**Exhibit10.99**

 

**TECHNICALSERVICES AGREEMENT**

 

THIS TECHNICAL SERVICES AGREEMENT (the “Agreement”) isentered into as of this 26th day of April, 2005, between CROWN MEDIAINTERNATIONAL LLC (“Buyer”), a Delaware limited liability company, with itsprincipal offices at 6430 S. Fiddlers Green Circle, Suite 225 GreenwoodVillage, Colorado 80111 and CROWN MEDIA UNITED STATES, LLC (“CMUS”), a Delawarelimited liability corporation, with its principal offices at 12700 VenturaBlvd., Studio City, California 91604.

 

WHEREAS, Buyer is engaged in the provision oftelevision post-production, origination, compression, authorization andtransmission services at its Network Operations Center facility (as definedbelow);

 

WHEREAS, CMUS operates a television programming servicedelivering CMUS’ program channels or program content, including, but notlimited to an East and West Coast regional feed of the Hallmark Channel andHallmark Movie Channel as such channels are more particularly described inExhibit A(1) hereto (the “Channel” or the “Channels”), and CMUS desires toengage Buyer for the non-exclusive provision of the services specified inParagraph 1; and

 

WHEREAS, a purchase and sale agreement is beingentered into between CM Intermediary LLC (as Seller) and Rightfolder Limited(as Buyer), dated as of the date hereof, for the sale and purchase, *inter alia*, of all the membership interests of Buyer (the “Purchaseand Sale Agreement”).

 

NOW, THEREFORE, in consideration of the mutual termsand conditions contained herein and for other good and valuable consideration,the receipt and sufficiency of which is hereby acknowledged, the parties herebyagree as follows:

 

**1.             SERVICESAND FACILITIES PROVIDED BY BUYER.**  During the Service Term (as defined below),Buyer will render to CMUS in relation to the Channels the services (the “Services”)as described in Exhibits A though D attached hereto, in accordance with theadditional terms and conditions specified in Exhibits E and F attached hereto,each as incorporated herein by reference.  In the event of any conflict between anyExhibit and Paragraphs 1 to 14 of this Agreement, Paragraphs 1 to 14 shallprevail.  The Exhibits are:

 

EXHIBIT A - ORIGINATIONSERVICES

EXHIBIT B - TRANSMISSIONAND COMPRESSION SERVICES

EXHIBIT C -POST-PRODUCTION SERVICES PRICES

EXHIBIT D - SATELLITERECEPTION AUTHORIZATION SERVICES

EXHIBIT E - REPORTINGSERVICE PROBLEMS

EXHIBIT F - SERVICES

 

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The Services shall berendered by Buyer at the Network and Production Operations Center (the “NOC”),6430 S. Fiddlers Green Circle, Suite 225, Greenwood Village, Colorado80111.  Uplink and satellite transponderservices shall be provided by a third party contracted by CMUS.  Notwithstanding the above, CMUS may elect tocancel the Services provided hereunder in respect of one (1) of the Channelsupon six (6) months prior written notice to Buyer, such cancellation to takeeffect at the earliest upon expiry of the third year of the Service Term (the “CancellationOption”).  CMUS may also elect, upon six(6) months prior written notice to Buyer, to extend any part of the Servicesfor up to two additional channels (the “Additional Channels” and each an “AdditionalChannel”) for the remainder of the Service Term upon the terms set out herein(the “Additional Channel Option(s)”).

 

**2.             SERVICE TERM.** Subject to the provisions of Paragraph 10, this Agreement shall beeffective from Closing (as defined in the Purchase and Sale Agreement) (the “EffectiveDate”) and shall continue for a period of seven (7) consecutive years followingthe Effective Date or until such further time as the parties shall mutuallyagree (“the “Service Term”).

 

**3.****                                      EQUIPMENT AND INSURANCE.**

 

3.1           For the duration of the Service Term,CMUS appoints Buyer as a non-exclusive provider of Services and Buyer agrees toprovide to CMUS the Services, including redundancy protection and operatingstandards equivalent to the redundancy protection and operating standards as ineffect at the Effective Date, utilizing substantially the same equipment andpersonnel staffing support levels that it has utilized to provide the Servicesprior to the Service Term and which meet the standards and requirements set outin the Exhibits (the “Service Standard”). Buyer may substitute other equipment for the equipment utilized toprovide the Services on the Effective Date, provided that such equipmenthas substantially the same operating standards and capabilities as theequipment it replaces and is compatible with the CMUS equipment with which itis required to interface.

 

3.2           During the Service Term, each ofBuyer and CMUS shall, at its own expense and only to the extent that the sameis available at reasonable cost, provide and maintain:

 

3.2.1        Statutory Workers’ Compensation coveragefor all of its employees rendering services or who are responsible forinterfacing with those rendering services under this Agreement, includingoccupational disease coverage, as required by applicable law, and employer’sliability with limits of at least $1,000,000 bodily injury each accident,$1,000,000 bodily injury by disease each employee and $1,000,000 bodily injuryby disease in the aggregate.  The policymust be endorsed to include “all states” coverage;

 

3.2.2        Comprehensive General LiabilityInsurance, including media liability, written on an “occurrence” basis with acombined single limit of at least $2,000,000 per occurrence, and $5,000,000 inthe aggregate for bodily injury and property damage in a form providingcoverage not less than a standard commercial general liability policy includinghazards

 

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of operation coverage,broad form property damage liability coverage, media liability,products/completed operations coverage and broad form contractual coverage withliability limits equal to at least the above limits.  Each party shall upon request add the otheras an additional insured under the CGL policy; and

 

3.2.3        Errors and Omissions Liability Insuranceincluding blanket contractual liability coverage sufficient to coverindemnifications extended in Paragraph 13 below with a limit of not less than$5,000,000 per occurrence and in the aggregate.

 

3.2.4        All required insurance must be fromcompanies with at least an A.M. Best rating of “A-”. Each party shall furnishthe other party on request with satisfactory evidence of the required insurancein the form of a certificate of insurance prior to the commencement of theServices and at any time thereafter upon request. At least thirty (30) days’prior written notice must be given in the event of cancellation or materialchange to the insurance.

 

**4.****                                      SERVICE PROBLEMS AND INTERRUPTIONS.**

 

4.1           Reporting.  Buyer shall report all continuing ServiceInterruptions (as defined in Exhibit F) to CMUS as soon as is reasonablypracticable, but in no event later than one hour after they first occur, using the procedures (i.e.,form of notification and parties notified) in effect as of the datehereof.  At the time of the report, Buyerwill advise Buyer of the action it intends to take to correct the ServiceInterruption and will promptly take such corrective action unless such Service Interruptionarises in the circumstances described in Paragraph 4.3 below.  Buyer will notify CMUS when the ServiceInterruption has been corrected.  Buyershall take the same corrective actions with respect to Service Interruptionsreported by CMUS.  Buyer shall report anyService Interruptions that are not re-occurring or are corrected immediatelyafter they occur to CMUS within 48 hours.

 

4.2           Service Interruption Credits.  So long as this Agreement has not beenterminated and CMUS is not in material breach of any of the material provisionsof this Agreement, CMUS shall, subject to the terms of this Agreement, beentitled to Service Interruption Credits for Service Interruptions, calculatedin accordance with Exhibit F.

 

4.3           ForceMajeure.  For the purposes of thisParagraph 4.3, as well as Paragraphs 4.4 through 4.6 below, “Force MajeureCondition” shall mean in relation to either party, an event or circumstancebeyond the reasonable control of that party including without limitation (i)damage to any equipment or Service Interruption caused by electrical storms,fire, weather, flood, natural disaster, national emergency or war, sabotage,riots, governmental authority, acts of God, wilful or criminal misconduct ofthird parties unaffiliated with Buyer or CMUS, or forces outside the control ofeither Buyer or CMUS; (ii) interference from other communications systems,whether licensed or not, that use the same frequency bands as the Servicesherein; (iii) any interruption or out-of specification performance of anyassociated satellite transponders; (iv) conditions, which are beyond thecontrol of Buyer, that threaten the safety of operations and maintenancepersonnel; (v) occasional Service Interruptions due to

 

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passing of the sun within the beamwidth of anyassociated receive antenna system(s) during the spring and fall equinoxperiods; (vi) outage, interruption or degradation due to atmosphericattenuation of signals; (vii) such planned Service Interruptions for testing ormaintenance as may be agreed to in advance between CMUS and Buyer, with CMUS’sagreement not to be unreasonably withheld or delayed; (viii) any action orfailure of CMUS where the action or failure of CMUS is the predominant cause ofa Service Interruption; and/or (ix) compliance by Buyer with action by anycourt, agency, legislature or other governmental or regulatory authority of competentjurisdiction that makes it unlawful for Buyer to provide the Services or anypart thereof in accordance with this Agreement. For as long as a Force Majeure Condition subsists, the provisions ofParagraph 10.2 shall not apply and CMUS shall not be entitled to any ServiceInterruption Credits, except as provided below. Any lack or shortage of funds shall not be capable of being a ForceMajeure Condition.

 

In the event of a Force Majeure Condition, the partiesshall:

 

(a)          for the first 24 hours that the Force Majeure Conditionsubsists (the “Initial Period”),fully co-operate to ascertain the cause of the Force Majeure Condition and toidentify means to repair or correct such a problem, during which period CMUSshall continue to be liable to pay the applicable Service Fee and during whichtime Buyer shall use reasonable efforts to promptly repair or correct such aproblem; and

 

(b)         after the end of the Initial Period and for a further 90days (the “Suspension Period”),subject to the provisions of Paragraph 4.4 below, continue to fully co-operateto ascertain the cause of the Force Majeure Condition and to identify means torepair or correct such a problem, during which time neither party shall beresponsible for or be in breach of this Agreement as a result of, be heldliable for any damages, claims, losses, or costs and expenses on account of, inthe case of Buyer, any Service Interruption or any failure to provide anyServices hereunder, if such interruption or failure occurs due to a ForceMajeure Condition, and in the case of CMUS, the obligation to pay the relevantService Fees. To the extent the Service Fees have been prepaid for suchSuspension Period, however, CMUS will receive a Service Interruption Credit forthe Suspension Period.

 

(c)          Unless CMUS shall have exercised its rights to terminatethis agreement in accordance with Paragraph 4.4 below, Buyer shall notify CMUSimmediately once the Force Majeure Condition no longer applies and theSuspension Period shall immediately cease and both parties shall immediatelyresume performance of their respective obligations under this agreement

 

4.4           ReplacementService Providers.  During anyInitial Period or Suspension Period, subject to CMUS continuing to fullyco-operate with Buyer, pursuant to Paragraph 4.3 above, CMUS will have theright to seek an alternative service provider for the provision of

 

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services to replace those Services subject to the Force MajeureCondition (a “Replacement Service Provider”). If CMUS, acting reasonably after consideration of the good faithestimates of Buyer as to the duration and remedy of the Force MajeureCondition, contends that the Force Majeure Condition is incapable of resolutionwithin a reasonable time period and CMUS is required by a Replacement ServiceProvider to enter into an agreement for a term which extends beyond Buyer’sestimated resolution date and which agreement may not be terminated prior tothat date without penalty, CMUS shall notify Buyer of the same and either partyhereto may immediately terminate this Agreement.

 

4.5           Wherea Force Majeure Condition of the nature set out in Paragraph 4.3(ii) occurs,Buyer shall use reasonable efforts to promptly repair or correct suchproblem.  CMUS hereby represents andwarrants that no material occurrences of interference of the sort envisaged inParagraph 4.3(ii) affecting the Services have occurred prior to the ServiceTerm.

 

4.6           Wherea Force Majeure Condition of the nature set out in Paragraph 4.3(ix) occurs,Buyer shall provide written notice to CMUS of any such action as soon as isreasonably possible and no later than two (2) business days of Buyer receivingsuch notice from any court, agency, legislature or other government authority.

 

**5.****                                      SERVICE FEES.**

 

5.1           Service Fees.  In consideration of the Services providedhereunder, CMUS shall pay to Buyer a service fee per Channel (“Service Fee”).  In year one (1) of the Service Term, the perannum Service Fee shall be one million, one hundred thousand US dollars (US$1,100,0000) so that subject to the exercise by CMUS of its option to requireBuyer to provide Services in respect of any Additional Channel in accordancewith Paragraph 1 above, Service Fees in year one of the Service Term shall bepayable in respect of not less than three (3) Channels with aggregate ServiceFees of three million, three hundred thousand US dollars (US$ 3,300,000).  The Service Fee for any Additional Channelshall be equal to seventy per cent (70%) of the Service Fee for a Channel, providedthat the service and equipment required for such Additional Channel do notsubstantially exceed that required for one of the Channels of the HallmarkChannel.  By way of example, but withoutlimiting the generality of the foregoing, the service and equipment requiredfor any high definition channel shall substantially exceed that required forthe current Hallmark Channel.  Anyadditional costs will be negotiated in good faith at the time servicerequirements are defined.  The annualService Fee for all Channels shall increase each year of the Service Term bythe actual percentage increase in the cost of living over the preceding yearmeasured by reference to the United States Retail Price Index.  If CMUS exercises the Cancellation Option andeither of the Additional Channel Options in accordance with Paragraph 1 above,then the Service Fee payable in respect of the first Additional Channel shallbe the same as the Service Fee payable for the Channel cancelled in exercise ofthe Cancellation Option.  If CMUSexercises the Cancellation Option, then no further Service Fees will be payablefor such Channel and Buyer shall apply the balance of the amount of License Fee

 

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paid on execution of thisAgreement in respect of that Channel against further Monthly Service Fees (asdefined in section 5.2 below) payable in respect of the remaining Channels.

 

5.2           CMUSshall pay to Buyer upon execution of this Agreement a sum of $12,643,062, beingfifty per cent (50%) of the Service Fees payable by CMUS for the Channels overthe Service Term, including a total “cost of living” adjustment of 3%,compounded annually.  Buyer shall submitto CMUS an invoice for 1/84 of the balance of the Service Fee, as increased byany annual inflation adjustments, monthly in arrears each month of the ServiceTerm (the “Monthly Service Fees”), which invoices shall include and itemize allapplicable Taxes (as defined in Paragraph 7, below), if any.*** ***CMUSshall pay each invoice within 45 days of receipt.  Interest at a rate of 5% over the US$ primerate offered by the Bank of America from time to time per annum per month (orat the highest allowable rate under law, whichever is lower) will accrue uponall unpaid balances outstanding after the due date of the invoice.  Payment shall be sent to the followingaddress: Crown Media International, LLC, Accounts Receivable Dept., 6430 S,Fiddlers Green Circle, Suite 225, Greenwood Village, CO 80111,****or such other address as Buyer maydesignate from time to time by written notice thereof to CMUS.

 

**6.****                                      COMPLIANCE WITH APPLICABLE LAWS.**

 

6.1           Buyer’sObligations.  Buyer shall prepare,apply for and maintain all governmental permits, licenses and authorizationsnecessary or commercially appropriate to perform the Services.

 

6.2           ApplicableLaws.  This Agreement is subject toall applicable federal, state and local laws and regulations and orders ofgovernmental agencies, as in effect from time to time in the United States,including but not limited to, the Communications Act of 1934 and the rules andregulations of the FCC or any other applicable governing body.  Either party may terminate this Agreementwithout further liability if ordered to do so by the final order of a court orother governmental agency or if such order or ruling would make it impossiblefor either such party to carry out its obligations under this Agreement.

 

**7.             TAXES.**  CMUSacknowledges and understands that all charges are computed exclusive of anyapplicable federal, state or local use, excise, gross receipts, sales andprivilege taxes, duties, fees or similar liabilities (other than general incomeor property taxes) charged or chargeable to CMUS for the Services provided toCMUS (the “Taxes”) and CMUS shall pay all such taxes simultaneously with thepayment of all invoiced charges or, as applicable, reimburse Buyer for suchtaxes when due and payable to the taxing authorities.  These Taxes may include CMUS’ pro rata shareof any “Universal Service Fund” tax or charge required by the CommunicationsAct of 1996 which arises from CMUS’ use the telecommunications servicesprovided hereunder.

 

**8.             CMUS CONTENT OBLIGATIONS.**  CMUS shall be solely responsible for allcontent transmitted by Buyer as part of the Services provided hereunder andCMUS warrants that no element of the content shall be defamatory, or will, whentransmitted by Buyer, violate or infringe upon any copyright, trademark, patentand/or any other third party right

 

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including without limitationany intellectual property, neighbouring, moral, privacy, publicity, performers’contractual or confidentiality rights, or any other right whatsoever or violateany law. *** ***Further,to the extent to which Buyer is not otherwise obligated hereunder as part ofthe Services, CMUS shall make all arrangements with other common carriers,stations, networks, sponsors, music licensing organizations, performers,representatives or other parties for the authorizations necessary to availitself of the Services.  Buyer shall notmake any changes, modifications or alterations to the content of the signal,unless expressly instructed by CMUS and agreed to by Buyer.

 

**9.             CONFIDENTIALITY.** Each party to this Agreement agrees that all terms and conditions ofthis Agreement and all confidential information furnished by either partyhereunder shall be used only in performance of this Agreement, treated asconfidential and not disclosed to anyone other than those who have a need touse such confidential and proprietary information for the purposes of thisAgreement.  The foregoing restrictionsand obligations shall not apply with respect to any information which:  (i) is or become generally available to thepublic through any means other than a breach by the receiving party of itsobligations under this Agreement; (ii) was in the possession of the receivingparty without obligation of confidentiality prior to receipt under thisAgreement; (iii) is disclosed to the receiving party without an obligation ofconfidentiality by a third party who has the right to make such disclosure;(iv) is developed independently by or on behalf of the receiving party withoutuse of or benefit from the confidential or proprietary information; (v) isrequired to be disclosed by a court or governmental agency of competentjurisdiction, provided that the party whose information is to bedisclosed is given prompt notice of such requirement and an opportunity tocontest to the extent permitted by the court or governmental agency; or (vi) isdisclosed subject to the same provisions as regards confidentiality as arecontained herein to agents or institutions associated with financing and toinvestors or potential investors or to legal and financial advisors.  Except for any announcement intended solelyfor the internal distribution within either Buyer or CMUS as the case may be(and which is not subsequently distributed externally of the relevantorganization), or any disclosure required by legal, accounting or regulatoryrequirements, all media releases that refer to the other party hereto(including, but not limited to, promotional or marketing material) by Buyer andCMUS or their related companies shall be subject to the written approval of theother party prior to the release thereof, such approval not to be unreasonablywithheld or delayed.  Notwithstanding theforegoing, CMUS and Buyer may state, without prior approval, in theirpromotional and advertising material that services of the type comprised in theServices are provided to CMUS by Buyer.

 

**10.          TERMINATION.** This Agreement may be terminated prior to the end of the Service Term asprovided in this Paragraph 10 and the rights and remedies of the Parties uponsuch termination shall be as set forth in this Paragraph.

 

10.1         Terminationfor Cause.  Either party (the “Non-DefaultingParty”) may terminate this Agreement with immediate effect by prior writtennotice to the other party on or at any time after a material and irremediablebreach of this Agreement by the other party (the “Defaulting Party”) or, ifsuch material breach is remediable, if such material breach is not cured orremedied by the Defaulting Party within 30 days starting on the day of itsreceipt of written

 

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notice regarding such breach from the Non-Defaulting Party stating thatfailure to remedy such breach may give rise to termination under thisParagraph.

 

10.2         For Major Signal Outages orSignificant Service Interruptions. CMUS may terminate this Agreement upon thirty (30) days’ written noticein the event of a “Major Signal Outage” or “Significant Service Interruption”as follows:

 

(a) For “MajorSignal Outages”:

 

(i)  A Major Signal Outage whichcontinues for a period exceeding twenty-four (24) hours;

 

(ii)  Five (5) Major SignalOutages of one minute or more within any ninety (90) day period; or

 

(iii)  Ten (10) Major SignalOutages of one minute or more within any twelve (12) month period.

 

A “Major SignalOutage” is defined as Buyer’s complete failure to deliver a Channel signal tothe Uplink Provider (as defined in Paragraph 5 of Exhibit B) or the delivery tothe Uplink Provider of a Channel signal in which the audio or video issubstantially degraded so as to be apparent to the average viewer.

 

(b)  For “Significant Service Interruptions”:

 

(i) Thirty (30) Significant Service Interruptions within any ninety(90) day period; or

 

(ii) Ninety (90) Significant Service Interruptions with any twelve (12)month period.

 

A “SignificantService Interruption” is a Service Interruption (as defined in Exhibit F)involving either the wrong or an omitted program, commercial, or promotionalspot or similar programming element. Omitted logos, “violators” or other minor elements are not considered “SignificantService Interruptions.”

 

Any Major Signal Outages or Significant Service Interruptions arisingas a result of CMUS’ failure to timely perform any of its express or impliedobligations or provide materials and accurate elements under this Agreement,including without limitation to the generality of the foregoing all program orchannel schedules, program logs, accurately labeled program tapes, commercials,or as a result of any other breach of this Agreement by CMUS, shall not beconsidered a Major Signal Outage or Significant Service Interruption for thepurposes of this Paragraph 10.2.  In theevent that a single failure, event, or common cause results in a simultaneousMajor Signal Outage or Significant Service Interruption on more than oneChannel, such event shall be considered one Major Signal Outage or SignificantService Interruption.

 

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Such right of terminationmay be exercised by providing written notice to Buyer thereof (the “TerminationNotice”) within 45 days of the date CMUS’ right of termination first arises,along with the date upon which the termination will be effective.  If the Termination Notice is not given withinthe 45 day period, CMUS will not have a further termination right until Buyerhas again defaulted in the manner set out in (a) to (c) above.

 

10.3         CMUS may terminate any or all of theServices hereunder at any time without cause by providing Buyer a minimum ofninety (90) days’ prior written notice of such intended termination,accompanied (except for termination of Services for one Channel pursuant toParagraph 1) by payment of 75% of the Service Fees as due hereunder for theremainder of the applicable Service Term.

 

10.4         If CMUS legitimately exercises itsrights to terminate this Agreement pursuant to Paragraphs 10.1 or 10.2, nofurther Service Fees will be payable and any Service Fees prepaid for theperiods remaining in the Service Term following the effective date oftermination will be refunded by Buyer to CMUS within thirty (30) days of sucheffective date of termination.

 

**11.          NOTICES**.  Allnotices, demands, requests, or other communications which may be or arerequired to be given or made hereunder or in connection with the matterscontemplated by this Agreement shall be in writing and shall be deliveredpersonally, or sent by overnight messenger, or sent by facsimile transmission,or mailed by first-class certified mail with return receipt requested,addressed as follows:

 
| If to CMUS:     |   |                                        |
|-----------------|--------|---------------------------------------------|
|            |   | Crown Media United  States, LLC             |
|            |   | 12700 Ventura Blvd.  Suite 200              |
|            |   | Studio City,  CA 91604                 |
|            |   | Attention: Brian  Stewart, CFO              |
|            |   | Telephone: (818)  755-2648                  |
|            |   | Facsimile: (818)  755-2564                  |
|            |   |                                        |
| With a copy to: |   |                                        |
|            |   | Legal Department                            |
|            |   | Crown Media Holdings,  Inc.                 |
|            |   | 12700 Ventura Blvd.                         |
|            |   | Studio City, CA 91604                       |
|            |   | Attn: Charles Stanford,  General Counsel    |
|            |   | Telephone: (818)  755-2469                  |
|            |   | Facsimile: (818)  755-2461                  |
|            |   |                                        |
| If to Buyer:    |   |                                        |
|            |   | Crown Media  International, LLC             |
|            |   | 6430 S. Fiddlers Green Circle, Suite 225    |
|            |   | Greenwood Village,  Colorado 80111          |
|            |   | Attn: Richard Buchanan,  Sr. Vice President |
|            |   | Telephone: (303)  967-4616                  |
|            |   | Facsimile: (303)  220-8679                  |

 

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| with copies to: |   |                                      |
|-----------------|--------|-------------------------------------------|
|            |   | Crown Media  International, LLC           |
|            |   | 6430 S. Fiddlers Green  Circle, Suite 225 |
|            |   | Greenwood Village,  Colorado 80111        |
|            |   | Attn: Charles Zabilski,  Vice President   |
|            |   | Telephone: (303)  220-7990                |
|            |   | Facsimile: (303)  220-7660                |

 

Either party may designate by notice in writing a new address oraddressee to which any notice, demand, request, or communication may thereafterbe so given, served or sent.  Eachnotice, demand, request, or communication shall be deemed to have been dulygiven or made as follows:

 

(i)                                     ifpersonally delivered, upon delivery at the address of the relevant party;

 

(ii)                                  ifsent by overnight courier, such time as it is delivered to the addressee (withsigned messenger or delivery receipt being deemed conclusive evidence of suchdelivery);

 

(iii)                               ifsent by certified mail, upon the date of delivery shown in the signed receipt;or

 

(iv)                              ifsent by facsimile, when dispatched and confirmation of receipt is received.

 

**12.****                               GENERAL.**

 

12.1         Entire Agreement.  This Agreement, together with Exhibits Athrough F, constitutes the entire and only understanding of the parties heretoand supersedes all prior agreements, whether oral or written, relating to thesubject matters specifically expressed herein. Neither party has been induced to enter into this Agreement in relianceupon, nor has any party been given any warranty, representation, statement,assurance, covenant, agreement, undertaking, indemnity or commitment of anynature whatsoever other than are set out in this Agreement including theExhibits attached hereto and the Purchase and Sale Agreement including anyExhibits attached thereto.  This Agreementcannot be modified or changed except as agreed in writing by both partieshereto.

 

12.2         Relationship.  It is expressly understood that the partiesto this Agreement intend to establish the relationship of independentcontractors, and nothing in this Agreement and no action taken by the partiespursuant to this Agreement will constitute, or be deemed to constitute, theparties in the relationship of principal and agent or to create a jointventure, partnership, association or other cooperative entity betweenthemselves or their respective successors in interest, and at no time willeither of the parties have the authority to hold itself out as the agent of theother or as being empowered to bind the other in any way whether contractuallyor otherwise.

 

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12.3         Waiver.  No delay or failure of Buyer or CMUS toinsist on performance of any of the terms or conditions herein or to exerciseany right, power or privilege shall be construed to be a waiver thereof or awaiver of any other terms, conditions or privileges, whether of the same orsimilar type.  No breach of any provisionof this Agreement shall be waived or discharged except with the express writtenconsent of the parties hereto.

 

## 12.4         Assignment.

 

## (a)           ThisAgreement is personal to the parties and accordingly (except as provided below)no party without the prior written consent of the others shall assign, transferor declare a trust of the benefit of all or any of the other party’sobligations nor any benefit arising under this Agreement.  Notwithstanding anything contained herein tothe contrary, at no time shall any such assignment relieve such assigning partyof any of its obligations or agreements hereunder unless expressly agreed to inwriting by the other party hereto in its sole discretion.

##  

### **(b)           Anyparty may (without the consent of the others) assign to an Affiliate thebenefit of all or any of the parties’ obligations or any benefit it enjoysunder this Agreement provided, however, that such assignmentshall not be absolute but shall be expressed to have effect only for so long asthe assignee remains an Affiliate and that immediately before ceasing to be anAffiliate the assignee shall assign the benefit to an Affiliate of the partyconcerned.**

 

### **(c)           Buyermay assign and/or charge all or any of its rights under this Agreement by wayof security to any bank(s) and/or holders of debt securities and/or financialinstitutions(s) and/or hedge counterparties and/or any other person lendingmoney or making other banking facilities available to Buyer or any Affiliate ofBuyer in connection with the acquisition of the Purchased Interests describedin the Purchase and Sale Agreement and/or any refinancing of the existing debtof any Group Member or to any financiers who provide funds on or in connectionwith any subsequent refinancing of such funding or to any person from time totime appointed by any financier to act as security trustee on behalf of suchfinancier; without limitation to the foregoing, any such person or financiermay assign such rights on any enforcement of the security under such financearrangements.**

 

For purposes ofthis Section 12.4, the term “Affiliate” shall have the same meaning asset out in Section 10.4 of the Purchase and Sale Agreement.

 

12.5         Interpretation.  As used herein, the singular shall includethe plural and the plural may refer to only the singular.  The use of any gender shall be applicable toall genders.  The captions containedherein are for purpose of convenience only and are not part of the Agreement.

 

12.6         Governing Law.  This Agreement (including any dispute,controversy, proceedings or claims of whatever nature arising out of or in anyway relating to this Agreement or its formation) shall be governed andinterpreted by the laws of the State of New York, without regard to conflict oflaw rules.

 

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12.7         Arbitration. The parties heretoirrevocably agree that each and every controversy or claim arising out of, orin connection with or relating to this Agreement or the interpretation, performanceor breach thereof shall be settled by binding arbitration under the rules thenin effect of the American Arbitration Association or its successor and inaccordance with applicable law but subject to the following agreed provisions.  The arbitration shall be conducted in NewYork, New York, and the proceedings shall be kept confidential.  Notice of papers or processes relating to anyarbitration proceeding, or for the confirmation of award and entry of judgmenton an award may be served on each of the parties by registered or certifiedmail at the addresses set forth under the signature lines above.  Each dispute shall be promptly adjudicated bya panel of three neutral arbitrators appointed as follows:  each party shall nominate an arbitrator, andthe two arbitrators so appointed shall appoint a third arbitrator who shall actas president of the arbitral tribunal; if either party fails to nominate anarbitrator within 30 days of receiving notice of the nomination of an arbitratorby the other party, such arbitrator shall at the request of that party beappointed by the American Arbitration Association; if the two arbitrators to benominated by the parties fail to agree upon a third arbitrator within 30 daysof the appointment of the second arbitrator, the third arbitrator shall beappointed on the nomination of the American Arbitration Association at thewritten request of either party; and should a vacancy arise because anyarbitrator dies, resigns, refuses to act, or becomes incapable of performinghis functions, the vacancy shall be filled by the method by which thatarbitrator was originally appointed.  Allarbitrators shall be of good reputation and character and shall be highlyknowledgeable of entertainment industry matters.  CM shall pay one-half of the arbitrators’expenses and Buyer shall pay one-half. The parties shall pay their own legal expenses.  The arbitrators shall provide a reasonedopinion supporting their conclusion, including detailed findings of fact andconclusions of law.  Such findings offact shall be final and binding on the parties but such conclusions of lawshall be subject to appeal in any court of competent jurisdiction.  For these purposes, the parties agree thatall appeals shall be brought in the state or federal courts of appropriatesubject matter jurisdiction in New York and each party hereby submits itself tothe exclusive *in personam*jurisdiction of such courts for purposes of any such appeals. The arbitratorsmay award damages and/or permanent injunctive relief, but in no event shall thearbitrators have the authority to award punitive or exemplary damages.  Notwithstanding anything to the contrary inthis Section 12.7, either party may apply to a court of competent jurisdictionfor relief in the form of a temporary restraining order or preliminaryinjunction, or other provisional remedy pending final determination of a claimthrough arbitration in accordance with this Section 12.7.  If proper notice of any hearing has beengiven, the arbitrators will have full power to proceed to take evidence or toperform any other acts necessary to arbitrate the matter in the absence of anyparty who fails to appear.

 

12.8         Counterparts.  This Agreement may be executed incounterparts, each of which shall constitute an original and all of which, whentaken together, shall constitute one agreement.

 

12.9         Representations and Warranties.  Each party represents and warrants to theother that (i) it is an entity duly organized and validly existing under thelaws of its state of organization, (ii) it has the power and authority to enterinto this Agreement and to perform fully all of its obligations under thisAgreement, (iii) it is under no contractual or other legal obligation thatmight interfere in any way with its prompt and complete performance under thisAgreement,

 

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and (iv) the personexecuting this Agreement on its behalf has been duly authorized to do so andsuch execution is binding upon it.

 

12.10       Access to Facilities.  Buyer shall provide CMUS with reasonableaccess during normal business hours to the NOC and other areas of thefacilities hereunder located at the NOC Building required in relation to theServices subject to such supervisionand restrictions as may be reasonably necessary having regard to Buyer’sobligations to third parties. Buyer agrees that CMUS employees or contractors may occupy the space inthe NOC Building provided for in Section 1(g) of Exhibit F on a full time basisfor the purpose of exercising such access rights and for maintaining thecomputer equipment in the Server Room provided for in Section 1(h) of ExhibitF.  Any other CMUS employees orrepresentatives will be given supervised and restricted access to thefacilities used to provide the Services upon not less than two (2) businessdays prior written notice to Buyer or on such other terms as the parties mayagree hereafter.

 

**13.****                               INDEMNIFICATION/CONSEQUENTIAL DAMAGES.**

 

13.1         Buyer shall indemnify, defend and holdCMUS, its members, affiliates, subsidiaries, and their respective successors,officers, directors, employees, agents and customers (the “CMUS Indemnified Parties”), harmless from andagainst any and all third party claims, demands, proceedings, suits andactions, including any related liabilities, obligations, losses, damages,penalties, fines, judgments, settlements, expenses (including reasonableattorneys’ and accountants’ fees and disbursements) and costs (collectively, “Claimsagainst CMUS”), incurred by, borne by or asserted against any of theCMUS Indemnified Parties to the extent such Claims against CMUS result from:(i) any intentional or willful misconduct or any negligence of any employee,agent or subcontractor of Buyer; (ii) Buyer’s or Buyer’s representatives’infringement of a third party’s rights; (iii) any material breach of anyrepresentation or warranty made by Buyer in this Agreement; (iv) any materialbreach or default in the performance by Buyer of any of the covenants to beperformed by Buyer under this Agreement; (v) any acts or omissions of Buyer inviolation of applicable federal, state or local laws or (vi) any actual oralleged infringement or misappropriation of any patent, copyright, trademark,trade name, trade secret or other proprietary or intellectual property right byany Service provided pursuant to this Agreement except where such actual oralleged infringement or misappropriation relates to the content supplied byCMUS and carried by Buyer as a consequence of it providing the Services; providedthat in no event shall Buyer’s aggregate liability hereunder exceed theaggregate of the Service Fees paid in the immediately preceding period ofeighteen (18) months.

 

13.2         CMUS shall similarly indemnify, defendand hold Buyer, its members, affiliates, subsidiaries, and their respectivesuccessors, officers, directors, employees, agents and customers (the “Buyer Indemnified Parties”), harmless fromand against any and all claims, demands, proceedings, suits and actions,including any related liabilities, obligations, losses, damages, penalties,fines, judgments, settlements,expenses (including reasonable attorneys’ and accountants’ fees anddisbursements) and costs (collectively, “Claims against Buyer”),incurred by, borne by or asserted against any of the Buyer Indemnified Partiesto the extent such Claims against Buyer result from: (i) any intentional orwillful misconduct or any negligence of any employee, agent or subcontractor ofCMUS; (ii) CMUS or CMUS’ representatives’ infringement

 

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of a third party’srights; (iii) any material breach of any representation or warranty made byCMUS in this Agreement; (iv) any material breach or default in the performanceby CMUS of any of the covenants to be performed by CMUS under this Agreement;(v) any acts or omissions of CMUS in violation of applicable federal, state orlocal laws; (vi) any actual or alleged infringement or misappropriation of anypatent, copyright, trademark, trade name, trade secret or other proprietary orintellectual property right by any programming delivered pursuant to thisAgreement or (vii) any other Claim against Buyer based on the content of suchprogramming or other material supplied by CMUS; provided that in noevent shall CMUS’ aggregate liability hereunder exceed the aggregate of theService Fees paid in the immediately preceding period of eighteen (18) months.

 

## 13.3         Neitherparty nor their parent or co-owned companies, nor their officers, directors,employees, shareholders, partners, representatives, consultants and agentsshall be liable to the other party or their parent or co-owned comanies, or toany officer, director, employee, shareholder, partner, representative,consultant or agent of the other party, whether in contract, tort (includingstrict liability), or otherwise, for any special, indirect, incidental orconsequential damages whatsoever, which in any way arise out of, relate to, orare a consequence of either party’s performance or nonperformance hereunder orthe performance of their respective contractors and vendors.

##  

**14.          CROSS INDEMNIFICATION.**  In the event any act or omission of a partyor its employees, servants, agents, or representatives causes or results in(i) damage to or destruction of tangible property of the other party orthird parties, and/or (ii) death or injury to persons including, but notlimited to, employees or invitees of either party, then such party shallindemnify, defend, and hold the other party harmless from and against any andall claims, actions, damages, demands, liabilities, costs, and expenses,including reasonable attorneys’ fees and expenses, resulting there from.  The indemnifying party shall pay or reimbursethe other party promptly for all such damage, destruction, death, or injury.

 

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**INWITNESS WHEREOF,** the parties hereto have duly executed thisAgreement as of the date firstset forth above.

 

 
| **CROWN MEDIA UNITED STATES, LLC** | **CROWN MEDIA INTERNATIONAL, LLC** |
|------------------------------------|------------------------------------|
|                               |                               |
| By:                                |                               |   | By: |   |   |
|                               |                               |
| Name:                              |                               |   | Name: |   |   |
|                               |                               |
| Title:                             |                               |   | Title: |   |   |

 

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**EXHIBIT A**

 

**ORIGINATIONSERVICES**

 

1.             Buyer shall originatethree full-time (52 x 7 x 24) Hallmark channels, namely Hallmark Channel East,Hallmark Channel West, and Hallmark Movie Channel with the configuration ofequipment listed below.  Even though notpresently the case, the Hallmark Movie Channel may eventually contain all thesame types of elements that the Hallmark Channel currently contains (such ascommercials).  If CMUS elects toincorporate such elements, they will be integrated by Buyer into the HallmarkMovie Channel signal at no additional charge. Each of these channels shalloriginate from the NOC.  Each channelshall originate in digital 525 format from any of the following:

 

a.               Sony Digital Betacam or IMX Video TapeRecorders (“VTR”);

 

b.              Video Server material previously ingestedfrom VTRs; or material electronically delivered;

 

c.               Time Delay Video Server from a differentprimary channel; or

 

d.              Live feed directly from remote site routedthrough the NOC and delivered to the NOC at CMUS expense.

 

Eachchannel shall utilize a serial digital interface with four channels of embeddedaudio and shall conform to SMPTE 259M, Level C.  The three channels shall be configured asfollows:

 

a.               The Hallmark Channel, East Coast;

 

b.              The Hallmark Channel, West Coast (Time Delayof the East Coast feed with the ability to cover certain program, advertisingand commercial elements); and

 

c.               The Hallmark Movie Channel.

 

2.             Buyer shall provide additionalequipment to facilitate closed captioning from data files, V-Chip data, cuetriggers, ANSI/SCTE 30 2001 and DTMF cue tones on audio channel 3, collectivelyreferred to as “ancillary data”, on the Hallmark Movie Channel, Hallmark EastCoast channel and Hallmark West Coast Channel. The ANSI/SCTE 30 2001 standard is not currently implemented, but will beimplemented by Buyer upon 30 days written notice from CMUS.  In addition, any channel withclosed-captioned data contained within the Vertical Blanking Interval (“VBI”), as defined in EIA 608, shallbe passed without deletion.

 

3.             Buyer shall provide personnel whoare of sufficient experience, in accordance with industry standards, tomaintain a high quality on-air look including: (a) engineering management personnel to assure overall technical qualityand to maintain equipment within its performance parameters; (b) operationsmanagement to supervise operations personnel and equipment operation and (c) adesignated management-level person as a contact for CMUS who will address allbusiness and contractual issues including the on-air look to ensure that CMUS’commercially reasonable expectations for network operations are being met.  Discrepancy summaries shall be

 

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provided inwriting to CMUS on a daily basis by Buyer in Buyer’s standard format ascurrently delivered by Buyer and agreed to by CMUS, with such agreement not tobe unreasonably withheld or delayed.  Buyershall use an equipment configuration in the provision of “Origination Services”to CMUS, in accordance with the following “Performance Standard”:  (a) associated synchronization equipmentconforming to broadcast standards, including sync generators, signalgenerators, and time base correctors; (b) associated audio/video distributionand routing equipment, racks, consoles and test equipment; (c) a comprehensivemonitoring system to view outgoing and return signals and to monitor the signalat various points throughout the transmission path; and (d) existinguninterrupted (UPS) and back-up generator power and HVAC for all technical andequipment areas; and e) equipment providing output signals, per channel, audioand video, for delivery to the CMUS transmission facility in accordance withthe Exhibits.  All Origination equipmentshall meet manufacturers’ specifications in effect at the time of purchase, oras modified and/or upgraded thereafter. Any and all changes in the systems or equipment, from those currentlyutilized, which may affect the Services in any material way, must be inaccordance with the Performance Standard and approved in advance by CMUS inwriting before implementation.

 

4.             CMUS, at CMUS’ expense, shallprovide a daily broadcast schedule or program grid to Buyer’s Broadcast Supportdepartment.  CMUS shall use reasonablebest efforts to provide tape elements and other appropriate materials to theBuyer master control staff at least 48 hours prior to scheduled broadcast time,except for live feeds.  In the event,however, that CMUS is not able to provide any element within 48 hours of air,Buyer will nevertheless use reasonable best efforts to incorporate theseelements into the Channel signal if they are actually received at the NOC, bymeans of physical or electronic delivery, at least 4 hours in advance of air,in the case of programming, and at least 2 hours in advance in the case ofcommercials, promos, interstitials or other short form material. *** ***CMUSwill be responsible for all communications links, as required, between CMUSoffices and the NOC.  CMUS personnelshall verify the daily log, tape delivery, program integrity and discrepancieswith Buyer personnel.  Source tapes for “directto air” programming will be supplied to Buyer by CMUS on Sony Digital Betacam,Betacam SP or IMX, or such other tape or transmission means as the partiesagree.  Source tapes for other elements,such as commercials, promos and interstitial material, may be supplied on thetape stock of other manufacturers, in addition to Sony.  In either case, such material may also beprovided by electronic transfer to Buyer. All tape stock shall be supplied by and shall remain the property ofCMUS. CMUS acknowledges that it is directly responsible for arranging for andpaying the costs of the following: (a) costs for shipping of its tape materialto and from the NOC; (b) the delivery of any satellite turnaround programmingto the NOC and (c) any third party-provided fiber optic, transponder ormicrowave transport other than required for uplinking of CMUS’ Services.  CMUS shall obtain and provide Buyer with allauthorizations of any signal security device employed by CMUS’ programsuppliers, necessary for Buyer to receive program material from CMUS’ programsuppliers.

 

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**EXHIBIT B**

 

**TRANSMISSION AND COMPRESSION SERVICES**

 

1.             Buyer will encode,compress, encrypt, and transport the CMUS channels to CMUS’ Uplink Provider (asdefined below), on its existing platform, utilizing the CMUS fully protected, non-preemptabletransponder capacity on AMC-11, or its replacement or successor, located at131° West Longitude (the “CMUS Transponder”). AMC-11 is owned and operated by SES Americom. All “Transmission andCompression” services provided hereunder are subject to the terms andconditions of CMUS agreements with SES Americom (the “SES Agreements”).

 

2.             Transmission and Compression Services shall be providedfor the CMUS’ Channel(s), on a 24 hour per day basis, in a digital compressedmode using a Scientific Atlanta PowerVu Plus Digital Compression/EncryptionEncoder System (the “Buyer Encoder”) as part of the compression chain, provided,however, that CMUS may specify other operational parameters for thecompression system.  Buyer will not beobligated to implement any such new operational parameters if they interferewith Buyer’s ability to continue to provide compression services on the sameBuyer Encoder for the signals of other parties or degrade the quality of suchsignals.  If CMUS wishes to implement newoperational parameters for the Buyer Encoder or upgrade the Buyer Encodersoftware or hardware, it will pay or reimburse Buyer for the coststhereof.  Any utilization by Buyer of theBuyer Encoder to provide compression/encryption services for channels or otherservices transmitted over the CMUS’ Transponder, other than the servicesprovided third parties as of the date hereof, will be subject to CMUS’ writtenapproval. ** **CMUSmay use the Buyer Encoder to provide compression services for the signals ofthird parties which are utilizing the CMUS Transponder and Buyer will permitsuch use provided that CMUS delivers the third party signals to the NOC “demarcationpoint” at its cost and reimburses Buyer for its actual costs of labor andmaterials necessary to modify the Buyer Encoder to accommodate the additionalsignals.  Buyer shall provide a protectedmicrowave and/or fiber path from the NOC to CMUS’ transmission facility withequipment meeting the specifications contained in this Exhibit B.  Such technical specifications for theServices are based on the assumption that, if programming material is beingreceived via third party transport, Buyer shall not be responsible for anyfailure of the Services to comply with the technical specifications of thisExhibit B, to the extent that such failure is caused by the third partytransport systems.

 

3.             Buyer shall ensure that thefacilities provided by Buyer have sufficient uninterrupted (UPS) and back-upgenerator power and HVAC for all technical operations and equipment. .

 

a.       The design and maintenance for CompressedServices shall be video and audio performance as specified by the compressionsystem manufacturer.

 

b.       The microwave and/or fiber opticsfacility used to transport the Channel from the NOC to the transmission oruplink facility, if any, shall be protected. The design for fiber optics systems shall be a digital DS3 or T3 servicewith 44.736 Mbps.

 

c.       The Buyer Encoder comprising thecompression system shall transport both MPEG audio and AC-3 audio as availablefrom Scientific-Atlanta.

 

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4.             Obligations of CMUS and Buyerwith respect to satellite transponders: CMUS shall obtain the rights to use the transponder(s) to which theChannel(s) shall be transported by Buyer and shall obtain all technicalinformation necessary to enable Buyer to provide the Services to suchtransponder(s).  CMUS and Buyer shalleach remain in compliance with all terms and conditions contained in thisExhibit B, as they relate to CMUS’ and/or Buyer’s specific obligations.

 

5.             Future Uplink Services:  As provided above, Buyer shall deliver asignal to CMUS current uplink service provider or any new uplink serviceprovider designated by CMUS (in either case the “Uplink Provider”).  The Uplink Provider is currently ComcastDigital Media Centers in Denver (“CDMC”). Until expiry or termination of the current agreement between CDMC andCMUS (the “Uplink Agreement”) CMUS shall be solely responsible for all costsarising in connection with the uplink of such signal to the CMUS Transponder,through use of Buyer facilities to those of the Uplink Provider.  At least sixty (60) days prior to theexpiration of the Uplink Agreement, CMUS will negotiate in good faith withBuyer regarding the possible provision of uplink services by Buyer.  If the parties do not reach agreement within30 days of the commencement of these negotiations, CMUS will be free to enterinto an agreement for uplink services with a third party (including a renewalof its Uplink Agreement with CMDC) and Buyer will deliver the Channel Signalsat Buyer’s cost to the new Uplink Provider as provided herein.  To the extent Buyer’s reasonable cost ofdelivery to the new Uplink Provider, including the costs of modifying itsequipment to meet any new technical standards of the Uplink Provider, exceedsthe costs of delivery to the previous Uplink Provider, CMUS will reimburseBuyer for such excess cost.  The signalprovided by Buyer to the Uplink Provider in connection with the Services shallbe a high quality broadcast signal which permits a high quality of aural andvisual signal transmission and reception. Buyer agrees that all rights to the vertical blanking interval (“VBI”)on the CMUS contracted channels are expressly retained and reserved to CMUS.

 

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**EXHIBIT C**

 

**POST PRODUCTION SERVICES**

 
| **Service**            | ** ** | **Rate with Operator** | ** ** | **Rate without Operator** | ** ** |
|------------------------|------------|------------------------|------------|---------------------------|------------|
|                   |       |                   |       |                      |       |
| Avid Media  Composer   | ** ** | ** **             | ** ** | ** **                | ** ** |
| Weekly Rate            |       | $                      | 1,250.00   |                      | $          | 750.00 |   |
| Daily Rate             |       | $                      | 415.00     |                      | $          | 250.00 |   |
|                   |       |                   |       |                      |       |
| Linear Editing  Bay    |       |                   |       |                      |       |
| Weekly Rate            |       | $                      | 1,500.00   |                      | $          | 900.00 |   |
| Daily Rate             |       | $                      | 500.00     |                      | $          | 300.00 |   |
|                   |       |                   |       |                      |       |
| Discreet  Inferno/Fire |       |                   |       |                      |       |
| Weekly Rate            |       | $                      | 1,900.00   |                      |       |   |
| Daily Rate             |       | $                      | 640.00     |                      |       |   |
|                   |       |                   |       |                      |       |
| QC Workstation         |       |                   |       |                      |       |
| Hourly Rate            |       |                   |       | $                         | 25.00      |   |

 

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**EXHIBIT D**

 

**SATELLITE RECEPTION AUTHORIZATIONSERVICES**

 

1.             Satellite Authorization ServicesProvided by Buyer:  Buyer willprovide satellite authorization services during normal business hours..  Each such authorization will be performed byBuyer only at CMUS’ direction and Buyer shall not in any way interfere with,deny or alter authorizations or de-authorizations.  For each such authorization orde-authorization, CMUS will provide such information on the cable or otherdistributor as is reasonably needed by Buyer and once this information isprovided, Buyer will promptly implement the authorization.

 

2.             Satellite Authorization ServicesPerformed by CMUS:  In thealternative, CMUS may perform its own satellite authorizations.  In such event, Buyer will provide a dial-upmodem interface into the multiplex equipment used to trigger authorizations toenable CMUS to directly control the authorizations of CMUS’ affiliates. The transfer of this responsibility will bein writing by CMUS with 30 days notice. After the transfer of responsibility, Buyer will assume noresponsibility for authorization or database management, and no reduction infees will be applied to this Agreement.

 

3.             Re-hits:  Whether initial authorizations are performedby Buyer or by CMUS, from time to time, it may be necessary to perform “re-hits”for the headend equipment, or to change the headend equipment for differentequipment.  In these situations, thedistributor will call Buyer and make appropriate identification of the system,and request a “re-hit” or change of equipment. (For a change of equipment, caller must be able to provide the existingequipment identification numbers.)  Buyerwill then perform the “re-hit” or equipment change.  Buyer will maintain, monitor, and answer a 24hour authorization and technical telephone hotline to assist CMUS affiliateswith these requests. All incoming and outgoing calls will be logged, in amanner acceptable to CMUS as at the Effective Date, and this log, along withreports on any re-hits or equipment changes performed in response to the calls,will be provided CMUS on a weekly basis.

 

All related shipping of IRDs will be billed to CMUS at Buyer’s cost.

 

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**EXHIBIT E**

 

**REPORTINGSERVICE PROBLEMS**

 

CMUS may report routine service problems, outages and degraded Servicesto Buyer operators, available on a 24-hour basis at the Network OperationsCenter and shall specify the date and time of the service problem, outageand/or degraded service, the number and type of receive systems affected, thespecific nature of the problem experienced, and the extent and severity of theservice problem, outage, and or degraded service.  For normal procedures and emergencies, 24hours per day:

 

**BusinessHours Contacts (9:00 AM - 5:00 PM Mountain Time):**
| Jose Perez, Sr. Manager  of Broadcast Support and Affiliate Operations (IRD Authorizations) |   | (303) 967 4624      |
|---------------------------------------------------------------------------------------------|--------|---------------------|
| Doug Miller, Sr.  Manager of Network Operations                                             |   | (303) 967 4621      |
|                                                                                        |   | cell (303) 881 8698 |
| Brett Pierce, Chief  Engineer                                                               |   | (303) 967 4763      |
|                                                                                        |   |                |
| **24-Hour  Emergency Telephone:**                                                           |   |                |
| Broadcast Operations  Control                                                               |   | (720) 554 1851      |
|                                                                                        |   | (720) 554-1852      |
| Broadcast Operations  Control Fax                                                           |   | (720) 554 1863      |

 

**Allnotices involving an emergency response shall indicate**

**-Urgent,immediate response required-**

**Buyerwill promptly update these contact names/numbers as needed**

 

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**EXHIBIT F**

 

**SERVICES**

 

**1.****                                      MonthlyServices**

 

The following servicesshall apply for the Service Term.

 

a.                Originationand Playback of Hallmark East Coast Channel

 

b.               Originationand Playback of Hallmark West Coast Channel

 

c.                Originationand Playback of Hallmark Movie Channel

 

d.               Compressionand Transmission of all channels to CMUS’ Uplink Provider

 

e.                IRDAuthorization

 

f.      Library Services:  Buyer will provide a securedclimate-controlled video tape storage area on a 24-hour per day basis for amaximum of 15,000] tapes as part of the Service contract.  Buyer will also provide capacity for digitalstorage of up to a total of 360 hours of programming, commercial and promotionsmaterial across all three existing channels.

 

g.     Premises: During the Service Term, Buyer will provide CMUS with two workstationcubicles located at the NOC facility with fixtures, furniture and equipmentequivalent to that provided for similar personnel at Buyer.

 

h.     Buyerwill provide CMUS with the use of an enclosed and secure space, a diagram ofwhich is attached hereto as Exhibit G, for use as a “Server Room”,  This space will be the same space as iscurrently used for that purpose.  Thefollowing services will be provided by Buyer for the Server Room, to the sameextent currently provided for other areas of the NOC facility:

 

(i)electrical service supported by generators, uninterruptible power supplies andpower distribution units.

 

(ii)  HVAC.

 

(iii)Access control security systems

 

(iv)  Fire detection and protection sprinklersystems.

 

(v)Environmental monitoring and response.

 

Up to twoemployees or contractors of CMUS may have unrestricted access to this ServerRoom on a 24 hour basis.  No otherpersonnel of Buyer or a third party will have access to the Server Room withoutCMUS’ consent, provided however, that Buyer will be given a master key to thepremises and be allow to access the Server Room without consent in case ofemergency or to satisfy the requirements of applicable law, such as safetyinspection requirements.  All equipmentin the Server Room will be owned by CMUS and maintained by the CMUS contractorsor employees.

 

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**2.****                                      SecurityDeposit.**

 

Because the CMUSchannels are currently originating from the NOC, the security depositrequirement is waived.  If new channelsare launched pursuant to the Additional Channel Options, a security deposit maybe required to help defray additional capital outlays by Buyer, but suchsecurity deposit will not exceed an amount equal to two months Monthly ServiceFee for such Channel***.***

 

**3.****                                      ServiceInterruption Credits.**

 

A “ServiceInterruption” shall mean the failure of Buyer to deliver a signal meeting thetechnical standards hereunder as well as conforming in all respects to andcontaining all the audio and video elements described in the broadcast logprepared by CMUS, which is not the result of CMUS’ failure to timely performany of its obligations or provide accurate materials and elements under thisAgreement, including program or channel schedules, program logs, accuratelylabeled program tapes, commercials, or output(s) of CMUS or as a result of anyother breach of this Agreement by CMUS. Buyer shall grant CMUS a Service Interruption Credit of the MonthlyService Fees in Paragraphs 1(a) and (b) above, as appropriate, based upon theratio of total number of Outage minutes divided by 43,200 (total minutes in a30-day month).  Failure to provide otherServices hereunder will be subject to a pro rata reduction in the applicablefees for those Services.  The issuance ofor CMUS entitlement to Service Interruption Credits under this paragraph shallnot affect CMUS termination rights under Paragraph 10.2.  CMUS will not be entitled to a ServiceInterruption Credit unless and until it has paid the Monthly Fee for the periodfor which the Service Interruption Credit is due.

 

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