stockholdersagreement.htm


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Exhibit
4.1

    CROWN
MEDIA HOLDINGS, INC.

     

    STOCKHOLDERS
AGREEMENT

     

    This
STOCKHOLDERS AGREEMENT (this “Agreement”), dated as of
[                         
], 2010, is by and among H C Crown Corp., a Delaware corporation
(“HCC”), Hallmark
Cards, Incorporated, a Missouri corporation (“Hallmark Cards” and, together
with HCC, “Hallmark”),
and Crown Media Holdings, Inc., a Delaware corporation (the “Company”).

     

    R E C I T A L
S

     

    WHEREAS,
HCC and the Company, among other parties, are parties to a Master
Recapitalization Agreement, dated as of February 26, 2010 (the “Recapitalization Agreement”),
pursuant to which, on the date hereof, the Company refinanced its obligations to
Hallmark through the issuance of new indebtedness, shares of the Company’s
Series A Convertible Preferred Stock, par value $.01 per share (the “Series A Preferred Stock”),
and shares of the Company’s Class A Common Stock, par value $.01 per share (the
“Common
Stock”);

     

    WHEREAS,
the Special Committee of the Board of Directors of the Company formed for the
purpose of negotiating the terms of the recapitalization (the "Special
Committee") acknowledged the right of a 90.1% holder to effectuate such a merger
pursuant to which the rights of minority stockholders would be so limited under
current Delaware law and, therefore, sought to negotiate limitations on such
right, and to negotiate other limitations on the rights of Hallmark as the owner
of the equity stake of the Company it will own following the transactions
provided for in the Recapitalization Agreement;

     

    WHEREAS,
the negotiations between the Special Committee and Hallmark resulted in certain
agreements with respect to such matters which are set forth herein;

     

    WHEREAS,
in negotiating the transactions provided for in the Recapitalization Agreement,
Hallmark sought, and ultimately was successful in obtaining, an increase in its
equity ownership to 90.1% of the Common Stock, as provided for in the
Recapitalization Agreement, with the intent that such ownership would, but for
any limitations provided for in connection with the Recapitalization Agreement,
entitle it to effectuate a "short form" merger under Section 253 of the Delaware
General Corporation Law (the “DGCL”) pursuant to which,
absent fraud or illegality, appraisal rights under Section 262 of the DGCL would
be the only remedy of any minority stockholder of the Company.

     

    WHEREAS,
pursuant to the Recapitalization Agreement, the parties hereto have agreed to
enter into this Agreement to provide for certain rights and obligations in
respect of, among other things, such shares of Series A Preferred Stock and
Common Stock.

     

    NOW,
THEREFORE, in consideration of the premises, 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. LEGENDS;
STOP TRANSFER

     

    (a) Restrictive Transfer
Legends.  Each certificate representing shares of Common Stock
beneficially owned (as such term is defined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended, “Owned”) by Hallmark (the
“Shares”) shall bear
substantially the following legend reflecting the restrictions on the transfer
of such securities contained in this Agreement:

     

    “The
securities evidenced hereby are subject to the terms of that certain
Stockholders Agreement, dated as of _________, 2010 (as amended from time to
time) by and among the Company and certain stockholders identified therein,
including certain restrictions on transfer.  A copy of the
Stockholders Agreement has been filed with the Secretary of the Company and is
available upon request.”

     

    (b) Securities Act
Legends.  Each certificate representing the Shares will bear
substantially the following legend reflecting the restrictions on the transfer
of such securities under the federal and state securities laws:

     

    “The
securities evidenced hereby were issued in a private placement, without
registration under the Securities Act of 1933, as amended (the “Securities
Act”), and may not be sold, assigned, pledged or otherwise transferred in the
absence of an effective registration under the Securities Act covering the
transfer or an opinion of counsel, satisfactory to the issuer, that registration
under the Securities Act and other securities laws is not
required.”

     

    (c) Termination of
Legends.  The legend required by Section 1(a) hereof shall be
removed at such time as Hallmark ceases to Own the applicable shares of Common
Stock.  The requirement imposed by Section 1(b) hereof shall cease and
terminate as to any particular Shares (i) when, in the opinion of counsel
reasonably acceptable to the Company, such legend is no longer required in order
to assure compliance by the Company with the Securities Act or (ii) when such
Shares have been effectively registered under the Securities Act or transferred
pursuant to Rule 144.  Whenever such requirement shall cease and
terminate as to any Shares, the holder thereof shall be entitled to receive from
the Company, without expense, new certificates not bearing the legend set forth
in Section 1(b) hereof.

     

    (d) Stop Transfer
Instruction.  The Company may instruct any transfer agent not
to register the transfer of any Shares until the conditions specified in the
foregoing legends and this Agreement are satisfied.  As promptly as
practicable after the date hereof, HCC shall deliver all certificates
representing any Shares it Owns to the Company to enable the Company to place
the foregoing legends on such certificates.

     

    2. STANDSTILL

     

    From the
date hereof until December 31, 2013, Hallmark shall not, and shall cause its
controlled affiliates (as such term is defined under the Securities Act of 1933,
as amended, “Affiliates”) not to, acquire
any additional shares of Common Stock, except in the case of any of the
following:

     

    (a) acquisitions
effected with the prior approval of a special committee of the Board of
Directors of the Company (the “Board”) comprised solely of
independent, disinterested directors (a “Special
Committee”);

     

    (b) acquisitions
of additional shares of Common Stock in connection with the conversion of the
Series A Preferred Stock;

     

    (c) pursuant
to the Subscription Rights contained in this Agreement;

     

    (d) acquisitions
effected after December 31, 2011, either:

     

    (i) in
connection with a Premium Transaction (as defined below); or

     

    (ii) pursuant
to a tender offer by Hallmark or its Affiliates for all of the outstanding
shares of Common Stock, provided that the holders of Common Stock not Affiliated
with Hallmark (the “Minority
Stockholders”) tender, in the aggregate, at least a majority of the
shares of Common Stock held by the Minority Stockholders at such
time.

     

    3. CO-SALE;
EQUAL TREATMENT; INFORMATION RIGHTS

     

    (a) From the
date hereof until December 31, 2013, HCC may not sell, transfer, assign or
convey (a “Transfer”)
its shares of Common Stock, except (x) to an Affiliate of Hallmark Cards that
agrees to be bound by the terms and conditions of this Agreement, or pursuant to
a bona fide pledge of the shares to a lender that is not an Affiliate of
Hallmark (collectively, a “Permitted Transfer”), (y)
with the prior approval of a Special Committee or (z) on or after January
1, 2012 if, with respect to this clause (z):

     

    (i) pursuant
to a public offering in which, to the actual knowledge of the executive officers
of HCC after reasonable inquiry (“Knowledge”), no single
purchaser (together with its affiliates and associates) acquires Ownership of
such number of shares of Common Stock which, when combined with the number of
shares Owned thereby immediately prior to such offering, will cause such
purchaser to Own in excess of 5% of the Common Stock outstanding at such
time;

     

    (ii) pursuant
to a block sale, market transaction or private sale in which, to the Knowledge
of HCC, no single purchaser (together with its affiliates and associates)
acquires Ownership of such number of shares of Common Stock which, when combined
with the number of shares Owned thereby immediately prior to such sale or
transaction, will cause such purchaser to Own in excess of 2% of the Common
Stock outstanding at such time (transactions pursuant to clauses (i) and (ii),
“Permitted Sales”);
or

     

    (iii) in a
transaction (a “Premium
Transaction”) in which the Minority Stockholders have the right to sell
their Common Stock in connection with such transaction for, or the right to
receive in connection with such transaction, consideration per share of Common
Stock consisting of:  (x) consideration equivalent (“Equivalent Consideration”) to
the greatest consideration per share of Common Stock received by HCC in
connection with such transaction (the “Reference Consideration”) and
(y) a premium, in cash, equal to $0.50 per share of Common Stock, subject to
proportionate adjustments for any stock splits, combinations, reclassifications,
adjustments, sales of Common Stock by the Company, sales of Common Stock by HCC
pursuant to Section 3(a)(i) or (ii), or any similar
transaction.

     

    (A) In the
event that the Reference Consideration is other than solely cash, Equivalent
Consideration shall mean at HCC’s election either (I) the Reference
Consideration, or (II) cash in an amount determined pursuant to this Section to
be equivalent to the value of the Reference Consideration as of the date of the
closing of the Premium Transaction (the “Cash
Equivalent”).  The Cash Equivalent shall be determined as
follows:

     

    (1) a Special
Committee shall select an independent, nationally recognized investment bank or
appraisal firm that has not had a material engagement from Hallmark or its
controlled Affiliates in the three full calendar years immediately preceding the
engagement (the “Independent
Banker”) for the purpose of valuing the Reference
Consideration;

     

    (2) the
Independent Banker shall submit its report as to its view as to the value of the
Reference Consideration at the time of the closing of the Premium Transaction
(the “Banker
Valuation”);

     

    (3) if
Hallmark does not object, in writing, to the Banker Valuation within ten (10)
business days of the receipt of the report containing the Banker Valuation, then
the Banker Valuation shall be the Cash Equivalent;

     

    (4) if
Hallmark objects, in writing, to the Banker Valuation within ten (10) business
days of the receipt of such report, then Hallmark shall specify its view as to
the value of the Reference Consideration at the time of the closing of the
Premium Transaction (the “Hallmark Valuation”);
and

     

    (5) unless
the Special Committee accepts the Hallmark valuation or the Special Committee
and Hallmark otherwise agree, the value of the Reference Consideration at the
time of the closing of the Premium Transaction shall be submitted to an
impartial third party selected by both parties.  Such third party may
only select either the Banker Valuation or the Hallmark Valuation as the Cash
Equivalent.

     

    (B) Pending
the determination of the Cash Equivalent pursuant to clause (A) above, Hallmark
may proceed with a Premium Transaction based on Hallmark’s reasonable good faith
estimate of the Cash Equivalent; provided, however, that (1) such estimate shall
automatically be deemed to constitute the Hallmark Valuation, and (2) Hallmark
shall pay to the Minority Stockholders the Cash Equivalent as ultimately
determined in the event such amount is greater than the Hallmark
estimate.

     

    (C) For the
avoidance of doubt, the aggregate premium pursuant to clause (y) of Section
3(a)(iii) shall not exceed $17,400,880 (the product of $0.50 multiplied by
34,801,759 shares Owned by the Minority Stockholders as of the date of the
Master Recapitalization Agreement).

     

    (D) HCC may
effectuate a Premium Transaction pursuant to a short form merger (or other
merger) between the Company and HCC and its Affiliates or any purchaser of HCC’s
shares, so long as the holders of Common Stock not Affiliated with HCC receive
the consideration provided for in this paragraph in connection with such
merger.

     

    (b) From and
after January 1, 2014 until the earlier of (x) December 31, 2020, or (y) such
time as Hallmark and its controlled Affiliates cease to Own a majority of the
outstanding Common Stock, HCC may not Transfer to any transferee or group of
transferees that are Affiliates, in one transaction or in a series of related
transactions, shares of Common Stock constituting a majority of the outstanding
shares of Common Stock, except (i) in a Permitted Transfer, (ii) with the prior
approval of a Special Committee, or (iii) in a transaction in which the Minority
Stockholders have the right to sell their Common Stock in connection with such
transaction for, or the right to receive in connection with such transaction,
Equivalent Consideration.  HCC may effectuate a transaction pursuant
to clause (iii) of the preceding sentence pursuant to a short form merger (or
other merger) between the Company and HCC and/or its Affiliates, or between the
Company and any purchaser of HCC’s shares, so long as the holders of Common
Stock not Affiliated with HCC receive Equivalent Consideration.

     

    (c) Following
the date hereof, but subject to the other terms of this Agreement, HCC and its
Affiliates shall be entitled, on behalf of the Company and all of the Company’s
stockholders, to explore the possibility of a sale of the equity of the Company
to a third party and to conduct any negotiations with respect to such a
transaction.  HCC and its Affiliates shall be authorized to utilize
confidential information relating to the Company, and the Company shall cause
its management to cooperate with HCC and its Affiliates and to provide
management’s time and assistance (in each case as reasonably requested by HCC
and its Affiliates) in connection with the exploration and negotiation of a sale
of the equity of the Company to a third party; provided that HCC and its
Affiliates shall not provide confidential information regarding the Company to
any such third party until such third party executes a confidentiality agreement
of the type typically utilized in connection with such a sale which agreement
provides that the Company is a third party beneficiary thereof.

     

    4. SUBSCRIPTION
RIGHTS

     

    (a) If, at
any time after the date hereof, the Company proposes to issue equity securities
of any kind, including any warrants, options or other rights to acquire equity
securities and debt securities convertible into equity securities (“Proposed Securities”), the
Company shall:

     

    (i) give
written notice to HCC setting forth in reasonable detail (w) the designation and
all of the terms and provisions of the Proposed Securities, including, where
applicable, the voting powers, preferences and relative participating, optional
or other special rights, and the qualification, limitations or restrictions
thereof and interest rate and maturity, (x) the price and other terms of
the proposed sale of such securities, (y) the amount of such securities proposed
to be issued, and (z) such other information as HCC may reasonably request in
order to evaluate the proposed issuance; and

     

    (ii) offer to
issue to HCC or its Affiliates a portion of the Proposed Securities equal to a
percentage (the “Fully Diluted
Ownership Percentage”) determined by dividing (x) the number of Shares
Owned by HCC and its Affiliates immediately prior to the issuance of the
Proposed Securities by (y) the total number of Shares then outstanding,
including for purposes of this calculation all Shares outstanding on a fully
diluted basis but excluding Shares issuable upon the exercise of options or
rights issued after the date of this Agreement.

     

    (b) HCC and,
if applicable, its Affiliates must exercise their purchase rights hereunder
within ten (10) business days after receipt of such notice from the
Company.

     

    (c) Upon the
expiration of the offering period described above, the Company will be free to
sell such Proposed Securities that HCC and its Affiliates have not elected to
purchase during the ninety (90) days following such expiration on terms and
conditions no more favorable to the purchasers thereof than those offered HCC
and its Affiliates.  Any Proposed Securities offered or sold by the
Company after such ninety (90)-day period must be reoffered to such Stockholders
pursuant to this Section 4.

     

    (d) The
election by HCC and its Affiliates not to exercise their subscription rights in
any one instance shall not affect their right (other than in respect of a
reduction in their percentage holdings) as to any subsequent proposed
issuance.  Any sale of such securities by the Company without first
giving HCC and its Affiliates the rights described in this Section 4 shall be
void and of no force and effect.

     

    (e) Notwithstanding
anything to the contrary contained herein:

     

    (i) If the
Proposed Securities are being issued to employees of the Company or its
Affiliates as compensation with the approval of the Board of Directors (“Employee Proposed
Securities”), then the Company shall be free to issue such Proposed
Securities without first complying with Section 4(a) above, subject to
compliance with the following provisions:

     

    (A) If the
Employee Proposed Securities are shares of capital stock, subject to vesting or
other similar conditions (“Restricted Stock”), then, in
connection with the issuance of such Restricted Stock, HCC and, if applicable,
its Affiliates shall have the right to purchase, prior to the expiration of ten
(10) business days after receipt of notice of such issuance from the Company,
capital stock of the same class as the Restricted Stock which shall not be
subject to vesting or other similar conditions.  The number of shares
of capital stock available for purchase by HCC or its Affiliates shall be equal
to the number of shares of Restricted Stock to be issued multiplied by a
fraction, the numerator of which is the Fully Diluted Ownership Percentage and
the denominator of which is the quantity 100% minus the Fully Diluted Ownership
Percentage.  The purchase price for such securities shall be the fair
market value of the Restricted Stock on the date of issuance.

     

    (B) If the
Employee Proposed Securities are options to acquire capital stock of the
Company, then for purposes of this Section 4, the issuance of the Proposed
Securities shall be deemed to occur upon the exercise of the options and not
upon the issuance of the options, and HCC and, if applicable, its Affiliates
shall have the right to purchase, prior to the expiration of ten (10) business
days after receipt of notice of such exercise from the Company, capital stock of
the same class as the underlying security.  The number of shares of
capital stock available for purchase by HCC or its Affiliates shall be equal to
the number of shares of the underlying security to be issued upon the exercise
of such Employee Proposed Securities multiplied by a fraction, the numerator of
which is the Fully Diluted Ownership Percentage and the denominator of which is
the quantity 100% minus the Fully Diluted Ownership Percentage.  The
issuance price shall be deemed to be the fair market value of the underlying
security on the date of exercise and not the exercise price of the option or
right.

     

    (ii) If the
Proposed Securities are options or rights to acquire capital stock of the
Company but are not Employee Proposed Securities, then for purposes of this
Section 4, the issuance of the Proposed Securities shall be deemed to occur
upon the exercise of the options or rights and not upon the issuance of the
options or rights, and HCC and, if applicable, its Affiliates shall have the
right to purchase, prior to the expiration of ten (10) business days after
receipt of notice of such exercise from the Company, capital stock of the same
class as the underlying security.  The number of shares of capital
stock available for purchase by HCC or its Affiliates shall be equal to the
number of shares of the underlying security to be issued upon the exercise of
such Proposed Securities multiplied by a fraction, the numerator of which is the
Fully Diluted Ownership Percentage and the denominator of which is the quantity
100% minus the Fully Diluted Ownership Percentage.  The issuance price
shall be deemed to be the sum of the purchase price for such options or rights,
plus any additional consideration paid upon exercise of such options or
rights.

     

    5. LISTING
REQUIREMENT

     

    From the
date hereof until December 31, 2013: (a) the Company shall use its commercially
reasonable best efforts to maintain the listing of the Common Stock on the
Nasdaq Global Market, and (b) HCC shall (i) reasonably cooperate with the
Company in meeting with representatives of the Nasdaq Global Market to support
the Company's listing thereon, (ii) not cause the Company voluntarily to delist
the Common Stock from the Nasdaq Global Market or to deregister the shares of
Common Stock under the Securities and Exchange Act of 1934, as amended, except,
in the case of the immediately preceding clauses (i) and (ii), in connection
with a Premium Transaction or pursuant to a tender offer under Section 2(d)(ii)
hereof, and (iii) vote in favor of any proposed amendment to the Company's
certificate of incorporation to effect a reverse split of the Common Stock
necessary to maintain the listing on the Nasdaq Global Market to the extent such
reverse stock split is recommended by a majority of the Company’s directors who
are not Affiliates of Hallmark.

     

    6. REVOLVER
GUARANTEE.

     

    (a) Hallmark
Cards shall guarantee, or cause one or more of its Affiliates to guarantee (the
“Revolver Guarantee”),
a revolving line of credit issued to the Company, in an amount up to $30
million, from a third party lender (the “Revolver”) until the earlier
of (the "Guarantee Termination
Date"): (i) the date of the payment or refinancing of the $315 million of
the principal amount of debt owed to HCC and its subsidiaries by the Company on
the date hereof (the “New HCC
Debt”) or (ii) December 31, 2013.

     

    (b) The
Revolver Guarantee shall (i) have terms and conditions no less favorable to the
Company than those contained in that certain Guarantee Agreement, dated March 2,
2009, between Hallmark Cards and JPMorgan Chase Bank, N.A. and (ii) include an
annual guarantee fee in favor of HCC or, if applicable, its Affiliates, equal to
the sum of (x) 0.125% multiplied by the portion of the Revolver that is undrawn
during such period and (y) 0.75% multiplied by the portion of the Revolver that
is drawn during such period.

     

    (c) On or
prior to the Guarantee Termination Date, Hallmark shall reasonably cooperate
with any prospective provider of a Revolver in connection with the issuance of a
Revolver Guarantee.  The parties understand and agree that this
Section 6 shall not be construed as a guarantee by HCC or its Affiliates that
the Company will be able, at any time, to obtain a Revolver on any particular
terms.

     

    7. TERMINATION
OF RIGHTS

     

    (a) This
Agreement shall terminate upon the earliest of:

     

    (i) the
written agreement of the Company and HCC;

     

    (ii) such time
as Hallmark and its controlled Affiliates cease to Own a majority of the Common
Stock;

     

    (iii) December
31, 2020; or

     

    (iv) such time
as Hallmark and its controlled Affiliates Own all of the outstanding Common
Stock.

     

    (b) The
obligations of Hallmark set forth in Sections 2, 3(a) and (b), 5 and 6 shall
terminate upon the failure by the Company or any of its Affiliates to make any
payment, when and as required with respect to the New HCC Debt, which failure
continues for sixty (60) days following written notice of such
failure.

     

    8. INTERPRETATION
OF THIS AGREEMENT

     

    (a) Terms Defined.  As
used in this Agreement, the following terms have the respective meanings set
forth in the corresponding section of this Agreement:

     

    
      	 
      	
              Term

            	
              Section
      Defined

            
	 
      	
              Affiliates

            	
              2

            
	 
      	
              Agreement

            	
              preamble

            
	 
      	
              Banker
      Valuation

            	
              3(a)

            
	 
      	
              Board

            	
              2(a)

            
	 
      	
              Cash
      Equivalent

            	
              3(a)

            
	 
      	
              Common
      Stock

            	
              recitals

            
	 
      	
              Company

            	
              preamble

            
	 
      	
              Employee
      Proposed Securities

            	
              4(e)

            
	 
      	
              Equivalent
      Consideration

            	
              3(a)

            
	 
      	
              Fully
      Diluted Ownership Percentage

            	
              4(a)

            
	 
      	
              Hallmark

            	
              preamble

            
	 
      	
              Hallmark
      Cards

            	
              preamble

            
	 
      	
              Hallmark
      Valuation

            	
              3(a)

            
	 
      	
              HCC

            	
              preamble

            
	 
      	
              Knowledge

            	
              3(a)

            
	 
      	
              Minority
      Stockholders

            	
              2(e)

            
	 
      	
              New
      HCC Debt

            	
              6(a)

            
	 
      	
              Owned

            	
              1(a)

            
	 
      	
              Permitted
      Sale

            	
              3(a)

            
	 
      	
              Permitted
      Transfer

            	
              3(a)

            
	 
      	
              Proposed
      Securities

            	
              4(a)

            
	 
      	
              Recapitalization
      Agreement

            	
              recitals

            
	 
      	
              Restricted
      Stock

            	
              4(e)

            
	 
      	
              Revolver

            	
              6(a)

            
	 
      	
              Revolver
      Guarantee

            	
              6(a)

            
	 
      	
              Series
      A Preferred Stock

            	
              recitals

            
	 
      	
              Shares

            	
              1(a)

            
	 
      	
              Special
      Committee

            	
              2(a)

            
	 
      	
              Transfer

            	
              3(a)

            


    

    


     

    (b) Accounting
Principles.  Any reference to any accounting term or principle
shall be determined in accordance with U.S. generally accepted accounting
principles at the time in effect, to the extent applicable, except where such
principles are inconsistent with the requirements of this
Agreement.

     

    (c) Construction.  The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction will
be applied against any party.  Any references to any federal, state,
local or foreign statute or law will also refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.  Unless
the context otherwise requires:  (i) a term has the meaning assigned
to it by this Agreement; (ii) including means “including but not limited to”;
(iii) “or” is disjunctive but not exclusive; (iv) words in the singular
include the plural, and in the plural include the singular; and (v) “$” means
the currency of the United States of America.

     

    9. MISCELLANEOUS

     

    (a) Notices.  All
notices, demands or other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given (a) when delivered personally to the recipient, (b)
when sent to the recipient by telecopy (receipt electronically confirmed by
sender’s telecopy machine) if during normal business hours of the recipient,
otherwise on the next business day, (c) one (1) business day after the date when
sent to the recipient by reputable express courier service (charges prepaid), or
(d) seven (7) business days after the date when mailed to the recipient by
certified or registered mail, return receipt requested and postage
prepaid.  Such notices, demands and other communications shall be sent
to the parties at the addresses indicated below:

     

    
      	
              If
      to the Company:

            	
              Crown
      Media Holdings Inc.

              12700
      Ventura Boulevard
 




              Studio
      City, CA  91604

              Attention:  Chief
      Executive Officer

            
	
              With
      a copy to:

              (which
      shall not constitute notice)

            	
              Crown
      Media Holdings Inc.

              12700
      Ventura Boulevard

              Studio
      City, CA  91604

              Attention:  Chief
      Financial Officer

              Crown
      Media Holdings Inc.

              12700
      Ventura Boulevard

              Studio
      City, CA  91604

              Attention:
      General Counsel

              Richards,
      Layton & Finger, P.A.

              920
      N. King Street

              Wilmington,
      DE 19801

              Attention:
      Mark J. Gentile

              Facsimile
      No. (302) 498-7722

            
	
              If
      to Hallmark:

            	
              Hallmark
      Cards, Incorporated

              2501
      McGee Trafficway

              Kansas
      City, MO 64108

              Attention:  Chief
      Financial Officer

              MD
      342

            
	
              With
      a copy to:

              (which
      shall not constitute notice)

            	
              Willkie
      Farr & Gallagher LLP

              787
      Seventh Avenue

              New
      York, New York 10019

              Attention:  Maurice
      M. Lefkort, Esq.

              Facsimile
      No.:  (212) 728-8111

            


    

    or to
such other address as either party hereto may, from time to time, designate in
writing delivered pursuant to the terms of this Section.

     

    (b) Amendments.  The
terms, provisions and conditions of this Agreement may not be changed, modified
or amended in any manner except by an instrument in writing duly executed by all
of the parties hereto.

     

    (c) No Waiver.  No
failure on the part of the parties hereto to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.

     

    (d) Assignment and Parties in
Interest. Neither this Agreement
nor any of the rights, duties, or obligations of any party hereunder may be
assigned or delegated (by operation of law or otherwise) by any of the parties
hereto except with the prior written consent of the other parties
hereto.  This Agreement shall not confer any rights or remedies upon
any person or entity other than the parties hereto and their respective
permitted successors and assigns.

     

    (e) Expenses.  Except
as expressly set forth in this Agreement, each party to this Agreement shall
bear all legal, accounting, investment banking and other expenses incurred by it
or on its behalf in connection with this Agreement.

     

    (f) Entire Agreement; No Inconsistent
Agreements.

     

    (i) This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof, supersedes and is in full substitution for any and
all prior agreements and understandings among them relating to such subject
matter, and no party shall be liable or bound to the other party hereto in any
manner with respect to such subject matter by any warranties, representations,
indemnities, covenants, or agreements except as specifically set forth
herein.

     

    (ii) The
Company represents, warrants, covenants and agrees that it is not party to, and
shall not enter into, any agreements inconsistent with the terms of this
Agreement.

     

    (g) Descriptive
Headings.  The descriptive headings of the several sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.

     

    (h) Counterparts.  For
the convenience of the parties, any number of counterparts of this Agreement may
be executed by any one or more parties hereto, and each such executed
counterpart shall be, and shall be deemed to be, an original, but all of which
shall constitute, and shall be deemed to constitute, in the aggregate but one
and the same instrument.  Facsimile signatures will be treated as
originals.

     

    (i) Governing
Law; Jurisdiction.

     

    (i) This
Agreement and the legal relations between the parties hereto shall be governed
by and construed in accordance with the laws of the State of Delaware,
applicable to contracts made and performed therein.

     

    (ii) Any and
all claims arising out of, relating to or in connection with this Agreement or
the subject matter hereof, shall be brought exclusively in the Court of Chancery
of the State of Delaware (or, if under applicable law exclusive jurisdiction is
vested in the federal courts, the United States District Court for the District
of Delaware  (the “Designated
Court”).  Each of the parties hereto hereby irrevocably submits
with regard to any such action or proceeding for itself and in respect of its
property, generally and unconditionally, to the personal jurisdiction of the
Designated Court and agrees that it will not bring any action whether in tort,
contract or otherwise arising out of, relating to or in connection with this
Agreement or the subject matter hereof in any court other than the Designated
Court.  Each of the parties hereto hereby irrevocably waives, and
agrees not to assert as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the Designated Court, (b) any claim
that it or its property is exempt or immune from jurisdiction of the Designated
Court or from any legal process commenced in such the Designated Court (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise) and (c) to the
fullest extent permitted by applicable law, any claim that (I) the suit, action
or proceeding in such Designated Court is brought in an inconvenient forum, (II)
the venue of such suit, action or proceeding is improper or (III) this
Agreement, or the subject matter hereof, may not be enforced in or by such
Designated Court.

     

    (iii) Each
party acknowledges and agrees that any controversy which may arise under this
Agreement is likely to involve complicated and difficult issues, and, therefore,
each such party hereby irrevocably and unconditionally waives any right such
party may have to a trial by jury in respect of any litigation directly or
indirectly arising out of or relating to this Agreement.  Each party
certifies and acknowledges that (a) no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing waiver, (b) each
party understands and has considered the implications of this waiver,
(c) each party makes this waiver voluntarily, and (d) each party has been
induced to enter into this agreement by, among other things, the mutual waivers
and certifications in this Section 9(i).

     

    (j) Severability.  In
the event that any one or more of the provisions contained in this Agreement or
in any other instrument referred to herein, shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such
instrument.  Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a part
of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and
enforceable.

     

    (k) Specific
Performance.  Without limiting or waiving in any respect any
rights or remedies of Hallmark under this Agreement now or hereinafter existing
at law or in equity or by statute, each of the parties hereto shall be entitled
to seek specific performance of the obligations to be performed by the other in
accordance with the provisions of this Agreement.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by
their respective authorized officers as of the day and year first above
written.

     

    


     

    CROWN
MEDIA HOLDINGS, INC.

     

    By:           ______________________________

     

    Name:

     

    Title:

     

    H C CROWN
CORP.

     

    By:           ______________________________

     

    Name:

     

    Title:

     

    HALLMARK
CARDS, INCORPORATED

     

    By:           ______________________________

     

    Name:

     

    Title: