**Exhibit10.12**

 

**EXECUTION COPY**
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PLEDGE AGREEMENT

 

DATED AS OF JUNE 29, 2010

 

AMONG

 

CROWN MEDIAHOLDINGS, INC.

 

AS PLEDGOR

 

AND

 

HC CROWN CORP.

 

AS SECURED PARTY

 
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TABLE OF CONTENTS

 
| ** ** | ** **                                                               | **Page**   |
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| ** ** | ** **                                                               | ** ** |
| 1.         | Definitions and Construction                                             | 1          |
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| 2.         | Pledge                                                                   | 4          |
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| 3.         | Delivery and Registration of Collateral                                  | 4          |
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| 4.         | Voting Rights and Dividends                                              | 5          |
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| 5.         | Representations and Warranties                                           | 5          |
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| 6.         | Further Assurances                                                       | 6          |
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| 7.         | Covenants of Pledgor                                                     | 7          |
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| 8.         | Secured Party as Pledgor’s Attorney-in-Fact                         | 7          |
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| 9.         | Remedies upon Default                                                    | 8          |
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| 10.        | Application of Proceeds                                                  | 10         |
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| 11.        | Indemnity and Expenses                                                   | 10         |
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| 12.        | Duties of Secured Party                                                  | 11         |
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| 13.        | Choice of Law and Venue; Submission to Jurisdiction; Service of  Process | 11         |
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| 14.        | Amendments; etc.                                                         | 12         |
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| 15.        | Notices                                                                  | 12         |
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| 16.        | Continuing Security Interest                                             | 13         |
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| 17.        | Security Interest Absolute                                               | 13         |
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| 18.        | Headings                                                                 | 14         |
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| 19.        | Severability                                                             | 14         |
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| 20.        | Counterparts; Telefacsimile Execution                                    | 14         |
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| 21.        | Waiver of Marshaling                                                     | 14         |
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| 22.        | Waiver of Jury Trial                                                     | 14         |

 

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| 23. | Intercreditor | 14 |
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Pledge Agreement

 

THIS PLEDGE AGREEMENT (this “Agreement”), datedas of June 29, 2010 is entered into between Crown MediaHoldings, Inc. a Delaware corporation (“Debtor”) each of theGuarantors listed on the signature pages hereto (the “Guarantors” andtogether with the Debtor each individually a “Pledgor” and collectivelythe “Pledgors”) and HC Crown Corp., a Delaware Corporation (“SecuredParty”),with reference to the following:

 

WHEREAS, the Pledgors and the Secured Party are eacha party that certain Security and Pledge Agreement, dated July 27, 2007(as amended, supplemented or modified from time to time the “2007 Pledge andSecurity Agreement”) by and among the Debtor, the subsidiaries of theDebtor listed as Guarantors on that certain Credit, Security, Guarantee andPledge Agreement dated as of August 31, 2001, as subsequently amended,among Crown Holdings, the Guarantors named therein, the Lenders named thereinand JPMorgan Chase as Agent and Hallmark Cards, Incorporated on behalf ofitself and as agent for each of the Secured Party and Hallmark EntertainmentHoldings, Inc., and the Debtor and the Secured party wish to, and herebydo, continue and extend the pledge made therein;

 

WHEREAS, Pledgors and Secured Party are parties tothat certain Credit Agreement (as amended, restated, or otherwise modified fromtime to time, the “Credit Agreement”), of even date herewith, pursuantto which Secured Party has agreed to make certain financial accommodations toPledgor;

 

WHEREAS, the Pledgors beneficially own the EquityInterests (as hereinafter defined) in the Issuers (as hereinafter defined);

 

WHEREAS, to induce Secured Party to make the financialaccommodations provided to Pledgors pursuant to the Credit Agreement, Pledgorsdesire to pledge, grant, transfer, and assign to Secured Party a securityinterest in the Collateral (as hereinafter defined) to secure the SecuredObligations (as hereinafter defined), as provided herein.

 

NOW, THEREFORE, in consideration of the mutualpromises, covenants, representations, and warranties set forth herein and forother good and valuable consideration, the parties hereto agree as follows:

 

1.             Definitions andConstruction.

 

(a)           Definitions.

 

All initially capitalized terms used herein and nototherwise defined herein shall have the meaning ascribed thereto in the CreditAgreement. As used in this Agreement:

 

“Bankruptcy Code” means United StatesBankruptcy Code (11 U.S.C. Section 101 et seq.), as in effect from time totime, and any successor statute thereto.

 

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“Business Day” means any day that is not aSaturday, Sunday, or other day on which national banks are authorized orrequired to close.

 

“Code” means the Uniform Commercial Code asin effect in the State of New York from time to time.

 

“Collateral” shall mean the PledgedInterests, the Future Rights, and the Proceeds, collectively.

 

“Credit Agreement” shall have the meaningascribed thereto in the recitals to this Agreement.

 

“Equity Interests” means all securities,shares, units, options, warrants, interests, participations, or otherequivalents (regardless of how designated) of or in a corporation, partnership,limited liability company, or similar entity, whether voting or nonvoting,certificated or uncertificated, including general partner partnershipinterests, limited partner partnership interests, common stock, preferredstock, or any other “equity security” (as such term is defined inRule 3a11-1 of the General Rules and Regulations promulgated by theSecurities and Exchange Commission under the Securities Exchange Act of 1934).

 

“Event of Default” shall have the meaningascribed thereto in the Credit Agreement. 

 

“Fundamental Documents” shall have themeaning ascribed to it in the Credit Agreement.

 

“Future Rights” shall mean: (a) allEquity Interests (other than Pledged Interests) of the Issuers, and allsecurities convertible or exchangeable into, and all warrants, options, orother rights to purchase, Equity Interests of the Issuers; and (b) thecertificates or instruments representing such Equity Interests, convertible orexchangeable securities, warrants, and other rights and all dividends, cash,options, warrants, rights, instruments, and other property or proceeds fromtime to time received, receivable, or otherwise distributed in respect of or inexchange for any or all of such Equity Interests.

 

“Holder” and “Holders” shall have themeanings ascribed thereto in Section 3 of this Agreement.

 

“Issuers” shall mean each of the Personsidentified as an Issuer on Schedule 1 attached hereto (or any addendumthereto), and any successors thereto, whether by merger or otherwise.

 

“Lien” shall mean any lien, mortgage, pledge,assignment (including any assignment of rights to receive payments of money),security interest, charge, or encumbrance of any kind (including anyconditional sale or other title retention agreement, any lease in the naturethereof, or any agreement to give any security interest).

 

“Pledged Interests” shall mean (a) allEquity Interests of the Issuers identified on Schedule 1; and (b) thecertificates or instruments representing such Equity Interests.

 

“Pledgor” shall have the meaning ascribedthereto in the recitals to this Agreement.

 

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“Proceeds” shall mean all proceeds (includingproceeds of proceeds) of the Pledged Interests and Future Rights including all:(a) rights, benefits, distributions, premiums, profits, dividends,interest, cash, instruments, documents of title, accounts, contract rights,inventory, equipment, general intangibles, payment intangibles, depositaccounts, chattel paper, and other property from time to time received,receivable, or otherwise distributed in respect of or in exchange for, or as areplacement of or a substitution for, any of the Pledged Interests, FutureRights, or proceeds thereof (including any cash, Equity Interests, or othersecurities or instruments issued after any recapitalization, readjustment,reclassification, merger or consolidation with respect to the Issuers and anysecurity entitlements, as defined in Section 8-102(a)(17) of the Code,with respect thereto); (b) “proceeds,” as such term is defined inSection 9-102(a)(64) of the Code; (c) proceeds of any insurance,indemnity, warranty, or guaranty (including guaranties of delivery) payablefrom time to time with respect to any of the Pledged Interests, Future Rights,or proceeds thereof; (d) payments (in any form whatsoever) made or due andpayable to any Pledgor from time to time in connection with any requisition,confiscation, condemnation, seizure or forfeiture of all or any part of thePledged Interests, Future Rights, or proceeds thereof; and (e) otheramounts from time to time paid or payable under or in connection with any ofthe Pledged Interests, Future Rights, or proceeds thereof.

 

“Registered Organization” shall have themeaning ascribed thereto in Section 9-102(a)(7) of the Code.

 

“Secured Obligations” shall mean allliabilities, obligations, or undertakings owing by any Pledgor to Secured Partyof any kind or description arising out of or outstanding under, advanced orissued pursuant to, or evidenced by the Credit Agreement, this Agreement, orany other Fundamental Document, irrespective of whether for the payment ofmoney, whether direct or indirect, absolute or contingent, due or to becomedue, voluntary or involuntary, whether now existing or hereafter arising, andincluding all interest (including interest that accrues after the filing of acase under the Bankruptcy Code) and any and all costs, fees (includingattorneys fees), and expenses which any Pledgor is required to pay pursuant toany of the foregoing, by law, or otherwise.

 

“Secured Party” shall have the meaning ascribedthereto in the recitals to this Agreement, together with its successors orassigns.

 

“Securities Act”shall have the meaning ascribed thereto in Section 9(c) of thisAgreement. 

 

(b)           Construction.

 

(i)            Unless the context of this Agreement clearly requiresotherwise, references to the plural include the singular and to the singularinclude the plural, the part includes the whole, the term “including” is notlimiting, and the term “or” has, except where otherwise indicated, theinclusive meaning represented by the phrase “and/or.” The words “hereof,”“herein,” “hereby,” “hereunder,” and other similar terms in this Agreementrefer to this Agreement as a whole and not exclusively to any particularprovision of this Agreement. Article, section, subsection, exhibit, andschedule references are to this Agreement unless otherwise specified. All ofthe exhibits or schedules attached to this Agreement shall be deemedincorporated herein by reference. Any reference to any of the followingdocuments includes any and all alterations, amendments,

 

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restatements, extensions, modifications, renewals, or supplementsthereto or thereof, as applicable: this Agreement, the Credit Agreement, or anyof the other Fundamental Documents.

 

(ii)           Neither this Agreement nor any uncertainty orambiguity herein shall be construed or resolved against Secured Party or anyPledgor, whether under any rule of construction or otherwise. On thecontrary, this Agreement has been reviewed by both of the parties and theirrespective counsel and shall be construed and interpreted according to theordinary meaning of the words used so as to fairly accomplish the purposes andintentions of the parties hereto.

 

(iii)          In the event of any direct conflict between theexpress terms and provisions of this Agreement and of the Credit Agreement, theterms and provisions of the Credit Agreement shall control.

 

2.             Pledge.

 

As security for the prompt payment and performanceof the Secured Obligations in full by Pledgors when due, whether at statedmaturity, by acceleration or otherwise (including amounts that would become duebut for the operation of the provisions of the Bankruptcy Code), each Pledgorhereby pledges, grants, transfers, and assigns to Secured Party a securityinterest in all of such Pledgor’s right, title, and interest in and to theCollateral.

 

3.             Delivery andRegistration of Collateral.

 

(a)           All certificates or instruments representing orevidencing the Collateral shall be promptly delivered by each Pledgor toSecured Party or Secured Party’s designee pursuant hereto at a locationdesignated by Secured Party and shall be held by or on behalf of Secured Partypursuant hereto, and shall be in suitable form for transfer by delivery, orshall be accompanied by duly executed indorsement certificate in the formattached hereto as Exhibit A or other instrument of transfer or assignmentin blank, in form and substance satisfactory to Secured Party.

 

(b)           Upon the occurrence and during the continuance of anEvent of Default, Secured Party shall have the right, at any time in itsdiscretion and without notice to any Pledgor, to transfer to or to register onthe books of the Issuers (or of any other Person maintaining records withrespect to the Collateral) in the name of Secured Party or any of its nomineesany or all of the Collateral. In addition, Secured Party shall have the rightat any time to exchange certificates or instruments representing or evidencingCollateral for certificates or instruments of smaller or larger denominations.

 

(c)           If, at any time and from time to time, anyCollateral (including any certificate or instrument representing or evidencingany Collateral) is in the possession of a Person other than Secured Party orPledgor (a “Holder”), then Pledgor shall immediately, at Secured Party’soption, either cause such Collateral to be delivered into Secured Party’spossession, or cause such Holder to enter into a control agreement, in form andsubstance satisfactory to Secured Party, and take all other steps deemednecessary by Secured Party to perfect the security interest of Secured Party insuch Collateral, all pursuant to Sections 9-106 & 9-313 of the Code orother applicable law governing the perfection of Secured Party’s security interestin the Collateral in the possession of such Holder.

 

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(d)           Any and all Collateral (including dividends,interest, and other cash distributions) at any time received or held by anyPledgor shall be so received or held in trust for Secured Party, shall besegregated from other funds and property of Pledgor and shall be forthwithdelivered to Secured Party in the same form as so received or held, with anynecessary indorsements; provided that cash dividends or distributions receivedby Pledgor, may be retained by Pledgor in accordance with Section 4 andused in the ordinary course of Pledgor’s business.

 

(e)           If at any time, and from time to time, anyCollateral consists of an uncertificated security or a security in book entryform, then Pledgor shall immediately cause such Collateral to be registered orentered, as the case may be, in the name of Secured Party, or otherwise causeSecured Party’s security interest thereon to be perfected in accordance withapplicable law.

 

4.             Voting Rightsand Dividends.

 

(a)           So long as no Event of Default shall have occurredand be continuing, each Pledgor shall be entitled to exercise any and allvoting and other consensual rights pertaining to the Collateral or any partthereof for any purpose not inconsistent with the terms of the FundamentalDocuments and shall be entitled to receive and retain any cash dividends ordistributions paid or distributed in respect of the Collateral.

 

(b)           Upon the occurrence and during the continuance of anEvent of Default, all rights of each Pledgor to exercise the voting and otherconsensual rights or receive and retain cash dividends or distributions that itwould otherwise be entitled to exercise or receive and retain, as applicablepursuant to Section 4(a), shall cease, and all such rights shall thereuponbecome vested in Secured Party, who shall thereupon have the sole right toexercise such voting or other consensual rights and to receive and retain suchcash dividends and distributions. Pledgors shall execute and deliver (or causeto be executed and delivered) to Secured Party all such proxies and otherinstruments as Secured Party may reasonably request for the purpose of enablingSecured Party to exercise the voting and other rights which it is entitled toexercise and to receive the dividends and distributions that it is entitled toreceive and retain pursuant to the preceding sentence.

 

5.             Representationsand Warranties.

 

Each Pledgor represents, warrants, and covenants asfollows:

 

(a)           Pledgor has taken all steps it deems necessary orappropriate to be informed on a continuing basis of changes or potentialchanges affecting the Collateral (including rights of conversion and exchange,rights to subscribe, payment of dividends, reorganizations or recapitalization,tender offers and voting and registration rights), and Pledgor agrees thatSecured Party shall have no responsibility or liability for informing Pledgorof any such changes or potential changes or for taking any action or omittingto take any action with respect thereto.

 

(b)           Pledgor is a Registered Organization, organizedunder the laws of the state set forth on Schedule 2. Pledgor’s type oforganization is set forth on Schedule 2.

 

(c)           All information herein or hereafter supplied to SecuredParty by or on behalf of Pledgor in writing with respect to the Collateral is,or in the case of information hereafter supplied will be, accurate and completein all material respects.

 

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(d)           Pledgor is and will be the sole legal and beneficialowner of the Collateral of such Pledgor (including the Pledged Interests andall other Collateral acquired by Pledgor after the date hereof) free and clearof any adverse claim, Lien, or other right, title, or interest of any party,other than the Liens in favor of Secured Party.

 

(e)           This Agreement, and the delivery to Secured Party ofthe Pledged Interests representing Collateral (or the control agreementsreferred to in Section 3 of this Agreement), creates a valid, perfected,and first priority security interest in one hundred percent (100%) of thePledged Interests in favor of Secured Party securing payment of the SecuredObligations, and all actions necessary to achieve such perfection have beenduly taken.

 

(f)            Schedule 1 to this Agreement is true and correct andcomplete in all material respects. Without limiting the generality of theforegoing: (i) except as set forth on Schedule 1, all the PledgedInterests are in certificated form, and, except to the extent registered in thename of Secured Party or its nominee pursuant to the provisions of thisAgreement, are registered in the name of the Pledgor who owns such PledgedInterests; and (ii) the Pledged Interests as to each of the Issuersconstitute at least the percentage of all the fully diluted issued andoutstanding Equity Interests of such Issuer as set forth in Schedule 1 to thisAgreement.

 

(g)           There are no presently existing Future Rights orProceeds owned by Pledgor.

 

(h)           The Pledged Interests have been duly authorized andvalidly issued and are fully paid and nonassessable.

 

(i)            Neither the pledge of the Collateral pursuant tothis Agreement nor the extensions of credit represented by the SecuredObligations violates Regulation T, U or X of the Board of Governors of theFederal Reserve System.

 

6.             FurtherAssurances.

 

(a)           Each Pledgor agrees that from time to time, at theexpense of Pledgor, Pledgor will promptly execute and deliver all furtherinstruments and documents, and take all further action that may be necessary orreasonably desirable, or that Secured Party may request, in order to perfectand protect any security interest granted or purported to be granted hereby orto enable Secured Party to exercise and enforce its rights and remedies hereunderwith respect to any Collateral. Without limiting the generality of theforegoing, Pledgor will: (i) at the request of Secured Party, markconspicuously each of its records pertaining to the Collateral with a legend,in form and substance reasonably satisfactory to Secured Party, indicating thatsuch Collateral is subject to the security interest granted hereby;(ii) execute any such instruments or notices, as may be necessary orreasonably desirable, or as Secured Party may request, in order to perfect andpreserve the first priority security interests granted or purported to begranted hereby; (iii) allow inspection of the Collateral by Secured Partyor Persons designated by Secured Party; and (iv) appear in and defend anyaction or proceeding that may affect Pledgor’s title to or Secured Party’ssecurity interest in the Collateral.

 

(b)           Each Pledgor hereby authorizes Secured Party to fileone or more financing or continuation statements, and amendments thereto,relative to all or any part of the Collateral. A carbon, photographic, or otherreproduction of this Agreement or any financing statement covering

 

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the Collateral or any part thereof shall be sufficient as a financingstatement where permitted by law.

 

(c)           Each Pledgor will furnish to Secured Party, upon therequest of Secured Party: (i) a certificate executed by an authorizedofficer of Pledgor, and dated as of the date of delivery to Secured Party,itemizing in such detail as Secured Party may request, the Collateral which, asof the date of such certificate, has been delivered to Secured Party by Pledgorpursuant to the provisions of this Agreement; and (ii) such statements andschedules further identifying and describing the Collateral and such otherreports in connection with the Collateral as Secured Party may request.

 

7.             Covenants ofPledgor.

 

Each Pledgor shall:

 

(a)           Perform each and every covenant in the FundamentalDocuments applicable to such Pledgor;

 

(b)           Neither change its jurisdiction of organization norcease to be a Registered Organization, in each case, without giving SecuredParty at least thirty (30) days prior written notice thereof;

 

(c)           To the extent it may lawfully do so, use its bestefforts to prevent the Issuers from issuing Future Rights or Proceeds, exceptfor cash dividends and other distributions to be paid by any Issuer to Pledgor;and

 

(d)           Upon receipt by Pledgor of any material notice,report, or other communication from any of the Issuers or any Holder relatingto all or any part of the Collateral, deliver such notice, report or othercommunication to Secured Party as soon as possible, but in no event later thanfive (5) days following the receipt thereof by Pledgor.

 

8.             Secured Partyas Pledgor’s Attorney-in-Fact.

 

(a)           Each Pledgor hereby irrevocably appoints SecuredParty as Pledgor’s attorney-in-fact, with full authority in the place and steadof Pledgor and in the name of Pledgor, Secured Party or otherwise, from time totime at Secured Party’s discretion, to take any action and to execute anyinstrument that Secured Party may reasonably deem necessary or advisable toaccomplish the purposes of this Agreement, including: (i) upon theoccurrence and during the continuance of an Event of Default, to receive, indorse,and collect all instruments made payable to Pledgor representing any dividend,interest payment or other distribution in respect of the Collateral or any partthereof to the extent permitted hereunder and to give full discharge for thesame and to execute and file governmental notifications and reporting forms;(ii) to enter into any control agreements Secured Party deems necessarypursuant to Section 3 of this Agreement; or (iii) to arrange for thetransfer of the Collateral on the books of any of the Issuers or any otherPerson to the name of Secured Party or to the name of Secured Party’s nominee.

 

(b)           In addition to the designation of Secured Party aseach Pledgor’s attorney-in-fact in subsection (a), each Pledgor herebyirrevocably appoints Secured Party as Pledgor’s agent and

 

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attorney-in-fact to make, execute and deliver any and all documents andwritings which may be necessary or appropriate for approval of, or be requiredby, any regulatory authority located in any city, county, state or countrywhere Pledgor or any of the Issuers engage in business, in order to transfer orto more effectively transfer any of the Pledged Interests or otherwise enforceSecured Party’s rights hereunder.

 

9.             Remedies uponDefault.

 

Upon the occurrence and during the continuance of anEvent of Default:

 

(a)           Secured Party may exercise in respect of theCollateral, in addition to other rights and remedies provided for herein orotherwise available to it, all the rights and remedies of a secured party ondefault under the Code (irrespective of whether the Code applies to theaffected items of Collateral), and Secured Party may also without notice(except as specified below) sell the Collateral or any part thereof in one ormore parcels at public or private sale, at any exchange, broker’s board or at anyof Secured Party’s offices or elsewhere, for cash, on credit or for futuredelivery, at such time or times and at such price or prices and upon such otherterms as Secured Party may deem commercially reasonable, irrespective of theimpact of any such sales on the market price of the Collateral. To the maximumextent permitted by applicable law, Secured Party may be the purchaser of anyor all of the Collateral at any such sale and shall be entitled, for thepurpose of bidding and making settlement or payment of the purchase price forall or any portion of the Collateral sold at any such public sale, to use andapply all or any part of the Secured Obligations as a credit on account of thepurchase price of any Collateral payable at such sale. Each purchaser at anysuch sale shall hold the property sold absolutely free from any claim or righton the part of any Pledgor, and each Pledgor hereby waives (to the extentpermitted by law) all rights of redemption, stay, or appraisal that it now hasor may at any time in the future have under any rule of law or statute nowexisting or hereafter enacted. Each Pledgor agrees that, to the extent noticeof sale shall be required by law, at least ten (10) calendar days noticeto Pledgor of the time and place of any public sale or the time after which aprivate sale is to be made shall constitute reasonable notification. SecuredParty shall not be obligated to make any sale of Collateral regardless ofnotice of sale having been given. Secured Party may adjourn any public orprivate sale from time to time by announcement at the time and place fixedtherefore, and such sale may, without further notice, be made at the time andplace to which it was so adjourned. To the maximum extent permitted by law,each Pledgor hereby waives any claims against Secured Party arising because theprice at which any Collateral may have been sold at such a private sale wasless than the price that might have been obtained at a public sale, even ifSecured Party accepts the first offer received and does not offer suchCollateral to more than one offeree.

 

(b)           Each Pledgor hereby agrees that any sale or otherdisposition of the Collateral conducted in conformity with reasonablecommercial practices of banks, insurance companies, or other financial institutionsin the city and state where Secured Party is located in disposing of propertysimilar to the Collateral shall be deemed to be commercially reasonable.

 

(c)           Each Pledgor hereby acknowledges that the sale bySecured Party of any Collateral pursuant to the terms hereof in compliance withthe Securities Act of 1933 as now in effect or as hereafter amended, or anysimilar statute hereafter adopted with similar purpose or effect (the“Securities Act”), as well as applicable “Blue Sky” or other state securitieslaws, may require strict

 

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limitations as to the manner in which Secured Party or any subsequenttransferee of the Collateral may dispose thereof. Each Pledgor acknowledges andagrees that in order to protect Secured Party’s interest it may be necessary tosell the Collateral at a price less than the maximum price attainable if a salewere delayed or were made in another manner, such as a public offering underthe Securities Act. No Pledgor has any objection to sale in such a manner andagrees that Secured Party shall have no obligation to obtain the maximumpossible price for the Collateral. Without limiting the generality of theforegoing, each Pledgor agrees that, upon the occurrence and during thecontinuation of an Event of Default, Secured Party may, subject to applicablelaw, from time to time attempt to sell all or any part of the Collateral by aprivate placement, restricting the bidders and prospective purchasers to thosewho will represent and agree that they are purchasing for investment only andnot for distribution. In so doing, Secured Party may solicit offers to buy theCollateral or any part thereof for cash, from a limited number of investorsreasonably believed by Secured Party to be institutional investors or otheraccredited investors who might be interested in purchasing the Collateral. IfSecured Party shall solicit such offers, then the acceptance by Secured Partyof one of the offers shall be deemed to be a commercially reasonable method ofdisposition of the Collateral.

 

(d)           If Secured Party shall determine to exercise itsright to sell all or any portion of the Collateral pursuant to this Section,each Pledgor agrees that, upon request of Secured Party, Pledgor will, at itsown expense:

 

(i)            use its best efforts to execute and deliver, andcause the Issuers and the directors and officers thereof to execute anddeliver, all such instruments and documents, and to do or cause to be done allsuch other acts and things, as may be necessary or, in the opinion of SecuredParty, advisable to register such Collateral under the provisions of theSecurities Act, and to cause the registration statement relating thereto tobecome effective and to remain effective for such period as prospectuses arerequired by law to be furnished, and to make all amendments and supplementsthereto and to the related prospectuses which, in the opinion of Secured Party,are necessary or advisable, all in conformity with the requirements of theSecurities Act and the rules and regulations of the Securities andExchange Commission applicable thereto;

 

(ii)           use its best efforts to qualify the Collateral underthe state securities laws or “Blue Sky” laws and to obtain all necessarygovernmental approvals for the sale of the Collateral, as requested by SecuredParty;

 

(iii)          cause the Issuers to make available to theirrespective security holders, as soon as practicable, an earnings statementwhich will satisfy the provisions of Section 11 (a) of the SecuritiesAct;

 

(iv)          execute and deliver, or cause the officers anddirectors of the Issuers to execute and deliver, to any person, entity orgovernmental authority as Secured Party may choose, any and all documents andwritings which, in Secured Party’s reasonable judgment, may be necessary orappropriate for approval, or be required by, any regulatory authority locatedin any city, county, state or country where Pledgor or the Issuers engage inbusiness, in order to transfer or to more effectively transfer the PledgedInterests or otherwise enforce Secured Party’s rights hereunder; and

 

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(v)           do or cause to be done all such other acts andthings as may be necessary to make such sale of the Collateral or any partthereof valid and binding and in compliance with applicable law.

 

Each Pledgor acknowledges that there is no adequateremedy at law for failure by it to comply with the provisions of thisSection and that such failure would not be adequately compensable indamages, and therefore agrees that its agreements contained in thisSection may be specifically enforced.

 

(e)           EACH PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTEDBY LAW: (i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIORTO THE TIME SECURED PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL ASPROVIDED IN THIS SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, ORAPPRAISAL THAT IT NOW HAS OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANYRULE OF LAW OR STATUTE NOW EXISTING OR HEREAFTER ENACTED; AND (iii) EXCEPTAS SET FORTH IN SUBSECTION (a) OF THIS Section 9, ANYREQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.

 

10.           Application ofProceeds.

 

Upon the occurrence and during the continuance of an Event of Default,any cash held by Secured Party as Collateral and all cash Proceeds received bySecured Party in respect of any sale of, collection from, or other realizationupon all or any part of the Collateral pursuant to the exercise by SecuredParty of its remedies as a secured creditor as provided in Section 9 shallbe applied from time to time by Secured Party as provided in the CreditAgreement.

 

11.           Indemnity andExpenses.

 

Each Pledgor jointly and severally agrees:

 

(a)           To indemnify and hold harmless Secured Party andeach of its directors, officers, employees, agents and affiliates from andagainst any and all claims, damages, demands, losses, obligations, judgmentsand liabilities (including, without limitation, reasonable attorneys’ fees andexpenses) in any way arising out of or in connection with this Agreement or theSecured Obligations, except to the extent the same shall arise as a result ofthe gross negligence or willful misconduct of the party seeking to beindemnified; and

 

(b)           To pay and reimburse Secured Party upon demand forall reasonable costs and expenses (including, without limitation, reasonableattorneys’ fees and expenses) that Secured Party may incur in connection with(i) the custody, use or preservation of, or the sale of, collection fromor other realization upon, any of the Collateral, including the reasonableexpenses of re-taking, holding, preparing for sale or lease, selling orotherwise disposing of or realizing on the Collateral, (ii) the exerciseor enforcement of any rights or remedies granted hereunder, under the CreditAgreement, or under any of the other Fundamental Documents or otherwiseavailable to it (whether at law, in equity or otherwise), or (iii) thefailure by any Pledgor to perform or observe any of the provisions hereof. Theprovisions of this Section shall survive the execution and delivery ofthis Agreement, the repayment of any of the Secured Obligations, thetermination of the commitments

 

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of Secured Party under the Credit Agreement and the termination of thisAgreement or any other Fundamental Document.

 

12.           Duties ofSecured Party.

 

The powers conferred on Secured Party hereunder aresolely to protect its interests in the Collateral and shall not impose on itany duty to exercise such powers. Except as provided in Section 9-207 ofthe Code, Secured Party shall have no duty with respect to the Collateral orany responsibility for taking any necessary steps to preserve rights againstany Persons with respect to any Collateral.

 

13.           Choice of Lawand Venue; Submission to Jurisdiction; Service of Process.

 

(a)           THE VALIDITY OF THIS AGREEMENT, ITSCONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THEPARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED INACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THECHOICE OF LAW PRINCIPLES THEREOF). THE PARTIES AGREE THAT ALL ACTIONS ORPROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATEDIN ANY OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, THEUNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, THE COURTSOF THE STATE OF DELAWARE SITTING IN NEW CASTLE COUNTY DELAWARE OR OF THE UNITEDSTATES DISTRICT COURT OF THE DISTRICT OF DELAWARE, AND ANY APPELLATE COURT FROMANY THEREOF.

 

(b)           EACH PLEDGOR HEREBY SUBMITS FOR ITSELF AND INRESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE JURISDICTION OFTHE AFORESAID COURTS AND WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TOOBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THISSECTION.

 

(c)           EACH PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF THESUMMONS, COMPLAINT, OR OTHER PROCESS ISSUED IN ANY ACTION OR PROCEEDING ANDAGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT, OR OTHER PROCESS MAY BEMADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO PLEDGOR AT ITS ADDRESS FORNOTICES IN ACCORDANCE WITH THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMEDCOMPLETED UPON THE EARLIER OF PLEDGOR’S ACTUAL RECEIPT THEREOF OR THREE DAYSAFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

 

(d)           NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATETO AFFECT THE RIGHT OF SECURED PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNERPERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY SECURED PARTY OF ANYJUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING

 

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OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHERAPPROPRIATE FORUM OR JURISDICTION.

 

14.           Amendments;etc.

 

No amendment or waiver of any provision of thisAgreement nor consent to any departure by any Pledgor herefrom shall in anyevent be effective unless the same shall be in writing and signed by the Debtorand the Secured Party, and then such waiver or consent shall be effective onlyin the specific instance and for the specific purpose for which given. Nofailure on the part of Secured Party to exercise, and no delay in exercisingany right under this Agreement, any other Fundamental Document, or otherwisewith respect to any of the Secured Obligations, shall operate as a waiverthereof; nor shall any single or partial exercise of any right under thisAgreement, any other Fundamental Document, or otherwise with respect to any ofthe Secured Obligations preclude any other or further exercise thereof or theexercise of any other right. The remedies provided for in this Agreement orotherwise with respect to any of the Secured Obligations are cumulative and notexclusive of any remedies provided by law.

 

15.           Notices.

 

Unless otherwise specifically provided herein, allnotices shall be in writing addressed to the respective party as set forthbelow: and may be personally served, faxed, telecopied or sent by overnightcourier service or United States mail:

 
| If to any Pledgor:                   |   |
|--------------------------------------|--------|
|                                 |   |
| Crown Media Holdings, Inc.      |   |
|                                 |   |
| 12700 Ventura Blvd.                  |   |
|                                 |   |
| Studio City, California 91604        |   |
|                                 |   |
| Attention: William J. Abbott         |   |
|                                 |   |
| If to Secured Party:                 |   |
|                                 |   |
| Hallmark Cards, Inc.            |   |
|                                 |   |
| 2501 McGee, Mail Drop 342            |   |
|                                 |   |
| Kansas City, MO 64108                |   |
|                                 |   |
| Attention: Tim Griffith              |   |
|                                 |   |
| with a copy to:                      |   |
|                                 |   |
| Willkie Farr & Gallagher LL |   |
|                                 |   |
| 787 Seventh Avenue                   |   |

 

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| New York, New York 10019      |   |
|-------------------------------|--------|
|                          |   |
| Attention: Maurice M. Lefkort |   |

 

Any notice given pursuant to this section shall bedeemed to have been given: (a) if delivered in person, when delivered;(b) if delivered by fax, on the date of transmission if transmitted on aBusiness Day before 4:00 p.m. at the place of receipt or, if not, on the nextsucceeding Business Day; (c) if delivered by overnight courier, two(2) days after delivery to such courier properly addressed; or (d) ifby United States mail, four (4) Business Days after depositing in theUnited States mail, with postage prepaid and properly addressed. Any partyhereto may change the address or fax number at which it is to receive noticeshereunder by notice to the other party in writing in the foregoing manner.

 

16.           Continuing SecurityInterest.

 

This Agreement shall create a continuing securityinterest in the Collateral and shall: (a) remain in full force and effectuntil the indefeasible payment in full of the Secured Obligations and the fulland final termination of any commitment to extend any financial accommodationsunder the Credit Agreement; (b) be binding upon each Pledgor and itssuccessors and assigns; and (c) inure to the benefit of Secured Party andits successors, transferees, and assigns. Upon the indefeasible payment in fullof the Secured Obligations and the full and final termination of any commitmentto extend any financial accommodations under the Credit Agreement, the securityinterests granted herein shall automatically terminate and all rights to theCollateral shall revert to Pledgor. Upon any such termination, Secured Partywill, at Pledgor’s expense, execute and deliver to Pledgor such documents asPledgor shall reasonably request to evidence such termination. Such documentsshall be prepared by Pledgor and shall be in form and substance reasonablysatisfactory to Secured Party.

 

17.           SecurityInterest Absolute.

 

To the maximum extent permitted by law, all rightsof Secured Party, all security interests hereunder, and all obligations of eachPledgor hereunder, shall be absolute and unconditional irrespective of:

 

(a)           any lack of validity or enforceability of any of theSecured Obligations or any other agreement or instrument relating thereto,including any of the Fundamental Documents;

 

(b)           any change in the time, manner, or place of paymentof, or in any other term of, all or any of the Secured Obligations, or anyother amendment or waiver of or any consent to any departure from any of theFundamental Documents, or any other agreement or instrument relating thereto;

 

(c)           any exchange, release, or non-perfection of anyother collateral, or any release or amendment or waiver of or consent todeparture from any guaranty for all or any of the Secured Obligations; or

 

(d)           any other circumstances that might otherwiseconstitute a defense available to, or a discharge of, any Pledgor.

 

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18.           Headings.

 

Section and subsection headings in thisAgreement are included herein for convenience of reference only and shall not constitutea part of this Agreement or be given any substantive effect.

 

19.           Severability.

 

In case any provision in or obligation under thisAgreement shall be invalid, illegal or unenforceable in any jurisdiction, thevalidity, legality and enforceability of the remaining provisions orobligations, or of such provision or obligation in any other jurisdiction,shall not in any way be affected or impaired thereby.

 

20.           Counterparts;Telefacsimile Execution.

 

This Agreement may be executed in one or more counterparts,each of which shall be deemed an original and all of which together shallconstitute one and the same Agreement. Delivery of an executed counterpart ofthis Agreement by telefacsimile shall be equally as effective as delivery of anoriginal executed counterpart of this Agreement. Any party delivering anexecuted counterpart of this Agreement by telefacsimile also shall deliver anoriginal executed counterpart of this Agreement but the failure to deliver anoriginal executed counterpart shall not affect the validity, enforceability, orbinding effect hereof.

 

21.           Waiver ofMarshaling.

 

Each of Pledgor and Secured Party acknowledges andagrees that in exercising any rights under or with respect to the Collateral:(a) Secured Party is under no obligation to marshal any Collateral;(b) may, in its absolute discretion, realize upon the Collateral in anyorder and in any manner it so elects; and (c) may, in its absolutediscretion, apply the proceeds of any or all of the Collateral to the SecuredObligations in any order and in any manner it so elects. Each Pledgor andSecured Party waive any right to require the marshaling of any of theCollateral.

 

22.           Waiver of JuryTrial.

 

EACH OF PLEDGOR AND SECURED PARTY HEREBY WAIVE THEIRRESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON ORARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATEDHEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, ANDALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF PLEDGOR AND SECURED PARTYREPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILYWAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THEEVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENTTO A TRIAL BY THE COURT.

 

23.           Intercreditor

 

The terms and conditions of this Agreement aresubject to the terms and conditions of the Intercreditor Agreement. In theevent of any conflict between the terms and conditions of this

 

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Agreement and the terms, conditions and provisions of the IntercreditorAgreement, the terms, conditions and provisions of the Intercreditor Agreementshall control. The rights and remedies of the Secured Party under this Agreementwill be subject to the terms, conditions and provisions of the IntercreditorAgreement. Notwithstanding anything to the contrary in this Agreement, prior tothe discharge of the First Priority Obligations (as defined in theIntercreditor Agreement), any obligation of the Pledgors in this Agreement thatrequires delivery of Collateral to, possession or control of Collateral with,the pledge, assignment, endorsement or transfer of Collateral to or theregistration of Collateral in the name of, the Secured Party shall be deemedcomplied with and satisfied if such delivery of collateral is made to, suchpossession or control of Collateral is with, or such Collateral be assigned,endorsed or transferred to or registered in the name of, the Revolving Lender;provided that, notwithstanding the foregoing, nothing contained in thisSection shall limit or otherwise adversely effect the pledge of anyCollateral under Section 2 of this Agreement. To the extent that anycovenants, representations or warranties set forth in this Agreement are untrueor incorrect solely as a result of the delivery to, or grant of possession orcontrol to, the Revolving Lender in accordance with this Section, suchrepresentation or warranty shall not be deemed to be untrue or incorrect forpurposes of this Agreement.

 

[Signature page tofollow.]

 

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IN WITNESS WHEREOF, each of the Pledgors and SecuredParty have caused this Agreement to be duly executed and delivered by theirofficers thereunto duly authorized as of the date first written above.

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

 

[Signature Page to PledgeAgreement]

 

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|   | SECURED PARTY:     |
|--------|--------------------|
|   |               |   |
|   | **HC CROWN CORP.** |
|   |               |   |
|   | By:                | /s/ Timothy Griffith |
|   |               | Name: | Timothy Griffith |
|   |               | Title: | Vice President |

 

[Signature Page to thePledge Agreement]

 

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