**Exhibit 10.2**

 

AMENDMENTNO. 17 dated as of June 29, 2010 (this “Amendment”) to the Credit,Security, Guaranty and Pledge Agreement dated as of August 31, 2001 asamended by Amendments 1 through 15 thereto, dated as of December 14,2001, December 31, 2001, March 29, 2002, May 14, 2002,February 5, 2003, August 4, 2003, October 28, 2004, March 1,2005, March 21, 2006, April 28, 2006, December 8, 2006, March 2, 2007, July 27,2007, March 10, 2008, March 2, 2009 and March 2, 2010, among Crown MediaHoldings, Inc. (the “Borrower”), the Guarantors named therein, theLenders referred to therein and JPMorgan Chase Bank, N.A. (formerly known asJPMorgan Chase Bank), as Administrative Agent and as Issuing Bank for theLenders (the “Agent”) (as the same may be further amended, supplementedor otherwise 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 effectuate a recapitalization of its intercompanyIndebtedness pursuant to a Master Recapitalization Agreement dated as ofFebruary 26, 2010 among Hallmark Cards, HCC and certain other partiespursuant to which, among other things, it is contemplated that various of theBorrowers’ Subordinated Debt to HCC and its Affiliates will be converted intoreduced intercompany Indebtedness, common stock and preferred stock;

 

WHEREAS,in connection with a condition precedent to the effectiveness of theRecapitalization Agreement, the Borrower has requested that the Maturity Dateof the Credit Agreement be extended from August 31, 2010 to June 30, 2011.

 

WHEREAS,the Administrative Agent and each of the Lenders have agreed to make certainmodifications to the Credit Agreement in order to accommodate the itemsdescribed in the preceding recitals.

 

NOWTHEREFORE, the parties hereto hereby agree as follows:

 

Section 1.               DefinedTerms.  Capitalized terms used hereinand not otherwise defined herein shall have the meaning given them in theCredit Agreement.

 

Section 2.               Amendmentsto Credit Agreement.  Upon theAmendment Effective Date (as defined below):

 

(A)          theCredit Agreement is hereby amended by (i) inserting all of the words and/orprovisions which appear with computerized underscoring in the document annexedhereto 

 

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as Exhibit A and (ii) deleting each of thewords and/or provisions which appear with computerized strike-through in thedocument annexed hereto as Exhibit A (with the Credit Agreement as to beso amended reflecting the changes set forth on Exhibit A referred toherein as the “Revised Credit Agreement”).  It is understood and agreed that thisAmendment and the marked document attached hereto as Exhibit Aintentionally omit Section 4.1 and all of the pre-existing Exhibits to theCredit Agreement, which shall be unaffected by this Amendment;

 

(B)           Schedules3.1, 3.6(a), 3.6(b), 3.7(a), 3.7(b), 3.8, 3.10, 3.11, 3.17, 3.18(a), 3.18(b),3.18(c), 3.23, 3.25 and 8.3 of the Credit Agreement are hereby replaced withSchedules 3.1, 3.6(a), 3.6(b), 3.7(a), 3.7(b), 3.8, 3.10, 3.11, 3.17, 3.18(a),3.18(b), 3.18(c), 3.23, 3.25 and 8.3, respectively, to this Amendment, whichreplacement schedules reflect the Equity Interests of the Credit Parties on apro forma basis upon the consummation of the Recapitalization and theintercompany mergers contemplated in connection therewith;

 

(C)           TheHallmark Cards Subordination and Support Agreement is hereby terminated;

 

(D)          Notwithstandinganything to the contrary in the Credit Agreement, the Required Lenders consentto the merger of Hallmark Holdings and Hallmark Entertainment Investments Co.with and into the Borrower in connection with the Recapitalization (as definedin the Revised Credit Agreement);

 

(E)           AnExhibit T is hereby added to the Credit Agreement [“Recapitalized DebtIntercreditor Agreement”] in the form of Exhibit T to thisAgreement, and the Table of Contents of the Credit Agreement is hereby updatedas appropriate;

 

(F)           ASchedule 3.17B [“Material Affiliate Transactions”] is hereby added tothe Credit Agreement in the form of Schedule 3.17B to this Amendment,and the Table of Contents of the Credit Agreement is hereby updated asappropriate.

 

Section 3.               Conditionsto Effectiveness.  The effectivenessof this Amendment is subject to the satisfaction in full of each of theconditions precedent set forth below (the date on which all such conditionshave been satisfied being herein called the “Amendment Effective Date”):

 

(A)          theAgent shall have received counterparts of this Amendment which, when takentogether, bear the signatures of the Borrower, Hallmark Cards, each Guarantorand each of the Lenders;

 

(B)           theAgent shall have received for the account of the Lenders a fee of $25,000 inconsideration for the extensions of the Maturity Date to be implementedhereunder;

 

(C)           therepresentations and warranties in Section 4 hereof shall be true on theAmendment Effective Date as if made on such date;

 

(D)          alllegal matters incident to this Amendment shall be satisfactory to Morgan, Lewis& Bockius, LLP, counsel for the Agent;

 

2

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(E)           theAgent has received a fully-executed Recapitalized Debt Intercreditor Agreementin the form of Exhibit T to this Amendment;

 

(F)           theprior or simultaneous consummation of the Recapitalization on terms andconditions satisfactory to the Agent including that (i) criteria set forthunder the definition of Recapitalization as set forth in the Revised CreditAgreement are satisfied in connection therewith, (ii) that eachRecapitalization Credit Document (as defined in the Revised Credit Agreement)is satisfactory in form and substance to the Agent; and (iii) the Agent issatisfied with any and all liabilities of Hallmark Holdings and HallmarkEntertainment Investments Co., who are contemplated to be merged with and intothe Borrower in connection with the consummation of the Recapitalization;

 

(G)           theAgent shall have received evidence satisfactory to it that Hallmark Cardsand/or its Affiliates shall have, pursuant to documentation satisfactory to theAdministrative Agent, extended through no earlier than the Maturity Date (asthe same is being extended in the Revised Credit Agreement) the licenseagreement which provides the Borrower and its Subsidiaries with the right touse the “Hallmark” name and the “Crown” name in their respective televisionseries or on or with respect to any channels owned or operated by the Borroweror any of its Subsidiaries; and

 

Section 4.               Representationsand Warranties of the Credit Parties. Each Credit Party represents and warrants that:

 

(A)          beforeand after giving effect to this Amendment, the representations and warrantiescontained in Section 3 of the Credit Agreement and in the other FundamentalDocuments (including with respect to the accuracy of Schedules 3.6(a) and3.6(b)) are true and correct in all material respects (except to the extentthat any such representations and warranties specifically relate to an earlierdate, in which case they shall be true and correct as of such earlier date, orchanged circumstances specifically contemplated by, and allowed pursuant to,the Revised Credit Agreement) with the same effect as if made on and as of thedate hereof;

 

(B)           beforeand after giving effect to this Amendment, no Event of Default or Default willhave occurred and be continuing on and as of the date hereof; and

 

(C)           theService Agreement referred to in Section 4.1(h) of the Credit Agreement hasheretofore been terminated..

 

Section 5.               Acknowledgmentre: Hallmark Cards Facility Guarantee. By its execution of this Amendment, Hallmark Cards, in its capacity asguarantor under the Hallmark Cards Facility Guarantee, hereby acknowledges theextension of the Maturity Date which is being implemented under the CreditAgreement pursuant to this Amendment, and hereby acknowledges and agrees thatthe provisions of the Hallmark Cards Facility Guarantee shall be in full forceand effect both prior and subsequent to the Amendment Effective Date, andregardless of whether any Change in Control (as defined in the Revised CreditAgreement) may occur subsequent to the date hereof.

 

Section 6.               FurtherAssurances.  At any time and fromtime to time, upon the Agent’s request and at the sole expense of the CreditParties, each Credit Party will promptly and duly 

 

3

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execute and deliver any and all further instrumentsand documents and take such further action as the Agent shall reasonablyrequest.

 

Section 7.               FundamentalDocuments.  This Amendment is designateda Fundamental Document by the Agent.

 

Section 8.               FullForce and Effect.  Except asexpressly amended hereby, the Credit Agreement and the other FundamentalDocuments shall continue in full force and effect in accordance with theprovisions thereof on the date hereof. As used in the Credit Agreement, the terms “Agreement”, “this Agreement”,“herein”,  “hereafter”, “hereto”, “hereof”,and words of similar import, shall, unless the context otherwise requires, meanthe Credit Agreement as amended by this Amendment.

 

Section 9.               APPLICABLELAW.  THIS AMENDMENT SHALL BEGOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 10.             Counterparts.  This Amendment may be executed in two or morecounterparts, each of which shall constitute an original, but all of which whentaken together shall constitute but one instrument.

 

Section 11.             Expenses.  The Borrower agrees to pay all out-of-pocketexpenses incurred by the Agent in connection with the preparation, executionand delivery of this Amendment, including, but not limited to, the reasonablefees and disbursements of counsel for the Agent.

 

Section 12.             Headings.  The headings of this Amendment are for thepurposes of reference only and shall not affect the construction of or be takeninto consideration in interpreting this Amendment.

 

IN WITNESS WHEREOF, the parties hereby have causedthis Amendment to be duly executed as of the date first written above.

 

[Signature Pages Follow]

 

4

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| ** ** | **BORROWER**:                   |
|------------|---------------------------------|
|       |                            |
|       | CROWN  MEDIA HOLDINGS, INC.     |
|       |                            |
|       |                            |
|       | By                              | /s/  Brian Stewart |
|       | Name:  Brian Stewart            |
|       | Title:  EVP/CFO                 |
|       |                            |
|       |                            |
| ** ** | **GUARANTORS:**                 |
|       | CM  INTERMEDIARY, LLC           |
|       | CROWN  MEDIA UNITED STATES, LLC |
|       | CITI  TEEVEE, LLC               |
|       | DOONE  CITY PICTURES, LLC       |
|       |                            |
|       |                            |
|       | By                              | /s/  Brian Stewart |
|       | Name:  Brian Stewart            |
|       | Title:  EVP/CFO                 |

 

*Signature Page toAmendment No. 17*

 

----

 
|                                                                 |                             | **LENDER**:                                                            |
|----------------------------------------------------------------------|----------------------------------|------------------------------------------------------------------------|
|                                                                 |                             | JPMORGAN  CHASE BANK, N.A., individually and as Agent and Issuing Bank |
|                                                                 |                             |                                                                   |
|                                                                 |                             | By                                                                     | /s/  Gregory T. Martin |
|                                                                 |                             |                                                                   | Name:  Gregory T. Martin |
|                                                                 |                             |                                                                   | Title:   Vice President |
|                                                                 |                             |                                                                   |
|                                                                 |                             |                                                                   |
| Acknowledged  and Agreed, solely with   Respect to Section 5 hereof: |                             |                                                                   |
|                                                                 |                             |                                                                   |
|                                                                 |                             |                                                                   |
| HALLMARK  CARDS, INCORPORATED                                        |                             |                                                                   |
|                                                                 |                             |                                                                   |
|                                                                 |                             |                                                                   |
| By                                                                   | /s/  Timothy Griffith            |                                                                   |   |
|                                                                 | Name:  Timothy Griffith          |                                                                   |   |
|                                                                 | Title:  Executive Vice President |                                                                   |   |

 

*Signature Page toAmendment No. 17*

 

----

 

**EXHIBIT A**

**to Amendment No. 17**

 

**FORM OF REVISED CREDIT AGREEMENT**

 

**[Please see attached]**

 

***HIGHLIGHTING CHANGES TO BE IMPLEMENTED***

***TO THE CREDIT AGREEMENT  (AS THESAME HAD***

***PREVIOUSLY BEEN AMENDED THROUGH***

***AMENDMENT NO. 16 DATED AS OF MARCH 2, 2010) VIA***

***AMENDMENT NO. 17 DATED AS OF JUNE 29, 2010***

 

**CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT**

 

**Dated as of August 31, 2001**

**among**

 

**CROWN MEDIA HOLDINGS, INC.**

**as Borrower**

 

**and**

 

**ITS SUBSIDIARIES NAMED HEREIN**

**as Guarantors**

 

**and**

 

**THE LENDERS NAMED HEREIN**

 

**and**

 

**JPMORGAN CHASE**

 

**BANK, N.A.**

 

----

 

**(f/k/a THE CHASE MANHATTAN BANK)**

 

**as Administrative Agent and Issuing Bank**

 

ii

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**TABLE OF CONTENTS**

 
| ** **    | ** **                                                | ** ** | **Page** |
|---------------|-----------------------------------------------------------|------------|----------|
|          |                                                      |       |     |
|          | INTRODUCTORY STATEMENT                                    |       | 1        |
|          |                                                      |       |     |
| 1.            | DEFINITIONS                                               |       | 2        |
|          |                                                      |       |     |
| 2.            | THE LOANS                                                 |       | 22       |
|          |                                                      |       |     |
| SECTION 2.1.  | REVOLVING CREDIT LOANS                                    |       | 22       |
|          |                                                      |       |     |
| SECTION 2.2.  | TERM LOANS                                                |       | 23       |
|          |                                                      |       |     |
| SECTION 2.3.  | MAKING OF LOANS                                           |       | 23       |
|          |                                                      |       |     |
| SECTION 2.4.  | LETTERS OF CREDIT                                         |       | 24       |
|          |                                                      |       |     |
| SECTION 2.5.  | NOTES; REPAYMENT                                          |       | 27       |
|          |                                                      |       |     |
| SECTION 2.6.  | INTEREST ON LOANS                                         |       | 27       |
|          |                                                      |       |     |
| SECTION 2.7.  | COMMITMENT FEES AND OTHER  FEES                           |       | 28       |
|          |                                                      |       |     |
| SECTION 2.8.  | TERMINATION OR REDUCTION  OF REVOLVING CREDIT COMMITMENTS |       | 28       |
|          |                                                      |       |     |
| SECTION 2.9.  | DEFAULT INTEREST;  ALTERNATE RATE OF INTEREST             |       | 28       |
|          |                                                      |       |     |
| SECTION 2.10. | CONTINUATION AND  CONVERSION OF LOANS                     |       | 29       |
|          |                                                      |       |     |
| SECTION 2.11. | PREPAYMENT OF LOANS;  REIMBURSEMENT OF LENDERS            |       | 30       |
|          |                                                      |       |     |
| SECTION 2.12. | CHANGE IN CIRCUMSTANCES                                   |       | 32       |
|          |                                                      |       |     |
| SECTION 2.13. | CHANGE IN LEGALITY                                        |       | 34       |
|          |                                                      |       |     |
| SECTION 2.14. | MANNER OF PAYMENTS                                        |       | 35       |
|          |                                                      |       |     |
| SECTION 2.15. | UNITED STATES WITHHOLDING                                 |       | 35       |
|          |                                                      |       |     |
| SECTION 2.16. | INTEREST ADJUSTMENTS                                      |       | 37       |
|          |                                                      |       |     |
| 3.            | REPRESENTATIONS AND  WARRANTIES                           |       | 38       |
|          |                                                      |       |     |
| SECTION 3.1.  | CORPORATE EXISTENCE AND  POWER                            |       | 38       |
|          |                                                      |       |     |
| SECTION 3.2.  | AUTHORITY AND NO VIOLATION                                |       | 38       |
|          |                                                      |       |     |
| SECTION 3.3.  | GOVERNMENTAL AND OTHER  APPROVALS                         |       | 39       |
|          |                                                      |       |     |
| SECTION 3.4.  | FINANCIAL STATEMENTS                                      |       | 39       |
|          |                                                      |       |     |
| SECTION 3.5.  | NO MATERIAL ADVERSE CHANGE                                |       | 39       |
|          |                                                      |       |     |
| SECTION 3.6.  | OWNERSHIP OF PLEDGED  SECURITIES, SUBSIDIARIES, ETC       |       | 40       |
|          |                                                      |       |     |
| SECTION 3.7.  | COPYRIGHTS, TRADEMARKS AND  OTHER RIGHTS                  |       | 40       |
|          |                                                      |       |     |
| SECTION 3.8.  | FICTITIOUS NAMES                                          |       | 41       |
|          |                                                      |       |     |
| SECTION 3.9.  | TITLE TO PROPERTIES                                       |       | 41       |
|          |                                                      |       |     |
| SECTION 3.10. | UCC FILING INFORMATION                                    |       | 41       |

 

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**TABLE OF CONTENTS**

(continued)

 
| ** **                                                                                                                                                                                                                                                                                                                                                                    | ** **                                             | ** ** | **Page** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.11.                                                                                                                                                                                                                                                                                                                                                                 | LITIGATION                                             |       | 42       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.12.                                                                                                                                                                                                                                                                                                                                                                 | FEDERAL RESERVE REGULATIONS                            |       | 42       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.13.                                                                                                                                                                                                                                                                                                                                                                 | INVESTMENT COMPANY ACT                                 |       | 42       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.14.                                                                                                                                                                                                                                                                                                                                                                 | BINDING AGREEMENTS                                     |       | 42       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.15.                                                                                                                                                                                                                                                                                                                                                                 | TAXES                                                  |       | 42       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.16.                                                                                                                                                                                                                                                                                                                                                                 | COMPLIANCE WITH ERISA AND APPLICABLE LAW               |       | 42       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.17.                                                                                                                                                                                                                                                                                                                                                                 | AGREEMENTS                                             |       | 43       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.18.                                                                                                                                                                                                                                                                                                                                                                 | INDEBTEDNESS; GUARANTIES; LIENS                        |       | 44       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.19.                                                                                                                                                                                                                                                                                                                                                                 | SECURITY INTEREST; OTHER SECURITY                      |       | 44       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.20.                                                                                                                                                                                                                                                                                                                                                                 | DISCLOSURE                                             |       | 44       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.21.                                                                                                                                                                                                                                                                                                                                                                 | LICENSED RIGHTS                                        |       | 44       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.22.                                                                                                                                                                                                                                                                                                                                                                 | ENVIRONMENTAL LIABILITIES                              |       | 44       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.23.                                                                                                                                                                                                                                                                                                                                                                 | PLEDGED SECURITIES                                     |       | 45       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.24.                                                                                                                                                                                                                                                                                                                                                                 | COMPLIANCE WITH LAWS                                   |       | 46       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 3.25.                                                                                                                                                                                                                                                                                                                                                                 | BANK ACCOUNTS                                          |       | 46       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| 4.                                                                                                                                                                                                                                                                                                                                                                            | CONDITIONS OF LENDING                                  |       | 46       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION  4.1.[THE TEXT OF SECTION 4.1 OF THE CREDIT AGREEMENT IS INTENTIONALLY OMITTED  FROM THIS EXHIBIT A TO AMENDMENT NO. 17; NO CHANGES ARE BEING EFFECTUATED TO  SECTION 4.1 OF THE CREDIT AGREEMENT FROM THOSE PREVIOUSLY IN EFFECT VIA  AMENDMENT NO. 17, AND THE CONDITIONS PRECEDENT SET FORTH IN SECTION 4.1 WERE  SATISFIED OR WAIVED ON OR ABOUT AUGUST 31, 2001] |                                                   | 46         |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 4.2.                                                                                                                                                                                                                                                                                                                                                                  | CONDITIONS PRECEDENT TO EACH LOAN AND LETTER OF CREDIT |       | 46       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| 5.                                                                                                                                                                                                                                                                                                                                                                            | AFFIRMATIVE COVENANTS                                  |       | 47       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.1.                                                                                                                                                                                                                                                                                                                                                                  | FINANCIAL STATEMENTS AND REPORTS                       |       | 47       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.2.                                                                                                                                                                                                                                                                                                                                                                  | CORPORATE EXISTENCE                                    |       | 48       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.3.                                                                                                                                                                                                                                                                                                                                                                  | MAINTENANCE OF PROPERTIES                              |       | 48       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.4.                                                                                                                                                                                                                                                                                                                                                                  | NOTICE OF MATERIAL EVENTS                              |       | 48       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.5.                                                                                                                                                                                                                                                                                                                                                                  | INSURANCE                                              |       | 49       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.6.                                                                                                                                                                                                                                                                                                                                                                  | [INTENTIONALLY OMITTED.]                               |       | 50       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.7.                                                                                                                                                                                                                                                                                                                                                                  | [INTENTIONALLY OMITTED.]                               |       | 50       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.8.                                                                                                                                                                                                                                                                                                                                                                  | BOOKS AND RECORDS                                      |       | 50       |
|                                                                                                                                                                                                                                                                                                                                                                          |                                                   |       |     |
| SECTION 5.9.                                                                                                                                                                                                                                                                                                                                                                  | OBSERVANCE OF AGREEMENTS                               |       | 50       |

 

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**TABLE OF CONTENTS**

(continued)

 
|          |                                                           |   | **Page** |
|---------------|----------------------------------------------------------------|--------|----------|
|          |                                                           |   |     |
| SECTION 5.10. | LABORATORIES; NO REMOVAL                                       |   | 50       |
|          |                                                           |   |     |
| SECTION 5.11. | TAXES AND CHARGES; INDEBTEDNESS IN ORDINARY COURSE OF BUSINESS |   | 51       |
|          |                                                           |   |     |
| SECTION 5.12. | LIENS                                                          |   | 51       |
|          |                                                           |   |     |
| SECTION 5.13. | CASH RECEIPTS                                                  |   | 51       |
|          |                                                           |   |     |
| SECTION 5.14. | [INTENTIONALLY OMITTED.]                                       |   | 52       |
|          |                                                           |   |     |
| SECTION 5.15. | [INTENTIONALLY OMITTED.]                                       |   | 52       |
|          |                                                           |   |     |
| SECTION 5.16. | ENVIRONMENTAL LAWS                                             |   | 52       |
|          |                                                           |   |     |
| SECTION 5.17. | [INTENTIONALLY OMITTED.]                                       |   | 53       |
|          |                                                           |   |     |
| SECTION 5.18. | FURTHER ASSURANCES; SECURITY INTERESTS                         |   | 53       |
|          |                                                           |   |     |
| SECTION 5.19. | [INTENTIONALLY OMITTED.]                                       |   | 53       |
|          |                                                           |   |     |
| 6.            | NEGATIVE COVENANTS                                             |   | 53       |
|          |                                                           |   |     |
| SECTION 6.1.  | LIMITATIONS ON INDEBTEDNESS                                    |   | 53       |
|          |                                                           |   |     |
| SECTION 6.2.  | LIMITATIONS ON LIENS                                           |   | 54       |
|          |                                                           |   |     |
| SECTION 6.3.  | GUARANTIES                                                     |   | 56       |
|          |                                                           |   |     |
| SECTION 6.4.  | LIMITATIONS ON INVESTMENTS                                     |   | 56       |
|          |                                                           |   |     |
| SECTION 6.5.  | RESTRICTED PAYMENTS                                            |   | 57       |
|          |                                                           |   |     |
| SECTION 6.6.  | LIMITATIONS ON SALE OF ASSETS                                  |   | 57       |
|          |                                                           |   |     |
| SECTION 6.7.  | RECEIVABLES                                                    |   | 58       |
|          |                                                           |   |     |
| SECTION 6.8.  | TAX SHELTERS, SALE AND LEASEBACK ETC                           |   | 58       |
|          |                                                           |   |     |
| SECTION 6.9.  | [INTENTIONALLY OMITTED.]                                       |   | 58       |
|          |                                                           |   |     |
| SECTION 6.10. | [INTENTIONALLY OMITTED.]                                       |   | 58       |
|          |                                                           |   |     |
| SECTION 6.11. | TRANSACTIONS WITH AFFILIATES                                   |   | 58       |
|          |                                                           |   |     |
| SECTION 6.12. | PROHIBITION OF AMENDMENTS OR WAIVERS                           |   | 59       |
|          |                                                           |   |     |
| SECTION 6.13. | NO NEGATIVE PLEDGE                                             |   | 59       |
|          |                                                           |   |     |
| SECTION 6.14. | ACQUISITIONS OR MERGERS, ETC                                   |   | 59       |
|          |                                                           |   |     |
| SECTION 6.15. | PRODUCTION                                                     |   | 59       |
|          |                                                           |   |     |
| SECTION 6.16. | CHANGE IN BUSINESS                                             |   | 60       |
|          |                                                           |   |     |
| SECTION 6.17. | ERISA COMPLIANCE                                               |   | 60       |
|          |                                                           |   |     |
| SECTION 6.18. | INTEREST RATE PROTECTION AGREEMENTS, ETC                       |   | 60       |
|          |                                                           |   |     |
| SECTION 6.19. | SUBSIDIARIES                                                   |   | 60       |

 

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**TABLE OF CONTENTS**

(continued)

 
|          |                                                                                 |   | **Page** |
|---------------|--------------------------------------------------------------------------------------|--------|----------|
|          |                                                                                 |   |     |
| SECTION 6.20. | HAZARDOUS MATERIALS                                                                  |   | 60       |
|          |                                                                                 |   |     |
| SECTION 6.21. | [INTENTIONALLY OMITTED.]                                                             |   | 60       |
|          |                                                                                 |   |     |
| SECTION 6.22. | [INTENTIONALLY OMITTED.]                                                             |   | 61       |
|          |                                                                                 |   |     |
| SECTION 6.23. | [INTENTIONALLY OMITTED.]                                                             |   | 61       |
|          |                                                                                 |   |     |
| SECTION 6.24. | [INTENTIONALLY OMITTED.]                                                             |   | 61       |
|          |                                                                                 |   |     |
| SECTION 6.25. | [INTENTIONALLY OMITTED.]                                                             |   | 61       |
|          |                                                                                 |   |     |
| SECTION 6.26. | CORPORATE STRUCTURE                                                                  |   | 61       |
|          |                                                                                 |   |     |
| SECTION 6.27. | [INTENTIONALLY OMITTED.]                                                             |   | 61       |
|          |                                                                                 |   |     |
| SECTION 6.28. | NO NEW LIENS                                                                         |   | 61       |
|          |                                                                                 |   |     |
| 7.            | EVENTS OF DEFAULT                                                                    |   | 61       |
|          |                                                                                 |   |     |
| 8.            | GRANT OF SECURITY INTEREST; REMEDIES                                                 |   | 64       |
|          |                                                                                 |   |     |
| SECTION 8.1.  | SECURITY INTERESTS                                                                   |   | 64       |
|          |                                                                                 |   |     |
| SECTION 8.2.  | USE OF COLLATERAL                                                                    |   | 64       |
|          |                                                                                 |   |     |
| SECTION 8.3.  | COLLECTION ACCOUNTS                                                                  |   | 65       |
|          |                                                                                 |   |     |
| SECTION 8.4.  | CREDIT PARTIES TO HOLD IN TRUST                                                      |   | 65       |
|          |                                                                                 |   |     |
| SECTION 8.5.  | COLLECTIONS, ETC                                                                     |   | 65       |
|          |                                                                                 |   |     |
| SECTION 8.6.  | POSSESSION, SALE OF COLLATERAL, ETC                                                  |   | 66       |
|          |                                                                                 |   |     |
| SECTION 8.7.  | APPLICATION OF PROCEEDS ON DEFAULT                                                   |   | 67       |
|          |                                                                                 |   |     |
| SECTION 8.8.  | POWER OF ATTORNEY                                                                    |   | 67       |
|          |                                                                                 |   |     |
| SECTION 8.9.  | FINANCING STATEMENTS, DIRECT PAYMENTS, CONFIRMATION OF RECEIVABLES  AND AUDIT RIGHTS |   | 68       |
|          |                                                                                 |   |     |
| SECTION 8.10. | FURTHER ASSURANCES                                                                   |   | 68       |
|          |                                                                                 |   |     |
| SECTION 8.11. | TERMINATION AND RELEASE                                                              |   | 68       |
|          |                                                                                 |   |     |
| SECTION 8.12. | REMEDIES NOT EXCLUSIVE                                                               |   | 69       |
|          |                                                                                 |   |     |
| SECTION 8.13. | CONTINUATION AND REINSTATEMENT                                                       |   | 69       |
|          |                                                                                 |   |     |
| 9.            | CASH COLLATERAL                                                                      |   | 69       |
|          |                                                                                 |   |     |
| SECTION 9.1.  | CASH COLLATERAL ACCOUNT                                                              |   | 69       |
|          |                                                                                 |   |     |
| SECTION 9.2.  | GRANT OF SECURITY INTEREST                                                           |   | 70       |
|          |                                                                                 |   |     |
| SECTION 9.3.  | REMEDIES                                                                             |   | 70       |
|          |                                                                                 |   |     |
| 10.           | GUARANTY                                                                             |   | 70       |
|          |                                                                                 |   |     |
| SECTION 10.1. | GUARANTY                                                                             |   | 70       |

 

iv

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**TABLE OF CONTENTS**

(continued)

 
| ** **     | ** **                                                       | ** ** | **Page** |
|----------------|------------------------------------------------------------------|------------|----------|
|           |                                                             |       |     |
| SECTION 10.2.  | NO IMPAIRMENT OF GUARANTY, ETC                                   |       | 71       |
|           |                                                             |       |     |
| SECTION 10.3.  | CONTINUATION AND REINSTATEMENT, ETC                              |       | 72       |
|           |                                                             |       |     |
| SECTION 10.4.  | LIMITATION ON GUARANTEED AMOUNT ETC                              |       | 72       |
|           |                                                             |       |     |
| 11.            | PLEDGE                                                           |       | 73       |
|           |                                                             |       |     |
| SECTION 11.1.  | PLEDGE                                                           |       | 73       |
|           |                                                             |       |     |
| SECTION 11.2.  | REGISTRATION IN NOMINEE NAME; DENOMINATIONS                      |       | 73       |
|           |                                                             |       |     |
| SECTION 11.3.  | COVENANT                                                         |       | 73       |
|           |                                                             |       |     |
| SECTION 11.4.  | VOTING RIGHTS; DIVIDENDS; ETC                                    |       | 73       |
|           |                                                             |       |     |
| SECTION 11.5.  | REMEDIES UPON DEFAULT                                            |       | 74       |
|           |                                                             |       |     |
| SECTION 11.6.  | APPLICATION OF PROCEEDS OF SALE AND CASH                         |       | 75       |
|           |                                                             |       |     |
| SECTION 11.7.  | SECURITIES ACT, ETC                                              |       | 76       |
|           |                                                             |       |     |
| SECTION 11.8.  | CONTINUATION AND REINSTATEMENT                                   |       | 76       |
|           |                                                             |       |     |
| SECTION 11.9.  | TERMINATION                                                      |       | 76       |
|           |                                                             |       |     |
| 12.            | THE AGENT AND THE ISSUING BANK                                   |       | 77       |
|           |                                                             |       |     |
| SECTION 12.1.  | ADMINISTRATION BY AGENT                                          |       | 77       |
|           |                                                             |       |     |
| SECTION 12.2.  | ADVANCES AND PAYMENTS                                            |       | 79       |
|           |                                                             |       |     |
| SECTION 12.3.  | SHARING OF SETOFFS, CASH COLLATERAL AND SHARING EVENTS           |       | 79       |
|           |                                                             |       |     |
| SECTION 12.4.  | NOTICE TO THE LENDERS                                            |       | 80       |
|           |                                                             |       |     |
| SECTION 12.5.  | LIABILITY OF THE AGENT                                           |       | 80       |
|           |                                                             |       |     |
| SECTION 12.6.  | REIMBURSEMENT AND INDEMNIFICATION                                |       | 81       |
|           |                                                             |       |     |
| SECTION 12.7.  | RIGHTS OF AGENT AND ISSUING BANK                                 |       | 81       |
|           |                                                             |       |     |
| SECTION 12.8.  | INDEPENDENT INVESTIGATION BY LENDERS                             |       | 82       |
|           |                                                             |       |     |
| SECTION 12.9.  | AGREEMENT OF REQUIRED LENDERS                                    |       | 82       |
|           |                                                             |       |     |
| SECTION 12.10. | NOTICE OF TRANSFER                                               |       | 82       |
|           |                                                             |       |     |
| SECTION 12.11. | SUCCESSOR AGENT                                                  |       | 82       |
|           |                                                             |       |     |
| SECTION 12.12. | SUCCESSOR ISSUING BANK                                           |       | 83       |
|           |                                                             |       |     |
| 13.            | MISCELLANEOUS                                                    |       | 83       |
|           |                                                             |       |     |
| SECTION 13.1.  | NOTICES                                                          |       | 83       |
|           |                                                             |       |     |
| SECTION 13.2.  | SURVIVAL OF AGREEMENT, REPRESENTATIONS AND WARRANTIES, ETC       |       | 84       |
|           |                                                             |       |     |
| SECTION 13.3.  | SUCCESSORS AND ASSIGNS; SYNDICATIONS; LOAN SALES; PARTICIPATIONS |       | 84       |

 

v

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**TABLE OF CONTENTS**

(continued)

 
|           |                                                                                                |   | **Page** |
|----------------|-----------------------------------------------------------------------------------------------------|--------|----------|
|           |                                                                                                |   |     |
| SECTION 13.4.  | EXPENSES; DOCUMENTARY TAXES                                                                         |   | 89       |
|           |                                                                                                |   |     |
| SECTION 13.5.  | INDEMNIFICATION OF THE AGENT, THE ISSUING BANK AND THE LENDERS                                      |   | 89       |
|           |                                                                                                |   |     |
| SECTION 13.6.  | CHOICE OF LAW                                                                                       |   | 90       |
|           |                                                                                                |   |     |
| SECTION 13.7.  | WAIVER OF JURY TRIAL                                                                                |   | 91       |
|           |                                                                                                |   |     |
| SECTION 13.8.  | WAIVER WITH RESPECT TO DAMAGES                                                                      |   | 91       |
|           |                                                                                                |   |     |
| SECTION 13.9.  | NO WAIVER                                                                                           |   | 91       |
|           |                                                                                                |   |     |
| SECTION 13.10. | EXTENSION OF PAYMENT DATE                                                                           |   | 91       |
|           |                                                                                                |   |     |
| SECTION 13.11. | AMENDMENTS, ETC                                                                                     |   | 92       |
|           |                                                                                                |   |     |
| SECTION 13.12. | SEVERABILITY                                                                                        |   | 92       |
|           |                                                                                                |   |     |
| SECTION 13.13. | SERVICE OF PROCESS                                                                                  |   | 92       |
|           |                                                                                                |   |     |
| SECTION 13.14. | HEADINGS                                                                                            |   | 93       |
|           |                                                                                                |   |     |
| SECTION 13.15. | EXECUTION IN COUNTERPARTS                                                                           |   | 93       |
|           |                                                                                                |   |     |
| SECTION 13.16. | SUBORDINATION OF INTERCOMPANY INDEBTEDNESS, RECEIVABLES AND ADVANCES                                |   | 94       |
|           |                                                                                                |   |     |
| SECTION 13.17. | CONFIDENTIALITY                                                                                     |   | 94       |
|           |                                                                                                |   |     |
| SECTION 13.18. | ENTIRE AGREEMENT                                                                                    |   | 95       |
|           |                                                                                                |   |     |
| SECTION 13.19. | RIGHT OF SET-OFF                                                                                    |   | 95       |
|           |                                                                                                |   |     |
| 14.            | HALLMARK SUBORDINATED PARTICIPATION                                                                 |   | 95       |
|           |                                                                                                |   |     |
| SECTION 14.1.  | SALE AND GENERAL TERMS OF PARTICIPATION UPON A PAYMENT UNDER THE  HALLMARK CARDS FACILITY GUARANTEE |   | 95       |
|           |                                                                                                |   |     |
| SECTION 14.2.  | AGREEMENT TO SUBORDINATE                                                                            |   | 96       |
|           |                                                                                                |   |     |
| SECTION 14.3.  | RESTRICTIONS ON PAYMENT OF THE JUNIOR OBLIGATIONS                                                   |   | 96       |
|           |                                                                                                |   |     |
| SECTION 14.4.  | ADDITIONAL PROVISIONS CONCERNING SUBORDINATION                                                      |   | 97       |

 

vi

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Schedules

 
| 1       | Schedule  of Commitments                                                         |
|---------|----------------------------------------------------------------------------------|
| 3.1     | List  of Jurisdictions Where Credit Parties and their Subsidiaries are Qualified |
| 3.6(a)  | Credit  Parties/Pledged Securities                                               |
| 3.6(b)  | Beneficial  Interest                                                             |
| 3.7(a)  | Items  of Product                                                                |
| 3.7(b)  | Trademarks                                                                       |
| 3.8     | Fictitious  Names                                                                |
| 3.10    | Principal  Executive Office/Location of Collateral                               |
| 3.11    | Litigation                                                                       |
| 3.17    | Material  Agreements                                                             |
| 3.17B   | Material  Intercompany Transactions                                              |
| 3.18(a) | Existing  Indebtedness                                                           |
| 3.18(b) | Existing  Guaranties                                                             |
| 3.18(c) | Existing  Liens                                                                  |
| 3.23    | Pledged  Securities                                                              |
| 3.25    | Bank  Accounts                                                                   |
| 8.3     | Collection  Accounts                                                             |

 

Exhibits

 
| A-1    | Form  of Revolving Note                                                     |
|--------|-----------------------------------------------------------------------------|
| A-2    | Form  of Term Note                                                          |
| B-1    | Copyright  Security Agreement                                               |
| B-2    | Form  of Copyright Security Agreement Supplement                            |
| C      | Form  of Laboratory Pledgeholder Agreement                                  |
| D      | Form  of Borrowing Certificate                                              |
| E      | Trademark  Security Agreement                                               |
| F      | Form  of Laboratory Access Letter                                           |
| G      | Opinions  of Counsel to the Credit Parties, Hallmark Cards, Inc.            |
|   | and  Hallmark Entertainment Inc.                                            |
| H      | Form  of Assignment and Acceptance                                          |
| I      | Contribution  Agreement                                                     |
| J      | Form  of Instrument of Assumption and Joinder                               |
| K      | Hallmark  Cards Subordination and Support Agreement                         |
| L      | Limited  Guarantee                                                          |
| L-1    | Hallmark  Cards Letter of Credit                                            |
| M-1    | Amended  and Restated Program License Agreement (Crown Media International) |
| M-2    | Amended  and Restated Program License Agreement (Crown Media United States) |
| N      | HEDC  Purchase Agreement                                                    |
| O      | Hallmark  Inducement Agreement                                              |
| P      | Form  of Sale/Leaseback Power of Attorney                                   |
| Q      | Description  of Foreign Asset Sale                                          |
| R      | Hallmark  L/C                                                               |

 

----

 
| S | Form  of Hallmark Cards Facility Guarantee          |
|---|-----------------------------------------------------|
| T | Form  of Recapitalized Debt Intercreditor Agreement |

 

2

----

 

CREDIT,SECURITY, GUARANTY AND PLEDGE AGREEMENT, dated as of August 31, 2001 among(i) CROWN MEDIA HOLDINGS, INC., a Delaware corporation (the “Borrower”),(ii) the GUARANTORS which are parties hereto from time to time, (iii) theLENDERS which are parties hereto from time to time and (iv) JPMORGAN CHASEBANK, N.A., a national banking corporation (f/k/a THE CHASE MANHATTAN BANK), asAgent for the Lenders and as Issuing Bank.

 

INTRODUCTORY STATEMENT

 

Allterms not otherwise defined above or in this Introductory Statement are asdefined in Article 1 hereof, or as defined elsewhere herein.

 

TheBorrower requested that the Lenders make available a $320,000,000 five-yearsecured credit facility consisting of a term loan of $100,000,000 and arevolving credit facility of up to $240,000,000 (or such lesser amount as isavailable based upon amounts actually committed) to be used (i) to payHEDC for the acquisition of certain rights in the HEDC Library in an amount notto exceed $120,000,000 (or such lesser amount as represents the cash portion ofthe purchase price of the HEDC Library), (ii) to repay intercompany loansfrom Hallmark or HCC (subject to the limitations set forth herein), (iii) tofund the development, distribution, exploitation and acquisition of intellectualproperties including feature films, television and video product and/or rightstherein or thereto; (iv) for general working capital purposes, includingacquisitions and the operation of the Borrower and its Subsidiaries; and (v) tofund the acquisition, distribution, marketing and other exploitation ofmovies-of-the-week, mini-series, cable, pay cable, first-run syndication,network and video programming.

 

To provide security for therepayment of the Loans and all other Obligations of the Credit Partieshereunder, the Credit Parties provided the following to the Agent, for thebenefit of itself, the Issuing Bank and the Lenders: (i) a securityinterest from the Credit Parties in the Collateral pursuant to Article 8hereof which will include (x) the material contracts of the CreditParties, including but not limited to, Platform Agreements, and (y) all ofthe Credit Parties’ rights in copyrights, trademarks, tradenames and servicemarks; (ii) a guaranty from the Guarantors pursuant to Article 10hereof; (iii) a pledge of the capital stock or other ownership interest ofthe Guarantors, pursuant to Article 11 hereof and (iv) a securityinterest from the Borrower in the Cash Collateral Account.

 

For the avoidance of doubt, (a) theterm loans described above were repaid in their entirety on or prior to October 28,2004****and the term loan commitmentswere permanently reduced to zero in connection with such repayment, (b) inconnection with Amendment No. 16 dated as of March 2, 2010 to thisCredit Agreement , the Total Commitments were reduced to $30,000,000 and (c) inconnection with Amendment No. 17 (defined below), the Maturity Date hasbeen extended to June 30, 2011.

 

----

 

The Borrower, Hallmark Cards, HCC and certain otherparties have entered into a Master Recapitalization Agreement dated as of February 26,2010 (the “Recapitalization Agreement”) pursuant to which, among other things, (a) allof Borrower’s existing Subordinated Debt to HCC and its Affiliates (excludingcertain intercompany payables and amounts due under the Tax Sharing Agreement)is being converted into intercompany Indebtedness, common stock and preferredstock in accordance with the following parameters: (i) $315 millionprincipal amount of Indebtedness of the Credit Parties will remain, with (a) $200million of such Indebtedness constituting cash-pay interest-bearingobligations, with an interest rate not to exceed 9.5% per annum through December 31,2011 and 12% thereafter (the “Term A Loan Recapitalized Debt”) and (b) $115million of such Indebtedness constituting obligations on which (1) theapplicable interest rate shall be a rate per annum equal to 11.5% through December 31,2011, increasing to 14% thereafter and (2) interest through December 31,2010 may be payable in kind by adding accrued interest to principal but whichshall become cash-pay beginning on January 1, 2011 (the “Term B LoanRecapitalized Debt” and, together with the Term A Loan Recapitalized Debt, the “RecapitalizedDebt”); (ii) the Recapitalized Debt will be evidenced by the CreditAgreement dated on or about the Amendment No. 17 Effective Date amongBorrower as borrower, HCC as lender and each of the other “Credit Parties” fromtime to time party thereto (the “Recapitalization Credit Agreement”, and,together with any other documentation to be established in connectiontherewith, the “Recapitalization Credit Documents”); (iii) $185 million ofsuch existing intercompany Indebtedness will be converted into convertiblepreferred stock of the Borrower (the “Series A Preferred Stock”); (iv) theremaining intercompany Subordinated Debt of the Credit Parties shall beconverted into shares of class A common stock of the Borrower; and (v) twointermediate holding companies above the Borrower will be merged with and intothe Borrower (the consummation of the transactions contemplated in theRecapitalization Agreement, as described above, is referred to herein as the “Recapitalization”).

 

Subjectto the terms and conditions set forth herein, the Agent is willing to act asagent for the Lenders and each Lender is willing to make Loans to the Borrowerand to participate in Letters of Credit in amounts in the aggregate at any onetime outstanding not in excess of the Commitment of that Lender hereunder.

 

Accordingly,the parties hereto hereby agree as follows:

 

1.             DEFINITIONS

 

Forthe purposes hereof unless the context otherwise requires, the following termsshall have the meanings indicated, all accounting terms not otherwise definedherein shall have the respective meanings accorded to them under GAAP and allterms defined in the UCC and not otherwise defined herein shall have therespective meanings accorded to them therein. Unless the content otherwise requires, any of the following terms may beused in the singular or the plural, depending on the reference:

 

“Affiliate”shall mean any Person which directly or indirectly holds a controlling interestin, is controlled by, or is under common control with, another Person.  For purposes of this definition, a Personshall be deemed to be “controlled by” another Person if such latter Personpossesses, directly or indirectly, the power to direct or cause the directionof the management and policies of such controlled Person whether by contract orotherwise.

 

----

 

“Agent”and “Administrative Agent” shall mean JPMorgan Chase Bank, N.A. in itscapacity as agent for the Lenders hereunder, and any successor agent appointedpursuant to Section 12.11 hereof.

 

“Agreement”and “Credit Agreement” shall mean this Credit, Security, Guaranty andPledge Agreement, as it may be amended, supplemented or otherwise modified fromtime to time.

 

“AlternateBase Rate” shall mean for any day, a rate per annum equal to the greatestof (a) the Prime Rate in effect on such day, (b) the Federal FundsEffective Rate in effect for such day plus 1⁄2 of 1% and (c) the LIBO Ratefor a one month Interest Period on such day (or if such day is not a BusinessDay, the immediately preceding Business Day) plus 1%.  For purposes hereof, “Prime Rate” shall meanthe rate of interest per annum publicly announced from time to time by theAdministrative Agent as its prime rate in effect at its principal office in NewYork City.  “Federal Funds Effective Rate”shall mean, for any day, the weighted average of the rates on overnight Federalfunds transactions with members of the Federal Reserve System arranged byFederal funds brokers, as published on the next succeeding Business Day by theFederal Reserve Bank of New York, or, if such rate is not so published for anyday which is a Business Day, the average of the quotations for the day of suchtransactions received by the Agent from three Federal funds brokers ofrecognized standing selected by it.  Iffor any reason the Agent shall have determined (which determination shall beconclusive absent manifest error) that it is unable to ascertain the FederalFunds Effective Rate for any reason, including the inability or failure of theAgent to obtain sufficient quotations in accordance with the terms hereof, theAlternate Base Rate shall be determined without regard to clause (b) ofthe first sentence of this definition, as appropriate, until the circumstancesgiving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate,the one-month LIBO Rate or the Federal Funds Effective Rate shall be effectiveon the effective date of such change in the Prime Rate, the one-month LIBO Rateor the Federal Funds Effective Rate, respectively.

 

“AlternateBase Rate Loan” shall mean a Loan bearing interest based on the AlternateBase Rate in accordance with the provisions of Article 2 hereof.

 

“AmendmentNo. 12 Effective Date” shall mean the Amendment Effective Date, assuch term is defined in that certain Amendment No. 12 dated as of March 2,2007 to this Credit Agreement.

 

“AmendmentNo. 13” shall mean that certain Amendment No. 13 dated as of July 27,2007 to this Credit Agreement.

 

“AmendmentNo. 15” shall mean that certain Amendment No. 15 dated as of March 2,2009 to this Credit Agreement.

 

----

 

“Amendment No. 17” shall mean that certain Amendment No. 17dated as of June     , 2010 to this Credit Agreement.

 

“AmendmentNo. 17 Effective Date” shall mean the Amendment Effective Date (as definedin Amendment No. 17).

 

“ApplicableLaw” shall mean all provisions of statutes, rules, regulations and ordersof governmental bodies or regulatory agencies applicable to a Person, and allorders and decrees of all courts and arbitrators in proceedings or actions inwhich the Person in question is a party.

 

“ApplicableMargin” shall mean (i) in the case of Alternative Base Rate Loans,1.25% per annum and (ii) in the case of Eurodollar Loans 2.25% per annum.

 

“AssessmentRate” shall mean, for any date, the net annual assessment rate (roundedupwards, if necessary, to the next higher 1/100 of 1%) as most recentlyestimated by the Agent for determining the then current net annual assessmentrate that will be employed in determining amounts payable by The ChaseManhattan Bank to the Federal Deposit Insurance Corporation (or any successor)for insurance by such Corporation (or such successor) of time deposits made indollars at The Chase Manhattan Bank’s domestic offices.

 

“Assignmentand Acceptance” shall mean an agreement substantially in the form of Exhibit Hhereto, executed by the assignor, assignee and other parties as contemplatedthereby.

 

“AuthorizedOfficer” shall mean, with respect to any Person, its chief executiveofficer, chief operating officer or chief financial officer.

 

“BankruptcyCode” shall mean the Bankruptcy Reform Act of 1978, as heretofore andhereafter amended, as codified at 11 U.S.C. 101 etseq.

 

“Board”shall mean the Board of Governors of the Federal Reserve System of the UnitedStates of America.

 

“Borrowing”shall mean a group of Loans of a single Interest Rate Type and as to which asingle Interest Period is in effect on any given day.

 

“BorrowingCertificate” shall be as defined in Section 4.2(d).

 

“BusinessDay” shall mean any day other than a Saturday, Sunday or other day on whichbanks in The City of New York or the City of Los Angeles are permitted toclose; provided, however, that when used in connection with a Eurodollar Loan, theterm “Business Day” shall also exclude any day on which banks are not open fordealings in Dollar deposits on the London interbank market.

 

“CapitalExpenditures” shall mean, with respect to any Person for any period,  the sum of (i) the aggregate of allexpenditures (whether paid in cash or accrued as a liability) by such Personduring that period which, in accordance with GAAP, are or should be included in

 

----

 

“additionsto 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 GAAPby such Person to acquire, by purchase or otherwise, the business, property orfixed assets of, or stock or other evidence of beneficial ownership of, anyother Person (other than the portion of such expenditures allocable in accordancewith GAAP to net current assets or which is allocable to the acquisition ofitems of Product).

 

“CapitalLease”, as applied to any Person, shall mean any lease of any property(whether real, personal or mixed) by that Person as lessee which, in accordancewith GAAP, is or should be accounted for as a capital lease on the balancesheet of that Person.

 

“CashCollateral Account” shall be as defined in Section 9.1 hereof.

 

“CashEquivalents” shall mean (i) marketable securities issued or directlyand fully guaranteed or insured by the United States of America or any agencyor instrumentality thereof (provided that the full faith and credit ofthe United States of America is pledged in support thereof) having maturitiesof not more than twelve months from the date of acquisition, (ii) timedeposits, demand deposits, certificates of deposit, acceptances or primecommercial paper or repurchase obligations for underlying securities of thetypes described in clause (i) entered into with any Lender or any commercialbank organized under the laws of the United States or a state thereof having ashort-term deposit rating at the time of acquisition of at least A-2 or theequivalent thereof by Standard & Poor’s Ratings Services or at leastP-2 or the equivalent thereof by Moody’s Investors Service, Inc., (iii) commercialpaper issued by a Lender or the parent of a Lender with a rating at the time ofacquisition of A-1 or A-2 or the equivalent thereof by Standard & Poor’sRatings Services or P-1 or P-2 or the equivalent thereof by Moody’s InvestorsService, Inc. and in each case maturing within twelve months after thedate of acquisition, (iv) repurchase agreements and reverse repurchaseagreements with any Lender or any Affiliate of any Lender relating to marketabledirect obligations issued or unconditionally backed by the full faith andcredit of the United States, in each case maturing within one year from thedate thereof and (v) marketable direct obligations issued by any state ofthe United States or any agency or instrumentality thereof maturing withintwelve months from the date of acquisition thereof and, at the time ofacquisition, having one of the two highest ratings generally obtainable fromeither Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.

 

“Changein Control” shall mean (a) Hallmark Cards shall cease to own (directlyor indirectly) at least 80% of the Equity Interests of the Borrower, (b) HallmarkCards shall cease to have (i) sufficient voting power to elect a majorityof the Borrower’s Board of Directors or (ii) beneficial ownership over amajority of the issued and outstanding Equity Interests of the Borrower havingvoting power or (c) the 

 

----

 

consummationby the Borrower of any transaction that would constitute a “Rule 13e-3transaction” as defined in the Exchange Act.

 

“ChargeOver Shares” shall mean a charge over shares to be delivered by theBorrower in favor of the Agent, in form and substance satisfactory to theAgent; it being understood that the Charge Over Shares was terminated andreleased in connection with the consummation of the Foreign Asset Sale.

 

“ClearingAccount” shall mean the account of the Borrower maintained at the office ofthe Agent at 270 Park Avenue, New York, New York 10017-2070, designated as the “CrownMedia, Inc. - Clearing Account”, Account No. 323224679.

 

“ClosingDate” shall mean the date on which the conditions precedent set forth in Section 4.1have been satisfied or waived, which occurred on or about August 31, 2001.

 

“CMIntermediary” shall mean CM Intermediary, LLC, a Delaware limited liabilitycompany.

 

“Code”shall mean the Internal Revenue Code of 1986 and the rules and regulationsissued thereunder, as heretofore and hereafter amended, as codified at 26U.S.C. etseq., or any successor provision thereto.

 

“Collateral”shall mean with respect to each Credit Party, all of such Credit Party’s right,title and interest in and to all personal property, tangible and intangible,wherever located or situated and whether now owned, presently existing orhereafter acquired or created, including, but not limited to, all goods,accounts, instruments, intercompany obligations, contract rights, partnershipand joint venture interests, documents, chattel paper, general intangibles,goodwill, equipment, machinery, inventory, investment property, copyrights,trademarks (other than any rights which such Credit Party may have in and tothe “Hallmark” and “Odyssey” trademarks), trade names, insurance proceeds,cash, deposit accounts and the Pledged Securities, and any proceeds thereof,products thereof or income therefrom, further including, but not limited to,all of such Credit Party’s right, title and interest in and to each and everyitem and type of Product, the scenario, screenplay or script upon which an itemof Product is based, all of the properties thereof, tangible and intangible,and all domestic and foreign copyrights and all other rights therein andthereto, of every kind and character, whether now in existence or hereafter tobe made or produced, and whether or not in possession of such Credit Party,including with respect to each and every item of Product and without limitingthe foregoing language, each and all of the following particular rights andproperties (to the extent they are now owned or hereafter owned by such CreditParty):

 

(i)            all scenarios, screenplays and/orscripts at every stage thereof;

 

(ii)           all common law and/or statutorycopyright and other rights in all literary and other properties (hereinaftercalled “said literary properties”) which form the basis of such item ofProduct and/or which are or will be incorporated into such item of Product, allcomponent parts of such item of Product consisting of said literary properties,all motion picture rights in and to the story, all treatments of said story andsaid literary properties, together with all preliminary and final screenplaysused and to be used in connection with such item of Product,

 

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andall other literary material upon which such item of Product is based or fromwhich it is adapted;

 

(iii)          all motion picture rights in and toall music and musical compositions used and to be used in such item of Product,if any, including, each without limitation, all rights to record, rerecord,produce, reproduce or synchronize all of said music and musical compositions inand in connection with motion pictures;

 

(iv)          all tangible personal propertyrelating to such item of Product, including, without limitation, all exposedfilm, developed film, positives, negatives, prints, positive prints, answerprints, 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-printelements), sound tracks, cutouts, trims and any and all other physicalproperties of every kind and nature relating to such item of Product whether incompleted form or in some state of completion, and all masters, duplicates,drafts, versions, variations and copies of each thereof, in all formats whetheron film, videotape, disk or other optical or electronic media or otherwise andall music sheets and promotional materials relating to such item of Product(collectively, the “Physical Materials”);

 

(v)           all collateral, allied, subsidiaryand merchandising rights appurtenant or related to such item of Productincluding, without limitation, the following rights:  all rights to produce remakes, sequels orprequels to such item of Product, based upon such item of Product, said literaryproperties or the theme of such item of Product and/or the text or any part ofsaid literary properties; all rights throughout the world to broadcast,transmit and/or reproduce by means of television (including commerciallysponsored, sustaining and subscription or “pay” television) or by streamingvideo or by other means over the internet or any other open or closed physicalor wireless network or by any process analogous to any of the foregoing, nowknown or hereafter devised, such item of Product or any remake, sequel orprequel to the item of Product; all rights to produce primarily for televisionor similar use, a motion picture or series of motion pictures, by use of filmor any other recording device or medium now known or hereafter devised, basedupon such item of Product, said literary properties or any part thereof,including, without limitation, based upon any script, scenario or the like usedin such item of Product; all merchandising rights including, withoutlimitation, all rights to use, exploit and license others to use and exploitany and all commercial tie-ups of any kind arising out of or connected withsaid literary properties, such item of Product, the title or titles of suchitem of Product, the characters of such item of Product and/or said literaryproperties and/or the names or characteristics of said characters and includingfurther, without limitation, any and all commercial exploitation in connectionwith or related to such item of Product, any remake, sequel or prequel thereofand/or said literary properties;

 

(vi)          all statutory copyrights, domestic andforeign, obtained or to be obtained on such item of Product, together with anyand all copyrights obtained or to be obtained in connection with such item ofProduct or any underlying or component elements of such item of Product,including, in each case without limitation, all copyrights on the propertydescribed in subparagraphs (i) through (v) inclusive, of thisdefinition, together with the right to copyright (and all rights to renew orextend such copyrights) and the right to sue in the name of any of the CreditParties for past, present and future infringements of copyright;

 

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(vii)         all insurance policies and completionguaranties connected with such item of Product and all proceeds which may bederived therefrom;

 

(viii)        all rights to distribute, sell, rent,license the exhibition of and otherwise exploit and turn to account such itemof Product, the Physical Materials, the motion picture rights in and to thestory and/or other literary material upon which such item of Product is basedor from which it is adapted, and the music and musical compositions used or tobe used in such item of Product;

 

(ix)           any and all sums, proceeds, money,products, profits or increases, including money profits or increases (as thoseterms are used in the UCC or otherwise) or other property obtained or to beobtained from the distribution, exhibition, sale or other uses or dispositionsof such item of Product or any part of such item of Product, including, withoutlimitation, all sums, proceeds, profits, products and increases, whether inmoney or otherwise, from the sale, rental or licensing of such item of Productand/or any of the elements of such item of Product including, withoutlimitation, from collateral, allied, subsidiary and merchandising rights, andfurther including, without limitation, all monies held in any CollectionAccount;

 

(x)            the dramatic, nondramatic, stage,television, radio and publishing rights, title and interest in and to such itemof Product, and the right to obtain copyrights and renewals of copyrightstherein;

 

(xi)           the name or title of such item ofProduct and all rights of such Credit Party to the use thereof, including,without limitation, rights protected pursuant to trademark, service mark,unfair competition and/or any other applicable statutes, common law, or other rule orprinciple of law;

 

(xii)          any and all contract rights and/orchattel paper which may arise in connection with such item of Product;

 

(xiii)         all accounts and/or other rights topayment which such Credit Party presently owns or which may arise in favor ofsuch Credit Party in the future, including, without limitation, any refund orrebate in connection with a completion guaranty or otherwise, all accountsand/or rights to payment due from Persons in connection with the distributionof such item of Product, or from the exploitation of any and all of thecollateral, allied, subsidiary, merchandising and other rights in connectionwith such item of Product;

 

(xiv)        any and all “general intangibles” (asthat term is defined in the UCC) not elsewhere included in this definition,including, without limitation, any and all general intangibles consisting ofany right to payment which may arise in connection with the distribution orexploitation of any of the rights set out herein, and any and all generalintangible rights in favor of such Credit Party for services or otherperformances by any third parties, including actors, writers, directors,individual producers and/or any and all other performing or nonperformingartists in any way connected with such item of Product, any and all generalintangible rights in favor of such Credit Party relating to licenses of soundor other equipment, or licenses for any photograph or photographic or otherprocesses, and any and all general intangibles related to the distribution orexploitation of such item of Product including general

 

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intangiblesrelated to or which grow out of the exhibition of such item of Product and theexploitation of any and all other rights in such item of Product set out inthis definition;

 

(xv)         any and all goods including, withoutlimitation, inventory (as that term is defined in the UCC) which may arise inconnection with the creation, production or delivery of such item of Productand which goods pursuant to any production or distribution agreement orotherwise are owned by such Credit Party;

 

(xvi)        all and each of the rights, regardlessof denomination, which arise in connection with the acquisition, creation,production, completion of production, delivery, distribution, or otherexploitation of such item of Product, including, without limitation, any andall rights in favor of such Credit Party, the ownership or control of which areor may become necessary or desirable, in the opinion of the AdministrativeAgent, in order to complete production of such item of Product in the eventthat the Administrative Agent exercises any rights it may have to take over andcomplete production of such item of Product;

 

(xvii)       any and all documents issued by anypledgeholder or bailee with respect to such item of Product or any PhysicalMaterials (whether or not in completed form) with respect thereto;

 

(xviii)      any and all Collection Accounts or otherbank accounts established by such Credit Party with respect to such item ofProduct;

 

(xix)         any and all rights of such Credit Partyunder any License Agreements or Platform Agreements relating to such item ofProduct; and

 

(xx)          any and all rights of such Credit Partyunder contracts relating to the production or acquisition of such item ofProduct, including, but not limited to, all contracts which have been deliveredto the Agent pursuant to this Credit Agreement.

 

“CollectionAccount” shall have the meaning given such term in Section 8.3 hereof.

 

“Commitment”shall mean, collectively, the Term Loan Commitment and the Revolving LoanCommitment of each Lender.

 

“CommitmentFees” shall have the meaning given such term in Section 2.7 hereof.

 

“CommitmentTermination Date” shall mean the earlier to occur of (i) June 30,2011 and (ii) such earlier date on which the Total Commitment shallterminate in accordance with Section 2.8(a) or Article 7 hereof.

 

“ConsolidatedNet Income” shall mean, for any period for which such amount is beingdetermined, the consolidated net income of such Person for such period inaccordance with GAAP.

 

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“ConsolidatedSubsidiaries” shall mean, for any Person, all subsidiaries of such Personwhich are required or permitted to be consolidated with such Person forfinancial reporting purposes in accordance with GAAP.

 

“ContributionAgreement” shall mean the Contribution Agreement substantially in the formof Exhibit I hereto to be entered into by the Guarantors, as suchContribution Agreement may be amended, supplemented or otherwise modified fromtime to time.

 

“ControlledForeign Corporation” shall mean a Subsidiary of the Borrower which is a “controlledforeign corporation” as defined in Section 957(a) of the Code or anysuccessor provision thereto.

 

“CopyrightSecurity Agreement” shall mean the Copyright Security Agreement,substantially in the form of Exhibit B-1 hereto, as the same may beamended or supplemented from time to time by delivery of a Copyright SecurityAgreement Supplement or otherwise.

 

“CopyrightSecurity Agreement Supplement” shall mean a Supplement to the CopyrightSecurity Agreement substantially in the form of Exhibit B-2 hereto.

 

“CreditExposure” shall mean, without duplication, with respect to any Lender, thesum of such Lender’s (i) aggregate outstanding Loans hereunder and (ii) ProRata Share of the then current L/C Exposure.

 

“CreditParties” shall mean the Borrower and the Guarantors.

 

“CrownMedia US” shall mean Crown Media United States, LLC, a Delaware limitedliability company.

 

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“CurrencyAgreement” shall mean any foreign exchange contract, currency swapagreement, futures contract, option contract, synthetic cap or other similaragreement designed to protect the Borrower against fluctuations in currencyvalues.

 

“Debenture”shall mean a debenture to be delivered by any U.K. Credit Party in favor of theAgent, in form and substance satisfactory to the Agent; it being understoodthat the Debenture(s) was terminated and released in connection with theconsummation of the Foreign Asset Sale.

 

“Default”shall mean any event, act or condition which with notice or lapse of time, orboth, would constitute an Event of Default.

 

“Dollars”and “$” shall mean lawful money of the United States of America.

 

“EnvironmentalLaws” shall mean any and all federal, state, local or municipal laws,rules, orders, regulations, statutes, ordinances, codes, decrees orrequirements of any Governmental Authority regulating, relating to, or imposingliability or standards of conduct concerning, any Hazardous Material orenvironmental protection or health and safety, as now or at any time hereafterin effect, including without limitation, the Clean Water Act also known as theFederal Water Pollution Control Act (“FWPCA”), 33 U.S.C. § 1251 etseq.,the Clean Air Act (“CAA”), 42 U.S.C. §§ 7401 etseq., the FederalInsecticide, Fungicide and Rodenticide Act (“FIFRA”), 7 U.S.C. §§ 136 etseq., the Surface Mining Control and Reclamation Act (“SMCRA”), 30U.S.C. §§ 1201 etseq., the Comprehensive Environmental Response,Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9601 etseq.,the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), Public Law99-499, 100 Stat. 1613, the Emergency Planning and Community Right to Know Act(“EPCRA”), 42 U.S.C. § 11001 etseq., the Resource Conservationand Recovery Act (“RCRA”), 42 U.S.C. § 6901 etseq., theOccupational Safety and Health Act as amended (“OSHA”), 29 U.S.C. § 655 and §657, and other such laws relating to the storage, transportation, treatment anddisposal of Hazardous Materials into the air, surface water, ground water, landsurface, subsurface strata or any building or structure and, together, in eachcase, with any amendment thereto, and the regulations adopted pursuant thereto.

 

“EquityInterest” shall mean shares of the capital stock, partnership interests,membership interest in a limited liability company, beneficial interests in atrust or other equity interests in any Person or any warrants, options or otherrights to acquire such interests.

 

“ERISA”shall mean the Employee Retirement Income Security Act of 1974, as heretoforeand hereafter amended, as codified at 29 U.S.C. § 1001 etseq.,and the regulations promulgated thereunder.

 

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“ERISAAffiliate” shall mean each Person (as defined in Section 3(9) of ERISA)which is treated as a single employer with any Credit Party under Section414(b), (c), (m) or (o) of the Code.

 

“EurodollarLoan” shall mean a Loan bearing interest based on the LIBO Rate inaccordance with the provisions of Article 2 hereof.

 

“Eventsof Default” shall have the meaning given such term in Article 7 hereof.

 

“ExecutiveOfficer” shall mean, with respect to any Person, its chief executiveofficer, chief operating officer, chief financial officer or executive orsenior vice president.

 

“ExistingAgreement” shall mean the Amended and Restated Credit and SecurityAgreement dated as of August 31, 1995 as amended and restated as of October 16,1998 among Hallmark, certain of its Subsidiaries, the lenders party thereto andthe Agent.

 

“FeeLetter” shall mean the letter agreement dated June 27, 2001, between theBorrower and the Agent.

 

“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.

 

“FundamentalDocuments” shall mean this Credit Agreement, the Notes, the ContributionAgreement, the Pledgeholder Agreements, the Laboratory Access Letters, theCopyright Security Agreement, the Copyright Security Agreement Supplements, theTrademark Security Agreement, UCC Financing Statements, the Recapitalized DebtIntercreditor Agreement, and any other ancillary agreement which is required tobe or otherwise executed by such Credit Party and delivered to the Agent inconnection with this Agreement and, in addition, with respect to the Borrower,the Notes.

 

“GAAP”shall mean generally accepted accounting principles in the United States ofAmerica consistently applied as in effect on the date hereof; provided, however,that if either the Required Lenders or the Borrower proposes that GAAP bemodified as a result of any changes allowed by or in response to FASB releasesor other authoritative pronouncements issued after the date hereof, theRequired Lenders or the Borrower (as applicable) agree not to unreasonablywithhold or delay their consent to any such proposal so long as such proposedmodification would not affect the calculation of any of the financial covenantscontained herein.

 

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“GovernmentalAuthority” shall mean any federal, state, municipal or other governmentaldepartment, commission, board, bureau, agency or instrumentality, or any court,in each case whether of the United States or foreign.

 

“GrantingLender” has the meaning specified in Section 13.3.

 

“Guarantors”shall mean CM Intermediary, LLC, Crown Media United States, LLC, Citi Teevee,LLC, Doone City Pictures, LLC and any other Subsidiaries which hereafter arerequired to become signatories to this Agreement pursuant to Section 6.19hereof.

 

“Guaranty”shall mean, as to any Person, any direct or indirect obligation of such Personguaranteeing or intended to guarantee any Indebtedness, Capital Lease, dividendor other monetary obligation (“primary obligation”) of any other Person (the “primaryobligor”) in any manner, whether directly or indirectly, including, withoutlimitation, any obligation of such Person, whether or not contingent, (a) topurchase any such primary obligation or any property constituting direct orindirect security therefor, (b) to advance or supply funds (i) for the purchaseor payment of any such primary obligation or (ii) to maintain working capitalor equity capital of the primary obligor or otherwise to maintain the net worthor solvency of the primary obligor, or (c) to purchase property, securities orservices, in each case, primarily for the purpose of assuring the owner of anysuch primary obligation.  The amount ofany Guaranty shall be deemed to be an amount equal to (x) the stated ordeterminable amount of the primary obligation in respect of which such Guarantyis made or, if not stated or determinable, the maximum reasonably anticipatedliability in respect thereof (assuming such Person is required to performthereunder) or (y) the stated maximum liability under such Guaranty, whicheveris less.

 

** **“HallmarkCards” shall mean Hallmark Cards, Incorporated, a Missouri corporation.

 

“HallmarkCards Facility Guarantee” shall mean a guarantee agreement substantially inthe form of Exhibit S hereto, as the same may be amended, supplemented,extended or replaced from time to time, which shall provide for a guarantee byHallmark Cards in favor of the Agent (on behalf of itself, the Issuing Bank andthe Lenders) of any and all Obligations from time to time outstandinghereunder.

 

 “Hallmark Cards Letter of Credit” shallmean the Letter of Credit issued by Credit Suisse First Boston or an Affiliateon behalf of HCC for the benefit of the Borrower, and substantially in the formof Exhibit L-1 hereto; it being understood that the Hallmark Cards Letter ofCredit was terminated prior to the Amendment No. 17 Effective Date.

 

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“HallmarkCards Subordination and Support Agreement” shall mean the subordination andsupport agreement from Hallmark Cards substantially in the form of Exhibit Khereto, as amended, supplemented or otherwise modified from time to time inaccordance with the terms thereof; it being understood that the Hallmark CardsSubordination and Support Agreement was terminated on the Amendment No. 17Effective Date in connection with the consummation of the Recapitalization.

 

“HallmarkHoldings” shall mean Hallmark Entertainment Holdings, Inc., a Delawarecorporation which is an indirect wholly-owned subsidiary of Hallmark Cards thatwas merged with and into the Borrower in connection with the Recapitalization.

 

“HallmarkInducement Agreement” shall mean the Hallmark Inducement Agreementsubstantially in the form of Exhibit O hereto, as amended, supplemented orotherwise modified from time to time in accordance with the terms thereof; itbeing understood that the Hallmark Inducement Agreement was terminated prior tothe Amendment No. 17 Effective Date.

 

“HallmarkL/C” shall mean an irrevocable letter of credit issued to the Agent byCitibank, N.A. in the amount of the Total Commitment as credit support for theObligations of the Borrower, substantially in the form of Exhibit R hereto or areplacement irrevocable letter of credit issued to the Agent by JPMorgan ChaseBank, N.A. in substantially the form of Exhibit R-1 hereto; it being understoodthat the Hallmark L/C was cancelled in connection with the effectiveness ofAmendment No. 15.

 

“HallmarkPurchase” shall have the meaning given such term in Section 13.3(l) hereof.

 

“HallmarkSubordinated Participation” shall have the meaning set forth in Section14.1 hereof.

 

“HazardousMaterials” shall mean any flammable materials, explosives, radioactivematerials, hazardous materials, hazardous wastes, hazardous or toxicsubstances, or similar materials defined as such in any Environmental Law.

 

“HallmarkTax Note” shall mean that certain promissory note in favor of HallmarkCards in the original principal amount of $33,082.019 in consideration for itsobligations of repayments to Hallmark Cards arising under that certain TaxSharing Agreement dated March 11, 2003 as a result of the disallowance by theInternal Revenue Service of the use of certain of Borrower’s losses for thecalendar years 2003 and 2004; it being understood that the obligations underthe Hallmark Tax Note were fully paid in December 2009.

 

“HCC”shall mean HC Crown Corp., a Delaware corporation.

 

“HCCPromissory Note” shall mean the promissory note dated as of August 31, 2001among the Borrower, as borrower, Crown Media International, Inc. and CrownMedia United States, LLC, as guarantors, and HCC, as lender; it beingunderstood that the obligations under the HCC Promissory Note were convertedinto Recapitalized Debt and/or Equity Interests in connection with theconsummation of the Recapitalization.

 

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“HEDC”shall mean Hallmark Entertainment Distribution, LLC, a Delaware limitedliability company, now known as RHI Entertainment Distribution, LLC, whichceased to be an Affiliate of the Borrower in January 2008.

 

“HEDCLibrary” shall mean the seven hundred two titles in which the Borrower isto obtain certain rights pursuant to the HEDC Purchase Agreement.

 

“HEDCLicense Agreements” shall mean (i) prior to the Closing Date, the ProgramLicense Agreement dated as of July 1, 1999 between HEDC and Crown Media and,subsequent to the Closing Date, the amended and restated version thereofsubstantially in the form of Exhibit M-1 hereto and (ii) prior to the ClosingDate, the Program License Agreement dated as of November 13, 1998 between HEDCand Crown Media US and, subsequent to the Closing Date, the amended andrestated version thereof substantially in the form of Exhibit M-2 hereto.

 

“HEDCPurchase Agreement” shall mean the Purchase and Sale Agreement dated as ofApril 10, 2001 between HEDC and the Borrower pursuant to which the Borrower isacquiring rights in the HEDC Library, a copy of which is attached hereto asExhibit N.

 

“Indebtedness”shall mean (without double counting), at any time and with respect to anyPerson, (i) indebtedness of such Person for borrowed money (whether by loan orthe issuance and sale of debt securities) or for the deferred purchase price ofproperty 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, acceptancefacilities, or drafts or similar instruments issued or accepted by banks andother financial institutions for the account of such Person; (iii) obligationsof such Person under Capital Leases; (iv) deferred payment obligations of suchPerson resulting from the adjudication or settlement of any litigation; (v)obligations of such Person under synthetic leases or financing leases (but notoperating leases); and (vi) indebtedness of others of the type described inclauses (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 Personhas assumed such indebtedness (provided, that if such Person has notassumed such indebtedness of another Person then the amount of indebtedness ofsuch Person pursuant to this clause (vi) for purposes of this Credit Agreementshall be equal to the lesser of the amount of the indebtedness of the otherPerson and the fair market value of the assets of such Person which secure suchother indebtedness).

 

“InitialDate” shall mean (i) in the case of the Agent and the Issuing Bank, thedate hereof, (ii) in the case of each Lender which is an original party to thisCredit Agreement, the date hereof and (iii) in the case of any other Lender,the effective date of the Assignment and Acceptance pursuant to which it becamea Lender.

 

“Instrumentof Assumption and Joinder” shall mean an Instrument of Assumption andJoinder substantially in the form of Exhibit J hereto.

 

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“InterestDeficit” shall have the meaning given such term in Section 2.16 hereof.

 

“InterestExpense” shall mean, for any period in respect of the Borrower and itsSubsidiaries, the sum of (a) the interest expense (including the interestcomponent in respect of Capital Lease obligations), plus (b) allcommitment fees, letter of credit fees, issuing bank fees, or similar fees paidby such Persons during such period in respect of any Indebtedness, plus(c) the net amounts paid by such Persons during such period in connection withany Interest Rate Protection Agreement, Currency Agreement or other hedgingarrangement, plus (d) any dividends or similar amounts paid by suchPersons during such period in respect of any preferred stock.

 

“InterestPayment Date” shall mean (i) as to any Eurodollar Loan having an InterestPeriod of one, two or three months, the last day of such Interest Period, (ii)as to any Eurodollar Loan having an Interest Period of at least six months, thelast day of such Interest Period and, in addition, each date during suchInterest Period that is an integral multiple of three months from thecommencement of such Interest Period and (iii) with respect to Alternate BaseRate Loans, the last Business Day of each March, June, September and December(commencing the last Business Day of September 2001).

 

“InterestPeriod” shall mean as to any Eurodollar Loan, the period commencing on thedate of such Loan or the last day of the preceding Interest Period and endingon the numerically corresponding day (or if there is no corresponding day, thelast day) in the calendar month that is one, two, three, six or twelve monthsthereafter as the Borrower may elect; provided,however, that (i) if any Interest Periodwould end on a day which shall not be a Business Day, such Interest Periodshall be extended to the next succeeding Business Day, unless such nextsucceeding Business Day would fall in the next calendar month, in which case,such Interest Period shall end on the next preceding Business Day, (ii) noInterest Period may be selected which would end later than the Maturity Date,(iii) interest shall accrue from and including the first day of such InterestPeriod to but excluding the last date of such Interest Period and (iv) noInterest Period of six or twelve months may be selected unless such InterestPeriod is available from all of the Lenders.

 

“InterestRate Protection Agreement” shall mean any interest rate swap agreement,interest rate cap agreement, synthetic cap, collar or floor or other financialagreement or arrangement designed to protect a Credit Party againstfluctuations in interest rates.

 

“InterestRate Type” shall have the meaning given such term in Section 2.3 hereof.

 

“Investment”shall mean any stock, evidence of indebtedness or other security of any Person,any loan, advance, contribution of capital, extension of credit or commitmenttherefor (including, without limitation, the Guaranty of loans made to others,but excluding current trade and customer accounts receivable arising in theordinary course of business and

 

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payablein accordance with customary trading terms in the ordinary course of business),any purchase of (i) any security of another Person or (ii) any business orundertaking of any Person or any commitment to make any such purchase, or anyother investment.

 

“IssuingBank” shall mean (i) JPMorgan Chase Bank, N.A., a national bankingassociation, in its capacity as such or (ii) such successor as may be appointedpursuant to Section 12.12 hereof.

 

“JuniorCreditor” shall mean the holder of the Hallmark Subordinated Participation.

 

“JuniorObligations” shall mean the obligation of the Borrower to repay theprincipal of, and accrued interest on, the Hallmark Subordinated Participation.

 

“Laboratory”shall mean any laboratory acceptable to the Agent which is located in theUnited States and is a party to a Pledgeholder Agreement or a Laboratory AccessLetter.

 

“LaboratoryAccess Letter” shall mean a letter agreement among (i) a Laboratory holdingany elements of any Product to which any Credit Party has the right of access,(ii) such Credit Party and (iii) the Agent, substantially in the form ofExhibit F hereto or a form otherwise acceptable to the Agent.

 

“L/CExposure” shall mean, at any time, the amount expressed in Dollars of theaggregate face amount of all drafts which may then or thereafter be presentedby beneficiaries under all Letters of Credit then outstanding, plus(without duplication) the face amount of all drafts which have been presentedor accepted under Letters of Credit but have not yet been paid or have beenpaid but not reimbursed, whether directly or from the proceeds of a Loanhereunder.

 

“Lender”and “Lenders” shall mean the financial institutions whose names appearat the foot hereof and any assignee of a Lender pursuant to Section 13.3(b).

 

“LendingOffice” shall mean, with respect to any of the Lenders, the branch orbranches (or affiliate or affiliates) from which any such Lender’s EurodollarLoans or Alternate Base Rate Loans, as the case may be, are made or maintainedand for the account of which all payments of principal of, and interest on,such Lender’s Eurodollar Loans or Alternate Base Rate Loans are made, asnotified to the Agent from time to time.

 

“Letterof Credit” shall mean a letter of credit issued pursuant to Section 2.4.

 

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 “LIBO Rate” shall mean, with respect tothe Interest Period for a Eurodollar Loan (or, as applicable, for purposes ofdetermining the Alternate Base Rate with respect to any Alternate Base RateLoan), an interest rate per annum equal to the quotient (rounded upwards, ifnecessary to the next 1/100 of 1%) of (A) (i) the rate appearing on the ReutersBBA LIBOR Rates Page 3750 (or on any successor or substitute page of suchService, or any successor to or substitute for such Service, providing ratequotations comparable to those currently provided on such page of such Service,as determined by the Agent from time to time for purposes of providingquotations of interest rates applicable to dollar deposits in the Londoninterbank market) at approximately 11:00 a.m., London time, two Business Daysprior to the commencement of such Interest Period, as the rate for dollardeposits with a maturity comparable to such Interest Period or (ii) if the ratedescribed in clause (A)(i) is not available on any relevant date ofdetermination, the rate at which dollar deposits of $5,000,000 and for amaturity comparable to such Interest Period are offered by the principal Londonoffice of the Agent in immediately available funds in the London interbankmarket at approximately 11:00 a.m., London time, two Business Days prior to thecommencement of such Interest Period, divided by (B) one minus the applicablestatutory reserve requirements of the Agent, expressed as a decimal (includingwithout duplication or limitation, basic, supplemental, marginal and emergencyreserves), from time to time in effect under Regulation D or similarregulations of the Board of Governors of the Federal Reserve System.  It is agreed that for purposes of thisdefinition, Eurodollar Loans made hereunder shall be deemed to constituteEurocurrency Liabilities as defined in Regulation D and to be subject to thereserve requirements of Regulation D.

 

“LicenseAgreements” shall mean any and all agreements entered into by any CreditParty pursuant to which such Credit Party acquires license rights in any itemof Product (including the HEDC License Agreements).

 

“Lien”shall mean any mortgage, pledge, security interest, copyright mortgage,encumbrance, lien or charge of any kind whatsoever (including any conditionalsale or other title retention agreement, any lease in the nature thereof, andthe filing of or agreement to give any financing statement under the UniformCommercial Code of any jurisdiction).

 

“LimitedGuarantee” shall mean a Limited Guarantee Agreement and Acknowledgment byHallmark Cards in favor of the Agent substantially in the form attached heretoas Exhibit L, as it may be amended, supplemented or otherwise modified fromtime to time in accordance with the terms thereof it being understood that theLimited Guarantee was terminated prior to the Amendment No. 17 Effective Date.

 

“Loans”shall mean the Revolving Credit Loans and/or the Term Loans.

 

“MarginStock” shall be as defined in Regulation U of the Board.

 

“MaterialAdverse Effect” shall mean any change or effect that (a) has a materiallyadverse effect on the business, assets, properties, operations, condition(financial or otherwise) or prospects of the Borrower and its Subsidiaries,taken as a whole, (b) materially impairs the ability of any Credit Party toperform its respective obligations under the Fundamental Documents to which itis a party, (c) materially impairs the validity or enforceability of, ormaterially impairs the security interests, rights, remedies or benefits

 

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availableto the Agent or the Lenders under any of the Fundamental Documents; or (d) hasa material adverse effect on the Collateral or the Pledged Securities taken asa whole.

 

“MaturityDate” shall mean June 30, 2011.

 

“MultiemployerPlan” shall mean a plan that is a multiemployer plan as defined in Section4001(a)(3) of ERISA to which any Credit Party or ERISA Affiliate is making oraccruing an obligation to make contributions or has within any of the fivepreceding plan years made or accrued an obligation to make contributions.

 

“NetCash Proceeds” shall mean cash payments received in exchange for theissuance of any debt or equity security by any Credit Party net of commissionsand other reasonable fees and expenses incurred, any taxes payable andreasonably estimated income taxes payable with respect to the fiscal yearduring which such issuance occurs, as a consequence of any repatriation of suchcash payments.

 

 “Note” or “Notes” shall mean theTerm Note(s) and/or the Revolving Credit Note(s).

 

“Obligations”shall mean the obligation of the Borrower to make due and punctual payment of(i) principal of and interest on the Loans, the Commitment Fees, anyreimbursement obligations (current or contingent) in respect of Letters ofCredit, costs and attorneys’ fees and all other monetary obligations of theBorrower to the Agent, the Issuing Bank or any Lender under this Agreement, theNotes, any other Fundamental Document or the Fee Letter, (ii) all amountspayable by the Borrower to any Lender under any Currency Agreement or InterestRate Protection Agreement, provided that the Administrative Agent shallhave received written notice thereof within ten (10) Business Days afterexecution of such Currency Agreement or Interest Rate Protection Agreement and(iii) amounts payable to any Lender or any of its Affiliates in connection withany bank account maintained by the Borrower or any other Credit Party at anyLender or any such Affiliate or any other banking services provided to theBorrower or any other Credit Party by any Lender or any such Affiliate.

 

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 “PBGC” shall mean the Pension BenefitGuaranty Corporation established pursuant to Section 4002 of ERISA, or anysuccessor thereto.

 

“Percentage”shall mean each Lender’s percentage share of the Total Commitment as set forthin the Schedule of Commitments opposite the name of such Lender in the columncaptioned “Percentage” (as the same may be modified pursuant to any Assignmentand Acceptance to which such Lender is a party).

 

“PermittedEncumbrances” 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, unincorporatedorganization or government or any agency or political subdivision thereof.

 

“PhysicalMaterials” shall have the meaning given to such term in paragraph (iv) ofthe definition of “Collateral” herein.

 

“Plan”shall mean an employee benefit plan within the meaning of Section 3(3) of ERISA(other than a Multiemployer Plan) which is maintained or contributed to by anyCredit Party or any ERISA Affiliates, or with respect to which any Credit Partycould otherwise have any liability.

 

“PlatformAgreements” shall mean any and all agreements entered into by a CreditParty with a television distributor pursuant to which the televisiondistributor agrees to deliver channels owned by a Credit Party to subscribersin exchange for a fee.

 

“PledgedCollateral” shall mean the Pledged Securities and any proceeds (as definedin Section 9-102(a)(64) of the UCC) of the Pledged Securities.

 

“PledgedSecurities” shall mean all of the issued and outstanding capital stock orother equity interests of each of the Guarantors directly or indirectly ownedby the Borrower (other than any Controlled Foreign Corporation which theBorrower has elected to pledge only 65% of the stock of such Controlled ForeignCorporation) and all other equity securities or interests now owned orhereafter acquired by any of the Credit Parties, including without limitationthe securities listed in Schedule 3.6(a) hereto.

 

“PledgeholderAgreement” shall mean a Laboratory Pledgeholder Agreement among a CreditParty, the Agent, and one or more Laboratories located within the continentalUnited States, substantially in the form of Exhibit C hereto, or in such otherform as shall be acceptable to the Agent.

 

“Pledgor”shall mean those Credit Parties that own any Pledged Securities.

 

“PrepaymentDate” shall have the meaning given to such term in Section 2.11(h) hereof.

 

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“Product”shall mean any movie-of-the-week, episode of a television series, mini-series,motion picture, film, videotape or other program produced for televisionrelease or for release in any other medium, shown on network, free, cable, payand/or other television medium (including without limitation first runsyndication) in each case whether recorded on film, videotape, cassette,cartridge, disc or on or by any other means, method, process or device whethernow known or hereafter developed.  Theterm “Product” shall include, without limitation, the scenario, screenplay orscript 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 madeor produced, whether or not in possession of any of the Credit Parties, and allrights therein and thereto, of every kind and character.

 

“ProRata Share” shall mean with respect to any Obligation or other amount, eachLender’s pro rata share of such Obligation or other amount determined inaccordance with each Lender’s Percentage.

 

“PurchasePrice” shall have the meaning given such term in Section 13.3(l) hereof.

 

“Recapitalization”shall have the meaning set forth in the Introductory Statement.

 

“RecapitalizationAgreement” shall have the meaning set forth in the Introductory Statement.

 

“RecapitalizationCredit Agreement” shall have the meaning set forth in the IntroductoryStatement.

 

“RecapitalizationCredit Documents” shall have the meaning set forth in the IntroductoryStatement, and shall include, without limitation, the Recapitalization CreditAgreement and any other Fundamental Document referred to therein.

 

“RecapitalizedDebt Intercreditor Agreement” shall mean the intercreditor agreement between **[HCC]**and the Agent in the form of ExhibitT hereto, as amended, supplemented or otherwise modified in accordance with theterms hereof.

 

“RecapitalizedDebt” shall have the meaning set forth in the Introductory Statement.

 

“Redeemable Stock” shall mean any equity interest of the Borroweror any of its Consolidated Subsidiaries that by its terms or otherwise isrequired to be redeemed or is redeemable at the option of the holder thereof orof any third party other than the Borrower or one of its ConsolidatedSubsidiaries.

 

“RegulationD”, “Regulation T”, “Regulation U” and “Regulation X”shall mean such regulation of the Board.

 

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 “Reportable Event” shall mean anyreportable event as described in Section 4043(c) of ERISA, other than areportable event as to which provision for 30-day notice to the PBGC would bewaived under applicable regulations had the regulations in effect on theClosing Date been in effect on the date of occurrence of such reportable event.

 

“RequiredLenders” shall mean (i) the Lenders holding at least 51% of the outstandingCredit Exposure or (ii) if at the time there is zero Credit Exposure, theLenders holding at least 51% of the Total Commitment.

 

“RestrictedPayment” shall mean (i) any distribution, dividend or other direct orindirect payment on account of any Equity Interest in a Credit Party or anAffiliate (including without limitation any Equity Interest issued inconnection with the Recapitalization), in each case whether now or hereafteroutstanding; (ii) any redemption or other acquisition or re-acquisition by aCredit Party of any Equity Interest in a Credit Party or an Affiliate(including without limitation any Equity Interest issued in connection with theRecapitalization), in each case whether now or hereafter outstanding; (iii) anypayment by a Credit Party of principal of, premium or liquidated damages, ifany, interest on, fees in relation to, or any redemption, purchase, retirement,defeasance, sinking fund, or any other payment with respect to, anySubordinated Debt or any Recapitalized Debt; and****(v) any other payment (whether in cash or in kind) toHallmark Cards, HCC or any Affiliate thereof

 

“RevolvingCredit Commitment” shall mean the commitment of each Lender to makeRevolving Credit Loans to the Borrower and to participate in Letters of Creditfrom the Initial Date applicable to such Lender through the CommitmentTermination Date up to an aggregate amount, at any one time, not in excess ofthe amount set forth (i) opposite its name under the column entitled “RevolvingCredit Commitment” in the Schedule of Commitments appearing in Schedule 1, or(ii) in any applicable Assignment and Acceptance(s) to which it may be a party,as the case may be, as such amount may be reduced from time to time inaccordance with the terms of this Credit Agreement.

 

“RevolvingCredit Loans” shall mean the loans made hereunder in accordance with theprovisions of Section 2.1(a) or 2.1(b), whether made as a Eurodollar Loan or anAlternate Base Rate Loan, as permitted hereby.

 

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“RevolvingCredit Notes” shall have the meaning given such term in Section 2.5(a)hereof.

 

** **“S.E.C.”shall mean the Securities and Exchange Commission or any successor thereto.

 

“Sale/LeasebackPowers of Attorney” shall mean powers of attorney executed by HEDCappointing the Borrower as its attorney-in-fact in connection with eachsale/leaseback transaction to which HEDC or any of its predecessors in interestis a party, each substantially in the form of Exhibit P hereto.

 

“SPC”has the meaning specified in Section 13.3.

 

“SeniorObligations” shall mean all Obligations other than the Junior Obligations.

 

“SeriesA Preferred Stock” shall have the meaning set forth in the IntroductoryStatement.

 

“SubordinatedDebt” or “Subordinated Indebtedness” shall mean all Indebtedness orother obligations of the Borrower subordinated to the Obligations pursuant towritten agreements, containing interest rates, payment terms, maturities,amortization schedules, covenants, defaults, remedies, subordination provisionsand other material terms in form and substance satisfactory to the Agent andthe Required Lenders in their sole discretion.

 

“Subscriber”shall mean any Person or location that receives a channel owned or operated bya Credit Party either directly from a pay television distributor party to aPlatform Agreement or from cable operators to whom such pay televisiondistributors sublicense the right to distribute such channel.

 

“Subsidiary”shall mean with respect to any Person, any corporation, association, jointventure, partnership, limited liability company or other business entity(whether now existing or hereafter organized) of which at least a majority ofthe voting stock or other ownership interests having ordinary voting power forthe election of directors (or the equivalent) is, at the time as of which anydetermination is being made, owned or controlled by such Person or one or moresubsidiaries of such Person or by such Person and one or more subsidiaries ofsuch Person.

 

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** **“Tax SharingAgreement” shall mean the Federal Income Tax Sharing Agreement dated as ofMarch 11, 2003 between the Borrower and Hallmark Cards, as amended.

 

“Term A Loan Recapitalized Debt” shall have the meaning set forth inthe Introductory Statement.

 

“TermB Loan Recapitalized Debt” shall have the meaning set forth in the IntroductoryStatement.

 

“TermLoan Commitment” shall mean the commitment of each Lender to make a TermLoan to the Borrower up to an aggregate amount not in excess of the amount setforth (i) opposite its name under the column entitled “Term Loan Commitment” inthe Schedule of Commitments appearing in Schedule 1, or (ii) in any applicableAssignment and Acceptance(s) to which it may be a party, as the case may be, assuch amount may be reduced from time to time in accordance with the terms ofthis Credit Agreement.  For the avoidanceof doubt, the Term Loans were repaid in their entirety on or prior to October28, 2004****and the Term LoanCommitments were permanently reduced to zero in connection with such repayment.

 

“TermLoans” shall mean the loans made hereunder in accordance with theprovisions of Section 2.2(a).  For theavoidance of doubt, the Term Loans were repaid in their entirety on or prior toOctober 28, 2004.

 

“TermNotes” shall mean the promissory notes substantially in the form of Exhibit A-2hereto which had been used to evidence the Term Loans.  For the avoidance of doubt, the Term Loanswere repaid in their entirety on or prior to October 28, 2004.

 

“TotalCommitment” shall mean the aggregate amount of the Commitments.

 

“TrademarkSecurity Agreement” shall mean the Trademark Security Agreementsubstantially in the form of Exhibit E hereto, as the same may be amended orsupplemented from time to time in accordance with the terms hereof.

 

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“UCC”shall mean the Uniform Commercial Code as in effect in the State of New York onthe date of execution of this Agreement.

 

2.             THE LOANS

 

SECTION 2.1.  Revolving CreditLoans.  (a)  Each Lender, severally and not jointly,agrees, upon the terms and subject to the conditions hereof, to make its ProRata Share of Revolving Credit Loans to the Borrower on any Business Day andfrom time to time from the Closing Date and prior to the Commitment TerminationDate, each in an amount which when added to the aggregate principal amount ofall Revolving Credit Loans then outstanding to the Borrower from such Lenderand such Lender’s Pro Rata Share of the then-current L/C Exposure does notexceed such Lender’s Revolving Credit Commitment.

 

(b)           Subject to the termshereof, the Borrower may borrow, repay and reborrow amounts constituting theRevolving Credit Commitments.

 

(c)           Subject to Section2.2 hereof, the Loans shall be made at such times as the Borrower shallrequest, but the Lenders shall not be required to make Loans hereunder moreoften than once each calendar week.

 

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(d)           Payments of theRevolving Credit Loans which are not made as a result of an optional ormandatory termination or reduction of the Revolving Credit Commitments shallnot reduce the Revolving Credit Commitments.

 

SECTION 2.2.  Term Loans.  (a) Each Lender, severally and not jointly, agrees, upon the terms andsubject to the conditions hereof, to make its Pro Rata Share of the Term Loansto the Borrower on the Closing Date in a principal amount not exceeding theamount of such Lender’s Term Loan Commitment.

 

(b)           Once repaid, amountsconstituting the Term Loan Commitments may not be reborrowed.  For the avoidance of doubt, the Term Loanswere repaid in their entirety on or prior to October 28, 2004****and the Term Loan Commitments werepermanently reduced to zero in connection with such repayment.

 

SECTION 2.3.  Making of Loans.  (a) Each Loan shall be an Alternate Base Rate Loan or a Eurodollar Loan(each such type of Loan, an “Interest Rate Type”) as the Borrower mayrequest subject to and in accordance with this Section.  The Borrower shall give the Agent priorwritten, facsimile or telephonic (promptly confirmed in writing) notice of (i)at least three Business Days for a Borrowing which is to consist of EurodollarLoans and (ii) at least one Business Day for a Borrowing which is to consist ofAlternate Base Rate Loans.  Each suchnotice in order to be effective must be received by the Agent not later than1:00 p.m., New York City time, on the day required and shall specify the date(which shall be a Business Day) on which such Borrowing is to be made and theaggregate principal amount of the requested Borrowing.  Each such notice shall be irrevocable andshall specify whether the Borrowing then being requested is to consist ofAlternate Base Rate Loans or Eurodollar Loans, and in the case of EurodollarLoans, the Interest Period or Interest Periods with respect thereto.  If no election of an Interest Period isspecified in such notice in the case of a Borrowing consisting of EurodollarLoans, such notice shall be deemed to be a request for an Interest Period ofone month.  If no election is made as tothe Interest Rate Type of any Borrowing, such notice shall be deemed a requestfor a Borrowing consisting of Alternate Base Rate Loans.  No Borrowing shall consist of EurodollarLoans if after giving effect thereto an aggregate of more than ten (10)separate Eurodollar Loans would be outstanding hereunder with respect to eachLender (determined in accordance with Section 2.10(c) hereof).

 

(b)           The Agent shallpromptly notify each Lender of its proportionate share of each Borrowing underthis Section, the date of such Borrowing, the Interest Rate Type of each Loanbeing requested and the Interest Period or Interest Periods applicable thereto.  On the borrowing date specified in suchnotice, each Lender shall make its share of the Borrowing available at theoffices of The Chase Manhattan Bank, Loan and Agency Services Group, One ChaseManhattan Plaza, 8th Floor, New York, New York 10081, Attention:  Donna Montgomery, for credit to the ClearingAccount no later than 1:00 p.m., New York City time, in Federal or otherimmediately available funds.  Uponreceipt of any funds to be made available by the Lenders to fund any Borrowinghereunder, the Agent shall disburse such funds by depositing them into anaccount specified by the Borrower.

 

(c)           Each Lender may atits option fulfill its obligation to make Eurodollar Loans by causing a foreignbranch or affiliate to fund such Eurodollar Loans, provided that any

 

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exerciseof such option shall not affect the obligation of the Borrower to repay theLoans in accordance with the terms hereof and of the Notes.  Subject to the other provisions of thisSection, Loans of more than one type may be outstanding at the same time.

 

(d)           The amount of anyBorrowing of new funds hereunder shall be in an aggregate principal amount of$500,000 for Alternate Base Rate Loans and $1,000,000 for Eurodollar Loans (orsuch lesser amount as shall equal the available but unused portion of the RevolvingCredit Commitments) or such greater amount which is an integral multiple of$500,000.

 

SECTION 2.4.  Letters ofCredit.  (a)  Upon the terms and subject to the conditionshereof, the Issuing Bank agrees, upon the request of the Borrower, to issueLetters of Credit, payable in Dollars from time to time after the Closing Dateand prior to the 30th day prior to the Commitment Termination Date, providedthat (i) the Borrower shall not request, and the Issuing Bank shall not issue,any Letter of Credit, if after giving effect thereto, (A) [intentionallyomitted], (B) the sum of the then-current L/C Exposure plus the aggregateamount of all outstanding Revolving Credit Loans would exceed the RevolvingCredit Commitment then in effect, or (C) the sum of the then-current L/CExposure would exceed $20,000,000 and (ii) in no event shall the Issuing Bankbe required to issue any Letter of Credit having an expiration date (x) laterthan the tenth Business Day prior to the Commitment Termination Date or (y) morethan one year after its date of issuance.

 

(i)            Immediately uponthe issuance of each Letter of Credit, each Lender shall be deemed to, andhereby agrees to, have irrevocably purchased from the Issuing Bank aparticipation in such Letter of Credit in accordance with such Lender’sPercentage.

 

(ii)           Each Letter ofCredit may, at the option of the Issuing Bank, provide that the Issuing Bankmay (but shall not be required to) pay all or any part of the maximum amountwhich may at any time be available for drawing thereunder to the beneficiarythereof upon the occurrence or continuation of an Event of Default and theacceleration of the maturity of the Loans, provided that, if payment is notthen due to the beneficiary, the Issuing Bank shall deposit the funds inquestion in a segregated account with the Issuing Bank to secure payment to thebeneficiary and any funds so deposited shall be paid to the beneficiary of theLetter of Credit if conditions to such payment are satisfied or returned to theIssuing Bank for distribution to the Lenders (or, if all Obligations shall havebeen paid in full in cash, to the Borrower) if no payment to the beneficiaryhas been made and the final date available for drawings under the Letter ofCredit has passed.  Each payment or depositof funds by the Issuing Bank as provided in this paragraph shall be treated forall purposes of this Credit Agreement as a drawing duly honored by such IssuingBank under the related Letter of Credit.

 

(b)           Whenever theBorrower desires the issuance of a Letter of Credit, it shall deliver to theAgent and the Issuing Bank a written notice no later than 1:00 p.m. (New Yorktime) at least five Business Days prior to the proposed date of issuance.  That notice shall specify (i) the proposeddate of issuance (which shall be a Business Day), (ii) the face amount of theLetter of Credit, (iii) the expiration date of the Letter of Credit and (iv)the name and address of the beneficiary. Such notice shall be accompanied by a brief description of theunderlying transaction and upon reasonable request of the Issuing Bank or theAgent, the Borrower shall

 

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provideadditional details regarding the underlying transaction.  Concurrently with the giving of writtennotice of a request for the issuance of a Letter of Credit, the Borrower shallprovide a precise description of the documents and the verbatim text of anycertificate to be presented by the beneficiary of such Letter of Credit which,if presented by such beneficiary prior to the expiration date of the Letter ofCredit, would require the Issuing Bank to make payment under the Letter ofCredit; provided, however, that the Issuing Bank, in itsreasonable discretion, may require customary changes in any such documents andcertificates to be presented by the beneficiary.  Upon issuance of each Letter of Credit, theIssuing Bank shall notify the Agent of the issuance of such Letter ofCredit.  Promptly after receipt of suchnotice, the Agent shall notify each Lender of the issuance and the amount ofsuch Lender’s respective participation in the applicable Letter of Credit.

 

(c)           The acceptance andpayment of drafts under any Letter of Credit shall be made in accordance withthe terms of such Letter of Credit and the Uniform Customs and Practice forDocumentary Credits, International Chamber of Commerce Publication No. 500, asadopted or amended from time to time. The Issuing Bank shall be entitled to honor any drafts and accept anydocuments presented to it by the beneficiary of such Letter of Credit inaccordance with the terms of such Letter of Credit and believed by the IssuingBank in good faith to be genuine.  Exceptas otherwise required by Applicable Law which cannot be waived, the IssuingBank shall not have any duty to inquire as to the accuracy or authenticity ofany draft or other drawing documents which may be presented to it, but shall beresponsible only to determine in accordance with customary commercial practicesthat the documents which are required to be presented before payment oracceptance of a draft under any Letter of Credit have been delivered and thatthey comply on their face with the requirements of that Letter of Credit.

 

(d)           If the Issuing Bankshall make payment on any draft presented under a Letter of Credit (regardlessof whether a Default, Event of Default or acceleration has occurred), theIssuing Bank shall give notice of such payment to the Borrower, the Agent andthe Lenders and each Lender hereby authorizes and requests the Issuing Bank toadvance for its account, pursuant to the terms hereof, its share of suchpayment based upon its participation in such Letter of Credit and agreespromptly to reimburse the Issuing Bank in immediately available funds for theDollar equivalent of the amount so advanced on its behalf by the Issuing Bank.  If any such reimbursement is not made by anyLender in immediately available funds on the same day on which the Issuing Bankshall have made payment on any such draft, such Lender shall pay interestthereon to the Issuing Bank at a rate per annum equal to the Issuing Bank’scost of obtaining overnight funds in the New York Federal Funds Market for thethree (3) Business Days following the time such Lender fails to make thereimbursement and thereafter at a rate per annum equal to the Alternate BaseRate plus the Applicable Margin.

 

(e)           The Borrower isabsolutely, unconditionally and irrevocably obligated to reimburse all amountsdrawn under each Letter of Credit.  Ifany draft is presented under a Letter of Credit, the payment of which isrequired to be made at any time on or before the Commitment Termination Date,then payment by the Issuing Bank of such draft shall constitute an AlternateBase Rate Loan hereunder and interest shall accrue from the date the IssuingBank makes payment on such draft under such Letter of Credit.  If any draft is presented under a Letter ofCredit, the payment of which is required to be made after the CommitmentTermination Date or at the time when an Event of Default or Default shall haveoccurred and then be continuing, then

 

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theBorrower shall immediately pay to the Issuing Bank, in immediately availablefunds, the full amount of such draft together with interest thereon at a rateper annum of 2% in excess of the rate then in effect for Alternate Base RateLoans from the date on which the Issuing Bank makes such payment of such draftuntil the date it receives full reimbursement for such payment from theBorrower.  The Borrower further agreesthat the Issuing Bank may reimburse itself for such drawing, first, fromamounts in the Clearing Account, second, from amounts in the CollectionAccount, and third, from the balance in any other account of the Borrowermaintained with the Issuing Bank.

 

(f)            The Borrower shallpay the following amounts to the Issuing Bank for its own account with respectto Letters of Credit issued by it hereunder:

 

(A)          with respect to theissuance, amendment or transfer of each Letter of Credit and each drawing madethereunder, documentary and processing charges in accordance with the IssuingBank’s standard schedule for such charges in effect at the time of suchissuance, amendment, transfer or drawing, as the case may be; and

 

(B)           a fronting feepayable to the Issuing Bank equal to 1⁄4 of 1% of the face amount of any Letterof Credit issued hereunder payable upon the issuance of such Letter of Credit.

 

(g)           The Borrower agreesto pay to the Agent for distribution to each Lender in respect of its L/CExposure, such Lender’s Pro Rata Share of a commission (calculated on the basisof a 360-day year) equal to 3% per annum of the daily average L/CExposure.  Such commission shall be dueand payable in arrears on and through the last Business Day of each March,June, September and December (commencing the last Business Day of September,2001) prior to the Commitment Termination Date or the expiration of the lastoutstanding Letter of Credit (whichever is later) and on the later of theCommitment Termination Date and the expiration of the last outstanding Letterof Credit.

 

(h)           Promptly uponreceipt by the Issuing Bank or the Agent of any amount described in Section2.4(g), or any amount described in Section 2.4(e) previously reimbursed to theIssuing Bank by the Lenders, the Issuing Bank or the Agent (as applicable)shall distribute to each Lender its Pro Rata Share of such amount.

 

(i)            [Intentionallyomitted.]

 

(j)            If, at any timewhen an Event of Default shall have occurred and be continuing, any Letters ofCredit shall remain outstanding, then the Issuing Bank may, and if directed bythe Required Lenders shall, require the Borrower to deliver to the Issuing BankCash Equivalents in an amount equal to the full amount of the L/C Exposure orto furnish other security acceptable to the Required Lenders.  Any amounts so delivered pursuant to thepreceding sentence shall be applied to reimburse the Issuing Bank for theamount of any drawings honored under Letters of Credit; provided, however,that if prior to the Maturity Date, (i) no Default or Event of Default is thencontinuing, then the Agent shall return all of such Cash Equivalents andcollateral relating to such deposit to the Borrower if requested by it or (ii)Letters of Credit shall expire or be returned by the beneficiary so that theamount of the Cash

 

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Equivalentsdelivered to the Agent hereunder shall exceed the then current L/C Exposure,then such excess shall first be applied to pay any Obligations then due underthis Credit Agreement and the remainder shall be returned to the Borrower.

 

(k)           Notwithstanding thetermination of the Commitments and the payment of the Loans, the obligations ofthe Borrower under this Section 2.4 shall remain in full force and effect untilthe Agent, the Issuing Bank and the Lenders shall have been irrevocablyreleased from their obligations with regard to any and all Letters of Credit.

 

SECTION 2.5.  Notes; Repayment.  (a) The Revolving Credit Loans made by each Lender hereunder shall beevidenced by a Revolving Credit promissory note substantially in the form ofExhibit A-1 hereto (each a “Revolving Credit Note” and collectively the “RevolvingCredit Notes”) in the face amount of such Lender’s Revolving CreditCommitment, payable to the order of such Lender, duly executed by the Borrowerand dated the date hereof.  Theoutstanding principal balance of each Revolving Credit Loan as evidenced by aRevolving Credit Note shall be payable in full on the Maturity Date, subject toacceleration as provided in Article 7.

 

(b)           **[Intentionally omitted.]**

 

(c)           Each of the Notesshall bear interest on the outstanding principal balance thereof as set forthin Section 2.6 hereof.  Each Lender andthe Agent on its behalf is hereby authorized by the Borrower, but notobligated, to enter the amount of each Loan and the amount of each payment orprepayment of principal or interest thereon in the appropriate spaces on thereverse of or on an attachment to the Notes; provided, however,that the failure of any Lender or the Agent to set forth such Loans, principalpayments or other information shall not in any manner affect the obligations ofthe Borrower to repay such Loans.

 

SECTION 2.6.  Interest onLoans.  (a)  In the case of a Eurodollar Loan, interestshall be payable at a rate per annum (computed on the basis of the actualnumber of days elapsed over a year of 360 days) equal to the LIBO Rate plus theApplicable Margin for Eurodollar Loans. Interest shall be payable on each Eurodollar Loan on each applicableInterest Payment Date, on the Maturity Date and on the date of a conversion ofsuch Eurodollar Loan to an Alternate Base Rate Loan.  The Agent shall determine the applicable LIBORate for each Interest Period as soon as practicable on the date when suchdetermination is to be made in respect of such Interest Period and shall notifythe Borrower and the Lenders of the applicable interest rate sodetermined.  Such determination shall beconclusive absent manifest error.

 

(b)           In the case of an Alternate Base Rate Loan, interest shallbe payable at a rate per annum (computed on the basis of the actual number ofdays elapsed over a year of

 

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365/366days, as the case may be, during such times as the Alternate Base Rate is basedupon the Prime Rate, and over a year of 360 days at all other times) equal tothe Alternate Base Rate plus the Applicable Margin for Alternate Base RateLoans.  Interest shall be payable on eachAlternate Base Rate Loan on each applicable Interest Payment Date and on theMaturity Date.

 

(c)           Anything in thisCredit Agreement or the Notes to the contrary notwithstanding, the interestrate on the Loans or with respect to any drawing under a Letter of Credit shallin no event be in excess of the maximum permitted by Applicable Law.

 

SECTION 2.7.  Commitment Feesand Other Fees.  (a)  The Borrower agrees to pay to the Agent (forthe account of each Lender in accordance with its Percentage) on the lastBusiness Day of each March, June, September and December in each year(commencing on the last Business Day of September 2001) prior to the CommitmentTermination Date and on the Commitment Termination Date, an aggregate fee (the “CommitmentFees”) of 0.375% per annum, computed on the basis of the actual number ofdays elapsed over a year of 360 days, on the average daily amount by which theaggregate amount of the Revolving Credit Commitments, as they may be reduced inaccordance with the provisions of this Agreement, exceeds the sum of theprincipal balance of Revolving Credit Loans outstanding plus the L/C Exposureduring the preceding period or quarter. Such Commitment Fees shall commence to accrue on the date on which thisAgreement is fully executed and shall cease to accrue on the CommitmentTermination Date.

 

(b)           In addition, theBorrower agrees to pay to the Agent and/or the Lenders, as the case may be(without duplication) the various fees referred to in the Fee Letter.

 

SECTION 2.8.  Termination orReduction of Revolving Credit Commitments. (a)  Upon written, facsimile ortelephonic (promptly confirmed in writing) notice to the Agent, which noticemust be received by the Agent not later than 1:00 p.m. New York City time onthe same Business Day, the Borrower may at any time permanently terminate theRevolving Credit Commitments in their entirety or from time to time permanentlyreduce the Revolving Credit Commitments in part.  Each such reduction shall be in a minimumaggregate amount of $5,000,000 (or such lesser amount as is the aggregate ofthe Revolving Credit Commitments) or such greater amount which is an integralmultiple of $1,000,000; provided, however, that the Revolving Credit Commitmentsmay not be reduced to an amount less than the sum of the aggregate principalbalance of the Revolving Credit Loans then outstanding plus the L/C Exposure.

 

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(b)           Simultaneously witheach such termination or reduction of the Revolving Credit Commitments, theBorrower shall pay to the Agent for the account of the Lenders all accrued andunpaid Commitment Fees on the amount of the Revolving Credit Commitments soterminated or reduced through the date of such termination or reduction.

 

(c)           Any reduction of theRevolving Credit Commitments pursuant to this Section shall be made among theLenders ratably in accordance with their respective Percentages.

 

(d)           [Intentionallyomitted.]

 

SECTION 2.9.  DefaultInterest; Alternate Rate of Interest. (a)  So long as an Event ofDefault shall have occurred and be continuing (after, as well as before ajudgment), the Borrower shall on demand from time to time pay interest, to theextent permitted by Applicable Law, on any then unpaid amount of theObligations at a rate per annum (i) for the remainder of the then currentInterest Period for each Eurodollar Loan, equal to 2% in excess of the ratethen in effect for such Eurodollar Loan and (ii) for all periods subsequent tothe then current Interest Period for each Eurodollar Loan, for all AlternateBase Rate Loans and for all other overdue amounts hereunder, equal to 2% inexcess of the rate then in effect for Alternate Base Rate Loans.

 

(b)           In the event, and oneach occasion, that on the day two Business Days prior to the commencement ofany Interest Period for a Eurodollar Loan, (i) the Agent shall have receivednotice from any Lender of such Lender’s determination (which determination,absent manifest error, shall be conclusive) that Dollar deposits in the amountof the principal amount of such Eurodollar Loan are not generally available inthe London interbank market or that the rate at which such Dollar deposits arebeing offered will not adequately and fairly reflect the cost to such Lender ofmaking or maintaining the principal amount of such Eurodollar Loan during suchInterest Period or (ii) the Agent shall have determined that reasonable meansdo not exist for ascertaining the applicable LIBO Rate, the Agent shall, assoon as practicable thereafter, give written or facsimile notice of suchdetermination by such Lender or the Agent, as applicable, to the Borrower andthe Lenders, and any request by the Borrower for a Borrowing of EurodollarLoans (or conversion to or continuation as Eurodollar Loans pursuant to Section2.10), made after receipt of such notice and until the circumstances givingrise to such notice no longer exist, shall be deemed a request for AlternateBase Rate Loans; provided, however, that in the circumstances describedin clause (i) above such deemed request shall only apply to the affected Lender’sLoan.

 

SECTION 2.10.  Continuationand Conversion of Loans.  Thecontinuation or conversion of any Loan pursuant to this Section 2.10 does notconstitute a repayment and a reborrowing hereunder and is not subject to theconditions set forth in Section 4.2, and the designation of a Loan as anAlternate Base Rate Loan or Eurodollar Loan, and the designation of applicableInterest Periods, is merely a mechanism for determining the interest rateapplicable to such Loan.

 

TheBorrower shall have the right, at any time, (i) to convert any Eurodollar Loanor portion thereof to an Alternate Base Rate Loan or to continue suchEurodollar Loan for a successive Interest Period, or (ii) to convert anyAlternate Base Rate Loan to a Eurodollar Loan, subject to the following:

 

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(a)           the Borrower shallgive the Agent prior written, facsimile or telephonic (promptly confirmed inwriting) notice of each continuation or conversion hereunder of at least three(3) Business Days for each continuation or conversion hereunder; such noticeshall be irrevocable and to be effective must be received by the Agent on theday required not later than 1:00 p.m., New York City time;

 

(b)           no Event of Defaultor Default shall have occurred and be continuing at the time of any conversionto a Eurodollar Loan or continuation of a Eurodollar Loan into a subsequentInterest Period;

 

(c)           no Alternate BaseRate Loan may be converted to a Eurodollar Loan and no Eurodollar Loan may becontinued as a Eurodollar Loan if, after such conversion and after giving effectto any concurrent prepayment of Loans, an aggregate of more than ten (10)separate Eurodollar Loans would be outstanding hereunder with respect to eachLender (for purposes of determining the number of such Loans outstanding, Loanswith different Interest Periods shall be counted as different Loans even ifmade on the same date);

 

(d)           if fewer than allEurodollar Loans and Alternate Base Rate Loans at the time outstanding shall becontinued or converted, such continuation or conversion shall be made pro rataamong the Lenders in accordance with the respective principal amounts of theLoans held by the Lenders immediately prior to such continuation or conversion;

 

(e)           the aggregateprincipal amount of Loans continued as or converted to Eurodollar Loans as partof the same borrowing shall be $1,000,000 or such greater amount which is anintegral multiple of $500,000;

 

(f)            accrued interest onany Eurodollar Loan (or portion thereof) being continued or converted shall bepaid by the Borrower at the time of continuation or conversion;

 

(g)           the Interest Periodwith respect to a new Eurodollar Loan effected by a continuation or conversionshall commence on the date of such continuation or conversion;

 

(h)           if a Eurodollar Loanis converted to another type of Loan other than on the last day of the InterestPeriod with respect thereto, the amounts required by Section 2.11(b) shall bepaid upon such conversion; and

 

(i)            each request for acontinuation as or conversion to a Eurodollar Loan which fails to state an applicableInterest Period shall be deemed to be a request for an Interest Period of onemonth.

 

Inthe event that the Borrower shall not give notice to continue or convert anyEurodollar Loan as provided above, such Loan (unless repaid) shallautomatically be (i) continued as a Eurodollar Loan with an Interest Period ofone month or (ii) converted to an Alternate Base Rate Loan at the expiration ofthe then current Interest Period at the Agent’s discretion.  The Agent shall, after it receives noticefrom the Borrower, promptly give the Lenders notice of any continuation or conversion.

 

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SECTION 2.11.  Prepayment ofLoans; Reimbursement of Lenders. (a)  Subject to the terms ofparagraph (b) of this Section 2.11, the Borrower shall have the right at itsoption at any time and from time to time to prepay (i) the Alternate Base RateLoans, in whole or in part, upon at least one Business Day’s written, facsimileor telephonic (promptly confirmed in writing) notice, in the principal amountof $500,000 or such greater amount which is an integral multiple of $500,000and (ii) any Borrowings of Eurodollar Loans, in whole or in part, upon at leastthree Business Days’ written, facsimile or telephonic (promptly confirmed inwriting) notice, in the principal amount of $1,000,000 or such greater amountwhich is an integral multiple of $500,000. Each notice of prepayment shall specify the prepayment date, the Loansto be prepaid and the principal amount thereof, shall be irrevocable and shallcommit the Borrower to prepay such Loans in the amount and on the date statedtherein.  Such notice shall also specifythe expected principal amount of Loans to be outstanding after giving effect tosuch prepayment.

 

(b)           The Borrower shallreimburse each Lender on demand for any loss incurred or to be incurred by itin the reemployment of the funds released (i) by any prepayment (for anyreason) of any Eurodollar Loan if such Loan is repaid other than on the lastday of the Interest Period for such Loan or (ii) in the event that after theBorrower delivers a notice of borrowing under Section 2.3(a) or continuation orconversion under Section 2.10(a) in respect of Eurodollar Loans, such Loan isnot made, continued or converted on the first day of the Interest Periodspecified in such notice for any reason other than (I) a suspension orlimitation under Section 2.9(b) of the right of the Borrower to select aEurodollar Loan or (II) a breach by the Lenders of their obligationhereunder.  Such loss shall be the amountas reasonably determined by such Lender as the excess, if any, of (A) theamount of interest which would have accrued to such Lender on the amount sopaid or not borrowed, continued or converted at a rate of interest equal to theinterest rate applicable to such Loan pursuant to Section 2.6 hereof, for theperiod from the date of such payment or failure to borrow, continue or convertto the last day (x) in the case of a payment other than on the last day of theInterest Period for such Loan, of the then current Interest Period for suchLoan or (y) in the case of such failure to borrow, continue or convert, of theInterest Period for such Loan which would have commenced on the date of suchfailure to borrow, continue or convert, over (B) the amount realized by suchLender in reemploying the funds not advanced or the funds received inprepayment or realized from the Loan so continued or converted during theperiod referred to above.  Each Lendershall deliver to the Borrower from time to time one or more certificatessetting forth the amount of such loss (and in reasonable detail the manner ofcomputation thereof) as determined by such Lender, which certificates shall beconclusive absent manifest error.

 

(c)           In the event theBorrower fails to prepay any Loan on the date specified in any prepaymentnotice delivered pursuant to Section 2.11(a), the Borrower on demand by anyLender shall pay to the Agent for the account of such Lender any amountsrequired to compensate such Lender for any loss incurred by such Lender as aresult of such failure to prepay, including, without limitation, any loss, costor expenses incurred by reason of the acquisition of deposits or other funds bysuch Lender to fulfill deposit obligations incurred in anticipation of suchprepayment.  Each Lender shall deliver tothe Borrower and the Agent from time to time one or more certificates settingforth the amount of such loss (and in reasonable detail the manner ofcomputation thereof) as determined by such Lender, which certificates shall beconclusive absent manifest error.

 

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(d)           [Intentionallyomitted.]

 

(e)           The outstandingprincipal amount of the Loans shall be repaid immediately to the extent thatthe aggregate amount of the Loans plus the L/C Exposure exceeds the TotalCommitment then in effect.

 

(f)            [Intentionallyomitted.]

 

(g)           Simultaneously witheach termination and/or reduction of the Total Commitment pursuant to Section2.8, the Borrower shall pay to the Agent for the account of the Lenders theamount, if any, by which the sum of the aggregate outstanding principal amountof the Loans and the L/C Exposure exceeds the reduced Total Commitment, allaccrued and unpaid interest thereon and the Commitment Fees on the amount ofthe Total Commitment so terminated or reduced through the date thereof.

 

(h)           If on any day onwhich the Loans would otherwise be required to be prepaid but for the operationof this Section 2.11(h) (each, a “Prepayment Date”), the amount of suchrequired prepayment exceeds the then outstanding aggregate principal amount ofthe Loans which consist of Alternate Base Rate Loans, and no Default or Eventof Default is then continuing, then on such Prepayment Date the Borrower may,at its option, deposit Dollars into the Cash Collateral Account in an amountequal to such excess.  If the Borrower makessuch deposit (i) only the outstanding Alternate Base Rate Loans that are alsoRevolving Credit Loans shall be required to be prepaid on such Prepayment Date,and (ii) on the last day of each Interest Period in effect after suchPrepayment Date the Agent is irrevocably authorized and directed to apply fundsfrom the Cash Collateral Account (and liquidate investments held in the CashCollateral Account as necessary) to prepay Eurodollar Loans that are alsoRevolving Credit Loans for which the Interest Period is then ending until theaggregate of such prepayments equals the prepayment which would have beenrequired on such Prepayment Date but for the operation of this Section 2.11(h);provided, however, that if there are no outstanding RevolvingCredit Loans, or the amount of outstanding Revolving Credit Loans is less thanthe required prepayment, then the outstanding Term Loans that are alsoAlternate Base Rate Loans shall be required to be prepaid on such PrepaymentDate and on the last day of each Interest Period the Agent may apply funds inthe Cash Collateral Account to prepay Eurodollar Loans that are also Term Loansas set forth in clause (ii) herein.

 

(i)            Unless otherwisedesignated in writing by the Borrower, all prepayments shall be applied to theapplicable principal payment set forth in this Section 2.11, first to thatamount of such applicable principal payment then maintained as Alternate BaseRate Loans, and then to that amount of such applicable principal paymentmaintained as Eurodollar Loans in order of the scheduled expiry of InterestPeriods with respect thereto.

 

(j)            All prepayments(other than prepayments of Alternate Base Rate Loans) shall be accompanied byaccrued but unpaid interest on the principal amount being prepaid to the dateof prepayment.

 

SECTION 2.12.  Change inCircumstances.  (a)  In the event that after the Initial Datehereof any change in Applicable Law or in the interpretation or administrationthereof

 

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(including,without limitation, any request, guideline or policy not having the force oflaw) by any Governmental Authority charged with the administration orinterpretation thereof or, with respect to clause (ii), (iii) or (iv) below,any change in conditions shall occur which shall:

 

(i)            subject any Lenderto, or increase the net amount of, any tax, levy, impost, duty, charge, fee,deduction or withholding with respect to any Eurodollar Loan (other thanwithholding tax imposed by the United States of America or any politicalsubdivision or taxing authority thereof or any other tax, levy, impost, duty,charge, fee, deduction or withholding (x) that is measured with respect to theoverall net income of such Lender or of a Lending Office of such Lender, andthat is imposed by the United States of America, or by the jurisdiction inwhich such Lender or Lending Office is incorporated, in which such LendingOffice is located, managed or controlled or in which such Lender has itsprincipal office (or any political subdivision or taxing authority thereof ortherein), or (y) that is imposed solely by reason of any Lender failing to makea declaration of, or otherwise to establish, non-residence, or to make anyother claim for exemption, or otherwise to comply with any certification,identification, information, documentation or reporting requirements prescribedunder the laws of the relevant jurisdiction, in those cases where a Lender mayproperly make such declaration or claim or so establish non-residence orotherwise comply); or

 

(ii)           change the basis oftaxation of any payment to any Lender of principal or any interest on anyEurodollar Loan or other fees and amounts payable hereunder, or any combinationof the foregoing other than withholding tax imposed by the United States ofAmerica as applicable, or any political subdivision or taxing authority thereofor therein or any other tax, levy, impost, duty, charge, fee, deduction orwithholding that is measured with respect to the overall net income of suchLender or of a Lending Office of such Lender, and that is imposed by the UnitedStates of America or by the jurisdiction in which such Lender or Lending Officeis incorporated or carries on business, in which such Lending Office islocated, managed or controlled or in which such Lender has its principal officeor a presence not otherwise connected with, or required by, this transaction(or any political subdivision or taxing authority thereof or therein); or

 

(iii)          impose, modify ordeem applicable any reserve, deposit or similar requirement against any assetsheld by, deposits with or for the account of or loans or commitments by anoffice of such Lender; or

 

(iv)          impose upon suchLender or the London interbank market any other condition with respect to theEurodollar Loans, any Letter of Credit or this Agreement;

 

andthe result of any of the foregoing shall be to increase the actual cost to suchLender of making or maintaining any Eurodollar Loan hereunder or to reduce theamount of any payment (whether of principal, interest or otherwise) received orreceivable by such Lender, or to require such Lender to make any payment inconnection with any Eurodollar Loan, in each case by or in an amount which suchLender in its sole judgment shall deem material, then and in each case theBorrower shall pay to the Agent for the account of such Lender, as provided inparagraph (c) below, such amounts as shall be necessary to compensate suchLender for such cost, reduction or payment.

 

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(b)           If at any time andfrom time to time after the Initial Date any Lender shall have determined thatthe applicability of any law, rule, regulation or guideline adopted after theInitial Date regarding capital adequacy, or any change in any of the foregoingor in the interpretation or administration of any of the foregoing by anyGovernmental Authority, central bank or comparable agency charged with theinterpretation or administration thereof, or compliance by any Lender (or anyLending Office of such Lender) or any Lender’s holding company with any requestor directive regarding capital adequacy (whether or not having the force oflaw) of any such authority, central bank or comparable agency, has or wouldhave the effect of reducing the rate of return on such Lender’s capital or onthe capital of such Lender’s holding company, if any, as a consequence of thisCredit Agreement or the Loans made or Letters of Credit issued or participatedin by such Lender pursuant hereto to a level below that which such Lender orsuch Lender’s holding company could have achieved but for such applicability,adoption, change or compliance (taking into consideration such Lender’spolicies and the policies of such Lender’s holding company with respect tocapital adequacy), then from time to time the Borrower shall pay to such Lendersuch additional amount or amounts as will compensate such Lender or such Lender’sholding company for any such reduction suffered with respect to Loans made orLetters of Credit issued or participated in by such Lender hereunder.

 

(c)           Each Lender shalldeliver to the Borrower and the Agent from time to time, one or morecertificates setting forth the amounts due to such Lender under paragraphs (a)and (b) above, the changes as a result of which such amounts are due and themanner of computing such amounts.  Eachsuch certificate shall be conclusive in the absence of manifest error.  The Borrower shall pay to the Agent for theaccount of each such Lender the amounts shown as due on any such certificatewithin ten Business Days after its receipt of the same.  No failure on the part of any Lender todemand compensation under paragraph (a) or (b) above on any one occasion shallconstitute a waiver of its rights to demand compensation on any otheroccasion.  The protection of this Sectionshall be available to each Lender regardless of any possible contention of theinvalidity or inapplicability of any law, regulation or other condition whichshall give rise to any demand by such Lender for compensation thereunder.

 

(d)           Each Lender agreesthat, as promptly as practicable after it becomes aware of the occurrence of anevent or the existence of a condition that (i) would cause it to incur anyincreased cost under Section 2.9(b) or this Section 2.12 or (ii) would requirethe Borrower to pay an increased amount under Section 2.9(b) or this Section2.12, it will use reasonable efforts to notify the Borrower of such event orcondition and, to the extent not inconsistent with such Lender’s internalpolicies, will use its reasonable efforts to make, fund or maintain theaffected Loans of such Lender, or, if applicable, to participate in Letters ofCredit as required by Section 2.4, through another Lending Office of suchLender if as a result thereof the additional monies which would otherwise berequired to be paid or the reduction of amounts receivable by such Lender thereunderin respect of such Loans or Letters of Credit would be materially reduced, orsuch inability to perform would cease to exist, or the increased costs whichwould otherwise be required to be paid in respect of such Loans or Letters ofCredit pursuant to Section 2.11(b) or this Section 2.12 would be materiallyreduced or the taxes or other amounts otherwise payable under Section 2.9(b) orthis Section 2.12 would be materially reduced, and if, as determined by suchLender, in its sole discretion, the making, funding or maintaining of suchLoans or the participation in such Letters of Credit through such other LendingOffice would not otherwise materially adversely affect such Loans, such Lettersof Credit or such Lender.

 

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SECTION 2.13.  Change inLegality.  (a)  Notwithstanding anything to the contrarycontained elsewhere in this Agreement, if any change after the date hereof inApplicable Law, guideline or order, or in the interpretation thereof by anyGovernmental Authority charged with the administration thereof, shall make itunlawful for any Lender to make or maintain any Eurodollar Loan or to giveeffect to its obligations as contemplated hereby with respect to a EurodollarLoan, then, by written notice to the Borrower and the Agent, such Lender may (i)declare that Eurodollar Loans will not thereafter be made by such Lenderhereunder and/or (ii) require that, subject to Section 2.11(b), all outstandingEurodollar Loans made by it be converted to Alternate Base Rate Loans,whereupon all of such Eurodollar Loans shall automatically be converted toAlternate Base Rate Loans as of the effective date of such notice as providedin paragraph (b) below.  Such Lender’sPro Rata Share of any subsequent Borrowing of Eurodollar Loans shall, instead,be an Alternate Base Rate Loan unless such declaration is subsequentlywithdrawn.

 

(b)           A notice to theBorrower by any Lender pursuant to paragraph (a) above shall be effective forpurposes of clause (ii) thereof, if lawful, on the last day of the currentInterest Period for each outstanding Eurodollar Loan and, in all other cases,on the date of receipt of such notice by the Borrower.

 

SECTION 2.14.  Manner ofPayments.  All payments of principaland interest in respect of any Loans shall be pro rata among the Lenders inaccordance with their Percentages.  Allpayments by the Borrower hereunder and under the Notes shall be made withoutoffset or counterclaim in Dollars in Federal or other immediately availablefunds at the office of The Chase Manhattan Bank, Loan and Agency ServicesGroup, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081,Attention: Donna Montgomery, for credit to the Clearing Account no later than1:00 p.m., New York City time, on the date on which such payment shall be due.  Any payment received at such office aftersuch time shall be deemed received on the following Business Day.  Interest in respect of any Loan hereundershall accrue from and including the date of such Loan to but excluding the dateon which such Loan is paid or converted to a Loan of a different type.

 

SECTION 2.15.  United StatesWithholding.  (a)  Prior to the date of the initial Loanshereunder and prior to the effective date set forth in the Assignment andAcceptance with respect to any Lender becoming a Lender after the date hereof,and from time to time thereafter if requested by the Borrower or the Agent orrequired because, as a result of a change in law or a change in circumstancesor otherwise, a previously delivered form or statement becomes incomplete orincorrect in any material respect, each Lender organized under the laws of ajurisdiction outside the United States shall provide, if applicable, the Agentand the Borrower with complete, accurate and duly executed forms or otherstatements prescribed by the Internal Revenue Service of the United Statescertifying such Lender’s exemption from, or entitlement to a reduced rate of,United States withholding taxes (including backup withholding taxes) withrespect to all payments to be made to such Lender hereunder and under any otherFundamental Documents.

 

(b)           The Borrower and theAgent shall be entitled to deduct and withhold any and all present or futuretaxes or withholdings, and all liabilities with respect thereto, from paymentshereunder or under any other Fundamental Documents, if and to the extent thatthe

 

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Borroweror the Agent in good faith determines that such deduction or withholding isrequired by the law of the United States, including, without limitation, anyapplicable treaty of the United States. In the event the Borrower or the Agent shall so determine that deductionor withholding of taxes is required, it shall advise the affected Lender as tothe basis of such determination prior to actually deducting and withholdingsuch taxes.  In the event the Borrower orthe Agent shall so deduct or withhold taxes from amounts payable hereunder, it(i) shall pay to or deposit with the appropriate taxing authority in a timelymanner the full amount of taxes it has deducted or withheld; (ii) shall provideevidence of payment of such taxes to, or the deposit thereof with, theappropriate taxing authority and a statement setting forth the amount of taxesdeducted or withheld, the applicable rate, and any other information ordocumentation reasonably requested by the Lenders from whom the taxes werededucted or withheld; and (iii) shall forward to such Lenders any receipt ofthe deducted or withheld taxes as may be issued from time to time by theappropriate taxing authority.  Unless theBorrower and the Agent have received forms or other documents satisfactory tothem indicating that payments hereunder or under the Notes are not subject toUnited States withholding tax or are subject to such tax at a rate reduced byan applicable tax treaty, the Borrower or the Agent may withhold taxes fromsuch payments at the applicable statutory rate in the case of payments to orfor any Lender organized under the laws of a jurisdiction outside the UnitedStates.

 

(c)           Each Lender agrees(i) that as between it and the Borrower or the Agent, it shall be the Person todeduct and withhold taxes, and to the extent required by law it shall deductand withhold taxes, on amounts that such Lender may remit to any otherPerson(s) by reason of any undisclosed transfer or assignment of an interest inthis Agreement to such other Person(s) pursuant to paragraph (f) of Section13.3 and (ii) to indemnify the Borrower and the Agent and any officers,directors, agents, or employees of the Borrower or the Agent against and tohold them harmless from any tax, interest, additions to tax, penalties,reasonable counsel and accountants’ fees, disbursements or payments arisingfrom the assertion by any appropriate taxing authority of any claim againstthem relating to a failure to withhold taxes as required by law with respect toamounts described in clause (i) of this paragraph (c) or arising from thereliance by the Borrower or the Agent on any form or other document furnishedby such Lender and purporting to establish a basis for not withholding, or forwithholding at a reduced rate, taxes with respect to payments hereunder orunder any other Fundamental Document.

 

(d)           Each assignee of aLender’s interest in this Credit Agreement in conformity with Section 13.3shall be bound by this Section 2.15, so that such assignee will have all of theobligations and provide all of the forms and statements and all indemnities,representations and warranties required to be given under this Section 2.15.

 

(e)           Notwithstanding theforegoing, in the event that any withholding taxes or additional withholdingtaxes shall become payable solely as a result of any change in any statute,treaty, ruling, determination or regulation (or interpretation of any of theforegoing) occurring after the Initial Date in respect of any sum payablehereunder or under any other Fundamental Document to any Lender or the Agent(i) the sum payable by the Borrower (or, if applicable, the relevant CreditParty) shall be increased as may be necessary so that after making all requireddeductions (including deductions applicable to additional sums payable underthis Section 2.15) such Lender or the Agent (as the case may be) receives anamount equal to the sum it would have received had no such deductions beenmade, (ii) the Borrower (or, if applicable, the

 

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relevantCredit Party) shall make such deductions, (iii) the Borrower (or, ifapplicable, the relevant Credit Party) shall pay the full amount deducted tothe relevant taxation authority or other authority in accordance withApplicable Law and (iv) the Borrower (or, if applicable, the relevant CreditParty) shall forward to such Lender or the Agent (as the case may be) theofficial tax receipts or other documentation pursuant to Section 2.15(b).  In addition, the Borrower (and, ifapplicable, the relevant Credit Party) shall indemnify each Lender and theAgent for any additional withholding taxes paid by such Lender or the Agent, asthe case may be, or any liability (including penalties and interest) arisingtherefrom or with respect thereto, whether or not such additional withholdingtaxes were correctly or legally asserted.

 

(f)            In the event that aLender receives a refund of or credit for taxes withheld or paid pursuant toclause (e) of this Section, which credit or refund is identifiable by suchLender as being a result of taxes withheld or paid in connection with sumspayable hereunder or under any other Fundamental Document, such Lender shallpromptly notify the Agent and the Borrower and shall, if no Event of Defaulthas occurred and is continuing, remit to the Borrower the amount of such refundor credit allocable to payments made hereunder or under any other FundamentalDocument.

 

(g)           Each Lender agreesthat after it becomes aware of the occurrence of an event that would cause theBorrower or any other Credit Party to pay any amount pursuant to Section2.15(d), it will use reasonable efforts to notify the Borrower of such eventand, to the extent not inconsistent with such Lender’s internal policies, willuse its reasonable efforts to make, fund or maintain the affected Loans of suchLender, or, if applicable, to participate in Letters of Credit through anotherLending Office of such Lender if as a result thereof the additional monieswhich would otherwise be required to be paid by reason of Section 2.15(d) inrespect of such Loans, Letters of Credit or participations therein would bematerially reduced, and if, as determined by such Lender, in its discretion,the making, funding or maintaining of such Loans, Letters of Credit orparticipations therein through such other Lending Office would not otherwisematerially adversely affect such Loans, Letters of Credit or participationstherein or such Lender.

 

SECTION 2.16.  InterestAdjustments.  If the provisions ofthis Credit Agreement or any Note would at any time require payment by theBorrower to a Lender of any amount of interest in excess of the maximum amountthen permitted by Applicable Law, the interest payments to that Lender shall bereduced to the extent necessary so that such Lender shall not receive interestin excess of such maximum amount.  If, asa result of the foregoing, a Lender shall receive interest payments hereunderor under a Note in an amount less than the amount otherwise provided hereunder,such deficit (hereinafter called the “Interest Deficit”) will, to the fullestextent permitted by Applicable Law, cumulate and will be carried forward(without interest) until the termination of this Agreement.  Interest otherwise payable to a Lenderhereunder and under a Note for any subsequent period shall be increased by themaximum amount of the Interest Deficit that may be so added without causingsuch Lender to receive interest in excess of the maximum amount then permittedby Applicable Law.

 

Theamount of any Interest Deficit relating to a particular Loan and Note shall betreated as a prepayment penalty and paid in full at the time of any optionalprepayment by the Borrower to the Lenders of all the Loans at that timeoutstanding pursuant to Section 2.11(a) hereof and a

 

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terminationof the Commitments under Section 2.8. The amount of any Interest Deficit relating to a particular Loan andNote at the time of any complete payment of the Loans at that time outstanding(other than an optional prepayment thereof pursuant to Section 2.10(a) hereof)shall be cancelled and not paid.

 

3.             REPRESENTATIONS AND WARRANTIES

 

Inorder to induce the Agent, Lenders and the Issuing Bank to enter into thisCredit Agreement and to make the Loans and issue or participate in the Lettersof Credit provided for herein, the Credit Parties, jointly and severally, makethe following representations and warranties to, and agreements with, theAgent, the Lenders and the Issuing Bank, all of which shall survive theexecution and delivery of this Agreement, the issuance of the Notes and theLetters of Credit and the making of the Loans:

 

SECTION 3.1.  CorporateExistence and Power.  (a)  Each Credit Party is a corporation, limitedliability company or partnership, duly organized, validly existing and in goodstanding under the laws of its jurisdiction of organization and is in goodstanding or has applied for authority to operate as a foreign entity in alljurisdictions where the nature of its properties or business so requires it andwhere a failure to be in good standing as a foreign entity would have amaterial adverse effect on the business, assets or condition, financial orotherwise, of such Credit Party.  As ofthe Closing Date, the Borrower is engaged in a U.S. trade or business.

 

(b)           Each Credit Partyhas the power and authority (i) to own its respective properties and carry onits respective businesses as now being conducted, (ii) to execute, deliver andperform its obligations (as applicable) under this Credit Agreement and theother Fundamental Documents and any other documents contemplated hereby, (iii)in the case of the Borrower, to borrow hereunder, (iv) to grant to the Agent,for the benefit of itself, the Issuing Bank and the Lenders, a securityinterest in the Collateral including the Pledged Securities, to the extentapplicable, as contemplated by this Credit Agreement and the other FundamentalDocuments to which it is or will be a party and (v) in the case of theGuarantors, to guarantee the Obligations as contemplated by Article 10 hereof.

 

(c)           A list of all of theCredit Parties setting forth their jurisdictions of organization and thejurisdictions in which they are in good standing as of the Amendment No. 17Effective Date as provided in Section 3.1(a) hereof is attached hereto asSchedule 3.1.

 

SECTION 3.2.  Authority and NoViolation.  (a)  The execution, delivery and performance ofthis Credit Agreement and the other Fundamental Documents by each Credit Partyand the grant to the Agent for the benefit of itself, the Issuing Bank and theLenders of a security interest in the Collateral as contemplated herein or inthe other Fundamental Documents, and in the case of the Borrower, theBorrowings hereunder and the execution, delivery and performance of the Notesby the Borrower and, in the case of each Guarantor, the guaranty of theObligations as contemplated by Article 10 hereof, (a) have been duly authorizedby all necessary corporate or company (as applicable) action on the part ofeach Credit Party, (b) will not violate any provision of any Applicable Law, orany order of any court or other agency of the United States or any Statethereof, applicable to any Credit Party or any of its respective properties orassets, (c) will not violate any provision of the Certificate of Incorporationor By-Laws, limited

 

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liabilitycompany agreement or other organizational document of any Credit Party, or anyindenture, any agreement for borrowed money, any bond, note or other similarinstrument in any material respect or any other material agreement to which anyCredit Party is a party or by which any Credit Party or any of its propertiesor assets are bound, (d) will not be in conflict with, result in a breach of orconstitute (with due notice or lapse of time or both) a default under any suchindenture, agreement, bond, note, instrument or other material agreement and(e) will not result in the creation or imposition of any Lien, charge orencumbrance of any nature whatsoever upon any property or assets of any CreditParty other than pursuant to this Agreement or any other Fundamental Document.

 

(b)           There are norestrictions on the transfer of any Pledged Securities other than as a resultof the Credit Agreement or applicable securities laws and the regulationspromulgated thereunder or such as would not prevent the Agent from exercisingits remedies with respect to such Pledged Securities in the case of an Event ofDefault.

 

SECTION 3.3.  Governmental andOther Approvals.  All authorizations,approvals, registrations or filings with any Governmental Authority or publicregulatory body (other than UCC-1 Financing Statements, the Copyright SecurityAgreement and the Trademark Security Agreement which will be delivered to theAgent on or prior to the Closing Date), in form suitable for recording orfiling with the appropriate filing office, required for the execution, deliveryand performance by the Credit Parties of this Credit Agreement and the otherFundamental Documents, and the execution and delivery by the Borrower of theNotes, have been duly obtained or made and are in full force and effect or havebeen duly applied for, and if any such further authorizations, approvals,registrations or filings should hereafter become necessary, the Credit Partiesshall obtain or make all such authorizations, approvals, registrations orfilings.

 

SECTION 3.4.  FinancialStatements.  Each of the auditedfinancial statements of the Borrower and its Consolidated Subsidiaries atDecember 31, 2009 together with the related statements of operations and cashflow and the related notes and supplemental information are complete andcorrect and have been prepared in accordance with GAAP in effect as of suchdate consistently applied, except as otherwise indicated in the notes to suchfinancial statements and subject in the case of unaudited statements to changesresulting from year-end audit adjustments. All of such financial statements fairly present the financial conditionor the results of operations of the Borrower and its Consolidated Subsidiarieson a consolidated basis at the dates and for the periods indicated and (in thecase of the balance sheets) reflect (including the notes thereto) all knownliabilities and subject in the case of unaudited statements to changesresulting from year-end audit adjustments, contingent or otherwise, as of suchdates required in accordance with GAAP to be shown or reserved against, ordisclosed in notes to financial statements.

 

SECTION 3.5.  No MaterialAdverse Change.  (a)  Since December 31, 2009 there has been nomaterial adverse change in the business, assets, condition (financial orotherwise), or results of operations of the Borrower and its Subsidiaries,taken as a whole.

 

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(b)           No Credit Party has entered or isentering into the arrangements contemplated hereby and by the other FundamentalDocuments, or intends to make any transfer or incur any obligations hereunderor thereunder, with actual intent to hinder, delay or defraud either present orfuture creditors.  On and as of theClosing Date, on a pro forma basis after giving effect to all Indebtedness(including the Loans) expected to be borrowed or repaid on the Closing Date,(i) each Credit Party expects the cash available to such Credit Party, aftertaking into account all other anticipated uses of the cash of such Credit Party(including the payments on or in respect of debt referred to in clause (iii) ofthis Section 3.5(b)), will be sufficient to satisfy all final judgments formoney damages which have been docketed against such Credit Party or which maybe rendered against such Credit Party in any action in which such Credit Partyis a defendant (taking into account the reasonably anticipated maximum amountof any such judgment and the earliest time at which such judgment mightreasonably be anticipated to be entered); (ii) the sum of the present fairsaleable value of the combined assets of all of the Credit Parties will exceedthe probable liability of the Credit Parties on their debts (including theirGuaranties); (iii) no Credit Party will have incurred or intends to, orbelieves that it will, incur debts beyond its ability to pay such debts as suchdebts mature (taking into account the timing and amounts of cash to be receivedby such Credit Party from any source and of amounts to be payable on or inrespect of debts of such Credit Party and the amounts referred to in clause(i)); and (iv) each Credit Party believes it will have sufficient capital withwhich to conduct its present and proposed business and the property of suchCredit Party does not constitute unreasonably small capital with which toconduct its present or proposed business. For purposes of this paragraph (b), “debt” means any liability ora claim, and “claim” means (y) right to payment whether or not suchright is reduced to judgment, liquidated, unliquidated, fixed, contingent,matured, unmatured, disputed, undisputed, legal, equitable, secured orunsecured, or (z) right to an equitable remedy for breach of performance ifsuch breach gives rise to a payment, whether or not such right is reduced tojudgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,disputed, undisputed, legal, equitable, secured or unsecured.

 

SECTION3.6.  Ownership of Pledged Securities,Subsidiaries, etc.  (a)  Annexed hereto as Schedule 3.6(a) is acorrect and complete list as of the Amendment No. 17 Effective Date, of eachCredit 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 authorizedcapitalization, the number of shares of its capital stock outstanding and otherthan as to the Borrower the ownership of its capital stock and (v) in the caseof each Credit Party which is a limited liability company, the ownership of itsmembership interests.

 

(b)           Except as noted on Schedule 3.6(b),as of the Amendment No. 17 Effective Date no Credit Party holds any EquityInterest or other Investment, either directly or indirectly, in any Personother than another Credit Party and no Credit Party is a general or limitedpartner in any joint venture or partnership.

 

SECTION3.7.  Copyrights, Trademarks and OtherRights.  (a)  As of the Amendment No. 17 Effective Date,the items of Product listed on Schedule 3.7(a) hereto comprise all of theProduct in which any Credit Party has any right, title or interest (eitherdirectly, through a joint venture or partnership or otherwise).  The existing U.S. copyright registrationnumber (or if not yet obtained, the registration status) for each of the itemsof Product

 

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setforth on Schedule 3.7(a) for which any Credit Party owns the underlyingcopyright or an interest in copyright are as set forth on Schedule 3.7(a). Schedule 3.7(a) also identifies the location of the Physical Materialsrelated to each item of Product owned by any Credit Party or to which anyCredit Party has rights of access.  Tothe best of each Credit Party’s knowledge, all items of Product and allcomponent parts thereof do not and will not violate or infringe upon anycopyright, right of privacy, trademark, patent, trade name, performing right orany literary, dramatic, musical, artistic, personal, private, several, care,contract, property or copyright right or any other right of any Person, in anymaterial respect or contain any libelous or slanderous material.  There is no claim, suit, action or proceedingpending or, to the best of each Credit Party’s knowledge, threatened againstany Credit Party that involves a claim of infringement of any copyright withrespect to any item of Product listed on Schedule 3.7(a), and no Credit Partyhas any knowledge of any existing infringement by any other Person of anycopyright held by any Credit Party with respect to any item of Product listedon Schedule 3.7(a).

 

(b)           Schedule 3.7(b) hereto (i) lists allthe trademarks registered by any Credit Party as of the Amendment No. 17Effective Date and identifies the Credit Party in whose name each suchtrademark is registered and (ii) specifies as to each, the jurisdictions inwhich such trademark has been issued or registered (or, if applicable, in whichan application for such issuance or registration has been filed), including therespective registration or application numbers and applicable dates ofregistration or application and (iii) specifies as to each, as applicable,material licenses, sublicenses and other material agreements as of theAmendment No. 17 Effective Date  (otherthan any agreements which relate to the exploitation of an item of Product), towhich any Credit Party is a party and pursuant to which any Person, other thana Credit Party, is authorized to use such trademark.

 

(c)           All applications and registrationsfor all copyrights, trademarks, service marks, trade names and service names inwhich any Credit Party has any right, title or interest are valid and in fullforce and effect and are not subject to the payment of any taxes or maintenancefees or the taking of any other actions by the Credit Parties (other thanstandard renewals) to maintain their validity or effectiveness.

 

SECTION3.8.  Fictitious Names.  None of the Credit Parties has done business,is doing business or intends to do business other than under its full corporateor company name (as applicable), including, without limitation, under anytradename or other doing business name other than as listed on Schedule 3.8.

 

SECTION3.9.  Title to Properties.  The Credit Parties have good title to each ofthe properties and assets reflected on the financial statements referred to inSection 3.4 or delivered pursuant to Section 5.1(a) hereof and all suchproperties and assets will be free and clear of Liens, except PermittedEncumbrances.

 

SECTION3.10.  UCC Filing Information.  The chief executive office of each CreditParty is, as of the Amendment No. 17 Effective Date, as set forth on Schedule3.10 hereto, the state of incorporation or formation of each Credit Party islisted on Schedule 3.10 hereto and the place where each Credit Party keeps therecords concerning the Collateral as of the Amendment****

 

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No.17 Effective Date or regularly keeps any goods included in the Collateral as ofthe Amendment No. 17 Effective Date are also listed on Schedule 3.10 hereto.

 

SECTION3.11.  Litigation.  Except as set forth on Schedule 3.11, thereare no actions, lawsuits or other proceedings pending (including, but notlimited to, matters relating to environmental liability), or, to the knowledgeof any Credit Party, threatened, against or affecting any Credit Party or anyof its respective properties, by or before any Governmental Authority,arbitration panel, or arbitrator, which could reasonably be expected to have aMaterial Adverse Effect on the financial condition or the business of anyCredit Party or which involve this Agreement or any of the transactionscontemplated hereby.  No Credit Party isin default with respect to any order, writ, injunction, decree, rule orregulation of any Governmental Authority, which default would have a MaterialAdverse Effect.

 

SECTION3.12.  Federal Reserve Regulations.  No Credit Party is engaged principally, or asone of its important activities, in the business of extending credit for thepurpose of purchasing or carrying any Margin Stock.  No part of the proceeds of the Loans will beused, directly or indirectly, and whether immediately, incidentally orultimately to purchase or carry any Margin Stock, to extend credit to others forthe purpose of purchasing or carrying any Margin Stock or for any other purposeviolative of or inconsistent with any of the provisions of any regulations ofthe Board of Governors of the Federal Reserve System, including, withoutlimitation, Regulations D, T, U and X.

 

SECTION3.13.  Investment Company Act.  No Credit Party will during the term of thisAgreement be, (x) an “investment company”, within the meaning of the InvestmentCompany Act of 1940, as amended or (y) subject to regulation under the PublicUtility Holding Company Act of 1935, the Federal Power Act or any foreign,federal or local statute or regulation limiting its ability to incurindebtedness for money borrowed as contemplated hereby or by any otherFundamental Document.

 

SECTION3.14.  Binding Agreements.  This Credit Agreement and the otherFundamental Documents when executed will constitute, the legal, valid andenforceable obligations of each Credit Party that is a party theretoenforceable 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 theenforcement of creditors’ rights generally and to general principles of equity.

 

SECTION3.15.  Taxes.  All federal, state and local tax returnswhich are required to be filed by or on behalf of the Credit Parties have beenfiled, and the Credit Parties have paid or caused to be paid all taxes payableby the Credit Parties as shown on said returns or on any assessment received bythem in writing, to the extent that such taxes have become due, except aspermitted by Section 5.11 hereof.  NoCredit Party knows of any material additional assessments or any basistherefore.  The Credit Parties believethat the charges, accruals and reserves on their books in respect of taxes orother governmental charges are accurate in all material respects.

 

SECTION3.16.  Compliance with ERISA andApplicable Law.  (a)  Each Plan has been maintained and operated inall material respects in accordance with all applicable laws, including 

 

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ERISAand the Code, and each Plan intended to qualify under section 401(a) of theCode so qualifies.  No Reportable Eventhas occurred in the last five years as to any Plan.  No Plan has any “accumulated funding deficiency”as defined in section 302 of ERISA or Section 412 of the Code (whether or notwaived) and no application has been made to the Secretary of the Treasury for awaiver or modification of the minimum funding standards (including requiredinstallment payments) or an extension of any amortization period under Section412 of the Code with respect to a Plan. No material liability has been, and no circumstances exist pursuant towhich any material liability could be, imposed upon any Credit Party or ERISAAffiliate (i) under sections 4971 through 4980B of the Code, section 502(i) or502(l) of ERISA, or Title IV of ERISA with respect to any Plan or MultiemployerPlan or with respect to any plan heretofore maintained by any Credit Party orERISA Affiliate or any entity that heretofore was an ERISA Affiliate or (ii)for the failure to fulfill any obligation to contribute to any MultiemployerPlan.  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 providespost-retirement welfare coverage (other than as required pursuant to Section4980B of the Code).  Neither any CreditParty nor any ERISA Affiliate has received any notification that any MultiemployerPlan is in reorganization or has been terminated within the meaning of Title IVof ERISA, and no Multiemployer Plan is reasonably expected to be inreorganization or to be terminated.

 

(b)           The execution, delivery andperformance of the Fundamental Documents and the consummation of thetransactions contemplated hereby and thereby will not involve any “prohibitedtransaction” within the meaning of ERISA or the Code.

 

SECTION3.17.  Agreements.  (a)  NoCredit Party is in default in the performance, observance or fulfillment of anyof the obligations, covenants or conditions contained in any agreement orinstrument (including any License Agreement or Platform Agreement) to which itis a party which could reasonably be expected to have a Material Adverse Effector result in the loss of more than 5,000,000 Subscribers.

 

(b)           Schedule 3.17 is a true andcomplete listing as of the Amendment No. 17 Effective Date of (i) all creditagreements, indentures, and other agreements related to any indebtedness for borrowedmoney of any Credit Party, other than the Fundamental Documents andintercompany indebtedness among the Credit Parties, (ii) all joint ventureagreements to which any Credit Party is a party, (iii) all material LicenseAgreements and Platform Agreements, (iv) all agreements or other arrangementspursuant to which a Credit Party has granted a Lien to any Person other thanPermitted Encumbrances and (v) all other contractual arrangements entered intoby a Credit Party or by which any Credit Party is bound which arrangements arematerial to any Credit Party, including but not limited to, Guaranties andemployment agreements.  For purposes ofthis Section 3.17, a Platform Agreement or other contract, agreement or arrangementshall be deemed “material” if the Credit Parties reasonably expect thatany Credit Party would, pursuant to the terms thereof, (A) recognize futurerevenues in excess of US$1,000,000 per annum or, (B) incur liabilities,obligations or expenses in excess of US$1,000,000 per annum.  Schedule 3.17B is a true and complete listingas of the Amendment No. 17 Effective Date of all material (with materialitydetermined in accordance with the preceding sentence) agreements between anyCredit Party and any of their non-Credit Party Affiliates.

 

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SECTION3.18.  Indebtedness; Guaranties; Liens.  (a) Except for this Agreement and as otherwise disclosed on Schedule3.18(a), as of the Amendment No. 17 Effective Date no Credit Party has anyoutstanding Indebtedness except for intercompany indebtedness among the CreditParties.

 

(b)           Except for this Agreement and asotherwise disclosed on Schedule 3.18(b), as of the Amendment No. 17 EffectiveDate no Credit Party is responsible for any Indebtedness of any other Person.

 

(c)           Except for (i) Liens arising underthis Agreement, (ii) Liens disclosed on Schedule 3.18(c) and (iii) PermittedEncumbrances no Credit Party has granted or is aware of the existence of anyLiens on any property of any Credit Party.

 

SECTION3.19.  Security Interest; OtherSecurity.  This Agreement and theother Fundamental Documents, when executed and delivered and, to the extentappropriate, filed in locations where required by law, in connection with theexecution and delivery hereof will create and grant to the Agent for the benefitof itself, the Issuing Bank and the Lenders (upon the making of the first Loanhereunder, the filing of the appropriate UCC-1 financing statements, theCopyright Security Agreement with the United States Copyright Office, theTrademark Security Agreement with the Patent and Trademark Office and deliveryof the Pledged Securities with appropriate stock powers to the Agent) a validand first priority perfected security interest in the Collateral located in theUnited States subject only to Permitted Encumbrances.

 

SECTION3.20.  Disclosure.  Neither this Credit Agreement nor any otherFundamental Document nor any other agreement, document, certificate orstatement furnished to the Agent for the benefit of the Lenders by or on behalfof any Credit Party in connection with the transactions contemplated hereby atthe time it was furnished contained any untrue statement of a material fact oromitted to state a material fact, under the circumstances under which it wasmade, necessary in order to make the statements contained herein or in anyother Fundamental Document not misleading in any material respect.  At the date hereof, there is no fact relatingto any Credit Party known to any Credit Party which would have a MaterialAdverse Effect or would reasonably be expected to have a Material AdverseEffect in the future.

 

SECTION3.21.  Licensed Rights.  The License Agreements grant to the CreditParties sufficient rights in and to the items of Product licensed thereunder toenable the Credit Parties to perform their respective obligations under thePlatform Agreements, and no Credit Party is in breach of any of its materialobligations under such agreements, nor does any Credit Party have any knowledgeof any breach or anticipated breach by any other parties thereto which couldreasonably be expected to result in any material adverse change in thebusiness, properties, assets, operations or condition (financial or otherwise)of any Credit Party.

 

SECTION3.22.  Environmental Liabilities.  (a)  NoCredit Party has used, stored, treated, transported, manufactured, refined,handled, produced or disposed of any Hazardous Materials on, under, at, from orin any way affecting, any properties or assets owned or leased by a CreditParty, in any manner which at the time of the action in question violated inany material respect any Environmental Law governing the use, storage,treatment, transportation, manufacture, refinement, handling, production ordisposal of Hazardous Materials, and, to the

 

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bestof each Credit Party’s knowledge, no prior owner of any such property or assetor any tenant, subtenant, prior tenant or prior subtenant thereof has usedHazardous Materials on or affecting such property or asset, or otherwise, inany manner which at the time of the action in question violated in any materialrespect any Environmental Law governing the use, storage, treatment,transportation, manufacture, refinement, handling, production or disposal ofHazardous Materials.

 

(b)           To the best of each Credit Party’sknowledge, (i) no Credit Party has any obligations or liabilities, known orunknown, matured or not matured, absolute or contingent, assessed orunassessed, which could reasonably be expected to have a Material AdverseEffect and (ii) no claims have been made against any of the Credit Parties inthe past five years and no presently outstanding citations or notices have beenissued against any of the Credit Parties, which could reasonably be expected tohave a Material Adverse Effect which in either case have been or are imposed byreason of or based upon any provision of any Environmental Law, including,without limitation, any such obligations or liabilities relating to or arisingout of or attributable, in whole or in part, to the manufacture, processing,distribution, use, treatment, storage, disposal, transportation or handling ofany Hazardous Materials by any Credit Party, or any of its employees, agents,representatives or predecessors in interest in connection with or in any wayarising from or relating to any of the Credit Parties or any of theirrespective owned or leased properties, or relating to or arising from orattributable, in whole or in part, to the manufacture, processing,distribution, use, treatment, storage, disposal, transportation or handling ofany such substance, by any other Person at or on or under any of the realproperties owned or used by any of the Credit Parties or any other locationwhere such could reasonably be expected to have a Material Adverse Effect.

 

SECTION3.23.  Pledged Securities.  (a) Annexed hereto as Schedule 3.23 is a correct and complete list as of theAmendment No. 17 Effective Date**,**of all the Pledged Securities hereunder showing, as to each, the entity whosestock or other Equity Interests are being pledged, the Pledgor of such stock orother Equity Interests, the stock certificate number (as applicable) and thenumber of shares or amount of the capital stock or other Equity Interests beingpledged hereunder.  Each Pledgor (i) isthe legal and beneficial owner of, and has sole right, title and interest to,the Pledged Securities owned by such Pledgor, free and clear of all Liens,security interests or other encumbrances whatsoever, except the securityinterests created by this Credit Agreement and the other Fundamental Documentsand (ii) has sole right and power to pledge, and grant the security interestin, and Lien upon, such Pledged Securities pursuant to this Credit Agreementand the other Fundamental Documents without the consent of any Person orGovernmental Authority whatsoever.

 

(b)           All of the Pledged Securities areduly authorized, validly issued, fully paid and non-assessable.

 

(c)           Except for contractual restrictionsdisclosed on Schedule 3.23 and restrictions created herein or under applicablesecurities laws and the regulations promulgated thereunder, there are norestrictions on the transfer of any of the Pledged Securities.

 

(d)           Except as set forth on Schedule 3.23,there are no warrants, options, conversion or similar rights currentlyoutstanding with respect to, and no agreements to purchase

 

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orotherwise acquire, any shares of the capital stock or other Equity Interests ofany issuer of any of the Pledged Securities; and there are no securities orobligations of any kind convertible into any shares of the capital stock orother Equity Interests of any issuer of any of the Pledged Securities**.**

 

(e)           Article 11 of this Credit Agreementcreates in favor of the Agent (on behalf of the Agent, the Issuing Bank and theLenders) a valid, binding and enforceable security interest in, and Lien upon,all right, title and interest of the Pledgors in the Pledged Securities andconstitutes a fully perfected first and prior security interest and Lien uponall right, title and interest of the Pledgors in such Pledged Securities subject,as to the enforcement of remedies, to applicable bankruptcy, insolvency,reorganization and similar laws affecting creditors’ rights generally and togeneral principles of equity.

 

SECTION3.24.  Compliance with Laws.  No Credit Party is in violation of anyApplicable Law except for such violations which in the aggregate would not havea Material Adverse Effect.  TheBorrowings hereunder, the intended use of the proceeds of the Loans asdescribed in the preamble hereto and as contemplated by Section 5.17 hereof andany other transactions contemplated hereby will not violate any Applicable Law.

 

SECTION3.25.  Bank Accounts. As of theAmendment No. 17 Effective Date, the Credit Parties have no bank accounts otherthan those listed on Schedule 3.25.

 

4.             CONDITIONS OF LENDING

 

SECTION4.1.  **[THETEXT OF SECTION 4.1 OF THE CREDIT AGREEMENT IS INTENTIONALLY OMITTED FROM THISEXHIBIT A TO AMENDMENT NO. 17; NO CHANGES ARE BEING EFFECTUATED TO SECTION 4.1OF THE CREDIT AGREEMENT FROM THOSE PREVIOUSLY IN EFFECT VIA AMENDMENT NO. 17,AND THE CONDITIONS PRECEDENT SET FORTH IN SECTION 4.1 WERE SATISFIED OR WAIVEDON OR ABOUT AUGUST 31, 2001]**

 

SECTION4.2.  Conditions Precedent to EachLoan and Letter of Credit.  Theobligation of the Lenders (including the Agent) to make each Loan (includingthe initial Loan) and to participate in each Letter of Credit (including theinitial Letter of Credit) and of the Issuing Bank to issue each Letter ofCredit is subject to the following conditions precedent:

 

(a)           Notice.  The Agent shall have received a notice withrespect to such Borrowing or the Issuing Bank shall have received a notice withrespect to such Letter of Credit as required by Article 2 hereof.

 

(b)           Representations and Warranties.  The representations and warranties set forthin Article 3 hereof and in the other Fundamental Documents shall be true andcorrect in all material respects on and as of the date of each Borrowing orissuance of a Letter of Credit hereunder (except to the extent that suchrepresentations and warranties expressly relate to an earlier date, in whichcase they shall be true and correct as of such earlier date, or changedcircumstances specifically contemplated by, and allowed pursuant to, thisAgreement) with the same effect as if made on and as of such date.

 

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(c)           No Event of Default.  On the date of each Borrowing or issuance ofa Letter of Credit hereunder, the Credit Parties shall be in materialcompliance with all of the terms and provisions set forth herein to be observedor performed and no Event of Default or Default shall have occurred and becontinuing nor shall any such event occur by reason of the making of such Loansor issuance of such Letter of Credit.

 

(d)           Borrowing Certificate.  On the date of each Borrowing hereunder, theAgent shall have received a borrowing certificate, substantially in the form ofExhibit D hereto (the “Borrowing Certificate”), executed by anAuthorized Officer of the Borrower, dated the date of such Borrowing,containing a certification by the chief financial officer of the Borrower, that(i) no Event of Default or Default has occurred or is continuing and (ii) noEvent of Default or Default will occur if the Lenders should make the Loansrequested.

 

(e)           Additional Documents.  The Lenders shall have received from theBorrower on the date of such Borrowing or issuance of a Letter of Credit suchdocuments and information as they may reasonably request relating to thesatisfaction of the conditions in this Section 4.2.

 

EachBorrowing or request for issuance of a Letter of Credit shall be deemed to be arepresentation and warranty by the Borrower on the date of such Borrowing orissuance as to the matters specified in paragraphs (b) and (c) of this Section.

 

5.             AFFIRMATIVE COVENANTS

 

Fromthe date hereof and for as long as the Commitments shall be in effect, anyamount shall remain outstanding under the Notes, any Letter of Credit shallremain unpaid or unsatisfied, or any other Obligations remain unpaid orunsatisfied, each Credit Party agrees that, unless the Required Lenders shallotherwise consent in writing, each of them will:

 

SECTION5.1.  Financial Statements and Reports.Furnish or cause to be furnished to the Agent:

 

(a)           Within 90 days after the end of eachfiscal year, all audited financial statements that the Borrower was required tosubmit to the S.E.C. as part of its public filings for such fiscal year;

 

(b)           Within 45 days after the end of eachof the first three fiscal quarters of each of its fiscal years, all unauditedfinancial statements that the Borrower was required to submit to the S.E.C. aspart of its public filings for such fiscal quarter;

 

(c)           Simultaneously with the delivery ofthe statements referred to in paragraphs (a) and (b) of this Section 5.1, acertificate of an Authorized Officer of the Borrower, in form and substancesatisfactory to the Agent (i) stating that in the course of the performance ofhis duties, he would normally have knowledge of any condition or event whichwould

 

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constitutean Event of Default or Default and stating whether or not he has knowledge ofany such condition or event and, if so, specifying each such condition or eventof which he has knowledge and the nature thereof (ii) demonstrating in detailsatisfactory to the Agent compliance with the provisions of Sections 6.5(iv)(a)and 6.15 hereof; and (iii) certifying that all filings required under Section5.8 hereof have been made and listing each such filing that has been made sincethe date of the last certificate delivered in accordance with this Section 5.1(c);

 

(d)           [Intentionally omitted;]

 

(e)           From time to time such additionalinformation regarding the financial condition, business or business prospectsof the Credit Parties, the amount of film inventory in which any of the CreditParties has rights on an individual or market basis or otherwise regarding theCollateral, as any Lender may reasonably request.

 

SECTION5.2.  Corporate Existence.  Do or cause to be done all things necessaryto 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, providedfurther that the Borrower, if it is a party thereto, is the surviving entity),and material rights, licenses, permits and franchises, and comply in all materialrespects with all applicable statutes, regulations and orders of, and allapplicable restrictions imposed by, any Governmental Authority.

 

SECTION5.3.  Maintenance of Properties.  Keep its tangible properties which arematerial to its business in good repair, working order and condition subject toordinary wear and tear and, from time to time (i) make all necessary and properrepairs, renewals, replacements, additions and improvements thereto and (ii)comply at all times with the provisions of all material leases and othermaterial agreements to which it is a party so as to prevent any loss orforfeiture thereof or thereunder unless compliance therewith is being currentlycontested in good faith by appropriate proceedings and appropriate reserves havebeen established in accordance with GAAP.

 

SECTION5.4.  Notice of Material Events.  (a) Promptly upon any Executive Officer of a Credit Party obtainingknowledge of (i) any Default or Event of Default, or becoming aware that theAgent, the Issuing Bank or any Lender has given notice or taken any otheraction with respect to a claimed Event of Default, (ii) any material adversechange in the condition or operations of any Credit Party, financial orotherwise, (iii) any action or event which could reasonably be expected tomaterially and adversely affect the performance of the Credit Parties’obligations under this Credit Agreement or any other Fundamental Document, therepayment of the Notes, or the security interests granted to the Agent for thebenefit of itself, the Issuing Bank and the Lenders under this Credit Agreementor any other Fundamental Document, (iv) any other event which could reasonablybe expected to result in a Material Adverse Effect, (v) the opening of anyoffice of a Credit Party or the change of the executive office, jurisdiction orform of organization, or the principal place of business of any Credit Party orof the location of any Credit Party’s books and records, (vi) any change in thename of any Credit Party, (vii) any other event which could reasonably beexpected to materially and adversely impact upon the amount of collectabilityof any material accounts receivable of the Credit Parties or materiallydecrease the value of the Collateral or the Pledged Securities, (viii) any proposedmaterial amendment to any material agreements that are part of the Collateralthat could reasonably be anticipated to 

 

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negativelyimpact the value of the Collateral, or (ix) any Person giving any notice to anyCredit Party or taking any other action with respect to a claimed default orevent or condition of the type referred to in paragraph (e) of Article 7, suchCredit Party shall promptly give written notice thereof to the Agent specifyingthe nature and period of existence of any such condition or event, orspecifying the notice given or action taken and the nature of such claimedEvent of Default or condition and what action such Credit Party has taken, istaking and proposes to take with respect thereto.

 

(b)           [Intentionally omitted.]

 

SECTION5.5.  Insurance.  (a) Keep its assets which are of an insurable character insured (to theextent and for the time periods consistent with normal industry practices) byfinancially sound and reputable insurers against loss or damage by fire,explosion, theft or other hazards which are included under extended coverage inamounts not less than the insurable value of the property insured or suchlesser amounts, and with such self-insured retention or deductible levels, asare consistent with customary industry practices.

 

(b)           Maintain with financially sound andreputable insurers, insurance against other hazards and risks and liability toPersons and property to the extent and in the manner customary for companies insimilar businesses.

 

(c)           Maintain, or cause to be maintained,in effect during the period from the date of acquisition of each item ofProduct acquired by any Credit Party until such time as the Agent shall havebeen provided with satisfactory evidence of the existence of one negative ormaster tape in one location and in another location, an interpositive orinternegative or duplicate master tape of the final version of the completedProduct, insurance on the negatives and sound tracks of such item of Product inan amount not less than the cost of re-shooting the principal photography ofthe item of Product and otherwise recreating such item of Product.

 

(d)           Maintain, or cause to be maintained,distributor’s “Errors and Omissions” insurance to the extent and in amountsconsistent with or greater than customary industry standards.

 

(e)           Maintain, or cause to be maintained,broadcaster’s “Errors and Omissions” insurance to the extent and in amountsconsistent with or greater than customary industry standards.

 

(f)            Cause all such above-describedinsurance (excluding worker’s compensation insurance) to (1) provide for thebenefit of the Lenders that 30 days’ prior written notice of suspension,cancellation, termination, reduction, non-renewal or lapse or material changeof coverage shall be given to the Agent; (2) name the Agent for the benefit ofthe Lenders as a loss payee (except for “Errors and Omissions” insurance andother third party liability insurance), provided,however, that so long as an Event ofDefault has occurred and is continuing, property insurance proceeds may be usedto repair damage in respect of which such proceeds were received or so long asno Default or Event of Default has occurred and is then continuing, toreimburse a Credit Party for its own funds expended to repair the applicabledamage; and (3) to the extent that neither the Agent nor the Lenders shall beliable for premiums

 

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orcalls, name the Agent for the benefit of the Lenders as an additional insuredincluding, without limitation, under any “Errors and Omissions” insurance andother third party liability insurance but only from claims arising from theacts or omissions of any Credit Party or its employees, representatives orcontractors.

 

(g)           Upon the request of the Agent, theBorrower will render to the Agent a statement in such detail as the Agent mayrequest as to all such insurance coverage.

 

SECTION5.6.  [Intentionally omitted.]

 

SECTION5.7.  [Intentionally omitted.]

 

SECTION5.8.  Books and Records.  Maintain or cause to be maintained at alltimes true and complete books and records of its financial operations andprovide the Agent and its representatives (and each Lender and itsrepresentatives during the continuance of an Event of Default) access to suchbooks and records and to any of its properties or assets upon reasonable noticeand during regular business hours in order that the Agent (or such Lender) maymake such audits and examinations and make abstracts from such books, accounts,records and other papers pertaining to the Collateral (including, but notlimited to, all on and off balance sheet receivables) and may discuss theaffairs, finances and accounts with, and be advised as to the same by theCredit Parties’ officers and independent accountants, all as the Agent (or suchLender) may deem appropriate for the purpose of verifying the various reportsdelivered by any Credit Party to the Agent and/or the Lenders pursuant to thisCredit Agreement or for otherwise ascertaining compliance with this CreditAgreement or any Fundamental Document.

 

SECTION5.9.  Observance of Agreements.  Duly observe and perform in all materialrespects all the terms and conditions of all material agreements with respectto the distribution and/or exploitation of items of Product and diligentlyprotect and enforce the rights of the Credit Party under all such agreements ina manner consistent with prudent business judgment and subject to the terms andconditions of such agreements.

 

SECTION5.10.  Laboratories; No Removal.  (a)  Tothe extent any Credit Party has control over or rights to receive any of thePhysical Materials relating to any item of Product, deliver or cause to be deliveredto a Laboratory or Laboratories all negative and preprint material, mastertapes and all sound track materials with respect to each such item of Productand deliver to the Agent a fully executed Pledgeholder Agreement with respectto such materials.  To the extent thatany Credit Party has only rights of access to preprint material or master tapesand has not created duplicate materials sufficient to exploit its rights andhas not stored such duplicate materials at a Laboratory that has delivered aPledgeholder Agreement to the Agent, then the Credit Parties will deliver tothe Agent a fully executed Laboratory Access Letter covering suchmaterials.  Prior to requesting anyLaboratory to deliver such negative or other preprint or sound track materialor master tapes to another Laboratory, any such Credit Party shall provide theAgent with a Pledgeholder Agreement or Laboratory Access Letter, asappropriate, executed by such other Laboratory and all other parties to suchPledgeholder Agreement (including the Agent). Without the consent of the Agent, no Credit Party shall deliver orremove or cause the delivery or removal of the original negative and film orsound materials or master tapes with respect to any item of Product owned bysuch Credit Party or in

 

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whichsuch Credit Party has an interest (i) to a location outside the United Statesor (ii) to any state or jurisdiction where UCC-1 financing statements have notbeen filed against such Credit Party.

 

(b)           With respect to items of Productacquired after the Closing Date, on at least a quarterly basis, deliver to theAgent and the Laboratories which are signatories to Pledgeholder Agreements arevised schedule of Product on deposit with such Laboratories.

 

SECTION5.11.  Taxes and Charges; Indebtednessin Ordinary Course of Business.  Dulypay and discharge, or cause to be paid and discharged, before the same shallbecome in arrears, all taxes, assessments, levies and other governmentalcharges, imposed upon any Credit Party or its properties, sales and activities,or any part thereof, or upon the income or profits therefrom, as well as allclaims for labor, materials, or supplies which if unpaid could reasonably beexpected 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 thevalidity or amount thereof shall currently be contested in good faith byappropriate proceedings and if the Borrower shall have set aside on its booksreserves (the presentation of which is segregated to the extent required byGAAP) adequate with respect thereto if reserves shall be deemed necessary; and provided, further, that such CreditParty will pay all such taxes, assessments, levies or other governmentalcharges forthwith upon the commencement of proceedings to foreclose any Lienwhich may have attached as security therefor. The Credit Parties will pay when due, or in conformance with customarytrade terms all other obligations incident to their respective operations.

 

SECTION5.12.  Liens.  Defend the Collateral (including, withoutlimitation, the Pledged Securities) to the extent commercially reasonableagainst any and all Liens howsoever arising, other than Permitted Encumbrancesand in any event defend against any attempted foreclosure.

 

SECTION5.13.  Cash Receipts.  In the event any Credit Party receives (i)payment from any obligor, which payment should have been remitted to the Agentor (ii) the proceeds of any sale of Product, whether in the form of cash orotherwise, such Credit Party shall immediately remit such payment or proceedsto the Agent for deposit to the Collection Account.

 

SECTION5.14.  [Intentionally omitted.]

 

SECTION5.15.  [Intentionally omitted.]

 

SECTION5.16.  Environmental Laws.  (a) Promptly notify the Agent upon any Executive Officer becoming aware ofany violation or potential violation or non-compliance with, or liability orpotential liability under any Environmental Laws which, when taken togetherwith all other pending violations could reasonably be expected to have aMaterial Adverse Effect, and promptly furnish to the Agent all notices of anynature which any Credit Party or any Subsidiary may receive from anyGovernmental Authority or other Person with respect to any violation, or potentialviolation or non-compliance with, or liability or potential liability under anyEnvironmental Laws which, in any case or when taken together with all suchother notices, could reasonably be expected to have a Material Adverse Effect.

 

(b)           Comply in all material respects withand use reasonable efforts to ensure compliance in all material respects by alltenants and subtenants with all Environmental Laws, 

 

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andobtain and comply in all material respects with and maintain and use bestefforts to ensure that all tenants and subtenants obtain and comply in allmaterial respects with and maintain any and all licenses, approvals,registrations or permits required by Environmental Laws.

 

(c)           Conduct and complete allinvestigations, studies, sampling and testing, and all remedial, removal andother actions required under all Environmental Laws and promptly comply in allmaterial respects with all lawful orders and directives of all GovernmentalAuthorities.  Any order or directivewhose lawfulness is being contested in good faith by appropriate proceedingsshall be considered a lawful order or directive when such proceedings,including any judicial review of such proceedings, have been finally concludedby 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 harmlessthe Agent, the Issuing Bank and the Lenders, and their respective employees,agents, officers and directors, from and against any claims, demands,penalties, fines, liabilities, settlements, damages, costs and expenses ofwhatever kind or nature, known or unknown, contingent or otherwise, arising outof, or in any way related to the violation of or non-compliance by any CreditParty with any Environmental Laws, or any orders, requirements or demands ofGovernmental Authorities related thereto, including, without limitation,reasonable external attorney and consultant fees, investigation and laboratoryfees, court costs and litigation expenses, but excluding therefrom all claims,demands, penalties, fines, liabilities, settlements, damages, costs andexpenses arising out of or resulting from (i) the gross negligence or willfulacts or willful misconduct of any indemnified party or (ii) any acts oromissions of any indemnified party occurring after any indemnified party is inpossession of, or controls the operation of, any property or asset.

 

SECTION5.17.  [Intentionally omitted.]

 

SECTION5.18.  Further Assurances; SecurityInterests.  (a)  Upon the request of the Agent, duly executeand deliver, or cause to be duly executed and delivered, at the cost andexpense of the Borrower, such further instruments as may be necessary orproper, in the reasonable judgment of the Agent, to provide the Agent (for thebenefit of itself, the Issuing Bank and the Lenders) a perfected Lien in theCollateral and to carry out the provisions and purposes of this Agreement andthe other Fundamental Documents.

 

(b)           Upon the request of the Agent,promptly perform or cause to be performed any and all acts and execute or causeto be executed any and all documents (including, without limitation, theexecution, amendment or supplementation of any financing statement andcontinuation statement or other statement) for filing under the provisions ofthe UCC and the rules and regulations thereunder, or any other statute, rule orregulation of any applicable foreign, federal, state or local jurisdiction,which are necessary or advisable, from time to time, in order to grant andmaintain in favor of the Agent for the ratable benefit of itself, the IssuingBank and the Lenders as beneficiaries thereof the security interest in theCollateral contemplated hereunder and under the other Fundamental Documents,subject (other than in connection with the Pledged Securities) only toPermitted Encumbrances.

 

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(c)           Promptly undertake to deliver orcause to be delivered to the Lenders from time to time such otherdocumentation, consents, authorizations and approvals in form and substancesatisfactory to the Agent, as the Agent shall deem reasonably necessary oradvisable to perfect or maintain the Liens of the Agent for the benefit ofitself, the Issuing Bank and the Lenders.

 

(d)           [Intentionally omitted.]

 

SECTION5.19.  [Intentionally omitted.]

 

6.             NEGATIVE COVENANTS

 

Fromthe date hereof and for so long as the Commitments shall be in effect, anyamount shall remain outstanding under the Notes, any Letter of Credit shallremain unpaid or unsatisfied, or any other Obligations remain unpaid orunsatisfied, each Credit Party agrees that unless the Required Lenders shallotherwise consent in writing, it will not, directly or indirectly, and will notallow any Subsidiary, directly or indirectly, to:

 

SECTION6.1.  Limitations on Indebtedness.  Incur, create, assume or suffer to exist anyIndebtedness other than:

 

(i)            the Indebtedness represented by theNotes and the other Obligations;

 

(ii)           Indebtedness in respect of securedpurchase money financings, including Capital Leases, not to exceed $47,000,000at any time outstanding;

 

(iii)          ordinary trade payables which are notyet due and payable and are not the result of a transaction which isessentially the borrowing of money;

 

(iv)          Indebtedness by any Credit Party toany other Credit Party to the extent not otherwise prohibited by this Section6.1;

 

(v)           existing Indebtedness listed onSchedule 3.18(a) hereto but no increases thereof;

 

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(vi)          Indebtedness to HCC or an Affiliate ofHCC (including the Recapitalized Debt) where the obligee of such indebtednessacknowledges that same is subject to the subordination provisions of theRecapitalized Debt Intercreditor Agreement;

 

(vii)         [Intentionally omitted.]

 

(viii)        convertible unsecured subordinated notesissued subsequent to the Amendment No. 17 Effective Date in an amount and onterms acceptable to the Required Lenders in their sole discretion;

 

(ix)           preferred stock (to the extentclassified as Indebtedness under GAAP);

 

(x)            [Intentionally omitted;]

 

(xi)           [Intentionally omitted;]

 

(xii)          [Intentionally omitted;]

 

SECTION6.2.  Limitations on Liens.  Incur, create, assume or suffer to exist anyLien on any of the Collateral, whether now owned or hereafter acquired, except:

 

(i)            [Intentionally omitted];

 

(ii)           with regard to all items of Product,Liens pursuant to written security agreements (in form and substance acceptableto the Agent) in favor of guilds as required pursuant to terms of collectivebargaining agreements, which Liens are (A) subordinated or junior to the claimsof the Lenders hereunder pursuant to documentation that is satisfactory in formand substance to the Agent or (B) on terms otherwise acceptable to the Agent;

 

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(iii)          deposits under workers’ compensation,unemployment insurance and Social Security laws or to secure statutoryobligations or surety or appeal bonds or performance or other similar bonds inthe ordinary course of business (other than completion bonds);

 

(iv)          Liens for taxes, assessments or othergovernmental charges or levies due and payable, the validity or amount of whichis currently being contested in good faith by appropriate proceedings pursuantto the terms of Section 5.11 hereof;

 

(v)           Liens customarily granted or incurredin the ordinary course of business to secure payment for services rendered bylaboratories and production houses and suppliers of materials and equipment;

 

(vi)          mechanic’s liens and Liens inconnection with secured purchase money financings to the extent permitted inSection 6.1(ii) hereof;

 

(vii)         possessory Liens other than on Productor physical properties of Product (other than of laboratories and productionhouses) which (a) occur in the ordinary course of business, (b) secure normaltrade debt which is not yet due and payable, (c) do not secure Indebtedness forborrowed money and (d) do not defer payment terms beyond 180 days;

 

(viii)        Liens arising out of attachments,judgments or awards as to which an appeal or other appropriate proceedings forcontest or review are promptly commenced (and as to which foreclosure and otherenforcement proceedings (a) shall not have been commenced (unless fully bondedor otherwise effectively stayed) or (b) in any event shall be promptly fullybonded or otherwise effectively stayed);

 

(ix)           Liens arising from zoningrestrictions or easements;

 

(x)            the Liens of the Agent under thisAgreement, the other Fundamental Documents and other documents contemplatedhereby;

 

(xi)           existing Liens listed on Schedule3.18(c) hereto; provided, however, that, without the consent of theRequired Lenders, any Indebtedness secured by any such Lien may not beincreased, extended or renewed and such Lien may not extend to any otherproperty of the Credit Party.

 

(xii)          interests of lessees and licensees inproperty owned by the Borrower or any of its Subsidiaries where such interestsare created in the ordinary course of their respective leasing and licensingactivities and are not created directly or indirectly in connection with theborrowing of money or the securing of Indebtedness by the Borrower or any ofits Subsidiaries;

 

(xiii)         Liens in favor of customs and revenueauthorities arising as a matter of law or regulation to secure the payment ofcustoms duties in connection with the importation of goods and deposits made tosecure statutory obligations in the form of excise taxes;

 

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(xiv)        statutory Liens of depository orcollecting banks on items in collection and any accompanying documents or theproceeds thereof;

 

(xv)         Liens arising from precautionary UCCfinancing statement filings regarding operating leases;

 

(xvi)        statutory and contractual landlordsLiens securing amounts which are not delinquent beyond any applicable graceperiod or which are being contested in good faith; and

 

(xvii)       from and after the Amendment No. 17Effective Date, Liens granted by the Borrower or any other Credit Party infavor of HCC or its Affiliates securing the Recapitalized Debt, so long as suchLiens are subject in all respects to the Recapitalized Debt IntercreditorAgreement.

 

SECTION6.3.  Guaranties.  Incur, create, assume or suffer to exist anyGuaranty, either directly or indirectly, or otherwise in any way becomeresponsible for any Indebtedness (including working capital maintenance, pay orplay contracts or other similar obligations) of any other Person, contingentlyor otherwise, except (i) for the endorsement of negotiable instruments by aCredit Party in the ordinary course of business, (ii) for Guaranties whichwould constitute investments in items of Product not otherwise prohibitedhereunder, (iii) for existing Guaranties listed on Schedule 3.18(b) hereto,(iv) as permitted in Section 6.1 hereof and (v) [Intentionally omitted].

 

SECTION6.4.  Limitations on Investments.  Make any Investment (including any loans toany shareholder or other Affiliate of the Borrower) except:

 

(i)            purchases of Cash Equivalents;

 

(ii)           loans to officers and travel advancesin the ordinary course of business to employees and/or officers; provided, however,that the aggregate amount of such loans and/or advances may not exceed$2,000,000 at any time;

 

(iii)          [Intentionally omitted;]

 

(iv)          additional Investments not in excessof $5,000,000 in the aggregate in entities which are not wholly-ownedSubsidiaries;

 

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(v)           with the prior written consent of theRequired Lenders, investments representing ownership interests (whether in cashor otherwise) for acquisition purposes;

 

(vi)          intercompany advances from theBorrower or any Guarantor to a Guarantor; and

 

(vii)         [Intentionally omitted.]

 

SECTION6.5.  Restricted Payments. Pay ordeclare or enter into any agreement to pay or otherwise become obligated tomake any Restricted Payments other than:

 

(i)            stock dividends paid solely in sharesof stock of the Borrower or another Guarantor which stock is not subject to anymandatory redemption or redemption at the option of the holder;

 

(ii)           payments by a Credit Party to anotherCredit Party;

 

(iii)          [Intentionally omitted];

 

(iv)          payments to Hallmark, Hallmark Cardsor an Affiliate as described below:  (a)any of the following payments with respect to the Recapitalized Debt: (1)scheduled payments of interest on the Term A Loan Recapitalized Debt and on theTerm Loan B Recapitalized Debt, in each case to the extent set forth in theRecapitalization Credit Agreement as in effect as of the Amendment No. 17Effective Date (including that the Borrower may make scheduled interestpayments on the Term Loan B Recapitalized Debt in cash notwithstanding that theBorrower has the option to pay interest thereon in kind through December 31,2010) and (2) scheduled amortization of the Recapitalized Intercompany Debt andmandatory prepayments of principal (i.e., with the proceeds of dispositions,equity issuances, debt issuances and condemnations) on the RecapitalizedIntercompany Debt, in each case, to the extent set forth under theRecapitalization Credit Agreement as in effect as of the Amendment No. 17Effective Date; (b) payments with respect to any other valid outstandingobligation other than obligations set forth in clause (a) above; or (c)commercially reasonable fees to Hallmark Cards in consideration for HallmarkCards having extended the Hallmark Cards Facility Guarantee; provided that, itshall be a condition to the making of any and all payments under this Section6.5(iv), that (1) no Default or Event of Default has occurred and is continuingafter giving effect on a pro forma basis to such payments, and (2) the Borroweris a public company;

 

(v)           issuance of common stock for or uponconversion of preferred stock or debt of the Borrower;

 

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(vi)          payments of dividends on the Series APreferred Stock pursuant to the terms applicable to the Series A PreferredStock as of the Amendment No. 17 Effective Date; provided that, it shall be acondition to the making of any and all payments under this Section 6.5(vi),that (1) no Default or Event of Default has occurred and is continuing aftergiving effect on a pro forma basis to such payments, and (2) the Borrower is apublic company; and

 

(vii)         issuance of common stock or payment ofamounts pursuant to Restricted Stock Unit Agreements of the Borrower insettlement of awards made to employees pursuant to the terms of thoseAgreements.

 

SECTION6.6.  Limitations on Sale of Assets.  Sell, lease, license, transfer or otherwisedispose of:

 

(i)            items of Product other than in theordinary course of business, provided that the Credit Parties shall notbe entitled to sell, transfer or alienate their entire right, title or interestin and to items of Product with an aggregate value in excess of $4,000,000; and

 

(ii)           any of the channels owned or operatedby 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 asowner or operator) or indirectly (e.g., by selling, assigning orotherwise transferring the Credit Party’s rights in any Platform Agreement), providedthat a Credit Party shall at all times be entitled to dispose of some or all ofits rights as owner or operator of a channel in a territory to the extent suchdisposition is required (x) by Applicable Law in the territory in which thechannel is available or (y) in order to comply with local practices and/orcustoms in the relevant territory relating to the ownership or operation ofchannels by non-residents; and

 

(iii)          any other property of the CreditParties, other than dispositions made in the ordinary course of businessinvolving property with an aggregate fair market value at the time ofdisposition of less than $100,000.

 

Thelimitation contained in clause (ii) of the preceding sentence shall not limitthe rights of the Credit Parties to shut down existing operations they believeto be no longer financially beneficial or to acquire the ownership of, orrights to operate, channels in new territories, or to expand existing channelsinto new territories, through joint ventures or such other arrangements as maybe otherwise permitted by the terms of this Agreement, provided that anydisposition of such rights and interests (once so acquired) may only be made incompliance with the terms of clause (ii) of the preceding sentence.

 

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SECTION6.7.  Receivables.  Sell, discount or otherwise dispose of notes,accounts receivable or other obligations owing to a Credit Party except for thepurpose of collection in the ordinary course of business.

 

SECTION6.8.  Tax Shelters, Sale and Leasebacketc.  Enter into any arrangement withany Person or Persons other than a Credit Party, whereby in contemporaneoustransactions a Credit Party sells essentially all of its right, title andinterest in an item of Product or upon which an item of Product is based andacquires or licenses the right to distribute or exploit such item of Product inmedia and markets accounting for substantially all the value of such item ofProduct; except on terms customary in the entertainment industry and subject tothe Agent’s approval.

 

SECTION6.9.  [Intentionally omitted.]

 

SECTION6.10.  [Intentionally omitted.]

 

SECTION6.11.  Transactions with Affiliates.  Effect any transaction with an Affiliate on abasis less favorable to a Credit Party than would have been the case if suchtransaction had been effected at arms-length with a Person other than anAffiliate.

 

SECTION6.12.  Prohibition of Amendments orWaivers.  Amend, alter, modify, orwaive, or consent to any amendment, alteration, modification or waiver of anymaterial agreement to which any Credit Party is a party or the terms thereof inany manner which would change, alter or waive any material term thereof andwhich might (i) materially and adversely affect the collectability of accountsreceivable, (ii) materially and adversely affect the financial condition of theCredit Party on a consolidated basis, (iii) materially and adversely affect therights of the Agent, the Issuing Bank or the Lenders under this Agreement, theother Fundamental Documents and any other agreements contemplated hereby, (iv)materially decrease the value of the Collateral, (v) with respect to anyRecapitalization Credit Document , increase the rate of interest on any of theRecapitalized Debt, accelerate the date on which cash interest payments becomeobligatory for the Term B Recapitalized Indebtedness, impose any requiredamortization of any of the Recapitalized Debt or impose or tighten anymandatory repayment provisions beyond those in effect as of the Amendment No.17 Effective Date or shorten any maturity date with respect to anyRecapitalized Debt or which would otherwise modify any term thereof to thedetriment of 

 

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anyCredit Party and/or the Lenders (and without limiting the foregoing, the CreditParties shall not enter into any amendment to any Recapitalized Credit Documentwithout having provided the Administrative Agent a substantially final draftthereof at least five (5) Business Days prior to the proposed executionthereof) or (vi) accelerate any date on which dividends on the Series APreferred Stock accrue, increase the rate of dividends on the Series APreferred Stock or reduce any flexibility of the Borrower to pay any dividendon the Series A Preferred Stock in kind rather than in cash.

 

SECTION6.13.  No Negative Pledge.  Enter into any agreement after the datehereof (other than Fundamental Documents) which prohibits the creation orassumption of any Lien upon the properties or assets of any Credit Party,whether now owned or hereafter acquired or requiring an obligation to besecured if some other obligation is secured.

 

SECTION6.14.  Acquisitions or Mergers, etc.  Merge into or consolidate with a Person oracquire substantially all the assets of another Person other than acquisitionsof cable channels provided that such acquisitions shall not be for cashconsideration and providedfurther, that after giving effect toany such transaction there would not exist any Default or Event of Defaulthereunder and a Credit Party shall be the surviving entity.  In addition, (a) any Guarantor may merge withany other Guarantor or with the Borrower and (b) Hallmark Holdings and HallmarkEntertainment Investments Co. may merge into the Borrower, with the Borrowerbeing the surviving entity, in connection with the Recapitalization.

 

SECTION6.15.  Production.  Engage in production of Items of Product inany fiscal year having an aggregate budgeted negative cost in excess of $5million.

 

SECTION6.16.  Change in Business.  Engage in any business activity other than(i) activities incident and related to the acquisition, distribution andlicensing of Product; (ii) the operation of television channels; or (iii) thedevelopment and operation of the interactive television business.

 

SECTION6.17.  ERISA Compliance.  Engage in a “prohibited transaction”, asdefined in Section 406 of ERISA or Section 4975 of the Code, with respect to anyPlan 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) orERISA and Section 4975(e)(2) of the Code, respectively, engaging in any “prohibitedtransaction”, with respect to any Plan or Multiemployer Plan; or permit anyPlan to incur any “accumulated funding deficiency”, as defined in Section 302of ERISA or Section 412 of the Code, unless such incurrence shall have beenwaived in advance by the Internal Revenue Service; or terminate any Plansubject to Title IV of ERISA in a manner which could result in the impositionof a Lien on any property of any Credit Party pursuant to

 

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Section4068 of ERISA; or breach or knowingly permit any employee or officer or anytrustee or administrator of any Plan to breach any fiduciary responsibilityimposed under Title I of ERISA with respect to any Plan; engage in anytransaction which would result in the incurrence of a liability under Section4069 of ERISA; or fail to make contributions to a Plan or Multiemployer Planwhich could result in the imposition of a Lien on any property of any CreditParty pursuant to Section 302(f) of ERISA or Section 412(n) of the Code, if theoccurrence of any of the foregoing events (alone or in the aggregate) couldresult in a liability which has a Material Adverse Effect.

 

SECTION6.18.  Interest Rate ProtectionAgreements, etc.  Enter into anyInterest Rate Protection Agreement or Currency Agreement for other than bonafide hedging purposes.

 

SECTION6.19.  Subsidiaries.  Acquire or create any new direct or indirectSubsidiary; provided, however, that a Credit Party may organizeadditional Subsidiaries if each such Subsidiary executes an Instrument ofAssumption and Joinder in the form attached hereto as Exhibit J whereby suchSubsidiary becomes a Credit Party hereunder and the certificates representing100% of the shares of capital stock or other Equity Interests, of suchSubsidiary held by such Credit Party become part of the Pledged Securitieshereunder and are delivered to the Agent together with stock powers for eachsuch certificate or such other documents that are necessary providing for thetransfer of a membership interest of a Subsidiary that is an LLC.

 

SECTION6.20.  Hazardous Materials.  Cause or permit any of its properties orassets to be used to generate, manufacture, refine, transport, treat, store,handle, dispose, transfer, produce or process Hazardous Materials, except incompliance in all material respects with all applicable Environmental Laws, norrelease, discharge, dispose of or permit or suffer any release or disposal as aresult of any intentional act or omission on its part of Hazardous Materialsonto any such property or asset in material violation of any Environmental Law.

 

SECTION6.21.  [Intentionally omitted.]

 

SECTION6.22.  [Intentionally omitted.]

 

SECTION6.23.  [Intentionally omitted.]

 

SECTION6.24.  [Intentionally omitted.]

 

SECTION6.25.  [Intentionally omitted.]

 

SECTION6.26.  Corporate Structure.  Create any first tier Subsidiary other thanCM Intermediary or have any asset relating to the channels at a corporate levelabove CM Intermediary.

 

SECTION6.27.  [Intentionally omitted.]

 

SECTION6.28.  No New Liens.   Permit any portion of the Recapitalized Debtor any Equity Interests issued in connection with the Recapitalization to besecured by any asset which does not secure the Facility, or permit HCC or anyother holder of any of the Recapitalized Debt to file any document in order toperfect any security interest under

 

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anyRecapitalization Credit Document unless the Administrative Agent has filed asimilar document (but on a first lien basis).

 

7.             EVENTS OF DEFAULT

 

Inthe case of the happening and during the continuance of any of the followingevents (herein called “Events of Default”):

 

(a)           any representationor warranty made by any Credit Party in this Credit Agreement or in any otherFundamental Document or any statement or representation made by any CreditParty in any report, financial statements, certificate or other documentfurnished by or on behalf of any Credit Parties to the Agent or any Lenderpursuant to this Credit Agreement or any other Fundamental Document, shallprove to have been false or misleading in any material respect when made ordelivered;

 

(b)           default shall bemade in the payment of any principal of or interest on the Loans or Letter ofCredit reimbursement obligations or of any fees or other amounts payable by theBorrower hereunder, when and as the same shall become due and payable, whetherat the due date thereof or at a date fixed for prepayment thereof or byacceleration thereof or otherwise, and, in the case of payments of interest,such default shall continue unremedied for five (5) days after receipt bythe Borrower of an invoice therefor;

 

(c)           default shall bemade by any Credit Party in the due observance or performance of any covenant,condition or agreement contained in Section 5.1(h), Section 5.4 or Article 6(other than Sections 6.3, 6.7, 6.8, 6.11, 6.15, 6.17, and 6.18) of this Agreement;

 

(d)           default shall bemade by any Credit Party in the due observance or performance of any othercovenant, condition or agreement to be observed or performed pursuant to theterms of this Agreement, or any other Fundamental Document and such default shallcontinue unremedied for fifteen (15) consecutive days after any Credit Partyobtains knowledge or receives written notice from the Agent or any Lenderthereof;

 

(e)           default shall bemade 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 inconnection with any such Indebtedness, if the effect of such default is toaccelerate the maturity of such Indebtedness or to permit the holder thereof tocause such Indebtedness to become due prior to its stated maturity and suchdefault shall not be remedied, cured, waived or consented to within the periodof grace with respect thereto;

 

(f)            any Credit Party orHallmark Cards****shall generally notpay its debts as they become due or shall admit in writing its inability to payits debts, or shall make a general assignment for the benefit of creditors; orany such Person shall commence any case, proceeding or other action seeking tohave an order for relief entered on its behalf or to adjudicate it a bankruptor insolvent, or seeking reorganization, arrangement, adjustment, liquidation,dissolution or composition of it or its debts under any law relating tobankruptcy, insolvency, reorganization or relief of such Person or seeking appointmentof a receiver, trustee, custodian or other similar official for it or for allor any substantial part of its property or shall file an answer or otherpleading in any such case, proceeding or other action 

 

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admittingthe material allegations of any petition, complaint or similar pleading filedagainst it or consenting to the relief sought therein; or any such Person shalltake any action to authorize any of the foregoing;

 

(g)           any involuntarycase, proceeding or other action against any Credit Party or Hallmark Cardsshall be commenced seeking to have an order for relief entered against it or toadjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,adjustment, liquidation, dissolution or composition of it or its debts underany law relating to bankruptcy, insolvency, reorganization or relief of suchPerson, or seeking appointment of a receiver, trustee, custodian or othersimilar official for it or for all or any substantial part of its property, andsuch case, proceeding or other action (i) results in the entry of anyorder for relief against it or (ii) shall remain undismissed for a periodof thirty (30) days;

 

(h)           final judgment(s) forthe payment of money in excess of $100,000 shall be rendered in the aggregateagainst any Credit Party which within thirty (30) days from the entry of suchjudgment shall not have been discharged or stayed pending appeal or which shallnot have been discharged within thirty (30) days from the entry of a finalorder of affirmance on appeal;

 

(i)            this CreditAgreement, the Copyright Security Agreement, any Copyright Security AgreementSupplement or any Trademark Security Agreement (each, a “Security Document”)shall, for any reason, not be or shall cease to be in full force and effect orshall be declared null and void or any of the Security Documents shall not giveor shall cease to give the Agent the Liens, rights, powers and privilegespurported to be created thereby in favor of the Agent for the benefit of theAgent, the Issuing Bank and the Lenders, superior to and prior to the rights ofall third Persons and subject to no other Liens (other than PermittedEncumbrances), or the validity or enforceability of the Liens granted, to begranted, or purported to be granted, by any of the Security Documents shall becontested by any Credit Party or any of their respective Affiliates;

 

(j)            [Intentionallyomitted;]

 

(k)           a Change in Controlshall occur;

 

(l)            [Intentionallyomitted.]

 

(m)          (i)  any CreditParty or ERISA Affiliate shall fail to make any contributions required to bemade to a Plan subject to Title IV of ERISA or Multiemployer Plan, (ii) anyaccumulated funding deficiency (within the meaning of Section 4971 of theCode) shall exist with respect to any Plan (whether or not waived) or an applicationshall have been made to the Secretary of the Treasury for a waiver ormodification of the minimum funding standards (including any requiredinstallment payments) or an extension of any amortization period under Section 412of the Code with respect to a Plan, (iii) any Credit Party or ERISAAffiliate shall have been notified by the sponsor of a Multiemployer Plan thatit has incurred withdrawal liability to such Multiemployer Plan, or that aMultiemployer Plan is in reorganization or is being terminated, (iv) aReportable Event with respect to a Plan shall have occurred, (v) anyCredit Party or ERISA Affiliate shall withdraw from a Plan during a plan yearin which it was a 

 

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substantialemployer (within the meaning of section 4001(a)(2) or 4062(e) ofERISA), (vi) a U.S. Plan subject to Title IV of ERISA shall be terminated,or notice of intent to terminate a Plan under section 4041(c) of ERISAshall be filed, (vii) proceedings to terminate, a Plan subject to Title IVof ERISA shall be instituted by the PBGC or a trustee shall be appointed withrespect to any such Plan, (viii) any other event or condition which couldconstitute 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 ofERISA shall occur, or (ix) a Lien pursuant to section 412 of the Code orsection 302 of ERISA shall be imposed as to any Credit Party or ERISAAffiliate;

 

(n)           Hallmark Cards shallhave breached or disaffirmed any Fundamental Document to which it is a party orits obligations thereunder shall cease to be in full force and effect or shallbe void or voidable or any such Person shall contest the enforceability of anyprovision thereof;

 

(o)           [Intentionallyomitted;]

 

(p)           a termination byHallmark Cards or by any of its affiliates of (or any notice by any such Personthat it intends to terminate) the right of the Borrower or any of itsSubsidiaries to use the “Hallmark” name or the “Crown” name in their respectivetelevision services or on or with respect to any channels owned or operated bythe Borrower or any of its Subsidiaries;

 

(q)           [Intentionallyomitted;]

 

(r)            [Intentionallyomitted;]

 

(s)           any default shalloccur in the performance of any obligation or agreement under any of theRecapitalization Debt Documents, whether arising in connection with a failureto make payments thereunder, in connection with any breach of representation,warranty covenant or otherwise if the effect of such default is to acceleratethe maturity of such Recapitalized Debt or to permit the holder thereof tocause such Indebtedness to become due prior to its stated maturity and suchdefault shall not be remedied, cured, waived or consented to within the periodof grace with respect thereto; or

 

(t)            the Hallmark CardsFacility Guarantee shall have expired or otherwise terminated or Hallmark Cardsshall have disavowed its obligations thereunder or a default shall otherwisehave occurred in accordance with the terms thereof.

 

then,in every such event and at any time thereafter during the continuance of suchevent, the Agent may, or if directed by the Required Lenders shall, take any orall of the following actions, at the same or different times: (x) terminateforthwith the Commitments, (y) declare the principal of and the intereston the Loans and the Notes and all other amounts payable hereunder orthereunder to be forthwith due and payable, whereupon the same shall become andbe forthwith due and payable, without presentment, demand, protest, or othernotice of any kind, all of which are hereby expressly waived, anything in thisAgreement or in the Notes to the contrary notwithstanding and/or (z) requirethe Borrower to deliver to the Agent from time to time Cash Equivalents in anamount equal to the full amount of the L/C Exposure or to furnish other 

 

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securitytherefor acceptable to the Required Lenders. If an Event of Default specified in paragraphs (f) or (g) aboveshall have occurred, the Commitments shall automatically terminate and theNotes and all other amounts payable hereunder and thereunder shallautomatically become due and payable, without presentment, demand, protest, orother notice of any kind, all of which are hereby expressly waived, anything inthis Credit Agreement or the Notes to the contrary notwithstanding.  Such remedies shall be in addition to anyother remedy available to the Agent, the Lenders or the Issuing Bank pursuantto Applicable Law or otherwise.

 

8.             GRANT OF SECURITY INTEREST;REMEDIES

 

SECTION 8.1.  SecurityInterests.  The Borrower, as securityfor the due and punctual payment of the Obligations (including interestaccruing on and after the filing of any petition in bankruptcy or ofreorganization of the Borrower whether or not post filing interest is allowedin such proceeding) and each of the Guarantors, as security for its obligationsunder Article 10 hereof, hereby mortgages, pledges, assigns, transfers,sets over, conveys and delivers to the Agent (for the benefit of the Agent, theIssuing Bank and the Lenders) and grants to the Agent (for the benefit of theAgent, the Issuing Bank and the Lenders) a security interest in the Collateral.

 

SECTION 8.2.  Use ofCollateral.  So long as no Event ofDefault shall have occurred and be continuing, and subject to the variousprovisions of this Credit Agreement and the other Fundamental Documents, aCredit Party may use the Collateral in any lawful manner except as otherwiseprovided hereunder.

 

SECTION 8.3.  CollectionAccounts.  (a) The CreditParties will maintain or establish collection bank accounts (each, a “CollectionAccount”) and will direct, by a notice of assignment and irrevocableinstructions in form acceptable to the Agent, all Persons who become licensees,buyers or account debtors under receivables with respect to any item of Productincluded in the Collateral to make payments under or in connection with thelicense agreements, sales agreements or receivables directly to a CollectionAccount.  Upon agreement between theAgent and the Borrower, a Collection Account may also serve as the CashCollateral Account, provided that such Collection Account is in the nameof the Agent (for the benefit of itself, the Issuing Bank and the Lenders) andis under the sole dominion and control of the Agent.  So long as no Event of Default is continuingthe Borrower shall have full and unfettered access to the CollectionAccounts.  A list of all CollectionAccounts of the Borrower existing as of the Amendment No. 17 EffectiveDate is attached as Schedule 8.3.

 

(b)           The Credit Partieswill execute such documentation as may be reasonably required by the Agent inorder to effectuate the provisions of this Section 8.3.

 

(c)           In the event aCredit Party receives payment from any Person, which payment should have beenremitted directly to a Collection Account, such Credit Party shall promptlyremit such payment or proceeds to a Collection Account to be applied inaccordance with the terms of this Credit Agreement.

 

(d)           All such CollectionAccounts shall be maintained with the Agent or with such other financialinstitutions as may be approved by the Agent (subject to their willingness to 

 

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executeappropriate documentation as required by this Section 8.3), subject to theright of the Agent to at any time withdraw such approval and transfer any suchCollection Account(s) to the Agent or another approved financialinstitution acceptable to the Borrower.

 

SECTION 8.4.  CreditParties to Hold in Trust.  Upon theoccurrence and during the continuance of an Event of Default, each Credit Partywill, upon receipt by it of any revenue, income, profits or other sums in whicha security interest is granted by this Article 8, payable pursuant to anyagreement or otherwise, or of any check, draft, note, trade acceptance or otherinstrument evidencing an obligation to pay any such sum, hold the sum in trustfor the Agent (for the benefit of the Agent, the Issuing Bank and the Lenders),segregate such sum from its own assets and forthwith, without any notice ordemand whatsoever (all notices, demands, or other actions on the part of theAgent, the Issuing Bank or the Lenders being expressly waived), endorse,transfer and deliver any such sums or instruments or both to the Agent to beapplied to the repayment of the Obligations in accordance with the provisionsof Section 8.7 hereof.

 

SECTION 8.5.  Collections, etc.  Upon the occurrence and during thecontinuance of an Event of Default, the Agent may, in its sole discretion, inits name or in the name of any Credit Party or otherwise, demand, sue for,collect or receive any money or property at any time payable or receivable onaccount of or in exchange for, or make any compromise or settlement deemeddesirable with respect to, any of the Collateral, but shall be under noobligation so to do, or the Agent may extend the time of payment, arrange forpayment in installments, or otherwise modify the terms of, or release, any ofthe Collateral, without thereby incurring responsibility to, or discharging orotherwise affecting any liability of, the Credit Parties.  The Agent will not be required to take anysteps to preserve any rights against prior parties to the Collateral.  If the Credit Parties fail to make anypayment or take any action required hereunder, the Agent may make such paymentsand take all such actions as the Agent reasonably deems necessary to protectthe Agent’s (for the benefit of itself, the Issuing Bank and the Lenders)security interests in the Collateral and/or the value thereof, and the Agent ishereby authorized (without limiting the general nature of the authority hereinabove conferred) to pay, purchase, contest or compromise any Liens that in thejudgment of the Agent appear to be equal to, prior to or superior to thesecurity interests of the Agent in the Collateral and any Liens not expresslypermitted by this Credit Agreement.

 

SECTION 8.6.  Possession,Sale of Collateral, etc.  Uponthe occurrence and during the continuance of an Event of Default, the Agent mayenter upon the premises of any Credit Party or wherever the Collateral may be,and take possession of the Collateral, and may demand and receive suchpossession from any Person who has possession thereof, and the Agent may takesuch measures as it may deem necessary or proper for the care or protectionthereof, including the right to remove all or any portion of the Collateral,and with or without taking such possession may sell or cause to be sold,whenever the Agent shall decide, in one or more sales or parcels, at suchprices as the Agent may deem best, and for cash or on credit or for future delivery,without assumption of any credit risk, all or any portion of the Collateral, atany broker’s board or at public or private sale, without demand of performanceor notice of intention to sell or of time or place of sale (except 7 days’written notice to the Borrower of the time and place of any such public sale orsales and such other notices as may be required by Applicable Law and cannot bewaived), and any Person may be the purchaser of all or any portion of theCollateral so sold and thereafter hold the same absolutely, free (to thefullest extent permitted by 

 

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ApplicableLaw) from any claim or right of whatever kind, including any equity ofredemption, of any Credit Party, any such demand, notice, claim, right orequity being hereby expressly waived and released.  At any sale or sales made pursuant to this Article 8,the Agent may bid for or purchase, free (to the fullest extent permitted byApplicable Law) from any claim or right of whatever kind, including any equityof redemption, of any Credit Party, any such demand, notice, claim, right orequity being hereby expressly waived and released, any part of or all of theCollateral offered for sale, and may make any payment on account thereof byusing any claim for moneys then due and payable to the Agent, the Issuing Bankand the Lenders by any Credit Party hereunder as a credit against the purchaseprice.  The Agent shall in any such salemake no representations or warranties with respect to the Collateral or anypart thereof, and the Agent shall not be chargeable with any of the obligationsor liabilities of any Credit Party.  EachCredit Party hereby agrees (i) that it will indemnify and hold the Agent,the Issuing Bank and the Lenders harmless from and against any and all claimswith respect to the Collateral asserted before the taking of actual possessionor control of the relevant Collateral by the Agent pursuant to this Article 8,or arising out of any act of, or omission to act on the part of, any partyother than the Agent prior to such taking of actual possession or control bythe Agent, or arising out of any act on the part of any Credit Party, or itsagents before or after the commencement of such actual possession or control bythe Agent; and (ii) none of the Agent, the Lenders or the Issuing Bankshall have any liability or obligation to any Credit Party arising out of anysuch claim except for acts by the Agent, the Lenders or the Issuing Bank ofwillful misconduct or gross negligence or acts not taken in good faith.  Subject only to the lawful rights of thirdparties, any laboratory which has possession of any of the Collateral is herebyconstituted and appointed by each Credit Party as pledgeholder for the Agentand, upon the occurrence and during the continuance of an Event of Default, eachsuch pledgeholder is hereby authorized to sell all or any portion of theCollateral upon the order and direction of the Agent, and each Credit Partyhereby waives any and all claims, for damages or otherwise, for any actiontaken by such pledgeholder in accordance with the terms of the UCC nototherwise waived hereunder.  In anyaction hereunder, the Agent shall be entitled to the appointment of a receiver,without notice, to take possession of all or any portion of the Collateral andto exercise such powers as the court shall confer upon the receiver.  Notwithstanding the foregoing, upon theoccurrence and during the continuance of an Event of Default, the Agent shallbe entitled to apply, without prior notice to any Credit Party, any cash orcash items constituting Collateral in the possession of the Agent to payment ofthe Obligations.

 

SECTION 8.7.  Applicationof Proceeds on Default.  Upon theoccurrence and during the continuance of an Event of Default, the balances inthe Clearing Account, the Collection Account(s), the Cash Collateral Account(s) orin any account of the Credit Party with a Lender, all other income earned onthe Collateral, and all proceeds from any sale of the Collateral pursuanthereto shall be applied first toward payment of the reasonable out-of-pocketcosts and expenses paid or incurred by the Agent in enforcing this CreditAgreement, in realizing on or protecting any Collateral and in enforcing orcollecting any Obligations or any Guaranty thereof, including, without limitation,court costs and the reasonable attorney’s fees and expenses incurred by theAgent, then to satisfy or provide cash Collateral for all Obligations relatingto the Letters of Credit, and then to the payment in full of the Obligations inaccordance with Section 12.2(b) hereof.  Any amounts remaining after such payment infull shall be remitted to the appropriate Credit Party or as a court ofcompetent jurisdiction may otherwise direct.

 

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SECTION 8.8.  Power ofAttorney.  Upon the occurrence andduring the continuance of an Event of Default which is not waived in writing bythe Required Lenders (a) each of the Credit Parties does herebyirrevocably make, constitute and appoint the Agent or any of its officers ordesignees its true and lawful attorney-in-fact with full power in the name ofthe Agent or such other Person to receive, open and dispose of all mailaddressed to any Credit Party, and to endorse any notes, checks, drafts, moneyorders or other evidences of payment relating to the Collateral that may comeinto the possession of the Agent, with full power and right to cause the mailof such Persons to be transferred to the Agent’s own offices or otherwise, andto do any and all other acts necessary or proper to carry out the intent ofthis Agreement and the grant of the security interests hereunder and under theother Fundamental Documents, and each of the Credit Parties hereby ratifies andconfirms all that the Agent or its substitutes shall properly do by virtuehereof; (b) each of the Credit Parties does hereby further irrevocablymake, constitute and appoint the Agent or any of its officers or designees itstrue and lawful attorney-in-fact in the name of the Agent or any Credit Party (i) toenforce all of such Credit Party’s rights under and pursuant to all agreementswith respect to the Collateral, all for the sole benefit of the Agent, for thebenefit of itself, the Issuing Bank and the Lenders, and to enter into suchother agreements as may be necessary or appropriate in the judgment of theAgent to complete the distribution or exploitation of any item of Product whichis included in the Collateral, (ii) to enter into and perform suchagreements as may be necessary in order to carry out the terms, covenants andconditions of the Fundamental Documents that are required to be observed orperformed by such Credit Party, (iii) to execute such other and furthermortgages, pledges and assignments of the Collateral, and related instrumentsor agreements, as the Agent may reasonably require for the purpose ofperfecting, protecting, maintaining or enforcing the security interests grantedto the Agent, for the benefit of itself, the Issuing Bank and the Lenders,hereunder and under the other Fundamental Documents, and (iv) to do anyand all other things necessary or proper to carry out the intention of thisAgreement and the grant of the security interests hereunder.  In the event the Agent exercises the power ofattorney granted herein, the Agent shall use reasonable efforts to providesubsequent written notice promptly to the Borrower in accordance with Section 13.1.  Each of the Credit Parties hereby ratifiesand confirms in advance all that the Agent as such attorney-in-fact or itssubstitutes shall properly do by virtue of this power of attorney.

 

SECTION 8.9.  FinancingStatements, Direct Payments, Confirmation of Receivables and Audit Rights.  Each Credit Party hereby authorizes the Agentto file Uniform Commercial Code financing statements (covering all of theproperty of such Credit Party) and any amendments thereto or continuationsthereof, any Copyright Security Agreement, any Copyright Security AgreementSupplement and any Trademark Agreement Supplement and any other appropriatesecurity documents or instruments and to give any notices necessary or desirableto perfect the Lien of the Agent (for the benefit of itself, the Issuing Bankand the Lenders) on the Collateral, in all cases without the signatures of therelevant Credit Party or to execute such items as attorney-in-fact for theCredit Party.  Each Credit Party furtherauthorizes the Agent (i) upon the occurrence and during the continuance ofan Event of Default, to notify any account debtor that all sums payable to suchCredit Party relating to the Collateral shall be paid directly to the Agent; (ii) toconfirm directly with account debtors the amounts payable by them to suchCredit Party with regard to the Collateral and the terms of all accountsreceivable; and (iii) to participate with such Credit Party in the auditsof its account debtors or to request that such Credit Party’s auditors confirmwith account debtors the amounts and terms of all accounts receivable.  The 

 

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Agenthereby agrees to provide the Borrower with copies of any notification orwritten requests sent by the Agent to such account debtors at the same time asthe mailing of such documents.

 

SECTION 8.10.  FurtherAssurances.  Upon the request of theAgent, each Credit Party hereby agrees to duly and promptly execute anddeliver, or cause to be duly executed and delivered, at the cost and expense ofthe Credit Party, such further instruments as may be necessary or proper, inthe judgment of the Agent, to carry out the provisions and purposes of this Article 8,and to do all things necessary, in the judgment of the Agent, to perfect andpreserve the Liens of the Agent for the benefit of itself, the Issuing Bank andthe Lenders hereunder and under the other Fundamental Documents in theCollateral or any portion thereof.

 

SECTION 8.11.  Terminationand Release.  The security interestsgranted under this Article shall terminate when all the Obligations havebeen indefeasibly fully paid and performed and the Commitments shall haveterminated and all Letters of Credit shall have expired or been terminated orcancelled.  Upon request by the Borrower(and at the sole expense of the Borrower) after such termination, the Agentwill take all reasonable action and do all things reasonably necessary,including executing Uniform Commercial Code terminations, PledgeholderAgreement terminations, termination letters to account debtors and copyrightreassignments, to release the security interest granted to it hereunder.

 

SECTION 8.12.  RemediesNot Exclusive.  The remediesconferred upon or reserved to the Agent in this Article 8 are intended tobe in addition to, and not in limitation of, any other remedy or remediesavailable to the Agent.  Without limitingthe generality of the foregoing, the Agent and the Lenders shall have allrights and remedies of a secured creditor under Article 9 of the UCC andunder any other Applicable Law.

 

SECTION 8.13.  Continuationand Reinstatement.  Each Credit Partyfurther agrees that the security interest granted hereunder shall continue tobe effective or be reinstated, as the case may be, if at any time payment orany part thereof of any Obligation is rescinded or must otherwise be restoredby the Agent, the Issuing Bank or the Lenders upon the bankruptcy orreorganization of any Credit Party or otherwise.

 

9.             CASH COLLATERAL

 

SECTION 9.1.  CashCollateral Account.  (a)  On orprior to the Closing Date, there shall be established with the Agent acollateral account in the name of the Agent (the “Cash Collateral Account”),into which the Borrower shall from time to time deposit Dollars pursuant to theexpress provisions of this Agreement requiring or permitting such deposit.  Except to the extent otherwise provided inthis Section 9.1, the Cash Collateral Account shall be under the soledominion and control of the Agent.

 

(b)           The Agent is herebyauthorized and directed to invest and reinvest the funds from time to timedeposited in the Cash Collateral Account so long as no Event of Default hasoccurred and is continuing on the instructions of the Borrower (provided thatsuch notice may be given verbally to be confirmed promptly in writing) or, ifthe Borrower shall fail to give such instruction upon delivery of any suchfunds, in the sole discretion of the Agent, provided that in no eventmay the Borrower give instructions to the Agent to, or may the Agent in its 

 

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discretion,invest or reinvest funds in the Cash Collateral Account in other than CashEquivalents described in clause (i) of the definition of Cash Equivalentsor described in clauses (ii) and (iii) of the definition of CashEquivalents to the extent issued by The Chase Manhattan Bank.

 

(c)           Any net income orgain on the investment of funds from time to time held in the Cash CollateralAccount shall be promptly reinvested by the Agent as a part of the CashCollateral Account, and any net loss on any such investment shall be chargedagainst the Cash Collateral Account.

 

(d)           Neither the Agentnor the Lenders shall be a trustee for the Borrower, or shall have anyobligations or responsibilities, or shall be liable for anything done or notdone, in connection with the Cash Collateral Account, except as expresslyprovided herein and except that the Agent shall have the obligations of asecured party under the UCC.  The Agentand the Lenders shall not have any obligation or responsibilities and shall notbe liable in any way for any investment decision made pursuant to this Section 9.1or for any decrease in the value of the investments held in the Cash CollateralAccount.

 

SECTION 9.2.  Grant ofSecurity Interest.  For valuereceived and to induce the Lenders to make Loans from time to time to theBorrower and to acquire participations in Letters of Credit from time to timeas provided for in this Credit Agreement, as security for the payment of all ofthe Obligations, (including interest accruing on and after the filing of anypetition in bankruptcy or of reorganization of the Borrower whether or notpost-filing interest is allowed in such proceeding), the Borrower herebyassigns to the Agent (for the benefit of itself, the Issuing Bank and theLenders), and grants to the Agent (for the benefit of itself, the Issuing Bankand the Lenders), a first and prior Lien upon, all the Borrower’s rights in andto the Cash Collateral Account, all cash, documents, instruments and securitiesfrom time to time held therein, and all rights pertaining to investments offunds in the Cash Collateral Account and all products and proceeds of any ofthe foregoing.  All cash, documents,instruments and securities from time to time on deposit in the Cash CollateralAccount, and all rights pertaining to investments of funds in the CashCollateral Account, shall immediately and without any need for any furtheraction on the part of any of the Credit Parties, any Lender or the Agent,become subject to the Lien set forth in this Section 9.2, be deemedCollateral for all purposes hereof and be subject to the provisions of thisAgreement.

 

SECTION 9.3.  Remedies.  At any time during the continuation of anEvent of Default, the Agent may sell any documents, instruments and securitiesheld in the Cash Collateral Account and may immediately apply the proceedsthereof and any other cash held in the Cash Collateral Account in accordancewith Section 8.7.

 

10.           GUARANTY

 

SECTION 10.1.  Guaranty.  (a)  Each of the Guarantors, jointly andseverally, unconditionally and irrevocably guarantees to the Agent, the IssuingBank and the Lenders the due and punctual payment and performance of theObligations (including interest accruing on and after the filing of anypetition in bankruptcy or of reorganization of the obligor whether or not postfiling interest is allowed in such proceeding). Each of the Guarantors further agrees that the Obligations may beincreased, extended or renewed, in whole or in part, without notice or 

 

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furtherassent from it (except as may be otherwise required herein), and it will remainbound under this Article 10 notwithstanding any extension or renewal ofany Obligation.

 

(b)           Each Guarantorwaives presentation to, demand for payment from and protest to, as the case maybe, any Credit Party or any other guarantor of any of the Obligations, and alsowaives notice of protest for nonpayment, notice of acceleration and notice ofintent to accelerate.  The obligations ofeach Guarantor hereunder shall not be affected by (i) the failure of theAgent, the Issuing Bank or the Lenders to assert any claim or demand or toenforce any right or remedy against the Borrower or any Guarantor or any otherguarantor under the provisions of this Credit Agreement or any other agreementor otherwise; (ii) any extension or renewal of any provision hereof orthereof; (iii) the failure of the Agent, the Issuing Bank or the Lendersto obtain the consent of such Guarantor with respect to any rescission, waiver,compromise, acceleration, amendment or modification of any of the terms orprovisions of this Credit Agreement, the Notes or any other agreement; (iv) therelease, exchange, waiver or foreclosure of any security held by the Agent forthe Obligations or any of them; (v) the failure of the Agent, the IssuingBank or the Lenders to exercise any right or remedy against any other Guarantoror any other guarantor of the Obligations; (vi) any bankruptcy,reorganization, liquidation, dissolution or receivership proceeding or case byor against the Borrower or other Credit Party, any change in the corporateexistence, structure, ownership or control of any such Guarantor or any otherCredit Party (including any of the foregoing arising from any merger,consolidation, amalgamation, reorganization or similar transaction); or (vii) therelease or substitution of any Guarantor or any other guarantor of theObligations.

 

(c)           Each Guarantorfurther agrees that this Article 10 is a continuing guaranty, shall securethe Obligations and any ultimate balance thereof, notwithstanding that theBorrower or others may from time to time satisfy the Obligations in whole or inpart and thereafter incur further Obligations, and constitutes a guaranty ofperformance and of payment when due and not just of collection, and waives anyright to require that any resort be had by the Agent, the Issuing Bank or anyLender to any security held for payment of the Obligations or to any balance ofany deposit, account or credit on the books of the Agent, the Issuing Bank orany Lender in favor of the Borrower or any Guarantor or to any other Person.

 

(d)           Each Guarantorhereby expressly assumes all responsibilities to remain informed of thefinancial condition of the Borrower, the Guarantors and any other guarantors ofthe Obligations and any circumstances affecting the Collateral or the PledgedSecurities or the ability of the Borrower to perform under this CreditAgreement.

 

(e)           Each Guarantor’sobligations under the Article 10 shall not be affected by the genuineness,validity, regularity or enforceability of the Obligations, the Notes or anyother instrument evidencing any Obligations, or by the existence, validity,enforceability, perfection, or extent of any collateral therefor or by anyother circumstance relating to the Obligations which might otherwise constitutea defense to this Article 10.  TheAgent, the Issuing Bank and the Lenders make no representation or warranty withrespect to any such circumstances and have no duty or responsibility whatsoeverto any Guarantor in respect to the management and maintenance of theObligations or any collateral security for the Obligations.

 

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SECTION 10.2.  NoImpairment of Guaranty, etc. The obligations of each Guarantor under this Article 10 shall notbe subject to any reduction, limitation, impairment or termination for anyreason (except payment and performance in full of the Obligations), including,without limitation, any claim of waiver, release, surrender, alteration orcompromise, and shall not be subject to any defense or set-off, counterclaim,recoupment or termination whatsoever by reason of the invalidity, illegality orunenforceability of the Obligations or otherwise.  Without limiting the generality of theforegoing, the obligations of each Guarantor under this Article 10 shallnot be discharged or impaired or otherwise affected by the failure of theAgent, the Issuing Bank or any Lender to assert any claim or demand or toenforce any remedy under this Credit Agreement or any other agreement, by anywaiver or modification of any provision hereof or thereof, by any default,failure or delay, willful or otherwise, in the performance of the Obligations,or by any other act or thing or omission or delay to do any other act or thingwhich may or might in any manner or to any extent vary the risk of suchGuarantor or would otherwise operate as a discharge of such Guarantor as amatter of law, unless and until the Obligations are paid in full, theCommitments have terminated and each outstanding Letter of Credit has expiredor otherwise been terminated.

 

SECTION 10.3.  Continuationand Reinstatement, etc.  EachGuarantor further agrees that its guaranty under this Article 10 shallcontinue to be effective or be reinstated, as the case may be, if at any timepayment, or any part thereof, of any Obligation is rescinded or must otherwisebe restored by the Agent, the Issuing Bank or the Lenders upon the bankruptcyor reorganization of the Borrower or a Guarantor, or otherwise.  In furtherance of the provisions of this Article 10,and not in limitation of any other right which the Agent, the Issuing Bank orthe Lenders may have at law or in equity against the Borrower, a Guarantor orany other Person by virtue hereof, upon failure of the Borrower to pay anyObligation when and as the same shall become due, whether at maturity, byacceleration, after notice or otherwise, each Guarantor hereby promises to andwill, upon receipt of written demand by the Agent on behalf of itself, theIssuing Bank and/or the Lenders, forthwith pay or cause to be paid to the Agentfor the benefit of itself, the Issuing Bank and/or the Lenders (as applicable)in cash an amount equal to the unpaid amount of all the Obligations withinterest thereon at a rate of interest equal to the rate specified in Section 2.9(a) hereof,and thereupon the Agent shall assign such Obligation, together with allsecurity interests, if any, then held by the Agent in respect of suchObligation, to the Guarantors making such payment; such assignment to besubordinate and junior to the rights of the Agent on behalf of itself, theIssuing Bank and the Lenders with regard to amounts payable by the Borrower inconnection with the remaining unpaid Obligations and to be pro tanto to theextent to which the Obligation in question was discharged by the Guarantor orGuarantors making such payments.

 

(a)           All rights of aGuarantor against the Borrower, arising as a result of the payment by suchGuarantor of any sums to the Agent for the benefit of the Agent, the IssuingBank and/or the Lenders or directly to the Issuing Bank or the Lendershereunder by way of right of subrogation or otherwise, shall in all respects besubordinated and junior in right of payment to, and shall not be exercised bysuch Guarantor until and unless, the prior final and indefeasible payment infull of all the Obligations.  If anyamount shall be paid to such Guarantor for the account of the Borrower, suchamount shall be held in trust for the benefit of the Agent segregated from suchGuarantor’s own assets and shall forthwith be paid to the Agent on behalf 

 

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ofitself, the Issuing Bank and/or the Lenders to be credited and applied to theObligations, whether matured or unmatured.

 

SECTION 10.4.  Limitationon Guaranteed Amount etc.  (a) Notwithstanding any other provision of this Article 10, the amountguaranteed by each Guarantor under this Article 10 shall be limited to theextent, if any, required so that its obligations under this Article 10shall not be subject to avoidance under Section 548 of the Bankruptcy Codeor to being set aside or annulled under any Applicable Law relating to fraud oncreditors.  In determining the limitations,if any, on the amount of any Guarantor’s obligations under this Article 10pursuant to the preceding sentence, it is the intention of the parties heretothat any rights of subrogation or contribution which such Guarantor may haveunder this Article 10, any other agreement or Applicable Law shall betaken into account.

 

11.           PLEDGE

 

SECTION 11.1.  Pledge.  Each Pledgor, as security for the due andpunctual payment of the Obligations (including interest accruing on and afterthe filing of any petition in bankruptcy or of reorganization of the Borrowerwhether or not post filing interest is allowed in such proceeding) in the caseof the Borrower and as security for its obligations under Article 10hereof in the case of a Pledgor which is a Guarantor, hereby pledges,hypothecates, assigns, transfers, sets over and delivers unto the Agent for thebenefit of itself, the Issuing Bank and the Lenders, a security interest in allPledged Collateral now owned or hereafter acquired by it.  On the Closing Date, the Pledgors shalldeliver to the Agent the definitive instruments (if any) representing allPledged Securities, accompanied by undated stock powers, duly endorsed orexecuted in blank by the appropriate Pledgor, and such other instruments ordocuments as the Agent or its counsel shall reasonably request.

 

SECTION 11.2.  Registrationin Nominee Name; Denominations.  TheAgent shall have the right (in its sole and absolute discretion) to hold thecertificates representing any Pledged Securities (a) in its own name (onbehalf of the Agent, the Issuing Bank and the Lenders) or in the name of itsnominee or (b) in the name of the appropriate Pledgor, endorsed orassigned in blank or in favor of the Agent. Upon the occurrence and continuance of an Event of Default, the Agentshall have the right to exchange the certificates representing any of thePledged Securities for certificates of smaller or larger denominations for anypurpose consistent with this Credit Agreement.

 

SECTION 11.3.  Covenant.  Each Pledgor covenants that as a stockholderof each of its respective Subsidiaries it will not take any action to allow anyadditional shares of common stock, preferred stock or other equity securitiesof any of its respective Subsidiaries or any securities convertible orexchangeable into common or preferred stock of such Subsidiaries to be issued,or grant any options or warrants, unless such securities are pledged to theAgent (for the benefit of itself, the Issuing Bank and the Lenders) as securityfor the Obligations and such Pledgor’s obligations (if any) under Article 10hereof.

 

SECTION 11.4.  VotingRights; Dividends; etc.  (a)       The appropriate Pledgor shall be entitledto exercise any and all voting and/or consensual rights and powers accruing toan owner of the Pledged Securities being pledged by it hereunder or any partthereof for any purpose not 

 

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inconsistentwith the terms hereof, at all times, except as expressly provided in paragraph (c) below.

 

(b)           All dividends ordistributions of any kind whatsoever (other than cash dividends ordistributions paid while no Event of Default is continuing) received by aPledgor, whether resulting from a subdivision, combination, or reclassificationof the outstanding capital stock of the issuer or received in exchange forPledged Securities or any part thereof or as a result of any merger,consolidation, acquisition, or other exchange of assets to which the issuer maybe a party, or otherwise, shall be and become part of the Pledged Securitiespledged hereunder and shall immediately be delivered to the Agent to be heldsubject to the terms hereof.  Alldividends and distributions which are received contrary to the provisions ofthis subsection (b) shall be received in trust for the benefit of theAgent, the Issuing Bank and the Lenders, segregated from such Pledgor’s ownassets, and shall be delivered to the Agent.

 

(c)           Upon the occurrenceand during the continuance of an Event of Default and notice from the Agent ofthe transfer of such rights to the Agent, all rights of a Pledgor (i) toexercise the voting and/or consensual rights and powers which it is entitled toexercise pursuant to this Section and (ii) to receive and retain cashdividends and distributions shall cease, and all such rights shall thereuponbecome vested in the Agent, which shall have the sole and exclusive right andauthority to exercise such voting and/or consensual rights and receive suchcash dividends and distributions until such time as all Events of Default havebeen cured.

 

SECTION 11.5.  RemediesUpon Default.  If an Event of Defaultshall have occurred and be continuing, the Agent, on behalf of itself, theIssuing Bank and the Lenders, may sell the Pledged Securities, or any partthereof, at public or private sale or at any broker’s board or on anysecurities exchange, for cash, upon credit or for future delivery as the Agentshall deem appropriate subject to the terms hereof or as otherwise provided inthe UCC.  The Agent shall be authorizedat any such sale (if it deems it advisable to do so) to restrict to the fullextent permitted by Applicable Law the prospective bidders or purchasers toPersons who will represent and agree that they are purchasing the PledgedSecurities for their own account for investment and not with a view to thedistribution or sale thereof, and upon consummation of any such sale, the Agentshall have the right to assign, transfer, and deliver to the purchaser orpurchasers thereof the Pledged Securities so sold.  Each such purchaser at any such sale shallhold the property sold absolutely, free from any claim or right on the part ofany Pledgor.  The Agent shall give thePledgors ten (10) days’ written notice of any such public or private sale,or sale at any broker’s board or on any such securities exchange, or of any otherdisposition of the Pledged Securities. Such notice, in the case of public sale, shall state the time and placefor such sale and, in the case of sale at a broker’s board or on a securitiesexchange, shall state the board or exchange at which such sale is to be madeand the day on which the Pledged Securities, or portion thereof, will first beoffered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinarybusiness hours and at such place or places as the Agent may fix and shall statein the notice of such sale.  At any suchsale, the Pledged Securities, or portion thereof, to be sold may be sold in onelot as an entirety or in separate parcels, as the Agent may (in its sole andabsolute discretion) determine.  TheAgent shall not be obligated to make any sale of the Pledged Securities if itshall determine not to do so, regardless of the fact that notice of sale of thePledged Securities may have been given. The Agent may, without notice or publication, adjourn any public orprivate sale or cause the same to be 

 

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adjournedfrom time to time by announcement at the time and place fixed for sale, andsuch sale may, without further notice, be made at the time and place to whichthe same was so adjourned.  In case thesale of all or any part of the Pledged Securities is made on credit or forfuture delivery, the Pledged Securities so sold shall be retained by the Agentuntil the sale price is paid by the purchaser or purchasers thereof, but theAgent shall not incur any liability in case any such purchaser or purchasersshall fail to take up and pay for the Pledged Securities so sold and, in caseof any such failure, such Pledged Securities may be sold again upon likenotice.  At any sale or sales made pursuantto this Section 11.5, the Agent (on behalf of itself, the Issuing Bankand/or the Lenders) may bid for or purchase, free from any claim or right ofwhatever kind, including any equity of redemption, of the Pledgors, any suchdemand, notice, claim, right or equity being hereby expressly waived andreleased, any or all of the Pledged Securities offered for sale, and may makeany payment on the account thereof by using any claim for moneys then due andpayable to the Agent, the Issuing Bank (to the extent it consents) or anyconsenting Lender by any Credit Party as a credit against the purchase price;and the Agent, upon compliance with the terms of sale, may hold, retain anddispose of the Pledged Securities without further accountability therefor to anyPledgor or any third party (other than the Issuing Bank and/or theLenders).  The Agent shall in any suchsale make no representations or warranties with respect to the PledgedSecurities or any part thereof and shall not be chargeable with any of the obligationsor liabilities of the Pledgors with respect thereto.  Each Pledgor hereby agrees that (i) itwill indemnify and hold the Agent, the Issuing Bank and the Lenders harmlessfrom and against any and all claims with respect to the Pledged Securities assertedbefore the taking of actual possession or control of the Pledged Securities bythe Agent pursuant to this Credit Agreement, or arising out of any act of, oromission to act on the part of, any Person prior to such taking of actualpossession or control by the Agent (whether asserted before or after suchtaking of possession or control), or arising out of any act on the part of anyPledgor, its agents or Affiliates before or after the commencement of suchactual possession or control by the Agent and (ii) the Agent, the IssuingBank and the Lenders shall have no liability or obligation arising out of anysuch claim.  As an alternative toexercising the power of sale herein conferred upon it, the Agent may proceed bya suit or suits at law or in equity to foreclose upon the Collateral andPledged Securities under this Credit Agreement and to sell the PledgedSecurities, or any portion thereof, pursuant to a judgment or decree of a courtor courts having competent jurisdiction.

 

SECTION 11.6.  Applicationof Proceeds of Sale and Cash.  Theproceeds of sale of the Pledged Securities sold pursuant to Section 11.5hereof shall be applied by the Agent on behalf of itself, the Issuing Bank andthe Lenders as follows:

 

(i)            to the payment ofall reasonable out-of-pocket costs and expenses paid or incurred by the Agentin connection with such sale, including, but not limited to, all court costsand the reasonable fees and expenses of counsel for the Agent in connectiontherewith, and the payment of all reasonable out-of-pocket costs and expensespaid or incurred by the Agent in enforcing this Credit Agreement, in realizingor protecting any Collateral and in enforcing or collecting any Obligations orany Guaranty thereof, including, without limitation, court costs and thereasonable attorney’s fees and expenses incurred by the Agent in connectiontherewith;

 

(ii)           to satisfy orprovide cash collateral for all Obligations relating to the Letters of Credit;and

 

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(iii)          to the indefeasiblepayment in full of the Obligations in accordance with Section 12.2(b) hereof.

 

Anyamounts remaining after such indefeasible payment in full shall be remitted tothe appropriate Pledgor, or as a court of competent jurisdiction may otherwisedirect.

 

SECTION 11.7.  SecuritiesAct, etc.  In view of theposition of each Pledgor in relation to the Pledged Securities pledged by it,or because of other present or future circumstances, a question may arise underthe Securities Act of 1933, as amended, as now or hereafter in effect, or anysimilar statute hereafter enacted analogous in purpose or effect (such Act andany such similar statute as from time to time in effect being hereinaftercalled the “Federal Securities Laws”), with respect to any dispositionof the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal SecuritiesLaws may very strictly limit the course of conduct of the Agent if the Agentwere to attempt to dispose of all or any part of the Pledged Securities, andmay also limit the extent to which or the manner in which any subsequenttransferee of any Pledged Securities may dispose of the same.  Similarly, there may be other legalrestrictions or limitations affecting the Agent in any attempt to dispose ofall or any part of the Pledged Securities under applicable Blue Sky or otherstate securities laws, or similar laws analogous in purpose or effect.  Under Applicable Law, in the absence of anagreement to the contrary, the Agent may perhaps be held to have certaingeneral duties and obligations to a Pledgor to make some effort towardsobtaining a fair price even though the Obligations may be discharged or reducedby the proceeds of a sale at a lesser price. Each Pledgor waives to the fullest extent permitted by Applicable Lawany such general duty or obligation to it, and the Pledgors and/or the CreditParties will not attempt to hold the Agent responsible for selling all or anypart of the Pledged Securities at an inadequate price, even if the Agent shallaccept the first offer received or shall not approach more than one possiblepurchaser.  Without limiting thegenerality of the foregoing, the provisions of this Section 11.7 wouldapply if, for example, the Agent were to place all or any part of the PledgedSecurities for private placement by an investment banking firm, or if suchinvestment banking firm purchased all or any part of the Pledged Securities forits own account, or if the Agent placed all or any part of the PledgedSecurities privately with a purchaser or purchasers.

 

SECTION 11.8.  Continuationand Reinstatement.  Each Pledgorfurther agrees that its pledge hereunder shall continue to be effective or bereinstated, as the case may be, if at any time payment, or any part thereof, ofany Obligation is rescinded or must otherwise be restored by the Agent, theIssuing Bank or the Lenders upon the bankruptcy or reorganization of anyPledgor or otherwise.

 

SECTION 11.9.  Termination.  The pledge referenced herein shall terminatewhen all Obligations shall have been indefeasibly fully paid and performed andthe Commitments shall have terminated, and all Letters of Credit shall haveexpired or been terminated or canceled, at which time the Agent shall assignand deliver to the appropriate Pledgor, or to such Person or Persons as suchPledgor shall designate, against receipt, such of the Pledged Securities (ifany) as shall not have been sold or otherwise applied by the Agent pursuant tothe terms hereof and shall still be held by it hereunder, together withappropriate instruments of reassignment and release.  Any such reassignment shall be free and clearof all Liens, arising by, under or through the 

 

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Agentbut shall otherwise be without recourse upon or warranty by the Agent and atthe expense of the Pledgors.

 

12.           THE AGENT AND THE ISSUING BANK

 

SECTION 12.1.  Administrationby Agent.  (a)  The generaladministration of the Fundamental Documents and any other documentscontemplated by this Agreement shall be by the Agent or its designees.  Each of the Lenders hereby irrevocablyauthorizes the Agent, at its discretion, to take or refrain from taking suchactions as agent on its behalf and to exercise or refrain from exercising suchpowers under the Fundamental Documents, the Notes and any other documentscontemplated by this Credit Agreement as are delegated by the terms hereof orthereof, as appropriate, together with all powers reasonably incidentalthereto.  The Agent shall have no dutiesor responsibilities except as set forth in the Fundamental Documents.

 

(b)           The Lenders herebyauthorize the Agent (in its sole discretion):

 

(i)            in connection withthe sale or other disposition of any asset included in the Collateral or thecapital stock of any Guarantor, in accordance with the terms of this Agreement,to release a Lien granted to it (for the benefit of itself, the Issuing Bankand the Lenders) on such asset or capital stock and/or release such Guarantorfrom its obligations hereunder;

 

(ii)           to determine thatthe cost to a Credit Party is disproportionate to the benefit to be realized bythe Lenders by perfecting a Lien in a given asset or group of assets includedin the Collateral and that such Credit Party should not be required to perfectsuch Lien in favor of the Agent (for the benefit itself, the Issuing Bank andof the Lenders);

 

(iii)          to appointsubagents or Lenders to be the holder(s) of record of a Lien to be grantedto the Agent (for the benefit of itself, the Issuing Bank and the Lenders) orto hold on behalf of the Agent such collateral or instruments relating thereto;

 

(iv)          to grant a right ofquiet enjoyment to licensees of Product other than pursuant to PlatformAgreements and to confirm such grant in writing;

 

(v)           to enter intointercreditor and/or subordination agreements on terms acceptable to the Agentwith (A) the unions and/or the guilds with respect to the securityinterests in favor of such unions and/or guilds required pursuant to the termsof any collective bargaining agreement or (B) any licensee or licensorhaving any rights to any item of Product or (C) Persons providing anyservices in connection with any item of Product;

 

(vi)          to enter into andperform its obligations under the other Fundamental Documents;

 

(vii)         to acceptcommitments from one or more Persons for the remaining $15,000,000 of the facilitynot committed to as of the date hereof by (A) obtaining an executedcounterpart of this Agreement from each such Person, (B) amending Schedule1 hereto to add each such Person’s name, Term Loan Commitment and RevolvingCredit Commitment and circulating the amended Schedule 1 to the Lenders and theBorrower and (C) recording in 

 

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theRegister the name and address of each such Person, its Term Loan Commitment andRevolving Loan Commitment, and the principal amount of the Loans owing to it,whereupon (x) the Borrower shall execute and deliver to the Agent (i) aTerm Note in the amount of such Person’s Term Loan Commitment and (ii) aRevolving Credit Note in the amount of such Person’s Revolving CreditCommitment and (y) each such Person shall be a party hereto, have therights and obligations of a Lender hereunder and under the other FundamentalDocuments and shall be bound by the provisions hereof and thereof;

 

(viii)        upon the acceptanceof additional commitments pursuant to Section 12.1(b)(vii), to allocateequitably among the Lenders, the Term Loans and the Revolving Credit Loans soas to achieve pro rata status;

 

(ix)           to execute anddeliver reduction certificates from time to time under the Hallmark CardsLetter of Credit in connection with (and in the amount of) (x) anyreduction in the commitments under the Hallmark Subordination and SupportAgreement permitted pursuant to Section 6.5 hereof or (y) advancesmade under the Hallmark Subordination and Support Agreement (other than withthe proceeds of drawings made under the Hallmark Cards Letter of Credit);

 

(x)            [Intentionallyomitted]

 

(xi)           [Intentionallyomitted],

 

(xii)          to approve thefinal terms of the Foreign Asset Sale and the related documentation, and toexecute the related collateral release documents in connection with the ForeignAsset Sale,

 

(xiii)         to accept areplacement Hallmark L/C in substantially the form of Exhibit R-1 inreplacement for the existing Hallmark L/C in the form of Exhibit R, and tosurrender the existing Hallmark L/C in connection therewith,

 

(xiv)        to accept a revisedHallmark L/C in the face amount of $90,000,000 in connection with theeffectiveness of Amendment No. 14 dated as of March 10, 2008 to theCredit Agreement,

 

(xv)         to enter into anamendment and restatement of Hallmark Cards Subordination and Support Agreementin connection with Amendment No. 13 in the form attached as an exhibit toAmendment No. 13,

 

(xvi)        to, in connectionwith the effectiveness of Amendment No. 15, (A) accept thecancellation of the Hallmark L/C and (B) and accept the Hallmark CardsFacility Guarantee and enforce its rights under the Hallmark Cards Facility Guarantee,and

 

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(xvii)       to negotiate, enterinto and exercise its rights under the Recapitalized Debt IntercreditorAgreement in the form attached hereto as Exhibit T.

 

SECTION 12.2.  Advancesand Payments.  (a)  On the dateof each Loan, (x) the Agent shall be authorized (but not obligated) toadvance, for the account of each of the Lenders, the amount of the Loan to bemade by it in accordance with its Percentage hereunder.  Each of the Lenders hereby authorizes andrequests the Agent to advance for its account, pursuant to the terms hereof,the amount of the Loan to be made by it, and each of the Lenders agreesforthwith to reimburse the Agent, in immediately available funds for the amountso advanced on its behalf by the Agent. If any such reimbursement is not made in immediately available funds onthe same day on which the Agent shall have made any such amount available onbehalf of any Lender, such Lender shall pay interest to the Agent, at a rateper annum equal to the Agent’s cost of obtaining overnight funds in the NewYork Federal Funds Market for the first three days following the time when theLender fails to make the required reimbursement, and thereafter at a rate perannum equal to the Alternate Base Rate plus the Applicable Margin for AlternateBase Rate Loans plus the default rate applicable to Alternate Base Rate Loansas set forth in Section 2.9 hereof. If and to the extent that any such reimbursement shall not have beenmade to the Agent, the Borrower agrees to repay to the Agent forthwith ondemand a corresponding amount with interest thereon for each day from the datesuch amount is made available to the Borrower until the date such amount isrepaid to the Agent, in the case of an Alternate Base Rate Loan, at theAlternate Base Rate plus the Applicable Margin for Alternate Base Rate Loansplus the default rate applicable to Alternate Base Rate Loans as set forth in Section 2.9hereof and in the case of a Eurodollar Loan, at the LIBO Rate plus theApplicable Margin for Eurodollar Loans plus the default rate applicable toEurodollar Loans as set forth in Section 2.9 hereof.

 

(b)           As between the Agentand the Lenders, any amounts received by the Agent in connection with theFundamental Documents, the application of which is not otherwise provided for,shall be applied, first, to pay the accrued but unpaid Commitment Feesin accordance with each Lender’s Percentage, second, to pay accrued butunpaid interest on the Loans in accordance with the amount of outstanding Loansowed to each Lender, third, to pay the principal balance outstanding onthe Loans (with amounts payable on the principal balance outstanding on theLoans in accordance with the amount of outstanding Loans owed to each Lender),and amounts then due in respect of unreimbursed draws under the Letter ofCredit, fourth, to pay amounts outstanding under Currency Agreements andInterest Rate Protection Agreements, and fifth, to pay any other amountsthen due under this Credit Agreement. All amounts to be paid to any Lender by the Agent shall be credited tothat Lender, after collection by the Agent, in immediately available funds eitherby wire transfer or deposit in such Lender’s correspondent account with theAgent or as such Lender and the Agent shall from time to time agree.

 

SECTION 12.3.  Sharing ofSetoffs, Cash Collateral and Sharing Events.  Each of the Lenders agrees that if it shall,through the exercise of a right of banker’s lien, setoff or counterclaimagainst any Credit Party (including, but not limited to, a secured claim under Section 506of Title 11 of the United States Code or other security or interest arisingfrom, or in lieu of, such secured claim and received by such Lender under anyapplicable bankruptcy, insolvency or other similar law) or otherwise, obtainpayment in respect of its Obligations as a result of which the unpaid portionof its Obligations is proportionately less than the unpaid 

 

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portionof Obligations of any of the other Lenders (a) it shall promptly purchaseat par (and shall be deemed to have thereupon purchased) from such otherLenders a participation in the Obligations of such other Lenders, so that theaggregate unpaid principal amount of each of the Lender’s Obligations and itsparticipation in Obligations of the other Lenders shall be in the sameproportion to the aggregate unpaid amount of all remaining Obligations as theamount of its Obligations prior to the obtaining of such payment was to theamount of all Obligations prior to the obtaining of such payment and (b) suchother adjustments shall be made from time to time as shall be equitable toensure that the Lenders share such payment pro rata.  If all or any portion of such excess paymentis thereafter recovered from the Lender which originally received such excesspayment, such purchase (or portion thereof) shall be canceled and the purchaseprice restored to the extent of such recovery. Each Credit Party expressly consents to the foregoing arrangements andagrees that any Lender or Lenders (and any Person holding (or deemed to beholding) a participation in) a Loan, Note, or Letter of Credit may exercise anyand all rights of banker’s lien, setoff or counterclaim with respect to any andall moneys owing by such Credit Party to such Person(s) as fully as ifsuch Person(s) held a Note and was the original obligee thereon or was theissuer of the Letter of Credit in the amount of such participation.

 

SECTION 12.4.  Notice to theLenders.  Upon receipt by the Agentor the Issuing Bank from any of the Credit Parties of any communication callingfor an action on the part of the Lenders, or upon notice to the Agent of anyEvent of Default, the Agent or the Issuing Bank will in turn immediately informthe other Lenders in writing (which shall include facsimile communications) ofthe nature of such communication or of the Event of Default, as the case maybe.

 

SECTION 12.5.  Liabilityof the Agent.  (a)  The Agent orthe Issuing Bank, when acting on behalf of the Lenders, may execute any of itsduties under this Credit Agreement or the other Fundamental Documents by orthrough its officers, agents, or employees and neither the Agent, the IssuingBank nor their respective officers, agents or employees shall be liable to theLenders or any of them for any action taken or omitted to be taken in goodfaith, nor be responsible to the Lenders or to any of them for the consequencesof any oversight or error of judgment, or for any loss, unless the same shallhappen through its gross negligence or willful misconduct.  The Agent, the Issuing Bank and theirrespective directors, officers, agents, and employees shall in no event beliable to the Lenders or to any of them for any action taken or omitted to betaken by it pursuant to instructions received by it from the Required Lenders(or such other number of Lenders as is expressly required by any FundamentalDocument) or in reliance upon the advice of counsel selected by it withreasonable care.  Without limiting theforegoing, neither the Agent, the Issuing Bank, nor any of their respectivedirectors, officers, employees, or agents shall be responsible to any of theLenders for the due execution, validity, genuineness, effectiveness,sufficiency, or enforceability of, or for any statement, warranty, orrepresentation in, or for the perfection of any security interest contemplatedby, this Credit Agreement, any other Fundamental Document or any relatedagreement, document or order, or for freedom of any of the Collateral or any ofthe Pledged Securities from prior Liens or security interests, or shall berequired to ascertain or to make any inquiry concerning the performance orobservance by the Borrower or any other Credit Party of any of the terms,conditions, covenants, or agreements of this Credit Agreement, any otherFundamental Document, or any related agreement or document.

 

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(b)           None of the Agent(as agent for the Lenders), the Issuing Bank or any of their respectivedirectors, officers, employees, or agents shall have any responsibility to theBorrower or any other Credit Party on account of the failure or delay inperformance or breach by any of the Lenders of any of such Lender’s obligationsunder this Credit Agreement, the other Fundamental Documents or any relatedagreement or document or in connection herewith or therewith.  No Lender nor any of its directors, officers,employees or agents shall have any responsibility to the Borrower or any otherCredit Party on account of the failure or delay in performance or breach by anyother Lender of such other Lender’s obligations under this Credit Agreement,the other Fundamental Documents or any related agreement or document or inconnection herewith or therewith.

 

(c)           The Agent as agentfor the Lenders hereunder and the Issuing Bank in such capacity, shall beentitled to rely on any communication, instrument, or document believed by itto be genuine or correct and to have been signed or sent by a Person or Personsbelieved by it to be the proper Person or Persons, and it shall be entitled torely on advice of legal counsel, independent public accountants, and otherprofessional advisers and experts selected by it.

 

SECTION 12.6.  Reimbursementand Indemnification.  Each of theLenders agrees (i) to reimburse the Agent for such Lender’s Pro Rata Shareof any expenses and fees incurred for the benefit of the Lenders under theFundamental Documents, including, without limitation, counsel fees andcompensation of agents and employees paid for services rendered on behalf ofthe Lenders, and any other expense incurred in connection with the operationsor enforcement thereof not reimbursed by or on behalf of the Borrower, (ii) toindemnify and hold harmless the Agent and any of its directors, officers, employees,or agents, on demand, in accordance with such Lender’s Pro Rata Share, from andagainst any and all liabilities, obligations, losses, damages, penalties,actions, judgments, suits, costs, expenses, or disbursements of any kind ornature whatsoever which may be imposed on, incurred by, or asserted against, itor any of them in any way relating to or arising out of the FundamentalDocuments or any related agreement or document, or any action taken or omittedby it or any of them under the Fundamental Documents or any related agreementor document, to the extent not reimbursed by or on behalf of the Borrower orany other Credit Party (except such as shall result from its or their grossnegligence or willful misconduct), and (iii) to indemnify and holdharmless the Issuing Bank and any of its directors, officers, employees, oragents, on demand, in the amount of its Pro Rata Share, from and against anyand all liabilities, obligations, losses, damages, penalties, actions,judgments, suits, costs expenses or disbursements of any kind or naturewhatsoever which may be imposed on, incurred by, or asserted against it or anyof them in any way relating to or arising out of the issuance of any Letters ofCredit or the failure to issue Letters of Credit if such failure or issuancewas at the direction of the Required Lenders (except as shall result from thegross negligence or willful misconduct of the Person to be reimbursed,indemnified or held harmless, as applicable). To the extent indemnification payments made by the Lenders pursuant tothis Section 12.6 are subsequently recovered by the Agent from a CreditParty, the Agent will promptly refund such previously paid indemnity paymentsto the Lenders.

 

SECTION 12.7.  Rights ofAgent and Issuing Bank.  It is understoodand agreed that each of the Agent and the Issuing Bank shall have the sameduties, rights and powers as a Lender hereunder (including the right to givesuch instructions) as any of the other Lenders and may exercise such rights andpowers, as well as its rights and powers under other agreements and 

 

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instrumentsto which it is or may be party, and engage in other transactions with anyCredit Party or Affiliate thereof, as though it were not the Agent of theLenders under this Credit Agreement and the other Fundamental Documents or theIssuing Bank.

 

SECTION 12.8.  IndependentInvestigation by Lenders.  Each ofthe Lenders acknowledges that it has decided to enter into this CreditAgreement and the other Fundamental Documents and to make the Loans andparticipate in the Letters of Credit hereunder based on its own analysis of thetransactions contemplated hereby and of the creditworthiness of the CreditParties and agrees that neither the Agent nor the Issuing Bank shall bear anyresponsibility therefor.

 

SECTION 12.9.  Agreementof Required Lenders.  Upon anyoccasion requiring or permitting an approval, consent, waiver, election orother action on the part of the Required Lenders, action shall be taken by theAgent for and on behalf of, or for the benefit of, all Lenders upon thedirection of the Required Lenders and any such action shall be binding on allLenders.  No amendment, modification,consent or waiver shall be effective except in accordance with the provisionsof Section 13.11 hereof.

 

SECTION 12.10.  Notice ofTransfer.  The Agent and the IssuingBank may deem and treat any Lender which is a party to this Credit Agreement asthe owner of such Lender’s respective portions of the Loans and participationsin Letters of Credit for all purposes, unless and until a written notice of theassignment or transfer thereof executed by any such Lender shall have beenreceived by the Agent and become effective in accordance with Section 13.3hereof.

 

SECTION 12.11.  SuccessorAgent.  The Agent may resign at anytime by giving written notice thereof to the Lenders and the Borrower, but suchresignation shall not become effective until acceptance by a successor agent ofits appointment pursuant hereto.  Uponany such resignation, the retiring Agent shall promptly appoint a successoragent from among the Lenders which successor shall be experienced andsophisticated in entertainment industry lending, provided that suchreplacement is reasonably acceptable (as evidenced in writing) to the RequiredLenders and the Borrower; provided, however, that such approvalby the Borrower shall not be required at any time when a Default or Event ofDefault is continuing.  If no successoragent shall have been so appointed by the retiring Agent and shall have acceptedsuch appointment, within 30 days after the retiring agent’s giving of notice ofresignation, the Borrower may appoint a successor agent (which successor may bereplaced by the Required Lenders; provided that such successor is experiencedand sophisticated in entertainment industry lending or media lending andreasonably acceptable to the Borrower), which shall be either a Lender or acommercial bank organized, licensed, carrying on business under the laws of theUnited States of America or of any State thereof and shall have a combinedcapital and surplus of at least US$500,000,000 and shall be experienced andsophisticated in entertainment industry lending.  Upon the acceptance of any appointment asAgent hereunder by a successor agent, such successor agent shall thereuponsucceed to and become vested with all the rights, powers, privileges and dutiesof the retiring Agent, and the retiring Agent shall be discharged from itsduties and obligations under this Credit Agreement, the other FundamentalDocuments and any other credit documentation. After any retiring Agent’s resignation hereunder as Agent, theprovisions of this Article 12 and Article 13 shall inure to itsbenefit as to any actions taken or omitted to be taken by it while it was Agentunder this Credit Agreement.

 

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SECTION 12.12.  SuccessorIssuing Bank.  The Issuing Bank mayresign at any time by giving prior written notice thereof to the Lenders andthe Borrower, but such resignation shall not become effective until acceptanceby a successor Issuing Bank of its appointment pursuant hereto.  Upon any such resignation, the retiringIssuing Bank shall promptly appoint a successor Issuing Bank from among theLenders, provided that such replacement is reasonably acceptable (asevidenced in writing) to the Required Lenders and the Borrower and has a creditrating at least as high as that of the Issuing Bank; provided, however,that such approval by the Borrower shall not be required at any time when aDefault or Event of Default is continuing. If no successor Issuing Bank shallhave been so appointed by the retiring Issuing Bank and shall have acceptedsuch appointment, within 30 days after the retiring Issuing Bank’s giving ofnotice of resignation, the Borrower may appoint a successor Issuing Bank (whichsuccessor may be replaced by the Required Lenders; provided that suchsuccessor is reasonably acceptable to the Borrower), which shall be either aLender or a commercial bank organized, licensed, carrying on business under thelaws of the United States of America or of any State thereof and shall have acombined capital and surplus of at least US$500,000,000.  Upon the acceptance of any appointment asIssuing Bank hereunder by a successor Issuing Bank, such successor Issuing Bankshall thereupon succeed to and become vested with all the rights, powers,privileges and duties of the retiring Issuing Bank, and the retiring IssuingBank shall be discharged from its duties and obligations under this CreditAgreement, the other Fundamental Documents and any other credit documentation,except with respect to Letters of Credit which are outstanding at the time ofthe resignation unless the successor Issuing Bank replaces the retiring IssuingBank as the issuing bank on such Letters of Credit.  The Borrower and each Lender hereby agreethat each will use its commercially reasonable efforts to replace any suchoutstanding Letters of Credit issued by the retiring Issuing Bank.  After any retiring Issuing Bank’s resignationhereunder as Issuing Bank, the provisions of this Article 12 and Article 13shall inure to its benefit as to any actions taken or omitted to be taken by itwhile it was Issuing Bank under this Credit Agreement.

 

13.           MISCELLANEOUS

 

SECTION 13.1.  Notices.  Notices and other communications provided forherein shall be in writing and shall be delivered or mailed (or in the case oftelegraphic communication, if by telegram, delivered to the telegraph companyand, if by telex, graphic scanning or other telegraphic or facsimilecommunications equipment of the sending party hereto, delivered by suchequipment) addressed, if to the Agent, the Issuing Bank or JPMorgan Chase Bank,N.A., to  JPMorgan Chase Bank, N.A., 1166Avenue of the Americas, Floor 17, New York, New York 10036, Attention: GarrettJ. Verdone, Senior Vice President, facsimile no.: (212) 899-2893, with a copyto J.P. Morgan Securities, 1800 Century Park East, Suite 400, Los Angeles,California 90067, Attn: P. Clark Hallren, facsimile no.: (310) 788-5628, or ifto any Credit Party, to it at Crown Media Holdings, 12700 Ventura Blvd, StudioCity, California 91604, Attn.:  CharlesStanford, Esq., facsimile no.: (303) 221-3779, with a courtesy copy to Hallmark Cards Incorporated,2501 McGee, P.O. 419580, Mail Drop #339, Kansas City, Missouri 64108,Attn: Deanne Stedem, facsimile no.: (816) 274-7171, or if to a Lender, to it atits address set forth on the signature page, or such other address as suchparty may from time to time designate by giving written notice to the otherparties hereunder.  Any failure of theAgent, the Issuing Bank or a Lender giving notice pursuant to this Section 13.1,to provide a courtesy copy to a party as provided 

 

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herein,shall not affect the validity of such notice. All notices and other communications given to any party hereto in accordancewith the provisions of this Agreement shall be deemed to have been given on thefifth Business Day after the date when sent by registered or certified mail,postage prepaid, return receipt requested, if by mail, or when delivered to thetelegraph company, charges prepaid, if by telegram, or when receipt isacknowledged, if by any telegraphic or facsimile communications equipment ofthe sender, in each case addressed to such party as provided in this Section 13.1or in accordance with the latest unrevoked written direction from such party.

 

SECTION 13.2.  Survivalof Agreement, Representations and Warranties, etc.  All warranties, representations and covenantsmade by any of the Credit Parties herein or in any other Fundamental Documentor in any certificate or other instrument delivered in connection with thisCredit Agreement or any other Fundamental Document shall be considered to havebeen relied upon by the Agent, the Issuing Bank and the Lenders except for anyterminations, amendments, modifications or waivers thereof in accordance withthe terms hereof, and shall survive the making of the Loans and the issuance ofthe Letters of Credit herein contemplated and the issuance and delivery to theAgent of the Notes regardless of any investigation made by the Agent, theIssuing Bank or the Lenders or on their behalf and shall continue in full forceand effect so long as any Obligation is outstanding and unpaid and so long asany Letter of Credit remains outstanding and the Commitments have not beenterminated.  All statements in any suchcertificate or other instrument shall constitute representations and warrantiesby the Credit Party hereunder.

 

SECTION 13.3.  Successorsand Assigns; Syndications; Loan Sales; Participations.  (a)  Whenever in this Credit Agreementany of the parties hereto is referred to, such reference shall be deemed toinclude the successors and assigns of such party (provided, however, that noCredit Party may assign its rights or obligations hereunder without the priorwritten consent of the Agent, the Issuing Bank and all the Lenders), and allcovenants, promises and agreements by or on behalf of any Credit Party whichare contained in this Agreement shall inure to the benefit of the successorsand assigns of the Administrative Agent, the Issuing Bank and the Lenders.

 

(b)           Each of the Lendersmay (but only with the prior written consent of the Agent and the Issuing Bank,which consent shall not be unreasonably withheld or delayed and with the priorwritten consent of the Borrower, which consent shall not be unreasonablywithheld or delayed and which consent of the Borrower shall not be required foran assignment by a Lender to any Affiliate thereof or when an Event of Defaulthas occurred and is continuing) assign all or a portion of its interests,rights and obligations under this Credit Agreement (including, withoutlimitation, all or a portion of its Commitment and the same portion of allLoans at the time owing to it and the Notes held by it and its obligations andrights with regard to Letters of Credit); provided, however, that(i) each assignment shall be of a constant, and not a varying, percentageof the assigning Lender’s interests, rights and obligations under this CreditAgreement, (ii) each assignment shall be in a minimum Commitment amount(or, at any time after the Commitment Termination Date, minimum Loan amount) ofat least $5,000,000 (except that any assignment of the entire remaining portionof a Lender’s Commitment or Loan amount shall not be subject to thislimitation), (iii) the parties to each such assignment shall execute anddeliver to the Agent, for its acceptance and recording in the Register (asdefined below), an Assignment and Acceptance, together with the assigningLender’s original Note and a processing 

 

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andrecordation fee of US$3,500 to be paid to the Administrative Agent by theassigning Lender or the assignee.  Uponsuch execution, delivery, acceptance and recording, from and after theeffective date specified in each Assignment and Acceptance, which effectivedate shall not (unless otherwise agreed to by the Agent) be earlier than fiveBusiness Days after the date of acceptance and recording by the Agent, (x) theassignee thereunder shall be a party hereto and, to the extent provided in suchAssignment and Acceptance, have the rights and obligations of a Lenderhereunder and under the other Fundamental Documents and shall be bound by theprovisions hereof and (y) the assigning Lender thereunder shall, to theextent provided in such Assignment and Acceptance, relinquish its rights and bereleased from its obligations under this Credit Agreement except that,notwithstanding such assignment, any rights and remedies available to theBorrower for any breaches by such assigning Lender of its obligations hereunderwhile a Lender shall be preserved after such assignment and such Lender shallnot be relieved of any liability to the Borrower due to any such breach.  In the case of an Assignment and Acceptancecovering all or the remaining portion of the assigning Lender’s rights andobligations under this Credit Agreement, such assigning Lender shall cease tobe a party hereto.

 

(c)           Each Lender may atany time make an assignment of its interests, rights and obligations under thisCredit Agreement, without the consent of the Agent or the Issuing Bank, to (i) anyAffiliate of such Lender or (ii) any other Lender hereunder; providedthat after giving effect to such assignment, the assignee’s Percentage shallnot exceed 20% of the aggregate amount of all Commitments then outstandinghereunder.  Any such assignment to anyAffiliate of the assigning Lender or any other Lender hereunder shall not besubject to the requirements of Section 13.3(b) that (x) that theamount of the Commitment (or Loans if applicable) of the assigning Lendersubject to each assignment be in a minimum principal amount of $5,000,000 and (y) thepayment of a processing and recordation fee and any such assignment to anyAffiliate of the assigning Lender shall not release the assigning Lender of itsremaining obligations hereunder, if any.

 

(d)           By executing anddelivering an Assignment and Acceptance, the assigning Lender thereunder andthe assignee thereunder confirm to and agree with each other and the otherparties hereto as follows:  (i) otherthan the representation and warranty that it is the legal and beneficial ownerof the interest being assigned thereby and that such interest is free and clearof any adverse claim, the assigning Lender makes no representation or warrantyand assumes no responsibility with respect to any statements, warranties orrepresentations made in or in connection with this Credit Agreement or anyother Fundamental Document or the execution, legality, validity,enforceability, genuineness, sufficiency or value of the Fundamental Documentsor any other instrument or document furnished pursuant hereto or thereto; (ii) suchassignor Lender makes no representation or warranty and assumes noresponsibility with respect to the financial condition of any of the CreditParties or the performance or observance by any of the Credit Parties of any oftheir obligations under the Fundamental Documents or any other instrument ordocument furnished pursuant thereto; (iii) such assignee confirms that ithas received a copy of this Credit Agreement, together with copies of the mostrecent financial statements delivered pursuant to Sections 5.1(a) and 5.1(b) (orif none of such financial statements shall have then been delivered, thencopies of the financial statements referred to in Section 3.4 hereof) andsuch other documents and information as it has deemed appropriate to make itsown credit analysis and decision to enter into such Assignment and Acceptance; (iv) suchassignee agrees that it will, independently and without reliance upon the assigningLender, 

 

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theAgent, the Issuing Bank or any other Lender and based on such documents andinformation as it shall deem appropriate at the time, continue to make its owncredit decisions in taking or not taking action under this Credit Agreement orany other Fundamental Document; (v) such assignee appoints and authorizesthe Agent, and the Issuing Bank to take such action as the agent on its behalfand to exercise such powers under this Credit Agreement as are delegated to theAgent or the Issuing Bank by the terms hereof, together with such powers as arereasonably incidental thereto; and (vi) such assignee agrees that it willbe bound by the provisions of this Credit Agreement and will perform inaccordance with their terms all of the obligations which by the terms of thisCredit Agreement are required to be performed by it as a Lender.

 

(e)           The Agent shallmaintain at its address at which notices are to be given to it pursuant to Section 13.1a copy of each Assignment and Acceptance and a register for the recordation ofthe names and addresses of the Lenders and the Commitments of, and principalamount of the Loans owing to, each Lender from time to time (the “Register”).  The entries in the Register shall beconclusive, in the absence of manifest error, and the Credit Parties, theAgent, the Issuing Bank and the Lenders may treat each Person whose name isrecorded in the Register as a Lender hereunder for all purposes of theFundamental Documents.  The Registershall be available for inspection by any Credit Party or any Lender at anyreasonable time and from time to time upon reasonable prior notice.

 

(f)            Subject to theforegoing, upon its receipt of an Assignment and Acceptance executed by anassigning Lender and an assignee together with the assigning Lender’s originalNotes and the processing and recordation fee, the Agent shall, if suchAssignment and Acceptance has been completed and is substantially in the formof Exhibit H hereto, (i) accept such Assignment and Acceptance, (ii) recordthe information contained therein in the Register and (iii) give promptwritten notice thereof to the Borrower. Within five (5) Business Days after receipt of the notice, theBorrower, at its own expense, shall execute and deliver to the Agent, inexchange for each surrendered Note, a new Note to the order of such assignee inan amount equal to the Revolving Credit Commitment and/or Term Loan, as thecase may be, assumed by it pursuant to such Assignment and Acceptance and ifthe assigning Lender has retained a Revolving Credit Commitment and/or TermLoan hereunder, new Notes to the order of the assigning Lender in an amountequal to the Revolving Credit Commitment or Term Loan, as the case may be,retained by it hereunder.  Such new Notesshall be in an aggregate principal amount equal to the aggregate principalamount of the surrendered Note and shall otherwise be in substantially the formof Exhibit A-1 or Exhibit A-2, as applicable.  In addition the Credit Parties will promptly,at their own expense, execute such amendments to the Fundamental Documents towhich each is a party and such additional documents, and take such otheractions as the Agent or the assignee Lender may reasonably request in order togive such assignee Lender the full benefit of the Liens contemplated by theFundamental Documents.

 

(g)           Each of the Lendersmay, without the consent of any of the Credit Parties, the Issuing Bank or theAgent or the other Lenders, sell participations to one or more banks or otherentities in all or a portion of its rights and obligations under this CreditAgreement (including, without limitation, all or a portion of its Commitmentand the Loans owing to it and the Note or Notes held by it and itsparticipation in Letters of Credit); provided, however, that (i) anysuch Lender’s obligations under this Credit Agreement shall remain unchanged, (ii) suchparticipant shall not be granted any voting rights or any right to control thevote of such Lender 

 

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underthis Credit Agreement, except with respect to proposed changes to interestrates, amount of Commitments, final maturity of any Loan, releases of all orsubstantially all the Collateral and fees (as applicable to such participant), (iii) anysuch Lender shall remain solely responsible to the other parties hereto for theperformance of such obligations, (iv) the participating banks or otherentities shall be entitled to the cost protection provisions contained inSections 2.11, 2.12, 2.13 and 12.3 hereof but a participant shall not beentitled to receive pursuant to such provisions an amount larger than its shareof the amount to which the Lender granting such participation would have beenentitled to receive and (v) the Credit Parties, the Agent, the IssuingBank and the other Lenders shall continue to deal solely and directly with suchLender in connection with such Lender’s and its participants’ rights andobligations under this Credit Agreement.

 

(h)           A Lender may, inconnection with any assignment or participation or proposed assignment orparticipation pursuant to this Section 13.3, disclose to the assignee orparticipant or proposed assignee or participant, any information relating toany of the Credit Parties furnished to the Agent or such Lender by or on behalfof the Borrower; provided that prior to any such disclosure, each suchassignee or participant or proposed assignee or participant shall agree, byexecuting a confidentiality letter, substantially in the form of theconfidentiality letter executed by the Lenders in connection with informationreceived by the Lenders relating to this transaction, to preserve theconfidentiality of any confidential information relating to any of the CreditParties received from such Lender.

 

(i)            Any assignmentpursuant to paragraph (b) or (c) of this Section 13.3 shall constitutean amendment of the Schedule of Commitments as of the effective date of suchassignment.

 

(j)            The Credit Partiesconsent that any Lender may at any time and from time to time pledge orotherwise grant a security interest in any Loan or in any Note evidencing theLoans (or any part thereof) to any Federal Reserve Bank.

 

(k)           Notwithstanding anything to thecontrary contained herein, any Lender (a “Granting Lender”) may grant toa special purpose funding vehicle (an “SPC”) identified as such inwriting from time to time by the Granting Lender to the Agent and the Borrower,the option to provide to the Borrower all or any part of any Loan that suchGranting Lender would otherwise be obligated to make to the Borrower pursuantto this Agreement; provided that (i) nothing herein shallconstitute a commitment by any SPC to make any Loan and (ii) if an SPCelects not to exercise such option or otherwise fails to provide all or anypart of a Loan, the Granting Lender shall be obligated to make such Loanpursuant to the terms hereof.  The makingof a Loan by an SPC hereunder shall utilize the relevant portion of theCommitment of the Granting Lender to the same extent, and as if, such Loan weremade by such Granting Lender.  Each partyhereto hereby agrees that no SPC shall be liable for any indemnity or similarobligation under the Fundamental Documents (all liability for which shallremain with the Granting Lender).  Inaddition, notwithstanding anything to the contrary contained in this Section 13.3(k),any SPC may (i) with notice to, but without prior written consent of, theBorrower and the Agent and without paying any processing fee therefor, assignall or a portion of its interests in any Loans to the Granting Lender or to anyfinancial institutions (consented to by the Agent) providing liquidity and/orcredit support to or for the account of such SPC to support the funding ormaintenance of Loans and (ii) disclose on a confidential basis anynon-public information 

 

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relatingto its Loans to any rating agency, commercial paper dealer or provider of anysurety, guarantee or credit or liquidity enhancement to such SPC.  This Section 13.3(k) may not beamended without the prior written consent of each Granting Lender, all or anyof whose Loans are being funded by an SPC at the time of such amendment.  For the avoidance of doubt, the GrantingLender shall for all purposes (including, without limitation, the approval ofany amendment or waiver of any provision of any of the Fundamental Documents)continue to be the Lender of record hereunder.

 

(l)            Notwithstanding anything to thecontrary in this Section 13.3, upon five (5) Business Days writtennotice to the Agent, Hallmark Cards (or its designee) shall have the right topurchase from each of the Lenders its entire interest in the Total Commitmentsand the Loans and to assume each of the Lender’s obligations under the CreditAgreement (the “Hallmark Purchase”) for an amount equal to the totaloutstanding principal plus the total accrued, unpaid interest plusall other outstanding Obligations to the Lenders plus all Obligationsowing to the Agent and the Issuing Bank plus cash collateral for anyoutstanding L/C Exposure (the “Purchase Price”).  The Hallmark Purchase Price is onlyexercisable with regard to all of the Lenders at the same time.  Such Purchase Price shall be paid directly tothe Agent for the benefit of the Agent, the Issuing Bank and each Lender inaccordance with such Lender’s Commitment on the date of the HallmarkPurchase.  Provided the Hallmark Guaranteeremains in full force and effect and has not been disavowed by Hallmark Cards,during the five (5) day written notice period, the Agent will take noaction to foreclose on the Collateral or to demand payment from the Borrowerwithout the consent of Hallmark Cards. The Hallmark Purchase will be treated as if each of the Lenders andHallmark Cards (or its designee) had signed an Assignment and AcceptanceAgreement and neither party shall have any obligation to the other beyond thatprovided for in the form of Assignment and Acceptance attached hereto as Exhibit Hand as soon as practicable thereafter, each of the assigning Lenders willsurrender to the Agent the Note or Notes held by it and the Agent will, at therequest of Hallmark Cards (or its designee), issue a replacement Note or Notesto Hallmark Cards (or its designee).  Assoon as practicable subsequent to the payment of the Purchase Price, the Agentshall surrender the Hallmark L/C to Hallmark Cards and Hallmark Cards willdesignate a successor agent to the Agent as contemplated by Section 12.11of the Credit Agreement and a successor to the Issuing Bank as contemplated by Section 12.12of the Credit Agreement.  Until suchsuccessor Issuing Bank is appointed and assumes the obligations of JPMorganChase Bank, N.A., as the existing Issuing Bank, the Borrower shall not beentitled to request that any additional letters of credit be issued on itsbehalf pursuant to Section 2.4 of the Credit Agreement.  Subsequent to the payment of the PurchasePrice, each of the assigning Lenders shall have the same rights against theBorrower for continuing indemnification and expense reimbursement as it wouldhave had had it signed an Assignment and Assumption Agreement; and subsequentto its replacement as the Agent and as the Issuing Bank, JPMorgan Chase Bank,N.A. shall have the same continuing claims against the Borrower as it wouldhave had had it resigned and been replaced as the Agent and the Issuing Bank inaccordance with the procedures contemplated by Sections 12.11 and 12.12 of theCredit Agreement.  Notwithstanding any ofthe preceding provisions of this Section 13.3(l), at any time prior to thepayment of the Purchase Price, the Agent may make a claim under, or otherwiseseek to enforce any remedies available to it under the Hallmark Cards FacilityGuarantee in accordance with the terms thereof.

 

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SECTION 13.4.  Expenses;Documentary Taxes.  Whether or notthe transactions hereby contemplated shall be consummated, the Borrower agreesto pay (a) all reasonable out-of-pocket expenses incurred by the Agent orJ.P. Morgan Securities Inc. in connection with, or growing out of, theperformance of due diligence, the syndication of the credit facilitycontemplated hereby, the negotiation, preparation, execution, delivery, waiveror modification and administration of this Credit Agreement and any otherdocumentation contemplated hereby, the making of the Loans and the issuance ofthe Letters of Credit, the Collateral, the Pledged Securities or anyFundamental Document, including, but not limited to, the reasonableout-of-pocket costs and internally allocated charges of audit or fieldexaminations of the Agent in connection with the administration of this CreditAgreement, the verification of financial data and the transactions contemplatedhereby, and the reasonable fees and disbursements of Morgan, Lewis &Bockius LLP, counsel for the Agent and the Issuing Bank, and any other counselthat the Agent or the Issuing Bank shall retain, and (b) all reasonableout-of-pocket expenses incurred by the Agent, the Issuing Bank or the Lendersin the enforcement or protection of the rights and remedies of the Agent, theIssuing Bank or the Lenders in connection with this Credit Agreement, the otherFundamental Documents, the Letters of Credit or the Notes, or as a result ofany transaction, action or non-action arising from any of the foregoing,including, but not limited to, the reasonable fees and disbursements of anycounsel for the Agent, the Issuing Bank or the Lenders.  Such payments shall be made on the date thisCredit Agreement is executed by the Borrower and thereafter on demand.  The Borrower agrees that it shall indemnifythe Agent, the Issuing Bank and the Lenders from and hold them harmless againstany documentary taxes, assessments or charges made by any GovernmentalAuthority by reason of the execution and delivery of this Credit Agreement orthe Notes or the other Fundamental Documents or the issuance of the Letters ofCredit.  The obligations of the Borrowerunder this Section shall survive the termination of this Credit Agreement,the payment of the Loans and the expiration of all Letters of Credit.

 

SECTION 13.5.  Indemnificationof the Agent, the Issuing Bank and the Lenders.  The Borrower agrees (a) to indemnify andhold harmless the Agent, the Issuing Bank and the Lenders and their respectivedirectors, officers, employees, trustees, agents and affiliates (each, an “IndemnifiedParty”) (to the full extent permitted by Applicable Law) from and againstany and all claims, demands, losses, judgments and liabilities (includingliabilities for penalties) of whatsoever nature, and (b) to pay to theIndemnified 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 orother proceedings relating to the Collateral, this Credit Agreement, the otherFundamental Documents and the Letters of Credit, the making of the Loans, anyattempt to audit, inspect, protect or sell the Collateral, or theadministration and enforcement or exercise of any right or remedy granted tothe Agent, the Issuing Bank or Lenders hereunder or thereunder but excludingtherefrom all claims, demands, losses, judgments, liabilities, costs andexpenses arising out of or resulting from (i) in the case of anyIndemnified Party, the gross negligence or willful misconduct of suchIndemnified Party and (ii) claims asserted or litigation commenced againstsuch Indemnified Party by a Credit Party in which the Credit Party is theprevailing party.  The foregoingindemnity agreement includes any reasonable costs incurred by any IndemnifiedParty in connection with any action or proceeding which may be instituted inrespect of the foregoing by any Indemnified Party, or by any other Personeither against any Indemnified Party or in connection with which any officer,director, agent or employee of any Indemnified Party is 

 

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calledas a witness or deponent, including, but not limited to, the reasonable feesand disbursements of Morgan, Lewis & Bockius LLP, counsel to the Agentand the Issuing Bank, and any out-of-pocket costs incurred by any IndemnifiedParty in appearing as a witness or in otherwise complying with legal processserved upon them.  Except as otherwiserequired by Applicable Law which may not be waived, the Agent, the Issuing Bankand the Lenders shall not be liable to any Credit Party for any matter or thingin connection with this Credit Agreement other than their express obligationshereunder, including obligations to make Loans and account for moneys actuallyreceived by them in accordance with the terms hereof.

 

Wheneverthe provisions of this Credit Agreement or any other Fundamental Document providethat, if any Credit Party shall fail to do any act or thing which it hascovenanted to do hereunder, the Agent may (but shall not be obligated to) dothe same or cause it to be done or remedy any such breach and if the Agent doesthe same or causes it to be done, there shall be added to the Obligationshereunder the cost or expense incurred by the Agent in so doing, and any andall amounts expended by the Agent in taking any such action shall be repayableto it upon its demand therefor and shall for advances made by the Agent, bearinterest at 2% in excess of the sum of the Alternate Base Rate plus theApplicable Margin, from time to time in effect from the date advanced to thedate of repayment.

 

Allindemnities contained in this Section 13.5 shall survive the expiration orearlier termination of this Credit Agreement and shall inure to the benefit ofany Person who was a Lender notwithstanding such Person’s assignment of all itsLoans and Commitments as to any actions taken or omitted to be taken by itwhile it was a Lender.

 

SECTION 13.6.  CHOICE OFLAW.  THIS CREDIT AGREEMENT AND THENOTES SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY,THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TOBE PERFORMED WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONSRELATING TO INTEREST RATES, ANY APPLICABLE LAW OF THE UNITED STATES OFAMERICA.  EACH LETTER OF CREDIT SHALL BEGOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS ORRULES DESIGNATED IN SUCH LETTER OF CREDIT OR IF NO SUCH LAWS OR RULES AREDESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, INTERNATIONALCHAMBER OF COMMERCE PUBLICATION NO. 500 AS ADOPTED OR AMENDED FROM TIME TO TIME (THE “UNIFORM CUSTOMS”)AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THESTATE OF NEW YORK.

 

SECTION 13.7.  WAIVER OFJURY TRIAL.  TO THE EXTENT NOTPROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH CREDIT PARTY HEREBYWAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANTOR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THISCREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT ORTHE SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER

 

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ARISINGAND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHERPARTIES HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIALINDUCEMENT UPON WHICH SUCH OTHER PARTIES HAVE RELIED, ARE RELYING AND WILL RELYIN ENTERING INTO THIS CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT.  ANY PARTY MAY FILE AN ORIGINAL COUNTERPART ORA COPY OF THIS SECTION 13.7 WITH ANY COURT AS WRITTEN EVIDENCE OF THECONSENT OF ANY OTHER PARTY TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

 

SECTION 13.8.  WAIVERWITH RESPECT TO DAMAGES.  EACH CREDITPARTY ACKNOWLEDGES THAT NEITHER THE AGENT, THE ISSUING BANK NOR ANY LENDER HASANY FIDUCIARY RELATIONSHIP WITH, OR FIDUCIARY DUTY TO, ANY CREDIT PARTY ARISINGOUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OTHER FUNDAMENTALDOCUMENT AND THE RELATIONSHIP BETWEEN THE AGENT, THE ISSUING BANK AND THE LENDERS,ON THE ONE HAND, AND THE CREDIT PARTIES, ON THE OTHER HAND, IN CONNECTIONHEREWITH AND THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOCREDIT PARTY SHALL ASSERT, AND EACH CREDIT PARTY HEREBY WAIVES, ANY CLAIMSAGAINST THE AGENT, THE ISSUING BANK, AND THE LENDERS, ON ANY THEORY OFLIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSEDTO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS ARESULT OF, THIS CREDIT AGREEMENT, ANY OTHER FUNDAMENTAL DOCUMENT, ANY AGREEMENTOR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATEDHEREBY OR THEREBY.

 

SECTION 13.9.  No Waiver.  No failure on the part of the Agent, or anyLender or the Issuing Bank to exercise, and no delay in exercising, any right,power or remedy hereunder, under the Notes or any other Fundamental Document orwith regard to any Letter of Credit shall operate as a waiver thereof, norshall any single or partial exercise of any such right, power or remedypreclude any other or further exercise thereof or the exercise of any otherright, power or remedy.  All remedieshereunder are cumulative and are not exclusive of any other remedies provided bylaw.

 

SECTION 13.10.  Extensionof Payment Date.  Except as otherwisespecifically provided in Article 2 hereof, should any payment orprepayment of principal of or interest on the Notes or any other amount duehereunder, become due and payable on a day other than a Business Day, the duedate of such payment or prepayment shall be extended to the next succeedingBusiness Day and, in the case of a payment or prepayment of principal, interestshall be payable thereon at the rate herein specified during such extension.

 

SECTION 13.11.  Amendments, etc.  No modification, amendment or waiver of anyprovision of this Credit Agreement or any other Fundamental Document, and noconsent to any departure by the Borrower or any other Credit Party herefrom ortherefrom, shall in any event be effective unless the same shall be in writingand signed by the Required Lenders and then such 

 

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waiveror consent shall be effective only in the specific instance and for the purposefor which given; provided, however, that no such modification,waiver, consent or amendment shall, without the written consent of (a) eachaffected Lender, (i) change any Commitment of such Lender, (ii) reducethe interest payable on such Lender’s Loans, (iii) alter the principalamount of such Lender’s Loans or any reimbursement obligation in respect ofLetters of Credit; (iv) reduce the rate at which the Commitment Fees arepayable to such Lender or (v) reduce the fees payable to such Lender withrespect to Letters of Credit issued hereunder as set forth in Section 2.4(f) and(g) and (b) all Lenders, (i) amend or modify any provision ofthis Credit Agreement, which expressly provides for the unanimous consent orapproval of the Lenders, (ii) release a substantial portion of theCollateral or any of the Pledged Securities (except as contemplated herein), (iii) extendthe Maturity Date or (iv) amend the definition of “Required Lenders,” (v) materiallyamend the definition of “Collateral” (and defined terms used in the definitionof Collateral), or (vi) amend or modify this Section 13.11.  No such amendment or modification mayadversely affect the rights and obligations of the Agent hereunder without itsprior written consent or the rights and obligations of the Issuing Bank withoutits prior written consent.  No notice toor demand on the Borrower shall entitle the Borrower to any other or furthernotice or demand in the same, similar or other circumstances.  Each holder of a Note shall be bound by anyamendment, modification, waiver or consent authorized as provided herein,whether or not such Note shall have been marked to indicate such amendment,modification, waiver or consent and any consent by any holder of a Note shallbind any Person subsequently acquiring such Note, whether or not such Note isso marked.

 

SECTION 13.12.  Severability.  Any provision of this Credit Agreement or ofthe 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 provisionshereof or thereof, and any such invalidity, illegality or unenforceability inany jurisdiction shall not invalidate or render unenforceable such provision inany other jurisdiction.

 

SECTION 13.13.  **SERVICE OF PROCESS.  EACH CREDIT PARTY PARTY HERETO (EACH A “SUBMITTINGPARTY”) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OFTHE STATE OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITEDSTATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OFANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS CREDITAGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE LETTERS OF CREDIT), THE SUBJECTMATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT AND THE SUBJECT MATTER THEREOF.  EACH SUBMITTING PARTY TO THE EXTENT PERMITTEDBY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OFMOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHERPROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECTPERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT ITS PROPERTY IS EXEMPT ORIMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING ISBROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION ORPROCEEDING IS IMPROPER OR THAT THIS CREDIT AGREEMENT, THE**

 

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**SUBJECT MATTER HEREOF, THE OTHER FUNDAMENTAL DOCUMENT OR THESUBJECT MATTER THEREOF (AS APPLICABLE) MAY NOT BE ENFORCED IN OR BY SUCHCOURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT ORPROCEEDING INSTITUTED BY THE AGENT, THE ISSUING BANK OR A LENDER IN STATE COURTTO FEDERAL COURT, OR TO REMAND AN ACTION INSTITUTED IN FEDERAL COURT TO STATECOURT AND (C) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUITOR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARECOMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER.  EACH SUBMITTING PARTY HEREBY CONSENTS TOSERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TO ITPURSUANT TO SECTION 13.1 HEREOF. EACH SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION ANDCONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF EACHOF THE OTHER PARTIES HERETO.  FINALJUDGMENT AGAINST ANY SUBMITTING PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALLBE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BYSUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICHSHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS ORLIABILITY OF THE SUBMITTING PARTY THEREIN DESCRIBED, OR (Y) IN ANY OTHERMANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED,HOWEVER, THAT THE AGENT, THE ISSUING BANK OR A LENDER MAY AT ITSOPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS, AGAINST ASUBMITTING PARTY OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THEUNITED STATES OR OF ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCHASSETS MAY BE FOUND.**

 

SECTION 13.14.  Headings.  Section headings used herein and theTable of Contents are for convenience only and are not to affect theconstruction of or be taken into consideration in interpreting this CreditAgreement.

 

SECTION 13.15.  Executionin Counterparts.  This CreditAgreement may be executed in any number of counterparts, each of which shallconstitute an original, but all of which taken together shall constitute oneand the same instrument.

 

SECTION 13.16.  Subordinationof Intercompany Indebtedness, Receivables and Advances.  (a)  Each Credit Party hereby agreesthat any intercompany Indebtedness or other intercompany receivables orintercompany advances of any other Credit Party, directly or indirectly infavor of such Credit Party of whatever nature at any time outstanding shall becompletely subordinate in right of payment to the prior payment in full of theObligations, and that no payment on any such Indebtedness, receivable oradvance shall be made (i) except that intercompany receivables andintercompany advances permitted pursuant to the terms hereof may be repaid andintercompany Indebtedness permitted pursuant to the terms hereof may be repaid,in each case so long as no Default or Event of Default shall have occurred andbe continuing and (ii) except as specifically consented to by all theLenders in writing, until the 

 

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priorpayment in full of all the Obligations, expiration or other termination of alloutstanding Letters of Credit and termination of the Commitments.

 

(b)           In the event thatany payment on any such Indebtedness shall be received by any Credit Partyother than as permitted by Section 13.16(a) before payment in full ofall Obligations, expiration or other termination of all outstanding Letters ofCredit and termination of the Commitments, such Credit Party shall receive suchpayments and hold the same in trust for the Agent segregate the same from itsown assets and immediately pay over to the Agent for itself, the Issuing Bankand the Lenders all such sums to the extent necessary so that the Agent, theIssuing Bank and the Lenders shall have been paid all Obligations owed or whichmay become owing.

 

SECTION 13.17.  Confidentiality.  Each of the Lenders, the Agent and theIssuing Bank hereby agrees that it will use its best efforts to treat anyinformation obtained from the Credit Parties and their Affiliates in connectionwith this Credit Agreement as confidential, except that each of the Lenders,the Agent and the Issuing Bank shall be permitted to disclose information (i) totheir 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) toprospective assignees in accordance with Section 13.3(h) hereof, (iii) tothe extent required by Applicable Law or by any subpoena or similar legalprocess; (iv) to the extent requested by any bank or other regulatoryauthority; (v) to the extent such information (A) becomes publiclyavailable other than as a result of a breach of this provision or any confidentialityletter executed by any prospective assignee addressed to the Borrower, itsrepresentatives or agents, (B) becomes available to any of the Lenders,the Agent or the Issuing Bank on a nonconfidential basis from a source otherthan the Credit Parties or any of their respective Affiliates which source isnot known to such Lender, the Agent or the Issuing Bank to be prohibited fromtransmitting the information by a contractual, legal or fiduciary obligation or(C) was available to any of the Lenders, the Agent or the Issuing Bank ona nonconfidential basis prior to its disclosure to any of the Lenders, theAgent or the Issuing Bank  by any CreditParty or any of their respective Affiliates; (vi) to the extent any CreditParty, prior to such disclosure, shall have consented to such disclosure inwriting; or (vii) in connection with the enforcement by any Lender, theAgent or the Issuing Bank of its rights under or in respect of this CreditAgreement.

 

SECTION 13.18.  EntireAgreement.  This Credit Agreement(including the Exhibits and Schedules hereto) and the other FundamentalDocuments represent the entire agreement of the parties with regard to thesubject matter hereof and the terms of any letters and other documentationentered into between any of the parties hereto (other than the Fee Letter)prior to the execution of this Credit Agreement which relate to Loans to bemade or the Letters of Credit to be issued hereunder shall be replaced by theterms of this Credit Agreement.

 

SECTION 13.19.  Right ofSet-Off.  Upon the occurrence andduring the continuance of any Event of Default, each of the Agent and theLenders is hereby authorized at any time and from time to time, to the fullestextent permitted by law and without order of or application to any court, toset 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 owingby such Person to or for the credit or the account of any Credit Party againstany and all of the Obligations, 

 

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irrespectiveof whether or not such Person shall have made any demand under any FundamentalDocument and although the Obligations may not have been accelerated. The rightsof each Lender and the Agent under this Section are in addition to otherrights and remedies which such Lender and the Agent may have upon theoccurrence and during the continuance of any Event of Default.

 

14.           HALLMARK SUBORDINATED PARTICIPATION

 

SECTION 14.1.  Sale andGeneral Terms of Participation Upon A Payment Under the Hallmark Cards FacilityGuarantee.  (a)  The netproceeds received by the Agent from any payment made by Hallmark Cards underthe Hallmark Cards Facility Guarantee shall not be applied to repay Obligationsbut shall instead be treated as the purchase price for the sale of asubordinated participation in the Obligations from the Agent and the Lenders toHallmark Cards.  Such subordinatedparticipation in the Obligations shall be purchased at the face amount andshall be hereinafter referred to as the “Hallmark Subordinated Participation”.  If the amount of the drawing is less than theamount of the outstanding Obligations, the purchase shall be deemed to be madein the following order: (i) claims other than principal and interest, (ii) interest,and (iii) principal.

 

(b)           The purchase and sale of the HallmarkSubordinated Participation shall be automatic and shall not require any actionon behalf of Hallmark Cards or on behalf of the Lenders.  Such purchase and sale shall be pro rata amongall of the Lenders.  To the extent thatsuch purchase and sale is of the outstanding principal amount of the Loans, theAgent shall give notice to each of the Lenders and each Lender shall annex toits Note the notice from the Agent which memorializes the amount of thesubordinated participation being purchased in that Note.

 

(c)           Such purchase and sale shall bewithout any representation, warranty or recourse to the Agent or the Lenders;provided, however, that each Lender makes a representation and warranty that itis the legal and beneficial owner of the interest being assigned thereby andthat such interest is free and clear of any adverse claims.  The assigning Lender makes no representationor warranty and assumes no responsibility with regard to any of the statements,warranties or representations made in or in connection with any FundamentalDocument or as to the execution, legality, validity, enforceability,genuineness or sufficiency or value thereof or of any instrument ordocumentation furnished pursuant thereto.

 

(d)           Once all of the Senior Obligationshave been paid in full, each of the Lenders shall, if requested by HallmarkCards and at the expense of Hallmark Cards, endorse its Note withoutrepresentation, warranty or recourse to Hallmark Cards and deliver such Note tothe Agent for delivery to Hallmark Cards. At that point in time, the Credit Parties and Hallmark Cards agree thatthe Agent may immediately resign notwithstanding any provisions to the contrarycontained in the Credit Agreement and that the Agent and the Issuing Bank shallcontinue to be entitled to all of the indemnities provided in the CreditAgreement as secured Lenders with regard to all matters relating to periods oractions taken prior to their resignation. To the extent that there are any Letters of Credit outstanding at thetime of a payment by Hallmark Cards under the Hallmark Cards FacilityGuarantee, cash received by the Agent subsequent to such payment shall be usedfirst to provide cash collateral for such Letters of Credit.

 

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(e)           Notwithstanding any provisions to thecontrary in the Credit Agreement, the Junior Creditor shall not be entitled toany right of consent or to vote under the Credit Agreement or to receive anypayments with regard to accrued interest and fees or other amounts applicableto the Hallmark Subordinated Participation until all of the Senior Obligationsshall have been paid in full.

 

(f)            The Borrower acknowledges that theTotal Commitment shall terminate upon any assertion by the Agent of any claimunder the Hallmark Cards Facility Guarantee and that subsequent thereto neitherthe Agent, the Issuing Bank nor the Lenders shall be obligated to provide anyadditional credit whatsoever to the Credit Parties.

 

SECTION 14.2.  Agreementto Subordinate.  The Junior Creditoragrees that the Junior Obligations are and shall be subordinate and junior inright of payment, to the extent and in the manner hereinafter set forth, to theprior payment in full of the Senior Obligations.  Interest on the Hallmark Subordinated Participationshall accrue in accordance with the provisions of Section 2.6 hereof, butno payment of principal or interest or any other amounts shall be made withrespect to the Junior Obligations until all of the Senior Obligations have beenpaid in full.  Any payment of principalof, or interest on, the Loans or any other amounts with regard to Obligationsreceived or collected by the Agent, any Lender or the Junior Creditor shall beallocated first entirely to the Senior Obligations until the Senior Obligationsare paid in full and only thereafter allocated to the Junior Obligations.  The expressions “prior payment in full”, “paymentin full”, “paid in full” or any other similar term or phrase when used hereinwith respect to the Senior Obligations shall mean the payment in full, in cash,of all of the Senior Obligations.

 

SECTION 14.3.  Restrictionson Payment of the Junior Obligations. The Junior Creditor shall not ask, demand, sue for, take or receive,directly or indirectly, from any Credit Party, in cash or other property, bysetoff, by realizing upon the Collateral, foreclosing on any lien or otherwise,by exercise of any remedies or rights under this Credit Agreement or byexecutions, garnishments, or in any other manner, payment of, or additional securityfor, all or any part of the Junior Obligations unless and until the SeniorObligations shall have been paid in full. The Credit Parties will not make any payment of the Junior Obligations,or take any other action, in contravention of the provisions of this Article 14.

 

SECTION 14.4.  AdditionalProvisions Concerning Subordination. The Junior Creditor and the Credit Parties agree as follows:

 

(a)           In the event of (x) any dissolution, winding-up,liquidation or reorganization of a Credit Party (whether voluntary orinvoluntary and whether in bankruptcy, insolvency or receivership proceedings,or upon an assignment for the benefit of creditors or proceedings for voluntaryor involuntary liquidation, dissolution or other winding-up of the Credit Party,whether involving insolvency or bankruptcy, or any other marshalling of theassets and liabilities of the Credit Party or otherwise), or (y) any Eventof Default or an event that with notice or passage of time would constitute anEvent of Default, or any default, demand for payment or acceleration ofmaturity regarding the Junior Obligations:

 

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(i)            all Senior Obligations shall first be paid in full to theAgent for the benefit of the holders of the Senior Obligations before anypayment or distribution is made upon the principal of, interest on, or anyfees, costs, charges or expenses in connection with, the Junior Obligations;and

 

(ii)           to the extent necessary to pay in full all SeniorObligations remaining unpaid after giving effect to any concurrent payment ordistribution to the holders of the Senior Obligations, any payment ordistribution of assets of a Credit Party, whether in cash, property orsecurities to which the Junior Creditor would be entitled except for theprovisions hereof, shall be paid or delivered by the Credit Party, or anyreceiver, trustee in bankruptcy, liquidating trustee, disbursing agent, agentor other person making such payment or distribution, directly to the Agent tobe applied to outstanding Senior Obligations before any payment or distributionis made upon the Junior Obligations.

 

(b)           In any proceeding referred to or resulting from any eventreferred to in subsection (a) of this Section 14.4 commenced by oragainst the Borrower:

 

(i)            The Agent may, and is hereby irrevocably authorized andempowered (in its own name or in the name of the Junior Creditor or otherwise),but shall have no obligation to, (A) demand, sue for, collect and receiveevery payment or distribution referred to in subsection (a) of this Section 14.4and give acquittance therefor, (B) file claims and proofs of claim inrespect of the Junior Obligations and (C) take such other action as theAgent may deem necessary or advisable for the exercise or enforcement of any ofthe rights or interests of the Agent and the Lenders.

 

(ii)           The Junior Creditor will duly and promptly take suchaction as the Agent may reasonably request to collect the Junior Obligationsfor the account of the holders of the Senior Obligations and to fileappropriate claims or proofs of claim with respect thereto, to execute anddeliver to the Agent such powers of attorney, assignments or other instrumentsas the Agent may request in order to enable it to enforce any and all claimswith respect to the Junior Obligations, and to collect and receive any and allpayments or distributions that may be payable or deliverable upon or withrespect to the Junior Obligations.

 

(c)           All payments or distributions upon or with respect to theJunior Obligations that are received by the Junior Creditor contrary to theprovisions of this Article 14 shall be deemed to be the property of theholders of the Senior Obligations, shall be received in trust for the benefitof the holders of the Senior Obligations, shall be segregated from other fundsand property held by the Junior Creditor and shall be forthwith paid over tothe Agent for the benefit of the holders of the Senior Obligations in the sameform as so received (with any necessary endorsement) to be applied to thepayment or prepayment of the Senior Obligation until the Senior Obligationsshall have been paid in full.

 

(d)           The subordination provisions contained herein are for thebenefit of each holder of Senior Obligations and may not be rescinded, modifiedor cancelled at any time without the prior written consent of all holders.

 

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(e)           So long as the Junior Obligations remains outstanding, theJunior Creditor agrees not to assert any direct right of legal redress againsta Credit Party with respect to the Junior Obligations.  The Junior Creditor hereby authorizes theAgent to take legal action to enforce or protect their interest with respect tothe Senior Obligations as it may from time to time see fit.

 

(f)            Any holder of Senior Obligations may at any time or fromtime to time grant to others assignments or participations in the Loanspursuant to the terms of Section 13.3 hereof.  Any such assignment or participation shallcontinue to be treated as a Senior Obligation of the Credit Parties and anyholder of such an assignment or participation shall be entitled to the benefitsof the subordination set forth in Section 14.2 above.  The Junior Creditor will not sell, assign orotherwise dispose of the Junior Obligations or any portion thereof, or grantany sub-participation therein, without the prior written consent of theRequired Lenders.

 

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INWITNESS WHEREOF, the parties hereto have caused this Credit Agreement to beduly executed as of the day and the year first written.

 
|   | BORROWER:                        |
|--------|----------------------------------|
|   |                             |
|   | CROWN  MEDIA HOLDINGS, INC. |
|   |                             |
|   | [signature  block omitted]       |
|   |                             |
|   | CM  INTERMEDIARY, LLC            |
|   | CROWN  MEDIA UNITED STATES, LLC  |
|   | CITI  TEEVEE, LLC                |
|   | DOONE  CITY PICTURES, LLC        |
|   |                             |
|   | [signature  block omitted]       |

 

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|   | LENDERS:                                                               |
|--------|------------------------------------------------------------------------|
|   |                                                                   |
|   | JPMORGAN CHASE BANK, N.A.,  individually and as Agent and Issuing Bank |

 

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|   | [signature  block omitted] |
|--------|----------------------------|

 

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