Exhibit
10.7


SECURITY
AND PLEDGE AGREEMENT


This Security and Pledge Agreement (this “Security and Pledge Agreement”)
is entered into as of July 27, 2007, by and among (i) Crown Media Holdings,
Inc., a Delaware corporation (“Crown Holdings”), and the subsidiaries of Crown
Holdings listed as Guarantors (the “Guarantors”) on that certain Credit,
Security, Guaranty and Pledge Agreement dated as of August 31, 2001 as
subsequently amended among Crown Holdings, the Guarantors named therein, the
Lenders named therein and JPMorgan Chase as Agent (the “Credit Agreement”), (the
“Guarantors” together with Crown Holdings shall be the “Borrowers”) and (ii)
Hallmark Cards, Incorporated, a Missouri corporation (“Hallmark”) on behalf of
itself and as agent for each of HC Crown Corp., a Delaware corporation (“HCC”)
and Hallmark Entertainment Holdings, Inc., a Delaware corporation (“HEHI” and
together with Hallmark and HCC the “Hallmark Lenders”).


WHEREAS, the Borrowers are indebted to Hallmark Lenders pursuant to the
obligations listed on Schedule A hereto in favor of one or more of the Hallmark
Lenders (collectively, the “Subject Obligations”);


WHEREAS, the Hallmark Lenders have been willing to defer certain
payments due under the Subject Obligations and have agreed to purchase from the
Bank Lenders certain obligations of the Borrowers, on the terms and subject to
the conditions set forth in that certain Waiver and Standby Purchase
Agreement between the parties dated as of March 21, 2006, as the same has been
and may be amended from time to time (the “Waiver Agreement”);


WHEREAS, the Borrowers are willing to further extend the terms of the
Waiver Agreement subject to receiving a grant of security interest in the
Borrowers as set forth herein;


NOW, THEREFORE, in consideration for the foregoing premises and the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as follows:


1.             Definitions and Rules of Construction.


1.1           “Borrowers” shall be as defined in the
introductory paragraph.


1.2           “Cash Collateral Account” shall be as defined
in the Credit Agreement.


1.3           “Collateral” shall mean with respect
to each Borrower, all of such Borrower’s right, title and interest in and to
all personal property, tangible and intangible, wherever located or situated
and whether now owned, presently existing or hereafter acquired or created,
including, but not limited to, all goods, accounts, instruments, intercompany
obligations, contract rights, partnership and joint venture interests,
documents, chattel paper, general intangibles, goodwill, equipment, machinery, 













inventory,
investment property, copyrights, 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 Borrower’s right, title and interest in and to each and every item
and type of Product, the scenario, screenplay or script upon which an item of
Product is based, all of the properties thereof, tangible and intangible, and
all domestic and foreign copyrights and all other rights therein and thereto,
of every kind and character, whether now in existence or hereafter to be made
or produced, and whether or not in possession of such Borrower, including with
respect to each and every item of Product and without limiting the foregoing
language, each and all of the following particular rights and properties (to
the extent they are now owned or hereafter owned by such Borrower):


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


(ii)           all common law and/or
statutory copyright and other rights in all literary and other properties
(hereinafter called “said literary properties”) which form the basis of
such item of Product and/or which are or will be incorporated into such item of
Product, all component 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 and said literary properties, together with all
preliminary and final screenplays used and to be used in connection with such
item of Product, and all other literary material upon which such item of
Product is based or from which it is adapted;


(iii)          all motion picture
rights in and to all 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 in and in connection with motion pictures;


(iv)          all tangible personal
property relating to such item of Product, including, without limitation, all
exposed film, developed film, positives, negatives, prints, positive prints,
answer prints, 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-print
elements), sound tracks, cutouts, trims and any and all other physical
properties of every kind and nature relating to such item of Product whether in
completed form or in some state of completion, and all masters, duplicates,
drafts, versions, variations and copies of each thereof, in all formats whether
on film, videotape, disk or other optical or electronic media or otherwise and
all music sheets and promotional materials relating to such item of Product
(collectively, the “Physical Materials”);


(v)           all collateral, allied,
subsidiary and merchandising rights appurtenant or related to such item of
Product including, without limitation, the following rights:  all rights to produce remakes, sequels or
prequels to such item of Product, based upon such item of Product, said
literary properties or the theme 



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of such item of Product and/or the text or any part of
said literary properties; all rights throughout the world to broadcast,
transmit and/or reproduce by means of television (including commercially
sponsored, sustaining and subscription or “pay” television) or by streaming
video or by other means over the internet or any other open or closed physical
or wireless network or by any process analogous to any of the foregoing, now
known or hereafter devised, such item of Product or any remake, sequel or
prequel to the item of Product; all rights to produce primarily for television
or similar use, a motion picture or series of motion pictures, by use of film
or any other recording device or medium now known or hereafter devised, based
upon such item of Product, said literary properties or any part thereof,
including, without limitation, based upon any script, scenario or the like used
in such item of Product; all merchandising rights including, without
limitation, all rights to use, exploit and license others to use and exploit
any and all commercial tie-ups of any kind arising out of or connected with
said literary properties, such item of Product, the title or titles of such
item of Product, the characters of such item of Product and/or said literary
properties and/or the names or characteristics of said characters and including
further, without limitation, any and all commercial exploitation in connection
with or related to such item of Product, any remake, sequel or prequel thereof
and/or said literary properties;


(vi)          all statutory
copyrights, domestic and foreign, obtained or to be obtained on such item of
Product, together with any and all copyrights obtained or to be obtained in
connection with such item of Product or any underlying or component elements of
such item of Product, including, in each case without limitation, all
copyrights on the property described in subparagraphs (i) through (v)
inclusive, of this definition, together with the right to copyright (and all
rights to renew or extend such copyrights) and the right to sue in the name of
any of the Credit Parties for past, present and future infringements of
copyright;


(vii)         all insurance policies
and completion guaranties connected with such item of Product and all proceeds
which may be derived therefrom;


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


(ix)           any and all sums,
proceeds, money, products, profits or increases, including money profits or
increases (as those terms are used in the UCC or otherwise) or other property
obtained or to be obtained from the distribution, exhibition, sale or other
uses or dispositions of such item of Product or any part of such item of
Product, including, without limitation, all sums, proceeds, profits, products
and increases, whether in money or otherwise, from the sale, rental or
licensing of such item of Product and/or any of the elements of such item of
Product including, without limitation, from collateral, allied, subsidiary and 



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merchandising rights, and further including, without
limitation, all monies held in any Collection Account;


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


(xi)           the name or title of
such item of Product and all rights of such Borrower 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 or principle of law;


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


(xiii)         all accounts and/or other
rights to payment which such Borrower presently owns or which may arise in
favor of such Borrower in the future, including, without limitation, any refund
or rebate in connection with a completion guaranty or otherwise, all accounts
and/or rights to payment due from Persons in connection with the distribution
of such item of Product, or from the exploitation of any and all of the
collateral, allied, subsidiary, merchandising and other rights in connection with
such item of Product;


(xiv)        any and all “general
intangibles” (as that term is defined in the UCC) not elsewhere included in
this definition, including, without limitation, any and all general intangibles
consisting of any right to payment which may arise in connection with the
distribution or exploitation of any of the rights set out herein, and any and
all general intangible rights in favor of such Borrower for services or other
performances by any third parties, including actors, writers, directors, individual
producers and/or any and all other performing or nonperforming artists in any
way connected with such item of Product, any and all general intangible rights
in favor of such Borrower relating to licenses of sound or other equipment, or
licenses for any photograph or photographic or other processes, and any and all
general intangibles related to the distribution or exploitation of such item of
Product including general intangibles related to or which grow out of the
exhibition of such item of Product and the exploitation of any and all other
rights in such item of Product set out in this definition;


(xv)         any and all goods
including, without limitation, inventory (as that term is defined in the UCC)
which may arise in connection with the creation, production or delivery of such
item of Product and which goods pursuant to any production or distribution
agreement or otherwise are owned by such Borrower;


(xvi)        all and each of the
rights, regardless of denomination, which arise in connection with the acquisition,
creation, production, completion of production, delivery, distribution, or
other exploitation of such item of Product, including, without limitation, any
and all rights in favor of such Borrower, the 



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ownership or control of which are or may become
necessary or desirable, in the opinion of Hallmark, in order to complete
production of such item of Product in the event that Hallmark exercises any
rights it may have to take over and complete production of such item of
Product;


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


(xviii)      any and all Collection
Accounts or other bank accounts established by such Borrower with respect to
such item of Product;


(xix)         any and all rights of
such Borrower under any License Agreements or Platform Agreements relating to
such item of Product; and


(xx)          any and all rights of
such Borrower under contracts relating to the production or acquisition of such
item of Product.


1.4           “Collection
Accounts” shall be as defined in the Credit Agreement.


1.5           “Credit
Agreement” shall be as defined in the introductory paragraph.


1.6           “Event
of Default” shall mean an occurrence of any of the following:  (i) any event constituting an Event of
Default in the Credit Agreement; (ii) any event set forth in 2(c)(i)-(iv) of
the Waiver Agreement; or (iii) any event constituting an Event of Default
pursuant to any of the Subject Obligations.


1.7           “Guarantors”
shall be as defined in the introductory paragraph.


1.8           “Lien”
shall be as defined in the Credit Agreement.


1.9           “Pledged
Securities” shall mean all of the issued and outstanding capital stock or other
equity interests of each of the Guarantors directly or indirectly owned by
Crown Holdings and all other equity securities or interests now owned or
hereafter acquired by any of the Borrowers including without limitation the
securities listed in Schedule B hereto and any proceeds as defined in Section
9-102(a)(64) of the UCC related to any of the foregoing.


1.10         “Product”
shall be as defined in the Credit Agreement and shall include but not be
limited to those items of Product set forth on Schedule C hereto.


1.11         Unless
otherwise defined herein, capitalized terms shall be as defined in the Waiver
Agreement.


2.             Security Interests.  The
Borrowers, as security for the due and punctual payment of the Subject Obligations
(including interest thereon and interest accruing on and after the filing of
any petition in bankruptcy or of reorganization of the Borrower whether or not
post filing 



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interest
is allowed in such proceeding), hereby mortgages, pledges, assigns, transfers,
sets over, conveys and delivers to Hallmark (for the benefit of Hallmark and
the Hallmark Lenders) and grants to Hallmark (for the benefit of Hallmark and
the Hallmark Lenders) a security interest in the Collateral.


3.             Use of Collateral.  So
long as no Event of Default shall have occurred and be continuing, and subject
to the various provisions of each Subject Obligation, Borrowers may use the
Collateral in any lawful manner except as otherwise provided hereunder.


4.             Collection Accounts and Cash Collateral
Account.


(a)           The Borrowers will
maintain or establish Collection Accounts and a Cash Collateral Account as
directed pursuant to the Credit Agreement. 
So long as no Event of Default is continuing the Borrowers shall have
full and unfettered access to the Collection Accounts and the Cash Collateral
Account.  A list of all Collection
Accounts and Cash Collateral Accounts of the Borrowers existing on the date hereof
is attached as Schedule D.


(b)           The Borrowers will
execute such documentation as may be reasonably required by Hallmark in order
to effectuate Hallmark’s first and prior Lien upon all of the Borrowers’ rights
in and to the Collection Accounts, the Cash Collateral Account and all cash,
documents, investments and securities from time to time held therein.  All cash, documents, instruments and
securities from time to time on deposit in the Collection Account or Cash
Collateral Account, and all rights pertaining to investments of funds in the Collection
Account or Cash Collateral Account, shall immediately and without any need for
any further action on the part of any of the Borrowers, Hallmark or any Hallmark
Lender, become subject to the Lien set forth in this Section 4, be deemed
Collateral for all purposes hereof and be subject to the provisions of this
Security and Pledge Agreement.


(c)           In the event a Borrower
receives payment from any person or entity, which payment should have been
remitted directly to a Collection Account, such Borrower shall promptly remit
such payment or proceeds to a Collection Account in accordance with the terms
of the Credit Agreement.


(d)           All such Collection
Accounts and the Cash Collateral Account shall be maintained with JPMorgan
Chase or with such other financial institutions as may be approved by Hallmark
(subject to their willingness to execute appropriate documentation as required
by this Section 4).


(e)           At any time during the continuation of an Event of Default, Hallmark
may sell any documents, instruments and securities held in the Collection
Accounts or Cash Collateral Account and may immediately apply the proceeds
thereof and any other cash held in the Collection Accounts or Cash Collateral
Account as set forth in this Security and Pledge Agreement.



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5.             Pledge of
Securities.


5.1           Pledge.  Each Borrower, as security for the due and
punctual payment of the Subject Obligations (including interest accruing on and
after the filing of any petition in bankruptcy or of reorganization of the
Borrower whether or not post filing interest is allowed in such proceeding)
hereby pledges, hypothecates, assigns, transfers, sets over and delivers to
Hallmark for the benefit of Hallmark and the Hallmark Lenders, a security
interest in all Pledged Securities now owned or hereafter acquired by it.


5.2           Covenant.  Each Borrower covenants that as a stockholder
or equity owner of each of its respective Subsidiaries it will not take any
action to allow any additional shares of common stock, preferred stock or other
equity securities of any of its respective Subsidiaries or any securities
convertible or exchangeable into common or preferred stock of such Subsidiaries
to be issued, or grant any options or warrants, unless such securities are
pledged to Hallmark (for the benefit of Hallmark and the Hallmark Lenders) as
security for the Subject Obligations and such Borrower’s obligations (if any)
under Article 10 hereof.


5.3           Voting Rights;
Dividends.


(a)           The appropriate
Borrower shall be entitled to exercise any and all voting and/or consensual
rights and powers accruing to an owner of the Pledged Securities being pledged
by it hereunder or any part thereof for any purpose not inconsistent with the
terms hereof, at all times, except as expressly provided in paragraph (c)
below.


(b)           All dividends or
distributions of any kind whatsoever (other than cash dividends or
distributions paid while no Event of Default is continuing) received by a
Borrower, whether resulting from a subdivision, combination, or
reclassification of the outstanding capital stock of the issuer or received in
exchange for Pledged Securities or any part thereof or as a result of any
merger, consolidation, acquisition, or other exchange of assets to which the
issuer may be a party, or otherwise, shall be and become part of the Pledged
Securities pledged hereunder and shall immediately be delivered to Hallmark to
be held subject to the terms hereof.  All
dividends and distributions which are received contrary to the provisions of
this subsection (b) shall be received in trust for the benefit of Hallmark and
the Hallmark Lenders, segregated from such Borrower’s own assets, and shall be
delivered to Hallmark.


(c)           Upon the occurrence and
during the continuance of an Event of Default and notice from Hallmark of the
transfer of such rights to Hallmark, all rights of a Borrower (i) to
exercise the voting and/or consensual rights and powers which it is entitled to
exercise pursuant to this Section and (ii) to receive and retain cash
dividends and distributions shall cease, and all such rights shall thereupon
become vested in Hallmark, which shall have the sole and exclusive right and
authority to exercise such voting and/or consensual rights and receive such
cash dividends and distributions until such time as all Events of Default have
been cured.



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5.4           Remedies Upon
Default.  If an Event of Default
shall have occurred and be continuing, Hallmark and the Hallmark Lenders, may
sell the Pledged Securities, or any part thereof, at public or private sale or
at any broker’s board or on any securities exchange, for cash, upon credit or
for future delivery as Hallmark shall deem appropriate subject to the terms
hereof or as otherwise provided in the Uniform Commercial Code.  Hallmark shall be authorized at any such sale
(if it deems it advisable to do so) to restrict to the full extent permitted by
applicable law the prospective bidders or purchasers to entities or persons who
will represent and agree that they are purchasing the Pledged Securities for
their own account for investment and not with a view to the distribution or
sale thereof, and upon consummation of any such sale, Hallmark shall have the
right to assign, transfer, and deliver to the purchaser or purchasers thereof
the Pledged Securities so sold.  Each
such purchaser at any such sale shall hold the property sold absolutely, free
from any claim or right on the part of any Borrower.  Hallmark shall give the Borrowers 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 other disposition of the
Pledged Securities.  Such notice, in the
case of public sale, shall state the time and place for such sale and, in the
case of sale at a broker’s board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Pledged Securities, or portion thereof, will first be offered for sale at such
board or exchange.  Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as Hallmark may fix and shall state in the notice of such
sale.  At any such sale, the Pledged
Securities, or portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as Hallmark may (in its sole and absolute
discretion) determine.  Hallmark shall
not be obligated to make any sale of the Pledged Securities if it shall
determine not to do so, regardless of the fact that notice of sale of the
Pledged Securities may have been given. 
Hallmark may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.  In case the sale of all or
any part of the Pledged Securities is made on credit or for future delivery,
the Pledged Securities so sold shall be retained by Hallmark until the sale
price is paid by the purchaser or purchasers thereof, but Hallmark shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Pledged Securities so sold and, in case of any such failure,
such Pledged Securities may be sold again upon like notice.  At any sale or sales made pursuant to this
Section 5.4, Hallmark (on behalf of Hallmark and/or the Hallmark Lenders) may
bid for or purchase, free from any claim or right of whatever kind, including
any equity of redemption, of the Borrowers, any such demand, notice, claim,
right or equity being hereby expressly waived and released, any or all of the
Pledged Securities offered for sale, and may make any payment on the account
thereof by using any claim for moneys then due and payable to Hallmark (to the
extent it consents) or any consenting Hallmark Lender by any Borrower as a
credit against the purchase price; and Hallmark, upon compliance with the terms
of sale, may hold, retain and dispose of the Pledged Securities without further
accountability therefor to any Borrower or any third party (other than the Hallmark
Lenders).  Hallmark shall in any such
sale make no representations or warranties with respect to the Pledged
Securities or any part thereof and shall not be chargeable with any of the
obligations or liabilities of 



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the Borrowers with respect thereto.  Each Borrower hereby agrees that (i) it
will indemnify and hold Hallmark and the Hallmark Lenders harmless from and
against any and all claims with respect to the Pledged Securities asserted
before the taking of actual possession or control of the Pledged Securities by
Hallmark pursuant to this Security and Pledge Agreement, or arising out of any
act of, or omission to act on the part of, any Person prior to such taking of
actual possession or control by Hallmark (whether asserted before or after such
taking of possession or control), or arising out of any act on the part of any
Borrower, its agents or Affiliates before or after the commencement of such
actual possession or control by Hallmark and (ii) Hallmark and the Hallmark Lenders
shall have no liability or obligation arising out of any such claim.  As an alternative to exercising the power of
sale herein conferred upon it, Hallmark may proceed by a suit or suits at law
or in equity to foreclose upon the Collateral and Pledged Securities under this
Security and Pledge Agreement and to sell the Pledged Securities, or any
portion thereof, pursuant to a judgment or decree of a court or courts having
competent jurisdiction.


5.5           Securities Act.  In view of the position of each Borrower in
relation to the Pledged Securities pledged by it, or because of other present
or future circumstances, a question may arise under the Securities Act of 1933,
as amended, as now or hereafter in effect, or any similar statute hereafter
enacted analogous in purpose or effect (such Act and any such similar statute
as from time to time in effect being hereinafter called the “Federal
Securities Laws”), with respect to any disposition of the Pledged
Securities permitted hereunder.  Each
Borrower understands that compliance with the Federal Securities Laws may very
strictly limit the course of conduct of Hallmark if Hallmark were to attempt to
dispose of all or any part of the Pledged Securities, and may also limit the
extent to which or the manner in which any subsequent transferee of any Pledged
Securities may dispose of the same. 
Similarly, there may be other legal restrictions or limitations
affecting Hallmark in any attempt to dispose of all or any part of the Pledged
Securities under applicable Blue Sky or other state securities laws, or similar
laws analogous in purpose or effect. 
Under applicable law, in the absence of an agreement to the contrary,
Hallmark may perhaps be held to have certain general duties and obligations to
a Borrower to make some effort towards obtaining a fair price even though the Subject
Obligations may be discharged or reduced by the proceeds of a sale at a lesser
price.  Each Borrower waives to the
fullest extent permitted by applicable law any such general duty or obligation
to it, and the Borrowers will not attempt to hold Hallmark responsible for
selling all or any part of the Pledged Securities at an inadequate price, even
if Hallmark shall accept the first offer received or shall not approach more
than one possible purchaser.  Without
limiting the generality of the foregoing, the provisions of this Section 5.5
would apply if, for example, Hallmark were to place all or any part of the
Pledged Securities for private placement by an investment banking firm, or if
such investment banking firm purchased all or any part of the Pledged
Securities for its own account, or if Hallmark placed all or any part of the
Pledged Securities privately with a purchaser or purchasers.


5.6           Continuation and
Reinstatement.  Each Borrower further
agrees that its pledge hereunder shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Subject Obligation is rescinded or must 



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otherwise be restored by Hallmark or the Hallmark Lenders
upon the bankruptcy or reorganization of any Borrower or otherwise.


6.             Borrowers to Hold
in Trust.  Upon the occurrence and
during the continuance of an Event of Default, each Borrower will, upon receipt
by it of any revenue, income, profits or other sums in which a security
interest is granted hereunder, payable pursuant to any agreement or otherwise,
or of any check, draft, note, trade acceptance or other instrument evidencing
an obligation to pay any such sum, hold the sum in trust for Hallmark (for the
benefit of Hallmark and the Hallmark Lenders), segregate such sum from its own
assets and forthwith, without any notice or demand whatsoever (all notices,
demands, or other actions on the part of Hallmark or the Hallmark Lenders being
expressly waived), endorse, transfer and deliver any such sums or instruments
or both to Hallmark to be applied to the repayment of the Subject Obligations
in accordance with this Security and Pledge Agreement.


7.             Collections.  Upon the occurrence and during the
continuance of an Event of Default, Hallmark may, in its sole discretion, in
its name or in the name of any Borrower or otherwise, demand, sue for, collect
or receive any money or property at any time payable or receivable on account
of or in exchange for, or make any compromise or settlement deemed desirable
with respect to, any of the Collateral, but shall be under no obligation so to
do, or Hallmark may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, or release, any of the
Collateral, without thereby incurring responsibility to, or discharging or
otherwise affecting any liability of, the Borrowers.  Hallmark will not be required to take any
steps to preserve any rights against prior parties to the Collateral.  If the Borrowers fail to make any payment or
take any action required hereunder, Hallmark may make such payments and take
all such actions as Hallmark reasonably deems necessary to protect Hallmark’s
(for the benefit of itself and the Hallmark Lenders) security interests in the
Collateral and/or the value thereof, and Hallmark is hereby authorized (without
limiting the general nature of the authority herein above conferred) to pay,
purchase, contest or compromise any Liens (as defined in the Credit Agreement) that
in the judgment of Hallmark appear to be equal to, prior to or superior to the
security interests of Hallmark in the Collateral and any liens not expressly
permitted by the Credit Agreement.


8.             Possession, Sale
of Collateral.  Upon the occurrence
and during the continuance of an Event of Default, Hallmark may enter upon the
premises of any Borrower or wherever the Collateral may be, and take possession
of the Collateral, and may demand and receive such possession from any person or
entity who has possession thereof, and Hallmark may take such measures as it
may deem necessary or proper for the care or protection thereof, 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 Hallmark shall
decide, in one or more sales or parcels, at such prices as Hallmark 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, at any broker’s board or
at public or private sale, without demand of performance or 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 or sales and such other notices
as may be required by applicable law and cannot be waived), and any Person may
be the purchaser of all or any portion of the Collateral so sold and thereafter
hold the same absolutely, free (to the fullest extent permitted by applicable law)
from any claim or right of whatever kind, including any equity of redemption,
of any Borrower, any 



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such demand, notice,
claim, right or equity being hereby expressly waived and released.  At any sale or sales made hereunder, Hallmark
may bid for or purchase, free (to the fullest extent permitted by applicable law)
from any claim or right of whatever kind, including any equity of redemption,
of any Borrower, any such demand, notice, claim, right or equity being hereby
expressly waived and released, any part of or all of the Collateral offered for
sale, and may make any payment on account thereof by using any claim for moneys
then due and payable to Hallmark the Hallmark Lenders by any Borrower hereunder
as a credit against the purchase price.  Hallmark
shall in any such sale make no representations or warranties with respect to
the Collateral or any part thereof, and Hallmark shall not be chargeable with
any of the obligations or liabilities of any Borrower.  Each Borrower hereby agrees (i) that it will
indemnify and hold Hallmark and the Hallmark Lenders harmless from and against
any and all claims with respect to the Collateral asserted before the taking of
actual possession or control of the relevant Collateral by Hallmark hereunder,
or arising out of any act of, or omission to act on the part of, any party
other than Hallmark prior to such taking of actual possession or control by Hallmark,
or arising out of any act on the part of any Borrower, or its agents before or
after the commencement of such actual possession or control by Hallmark; and
(ii) none of Hallmark or the Hallmark Lenders shall have any liability or
obligation to any Borrowers arising out of any such claim except for acts by Hallmark
or the Hallmark Lenders of willful misconduct or gross negligence or acts not
taken in good faith.  Subject only to the
lawful rights of third parties, any laboratory which has possession of any of
the Collateral is hereby constituted and appointed by each Borrower as
pledgeholder for Hallmark and, upon the occurrence and during the continuance
of an Event of Default, each such pledgeholder is hereby authorized to sell all
or any portion of the Collateral upon the order and direction of Hallmark, and
each Borrower hereby waives any and all claims, for damages or otherwise, for
any action taken by such pledgeholder in accordance with the terms of the Uniform
Commercial Code not otherwise waived hereunder. 
In any action hereunder, Hallmark shall be entitled to the appointment
of a receiver, without notice, to take possession of all or any portion of the
Collateral and to exercise such powers as the court shall confer upon the
receiver.  Notwithstanding the foregoing,
upon the occurrence and during the continuance of an Event of Default, Hallmark
shall be entitled to apply, without prior notice to any Borrower, any cash or
cash items constituting Collateral in the possession of Hallmark to payment of
the Subject Obligations.


9.             Application of
Proceeds on Default.  Upon the
occurrence and during the continuance of an Event of Default, the balances in
the Collection Account(s) or the Cash Collateral Account, all other income
earned on the Collateral, and all proceeds from any sale of the Collateral pursuant
hereto shall be applied first toward payment of the reasonable out-of-pocket
costs and expenses paid or incurred by Hallmark in enforcing this Security Agreement,
in realizing on or protecting any Collateral and in enforcing or collecting any
Subject Obligations or any guaranty thereof, including, without limitation,
court costs and the reasonable attorney’s fees and expenses incurred by Hallmark,
and then to the payment in full of the Subject Obligations.  Any amounts remaining after such payment in full
shall be remitted to the appropriate Borrower or as a court of competent
jurisdiction may otherwise direct.


10.           Power of Attorney.  Upon the occurrence and during the
continuance of an Event of Default which is not waived in writing by Hallmark (a)
each of the Borrowers does hereby irrevocably make, constitute and appoint Hallmark
or any of its officers or designees its true and 



 11
 









lawful attorney-in-fact
with full power in the name of Hallmark to receive, open and dispose of all
mail addressed to any Borrower, and to endorse any notes, checks, drafts, money
orders or other evidences of payment relating to the Collateral that may come
into the possession of Hallmark, with full power and right to cause the mail of
such Borrower to be transferred to Hallmark’s own offices or otherwise, and to
do any and all other acts necessary or proper to carry out the intent of this Security
Agreement and the grant of the security interests hereunder, and each of the Borrowers
hereby ratifies and confirms all that Hallmark or its substitutes shall
properly do by virtue hereof; (b) each of the Borrowers does hereby further
irrevocably make, constitute and appoint Hallmark or any of its officers or
designees its true and lawful attorney-in-fact in the name of Hallmark or any Borrower
(i) to enforce all of such Borrower’s rights under and pursuant to all
agreements with respect to the Collateral, all for the sole benefit of Hallmark,
for the benefit of itself and the Hallmark Lenders, and to enter into such
other agreements as may be necessary or appropriate in the judgment of Hallmark
to complete the distribution or exploitation of any item of product which is
included in the Collateral, (ii) to enter into and perform such agreements as
may be necessary in order to carry out the terms, covenants and conditions of
the Waiver Agreement that are required to be observed or performed by such Borrower,
(iii) to execute such other and further mortgages, pledges and assignments of
the Collateral, and related instruments or agreements, as Hallmark may
reasonably require for the purpose of perfecting, protecting, maintaining or
enforcing the security interests granted to Hallmark, for the benefit of itself
and the Hallmark Lenders, hereunder and under the Waiver Agreement, and (iv) to
do any and all other things necessary or proper to carry out the intention of
this Security Agreement and the grant of the security interests hereunder.  In the event Hallmark exercises the power of
attorney granted herein, Hallmark shall use reasonable efforts to provide
subsequent written notice promptly to the Borrowers.  Each of the Borrowers hereby ratifies and
confirms in advance all that Hallmark as such attorney-in-fact or its
substitutes shall properly do by virtue of this power of attorney.


11.           Financing
Statements, Direct Payments, Confirmation of Receivables and Audit Rights.  Each Borrower hereby authorizes Hallmark to
file Uniform Commercial Code financing statements (covering all of the property
of such Borrower) and any amendments thereto or continuations thereof, and any
other appropriate security documents or instruments and to give any notices
necessary or desirable to perfect the Lien of Hallmark (for the benefit of
itself and the Hallmark Lenders) on the Collateral, in all cases without the signatures
of the relevant Borrowers or to execute such items as attorney-in-fact for the Borrowers.  Each Borrower further authorizes Hallmark (i)
upon the occurrence and during the continuance of an Event of Default, to
notify any account debtor that all sums payable to such Borrower relating to
the Collateral shall be paid directly to Hallmark; (ii) to confirm directly
with account debtors the amounts payable by them to such Borrower with regard
to the Collateral and the terms of all accounts receivable; and (iii) to
participate with such Borrower in the audits of its account debtors or to
request that such Borrower’s auditors confirm with account debtors the amounts
and terms of all accounts receivable.  Hallmark
hereby agrees to provide the Borrower with copies of any notification or
written requests sent by Hallmark to such account debtors at the same time as
the mailing of such documents.


12.           Further Assurances.  Upon the request of Hallmark, each Borrower
hereby agrees to duly and promptly execute and deliver, or cause to be duly
executed and delivered, at the cost 



 12
 









and expense of Crown
Holdings, such further instruments as may be necessary or proper, in the
judgment of Hallmark, to carry out the provisions and purposes of this Security
Agreement, and to do all things necessary, in the judgment of Hallmark, to
perfect and preserve the Liens in the Collateral or any portion thereof of Hallmark
for the benefit of itself and the Hallmark Lenders hereunder and under the Waiver
Agreement.


13.           Termination and
Release.  The security interests
granted under this Security and Pledge Agreement shall terminate when all the Subject
Obligations have been indefeasibly fully paid and performed.  Upon request by Crown Holdings (and at the
sole expense of the Crown Holdings) after such termination, Hallmark will take
all reasonable action and do all things reasonably necessary, including
executing Uniform Commercial Code terminations, termination letters to account
debtors and copyright reassignments, to release the security interest granted
to it hereunder.


14.           Remedies Not
Exclusive.  The remedies conferred
upon or reserved to Hallmark pursuant to this Security and Pledge Agreement are
intended to be in addition to, and not in limitation of, any other remedy or
remedies available to Hallmark.  Without
limiting the generality of the foregoing, Hallmark and the Lenders shall have
all rights and remedies of a secured creditor under Article 9 of the Uniform Commercial
Code and under any other applicable law.


15.           Continuation and
Reinstatement.  Each Borrower further
agrees that the security interest granted hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment or any
part thereof of any Subject Obligation is rescinded or must otherwise be
restored by Hallmark or the Hallmark Lenders upon the bankruptcy or
reorganization of any Borrower or otherwise.


16.           Guaranty of Subject
Obligations.


16.1         Guaranty.


(a)           Each of the Guarantors,
jointly and severally, unconditionally and irrevocably guarantees to Hallmark and
the Hallmark Lenders the due and punctual payment and performance of the Subject
Obligations (including interest accruing on and after the filing of any
petition in bankruptcy or of reorganization of the obligor whether or not post
filing interest is allowed in such proceeding). 
Each of the Guarantors further agrees that the Subject Obligations may
be increased, extended or renewed, in whole or in part, without notice or
further assent from it (except as may be otherwise required herein), and it
will remain bound under this Section 16 notwithstanding any extension or
renewal of any Subject Obligation.


(b)           Each Guarantor waives
presentation to, demand for payment from and protest to, as the case may be,
any Borrower or any other guarantor of any of the Subject Obligations, and also
waives notice of protest for nonpayment, notice of acceleration and notice of
intent to accelerate.  The obligations of
each 



 13
 









Guarantor hereunder shall not be affected by (i) the
failure of Hallmark or the Hallmark Lenders to assert any claim or demand or to
enforce any right or remedy against the Borrowers or any other guarantor under
the provisions of any agreement or otherwise; (ii) any extension or renewal of
any provision hereof or thereof; (iii) the failure of Hallmark or the Hallmark Lenders
to obtain the consent of such Guarantor with respect to any rescission, waiver,
compromise, acceleration, amendment or modification of any of the terms or
provisions of this Security and Pledge Agreement or the Subject Obligations;
(iv) the release, exchange, waiver or foreclosure of any security held by Hallmark
for the Subject Obligations or any of them; (v) the failure of Hallmark or the Hallmark
Lenders to exercise any right or remedy against any Borrower or any other
guarantor of the Subject Obligations; (vi) any bankruptcy, reorganization,
liquidation, dissolution or receivership proceeding or case by or against any Borrower
or, any change in the corporate existence, structure, ownership or control of
any such Borrower or any other Borrower (including any of the foregoing arising
from any merger, consolidation, amalgamation, reorganization or similar
transaction); or (vii) the release or substitution of any Guarantor or any
other guarantor of the Subject Obligations.


(c)           Each Borrower further
agrees that this Section is a continuing guaranty, shall secure the Subject Obligations
and any ultimate balance thereof, notwithstanding that Crown Holdings or others
may from time to time satisfy the Subject Obligations in whole or in part and
thereafter incur further Subject Obligations, and constitutes a guaranty of
performance and of payment when due and not just of collection, and waives any
right to require that any resort be had by Hallmark or any Hallmark Lender to
any security held for payment of the Subject Obligations or to any balance of
any deposit, account or credit on the books of Hallmark or any Hallmark Lender
in favor of Crown Holdings, any Guarantor or any other person or entity.


(d)           Each Borrower hereby
expressly assumes all responsibilities to remain informed of the financial
condition of the other Borrowers, and any other guarantors of the Subject Obligations
and any circumstances affecting the Collateral or the ability of the Borrowers
to perform under this Security Agreement.


(e)           Each Guarantor’s obligations
under this Section shall not be affected by the genuineness, validity,
regularity or enforceability of the Subject Obligations, the Notes or any other
instrument evidencing any Subject Obligations, or by the existence, validity,
enforceability, perfection, or extent of any collateral therefor or by any
other circumstance relating to the Subject Obligations which might otherwise
constitute a defense to this Section.  Hallmark
and the Hallmark Lenders make no representation or warranty with respect to any
such circumstances and have no duty or responsibility whatsoever to any Borrower
in respect to the management and maintenance of the Subject Obligations or any
collateral security for the Subject Obligations.



 14
 









16.2         No
Impairment of Guaranty.  The
obligations of each Borrower under this Section shall not be subject to any
reduction, limitation, impairment or termination for any reason (except payment
and performance in full of the Subject Obligations), including, without
limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense or set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Subject Obligations or otherwise.  Without limiting the generality of the
foregoing, the obligations of each Borrower under this Section shall not be
discharged or impaired or otherwise affected by the failure of Hallmark or any Hallmark
Lender to assert any claim or demand or to enforce any remedy under this Security
Agreement or any other agreement, by any waiver or modification of any
provision hereof or thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Subject Obligations, or by any other act
or thing or omission or delay to do any other act or thing which may or might
in any manner or to any extent vary the risk of such Borrower or would
otherwise operate as a discharge of such Borrower as a matter of law, unless
and until the Subject Obligations are paid in full.


16.3         Continuation
and Reinstatement.


(a)           Each Borrower further
agrees that its guaranty under this Section shall continue to be effective or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any Subject Obligation is rescinded or must otherwise be restored by Hallmark
or the Hallmark Lenders upon the bankruptcy or reorganization of any Borrower,
or otherwise.  In furtherance of the
provisions of this Section, and not in limitation of any other right which Hallmark
or the Hallmark Lenders may have at law or in equity against any Borrower, or
any other person or entity by virtue hereof, upon failure of the Borrower to
pay any Subject Obligation when and as the same shall become due, whether at
maturity, by acceleration, after notice or otherwise, each Borrower hereby
promises to and will, upon receipt of written demand by Hallmark on behalf of
itself, and/or the Hallmark Lenders, forthwith pay or cause to be paid to Hallmark
for the benefit of itself, and/or the Hallmark Lenders (as applicable) in cash
an amount equal to the unpaid amount of all the Subject Obligations with
interest thereon, and thereupon Hallmark shall assign such Subject Obligation,
together with all security interests, if any, then held by Hallmark in respect
of such Subject Obligation, to the Borrowers making such payment; such
assignment to be subordinate and junior to the rights of Hallmark on behalf of
itself and the Hallmark Lenders with regard to amounts payable by the Borrower
in connection with the remaining unpaid Subject Obligations and to be pro tanto
to the extent to which the Subject Obligation in question was discharged by any
Borrower making such payments.


(b)           All rights of Borrower against
any other Borrower, arising as a result of the payment by such Borrower of any
sums to Hallmark for the benefit of Hallmark, and/or the Hallmark Lenders or
directly to the Hallmark Lenders hereunder by way of right of subrogation or
otherwise, shall in all respects be subordinated and junior in right of payment
to, and shall not be exercised by such 



 15
 









Borrower until and unless, the prior final and
indefeasible payment in full of all the Subject Obligations.  If any amount shall be paid to such Borrower for
the account of any other Borrower, such amount shall be held in trust for the
benefit of Hallmark segregated from such Borrower’s own assets and shall
forthwith be paid to Hallmark on behalf of itself, and/or the Hallmark Lenders
to be credited and applied to the Subject Obligations, whether matured or
unmatured.


16.4         Limitation on
Guaranteed Amount.  Notwithstanding
any other provision of this Section, the amount guaranteed by each Borrower
under this Section shall be limited to the extent, if any, required so that its
obligations under this Section shall not be subject to avoidance under Section
548 of the Bankruptcy Code or to being set aside or annulled under any
applicable law relating to fraud on creditors. 
In determining the limitations, if any, on the amount of any Borrower’s
obligations under this Section pursuant to the preceding sentence, it is the
intention of the parties hereto that any rights of subrogation or contribution
which such Borrower may have under this Section, any other agreement or
applicable law shall be taken into account.


17.           Subordination.  This
Security and Pledge Agreement and the security interests granted herein shall
be subject to the terms and conditions of that certain Amended and Restated
Subordination and Support Agreement dated as of July 27, 2007 among Crown
Holdings, the guarantors, hallmark and JPMorgan Chase Bank as agent for the
lending banks under the Credit Agreement.



 16
 









IN
WITNESS WHEREOF, the parties hereto have caused this Security and Pledge
Agreement to be duly executed as of the day and the year first written.


	
  

  	
  CROWN MEDIA HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Charles L.
  Stanford

  	
   

  
	
   

  	
  Name: Charles L.
  Stanford

  
	
   

  	
  Title: Executive
  Vice President

  
	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
  CROWN MEDIA
  UNITED STATES, LLC

  
	
   

  	
  CM INTERMEDIARY,
  LLC

  
	
   

  	
  CITI TEEVEE, LLC

  
	
   

  	
  DOONE CITY
  PICTURES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Charles L.
  Stanford

  	
   

  
	
   

  	
  Name: Charles L.
  Stanford

  
	
   

  	
  Title: Executive
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HALLMARK CARDS,
  INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Brian E.
  Gardner

  	
   

  
	
   

  	
  Name: Brian E.
  Gardner

  
	
   

  	
  Title: Executive
  Vice President

  
	
   

  	
   

  
	
   

  	
  HC CROWN CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Brian E.
  Gardner

  	
   

  
	
   

  	
  Name: Brian E.
  Gardner

  
	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
  HALLMARK
  ENTERTAINMENT HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Brian E.
  Gardner

  	
   

  
	
   

  	
  Name: Brian E.
  Gardner

  
	
   

  	
  Title: Vice
  President

  
						



 



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