |
|   |                                               |
|   |                                               |
|   | By:                                                | /s/ William J. Aliber |   |
|   |                                               |     Name:  William J. Aliber |
|   |                                               |     Title:  EVP/CFO |
|   |                                               |   |
|   | **GUARANTORS:**                                    |
|   | ** **                                         |
|   | CM INTERMEDIARY, LLC                               |
|   | CROWN MEDIA  INTERNATIONAL, LLC                    |
|   | CROWN  MEDIA INTERNATIONAL   (SINGAPORE) INC.      |
|   | CROWN ENTERTAINMENT  LIMITED                       |
|   | CROWN MEDIA  DISTRIBUTION, LLC                     |
|   | CROWN  MEDIA INTERNATIONAL (HK)  LIMITED           |
|   | HEN, LLC                                           |
|   | HEN (L) LTD.                                       |
|   | CROWN MEDIA UNITED  STATES, LLC                    |
|   | CITI TEEVEE, LLC                                   |
|   | DOONE CITY PICTURES,  LLC                          |
|   | HALLMARK INDIA PRIVATE  LIMITED                    |
|   | WAYZGOOSE  CONCERT SERVICES,   B.V.                |
|   | CROWN  MEDIA INTERNATIONAL   (AUSTRALIA) PTY. LTD. |
|   |                                               |
|   |                                               |
|   | By:                                                | /s/ William J. Aliber |   |
|   |                                               |     Name:  William J. Aliber |
|   |                                               |     Title:  EVP/CFO |
|        |                                                    |  |  |  |

 

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|   | **LENDERS**:                                                           |
|--------|------------------------------------------------------------------------|
|   | ** **                                                             |
|   | JPMORGAN CHASE BANK,                                                   |
|   | individually and as Agent and Issuing Bank                             |
|   |                                                                   |
|   |                                                                   |
|   | By                                                                     | /s/ Garrett J. Verdone |   |
|   |                                                                   | Name: Garrett J.  Verdone |
|   |                                                                   | Title: Senior Vice  President |
|   |                                                                   |
|   |                                                                   |
|   | BANK OF AMERICA, N. A.                                                 |
|   |                                                                   |
|   |                                                                   |
|   | By                                                                     | /s/ Thomas R. Durham |   |
|   |                                                                   | Name: Thomas R. Durham |
|   |                                                                   | Title: Senior Vice  President |
|   |                                                                   |
|   |                                                                   |
|   | CREDIT SUISSE FIRST BOSTON, acting   through its Cayman Islands Branch |
|   |                                                                   |
|   |                                                                   |
|   | By                                                                     | /s/ Thomas S. Hall |   |
|   |                                                                   | Name: Thomas S. Hall |
|   |                                                                   | Title: Vice President |
|   |                                                                   |
|   |                                                                   |
|   | By                                                                     | /s/ Doreen Barr |   |
|   |                                                                   | Name: Doreen Barr |
|   |                                                                   | Title: Associate |
|   |                                                                   |
|   |                                                                   |
|   | CITICORP USA, INC.                                                     |
|   |                                                                   |
|   |                                                                   |
|   | By                                                                     | /s/ Maureen Maroney |   |
|   |                                                                   | Name: Maureen Maroney |
|   |                                                                   | Title: Director |
|        |                                                                        |  |  |  |  |  |

 

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|   | DEUTSCHE BANK AG NEW YORK   BRANCH |
|--------|------------------------------------|
|   |                               |
|   |                               |
|   | By                                 | /s/ Frederick W. Laird |   |
|   |                               | Name: Frederick W.  Laird |
|   |                               | Title: Managing  Director |
|   |                               |   |
|   |                               |   |
|   | By                                 | /s/ Belinda Wheeler |   |
|   |                               | Name: Belinda Wheeler |
|   |                               | Title: Vice President |
|   |                               |   |
|   |                               |   |
|   | ROYAL BANK OF CANADA               |
|   |                               |
|   |                               |
|   | By                                 | /s/ Barbara E. Nash |   |
|   |                               | Name: Barbara E. Nash |
|   |                               | Title: Authorized  Signatory |
|   |                               |   |
|   |                               |   |
|   | ABN AMRO BANK N.V.                 |
|   |                               |
|   |                               |
|   | By                                 | /s/ Terrence J. Ward |   |
|   |                               | Name: Terrence J. Ward |
|   |                               | Title: Senior Vice  President |
|   |                               |   |
|   |                               |   |
|   | By                                 | /s/ Angela Noïque |   |
|   |                               | Name: Angela Noïque |
|   |                               | Title: Group Vice  President |
|   |                               |   |
|   |                               |   |
|   | BANK ONE, NA (Main Office Chicago) |
|   |                               |
|   |                               |
|   | By                                 | /s/ Michael A. Basak |   |
|   |                               | Name: Michael A. Basak |
|   |                               | Title: M.D. |
|        |                                    |  |  |  |  |  |

 

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|   | WESTLB AG, NEW YORK BRANCH (f/k/a Westdeutsche Landesbank Girozentrale) |
|--------|-------------------------------------------------------------------------|
|   |                                                                    |
|   |                                                                    |
|   | By                                                                      | /s/ Richard J. Pearse |   |
|   |                                                                    | Name: Richard J. Pearse |
|   |                                                                    | Title: Executive  Director |
|   |                                                                    |   |
|   |                                                                    |   |
|   | By                                                                      | /s/ JL Guernsey |   |
|   |                                                                    | Name: JL Guernsey |
|   |                                                                    | Title: Executive  Director |
|        |                                                                         |  |  |  |

 

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**Schedule 1**

 
| **Lender**                            | ** ** | **Revolving Credit   Commitment** | ** **  | **Total Commitment** | ** ** | **Percentage** | ** ** |
|---------------------------------------|------------|-----------------------------------|-------------|----------------------|------------|----------------|------------|
| JPMorgan Chase  Bank                  |       | 25,312,500                        |        | 25,312,500           |       | 14.06          | %          |
| Bank of America,  N.A.                |       | 22,500,000                        |        | 22,500,000           |       | 12.50          | %          |
| Credit Suisse  First Boston           |       | 22,500,000                        |        | 22,500,000           |       | 12.50          | %          |
| Citicorp USA,  Inc.                   |       | 22,500,000                        |        | 22,500,000           |       | 12.50          | %          |
| Deutsche Bank AG  New York Branch     |       | 22,500,000                        |        | 22,500,000           |       | 12.50          | %          |
| Royal Bank of  Canada                 |       | 22,500,000                        |        | 22,500,000           |       | 12.50          | %          |
| WestLB AG, New York Branch            |       | 19,687,500                        |        | 19,687,500           |       | 10.94          | %          |
| ABN Amro                              |       | 16,875,000                        |        | 16,875,000           |       | 9.38           | %          |
| Bank One, N.A.  (Main Office Chicago) |       | 5,625,000                         |        | 5,625,000            |       | 3.13           | %          |
|                                  |       |                              |        |                 |       |           |       |
| TOTAL                                 |       | $                                 | 180,000,000 |                 | $          | 180,000,000    |       | 100.00 | % |
|                                       |            |                                   |             |                      |            |                |            |  |  |

 

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# **[The Amended Schedules Will be Posted Separately]**

 

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Exhibit Q

 

Crown Media is sellingits international channels and international rights to its film library.  CM Intermediary, LLC is selling 100% of itsownership interest of Crown Media International, LLC.  This will include the following subsidiaries:  Crown Media International (Australia) Pty.Ltd., Crown Media International (HK) Limited, Hallmark India Private Limited,HEN (L) Ltd, HEN, LLC. These entities hold the channels in EMEA, Latin America and Asia, aswell as the Network Operating Center in Denver and the Contract for CombinedUplink and Space Segment Service with British Telecommunications PLC.  CM Intermediary, LLC is also selling 100% ofits ownership interest of Crown Entertainment Limited, the entity which holdsthe channel in the UK).  In the sametransaction, Crown Media Distribution, LLC is selling the exhibition,distribution and ancillary rights to its Film Library outside the UnitedStates.

 

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